What Is a “Market Maker Rebate” and How Does It Incentivize Liquidity Provision?

A market maker rebate is a payment from an exchange to a trader (the "maker") whose limit order adds liquidity to the order book. By offering this rebate, the exchange incentivizes market makers to continuously quote competitive bid and ask prices.

This increased liquidity narrows the bid-ask spread, which benefits all traders by reducing the cost of execution and minimizing slippage for market orders. It is the core of the "maker-taker" fee model.