Are Flat Fees the Solution to Maker-Taker?

While most exchanges have a maker-taker pricing model, one that pays rebates to market makers for adding liquidity, or charges a modest fee for taking liquidity, IEX offers a fresh approach to an alternative by offering one flat fee rather than incentives and rebates.  

IEX Flat Rate Fee Schedule

IEX, the newest stock exchange, does not charge for connectivity or data fees, and they also do not encourage a Maker-Taker environment.  IEX prefers to implement flat rate fees based on order visibility.  For non-displayed liquidity brokers will pay a flat rate of $.0009/share, whether they are making or taking liquidity.

For displayed liquidity, there is NO fee whether making or taking liquidity.  Here, the choice for the customer is whether to take the discount for making their order visible, and thus part of the NBBO, or pay extra to hide it.

The flat fee schedule utilized by IEX puts the incentive where it should be, on displaying your liquidity and aiding price discovery in the market.

Maker Taker Pilot

There was talk of a pilot program to measure the impact that reduced fees would have on market quality and behavior.  In 2016. the Securities and Exchange Commission’s Equity Market Structure Advisory Committee recommended the pilot program.   SEC Chairwoman at the time, Mary Jo White, stated that the pilot would be voted on by the commission in 2017.  Since then, new developments such as President Trump in the White House and turnover at the SEC have put the pilot on hold.   

Prior to Trump’s inauguration, Mary Jo White resigned as SEC Chair. According to Trump’s advisors, incoming SEC officials are looking at broader reform rather than piecemeal reform with Maker-Taker.   Paul Atkins is the former SEC commissioner, who now advises President Trump on financial regulation matters.  Mr. Atkins is actually an opponent of Reg NMS, and a proponent for a holistic overall review of the market.  

It will be interesting to see what the coming months have in store from the new administration, and new SEC leaders.  While exchanges need a compensation for providing a valuable service, a flat fee would result in revenue for the exchange, without creating a conflict of interest with rebates.   

There is no easy answer for such a complex situation.  Most traders and brokers agree, however, that Maker-Taker needs to go!  (and we do not need a pilot program to tell us that).  

Great Point Capital has the in-depth knowledge of the market structure and order types, including the available order types that allow you to go directly to dark pools, to place orders at the midpoint of the NBBO, and capture rebates by adding liquidity.  We combine this knowledge with valuable tools like the Takion software platform, to let you direct orders to the venue giving the best outcome.

Great Point Capital has been serving the trading community since 2001 and our 100+ prop traders actively trade the firm’s capital, specializing in equities and equity options.  We are headquartered in Chicago with a location in Austin, TX.  Contact Great Point Capital LLC today, in either our Chicago Office, or our Austin Office, to learn more about how we can successfully trade together with high performance results.  We are one of the very few firms able to offer access to Takion Software Platform, enhancing your online trading broker performance.