Amex Payment for Participation

Today was the second day of a new program on the American Stock Exchange. The Exchange has eliminated the ability for ETF Specialists to charge commissions for orders. This elimination is almost meaningless in that only two or three of the ten Specialists were charging customers.

As a replacement the Amex will pay the Specs 4 cents per 100 shares for all volume in a specialists book minus those orders where the Spec has taken liquidity. The Specs will now be paid 24 cents per hundred for volume with which they interact. The goal is to financially persuade the Specs to make bigger and tighter markets so that the Amex will regain lost market share. The Amex currently retains roughly 4% market share in ETFs in spite of the fact that it is the birthplace of ETFs.

Looking at two days of vacation time volume and with only one specialist group, it looks as though there is hope. Of note is that for most of the Specs this will be found money and has no additional costs associated with it.

We will watch the numbers and give further reports as the numbers roll in. After two days, it looks promising.


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