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Exchange fees: Market makers and marketing makers at LSE

Those who consider the trade reporting fees charged on the London Stock Exchange a thorn in their side are in for some pain relief.

Under what has cumbersomely been termed the Larger Size Market Maker Scheme, the exchange effectively gives a fee rebate of 50% to those that qualify as larger market makers trading shares outside the FTSE 350. The scheme builds on the SETSmm order book, a previous effort to boost the liquidity of smaller-cap stocks.

The LSE, however, claims that the scheme is not designed to address the discontent about fees that exists among market participants. Instead it says that a lot of thought has gone into improving the image of the market makers. “The Larger Size Market Makers didn’t simply want fee incentives, they were more interested in raising their profile in these securities,” says David Smith, product manager in the product management and development team at the LSE. According to the exchange, a Larger Size Market Maker undertakes to meet much more demanding size and spread requirements in at least half of the securities in which it acts as a registered market maker in a given trading segment for at least 75% of a given month.

This marketing ploy has so far attracted 11 market makers, including JPMorgan Securities and UBS Investment Bank. The LSE says that of the 2,600 securities that large-size market makers can register for trading with, 53% have been covered in the first week after the scheme was implemented.

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