How Does an Exchange’s Fee Structure Influence a Market Maker’s Quoting Strategy for Options?
The exchange's fee structure, particularly maker-taker fees, is a direct cost input for the market maker. Lower maker fees (or rebates) incentivize market makers to post tighter quotes (narrower bid-ask spreads) to attract order flow.
High taker fees discourage aggressive hedging or liquidation, potentially leading to wider option spreads to cover the increased transaction costs. The fee structure is a key determinant of quoted liquidity.
Glossar
Fee Structure Influence
Influence ⎊ The interplay between fee structures and market dynamics within cryptocurrency derivatives, options trading, and broader financial derivatives represents a critical area of analysis for both traders and risk managers.
Fee Structure
Allocation ⎊ Fee structures within cryptocurrency, options trading, and financial derivatives represent the systematic distribution of costs associated with executing and maintaining positions, impacting net profitability and strategic decision-making.
Quoting Strategy
Precision ⎊ Quoting strategy, within cryptocurrency derivatives, necessitates a granular approach to price discovery, reflecting the inherent volatility and fragmented liquidity characteristic of these markets.