Competitive Liquidity Provider Program
Cboe Europe (Cboe) has designed a unique Competitive Liquidity Provider (CLP) program that rebates liquidity providers based on their quoting (rather than trading) activity in addition to traditional liquidity provider programs and designated market maker schemes. This innovative program has been used by Cboe in the U.S. since January 2012 to create tighter spreads, more size at the Best Bid and Offer (BBO) and greater depth of liquidity.
How the Program Works
- The Issuer determines with Cboe the duration of the CLP program and the value of the incentives paid. Most schemes are expected to run for either six or twelve months.
- Any Cboe Trading Participant can register as a CLP but must achieve the criteria, set on a security-by-security basis, to be rewarded.
- If the Issuer requires seed capital, the number of CLPs could be limited to those that fund the ETF/ETP at its launch.
- CLPs compete for a known financial amount — half paid to the winning CLP(s) on the bid side of the market and half on the offer side of the market. The two winning CLP(s) on each side will share the daily rebate based on their percentage of Size Event Tests (SETs) won during the trading day. A SET is a testing event evaluated randomly within each second between 08:00 and 16:30. See the example below.
To win a SET, a CLP must:
- have the most aggregated size at the best bid or the best offer on the lit order book
- quote at the minimum published size for that ETF/ETP
- quote on the other side for that ETF/ETP at the minimum published size and within a maximum published spread
- win at least 10% of the available SETs each day
A non-attributable daily report will be provided to Issuers sponsoring a CLP program and the registered CLPs. The report will include market quality, SETS ranking and market share analysis.
Cboe Trading Participants wishing to register as a CLP, should review and complete the following:
- CLP Program Definition – detailed description of the program
- CLP Application Form – form for Trading Participants to register as a CLP
See our current list of ETF/ETPs operating under the CLP program