You can "update an order" with a single transaction (technically) and pay a single fee... but every order on the blockchain burdens everyone so these are not "free" and everyone is playing the same fees / risks. If we had no fees then obviously someone could flood the network at no cost.
An arbitrage bot at normal exchanges charge you a percent of your volume... compared to a flat rate regardless of volume and depending only upon update frequency. The whole market moves slower... so assuming you were to update your orders every single block you would pay a total of $400 per day in fees. If you have a spread of 1% and work it with $40,000 in volume you would be break even.
The good news is that you rarely have to update your orders every 10 seconds. If you do it once per minute then your costs are $65 per day. If you are a large trader with $100,000 in volume then you will be paying $250 per day on BitStamp vs $65 per day on BTSX.
If you drop down to lower volumes then the big exchanges charge higher fees.
So I think the fee schedule for BTSX is better for "low frequency traders"... given the fee schedule on BitStamp there is a minimum spread of 0.5% for small orders.
Given a choice between paying .5% or paying $0.05 per order, I think BTSX is far cheaper for all orders greater than $10.
Thanks for these explanations. So you see only at quite large volumes, this becomes cheaper than centralized exchanges. And most of them have 0.2 % not 0.5 %.
So let's break it down: if the cancel/fill ratio is 1:1, BTSX is cheaper clearly.
If the cancel/fill ratio is 10:1 (I update 10 times my order before I get a fill), we have $0.03 per fill, and for a ratio of 100 0.3$ dollar and so on. Of course no-one would update every block I agree with this. But for example every 5 minutes is not insane, we would then have 288*0.003 = roughly $1 per day, just for submitting orders. So for a poor guy like me working with $100 capital to have some fun on the blockchain it is too expensive, given that my bot does not make 1% per day.
So you see: this prevents guys like me to start small and experiment with some trading algo. I understand you need to prevent abuse, but one must also facilitate use. I wrote in the other post: a simple POW system, like bitmessage is using, would be a possibility. Only for submitting orders, nothing else, so that the client stays light.