Optimal make–take fees for market making regulation

We address the mechanism design problem of an exchange setting suitable make– take fees to attract liquidity on its platform. Using a principal–agent approach, we provide the optimal compensation scheme of a market maker in quasi‐explicit form. This contract depends essentially on the market maker i...

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Bibliographic Details
Published in:Mathematical finance 2021-01, Vol.31 (1), p.109-148
Main Authors: Euch, Omar El, Mastrolia, Thibaut, Rosenbaum, Mathieu, Touzi, Nizar
Format: Article
Language:English
Subjects:
Compensation
Exchanging
Fees & charges
financial regulation
high‐frequency trading
Investors
Liquidity
make–take fees
market making
Markets
Oligopoly
principal–agent problem
Regulation
Simplicity
stochastic control
Trading
Volatility
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