Once REP is distributed I assume it will be listed on exchanges.
Are the exchanges going to lose up to 20% of their clients REP holdings every two months for being in a dormant state ?
No. Dormant rep wont lose a %. Only dormant rep should be transferable so exchanges shouldn't be able to hold active rep (unless they activate it themselves - which would bring about reporting requirements and potentially liability - so doubtful they would). However, I think it can only be dormant for x period and then it becomes active. Maybe 6 months (3 reporting periods) or so.