One week after receiving approval from the SEC, NASDAQ OMX Group has outlined the details of it spilt program designed to provide monetary incentives to firms willing to serve as market makers for less liquid exchange-traded funds.
The Market Quality Program (MQP) will launch in the second quarter of 2013.
It will serve as an optional listing program that allows exchange traded fund (ETF) issuers to contribute funds to the Exchange that may be used to pay market makers that improve the liquidity and quality of the markets in MQP products.
Through the MQP, an ETF issuer will pay a basic annual fee into NASDAQ
OMX's general fund which will be rebated quarterly to qualified market
makers. Market maker performance will be measured by time and size
quoted at the National Best Bid and Offer and depth of displayed
liquidity. MQP details and progress throughout the pilot will be
provided on our ETP listings homepage.
NASDAQ OMX Announces Pilot Plan for ETF Market Quality
Program
First ETFs Listing Exchange to Launch Competitive Payment for
Market Making Program
NEW YORK, April 3, 2013 -- The NASDAQ OMX Group, Inc.
(Nasdaq:NDAQ) today announced that the Market Quality Program (MQP)
will launch in the second quarter of 2013. MQP is an optional listing
program that allows exchange traded fund (ETF) issuers to contribute
funds to the Exchange that may be used to pay market makers that
improve the liquidity and quality of the markets in MQP products. This
groundbreaking liquidity and market quality incentive program in the
U.S. will be available only on The NASDAQ Stock Market, the largest and
most liquid cash equities market on the planet, and has been approved
by the Securities and Exchange Commission on a pilot basis.
Recognizing a need for liquidity in ETFs, NASDAQ OMX designed the MQP
to broaden the pool of ETF liquidity providers, encourage competitive
trading and enhance the quality of the markets in exchange traded funds
by tightening quote spreads, increasing depth of liquidity and reducing
execution costs for investors. Issuers that list new or existing ETFs
in the MQP will benefit from a broader pool of liquidity providers,
which offers investors decreased trading costs and certainty of
execution. Market makers will benefit from the program's quarterly
rebate payments in exchange for a demonstrated commitment to enhance
the quality of the markets in registered ETFs.
"This market quality incentive program, which is similar to non-U.S.
paid for market making programs around the globe, is an important step
in the evolution of our U.S. capital markets system," said Eric Noll,
Executive Vice President of Transaction Services U.S. and U.K. at
NASDAQ OMX. "The MQP will enhance liquidity and exposure for exchange
traded products (ETPs), attract investors in the capital markets to
stimulate growth in these products, generate interest from a broader
range of market participants and benefit investors by reducing
execution costs and narrowing bid/ask spreads."
He added, "The MQP is a key piece of our larger strategy to better
serve the ETP industry with market quality incentive programs,
ETP-specific functionality and a platform built to be the preeminent
ETP trading destination."
Through the MQP, an ETF issuer will pay a basic annual fee into NASDAQ
OMX's general fund which will be rebated quarterly to qualified market
makers. Market maker performance will be measured by time and size
quoted at the National Best Bid and Offer and depth of displayed
liquidity. MQP details and progress throughout the pilot will be
provided on our ETP listings homepage:
www.nasdaqomxtrader.com/etfmarket
"We're thrilled to demonstrate our commitment to the listings community
as the first U.S. exchange to launch a competitive payment for market
making program for ETPs, and we're proud to have transformed what was a
market structure concept for many years into a reality with the help of
the SEC," said Dave LaValle, Head of ETP Listings at NASDAQ OMX.
He added, "Our market is primed for additional ETP listings and
stronger issuer partnerships in 2013 as we look to leverage our
relationships in the market making community to increase ETP liquidity
and broaden the pool of ETP liquidity providers. The MQP will
accelerate our momentum within the ETP community."
About NASDAQ OMX:
The inventor of the electronic exchange, The NASDAQ OMX Group, Inc.,
fuels economies and provides transformative technologies for the entire
lifecycle of a trade - from risk management to trade to surveillance to
clearing. In the U.S. and Europe, we own and operate 24 markets, 3
clearinghouses and 5 central securities depositories supporting
equities, options, fixed income, derivatives, commodities, futures and
structured products. Able to process more than 1 million messages per
second at sub-40 microsecond speeds with 99.999% uptime, our technology
drives more than 70 marketplaces in 50 developed and emerging countries
into the future, powering 1 in 10 of the world's securities
transactions. Our award-winning data products and worldwide indexes are
the benchmarks in the financial industry. Home to approximately 3,400
listed companies worth $6 trillion in market cap whose innovations
shape our world, we give the ideas of tomorrow access to capital today.
Welcome to where the world takes a big leap forward, daily. Welcome to
the NASDAQ OMX Century. To learn more, visit www.nasdaqomx.com. Follow
us on Facebook (http://www.facebook.com/NASDAQ) and Twitter
(http://www.twitter.com/nasdaqomx). (Symbol: NDAQ and member of S&P
500)
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