FR 2025-05042

Cboe EDGA Exchange, Inc. has introduced a significant change to its fee schedule by proposing fees for Dedicated Cores—CPU resources singularly assigned to users to enhance trading performance by reducing latency. This shift is designed to help users who require more efficient and robust trading systems by providing an optional service. However, this comes with an additional cost beyond the first two free cores, which might raise important considerations for various market participants.

General Summary

The exchange allows users to use up to two Dedicated Cores at no extra charge. Additional cores come with a fee that increases per unit as more cores are used. Essentially, this fee schedule offers a scalable model for users depending on the number of Dedicated Cores they wish to employ. A significant aspect of this proposal is its optional nature, allowing users to stick with shared cores if they do not see added value in dedicated ones.

Significant Issues

Several concerns arise from this proposal. The document is embedded with complex legal and technical jargon, creating a barrier for those without expertise in securities law or stock exchange operations. The lack of clarity surrounding why Dedicated Cores are beneficial limits public understanding of their practical utility. The multi-tiered pricing structure, which changes over time, may be confusing for users, potentially affecting their decision-making.

Additionally, the document fails to address whether the provision of two free cores is justifiable or if it unfairly benefits certain market participants over others. Importantly, there is no detailed exploration of how these fees could impact smaller versus larger participants, raising concerns about equitable access to market improvements.

Public Impact

For the general public, especially market participants, this proposal increases the complexity of trading costs. It might deepen existing disparities between smaller firms, which may find new costs prohibitive, and larger firms, which can absorb these fees more comfortably. For investors and traders, the benefits of using Dedicated Cores may translate into more efficient trading, potentially resulting in a positive market experience. However, without clear evidence of the proposed improvements' effectiveness, public trust and confidence might waver.

Impact on Stakeholders

Smaller market participants might experience a negative impact if they perceive that Dedicated Cores become a necessity for competitive trading despite the additional cost. Conversely, larger firms and those particularly sensitive to latency could benefit significantly from the proposal, as they could optimize their trading strategies with minimized delay.

The document does not fully explore potential complications, such as how introducing Dedicated Cores might influence market dynamics or infrastructure costs. This omission leaves several stakeholders—ranging from investors to regulators—with unanswered questions about the wider implications.

In conclusion, while the proposed rule change by Cboe EDGA Exchange offers an innovative option for improving trading performance, it also introduces complexities and potential inequities that require careful consideration and monitoring. To fully understand its impact, stakeholders need clearer information on the tangible benefits and fairness of this proposal.

The Federal Register document outlines a proposed rule change by the Cboe EDGA Exchange regarding the implementation of fees for Dedicated Cores. This commentary will focus on the financial aspects and how they relate to the identified issues in the document.

The proposed rule introduces a tiered fee structure for the use of Dedicated Cores by Exchange Users. The fees are categorized as follows:

• Each User can use up to two Dedicated Cores at no additional cost.
• For more than two Dedicated Cores, the fees are set at $650 per Dedicated Core for 3 to 10 cores, $850 per Dedicated Core for 11 to 15 cores, and $1,050 per Dedicated Core for 16 or more cores.

The document provides an example to illustrate the application of these fees: If a User purchases 11 Dedicated Cores, they will be charged a total of $6,050 per month. This calculation includes two free Dedicated Cores, eight cores at $650 each, and one core at $850.

Additionally, it is noted that Sponsoring Members, who may have Sponsored Access relationships, will face specific fee structures based on their Dedicated Core usage. For example, a Sponsoring Member with three Sponsored Access relationships that fully utilize the Dedicated Cores can expect to pay $30,450 per month.

These financial references highlight the complexity of the pricing structure, which involves a graduated fee scale seemingly crafted to incentivize optimal use without overwhelming the system. The gradual increase in fees aligned with the number of cores suggests an attempt to ensure equitable access to exchange resources.

The allocation of Dedicated Cores at no cost for the first two units is mentioned but lacks explicit justification. This could imply preferential treatment or create unequal footing if not all Users have equal opportunity or need for those cores.

Furthermore, the complexity and layered nature of the fee schedule could be challenging for potential Users to interpret, especially smaller market participants who may not have the resources to fully assess the financial implications. This complexity adds to concerns regarding fair competition and accessibility, as smaller entities might struggle to compete with larger firms that can more readily afford the costs associated with higher numbers of Dedicated Cores.

The document notes that the introduction of Dedicated Cores has received positive feedback, with some Users experiencing better order execution and performance. However, this evidence is anecdotal and lacks concrete data to substantiate claims of such enhancements, adding to the opacity of the financial benefits of the Dedicated Core fees.

In conclusion, while the financial allocations in the proposed rule change are structured to promote efficient use of exchange resources, the lack of detailed justifications and examples of performance benefits, coupled with the complex pricing tiers, raises concerns about potential barriers for smaller market participants and the overall understanding of these financial implications.