In response to the ETF boom, the Nasdaq Stock Market exchange launched a market specifically for ETFs and index-linked investments today. Of the three main indexes, Nasdaq currently houses the fewest number of ETFs, although it does have the popular PowerShares QQQ (QQQQ). The launch of the new Nasdaq ETF Market aims to change that.

"The Nasdaq ETF Market heightens the competition in an industry that is entering a new phase. As electronic exchanges become more dominant and specialists less active, the Nasdaq ETF Market is structured to provide unprecedented levels of liquidity and efficiency in ETF trading," said John Jacobs, Nasdaq executive vice president. "Investors – both institutional and retail – will be the ultimate beneficiaries."

Besides focusing solely on ETFs, the new market differs from other exchanges in a few other ways, reports John Spence for MarketWatch.

  • It’s goal is to help ETFs flourish from their conception to reach their full potential.
  • The new market features "designated liquidity providers" that will be held to execution standards and receive incentives to support ETFs in their early trading phases.

While the new market is exciting, some experts are concerned that new ETFs might not receive adequate funding because traditionally, specialists have helped develop the new products in their early stages and provide seed capital.

The creation of Nasdaq’s ETF Market will open up more competition for the American Stock Exchange (Amex) and the New York Stock Exchange (NYSE). Already Amex is in the works to create and list actively-managed ETFs.

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.