If you look into the description of Nasdaq ITCH data, you see two types of order entries in the book: Message of Type A and F. Under type F, you will see the identity of the market participant (MPID). In other words, you know the firm that supplies liquidity. Why liquidity providers may disclose their identity? What are their motivation to do so? Do they get a higher maker fee?
2 Answers
The two types of orders are called "Attributed" and "Non-Attributed". Venues will sometimes provide incentives to encourage order attribution. For example, Direct Edge has their "Edge Attribution Incentive Program" which you can read about on their price list.
I believe NASDAQ has offered incentives for attribution in the past, but I don't think they do with their current price list. Attribution is used, but I wouldn't say it is wide spread. For example, here is the list of MPIDs that show up in the NASDAQ ITCH feed on 2013-02-06 (A random date I snagged from our data store. Also, ignore tzero
.)
MPID TABLE - 160
tzero CDRG CANT SBSH BOOK ADAM FLTL SALI WEDB CKCC
ROTH RILY KING MWRI DOWL MSRO GLBL EURP RWPC RHCO
PRCO JANY NORT CHLM SOHO AVON SUSQ PIPR MSCO ATDF
MAXM FBCO OTAA TMBR ETMM FBRC BTIG WCHV IMCC CRTC
JPMS GSCO TRIM RAJA BARD COWN RBCM HBIF NITP NEED
VERT LEHM NITE PERT STFL SUFI XGWD JEFF MLCO UBSS
VFIN BMOC DRWS JSSF VNDM MURF WBLR OPCO KBWI KELL
PACS DADA DBAB MERI WABR BERN LAZA PUMA BBNT BMUR
DRCO STXG KEYB SDLR BKMM SUNR OCTG INTL MZHO BOSC
KOSE DOTC RONI BNKS AABA LEER INET JPTC LTCO NTFN
SPHN MONR BRUT CWCO IMPC PAUL WDCO EGRO SMHI BARR
WUND COWL FANC TEJS LAFC FUND AXGP ALPS NOBL MACQ
ROBT BMAK DLNY AGIS DAIN MICA BKRT FSWC ASCM GRST
PERS SWEN CCMB CSTI NQRE TRWN PENA HAMR SSGI GLEN
ACAP VRTU NQPM BNCH TRLN NATL WBRO PMCI CFGN BCAP
TOOL AFCO COWX AUTO GUGS GFIS MBAY VIRT NQMO CEMM
Finally, there might be some requirement to attribute your orders if you participate in NASDAQ's QMM or DLP program. You might check the detailed descriptions to see if there is. Ultimately, a firm is only going to attribute their order if (a) there is no downside to doing so; or (b) the upside, i.e. additional rebate or qualification, is significantly large to negate the downside.
ADDED: To expand on the above. If you look at the message statistics for the same day, 2013-02-06, you see the following for adding new orders:
ADD ORDER : 92532210
ADD ORDER MPID : 3389849 <<--- this one is the attributed order
So you're looking at about a $3.7\%$ attribution rate for orders on this particular day.
-
$\begingroup$ Thanks! that was very clear. Would you know why the MPID for trades on off-exchange (the ones that are reported to FINRA) are proprietary information? $\endgroup$– CharlesMJan 21, 2014 at 21:00
-
My blog discusses this at length: https://mechanicalmarkets.wordpress.com/2015/02/16/protecting-client-interests-anonymity-in-us-equities/ . To quickly summarize, as Louis Marascio said, DirectEdge pays brokers to disclose their MPID. Another possible incentive is the broker trying to maximize their order's chance of execution; if by disclosing their MPID the market is alerted to an order having particularly low-alpha, then that order will be more likely to execute.