FR 2021-01728

Summary of the Document

The document is a proposal by the Cboe BZX Exchange, Inc. to change its fee structure for listing certain financial products known as Outcome Strategy Exchange-Traded Products (ETPs). The current annual listing fee is capped at $16,000, but this cap only applies to ETPs based on a single reference index. The proposed change seeks to extend the cap to include ETPs that draw on the performance of multiple reference indexes. The goal is to reduce listing costs to encourage more issuers to either list new ETPs or transfer existing ones to Cboe BZX, enhancing competition in the market.

Significant Issues and Concerns

There are several potential issues with the proposal. First, the document does not specify the financial impact of this change, leaving room for uncertainty about whether it may lead to wasteful expenditures. Moreover, while it is claimed that this amendment will foster competition and reduce fees, there are no concrete examples or data presented to support these points.

The document heavily relies on technical jargon and references complex financial regulations, potentially making it challenging for someone without a background in finance to fully understand. It suggests an increase in competition but lacks specific data to support how the additional listings might achieve this. Furthermore, there is no discussion regarding the impact of reduced fees on the Exchange's revenue or how it could affect its ability to provide necessary services in the long term.

Broader Public Impact

For the general public, especially those investing in ETPs, the proposed rule change could potentially lower costs associated with a broader range of ETP listings, thus possibly making investing in multiple index-based ETPs more accessible and affordable. However, consumers must remain cautious, as the document does not address whether these lower fees might compromise the quality of services provided by the Exchange.

Impact on Specific Stakeholders

ETP Issuers: This group stands to gain as the proposal may offer cost savings, particularly for issuers managing Outcome Strategy ETPs across multiple indices. It could incentivize issuing more products or transferring existing ETPs to the Cboe BZX Exchange, potentially leading to an expanded market presence.

The Cboe BZX Exchange: If successful, the proposal could attract more issuers to this exchange, thereby increasing its market share. However, if not managed well, reduced fees might cut into the revenues needed to maintain service levels.

Competing Exchanges: Other exchanges might feel competitive pressure to revise their fee structures similarly, which could spur a race to the bottom in terms of pricing. While this could benefit issuers and consumers, it also holds the risk of diminishing overall service quality if exchanges cannot sustain services at such pricing levels.

In conclusion, while the proposal centers around creating a broader, more competitive market, it lacks detailed substantiation for its claims. Stakeholders should weigh the possible benefits against the risk of potential adverse impacts on revenue and service integrity. Nonetheless, it is a step toward promoting a more dynamic and potentially more affordable ETP marketplace.

The document discusses a proposed rule change by the Cboe BZX Exchange, Inc., concerning the listing fees for Outcome Strategy Exchange-Traded Products (ETPs). This commentary provides an analysis of the financial references and their implications as presented in the document.

Financial Summary

A primary focus of the proposed rule change is the adjustment of the cost structure associated with listing fees for Outcome Strategy ETPs. Specifically, the rule caps the maximum listing fee per year for an Outcome Strategy Series at $16,000. This cap is meant to offer a financial incentive for issuers of ETPs by providing a cost ceiling, which could make listing these products on the Exchange more attractive from a financial standpoint.

Relation to Identified Issues

The document highlights that the $16,000 fee cap will be applied to ETPs that are based on more than one underlying instrument. This change is aimed at expanding the benefit of the fee cap to a greater number of Outcome Strategy Series. However, the document falls short of providing specific financial data or business impacts to substantiate claims that this adjustment will necessarily enhance competition or lower fees for issuers. The lack of concrete examples or quantitative data leaves questions about the real financial benefits or savings for the issuers.

Another consideration is the dependence on technical terminology and references to financial regulations, which could limit the accessibility of the implications to a general audience. By not providing clearer explanations and break-downs of the financial figures, the document does not fully convey how these changes might potentially impact both the Exchange's and the issuers’ financial positions.

While the document posits that these proposed changes do not burden competition — but rather enhance it — by potentially lowering the barriers for listing new ETPs, no in-depth financial analysis or empirical evidence supports this claim. Consequently, readers may find it challenging to evaluate the proposal's effectiveness or necessity from a fiscal perspective.

Lastly, there is no explicit discussion on how this fee adjustment might influence the Exchange’s revenue streams or the long-term sustainability of its operations. Therefore, while the document emphasizes potential competitive advantages, it leaves open questions regarding the broader financial implications.

Overall, while the proposed rule change concerning the $16,000 fee cap is significant in terms of regulatory adjustments, the lack of detailed financial impact analysis calls for a cautious interpretation of the potential benefits. More transparency and data would be beneficial for stakeholders to assess the economic soundness and efficiency of this regulatory change.