FR 2025-00891

Editorial Commentary

The document contained in the Federal Register outlines a notice from the Securities and Exchange Commission (SEC) regarding a proposed change by MIAX Sapphire, LLC. This change concerns the establishment of a new fee, known as CAT Fee 2025-1, which will be levied on Industry Members as part of the ongoing efforts to manage the costs associated with the National Market System Plan governing the Consolidated Audit Trail (CAT). Specifically, the fee is intended to be part of the funding strategy for 2025, replacing the previous CAT Fee 2024-1 and set at $0.000022 per executed equivalent share.

General Summary

This document serves to notify the public and interested parties of MIAX Sapphire's proposed amendment to its Fee Schedule. The fee adjustment is designed to address and partially cover the operating costs related to the CAT system for the upcoming year. Importantly, the CAT Fee 2025-1 is being implemented with immediate effect, and public comments are invited on the proposal until February 6, 2025. CAT Fees are part of the securities industry's collaborative approach to tracking and auditing trades, thus ensuring transparency and regulatory compliance.

Significant Issues or Concerns

Several concerns arise from the proposed fee adjustment and the information provided within the document:

• Lack of Transparency on Budget: The document does not disclose the total budget or projected expenses for the reasonably budgeted CAT costs in 2025. Without these figures, stakeholders may find it challenging to gauge whether the proposed fee rate is fair and appropriate.

• Terminology Accessibility: Terms like "Industry Members," "CAT Executing Brokers," "CEBB," and "CEBS" are introduced without adequate explanation. Such jargon can obscure understanding for those unfamiliar with the intricacies of securities trading and regulatory practices, potentially alienating the general public.

• Fee Rate Determination: There is little explanation of how the amount of $0.000022 per executed equivalent share was calculated. Without insight into the fee-setting process, questions about its fairness and the Equitable distribution of operational costs might arise.

• Rationale for Fee Adjustment: The reasoning behind reducing the fee from $0.000035 (CAT Fee 2024-1) to $0.000022 is not clearly delineated. Stakeholders could question the rationale for this reduction without a clear articulation of financial or operational changes.

Public and Stakeholder Impacts

Broadly, this document impacts participants in securities markets, such as investors, brokers, and trading firms. By creating a framework for funding industry-wide regulatory infrastructures like the CAT, the changes foster a more robust and accountable market environment, indirectly benefiting public investors through enhanced oversight.

• Impact on Industry Members: The fee adjustment impacts brokers and firms that process significant trading volumes, as small per-transaction fees can accumulate to significant amounts. Firms may need to reassess their operating budgets and potentially pass on costs to clients, affecting the end-user indirectly.

• Potential Positive Outcomes: If effectively allocated, the fees contribute to a well-regulated market environment that safeguards investors through diligent trade tracking and transparency. This could bolster confidence in the equity and fairness of the securities market.

• Concerns for Consistency and Fairness: Without clarity and transparency concerning the fee's rationale, stakeholders might harbor doubts about the motivations behind these financial adjustments, questioning if they uniformly benefit the entire industry or serve more narrow interests.

Conclusion

The document reflects ongoing regulatory adjustments in the ever-evolving landscape of securities trading. It illustrates a particular regulatory process where industry feedback is sought to enhance rule-making efficacy. For optimal transparency and stakeholder reassurance, providing a more detailed budgeting context and clearer language would be beneficial, enabling full participation and understanding from all market participants.

The Federal Register document outlines a proposed rule change by MIAX Sapphire, LLC, which involves amending the exchange's fee schedule. The specific financial matter addressed is the establishment of fees for industry members in relation to the reasonably budgeted costs of the National Market System Plan governing the Consolidated Audit Trail (CAT) for the year 2025.

Fee Structure Overview

The proposed fee, referred to as CAT Fee 2025-1, is set at $0.000022 per executed equivalent share. This fee is payable to Consolidated Audit Trail, LLC (CAT LLC) and is expected to recover about half of the costs outlined in the reasonably budgeted CAT costs for 2025. The CAT Fee 2025-1 replaces the previous year's fee, CAT Fee 2024-1, which had a higher rate of $0.000035 per executed equivalent share.

Issues with Fee Justification and Transparency

The document raises several concerns related to the financial aspects of the proposed fee change:

1. Lack of Total Budget Clarity: The document does not specify the total budgetary amount needed for the reasonably budgeted CAT costs for 2025. Without this information, stakeholders might find it challenging to gauge the scale and adequacy of the proposed fee rate.

2. Terminology and Accessibility: Key terms such as "Industry Members," "CAT Executing Brokers," "CEBB," and "CEBS" are used but not clearly defined for a general audience. This lack of straightforward explanation may make it difficult for those outside the industry to understand how these parties are financially impacted by the fee.

3. Absence of Detailed Fee Calculation: There is no detailed explanation of the budgeting process or the methodology behind determining the fee rate of $0.000022 per executed equivalent share. This absence could lead to questions regarding the transparency and fairness in setting this fee.

4. Rationale Behind Fee Adjustment: Replacing CAT Fee 2024-1 with a reduced CAT Fee 2025-1 prompts questions about the reasons and rationale behind this adjustment. The document does not provide justification for reducing the rate from $0.000035 to $0.000022, which may impact stakeholders' understanding of the fee's consistency and equity.

5. Footnote Clarifications: Although various footnotes are cited throughout the text, they lack accompanying explanations in the main body of the document. As these footnotes likely contain critical contextual information, readers need to access each referenced rule or document separately, which can hinder comprehensive understanding.

In summary, while the document details a reduction in the fee rate for CAT-related costs, it lacks clear budgeting details and the rationale for fee modifications. Additionally, the absence of transparent explanations might lead to concerns regarding the fee's calculation and adjustment processes. These points would be significant to stakeholders evaluating the fee's impact and equity.