Maker-taker Exchange Fees and Market Liquidity: Evidence from a Natural Experiment

Abstract

Motivated by a desire to enhance market liquidity, exchanges around the world have recently shown increasing interest in so-called `maker-taker' fee structures. However, little is currently known about the e ectiveness of such schemes. We therefore make use of a natural experiment to empir- ically assess the impact of maker-taker fees on liquidity. For three months during 2008, the New Zealand Stock Exchange applied maker-taker ex-change fees to Australian securities cross-listed on the New Zealand stock market, thereby allowing us to isolate the change in liquidity attributable to the introduction of maker-taker fees. We nd some evidence suggesting that market depth and trading volume rose in response to the change in fee structure, but bid-ask spreads remained essentially unchanged. We conclude that the impact of maker-taker fees on market liquidity remains an open question.