Nasdaq also pulled a similar proposal last month. The exchange proposed to create a so-called market liquidity program that let fund sponsors provide additional pay beyond its listing fee to market makers but they would have to provide quotes with higher spreads and deeper liquidity.
“It’s most important when the product is brand-new. [Investors] will immediately dismiss a product based on what the screen liquidity or bid-ask spread is, even though that’s not always what the true liquidity is,” Adam Patti, CEO of ETF firm IndexIQ, said in the article. “Anything that keeps bid-ask spreads tight and the depth of liquidity sufficient is a good thing because it’s good for investors.” [Nasdaq Floats ETF Liquidity Plan]
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Max Chen contributed to this article.