Nasdaq Enhances Market Quality Incentive Programs

OREANDA-NEWS. Pending SEC filing, effective Wednesday, April 1, 2015, a new Qualified Market Maker (“QMM”) Program will be implemented. The new program, described below, will replace the current program.

A member may be designated as a QMM with respect to one of its MPIDs if it meets the below criteria. For the purposes of this rule the QMM MPID will be the member’s Primary MPID. Not listed below are criteria (1) and (2), which remain unchanged under the proposal and can be reviewed under Rule 7014.

First, the QMM program will be limited to members that are registered as a Nasdaq market maker.

Secondly, QMM rebate incentives for achieving the QMM criteria are as follows: A rebate per share executed (as defined in the below table) for all displayed orders (other than Designated Retail Orders, as defined in Rule 7018) in securities priced at \\$1 or more per share that provide liquidity and entered through a QMM MPID and were for securities listed on NYSE (“Tape A QMM Incentive”) or securities listed on exchanges other than Nasdaq and NYSE (“Tape B QMM Incentive”). Such rebate for executions via the QMM MPID will be in addition to any rebate payable under Rule 7018 (existing add displayed liquidity rebates):
However, if a QMM also participates in the ISP, Nasdaq will pay the greater of any applicable credit under the ISP or the above listed additional rebate, but not both. The rebate does not apply to Select Symbol securities listed under Rule 7018(a)(4).

In addition to the above rebate incentives, QMM’s that execute shares of liquidity provided in all securities through one or more of its Nasdaq Market Center MPIDs that represent 0.80% or more of Consolidated Volume during the month will be assessed a discounted remove fee of \\$0.00295 in Tapes A and B for shares executed via its QMM MPID. The discount does not apply to Select Symbol securities listed under Rule 7018(a)(4).

Lead Market Maker Program

Pending SEC filing, effective Friday, May 1, 2015, the Designated Liquidity Provider program will be replaced by the below Lead Market Maker program:

The following credits shall apply to transactions in a Qualified Security by one of its Lead Market Makers in lieu of credits provided under Rules 7018 and 7014:

For purposes of this paragraph:

(1) A security may be designated as a “Qualified Security” if:

• it is an exchange-traded fund or index-linked security listed on Nasdaq pursuant to Nasdaq Rules 5705, 5710, or 5720;
• it has at least one Lead Market Maker

(2) A “Lead Market Maker” or “LMM” is a registered Nasdaq market maker for a Qualified Security that has committed to maintain minimum performance standards. A LMM shall be selected by Nasdaq based on factors including, but not limited to, experience with making markets in exchange-traded funds and index-linked securities, adequacy of capital, willingness to promote Nasdaq as a marketplace, issuer preference, operational capacity, support personnel, and history of adherence to Nasdaq rules and securities laws. Nasdaq may limit the number of LMMs in a security, or modify a previously established limit, upon prior written notice to members.

The minimum performance standards applicable to a LMM may be determined from time to time by Nasdaq and may vary depending on the price, liquidity, and volatility of the Qualified Security in which the LMM is registered. The performance measurements will include one or more of the following: (A) percent of time at the national best bid (best offer) (“NBBO”); (B) percent of executions better than the NBBO; (C) average displayed size; and (D) average quoted spread (collectively, “LMM Criteria”).  The LMM Criteria will be established upon written notice to members.

The Exchange intends to announce any further definition to the LMM Criteria and other specifics of the program later this month, where applicable.