First up, I will admit this. I am curious to see how this will play out.
NT inverts the widely used Maker-Taker (MT) model employed across all major exchanges.
Let’s stay with this.
Imagine an apple market. It could attract a massive crowd of buyers and sellers, yet absolutely nothing – NOTHING – happens until someone steps up and creates a choice by posting an initial offer: ‘I will sell apples for $0.80’
That someone is called a MAKER.
A maker of what exactly?
In simple terms, choices for you. In market terms, liquidity.
You then respond to that choice and hence become the taker (of choice, of liquidity).
Now, you may not have paid much thought to this earlier, but the maker is bearing considerable risk by creating a choice: primarily around price discovery
What if they get it wrong?
And that is why they get a reward for creating liquidity.
What happens if this model is flipped?
Well, if that happens, the apples will still need to be there; but now, you create the choice.
That flipped model is the Taker-Maker (TM)
So now, in the context of SpaceX, you have a mega-IPO that has split its trading across two distinct venues operating during identical market hours. One [NASDAQ], running the traditonal MT and the other [NT] using the less-used TM Model.
Is there a grand design here?
To coalesce retail orders at a venue with an inverted model?
Could SpaceX be the first in a cluster of mega-sized, iconic, retail-loved companies to list on NT?
In that case, NT could become unusual: a venue where retail participation contributes disproportionately to price discovery.
Ah, in that sweet dream state, you would then view this: Listings will attract liquidity. That liquidity attracts more liquidity. Traditional price discovery is altered. Tick constraints get shattered.
All is good.
But what could also happen is this: if a massive hedge fund has negative news about a stock and needs to dump millions of shares, it will sweep the Taker-Maker exchanges to capture the taker rebate. The passive retail limit orders sitting on the Texas book will be instantly steamrolled by highly informed institutional selling.
But surely, will that not fill the High-Frequency-Traders (HFTs) out first?
No, the HFTs will have flash-closed their open orders.
In milliseconds.
Can this happen?
Yes. This a truism.
Will this happen in the case of SpaceX?
I don’t know. I remain curious about the emergent outcomes here, but not morbidly so.
Sure, NT does state that it ‘serves retail investors through the Retail Price Improvement Program (RPI) providing liquidity at prices better than the National Best Bid and Offer (NBBO)’.
That is no doubt well-intentioned.
But this is a first of its kind.
It’s a mega-IPO with its liquidity pool fragmented across two different kinds of execution venues.
But surely, you say, the greenshoe …
