What concerns traders the most when choosing an exchange is whether it provides a fair trading environment as well as the profits they can gain on it compared to other exchanges. The profits one can gain are related to the trading rules, such as order types, take profit and stop loss, leverage and etc. In today’s article, we will talk about trading fees on exchanges, what are they, and how much some exchanges like Bybit charge.
Maker and Taker
Trading fees vary on different exchanges. First of all, you have to understand the definition of maker and taker. A maker is someone who places a limit order or conditional order that goes to the order book and adds up to the market depth, regardless of whether the trader chooses to go long or short. These traders help to make the market and thus are named makers.
A taker is someone who places orders that are immediately fulfilled before they go to the order book and decrease the market depth by taking orders from the order book. Usually, these are market orders, however, those who place limit orders can also be takers; for example when the time in force(TIF) they choose is Immediate Or Cancel(IOC) or Fill Or Kill(FOK) because in nature they are taking volumes. Another option is when someone is placing a limit order at a price worse or equal to the Last Traded Price.
What is Trading Fee
Depending on the functions of the two kinds of traders mentioned above, exchanges make rules to charge fees from them accordingly. Some exchanges decide they share the same fee, and others will charge makers less or even give them money in the form of rebates.
The trading fee is charged because the platform is providing users with safe and high-quality services, so users have to pay the necessary service fees based on the quantity of the user's orders. The payment will be devoted to providing users with safer, more convenient, and professional trading experiences. When a trader’s order get fulfilled, the fee the exchange charged will be included in the realized profit and loss.
For example, you buy 10,000 BTCUSD contracts using a Market order and traded at $4,000. In this case, you are a taker and the correspondent fee rate on the exchange is 0.1%. This means that you have to pay 10,000/4,000*0.1%= 0.0025 BTC as the trading fee.
Trading Fee on Bybit
On Bybit, the trading fee for takers is 0.075%, while for makers, a 0.025% rebate will be given to them. This is a relatively fair price in the industry. To note, the fee is deducted from the account balance, and will not affect the initial margin of the order.
Except for the trading fee that is charged when your orders are conducted, exchanges also charge/give funding fees to ensure the price on an exchange is always anchored to the global spot price. On Bybit, Funding is exchanged directly between buyers and sellers every 8 hours. When the funding rate is positive, long positions pay short positions and if it is negative, the short position holders have to pay the long position holders. If you close your position before the Funding interval, you will not be charged.
Please note that the Funding fees are exchanged directly between long and short positions and that exchanges do not receive or gain any profits from the exchange of the fee.
The fee on Bybit is calculated as follows: funding fee = position value*funding rate. Position value = quantity of contract/mark price. For example, at 8:00 UTC you still hold a long position of 10,000 BTCUSD contracts, the mark price now is 4,000 USD. Suppose that the funding rate now is 0.02%. the position value will be 10,000/4,000=2.5 BTC. Then the funding fee is 2.5 BTC *0.02%=0.0005BTC.
This concludes today’s article about maker and taker and trading fees on Bybit. We hope you learned a lot, enjoyed the read, and stay tuned for more great content.