Arca Scotches Paid-For-Market-Making Proposal
Traders Magazine Online News, January 18, 2013
NYSE Arca temporarily removed its controversial paid-for-market-making proposal from consideration by the Securities and Exchange Commission.
The regulator was due to rule on Arca’s “Fixed Incentive Program” by the end of last week, but instead the NYSE Euronext-owned exchange withdrew it on January 9. Still, an NYSE Euronext spokesperson told Traders Magazine that the proposal, to be renamed the 'NYSE Arca ETP Incentive Program,' was a "top priority" and that Arca would soon refile.
Arca originally proposed the dealer compensation plan last April. The proposal would’ve allowed issuers of exchange-traded funds to pay market makers through Arca to support trading in their securities.
Arca’s proposal is similar to one by the Nasdaq Stock Market that is still under consideration by the SEC. Both have proved contentious partly because of a 16-year old ban by the Financial Industry Regulatory Authority on issuers paying for trading support.
Arca’s proposal drew criticism from several quarters including ETF issuers who argued it did not require enough of market makers and covered too many securities. Both Nasdaq and Arca were pitching their proposals as boosts for small and struggling ETFs, but Arca’s proposal would’ve covered all of its 1,400 exchange-traded products.
The SEC has about seven weeks—to March 8— to reach a decision about Nasdaq’s proposal.
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