FR 2024-29633

Nasdaq BX, Inc., has introduced a proposal to adjust certain fees related to its exchange services, basing these changes on inflation rates. These adjustments are set to be rolled out in phases over three years, beginning in January 2025. While the goal is to realign fees with their original value accounting for inflation, there are several noteworthy issues, potential impacts, and areas of consideration for both the general public and specific stakeholders.

General Summary

Nasdaq BX seeks to update its fee structure, attributing the need for changes to inflation that has reduced the real value of existing fees over time. These planned adjustments combine into a one-time correction, spread over three years and utilizing the Data Processing Producer Price Index (PPI) as the measure for inflation. The targeted fees pertain to certain market data products, while other categories remain unchanged. By adjusting fees, Nasdaq aims to finance ongoing investments in its technological infrastructure and the quality of its data services.

Significant Issues and Concerns

One of the primary concerns surrounding this proposal is the ambiguity about future adjustments beyond this initial plan. The document indicates that further fees may need adjustment depending on inflation trends, yet provides no clear criteria or process for how such future decisions will be made. This leaves room for uncertainty among those affected by the fee changes.

Another issue is the rationale for choosing the Data Processing PPI as the basis for these fee adjustments. There is limited explanation offered for why this specific index is deemed most appropriate, or why alternatives were not explored. Furthermore, the methodology adopted for rounding fees could lead to discrepancies between calculated and actual adjustments, potentially raising fairness concerns.

The complex statistical metrics and detailed financial calculations included in the proposal may also pose comprehension challenges for the lay public, potentially hindering meaningful public engagement or commentary.

Impact on the Public

Broadly speaking, the impact on the general public could be minimal, as changes primarily affect users engaged with the exchange's market data products. However, any increase in operational costs for firms that deal directly with Nasdaq could conceivably translate into higher costs for retail investors who indirectly use such services.

Impact on Specific Stakeholders

For market data consumers and distributors, the proposal implies increased fees which may affect their operational finances. The phased introduction of fees could ease immediate fiscal pressure, but adjustments over three years require strategic financial planning to accommodate these changes. On the other hand, the potential benefit lies in enhanced service quality and infrastructure investments, which could boost reliability and effectiveness.

Competitively, the document asserts that fee increases will not unfairly disadvantage any group, suggesting uniform application across customer bases. However, there is scant analysis on how these changes might affect Nasdaq's competitive stance relative to other financial markets or self-regulatory organizations.

Conclusion

This proposed rule change by Nasdaq BX marks a notable effort to recalibrate its fee structure with considerations of historical inflation, yet it leaves several consequential areas open for interpretation. The absence of stakeholder engagement is also a matter of concern, potentially limiting input from those most impacted by these fee adjustments. Transparent communication about the rationale, methodology, and implications could help mitigate uncertainties and foster more informed discussions among stakeholders and the public.

The document under consideration primarily deals with the amendment of fees by the Nasdaq BX, Inc., due to inflationary adjustments. The financial references focus on how these fees are recalculated, the relevant indices used, and the rounding methodologies implemented.

Summary of Financial Adjustments

Nasdaq BX, Inc. proposes to adjust its fees to account for inflation that has occurred since the fees were last set. The proposed adjustments are planned to roll out in three stages: 45% in 2025, 30% in 2026, and the final 25% in 2027. This structured rollout aims to mitigate any immediate financial impact on users.

Fee Rounding Methodologies

The document explains a specific method for rounding fees, which is crucial in understanding potential discrepancies in the actual fees paid by consumers. Fees over $999.99 are rounded to the nearest $10, those between $99.99 and $999.99 are rounded to the nearest dollar, fees between $9.99 and $99.99 are rounded to the nearest $0.50, and fees less than $9.99 are rounded to the nearest $0.10. This rounding process can cause differences between the calculated inflation-adjusted changes and what consumers actually pay, which could be perceived as inequitable if the rounding results in noticeable discrepancies.

Relation to Identified Issues

A significant issue identified is that the use of the Data Processing Producer Price Index (PPI) for calculating these inflation adjustments lacks a detailed justification for its application across various types of fees. It is important to note that the document does not explore alternative indices that could potentially provide a more tailored adjustment, thus leaving its suitability open to question.

Moreover, the proposed fee changes include the idea of a one-time adjustment. However, the document ambiguously suggests that future changes might be required, depending on inflation rates post-August 2024. This creates uncertainty around whether consumers might expect further financial obligations in the future and under what conditions these might occur.

Potential Impacts on Stakeholders

The detailed message traffic and system demand statistics mentioned serve as indirect justification for the fee increases. However, the document lacks clarity on directly correlating these technical metrics to the necessity and magnitude of financial changes, potentially causing confusion among stakeholders.

Additionally, the statement that no written comments were solicited or received suggests a gap in stakeholder engagement. Without transparent discussion and input from affected parties, there's a risk of inadequately addressing their financial concerns, which could be compounded by the complex language used in the document, potentially alienating stakeholders unfamiliar with financial and technical jargon.

Competition and Fee Structure

In relation to competition, both intra- and intermarket, the financial adjustments are claimed to be non-discriminatory and uniformly applied, aiming not to impose an undue burden. However, the document offers minimal analysis or comparative data to substantiate claims that these adaptations will not unfavorably impact competition, either within the market sector or more broadly.

Overall, while the document outlines a grounded approach to updating fees in light of inflation, the financial methodologies applied raise potential concerns about equity, transparency, and stakeholder understanding. The way fees have been structured, calculated, and potentially adjusted again in the future should be communicated more clearly to mitigate any adverse perceptions.