FR 2025-01855

The document in question is a notice from the Securities and Exchange Commission (SEC) regarding a proposed rule change by the NYSE Arca, Inc. This proposed change involves waiving the Options Regulatory Fee (ORF) for December 2024 and then reinstating it at the same rate starting in January 2025. The SEC has temporarily suspended this proposal and is initiating a process to decide whether to approve or disapprove it. The aim is to ensure the proposal aligns with legal standards and is fair to all parties involved.

General Summary

At its core, the proposed rule change pertains to a fee charged by a stock exchange to cover regulatory costs associated with monitoring and overseeing trading activities. The NYSE Arca, a subsidiary of the New York Stock Exchange, sought to temporarily waive this fee for a specific month, which it claims would prevent collecting excess revenue beyond what is necessary for regulatory activities. The fee would resume the following month at the existing rate.

Significant Issues and Concerns

One of the primary issues with the proposal is its lack of detailed explanation. The NYSE Arca did not furnish sufficient specifics to clarify why the temporary waiver is necessary. It has made broad claims about increased options trading volumes and projected regulatory costs but has not substantiated these claims with concrete data. This raises concerns about whether there is adequate oversight of spending and fee collection.

Additionally, the practice of waiving the fee at the year's end, which has occurred in previous years, suggests there might be systemic problems with the exchange's fee forecasting or management. This repetitive pattern raises the question of whether such practices are fair and equitable for all trading participants, or if they could favor certain groups over others unintentionally.

Impact on the Public

For the general public, especially investors and traders operating within the NYSE Arca, the outcome of this proposal could influence the fairness and cost-effectiveness of transaction fees. If significant regulatory costs are consistently miscalculated, this could lead either to too high fees without appropriate justification or to a lack of sufficient regulatory resources, potentially affecting market integrity.

Impact on Specific Stakeholders

Existing stakeholders include the Options Trading Permit (OTP) Holders who are directly affected by the ORF. These entities bear the costs of this fee, so any waiver or reinstatement directly impacts their operational expenses. If the suspension of the rule is deemed unfair or inefficient, these stakeholders could face unexpected financial burdens or benefits, influencing their competitive position in the market.

In summary, this proposal from the NYSE Arca and the ensuing review by the SEC raises crucial questions about transparency, fairness, and financial management practices within financial exchanges. These issues have implications not only for industry participants but also for the larger public interest in maintaining a fair and competitive trading environment. The SEC's invitation for public comments serves as an essential mechanism for interested parties to share insights and address potential concerns, fostering a more transparent decision-making process.

The document discusses a proposed rule change by NYSE Arca, Inc., involving the temporary waiver of the Options Regulatory Fee (ORF) for December 2024. This financial decision is designed to prevent the exchange from collecting fees that exceed its regulatory costs. Specifically, the exchange intends to suspend the ORF for December 2024 and then resume it at the same rate of $0.0038 per share starting January 1, 2025. This financial strategy is set against a backdrop of fluctuating options volumes and estimated regulatory costs.

One of the central issues raised in relation to the financial decision is the lack of detailed explanation or justification for this temporary fee waiver. The exchange's argument that the waiver is necessary is primarily based on predicted regulatory costs and variable options trading volumes. However, the document notes a deficiency in detailed financial data to substantiate these claims. For instance, while the waiver is meant to align fee collection with regulatory costs, the exchange does not provide precise figures or projections to demonstrate how these financial elements interact. The absence of comprehensive data may lead to concerns about the accuracy and reliability of the exchange's financial forecasting.

Additionally, the practice of waiving the ORF at the end of each year suggests a recurring issue with fee management. This pattern indicates potential inadequacies in the exchange's ability to predict its financial needs accurately. As such, there is a risk that the financial decision could inadvertently favor or disadvantage certain market participants, questioning the fairness of the fee structure. The exchange asserts that the waiver applies equally to all OTP Holders, yet this claim is undermined by the lack of clarity around the calculation and implications of the anticipated waiver.

In summary, while the financial reference of continuing the ORF at $0.0038 per share after a one-month suspension aims to align collections with costs, the proposal is marred by a lack of specific financial detail and transparency. This obscurity raises concerns about spending oversight and equitable treatment of market participants, highlighting a need for improved financial documentation and management within the exchange's regulatory framework.