Posting costs no fee and pays a rebate when filled. It sounds free. What the poster pays instead is adverse selection: the moment your quote is hit is usually the moment it should not have been. Here is that cost measured, and why it is an order of magnitude worse on short tenors.
You have a bid at 0.61. Under what circumstances does it fill?
| Case | Why they sold to you | For you |
|---|---|---|
| They are closing out / need cash | nothing to do with value | the fill you wanted |
| They know it is going down | because 0.61 is already too expensive | the fill you did not want |
The asymmetry: the second group is more urgent. Someone in no hurry can rest an order; someone with information must trade now — so informed traders are over-represented in the flow that reaches you relative to their share of the population.
| Nature | Magnitude | |
|---|---|---|
| Maker rebate | fixed | about +0.25¢/share |
| Adverse selection | variable, and steep in tenor | 0.5¢ to 7¢+ /share |
Income is a flat line; cost is not. So whether the business works depends almost entirely on which board you run it on. Measured on crypto up/down, tenor by tenor:
| Tenor | Naked-leg share | Adverse selection /share | Rebate /share | Net |
|---|---|---|---|---|
| 1 hour | 3.5% | −0.475¢ | +0.248¢ | +0.099¢, barely positive |
| 5 minutes | 53% | ≈ −7.2¢ | +0.25¢ | an order of magnitude short |
Same action, same rebate — change the tenor and it goes from barely positive to deeply negative. And +0.099¢ leaves essentially no tolerance: a slightly worse cost and it flips.
You are trying to earn the spread, typically a cent or two, while carrying whatever the price does while you hold. The ratio between those decides the business.
Measured on five-minute boards — median mid-price movement over 30 seconds:
| Period | 30-second median move | vs the spread you want |
|---|---|---|
| across the window | 2–4¢ | about 1¢ |
| final stretch | 27.5¢ |
That 27.5¢ is the point: the price can move twenty-seven times your target profit in half a minute. In that environment whether you make money has almost nothing to do with your quoting skill.
Market making a short tenor is roughly like permanently living in the last few minutes of a long one.
Everyone knows the close is dangerous and avoids it. A short-tenor board is in that state for its entire life — there is no safe stretch. I recorded several hours of book and checked every period: 2–4¢ throughout, no safe window.
The maker's ideal is both sides filling, merged into sets, spread locked. Adverse selection specifically destroys that: when the market trends, only one side fills — the side that loses you money.
The unmatched part is the naked leg, and I measured its cost: about −13.5¢ per unpaired share (−$111.51 spread over 825 shares). Against a +0.25¢ rebate — fifty-four times.
Which is why the business lives or dies on the pair rate, not on spread capture. See pair rate and naked legs.
| Question | Measured |
|---|---|
| Median return of the group | −0.74¢/share (47 same-shape wallets) |
| What the best one earns | about $95/day — the ceiling for the lane |
| Do rebates rescue it? | Not necessarily. Wallets holding $100–380 in rebates stayed net negative |
And one detail that says a great deal: the wallets at the top of the maker-rebate table are almost all in sports, with not one of their last thousand-odd fills in crypto up/down. The people best at this business have voted with their feet against this category.
| Do | Note |
|---|---|
| Pick a longer tenor | longer holding, more chances to pair, less adverse selection |
| Quote further from mid | fewer sweeps — but LP rewards fall with you, measured at ×0.26 two cents out |
| Watch pair rate, not spread | paired is locked; unpaired is the risk |
| Do not call the rebate profit | it is the entry ticket. Compute net first |
| Read the population first | if the median is negative, why would you be the exception? |
A poster's income is fixed and their cost is variable — so "no fee plus a rebate" is where the analysis starts, not where it ends. Being filled is itself bad news: the person who took your quote usually knew slightly more than you did.