The Nasdaq Stock Market, Inc. (NASDAQ: NDAQ) today announced it intends to initiate its Select Market Maker Program, a certification program designed to recognize market makers who offer the highest levels of quoting and execution quality in NASDAQ-listed securities. The Select Market Maker Program will begin in the fourth quarter of 2006, pending Securities and Exchange Commission (SEC) approval.
Investors, NASDAQ-listed companies, funds, and prospective public companies will benefit from the Select Market Maker Program through the ability to identify which firms are continuously providing high-quality liquidity in a stock or a specific sector. Institutional investors will be able to identify, on a stock-by-stock basis, additional sources of potential liquidity. Market makers that qualify as Select Market Makers will benefit from the broad dissemination of their status as Select Market Makers.
NASDAQ will periodically evaluate market makers and designate as Select Market Makers those firms that meet pre-set quoting and trading standards. Unlike previous industry measurements that largely have been self-reported and based on volume, NASDAQ's program will deliver qualitative measures of trading performance and liquidity that will be searchable online by industry sector and individual stock.
“This program gives our market making firms the ability to distinguish the size and quality of their liquidity when marketing their services to both investors and issuers,” stated NASDAQ Executive Vice President Chris Concannon. “Investors and NASDAQ-listed companies and funds will benefit from greater transparency and clarity in evaluating the quality of each firms' trading capabilities.”
NASDAQ Senior Vice President William O'Brien added: “Firms will benefit from providing the highest quality quotes and executions, and they will be able to use Select Market Maker status to attract institutional order flow and investment banking business.”
All market makers will be eligible and there will be no limit to the number of Select Market Makers in an individual stock. The Select Market Maker designation and the evaluation criteria will be accessible by everyone. NASDAQ will also provide heightened visibility to the firms designated as Select Market Makers through NASDAQ Online, NASDAQ's proprietary information product for NASDAQ issuers, in addition to other channels. NASDAQ Online has over 5,000 users that include CEOs, CFOs, Investor Relations Officers and other senior executives of NASDAQ's 3,200 listed companies.
Every month, NASDAQ will evaluate market makers on their trading quality. The evaluation criteria will include quoted spread relative to the best bid and offer (BBO), quoted size, and a minimum share volume requirement. The criteria will vary depending on the liquidity of the stock. NASDAQ intends to begin publishing the criteria in advance of the first month of the program's evaluation of market maker performance.
NASDAQ is the largest U.S. electronic stock market. With approximately 3,200 companies, it lists more companies and, on average, trades more shares per day than any other U.S. market. It is home to companies that are leaders across all areas of business including technology, retail, communications, financial services, transportation, media and biotechnology. NASDAQ is the primary market for trading NASDAQ-listed stocks. For more information about NASDAQ, visit http://www.nasdaqfacts.com or the NASDAQ Newsroom at http://www.nasdaq.com/newsroom/ .
