Bats Global Markets has made changes to its incentive schemes for market makers who play a pivotal role throughout the life cycle of exchange-traded products (ETPs).
Previously, the exchange had offered an issuer incentive programme for all ETPs. This payment programme allowed an issuer to benefit from listing on Bats by providing an annual incentive payment of up to USD400,000 to each fund with a consolidated average daily volume (CADV) over 1 million shares per day.
Following extensive consultation with ETP industry participants, Bats filed yesterday to redirect these rebates to the lead market makers (LMMs) for qualifying products. The scheme, called the Lead Market Maker Partnership Program, becomes effective on 1 September 2016.
“We are committed to helping our issuers grow the assets under management and liquidity of their listed products, and separately, ensure that liquidity provision is sustainable throughout an ETP’s lifecycle. By further incentivising market makers, through the most competitive ETP incentive scheme available globally, they will be able to provide deeper and more resilient liquidity to all their assigned products,” says Laura Morrison, senior vice president and global head of exchange traded products at Bats.
Bryan Harkins, executive vice president and head of US markets, says: “Our pioneering, nimble nature allows us to experiment and adjust where necessary to best suit the markets and participants we serve. In this instance, the excellent dialogue we have with ETP industry participants, and in particular, our fast-growing and very diverse family of issuers and market-makers, has led us to make this change to our incentive schemes.
“This game-changing incentive programme is built on the premise that, in order for market makers to better support trading in ETPs across a varying liquidity spectrum, they should be rewarded with incentives generated from the most liquid of products. That allows them, in turn, to better support newer and less liquid ETPs with higher quality markets as issuers look to garner more assets.”