Maker-Taker Pricing

Maker-taker pricing is one of the defining features of modern US equity market structure. Under this model, an exchange charges a fee — typically around $0.0030 per share — to the party whose order removes resting liquidity from the order book (the taker), and pays a rebate — typically around $0.0020 per share — to the party whose resting order provided that liquidity (the maker). The exchange retains the spread between the fee charged and the rebate paid as revenue.

The economic rationale is straightforward: by paying makers for posting quotes, exchanges attract more displayed liquidity, which tightens spreads and makes the venue more attractive to order flow. This competition for liquidity has driven US equity spreads to historically narrow levels in large-cap stocks.

However, maker-taker pricing also creates potential conflicts of interest. When a retail broker routes an order to a venue that offers the highest rebate rather than the best execution for the client, the broker is profiting at the client's expense. Regulation NMS's Rule 610 caps access fees at $0.0030 per share to prevent excessive taker charges, but critics argue this cap is too high and that the rebate system distorts order routing decisions.

A variation called the inverted model, used by venues such as IEX and some NASDAQ venues, flips the structure: makers pay a fee and takers receive a rebate. Inverted venues attract order flow from participants who prefer to execute aggressively and want to be compensated for doing so.

The SEC has proposed reducing the access fee cap and the associated rebates as part of its equity market structure reform agenda, arguing that lower caps would reduce conflicts of interest in order routing. The debate reflects deep disagreements about whether maker-taker pricing primarily benefits investors through tighter spreads or primarily benefits exchanges and brokers through fee extraction.