FR 2024-31769

The document, published by the Cboe Exchange, Inc., announces a proposed rule change related to its "Consolidated Audit Trail Funding Fees" for the year 2025. Filed on December 20, 2024, with the Securities and Exchange Commission (SEC), this proposal sets a fee rate of $0.000022 per executed equivalent share and is intended to take immediate effect. The SEC invites public feedback on this rule change, allowing comments to be submitted by January 27, 2025.

Summary of the Document

This notice primarily addresses the financial mechanisms that the Cboe Exchange plans to use to cover the costs associated with the Consolidated Audit Trail (CAT), which is intended to enhance the oversight and accuracy of trade transactions. The proposed fee is specifically for industry members and is meant to fund these oversight operations efficiently.

Significant Issues and Concerns

Several noteworthy concerns arise from this proposed rule change. Firstly, the document lacks a detailed explanation for the specific fee rate of $0.000022 per executed equivalent share. This rate appears to be established without public disclosure of the calculation methods or the factors considered to ensure fairness and reasonableness regarding budgeted CAT costs.

Additionally, designating the proposed rule change for immediate effectiveness could sidestep a comprehensive public review process. This might result in overlooking important stakeholder insights or concerns, which could be critical to achieving a balanced and equitable fee schedule.

The language used in the document, particularly regarding how these fees relate to CAT costs, is not transparent. This could lead to potential misunderstandings or misinterpretations among stakeholders and the general public. Furthermore, the criteria used to assess and validate the "reasonably budgeted" nature of CAT costs remain unclear, which poses questions about the justification of the fees.

Lastly, the document's technical nature might present barriers for individuals who lack a background in regulatory or financial matters. This complexity could hinder the ability of some stakeholders to provide informed feedback or fully understand the implications of the proposed changes.

Impact on the Public and Stakeholders

Broadly, the public may not feel an immediate impact from these changes unless they engage in trading activities that intersect with the Cboe Exchange's operations. However, the proposed fee structure aims to uphold integrity and accuracy in trading oversight, potentially benefitting market stability and investor confidence in the long term.

For industry members directly subject to these fees, this change represents a potential increase in operational costs. While the document outlines the necessity of funding the CAT costs, the lack of transparency in the fee calculation could raise concerns about financial burdens being disproportionately placed on certain stakeholders without a clear framework of accountability or oversight.

In conclusion, the proposed rule change exemplifies a balancing act between effectively funding regulatory mechanisms and ensuring transparency and fairness in fee imposition. The SEC's invitation for public comment offers a platform for stakeholders to voice their insights, which could shape the implementation of these fees and contribute to more informed decision-making processes.

In the Federal Register document, the Cboe Exchange, Inc. proposes to establish a new fee related to the Consolidated Audit Trail (CAT) for the year 2025. This fee, referred to as CAT Fee 2025-1, is set at a rate of $0.000022 per executed equivalent share. This is a financial allocation aimed at industry members who are held responsible for the costs associated with the CAT, which serves as a regulatory tool to help monitor trading activity in the United States.

The financial reference in this proposal is significant as it directly impacts industry members who will bear the cost of the fee. However, several issues arise in understanding and assessing this fee:

1. Lack of Justification for Fee Rate: The document mentions the fee rate of $0.000022 per executed equivalent share, but it does not provide a detailed explanation of how this rate was determined. Without an explanation of the methodology used to calculate this fee, it is challenging to ascertain whether it represents a fair and budget-conscious decision. The absence of clarity leaves room for questions regarding the fairness and reasonableness of the budgeting for these costs.

2. Immediate Effectiveness Without Thorough Review: The document states that the proposed rule change is designated for immediate effectiveness. This approach might bypass a thorough review process that could otherwise address concerns of stakeholders. Immediate implementation means that industry members must adjust quickly to new financial demands without sufficient time for feedback or adaptation.

3. Transparency in Fee Calculation: There is a lack of transparency regarding how the fee ties into "reasonably budgeted CAT costs." This opaque language makes it difficult for industry members and other stakeholders to understand the underlying financial calculations, potentially leading to misinterpretation or mistrust in the process.

4. Clarity on Reasonably Budgeted Costs: The processes and criteria used to ensure that the CAT costs are “reasonably budgeted” are not clearly defined. Without explicit details, stakeholders might question whether the fees genuinely reflect a justifiable expense or if they are overestimated.

In conclusion, while the proposal sets a specific financial rate for CAT fees in 2025, the issues surrounding justification, transparency, and review processes complicate the financial implications for stakeholders and industry members. Greater clarity and detailed financial disclosures would aid in addressing these concerns, ensuring stakeholders feel confident that the allocations are necessary and fair.