How HFT Transaction Costs Depend on Fees and Rebates

Summary

The document considers how low transaction costs can be for high-frequency trading, where small price movements make fees consequential. Its response says the answer depends on what counts as a fee, including whether regulatory charges are included alongside exchange charges. It also notes that some exchanges pay liquidity providers, so passive trading can receive rebates that make the exchange-fee component negative.

The discussion distinguishes large exchanges, where the respondent is unsure whether fees can be negotiated, from dark pools, where fees may be negotiated to attract enough liquidity. It does not provide market-wide fee data or a specific cost estimate. Instead, it argues that strategy evaluation depends on the fee schedule actually available to the trader. The practical lesson is to model all relevant charges and rebates under the trader’s own arrangements; the comments are anecdotal and do not establish typical terms for any venue or firm.

Key ideas

• Transaction cost estimates depend on whether regulatory and exchange fees are both counted.
• Some venues pay rebates to passive liquidity providers, making exchange fees negative in some cases.
• Dark pool fees may be negotiated, while the response is uncertain about negotiation on large exchanges.
• A strategy’s relevant fee input is the schedule available to the trader.
• The document supplies no general market-wide cost estimate.

Tags

# How low can HFT transaction costs go?


# How low can HFT transaction costs go?












When evaluating an HFT strategy, transaction costs are clearly an important question. When looking at commercial discount brokers for retail clients, costs can be as low as 0.005 USD per share, but given the actual volumes traded back and forth, and the miniscule price movements HFTs try to exploit, it appears that HFT transaction costs have to be much lower than that.

Does anyone have data on how low these transaction costs can go?

## Answer by chollida (score 3)

https://quant.stackexchange.com/a/14223

Well the answer depends on what are you considering a fee?

Do you included per trade regulatory fees or just exchange fees?

Many exchanges will pay you for being the passive side of a trade, so technically the fees in that case are negative.

For the big exchanges, I'm not sure that you can negotiate the fee's. I'll confess I've never tried and the fund I work at isn't big enough:) But in dark pools there is a lot of negotiating that goes on for fees so you can imagine that the fees that some HFT firms pay approach zero very quickly, just so the dark pools can get a critical mass of liquidity.

I should point out that for developing a strategy, the only real fee that matters is the fee schedule you have negotiated. So in fact only you can answer this question:)

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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.