[miohtama]

First of all in traditional stock/futures exchanges you cannot connect to the exchange itself, but must go through a broker due to the regulation. This means you cannot directly interact with the order book, needed for the high frequency trading.

Cryptocurrency exchanges are direct-to-retail so anyone can run HFT strategies and act as a market maker. Thus, cryptocurrency trading is “more democratized.”

[Bluecobra]

You can absolutely host your networking gear/servers inside a co-location facility where the underlying exchange is hosted. It just requires tons of money to do so.

[gottorf]

> It just requires tons of money to do so.

On the order of thousands of dollars a month[0], depending on how close you want to get.

[0]: https://www.cmegroup.com/globex/connectivity-options.html

[djtango]

Realistically that isn't that much money unless you want to be some kind of hobbyist HFT tinkerer.

With no stance on whether people should be doing HFT as a hobby, presumably there is a finite amount of colocation space available and an opportunity cost/maintenance associated with onboarding people so this is what the market and regulators decided were the table stakes?

[gottorf]

Yes, it's really not that much money, all things considered. Even regular colocation (just for hosting) at a name-brand facility with all the redundancy that the CME facility has would run you $1-2k a month.

[nkaz001]

Sadly, it is becoming more like trad-fi. In the past, anyone could receive rebates for market making, but these days, only high-tier traders, trading companies, can benefit from them. The tier hurdle is getting higher. Also, there are now different APIs and limits for individual traders and high-tier trading companies.

[TeaBrain]

Brokers exist as they are providing the service of managing and routing orders to an exchange, which market participants in electronic exchanges wouldn't be able to interact with otherwise, without having a colocation spot on the exchange and knowing FIX protocol. Retail traders don't know, don't want to learn, and really have no reason to learn how to route unmanaged orders via FIX protocol. If you want to directly interact with an exchange you can do so, you'll just have to buy or lease a colocation spot on an exchange first.

Cryptocurrency exchanges are like many FX exchanges. They are not exchanges like the regulated stock, futures and options exchanges are, but are more like decentralized trading pools with unsynchronized order books, which are opaquely operated by a single broker. In crypto exchanges, it is not that there is no broker, but that the exchange and the broker are the same entity. There is no standardized protocol to route independently managed orders directly to crypto exchange servers. There's usually no way to directly interact with the exchange server at all.