How profitable are exchanges?

[jbrnt]

Apart from fees, exchanges receive nice income from votes too. In order to get new altcoins listed on exchanges, they go through a voting system where people vote by sending bitcoin to the exchange.

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[ShakyhandsBTCer]

Mintpal makes half a milion USD per month, according to their volume and fees.

What about their costs and expenses?

[leezay]

Mintpal makes half a milion USD per month, according to their volume and fees.

What about their costs and expenses?

Low compare to the fee they get.

[ajareselde]

MCXNow, Crypsy, BTCT, BTC-E?

I'm conducting a survey to determine the actual profitability of the popular exchanges.

Does anyone have any idea of what the volume is for these exchanges? What these exchanges make weekly or monthly and how we could find out?

you can observe the volume on sites themselves , and on sites like bitcoinwisdom.
Judging on the fact that most of the time exchanges have multi-milion traffic, their profit is huge.
and not just huge, but large enough that they can influence the price by keeping the profits in bitcoin or selling it for fiat.
funny when u think about it.

[leezay]

MCXNow, Crypsy, BTCT, BTC-E?

I'm conducting a survey to determine the actual profitability of the popular exchanges.

Does anyone have any idea of what the volume is for these exchanges? What these exchanges make weekly or monthly and how we could find out?

you can observe the volume on sites themselves , and on sites like bitcoinwisdom.
Judging on the fact that most of the time exchanges have multi-milion traffic, their profit is huge.
and not just huge, but large enough that they can influence the price by keeping the profits in bitcoin or selling it for fiat.
funny when u think about it.

Should be glad there are now more exchanges vs MtGox monopoly a year ago.

[ShakyhandsBTCer]

MCXNow, Crypsy, BTCT, BTC-E?

I'm conducting a survey to determine the actual profitability of the popular exchanges.

Does anyone have any idea of what the volume is for these exchanges? What these exchanges make weekly or monthly and how we could find out?

you can observe the volume on sites themselves , and on sites like bitcoinwisdom.
Judging on the fact that most of the time exchanges have multi-milion traffic, their profit is huge.
and not just huge, but large enough that they can influence the price by keeping the profits in bitcoin or selling it for fiat.
funny when u think about it.

Exchanges likely wish to keep as much money in bitcon as possible as if they pressure the price of bitcoin then trading volume would generally decrease, meaning less profits.

Exchanges likely have more expenses then you think.

The AML/KYC piece is probably one of their largest, if not their largest expenses. They need to hire people who are familiar with or train them to be familiar with identity documents from pretty much every country in the world. They need to have enough of this staff in order to look at identity documents from each of their customers.

[transient858]

MCXNow, Crypsy, BTCT, BTC-E?

I'm conducting a survey to determine the actual profitability of the popular exchanges.

Does anyone have any idea of what the volume is for these exchanges? What these exchanges make weekly or monthly and how we could find out?

you can observe the volume on sites themselves , and on sites like bitcoinwisdom.
Judging on the fact that most of the time exchanges have multi-milion traffic, their profit is huge.
and not just huge, but large enough that they can influence the price by keeping the profits in bitcoin or selling it for fiat.
funny when u think about it.

Exchanges likely wish to keep as much money in bitcon as possible as if they pressure the price of bitcoin then trading volume would generally decrease, meaning less profits.

Exchanges likely have more expenses then you think.

The AML/KYC piece is probably one of their largest, if not their largest expenses. They need to hire people who are familiar with or train them to be familiar with identity documents from pretty much every country in the world. They need to have enough of this staff in order to look at identity documents from each of their customers.

Assuming AML/KYC compliance is around 15k USD a month. This is probably less than 1 week of trading fee for the main exchanges.
 

[ShakyhandsBTCer]

MCXNow, Crypsy, BTCT, BTC-E?

I'm conducting a survey to determine the actual profitability of the popular exchanges.

Does anyone have any idea of what the volume is for these exchanges? What these exchanges make weekly or monthly and how we could find out?

you can observe the volume on sites themselves , and on sites like bitcoinwisdom.
Judging on the fact that most of the time exchanges have multi-milion traffic, their profit is huge.
and not just huge, but large enough that they can influence the price by keeping the profits in bitcoin or selling it for fiat.
funny when u think about it.

Exchanges likely wish to keep as much money in bitcon as possible as if they pressure the price of bitcoin then trading volume would generally decrease, meaning less profits.

Exchanges likely have more expenses then you think.

The AML/KYC piece is probably one of their largest, if not their largest expenses. They need to hire people who are familiar with or train them to be familiar with identity documents from pretty much every country in the world. They need to have enough of this staff in order to look at identity documents from each of their customers.

Assuming AML/KYC compliance is around 15k USD a month. This is probably less than 1 week of trading fee for the main exchanges.
 

You still need to consider things like DDOS protection, leasing servers, customer service/support and the like

[keithers]

They quietly make big money, just like pokerstars who takes a rake off of each pot that is played in poker. 

[Nagle]

They ought to be profitable, yet over half have failed.

[NapoleonBonaparte]

They quietly make big money, just like pokerstars who takes a rake off of each pot that is played in poker. 

Want to elaborate a little on this?

[bryant.coleman]

I don't know about the other exchanges, but monthly revenue for BTC-E is somewhere in the range of BTC2,000. That means around $1.2 million per month and $15 million per year. Don't know the net income.

[Este Nuno]

They quietly make big money, just like pokerstars who takes a rake off of each pot that is played in poker. 

Want to elaborate a little on this?

They generally take 5% of the pot up to $3 USD.

They've dealt almost 100 billion hands so you can imagine how much money they've made.

They actually just sold the company for 5 billion.

[GangkisKhan]

I don't know about the other exchanges, but monthly revenue for BTC-E is somewhere in the range of BTC2,000. That means around $1.2 million per month and $15 million per year. Don't know the net income.

That is huge profit for an exchange. No wonder no major exchange want to offer equity.

[ShakyhandsBTCer]

I don't know about the other exchanges, but monthly revenue for BTC-E is somewhere in the range of BTC2,000. That means around $1.2 million per month and $15 million per year. Don't know the net income.

That is huge profit for an exchange. No wonder no major exchange want to offer equity.

Offering equity would, in itself create huge amounts of additional expenses (shareholder relations, reporting, and the like) and most exchanges would not likely be able to fetch a valuation that could account for taking on those additional expenses. 

[keithers]

The day we will truly see how profitable an exchange really is, is when one is bought out. When we see how much it sells for, we can tell how profitable it really is..

[trand]

all about the transaction the more transactions you do in the exchanger, the greater benefit you because exchangers only take advantage of the difference in value buying and selling coin

[JorgeStolfi]

With no regulations and no auditing, exchanges could make lots of money besides the fees that they charge.

For instance, by delaying the trade logs for a couple of seconds, they can intercept client trades and "steal" some of their money.  Suppose that the lowest ask is 500$/BTC and the highest bid is 480$/BTC. Supose that Alice posts a sell offer of 1 BTC at 485. One second later Bob, who still cannot see Alice's offer, posts a bid for 1 BTC at 495.  Normally Bob's bid would be filled with Alice's offer, and he would save 10$.  But the exchange operator sees the two crossed orders, and inserts between them a buy order of 1 BTC at 485 (that takes Alice's coin), and a sell offer of 1 BTC at 495 (that fills Bob's bid).  The two transactions show up in the log and everything seems normal, and both Alice and Bob are happy that their orders got filled so promptly -- but the 10$ now goes to the exchange, instead of Bob.

Similarly, if two exchanges agree to show their order books to each other, a couple of seconds before they are posted to the public, they can exploit all opportunities for arbitrage between them.  Any client who tries to do arbitrage will then find that the prices have always shifted against him between the time that he places an order and the time that it gets executed.

There must be many other tricks, even more profitable than these, that exchange operators can pull.  I suppose that zero-fee exchanges, like Huobi and OKCoin, get their revenue from such insider trading.  Iam told that such tricks are totally illegal for regulated stock and currency exchanges.

Obviously, any money that the exchanges make, from fees or otherwise, must come out of their clients' pockets.

[arbitrage001]

With no regulations and no auditing, exchanges could make lots of money besides the fees that they charge.

For instance, by delaying the trade logs for a couple of seconds, they can intercept client trades and "steal" some of their money.  Suppose that the lowest ask is 500$/BTC and the highest bid is 480$/BTC. Supose that Alice posts a sell offer of 1 BTC at 485. One second later Bob, who still cannot see Alice's offer, posts a bid for 1 BTC at 495.  Normally Bob's bid would be filled with Alice's offer, and he would save 10$.  But the exchange operator sees the two crossed orders, and inserts between them a buy order of 1 BTC at 485 (that takes Alice's coin), and a sell offer of 1 BTC at 495 (that fills Bob's bid).  The two transactions show up in the log and everything seems normal, and both Alice and Bob are happy that their orders got filled so promptly -- but the 10$ now goes to the exchange, instead of Bob.

Similarly, if two exchanges agree to show their order books to each other, a couple of seconds before they are posted to the public, they can exploit all opportunities for arbitrage between them.  Any client who tries to do arbitrage will then find that the prices have always shifted against him between the time that he places an order and the time that it gets executed.

There must be many other tricks, even more profitable than these, that exchange operators can pull.  I suppose that zero-fee exchanges, like Huobi and OKCoin, get their revenue from such insider trading.  Iam told that such tricks are totally illegal for regulated stock and currency exchanges.

Obviously, any money that the exchanges make, from fees or otherwise, must come out of their clients' pockets.

Easy for an experience trader to detect this, as they watch the price on multiple exchanges at the same time.

[Ninietz]

They quietly make big money, just like pokerstars who takes a rake off of each pot that is played in poker. 

Want to elaborate a little on this?

Mostly these sites are badly managed, we have seen it with Gox and more will unfortunately follow...