NASDAQ OMX Announces Pilot Plan For ETF Market Quality Program


The NASDAQ OMX Group, Inc. (Nasdaq:NDAQ) today announced that the Market Quality Program (MQP) will launch in the second quarter of 2013. MQP is an optional listing program that allows exchange traded fund (ETF) issuers to contribute funds to the Exchange that may be used to pay market makers that improve the liquidity and quality of the markets in MQP products. This groundbreaking liquidity and market quality incentive program in the U.S. will be available only on The NASDAQ Stock Market, the largest and most liquid cash equities market on the planet, and has been approved by the Securities and Exchange Commission on a pilot basis.

Recognizing a need for liquidity in ETFs, NASDAQ OMX designed the MQP to broaden the pool of ETF liquidity providers, encourage competitive trading and enhance the quality of the markets in exchange traded funds by tightening quote spreads, increasing depth of liquidity and reducing execution costs for investors. Issuers that list new or existing ETFs in the MQP will benefit from a broader pool of liquidity providers, which offers investors decreased trading costs and certainty of execution. Market makers will benefit from the program's quarterly rebate payments in exchange for a demonstrated commitment to enhance the quality of the markets in registered ETFs.

"This market quality incentive program, which is similar to non-U.S. paid for market making programs around the globe, is an important step in the evolution of our U.S. capital markets system," said Eric Noll, Executive Vice President of Transaction Services U.S. and U.K. at NASDAQ OMX. "The MQP will enhance liquidity and exposure for exchange traded products (ETPs), attract investors in the capital markets to stimulate growth in these products, generate interest from a broader range of market participants and benefit investors by reducing execution costs and narrowing bid/ask spreads."

He added, "The MQP is a key piece of our larger strategy to better serve the ETP industry with market quality incentive programs, ETP-specific functionality and a platform built to be the preeminent ETP trading destination."

Through the MQP, an ETF issuer will pay a basic annual fee into NASDAQ OMX's general fund which will be rebated quarterly to qualified market makers. Market maker performance will be measured by time and size quoted at the National Best Bid and Offer and depth of displayed liquidity. MQP details and progress throughout the pilot will be provided on our ETP listings homepage:

"We're thrilled to demonstrate our commitment to the listings community as the first U.S. exchange to launch a competitive payment for market making program for ETPs, and we're proud to have transformed what was a market structure concept for many years into a reality with the help of the SEC," said Dave LaValle, Head of ETP Listings at NASDAQ OMX.

He added, "Our market is primed for additional ETP listings and stronger issuer partnerships in 2013 as we look to leverage our relationships in the market making community to increase ETP liquidity and broaden the pool of ETP liquidity providers. The MQP will accelerate our momentum within the ETP community."