FR 2025-00892

The document from the Federal Register discusses MIAX Emerald, LLC's proposal to amend its Fee Schedule to include a new fee referred to as CAT Fee 2025-1. This fee relates to the cost-sharing mechanism for the Consolidated Audit Trail (CAT) in 2025, a system implemented to improve the surveillance and investigation of illegal activities in securities markets. The fee rate proposed is $0.000022 per executed equivalent share. The change is effective immediately, and the Securities and Exchange Commission (SEC) invites public comments on the proposal until February 6, 2025.

Significant Issues and Concerns

Several issues arise from the proposal. Firstly, the document does not provide a detailed explanation of the "reasonably budgeted CAT costs," creating ambiguity about what these fees are intended to cover. Such a lack of transparency might lead to confusion or mistrust among industry members who are required to pay these fees.

Secondly, the language used in the document includes complex financial terminology and regulatory references. Individuals without a background in securities regulation could find the document difficult to understand, making it less accessible to the general public.

Furthermore, the determination of the fee rate at $0.000022 per executed equivalent share is not explained, which could lead to questions about whether this rate is appropriate and justified.

Additionally, there is no clear indication of whether efficient use mechanisms are in place for the collected fees by CAT LLC, raising concerns about potential inefficiencies or wastefulness.

Lastly, while the document notes that CAT Fee 2025-1 replaces CAT Fee 2024-1, it does not offer insights into why the fee is reduced or its expected impact on industry members, leaving stakeholders without adequate context or understanding of the situation.

Broad Public Impact

For the broader public, the proposed fee change aims to support the infrastructure necessary for monitoring and safeguarding the financial markets, which is crucial for investor protection and maintaining market integrity. However, the lack of clarity in the proposal may undermine public trust in the regulatory processes.

Impact on Specific Stakeholders

Industry members, such as brokers and traders on the exchange, are directly affected by the proposed fee change. The reduced fee might be financially beneficial to these stakeholders, as they would incur lower costs for their transactions compared to the previous fee structure. However, the absence of detailed financial rationalization may lead to skepticism or resistance among stakeholders.

For the SEC and MIAX Emerald, the proposal represents a step toward maintaining robust market surveillance. Obtaining feedback from stakeholders within the February 6, 2025, deadline could guide future developments, potentially aligning stakeholders' interests with regulatory goals more closely.

In conclusion, while the document aims to address pertinent issues in the regulation of securities markets, the need for greater transparency and explanation on several fronts remains. These factors present challenges both for stakeholders directly affected by the fee changes and for the broader public who rely on effective market oversight for fair and secure financial practices.

The document outlines a proposal related to the fee changes by MIAX Emerald, LLC, with a particular focus on the financial aspects involving the Consolidated Audit Trail (CAT) for the year 2025. These financial measures are relevant to industry members who operate within the securities exchange framework.

The primary financial change proposed involves the introduction of CAT Fee 2025-1, set at a rate of $0.000022 per executed equivalent share. This fee is implemented for cost recovery related to the Consolidated Audit Trail, which is a tracking system designed to help monitor trading activities in the markets. Notably, this new fee replaces the CAT Fee 2024-1, which had a higher rate of $0.000035. The purpose behind this change is said to be the recovery of approximately half of the CAT costs budgeted for 2025.

Interpretation of Financial References

Summary of Financial Allocations

The CAT Fee 2025-1 introduces a reduced fee structure compared to its predecessor CAT Fee 2024-1. The fee, $0.000022, is charged per executed equivalent share and represents the exchange's attempt to recover a substantial portion of its budgeted operational costs related to the CAT system. It is anticipated that this fee will be in effect for a period of six months in the year 2025.

Relation to Identified Issues

Regarding the financial allocations, there are concerns about the ambiguity surrounding what constitutes the "reasonably budgeted CAT costs." The absence of a detailed breakdown of these costs creates questions about the basis of the fee determination. Such clarity is crucial for industry members who are financially impacted by these changes.

Furthermore, the decrease in fee from CAT Fee 2024-1 to CAT Fee 2025-1 is noteworthy but lacks a clear explanation. Without understanding why the fee is set specifically at $0.000022, stakeholders might find it challenging to assess whether the revised amount is justified or aligns with the operational efficiencies and costs of CAT LLC.

Additionally, there is no mention of mechanisms in place to ensure the efficient utilization of collected fees by CAT LLC. This could lead to concerns about whether the funds will be managed judiciously and not lead to wasteful expenditure.

In summary, while the document specifies the fee changes, it leaves several open questions regarding the rationale and efficiency behind these financial allocations, which could lead to uncertainty and require further elaboration for stakeholders.