FR 2021-01836

Overview of the Proposal

The document outlines a proposal by Cboe EDGX Exchange, Inc., a self-regulatory financial organization, to implement a new monthly fee for members who use more than one Market Participant Identifier (MPID). The first MPID will be free, but any additional identifiers will incur a charge of $350 each. This fee is intended to encourage more efficient management of MPIDs among its users in an increasingly competitive trading marketplace where participants can choose various platforms based on fee structures.

Key Issues and Concerns

The document is dense with regulatory and industry-specific terminology, such as "Market Participant Identifier (MPID)," which might not be immediately understandable to those outside the financial sector. Similarly, references to legal statutes and specific exchange rules could be more transparent if simplified for general understanding.

There is a mention of similar fees existing in the Nasdaq market; however, the document does not rigorously analyze whether these fees are fair or excessive compared to the proposed fee by Cboe EDGX. Additionally, the rationale seems to lack detailed insights into what constitutes "administrative costs" when MPIDs are deactivated, leaving room for speculation and misunderstanding.

The explanation regarding market competitiveness and the rationale behind the fee implementation appears somewhat vague. A more detailed analysis of how these fees affect the marketplace, including cost impacts, would improve clarity. Statements suggesting that members can easily switch to other venues may overlook the complexities involved in such operational shifts, potentially misleading less informed readers.

Additionally, the proposal does not thoroughly consider the possible disproportionate effects on smaller members or new participants who may find the fee burdensome compared to larger, well-established members. Furthermore, the document would benefit from concrete examples or case studies to illustrate how such fees have impacted members in similar contexts.

Broad Impact on the Public

For the general public, particularly those holding investments or trading equities, this proposed change may not have immediate direct effects. However, shifts in trading costs can indirectly influence market practices, potentially affecting liquidity or pricing strategy, which might impact individual investors in the long run. The proposal's encouragement of efficient MPID use could lead to streamlined operations that might favorably affect transparency and execution speed.

Specific Stakeholders

For stakeholders, such as broker-dealers and trading firms, this proposal presents a cost consideration. Smaller firms or those just entering the market might feel more pressure under the new fee structure, especially if they rely on multiple MPIDs for their strategic operations. Conversely, for larger firms, this might represent a manageable cost, perhaps even incentivizing more streamlined trading practices that could result in lower administrative overhead.

The proposal aims to address competitive positioning within the market, as it acknowledges the robust competition with numerous trading platforms available. While it strives to balance fee implementation among its exchange members equitably, the effectiveness of such a strategy depends largely on its reception and adjustment by those operating within these markets. By not adequately addressing the asymmetric impact on varying sizes of members, the proposed rule change could inadvertently favor established entities over emerging competitors.

In summary, the proposed fee by Cboe EDGX seeks to manage identifier use efficiency but raises questions about its broader fairness and operational impact, requiring further clarity and examples for stakeholders and broader public understanding.

The document discusses a proposed rule by the Cboe EDGX Exchange, Inc. to impose a fee structure concerning Market Participant Identifiers (MPIDs). Specifically, the Exchange intends to assess a monthly fee of $350 per MPID per Member, with the provision that a Member's first MPID is free of charge. This is a notable financial allocation as it introduces an ongoing cost for members who choose to utilize multiple MPIDs.

Summary of Financial References

The proposed fee aims to bring consistency in financial assessment among members using multiple MPIDs. The implementation of this charge is designed as an incentive for members to use MPIDs efficiently. It's noteworthy that the document points out that this fee is lower compared to the analogous fees charged by the Nasdaq Stock Market LLC, which imposes a fee of $550 per MPID universally, including the first MPID. This comparison highlights an effort by the Cboe EDGX Exchange to be competitive in its fee structure while aligning the costs with the benefits provided.

Financial Allocations and Issues

The financial reference to a $350 monthly fee raises several issues addressed throughout the document. One prominent issue is the potential burden this fee may place on smaller members or new participants who may not have the same resources as larger, established members. The document does not address whether an exemption or a different scale of fees could be more equitable for organizations with fewer resources. Additionally, imposing a financial charge tied to MPIDs can be seen as a method to encourage more disciplined and efficient use of these identifiers by member companies.

However, the rationale behind these fees lacks detailed analysis in the document regarding administrative costs or the competitive advantage supposedly achieved through such fees. Other than mentioning that the fee is competitive relative to Nasdaq, there is limited discussion or data provided to substantiate the claim that this allocation will not impose a significant financial burden on members.

Moreover, while discussing the estimated benefits and value retrieved by members using multiple MPIDs, the document fails to provide specific examples or scenarios that might illustrate the practical financial impact of these fees on members' trading operations.

In conclusion, while the rule proposes a structured, financial charge associated with MPID usage, the document could benefit from more detailed financial analysis inclusive of impacts on smaller players, justification of fee structures, and specific data or scenarios reflecting the competitive nature of these charges. This would aid in providing a more comprehensive understanding of this financial decision's implications for all types of market participants.