Commissions in Derivative Trading — BitMEX vs Geco.one
There are hundreds of different entities on the cryptocurrency market that offer the possibility of trading. However, when trading cryptocurrencies with the help of exchanges, it is necessary to pay fees for transactions. Today we will go through several types of commissions charged by exchanges on the example of derivative trading exchanges. In this case, Geco.one and BitMEX as a comparison.
Commissions in Derivative Trading
Most investors will sooner or later encounter maker and taker commissions.
The “maker” commission is charged in a specific case. For example, when you create a new order that will not fill immediately — it goes to the order book. When someone completes them, then they have to pay the maker commission. You are a so-called market liquidity provider (maker) in this situation.
The taker commission is the opposite of the maker commission. The issued order automatically fills in another already existing one in this situation. Thus, you are incurring the cost of being a “taker” of liquidity in the market.
In the case of trading derivatives, we can often also talk about fees for maintaining a position. It is usually because derivative trading is focused on a short-term investment — therefore, a longer period of holding a position involves an additional fee. The time frame and fee amount varies between exchanges.
Maker and taker commissions work in relation to an order book existing on the exchange. However, some trading exchanges give up this solution in favour of an external liquidity provider. This helpful solution allows, above all, to avoid dangerous price slips — we are sure that our order will be closed at the price we have set.
Derivative Trading commissions on various exchanges
An example of a derivative trading exchange with an order book is BitMEX. When looking at the commission table, we can see the functioning of the maker and taker commissions and the Funding Interval.
As we can see, BitMEX “rewards” the provision of market liquidity — the Maker commission is much lower than Taker. Adding up these commissions, we can see that each time we pay for both commissions, the cost of 0.1% of the value of our transaction. We must add the commission charged every 8 hours for maintaining the position in the amount of 0.0731%. However, this commission only applies to Bitcoin. If we want to invest in other cryptocurrencies, we will consider that we will incur even higher costs. For example, stellar (XML) reaches a record value here. In this case, the charge is as much as 0.3781%.
The situation is slightly different in the case of Geco.one. Here we are not dealing with an order book — therefore, instead of a maker and taker fee, fees for opening and closing positions are charged. In both cases, we deal with a commission of 0.03%. In addition, a Settlement Fee is charged every 8 hours for holding a position — this fee is only 0.01%. Notably — the rate is the same for all pairs.
Native tokens lower the commission
Many trading exchanges allow you to lower your commission using your native tokens. The most significant native token is Binance Coin (BNB), enabling you to limit transaction fees on Binance. Its price may, however, be a deterrent.
Going back to the examples above, Geco.one also allows you to lower fees with its token. For instance, Gecoin reduces the commission for opening and closing a position by 20%.