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NYSE Arca launches ETP incentive programme

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NYSE Euronext (NYX) has received approval from the US Securities and Exchange Commission (SEC) to launch the NYSE Arca Exchange Traded Product Incentive Program (IP).

This new 12 month pilot programme offers an alternative for incentivising lead market makers (LMM) to be the primary market maker in certain exchange traded products (ETPs) selected by issuers.
 
NYSE Arca is the only exchange in the US to offer this optional IP, which provides greater certainty to ETP issuers that the LMM will receive the economic incentive tailored to their specific ETP. In return, the LMM is required to meet industry-leading quoting obligations and requirements aimed at improving market quality. The IP pilot programme will launch in the second half of 2013.
 
“At NYSE Euronext, we believe LMMs play a crucial role in promoting a consistent, fair and orderly market in all securities, particularly ETPs,” says Laura Morrison (pictured), SVP global index and exchange traded products. “We are proud to offer our issuers this optional incentive programme, proving that NYSE Arca is committed to providing ETP market participants with the best service and innovative market structure to meet their ETP listing and trading needs.”
 
Through the NYSE Arca ETP Incentive Program, issuers can select five existing ETPs in addition to any new ETP listed for inclusion in the programme. Issuers will immediately benefit from having oversight of an obligated liquidity provider assigned to their newly listed ETPs, resulting in improved market quality with narrower spreads, increased quote depth and reduced execution costs for investors trading the products.
 
As an extension of the current LMM programme, this new pilot programme offers LMMs a predetermined IP payment for the months that they meet their obligations in place of the enhanced rebate structure for trade executions. The increased LMM obligations include a percentage of time at the national best bid and offer requirement, a maximum spread and minimum depth requirement, and a layering requirement which requires the LMM to display size within two per cent of the national best bid and offer.

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