Commissions in Margin 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 margin trading platforms. In this case, Geco.one and BitMEX as a comparison.
Commissions in Margin 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. In this situation, you are a so-called market liquidity provider (maker).
The taker commission is the opposite of the maker commission. In this situation, the issued order automatically fills in another already existing one. Thus, you are incurring the cost of being a “taker” of liquidity in the market.
In the case of margin trading, we can often also talk about fees for maintaining a position. It is usually because margin trading is focused on a short-term investment — therefore, a longer period of maintaining a position involves an additional fee. The time frame and fee amount varies between platforms.
Maker and taker commissions work in relation to an order book existing on the exchange. Some trading platforms, however, 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.
Margin trading commissions on various platforms
An example of a margin 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 have to 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 0.04%. In addition, a Settlement Fee is charged every 24 hours for holding a position — this fee is only (compared to the BitMEX fee charged every 8 hours) 0.01%. Notably — the rate is the same for all pairs.
Native tokens lower the commission
Many trading platforms allow you to lower your commission by 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% each time.