FR 2025-00894

MIAX PEARL, LLC, a self-regulatory organization in the financial sector, has submitted a proposal to the Securities and Exchange Commission (SEC) to modify its fee structure related to the Consolidated Audit Trail (CAT) for the year 2025. The CAT system is essential for monitoring and improving the regulation and operation of the United States financial markets. The proposed changes include a new fee, labeled as CAT Fee 2025-1, which will be charged to industry members at a rate of $0.000022 per executed equivalent share. This fee is set to replace the previous CAT Fee 2024-1, and it is expected to be effective for six months, covering approximately half of the planned CAT expenses for the year. The SEC is actively soliciting public feedback on this proposal, with a deadline for comments set for February 6, 2025.

Significant Issues and Concerns

One primary concern with this document is the lack of detailed information regarding the rationale behind reducing the CAT Fee from $0.000035 to $0.000022 per executed share. There is no clear explanation provided as to why this reduction is necessary or how it was determined. Additionally, the document fails to elaborate on what exactly constitutes "reasonably budgeted CAT costs" or the method used to calculate these costs, which could raise questions about the transparency and accuracy of the budgeting process.

Moreover, the document mentions that the CAT Fee 2025-1 is only expected to cover half of these budgeted costs. It does not clarify why only half of the costs are being targeted or what the implications might be if the remaining half goes unrecovered. Another issue is the use of technical jargon without sufficient explanation. Terms like "CAT Executing Brokers," "CEBB," and "CEBS" are used without elucidation, making the document potentially confusing to those not well-versed in financial regulatory language.

Impact on the Public and Stakeholders

For the general public, this document might seem technical and difficult to relate to directly. However, the regulation and fees associated with financial markets can ultimately impact investors, particularly if the costs are passed down in trading commissions or influence market behaviors. Ensuring that financial markets are adequately funded and regulated is in the public's best interest to maintain integrity and transparency.

Specific stakeholders, namely industry members such as brokerage firms, may be directly impacted by the proposed fee change. For larger firms, the reduced fee may slightly ease the financial burden, whereas smaller firms might still struggle with the additional cost, especially if they operate on thinner margins. The lack of discussion about the potential impacts on different sizes of firms is a missed opportunity to understand how this change could affect market participation and competition.

Ultimately, the lack of clarity in how public comments will be used or integrated into the decision-making process is concerning. Engaging with the public in a meaningful way would necessitate explaining how feedback will affect the final ruling, yet this process remains unspecified.

Conclusion

While the proposed amendments to the MIAX PEARL fee schedule reflect necessary adaptations to the operational needs of the Consolidated Audit Trail, the document presents several questions that warrant further exploration and clarity. For stakeholders and the public alike, understanding these changes and their implications is crucial for informed participation in the regulatory process and confidence in the market's integrity.

This Federal Register document pertains to the Securities Exchange Commission's notice of a proposed rule change filed by MIAX PEARL, LLC, which deals with the establishment of new fees for 2025 in relation to the Consolidated Audit Trail (CAT) system. A primary focus of this filing is the change in the fee rate associated with the CAT.

Summary of Financial Allocations

The document outlines the introduction of a new fee, named CAT Fee 2025-1, with a rate of $0.000022 per executed equivalent share. This fee is intended to be payable by Industry Members, which include members of national securities exchanges or associations. The new fee is to replace the existing CAT Fee 2024-1, which has a higher rate of $0.000035 per executed equivalent share. The rationale behind the reduction of the fee from 2024 to 2025 is not explicitly stated in the document, leaving some ambiguity around the decision-making process for this adjustment.

Relation to Identified Issues

The reduction in the fee from CAT Fee 2024-1 to CAT Fee 2025-1, while clearly stated, lacks a detailed justification. The document does not provide insights into how the reduction aligns with the budgetary needs of the CAT system or how it will continue to support its operational costs.

One of the identified concerns is the vagueness surrounding the "reasonably budgeted CAT costs." The document does not clearly explain how these costs have been estimated or what specific expenses they intend to cover. This omission leaves affected parties without a concrete understanding of how the fee aligns with actual needs or operational efficiency improvements.

Moreover, the document notes that CAT Fee 2025-1 is anticipated to cover only approximately one-half of the budgeted costs for 2025. The lack of explanation or rationale for why the fees are set to recover only half is a point of concern. This raises questions about how CAT LLC will address the funding gap and what impact this might have on their operations or future financial needs.

Furthermore, the implementation of CAT Fee 2025-1 for a specified six-month period is mentioned but not justified, raising questions about the planning and foresight of the overall budgetary needs for the CAT system across the entire year.

Overall, the financial references in the document suggest a shift in the fee structure related to the CAT system, yet they leave many questions unanswered. The document could benefit from a more detailed financial explanation, addressing the concerns about cost allocation and the impact on Industry Members. Clearer communication regarding the financial rationale could help stakeholders better understand and prepare for the changes.