Optimal make-take fees for market making regulation
| Autor: | Nizar Touzi, Omar El Euch, Thibaut Mastrolia, Mathieu Rosenbaum |
|---|---|
| Přispěvatelé: | Mastrolia, Thibaut |
| Jazyk: | angličtina |
| Rok vydání: | 2019 |
| Předmět: |
[QFIN.GN] Quantitative Finance [q-fin]/General Finance [q-fin.GN]
[MATH.MATH-PR] Mathematics [math]/Probability [math.PR] media_common.quotation_subject high-frequency trading Principal–agent problem 01 natural sciences Market maker Microeconomics FOS: Economics and business 010104 statistics & probability 0502 economics and business Quality (business) stochastic control Asset (economics) principal-agent problem 0101 mathematics High-frequency trading Make-take fees market making media_common 050208 finance Quantitative Finance - Trading and Market Microstructure [QFIN.CP] Quantitative Finance [q-fin]/Computational Finance [q-fin.CP] 05 social sciences Market liquidity Trading and Market Microstructure (q-fin.TR) Financial regulation Business Volatility (finance) financial regulation |
| Popis: | We address the mechanism design problem of an exchange setting suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we provide the optimal compensation scheme of a market maker in quasi-explicit form. This contract depends essentially on the market maker inventory trajectory and on the volatility of the asset. We also provide the optimal quotes that should be displayed by the market maker. The simplicity of our formulas allows us to analyze in details the effects of optimal contracting with an exchange, compared to a situation without contract. We show in particular that it improves liquidity and reduces trading costs for investors. We extend our study to an oligopoly of symmetric exchanges and we study the impact of such common agency policy on the system. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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