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Friday, September 2, 2011

Equity Regulatory Alert #2011 - 12
NASDAQ OMX Reminds Firms of Minimum Market Maker Obligations

Markets Impacted:

Contact Information:

What you need to know:

  • NASDAQ OMX would like to remind firms they must maintain a continuous two-sided trading interest within certain parameters for each National Market System (NMS) security in which a firm is a registered market maker.
  • NASDAQ OMX offers the Market Maker Automation Quote Management System (AQR) to help market makers remain in compliance.

What is required of market makers under NASDAQ OMX rules?

NASDAQ OMX would like to remind market participants of their obligations under NASDAQ Rule 4613 regarding minimum market maker quotation obligations. For each NMS security in which an exchange member is registered as a market maker, the member is required to maintain a continuous two-sided trading interest during regular market hours at prices within certain parameters expressed as a percentage reference from the National Best Bid or Offer (NBBO) as applicable (the “Designated Percentage”).

What does NASDAQ OMX offer to aid market maker compliance?

To assist firms in meeting their NASDAQ market maker obligations, NASDAQ OMX developed the Market Maker Automated Quote Management System (AQR) that is designed to manage quotes so that market makers automatically remain in compliance with NASDAQ OMX exchange rules. Members may manually adjust their quotes to comply with the rule or, if they do not, AQR will perform the function for them. In the event of an execution against a system-created compliant quotation, AQR will refresh the quote on the executed side of the market at the applicable Designated Percentage away from the then National Best Bid (Offer) (or if no National Best Bid (Offer), the last reported sale).

Are market makers responsible for compliance when using AQR?

Yes, NASDAQ OMX emphasizes that when utilizing the AQR system, market makers remain responsible for complying with all NASDAQ OMX exchange rules, as well as Rule 610 and Rule 611 of Regulation NMS.

Members are advised that, in the event of an issue where AQR is not functioning properly, they remain obligated to monitor their quotes. Furthermore, members must have policies and procedures to address such contingencies and systems in place to ensure that they can continuously meet their two-sided obligation.

Where can I find additional information?


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