U.S. Futures Exchange (USFE) today announced plans to implement a “maker-taker” pricing model when it launches new mini-sized U.S. Dollar DAX® futures contracts (mini$ DAX® futures) on October 1, 2008.
The maker-taker model, popularized by the equity and options trading industries, offers rebates for market makers – the market participants who bring liquidity to an exchange – while charging fees to customers who remove liquidity from the exchange. It is a proven model that brings together favorable market conditions, supporting new market growth. The incentives encourage new and existing market makers to post additional liquidity resulting in tight bid-ask spreads, and increased open interest. The reductions in cost for liquidity takers lead to higher volumes and improvements to each product market.
“Maker-taker pricing has worked well in the equity and options markets, and we’ve received positive feedback from market participants that it will translate well to USFE,” said John Spiegel, CEO of USFE. “Liquidity providers are an incredibly valuable asset to Exchanges. We want to do all we can to make it as attractive as possible for them to engage in USFE markets, and the maker-taker model is a step in that direction.”
“We commend USFE for recognizing the important role providers of liquidity play in fostering a vibrant futures marketplace, and for taking steps to reward them for their participation,” said Aaron Lebovitz of Infinium Capital Management. “Traders who take liquidity from an exchange directly benefit from the risks shouldered by market makers, so it is reasonable for them to pay for those benefits. Moving to a maker-taker model is the logical next step in the evolution of futures pricing models.”
To benefit from maker-taker pricing and rebates, market participants must have a USFE membership. USFE memberships are available on a level playing field to firms and individuals, are free of cost, and the application process is simple and fast. With a USFE membership, market participants gain direct access to new markets that are available for trading 23-hours per day on the Exchange’s electronic trading platform. Members are not required to pay agency fees.
USFE plans to introduce the new pricing model in conjunction with the October 1, 2008 launch of its new mini$ DAX futures contracts. The mini$ DAX contracts are the result of an exclusive licensing agreement with Deutsche Börse, enabling market participants to gain exposure to Germany’s leading stock market index in an affordable fashion. DAX® index, comprised of the 30 largest and most liquid stocks traded on the Frankfurt Stock Exchange, is the most commonly cited benchmark for measuring performance of the German economy.
The new mini$ DAX® futures contracts will trade on USFE’s electronic trading platform from 5:25 p.m. – 4:00 p.m. Chicago Time, Sunday evening through Friday afternoon. The Exchange has developed a market maker program for the mini$ DAX® contract to ensure a two-sided market will be available to market participants.
For liquidity providers interested in learning more about USFE membership, the mini$ DAX® contract and the new USFE maker-taker pricing model, please contact the USFE sales team at 312-356-3939.
