FR 2021-01285

General Summary

The document from the Securities and Exchange Commission (SEC) outlines a proposal by Cboe Exchange, Inc. to make changes to the fee structure associated with its Silexx trading platform. Silexx is used for trading stocks and options. Among the changes proposed are new fees for "drop copy" services and order routing using a technology called Financial Information eXchange (FIX). These updates are part of a broader transition from an older platform known as PULSe to the newer Cboe Silexx platform. The SEC is requesting public comments on these changes to assess their impact and fairness.

Significant Issues and Concerns

One significant concern with the document is the complexity of the pricing structure, which may be difficult for readers without financial or technical expertise to grasp. While the document indicates that these changes are akin to existing fees, it lacks clear, straightforward descriptions of how the new fees compare to the old ones.

Furthermore, the document does not directly address the potential financial impact on smaller trading participants. This omission makes it challenging to evaluate whether the changes are equitable across different market participants, which is a critical consideration for ensuring fairness.

The language used is technical and could be hard to follow for a general audience. Key details such as the non-compulsory nature of using the Silexx platform are mentioned briefly, which could lead to misunderstandings about the necessity of adopting this platform.

Impact on the Public

Broad Impacts:

The proposed fee changes could have broad implications for individuals and firms engaging in stock and options trading. By restructuring the fees, Cboe aims to offer more streamlined trading operations, but it might also result in higher costs for some participants who choose to utilize the Silexx platform's added functionalities.

Specific Stakeholder Impacts:

• Small Trading Firms: These stakeholders might face disproportionate financial burdens compared to larger firms due to their limited resources. A clear explanation of the changes' impact on small trading entities is crucial, yet it is currently absent.

• Large Financial Institutions: On the other hand, larger entities may find these changes beneficial if they result in more efficient operations that justify the fees.

• Technology Providers & Brokers: These proposed changes present a potential opportunity for technology vendors who provide alternative solutions to the Silexx platform, as users could opt out of Silexx if the fees are not competitive.

Conclusion

Overall, while the proposed rule changes aim to modernize and streamline the fee structure for the Cboe Exchange's Silexx platform, the lack of clear communication and analysis could lead to confusion among affected stakeholders. It omits a discussion of the rationale and benefits of transitioning from the PULSe platform and lacks a detailed analysis regarding its effects on competition among firms of different sizes. Providing more comprehensive explanations and using visuals, such as charts and graphs, to illustrate comparative costs could aid public understanding and facilitate more meaningful feedback during the comment period.

In this Federal Register document, the focus is on the financial implications of proposed changes to the fee schedule for the Silexx trading platform, operated by the Cboe Exchange. The document details various new fees and adjustments that will affect users of the platform, specifically concerning order routing and receiving drop copies.

Summary of Financial References

The document outlines several key fees associated with the Silexx platform:

• A $500 per month fee for accessing the Silexx routing network. This fee is charged per customer connection, replacing an analogous fee related to the older PULSe platform.
• A $425 per month fee payable by Trading Permit Holder (TPH) customers receiving drop copies, unless the TPH broker directs otherwise. This is similar to existing fees under the PULSe system.
• A fee structure where TPH brokers incur a cost of $0.02 per contract, with a fee cap of $400 per month, for drop copies sent to non-TPH customers.

Additionally, a $500 per month fee applies to TPH brokers using a Silexx workstation for order routing via Financial Information eXchange (FIX).

Relation to Identified Issues

1. Complexity of Pricing Structure: The introduction of these financial references reflects a complex pricing structure that may be difficult for some users to understand, particularly those without a financial or technical background. The need for a clear explanation of how these fees affect small trading participants—potentially differently from larger firms—is not well addressed and might lead to confusion or misinterpretation of the financial impact.

2. Impact on Different Sized Participants: The document lacks an explicit analysis of how these fees might impact smaller trading firms compared to larger ones. The monthly fees could represent a substantial cost burden for smaller firms while being relatively negligible for more extensive operations, potentially contributing to competitive imbalances.

3. Technical Language and Clarity: The financial allocations are described using technical language that could be prohibitive for a general audience to parse. Readers seeking to understand the financial implications may find the references to specific network fees and contract caps challenging without a simplified explanation or additional clarification.

4. Nature of Service: While the document does mention that using the Silexx platform's drop copy and routing services is not mandatory, it fails to highlight or emphasize the cost implications of choosing to utilize these optional services versus potential alternatives.

In summary, the financial allocations referenced in this notice underscore the need for the Cboe Exchange to communicate these changes in a more accessible manner while addressing the potential competitive impact on different-sized firms. Enhanced clarity and supportive materials could mitigate the complexity and technical nature of the fee structure for all potential users.