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Optimal Dynamic Fees in Automated Market Makers
Leonardo Baggiani, Martin Herdegen, Leandro S\'anchez-Betancourt
https://arxiv.org/abs/2506.02869 https…

Optimal Dynamic Fees in Automated Market Makers
Automated Market Makers (AMMs) are emerging as a popular decentralised trading platform. In this work, we determine the optimal dynamic fees in a constant function market maker. We find approximate closed-form solutions to the control problem and study the optimal fee structure. We find that there are two distinct fee regimes: one in which the AMM imposes higher fees to deter arbitrageurs, and another where fees are lowered to increase volatility and attract noise traders. Our results also show…