Understanding Maker-Taker Fees in Cryptocurrency Trading

Maker and taker fees are two different types of fees that you may be subject to on a cryptocurrency exchange. We explain maker fees vs. taker fees.[1]

What are Maker Fees and Taker Fees

In cases where maker and taker fees apply:

  • When you place a order that gets compeltely filled immediately (for example with market and stop orders) you are a “taker” and you pay a fee for this.
  • Meanwhile, if an order takes a while to fill (such as with a limit order for a price the coin won’t hit immediately) you are a “maker” and you generally pay a reduced fee for this.

“Takers” generally pay a higher fee and “makers” generally pay a lower fee. Thus, one always wants to be a “maker.”

Due to this, in almost every situation it makes sense to set limit orders that won’t be placed immediately and wait to be matched with another buyer/seller (as this makes you a “maker” and avoids the fee or lowers the fee).

Not every exchange uses a maker-taker model, but popular ones like GDAX and Kraken do, thus this is important to understand.

TIP: Limit orders are inherently special, they are simply the only order type that doesn’t trigger an immediate buy/sell. A market order is immediate and a stop order creates a market order when a specific price is reached. Meanwhile, a limit order can “sit on the order books” if set at a price that won’t fill immediately (which is what you want when facing a maker-taker fee schedule).

Why Do Cryptocurrency Exchanges Use a Maker-Taker Model?

Markets with lots of high frequency trading can suffer from rapid trading that diminishes liquidity and distorts prices (which benefits short term traders trying to make big profits quick and hurts long term traders).[2]

To offset the bad behavior, exchanges can charge maker-taker fees. This essentially charges those who try to trade quickly a premium. In other words, if you want to “take” right now, you pay for it.

This ensures that lots of limit orders are sitting there, helping to steady the price of coin.

That is the gist of maker-taker fees and why they are a thing, the rest of this page we’ll use Coinbase’s GDAX as a model to further explore these concepts.

Understanding Maker-Taker Fees Via GDAX

The gist is maker fees are when your order isn’t filled immediately, taker fees is when it is. Maker fees are higher, so you should always aim to pay taker fees… that generally means setting limit orders that will take some time to be filled.

Maker: When you place an order at the market price that gets filled immediately, you are considered a taker and will pay a fee between (for GDAX that is 0.10% and 0.25% for BTC books and 0.10% and 0.30% for ETH books depending on your volume; the more you trade, the lower your fee).

Taker: When you place an order which is not immediately matched by an existing order (for example, a limit order that takes a few hours or days to fill), that order is placed on the order book. Once that order sells/buys, that is once another customer places an order that matches yours, you are considered the maker (for GDAX, your fee will be 0%.)

TIP: If an order that gets partially matched immediately, you pay a taker fee for that portion. The remainder of the order is placed on the order book and, when matched, is considered a maker order.

In other words, if your order goes through right away, which is generally the case with a market order (although can be the case with a limit or stop), then you pay a fee. If your order doesn’t go through right away, then you don’t pay a fee.

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Citations

  1. Fee Structure
  2. What Maker-Taker Fees Mean To You