alot of people here cannot even get the buzzwords right let alone associate the correct businesses to the correct buzzword

an investment company use terms like portfolio management not "exchange"
they use brokerage not "exchange" they use investment firm not "exchange"

so lets define 2 terms
portfolio managers (custodians of investment)
and exchanges(swap shops)

the latter would be a service of one currency in another currency out.. same day. no custodial service
the former would be a custodian. that allows buys and sells of multiple assets in and out interchangeably while still holding onto and being responsible of their customers value/security

there are not that many actual "swap shop" exchanges that are decentralised. but there can become some that offer instant swaps without long term custody services needed. and it can become its own industry.

however these swap shops would still need regulation because they are still a facilitator of finance a money business thus still end up needing to KYC customers
however due to lack of custody service they wont need extra requirements like auditing customers holdings or insuring customer holding becasue its a straight trade in and out

where as portfolio managers would need extreme regulation to support their competence to manage and hoard customers value as well as needing regular audits and pay for insurances and security and other safe guards like having a customer service team for customers to actually contact