DeutschLiquidity providers fulfill an important function in asset trading. By placing orders in the order book, they provide liquidity for purchases and sales for other market participants. Since this increases the tradable volume of an asset on an exchange, liquidity providers are very important for exchanges to increase the attractiveness of their trading venue.
The taker fee is a fee that is charged when an investor places an order that is executed immediately, i.e., the buyer accepts an already existing order instead of waiting for a new order to be executed. In this case, the buyer withdraws liquidity from the trading platform.
The counterpart to this is the so-called “maker fee”. A maker fee is the fee charged for a new order that is not executed immediately, but remains in the order book and waits for another buyer to accept it. In this case, you provide liquidity to the crypto exchange.
How High is the Taker Fee?
The taker fee varies among the different crypto exchanges. Depending on the crypto exchange and trading volume, the taker fee can even be less than 0.10 percent of the trading amount. However, values between 0.10 and 0.50 percent are more common. Since takers withdraw liquidity from the market by executing orders in the order book, taker fees are normally higher than maker fees in order to grant the maker a discount on their transaction fee.
Effects on the Trading of Cryptocurrencies
The taker fee can influence the trading of cryptocurrencies because it reduces the profit that an investor can make. For example, if an investor buys a cryptocurrency at a price of 10,000 euros and a taker fee of 0.25 percent is charged, the investor would have to pay a price of 10,025 euros. If the investor later sells the cryptocurrency at a price of 10,100 euros, he would make a profit of 75 euros instead of 100 euros, because he would have to take into account the taker fee of 25 euros.
Effects of the Taker Fee on Market Liquidity
The taker fee can also affect the liquidity of the market. By charging a fee for the completion of immediate trading orders, the incentive for traders to place such orders on the market is reduced, which can lead to less volume being traded in the market and thus less liquidity being available.
A low taker fee can help to increase the liquidity of the market by increasing the incentive for traders to place immediate trading orders on the market. If the taker fee is too high, traders may be discouraged from placing market orders, which can lead to lower liquidity.
A high taker fee can also cause the so-called spread, i.e. the difference between the buying and selling price, to increase. This can make it more difficult for traders to fulfill orders, because when the spread becomes larger, the price difference between the buying and selling price is larger. This also leads to a decrease in trading volume and thus less liquidity.
In some cases, exchanges may also offer incentives for investors to pay the taker fee in order to increase market liquidity. One way to do this is to offer discounts on the taker fee if the investor reaches a certain trading volume. This can help more investors place trades and thus more liquidity is available in the market.
Conclusion on the Taker Fee
The taker fee plays an important role in determining the liquidity of a market. A taker fee that is too high can lead to lower liquidity and higher spreads, while a reasonable taker fee can lead to a more competitive market with higher liquidity.
