Gemini has adjusted its flat fee schedule to a dynamic, real-time, “maker-taker” schedule after collecting enough data to know how to encourage a stable, efficient and active marketplace, according to a blog on the Gemini website by Cameron Winklevoss, president and co-founder.
To launch the program, every customer will get the most favorable fee and rebate rates of 15 bps (0.15%) rebate on liquidity-making trades and incur a 15 bps (0.15%) fee on all such trades for the following windows:
• Current Gemini operation areas March 1, 2016 at 9:30 a.m. ET to March 31, 2016 at 9:30 a.m. ET.
• Future Gemini operation areas: 30 days from opening day for trading.
Following this period, each customer will be able to continue to receive discounted fees and rebates for trades.
Fees and rebates after the introductory period will be determined based on liquidity-making buy/sell ratio and gross trading volume over the prior 30-calendar-day window. The fee rate gets reassessed every 24 hours and is accordingly adjusted. Once the real-time fee system begins for the trader’s account, the current fee rate will be viewable on the activity feed at the top right side of the trader’s dashboard.
The fees and rebates are calculated as a fraction of each trade’s notional value (i.e., price x size). Units of basis points (bps) that represent 1/100th of a percent of notional value determine the calculation. For example, a 25 bps fee means 0.25% of the dollar value of the trade is kept by the exchange, either deducted from gross proceeds of a trade or charged to the account when a trade executes. Fees and rebates are applied in real time at execution.
Each trade involves two orders – one providing liquidity to the order book and another removing liquidity from the order book. To provide liquidity, an order must first post in the order book. It doesn’t fill immediately; it has to wait until another market participant trades against it. This type of order adds liquidity to the marketplace and is known as “liquidity-making” – the customer placing it is referred to as a “maker.” An order that executes immediately against an existing order removes liquidity and is called a “taker.” Since liquidity-making orders do not immediately fill and bear more market risk, Gemini believes in offering more incentives to makers.
The base fee for liquidity-making trades is 25 bps, although fees are reduced using the following independent criteria:
• Trading Volume Discount: The fees are reduced based on the trader’s gross trading volume over a trailing 30-calendar-day window.
• Buy/Sell Ratio Discount: Fees are reduced based on the ratio of the trader’s liquidity-making buys and their liquidity-making sales, both measured in BTC, over a trailing 30-calendar-day window.
The base fee of all liquidity trades is 25 bps, but fees are reduced using the following criterion:
• Trading Volume Discount: Fees get reduced based on the trader’s gross trading volume over a 30-calendar-day window.
A trader called Alice trades 8,000 BTC of gross volume over 30 calendar days. Out of those trades, 5,000 BTC are from liquidity-taking orders. Of the remaining 3,000 BTC of trades, Alice bought 1,750 BTC and sold 1,250 BTC, making the buy/sell ratio 58/42. Hence, the gross trading volume discount is 15 bps on the maker side and 10 bps on the taker side, and the liquidity-making buy/sell ratio discount is 10 bps on the maker side. The fee for liquidity-making trades is then reduced from the 25 bps base fee to 0 bps. There is no discount on the taker side, so the fee for liquidity-taking trades remains the base 25 bps fee.
For another example, a trader called Bob purchases 15,000 BTC over 30 calendar days. None of the trades are liquidity-making, so Bob is not eligible for a liquidity-making buy/sell ratio discount. The gross trading volume, however, delivers a gross trading volume of 25 bps on the maker side and 10 bps on the taker side. The fee then for liquidity-making trades is reduced from the base 25 bps fee to 0 bps and the fee for liquidity-taking trades is reduced from the 25 bps base fee and the fee for liquidity-taking trades gets reduced from the 25 bps base fee to 15 bps.
For another example, a trader called Eve trades 20,000 BTC of gross volume over 30 calendar days. From those trades, 12,000 BTC are from liquidity-taking orders. For the remaining 8,000 BTC, Eve bought 3,600 BTC and sold 400 BTC, making the buy/sell ratio 45/55. Hence, the gross trading volume discount is 25 bps on the maker side and 10 bps on the taker side. The liquidity-making buy/sell ratio discount is 15 bps on the maker side, and the fee for liquidity-taking trades is reduced from the 25 bps base fee to 15 bps.
Any change to the universal fee structure will post no fewer than three calendar days before taking effect, and no changes will be in effect for less than 30 calendar days. This will include adjustments to any of the rates or tiers.
Images from Shutterstock and Gemini.