Overview
Title
Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees for Industry Members Related to Reasonably Budgeted CAT Costs of the National Market System Plan Governing the Consolidated Audit Trail for 2025
Agencies
ELI5 AI
Imagine there’s a fun project where everyone has to pay a tiny bit, like $0.000022 for each candy they eat, to help make the project better. But some people wonder if that's enough money or why it’s only for a short time, and they want to ask questions about it before they agree.
Summary AI
The Securities and Exchange Commission (SEC) announced that NYSE National, Inc. filed a proposed rule change to establish fees for industry members in 2025. This change is related to the costs of the National Market System Plan for the Consolidated Audit Trail (CAT) and involves setting a fee of $0.000022 per executed share, known as CAT Fee 2025-1. The fee is expected to be in effect for six months and aims to cover about half of the anticipated CAT costs for 2025. Public comments on this proposal are invited and should be submitted by January 31, 2025.
Keywords AI
Sources
AnalysisAI
The document under review is a notice from the Securities and Exchange Commission (SEC) regarding a proposed rule change filed by NYSE National, Inc. The change aims to establish fees for industry members related to the 2025 costs associated with the National Market System Plan governing the Consolidated Audit Trail (CAT). More specifically, the proposal introduces a fee of $0.000022 per executed equivalent share, identified as CAT Fee 2025-1, which will be effective for a period of six months.
Summary of the Document
The primary purpose of this regulatory notice is to inform the public and solicit feedback on a new fee structure that NYSE National intends to implement. This fee, dubbed CAT Fee 2025-1, is set to cover approximately half of the estimated costs associated with maintaining and operating the CAT system in 2025. The Consolidated Audit Trail is a comprehensive data system that tracks orders throughout their lifecycle, which is crucial for regulatory oversight.
Significant Issues or Concerns
Several key issues arise from this proposal, primarily related to transparency and justification:
Justification of the Fee Rate: The proposed fee rate of $0.000022 per executed share is not accompanied by a detailed explanation or supporting calculations. This lack of clarity could leave stakeholders and the general public questioning the derivation of this specific rate.
Transparency of Budgeting: The document mentions "reasonably budgeted CAT costs," but it does not elaborate on how these budgets are calculated. This omission could lead to concerns regarding the accuracy and transparency of the budgeting process.
Scope and Impact on Industry Members: The term "Industry Member" is defined, yet the exact implications for entities falling under this category remain ambiguous, potentially obscuring who will bear these costs.
Partial Cost Recovery: CAT Fee 2025-1 is expected to cover only half of the 2025 costs, raising questions about how the remaining costs will be managed and funded.
Comparative Analysis: There is no clear rationale for why the CAT Fee 2024-1 is being replaced by a lower fee for 2025, which may be crucial for understanding the broader implications on financial and operational planning.
Short Duration of Fee Implementation: The temporary six-month period may suggest a lack of longer-term planning and could introduce uncertainty for the stakeholders involved.
Potential Public Impact
For the general public, the establishment of the CAT Fee may seem distant; however, it could indirectly affect retail investors and market participants through potential adjustments in trading costs or market transparency. The fee is integral to maintaining the CAT system, which is vital for monitoring and securing fair market practices.
Impact on Specific Stakeholders
Industry Members: Entities defined as industry members, which include national securities exchanges and associations, are directly affected. They will incur additional costs, potentially influencing their operational expenses and strategy.
Market Regulators: The proposal supports regulatory bodies in maintaining market transparency and oversight, a positive impact by ensuring efficient regulatory processes.
Investors: While not directly charged these fees, the costs could trickle down to investors through modified service charges, albeit indirectly.
In conclusion, while the proposed rule change seeks to ensure continued funding and functionality of the CAT system, it is imperative that stakeholders have clarity on the financial rationale and implications to gauge the broader impact effectively. Public comments are encouraged and welcomed by the SEC until January 31, 2025, providing an opportunity for stakeholders to voice their views and concerns.
Financial Assessment
The document from the Federal Register outlines a proposal by NYSE National, Inc. that aims to adjust fees related to the Consolidated Audit Trail (CAT) for 2025. The proposed changes involve financial references that are critical for understanding the implications on the stakeholders involved.
Summary of Financial Allocations
The primary focus of the rule change is the introduction of a new fee, CAT Fee 2025-1, which is set at $0.000022 per executed equivalent share. This fee will be paid by industry members, specifically those who are part of the national securities exchanges or associations. The intention behind this fee adjustment is to cover the reasonably budgeted costs associated with the CAT NMS Plan for the year 2025, albeit only partially.
Interestingly, the proposed fee is lower than the previous year's fee, CAT Fee 2024-1, which had a rate of $0.000035 per executed equivalent share. CAT LLC, the entity overseeing the fee, plans for this reduced fee to be in effect for a period of six months and anticipates that it will cover approximately half of the costs budgeted for 2025.
Relation to Identified Issues
A key issue presented by the document is the lack of detailed justification or explanation for the specific rate of $0.000022 per executed equivalent share. Without clarity on how this fee rate was calculated or determined, stakeholders might question the transparency of the process and the fairness of the allocation.
Another point of concern revolves around the budgeting for the CAT costs and the reasoning behind the proposal to cover only half of these costs with the new fee. The document does not clarify how the remaining budget will be addressed or what financial strategies CAT LLC might employ to manage the shortfall. This raises questions about the organization's long-term financial planning and potential impact on involved parties.
Moreover, the change from CAT Fee 2024-1 to CAT Fee 2025-1 with a lower rate also lacks a clear rationale. Understanding why a lower fee is being introduced could illuminate whether this adjustment is due to a decrease in costs or a strategic financial decision that requires further scrutiny.
The document highlights that the rule change is designed for immediate effectiveness, which might limit opportunities for public commentary or critique regarding these financial decisions. The compressed feasibility of implementing such significant changes might overlook input that could ensure the equitable impact of the fee adjustments.
In summary, while the document outlines a financial framework for managing CAT costs for the first half of 2025, it suggests several areas where additional information and clarification are necessary to fully assess the implications and rationality of the proposed financial allocations.
Issues
• The document does not provide a detailed explanation for the fee rate of $0.000022 per executed equivalent share, which may leave readers unclear about the justification and calculation of this specific rate.
• There is no information on how the reasonably budgeted CAT costs are determined, which may lead to questions about the transparency and accuracy of the budgeting process.
• The document mentions that the rule change is designed for immediate effectiveness, which might bypass thorough public scrutiny or commentary on the fairness or impact of the fees.
• The term 'Industry Member' is defined, but the implications of this definition in terms of what entities would be affected by the new fees are not fully explained.
• It is unclear why CAT Fee 2025-1 is anticipated to recover only one-half of the 2025 budgeted costs, raising questions about how the remainder will be funded and the potential impact on stakeholders.
• The document does not provide a clear rationale for replacing CAT Fee 2024-1 with a lower rate Fee 2025-1, which could be necessary for understanding potential implications on budgeting and funding.
• The proposed rule change being in effect for only six months could be seen as lacking long-term planning or foresight, necessitating further explanation.