Introducing the IEX Enhanced Market Making Program
IEX Trading Alert #2018 - 004
In conjunction with the launch of IEX Listings, the Exchange is introducing the IEX Enhanced Market Making ("IEMM") Program which offers a discount on trading fees for all securities priced at or above $1.00 to Members when they meet market making requirements by quoting at and/or near the NBBO in IEX-listed securities.
The IEMM Program offers two tiers for which Members may qualify based on their quoting activity in IEX-listed securities: Inside Tier and Depth Tier. Members that qualify can earn a 1 mil (i.e., $0.0001) discount for satisfying either tier (2 mils for satisfying both); the discount is applicable to the transaction fees of all securities traded on IEX priced at or above $1.00, excluding trades subject to the Crumbling Quote Remove Fee (i.e., 30 mils) or the Internalization Fee (i.e., free), as well as any executions resulting from an IEX Auction or the Opening Process for non-IEX-listed securities.
For the purposes of calculating the quoting requirements, a quote is a displayed order entered in a principal capacity of at least one round lot resting on the continuous order book during Regular Market Hours.
A Member qualifies as an IEMM if they meet the following requirements at the conclusion of the month:
- The Member satisfies one or both of the following quoting tiers for each IEX-listed security:
- NBBO Quoting Percentage for the Inside Tier: Quoting with principal orders at the NBB or the NBO, or both the NBB and NBO, for an average of at least 20% of the trading day.
- Depth Quoting Percentage for the Depth Tier: Quoting with principal orders at the greater of 1 MPV or 3 bps away from the NBBO (or more aggressive) for an average of at least 75% of the trading day.
- The Member is a registered IEX Market Maker and meets the requirements in all IEX-listed securities.
Members will be notified of their qualification as an IEMM at the end of each calendar month and automatically receive the applicable discounts. IEX will not restrict the number of IEX Market Makers that can qualify as an IEMM, and IEX does not limit the number of IEX Market Makers registered in a particular security.
For Members that meet the requirements of the IEMM Program at the conclusion of the calendar month, IEX will discount qualifying executions for all symbols traded on the Exchange priced at or above $1.00. For IEMMs that qualify for both tiers, IEX will aggregate and apply the applicable discounts (e.g., a non-displayed execution will receive a 2 mil discount from the 9 mil fee per share).
Executions during continuous trading at or above $1.00 that are subject to the Non-Displayed Match Fee or Displayed Match Fee qualify for the Non-Displayed Match Fee Discount or Displayed Match Fee Discount, respectively. Executions subject to the Crumbling Quote Remove Fee (i.e., 30 mils) or the Internalization Fee (i.e., free) do not qualify for a discount.
|IEMM Tier||Quoting Requirements||Non-Displayed Match Fee Discount||Displayed Match Fee Discount|
|Inside Tier||Meets or exceeds the NBBO Quoting Percentage||$0.0001||$0.0001|
|Depth Tier1||Meets or exceeds the Depth Quoting Percentage||$0.0001 (capped)||$0.0001 (capped)|
1 The discount for the Depth Tier is capped at $20,000.00 in aggregate savings per month, per Member (i.e., CRD).
The IEX Fee Schedule has been updated to reflect the discounts available to Members that qualify for the IEMM Program.
Calculation of the Quoting Requirements
At the end of each calendar month, IEX will calculate if an IEX Market Maker met one or both quoting requirements for each IEX-listed security by aggregating the time that one or more of a Member's MPIDs was quoting each trading day that such security was listed on IEX. The Exchange will provide daily reports of quoting behavior to IEX Market Makers.
Calculation of the NBBO Quoting Percentage for the Inside Tier
((NBB Quoting Time + NBO Quoting Time) / 2) / (Regular Market Hours - Time Security is Halted) ≥ 20%
- NBB Quoting Time: aggregate amount of time quoting at the NBB
- NBO Quoting Time: aggregate amount of time quoting at the NBO
- Regular Market Hours: aggregate amount of time between the start and end of Regular Market Hours, usually 9:30 a.m. - 4:00 p.m. Eastern Time ("ET")
- Time Security is Halted: aggregate amount of time that a security is subject to a halt or pause in trading pursuant to IEX Rule 11.280
Note that a firm can quote at the NBB 40% of the time or be on both the NBB and NBO 20% of the time, or some combination, so long as the average of the time at the NBB and NBO is at least 20%.
Calculation of the Depth Quoting Percentage for the Depth Tier
((Bid Depth Quoting Time + Offer Depth Quoting Time) / 2) / (Regular Market Hours - Time Security is Halted) ≥ 75%
- Bid Depth Quoting Time: aggregate amount of time quoting at the greater of 1 MPV or 0.03% away from the NBB (or more aggressive)
- Offer Depth Quoting Time: aggregate amount of time quoting at the greater of 1 MPV or 0.03% away from the NBO (or more aggressive)
- Regular Market Hours: aggregate amount of time between the start and end of Regular Market Hours, usually 9:30 a.m. - 4:00 p.m. ET
- Time Security is Halted: aggregate amount of time that a security is subject to a halt or pause in trading pursuant to IEX Rule 11.280.
Note that a quotation at the NBB (NBO) counts towards a firm’s NBB (NBO) Quoting Time, as well as the Bid (Offer) Depth Quoting Time.
IEX Market Maker Registration
Members interested in participating in the IEMM Program must register as an IEX Market Maker by submitting a complete Market Maker Application to IEX Market Operations or IEX Sales. Once approved, such Member must subsequently register in all IEX-listed securities via the process described in the IEX Market Making Specification.
A Member that is not a registered IEX Market Maker pursuant to IEX Rule 11.150 in all securities listed on IEX (as specified above) may still be designated as an IEMM if (i) a Member does not act as a market maker in one or more IEX-listed securities on any other national securities exchange, and (ii) the IEX Market Maker provides documentation, satisfactory to IEX Regulation, substantiating that such Member is unable to act as a market maker in one or more particular securities listed on IEX (a) in order to comply with specified legal or regulatory requirements, or (b) operational restrictions not exceeding 90 calendar days from the date the security first lists on the Exchange. The documentation must specify the length of time such legal, regulatory requirement(s), or operational restriction is anticipated to persist.
If a Member satisfies the security registration requirement by registering as an IEX Market Maker pursuant to IEX Rule 11.150 in all securities listed on IEX after the first trading day of the calendar month, and remains registered for the remainder of the month, such Member remains eligible for designation as an IEMM if the Member otherwise satisfies the quoting requirements specified above.
Market Maker Peg Order Type
As previously announced in IEX Trading Alert #2017-025, IEX offers a Market Maker Peg order type to support IEX Market Makers with their quoting obligations for registered securities. Please see the IEX Market Maker Specification for additional details.
Please contact IEX Market Operations or Sales with any questions:
- Market Operations: 646.343.2300 or firstname.lastname@example.org
- Sales: 646.343.2100 or email@example.com
- See SR-IEX-2018-02 or the IEX blog "Designing a Market Making Program for IEX" for additional information.
IEX is on a mission to build fairer markets. Founded in 2012 and headquartered in New York City, IEX introduced its first trading venue in 2013 and launched as a U.S. stock exchange in 2016. IEX is the stock exchange that believes that every investor has the right to trade on equal and fair terms, on every trade. Learn more at: iextrading.com.