Gemini Introduced New Dynamic Fees for Liquidity Providers to Woo Institutional Investors

The Winklevoss brothers of Bitcoin exchange Gemini have announced a real time new fee and rebate schedule that will introduce a dynamic trading fee structure to traders on the exchange.

Cameron Winklevoss, the President of the company, published a blog post saying they have “collected” ample data since the launch of the exchange over the last few months “to determine how to best encourage an active, stable, and efficient marketplace.” Hence, they have decided to alter the flat fee and introduce “a real-time, dynamic maker-taker fee schedule.”

“To kick off our new program, every customer will receive our most favorable fee and rebate rates — customers will receive a 15 bps (0.15%) rebate on all liquidity-making trades and be charged only a 15 bps (0.15%) fee on all liquidity-taking trades,” said Mr. Winklevoss

The new dynamic fee schedule will certainly favor the liquidity providers – the makers - in the exchange. This incentive would certainly help add more liquidity, which is vital to attract institutional investors trading the BTC/USD pair.

In the initial flat fee schedule, Gemini charged a 0.25% commission to both takers and market makers. Since retail level Bitcoin traders often execute a number of trades in a short time to profit from small price movements, such high fees added up and discouraged traders from using the exchange.

With the new fee structure, Gemini has provided rebates to makers in order to favor liquidity providers based on the gross trading volume and a buy/sell ratio based on the last 30-day’s trading records.

Mr. Winklevoss noted that “every trade involves two orders: one that provides liquidity to the order book and another that removes liquidity from the order book. For an order to provide liquidity, it must first be posted on the order book.” Then he explained new dynamic fee structure in the blog post saying “because liquidity-making orders do not fill immediately and, therefore, bear more market risk, we believe in offering greater incentives to makers.”

However, under the new fee schedule, any taker with a 30-Day Gross Trading Volume (BTC) over 15,000 would enjoy a 10 bps discount as well, which would likely help balance the schedule a bit.

Since launch, Gemini has targeted institutional investors, but so far the exchange has failed to live up to the hype of providing a high level of liquidity to their target segment. Gemini is hoping that the dynamic fee structure may help them turn the tables.