Overview
Title
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule Regarding Dedicated Cores
Agencies
ELI5 AI
Cboe BYX Exchange wants to charge users money if they need extra "computer brain power" to trade, but lets them use a bit for free so everyone can still play fairly.
Summary AI
Cboe BYX Exchange, Inc. is proposing a new rule to amend its fee schedule by introducing fees for the use of "Dedicated Cores," which provide enhanced processing power by dedicating a CPU core to a single user rather than sharing it with others. Users can receive up to two Dedicated Cores at no extra cost, but additional cores will incur fees ranging from $650 to $1,050 based on the number used. The Exchange believes these changes would improve trading efficiency and performance while remaining optional and flexible for users. The new rule is designed to ensure fair access to these resources while managing limited data center space.
Keywords AI
Sources
AnalysisAI
Summary of the Document
The document in question is a notice from the Cboe BYX Exchange, Inc. about a proposed change to introduce a fee structure for "Dedicated Cores" on its platform. These Dedicated Cores allocate a single CPU core per user instead of sharing across multiple users. The intent behind this proposal is to reduce latency and enhance trading performance. Users can access up to two Dedicated Cores without extra costs, but will incur fees for additional cores. The fees are tiered and range from $650 to $1,050 depending on the number of Dedicated Cores that a user employs. This new structure is presented as optional, allowing users to make choices based on their processing needs.
Significant Issues and Concerns
The document is both lengthy and technical, likely posing comprehension difficulties for readers not familiar with stock exchange operations or CMOS efficacy nuances. The example provided to elucidate the fee structure may be too complex for those who are unacquainted with financial terminology and tiered pricing models. Furthermore, references to past amendments without clear explanations may breed confusion about the current operating conditions.
Another notable concern is that the justification for this fee structure is heavily based on somewhat subjective assessments, labeled as "reasonable" and "equitable," which might not assuage all stakeholders. Also, while it is argued that the changes could enhance trading performance, a thorough breakdown of the cost versus the expected benefit of Dedicated Cores might have addressed gaps in the justification of the proposed charges.
Impact on the Public
Broadly speaking, the implications of this document on the public are not immediately direct. However, anyone involved in stock trading could be affected, especially those who use the Cboe BYX platform for trading activities. While this change is intended to present users with more options for optimizing their trading operations, it may also lead to considerations of increased costs for those requiring more resources.
Impact on Specific Stakeholders
For proprietary trading firms, which are known for prioritizing speed, Dedicated Cores offer the potential for faster trades and faster execution times. A potential positive outcome for these firms is improved performance that could translate into financial gain if these firms are able to leverage trading speed effectively. However, the proposed costs could be seen as prohibitive for smaller entities or those with narrower profit margins, possibly leading them to re-evaluate their engagement with Cboe BYX.
Similarly, sponsors and sponsoring members might experience additional resource allocation, but with distinct limits compared to other users. The document's delineation between more and less latency-sensitive users suggests that the impacts of the Dedicated Core introduction will vary based on trading strategies focused on latency, as a primary concern might be more pronounced among proprietary firms rather than buy-side or sell-side users.
While the exchange declares having received positive feedback so far, the lack of negative feedback might not conclusively indicate the absence of concerns. Stakeholders not communicating dissatisfaction does not equate to universal approval. As such, further proactive engagement with all users might provide a fuller picture of the measure’s reception.
Financial Assessment
The document in question outlines a proposal by Cboe BYX Exchange, Inc. to amend its fee schedule, specifically concerning the use of Dedicated CPU Cores. These changes aim to offer market participants enhanced processing capabilities, although they come with a structured financial implication.
The primary financial aspect involves the introduction of a tiered fee structure for the use of Dedicated Cores beyond the first two, which are provided at no additional cost. Specifically, the fee for 3-10 Dedicated Cores is set at $650 per core, for 11-15 Dedicated Cores at $850 per core, and for 16 or more Dedicated Cores at $1,050 per core. An example highlights that if a user opts to purchase 11 Dedicated Cores, the total cost would be $6,050 per month. This tiered pricing approach is intended to align the costs with the consumption of exchange resources, aiming to be reasonable and encouraging users to only purchase what they realistically need.
The financial references in the document also include a commentary on existing fees, like the $550 per port per month currently assessed on BOE Logical Ports, alongside the new charges for Dedicated Cores. These existing fees remain unchanged, indicating that while the dedicated core fees are an additional cost, they do not replace or modify other existing charges.
The rationale for introducing such fees lies in managing finite exchange resources. The exchange emphasizes its limited data center space for hosting these cores, necessitating an allocation cap to ensure fair access and usage. However, the document lacks a detailed explanation of these constraints, which might lead readers to question the fairness and transparency of this tiered financial strategy. A more quantified presentation of resource constraints could strengthen this justification.
Additionally, the financial model proposes distinct limits for different user types, such as Members and Sponsored Participants. Here, the complexity of the fee example goes deeper with a Sponsoring Member setup, where the maximum for three Sponsored Access relationships would result in $30,450 per month in fees if each relationship found it necessary to have the maximum 35 Dedicated Cores. Despite the differentiation, the pricing structure endeavors to be equitable by considering varied user demands.
A noteworthy point is the document's reference to comparable offerings from other exchanges like Nasdaq, which introduced a dedicated port structure priced distinctly at $5,000 per month, plus a one-time installation fee of $5,000. This comparison lends context to the Cboe BYX Exchange's proposed fees and could indicate how competitive or reasonable their pricing is within the industry.
In summary, the financial aspects of this proposal reflect an attempt to tailor resource usage with structured pricing, offering flexibility and encouraging efficient resource consumption among users. However, the presentation could benefit from simplified examples and clearer delineations of resource limitations to better convey the value and necessity of these fees to a broad audience.
Issues
• The document is lengthy and complex, which might make it difficult for general audiences to understand the proposals and their implications.
• The proposed fee structure for Dedicated Cores is explained through an example, but the example itself may be complex for those not familiar with tiered pricing arrangements.
• The document discusses changes made multiple times since 2024, which may cause confusion about the current rules and fees.
• The explanation of the differences between latency-sensitive and non-latency-sensitive users, as well as the classification of proprietary trading firms, may not be clear to every reader.
• The rationale for the fee structure and the number of cores allocated is based on somewhat subjective determinations over what is 'reasonable' and 'equitable,' which might not be convincing to all stakeholders.
• The document refers to various rule changes and previous filings with minimal context provided, potentially leading to confusion.
• The discussion about managing finite resources and data center space might benefit from clearer quantification or more detailed explanation of constraints.
• The language describing the role and obligations of Sponsoring Members versus Sponsored Participants could be further simplified for better clarity.
• The document refers to a lack of negative comments or complaints but does not provide detailed data or feedback for independent verification.
• There is reference to competition with other exchanges, but more specific comparative data on cost-benefit analysis could provide clearer insight for assessment.