How Do Exchanges Use Tiered Fee Structures to Incentivize High-Volume Trading?
Exchanges use tiered fee structures to reward traders who generate high trading volumes. These tiers are typically based on a user's 30-day trading volume.
As a trader's volume increases, they move up through the tiers and qualify for lower maker and taker fees. This system incentivizes market makers and high-frequency traders to use the platform, which in turn increases liquidity and deepens the order book for all users.
Glossar
Tiered Fee Structures
Structure ⎊ Tiered fee structures segment transaction or trading fees based on the user's volume, status, or the complexity of the operation being performed, often rewarding higher activity with lower marginal costs.
Trading Volume
Liquidity ⎊ ⎊ Trading volume represents the total quantity of an asset ⎊ cryptocurrency, options contracts, or financial derivatives ⎊ bought and sold within a given timeframe, typically expressed in units or notional value.
Fee Structures
Commissions ⎊ Fee structures within cryptocurrency derivatives trading frequently employ a tiered commission model, scaling inversely with trading volume to incentivize liquidity provision and reward active participants.
Tiered Fee Structure
Structure ⎊ A Tiered Fee Structure is a pricing model employed by exchanges where the transaction fee rate applied to a trader's activity is determined by their volume or other quantitative metrics, placing them into one of several predefined levels.