FR 2021-01279

Summary of the Document

The document outlines a proposed rule change by the Cboe BZX Exchange, Inc. to amend the fee structure for their BZX Top Feed, which delivers real-time market data such as top-of-book quotations and trading information. The key changes include an increase in the monthly fee for internal distribution to $750 and the introduction of a $4 monthly fee for each professional user accessing the data internally. Notably, the fees for the external distribution of the feed remain unchanged.

Significant Issues and Concerns

The document is replete with financial jargon and legal references, which may render it difficult for individuals without expertise in securities law or the equity trading markets to fully comprehend. The complexity of the language and the assumption of a baseline knowledge about the industry could alienate readers who are not deeply embedded in financial markets. Additionally, the rationale for the fee increase and the introduction of charges for professional users is not clearly elucidated. This lack of clarity might lead to questions regarding the transparency of the decision-making process.

Impact on the Public

For the general public, particularly those not engaged in financial services, the changes in BZX Top Feed fees may seem abstract and removed from their everyday concerns. However, there could be broader implications related to financial transparency and the cost of financial data, which can indirectly impact individuals when these costs are passed down through financial services or products.

Impact on Specific Stakeholders

Those directly affected include firms that internally distribute BZX Top Feed data and their professional users. The increased costs may lead firms to reassess their data subscription choices or consider alternatives that might offer similar data at a lower price or with different terms. The document does not delve into how these changes might disproportionately affect smaller businesses or less affluent market participants, who may find even modest cost increases significant. Larger firms might absorb these costs more easily, potentially widening the competitive gap between them and smaller players.

Moreover, the unexamined potential burden on competition from smaller exchanges or new market entrants raises concerns about whether the changed fee structure supports or stifles market diversity. These parties might have hoped for adjustments that would lower, rather than raise, barriers to market participation.

In summary, while the document presents a significant regulatory change affecting how market data is priced and accessed, it also leaves several important questions unanswered. The complexity of the document poses challenges in understanding its full implications, especially for those not deeply versed in the industry. As the Securities and Exchange Commission is inviting comments, stakeholders who understand the nuances should consider engaging with the process to ensure a balanced and considerate regulatory outcome.

The document discusses a proposed rule change by the Cboe BZX Exchange, Inc. regarding fees related to the BZX Top Feed, a market data product. The primary focus is on the financial implications of these fee changes and their context within the competitive landscape of equities market data distribution.

Current and Proposed Fee Structure

The Cboe BZX Exchange is proposing to change the fees associated with the internal distribution of the BZX Top Feed. Previously, the Exchange charged a fee of $500 per month for this service. The proposal includes an increase to $750 per month. Additionally, the Exchange plans to introduce Professional User fees, which will be $4 per month per Professional User for internal subscribers. These changes reflect an adjustment in pricing strategy but still remain competitive compared to other national exchanges.

Comparison with Competitors

The document highlights how the charges by Cboe BZX compare to those of other significant exchanges. For example, the New York Stock Exchange (NYSE) charges $3,000 per month for equivalent internal distribution products. This fee is split between $1,500 per month for top-of-book quotation information and $1,500 for transaction information. Nasdaq's charges are set at $1,500 per month for similar data. Therefore, even with the proposed increase, the BZX Top Feed is positioned as a more cost-effective option. Additionally, Professional User fees at NYSE and Arca are $8 per month, while Nasdaq charges a total of $26 per month, indicating that BZX's Professional User fees remain lower.

Issues Related to Financial Adjustments

The proposed fee changes connect to several issues clarified in the document. One of the major concerns is the clarity and transparency around why these fees are justified. The document states that the Exchange believes these modifications are reasonable given the context of market competition and the value provided to data consumers. However, for those not familiar with the specific competition and dynamics of market data services, the explanation may not adequately clarify the process by which the fee levels were determined, leading to questions about transparency.

Another issue is the introduction of new Professional User fees where none existed before for internal users. This change could impact how data is utilized internally by firms, especially as these are new costs that did not previously apply. While the document states that the increase aims to compensate the Exchange fairly for its data services, it does not elaborate on why these fees are necessary now.

Accessibility and Competition

Lastly, whether these changes could impact smaller businesses or new market entrants remains unclear. Although the document mentions that the environment is competitive, it doesn't thoroughly explore how fee adjustments might affect smaller players who may already face financial constraints. The potential burden on competition, particularly in terms of smaller exchanges or new entrants, isn't deeply assessed despite an acknowledgment of the competitive environment within which these fees are set.

In conclusion, the proposed changes by Cboe BZX attempt to position their market data services competitively, but they also raise questions about financial justifications and market impacts, particularly regarding equity and access among a diverse range of market participants.