Recently, the predominant pricing structure on equity exchanges is the so-called maker-taker pricing model. In this model, market participants that offer liquidity, i.e., post a non-marketable order or a quote, pay a make fee, and market participants who remove liquidity, i.e., submit a marketable order to initiate a trade, pay a take fee. By allocating the total fee (make fee plus make fee) optimally to makers and takers, exchanges could presumably increase their market share in trading volume

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... and ultimately their revenue. We examine the relationship between make-take fees and measures of trading activity in the U.S. for the period January 2005 -December 2010 across more than a dozen registered exchanges. Contrary to common perception, we generally find that a change in the fee allocation between makers and takers does not affect an exchange's market share and only changes in the total fee are associated with changes in market share. These results are particularly strong in the second half of our sample, when Reg NMS was already in place and for NYSE-listed securities. We also provide some evidence that the allocation between the make fee and take fee affects the best bid and offer quote (BBO) and the cum-fee BBO. Abstract Recently, the predominant pricing structure on equity exchanges is the so-called maker-taker pricing model. In this model, market participants that offer liquidity, i.e., post a non-marketable order or a quote, pay a make fee, and market participants who remove liquidity, i.e., submit a marketable order to initiate a trade, pay a take fee. By allocating the total fee (make fee plus make fee) optimally to makers and takers, exchanges could presumably increase their market share in trading volume and ultimately their revenue. We examine the relationship between make-take fees and measures of trading activity in the U.S. for the period January 2005 -December 2010 across more than a dozen registered exchanges. Contrary to common perception, we generally find that a change in the fee allocation between makers and takers does not affect an exchange's market share and only changes in the total fee are associated with changes in market share. These results are particularly strong in the second half of our sample, when Reg NMS was already in place and for NYSE-listed securities. We also provide some evidence that the allocation between the make fee and take fee affects the best bid and offer quote (BBO) and the cum-fee BBO.