Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—D.C. Cir.: D.C. Circuit OKs SEC lowering exchange fee cap, (Oct 15, 2025)

By Rodney F. Tonkovic, J.D.

The SEC was within its authority when lowering the access-fee cap and did not act arbitrarily or capriciously.

An SEC regulation reducing exchanges' access-fee caps was upheld by a D.C. Circuit panel. In late 2024, the Commission approved amendments to Regulation NMS that, among other changes, reduced the maximum fees exchanges can charge investors for accessing their services. Several exchanges challenged the amendments, arguing that the SEC had exceeded its statutory authority and acted arbitrarily or capriciously. The panel disagreed on both fronts and denied the petition for review (Cboe Global Markets, Inc. v. SEC, No. 24-1350 (D.C. Cir. Oct. 14, 2025)).

In 2005, as part of Regulation NMS, the Commission adopted a rule limiting the fees that exchanges could charge investors for executing orders. These access fees were capped at 30 mils ($0.003) per share for stocks priced $1 or more and at 0.3 percent of the quotation price for stocks below $1. After much debate and a failed pilot program, in 2024, the Commission adopted rules lowering the cap on access fees from 30 mils to 10 mils for stocks over $1 and to 0.1 percent for stocks priced below $1. Several exchanges challenged the change, and the rule amendments were partially stayed pending review in December 2024.

Statutory authority. The court first addressed the argument that the SEC exceeded its statutory authority in setting an across-the-board access-fee cap.

Looking at Exchange Act Sections 11A and 23, the court concluded that imposing an access-fee cap was well within the SEC’s regulatory authority. Broadly, Section 11A directs the SEC to provide for the efficient and fair execution of securities transactions, and Section 23 gives it the power to implement the provisions of the statute. These two sections confer broad, discretionary authority over the national market system, and this power includes setting a universal access-fee cap, the court said, observing that the Commission had determined that the cap would promote the "fairness and usefulness" of price quotation information.

The exchanges objected, arguing that if the Commission can cap access fees at all, it must do so on an exchange-by-exchange basis. The court again pointed to the Exchange Act's broad grant of authority and noted that agencies are not required to point to "clear congressional authorization" for all exercises of authority.

The court also rejected the argument that the fees should be set on an exchange-by-exchange basis. The SEC has the authority to set generally applicable default rules or regulatory boundaries, and to suggest otherwise would "compel the SEC to accomplish through multiple, separate rulemakings what it could do in one"—and not just in the context of fees.

Not arbitrary. The petitioners also argued that the access-fee amendment was arbitrary and capricious. The Commission, the petitioners said, changed its position on the market effects of fees without adequate explanation and failed to reasonably explain why it lowered the fee cap to 10 mils. The court rejected both arguments.

First, the court concluded that the Commission did not change its position without adequate explanation. In 2019, the Commission adopted a pilot program to gather data on the effect of regulatory fee caps, expressing uncertainty about how they would affect transaction costs. But, by the 2024 rulemaking, the Commission had a definitive conclusion that reducing access fees would not increase transaction costs. The petitioners maintained that the Commission did not adequately explain its change in thinking.

The court disagreed, stating that the Commission's posture in 2024 reflected "more continuity than inconsistency." That is, the agency had collected data and incorporated it into its new analysis: this was "a single, natural course of rational agency decision-making." The court added that a corresponding reduction in the minimum tick size for certain stocks required a corresponding reduction in the access-fee cap. The court also said that the Commission offered good reasons for its change and did not ignore contrary facts.

Turning to the decision to set the cap at 10 mils for stocks priced at or above $1, the court said that it would not second-guess the Commission's choice. The SEC, the court said, considered and balanced many factors in settling on 10 mils, and agencies have wide discretion in "line drawing" decisions.

Among other arguments, the petitioners said that after Loper Bright, the court did not have to defer to the SEC's line-drawing determination. The court said that that case and others recognized that Congress can confer discretionary authority, including the authority to make discretionary policy judgments.

The petition for review was accordingly denied.

The case is No. 24-1350.

Judge: Garcia, B.

Attorneys: Paul Greenwalt, III (ArentFox Schiff LLP) for CBOE Global Markets, Inc., CBOE BZX Exchange, Inc., CBOE BYX Exchange, Inc., CBOE EDGA Exchange, Inc. and CBOE EDGX Exchange, Inc. Amir Cameron Tayrani (Gibson, Dunn & Crutcher LLP) for Nasdaq, Inc., The Nasdaq Stock Market LLC, Nasdaq BX, Inc. and Nasdaq PHLX LLC. Dominick V. Freda for the SEC.

Companies: CBOE Global Markets, Inc.; CBOE BZX Exchange, Inc.; CBOE BYX Exchange, Inc.; CBOE EDGA Exchange, Inc.; CBOE EDGX Exchange, Inc.; Nasdaq, Inc.; The Nasdaq Stock Market LLC; Nasdaq BX, Inc.; Nasdaq PHLX LLC

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