Nasdaq OMX to re-launch PSX as marketplace for ETPs

May 1st, 2013 | By | Category: ETF and Index News

Nasdaq OMX, a major global exchange operator, has outlined plans to re-launch the PSX exchange in an effort to create a leading marketplace for exchange-traded products (ETPs). The re-launch is expected sometime this month, pending approval by the US Securities and Exchange Commission.

Nasdaq OMX to re-launch PSX as marketplace for ETPs

© Copyright 2013, The NASDAQ OMX Group, Inc.

Upon re-launch, the price-time exchange will offer unique market-making programmes and features designed to provide robust liquidity to institutional and retail investors, including a controversial scheme that allows providers of ETPs to contribute funds to the exchange that may be used to pay market makers that improve the liquidity and quality of the markets in their products.

PSX will offer Registered Market Maker and PSX Supplemental Liquidity Provider (XLP) designations to participants that undertake an affirmative quoting obligation on the exchange. These market-making programmes will ensure committed liquidity is available by offering superior economics to participants that meet quoting requirements on a per-security basis.

PSX also plans to introduce an innovative, competitive and transparent Lead Market Maker (LMM) programme designed to narrow spreads and increase displayed size in ETP securities. PSX-registered market makers may compete for LMM status in ETP securities and will receive enhanced benefits in exchange for assuming enhanced liquidity provision obligations. In addition to receiving superior economics in the ETPs they lead, LMMs will be promoted by PSX to the ETP issuer and investor communities.

Eric Noll, Executive Vice President of Transaction Services US and UK at Nasdaq OMX, said: “We’re focused on delivering long-term value to investors by significantly broadening the asset classes we offer to our member firms, and the establishment of a pre-eminent marketplace for ETPs supports that effort. PSX is a key piece of our larger strategy to better service the ETP industry with a platform designed to incent high-quality liquidity, market incentive programs and ETP-specific functionality.”

In its move to re-launch the PSX, Nasdaq OMX will be hoping to capture new business from its closest rival’s ETP-focused exchange, the NYSE Arca. This fully electronic market continues to have the highest market share of any US exchange in both ETP listings and trading, and is typically seen as the market of choice for ETP listings. The NYSE, too, has worked on plans to implement various schemes to further enhance ETP market structure and quality, including an LMM Issuer Incentive Programme.

Then there is BATS Global Markets with its BATS Exchange. This relative newcomer to the primary-listings game has recently won business from both exchange-traded fund giant iShares and alternatives specialist ProShares. And while a recent technology hiccup may have deterred prospective ETP listings in the short term, the exchange will no doubt continue to seek a piece of the fast-growing ETP market.

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