By Robert Hackett, Jeff John Roberts, and Jen Wieczner
February 4, 2019

The Ledger paid a visit to the NASDAQ last week to hear how the exchange uses surveillance software to spot crypto cheats. High above New York City, a staffer explained how NASDAQ can spot spoofers, wash traders and other rogues who look to manipulate markets. It turns out that the type of hustles favored by crypto crooks are basically the same ones used by financial bad guys for many decades.

More interesting was NASDAQ telling the group of reporters it will only sell the software to reputable crypto shops, implying those who don’t buy it are minor league or just plain shifty. This is bunk, a source familiar with the exchange told us afterwards. NASDAQ will sell the software to anyone and their dog, they said, and the reason some don’t want it is because it’s not very good. In other words, what we witnessed may have been marketing to prop up a poor product.

All of this made me wonder if the big stock exchanges, NASDAQ and NYSE, are in the same position as the cable industry five years ago. Back then, TV executives still scoffed at streaming services like Netflix, arguing that no serious person would swap out their cable package for entertainment over the Internet. Today, even they will admit that so-called cord-cutters are upending their business.

In the case of the exchanges, NASDAQ and NYSE operate as a cozy oligopoly (much like the cable guys), piling on price hikes because they can. According to the Wall Street Journal, the big stock exchanges imposed over 400(!) fee increases in the last few years even as buyers complained they were adding little value in return.

The question now is whether anyone can break NYSE and NASDAQ’s stranglehold over the listings and data business—disrupting them the way the streaming companies disrupted the cable business. So far, there are flickers of a rebellion from upstarts like the IEX Exchange led by Brad Katsuyama of Flash Boys fame. Meanwhile, big Wall Street brokers like Morgan Stanley and UBS announced they are banding together to create a low-cost “Members Exchange.”

Then there are the big crypto firms like Coinbase, Binance and Circle. All of them are building trading infrastructure that could be adapted to offer traditional equities in the form of tokens. What’s more, their blockchain-based ledger systems would offer a faster and cheaper way to track and settle all the trades.

Taken together, the advent of these new players and new technologies could break the monopoly of the big exchanges in the same way the streaming services has shaken the cable industry.

On the other hand, monopolists are very good at guarding their turf, and it’s hard to see NASDAQ and NYSE letting anyone eat their lunch. Indeed, the two giants have so far succeeded in stopping a single company from listing on IEX. Meanwhile, NYSE is backing a crypto venture of its own that could help keep Coinbase and company out of its backyard.

As always, we like to hear your opinion. Do you think NYSE and NASDAQ will hold their financial forts now and forever? Or will others, including the crypto crowd, move in and turn them into dinosaurs? More news and nuggets below.

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Jeff John Roberts
@jeffjohnroberts
jeff.roberts@fortune.com

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