344 Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Notices 

27 15 U.S.C. 78s(b)(3)(A)(ii). 

28 17 CFR 240.19b–4(f)(2). 

29 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The term ‘‘Market Makers’’ refers to Lead Market 

Makers (‘‘LMMs’’), Primary Lead Market Makers 

(‘‘PLMMs’’), and Registered Market Makers 

(‘‘RMMs’’) collectively. See Exchange Rule 100. 

4See Securities Exchange Act Release No. 89317 

(July 14, 2020), 85 FR 43918 (July 20, 2020) (SR– 

MIAX–2020–23) (the ‘‘First Proposed Rule 

Change’’). 

rule change will impose a burden on 

intramarket competition because the 

two additional Limited Service MEO 

Ports will be available to all Members 

on an equal basis. It is a business 

decision of each Member whether to pay 

for the additional Limited Service MEO 

Ports. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,27 and Rule 

19b–4(f)(2) 28 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

PEARL–2020–35 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–PEARL–2020–35. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–PEARL–2020–35 and 

should be submitted on or before 

January 26, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–29133 Filed 1–4–21; 8:45 am] 

BILLING CODE P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90811; File No. SR–MIAX– 

2020–41] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Its Fee Schedule To 

Increase the Number of Additional 

Limited Service MIAX Express 

Interface Ports Available to Market 

Makers 

December 29, 2020. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

21, 2020, Miami International Securities 

Exchange, LLC (‘‘MIAX Options’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

increase the number of additional 

Limited Service MIAX Express Interface 

(‘‘MEI’’) Ports available to Market 

Makers.3 The Exchange does not 

propose to amend the fees for additional 

Limited Service MEI Ports. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to offer two (2) additional 

Limited Service MEI Ports to Market 

Makers. The Exchange does not propose 

to amend the fees charged for the 

additional Limited Service MEI Ports. 

The Exchange initially filed the 

proposal to increase the number of 

Limited Service MEI Ports available to 

Market Makers on June 30, 2020, with 

no change to the actual fee amounts 

being charged.4 The First Proposed Rule 


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5 Id. 

6See Comment Letter from Christopher Solgan, 

VP, Senior Counsel, the Exchange, dated August 24, 

2020, notifying the Commission that the Exchange 

would withdraw the First Proposed Rule Change. 

7See Securities Exchange Act Release No. 89769 

(September 4, 2020), 85 FR 55905 (September 10, 

2020) (SR–MIAX–2020–29) (the ‘‘Second Proposed 

Rule Change’’). 

8 Id. 

9See Comment Letter from Christopher Solgan, 

VP, Senior Counsel, the Exchange, dated October 

19, 2020, notifying the Commission that the 

Exchange would withdraw the Second Proposed 

Rule Change. 

10See Securities Exchange Act Release No. 90354 

(November 5, 2020), 85 FR 71958 (November 12, 

2020) (SR–MIAX–2020–34) (the ‘‘Third Proposed 

Rule Change’’). 

11 Id. 

12See Comment Letter from Christopher Solgan, 

VP, Senior Counsel, the Exchange, dated December 

18, 2020, notifying the Commission that the 

Exchange would withdraw the Third Proposed Rule 

Change. 

13A ‘‘matching engine’’ is a part of the MIAX 

electronic system that processes options quotes and 

trades on a symbol-by-symbol basis. Some matching 

engines will process option classes with multiple 

root symbols, and other matching engines will be 

dedicated to one single option root symbol (for 

example, options on SPY will be processed by one 

single matching engine that is dedicated only to 

SPY). A particular root symbol may only be 

assigned to a single designated matching engine. A 

particular root symbol may not be assigned to 

multiple matching engines. See Fee Schedule, 

Section 5(d)(ii), note 29. 

14Full Service MEI Ports provide Market Makers 

with the ability to send Market Maker quotes, 

eQuotes, and quote purge messages to the MIAX 

System. Full Service MEI Ports are also capable of 

receiving administrative information. Market 

Makers are limited to two Full Service MEI Ports 

per matching engine. See Fee Schedule, Section 

5(d)(ii), note 27. 

15Limited Service MEI Ports provide Market 

Makers with the ability to send eQuotes and quote 

purge messages only, but not Market Maker Quotes, 

to the MIAX System. Limited Service MEI Ports are 

also capable of receiving administrative 

information. Market Makers initially receive two 

Limited Service MEI Ports per matching engine. See 

Fee Schedule, Section 5(d)(ii), note 28. 

16See Securities Exchange Act Release No. 79666 

(December 22, 2016), 81 FR 96133 (December 29, 

2016) (SR–MIAX–2016–47). 

17See Securities Exchange Act Release Nos. 

70137 (August 8, 2013), 78 FR 49586 (August 14, 

2013) (SR–MIAX–2013–39); 70903 (November 20, 

2013), 78 FR 70615 (November 26, 2013) (SR– 

MIAX–2013–52); 78950 (September 27, 2016), 81 

FR 68084 (October 3, 2016) (SR–MIAX–2016–33); 

and 79198 (October 31, 2016), 81 FR 76988 

(November 4, 2016) (SR–MIAX–2016–37). 

18The term ‘‘Member’’ means an individual or 

organization approved to exercise the trading rights 

associated with a Trading Permit. Members are 

deemed ‘‘members’’ under the Exchange Act. See 

Exchange Rule 100. 

Change was published for comment in 

the Federal Register on July 20, 2020.5

The Exchange notes that the First 

Proposed Rule Change did not receive 

any comment letters. Nonetheless, the 

Exchange withdrew the First Proposed 

Rule Change on August 24, 2020.6 On 

August 25, 2020, the Exchange refiled 

its proposal to increase the number of 

Limited Service MEI Ports available to 

Market Makers (without increasing the 

actual fee amounts) to provide further 

clarification regarding the Exchange’s 

annual cost for providing additional 

Limited Service MEI Ports.7 The Second 

Proposed Rule Change was published 

for comment in the Federal Register on 

September 11, 2020.8 Like the First 

Proposed Rule Change, the Second 

Proposed Rule Change did not receive 

any comment letters. Nonetheless, the 

Exchange withdrew the Second 

Proposed Rule Change on October 23, 

2020.9

On October 23, 2020, the Exchange 

refiled its proposal to increase the 

number of Limited Service MEI Ports 

available to Market Makers (without 

increasing the actual fee amounts) to 

provide further clarification regarding 

the Exchange’s revenues, costs, and 

profitability for the two additional 

Limited Service MEI Ports (including 

information regarding the Exchange’s 

methodology for determining the costs 

and revenues for the two additional 

Limited Service MEI Ports).10 The Third 

Proposed Rule Change was published 

for comment in the Federal Register on 

November 12, 2020.11 Like the First and 

Second Proposed Rule Changes, the 

Third Proposed Rule Change did not 

receive any comment letters. 

Nonetheless, the Exchange withdrew 

the Third Proposed Rule Change on 

December 21, 2020.12

The Exchange now submits this 

proposed rule change to increase the 

number of additional Limited Service 

MEI Ports available to Market Makers 

(without increasing the actual fee 

amounts) to provide additional 

information regarding the Exchange’s 

cost analysis for the two additional 

Limited Service MEI Ports. 

Currently, MIAX assesses monthly 

MEI Port Fees on Market Makers based 

upon the number of MIAX matching 

engines 13 used by the Market Maker. 

Market Makers are allocated two (2) Full 

Service MEI Ports 14 and two (2) Limited 

Service MEI Ports 15 per matching 

engine to which they connect. The Full 

Service MEI Ports, Limited Service MEI 

Ports, and the additional Limited 

Service MEI Ports all include access to 

MIAX’s primary and secondary data 

centers and its disaster recovery center. 

Market Makers may request additional 

Limited Service MEI Ports for which 

they will be assessed the existing $100 

monthly fee for each additional port 

they request. This fee has been 

unchanged since 2016.16

The Exchange originally added the 

Limited Service MEI Ports to enhance 

the MEI Port connectivity made 

available to Market Makers, and has 

subsequently made additional Limited 

Service MEI Ports available to Market 

Makers.17 Limited Service MEI Ports 

have been well received by Market 

Makers since their addition. The 

Exchange now proposes to offer to 

Market Makers the ability to purchase 

an additional two (2) Limited Service 

MEI Ports per matching engine over and 

above the current six (6) additional 

Limited Service MEI Ports per matching 

engine that are available for purchase by 

Market Makers. The Exchange proposes 

making a corresponding change to 

footnote 30 of the Exchange’s Fee 

Schedule to specify that Market Makers 

will now be limited to purchasing eight 

(8) additional Limited Service MEI Ports 

per matching engine, for a total of ten 

(10) per matching engine. All fees 

related to MEI Ports shall remain 

unchanged and Market Makers that 

voluntarily purchase the additional 

Limited Service MEI Ports will remain 

subject to the existing $100 monthly fee 

per port. 

The Exchange is increasing the 

number of additional Limited Service 

MEI Ports because the Exchange is 

expanding its network. This network 

expansion is necessary due to increased 

customer demand and increased 

volatility in the marketplace, both of 

which have translated into increased 

message traffic rates across the network. 

Consequently, this network expansion, 

which increases the number of switches 

supporting customer facing systems, is 

necessary in order to provide sufficient 

access to new and existing Members,18

to maintain a sufficient amount of 

network capacity head-room, and to 

continue to provide the same level of 

service across the Exchange’s lowlatency, high-throughput technology 

environment. 

Currently, the Exchange has 8 

network switches that support the entire 

customer base of MIAX. The Exchange 

plans to increase this to 10 switches, 

which will increase the number of 

available customer ports by 25%. This 

increase in the number of available 

customer ports will enable the Exchange 

to continue to provide sufficient and 

equal access to MIAX Systems to all 

Members. Absent the proposed increase 

in available MEI Ports, the Exchange 

projects that its current inventory will 

be depleted and it will lack sufficient 

capacity to continue to meet Members’ 

access needs. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 


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19 15 U.S.C. 78f(b). 

20 15 U.S.C. 78f(b)(5). 

21 15 U.S.C. 78f(b)(5). 

22See supra note 16. 

23See supra notes 16 and 17. 

24See Securities Exchange Act Release No. 87875 

(December 31, 2019), 85 FR 770 (January 7, 2020) 

(SR–MIAX–2019–51). 

consistent with Section 6(b) of the Act 19

in general, and furthers the objectives of 

Section 6(b)(5) of the Act 20 in that it is 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers and dealers. 

The Exchange believes that its 

proposal is consistent with the 

objectives of Section 6(b)(5) of the Act 21

because the proposed additional 

Limited Service MEI Ports will be 

available to all Market Makers and the 

current fees for the additional Limited 

Service MEI Ports apply equally to all 

Market Makers regardless of type, and 

access to the Exchange is offered on 

terms that are not unfairly 

discriminatory. The Exchange is 

proposing to increase the number of 

available Limited Service MEI Ports 

because the Exchange is expanding its 

network. This network expansion is 

necessary due to increased customer 

demand and increased volatility in the 

marketplace, both of which have 

translated into increased message traffic 

rates across the network. Consequently, 

this network expansion, which 

increases the number of switches 

supporting customer facing systems, is 

necessary in order to provide sufficient 

and equal access to new and existing 

Members, to maintain a sufficient 

amount of network capacity head-room, 

and to continue to provide the same 

level of service across the Exchange’s 

low-latency, high-throughput 

technology environment. 

Currently, the Exchange has 8 

network switches that support the entire 

customer base of MIAX. The Exchange 

plans to increase this to 10 switches, 

which will increase the number of 

available customer ports by 25%. This 

increase in the number of available 

customer ports will enable the Exchange 

to continue to provide sufficient and 

equal access to MIAX Systems for all 

Members. Absent the proposed increase 

in available MEI Ports, the Exchange 

projects that its current inventory will 

be depleted and it will lack sufficient 

capacity to continue to meet Members’ 

access needs. Further, the Exchange 

notes the decision of whether to 

purchase two additional Limited 

Service MEI Ports is completely 

optional and it is a business decision for 

each Market Maker to determine 

whether the additional Limited Service 

MEI Ports are necessary to meet their 

business requirements. 

The Exchange further believes that the 

availability of the additional Limited 

Service MEI Ports is equitable and not 

unfairly discriminatory because it will 

enable Market Makers to maintain 

uninterrupted access to the MIAX 

System and consequently enhance the 

marketplace by helping Market Makers 

to better manage risk, thus preserving 

the integrity of the MIAX markets, all to 

the benefit of and protection of investors 

and the public as a whole. 

The Exchange also believes that its 

proposal is consistent with Section 

6(b)(4) of the Act because only Market 

Makers that voluntarily purchase the 

two additional Limited Service MEI 

Ports will be charged the existing $100 

monthly fee per port, which has been 

unchanged since 2016.22 The Exchange 

does not propose to amend the fees 

applicable to additional Limited Service 

MEI Ports which have been previously 

filed with the Commission and become 

effective after notice and public 

comment.23 As stated above, the 

Exchange proposes to expand its 

network by making available two 

additional Limit Service MEI Ports due 

to increased customer demand and 

increased volatility in the marketplace, 

both of which have translated into 

increased message traffic rates across 

the network. The cost to expand the 

network in this manner is greater than 

the revenue the Exchange anticipates 

the additional Limited Service MEI 

Ports will generate. Specifically, the 

Exchange estimates it will incur a onetime cost of approximately $175,000 in 

capital expenditures (‘‘CapEx’’) on 

hardware, software, and other items to 

expand the network to make available 

the two additional Limited Service MEI 

Ports. This estimated cost also includes 

expense associated with providing the 

necessary engineering and support 

personnel to transition those Market 

Makers who wish to acquire the two 

additional Limited Service MEI Ports. 

The Exchange projects that 

approximately six to seven Market 

Makers will purchase the additional 

Limited Service MEI Ports, which will 

be subject to the existing monthly fee of 

$100 per port. Accordingly, the 

Exchange projects that the annualized 

revenue from the two additional 

Limited Service MEI Ports will be 

approximately $16,800 (assuming seven 

Market Makers purchase the two 

additional Limited Service MEI Ports). 

Therefore, the Exchange’s upfront cost 

in expanding its network to provide its 

Members with the two additional 

Limited Service MEI Ports— 

approximately $175,000—is significant 

relative to the anticipated annualized 

revenue the Exchange expects to bring 

in from the two additional Limited 

Service MEI Ports—approximately 

$16,800. Further, the Exchange 

anticipates it will incur approximately 

$100,371 in annualized ongoing 

operating expense (‘‘OpEx’’) in order to 

support the expanded network and the 

two additional Limited Service MEI 

Ports. Thus, even excluding the upfront 

CapEx of $175,000, the Exchange is not 

generating a supra-competitive profit 

from the provision of these two 

additional Limited Service MEI Ports. In 

fact, even excluding the one-time CapEx 

cost of $175,000, the Exchange 

anticipates generating an annual loss 

from the provision of these two 

additional Limited Service MEI Ports of 

($83,571)—that is, $16,800 in revenue 

minus $100,371 in expense equates to a 

loss of ($83,571) to support the 

additional ports annually. 

The Exchange conducted an extensive 

cost review in which the Exchange 

analyzed every expense item in the 

Exchange’s general expense ledger (this 

includes over 150 separate and distinct 

expense items) to determine whether 

each such expense relates to the 

additional Limited Service MEI Ports, 

and, if such expense did so relate, what 

portion (or percentage) of such expense 

actually supports the additional Limited 

Service MEI Ports, and thus bears a 

relationship that is, ‘‘in nature and 

closeness,’’ directly related to those 

services. The sum of all such portions 

of expenses represents the total cost of 

the Exchange to provide services 

associated with the two additional 

Limited Service MEI Ports. For the 

avoidance of doubt, none of the 

expenses included herein relating to the 

services associated with providing the 

two additional Limited Service MEI 

Ports also relate to the provision of any 

other services offered by the Exchange. 

Stated differently, no expense amount of 

the Exchange is allocated twice. The 

Exchange notes that it made certain 

representations in a previous filing 24

regarding its expense allocation for the 

provision of network connectivity 

services. The Exchange represents that 

none of the expenses allocated to the 

provision of network connectivity 

services are also allocated to the 

provision of ports—that is, there is no 

overlap of any such expenses that are 


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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Notices 347 

25 In fact, on October 22, 2019, the Exchange was 

notified by SFTI that it is again raising its fees 

charged to the Exchange by approximately 11%, 

without having to show that such fee change 

complies with the Act by being reasonable, 

equitably allocated, and not unfairly 

discriminatory. It is unfathomable to the Exchange 

that, given the critical nature of the infrastructure 

services provided by SFTI, that its fees are not 

required to be rule-filed with the Commission 

pursuant to Section 19(b)(1) of the Act and Rule 

19b–4 thereunder. See 15 U.S.C. 78s(b)(1) and 17 

CFR 240.19b–4, respectively. 

included in the costs associated with 

services the Exchange provides for 

connectivity and for the services the 

Exchange provides for ports. 

Specifically, utilizing 2019 expense 

figures, total third-party expense, 

relating to fees paid by the Exchange to 

third-parties for certain products and 

services for the Exchange to be able to 

provide the two additional Limited 

Service MEI Ports, was approximately 

$12,393. This includes, but is not 

limited to, a portion of the fees paid to: 

(1) Equinix, for data center services, for 

the primary, secondary, and disaster 

recovery locations of the Exchange’s 

trading system infrastructure; (2) Zayo 

Group Holdings, Inc. (‘‘Zayo’’) for 

network services (fiber and bandwidth 

products and services) linking the 

Exchange’s office locations in Princeton, 

NJ and Miami, FL to all data center 

locations; (3) Secure Financial 

Transaction Infrastructure (‘‘SFTI’’),25

which supports network feeds for the 

entire U.S. options industry; (4) various 

other services providers (including 

Thompson Reuters, NYSE, Nasdaq, and 

Internap), which provide content, 

network services, and infrastructure 

services for critical components of 

options network services; and (5) 

various other hardware and software 

providers (including Dell and Cisco, 

which support the production 

environment in which Members and 

non-Members connect to the network to 

trade, receive market data, etc.). 

For clarity, only a portion of all fees 

paid to such third-parties is included in 

the third-party expense herein, and no 

expense amount is allocated twice. 

Accordingly, the Exchange does not 

allocate its entire information 

technology and communication costs to 

the services associated with providing 

the two additional Limited Service MEI 

Ports. 

The Exchange believes it is reasonable 

to allocate such third-party expense 

described above towards the total cost to 

the Exchange to provide the services 

associated with the two additional 

Limited Service MEI Ports. In particular, 

the Exchange believes it is reasonable to 

allocate the identified portion of the 

Equinix expense because Equinix 

operates the data centers (primary, 

secondary, and disaster recovery) that 

host the Exchange’s network 

infrastructure. This includes, among 

other things, the necessary storage 

space, which continues to expand and 

increase in cost, power to operate the 

network infrastructure, and cooling 

apparatuses to ensure the Exchange’s 

network infrastructure maintains 

stability. Without these services from 

Equinix, the Exchange would not be 

able to operate and support the network 

and provide the services associated with 

the two additional Limited Service MEI 

Ports to its Members and non-Members 

and their customers. The Exchange did 

not allocate all of the Equinix expense 

toward the cost of providing the services 

associated with the two additional 

Limited Service MEI Ports, only that 

portion which the Exchange identified 

as being specifically mapped to 

providing the services associated with 

the two additional Limited Service MEI 

Ports, approximately 0.5% of the total 

Equinix expense. The Exchange believes 

this allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the services associated with the 

two additional Limited Service MEI 

Ports, and not any other service, as 

supported by its cost review. 

The Exchange believes it is reasonable 

to allocate the identified portion of the 

Zayo expense because Zayo provides 

the internet, fiber and bandwidth 

connections with respect to the 

network, linking the Exchange with its 

affiliates, MIAX PEARL and MIAX 

Emerald, as well as the data center and 

disaster recovery locations. As such, all 

of the trade data, including the billions 

of messages each day per exchange, flow 

through Zayo’s infrastructure over the 

Exchange’s network. Without these 

services from Zayo, the Exchange would 

not be able to operate and support the 

network and provide the services 

associated with the two additional 

Limited Service MEI Ports. The 

Exchange did not allocate all of the 

Zayo expense toward the cost of 

providing the services associated with 

the two additional Limited Service MEI 

Ports, only the portion which the 

Exchange identified as being 

specifically mapped to providing the 

two additional Limited Service MEI 

Ports, approximately 0.4% of the total 

Zayo expense. The Exchange believes 

this allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the services associated with the 

two additional Limited Service MEI 

Ports, and not any other service, as 

supported by its cost review. 

The Exchange believes it is reasonable 

to allocate the identified portions of the 

SFTI expense and various other service 

providers’ (including Thompson 

Reuters, NYSE, Nasdaq, and Internap) 

expense because those entities provide 

connectivity and feeds for the entire 

U.S. options industry, as well as the 

content, network services, and 

infrastructure services for critical 

components of the network. Without 

these services from SFTI and various 

other service providers, the Exchange 

would not be able to operate and 

support the network and provide access 

to its Members and non-Members and 

their customers. The Exchange did not 

allocate all of the SFTI and other service 

providers’ expense toward the cost of 

providing the services associated with 

the two additional Limited Service MEI 

Ports, only the portions which the 

Exchange identified as being 

specifically mapped to providing the 

services associated with the two 

additional Limited Service MEI Ports, 

approximately 0.5% of the total SFTI 

and other service providers’ expense. 

The Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to provide the 

services associated with the two 

additional Limited Service MEI Ports. 

The Exchange believes it is reasonable 

to allocate the identified portion of the 

other hardware and software provider 

expense because this includes costs for 

dedicated hardware licenses for 

switches and servers, as well as 

dedicated software licenses for security 

monitoring and reporting across the 

network. Without this hardware and 

software, the Exchange would not be 

able to operate and support the network 

and provide access to its Members and 

non-Members and their customers. The 

Exchange did not allocate all of the 

hardware and software provider 

expense toward the cost of providing 

the services associated with the two 

additional Limited Service MEI Ports, 

only the portions which the Exchange 

identified as being specifically mapped 

to providing the services associated 

with the two additional Limited Service 

MEI Ports, approximately 0.3% of the 

total hardware and software provider 

expense. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the services associated with the 

two additional Limited Service MEI 

Ports. 

For 2019, total internal expense, 

relating to the internal costs of the 

Exchange to provide the services 

associated with the two additional 

Limited Service MEI Ports was $87,978. 

This includes, but is not limited to, 

costs associated with: (1) Employee 

compensation and benefits for full-time 


jbell on DSKJLSW7X2PROD with NOTICES
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employees that support the services 

associated with providing the two 

additional Limited Service MEI Ports, 

including staff in network operations, 

trading operations, development, system 

operations, business, as well as staff in 

general corporate departments (such as 

legal, regulatory, and finance) that 

support those employees and functions 

(including an increase as a result of the 

higher determinism project); (2) 

depreciation and amortization of 

hardware and software used to provide 

the services associated with the two 

additional Limited Service MEI Ports, 

including equipment, servers, cabling, 

purchased software and internally 

developed software used in the 

production environment to support the 

network for trading; and (3) occupancy 

costs for leased office space for staff that 

provide the services associated with the 

two additional Limited Service MEI 

Ports. The breakdown of these costs is 

more fully-described below. For clarity, 

only a portion of all such internal 

expenses are included in the internal 

expense herein, and no expense amount 

is allocated twice. Accordingly, the 

Exchange does not allocate its entire 

costs contained in those items to the 

services associated with providing the 

two additional Limited Service MEI 

Ports. 

The Exchange believes it is reasonable 

to allocate such internal expense 

described above towards the total cost to 

the Exchange to provide the services 

associated with the two additional 

Limited Service MEI Ports. In particular, 

the Exchange’s employee compensation 

and benefits expense relating to 

providing the services associated with 

the two additional Limited Service MEI 

Ports was approximately $58,870, which 

is only a portion of the $9,811,685 total 

expense for employee compensation 

and benefits. The Exchange believes it is 

reasonable to allocate the identified 

portion of such expense because this 

includes the time spent by employees of 

several departments, including 

Technology, Back Office, Systems 

Operations, Networking, Business 

Strategy Development (who create the 

business requirement documents that 

the Technology staff use to develop 

network features and enhancements), 

Trade Operations, Finance (who provide 

billing and accounting services relating 

to the network), and Legal (who provide 

legal services relating to the network, 

such as rule filings and various license 

agreements and other contracts). As part 

of the extensive cost review conducted 

by the Exchange, the Exchange reviewed 

the amount of time spent by each 

employee on matters relating to the 

provision of services associated with the 

two additional Limited Service MEI 

Ports. Without these employees, the 

Exchange would not be able to provide 

the services associated with the two 

additional Limited Service MEI Ports to 

its Members and non-Members and their 

customers. The Exchange did not 

allocate all of the employee 

compensation and benefits expense 

toward the cost of the services 

associated with providing the two 

additional Limited Service MEI Ports, 

only the portions which the Exchange 

identified as being specifically mapped 

to providing the services associated 

with the two additional Limited Service 

MEI Ports, approximately 0.6% of the 

total employee compensation and 

benefits expense. The Exchange believes 

this allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the services associated with the 

two additional Limited Service MEI 

Ports, and not any other service, as 

supported by its cost review. 

The Exchange’s depreciation and 

amortization expense relating to 

providing the services associated with 

the two additional Limited Service MEI 

Ports was $26,362, which is only a 

portion of the $5,272,469 total expense 

for depreciation and amortization. The 

Exchange believes it is reasonable to 

allocate the identified portion of such 

expense because such expense includes 

the actual cost of the computer 

equipment, such as dedicated servers, 

computers, laptops, monitors, 

information security appliances and 

storage, and network switching 

infrastructure equipment, including 

switches and taps that were purchased 

to operate and support the network and 

provide the services associated with the 

two additional Limited Service MEI 

Ports. Without this equipment, the 

Exchange would not be able to operate 

the network and provide the services 

associated with the two additional 

Limited Service MEI Ports to its 

Members and non-Members and their 

customers. The Exchange did not 

allocate all of the depreciation and 

amortization expense toward the cost of 

providing the services associated with 

the two additional Limited Service MEI 

Ports, only the portion which the 

Exchange identified as being 

specifically mapped to providing the 

services associated with the two 

additional Limited Service MEI Ports, 

approximately 0.5% of the total 

depreciation and amortization expense, 

as these services would not be possible 

without relying on such equipment. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to provide the 

services associated with the two 

additional Limited Service MEI Ports, 

and not any other service, as supported 

by its cost review. 

The Exchange’s occupancy expense 

relating to providing the services 

associated with providing the two 

additional Limited Service MEI Ports 

was approximately $2,746, which is 

only a portion of the $686,437 total 

expense for occupancy. The Exchange 

believes it is reasonable to allocate the 

identified portion of such expense 

because such expense represents the 

portion of the Exchange’s cost to rent 

and maintain a physical location for the 

Exchange’s staff who operate and 

support the network, including 

providing the services associated with 

the two additional Limited Service MEI 

Ports. This amount consists primarily of 

rent for the Exchange’s Princeton, NJ 

office, as well as various related costs, 

such as physical security, property 

management fees, property taxes, and 

utilities. The Exchange operates its 

Network Operations Center (‘‘NOC’’) 

and Security Operations Center (‘‘SOC’’) 

from its Princeton, New Jersey office 

location. A centralized office space is 

required to house the staff that operates 

and supports the network. The 

Exchange currently has approximately 

160 employees. Approximately twothirds of the Exchange’s staff are in the 

Technology department, and the 

majority of those staff have some role in 

the operation and performance of the 

services associated with providing the 

two additional Limited Service MEI 

Ports. Without this office space, the 

Exchange would not be able to operate 

and support the network and provide 

the services associated with the two 

additional Limited Service MEI Ports to 

its Members and non-Members and their 

customers. Accordingly, the Exchange 

believes it is reasonable to allocate the 

identified portion of its occupancy 

expense because such amount 

represents the Exchange’s actual cost to 

house the equipment and personnel 

who operate and support the Exchange’s 

network infrastructure and the services 

associated with the two additional 

Limited Service MEI Ports. The 

Exchange did not allocate all of the 

occupancy expense toward the cost of 

providing the services associated with 

the two additional Limited Service MEI 

Ports, only the portion which the 

Exchange identified as being 

specifically mapped to operating and 

supporting the network, approximately 

0.4% of the total occupancy expense. 

The Exchange believes this allocation is 

reasonable because it represents the 


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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Notices 349 

26 17 CFR 242.1000–1007. 

27 17 CFR 242.1001(a). 

28 15 U.S.C. 78s(b)(3)(A)(ii). 

29 17 CFR 240.19b–4(f)(2). 

Exchange’s cost to provide the services 

associated with the two additional 

Limited Service MEI Ports, and not any 

other service, as supported by its cost 

review. 

Accordingly, based on the facts and 

circumstances presented, the Exchange 

believes that its provision of the services 

associated with the two additional 

Limited Service MEI Ports will not 

result in excessive pricing or supracompetitive profit. 

The Exchange believes it is 

reasonable, equitable and not unfairly 

discriminatory to allocate the respective 

percentages of each expense category 

described above towards the total cost to 

the Exchange of operating and 

supporting the network, including 

providing the services associated with 

the two additional Limited Service MEI 

Ports because the Exchange performed a 

line-by-line item analysis of all the 

expenses of the Exchange, and has 

determined the expenses that directly 

relate to operation and support of the 

network. Further, the Exchange notes 

that, without the specific third-party 

and internal items listed above, the 

Exchange would not be able to operate 

and support the network, including 

providing the services associated with 

the two additional Limited Service MEI 

Ports to its Members and non-Members 

and their customers. Each of these 

expense items, including physical 

hardware, software, employee 

compensation and benefits, occupancy 

costs, and the depreciation and 

amortization of equipment, have been 

identified through a line-by-line item 

analysis to be integral to the operation 

and support of the network. Providing 

the two additional Limited Service MEI 

Ports at the existing rates is intended to 

recover the Exchange’s costs of 

operating and supporting the network. 

Accordingly, the Exchange believes 

that providing the two additional 

Limited Service MEI Ports at the 

existing rate is fair and reasonable 

because it does not result in excessive 

pricing or supra-competitive profit, 

when comparing the actual network 

operation and support costs to the 

Exchange versus the projected annual 

revenue from providing the two 

additional Limited Service MEI Ports. 

Further, subjecting the two additional 

Limited Service MEI Ports to the 

existing $100 monthly fee per port is 

also designed to encourage Market 

Makers to be efficient with their port 

usage, thereby resulting in a 

corresponding increase in the efficiency 

that the Exchange would be able to 

realize in managing its aggregate costs 

for providing the two additional ports. 

There is no requirement that any Market 

Maker maintain a specific number of 

Limited Service MEI Ports and a Market 

Maker may choose to maintain as many 

or as few of such ports as each Market 

Maker deems appropriate. 

Finally, subjecting the two additional 

Limited Service MEI Ports to the 

existing $100 monthly fee will help to 

encourage Limited Service MEI Port 

usage in a way that aligns with the 

Exchange’s regulatory obligations. As a 

national securities exchange, the 

Exchange is subject to Regulation 

Systems Compliance and Integrity 

(‘‘Reg. SCI’’).26 Reg. SCI Rule 1001(a) 

requires that the Exchange establish, 

maintain, and enforce written policies 

and procedures reasonably designed to 

ensure (among other things) that its Reg. 

SCI systems have levels of capacity 

adequate to maintain the Exchange’s 

operational capability and promote the 

maintenance of fair and orderly 

markets.27 By encouraging Members to 

be efficient with their usage of Limited 

MEI Ports, the current fee that will 

continue to apply to the proposed two 

(2) additional Limited Service MEI Ports 

will support the Exchange’s Reg. SCI 

obligations in this regard by ensuring 

that unused ports are available to be 

allocated based on individual Members 

needs and as the Exchange’s overall 

order and trade volumes increase. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

MIAX does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

The proposed rule change will not 

impose a burden on competition but 

will benefit competition by enhancing 

the Exchange’s ability to compete by 

providing additional services to market 

participants. It is not intended to 

address a competitive issue. Rather, the 

proposed increase in the number of 

additional Limited Service MEI Ports 

available per Market Maker is intended 

to allow the Exchange to increase its 

inventory of MEI Ports to meet 

increased Member demand. The 

Exchange is increasing the number of 

available additional Limited Service 

MEI Ports in response to Market Maker 

demand for increased connectivity to 

the MIAX System. The Exchange’s 

current inventory may soon be 

insufficient to meet those needs. Again, 

the Exchange is not proposing to amend 

the fees for MEI Ports, just to increase 

the number of MEI Ports available per 

Market Maker. The Exchange also does 

not believe that the proposed rule 

change will impose a burden on 

intramarket competition because the 

two additional Limited Service MEI 

Ports will be available to all Market 

Makers on an equal basis. It is a 

business decision of each Market Maker 

whether to pay for the additional 

Limited Service MEI Ports. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,28 and Rule 

19b–4(f)(2) 29 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

MIAX–2020–41 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MIAX–2020–41. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 


jbell on DSKJLSW7X2PROD with NOTICES
350 Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Notices 

30 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 ‘‘cPRIME’’ is the process by which a Member 

may electronically submit a ‘‘cPRIME Order’’ (as 

defined in Rule 518(b)(7)) it represents as agent (a 

‘‘cPRIME Agency Order’’) against principal or 

solicited interest for execution (a ‘‘cPRIME 

Auction’’), subject to the restrictions set forth in 

Exchange Rule 515A, Interpretation and Policy .12. 

See Exchange Rule 515A. 

4Under the PCRP, MIAX credits each Member the 

per contract amount resulting from each Priority 

Customer order transmitted by that Member which 

is executed electronically on the Exchange in all 

multiply-listed option classes (excluding, in simple 

or complex as applicable, QCC and cQCC Orders, 

mini-options, Priority Customer-to-Priority 

Customer Orders, C2C and cC2C Orders, PRIME and 

cPRIME AOC Responses, PRIME and cPRIME 

Contra-side Orders, PRIME and cPRIME Orders for 

which both the Agency and Contra-side Order are 

Priority Customers, and executions related to 

contracts that are routed to one or more exchanges 

in connection with the Options Order Protection 

and Locked/Crossed Market Plan referenced in 

Exchange Rule 1400), provided the Member meets 

certain percentage thresholds in a month as 

described in the PCRP table. See Fee Schedule, 

Section 1(a)(iii). ‘‘Priority Customer’’ means a 

person or entity that (i) is not a broker or dealer in 

securities, and (ii) does not place more than 390 

orders in listed options per day on average during 

a calendar month for its own beneficial accounts(s). 

A ‘‘Priority Customer Order’’ means an order for the 

account of a Priority Customer. See Exchange Rule 

100. 

5A ‘‘complex order’’ is any order involving the 

concurrent purchase and/or sale of two or more 

different options in the same underlying security 

(the ‘‘legs’’ or ‘‘components’’ of the complex order), 

for the same account, in a ratio that is equal to or 

greater than one-to-three (.333) and less than or 

equal to three-to-one (3.00) and for the purposes of 

executing a particular investment strategy. A 

complex order can also be a ‘‘stock-option’’ order, 

which is an order to buy or sell a stated number 

of units of an underlying security coupled with the 

purchase or sale of options contract(s) on the 

opposite side of the market, subject to certain 

contingencies set forth in the proposed rules 

governing complex orders. For a complete 

definition of a ‘‘complex order,’’ see Exchange Rule 

518(a)(5). See also Securities Exchange Act Release 

No. 78620 (August 18, 2016), 81 FR 58770 (August 

25, 2016) (SR–MIAX–2016–26). 

6See Securities Exchange Act Release No. 81131 

(July 12, 2017), 82 FR 32900 (July 18, 2017) (SR– 

MIAX–2017–19) (Order Granting Approval of a 

Proposed Rule Change to Amend MIAX Options 

Rules 515, Execution of Orders and Quotes; 515A, 

MIAX Price Improvement Mechanism (‘‘PRIME’’) 

and PRIME Solicitation Mechanism; and 518, 

Complex Orders). 

7 Id. 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–MIAX–2020–41, and 

should be submitted on or before 

January 26, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.30

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2020–29132 Filed 1–4–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90818; File No. SR–MIAX– 

2020–40] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Its Fee Schedule 

December 29, 2020. 

Pursuant to the provisions of Section 

19(b)(1) of the Securities Exchange Act 

of 1934 (‘‘Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that 

on December 21, 2020, Miami 

International Securities Exchange LLC 

(‘‘MIAX Options’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Options Fee Schedule 

(the ‘‘Fee Schedule’’). 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to extend the cap waiver 

of 1,000 contracts per leg for complex 

PRIME (‘‘cPRIME’’) 3 Agency Order 

rebates for all tiers under the Priority 

Customer Rebate Program (‘‘PCRP’’) 4

until March 31, 2021. 

Background 

Exchange Rule 518(b)(7) defines a 

cPRIME Order as a type of complex 

order 5 that is submitted for 

participation in a cPRIME Auction and 

trading of cPRIME Orders is governed 

by Rule 515A, Interpretation and Policy 

.12.6 cPRIME Orders are processed and 

executed in the Exchange’s PRIME 

mechanism, the same mechanism that 

the Exchange uses to process and 

execute simple PRIME orders, pursuant 

to Exchange Rule 515A.7 PRIME is a 

process by which a Member may 

electronically submit for execution an 

order it represents as agent (an ‘‘Agency 

Order’’) against principal interest and/or 

solicited interest. The Member that 

submits the Agency Order (‘‘Initiating 

Member’’) agrees to guarantee the 

execution of the Agency Order by 

submitting a contra-side order 

representing principal interest or 

solicited interest (‘‘Contra-Side Order’’). 

When the Exchange receives a properly 

designated Agency Order for Auction 

processing, a request for response 

(‘‘RFR’’) detailing the option, side, size 

and initiating price is broadcasted to 

MIAX participants up to an optional 

designated limit price. Members may 

submit responses to the RFR, which can 

be either an Auction or Cancel (‘‘AOC’’) 

order or an AOC eQuote. A cPRIME 


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