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An exchange is either a physical or virtual marketplace where members buy and sell the securities or futures listed for trading there, either for their own accounts or for customers. In contrast, similar transactions may be conducted away from an organized marketplace, and those trades are termed over=the-counter or OTC trades. Until the very late 1990s, the term "exchange" connoted a physical location. Since then, exchanges have mostly given way to electronic trading platforms that connect directly to members, either over the Internet or via a private trading network.

"Exchange" is a defined term under the U.S. Securities Exchange Act of 1934 and its use is properly restricted to securities or securities options operations that have been registered by the U.S. Securities and Exchange Commission (SEC). Futures exchanges are defined under the Commodity Exchange Act as contract markets designated by the U.S. Commodity Futures Trading Commission. A futures contract may only legally be traded on or in accordance with the rules of a futures exchange.

Cryptocurrency "exchanges" are platforms where people and entities exchange an amount of cryptocurrency for fiat money or another cryptocurrency. Having no legal or regulatory basis with regard to cryptocurrencies, the term "exchange" is used informally for a broad swath of businesses. For the most part, MarketsWiki employs the term "cryptocurrency trading platform" to avoid confusion with regulated trading venues. The SEC's Divisions of Trading and Markets and Enforcement formally warned the public not to be confused about the term "exchange" being used by trading platforms which are not regulated or overseen by the SEC, stating, "Many platforms refer to themselves as "exchanges," which can give the misimpression to investors that they are regulated or meet the regulatory standards of a national securities exchange."[1]

Members Only?[edit]

Major public stock and derivatives exchanges like the New York Stock Exchange and the Chicago Mercantile Exchange, where boards of governors set stringent rules for listing, deal mostly in the larger and better-known publicly traded securities. Such exchanges often still conduct most of their business as marketplaces for transacting listed securities by the floor traders employed by members of the exchange. Membership, which can cost upwards of $2.5 million annually on the NYSE, allows seat-holders to trade proprietary accounts or broker customer transactions directly with other exchange members.

India's exchange traders were cheered in 2008 by a Supreme Court ruling that such membership could not be inherited.[2]

Since the expansion of the Internet in the 1990s, traditional exchange models have been undermined by several developments. Electronic OTC exchanges like NASDAQ list securities that don't necessarily make the NYSE cut, giving investors access to growth opportunities,[3] while electronic communication networks (ECNs) like Instinet and its predecessor Island ECN allow traders and investors to bypass the specialists and trade publicly-listed securities directly. These developments have in turn led to the rise of market phenomona like round-the-clock trading, any-market trading and day trading.


In July 2008, America's equity and derivatives exchanges asked their regulator, the U.S. Securities and Exchange Commission, to exempt their market maker members from a new rule banning investors from trading naked shorts in troubled mortgage-broking giants Fannie Mae and Freddie Mac plus 11 other publicly-traded brokerages.[4] The exchanges argued that restricting market makers in this way could hinder their ability to keep transactions flowing and could negatively affect liquidity.

In May 2012, the Commodities Futures Trading Commission (CFTC) finalized new risk controls for larger exchanges, and set standards for exchanges offering swaps contracts. One rule that was delayed at this time, however, was the "85 percent rule," under which CME Group and other large exchanges would have to delist derivatives if less than 85 percent of the contracts were exchange traded.[5]

Cryptocurrency "exchanges"[edit]

On August 1, 2018, CoinMarketCap reported on and ranked 207 different cryptocurrency trading platforms from around the world.[6] Around the same time, Markets Media Group's Traders magazine estimated the number of number of exchanges to be more than twice that at over 500 of them.[7] In December 2019, despite a persistent and widespread fall-off in trading volumes, CoinMarketCap reported on trading volumes on 306 cryptocurrency trading platforms.[8]

In March 2018, a cryptocurrency trader named Sylvain Ribes published an indictment of cyrptocurrency exchanges' volume reporting practices.[9] CoinMarketCap, which is a widely followed crypto data reporter, started reporting adjusted data for cryptocurrency exchanges during the summer of 2018.[10] The newly formed Blockchain Transparency Institute began taking an independent view of exchange trading volumes and reporting on them in August 2018.[11]

Cryptocurrency trading platforms have often been hacked, frequently with losses valued in multiple millions of U.S. dollars. The two largest publicly known hacks - $450 million at Mt. Gox in 2014 and $535 million at Coincheck in 2018 - occurred at Japanese platforms.[12] There have been few if any hacks reported by the major U.S.-based cryptocurrency trading platforms.

Decentralized exchanges[edit]

Most cryptocurrency exchanges in the U.S. are electronic platforms. Recently, a new type of trading platform called a decentralized exchange - sometimes called a "DEX" platform - has emerged.[13] Unlike "centralized" exchanges, which hold their users' assets, decentralized exchanges do not require users to make accounts or deposit their assets. Theoretically, this feature has made them resistant to hacking attacks, although currently there are only a small number of users on them and consequently they do not currently have strong liquidity.[14]

In early December 2019, both CryptoBridge and Waves.DEX went out of business. CoinTelegraph, an online cryptocurrency news service, reported that trading on DEXs accounted for no more than one percent of total cryptocurrency trading volume.[15]

In 2018, the New York State Attorney General released a voluntary survey for cryptocurrency exchanges, including Coinbase, Gemini, and Kraken. Four exchanges - Binance,, Huobi, and Kraken, declined to participate in the survey, claiming exemption from New York regulation because, they said, they did not offer their services to New York residents. The New York AG later released a report in September, highlighting the possibility that some of these exchanges might be operating illegally in the state. The report said that "many virtual currency platforms lack the necessary policies and procedures to ensure the fairness, integrity, and security of their exchanges. The report also cited "serious conflicts of interest" evident in the business models and operations of some of these exchanges, as well as a general lack of transparency and auditability in the management of their platforms.[16][17][18]