The Nasdaq Stock Market Inc. announced it intends to initiate a certification program designed to recognize market makers who offer the highest levels of quoting and execution quality in Nasdaq-listed securities.

The Select Market Maker Program will begin in the fourth quarter, pending U.S. Securities and Exchange Commission approval. Nasdaq will periodically evaluate market makers and designate firms that meet pre-set quoting and trading standards as Select Market Makers.

All market makers will be eligible and there will be no limit to the number of Select Market Makers in an individual stock. Every month, Nasdaq will evaluate market makers on their trading quality. The evaluation criteria will include quoted spread relative to the best bid and offer, quoted size, and a minimum share volume requirement. The criteria will vary depending on the liquidity of the stock.

Previous industry measurements have been largely self-reported and based on volume. Nasdaq’s program will deliver qualitative measures of trading performance and liquidity that will be searchable online by industry sector and individual stock.

“This program gives our market making firms the ability to distinguish the size and quality of their liquidity when marketing their services to both investors and issuers,” stated Nasdaq executive vice president Chris Concannon. “Investors and Nasdaq-listed companies and funds will benefit from greater transparency and clarity in evaluating the quality of each firms’ trading capabilities.”

Nasdaq senior vice president William O’Brien added, “Firms will benefit from providing the highest quality quotes and executions, and they will be able to use Select Market Maker status to attract institutional
order flow and investment banking business.”