The anatomy of a fee change — evidence from cryptocurrency markets

Alexander Brauneis, Roland Mestel, Ryan Riordan and Erik Theissen

Journal of Empirical Finance, 2022, vol. 67, issue C, 152-167

Abstract: We analyze the impact on liquidity and trading activity of the introduction of maker fees (and simultaneous reduction of taker fees) on a leading cryptocurrency trading platform. Cryptocurrency markets are special because they are non-intermediated and highly fragmented. Furthermore, for the currency pair we analyze (BTC–USD) the relative minimum tick size is negligible, a feature which allows us to derive predictions from the Colliard and Foucault (2012) model which assumes a zero minimum tick size. Consistent with the model we find that quoted spreads increase after the fee change. However, the increase is overcompensated by the decrease in taker fees. Quoted depth and the number of transactions decrease while the average trade size increases.

Keywords: Cryptocurrencies; Trading fees; Market liquidity; Tick size (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:67:y:2022:i:c:p:152-167

DOI: 10.1016/j.jempfin.2022.03.003

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