Can maker-taker fees prevent algorithmic cooperation in market making?
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In a semi-realistic market simulator, independent reinforcement learning algorithms may facilitate market makers to maintain wide spreads even without communication. This unexpected outcome challenges the current antitrust law framework. We study the effectiveness of maker-taker fee models in preventing cooperation via algorithms. After modeling market making as a repeated general-sum game, we experimentally show that the relation between net transaction costs and maker rebates is not necessarily monotone. Besides an upper bound on taker fees, we may also need a lower bound on maker rebates to destabilize the cooperation. We also consider the taker-maker model and the effects of mid-price volatility, inventory risk, and the number of agents.
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