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> There is also a special order type called post-only. It is designed to only supply liquidity, never take liquidity. If the market moves between the decision
by TacticalCoder 4y ago
> There is also a special order type called post-only. It is designed to only supply liquidity, never take liquidity. If the market moves between the decision to send out an order, and the order reaching the exchange, the order will not cross. Instead, it will be hidden, or cancelled. This makes it easier for algorithm designers to get the behavior they intend (that is, resting orders will not accidentally be converted into crossing orders).
I'd argue that an order that'd immediately be filled does provide liquidity to the market overall.
One reason to use "post-only" is explained in TFA:
> Many markets use the maker-taker fee structure. Traders that place orders that rest on the exchange earn a maker fee, and traders that “take” liquidity, that is execute orders against the existing resting orders, pay a taker fee. The taker fee is higher than the maker fee
If you do post-only, you'll get maker fees.
- c54 4y agoYou might have multiple strategies in the same symbol, one intended to send out post-only orders and one intended to send out crossing orders. Niche functionality like this can help achieve that separation of concerns. Crossing orders are considered liquidity taking rather than providing since they're interacting with another market maker's resting (providing) orders.
- TacticalCoder 4y ago> Crossing orders are considered liquidity taking rather than providing since they're interacting with another market maker's resting (providing) orders. Ah that's interesting!
- siftrics 4y ago> I'd argue that an order that'd immediately be filled does provide liquidity to the market overall. No, it takes liquidity, by definition.
- porb121 4y agoif someone bids 10000000 shares for mid, and I hit their bid, who provided the liquidity?
- siftrics 4y agoYou can argue about this philosophically, but if you talk to literally anyone in the industry, they will understand that - "taking liquidity" is taking existing orders off the orderbook and - "making [liquidity]" is opening new orders that rest on the orderbook It's the terminology of the industry.
- Galanwe 4y agoTo add on your comment: I don't even think the philosophical discussion makes sense. At the end of the day, what counts as the truth is how much fees you pay when sending a limit order that immediately crosses. And the answer, for every single market on the planet, is "you pay taker fees". Period.
- nuclearnice1 4y agoMost futures markets you pay both sides. Some equity venues are pay both sides. Others are “reverse” provider pays.
- siftrics 4y agoEven in the markets that have fees on both sides, the maker fees are less than taker fees in almost all cases.
- deleted 4y ago[deleted]
- nuclearnice1 4y agoI don’t think that’s correct CME worlds largest futures exchange symmetrical fees https://www.cmegroup.com/company/files/cme-fee-schedule-2023-02-01.pdf https://www.cmegroup.com/company/files/cme-fee-schedule-2023...
- SamReidHughes 4y agoI would argue that it provides liquidity solely to whoever placed that resting order. But it takes it from the rest of the market.