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I am trying to understand how volume-based fee schedules would work with a high frequency trading algorithm.

Let's say I am trading 1 BTC and I am averaging 1000 trades every 5 minutes.

Does the fee schedule apply to the price of the entire bitcoin traded 1000 times in those 5 minutes?

For example, on Binance the Maker/Taker fee schedule for <50 BTC is: 0.1000% / 0.1000%. Does that mean every one of those 1000 trades in those 5 minutes will rack up 0.1% of the price of a bitcoin?

Let's say for one profitable trade, with one BTC buy @ $23737.00, and one BTC sell @ $23751.00, with a presumed profit of $14, would the fee for the buy = $23.737, and the fee for the sell = $23.751, making the total fee for both transactions = $47.488?

If so, how would it ever make sense to trade with an HFT algo? The fees would seem to outweigh any profits an HFT algo could eek out of trading.

Or am I misunderstanding fee schedules completely?

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  • It appears that Makers just pay a smaller trading fee than Takers when based on a 30-day volume: binance.com/en/fee/schedule . A Maker puts in a limit order that does not get executed at the immediate market while a Taker puts in an order that does get executed at the immediate market. – S Spring Dec 23 '20 at 0:23
  • I'm trying to understand how the fee schedule is applied. Is it applied to every trade against the whole amount of the trade? Yes/no? – Dshiz Dec 23 '20 at 0:26
  • Well, if more than 150000 BTC is traded in 30 days then the fee is 0.02% or less for the Maker. I think a round-trip would be two fees. I think the fee is on each trade. – S Spring Dec 23 '20 at 0:37
  • If I've traded 1 BTC 1000 times in 5 minutes, isn't that 1000 BTC volume in 5 minutes? And if so, my trade volume for 30 days might be 8760 BTC. So, I would be paying 0.0700% (according to the fee schedule) on 8760 BTC, correct? Even though I've really only traded 1 BTC the entire time? – Dshiz Dec 23 '20 at 0:39
  • I think the fee is on each trade of each BTC. – S Spring Dec 23 '20 at 1:06
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People trading in high frequencies use a mixture of exchanges where they have lower commissions and strategies where they have a greater edge per trade.

With many exchanges, lower and more favorable commissions arrangements can be negotiated, and they are more interested in volume than one single customer. Money talks.

In more established markets, exchanges typically offer rebates for the liquidity maker and only the taker pays commissions. You can see a similar trend playing out on crypto exchanges.

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  • Thank you for your answer. If you wouldn't mind looking at the updates to my question... Is my understanding of fee schedules correct, or am I missing something? – Dshiz Dec 23 '20 at 0:16
  • @Dshiz looks right – CQM Dec 23 '20 at 8:21

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