Subsidizing Liquidity: The Impact of Make/Take Fees on Market Quality
ثبت نشده
چکیده
Competition among stock exchanges has increased dramatically over the last decade. To attract trading volume, most exchanges introduced makertaker fees, an incentive scheme that rewards liquidity suppliers and charges liquidity demanders. Using a change in fees on the Toronto Stock Exchange, we analyze how the breakdown of trading fees between liquidity demanders and suppliers affects market outcomes. Although posted liquidity improves, after accounting for the fees, trading costs are unaffected. Yet trading behavior changed, and liquidity suppliers benefitted through decreased adverse selection. Our findings thus provide a rationale for the entry of liquidity providing high-frequency trading algorithms in subsequent years. JEL Classification: G12, G14.
منابع مشابه
Subsidizing Liquidity: The Impact of Make/Take Fees on Market Quality —Internet Appendix— I Measuring Competition: The Herfindahl Index
We quantify competition among traders by the Herfindahl Index. The index is widely used to assess market concentration and it is computed as the sum of the squared market shares. We study the market for liquidity provision. In an electronic limit order book, liquidity is provided by passive orders and a trader’s market share is the fraction of passive limit order volume that this trader provide...
متن کاملThe Impact of Make-Take Fees on Market Efficiency*
Recently, stock exchanges have altered their trading fees to subsidize liquidity by offering “make” rebates for providing liquidity through limit orders and charging “take” fees for consuming liquidity via marketable orders, leading to debate regarding the impact of these fees on market quality. Using an exogenous experiment performed by NASDAQ in 2015, I employ difference-in-differences analys...
متن کاملThe Impact of Liquidity Requirements on Central Bank Policies in Interbank Market of Iran
The interbank rate has a great impact on the bank's economic activities that it is one of the important instrument for central bank policy. Banks to back up their funds or liquidity demand participate in the interbank market. These change their needed or surplus liquidity based on interbank market conditions. According to this, liquidity requirements can change the central banks' monetary poli...
متن کاملImpact of Macroeconomic and Management Quality Variables on the Profitability of Private Banks; Using Structural Panel VAR Approach
Considering the importance of the Banking system in Iran economy and taking into account the strategic objectives of bank’s activities to improve their performance indicators, the main objective of the present study was to investigate the impact of internal and external factors affecting the three profitability components; including the return on assets (ROA), return on equity (ROE) and the n...
متن کاملBid-Ask Spreads, Volume, and Volatility: Evidence from Livestock Markets
Copyright 2009 by Julieta Frank and Philip Garcia. All rights reserved. Readers may make verbatim copies of this document for non‐commercial purposes by any means, provided that this copyright notice appears on all such copies. Abstract Understanding the determinants of liquidity costs in agricultural futures markets is hampered by a need to use proxies for the bid-ask spread which are often bi...
متن کامل