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Tuesday, March 31, 2015

Equity Trader Alert #2015 - 40
Nasdaq Enhances Market Quality Incentive Programs

Category:

  • Pricing

Markets Impacted:

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Lead Market Maker Program

Effective Wednesday, July 1, 2015, the Designated Liquidity Provider program will be replaced by the below Lead Market Maker program:

The following credits shall apply to transactions in a Qualified Security by one of its Lead Market Makers in lieu of credits provided under Rules 7018 and 7014:


Credit to Lead Market Maker providing displayed liquidity though the Nasdaq Market Center:
$0.004 per share executed (or $0, in the case of executions against Quotes/Orders in the Nasdaq Market Center at less than $1.00 per share)

For purposes of this paragraph:

(1) A security may be designated as a “Qualified Security” if:

  • it is an exchange-traded fund or index-linked security listed on Nasdaq pursuant to Nasdaq Rules 5705, 5710, or 5720;

  • it has at least one Lead Market Maker

(2) A “Lead Market Maker” or “LMM” is a registered Nasdaq market maker for a Qualified Security that has committed to maintain minimum performance standards. A LMM shall be selected by Nasdaq based on factors including, but not limited to, experience with making markets in exchange-traded funds and index-linked securities, adequacy of capital, willingness to promote Nasdaq as a marketplace, issuer preference, operational capacity, support personnel, and history of adherence to Nasdaq rules and securities laws. Nasdaq may limit the number of LMMs in a security, or modify a previously established limit, upon prior written notice to members.

The minimum performance standards applicable to a LMM may be determined from time to time by Nasdaq and may vary depending on the price, liquidity, and volatility of the Qualified Security in which the LMM is registered. The performance measurements will include one or more of the following: (A) percent of time at the national best bid (best offer) (“NBBO”); (B) percent of executions better than the NBBO; (C) average displayed size; and (D) average quoted spread (collectively, “LMM Criteria”).  The LMM Criteria will be established upon written notice to members.

The Exchange intends to announce any further definition to the LMM Criteria and other specifics of the program later this month, where applicable.
 
 
 
 
 
 
 
 

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