Inverted vs maker-taker routing choice and trader information

Ryan Garvey and Yaohua Qin

Journal of Empirical Finance, 2024, vol. 78, issue C

Abstract: We examine U.S. equity trader use of inverted versus maker-taker venues. Inverted (maker-taker) venues charge fees for maker (taker) executions and pay rebates for taker (maker) executions. Researchers argue maker fee orders can be used to front run same price maker rebate orders. We find maker fee orders are often routed with the intent to set market prices. They execute quicker and are more informed than maker rebate orders. Conversely, taker rebate orders execute slower and are less informed than taker fee orders. Our results suggest that maker and taker fee orders are more likely to convey information.

Keywords: Maker-taker pricing; Inverted pricing; Trading; U.S. equities (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:78:y:2024:i:c:s0927539824000653

DOI: 10.1016/j.jempfin.2024.101530

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