Why Maker Rebates Do Not Eliminate Crypto Trading Costs
Summary
This analysis explains how maker-taker pricing works on central limit order books and why a maker rebate is not automatically a profitable alternative to paying taker fees. It illustrates fee drag with a hypothetical daily BTC trading comparison, then argues that resting orders face adverse selection: informed or urgent traders can take stale quotes before makers adjust. Posting liquidity also ties up capital and may leave a limit order unfilled as prices move away.
The article describes how profitable market making requires technology and trading systems to compete for favorable fills and reduce losses from unfavorable ones. It contrasts transparent exchange order books with OTC and foreign exchange settings, where providers can assess client flow and vary prices. Tick size and volatility affect the economics of capturing spread. The examples are explanatory rather than a controlled empirical study, and the performance chart is described but not reproduced in the text. Its practical advice is to evaluate actual execution outcomes conservatively instead of assuming maker fees can be achieved on every trade.
Key ideas
- Maker orders earn rebates on some venues but face the risk of adverse selection.
- Taker fees can materially affect strategy results, while maker fills are not guaranteed.
- Market makers invest in infrastructure and models to compete for favorable fills.
- Volatility and tick size influence the potential reward for providing liquidity.
- Execution analysis should account for fill quality, missed trades, and fees.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.