Exchanges Ready Incentive Programs to Boost ETF Liquidity

August 8th at 2:20pm by John Spence

The NYSE and Nasdaq are preparing programs to offer incentives to ETF market makers to ensure the exchange-listed products stay liquid and function smoothly.

For example, the SEC this year gave the green light to a NYSE pilot program that would allow ETF providers to pay between $10,000 and $40,000 per product annually to lead market makers. [SEC Gives Green Light to Nasdaq ETF Liquidity Proposal: Report]

“At Nasdaq, ETF issuers are looking to offer $50,000-$100,00 to top market-makers in a product if certain quoting requirements are met,” the Financial Times reported Thursday. [NYSE Market-Maker Incentive Program]

The exchanges are hoping the programs will encourage more firms to make markets in ETFs, according to the article.

“It’s up to the issuer to secure that lead market-maker, and lead market-makers have become more and more selective of the products they’re willing to sign up for,” said Laura Morrison, head of US exchange traded products listing and trading at NYSE, in the FT story. “A lot of that has to do with the fact that there are just so many more products out there.” [ETF Sponsors Tackle Liquidity Issues with Market Makers]

The opinions and forecasts expressed herein are solely those of John Spence, 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.

Tickers