5 ms·

Easier Conspiratorial Answer: "Keep your friends close, and your enemies closer." The banks get to learn about their tech and keep abreast of whatever "new gro

by OzzyB 14y ago

Easier Conspiratorial Answer: "Keep your friends close, and your enemies closer." The banks get to learn about their tech and keep abreast of whatever "new groundbreaking innovations" they have, whilst pretending to play along.

InclinedPlane 14y ago
Hmmm, yeah, that is a potential reason I suppose. What better way to find out exactly how to disrupt your disruptor (likely via regulation) than working hand in hand with them? I'm not quite sure I buy it, but it certainly wouldn't be outside of the realm of possibility for banks.
- Anderjen 14y ago
  As a former employee of one of those banks, I can tell you that you are overestimating them. They are not even thinking about keeping their enemies' close or disrupting the disruptor. Who gets paid a bonus for that??! Nobody.
cynicalkane 14y ago
Projecting sinister and conspiratorial motives on banks has been a popular fad these last 3 years, but I don't really see why this is necessary to explain their actions here. There's nothing necessarily sinister about working with people introducing new ways to do your old business. Actually, that's what you want banks to do.
- beagle3 14y ago
  Well, I know of one market where this conspirational explanation is exactly what happened. Commodity and future exchanges existed, one way or the other, for 5000 years. The modern commodity exchange traces its history at least to 15th century Europe, if not earlier. If you need to change currency, you go to the bank. You would expect a currency exchange, where buyers and sellers meet to exchange currency, would have existed given that it's much simpler than a stock exchange / commodity exchange to run. Well, bank stifled the money supply to any such attempt, until they couldn't in the early '2000s -- but they invested and bought the emerging players, to make sure that their lucrative money changing business is not harmed. Look up who owns currenex, hotspot, EBS, and the other currency exchanges. Also, look up the rules - they favor the banks above other players.
  - JumpCrisscross 14y ago
    As someone who traded large volumes of commodities, currencies, and their derivatives, this is false. Most trading of these assets happens OTC, between private parties, and never touches an exchange. This is far more de-centralized and efficient than having it happen on exchanges. The retail money changing business is not so great if you're dealing in change (<$10k), but as someone who negotiated the rate at which he changed his Swiss francs into US Dollars at a JP Morgan Chase branch in New York, it isn't a regulatorily locked market. Having a private banking relationship will lower the threshold for negotiated rates, too.
    - beagle3 14y ago
      I'm not sure what you thought I'm claiming. > As someone who traded large volumes of commodities, currencies, and their derivatives, this is false. Most trading of these assets happens OTC, between private parties, and never touches an exchange. I was not claiming that it does happen in an exchange. I was claiming that the banks were (successfully, for years) doing everything in their power to stop such an exchange from forming - do you think that is not true? I was claiming that the big banks own the existing exchanges, currenex, hotspot, EBS, is that not true? (I've been out of the game in the last 3 years, the player names might have changed -- but I'd be surprised) I have first hand experience of big banks exerting their influence on those (supposedly anonymous) exchanges to kick participants out when their trading style was not compatible with the banks' interest. > This is far more de-centralized and efficient than having it happen on exchanges. De-centralized, yes. Efficient? Only for the other party (which is a bank, the vast majority of the time). If you want to change swiss francs to USD, and I want to change USD to swiss francs, if we had a two sided market ("an exchange") to meet in, we'd find each other, agree on a public, easily discoverable price, and that's it; The one of of us who was smarter (or could wait longer) would earn the spread, the other one would pay it; alternatively we would meet at the mid price, splitting the spread. This happens all the time in exchange traded shares, commodities and futures. However, the way it works today OTC is that instead you and I both find a big enough player (e.g. JP Morgan, or Goldman, or whoever), who makes a market in the currency - buys at the lower price, sells at the higher price, earning the entire spread, always. Unlike either of us, that player -- by virtue of its size and position -- knows the "buy" and "sell" orders of a lot of the smaller players, and can react accordingly. > s someone who negotiated the rate at which he changed his Swiss francs into US Dollars at a JP Morgan Chase branch in New York, it isn't a regulatorily locked market. Having a private banking relationship will lower the threshold for negotiated rates, too That's exactly my point: You would expect an exchange that would make this into a symmetric, competitive, information efficient market because there are hardly any regulatory issues (compared e.g. to running a stock or commodity exchange). The fact that this hasn't happened in 500 years of modern exchanges is a testament to the stronghold that banks have on currency trading. Note that such exchanges have appeared for everything, from bandwidth to energy to pork bellies - but only in a very limited way for currencies (controlled by the same old boys network), where it is easiest to start such an exchange, and such a market benefits everyone except same old boys.

by OzzyB 14y ago

InclinedPlane 14y ago

Hmmm, yeah, that is a potential reason I suppose. What better way to find out exactly how to disrupt your disruptor (likely via regulation) than working hand in hand with them? I'm not quite sure I buy it, but it certainly wouldn't be outside of the realm of possibility for banks.

Anderjen 14y ago
As a former employee of one of those banks, I can tell you that you are overestimating them. They are not even thinking about keeping their enemies' close or disrupting the disruptor. Who gets paid a bonus for that??! Nobody.

cynicalkane 14y ago

Projecting sinister and conspiratorial motives on banks has been a popular fad these last 3 years, but I don't really see why this is necessary to explain their actions here. There's nothing necessarily sinister about working with people introducing new ways to do your old business. Actually, that's what you want banks to do.

beagle3 14y ago
Well, I know of one market where this conspirational explanation is exactly what happened. Commodity and future exchanges existed, one way or the other, for 5000 years. The modern commodity exchange traces its history at least to 15th century Europe, if not earlier. If you need to change currency, you go to the bank. You would expect a currency exchange, where buyers and sellers meet to exchange currency, would have existed given that it's much simpler than a stock exchange / commodity exchange to run. Well, bank stifled the money supply to any such attempt, until they couldn't in the early '2000s -- but they invested and bought the emerging players, to make sure that their lucrative money changing business is not harmed. Look up who owns currenex, hotspot, EBS, and the other currency exchanges. Also, look up the rules - they favor the banks above other players.
- JumpCrisscross 14y ago
  As someone who traded large volumes of commodities, currencies, and their derivatives, this is false. Most trading of these assets happens OTC, between private parties, and never touches an exchange. This is far more de-centralized and efficient than having it happen on exchanges. The retail money changing business is not so great if you're dealing in change (<$10k), but as someone who negotiated the rate at which he changed his Swiss francs into US Dollars at a JP Morgan Chase branch in New York, it isn't a regulatorily locked market. Having a private banking relationship will lower the threshold for negotiated rates, too.
  - beagle3 14y ago
    I'm not sure what you thought I'm claiming. > As someone who traded large volumes of commodities, currencies, and their derivatives, this is false. Most trading of these assets happens OTC, between private parties, and never touches an exchange. I was not claiming that it does happen in an exchange. I was claiming that the banks were (successfully, for years) doing everything in their power to stop such an exchange from forming - do you think that is not true? I was claiming that the big banks own the existing exchanges, currenex, hotspot, EBS, is that not true? (I've been out of the game in the last 3 years, the player names might have changed -- but I'd be surprised) I have first hand experience of big banks exerting their influence on those (supposedly anonymous) exchanges to kick participants out when their trading style was not compatible with the banks' interest. > This is far more de-centralized and efficient than having it happen on exchanges. De-centralized, yes. Efficient? Only for the other party (which is a bank, the vast majority of the time). If you want to change swiss francs to USD, and I want to change USD to swiss francs, if we had a two sided market ("an exchange") to meet in, we'd find each other, agree on a public, easily discoverable price, and that's it; The one of of us who was smarter (or could wait longer) would earn the spread, the other one would pay it; alternatively we would meet at the mid price, splitting the spread. This happens all the time in exchange traded shares, commodities and futures. However, the way it works today OTC is that instead you and I both find a big enough player (e.g. JP Morgan, or Goldman, or whoever), who makes a market in the currency - buys at the lower price, sells at the higher price, earning the entire spread, always. Unlike either of us, that player -- by virtue of its size and position -- knows the "buy" and "sell" orders of a lot of the smaller players, and can react accordingly. > s someone who negotiated the rate at which he changed his Swiss francs into US Dollars at a JP Morgan Chase branch in New York, it isn't a regulatorily locked market. Having a private banking relationship will lower the threshold for negotiated rates, too That's exactly my point: You would expect an exchange that would make this into a symmetric, competitive, information efficient market because there are hardly any regulatory issues (compared e.g. to running a stock or commodity exchange). The fact that this hasn't happened in 500 years of modern exchanges is a testament to the stronghold that banks have on currency trading. Note that such exchanges have appeared for everything, from bandwidth to energy to pork bellies - but only in a very limited way for currencies (controlled by the same old boys network), where it is easiest to start such an exchange, and such a market benefits everyone except same old boys.