FR 2024-30525

Document Overview

The document is a notice from Nasdaq BX, Inc., a stock exchange, to the Securities and Exchange Commission (SEC). It outlines a proposal to increase the fees for two types of trading ports used by Market Makers. These fee increases are for the Specialized Quote Feed (SQF) Ports and the SQF Purge Ports, by 10% and 9%, respectively. According to the exchange, the fee adjustment is necessary to cover the costs of technological upgrades and to reflect inflation rates in the data processing industry since the last fee changes in 2016 and 2018.

Significant Issues and Concerns

One notable issue with the proposal is its potential impact on smaller Market Makers. Increasing fees could disproportionately affect those with fewer financial resources, making it more challenging for them to maintain competitive operations. This concern raises fairness questions about whether the fee hikes might favor larger, more financially secure Market Makers.

Another concern is the justification of the fee increases. The document refers to inflation and mentions that other exchanges have implemented similar measures, but it does not provide detailed examples or evidence. This lack of specificity might lead some stakeholders to question the adequacy and transparency of the exchange's rationale.

Moreover, the document uses a specific inflation measure, the Producer Price Index (PPI) for Data Processing and Related Services, as a basis for the adjustments. While this metric might be reasonable within the industry context, it might not fully capture the complexity of competitive market dynamics or actual cost changes faced by the exchange.

Detailed descriptions of the technological enhancements made by Nasdaq BX are absent, which can make it hard for interested parties to assess whether the fee increases are justified. This lack of transparency could concern stakeholders who need assurance that additional costs correlate with proportional benefits.

Finally, the technical nature of the document, particularly the explanation of the Data PPI, may be too complex for some stakeholders, making it difficult for them to fully understand the basis for the changes proposed.

Impact on the Public and Stakeholders

For the general public, the direct impact of this rule change might seem limited. However, broader implications could arise if increased fees lead to higher trading costs for smaller Market Makers, potentially affecting market liquidity and competition. Over time, these changes might influence the types and costs of investment options available to individual investors.

Market Makers, the primary users of SQF Ports, will feel the impacts more acutely. Larger Market Makers may be better equipped to absorb these new costs and benefit from improved technology and services. However, smaller Market Makers may find themselves financially squeezed, which could narrow market competition and possibly lead to fewer trading incentives or increased costs, trickling down to end-customers and investors.

Furthermore, the manner in which the SEC processes and considers public feedback regarding this proposed change could affect stakeholders' trust in regulatory processes. If the Commission does not adequately address concerns or incorporate public input, it could lead to dissatisfaction among those directly affected by these fee changes.

Overall, while the proposed fee increases are framed as necessary adjustments to maintain and enhance technological infrastructure, the issues of fairness, transparency, and stakeholder impact require careful consideration and possibly further explanation and engagement from both Nasdaq BX and the SEC.

The document related to Nasdaq BX, Inc. and its proposed rule change concerning port pricing provides insights into financial adjustments impacting Market Makers. These adjustments come in the form of fee increases for specific services essential to Market Makers on the Exchange.

Financial Summary

In this document, Nasdaq BX, Inc. details changes to its pricing structure. Specifically, the Exchange currently charges $500 per port, per month for both the Specialized Quote Feed (SQF) Port and the SQF Purge Port. The proposed adjustment seeks to increase the SQF Port Fee to $550 per port, per month, reflecting a 10% increase. Concurrently, the SQF Purge Port Fee will rise to $545 per port, per month, marking a 9% increase from the existing fee.

Relation to Identified Issues

The proposed fee hikes may exert varying impacts across Market Makers. Smaller firms, with potentially tighter financial constraints, might feel the effect of these increases more acutely than larger, more financially resilient competitors. This disparity raises questions about the overall fairness of the fee changes, suggesting that while the increases are uniform, their financial toll is not.

The rationale for these increases is linked to inflation and outlined with reference to the Data Processing and Related Services Producer Price Index (PPI). However, there is a significant concern about how accurately this metric captures the nuanced cost dynamics that the Exchange faces, potentially leading to a mismatch between actual service enhancement costs and the proposed fee increases. Moreover, the document mentions inflation-based adjustments while not detailing exact parallels drawn from other exchanges, which might weaken the foundational justification for such increases.

Additionally, the document briefly mentions investments and technological enhancements as a basis for the fee increase without elaborating on the specifics of these improvements. This lack of detail can lead to transparency issues, as stakeholders may not have a comprehensive understanding of how their increased fees directly correlate with enhancements and benefits received.

Finally, although the document encourages public commentary on these changes, there remains uncertainty regarding how such feedback will be addressed or incorporated by the Commission. This could lead to potential concerns among stakeholders about the thoroughness with which their perspectives and comments are considered in the final decision-making process.