7582 Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Notices 

13 15 U.S.C. 78s(b)(3)(A). 

14 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 

15 17 CFR 240.19b–4(f)(6). 

16 17 CFR 240.19b–4(f)(6)(iii). 

17For purposes only of waiving the 30-day 

operative delay, the Commission also has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

18 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The Commission notes that the Exchange 

initially filed the proposed Fee Schedule 

amendment on December 31, 2020 (SR–PEARL– 

the Exchange’s trading floor continues 

to be inoperable. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange neither solicited nor 

received comments on the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 13 and Rule 19b– 

4(f)(6) thereunder.14

A proposed rule change filed 

pursuant to Rule 19b–4(f)(6) under the 

Act 15 normally does not become 

operative for 30 days after the date of its 

filing. However, Rule 19b–4(f)(6)(iii) 16

permits the Commission to designate a 

shorter time if such action is consistent 

with the protection of investors and the 

public interest. The Exchange has asked 

the Commission to waive the 30-day 

operative delay so that the proposed 

rule change may become operative 

immediately. The Exchange believes 

extension of the temporary rules put in 

place due to the ongoing COVID–19 

pandemic will permit the Exchange to 

minimize disruptions in the market 

during a transition back to an allelectronic trading environment if the 

Exchange believes it is necessary and 

appropriate to help protect the safety 

and welfare of the trading community 

and did not make a virtual trading floor 

available. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest as it 

will allow the temporary rules to 

continue with minimal interruption, 

thereby avoiding investor confusion that 

could result from an interruption in the 

effectiveness of the rules. Accordingly, 

the Commission hereby waives the 

operative delay and designates the 

proposed rule change operative upon 

filing.17

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 

change 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– 

CBOE–2021–004 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–CBOE–2021–004. 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–CBOE–2021–004 and 

should be submitted on or before 

February 19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–01942 Filed 1–28–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90981; File No. SR– 

PEARL–2021–01] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the MIAX 

PEARL Options Fee Schedule for 

Member and Non-Member Monthly 

Network Connectivity Fees 

January 25, 2021. 

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 January 

13, 2021, MIAX PEARL, LLC (‘‘MIAX 

PEARL’’ 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 PEARL Fee Schedule 

(the ‘‘Fee Schedule’’) for the Exchange’s 

options market.3


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2020–39). On January 13, 2021, the Exchange 

withdrew that filing and submitted this filing. 

4The term ‘‘Member’’ means an individual or 

organization that is registered with the Exchange 

pursuant to Chapter II of these Rules for purposes 

of trading on the Exchange as an ‘‘Electronic 

Exchange Member’’ or ‘‘Market Maker.’’ Members 

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

See Exchange Rule 100. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’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 increase the Exchange’s 

network connectivity fees for its 10 

gigabit (‘‘Gb’’) ultra-low latency (‘‘ULL’’) 

fiber connection for Members 4 and nonMembers (the ‘‘Proposed Access Fees’’). 

The Exchange currently offers various 

bandwidth alternatives for connectivity 

to the Exchange, to its primary and 

secondary facilities, consisting of a 1Gb 

fiber connection, a 10Gb fiber 

connection, and a 10Gb ULL fiber 

connection. The 10Gb ULL offering uses 

an ultra-low latency switch, which 

provides faster processing of messages 

sent to it in comparison to the switch 

used for the other types of connectivity. 

The Exchange currently assesses the 

following monthly network connectivity 

fees to both Members and non-Members 

for connectivity to the Exchange’s 

primary/secondary facility: (a) $1,400 

for the 1Gb connection; (b) $6,100 for 

the 10Gb connection; and (c) $9,300 for 

the 10Gb ULL connection. 

The Exchange’s MIAX Express 

Network Interconnect (‘‘MENI’’) can be 

configured to provide Members and 

non-Members of the Exchange network 

connectivity to the trading platforms, 

market data systems, test systems, and 

disaster recovery facilities of both the 

Exchange and its affiliate, Miami 

International Securities Exchange, LLC 

(‘‘MIAX’’), via a single, shared 

connection. Members and non-Members 

utilizing the MENI to connect to the 

trading platforms, market data systems, 

test systems and disaster recovery 

facilities of the Exchange and MIAX via 

a single, shared connection are assessed 

only one monthly network connectivity 

fee per connection, regardless of the 

trading platforms, market data systems, 

test systems, and disaster recovery 

facilities accessed via such connection. 

The Exchange now proposes to increase 

the monthly network connectivity fees 

for its 10Gb ULL connections for both 

Members and non-Members from $9,300 

to $10,000 per connection. 

* * * * * 

The Exchange believes that 

exchanges, in setting fees of all types, 

should meet very high standards of 

transparency to demonstrate why each 

new fee or fee increase meets the 

requirements of the Act that fees be 

reasonable, equitably allocated, not 

unfairly discriminatory, and not create 

an undue burden on competition among 

members and markets. The Exchange 

believes this high standard is especially 

important when an exchange imposes 

various access fees for market 

participants to access an exchange’s 

marketplace. The Exchange deems 

connectivity fees to be access fees. The 

Exchange believes that it is important to 

demonstrate that these fees are based on 

its costs and reasonable business needs. 

Accordingly, the Exchange believes the 

Proposed Access Fees will allow the 

Exchange to offset expense the 

Exchange has and will incur, and that 

the Exchange is providing sufficient 

transparency (as described below) into 

how the Exchange determined to charge 

such fees. Accordingly, the Exchange is 

providing an analysis of its revenues, 

costs, and profitability for the Proposed 

Access Fees. This analysis includes 

information regarding its methodology 

for determining the costs and revenues 

associated with the Proposed Access 

Fees. 

In order to determine the Exchange’s 

costs associated with providing the 

Proposed Access Fees, the Exchange 

conducted an extensive cost review in 

which the Exchange analyzed every 

expense item in the Exchange’s general 

expense ledger to determine whether 

each such expense relates to the 

Proposed Access Fees, and, if such 

expense did so relate, what portion (or 

percentage) of such expense actually 

supports the services included in the 

Proposed Access Fees. The sum of all 

such portions of expenses represents the 

total cost of the Exchange to provide the 

Proposed Access Fees. For the 

avoidance of doubt, no expense amount 

was allocated twice. The Exchange is 

also providing detailed information 

regarding the Exchange’s cost allocation 

methodology—namely, information that 

explains the Exchange’s rationale for 

determining that it was reasonable to 

allocate certain expenses described in 

this filing towards the total cost to the 

Exchange to provide the Proposed 

Access Fees. 

In order to determine the Exchange’s 

projected revenues associated with 

providing the Proposed Access Fees, the 

Exchange analyzed the number of 

Members and non-Members currently 

utilizing the Exchange’s services 

associated with the Proposed Access 

Fees during 2020, and, utilizing a 

recently completed monthly billing 

cycle, extrapolated annualized revenue 

on a going-forward basis. The Exchange 

is presenting its revenue and expense 

associated with the Proposed Access 

Fees in this filing in a manner that is 

consistent with how the Exchange 

presents its revenue and expense in its 

Audited Unconsolidated Financial 

Statements. The Exchange’s most recent 

Audited Unconsolidated Financial 

Statement is for 2019. However, since 

the revenue and expense associated 

with the Proposed Access Fees were not 

in place in 2019 (or 2020), the Exchange 

believes its 2019 Audited 

Unconsolidated Financial Statement is 

not useful for analyzing the 

reasonableness of the total annual 

revenue and costs associated with the 

Proposed Access Fees. Accordingly, the 

Exchange believes it is more appropriate 

to analyze the Proposed Access Fees 

utilizing its 2020 (actual for the first 11 

months and projected for the final 1 

month) revenue and costs, as described 

herein, which utilize the same 

presentation methodology as set forth in 

the Exchange’s previously-issued 

Audited Unconsolidated Financial 

Statements. Based on this analysis, the 

Exchange believes that the Proposed 

Access Fees are fair and reasonable 

because they will not result in excessive 

pricing or supra-competitive profit 

when comparing the Exchange’s total 

annual expense associated with 

providing the services associated with 

the Proposed Access Fees versus the 

total projected annual revenue the 

Exchange will collect for providing 

those services. 

* * * * * 

On March 29, 2019, the Commission 

issued its Order Disapproving Proposed 

Rule Changes to Amend the Fee 


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5See Securities Exchange Act Release No. 85459 

(March 29, 2019), 84 FR 13363 (April 4, 2019) (SR– 

BOX–2018–24, SR–BOX–2018–37, and SR–BOX– 

2019–04). 6See Staff Guidance on SRO Rule Filings Relating 

to Fees (May 21, 2019), at https://www.sec.gov/tm/ 

staff-guidance-sro-rule-filings-fees (the 

‘‘Guidance’’). 7 15 U.S.C. 78f(b). 

8 15 U.S.C. 78f(b)(4). 

9 15 U.S.C. 78f(b)(5). 

10See The Options Clearing Corporation (‘‘OCC’’) 

publishes options and futures volume in a variety 

of formats, including daily and monthly volume by 

exchange, available here: https://www.theocc.com/ 

market-data/volume/default.jsp. 

11See Letter from Stefano Durdic, R2G, to 

Vanessa Countryman, Acting Secretary, 

Commission, dated March 27, 2019 (the ‘‘R2G 

Letter’’). 

Schedule on the BOX Market LLC 

Options Facility to Establish BOX 

Connectivity Fees for Participants and 

Non-Participants Who Connect to the 

BOX Network (the ‘‘BOX Order’’).5 On 

May 21, 2019, the Commission issued 

the Staff Guidance on SRO Rule Filings 

Relating to Fees.6

The Exchange believes that the 

Proposed Access Fees are consistent 

with the Act because they (i) are 

reasonable, equitably allocated, not 

unfairly discriminatory, and not an 

undue burden on competition; (ii) 

comply with the BOX Order and the 

Guidance; (iii) are supported by 

evidence (including data and analysis), 

constrained by significant competitive 

forces; and (iv) are supported by specific 

information (including quantitative 

information), fair and reasonable 

because they will permit recovery of the 

Exchange’s costs (less than all) and will 

not result in excessive pricing or supracompetitive profit. Accordingly, the 

Exchange believes that the Commission 

should find that the Proposed Access 

Fees are consistent with the Act. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 7

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 8 in particular, 

in that it provides for the equitable 

allocation of reasonable dues, fees and 

other charges among Exchange Members 

and issuers and other persons using any 

facility or system which the Exchange 

operates or controls. The Exchange also 

believes the proposal furthers the 

objectives of Section 6(b)(5) of the Act 9

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. 

For November 2020, the Exchange 

had only a 3.39% market share of the 

U.S. options industry.10 The Exchange 

is not aware of any evidence that a 

market share of approximately 3–4% 

provides the Exchange with anticompetitive pricing power. If the 

Exchange were to attempt to establish 

unreasonable pricing, then no market 

participant would join or connect, and 

existing market participants would 

disconnect. 

Separately, the Exchange is not aware 

of any reason why market participants 

could not simply drop their connections 

and cease being Members of the 

Exchange if the Exchange were to 

establish unreasonable and 

uncompetitive price increases for its 

connectivity alternatives. Market 

participants choose to connect to a 

particular exchange and because it is a 

choice, the Exchange must set 

reasonable connectivity pricing, 

otherwise prospective members would 

not connect and existing members 

would disconnect or connect through a 

third-party reseller of connectivity. No 

options market participant is required 

by rule, regulation, or competitive forces 

to be a Member of the Exchange. As 

evidence of the fact that market 

participants can and do disconnect from 

exchanges based on connectivity 

pricing, R2G Services LLC (‘‘R2G’’) filed 

a comment letter after BOX’s proposed 

rule changes to increase its connectivity 

fees (SR–BOX–2018–24, SR–BOX– 

2018–37, and SR–BOX–2019–04).11 The 

R2G Letter stated, ‘‘[w]hen BOX 

instituted a $10,000/month price 

increase for connectivity; we had no 

choice but to terminate connectivity 

into them as well as terminate our 

market data relationship. The cost 

benefit analysis just didn’t make any 

sense for us at those new levels.’’ 

Accordingly, this example shows that if 

an exchange sets too high of a fee for 

connectivity and/or market data services 

for its relevant marketplace, market 

participants can choose to disconnect 

from the exchange. 

The Exchange believes that its 

proposal is consistent with Section 

6(b)(4) of the Act because the Proposed 

Access Fees will not result in excessive 

or supra-competitive profit. The costs 

associated with providing access to 

Exchange Members and non-Members, 

as well as the general expansion of a 

state-of-the-art infrastructure, are 

extensive, have increased year-overyear, and are projected to increase yearover-year in the future. 

The Exchange believes the proposed 

increase to the 10Gb ULL connection is 

an equitable allocation of reasonable 

fees because 10Gb ULL purchasers: (1) 

Consume the most bandwidth and 

resources of the network; (2) transact the 

vast majority of the volume on the 

Exchange; and (3) require the high touch 

network support services provided by 

the Exchange and its staff, including 

more costly network monitoring, 

reporting and support services, resulting 

in a much higher cost to the Exchange. 

The Exchange believes that the 

proposed increase to the 10Gb ULL fees 

are equitably allocated among users of 

the network connectivity alternatives, as 

the users of the 10Gb ULL connections 

consume the most bandwidth and 

resources of the network. Specifically, 

the Exchange notes that these users 

account for approximately greater than 

99% of message traffic over the network, 

while the users of the 1Gb connections 

account for approximately less than 1% 

of message traffic over the network. In 

the Exchange’s experience, users of the 

1Gb connections do not have a business 

need for the high performance network 

solutions required by 10Gb ULL users. 

The Exchange’s high performance 

network solutions and supporting 

infrastructure (including employee 

support), provides unparalleled system 

throughput with the network ability to 

support access to several distinct 

options markets and the capacity to 

handle approximately 38 million quote 

messages per second. On an average 

day, the Exchange and MIAX handle 

over approximately 8,304,500,000 

billion total messages. Of that total, 

users of the 10Gb ULL connections 

generate approximately 8.3 billion 

messages, and users of the 1Gb 

connections generate approximately 4.5 

million messages. However, in order to 

achieve a consistent, premium network 

performance, the Exchange must build 

out and maintain a network that has the 

capacity to handle the message rate 

requirements of its most heavy network 

consumers. These billions of messages 

per day consume the Exchange’s 

resources and significantly contribute to 

the overall network connectivity 

expense for storage and network 

transport capabilities. Given this 

difference in network utilization rate, 

the Exchange believes that it is 

reasonable, equitable, and not unfairly 

discriminatory that the 10Gb ULL users 

pay for the vast majority of the shared 

network resources from which all 

Member and non-Member users benefit, 

but is designed and maintained from a 

capacity standpoint to specifically 

handle the message rate and 

performance requirements of 10Gb and 

10Gb ULL users. 


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The Exchange also believes that the 

connectivity fees are equitably allocated 

amongst users of the network 

connectivity alternatives, when these 

fees are viewed in the context of the 

overall trading volume on the Exchange. 

To illustrate, the purchasers of the 10Gb 

ULL connectivity account for 

approximately 94% of the volume on 

the Exchange for the month of 

November 2020. This overall volume 

percentage (94% of total Exchange 

volume) is in line with the amount of 

network connectivity revenue collected 

from 10Gb ULL purchasers (98% of total 

Exchange connectivity revenue). For 

example, utilizing the same recently 

completed billing cycle described 

above, Exchange Members and nonMembers that purchased 10Gb ULL 

connections accounted for 

approximately 87% of the total network 

connectivity revenue collected by the 

Exchange from all connectivity 

alternatives; and Members and nonMembers that purchased 1Gb and 10Gb 

connections accounted for 

approximately 13% of the revenue 

collected by the Exchange from all 

connectivity alternatives. 

The Exchange further believes that the 

fees are equitably allocated, as the 

amount of the fees for the various 

connectivity alternatives are directly 

related to the actual costs associated 

with providing the respective 

connectivity alternatives. That is, the 

cost to the Exchange of providing a 1Gb 

network connection is significantly 

lower than the cost to the Exchange of 

providing a 10Gb or 10Gb ULL network 

connection. Pursuant to its extensive 

cost review described above, the 

Exchange believes that the average cost 

to provide a 10Gb ULL network 

connection is approximately 8 times 

more than the average cost to provide a 

1Gb connection. The simple hardware 

and software component costs alone of 

a 10Gb ULL connection is not 8 times 

more than the 1Gb connection. Rather, 

it is the associated premium-product 

level network monitoring, reporting, 

and support services costs that 

accompany a 10Gb ULL connection 

which causes it to be 8 times more 

costly to provide than the 1Gb 

connection. Accordingly, the Exchange 

believes it is equitable to allocate those 

network infrastructure costs that 

accompany a 10Gb ULL connection to 

the purchasers of those connections, 

and not to purchasers of 1Gb 

connections. 

As discussed above, the Exchange 

differentiates itself by offering a 

‘‘premium-product’’ network 

experience, as an operator of a high 

performance, ultra-low latency network 

with unparalleled system throughput, 

which network can support access to 

three distinct options markets and 

multiple competing market-makers 

having affirmative obligations to 

continuously quote over 750,000 

distinct trading products (per exchange), 

and the capacity to handle 

approximately 10.7 million quote 

messages per second. The ‘‘premiumproduct’’ network experience enables 

users of 10Gb and 10Gb ULL 

connections to receive the network 

monitoring and reporting services for 

those approximately 750,000 distinct 

trading products. There is a significant, 

quantifiable amount of research and 

development (‘‘R&D’’) effort, employee 

compensation and benefits expense, and 

other expense associated with providing 

the high touch network monitoring and 

reporting services that are utilized by 

the 10Gb and 10Gb ULL connections 

offered by the Exchange. These value 

add services are fully-discussed herein, 

and the actual costs associated with 

providing these services are the basis for 

the differentiated amount of the fees for 

the various connectivity alternatives. 

In order to provide more detail and to 

quantify the Exchange’s costs associated 

with providing access to the Exchange 

in general, the Exchange notes that there 

are material costs associated with 

providing the infrastructure and 

headcount to fully-support access to the 

Exchange. The Exchange incurs 

technology expense related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting, as well as Regulation SCI 

mandated processes, associated with its 

network technology. While some of the 

expense is fixed, much of the expense 

is not fixed, and thus increases as the 

services associated with the Proposed 

Access Fees increase. For example, new 

10Gb ULL connections require the 

purchase of additional hardware to 

support those connections as well as 

enhanced monitoring and reporting of 

customer performance that MIAX 

PEARL and its affiliates provide. 

Further, as the total number of all 

connections increase, MIAX PEARL and 

its affiliates need to increase their data 

center footprint and consume more 

power, resulting in increased costs 

charged by their third-party data center 

provider. Accordingly, the cost to MIAX 

PEARL and its affiliates is not fixed. The 

Exchange believes the Proposed Access 

Fees are reasonable in order to offset the 

costs to the Exchange associated with 

providing access to its network 

infrastructure. 

Further, because the costs of operating 

its own data center are significant and 

not economically feasible for the 

Exchange at this time, the Exchange 

does not operate its own data centers, 

and instead contracts with a third-party 

data center provider. The Exchange 

notes that other competing exchange 

operators own/operate their data 

centers, which offers them greater 

control over their data center costs. 

Because those exchanges own and 

operate their data centers as profit 

centers, the Exchange is subject to 

additional costs. The Proposed Access 

Fees, which are charged for accessing 

the Exchange’s data center network 

infrastructure, are directly related to the 

network and offset such costs. 

The Exchange invests significant 

resources in network R&D to improve 

the overall performance and stability of 

its network. For example, the Exchange 

has a number of network monitoring 

tools (some of which were developed inhouse, and some of which are licensed 

from third-parties), that continually 

monitor, detect, and report network 

performance, many of which serve as 

significant value-adds to the Exchange’s 

Members and enable the Exchange to 

provide a high level of customer service. 

These tools detect and report 

performance issues, and thus enable the 

Exchange to proactively notify a 

Member (and the SIPs) when the 

Exchange detects a problem with a 

Member’s connectivity. In fact, the 

Exchange often receives inquiries from 

other industry participants regarding the 

status of networking issues outside of 

the Exchange’s own network 

environment that are impacting the 

industry as a whole via the SIPs, 

including inquiries from regulators, 

because the Exchange has a superior, 

state-of the-art network that, through its 

enhanced monitoring and reporting 

solutions, often detects and identifies 

industry-wide networking issues ahead 

of the SIPs. The Exchange also incurs 

costs associated with the maintenance 

and improvement of existing tools and 

the development of new tools. 

Additionally, certain Exchangedeveloped network aggregation and 

monitoring tools provide the Exchange 

with the ability to measure network 

traffic with a much more granular level 

of variability. This is important as 

Exchange Members demand a higher 

level of network determinism and the 

ability to measure variability in terms of 

single digit nanoseconds. Also, routine 

R&D projects to improve the 

performance of the network’s hardware 

infrastructure result in additional cost. 

In sum, the costs associated with 

maintaining and enhancing a state-ofthe-art exchange network in the U.S. 

options industry is a significant expense 


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12See Securities Exchange Act Release No. 90812 

(December 29, 2020) (SR–PEARL–2020–35). 

13For example, the Exchange previously noted 

that all third-party expense described in its prior fee 

filing was contained in the information technology 

and communication costs line item under the 

section titled ‘‘Operating Expenses Incurred 

Directly or Allocated From Parent,’’ in the 

Exchange’s 2019 Form 1 Amendment containing its 

financial statements for 2018. See Securities 

Exchange Act Release No. 87876 (December 31, 

2019), 85 FR 757 (January 7, 2020) (SR–PEARL– 

2019–36). Accordingly, the third-party expense 

described in this filing is attributed to the same line 

item for the Exchange’s 2020 Form 1 Amendment, 

which will be filed in 2021. 

14 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. 

for the Exchange that also increases 

year-over-year, and thus the Exchange 

believes that it is reasonable to offset 

those costs through the Proposed Access 

Fees. The Exchange invests in and offers 

a superior network infrastructure as part 

of its overall options exchange services 

offering, resulting in significant costs 

associated with maintaining this 

network infrastructure, which are 

directly tied to the amount of the 

Proposed Access Fees that must be 

charged to access it, in order to recover 

those costs. 

For the avoidance of doubt, none of 

the expenses included herein relating to 

the services associated with the 

Proposed Access Fees 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 12 regarding its expense 

allocation for the provision of additional 

limited service ports. The Exchange 

represents that none of the expenses 

allocated to the provision of additional 

limited service ports are also allocated 

to the services associated with the 

Proposed Access Fees—that is, there is 

no overlap of any such expenses that are 

included in the costs associated with 

services the Exchange provides for the 

Proposed Access Fees and for the 

services the Exchange provides for 

ports. Lastly, the Exchange notes that, 

with respect to the MIAX PEARL 

expenses included herein, those 

expenses only cover the MIAX PEARL 

options market; expenses associated 

with the MIAX PEARL equities market 

are accounted for separately and are not 

included within the scope of this filing. 

The Exchange only has four primary 

sources of revenue: Transaction fees, 

access fees (which includes the 

Proposed Access Fees), regulatory fees, 

and market data fees. Accordingly, the 

Exchange must cover all of its expenses 

from these four primary sources of 

revenue. 

The Exchange believes that the 

Proposed Access Fees are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit, when comparing the 

total annual expense of MIAX PEARL 

and MIAX associated with providing 

these services versus the total projected 

annual revenue for both exchanges from 

these services. For 2020, the total 

annual expense for providing network 

connectivity services (that is, the shared 

network connectivity of MIAX PEARL 

and MIAX, but excluding MIAX 

Emerald) is projected to be 

approximately $17.9 million. The $17.9 

million in projected total annual 

expense is comprised of the following, 

all of which are directly related to the 

services associated with the Proposed 

Access Fees for MIAX PEARL and 

MIAX: (1) Third-party expense, relating 

to fees paid by MIAX PEARL and MIAX 

to third-parties for certain products and 

services; and (2) internal expense, 

relating to the internal costs of MIAX 

PEARL and MIAX to provide the 

services associated with the Proposed 

Access Fees. As noted above, the 

Exchange believes it is more appropriate 

to analyze the Proposed Access Fees 

utilizing its 2020 (actual for the first 11 

months and projected for the final 1 

month) revenue and costs, which utilize 

the same presentation methodology as 

set forth in the Exchange’s previouslyissued Audited Unconsolidated 

Financial Statements.13 The $17.9 

million in projected total annual 

expense is directly related to the 

services associated with providing 

network connectivity services, and not 

any other product or service offered by 

the Exchange. It does not include 

general costs of operating matching 

systems and other trading technology, 

and no expense amount was allocated 

twice. As discussed, 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 services associated with 

the Proposed Access Fees, and, if such 

expense did so relate, what portion (or 

percentage) of such expense actually 

supports those services, 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 to 

the Exchange to provide the services 

associated with the Proposed Access 

Fees. 

For 2020, total third-party expense, 

relating to fees paid by MIAX PEARL 

and MIAX to third-parties for certain 

products and services for the Exchange 

to be able to provide network 

connectivity services, is projected to be 

$4,079,910. 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 MIAX PEARL 

and MIAX trading system infrastructure; 

(2) Zayo Group Holdings, Inc. (‘‘Zayo’’) 

for connectivity services (fiber and 

bandwidth connectivity) linking MIAX 

PEARL and MIAX office locations in 

Princeton, NJ and Miami, FL to all data 

center locations; (3) Secure Financial 

Transaction Infrastructure (‘‘SFTI’’),14

which supports connectivity and feeds 

for the entire U.S. options industry; (4) 

various other services providers 

(including Thompson Reuters, NYSE, 

Nasdaq, and Internap), which provide 

content, connectivity services, and 

infrastructure services for critical 

components of options connectivity; 

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, MIAX PEARL and MIAX 

do not allocate their entire information 

technology and communication costs to 

the services associated with the 

Proposed Access Fees. 

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 Proposed Access 

Fees. 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. 


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Without these services from Equinix, 

the Exchange would not be able to 

operate and support the network and 

provide the services associated with the 

Proposed Access Fees to its Members 

and non-Members and their customers. 

The Exchange did not allocate all of the 

Equinix expense toward the cost of 

providing network connectivity 

services, only that portion which the 

Exchange identified as being 

specifically mapped to providing 

network connectivity services, 

approximately 68% 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 

Proposed Access Fees, 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 MIAX PEARL with its 

affiliates, MIAX 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 Proposed Access 

Fees to its Members and non-Members 

and their customers. The Exchange did 

not allocate all of the Zayo expense 

toward the cost of providing network 

connectivity services, only that portion 

which the Exchange identified as being 

specifically mapped to providing 

network connectivity services, 

approximately 62% 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 

Proposed Access Fees, and not any 

other service, as supported by its cost 

review. 

The Exchange believes it is reasonable 

to allocate the identified portion 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, connectivity 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 the 

services associated with the Proposed 

Access Fees to its Members and nonMembers and their customers. The 

Exchange did not allocate all of the SFTI 

and other service providers’ expense 

toward the cost of providing network 

connectivity services, only that portion 

which the Exchange identified as being 

specifically mapped to providing 

network connectivity services, 

approximately 89% 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 Proposed 

Access Fees, and not any other service, 

as supported by its cost review. 

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 the services associated with 

the Proposed Access Fees 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 network connectivity 

services, only that portion which the 

Exchange identified as being 

specifically mapped to providing 

network connectivity services, 

approximately 54% 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 

Proposed Access Fees, and not any 

other service, as supported by its cost 

review. 

For 2020, total projected internal 

expense, relating to the internal costs of 

MIAX PEARL and MIAX to provide 

network connectivity services, is 

projected to be $13,831,434. This 

includes, but is not limited to, costs 

associated with: (1) Employee 

compensation and benefits for full-time 

employees that support the services 

associated with the Proposed Access 

Fees, 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; (2) 

depreciation and amortization of 

hardware and software used to provide 

the services associated with the 

Proposed Access Fees, 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 

Proposed Access Fees. 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 and MIAX 

do not allocate their entire costs 

contained in those items to the services 

associated with the Proposed Access 

Fees. 

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 Proposed Access 

Fee. In particular, MIAX PEARL’s and 

MIAX’s combined employee 

compensation and benefits expense 

relating to providing network 

connectivity services is projected to be 

approximately $6,892,689, which is 

only a portion of the $9,727,857 (for 

MIAX PEARL) and $11,811,796 (for 

MIAX) total projected 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 

Proposed Access Fees. Without these 

employees, the Exchange would not be 

able to operate and support the network 

and provide network and provide the 

services associated with the Proposed 

Access Fees to its Members and nonMembers and their customers. The 

Exchange did not allocate all of the 

employee compensation and benefits 

expense toward the cost of providing 

network connectivity services, only the 

portions which the Exchange identified 


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15The Exchange also projects an additional 

$215,000 in monthly revenue through non-10Gb 

ULL connections, however the Exchange is not 

proposing to adjust the fees for those connections 

at this time. 16See id. 

as being specifically mapped to 

providing network connectivity 

services, approximately 32% 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 

Proposed Access Fees, and not any 

other service, as supported by its cost 

review. 

MIAX PEARL’s and MIAX’s combined 

depreciation and amortization expense 

relating to providing network 

connectivity services is projected to be 

$6,378,337, which is only a portion of 

the $3,342,621 (for MIAX PEARL) and 

$5,276,753 (for MIAX) total projected 

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 

Proposed Access Fees. Without this 

equipment, the Exchange would not be 

able to operate the network and provide 

the services associated with the 

Proposed Access Fees 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 network 

connectivity services, only the portion 

which the Exchange identified as being 

specifically mapped to providing 

network connectivity services, 

approximately 74% 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 Proposed 

Access Fees, and not any other service, 

as supported by its cost review. 

MIAX PEARL’s and MIAX’s combined 

occupancy expense relating to providing 

network connectivity services is 

projected to be $560,408, which is only 

a portion of the $528,425 (for MIAX 

PEARL) and $615,264 (for MIAX) total 

projected 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 Proposed Access 

Fees. 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 

150 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 the Proposed 

Access Fees. Without this office space, 

the Exchange would not be able to 

operate and support the network and 

provide the services associated with the 

Proposed Access Fees 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 Proposed Access 

Fees. The Exchange did not allocate all 

of the occupancy expense toward the 

cost of providing network connectivity 

services, only that portion which the 

Exchange identified as being 

specifically mapped to providing the 

services associated with the Proposed 

Access Fees, approximately 49% of the 

total occupancy expense. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

actual cost to provide the services 

associated with the Proposed Access 

Fees, and not any other service, as 

supported by its cost review. 

The Exchange’s monthly projected 

revenue for the Proposed Access Fees is 

based on MIAX PEARL and MIAX 

Members and non-Members purchasing 

140 10Gb ULL connections, based on a 

recent billing cycle. Accordingly, based 

on current assumptions and 

approximations, the Exchange and 

MIAX PEARL project total combined 

monthly revenue from 10Gb ULL 

connections of approximately 

$1,400,000.15

On a going-forward, fully-annualized 

basis, the Exchange and MIAX project 

that their annualized revenue for 

providing the services associated with 

the Proposed Access Fees to be 

approximately $16.8 million per annum, 

based on a most recently completed 

billing cycle. The Exchange and MIAX 

project that their annualized revenue for 

providing network connectivity services 

(all connectivity alternatives) to be 

approximately $19.4 million per 

annum.16 The Exchange and MIAX 

project that their annualized expense for 

providing network connectivity services 

(all connectivity alternatives) to be 

approximately $17.9 million per annum. 

Accordingly, on a fully-annualized 

basis, the Exchange believes its total 

projected revenue for the providing 

network connectivity services (all 

additional connectivity alternatives) 

will not result in excessive pricing or 

supra-competitive profit, as the 

Exchange will make only an 8% profit 

margin on network connectivity services 

($19.4 million ¥ $17.9 million = $1.5 

million per annum). Additionally, this 

profit margin does not take into account 

the cost of capital expenditures 

(‘‘CapEX’’) the Exchange and MIAX are 

projected to spend in each year on 

CapEx going forward. 

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 Proposed Access Fees 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 Proposed Access Fees 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. 

The Proposed Access Fees are intended 

to recover the Exchange’s costs of 

operating and supporting the network. 

Accordingly, the Exchange believes that 

the Proposed Access Fee increases are 

fair and reasonable because they do not 


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17 15 U.S.C. 78s(b)(3)(A)(ii). 

18 17 CFR 240.19b–4(f)(2). 

result in excessive pricing or supracompetitive profit, when comparing the 

actual network operation and support 

costs to the Exchange versus the 

projected annual revenue from the 

Proposed Access Fees, including the 

increased amount. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intra-Market Competition 

The Exchange does not believe that 

the proposed rule change would place 

certain market participants at the 

Exchange at a relative disadvantage 

compared to other market participants 

or affect the ability of such market 

participants to compete. In particular, 

the Exchange has received no official 

complaints from Members, nonMembers (extranets and service 

bureaus), third-parties that purchase the 

Exchange’s connectivity and resell it, 

and customers of those resellers, that 

the Exchange’s fees or the Proposed 

Access Fees are negatively impacting or 

would negatively impact their abilities 

to compete with other market 

participants or that they are placed at a 

disadvantage. 

The Exchange believes that the 

Proposed Access Fees do not place 

certain market participants at a relative 

disadvantage to other market 

participants because the connectivity 

pricing is associated with relative usage 

of the various market participants and 

does not impose a barrier to entry to 

smaller participants. As described 

above, the less expensive 1Gb direct 

connection is generally purchased by 

market participants that utilize less 

bandwidth. The market participants that 

purchase 10Gb ULL direct connections 

utilize the most bandwidth, and those 

are the participants that consume the 

most resources from the network. 

Accordingly, the Proposed Access Fees 

do not favor certain categories of market 

participants in a manner that would 

impose a burden on competition; rather, 

the allocation of the Proposed Access 

Fees reflects the network resources 

consumed by the various size of market 

participants—lowest bandwidth 

consuming members pay the least, and 

highest bandwidth consuming members 

pays the most, particularly since higher 

bandwidth consumption translates to 

higher costs to the Exchange. 

Inter-Market Competition 

The Exchange believes the Proposed 

Access Fees do not place an undue 

burden on competition on other SROs 

that is not necessary or appropriate. In 

particular, options market participants 

are not forced to connect to (and 

purchase market data from) all options 

exchanges. Not only does MIAX PEARL 

have less than half the number of 

members as certain other options 

exchanges, but there are also a number 

of the Exchange’s Members that do not 

connect directly to MIAX PEARL or 

MIAX. There are a number of large 

market makers and broker-dealers that 

are members of other options exchange 

but not Members of MIAX PEARL or 

MIAX. Additionally, other exchanges 

have similar connectivity alternatives 

for their participants, including similar 

low-latency connectivity, but with 

much higher rates to connect. The 

Exchange is also unaware of any 

assertion that its existing fee levels or 

the Proposed Access Fees would 

somehow unduly impair its competition 

with other options exchanges. To the 

contrary, if the fees charged are deemed 

too high by market participants, they 

can simply disconnect. 

While the Exchange recognizes the 

distinction between connecting to an 

exchange and trading at the exchange, 

the Exchange notes that it operates in a 

highly competitive options market in 

which market participants can readily 

connect and trade with venues they 

desire. In such an environment, the 

Exchange must continually adjust its 

fees to remain competitive with other 

exchanges. The Exchange believes that 

the proposed changes reflect this 

competitive environment. 

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,17 and Rule 

19b–4(f)(2) 18 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–2021–01 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–2021–01. 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–2021–01 and 


khammond on DSKJM1Z7X2PROD with NOTICES
7590 Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Notices 

19 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78q(d). 

2 17 CFR 240.17d–2. 

3 15 U.S.C. 78s(g)(1). 

4 15 U.S.C. 78q(d). 

5 15 U.S.C. 78s(g)(2). 

6 15 U.S.C. 78q(d)(1). 

7See Securities Act Amendments of 1975, Report 

of the Senate Committee on Banking, Housing, and 

Urban Affairs to Accompany S. 249, S. Rep. No. 94– 

75, 94th Cong., 1st Session 32 (1975). 

8 17 CFR 240.17d–1 and 17 CFR 240.17d–2, 

respectively. 

9See Securities Exchange Act Release No. 12352 

(April 20, 1976), 41 FR 18808 (May 7, 1976). 

10See Securities Exchange Act Release No. 12935 

(October 28, 1976), 41 FR 49091 (November 8, 

1976). 

11See Securities Exchange Act Release No. 54394 

(August 31, 2006), 71 FR 52827 (September 7, 

2006). 

12See Securities Exchange Act Release No. 55505 

(March 22, 2007), 72 FR 14628 (March 28, 2007). 

should be submitted on or before 

February 19, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.19

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–01940 Filed 1–28–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–90985; File No. 4–523] 

Program for Allocation of Regulatory 

Responsibilities Pursuant To Rule 

17d–2; Notice of Filing and Order 

Approving and Declaring Effective an 

Amended Plan for the Allocation of 

Regulatory Responsibilities Between 

the Financial Industry Regulatory 

Authority, Inc. and NYSE Arca, Inc. 

January 25, 2021. 

Notice is hereby given that the 

Securities and Exchange Commission 

(‘‘Commission’’) has issued an Order, 

pursuant to Section 17(d) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 approving and declaring 

effective an amendment to the plan for 

allocating regulatory responsibility 

(‘‘Plan’’) filed on December 18, 2020, 

pursuant to Rule 17d–2 of the Act,2 by 

the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) and NYSE 

Arca, Inc. (‘‘NYSE Arca’’) (collectively, 

‘‘Participating Organizations’’ or 

‘‘parties’’). This agreement amends and 

restates the agreement entered into 

between the parties on February 9, 2007, 

entitled ‘‘Agreement Between the 

National Association of Securities 

Dealers, Inc. and NYSE Arca, Inc. 

Pursuant to SEA Rule 17d–2 Under the 

Securities Exchange Act of 1934,’’ and 

any subsequent amendments thereafter. 

I. Introduction 

Section 19(g)(1) of the Act,3 among 

other things, requires every selfregulatory organization (‘‘SRO’’) 

registered as either a national securities 

exchange or national securities 

association to examine for, and enforce 

compliance by, its members and persons 

associated with its members with the 

Act, the rules and regulations 

thereunder, and the SRO’s own rules, 

unless the SRO is relieved of this 

responsibility pursuant to Section 

17(d) 4 or Section 19(g)(2) 5 of the Act. 

Without this relief, the statutory 

obligation of each individual SRO could 

result in a pattern of multiple 

examinations of broker-dealers that 

maintain memberships in more than one 

SRO (‘‘common members’’). Such 

regulatory duplication would add 

unnecessary expenses for common 

members and their SROs. 

Section 17(d)(1) of the Act 6 was 

intended, in part, to eliminate 

unnecessary multiple examinations and 

regulatory duplication.7 With respect to 

a common member, Section 17(d)(1) 

authorizes the Commission, by rule or 

order, to relieve an SRO of the 

responsibility to receive regulatory 

reports, to examine for and enforce 

compliance with applicable statutes, 

rules, and regulations, or to perform 

other specified regulatory functions. 

To implement Section 17(d)(1), the 

Commission adopted two rules: Rule 

17d–1 and Rule 17d–2 under the Act.8

Rule 17d–1 authorizes the Commission 

to name a single SRO as the designated 

examining authority (‘‘DEA’’) to 

examine common members for 

compliance with the financial 

responsibility requirements imposed by 

the Act, or by Commission or SRO 

rules.9 When an SRO has been named as 

a common member’s DEA, all other 

SROs to which the common member 

belongs are relieved of the responsibility 

to examine the firm for compliance with 

the applicable financial responsibility 

rules. On its face, Rule 17d–1 deals only 

with an SRO’s obligations to enforce 

member compliance with financial 

responsibility requirements. Rule 17d–1 

does not relieve an SRO from its 

obligation to examine a common 

member for compliance with its own 

rules and provisions of the federal 

securities laws governing matters other 

than financial responsibility, including 

sales practices and trading activities and 

practices. 

To address regulatory duplication in 

these and other areas, the Commission 

adopted Rule 17d–2 under the Act.10

Rule 17d–2 permits SROs to propose 

joint plans for the allocation of 

regulatory responsibilities with respect 

to their common members. Under 

paragraph (c) of Rule 17d–2, the 

Commission may declare such a plan 

effective if, after providing for 

appropriate notice and opportunity for 

comment, it determines that the plan is 

necessary or appropriate in the public 

interest and for the protection of 

investors, to foster cooperation and 

coordination among the SROs, to 

remove impediments to, and foster the 

development of, a national market 

system and a national clearance and 

settlement system, and is in conformity 

with the factors set forth in Section 

17(d) of the Act. Commission approval 

of a plan filed pursuant to Rule 17d–2 

relieves an SRO of those regulatory 

responsibilities allocated by the plan to 

another SRO. 

II. The Plan 

On August 31, 2006, the Commission 

declared effective the Plan entered into 

between FINRA and NYSE Arca for 

allocating regulatory responsibility 

pursuant to Rule 17d–2.11 On March 22, 

2007, the Commission approved an 

amendment to the Plan that (1) 

eliminated paragraph 11 of the Plan that 

allocated to FINRA the responsibility to 

receive and act upon requests for 

extension of time pursuant to Federal 

Reserve Regulation T and Rule 15c3–3 

under the Act, and (2) changed from 

‘‘monthly’’ to ‘‘upon request’’ the 

obligation of FINRA to share 

information with NYSE Arca regarding 

notice of changes in allied members, 

partners, officers, registered personnel 

and other persons, and the opening, 

address change, and termination of 

main and branch offices and the names 

of branch office managers.12

The Plan is intended to reduce 

regulatory duplication for firms that are 

common members of FINRA and NYSE 

Arca by allocating regulatory 

responsibility with respect to certain 

applicable laws, rules, and regulations 

that are common among them. Included 

in the Plan is an exhibit that lists every 

NYSE Arca rule for which FINRA bears 

responsibility under the Plan for 

overseeing and enforcing with respect to 

NYSE Arca members that are also 

members of FINRA and the associated 

persons therewith (‘‘Certification’’). 

III. Proposed Amendment to the Plan 

On December 18, 2020, the parties 

submitted a proposed amendment to the 

Plan (‘‘Amended Plan’’). The primary 

purpose of the Amended Plan is to 


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