Market-making CPM: what does $1 million of turnover actually cost?
In this guide, CPM means cost per million dollars of executed turnover, not advertising impressions. It normalises a trading result by activity. It does not measure safety, capital efficiency or the probability of making money.
Define the denominator before comparing a number
For this guide, turnover is the sum of the absolute executed notional of both buys and sells in the reporting window. A $500,000 buy followed by a $500,000 sell contributes $1 million of turnover. Posted but unfilled orders do not count. Margin, leverage and account deposits are not turnover.
Some reports use one-way notional instead. Under that convention the same round trip has a $500,000 denominator, so the reported cost per million doubles even though the trades did not change. Always name the convention, currency, market and start/end times alongside the number.
Partial fills count by their actual executed quantity and price, once per unique fill. Do not count an order update, a reconnect replay and a trade record as three separate executions. Data completeness is part of the result, not an optional detail.
The formula and sign convention
CPM = −net trading PnL ÷ executed turnover × 1,000,000. With this cost convention, a positive CPM is a loss per million of turnover; a negative CPM is a net gain per million. Zero turnover makes CPM undefined, not zero.
At a flat endpoint, one useful decomposition is net PnL = realised trading PnL before fees + signed funding receipts − signed venue fees − builder fees. Treat rebates as negative fees. Check whether your venue's PnL already includes any of these items before adding or subtracting them.
Execution prices already determine realised trading PnL: do not subtract slippage again from that same fill-based result. You may report slippage as a separate diagnostic relative to an explicit reference price. Deposits and withdrawals are cash flows, not trading profit.
If positions remain open, report mark-to-market PnL and the valuation timestamp as well, or wait for a verified flat endpoint for a realised-only comparison. A realised-only headline that hides losing inventory is misleading.
A worked example, not a Vesper performance claim
Suppose a hypothetical flat run records $1,000,000 of executed turnover, $70 realised profit before costs, $80 of venue fees and $5 of funding received. Net PnL is $70 + $5 − $80 = −$5. The cost is therefore $5 per $1 million of turnover.
These figures illustrate the accounting; they are not observed product returns, an expected fee tier or a forecast. If the same net loss were divided by $500,000 of one-way notional, the headline would be $10 per million. Neither convention changes the $5 actually lost.
Read the selected mode’s guide and review the actual wallet authorization before signing. Venue fees, funding and trading risks depend on your account and market.
| Hypothetical item | Amount | Treatment |
|---|---|---|
| Executed turnover, both legs | $1,000,000 | Denominator |
| Realised trading PnL before fees | +$70 | Profit from fills |
| Funding received | +$5 | Add once |
| Venue fees | $80 | Subtract once |
| Net PnL | −$5 | CPM = +$5 per million |
Fee-only CPM is not all-in CPM
Read the selected mode’s guide and review the actual wallet authorization before signing. Venue fees, funding and trading risks depend on your account and market.
Fee schedules depend on the venue and account. For an example of tier and market-specific rules, consult the official Hyperliquid fee documentation. Do not apply one venue's fee schedule to Entropy or another exchange.
A maker rebate can reduce a fee component while adverse fills still produce a net loss. Conversely, favourable trading PnL can offset positive fees. Reporting only the maker share or rebate rate does not establish either outcome.
How to compare two runs without fooling yourself
Use the same accounting convention, comparable instruments and periods, and disclose differences in clip size, leverage, position limits and strategy version. Confirm fills are complete and endpoint inventory is treated consistently. A run that trades less may have lower dollar losses but a different CPM.
Include turnover, fill and cycle counts, net PnL, exposure and the length of the observation window. A large-looking annualised result from a few fills is not robust evidence. Market-making cycles share market conditions, so treating every fill as an independent sample can understate uncertainty.
For research, fixed time blocks and sensitivity checks across sessions can help describe uncertainty. Report the method and sample limitations. Do not remove bad cycles after observing them, and do not interpret one favourable window as a guarantee for a new market regime.
Use CPM beside a risk report
CPM is useful when your question is the cost of generating turnover. It cannot tell you whether that turnover is worth the inventory risk or capital committed. Keep maximum exposure, drawdown, open-order state, outages and any exceptional exits visible.
If your goal is a funding position held over time, yield after costs and margin requirements may be more relevant than turnover efficiency. See market making versus funding arbitrage before comparing unlike strategies.
Educational methodology only. It is not a recommendation to increase turnover, use leverage or trade for points. Fees, execution losses and liquidation can exceed any anticipated incentive.
Questions
What does CPM mean in market making?
Here it means cost per million dollars of executed turnover: negative net trading PnL divided by turnover, multiplied by one million. State whether turnover includes both buys and sells.
Is lower CPM always better?
Only for a comparable cost measurement. A lower CPM does not establish lower drawdown, less exposure, better capital efficiency or a repeatable future return.
Should I count both entry and exit?
This guide counts both executed legs. Other reports may use one-way notional; disclose the denominator before comparing them.
Is CPM a fixed fee?
Read the selected mode’s guide and review the actual wallet authorization before signing. Venue fees, funding and trading risks depend on your account and market.