I'm asking this question out of curiosity as a person who has never traded before.

I notice exchanges generally reward market makers while taxing takers with a fee. If everyone in an exchange chooses to avoid fees and just queue their limit orders on the order book, can the exchange match those orders? How does the exchange do this without anyone placing market orders?

From the little that I understand, those avoiding fees will place limit orders that do not coincide with existing prices on the order book to prevent instant matching, thus incurring a taker's fee.

In short, I'm curious to know, if an exchange only has market makers but zero takers, can the exchange match any orders?

3 Answers 3


Every limit order that gets filled means a taker showed up. The taker paid the commission and the maker got a rebate.

If everyone is a maker, then no trades will happen, simple as that.

The reality is there are plenty of different kinds of market participants. A lot of fractional share purchasing services for undercapitalized investors are always takers. Any organization that Market On Close orders at the end of the trading session are always takers.

It is so diverse that this will never happen. And if it does happen this means nothing for the exchange either, it just means volume dropped. Exchanges have other ways of making revenues, as they sell trade data.

The exchanges with the steepest rebates are typically geographically located before the normal exchange, and they are intentionally attracting liquidity with "the best deal" so that anybody watching that exchange gets to see what someone is trying to buy/sell and runs to the normal exchange faster to change their prices, before the investor's order reaches the normal exchange.

  • Did you overlook a word in "Any organization that Market On Close orders at the end of the trading session are always takers."
    – RonJohn
    Feb 5, 2021 at 2:50
  • perhaps a verb. @RonJohn "Any organization that initiates Market On Close (MOC) orders..."
    – CQM
    Feb 5, 2021 at 6:52

What is the difference between a market maker and a market taker?:

Market taker

A market taker is a participant of the market, that is agreeing with the currently listed prices on the order book and wishes to fill his trade immediately. If the highest selling price and the lowest buying price is okay for you and you settle a trade, you become a market taker.

Market maker

A market maker places the orders with prices that are different from the current market price. Usually, a market maker will try and sell for higher price and buy for lower price. If you make an order with a price that is different from the market price, you are a market maker. Market maker’s trades are not filled immediately, they usually appear in the order book and are executed when a market taker finds maker’s price satisfactory.

Thus, "if an exchange only has market makers but zero takers, can the exchange match any orders"? No, because there's nobody to agree with the maker.

What Maker-Taker Fees Mean for You:

Makers typically are high-frequency trading firms, whose business models largely depend on specialized trading strategies designed to capture payments. Takers generally are either large investment firms looking to buy or sell big blocks of stocks or hedge funds making bets on short-term price moves.

High-volume traders get a discount.

  • If an exchange needs market makers as much as takers to function, why do exchanges generally charge higher fees to takers while makers are sometimes given rebate? If both components are essential, why aren't they taxed or rewarded the same?
    – bass4focus
    Feb 5, 2021 at 1:49
  • @bass4focus see my edit.
    – RonJohn
    Feb 5, 2021 at 1:54
  • The reasoning behind higher maker rebates is to bring in additional traders, increasing liquidity. In the book "Flash Boys", Michael Lewis chronicled an ECN collocated near the NYSE SIP processor in New Jersey that provided taker rebates. I don't know if the exchange still exists and if so, if it still does this but the premise was to attract liquidity for price discovery so that the HFT-ers could front run orders. Feb 5, 2021 at 2:29

Here's a simple analogy.

When you get a real time stock quote, you'll see a bid and an ask price. In the U.S. this is NBBO. These are the limit orders placed by makers. Someone who crosses the spread with a market order (buy at the ask or sell at the bid) is a taker. IOW, transactions occur because a taker accepted the price of a maker. No takers, no transactions.

The ECN rebate system operates in the same fashion.

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