Mt.Gox’s custom implementation of a multi-currency platform is unique in that currency markets are not separated from one another
this could be scary. if the exchange is acting as market maker and doing arbitrage between their own currency markets that means they are incurring risk that they wouldn't normally have operating simply as an agent.
That's correct. If Mt. Gox is honest, under the existing system they took on no trading risk. If they are doing currency conversion, they have exchange rate risk. Not much, if they settle daily, but some. Does Mt. Gox charge for currency conversion? What are their exchange rates?
If Mt. Gox is becoming a foreign exchange broker, they face more regulatory problems in Japan.
I still wonder whether, as Bitcoin winds down and Mt. Gox has to pay out on all their cash deposits, if the money is actually all there.