As crypto-currency adoption continues to grow in South Africa, investors are increasingly comparing exchanges on more than just the number of listed coins or mobile app features.
This, as trading fees, often overlooked by new investors, can have a meaningful impact on long-term returns.
While experienced traders are familiar with concepts such as maker and taker fees, many retail investors simply want to know one thing: how much will it cost to buy or sell crypto-currency?
The answer varies considerably depending on the exchange.
What are maker and taker fees?
Most crypto-currency exchanges use a maker-taker pricing model.
A maker places an order that is added to the order book, increasing market liquidity. Because makers help improve market depth, exchanges often reward them with lower fees.
A taker buys or sells immediately using an existing order in the order book. Since takers remove liquidity, they generally pay a higher fee.
For investors placing market orders – which is how many retail users trade – the taker fee is often the most relevant cost.
For investors who are prepared to place limit orders and wait for execution, maker fees can result in meaningful savings.
As an example, under Afridax’s fee structure, a R100 000 maker trade incurs no trading fee, while an immediate market order costs R100.
Competing exchanges charge both maker and taker fees at their entry-level retail tiers, meaning even patient traders generally pay more before qualifying for high-volume discount tiers.
The catch with published fees
Comparing exchanges is not always straightforward.
Most South African exchanges operate volume-based fee schedules, meaning customers pay lower fees as their trading activity increases over a rolling 30-day period.
This means two customers using the same platform could pay completely different trading fees depending on how much they trade.
For institutional traders, professional market makers and high-frequency trading firms, these thresholds may be achievable. However, they remain well beyond the reach of most retail investors.
Do lower fees always mean better value?
Trading fees are only one part of choosing a crypto-currency exchange.
-Regulatory licensing
-Security and custody practices
-Liquidity and order book depth
-Number of supported assets
-Deposit and withdrawal methods
-Customer support
-Platform reliability and uptime
A lower trading fee may save money, but poor liquidity can sometimes result in a worse execution price that outweighs the fee savings.
A more competitive market
The South African crypto-currency exchange industry has matured significantly over the past few years. Increased regulatory oversight, stronger compliance requirements, and growing institutional participation have pushed exchanges to compete on a broader range of services.
Pricing has become another area of competition.
For everyday investors who trade modest amounts each month, differences of a few tenths of a percent may not seem significant. However, over hundreds of trades or years of investing, lower fees can translate into thousands of rand remaining invested rather than being paid to an exchange.
As more South Africans enter the digital asset market, fee transparency is likely to become an increasingly important factor influencing where they choose to trade.
Share
