Optimal transaction costs ensure smooth market operations and increased profits.
Transaction costs in financial markets are important, and researchers have looked into two main areas: how investors can trade optimally with these costs, and how market makers can set optimal transaction costs. By analyzing both perspectives simultaneously, it was found that the optimal transaction cost exists when market makers commit to the market for a long time. Additionally, the optimal transaction cost increases when the market is profitable for investors, but decreases when it is not.