The SEC approved a proposed rule change of the NYSE Arca, Inc. exchange to facilitate a plan to increase liquidity for the ETF market. The rule change provides a limited exemption from Rule 102 of Regulation M to establish an exchange-traded product (“ETP”) Incentive Program (“Incentive Program”), which provides market makers additional incentives to undertake Lead Market Maker assignments in ETPs. Under the Incentive Program, ETP issuers can choose to pay between $10,000 and $40,000 a year per ETP to the exchange. The exchange will then pay the Lead Market Maker if it meets or exceeds its Incentive Program performance standards (relating to the exchange’s requirements to post competitive bid and offer prices along with offering trades of sufficient size to meet certain liquidity standards) for the assigned ETP for a particular month. As part of the conditions imposed under the Incentive Program, the issuer of the participating ETP, or sponsor on behalf of the issuer, must provide prompt, prominent and continuous disclosure on its website in the location generally used to communicate information to investors about a particular security participating in the Incentive Program. The Incentive Program will launch in the second half of 2013 and run as a pilot program for 12 months. For a copy of the order granting the rule change click here.