Fee Architecture

Layer 1 — CLOB order-book taker fee

Base rate: 30 bps (0.3% of fill notional). Cut from 50 bps on 2026-09-06 to attract CLOB volume.

Code: lib/clobFees.js (charge path in services/clobEngine.js) + lib/fiveActorFees.js (split path via services/feeSplitPoller.js). Both files declare TAKER_FEE_BPS_BASE — a boot-time [fee-sync-guard] in server.js asserts equality and refuses startup on mismatch.

Progressive tier — builder share grows with tier

Unfilled roles: if acquisition_builder_id or market_creator_id is null on a trade, that share flows to platform_net. Every trade's 30 bps is always fully allocated.

Dynamic fee (env-gated)

When PAX_DYNAMIC_FEE_ENABLED=on, CLOB taker fee scales as fee = notional × rate × price × (1 - price) × 4 — matches Polymarket + Kalshi industry-standard formula. Max fee (30 bps at rate=0.003) at 50/50 markets; approaches 0 at extremes:

Layer 2 — AMM / fast-round house edge + spread

Rates (from riskSettings, admin-tunable via /admin/risk-control):

• house_edge: 2% default, dynamic 0.5-8% (via computeDynamicHouseEdge() — higher at extreme prices)
• spread: 4% default, dynamic 2-8%
• Split of spread + edge revenue: 83% platform / 12% LP holders / 5% insurance (via lp_platform_share, lp_holder_share, lp_insurance_share)

Two pricing models coexist (transition):

• v1 (legacy): user pays fair price at buy; winning shares payout × (1 - houseEdge). Edge captured at settle. Positions tagged _priceModelV2 = false.
• v2 (new, DisplayPrice v2): user pays inflated displayPrice = buyPrice / (1 - settleFee); winning shares payout $1 flat. Edge captured at buy. Positions tagged _priceModelV2 = true.

Ledger events (2026-09-06+): Both v1 and v2 write FEE_AMM_HOUSE rows to financial_event:

• v1: settle-time hook in server.js writes per winning position (lots × houseEdge). Idempotency key fee_amm:<marketId>:<roundId>:<userId>:<side>.
• v2: buy-time hook in _executeTradeInternalRaw writes at trade placement (notional × houseEdge). Idempotency key fee_amm_v2:<marketId>:<roundId>:<userId>:<side>:<ts>.

Builder attribution: at trade placement, _executeTradeInternalRaw checks builder_registry — if the trading user is a registered builder, _executionBuilderId is set on the position and carries through to both the buy-time and settle-time FEE_AMM_HOUSE events.

Layer 3 — Parlay margin

Rate: parlay_margin = 0.15 (15%) — industry standard for correlated multi-leg risk (FanDuel avg 23.5%, DraftKings 17.7%, rest of market 14.7%).

Mechanic: margin is baked into odds at PLACEMENT — potential_payout = stake / (Π(probs) × (1 - dynamicMargin)). On WIN, user receives the pre-discounted potential_payout; house implicitly captures the fair-vs-discounted difference. On LOSE, stake is retained as game outcome (not fee).

Ledger event (2026-09-06+): FEE_PARLAY_HOUSE is written on WON bets only (approximation effective_payout × parlay_margin). Idempotency key fee_parlay:<bet_id>. LOST bets get no fee event (game outcome, not fee).

Builder attribution: parlay_bets.execution_builder_id column populated at place time via builder_registry lookup on the user_id. Historical bets remain null.

Layer 4 — LP holder distribution

Source: the FEE_LP events written on every CLOB fill (7 bps at auto tier, 5-6 bps at higher tiers). Accumulates in financial_event with credit_account = 'pool:lp'.

Distribution: services/lpFeeDistributionCron.js runs hourly:

1. Aggregates unsettled FEE_LP total from Neon.
2. Reads active lp_positions from supabase2.
3. Distributes pro-rata by shares.
4. Updates lp_positions.total_earned + writes lp_pnl_log audit rows (pseudo-round clob_lp_dist_<ts>).
5. Marks the source FEE_LP events settled with the distribution ID.

Env knobs: LP_FEE_DISTRIBUTION_ENABLED (on/off, default off), LP_FEE_DISTRIBUTION_INTERVAL_MS (default 3600000 = 1 h), LP_FEE_DISTRIBUTION_MIN_USD (default 0.10). No active LP positions? Events settle to lp_dist_noholders_<ts> bucket — fees stay with platform_net.

Note on AMM/spread LP share (12% via lp_holder_share): that share flows through the pre-existing lp_pnl_log per-round mechanism at fast-round settle time (unchanged). The CLOB FEE_LP flow above closes the gap where CLOB LP share was accumulating in ledger but never reaching holders.

LP quality scoring — quadratic distance-from-mid

Raw FEE_LP distribution alone rewards volume regardless of spread tightness. A separate rollup (lib/lpPositionsRollup.js, hourly) computes a quality-weighted lp_units score per LP per market per ISO week. Formula:

quality       = SUM( size × max(0, 1 - min(1, |distance_from_mid| × 4))² )
share         = user_quality / market_total_quality × 100
spread_bonus  = clamp(share / 100, 0, 0.5)              // caps at +50%
lp_units      = rebate_earned_usdt × (1 + spread_bonus)

Quadratic penalty: an LP quoting at the mid (distance_from_mid = 0) gets quality = size × 1² = size. At 5 cents from mid (dist = 0.05) the multiplier is (1 - 0.20)² = 0.64. At 25 cents from mid (dist ≥ 0.25) the multiplier collapses to 0 — no quality credit. This forward-compatible bonus surfaces automatically as spread scoring lands per market; the rebate_earned_usdt base flow is unchanged.

Read your LP rollup via GET /v1/mm/me/lp-positions?week=YYYY-Www — returns per-market breakdown + weekly totals. Raw signed inventory + risk limits at GET /v1/mm/me/inventory and GET /v1/mm/me/risk-limits.