Optimal make–take fees for market making regulation

Omar El Euch, Thibaut Mastrolia, Mathieu Rosenbaum, Nizar Touzi

Research output: Contribution to journalArticlepeer-review


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.

Original languageEnglish (US)
Pages (from-to)109-148
Number of pages40
JournalMathematical Finance
Issue number1
StatePublished - Jan 2021


  • financial regulation
  • high-frequency trading
  • make–take fees
  • market making
  • principal–agent problem
  • stochastic control

ASJC Scopus subject areas

  • Accounting
  • Social Sciences (miscellaneous)
  • Finance
  • Economics and Econometrics
  • Applied Mathematics


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