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Impact of maker-taker fees on stock exchange competition from an agent-based simulation

Author

Listed:
  • Mahiro Hoshino

    (Graduate School of Kanagawa Institute of Technology)

  • Takanobu Mizuta

    (SPARX Asset Management Co., Ltd.)

  • Yasuhiro Sudo

    (Kanagawa Institute of Technology)

  • Isao Yagi

    (Kogakuin University)

Abstract

One fee structure offered by stock exchanges is maker-taker fees, in which the exchange pays rebates to traders who place limit orders and collects trading fees from traders who place market orders. A stock market that employs maker-taker fees is thought to outpace its stock market competition in the sense that its relative market volume share will increase due to the expectation of efficient market formation. However, whether this idea is true has not been sufficiently investigated. Therefore, in the present study, we constructed two artificial markets, one with maker-taker fees and the other without them, and investigated how the trading shares of these two markets vary. We also calculated and compared market liquidity, volatility, and efficiency of the two markets. As a result, the market volume share of the market with maker-taker fees was found to increase with the rebate amount when the stock exchange provided sufficient rebates. Otherwise, the market with maker-taker fees lost market volume share to the market without maker-taker fees. In addition, we found that market liquidity increased and volatility decreased in the market that adopted maker-taker fees. In the market that does not adopt maker-taker fees, market liquidity and volatility did not necessarily improve. In contrast, market efficiency was found to improve in both markets.

Suggested Citation

  • Mahiro Hoshino & Takanobu Mizuta & Yasuhiro Sudo & Isao Yagi, 2022. "Impact of maker-taker fees on stock exchange competition from an agent-based simulation," Journal of Computational Social Science, Springer, vol. 5(2), pages 1323-1342, November.
    • Handle: RePEc:spr:jcsosc:v:5:y:2022:i:2:d:10.1007_s42001-022-00169-5
    DOI: 10.1007/s42001-022-00169-5
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    References listed on IDEAS

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