Wall street letter - Wednesday, April 9, 2008
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Nasdaq Extends Structured Liquidity Incentives
Under the program, the Nasdaq provided $0.004 per share credit to traders providing start-up liquidity for ETFs. It limited the program to ETFs with less than 250,000 shares in daily volume during two months of any three-month period. The exchange is now extending the program to ETFs that have less than 10 million shares in average daily volume.
Several ETF sponsors said the program was limited to ETFs in start-up mode, which would discourage liquidity providers to be involved after the ETF would gain critical mass. "You want the exchange to support the listing after the initial stage because market conditions can change at any point and volumes can drop off," one sponsor said. Exchange officials said they are upping the limit to prevent that from happening. "The change will encourage market maker support for ETFs and ILSs beyond their initial introductory period and thereby further enhance liquidity for the products as their trading volumes increase," officials said in a related rule filing. Nasdaq has been locked in a listings battle with NYSE Arca, which has been luring multiple ETFs (WSL, 7/6). A spokeswoman declined to comment.
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