REVIEW 1 cited by
Optimal make-take fees for market making regulation
Not yet reviewed by Pith; the record is open.
This paper has not been read by Pith yet. Machine review is queued; the pith claim, tier, and objections will appear here once it completes.
SPECIMEN: schema-true, not a live event
T0 review · schema-true
One-sentence machine reading of the paper's core claim.
pith:XXXXXXXX · record.json · timestamp
read the original abstract
We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This contract depends essentially on the market maker inventory trajectory and on the volatility of the asset. We also provide the optimal quotes that should be displayed by the market maker. The simplicity of our formulas allows us to analyze in details the effects of optimal contracting with an exchange, compared to a situation without contract. We show in particular that it leads to higher quality liquidity and lower trading costs for investors.
Forward citations
Cited by 1 Pith paper
-
Regulation or Competition:Major-Minor Optimal Liquidation across Dark and Lit Pools
A dynamic make-take fee and compensation scheme is constructed for optimal liquidation across lit and dark pools and is claimed to reduce market impact relative to a competitive major-minor market.
Discussion (0). Continue with ORCID to comment.