Exchange market share, market makers, and murky behavior: The impact of no-fee trading on cryptocurrency market quality

【Author】 Galati, Luca

【Source】JOURNAL OF BANKING & FINANCE

【影响因子】3.539

【Abstract】This study examines the impact of zero fees on market quality. This issue is examined using a natural experiment in Bitcoin provided by the Binance exchange, which eliminated maker-taker trading fees for market participants in July 2022. I find that although zero fees increase investors' willingness to trade, thereby prima facie increasing liquidity, their elimination encourages market makers to widen the bid-ask spread and provide a shallower market depth, which in turn reduces liquidity. Liquidity providers realize gains at the expense of liquidity takers, suggesting the emergence of new potential forms of unethical financial market conduct. Notably, despite the removal of trading fees, total transaction costs increased for customers. These outcomes, coupled with the boost in exchange market share, raise concerns about price integrity and investors' protection in the highly unregulated crypto environment, in turn implying that the elimination of maker-taker fees is harmful to the market.

【Keywords】Bitcoin market; Cryptocurrency exchange; Unethical financial market conduct; Liquidity; Market microstructure; Zero -fee trading

【发表时间】2024 AUG

【收录时间】2024-06-27

【文献类型】实证数据

【主题类别】

区块链治理-市场治理-市场分析