..The software is definitely not dirt cheap..
Really? Want to buy exchange software for 0.1 bitcoin right now?
I am not criticizing you or anything. But building an exchange is as trivial as free and KYC problems are formality, but I wouldn't even trust my brother to hold my private keys, let alone an exchange.
I wanna get in quick, make profitable trade (which needs volume) and get out as soon as possible, when the moment comes. I care about being honest but I do not care about KYC formalities since they slow me down. Sure take my tax goverment, but atleast let me trade!
Your current approach is 'if you build it they will come', but that won't work because competition.
I cannot see how you labelled that 'if you build it they will come'.. :p