FIA PTG filed a comment letter with the Securities and Exchange Commission (SEC) today opposing NYSE MKT's proposed changes to CUBE auction fees. The SEC suspended the rule change and requested public comment on the proposed changes, noting concerns "about the potential effect the proposal may have on the operation of the CUBE Auction and its potential to provide price improvement to customers, as well as on competition among participants initiating CUBE Auctions and those responding to them."
MKT's proposal would:
- Increase break-up fees on responders in the MKT’s auction cross mechanism (CUBE)
- Increase rebates paid to auction initiators for CUBE transactions under its ACE program
- Pay “break-up credits” to auction initiators when they do not participate in an auction
FIA PTG supported and reiterated the points made by SIFMA in a comment letter in opposition to the proposed changes.
"We agree with SIFMA that competition results in tighter quotes—which in turn results in enhanced price improvement opportunities for market participants. When exchanges materially increase transaction fees, especially disproportionately across types of participants, these increased costs result in decreased competition, less liquidity and wider quotes—all to the detriment of retail customers," the letter notes. FIA PTG also reiterated SIFMA's point that "[h]igh internalization rates, which may be promoted by fee schedules such as the one proposed by MKT, could result in a deterioration of the tight and liquid market maker quotes and an overall decline in the execution quality of options." Accordingly, FIA PTG joined SIFMA in respectfully urging the Commission not to approve NYSE MKT’s proposal.