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Paying Market Makers

Exchanges suggest payments could boost stock trading.

By Nina Mehta, Bloomberg | Updated on November 16, 2011

Regulators should consider allowing smaller companies to pay broker-dealers to make markets in their shares as a way to spur trading and encourage initial offerings, NYSE Euronext and Nasdaq OMX Group Inc. executives said Tuesday.

Such a change in regulations would increase the ability of investors to buy and sell stock by boosting market makers’ economic incentives, Joseph Mecane, co-head of U.S. listings and cash execution at NYSE Euronext, said at a subcommittee meeting of the House Committee on Oversight and Government Reform. The Financial Industry Regulatory Authority, which oversees almost 4,500 brokers, banned the practice in 1997, he said.

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