U.S. exchanges have been flirting with the idea of boosting the number of shares in less-active securities. In November, they stated their intent to propose pilot programs that would allow issuers to pay market makers for additional services. The NYSE Arca is considering a program that would allow ETF issuers to pay market makers better bids and offers in their shares and “enhance liquidity in less-active securities,”Laura Morrison, head of the U.S. exchange- traded products listings and trading business at NYSE Euronext, said. [What is an ETF? — Part 7: Bid/Ask Spread]
“If ETF issuers want to incentivize market makers for services they provide, there should be mechanisms in place for that,” Reginald Browne, co-head of the ETF group at Knight Capital Group Inc., said in the Bloomberg article. “With more than 50 markets in the U.S., there’s just not enough incentive for market makers to bear the risk.”
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Max Chen contributed to this article.