Overview
Title
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Arca Equities Fees and Charges
Agencies
ELI5 AI
NYSE Arca, a company that helps people buy and sell stocks, wants to make its rule book simpler by taking out some old fees and credits that aren't needed anymore. The people in charge want to know what others think, so they've asked for comments.
Summary AI
The Securities and Exchange Commission has published a notice regarding a proposed rule change submitted by NYSE Arca, Inc. This change involves updating the fee schedule by eliminating charges and credits related to Self Trade Prevention Modifiers and Market Data Revenue Sharing Credits, as both have become obsolete. The proposal is intended to streamline the fee schedule for clarity and does not introduce any new fees. The SEC invites public comments on this proposal, encouraging interested individuals to submit their opinions by February 16, 2021.
Keywords AI
Sources
AnalysisAI
The document is a notice from the Securities and Exchange Commission (SEC) regarding a proposed rule change submitted by NYSE Arca, Inc. This change aims to amend the fee schedule by removing certain credits and fees associated with Self Trade Prevention Modifiers (STP) and Market Data Revenue Sharing Credits. The proposal is designed to streamline the fee schedule, providing clarity and removing obsolescent elements without introducing new fees.
General Summary
This notice is part of the regulatory process that governs how securities exchanges like NYSE Arca modify their fee structures. The primary focus here is on adjusting fees and credits that are deemed obsolete, ensuring they do not clutter the fee schedule. By doing so, NYSE Arca seeks to maintain a clear and transparent billing system for its stakeholders.
Significant Issues and Concerns
One notable issue with the document is the absence of detailed financial data or analysis supporting the decision to eliminate these fees and credits. The document states that these elements are no longer generating revenue or are not being used, but it does not quantify this or describe potential repercussions for market participants.
Additionally, there is considerable use of technical jargon, making it challenging for lay readers to fully grasp the implications. Terms like "ETP Holders" and "STP Modifiers" are specialized and require some background in securities trading to understand.
Moreover, the document indicates that no written comments were solicited or received, which may suggest a lack of engagement with stakeholders who could be affected by these changes. This raises concerns about whether the decision reflects the broader interests of those trading on the Exchange.
Impact on the Public
For the general public, this proposal indicates an ongoing effort to ensure fair trading practices by simplifying fee schedules and removing outdated procedures. The changes may enhance the transparency and efficiency of trading practices on the NYSE Arca platform, potentially benefiting all market participants in the long run.
Impact on Specific Stakeholders
Among specific stakeholders, the removal of credits and fees associated with STP Modifiers and Market Data Revenue Sharing could have varying effects. For ETP Holders who might have relied on these credits in their trading strategies, the changes could influence their cost management practices. On the other hand, eliminating obsolete fees might level the playing field and remove unnecessary complexity for newer entrants or smaller market participants.
However, the document’s lack of quantitative justifications can lead to uncertainty, as stakeholders might question whether the changes are equitable and how they align with competitive practices across other exchanges. The lack of public engagement or feedback in the process could also lead to dissatisfaction or concern among those who feel their voices were not heard in the decision-making process.
Overall, while the intent behind the proposal is to modernize and streamline the fee structure, the document could benefit from greater transparency and engagement to ensure all stakeholder perspectives are considered.
Financial Assessment
The document under review focuses primarily on the financial aspects of certain regulatory changes proposed by the NYSE Arca, Inc. The discussion centers around the modification and removal of specific fees and credits associated with trading on the Exchange.
Summary of Financial References
The document outlines a proposal to eliminate particular credits and fees associated with Self Trade Prevention (STP) Modifiers. Previously, the use of STPC (Self Trade Prevention Cancel) or STPD (Decrement and Cancel) Modifiers incurred a charge of $0.0030 per share for orders returned to the ETP Holder. Correspondingly, the resting orders interacting with these Modifiers received a credit of $0.0029 per share, which was updated to $0.0030 per share in 2018. The uniformity in fees and credits essentially rendered transactions involving these Modifiers revenue-neutral for the Exchange.
Another aspect of the proposal is the removal of the Market Data Revenue Sharing Credits, which applied to Cross Orders for different securities. The Exchange notes that these credits have become obsolete as Cross Orders were eliminated in 2019.
Financial Concepts and Identified Issues
The central issue identified is the document's decision to eliminate fees and credits for STP Modifiers and Market Data Revenue Sharing without providing detailed financial analysis or impact assessments. The changes suggest a move towards simplifying the Fee Schedule by removing elements deemed obsolete. However, the document does not offer quantitative data or evidence showing the financial implications for market participants. This absence could lead to concerns about whether the changes are justified or if they could unfairly disadvantage certain stakeholders.
The financial allocations and references mentioned in the document relate closely to issues of transparency and equity in trading practices. The decision to standardize fees and credits associated with STPC and STPD Modifiers may have initially addressed fairness among participants. However, the subsequent removal of these provisions without comprehensive justification might leave stakeholders questioning the benefits of maintaining a previously revenue-neutral system against the backdrop of evolving trading dynamics.
Additionally, the mention of minimal stakeholder engagement—evidenced by the document stating "no written comments were solicited or received"—raises questions about the inclusivity of the decision-making process. The absence of a detailed rationale behind labeling the revenue-sharing program "obsolete" could lead to misunderstandings or dissatisfaction among those relying on these credits for cost management.
The document relies on the recurring phrase "the Exchange believes," potentially weakening its position in the absence of supporting financial data or persuasive evidence. Establishing the financial justification behind such regulatory changes is crucial to gaining stakeholder trust and aligning interests in a competitive trading environment.
Overall, while the document seeks to streamline and simplify the Fee Schedule, attention to how financial changes impact various market participants and clearer justification of these changes are essential to address fairness and maintain market confidence.
Issues
• The document makes a proposal to eliminate certain credits and fees associated with Self Trade Prevention Modifiers, but does not provide specific financial impact details or data supporting the decision. This could be problematic if the decision impacts market participants differently or reduces incentives unfairly.
• The removal of Market Data Revenue Sharing Credits might raise concerns among market participants relying on these for cost management, yet the document states that they became obsolete without explaining the broader financial effects or considering alternatives.
• The document uses technical jargon, such as 'ETP Holders,' 'STP Modifiers,' and references to various forms and sections, which might not be easily comprehensible to stakeholders unfamiliar with the specifics of securities trading and regulatory language.
• The document states that 'no written comments were solicited or received,' which might indicate a lack of stakeholder engagement or feedback in the process.
• There is an absence of quantitative data or financial analysis to justify the elimination of certain credits and fees, which might raise concerns about whether the changes are financially justified or equitable.
• The document mentions 'the Exchange believes' several times without providing robust justifications or evidence, which can render the rationale for changes less convincing.
• It notes that the standardized credits and fees for STPC and STPD modifiers had rendered the process revenue-neutral since 2018, but doesn't provide details on why maintaining such a system is inappropriate now.