Market Makers & Takers

Knowing who provides liquidity and who consumes it helps interpret exchange fees, spreads, and how your strategy will actually fill.

Roles at a glance

Market makers place resting limit orders that add liquidity to the order book. They earn the spread and often receive reduced (or negative) fees.
Market takers send marketable orders that remove liquidity. They get immediate fills but usually pay higher fees.
Many desks operate hybrid models: provide liquidity most of the day, cross the spread aggressively when inventory or risk limits require.

Revenue sources: bid/ask spread capture, maker rebates, flow internalisation, and inventory financing.
Key costs: technology, connectivity, inventory risk, and occasional adverse selection when prices gap.
KPIs: quote uptime, spread width, queue position, fill ratio, and inventory utilisation.

Revenue sources: directional alpha, arbitrage, event-driven trade ideas, or hedging client flow.
Key costs: taker fees, slippage, and short-term funding when positions extend beyond the initial horizon.
KPIs: effective spread paid, latency to hit quotes, realised vs expected PnL, and opportunity cost of missed fills.

Most exchanges publish maker/taker schedules: higher volume unlocks lower taker fees and may pay rebates for makers.
Quoted spreads include expected taker fees. Compare net spread after fees when choosing venues.
Watch for hidden costs: large tick sizes, risk controls that cancel your resting order, or latency that pushes you down the queue.

Tip: log both gross and fee-adjusted PnL from Executed Trades to verify that strategy edge survives venue fee structures.

Strategy fit: mean-reversion grids or liquidity-provision bots resemble makers; fast breakout systems behave like takers.
Analytics filters: compare datasets (V1/V2) to see how a strategy performs under fee assumptions baked into the scoring model.
Executed trades: reconcile recorded fees with venue tier—if you downgrade, rerun profitability to ensure margins remain positive.
Scaling caution: when you size up, you may start impacting spreads. Rebenchmark to confirm you can still play the maker role profitably.

Map each strategy to its dominant role (maker, taker, or hybrid) before deploying capital.
Negotiate exchange tiers early; a small fee reduction often outweighs incremental PnL improvements.
Measure effective spread: compare mid-price at entry to actual fill price to gauge execution drag.
Review scoring vs realised results monthly. If taker costs grow, prioritise strategies that add liquidity instead.

Avoid mixing maker and taker workflows in the same account without separate risk metrics—combined reporting hides true cost drivers.