Tradescape is to introduce a 'get paid to trade' policy for retail customers in a bid to attract liquidity to its electronic communications network (ECN) MarketXT.
The New York-based firm says it will pay its retail customers up to $10 for displayed limit orders placed, and subsequently filled, over the MarketXT platform. Tradescape says it hopes to stimulate the use of limit orders, which were recently endorsed by the SEC.
"This new incentive marks the first time in history that retail customers will receive a net payment for their order flow. This 'liquidity-based' pricing policy essentially strips Wall Street's economic processes naked and is the next logical progression of the evolution of market structure. It blurs and merges the roles of market makers, brokers and exchanges. This is the model for the next generation of Wall Street," says Omar Amanat, CEO of Tradescape.
He says that for the first time retail customers will now be encouraged and rewarded for placing limit orders. The initiative challenges Wall Street's traditional arrangement, which solely offers rebates for market orders and typically levies penalty fees on the placing of limit orders.
"The structure of the brokerage business has undergone profound shifts over the past few years. While the unbundling of trading commissions through online brokers has brought much lower transaction fees to retail customers, the economic shifts in the business may have only just begun," says Greg Smith, senior research analyst at JP Morgan H&Q, of the move.
Scott Appleby, research analyst at Robertson Stephens, believes the Tradescape incentive programme may be enough to make MarketXT one of Wall Street's leading liquidity destinations overnight.