Binance Adjusts Fee Structure to Incentivize Market Makers on Futures Platform
Binance Offers Negative Fees to Market Makers on Futures Platform
Cryptocurrency exchange Binance is shaking up its fee structure in a bid to attract market makers to its futures platform. The revised Binance Futures Market Maker Program will now offer market makers a negative fee for selected trading pairs, as announced on Monday.
Market makers are users who add liquidity to the platform by placing buying and selling limit orders in the order book. In contrast, market takers are those who fill existing trades and take liquidity off the market.
Typically, exchanges offer lower fees to market makers compared to market takers to encourage liquidity on their platforms. However, Binance is taking it a step further by introducing a reward system for market makers trading on “select” pairs.
Details regarding the negative fee structure have not been disclosed yet. To qualify for the program, market makers must have trading volumes exceeding 1,000 BTC over a 30-day period on Binance and demonstrate “quality market maker strategies.” The exchange will also consider proposals from traders with similar trading volumes on other platforms.
A weekly performance review will be conducted based on various metrics such as market volumes, market-making time, bid/offer spread, total order size, and order duration.
Binance’s move comes at a time when the crypto derivatives market is gaining momentum. Regulated firms like the Chicago Mercantile Exchange (CME) and Intercontinental Exchange’s Bakkt have recently introduced bitcoin options after launching futures contracts.
Since the launch of Binance futures in September 2019, the platform has experienced significant growth. In January alone, Binance futures volume surged by 85 percent month-on-month, with $56 billion traded across perpetual contract markets. Open interest also saw a 98 percent increase, reaching $271 million by the end of January.
Bitcoin (BTC)/tether (USDT) perpetual contracts remained the most popular, accounting for 75 percent of the total open interest on Binance. Perpetual contracts are non-expiring contracts that closely track the spot market price.
In December, BitMEX and Binance dominated the BTC perpetual futures market volume, with daily averages of $1.7 billion (40 percent) and $947 million (22.5 percent) respectively.
Overall, Binance’s new fee structure aims to incentivize market makers to add liquidity to its futures platform, further solidifying its position in the competitive crypto derivatives market.
