Optimal maker-taker fees for a trading platform

We consider an exchange who wants to define an optimal maker-taker policy. This means it is looking for the best way to reward liquidity provision and apply fees to market participants consuming liquidity. The goal is to... [ view full abstract ]

We consider an exchange who wants to define an optimal maker-taker policy. This means it is looking for the best way to reward liquidity provision and apply fees to market participants consuming liquidity. The goal is to ensure a suitable profit and loss for the platform as well as a stable trading environment for investors. We recast this question into a principal-agent problem and show that we can design an optimal policy in explicit form.