The New York Stock Exchange (NYX) plans to let more brokers become market markers, providing a new category of competitor for firms such as Barclays Plc (BARC) and Getco LLC that oversee trading in shares at the Big Board.
The exchange proposed creating supplemental liquidity providers that would operate as registered market makers and get more lenient treatment for short sales, according to a filingwith the Securities and Exchange Commission. Such a category would fall between the two tiers of traders that now provide prices to buy and sell on the exchange: designated market makers, whose duties are most stringent, and the current supplemental liquidity providers, who face fewer obligations.
Exchanges are experimenting with ways of inducing market makers to quote more aggressively to attract volume. Nasdaq Stock Market proposed a pilot test in less-active exchange- traded funds that would allow issuers to pay for bids and offers. Bats Global Markets Inc. started a program this year that encourages market makers by giving $200 a day to the firm with the best quotation performance for ETFs listed on Bats and $50 to the firm in second place.
“The program recognizes the significance of SLPs to NYSE’s market model and expands the number of potential firms that could participate,” Joseph Mecane, co-head of U.S. listings and cash execution at NYSE Euronext, said in a phone interview. “It gives SLPs the ability to be deemed registered market makers.”
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