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Thanks for all the information. I was operating on some false assumptions, so this clarifies quite a bit.

I meant that the flat system of crypto where (at least before industrial mining), people could spin up mining rigs (which is still possible, I think at least with some altcoins), but also, that the barrier to entry for folks trading crypto is lower than traditional markets. Some may chalk this up to the need for KYC/AML, but I think there are intentional barriers to entry for individuals that people in power don't want to have access to say, equity markets, that don't exist as much in crypto markets. I don't think crypto markets should be used to supplement terrorism, money laundering, tax avoidance, or anything else like that, but if you take a look at say, Robinhood, who tried to lower some of these barriers to entry to traditional markets, I think crypto as a whole is trying to do that. I also have said in other posts, and will continue to, that blockchain analytics will only continue to get more advanced, so the narrative that crypto is only used for illegimate activity is bullshit. I do think that it is a power to the people that can't be stopped, due to its decentralized nature, and that it is the only possibility I've seen so far as an alternative to everything else going on that requires sovereign government policy and currencies (that are backed by war, control, etc).

> Those interested with very low latency are not hedge funds but market makers, and the kind of microstructure signals they exploit is not only orthogonal to what a retail investor would do, but often brings in just bips per trade, meaning the leverage required to make it worth it is anyway out of the retail league.

Thanks for clarifying.

> What is a normal retail investor? Obviously hedge funds are going to be faster to react to e.g. earnings events than you. That doesn't mean this information is not public. It's just that HF pay data providers, invest in automatic data processing and decision making, etc.

Well, this is sort of what I'm saying. As a regular person, you just don't have the same information, or the ability to act on it as quickly. Sure, buy and hold investors aren't really affected, but they are providing liquidity for these folks who can take some advantage. I may be pretty wrong about this, however, it's just like anything where there are friends / contacts / associates. Some parties just have more information, especially if they have money to spend. You did mention earnings though. I just have a hard time believing that hedge funds only act on public information. They might structure their trades based on how not to get flagged, but how do they not have friends or contacts in the space that tell them a thing or two? This is what they are doing full time, so I would imagine they spend a good majority of their time thinking about how to make the most money and not raise any red flags. I actually don't have an issue with this, but I always see claims that the traditional market is totally fair, but it does not seem like a very flat system to me. Those in power seem to have some advantage. If that was how the market was presented (i.e. some people have sway, more information, and the ability to act more quickly than retail), I wouldn't have any issue with this. I see the opposite though, the narrative is that retail traders can make trades without worrying because it's totally equal. If all retail traders were doing was buy and hold, then again, no issue, but not all retail traders trade that way.

> Yes, what about them? The name triggers the imagination of people but there's really nothing fancy about it. The objective of dark pools is to allow the exchange of shares without too much of a movement in the orderbook. This is actually good for both users of dark pool (they get lower slippage) and users of the public market (it prevents artificial big swings in price due to large buyouts, which would be announced anyway). The liquidity at time T in the order book is not tailored to absorb any ridiculous amount that a large investor could be willing to exchange.

Where do I learn more about dark pools? My initial response to learning about them was that they are basically tailored to hide trades from the general public, for the benefit of institutional traders. I was concerned that dark pool operators would also have information that then they could front-run the rest of the market with. I feel like when I make a trade in the equity markets, or if I read something in traditional news, someone else has heard about this earlier that day, or maybe days before, based on insider information, just due to them being more deeply involved with the market. I just don't really see how this is fair (and this is the claim I see time and time again in traditional markets). I don't think all this information is public. If it's in some obscure place, that 95% of the investing public doesn't see, is it really public? Maybe the SEC protects against that, but it seems like the big players have an advantage. It seems like I have a lot of incorrect assumptions though, so I'd like to learn more about this.

> What exchanges do, though, is offer rebates to providers of liquidity (including the market makers that you seem to despise) in exchange for the liquidity they provide. This is not a random decision by the exchange, it's because providing liquidity to the market is beneficial for everyone. As an investor, it means I won't have to worry that I will not be able to sell my shares whenever I want to. It also means that the spread will be tighter, thus lowering my slippage. And subsequently, it also means arbitrage is most likely in place, so I'm not being scammed just because I didn't check the price on 5 different platforms.

Yeah, I get it, this is a quite mature market (and that's a good thing). I still have a feeling that the extremely powerful have sway in the market, in a way that isn't exactly "fair", but maybe it just comes down to the amount of capital they have (but again, I would think that the size of the trades should be on public markets then, not dark pools). Anyway, in the end, what I've learned from all this is how far the traditional markets have come, and how other markets (like crypto, which also have things like dark pools) can learn from this.

> As you learn more about crypto and traditional finance, it'll be fun to compare the two. Your confusion about the role of an exchange in traditional finance might be because you see the crypto world, where a single entity often performs the roles that many entities perform in traditional finance (exchange, clearing firm, broker, etc.).

Yes, I agree!

In terms of what I called antiquated technology, I think there are a lot of layers on traditional finance, and a lot has changed since its beginnings. I think crypto will go through a similar evolution, in terms of tech, regulation, etc. I think we're in the very early stages for crypto and it has a chance to be an even better system.

I do know that HFTs exist in crypto, and it still is the wild west in some ways, but in the end I like that innovation is happening and that there are alternatives to existing systems.

That said, I appreciate all the responses and I'll take some time to learn more about traditional markets.

I still like the distribution of power to those who wouldn't have had a chance otherwise.

Thanks. I'm going to check this book out.

I don't know that much about this, so you could chalk it up to "great ignorance", I suppose.

I'm a software engineer, interested in crypto, and not that involved in traditional markets (except for holding an S&P 500 index fund).

I do think the exchanges in traditional finance shouldn't have required HFTs in the first place (i.e. it's an antiquated technology). I also think hedge funds and the ultra rich have privileged info, that retail investors don't have.

Anyway, I appreciate the clarification. I like learning about all this.

I was going to mention HFT. How is it a level playing field when they are in the picture? Paying top dollar just to be closer and closer to the exchanges to get the fastest, "best price", when really, they have info before anyone else.

Also, what about dark pools?

Contrary to my username, which I just get a kick out of, I don't actually work on wall street or anything, but I've always felt the stock market was rigged for the elite. I think it is very likely that they have info before normal retail investors have any idea.

I like crypto but the way I read this is that it's a good number of the reasons that the existing financial infrastructure is better (particularly once the US infrastructure updates to things like instant FedNow payments).

I think defaulting to using a mixer would be inconvenient and it could get folks flagged for even using it at all.

Also, what ever happened to not re-using addresses? I know it doesn't make it totally private, but I thought it helps some, since you'd still have to tie addresses to identities somewhere in the chain.

I think companies should still provide a way to link accounts via small deposits. It takes a few days, but at least you don't have to share your credentials. (This applies to US accounts, maybe there are better solutions elsewhere.)

If you use Plaid, I think it should only be if there's no other option and you change your credentials after. I've always thought giving away your credentials to a screen scraping company like Plaid was crazy.

In terms of the class action lawsuit, the only one who will see a meaningful payout from this are the lawyers.