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Say you want to transfer some coins from one exchange to another, and you want to do that directly without sending them to an indermediate address. Bittrex' Terms and Conditions, for example, state

You may be required to verify that you control the External Virtual Currency Address that you use to load Virtual Currency to your Hosted Wallet.

I presume you are not able to verify that, if the external address is under the control of an exchange. But under what circumstances would it be even necessary to verify your withdrawal address? And what other risks are there, if you send them directly from the withdrawal address of exchange A to the deposit address of exchange B without going through another address which is only under your personal control?

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I have used BITTREX, and I have transferred between exchanges (HitBTC, BITTREX, Binance). I am not aware of any risk, as this happens as a standard transaction between two wallets belonging to exchanges. I have even noticed, that the addresses change (maybe they use HD wallets). My use case was simple, that one exchange did not provide the altcoin I was looking for. So I was able to transfer amounts between exchanges, providing the target address. I did that with bitcoins, ethers and bcash. I haven't been asked by any of the exchanges, and can't remember having seen s.th. like this from BitTRex.

I cannot say, under which circumstances this would be necessary, that is a question which might need to go to BitTRex. But I think it is a layer of protection for the users. Two many people sent their coins to wrong addresses, and then spammed the support teams with requests about their lost coins.

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I have also just done that from Bitstamp to Luno, transfered BTC. All went well.

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Generally if everything goes fine it's safe.

Though if something goes wrong then it's much harder to investigate and act as your control over exchanges' wallets is very limited.

My personal approach is -- understand the risks and proceed :)

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The only issue I could see arising is that if the funds need to be refunded for some reason, exchanges occasionally use one hot wallet for all outgoing transactions while having individual wallets for incoming transactions.

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