Nasdaq Targets ETF Trading

March 14th at 12:41pm by Tom Lydon

In response to the growing popularity for exchange traded funds, Nasdaq OMX Group (NasdaqGS: NDAQ) is considering converting one of its smaller exchanges to focus solely on trading ETFs.

Nasdaq will change the structure of the PSX, its smallest trading venue by volume, and the exchange operator will introduce designated market makers to the restructured exchange, reports Kaitlyn Kiernan for the Dow Jones Newswires.

The shift in tactics could be an attempt to tap into the growing market segment that is dominated by the NYSE Euronext (NYSE: NYX) electronic Arca exchange. According to NYSE Euronext data, NYSE Arca accounted for 20% of trading volume in exchange traded products. In comparison, PSX sees 0.8% of U.S. trading volume.

Nasdaq OMX does not seek to list fund products on PSX but trade them.

The Nasdaq OMX PSX exchange uses the exchange license grated through the purchase of the Philadelphia Stock Exchange in 2007. Originally, the PSX was the only U.S. stock exchange to follow a “price/size priority model,” which attracted participants through rebates – it would rank orders by price and then size.

If granted SEC approval, the PSX would use the price-time priority model for ETF and ETN trades – orders are ranked by price and then by time they were entered.

The changes are expected to go through sometime in the second quarter.

For more information on the ETF industry, visit our current affairs category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

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