Market making
Market makers play an important role in ensuring that buyers and sellers of an ETP can transact at prices close to the net asset value (NAV) of the ETP. They provide liquidity to the market by providing quotes (bids and offers) through the trading day and frequently update their quotes to reflect changes in the NAV of the ETP.
ASX offers a market making incentive scheme to help promote tighter spreads and more liquidity in ETP markets. Participants in that scheme receive incentives equivalent to the trading fees they would otherwise pay to ASX if they achieve the minimum quoting benchmarks prescribed by ASX on a monthly basis. Each ETP is assigned a spread and liquidity requirement, as set out in the table below.
ASX does not incentivise internal market making arrangements. ETPs that use internal market making are generally noted with “N/A” in the table below. For specific information about the risks associated with internal market making, click here.
ASX has also determined that certain ETPs have sufficient natural liquidity and therefore do not need to be supported by ASX by way of a rebate of trading fees in those products. These ETPs have been designated "mature" by ASX and are marked as such below. While ASX does not provide a trading fee rebate in these ETPs, Market Makers are recognised in these products where they meet the minimum quoting benchmarks assigned below. Satisfying these criteria distinguishes Market Makers from other proprietary traders.
ASX reviews the ETPs it has identified as "mature" on an annual basis and takes into account the ETP's average traded value over the year, average bid/ask spread, funds under management, years of operation and the participants active in the ETP in determining whether to make the designation.
ASX offers certain market makers technical services rebates in support of their market making activity where they have shown persistent, quality support to the Australian ETP market. These market makers have demonstrated to ASX their support of ETP issuers by providing markets in a wide range of ETPs over a meaningful time period.
# means due to the products being admitted under the listings rules, there is no obligation for a Lead Maker Maker.
RB means that the product has been admitted under a Reasonable Bid test for market liquidity. Further information can be found in Guidance Note 12: Warrant and Aqua Product Liquidity Requirements.
Note: this table shows the Market Makers that have signed incentive contracts with ASX and the relevant ETPs. This information is a summary of select terms in the incentive agreements signed between ASX and relevant Market Makers, and is not a definitive or comprehensive summary of those agreements.
Quoting Schedules for ETPs
Bid Price in $AUD | Maximum Spread | Minimum Quantity |
---|---|---|
Schedule 1 | ||
<$5 | 2c | $50,000 |
>$5 | 40bps | $50,000 |
Schedule 2 | ||
<$5 | 3c | $30,000 |
>$5 | 60bps | $30,000 |
Schedule 3 | ||
<$5 | 5c | $25,000 |
>$5 | 1% | $25,000 |
Schedule 4 | ||
<$5 | 7c | $20,000 |
>$5 | 1.5% | $20,000 |
Schedule 5 | ||
<$5 | 10c | $17,500 |
>$5 | 2% | $17,500 |
Schedule 6 | ||
<$5 | 12c | $15,000 |
>$5 | 2.5% | $15,000 |
Schedule 7 | ||
<$5 | 17c | $12,500 |
>$5 | 3.5% | $12,500 |
Schedule 8 | ||
<$5 | 25c | $10,000 |
>$5 | 5% | $10,000 |
Schedule 9 | ||
<$5 | 37c | $7,500 |
>$5 | 7.5% | $7,500 |
Schedule 10 | ||
<$5 | 50c | $5,000 |
>$5 | 10% | $5,000 |
Mature | ||
<$5 | 1.5c | $100,000 |
>$5 | 0.3% | $100,000 |
Description of Quoting Specifications for Market Makers
Minimum % of time to maintain two-way quotes | Maximum Spread (Being the offer price less the bid price | Minimum Quantity of Products in each bid and offer ($AUD) |
---|---|---|
80% of the time from 10:15 until commencement of the Pre-CSPA (Closing Single Price Auction) Session State (generally 16:00) on any trading day. | The maximum spread referred to in schedules 1-10 above is based on the relevant Bid price in $AUD. | The minimum quantity for Products referred to in schedules 1-10 is based on the Bid price for the bid quantity and Offer price for the offer quantity in $AUD. |