FR 2021-02117

The document is a notice from the Securities and Exchange Commission regarding a proposed rule change by Cboe BYX Exchange, Inc., which involves amending its fee schedule to eliminate certain routing fee codes due to their minimal usage. This proposal seeks to simplify the fee structure by removing fee codes 8 and MX, which were used for routing orders to the NYSE American exchange. Instead, these orders will now be charged a standard routing fee, aligning with similar structures in Cboe's affiliated exchanges.

General Summary

Cboe BYX Exchange, Inc.'s proposal is to streamline the fee structure by eliminating fee codes that have seen minimal usage. The intention is to simplify the routing fee process while maintaining consistency with fees at affiliated exchanges. The Exchange believes that limited use of these specific fee codes does not justify the maintenance costs involved. The proposed change took effect immediately upon filing, but the SEC has invited public comments within a specified period to gather feedback.

Significant Issues

The explanation of the routing strategy and the reasons for these fee changes can be complex, potentially confusing readers not familiar with financial or stock exchange terminologies. Furthermore, the document does not explicitly discuss the financial impact on the Exchange's members, perhaps leaving affected parties uncertain about potential cost changes. Although some rationale is given for removing the codes, the document could benefit from a more detailed explanation of this minimal use to support transparency. Additionally, there are no specific examples illustrating how these changes impact competition or market participants, which could aid in understanding the necessity of such a change.

Public Impact

This proposal indicates a move towards a more straightforward and potentially cost-effective approach for transactions involving routing orders. For the public at large, particularly individuals indirectly participating in the stock market through investments or savings plans, this simplification could result in marginal fee shifts at the broker or intermediary level. However, the direct impact on the general public may be limited and more noticeable to institutional or active individual traders.

Impact on Stakeholders

For stakeholders within the Cboe BYX Exchange, particularly the Members, this change might result in slightly adjusted routing fees due to the standard fee application. If the removed fee codes initially offered lower costs, stakeholders could experience a slight increase in expenses. Conversely, eliminating these codes could lead to streamlined operations and possible cost savings in infrastructure maintenance, indirectly benefiting all users. Competitively, this alignment with affiliated exchanges might make Cboe BYX more appealing to entities seeking uniformity in their routing processes.

Overall, while the rule change aims at ensuring operational efficiency, stakeholders need to evaluate the specific financial impacts on their trading strategies and routing decisions. The Exchange encourages Members to provide feedback to understand the potential benefits or drawbacks better.

The Federal Register document titled "Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Eliminate Certain Routing Fee Codes" addresses financial changes in the fee schedule of the Cboe BYX Exchange. Two specific routing fee codes—Fee code 8 and Fee code MX—are proposed to be eliminated due to minimal usage. This commentary provides an analysis of the financial references in the document and their implications.

Summary of Financial References

The document outlines specific charges associated with certain routing fee codes. Fee code 8 is detailed as being appended to members' orders routed to NYSE American that add liquidity, assessing a charge of $0.00020 per contract. Similarly, Fee code MX is associated with orders routed to NYSE American using the SLIM strategy and imposes the same charge of $0.00020 per contract. Furthermore, Fee code X is described with a charge of $0.0030 per contract. This fee code will absorb the fees previously associated with Fee codes 8 and MX for routed orders not specified under other fee codes.

Relation to Identified Issues

The financial allocations referenced in the document are pertinent to several identified issues that may impact stakeholders. Firstly, the decision to eliminate certain routing fee codes due to minimal use indicates an effort to streamline the fee schedule and potentially reduce unnecessary infrastructure and maintenance costs. However, the document does not specify the financial benefits or cost savings resulting from this action, as pointed out in the issues section. Clarification on financial benefits could enhance understanding of the administrative efficiencies gained from these eliminations.

Secondly, the complexity and the lack of clarity around the potential financial impact on members due to these fee code changes could confuse stakeholders. While exact dollar amounts per contract are provided, the aggregate financial implications for exchange members remain unclear. Providing a clear analysis of the expected cost differences for members would aid in transparency and stakeholder understanding of the changes.

Moreover, exploring the reasoning behind the minimal use of these fee codes in more detail could inform stakeholders about market dynamics and the competitive landscape. This detail is absent from the document, which might help members understand the competitive factors driving changes in transaction costs.

Lastly, the document suggests that Fee code X, which has a higher charge, will now apply to orders that previously bore the charges of 8 and MX. The absence of detailed examples or a broader context on the market forces at play leaves stakeholders without a complete understanding of how these changes may affect their transactions on the exchange. Although the exchange operates in a competitive market with many alternatives, more information would provide a fuller picture.

In conclusion, while the document provides specific monetary details about routing fee code eliminations and charges, further explanation of the total financial impact and rationale behind these changes would be beneficial to stakeholders affected by these revisions.