Cboe Global Markets

Cboe to Introduce Lead Market Maker Incentive Program in Q3 2019

Lead market makers like CBOE would potentially receive $10-$200 per product for which they meet the standard requirements, and $12.50-$250 per product for which they meet enhanced market quality requirements on a daily basis.
CBOE announced the upcoming introduction of a Lead Market Maker Incentive Program which will incorporate enhanced market quality requirements and reward lead market makers on the Cboe Listed Marketplace for meeting certain quoting obligations and metrics.
Effective in Q3 2019, subject to regulatory review, the new program will focus on Cboe’s Listed Marketplace for exchange traded products (ETPs) in its quest to provide a superior trading experience for issuers and investors as quality markets are incentivized to tighten markets and deepen liquidity. Cboe has more than 320 ETPs from over 50 issuers listed on its Cboe Listed Marketplace.
Laura Morrison
Laura Morrison
Laura Morrison, Senior Vice President, Global Head of Listings at Cboe, commented:  “We endeavor to provide the best markets and deepest liquidity for exchange traded products listed on Cboe’s ETP marketplace. 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.
“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.”
Cboe had launched a rewards-based program for LMMs in 2015 which offered outsized rebates and implemented a depth of book requirement. In 2017, the company introduced its Liquidity Management Provider Program to encourage additional quoting activity during continuous trading. The upcoming LMM program will replace Cboe’s current LMM program.
Earlier this month, Cboe introduced a new Liquidity Provider Protection feature (“LP2”) on its Cboe EDGA Equities Exchange. The tool, which will be introduced subject to regulatory approval, was designed to enhance liquidity and enable market makers to make better markets in stocks traded on the exchange. The firm proposes that once a liquidity-taking order reaches EDGA it would wait four milliseconds before trading with resting orders on the order book. The feature reduces cross-market latency arbitrage in order to enable liquidity providers to enhance market quality by maintaining tighter spreads, increasing inside quote durations, and posting larger size.