What Are Maker and Taker Fees and How Do They Work?

Trading fees are a common operational cost in financial markets. Exchanges implement these charges to cover infrastructure expenses, process transactions, and ensure smooth market operation. They also contribute to the overall stability and efficiency of the trading environment.

Defining a Maker Order

A “maker” order is an instruction placed on an exchange’s order book that is not immediately matched. It waits to be filled, adding to the market’s available liquidity. These orders contribute to the depth of the order book.

Limit orders set at a price not immediately available in the market are common maker orders. For example, a buy limit order below the current lowest sell price, or a sell limit order above the current highest buy price, functions as a maker order. These orders await a counter-order at their specified price.

Maker vs. Taker: The Distinction

In contrast to a maker order, a “taker” order is executed immediately against an existing order on the exchange’s order book. These orders effectively “take” liquidity out of the market by fulfilling an outstanding buy or sell request. Taker orders prioritize immediate execution over price discovery.

A prime example of a taker order is a market order, which is executed at the best available current price. Similarly, a limit order that is set at a price that allows for immediate matching against an existing order also functions as a taker order. The fee structure often reflects this dynamic, with different charges applied based on whether an order contributes to or consumes liquidity.

Rationale Behind Maker Fees

Exchanges implement a maker-taker fee model primarily to incentivize the provision of liquidity to their trading platforms. This fee structure encourages traders to place limit orders that populate the order book, rather than only placing orders that immediately execute. By offering lower fees, or sometimes even rebates, to makers, exchanges make it more attractive to supply capital that waits for a match.

This strategy fosters a healthier trading ecosystem. Increased liquidity leads to deeper order books, meaning there are more buyers and sellers at various price points. Consequently, this can result in narrower bid-ask spreads, which are the differences between the highest price a buyer is willing to pay and the lowest price a seller is willing to accept. Narrower spreads and deeper order books facilitate better price discovery and smoother execution for all participants.

How Maker Fees are Applied

Maker fees are typically calculated as a percentage of the trade’s notional value, meaning the total value of the assets being exchanged. While the exact percentage can vary significantly, it commonly ranges from 0.01% to 0.25% per transaction, depending on the specific exchange and asset class. This percentage may also fluctuate based on a trader’s monthly trading volume, with higher volume traders often receiving discounted rates or even rebates.

These maker-taker fee models are prevalent across various financial markets, including cryptocurrency exchanges, stock exchanges, and foreign exchange (forex) markets. When a maker order is successfully matched and executed, the corresponding fee is generally deducted from the proceeds of the trade. For instance, if a sell order is a maker order, the fee would be subtracted from the cash received.