How Do CEXs Incentivize Market Makers to Maintain Tight Spreads?

CEXs primarily use a "maker-taker" fee model where market makers (who provide liquidity) receive a rebate on executed trades, while market takers (who remove liquidity) pay a fee. This rebate acts as a financial incentive for market makers to place limit orders that narrow the bid-offer spread, as they profit from the volume they attract and the spread they capture.