Investigation into effectiveness of maker-taker fees in stock markets using artificial market

As there are many stock exchanges in the United States, investors can choose the exchange that suits their purpose and trade shares there. On the other hand, competition among stock exchanges to secure market participants is intensifying. Furthermore, some new exchanges are attempting to open in asset markets where there is already a battle for market share because they think that they have a chance to obtain market share, due to the trading fees that the current stock exchanges charge being relatively high and their structures being complex. One trading fee structure is a maker-taker fee, in which stock exchanges provide makers, which place limit orders, with rebates and demand that takers, which place market orders, pay trading fees. It is said that maker-taker fees contribute to efficient market formation and improve the stock exchanges’ market shares; however, this opinion has not been sufficiently investigated. In this study, we built two artificial stock markets, one where the stock exchange employs a maker-taker fee and one where it does not, and observed each market’s market share, volatility, and market efficiency. As a result, it was found that the market share of the market where the stock exchange employs a maker-taker fee increases when the stock exchange provides market makers with sufficient rebates. However, when the stock exchange does not provide sufficient rebates, the market share of the market where the stock exchange does not employ a maker-taker fee increases. Also, as the maker’s rebate increases, volatility of the market with a maker-taker fee decreases, whereas that of the market without it increases. Finally, the market efficiencies of both the markets increase as the rebate increases