Not bad idea, but the biggest question is, what stops someone who wants another party suffer losses or/and he don't care about his losses? On escrow system with 2-of-3 multi-signature, it can be mitigated easily.
I don't know about ETH, but on Bitcoin it's already possible with 2-of-2 multi-signature scheme.
Let's say the locked fund are large enough, will it reduce fraudulent transactions?
Maybe yes, since scammer don't want risks big amount for small "profit"
Who will use this box to trade?
Probably no one, since deposit big money is required, unless there's user-friendly wallet for it.
Will there be a lot of extortion?
No idea