The Anatomy of a Fee Change - Evidence from Cryptocurrency Markets

19 Pages Posted: 25 Sep 2019

See all articles by Alexander Brauneis

Alexander Brauneis

University of Klagenfurt

Roland Mestel

University of Graz

Ryan Riordan

Queen's University - Smith School of Business

Erik Theissen

University of Mannheim - Finance Area

Date Written: September 16, 2019

Abstract

A maker fee is the fee charged to submitters of limit orders that execute. This could increase the cost of supplying liquidity and be reflected in bid-ask spreads and prices more generally. We analyze the introduction of maker fees on Coinbase Pro, a leading cryptocurrency exchange. We perform a difference-in-differences analysis using data from Bitfinex, another leading cryptocurrency exchange, as a control sample. Our study is different from previous papers in that:

(1) it analyzes cryptocurrency rather than equity markets,

(2) uses both low-frequency (daily) and high-frequency (minute-by-minute) data and,

(3) studies how the introduction of a maker fee affects liquidity beyond the best quotes.

We find that, upon the introduction of the maker fee, quoted spreads increases while depth and trading activity decrease. Liquidity beyond the best quotes also decreases.

Keywords: cryptocurrencies, trading fees, market liquidity, maker-taker fees

JEL Classification: G12, G14

Suggested Citation

Brauneis, Alexander and Mestel, Roland and Riordan, Ryan and Theissen, Erik, The Anatomy of a Fee Change - Evidence from Cryptocurrency Markets (September 16, 2019). Available at SSRN: https://ssrn.com/abstract=3454439 or http://dx.doi.org/10.2139/ssrn.3454439

Alexander Brauneis (Contact Author)

University of Klagenfurt ( email )

Universitaetsstrasse 65-67
Klagenfurt, 9020
Austria
+43 463 2700 4022 (Phone)
+43 463 2700 4092 (Fax)

HOME PAGE: http://www.aau.at/fin

Roland Mestel

University of Graz ( email )

Institute of Banking and Finance
Universitaetsstrasse 15/F2
A-8010 Graz
Austria
+43 316 380 7304 (Phone)
+43 316 380 9580 (Fax)

Ryan Riordan

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Erik Theissen

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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