National Securities Exchange Fee Filings

Summary

SIFMA submitted a comment letter to the SEC urging the suspension and disapproval of recent national securities exchange fee increases. The filings lack sufficient justification for compliance with the Securities Exchange Act, failing to demonstrate that fees are reasonable, equitably allocated, and not discriminatory. SIFMA highlights the need for transparency and adherence to established fee filing standards.

Excerpt

The Securities Industry and Financial Markets Association (“SIFMA”) ¹ respectfully submits this comment letter to the U.S. Securities and Exchange Commission (the “Commission”) in response to a series of recent rule changes certain national securities exchanges filed with the Commission to increase exchange connectivity and other fees. ² SIFMA urges the Commission to suspend the fee filings, institute proceedings to determine whether to disapprove the filings, and ultimately disapprove them because in each filing, the relevant exchange has not met its burden to demonstrate that the fees meet the requirements under the Securities Exchange Act of 1934 (“Exchange Act”) that such fees be (i) reasonable, (ii) equitably allocated, (iii) not unfairly discriminatory, and (iv) not an undue burden on competition. ³

Executive Summary

The recent national securities exchange filings to increase exchange fees for connectivity generally contain very little information to justify that the fees comply with Exchange Act fee requirements. Rather, the fee filings are short and repeat the same general statements across filings by separate exchanges. In addition to failing to demonstrate the fees comply with the Exchange Act, this approach, which is rapidly gaining traction among exchanges, is not consistent with the Staff Guidance on SRO Rule Filings Relating to Fees that SEC staff published in 2019 “to assist the national securities exchanges and FINRA . . . in preparing Fee Filings that meet their burden to demonstrate that proposed fees are consistent with the requirements of” the Exchange Act. ⁴ Therefore, the Commission should disapprove the fee filings because they are not consistent with the requirements of the Exchange Act.

Furthermore, despite fee filings that are inconsistent with the Exchange Act and Staff Fee Guidance, the Commission has not suspended any filings that use this new approach. If the Commission and its staff are using new standards to evaluate exchange fee filings for compliance with Exchange Act requirements, the Commission should notify the public so that market participants are aware of exchange fee filing standards going forward.

The New Exchange Fee Filing Approach

In recent fee filings, exchanges make general statements that the relevant product or service for which the exchange is raising prices operates in a competitive environment, and that as a result, the fees are subject to competition. However, the fee filings generally do not provide any data or information to support these assertions about the existence of competition for these highly specific offerings. The filings also do not acknowledge or address the regulatory obligations, such as Rule 611 of Regulation NMS, that compel certain market participants to maintain separate connections to multiple exchanges even as fees increase, potentially increasing costs to investors. ⁵ Rather than evidence of competition, the exchange fee filings provide or reference the prices of comparable offerings by other exchanges to support the exchange’s own increased fees. The Staff Fee Guidance explicitly stated that merely referencing the price of another exchange’s comparable offering was not sufficient. ⁶