“We also offer Nasdaq BX, which is an inverted pricing model, and we operate Nasdaq PSX, which has a Pro Rata pricing allocation to it,” Mack said. PSX is unique because it operates on a Price Setter Pro Rata model that provides an incentive for greater displayed size while also encouraging participants to aggressively compete on price.
“It’s all about the market structure with PSX,” Marigliano said. “It really puts an emphasis on price/size, and you have to think that certain names are going to do better trading in that market structure than price/time.” Traditionally, certain passive and market making strategies will do better in this type of structure.
Mack explains that the benefit PSX has for traders and investors is you won’t be stuck at the back of the line for being late to the game. If there is a deep queue to get done in a particular stock, you can trade on PSX and be part of every execution because everyone shares the priority there. In other words, since the other U.S. exchanges are on the price/time model, whoever gets there first will get priority execution when an incoming order comes to the market at the same price. On PSX, Nasdaq combines that concept with Pro Rata, and everyone participates in transactions based on the size of their order.
For more details on the unique structure of Nasdaq PSX, be sure to check out the rest of this video with Don and Chuck as they take a deeper look into the many benefits of PSX and the INET technology that powers it.
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