Research and analysis
Computer trading: pricing liquidity in electronic markets
Report examining the effects of 'make' and 'take' fees on market quality.
Ref: BIS/12/1051 PDF, 353KB, 27 pages
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Trading platforms using electronic limit order books increasingly charge different fees for traders submitting limit orders (‘makers’) and traders submitting market orders (‘takers’). In particular, they offer rebates to makers, contributing to the trading profits of high frequency market-makers. This report looks at the effects of differentiating make and take fees on bid-ask spreads, volume, the supply and demand of liquidity, and market participants’ welfare.
This review was commissioned as part of the Foresight project on the future of computer trading.