What Are Maker-Taker Exchange Fees?
If you're new to crypto trading, some of the terminology might be unfamiliar. In this guide we're covering maker-taker fees and what they mean for crypto traders.
What are maker-taker exchange fees?
The maker-taker fee model is designed to reward participants who provide liquidity to the market (makers) and charge those who remove liquidity (takers). Here's how it breaks down.
Maker fees
Makers are traders who place limit orders that are not immediately matched, thus "making" liquidity for the market. These orders sit on the order book, waiting to be executed when another trader takes them. Makers are typically rewarded with lower fees, and in some cases, even rebates. For instance, if a trader places a buy limit order at a price below the current market rate, it will remain pending until a seller matches it. Makers contribute to a more liquid market, making it easier for others to trade.
Taker fees
Takers are traders who place market orders that are filled immediately, thus "taking" liquidity from the market. These orders match with existing maker orders. Since takers reduce the available liquidity, exchanges charge them higher fees. Takers prioritize speed and certainty in their trades, paying a premium for the immediate execution of their orders.
What's an order book?
An order book is a digital list of buy and sell orders for a particular asset, such as a cryptocurrency, stock, or commodity, organized by price level. It is used on trading platforms to display the demand and supply for the asset in real-time, allowing traders to see the most recent market activity. The order book contains:
Buy orders (bids): These are the prices buyers are willing to pay, usually arranged from the highest price down.
Sell orders (asks): These are the prices sellers are asking for, arranged from the lowest price up.
Order sizes: Alongside each price, the volume or size of the order is displayed, showing how much of the asset is being bought or sold at that price.
Traders use the order book to gauge market depth and liquidity. It shows whether there is a lot of demand or supply at different price levels, helping them make informed decisions. When a buy order matches a sell order at the same price, the transaction occurs, and those orders are removed from the book. The order book is dynamic, constantly updating as new buy and sell orders are placed, filled, or canceled. There are different types of orders in an order book, including:
Market orders: These are orders that are executed immediately at the best available price, typically not shown in the order book as they are filled instantly.
Limit orders: These are the primary type of order shown in the order book, as they specify a price at which a trader is willing to buy or sell.
Read next: What are the different crypto order types?
How do maker-taker exchange fees impact traders?
The impact of maker-taker fees on your trades depends on your trading style:
Casual traders: If you're trading small amounts and prioritize speed, you're likely to be a taker. For example, buying or selling a cryptocurrency using a market order to ensure the trade is executed immediately. Takers usually pay a higher percentage fee for the convenience of instant transactions.
High-frequency and algorithmic traders: These traders typically prefer to act as makers because they benefit from liquidity rebates or lower fees. By using limit orders, they can trade in high volumes while minimizing transaction costs.
Maker-taker exchange fee structure
The specific fee structure varies across platforms and can even depend on your 30-day trading volume. For example:
Kraken offers relatively low fees, starting at 0.25% for makers and 0.40% for takers for low-volume traders, with discounts for higher volumes.
Coinbase has slightly higher fees, where makers may pay around 0.5%, while takers could pay as much as 0.6% for low-volume trades.
Binance typically provides one of the lowest fee structures in the industry, with takers and makers both starting at a 0.1% fee, which can be reduced further using the platform’s native token, BNB.
Read next: Exchange Fees Comparison Guide
How to reduce maker-taker fees
If you’re looking to reduce fees:
Use limit orders: This allows you to act as a maker. However, the downside is that your trade may not be executed instantly, which could lead to missed opportunities if prices move.
Research different exchanges: Some exchanges run promotional offers with zero fees on certain trading pairs, even for low-volume traders.
Invest in exchange tokens: Many exchanges offer their own token, with considerable discounts for holders, or those who pay fees using that token.
Trade larger volumes: Some exchanges offer discounted fees as your trading volume increases over a 30-day period, so scaling up your trading activity can reduce overall costs.
Read next: Best Crypto Exchanges
What are the pros and cons of the maker-taker model?
Pros
Liquidity incentives: Encourages more liquidity in the market, benefiting all participants.
Cost savings for makers: Traders providing liquidity often enjoy rebates or lower fees.
Cons
Fee complexity: The structure can be confusing, especially for new traders who might not fully understand the difference between market and limit orders.
Higher costs for takers: Immediate execution comes at a premium, which might deter traders who prioritize fast trades.
What do maker-taker fees mean for my crypto taxes?
It’s actually mostly good news in most instances when it comes to crypto fees and taxes. This is because your fees for purchasing or disposing of crypto can usually be added to your cost basis. Increasing your cost basis means you’ll have less of a gain/loss when you later dispose of your crypto and create a tax event. You can learn more in our crypto fees guide, as well as sign up to Koinly today to easily calculate your crypto taxes. Koinly even handles all your fees automatically. Try it free today.
