On 5 Mar 01, at 10:04, [EMAIL PROTECTED] wrote:
Date sent: Mon, 5 Mar 2001 10:04:20 +1100
To: "e-gold Discussion" <[EMAIL PROTECTED]>
From: [EMAIL PROTECTED]
Subject: [e-gold-list] Re: Electronic E-Gold Exchange Suggestion
> >THE SUGGESTION
> >Somebody needs to create an electronic exchange for e-gold that works like
> >the electronic stock exchanges, such as the Island ECN.
> A great idea Vincent, but it would be difficult to get this happening
> *AS YET* as the volume of e-gold transactions are (relatively)
E-Gold has a huge transaction volume in comparison with thinly traded
stocks, and even thinly traded stocks benefit from an exchange where bids
and asks are posted in one place.
> >THE EXCHANGE
> >Would work just like the Island ECN
> Here's a bit of trivia:
> Island cost ~20 or 30 times more to BUILD than the entire amount of
> e-gold in circulation each day!
The e-gold exchange would not have nearly as much complexity to deal
with as Island, so would be much cheaper to build. Island has to deal with
a huge number of stocks, and interface with brokers and other exchanges.
A simple e-gold exchange could be a self-contained website.
> >THE REWARDS
> >The reward for creating a website like this would be huge profit and
> >immediate dominance in the e-gold world, and the benefit to everybody else
> >would be a much narrower spread,
> No, you'd be building it with the hope that in (?) 2? 4? years, it
> would become profitable, if, e-gold continues to grow at the rate it
Market makers make a profit, do they not? Or they wouldn't be making a
market. The exchange would take smaller profit per transaction than
market makers, but over more transactions. If market makers can exist
profitably, so can an exchange.
> >and easy, cheap conversion between e-gold
> >and dollars.
> unfortunately it would not affect in any way the easiness of
> conversion between gold and US Dollars (see the May Scale!!)
> As a matter of fact, the exchange BETWEEN US DOLLARS, and ECN SYSTEMS
> (ie, your stockbroker like e-trade or quick & reilly) is EVEN HARDER
> than the exchange currently between e-gold and USD.
> As you say:
> >>In order to trade on a stock exchange, one opens an account with a broker.
> ... and it's exceedingly difficult to fund your brokerage account;
> you can only use a wire transfer or wait until checks are "utterly
> At least with e-gold many of the MMs build in a risk factor, and let
> you buy e-gold with shit forms of money (lowest on the May Scale)
> like credit cards, paypal etc.
> (Obviously, it's inconceivable a stock broker would accept ccs or
> paypal to fund an account!)
> (In fact, it will *never be easy* to exchange from USD to e-gold: if
> anyone knows how it can be, state the way. Exchanging the reverse
> way, from e-gold to USD, is and always will be trivial. But it's a
> fact that the only "easy" way to convert from USD --> e-gold, is,
> using *cash* USDs.)
I have to disagree with you about buying e-gold being easier than openning
a stock broker account. Openning and funding my datek account was
easier than any of the market maker's procedures for buying e-gold. For
one thing, I do not own a printer. All of the market makers require you to
print out a form and mail it with your money order. Datek offers an option
to have account forms mailed to you in case you don't have a printer.
Therefore, I used Datek's mailed forms and did not have to make a special
trip to a library or Kinkos to rent a printer. This may seem trivial, but I still
haven't bought e-gold from a market maker because of the inconvience of
this printer obstacle.
When I say easy and cheap, I mean for somebody who is willing to spend
time to find the best bid and ask. I am the kind of person willing to
research all the market maker sites to see who has the best rates. That
takes time and is not easy. An exchange would save me all that time,
thus would be far easier. Also, because of the inconvenience of buying
through a market maker, buying small amounts is a hassle. You have to
buy a big chunk all at once to minimize hassle. On an exchange, you
could buy small amounts as needed. This is another way it would be
easier. The narrower spread would make it cheaper for conversion back
Another way that buying stock with a broker is easier is psychologically. I
can hold the $$ in my account until I like the current price of the stock. I
know and control what price I pay for the stock. Mailing or wiring money
for an e-gold transaction that will clear at a price I do not know or control is
not easy in my opinion. I find that psychologically difficult.
> >CURRENT LACK OF PRICE DISCOVERY EFFICIENCY WITH E-GOLD
> >Compare this to the current situation with e-gold. There is no common
> >place to represent bids and asks. It takes a new user such as myself
> >hours or days to research all the market maker sites to figure out who has
> >the best bid and ask. Most people are not going to have the patience for
> What you're saying is that "no really good or leading MM has emerged".
Baloney. No single market maker can make a better spread than multiple
market makers competing on an exchange. On a competitive exchange,
the best bid and best ask will not be from the same market maker most of
the time. The inside spread is narrower than any single entity could
provide alone. If a market maker has both the best bid and best ask for a
while, he will eventually get out of balance because he will get hit with
more buys or more sells during a period. If he has accumulated an
excess, he can lower his bid for a while, letting someone else have best
bid, while maybe still keeping best ask. If he has sold too much and is
running low, he may raise his ask and let someone else have best ask,
while maybe still keeping highest bid. If a market maker doesn't want to
deal with small trades, he may deliberately keep an outside spread. Then
only big orders will plow through to either side of his spread. As it is now,
big orders clear at a discount because market makers court them. On an
exchange, it would be opposite. Big market orders would create a wider
spread for themselves. Alternately, someone with a big order could make
one side of the market for a while, creating a narrower spread and better
deal for those on the other side of the transaction.
> Here's a disturbing thought Vincent ...
> Let's say thies e-gold-island system existed. How would anyone know
> about it? It would just be yet another MM in the list...nothing
Wrong again. As a first time potential e-gold buyer, I went through the
entire list of MM's on e-gold's list and checked out each one. If I found an
exchange among them, rest assured I would be openning an account
there. Granted, most people are not as curious or patient as me, but word
of mouth would spread, and people would quickly find out where they can
buy and sell e-gold at a better rate.
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