The World's Leading Exchange for ETFs

Why did NASDAQ Create an ETF Market?

Based on trading volume, The NASDAQ Stock Market is the world’s largest exchange for exchange traded funds (ETFs). In 2004, 2005 and 2006, NASDAQ won the “Largest Exchange for ETFs” in the Americas award, presented by Exchangetradedfunds.com Inc. — a leading provider of information about ETFs. These awards were based on third party statistical evaluation.

We are also a leading index calculator, designer and creator of some of the most well-known ETFs in the world. The NASDAQ ETF Market is a new competitive listing market designed specifically for ETFs. It leverages NASDAQ’s strength in trading, indexing and investor outreach to best serve ETF sponsors and ETF investors. NASDAQ is best positioned to help sponsors create, grow and evolve ETFs into liquid investment tools.

What is the NASDAQ ETF Market?

The NASDAQ ETF Market allows the traditional floor-based specialist, who has historically provided initial liquidity to new ETFs, to play a similar role by placing two-side quotes in the NASDAQ Market Center. This enables ETF sponsors to continue to have the ability to develop "preferred" relationships with intermediaries. ETF issuers may choose a single Designated Liquidity Provider or multiple, competing liquidity providers. This flexible structure enables ETF issuers and traders to interact based on the needs of the issuer as they vary throughout the life cycle of the ETF.

The NASDAQ ETF Market reflects NASDAQ’s market structure:

  • Competitive: Multiple market makers competing for price and trade executions
  • Transparent: Full price disclosure to investors
  • Accessible: Trade executions measured in milliseconds
  • Proven Technology: Opening/closing cross process

Program Highlights

The centerpiece of The NASDAQ ETF Market is the Designated Liquidity Provider, a Market Maker who has been selected to maintain liquidity in qualified ETFs (i.e., Qualified Securities). NASDAQ requires Designated Liquidity Providers to maintain a higher standard of market quality. They receive price incentives to support ETFs during their period of initial listing, when ETFs need to develop more active trading. This rebate program will be available only during the incubation period of the ETF. Once the ETF reaches an average daily volume of 10,000,000 shares for two out of three months, regular NASDAQ pricing will apply. Designated Liquidity Providers will be selected through a consultative process between ETF sponsors, market-making firms and NASDAQ.

Benefits for Issuers

Issuers can choose single or multiple ETF Designated Liquidity Providers that are motivated by incentives and are held accountable during ETF formation and incubation to provide liquidity. Issuers will be able to maintain long standing relationships with the market intermediaries that help grow their ETFs on other exchanges.

NASDAQ’s strong and well-reputed brand has global reach to attract and educate investors, both institutional and retail. Issuers have access to increase visibility through NASDAQ.com, with 7 million page views per weekday and 3.1 million visitors each month, and NASDAQ MarketSite, located in the heart of New York’s Times Square. The MarketSite houses a state-of-the-art digital broadcast studio that transmits approximately 100 live market updates by a host of networks including CNBC, Bloomberg TV, Reuters, NDTV Profit, CNBD India, BusinessWeek TV and other financial networks to reach millions of viewers around the world with up-to-the-second market news. The MarketSite Tower, soaring 7 stories high and illuminates Times Square 24 hours a day, is featured in films, television programming, and news articles.

Issuers have access to NASDAQ Online (NOL), the private proprietary, investor relations tool for NASDAQ-listed companies. NOL will highlight and disseminate Liquidity Provider designations to its users. Additionally, issuers can use the NASDAQ Market Intelligence Desk® to establish further trading insight for those sponsors from their ETF Liquidity Providers. The MID collects and distills information from ETF Liquidity Providers to give NASDAQ-listed companies a better understanding of trading activity, particularly in conjunction with specific events (e.g., heavy trading days, persistent trends, big blocks, earnings releases).

Benefits of Being an ETF Designated Liquidity Provider

ETF Designated Liquidity Providers receive a special, exclusive NASDAQ designation and visibility to assist in attracting order flow. ETF Designated Liquidity Providers have a NASDAQ-created and monitored spread as well as depth criteria and a preferred rebate schedule. ETF Designated Liquidity Providers will also be reflected on nasdaq.com for retail investors to view.

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