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Equity Trader Alert #2022 – 79 Nasdaq to Add Auction Quality Requirement to Designated Liquidity Provider Program on Thursday, September 1, 2022

by biztrendz

Addition of Auction Quality Requirement to Designated Liquidity Provider (DLP) Program

Nasdaq is adding a fifth requirement to our Designated Liquidity Provider (DLP) Program around auction quality, effective Thursday, September 1st, 2022, according to Nasdaq’s rule filing. The notice approval was posted in the Federal Register.

The requirements included in the DLP Program will now be:

Requirements

Standard

Enhanced

Definitions

Time @ NBBO (min 100 shares)

20%

50%

Average % of time DLP is at the NBBO with a min of 100 shares (99% of time)

Time within 5bps of NBBO

50%

75%

Average % of time DLP most aggressive displayed bid or offer is within 5bps (99% of time)

Notional Depth

$100,000 (within 150bps of NBBO midpoint)

$100,000 (within 50bps of NBBO midpoint)

Average Notional Depth for DLP displayed orders

Average Spread

Time weighted average spread in basis points when the DLP has a two-sided quote

Auction Quality

within 350 (Opening) and 100 (Closing) basis points

within 150 (Opening) and 50 (Closing) basis points

Auction Price deviation from first reference price* after 30 seconds before the market open (Opening) and 120 seconds before the market close (Closing)

 

Primary Designated Liquidity Providers (DLPs) will have to meet 4 of the standard requirements to receive the standard rebate and will have to meet all 5 enhanced requirements for the enhanced rebate. Secondary DLPs will have to meet 2 of the enhanced requirements, excluding the auction quality requirement to receive their rebate.

 

*The Reference Price is a price within the Nasdaq Inside at which paired shares are maximized, the imbalance is minimized and the distance from the bid-ask midpoint is minimized, in that order. The Current Reference Price is disseminated along with other order information through Nasdaq’s Net Order Imbalance Indicator (NOII).

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