SEC Issues Guidance Compelling Further Disclosure by Exchanges on Fee Filing Increases
On May 22, 2019, the Securities and Exchange Commission (“SEC”) issued “Staff Guidance on SRO Rule Filings Related to Fees.” The guidance was issued to help exchanges meet their burden to demonstrate that proposed fee filings are consistent with the requirements of the Securities Exchange Act of 1934 that proposed fees are reasonable, equitably allocated, not unfairly discriminatory, or an undue burden on competition. The guidance was drafted by staff at the SEC’s Division of Trading and Markets, which has reviewed comments submitted from its “Roundtable on Market Data and Market Access” from a cross-section of industry participants, including end users and investors.
Among other things, the guidance provides that exchanges should include the following items in SRO filings regarding with the SEC exchange data products:
Discussion of the "benefits to investors" and market participants of the new product or service or changes thereto
Discussion of "reasonableness of proposed fee" – including persuasive evidence that the proposed fee is constrained by "competitive forces"
Disclosure of "cost-based discussion" if there is not enough relevant data to show competitive forces
Further data on number of ports, projected number of purchasers, how the fees will be assessed