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Friday, March 18, 2016

Equity Trader Alert #2016 - 59
Nasdaq to Add Liquidity Codes for New Limit Up-Limit Down Pricing Pilot

Category:

  • Pricing

Markets Impacted:

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As previously announced in Equity Trader Alert #2016 - 29, pending filing with the Securities and Exchange Commission (SEC), Nasdaq will introduce a Limit Up-Limit Down (LULD) Pricing Pilot (“LULD Pricing Pilot”) effective Monday, May 2, 2016. The modification in the date is to allow market participants additional time to prepare for the pilot. As previously noted, the pilot provides additional incentives to Registered Nasdaq Market Makers for entering executable orders when a pilot symbol enters a limit down state (i.e. straddle state or limit state) or a trading pause.

For eligible symbols, displayable buy orders entered by Nasdaq Market Makers from the time a symbol enters a limit down state, up until Nasdaq receives a message from the SIP that the symbol has exited the state, will be eligible to receive an additional add displayed rebate of $0.0010 per share executed upon execution. Details include:

  • Buy Orders must be priced at or better than the Lower Price Band
  • Orders will remain eligible to receive the additional displayed liquidity rebate of $0.0010 when executed, unless canceled by the entering party
  • The $0.0010 per share executed will be in addition to all other applicable rebates
  • The message is received from the SIP in approximately 200 microseconds

    • When an LULD trading pause is declared for a symbol, all orders entered during the pause will receive a $0.0005 rebate upon execution during the re-open process.

    Nasdaq will add four new liquidity codes under the LULD Pricing Pilot:

    Liquidity Code Description Rate For Market Makers registered in the Symbol (per share executed) Rate for all Other participants (per share executed
    b Displayed, liquidity-adding order improves the NBBO in pilot symbol during specified LULD Pricing Pilot timeframe $0.0010 rebate in addition to standard add display rebates Standard add display rebates
    c Added displayed liquidity in a pilot symbol during specified LULD Pricing Pilot timeframe $0.0010 rebate in addition to standard add display rebates Standard add display rebates
    h Removed liquidity in a pilot symbol during specified LULD Pricing Pilot timeframe Standard remove liquidity rate Standard remove liquidity rate
    N Halt Cross, orders entered in pilot symbols during the LULD Trading Pause $0.0005 rebate $0.0005 rebate

    All participants will receive the new liquidity codes when their executions meet the descriptions. The above liquidity codes will be in addition to the current liquidity codes Nasdaq provides to members (e.g. ‘A’,’7’,’8’,etc…).

    The list of eligible securities for the LULD Pricing Pilot can be found here.

    Please refer to the Specifications Page for more information.

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