Résumé
Markets are made up of makers and takers. Makers create buy or sell orders that are not immediately acted upon (e.g.: “Sell BTC when its price reaches $15,000”). This creates liquidity, meaning it becomes easier for others to instantly buy or sell BTC when the condition is met. People who buy or sell instantly are called takers. In other words, takers fill orders created by makers.
Introduction
On any type of exchange (Forex, stocks or crypto) sellers are put in contact with buyers. Without this connection, you would have to put ads on your social networks to trade Bitcoin for Ethereum and then wait for a favorable response.
In this article, we will discuss the concepts of makers and takers. Every market participant falls into at least one of these categories, but as a trader, you will likely alternate between these two roles. Makers and takers are the backbone of trading platforms and their presence (or absence) separates weak trades from strong trades.
Let's talk liquidity
Before we delve into makers and takers, it is essential to talk about the notion of liquidity. When you hear someone say that an asset is liquid or illiquid, they are referring to how easy it is to sell.
An ounce of gold is a very liquid asset because it can easily be exchanged for cash. A ten meter tall statue of the CEO of Binance riding a bull is unfortunately very illiquid. Although this one would look great in any garden in the world, the reality is that it wouldn't interest many people.
A similar (but slightly different) idea is that of market liquidity. A liquid market is one where you can easily buy and sell assets at their fair price. There is indeed strong demand from buyers and strong supply from sellers.
Because of this high activity, buyers and sellers tend to meet in the center: the lowest sell order (or ask price, "ask") will be approximately the same as the buy order (or highest bid price. So the difference between the highest bid and the lowest ask will be small (or narrow). For information, this difference is called the spread.
Conversely, an illiquid market has none of these properties. If you want to sell an asset, you will have difficulty doing so at a good price due to a lack of demand. Thus, illiquid markets often have a much higher spread.
Okay, now that we've covered the concept of liquidity, let's talk about makers and takers.
Market makers et market takers
As said previously, traders on exchanges act as makers or takers.
Makers
Exchanges often calculate the value of an asset using an order book. This collects all purchase and sale offers from users. You can submit an instruction like: Buy 800 BTC at $4,000. This will be added to the order book and will be processed if the BTC price reaches $4,000.
Maker orders (added to the order book) like the one described above require you to announce your intentions in advance by adding them to the order book. You are a maker, because you create the market. Exchanges are like a grocery store charging individuals to put goods on the shelves. In this one, you are the person who adds their own products.
It is common for large traders and institutions (such as those specializing in high-frequency trading) to act as market makers. Obviously, small traders can become makers by placing orders that will not be immediately executed.
Please note that using a limit order does not guarantee that it is a maker order. If you want to ensure that your order is added to the order book before being executed, please select "Post only" when placing your order (currently only available on the web and desktop versions).
Takers
Continuing our grocery store analogy, you put your items on the shelves to sell them to another person. This person is the taker. But instead of taking cans of beans from the store, they eat the liquidity you provide them.
Think about it: by placing a bid on the order book, you increase the liquidity of the exchange and make buying and selling easier for users. On the other hand, takers consume part of this liquidity, with a Market order: an instruction to buy or sell at the current market price. When they do, the orders on the order book are immediately processed.
If you have ever placed a market order on Binance or another cryptocurrency exchange, you have been a taker. Note that takers can also use Limit orders. In short, you are a taker every time you fill someone's order.
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Maker and taker fees
Many exchanges generate a considerable portion of their revenue by charging trading fees to matching users. This means that every time you create an order and it is executed, you pay a fee. These fees differ depending on the exchange and also depending on the size of your trade and your role.
In general, makers pay fewer fees. This is a way of rewarding them for the liquidity they provide to the exchange. Potential traders say “Great, this platform has great liquidity! » and join the platform. In the end, everyone is there. Indeed, a platform without liquidity will not attract investors, as transactions are difficult to execute. In many cases, takers pay higher fees as these do not provide liquidity.
As mentioned, maker and taker fees depend on the platform you use. You can see the difference in fees for makers and takers on Binance by visiting the Trading Fees page.
To conclude
In short, makers create orders and wait for them to be executed, while takers execute someone else's orders. The important thing to remember is that market makers are the liquidity providers.
For exchanges using a maker-taker model, makers are essential to attract people to the platform. In general, exchanges reward makers for their liquidity contributions by reducing fees. Conversely, takers use this liquidity to easily buy or sell assets. But in return they pay higher fees.