FR 2024-29042

Summary of the Document

The document details a proposal by the Cboe EDGX Exchange, Inc. to update its fee structure to include charges for Dedicated Cores, which are specialized CPU resources allocated exclusively to a single user for processing orders. Initially, up to two Dedicated Cores are offered at no cost, but there are fees for additional cores, which increase progressively. This initiative aims to improve trading performance by decreasing latency and increasing throughput, yet acquiring these cores remains optional for users. The proposal attempts to ensure fairness by providing similar opportunities to all users, avoiding unfair treatment, and responsibly managing their limited resources.

Significant Issues or Concerns

One notable issue is the complexity of the document's language, which might be difficult for general readers, especially those unfamiliar with technical jargon related to the stock exchange operations, such as terms like "Dedicated Cores" and "logical order entry ports." The financial implications on users are detailed through a fee structure, yet the numerous numerical details without straightforward illustrations may obscure understanding for some individuals.

Moreover, while the proposal mentions justifying the fee structure due to physical space and demand constraints, there may be concerns regarding whether these limitations are genuine operational constraints or strategies to manage market competition. The document's extensive use of regulatory footnotes can be challenging to follow for readers not well-versed in financial regulations.

Additionally, the document claims to have received "overwhelming positive feedback" regarding the Dedicated Cores. However, it lacks specific metrics or sources that could validate such claims, potentially affecting transparency and credibility. The differentiation between Members and Sponsored Participants, with different limits and fees, might also raise questions about fairness unless clearly justified.

Broad Public Impact

Broadly, this document's implications for the public relate to ensuring fair trading practices and resource management on the Exchange. The potential for improved trading efficiency and order processing could attract more participants to the Exchange, enhancing overall market liquidity. However, the complexity and new charges might dissuade smaller traders from utilizing these resources, maintaining a gap between larger firms and smaller participants in terms of trading capabilities.

Impact on Specific Stakeholders

For stakeholders, the introduction of Dedicated Cores could provide a competitive edge, particularly benefiting proprietary trading firms that rely heavily on high-speed transactions. The option of enhanced processing power can result in better execution of orders, possibly translating into financial gains. However, smaller trading firms or those less reliant on decreased latency may find the fees excessive or unnecessary, impacting their decision to engage with the new system.

For larger firms, increased fees for additional Dedicated Cores correspond with a higher usage, which could align with their greater resource demands. While the fee structure is justified as equitable, smaller participants might view distinct limits as potentially discriminatory unless clearly outlined to benefit all types of market players. Overall, while offering enhanced capabilities, the proposed changes must balance providing value with equitable access that does not favor larger entities disproportionately.

In this federal register document, financial references center around the fees associated with the use of Dedicated Cores by participants on the Cboe EDGX Exchange. The document proposes a tiered fee structure for the use of these Dedicated Cores, which are intended to enhance trading performance by assigning a dedicated Central Processing Unit (CPU) Core to individual users.

Financial Allocations and Spending

The financial references in the document outline a specific fee structure for the use of Dedicated Cores:

• $650 per Dedicated Core for those using between 3 to 15 Dedicated Cores.
• $850 per Dedicated Core for those using between 16 to 30 Dedicated Cores.
• $1,050 per Dedicated Core for users with 31 or more Dedicated Cores.

The exchange provides a helpful example to clarify these costs: if a user purchases 16 Dedicated Cores, the total charge would be $9,300 per month. This calculation considers two Dedicated Cores provided at no cost, then applies the appropriate tiered rates for additional Cores.

Relation to Identified Issues

One of the issues identified is the complexity and potential difficulty in understanding the fee structures due to the technical language used. While the document outlines specific fees, it assumes a level of familiarity with trading infrastructure that might not be present in all readers. Those unfamiliar with technical trading terminologies and the operations of Dedicated Cores might find the fee structure challenging to decipher.

The example provided in the document attempts to demystify these financial implications by breaking down costs based on usage. However, there could be further clarity for lay readers if additional, simpler examples were provided. This could help users better understand the financial implications without needing deep technical knowledge.

Another aspect concerns the fairness and potential discriminatory claims about the differentiation between fee structures for Members versus Sponsored Participants. The document notes that Members and Sponsored Participants have different fee and core allocation structures. Specifically, a Sponsoring Member with three Sponsored Access relationships could incur a monthly fee of $30,450 if each Sponsored Access relationship purchases the maximum number of Dedicated Cores. The justification for these different structures is linked to varying responsibilities and costs, such as no membership fee for Sponsored Participants. Nonetheless, for those affected, these justifications may lack transparency if not clearly communicated, promoting fairness and clarity could mitigate these concerns.

Conclusion

Overall, the financial references in the document are well-defined, indicating both free and chargeable services based on usage levels. Clearer communication or simplified examples might enhance understanding for a wider audience, particularly for new market participants or the general public. Additionally, ensuring justifications for different fee structures promote and are perceived as fair could address potential concerns about discrimination within market tiers.