FR 2021-01133

General Summary

The document in question is a notice from the Securities and Exchange Commission (SEC) about a proposed rule change by Cboe EDGX Exchange, Inc. The proposal seeks to adjust the fee structure for distributing market data through a program called the Derived Data Platform Service. This adjustment aims to expand the existing Financial Product Distribution Program, allowing data derived from the Cboe One Summary feed. The proposed changes are intended to enhance competition and offer more comprehensive market information across multiple exchanges. Importantly, these changes are designed not to impact the cost of other exchange products.

Significant Issues or Concerns

While the proposal aims to facilitate more affordable market data access, the document presents several issues:

1. Technical Language: The document employs specialized language that may be challenging for non-experts to understand. Terms like "Derived Data" and "Platform Service" are not explained in a manner accessible to those unfamiliar with trading or market data distribution.

2. Financial Impact Clarity: There is a lack of detail regarding how these changes might financially affect smaller market participants versus larger distributors. A clear analysis of the fee structure's fairness across different sizes of market players would be beneficial.

3. Effectiveness of Fee Changes: There are no clear estimates or data provided on whether the new fee structures will effectively attract more market data subscribers.

4. Fee Discrepancies: The document justifies different fee levels between Professional and Non-Professional users by suggesting that this reduces costs for retail investors. However, it offers little evidence or analysis to verify if these discrepancies align with usage patterns.

5. Comparison with Market Standards: There is no detailed analysis of how the proposed pricing aligns with existing market standards or affects overall market dynamics.

6. Competitor Comparisons: The lack of specific examples or comparisons with competitors leaves the claims about competitive advantages unsubstantiated.

7. Contextual References: The document references previous releases and regulations that may not be familiar to all readers, promoting potential confusion among those who haven't followed earlier communications.

Impact on the Public Broadly

Broadly speaking, this proposal is aimed at facilitating better access to financial market data, which could empower investors and traders. By potentially lowering costs for accessing comprehensive market data, the proposal has the potential to democratize data access, enabling more informed decision-making by more market participants.

Impact on Specific Stakeholders

Positive Impacts:

• Retail Investors: The proposal aims to lower costs for Non-Professional users, potentially making market data more accessible to individuals who may not have the financial means to access such resources at current prices.

• Data Distributors: Larger distributors could benefit from the reduced fees for providing Derived Data, enhancing their service offerings and potentially increasing their client base.

Negative Impacts:

• Smaller Market Participants: Without clear details on the fee structure, it's difficult to ascertain if smaller firms will face comparable benefits or if they might be at a disadvantage relative to larger firms.

• Competitors: Competitor exchanges and data providers might feel pressure to adjust their own pricing models, potentially leading to a race to the bottom in pricing that could impact service quality.

Overall, while the proposed rule change seeks to make market data more affordable and accessible, a more detailed analysis and transparency on its implementation and impact would be essential to ensure that the intended benefits are realized across all market participants.

The document discusses a proposed rule change by the Cboe EDGX Exchange, Inc., specifically focusing on amendments to the fee schedule related to the distribution of financial data. The proposal introduces new services and adjusts fees associated with data distribution, which may have implications for how financial market data is accessed and utilized.

Financial Summary

The document outlines fees associated with two types of data distribution services: the White Label Service and the API Service. For the White Label Service, distributors who offer data derived from the Cboe One Summary to 1-5 external subscribers will be charged $1,000 per month per subscriber. This fee decreases to $750 per subscriber for 6-10 subscribers and further to $500 per subscriber for 11 or more subscribers. Thus, a distributor catering to six subscribers would incur a total monthly charge of $4,500.

With the API Service, the charges are set at a higher rate, with fees of $5,000 per month per subscriber for 1-5 subscribers, $4,000 for 6-20 subscribers, and $3,000 for more than 20. For instance, a distributor serving six subscribers through this service would face a $24,000 monthly fee.

These fees are accompanied by a Professional User fee of $10 per month, though the proposal waives the standard Non-Professional User fee of $0.25 per month under the Platform Service.

Relation to Identified Issues

1. Complexity in Language: The document uses technical terms like "Derived Data" and "API Service," which may not be immediately clear to all readers. This complexity can obscure understanding of how these fees are structured and calculated.

2. Impact on Market Participants: There is an issue regarding how these fees would affect smaller versus larger market participants. The tiered structure seems to incentivize distributors with more subscribers, potentially offering cost benefits to larger entities. However, the document lacks a detailed discussion on whether this pricing model disadvantages smaller distributors or how it aligns with their financial capacities.

3. Evaluating Effectiveness: The document does not provide quantitative data on the potential attraction of new subscribers. While it aims to make financial data more accessible, particularly for creating derivative instruments, the absence of concrete data makes it difficult to assess the expected impact of the rule change.

4. Differences in User Fees: The differentiation in fees between Professional and Non-Professional users highlights efforts to make these services more affordable for retail investors. Yet, there is a lack of in-depth analysis or justification explaining how these fee differences are aligned with usage or service consumption patterns, leaving gaps in understanding the rationale behind the financial allocations.

5. Competitive Positioning: While the document claims the new fee structure fosters competition, it does not provide specific comparisons to competitor products or services. This absence makes it challenging to evaluate if the pricing truly offers a competitive advantage in the market.

Overall, the financial references in the document aim to outline a new fee structure intended to enhance market access and competitiveness. However, they also raise questions about fairness, impact, and clarity, particularly for smaller participants and those unfamiliar with the technical underpinnings of the services offered.