Nasdaq OMX plans to make it easier for market makers to publish quotes on its Nasdaq Options Market by making available new technology, Traders Magazine's Peter Chapman reports.  At the same time, the exchange operator will expand and tighten market makers' quoting requirements.

"This will attract new liquidity from market makers who previously weren't posting two-sided markets."  -- Ellen Greene, VP in Nasdaq's transaction services group.  The changes are slated to become effective in Q3 of 2011, subject to SEC approval.

Many of the market makers expected to start quoting on NOM are already quoting on Nasdaq OMX PHLX, NOM's sister options exchange, according to Tom Wittman, a Nasdaq senior vice president in charge of U.S. options markets. These firms also may be representing customer limit orders on NOM.

Nasdaq's homegrown options exchange is one of the smallest with a market share of about 5%. The exchange operator is treating the upgrade as a major event, dubbing it "NOM 2.0."  By introducing more quoting, Nasdaq hopes to generate more trading and therefore boost market share. Nasdaq's approach is one of carrot and stick.

To entice market makers to quote on NOM, Nasdaq is incorporating three key pieces of technology into the exchange. First, it will make available the same quoting interface market makers use on the Phlx, making it easier for them to quote on both markets. Second, Nasdaq will give market makers the same risk management technology it supplies on Phlx, making it easier for them to pull out of the market if necessary. Finally, NOM's market data interface will be similar to the Philly's.

To continue reading, go to:   [Traders Magazine Online News,5/24/11, Nasdaq Options Market .."]