How to use the HFT transaction cost calculator
The Daily cost model treats a trading day as two streams of volume:
- Shares per day and average price set the scale. The price is used only to express results in basis points.
- Volume filled as maker is the share of your fills that came from resting orders. The rest removed liquidity.
- Clearing and regulatory fees cover everything charged per share beyond the venue: clearing, broker or sponsor charges and pass-through regulatory fees. US regulatory fees on sales are value-based, so convert them to an average per share.
- Maker rebate and taker fee come from the venue’s fee schedule. Schedules are tiered by monthly volume, so use the tier you actually reach.
- Spread captured, adverse selection and spread paid are the trading economics. Measure them from your own fills against the midpoint; the defaults describe a stock quoted one cent wide.
One order: maker or taker compares a single order filled passively at the near side of the quote with the same order crossing the spread.
The formulas
Net P&L = M × (c − a + r) − T × (h + f) − S × kS is shares per day, m the maker share, c the spread captured per maker share, a the adverse selection per maker share, r the rebate, h the half-spread paid per taker share, f the taker fee and k the clearing and regulatory cost per share.
Break-even maker share = (h + f + k) ÷ (c − a + r + h + f)The capture per passive share, or the share of passive volume, at which net P&L is exactly zero.
Advantage per share = (ask − bid) + f + rFor a sell, the taker receives bid − f and the maker ask + r. The advantage assumes the passive order fills.
A worked example
A strategy trades 2,000,000 shares a day at an average $40, about $80,000,000 of stock. 80% of its volume is passive. Each passive share earns $0.0050 of spread but loses $0.0035 to adverse selection, then collects a $0.0020 rebate; each aggressive share pays $0.0050 of spread and a $0.0030 fee. Clearing costs $0.0002 on every share.
Rebates exceed taker fees, so the venue pays the strategy a net $2,000 a day. Spread P&L after adverse selection is only $400. After $400 of clearing, the net is $2,000 a day, $0.0010 per share or 0.25 basis points, and $504,000 a year.
The margin is thin. Passive fills would need to capture at least $0.0037 a share to break even, against the $0.0050 assumed, and if the maker share fell below 71.3% the day would lose money.
What moves the result most
High-turnover P&L is the small difference between large numbers, so modest changes in any input swing it:
| Change from the example | Net per day | Net per year |
|---|---|---|
| None | $2,000 | $504,000 |
| Maker share 60% | -$2,600 | -$655,200 |
| Maker share 100% | $6,600 | $1,663,200 |
| No rebate | -$1,200 | -$302,400 |
| Adverse selection $0.0045 | $400 | $100,800 |
The maker share matters because the two streams have opposite signs: each passive share nets $0.0033 here, while each aggressive share costs $0.0082. A strategy that has to cross the spread to hedge or to exit inventory pays for it out of passive profits.
Adverse selection is the input most traders underestimate. It depends on who trades against you: fills from slow, uninformed flow carry little, fills from faster traders who see the move coming carry a lot. Being picked off on a small fraction of fills can wipe out the spread earned on the rest, which is why speed and cancellation logic matter so much in market making.
Maker or taker on a single order
For a buy of 1,000 shares with the quote at $39.99 by $40, taking liquidity costs $40.0030 a share all-in and posting at the bid costs $39.9880. The difference is $15.00 on the order, 2.00 basis points worse than the midpoint against 1.75 better.
That advantage is conditional. A passive order may not fill at all, and if the price moves away you either chase it, paying more, or miss the trade. On an inverted venue, with a -$0.0010 rebate (makers pay) and a -$0.0005 fee (takers are paid), the same comparison shrinks to $8.50.
What this calculator does not include
- Tiered and changing fee schedules. One rebate and one fee apply to all volume. Real schedules depend on monthly volume, the venue, the tape and whether a quote is displayed.
- Queue position and fill probability. The maker share is an input, not a result of where your orders rest.
- Inventory risk. Price moves on positions held between fills are not modeled beyond the adverse selection figure.
- Technology, data and colocation costs, which are often larger than the per-share fees. The latency advantage calculator adds fixed infrastructure costs.
- Value-based regulatory fees and taxes. Convert them to an average per share and add them to clearing.