Optimal make–take fees for market making regulation
| Autor: | Nizar Touzi, Thibaut Mastrolia, Omar El Euch, Mathieu Rosenbaum |
|---|---|
| Rok vydání: | 2021 |
| Předmět: |
Stochastic control
Economics and Econometrics 050208 finance Applied Mathematics 05 social sciences Principal–agent problem 01 natural sciences Market maker Market liquidity Microeconomics Oligopoly 010104 statistics & probability Financial regulation Accounting 0502 economics and business Business 0101 mathematics High-frequency trading Volatility (finance) Social Sciences (miscellaneous) Finance |
| Zdroj: | Mathematical Finance |
| ISSN: | 0960-1627 |
| DOI: | 10.1111/mafi.12295 |
| 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 |
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