Hello, I’m making this post to discuss with you the way broker’s fees affect the market and its participants.
But let me please first introduce myself, I’m playing Eve Online since almost a year, and I spent the great majority of this time doing station trading and hauling between station. What really grasped me into this game was the realism of the economy and the mmo-sandbox aspect of the game.
Let’s get to the point,
when you put an order in the market you must pay the broker’s fee upfront (before the order is filled). My understanding is that this fee was introduced to discourage trading bots to undercut other participants orders by a small price change, since each time they do so they pay a fee to make a new order or modify an existing one.
If it was the goal I think it is really efficient at doing so but there is still a problem with this approach.
Since the fee is based on the total value of your order in ISK, the more your order is valuable the more you have to pay upfront. (Before any profit is made, so if the market didn’t fill you and left without you in the train, you must either accept the realized loss induced by the brokers fee or move your order close to the market price which will cost another broker’s fees although a smaller one)
What this actually incentivize is to post smaller orders and by smaller I mean the smallest value possible which is 1. Because if the market didn’t filled you and move far away from your order, the realized loss will be much smaller than if you put a big order.
And this is a loss for the players that trading bot can effortlessly avoid by sending only orders with the smallest amount possible. When their order get filled they add another one at the same price.
Although I didn’t find this practice common or bots that use this technique, It will still incentivize everyone to use smaller orders to avoid loss and result in a market harder to read since less big orders will be placed in the orderbook. And less liquid since people aren’t there 24/7 to update their small orders whhen they do get filled.
Let me hear what you think about it, and if you think it’s actually a problem or not, and if it is how you would solve it if you were working at cpp.
What I think could be a better way would be to put a broker fee’s upfront but not based on the value of the order. It would still discourage bots from undercutting and make the competition costly, but it would not penalize big orders. Although I don’t know to determine the right fee.
Thank you for reading me,
Fly safe !