Intuitively, I feel that, for a given stock traded on 2 exchanges with different price structure (i.e., exchange A is maker-taker, exchange B is taker-maker), the spread should be wider on exchange B (taker-maker) as liquidity providers expect to make the same amount, after fees, on both exchanges.

  1. Could someone please confirm, or deny?

  2. If this is not true, could you please explain why?

Many thanks!

3 Answers 3


"Informed Trading and Maker-Taker Fees in a Low-Latency Limit Order Market" by Brolley and Malinova (2013) not only supports your hypothesis, it sugests rebate fees improve welfare. From the paper:

Changes in exogenous market factors (e.g., a trading platform’s fee structure) lead to changes in the marginal valuations that investors require to submit market or limit orders, and subsequently, to changes in liquidity, trading volume, and market participation by investors. When investors pay a flat fee in a maker-taker pricing environment, ceteris paribus, an increase in a maker rebate lowers the bid-ask spread and induces investors previously indifferent to market and limit orders to trade with market orders (since an investor’s trading costs consists, loosely, of the bid-ask spread and the flat fee levied by their broker). Consequently, the probability of a market order submission increases, and so does the trading volume. This would lead to brokers paying taker fees more frequently and consequently charging investors a higher flat fee. We support this intuition numerically and find further that the increase in the flat fee is more than offset by the decline in the bid-ask spread. For a fixed total exchange fee, investors’ overall trading costs thus decline with an increase in the maker rebate. The marginal submitter of a market order then requires weaker information, and the price impact of a trade declines.


Displayed Spreads on Maker/Taker exchanges are typically narrower than spreads on Taker/Maker or other exchanges.

The reason is simple, participants (assuming they pay the exchange transaction fee or get the exchange rebate) would prefer to post their limit orders on a platform that costs the least. As a result, they display them on an exchange that they can access that has the highest likelihood of execution and the highest rebate.

This is often confused with Payment for Order Flow, which is where a market maker on a given exchange pays an order flow provider or consolidator for sending the order to them. This encourages the Market Maker or Specialist to offer a less competitive price (e.g. matching rather than improving upon the National Best Bid or Offer).

Some retail brokers offer 'flat rate' transaction fees (e.g. $7 per trade) so the customer does not benefit from the rebates (or payment for order flow), whereas other offer other models such as 'cost plus' where the transaction fee is lower, but the customer also pays the exchange fees or receives the rebate.


From what I have read, maker-taker payments attract people interested in the rebates. Who could that be? Brokers. That conflict of interest tends to result in poorer customer fills. To me, that implies that the maker-taker arrangement has wider spreads.

  • 1
    Thanks for your answer, Bob. But I thought maker-taker exchanges were very popular with HF traders, who usually drive spreads narrower.
    – Kroust
    Oct 21, 2018 at 2:21
  • I'm no authority on this topic. Here's a typical read about Payment For Order Flow: bloomberg.com/quicktake/payment-for-order-flow Read the paragraph that contains this: "Critics of the system argue that it sets up a conflict of interest, and that brokers may be tempted to funnel orders to the firms that dangle the most cash for their customer orders instead of firms that regularly trade for the best price." Oct 21, 2018 at 13:08
  • 1
    The rebates go to whoever pays the transaction fees (which in some cases is the customer) as opposed to payment for order flow(PFoF), which goes to the consolidators or the brokers. Bear in mind PFoF does not equal rebates, which is often confused by the media. PFoF is bad and Maker/Taker is a tool to stop it...
    – xirt
    Apr 27, 2019 at 3:53

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