FR 2025-00308

Overview

The document outlines a proposed rule change filed by NYSE American LLC with the Securities and Exchange Commission (SEC). This proposed change aims to establish new fees for industry members, specifically related to the costs associated with the Consolidated Audit Trail (CAT) for the year 2025. The newly proposed fee, referred to as CAT Fee 2025-1, is set at $0.000022 per executed equivalent share, replacing a higher fee from the previous year. The notice emphasizes that these fees are designed to cover approximately half of the budgeted costs for maintaining and operating CAT for 2025.

Key Issues and Concerns

One significant issue with the document is its use of technical jargon and specific terms such as "Executed Equivalent Share" and "CAT Executing Brokers for the Buyer (CEBB)" that could be challenging for individuals not familiar with securities trading. For those without a background in finance or trading, such terminology can make the document difficult to comprehend fully.

The justification for changing the fee rate from $0.000035 in 2024 to $0.000022 in 2025 is not elaborated upon beyond stating it is "reasonably budgeted." Without more detailed information or explanation, it is challenging to understand why this adjustment is being made or how it impacts the industry members.

Additionally, the proposal lacks a detailed breakdown of the financial implications or expected revenue from this fee, limiting transparency in assessing whether such fees are justified or necessary. There is also a notable absence of discussion about the possible effects on smaller brokers who may find higher fees burdensome, potentially influencing their capacity to compete in the market.

Broader Public Impact

The proposed fee change is positioned to recover a substantial portion of the CAT's operational costs for the year. This change affects industry members, which include all brokers who operate on national securities exchanges or associations. Although the fee per share might seem negligible, for high-volume traders and brokers, these costs could accumulate significantly over time.

For the broader public, such regulatory changes could indirectly influence the market by potentially increasing trading costs, which may then be passed down to individual investors. Therefore, while not immediately apparent, these fees could contribute to higher transaction costs in financial markets overall.

Impact on Specific Stakeholders

The immediate stakeholders affected are the brokerage firms and industry members required to pay this fee. For larger firms with significant trading volumes, the fee adjustment may be manageable, but smaller brokers could feel a more pronounced impact. The lack of a detailed financial justification for the budgeted costs and a clear breakdown of fee distribution raises questions about the fairness and impact across varying sizes of industry members.

The document briefly describes a public comment process, which allows the community and industry stakeholders to provide feedback. However, the lack of specific questions to guide this feedback process may limit the effectiveness of the comments received.

Conclusion

The document presents a proposed adjustment to fees associated with the Consolidated Audit Trail, emphasizing cost recovery and regulatory compliance. However, it lacks clarity in explaining the necessity and implications of the fee change, particularly how it might differentially affect stakeholders of varying sizes. Ensuring better transparency and providing a more detailed analysis of the proposed costs would greatly benefit both industry participants and the public interested in understanding these regulatory changes.

The document outlines a proposal by NYSE American LLC to establish fees for the year 2025 related to the costs of the Consolidated Audit Trail (CAT), specifically under the National Market System Plan. The financial reference central to this notice is the initiation of CAT Fee 2025-1 with a rate of $0.000022 per executed equivalent share. This fee is intended to replace the previous CAT Fee for 2024, which had a higher rate of $0.000035 per executed equivalent share.

Summary of Financial Allocations

The proposed fee highlights a specific cost allocation strategy for 2025's CAT activities. The fee seeks to cover approximately half of the "reasonably budgeted" costs associated with maintaining and operating the Consolidated Audit Trail for the given year. The adjustment from the previous rate indicates a reduction in the fee, aligning the financial structure with the forecasted budget for 2025.

Relationship to Identified Issues

1. Technical Language and Understanding:

The financial references made, specifically the fee rates and billing mechanisms, are framed in technical language such as "executed equivalent share" and complex broker roles. This could hinder understanding among industry members and stakeholders unfamiliar with these terms. Clearer explanations or definitions might assist those affected in comprehending how the fee relates to their financial responsibilities.

1. Impact on Industry Members:

While the fee rate has decreased from the previous year, the document lacks an explicit rationale for this reduction. Without detailed financial data or justification, stakeholders are left questioning the necessity and impact of the fee adjustments. A clearer explanation of how these fees integrate into the overall cost structure of the CAT and their implications for industry members would be beneficial, especially for smaller brokers concerned about competitive viability.

1. Lack of Budget Justification:

Although the fee is described as covering "reasonably budgeted" costs, the absence of detailed financial information or specific budget breakdowns makes it challenging for stakeholders to evaluate the appropriateness of the fee. Understanding precisely how the fees contribute to the CAT's financial health and operation would provide transparency and help affirm the necessity of these costs.

1. Public Feedback and Fee Transparency:

The solicitation for public comments is a critical part of the process, yet without guiding questions focusing on financial impacts, the feedback may not effectively address financial concerns. Including specific inquiries regarding the fee's budgetary justification and its economic impact could guide and enhance the quality of public responses, leading to a more informed discussion on the fee's implementation.

The document's financial elements present a strategic approach to funding operation costs associated with the CAT. However, accompanying these financial details with thorough explanations, clear budget justifications, and targeted public engagement would significantly contribute to a more comprehensive understanding and assessment of the proposed fee.