Following a divisive response from the financial services industry to the U.S. Securities and Exchange Commission's (SEC's) proposed Transaction Fee Pilot, NYSE President Stacey Cunningham has proposed an alternative solution that seeks to address buy-side concerns, provide reduced costs to broker dealers, protect corporate and ETF issuers and reduce unnecessary market complexity.

"As the industry continues to grapple with a path forward, this new proposal seeks to address the acknowledged frustrations felt by members of the industry, with a tangible compromise that meets the core needs of each constituency. We believe our proposal is a simplified, less controversial approach that will be easier and less expensive to implement," said NYSE President Stacey Cunningham.

In a letter filed with the SEC, the alternative fee pilot is a proposal that takes into consideration the varied perspectives of equity market participants, including corporate and ETF issuers.

The alternate proposal remains true to the original intent of the SEC's Equity Market Structure Advisory Committee's recommendation: to study the impact of reducing the scale of exchange fees and rebates on equity market quality and to reduce the scale of any potential broker routing conflicts. The NYSE's alternative fee pilot would impose reduced fee caps on exchanges, but does so uniformly across all Reg NMS stocks in an effort to protect corporate and ETF issuers. Both of these groups previously voiced their concerns in comment letters to the SEC that they may be negatively impacted relative to their peers if their securities were subject to different fee regimes.

Key Differences From the Current SEC Transaction Fee Pilot Proposal

  1. Reduce the fee cap in all NMS stocks, rather than different caps for different buckets of stocks. The alternate pilot would lower the existing Rule 610 access fee cap from $0.0030 to $0.0010.
  2. This alternative fee pilot would not introduce new classes of price controls, such as a prohibition on exchange-paid market making incentives.
  3. Exchanges would agree to a moratorium on any fee increases for existing market data products, connectivity services and co-location throughout the duration of the pilot. This recognizes that market participants consider the all-in cost to trade and that increases in fixed costs would skew the study's results.
The full text of Cunningham's letter to the SEC can be found here.