“If they don’t trade a lot, the lead market maker doesn’t get paid a whole lot,” says Laura Morrison, who heads US exchange traded products listing and trading at the New York Stock Exchange. The proposed NYSE program, on the other hand, “gives the LMM the confidence they will receive this dollar amount as long as they meet their obligations”
ETF providers also seem amicable to the idea as the benefits could outweigh the costs.
“The ability of the exchanges to offer proper incentives to market-makers who support new or less frequently traded ETPs … benefits all investors,” BlackRock executives said in a letter last year.
For more information on the ETF industry, visit our current affairs category.
Max Chen contributed to this article.