Posted: 01.07.2021 | 04:48
Makers and Takers
Markets are made up of makers and buyers. Makers create buy and sell orders that are not executed immediately. This creates liquidity. Instant buyers are called buyers. Buyers fill orders created by makers. In all types of exchanges, sellers are matched with buyers.
A liquid market is a place where one can easily buy and sell assets at a fair value. There is a high demand from those who want to buy the asset and a high supply from those who want to sell it. When there is such a high level of activity, it is easier for buyers and sellers to meet at a common point. The lowest sell order and the highest buy order are close to each other. The difference between the lowest selling price and the highest bid becomes more or less narrow. This difference is called the buy and sell difference.
Exchanges calculate the market value of an asset via the order book. The order book is the place where all the buy or sell offers of the investors are gathered together. Limit orders require pre-declaring the desired transaction by adding it to the order book. So it becomes constructive. It is common for large traders
and companies to take the role of maker in the market. In addition, small traders can also become market makers using non-immediate order types.
Adding an order to the order book increases the liquidity of the exchange because it is easier for users to buy and sell. A buyer, on the other hand, uses some of this liquidity with a market order. As soon as the market order is placed, the existing orders in the order book are immediately processed.
Many existing exchanges earn a large portion of their revenue from commissions that users receive in exchange for their matches. This means that a certain commission must be paid each time an order is created and each time it is executed. The amount to be paid may differ between exchanges and may vary according to your transaction size. A kind of refund is offered to the makers as liquidity is added to the exchange. Refunds are beneficial because users see it as an advantage.
Makers are users who create orders and wait for those orders to be executed. Executes orders of buyers and others. The key point in this case is that market makers are liquidity providers. In exchanges that use the maker-buyer format, makers are critical in attracting the platform as a trading place. Exchanges reward makers with lower commission fees because they provide liquidity. Buyers benefit from liquidity to easily buy and sell assets. However, they must pay higher commissions in return.