How Routed Market Orders Interact with Exchange Fees

Summary

The document discusses a market order sent to an exchange with a taker-maker fee schedule when the best available quote is at another venue. The answer describes the outcome for a buy order: it may rest as the best bid on the chosen exchange, fill there if a matching offer is available, or route to the venue displaying the best offer if routing is enabled. Thus, venue selection and routing behavior affect where execution occurs and which exchange fees apply.

It also clarifies who ultimately bears the fees. The answer says exchange charges or rebates flow through to the client account; a broker charging a flat commission may absorb those costs against the commission already collected. This is a brief explanation rather than a comprehensive account of order handling. Its example assumes a buy order and routing is permitted, and actual outcomes depend on order instructions, available quotes, and venue rules.

Key ideas

• A market order sent to one venue may execute there or route to another venue, depending on available quotes and routing permissions.
• For a buy order, the relevant comparison is whether a matching offer is available at the chosen exchange or elsewhere.
• Exchange fees and rebates are generally reflected in the client account, subject to the broker's pricing arrangement.
• The example does not cover every order type, routing rule, or fee schedule.

Tags

# Fees from market order routing in different fee-strucuted exchanges


# Fees from market order routing in different fee-strucuted exchanges












Let's have two exchanges A and B. Exchange A has maker-taker fee structure, while exchange B has taker-maker fee structure. What happens when a broker routes market order to an exchange B at the time when NBBO is at the exchange A? Will the order be automatically routed (when the order type allows routing) to the exchange A and therefore the broker will have to pay the routing fee from exchange B and taker fee from exchange A?

## Answer by amdopt (score 2, accepted)

https://quant.stackexchange.com/a/33580

> What happens when a broker routes market order to an exchange B at the time when NBBO is at the exchange A?

Assuming the order was a Buy order, your market order just became the best bid and it is on exchange B. If the best offer was on B, order filled, if not it will route to A (assuming routing allowed).

> the broker will have to pay the routing fee from exchange B and taker fee from exchange A?

The fees paid will land in the client account. The broker doesn't pay anything. If you have some sort of flat fee the you pay per trade then the broker absorbs (not pays) the trade fees against the flat (exorbitant) fee you paid the broker. Either way you want to look at it, the client account pays.

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