Vanguard in a comment letter to the SEC said it opposes a plan from NYSE Arca designed to boost ETF liquidity with payments to market makers.

The mutual fund and ETF manager said it does not support the NYSE Arca proposal as currently structured. initially reported on Vanguard’s comment letter.

Earlier this year, NYSE Arca proposed a pilot program that would allow ETF managers to pay additional incentive fees to market makers. The plan was designed to enhance liquidity in new ETFs and funds with low trading volume. ETFs with better liquidity have thinner bid/offer spreads and lower trading costs.

The Nasdaq has floated a similar proposal that would allow ETF sponsors to pay extra liquidity fees to market makers. [Nasdaq Wants ETF Providers to Pay for Additional Liquidity]

In an earlier SEC comment letter on the Nasdaq plan, Vanguard said the program could create a “pay-to-play” environment for ETF providers to launch new ETFs or maintain liquidity.

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