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I remember talking with SBF, telling him it was insane to start an exchange with %-based fees, I thought "who would take such a hit on their risk:reward ratio!"

by robswc 4y ago

I remember talking with SBF, telling him it was insane to start an exchange with %-based fees, I thought "who would take such a hit on their risk:reward ratio!" Crypto traders are something else though, lol.

smabie 4y ago
Tradfi has % based fees too tho?
hackerlight 4y ago
Aren't the fees of all crypto exchanges based on % of notional? As are most tradfi exchanges?
- robswc 4y ago
  They are. IIRC the fees at FTX were higher than Bitmex though, which had the lowest fees. I figured it would be hard to convince people to swap exchanges with higher fees but I was obviously way off.
anonymoushn 4y ago
FTX has similar fees to other crypto exchanges. lit venues in US equities also charge percentage-based fees.
- robswc 4y ago
  Sure, but looking at the fee schedule... https://help.ftx.us/hc/en-us/articles/360043579273-Fees https://help.ftx.us/hc/en-us/articles/360043579273-Fees Starting out, you're still looking at paying a ton of money in fees just to put on bets. I could do the calculations but I'm on mobile... essentially though, you would have to just do exceptionally well, for an exceptionally long time to make any sort of profit without some "unethical edge" which I just see as not being worthwhile. I run a trading firm and even at the best crypto fee tiers, those fees will absolutely destroy your risk to reward because you start the position down significantly if your targets are less than 1%. If you're a "swing trader" the fees aren't all too bad I guess... but at the end of the day, for equities, most brokers you're looking at only around $30-50 to trade $2 million, regardless of your targets or entry. $2 million even at the highest tier you're paying multiples of that. It's the taker fees that are brutal.
  - anonymoushn 4y ago
    > Starting out, you're still looking at paying a ton of money in fees just to put on bets. I could do the calculations but I'm on mobile... essentially though, you would have to just do exceptionally well, for an exceptionally long time to make any sort of profit without some "unethical edge" which I just see as not being worthwhile. These markets are pretty inefficient. I don't think participants are really concerned with 1.5bps taker fees. Notably these fees are smaller than the fees at the largest venue: https://www.binance.com/en/fee/futureFee https://www.binance.com/en/fee/futureFee In general I agree that the initial fee rates of e.g. 60bps at Coinbase or 20bps at FTX US are exploitative and would wipe out any reasonable edge. To some extent, venues could capture more volume by lowering fees, but price-insensitive spenders-on-fees would not make any more trades than they do now, and FTX in particular seems to be constantly running up against the technological limits of having written their risk checks and matching engine in Python and apparently not even using an in-memory cache or anything to allow this Python used for risk checks to access the state it needs faster some of the time, so attempting to allow people to place more orders just won't work out for them right now. I also run a trading firm. We trade about 25 million dollars per day at FTX and collect maker rebates on almost all of this. We'll get these numbers up though :) Edit: Actually, for the sort of trading you seem to be talking about, where a bunch of human traders make a moderate to large number of trading decisions throughout each day based on some combination of price information, news, and their own analysis, it seems nearly impossible to have any edge in US equities and decently likely to have an edge that is much larger than fees in cipher tokens. So from my perspective it seems like such shops should avoid trying to trade US equities.
    - robswc 4y ago
      Fair enough! I've been out of crypto for quite some time. Partly due to the fees. Again tho, that was back when I would try to get into a few positions a day and be lucky to see any good targets around 1%. I might get back into it though. To trade on FTX (non-US) are you able to do that through an off-shore business or is even that frowned upon?
junofan 4y ago
> "who would take such a hit on their risk:reward ratio!" What does this mean?
- robswc 4y ago
  IMO, it means that _most_ crypto trading is impossible (on less than 1D time frames at least)... or rather the edge you need to be successful is astronomical. If you have to pay $100 to place a $100,000 bet, you're going to burn through so much cash just to break even. Making a profit becomes exceptionally difficult. Now, on an exchange like BitMex, its a bit more feasible because you get a rebate on some trades. So you can make back a portion of what you pay in fees. This is just a general overview though. There are more complexities to it.
  - anonymoushn 4y ago
    You can have -1bps/1.5bps maker/taker fees at FTX. It seems pretty tough to achieve fees similar to this at BitMex, but you start out with the maker rebate and have to work only to get the taker fees down. With the maximum shitcoin-buying and volume, you'll be at -1bps/2.1bps, but it's not clear how much the unreleased shitcoin will cost yet. With only dollar volume you'll get -1bps/2.5bps, which is similar to the 0bps/1.5bps you can get at FTX by opening an FTT long/short (though the daily cost of this long/short has recently been higher that your fee savings if your daily turnover is anywhere near $2mm)
    - robswc 4y ago
      >You can have -1bps/1.5bps maker/taker fees at FTX Ahhh I wasn't aware they offered rebates. I would say if you're a serious trader, that is a better deal.

by robswc 4y ago

smabie 4y ago

Tradfi has % based fees too tho?

hackerlight 4y ago

Aren't the fees of all crypto exchanges based on % of notional? As are most tradfi exchanges?

robswc 4y ago
They are. IIRC the fees at FTX were higher than Bitmex though, which had the lowest fees. I figured it would be hard to convince people to swap exchanges with higher fees but I was obviously way off.

anonymoushn 4y ago

FTX has similar fees to other crypto exchanges. lit venues in US equities also charge percentage-based fees.

robswc 4y ago
Sure, but looking at the fee schedule... https://help.ftx.us/hc/en-us/articles/360043579273-Fees https://help.ftx.us/hc/en-us/articles/360043579273-Fees Starting out, you're still looking at paying a ton of money in fees just to put on bets. I could do the calculations but I'm on mobile... essentially though, you would have to just do exceptionally well, for an exceptionally long time to make any sort of profit without some "unethical edge" which I just see as not being worthwhile. I run a trading firm and even at the best crypto fee tiers, those fees will absolutely destroy your risk to reward because you start the position down significantly if your targets are less than 1%. If you're a "swing trader" the fees aren't all too bad I guess... but at the end of the day, for equities, most brokers you're looking at only around $30-50 to trade $2 million, regardless of your targets or entry. $2 million even at the highest tier you're paying multiples of that. It's the taker fees that are brutal.
- anonymoushn 4y ago
  > Starting out, you're still looking at paying a ton of money in fees just to put on bets. I could do the calculations but I'm on mobile... essentially though, you would have to just do exceptionally well, for an exceptionally long time to make any sort of profit without some "unethical edge" which I just see as not being worthwhile. These markets are pretty inefficient. I don't think participants are really concerned with 1.5bps taker fees. Notably these fees are smaller than the fees at the largest venue: https://www.binance.com/en/fee/futureFee https://www.binance.com/en/fee/futureFee In general I agree that the initial fee rates of e.g. 60bps at Coinbase or 20bps at FTX US are exploitative and would wipe out any reasonable edge. To some extent, venues could capture more volume by lowering fees, but price-insensitive spenders-on-fees would not make any more trades than they do now, and FTX in particular seems to be constantly running up against the technological limits of having written their risk checks and matching engine in Python and apparently not even using an in-memory cache or anything to allow this Python used for risk checks to access the state it needs faster some of the time, so attempting to allow people to place more orders just won't work out for them right now. I also run a trading firm. We trade about 25 million dollars per day at FTX and collect maker rebates on almost all of this. We'll get these numbers up though :) Edit: Actually, for the sort of trading you seem to be talking about, where a bunch of human traders make a moderate to large number of trading decisions throughout each day based on some combination of price information, news, and their own analysis, it seems nearly impossible to have any edge in US equities and decently likely to have an edge that is much larger than fees in cipher tokens. So from my perspective it seems like such shops should avoid trying to trade US equities.
  - robswc 4y ago
    Fair enough! I've been out of crypto for quite some time. Partly due to the fees. Again tho, that was back when I would try to get into a few positions a day and be lucky to see any good targets around 1%. I might get back into it though. To trade on FTX (non-US) are you able to do that through an off-shore business or is even that frowned upon?

junofan 4y ago

> "who would take such a hit on their risk:reward ratio!" What does this mean?

robswc 4y ago
IMO, it means that _most_ crypto trading is impossible (on less than 1D time frames at least)... or rather the edge you need to be successful is astronomical. If you have to pay $100 to place a $100,000 bet, you're going to burn through so much cash just to break even. Making a profit becomes exceptionally difficult. Now, on an exchange like BitMex, its a bit more feasible because you get a rebate on some trades. So you can make back a portion of what you pay in fees. This is just a general overview though. There are more complexities to it.
- anonymoushn 4y ago
  You can have -1bps/1.5bps maker/taker fees at FTX. It seems pretty tough to achieve fees similar to this at BitMex, but you start out with the maker rebate and have to work only to get the taker fees down. With the maximum shitcoin-buying and volume, you'll be at -1bps/2.1bps, but it's not clear how much the unreleased shitcoin will cost yet. With only dollar volume you'll get -1bps/2.5bps, which is similar to the 0bps/1.5bps you can get at FTX by opening an FTT long/short (though the daily cost of this long/short has recently been higher that your fee savings if your daily turnover is anywhere near $2mm)
  - robswc 4y ago
    >You can have -1bps/1.5bps maker/taker fees at FTX Ahhh I wasn't aware they offered rebates. I would say if you're a serious trader, that is a better deal.