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Order Execution

Posting vs. Taking Liquidity in Order Execution

Pomegra Learn

Why Does It Matter Whether You Post or Take Liquidity in Your Orders?

When you buy or sell, you're either adding liquidity to the market (posting an order that sits in the book waiting to be filled) or removing liquidity (taking an order that's already sitting in the book). The distinction affects your profit directly through two mechanisms: execution speed and rebates. Taking liquidity is immediate but costs you the full bid-ask spread. Posting liquidity is slower but often includes a small rebate from the exchange and saves you the spread cost. Skilled traders shift between posting and taking based on urgency, stock volatility, and whether they're trying to scalp or build a position.

Quick definition: Posting liquidity means placing a limit order that waits in the order book for buyers/sellers to hit; taking liquidity means placing a market order that immediately fills against existing orders, with the taker paying the spread and maker receiving a rebate.

Key takeaways​

  • Maker orders (posting liquidity) sit in the book, earn rebates (0.1–0.5 cents per share), and take longer to fill; taker orders (taking liquidity) fill instantly but cost the full spread.
  • Exchange rebates incentivize market makers and active traders to add liquidity, reducing the overall cost of trading for all market participants.
  • Rebate structures vary by venue (ARCA, NSDQ, EDGX); choosing the right venue based on your order type can add 0.1–0.3 cents of edge per share.
  • Smart order routing automatically picks the venue offering the best rebate for maker orders, but manual selection gives you more control.
  • Timing matters: posting a limit order 1–5 seconds before an expected price movement often fills as a maker instead of requiring a market taker order.
  • Scalpers and high-frequency traders live on rebates; for them, earning maker rebates is as important as capturing spreads.

Maker vs. Taker: The Fundamental Distinction​

When you place a maker order (also called a posted order), you're adding to the order book. Your buy limit order sits below the current ask; your sell limit order sits above the current bid. Other traders hit your order when they're ready to trade. Maker orders may take seconds or minutes to fill, or may never fill at all.

When you place a taker order (also called an aggressive order), you're removing existing orders from the book. Your market order hits the current best ask (if buying) or best bid (if selling) instantly. Your order fills immediately, but you pay the spread.

Example: AAPL bid-ask is $150.00 / $150.02. You want to buy 100 shares.

  • Maker route: Place a buy limit order at $150.00 (matching the current bid). Your order sits in the book. If another seller arrives, your order fills. You saved the $0.02 spread but had to wait.
  • Taker route: Place a market buy order at $150.02 (hitting the current ask). Your order fills immediately. You paid the $0.02 spread but got filled instantly.

Rebates and Who Pays Them​

Exchanges pay rebates to traders who add liquidity (makers) and charge small fees to traders who remove liquidity (takers). This structure encourages market participants to post orders and thus improve the quality of the order book.

Typical rebate structure (per share):

  • Maker receives: +$0.001 to +$0.005 (1–5 cents per 1,000 shares)
  • Taker pays: -$0.002 to -$0.005 (2–5 cents per 1,000 shares)

On a 1,000-share trade, the maker might earn $1–$5, while the taker pays $2–$5 in fees. Over a day of trading, this adds up significantly. A scalper executing 50 trades per day at 1,000 shares each, earning 2 cents per share as a maker, nets $1,000 in rebates before any trading profit.

Rebates vary by exchange. ARCA (Nasdaq's liquidity provider) offers different rebates than EDGX (Cboe's exchange). Smart traders use routing software or direct access platforms to send maker orders to the venue offering the highest rebate.

Venue Selection for Maker Rebates​

Not all orders route to the same exchange. When you send an order, your broker's order router chooses which venue to send it to, based on rebate structure, order type, and best execution obligations.

  • ARCA (Nasdaq OMX): High-volume venue, competitive rebates for makers, reliable execution.
  • NSDQ (Nasdaq): Prioritizes Nasdaq-listed stocks, good rebates for limit orders.
  • EDGX (Cboe): Alternative exchange, sometimes offers higher rebates for specific order types.
  • ISLAND (NASDAQ): Dedicated to post-only orders, high maker rebate environment.

For a retail trader using DAS Trader or a similar DMA platform, you can manually select which venue gets your order. If you're posting a maker order in a stock you know will see continued volume, routing to EDGX (which might offer 0.004 cents rebate) instead of NSDQ (which offers 0.002 cents) on 10,000 shares means $4 extra rebate. Small per-share amounts add up.

Smart Order Routing and Execution​

Most brokers offer smart order routing, which automatically sends your order to the venue that will give you the best execution. For taker orders, "best execution" usually means the best price and fastest fill. For maker orders, it means the highest rebate (or the best chance of fill combined with rebate).

Sophisticated traders sometimes disable smart routing and manually select venues because they understand the nuances. For example, if you know a stock is about to see a surge of buying (based on Level 2 analysis), you might post a sell limit order on EDGX (expecting high rebate and likely fill) rather than ARCA (lower rebate but more likely fill).

Timing and the Maker-Taker Decision​

The choice between posting and taking liquidity is often a timing decision. If you want to buy right now, you take liquidity (market order). If you can wait 5–10 seconds, you post a maker order and save the spread plus earn a rebate.

A common technique used by scalpers is to post orders slightly inside the spread, betting they'll fill as a maker before the price moves. For example, TSLA bid-ask is $250.00 / $250.01 (a 1-cent spread). You post a buy limit order at $249.99, hoping a seller will hit your order before the market moves higher. If the price dips to $249.99, you fill as a maker and earn a rebate. If the price stays or rises, you cancel and try a taker approach instead.

This technique works well in choppy, sideways markets where prices oscillate within small ranges. In trending markets (strong up or downtrend), posting inside the spread often fails because the market doesn't come back to your order.

Decision tree​

Rebate Capture in Active Trading​

For scalpers and high-frequency traders, rebates are a significant source of profit. A trader executing 100 trades per day at 500 shares each (50,000 shares total) with an average maker rebate of 0.002 cents per share earns $100 in rebates alone, before any trading profit from price movement.

The strategy to maximize rebates is to post-only orders whenever possible. Many traders set all their orders as post-only, meaning they won't execute if they would be a taker—they sit in the book waiting to be hit. This forces every fill to be a maker fill, guaranteeing the rebate.

Post-only orders have a downside: they might not fill if the market moves away from your order. But for scalpers who are looking to get in and out of small positions multiple times per hour, post-only orders combined with tight stops protect against slippage while guaranteeing rebates.

Fee Structure Pitfalls​

Not all trading activity gets rebates. There's usually a rebate tier—if you execute fewer than a certain number of shares per month, you might get no rebate. Also, some orders are excluded from rebates: orders on halt, orders that trigger circuit breakers, orders during market close.

Hidden orders (iceberg orders) and non-display orders often get lower rebates or no rebates at all because they don't improve the visible order book.

Understanding your broker's rebate structure is crucial. Ask your broker:

  • What's the minimum monthly volume to qualify for rebates?
  • Do all venues (ARCA, NSDQ, EDGX) offer the same rebate?
  • Are post-only orders rebated?
  • Are hidden orders rebated?

A trader who understands the answers to these questions can optimize their routing and order type selection to maximize rebate capture.

Real-world examples​

Consider a scalper trading MSFT 100 times per day, 500 shares per trade = 50,000 shares daily. If 70% of orders are posted (maker, earn 0.002 cents per share rebate) and 30% are taker (cost 0.003 cents per share), the daily rebate capture is:

  • Maker: 35,000 shares × $0.0002 = $7
  • Taker: 15,000 shares × -$0.0003 = -$4.50
  • Net rebate: $2.50 per day, or $500–$600 per month (assuming 200 trading days/month)

This is not a fortune, but it's pure profit from order structure knowledge.

In a second example, a trader notices AAPL is about to see heavy volume based on an imminent earnings announcement. The trader posts 2,000 shares on the sell side at a slightly lower price (inside the spread), expecting the pending buyers will hit the order. The order fills as a maker, earning $0.002 per share × 2,000 = $4. The trader also captures a better-than-bid price because of the inside-spread posting. Without understanding maker-taker dynamics, the trader would have used a market taker order, losing the spread cost and the rebate.

A third example: a trader realizes their broker offers different rebates on different venues. They execute 500 trades per month. EDGX offers 0.004 per share maker rebate; NSDQ offers 0.001 per share. By routing all maker orders to EDGX instead of letting smart routing choose NSDQ, the trader captures an extra 0.003 × (average order size) × (# of monthly orders). This adds hundreds of dollars per month if they're trading size.

Common Mistakes with Maker-Taker​

One mistake is ignoring rebates entirely. Many retail traders don't even know rebates exist and lose thousands per month by not optimizing their order routing and order types.

Another mistake is trying to capture rebates on every trade. If you're in a trending move (NVDA is rocketing up 3% in the first 5 minutes), posting a limit order to earn a 0.2-cent rebate is foolish—you should be taking liquidity and capturing the $1–$2 per share trend move. Rebates matter most in choppy, range-bound trading, not in strong trends.

Missing rebate tiers is also costly. Some brokers only pay rebates if you trade more than 100,000 shares per month. If you're a casual trader hitting that threshold, you might suddenly become eligible, doubling your rebate income. Conversely, if you're a semi-professional and your volume drops, you might fall out of the rebate tier without realizing it.

FAQ​

Do I earn rebates on market orders?​

No. Market orders are taker orders and usually incur a small fee instead of a rebate. Post-only limit orders earn rebates. Some brokers offer "sell short exempt" or other special order types that carry rebates; check with your broker.

Can I earn rebates on options trades?​

Yes, but option rebate structures are different and often more complex. Options exchanges (CBOE, etc.) have their own rebate schedules. Ask your broker for the options rebate detail.

Does my broker get the rebate or do I?​

This varies. Most discount brokers and DMA brokers pass rebates directly to the trader. Some full-service brokers keep the rebates as compensation for platform costs. Always ask.

How do I know what my rebate is?​

Check your broker's published rebate schedule or ask directly. Your trade statements should itemize rebates separately. If not, request a detailed rebate report.

Can I optimize my trading style for rebates?​

Yes, but be careful. Optimizing for rebates alone can lead to poor trading decisions (posting orders in trending markets, chasing small rebate improvements instead of real profits). Use rebates as a minor optimization, not the core strategy.

Are rebates taxable income?​

Yes. Rebates are ordinary income taxable at your marginal rate. If you're a trader for tax purposes, rebates might be deductible as a business expense, but consult a tax professional.

Summary​

Trading is fundamentally divided into two roles: posting liquidity (maker) as a limit order, or taking liquidity (taker) as a market order. Makers earn small rebates from exchanges (0.1–0.5 cents per share) and save on bid-ask spread, but fill slower. Takers fill instantly but pay the spread and are charged fees instead of earning rebates. Exchanges incentivize makers to improve order book quality by paying rebates. Savvy traders choose the best venues for their orders based on rebate schedules, post-only orders when they can afford to wait, and actively manage the maker-taker decision to reduce trading costs. Over time, consistently choosing maker orders over taker orders (when possible) and optimizing venue selection based on rebates can add hundreds or thousands of dollars per month to net profits. The key is balancing rebate capture with execution certainty—sometimes taking liquidity and paying a fee is the right choice if you need a fill urgently.

Next​

Iceberg Orders and Hidden Orders