FR 2025-01928

Summary

The document in question originates from the Securities and Exchange Commission (SEC) and deals with a proposed rule change by NYSE American, LLC regarding the Options Regulatory Fee (ORF). This proposal suggests that the fee, charged for option transaction regulation, should be waived for December 2024. The fee would then resume at the current rate starting January 1, 2025. The intention behind this waiver is to ensure that the collected fees do not exceed the regulatory costs incurred by NYSE American. However, the SEC has temporarily suspended the proposal. The suspension serves to allow further analysis and public feedback to assess whether the changes align with legal requirements and maintain fairness in fee allocation.

Significant Issues and Concerns

There are several significant issues and concerns evident in the document:

• Lack of Specificity: The proposal lacks detail on how the temporary waiver and subsequent resumption of the ORF is considered fair and non-discriminatory. There is no explicit information on how this fee cycle fits within equitable financial practices.

• Insufficient Data: The Exchange’s justification for this proposal is vague, not providing specific data on transaction volumes or a detailed breakdown of potential regulatory costs for the upcoming year. This makes it difficult to evaluate whether reinstating the fee at its original rate is justifiable.

• Recurrent Pattern: This is reportedly the third instance of such a proposal, suggesting a pattern of end-of-year fee waivers due to potential over-collection. The lack of measures to prevent this issue from repeating in the future raises concerns about long-term fiscal management.

• Technical Complexity: The document employs intricate legal and technical terminology, potentially rendering it less accessible to individuals without a background in securities regulation.

Public Impact

From a public perspective, the temporary waiver of the ORF could have mixed effects. On one hand, if the fee collections are indeed exceeding the costs, waiving the fee could potentially reduce excess financial burdens on market participants for December 2024. This can foster trust in regulatory bodies and provide a short-term financial relief.

Conversely, clarity and transparency might be compromised if stakeholders are left without a comprehensive understanding of the implementation and effects of this waiver. The document does not offer sufficient data or context for the general public to fully grasp the rationale and implications of the proposed change.

Impact on Specific Stakeholders

The impact of this document and its proposal varies among stakeholders:

• Market Participants: For stakeholders like investors and financial firms, the waiver might temporarily lower operational costs. However, without clarity on how these adjustments are measured and validated against regulatory needs, there is a risk of undermining confidence in fair market practices.

• Regulatory Bodies: For regulatory authorities, this situation highlights a critical need for precise data and clear communication strategies when implementing fee changes. The repetition of such fee waivers may suggest a need for better forecasting and planning.

• General Public: While the general public may not be directly affected by the specifics of the ORF, the overarching issue of financial regulation and transparency in such decisions has broader implications for public trust in financial markets.

In essence, the document presents a situation where more detailed information and clearer communication could greatly enhance understanding and approval from all parties involved.

The document discusses a proposal by NYSE American, LLC to adjust the Options Regulatory Fee (ORF) in its fee schedule. The Exchange intends to waive this fee for a specific period and then reinstate it at the same rate.

Summary of Financial References

The primary financial reference in the document is the proposed temporary waiver of the ORF, which is assessed at the rate of $0.0038 per share. This waiver would be effective from December 1 through December 31, 2024. On January 1, 2025, the Exchange plans to resume collecting the ORF at the unchanged rate of $0.0038 per share.

Relation to Identified Issues

The proposal to waive and then resume the ORF brings up several issues related to the justifications and financial implications of such decisions. First, the document highlights concerns regarding how the waiver and its subsequent reinstatement could be considered equitable, reasonable, and not unfairly discriminatory. These concerns stem from the Exchange's vague explanation of how this proposal aligns with these criteria, which are mandated by securities regulations.

The Exchange cites its analysis of recent options volumes and anticipated regulatory costs as a basis for the waiver. However, these statements are criticized for being general and lacking specific data. This makes it unclear whether the decision to waive the fee effectively prevents over-collection of regulatory fees, which is a recurring justification for similar temporary waivers in previous years.

Further scrutiny is called for due to the lack of detailed projections or evidence supporting the claim that regulatory costs will increase in 2025. This uncertainty questions whether resuming the ORF at the same rate will prevent another scenario of over-collection in the future. Thus, the financial decision to maintain the fee at an unchanged rate, despite previously waiving it at year-end, lacks clarity on preventing recurring financial imprudence.

In essence, while the proposed financial allocation by temporarily waiving and resuming the ORF seems straightforward, it raises significant questions about the Exchange's regulatory budgeting and the transparency of its financial reasoning.