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Jared Dillian
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The Great Rebalancing

In this guest blog, the author examines the need for portfolio rebalancing as time progresses.

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January 1, 2007

Dealers Get Tighter at the London Stock Exchange

By Peter Chapman

*The London Stock Exchange, hoping to improve liquidity in small-caps, is offering to pay market makers to tighten their spreads and increase their size. Under the new "Larger Size Market Maker" program, the LSE will share half of the fee it collects from liquidity takers with liquidity providers if they adhere to certain standards.

To qualify, a dealer must maintain its quotes at no more than 80 percent of the LSE's maximum allowed spread for a given security. It must also display the larger of the minimum allowed size in the security or GBP2,500. The scheme applies to around 1,000 FTSE Small Cap, Fledgling and AIM securities. Market makers that have signed on to the program include Merrill Lynch, Piper Jaffray, UBS, JP Morgan, ABN Amro and Royal Bank of Canada.