New Jersey exchange operator Direct Edge is switching one of its two equities exchanges from a maker-taker to a taker-maker pricing model.
The firm’s EDGA Exchange for equities will move to a pricing structure where members receive rebates for removing liquidity and will pay a fee for adding liquidity. From 1 September, the fee for adding liquidity will be $0.0006 per share, while the rebate for removing liquidity will be $0.0004. Adding and removing liquidity in securities priced under $1.00 remains free.
This replaces the current tariff that charges US$0.0007 per share for passive trades and rebates US$0.0003 per share for aggressive trades.
In addition, members meeting the criteria for volume tiers will be charged a discounted add fee of US$0.0005 per share and EDGA will discontinue the tier for firms which have posted at least 0.10% of total consolidated volume in average daily volume (ADV) more than their July 2012 ADV added to EDGA.
The market will also reduce the fee for internalised trades, with the fee for adding or removing liquidity during regular trading hours and in the pre- or post-market becoming US$0.0001 per share per side.
The maker-taker pricing structure has always faced a certain amount of disparagement from buy-sider firms that believe it does not work in their favour. In June the practice gained the attention of a New York senator who lobbied the Securities and Exchange Commission to reform it.
Meantime, Direct Edge has launched a new order type it says will enhance mid-point and discretionary algos. The Midpoint Discretionary Order (MDO) blends the behaviour of displayed, pegged and discretionary orders let algo get aggressive without crossing the spread.
The order type is pegged to the national best bid or offer (NBBO), yet the order type never establishes or maintains NBBO prices and always has displayed component . You have discretion to the midpoint of the NBBO and can enter with or without a limit price.