Where the P&L comes from
The rebate and captured spread are income; adverse selection, hedging and overhead are costs. The net is what actually lands in the account.
| Component | Monthly ($) | bps of volume |
|---|
Net P&L across adverse-selection rates
Adverse selection is the swing factor. This holds everything else fixed and steps the adverse rate to show where net flips from profit to loss — the break-even row is marked.
| Adverse selection (bps) | Adverse cost ($) | Net P&L ($) | Verdict |
|---|
The rebate is the easy part
It is tempting to read a negative maker fee as a licence to print money: post orders, collect the rebate, repeat. The rebate really is income, and at scale it is a large number — but it is the only part of market making that is easy to compute, which is exactly why it misleads. The hard parts are the costs that do not show up on the fee schedule. Adverse selection is the big one: your resting orders get filled most eagerly by the traders who know something you do not, so your average fill is worse than the mid-price you quoted around, and that gap, measured in basis points across your whole volume, is a real drain. Keeping inventory flat means occasionally paying the taker fee to hedge, and running the whole thing costs money whether or not the market cooperates. This calculator lays all of that out: it turns your volume and maker rate into a rebate, adds the spread you actually capture when both legs of a round-trip fill as maker, then subtracts adverse selection, hedging and overhead to leave a net P&L in dollars and in basis points of volume. The single most useful output is the break-even adverse-selection rate — the amount of getting-picked-off your quotes can survive before the strategy stops paying. If you are instead a directional trader deciding whether a limit order beats a market order, the maker vs taker savings calculator is the right tool; to see when chasing a lower fee tier is worth the extra volume, use the fee tier break-even calculator; and to fold fees, spread and slippage into one hurdle on a single trade, use the true trade cost calculator.
The math
Write monthly maker volume as V and the maker rate as m (a percent, negative for a rebate). The rebate income is −V · m ÷ 100, which is positive when m is negative. The spread income is V · f · s ÷ 10000, where f is the round-trip fill rate (the fraction of maker volume that completes a both-sides-as-maker round-trip and captures the spread) and s is the spread captured per round-trip in basis points.
On the cost side, adverse selection is V · a ÷ 10000 for an adverse rate a in basis points; the hedge cost is V · h · t ÷ 100 where h is the hedged fraction and t the taker fee percent; and F is fixed monthly overhead. The net P&L is rebate + spread − adverse − hedge − F, and the net margin in basis points is net ÷ V · 10000. Setting net to zero and solving for the adverse rate gives the break-even adverse selection a* = (rebate + spread − hedge − F) ÷ (V ÷ 10000) — the basis points of getting picked off the book can absorb before it bleeds. All figures are notional-weighted and ignore financing, latency losses and queue position, which in practice determine how much of the quoted spread and rebate you actually realise.