What would it take to create my own Bitcoin exchange? I'm looking into creating a Bitcoin / crypto currency trading platform (say, like Tradeking), as I've noticed there are a few sites out there already, except they all have pretty hefty fees.

So, to reduce fees, is it possible to create my own Bitcoin exchange? What is involved in setting one up? I'm pretty sure I'll need to develop an API, which I can do (I am an experienced software developer). I'll also need a business entity and a business bank account to use for transactions. What else? I see this thread...is there anything else I should consider?

Also, if I do set up an exchange, can I control of the fee rates? Other sites have rates averaging around 0.5%...can I set mine to whatever I want (considering my costs), or am I limited in some way by some third-party entity?
Setting up and operating an exchange can be quite involved.

A few tiers to start thinking about:  legal, banking, tech+security, and volume.

Legal


The first question is whether you want to operate globally (e.g. Bitfinex or BitStamp) or focus on a national market (e.g. FlowBTC, meXBT).  The next step is to seek legal counsel to help decide where you want to locate and how to incorporate/structure your business.
You want to think about how you can limit your liability and exposure to litigation, as well as what regulatory/compliance requirements are in your jurisdiction, and what they are likely to be in ther near term.
Merkle Tree offers a useful high-level global map of the regulatory landscape.


Banking


What sorts of banking relationships do I need and how can I secure them?
Note that banks can be heistant to provide services to digital currency exchanges.


Tech + Security

You or a partner need to build and maintain complex architecture that pairs orders, executes transactions, and manages deposits and withdrawals.  Major componets are:


Matching engine
Risk management system
Accounting/audit system
Wallet management
Payment gateways


Security is understandably paramount.  Some things to consider:


Sound internal security procedures among your team  - see, e.g.  CryptoCurrency Security Standard (CCSS) (incredibly important, and often overlooked)
Network and hardware security (secure data center, etc.)
KYC (Know Your Customer) + AML (Anti-Money Laundering) solutions
Two-Factor Authentication for users


Volume

Without lots of live volume, all the above is for naught.  It is well worth your time to actively consider all of the below:


Channeling liquidity from large exchanges like Bitfinex to your exchange
Messaging, media presence, brand creation and maintenance, ads and retargeting
User definition (is this a retail exchange, for advanced users?, etc.), and using this to inform UI design and to prioritize features for product differentiation


Hope this is helpful for getting started!  

Disclosure - I work at a firm called AlphaPoint (http://alphapoint.com) - we provide white label tech to many of the largest Bitcoin exchanges in the marketplace, including full stack tech and hosting, as well as order routing for day-one liquidity.