FR 2025-00895

The recent document from MIAX PEARL, LLC filed with the Securities and Exchange Commission (SEC) proposes amendments to the fee schedule for equity securities trading. The main goal is to establish a new fee, known as CAT Fee 2025-1. This fee is set to be $0.000022 per executed equivalent share. The fee replaces a previous charge, CAT Fee 2024-1, which was more expensive at $0.000035 per executed equivalent share. By implementing this change, MIAX PEARL aims to recover some of the costs associated with the National Market System Plan for the Consolidated Audit Trail for the year 2025.

Significant Issues

There are several notable issues and concerns within the document. First, there is little explanation regarding how the new fee rate was determined to be reasonable or how it aligns with the budgeted costs. The proposal states that the fee is expected to cover roughly half of the 2025 Consolidated Audit Trail (CAT) costs. However, it does not clarify how the other half of the budget will be covered, leaving stakeholders with unanswered questions about future funding.

Another concern lies in the anticipated short duration of the new fee, which is set to last only six months. The document lacks detailed information on any future plans for continued funding or potential new fees that might follow. This could create uncertainty both for Industry Members and the Exchange.

Additionally, the language used to describe the fee replacement process—from CAT Fee 2024-1 to CAT Fee 2025-1—could be simplified. The document's technical phrasing may pose a challenge to stakeholders who are not familiar with the intricacies of securities regulations.

Public and Stakeholder Impact

For the general public, the proposed fee change may seem distant, but it indirectly influences the financial market and could eventually affect investor confidence. The Consolidated Audit Trail is a significant project designed to provide comprehensive visibility into market transactions and improve oversight and regulation. If the financing of such projects is not clear or well-communicated, it could lead to a disruption in achieving market transparency goals.

For stakeholders, particularly Industry Members, the impact of this fee adjustment could vary. While a lower fee might appear beneficial, the concerns over how the remaining costs will be managed might lead to apprehensiveness. Large firms might absorb these changes more easily, compared to smaller firms that may feel a more pronounced impact if further financial adjustments are required.

Moreover, the document does not touch upon whether some organizations might benefit disproportionately from these changes. This oversight could leave room for discrepancies that could impact the perceived fairness of the fee adjustments.

Conclusion

Overall, while the proposal from MIAX PEARL, LLC seeks to address funding for the Consolidated Audit Trail in 2025 with a lowered fee, it opens the floor to several questions and potential uncertainties. Ensuring clarity in financial communications with logical justifications for fee structures is crucial to maintain trust and effectiveness in the securities exchange network. Stakeholders and the public alike might find that more comprehensive details and simplified explanations would enhance their understanding and confidence in such regulatory changes.

In the Federal Register document, a primary financial reference concerns the introduction of a new fee structure by MIAX PEARL, LLC related to the Consolidated Audit Trail (CAT) costs. The document specifies that CAT Fee 2025-1 will carry a fee rate of $0.000022 per executed equivalent share. This rate signifies the cost that Industry Members will incur per transaction to cover a portion of the budgeted costs associated with the CAT system for the year 2025.

The rationale behind this specific fee rate is not elaborated upon, which has been noted as an issue. There is a need for a clearer explanation to justify how this figure was determined to be reasonable and proportionate relative to the operational needs of the CAT. This lack of transparency might lead to confusion or concern among stakeholders regarding whether the fee adequately reflects actual expenses or if it is appropriately budgeted.

Additionally, the document indicates that this new fee, CAT Fee 2025-1, is intended to replace a previous fee, CAT Fee 2024-1, which had a higher rate of $0.000035 per executed equivalent share. This reduction in fee rate suggests an adjustment in the cost recovery strategy of the Consolidated Audit Trail for the coming year. Nonetheless, the surrounding narrative regarding the transition from CAT Fee 2024-1 to CAT Fee 2025-1 lacks clarity and simplicity, which could hinder stakeholders' understanding of the changes.

The document mentions that the anticipated revenue from CAT Fee 2025-1 is aimed at covering approximately half of the reasonably budgeted CAT costs for 2025. However, it remains unclear how the remaining costs will be managed or funded, creating uncertainty about the future financial strategy of the CAT. This unaddressed gap raises concerns about whether additional fees will be introduced, or if alternative funding mechanisms are planned.

Furthermore, the specified duration for CAT Fee 2025-1 is only six months. This brevity raises questions regarding long-term funding strategies and whether subsequent fees or adjustments will be necessary. Stakeholders might be particularly interested in understanding the implications of this short timeframe on ongoing budgetary planning and operational stability.

The document does not explicitly address whether any specific organizations or individuals stand to benefit from the proposed fee adjustments, nor does it provide comprehensive definitions or contexts for certain terms and entities like the "CAT NMS Plan" and "CAT LLC." Expanding on these references could aid in giving a more complete view of the financial landscape surrounding these regulatory changes.

In conclusion, while the document outlines new fee adjustments essential for maintaining the CAT, it leaves several financial aspects and justifications insufficiently detailed, which could impact stakeholders' comprehension and the perceived fairness of these financial allocations.