Importance of trading fees in the exchange platform

Posted On : 21 Jan 2020
Category : News

To trade successfully on the cryptocurrency trading platform, a minimum fee is required and it may differ as per every business requirement. There is a fee structure or list which highlights different rates for different markets or businesses and activities. However, having a proper fee structure helps a customer or client wanting to do trade and become well aware of every requirement. For successful trading, it is very important for every customer to study the fee structure first to find it satisfactory before deciding to start a trade in the market. Moreover, every fee structure is different from the other and there are certain points which should be remembered-

  •  Each fee structure efficiently describes the way every broker or firm likes to earn money from their clients or customers.
  • The fee structure has many different models such as an incentive-based, charging commissions, and a flat fee model.
  • Since every fee structure comes with its own benefits, so the customers are able to select from a different structure suiting their desired requirements.

In order to trade in the stock markets an individual has to bear the transaction costs, let’s take an example of an auction website where the cost is listed for an item to be sold. Here the website gets commission after selling the item and the display cost is described in the fee structure itself. However, there are different types of fee structure available as well-

  1. Classic fee structure

It follows the principle of the hedges fund which is an investment which helps in reducing the adverse risk price movement for an asset. A fund manager is allocated for managing the trading activities, and now the fund can be managed by one or many persons. The fee structure for a hedges fund is calculated in “2 and 20”, stating the fund manager may charge 2% on the assets under the management and another 20% for their own profit.

  1. Flat fee structure

Here the asset managers charge a flat rate for the assets under management. However, this structure has a downside of its own, like it has the potential to stifle innovation and creativity as it is earned regardless of performance.

  1. Free fee structure

This structure is quite popular with the brokers who offer commission-free trading. This structure allows buying stocks and EPFs just for $0, and earnings are generated using other methods like lending stocks to short sellers, applying cash management strategies for client funds and receive payment for directed order flow.

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