Market Making with Fees Interview Questions
Market making with fees interview questions for adjusting spread, edge, and quote decisions when each trade has explicit costs.
Candidates asked how transaction costs affect quotes.
Fees reduce edge
A fee per trade lowers the net value of each fill. Quotes that looked profitable before costs can become unattractive after fees.
Widening may be necessary
If each trade costs money, the spread may need to be wider to preserve expected edge after costs.
Concrete example
If your expected gross edge is 0.20 per unit and the fee is 0.05 per unit, the net edge is 0.15 before inventory and selection effects.
Fees affect fill decisions
A tighter quote may get more fills, but more fills also means more fees. The expected PnL calculation should include both.
State the cost convention
Say whether the fee applies per trade, per unit, per side, or only when filled, if the prompt gives that detail.
Common mistakes
Candidates often compute spread capture before fees and forget that every filled quote has a cost.
Practice the pattern
Use the LeetQuidity curriculum and calibration to turn this topic into a focused practice plan.