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Cboe to introduce new LMM incentive programme for Cboe listed ETP marketplace


Cboe Global Markets is to introduce a new Lead Market Maker (LMM) incentive program with enhanced market quality requirements on its Cboe Listed Marketplace for exchange traded products (ETPs).

The proposed new LMM program aims to provide a superior trading experience for issuers and investors by incenting Lead Market Makers to demonstrably enhance market quality in the form of tighter markets and deeper liquidity for Cboe-listed ETPs.  

Under the planned program, LMMs that meet certain quoting obligations and market quality requirements would receive daily incentives based on the number of Cboe-listed products for which they are an LMM, and the aggregate auction volume of those products. LMMs would potentially receive USD10-USD200 per product for which they meet the standard requirements, and USD12.50-USD250 per product for which they meet enhanced market quality requirements on a daily basis.

“We endeavour to provide the best markets and deepest liquidity for exchange traded products listed on Cboe’s ETP marketplace,” says Laura Morrison, Senior Vice President, Global Head of Listings at Cboe. “Our proposed new and innovative LMM program expands upon our previous program, which we believe will foster even greater market maker engagement, particularly in newly launched and less actively traded products.” 

As a leading listing venue for ETPs, Cboe has been first-to-market with several innovations to enhance market quality and depth of liquidity for ETPs listed and traded on its marketplace. The previous rewards-based program for LMMs, launched in 2015, offered outsized rebates and notably was the industry’s first incentive program to implement a depth of book requirement. Cboe also introduced its Liquidity Management Provider Program in 2017, another innovation to encourage additional quoting activity during continuous trading and therefore promote increased liquidity in issuer sponsored securities.

The new LMM program is planned to begin in the third quarter of 2019, subject to regulatory review, and will replace Cboe’s current LMM program.

“We are continually seeking innovative ways to define markets that benefit issuers and investors. Our new program will essentially transform our rebate model from one that is payment for executed volume to one that is payment for market quality.  We expect this to align the interests of market makers and issuer clients, and improve the overall trading environment for investors and all participants in our marketplace,” says Morrison. 

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