Exchange group Nasdaq OMX will cut the maker rebates and taker fees for stocks trading at less than $1 on its two US equities platforms following a similar move last week by rival equities platform Direct Edge.
From 15 April the Nasdaq Stock Market, Nasdaq OMX’s main US equities platform, will pay a 10 basis point rebate for adding liquidity in sub-$1 stocks, down from 20 bps currently, and charge 20 bps fee for removing liquidity, down from 30 bps currently.
Similarly, Nasdaq OMX’s BX trading platform will cut its maker rebate for sub-$1 stocks to five bps from 25 bps and its taker charge to 15 bps from 30 bps.
Direct Edge’s fee change, which took effect on 5 April, completely removed the maker rebate for sub-$1 stocks and cut the take fee to 10 bps from 30 bps.
Direct Edge made the change to bring fees more into line with the minimum price variation in sub-$1 stocks in the US, which is a hundredth of a cent, compared with one cent for stocks trading $1 or over.
One of the concerns is that if charges and rebates are larger than the minimum price movement, they can exert a larger influence on the price paid for a security than the price movement, thus distorting the price displayed on the tape.
“With some exchanges offering rebates up to 25 times the current MPV in sub-$1 stocks, Direct Edge has become increasingly concerned about the effect of this market structure anomaly on the trading and investing public,” said Bryan Harkins, head of sales and strategy at Direct Edge, when his firm’s pricing change was announced. “As America’s newest stock exchange, Direct Edge decided to take a leadership position on this issue to improve the quality of our markets.”
Direct Edge also called for a “comprehensive regulatory approach” to access fees in relation to the minimum price movement in response to the US Securities and Exchange Commission’s ‘concept release’ on the US equities market structure, which seeks comments and data from participants about the functioning of the market. Participants have until 21 April to submit their responses.