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The ability of a service provider, such as a broker, to set prices above production costs depends on the amount of competition in the market. The higher the co
by lottin 4y ago
The ability of a service provider, such as a broker, to set prices above production costs depends on the amount of competition in the market. The higher the competition, the thinner the margins are going to be. So, a monopolistic broker that doubles as exchange is absolutely not good for customers. In this scenario customers will be charged higher prices for brokerage services, compared to what they would be paying in a competitive market.
- olalonde 4y agoWhy would adding middlemen lower prices? If it dit, why not require another layer? Brokers of brokers, etc. I think you can see that it doesn't make sense.
- lottin 4y agoOkay... I see this is going to be a tough one. You're not adding an intermediary. The broker and the exchange do different jobs. Coinbase is an exchange and a brokerage firm. Under the current arrangement, Coinbase is providing its customers with both exchange and brokerage services, so Coinbase customers are paying for both. If Coinbase was providing exchange services to brokerage firms, and these brokerage firms were providing brokerage services to retail investors, these investors would still be paying for both services (directly or indirectly), but prices would be lower due to competition among brokerage firms.
- olalonde 4y agoI don't understand what you mean here. In what way do you consider Coinbase a brokerage? Users on Coinbase can trade directly on its exchange and pay trading fees. Restricting the exchange to only brokers would mean that the middlemen ("brokers") would now pay the trading fees and pass that cost onto their customers, plus some brokerage fee (which means a higher total fee for users). The broker-intermediated trades are necessarily more costly than the direct trades.
- lottin 4y agoDoes Coinbase do any of the following? - custody of assets - margin trading - customer support If the answer is yes, then Coinbase is providing typical brokerage services which could be provided instead by firms independent from the exchange. Do you not agree?
- mlrtime 4y agoI don't think you get it. In traditional stock markets you must do: Retail -> Broker -> Exchange Coinbase allows: Retail -> Coinbase Exchange Retail -> CB Broker -> CB Exchange Retail -> Broker -> CB Exchange How is this not better for retail than traditional finance? How can I get DMA at the NASDAQ as an individual?