FR 2024-29045

The Federal Register document reports on a proposed rule change by Cboe BYX Exchange, Inc., which has been submitted to the Securities and Exchange Commission. This proposal aims to revise the fee structure associated with the use of Dedicated Cores - special processing units that provide enhanced computational power to users on the exchange. In essence, this rule change seeks to define a new pricing scheme where users can access these Dedicated Cores, initially without charge for up to two units, and progressively higher fees when they wish to use more than two. Moreover, the proposal also seeks to increase the number of Dedicated Cores a member can utilize, accommodating growing demand while considering resource constraints.

Key Issues and Concerns

The document is heavily technical, possibly presenting challenges for readers not well-versed in the subject. The complexity extends to the proposed fee structure, which involves multiple tiers based on usage, potentially leading to confusion among users. The structure raises questions about fairness, particularly since Sponsored Participants and Members face different limitations, which could be seen as favoring certain market participants.

Furthermore, while the proposal underscores that no negative feedback has been recorded, the process of gathering and considering community input is not clearly elucidated, which raises concerns about the transparency of the consultation process. Additionally, the exchange's justification of higher charges for extensive use by citing resource constraints and increased demand might seem favorable to those with greater financial means, though it is not clearly explained how these allocations precisely align with market needs. While the document references benefits such as improved performance and reduced latency with Dedicated Cores, specific evidence supporting these claims is not provided.

Impact on the Public

Broadly, the public might experience indirect effects from this rule change through market dynamics and pricing structures within the securities market that can influence how stock trading occurs. While experienced traders might welcome improved trading performance, those unfamiliar with the complex fee structures could face difficulties in assessing their financial commitments.

Impact on Specific Stakeholders

For stakeholders such as proprietary trading firms who rely heavily on performance, the introduction of Dedicated Cores could offer significant advantages due to the potential for reduced latency and enhanced throughput. However, for smaller users or those with limited resources, the additional fees beyond the complimentary initial cores might prove burdensome, possibly impacting their competitive position.

Organizations classified as latency-sensitive, such as proprietary trading companies, could benefit more directly from the use of Dedicated Cores, which could enhance their operational efficiency. On the contrary, the rule change potentially poses challenges to non-latency sensitive firms who might feel compelled to adapt to new standards primarily driven by larger, more resourceful organizations leveraging such advanced tools.

Overall, the proposal reflects an attempt by the Cboe BYX Exchange to adapt its offerings to user demand while emphasizing itself as an attractive venue for trading activities by technological means. Nonetheless, clarity in communication and balanced consultation with all stakeholders would be crucial to ensure an equitable and transparent process.

The document outlines a proposed rule change by Cboe BYX Exchange, Inc., specifically concerning pricing modifications for the use of Dedicated Cores. Financial references are detailed, highlighting different fee structures based on the number of Dedicated Cores utilized.

Financial Summary

The Cboe BYX Exchange is implementing a tiered fee structure for users opting to utilize Dedicated Cores, which are essentially dedicated Central Processing Unit (CPU) resources for order processing. No charge is levied for the first two Dedicated Cores, providing a free baseline for users. However, there are fees when surpassing this baseline, with $650 per Dedicated Core for allocations of 3 to 10 cores, $850 for 11 to 15 cores, and $1,050 for any quantity above 16 cores. This tiered pricing is designed to correspond with the level of resource consumption.

For clarity, the document provides a scenario: if a user purchases 11 Dedicated Cores, the monthly fee would amount to $6,050. This is broken down as no cost for the first two cores, $650 each for the next eight cores, and $850 for the final core. Additionally, existing port usage fees of $550 per port per month remain unchanged, further impacting overall costs for users maintaining multiple ports or dedicated resources.

Financial Allocations and Issues

The proposed financial allocations and fee structures are central to several key issues identified in the document:

1. Complex Fee Structure: The tiered fee system introduces complexity, which may lead to confusion regarding financial obligations. Users need to understand the specifics of their resource usage to accurately predict costs.

2. Perceived Fairness in Allocation: Different limits and conditions for Members versus Sponsored Participants could appear as preferential treatment. Sponsored Participants, who do not pay Membership Fees, have a different initial limit on Dedicated Cores, potentially causing concern regarding unequal financial burdens or access to resources.

3. High Costs for Higher Usage: The increased costs for additional Dedicated Cores could be seen as favoring users with more substantial financial resources, raising concerns about accessibility and fairness, especially relevant in a competitive market landscape.

4. Transparency and Feedback: While the document notes a lack of negative feedback, it does not detail the feedback solicitation process. This could lead to questions about the fairness and transparency of how financial implications were assessed or if community input was genuinely integrated into the decision-making process.

5. Resource Justification: The document justifies the fees by citing benefits such as reduced latency and improved performance. However, without concrete data or specific evidence, users may question if the costs are commensurate with the value purportedly offered by these dedicated resources.

In summary, the financial references in the document play a vital role in understanding the implications of the proposed rule changes by the Cboe BYX Exchange. They highlight the necessity for users to closely evaluate their resource needs and financial capacity in the context of this new pricing structure. The document raises broader issues about cost complexity, fairness, and value, which are crucial considerations for all market participants affected by these changes.