hello, @carlbergman
Thank you for the clarification. I realize I made an error when calculating the volume. While my estimation of the taker fees paid by the vaults seems accurate, I agree with the reasoning in your query. Given that vaults typically act as makers, it makes more sense to focus on the taker fees generated in those trades, which can often be paid by the counterparties.
Even if the vaults generated $100 million in volume, that figure is still extremely low. It’s important to put this in context by calculating it as a percentage of the total trading volume. When it comes to market makers, they engaged in these trades because the vaults placed orders inefficiently. Professional participants identified these inefficiencies and acted as takers in those trades. I wouldn’t consider this trading volume to be a meaningful advantage for the vaults.
I understand that over 90% of trading volume across the market involves algorithmic trading battles. However, if the vaults have a negative expected value (–EV) when facing these professional participants, then why provide liquidity under such conditions? Who would want to be a liquidity provider for the vaults if they aren’t able to turn a profit?