Overview
Title
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Update Its Fee Schedule Regarding Uncontrolled External Distributors
Agencies
ELI5 AI
The Cboe EDGX Exchange wants to make it cheaper and easier for some companies to share their financial data by not charging them until they have a user. The plan is like giving new players in a video game free access until they make a friend, but some people are worried this isn't fair to everyone.
Summary AI
The Cboe EDGX Exchange, Inc. has submitted a proposal to update its fee schedule related to uncontrolled external distributors. The proposal introduces fee waivers to encourage new vendors to adopt and distribute the EDGX Top and Summary Depth data feeds, as well as the Cboe One Summary and Premium feeds, without being charged until they have at least one user. These waivers aim to assist distributors in managing initial costs while developing and integrating new data feeds for market data distribution. The Securities and Exchange Commission will review and solicit public comments on this proposal.
Keywords AI
Sources
AnalysisAI
The document from the Federal Register details a proposal by the Cboe EDGX Exchange, Inc. to modify its fee schedule. The key change involves implementing fee waivers for certain data feed distributors. This move potentially lowers the entry barrier for new distributors to access the market without upfront costs, especially focusing on those categorized as "Uncontrolled External Distributors."
General Summary
The Cboe EDGX Exchange, Inc. has proposed to update fees associated with its market data products. The main change involves waiving fees for new distributors of specific data feeds—namely the EDGX Top, Summary Depth, Cboe One Summary, and Premium feeds—until they secure at least one user. The aim is to support these distributors in mitigating initial costs related to developing and offering new market data feeds. This initiative is now under review by the Securities and Exchange Commission (SEC), which is soliciting public feedback.
Significant Issues and Concerns
One key issue is the apparent lack of comprehensive justification for why these fee waivers are necessary or beneficial across all market participants. There is a risk of perceptions of favoritism toward certain types of external distributors. Specifically, the proposal largely benefits "Uncontrolled External Distributors," potentially creating an unfair competitive landscape against Controlled Distributors who do not enjoy the same waivers.
Moreover, the document is filled with technical jargon around market data feed distribution, possibly making it challenging for the general public to grasp. The differentiation between Controlled and Uncontrolled Distributors, though critical, is not consistently explained, which could lead to misunderstandings about the impact of these distinctions.
Public Impact
For the broader public, the proposal's direct impact may seem minimal, mainly affecting those companies involved in distributing market data. However, these changes could indirectly influence the costs associated with accessing real-time market data through various financial information platforms used by individual investors.
Impact on Stakeholders
Positive Impacts:
Uncontrolled External Distributors stand to gain significantly from the proposed waivers, lowering their costs to enter and compete in the market. This could lead to more competitive pricing and varied data products available to end-users.
Negative Impacts:
Controlled Distributors may find themselves at a competitive disadvantage due to their exclusion from the fee waiver benefits. They might face increased pressure to justify their costs while attempting to attract users without the same initial financial relief, potentially impacting their market presence.
In summary, while the proposal presents opportunities to stimulate innovative distribution of data feeds, it raises concerns over the equitable treatment of all distributors and the clarity needed to ensure fair competition. The SEC's role in gathering feedback will be crucial to resolving these concerns and ensuring balanced market regulation.
Financial Assessment
In reviewing the financial references within the document, several notable details about the fee structures and proposed waivers are highlighted, specifically concerning market data distribution fees from the Cboe EDGX Exchange, Inc.
Financial References and Allocations
The document outlines several fee structures pertaining to the distribution of market data feeds:
EDGX Top Data Feed Distribution Fee: Currently, all external distributors are charged a monthly fee of $2,250.
EDGX Summary Depth Data Feed Distribution Fee: This fees stands at $2,500 per month for external distributors.
Cboe One Summary Feed Distribution Fee: A monthly fee of $5,000 is imposed on distributors.
Cboe One Premium Feed Distribution Fee: Distributors are charged an even higher fee of $12,500 per month.
Data Consolidation Fee: A separate fee of $1,000 per month is charged, reflecting the value of the work the Exchange does in consolidating data.
Proposed Waivers and Financial Implications
The most significant financial theme in the document is the proposed adoption of fee waivers for "Uncontrolled External Distributors." These distributors, who cannot control the usage of the data feed once sold to another party, are offered the following incentives:
- Fee Waivers for Uncontrolled External Distributors:
- For those new to the EDGX Top and Summary Depth feeds, fees are waived until they enlist one or more users. This removes the burden of the $2,250 and $2,500 monthly fees.
- Similarly, new distributors of the Cboe One Summary and Premium feeds will not have to pay the $5,000 or $12,500 fees, along with the $1,000 Data Consolidation Fee, until they have enlisted users.
Relation to Identified Issues
These financial waivers raise several issues:
Unclear Justification: While the fee waivers aim to reduce initial financial burdens for "Uncontrolled External Distributors," concrete evidence supporting the claim that these distributors face longer development times is not provided. This lack of evidence could cause concerns about favoritism towards this group over "Controlled External Distributors," who do not receive similar benefits.
Competition Concerns: The differential treatment in fee waivers could lead to competition concerns. By waiving substantial fees specifically for Uncontrolled External Distributors, the proposed changes might inadvertently disadvantage Controlled Distributors, who continue to shoulder the billing regardless of user acquisition status.
Development and Onboarding Times: The rationale for the waivers rests on the assumption that Uncontrolled External Distributors have longer lead times for development and user onboarding. This reasoning, however, is not backed by data or examples within the document, leading to potential scrutiny on the fairness and necessity of these financial provisions.
Overall, while the financial incentives aim to encourage market entry and data feed adoption by lowering initial costs, questions about their broader market impact and the balance of competitive fairness remain open for further discussion.
Issues
• The proposed fee waivers are not clearly justified in terms of overall benefit to all market participants, which could lead to concerns of favoritism towards certain external distributors.
• The document contains complex and technical language, which might be difficult for a general audience to understand without specific knowledge about market data feeds and their distribution.
• The differentiation between 'Controlled External Distributors' and 'Uncontrolled External Distributors' is important but is scattered across the document, making it hard to fully understand without close reading.
• There is potential for unfair competition concerns given that the pricing waivers seem to only apply to Uncontrolled External Distributors, which may disadvantage Controlled Distributors if not properly justified.
• The justification provided for the fee waivers appears to assume longer development times for Uncontrolled External Distributors without offering concrete evidence or examples.
• The waiver's requirement that the distributor has not received the data feed in the last 18 months is noted but not fully explained in terms of its rationale or how it benefits market integrity or competition.