FR 2025-00291

Summary of the Document

This document announces a proposal by the New York Stock Exchange (NYSE) that has been filed with the Securities and Exchange Commission (SEC) regarding the establishment of new fees for industry members in 2025. Known as CAT Fee 2025-1, these fees are intended to help cover the costs associated with the National Market System Plan for the Consolidated Audit Trail. The proposed fee is set at $0.000022 per executed equivalent share. The NYSE anticipates these fees will be active starting February 2025 and will cover about half of the expected costs for the year.

Significant Issues and Concerns

One notable issue is the lack of detailed explanation behind the fee rate of $0.000022 per executed equivalent share. The document does not clarify how this rate was calculated or justified, which is important for ensuring transparency and fairness. Furthermore, the proposal mentions that the fees will cover only about half of the predicted costs, raising questions about the budgeting process and allocation of funds. Stakeholders might benefit from an explanation or a breakdown of these budgeted costs.

The replacement of CAT Fee 2024-1 with this lower fee rate also raises unaddressed concerns about the potential financial impact on industry members and the CAT LLC. Moreover, the document fails to discuss any alternative funding methods considered before settling on the fee increase, or any incentives to ensure costs are maintained within budget limits.

Impact on the Public and Stakeholders

For the general public, the introduction of new fees for financial industry members may indirectly influence market activity, potentially affecting investors and traders. The financial institutions impacted by these fees could pass on costs to consumers or alter their trading practices, which might affect the overall market fluidity and costs.

Industry members, particularly smaller entities or new market entrants, might experience a heavier financial burden due to these fees. Smaller firms often have tighter budgets, and additional fees could pose challenges without proper adjustments or support.

The deadline for public comments, set for January 31, 2025, is relatively short, which may limit the input from concerned stakeholders who need more time to analyze the proposal.

Conclusion

The proposal to establish CAT Fee 2025-1 by the NYSE highlights significant adjustments to how the financial industry contributes to audit trail costs. While aimed at financial oversight, the lack of detailed justification and potential impacts on different stakeholders require further scrutiny. Stakeholders, especially smaller firms, may find the financial implications challenging unless additional information and support are provided. The public is encouraged to submit their comments, although the short timeframe for feedback could hinder a comprehensive evaluation of the proposal's impact.

The document discusses the introduction of a new fee, CAT Fee 2025-1, by the New York Stock Exchange (NYSE) as part of funding requirements for the Consolidated Audit Trail (CAT) under the National Market System Plan for the year 2025. This fee is specifically set at $0.000022 per executed equivalent share and is designed to cover approximately half of the reasonably budgeted costs for the CAT project in 2025.

Summary of Financial References

The primary financial element described in the document is the proposed fee rate of $0.000022 per executed equivalent share. This fee is intended to supplant the previous year’s fee, referred to as CAT Fee 2024-1, which was set at a slightly higher rate of $0.000035 per executed equivalent share. This shift represents a reduction in the fee burden relative to the previous year.

Relation to Identified Issues

One of the key issues identified is the lack of detailed justification for the newly proposed fee rate of $0.000022. It is unclear how this figure was determined or what criteria guided its calculation to balance CAT's operational funding requirements. Without further context, stakeholders may find it challenging to assess the adequacy or fairness of the rate.

The document notes that CAT Fee 2025-1 is expected to only recover about half of the projected CAT costs for 2025. However, the reasoning behind this financial strategy and the logic for covering only a portion of the costs is not explained. A comprehensive breakdown of budget allocations and the decision to pass only a part of the expense to the industry members could provide transparency and alleviate concerns about financial planning.

Additionally, the transition from CAT Fee 2024-1 to the lower CAT Fee 2025-1 rate might imply a reduced financial impact on industry members. Yet, there is no accompanying analysis or discussion on how this fee reduction might affect the financial structures of smaller industry members or new market entrants. The implications of decreased fees on the operational efficiency and financial stability of CAT LLC are also not addressed.

The document employs terms like "reasonably budgeted CAT costs" and "CAT Fee 2025-1," which could benefit from clearer definitions to ensure understanding by a non-expert audience. By explicitly detailing what constitutes "reasonably budgeted costs" and how they relate to the determined fees, stakeholders may gain a clearer picture of the budgeting process.

In absence of discussions around potential alternative funding mechanisms, it remains uncertain whether other strategies could have supplemented or replaced the new fee structure. This lack of alternative consideration might limit insights into whether the proposed fees are indeed the most effective solution given the circumstances.

Overall, the document presents a financial decision affecting various industry sectors but leaves several questions unanswered regarding the rationale and potential impacts of these financial allocations. Further elaboration and transparency on financial planning aspects would enhance stakeholder confidence and participation in related discussions.