FR 2021-01132

The document details a proposed rule change by Cboe BZX Exchange, Inc., submitted to the Securities and Exchange Commission (SEC). The proposal involves expanding its Financial Product Distribution Program with a new Derived Data Platform Service. This expansion aims to allow distributors to provide financial products using data derived from the Cboe Aggregated Market, promoting broader access to market data through reduced fees, particularly for Non-Professional Users.

General Summary of the Document

Cboe BZX Exchange, a prominent financial institution, proposes a modification to its fee schedule. The changes are intended to broaden options for distributing financial data, thereby potentially increasing accessibility for a wider audience, including retail investors. The introduction of a Derived Data Platform Service signifies an effort to modernize how market data is distributed and utilized, potentially leading to more innovative financial products and services.

Significant Issues or Concerns

The document contains jargon and terminology specific to the finance sector, such as "Derived Data," "swaption," and "contract for difference," which may confuse readers unfamiliar with such concepts. Additionally, the explanation of services like the White Label Service, API Service, and Platform Service lacks clarity, making it challenging for those without prior knowledge in these areas to understand. The descriptions of fees and how they apply to different types of users come across as complex and could benefit from simplification.

There is heavy reliance on legal citations to justify the pricing models, which may be challenging for a layperson to digest. Furthermore, while the proposal aims for cost reduction, there is a lack of transparency about whether the changes might lead to other unintended financial burdens elsewhere. The justification based on competitive environments and legal non-discrimination lacks detailed data to convincingly support its claims.

Public Impact

The proposed changes could significantly impact the public by making financial and market data more accessible, particularly for retail investors. By reducing fees for Non-Professional Users, the initiative strives to lower financial barriers, potentially enabling broader participation in financial markets. For average consumers, this means potentially more opportunities to engage in informed investing or utilizing financial technology tools powered by such derived data.

Impact on Specific Stakeholders

For market data distributors, the proposed changes offer potentially more favorable economics. These stakeholders could pass on cost savings to their customers or invest in creating new, innovative financial products. However, how effectively these savings or benefits translate to end-users depends on the specific business models these distributors adopt.

Professional users, on the other hand, might not benefit as much from the reduced fees, unless distributors decide to adopt a pricing model favoring them. Meanwhile, competing exchanges and financial data vendors might feel the pressure to adjust their own pricing and service models to remain competitive in light of Cboe BZX's new offering.

Overall, while the proposal introduces potentially positive changes by expanding the types of financial products available to a broader audience, it leaves room for further clarity and simplification to ensure all stakeholders understand and can fully leverage the intended benefits.

The document discusses proposed changes to the fee schedule under a program offered by the Cboe BZX Exchange, Inc. The proposal involves introducing a Derived Data Platform Service with varying fees based on different service levels and user types. This commentary will break down the financial references, aiming to clarify their significance and address issues that may arise from understanding these allocations.

Financial Allocations and Costs

The proposal outlines specific monthly fees for services related to handling "Derived Data". For the White Label Service, fees for "Cboe One Summary Derived Data" are set at $1,000 per month per External Subscriber for 1-5 subscribers, reducing to $750 per month for 6-10 subscribers, and further to $500 per month if there are 11 or more subscribers. Conversely, for the API Service, charges start at $5,000 per month per subscriber for 1-5 subscribers, decrease to $4,000 for 6-20 subscribers, and finally down to $3,000 for 11 or more subscribers.

In addition to these primary fees, there is a Professional User fee of $10 per month for each professional user accessing Derived Data. Notably, the document mentions no fee for Non-Professional Users under specific services, which serves as an incentive to promote the accessibility of the data to retail investors.

The document also refers to another service fee exemption, stating that the Non-Professional User fee, normally $0.25 per month, would be free under the proposed Platform Service.

Issues Related to Financial References

Several issues can arise from the way these financial details are communicated. The document's complex financial language and terms like "Derived Data" and "API Service" might obscure the actual impact of these fees for those unfamiliar with industry-specific terms. The description and differentiation of fees between varying user types (Professional vs. Non-Professional) might also be tangled for general understanding, as the document does not explicitly state why the discounts for Non-Professional Users are positioned as they are.

Moreover, the justification for these fees relies heavily on legal and market-based arguments, which might not effectively communicate the potential financial burden reduction for Distributors or whether retail investors actually benefit financially from these structures. There's a risk that stakeholders might find it challenging to determine how these fees compare to competitors, given the absence of direct comparisons or specific data.

Clearer articulation of how these financial references address broader market competition, as described, could better inform stakeholders of potential savings or additional costs. Ensuring this clarity could help alleviate any perceptions of unfair burden or advantage within the proposed changes.

In summary, understanding the scale and implications of these financial allocations requires deciphering a complex structure of service offerings and user categorizations. Providing more straightforward summaries or comparisons might aid broader audiences in assessing the intended economic efficacy and competition elements of these fee schedules.