Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices 8455 

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

16 17 CFR 240.19b–4(f)(6). 

17 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The term ‘‘Trading Permit’’ means a permit 

issued by the Exchange that confers the ability to 

transact on the Exchange. See Exchange Rule 100. 

4The 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 and the Definitions Section of 

the Fee Schedule. 

5 ‘‘Electronic Exchange Member’’ or ‘‘EEM’’ 

means the holder of a Trading Permit who is not 

a Market Maker. Electronic Exchange Members are 

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

Exchange Rule 100 and the Definitions Section of 

the Fee Schedule. 

6The term ‘‘Market Makers’’ refers to ‘‘Lead 

Market Makers’’, ‘‘Primary Lead Market Makers’’ 

and ‘‘Registered Market Makers’’ collectively. See 

Exchange Rule 100 and the Definitions Section of 

the Fee Schedule. 

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 15 and Rule 19b– 

4(f)(6) thereunder.16

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– 

MEMX–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–MEMX–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 such 

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–MEMX–2021–01, and 

should be submitted on or before 

February 26, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.17

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02395 Filed 2–4–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91033; File No. SR– 

EMERALD–2021–03] 

Self-Regulatory Organizations; MIAX 

Emerald, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Fee 

Schedule To Adopt Monthly Trading 

Permit Fees 

February 1, 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 

22, 2021, MIAX Emerald, LLC (‘‘MIAX 

Emerald’’ 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 Emerald Fee Schedule 

(the ‘‘Fee Schedule’’) to establish 

monthly Trading Permit 3 fees for 

Exchange Members.4

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/emerald, 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 adopt monthly Trading 

Permit fees (the ‘‘Proposed Access 

Fees’’) depending on the Member’s 

status as either an Electronic Exchange 

Member (‘‘EEM’’) 5 or as a Market 

Maker.6 MIAX Emerald commenced 


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8456 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices 

7 15 U.S.C. 78f. 

8See Securities Exchange Act Release No. 84891 

(December 20, 2018), 83 FR 67421 (December 28, 

2018) (File No. 10–233) (order approving 

application of MIAX Emerald, LLC for registration 

as a national securities exchange). 9See Securities Exchange Act Release No. 85393 

(March 21, 2019), 84 FR 11599 (March 27, 2019) 

(SR–EMERALD–2019–15) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

To Establish the MIAX Emerald Fee Schedule). 10 ‘‘Waiver Period’’ means, for each applicable 

fee, the period of time from the initial effective date 

of the MIAX Emerald Fee Schedule until such time 

that the Exchange has an effective fee filing 

establishing the applicable fee. The Exchange will 

issue a Regulatory Circular announcing the 

establishment of an applicable fee that was subject 

to a Waiver Period at least fifteen (15) days prior 

to the termination of the Waiver Period and 

effective date of any such applicable fee. See the 

Definitions Section of the Fee Schedule. 

11See MIAX Emerald Regulatory Circular 2020– 

41 available at https://www.miaxoptions.com/sites/ 

default/files/circular-files/MIAX_Emerald_RC_

2020_41.pdf. 

12See Securities Exchange Act Release Nos. 

90196 (October 15, 2020), 85 FR 67064 (October 21, 

2020) (SR–EMERALD–2020–11) (Notice of Filing 

and Immediate Effectiveness of a Proposed Rule 

Change To Amend Its Fee Schedule To Adopt OneTime Membership Application Fees and Monthly 

Trading Permit Fees) (the ‘‘First Proposed Rule 

Change’’). The Exchange notes that it refiled its 

proposal to establish the one-time membership 

application fee in a separate filing. See SR– 

EMERALD–2021–01. 

13See id. 

14See Comment Letter from Joseph W. Ferraro III, 

SVP, Deputy General Counsel, the Exchange, dated 

November 20, 2020, notifying the Commission that 

the Exchange will withdraw the First Proposed Rule 

Change. 

15See Securities Exchange Act Release Nos. 

90601 (December 8, 2020), 85 FR 80864 (December 

14, 2020) (SR–EMERALD–2020–18) (the ‘‘Second 

Proposed Rule Change’’). 

16See id. 

17See Comment Letter from Joseph W. Ferraro III, 

SVP, Deputy General Counsel, the Exchange, dated 

January 15, 2021, notifying the Commission that the 

Exchange will withdraw the Second Proposed Rule 

Change. 

18See the MIAX Fee Schedule, Section 3)b). 

19 ‘‘FIX Port’’ means an interface with MIAX 

Emerald systems that enables the Port user to 

submit simple and complex orders electronically to 

MIAX Emerald. See the Definitions Section of the 

Fee Schedule. 

20The MEI is a connection to the MIAX Emerald 

System that enables Market Makers to submit 

simple and complex electronic quotes to MIAX 

Emerald. The Exchange offers Full Service MEI 

Ports, which provide Market Makers with the 

ability to send Market Maker simple and complex 

quotes, eQuotes, and quote purge messages to the 

MIAX Emerald 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. The 

Exchange also offers Limited Service MEI Ports, 

which provide Market Makers with the ability to 

send simple and complex eQuotes and quote purge 

messages only, but not Market Maker Quotes, to the 

MIAX Emerald 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 the Definitions Section of the Fee Schedule. 

operations as a national securities 

exchange registered under Section 6 of 

the Act 7 on March 1, 2019.8 The 

Exchange adopted its transaction fees 

and certain of its non-transaction fees in 

its filing SR–EMERALD–2019–15.9 In 

that filing, the Exchange expressly 

waived, among other fees, the Proposed 

Access Fees for the Waiver Period,10 to 

provide an incentive to prospective 

EEMs and Market Makers to become 

Members of the Exchange. When the 

Exchange adopted the framework for its 

fees, it stated that it would provide 

notice to market participants when the 

Exchange intended to terminate the 

Waiver Period for the Proposed Access 

Fees. Accordingly, on September 15, 

2020, the Exchange issued a Regulatory 

Circular which announced that the 

Exchange would be ending the Waiver 

Period for the Proposed Access Fees, 

among other non-transaction fees, 

beginning October 1, 2020.11

The Exchange initially filed its 

proposal to establish the Proposed 

Access Fees on October 1, 2020.12 The 

First Proposed Rule Change was 

published for comment in the Federal 

Register on October 21, 2020.13 On 

November 25, 2020, the Exchange 

withdrew the First Proposed Rule 

Change 14 and refiled its proposal to 

establish monthly Trading Permit fees.15

The Second Proposed Rule Change was 

published for comment in the Federal 

Register on December 14, 2020.16 The 

Exchange notes that the Second 

Proposed Rule Change did not receive 

any comment letters. Nonetheless, on 

January 22, 2021, the Exchange 

withdrew the Second Proposed Rule 

Change and resubmitted this proposal.17

Trading Permits are issued to 

Members who are either EEMs or 

Market Makers. Trading Permits grant 

access to the Exchange, thus providing 

the ability to quote and trade on the 

Exchange, in the manner defined in the 

relevant Trading Permit. Without a 

Trading Permit, a Member cannot 

directly trade on the Exchange. 

Therefore, a Trading Permit is a means 

to directly access the Exchange (which 

offers meaningful value), and the 

Exchange now proposes to adopt a 

monthly fee designed to recover a 

portion of the costs associated with 

directly accessing the Exchange. The 

Exchange proposes to assess the 

Proposed Access Fees depending upon 

the category of Member that is issued a 

Trading Permit. Members issued 

Trading Permits during a calendar 

month will be assessed monthly Trading 

Permit Fees. The Exchange notes that 

the Exchange’s affiliate, Miami 

International Securities Exchange, LLC 

(‘‘MIAX’’), charges a similar, fixed 

trading permit fee to its EEMs, and a 

similar, varying trading permit fee to its 

Market Makers, based upon the number 

of assignments of option classes or the 

percentage of volume in option 

classes.18

The Exchange proposes that monthly 

Trading Permit fees will be assessed, 

with respect to the calculation of such 

fee to EEMs (other than clearing firms), 

in any month the EEM is certified in the 

membership system and is credentialed 

to use one or more Financial 

Information Exchange (‘‘FIX’’) 19 ports 

in the production environment. Further, 

the Exchange proposes that monthly 

Trading Permit fees will be assessed 

with respect to EEM clearing firms in 

any month the clearing firm is certified 

in the membership system to clear 

transactions on the Exchange. 

The Exchange proposes to assess 

EEMs a monthly fee of $1,000 for each 

Trading Permit. Below is the proposed 

table showing the Trading Permit fees 

for EEMs: 

Type of trading 

permit 

Monthly 

MIAX 

Emerald 

trading 

permit fee 

Electronic Exchange Member .. $1,000.00 

The Exchange proposes to assess 

monthly Trading Permit fees for Market 

Makers in any month the Market Maker 

(including a Registered Market Maker, 

Lead Market Maker, and Primary Lead 

Market Maker) is certified in the 

membership system, is credentialed to 

use one or more MIAX Emerald Express 

Interface (‘‘MEI’’) 20 ports in the 

production environment and is assigned 

to quote in one or more classes. 

Specifically, the Exchange proposes to 

adopt the following Trading Permit fees 

for Market Makers: (i) $7,000 for Market 

Maker Assignments in up to 10 option 

classes or up to 20% of option classes 

by national average daily volume 

(‘‘ADV’’); (ii) $12,000 for Market Maker 

Assignments in up to 40 option classes 

or up to 35% of option classes by ADV; 

(iii) $17,000 for Market Maker 

Assignments in up to 100 option classes 

or up to 50% of option classes by ADV; 

and (iv) $22,000 for Market Maker 

Assignments in over 100 option classes 

or over 50% of option classes by ADV 

up to all option classes listed on MIAX 

Emerald. 

The Exchange also proposes to adopt 

an alternative lower Trading Permit fee 

for Market Makers who fall within the 

following Trading Permit fee levels, 

which represent the 3rd and 4th levels 

of the Market Maker Trading Permit fee 


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Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices 8457 

21See supra note 18. 

22See e.g., NYSE Arca Options Fees and Charges, 

p.1 (assessing market makers $6,000 for up to 175 

option issues, an additional $5,000 for up to 350 

option issues, an additional $4,000 for up to 1,000 

option issues, an additional $3,000 for all option 

issues on the exchange, and an additional $1,000 

for the fifth trading permit and for each trading 

permit thereafter); NYSE American Options Fee 

Schedule, p. 23 (assessing market makers $8,000 for 

up to 60 plus the bottom 45% of option issues, an 

additional $6,000 for up to 150 plus the bottom 

45% of option issues, an additional $5,000 for up 

to 500 plus the bottom 45% of option issues, and 

additional $4,000 for up to 1,100 plus the bottom 

45% of option issues, an additional $3,000 for all 

issues traded on the exchange, and an additional 

$2,000 for 6th to 9th ATPs; plus an addition fee for 

premium products). See also Cboe BZX Options 

Exchange (‘‘BZX Options’’) assesses the Participant 

Fee, which is a membership fee, according to a 

member’s ADV. See Cboe BZX Options Exchange 

Fee Schedule under ‘‘Membership Fees’’. The 

Participant Fee is $500 if the member ADV is less 

than 5000 contracts and $1,000 if the member ADV 

is equal to or greater than 5000 contracts. Id. 

table: (i) Market Maker Assignments in 

up to 100 option classes or up to 50% 

of option classes by volume; and (ii) 

Market Maker Assignments in over 100 

option classes or over 50% of option 

classes by volume up to all option 

classes listed on MIAX Emerald. 

Specifically, the Exchange proposes to 

adopt footnote ‘‘D’’ following the Market 

Maker Trading Permit fee table for these 

Monthly Trading Permit tier levels, if 

the Market Maker’s total monthly 

executed volume during the relevant 

month is less than 0.025% of the total 

monthly executed volume reported by 

OCC in the customer account type for 

MIAX Emerald-listed option classes for 

that month, then the fee will be $15,500 

instead of the fee otherwise applicable 

to such level. 

Below is the proposed table showing 

the Trading Permit fees for Market 

Makers: 

Type of trading permit 

Monthly MIAX 

Emerald 

trading 

permit fee 

Market maker assignments 

(the lesser of the applicable measurements below) 

Per class % of National 

average daily volume 

Market Maker (includes RMM, LMM, PLMM) ....... $7,000.00 Up to 10 Classes .......... Up to 20% of Classes by volume. 

12,000.00 Up to 40 Classes .......... Up to 35% of Classes by volume. 

D 17,000.00 Up to 100 Classes ........ Up to 50% of Classes by volume 

D 22,000.00 Over 100 Classes ......... Over 50% of Classes by volume up to all Classes listed on MIAX Emerald. 

D For these Monthly MIAX Emerald Trading Permit tier levels, if the Market Maker’s total monthly executed volume during the relevant month is 

less than 0.025% of the total monthly executed volume reported by OCC in the customer account type for MIAX Emerald-listed option classes for 

that month, then the fee will be $15,500 instead of the fee otherwise applicable to such level. 

For the calculation of the monthly 

Market Maker Trading Permit fees, the 

number of classes is defined as the 

greatest number of classes the Market 

Maker was assigned to quote in on any 

given day within the calendar month 

and the class volume percentage is 

based on the total national ADV in 

classes listed on MIAX Emerald in the 

prior calendar quarter. Newly listed 

option classes are excluded from the 

calculation of the monthly Market 

Maker Trading Permit fee until the 

calendar quarter following their listing, 

at which time the newly listed option 

classes will be included in both the per 

class count and the percentage of total 

national average daily volume. The 

Exchange proposes to assess MIAX 

Emerald Market Makers the monthly 

Market Maker Trading Permit fee based 

on the greatest number of classes listed 

on MIAX Emerald that the Market 

Maker was assigned to quote in on any 

given day within a calendar month and 

the applicable fee rate that is the lesser 

of either the per class basis or 

percentage of total national ADV 

measurement. 

The purpose of the alternative lower 

fee designated in proposed footnote ‘‘D’’ 

is to provide a lower fixed cost to those 

Market Makers who are willing to quote 

the entire Exchange market (or 

substantial amount of the Exchange 

market), as objectively measured by 

either number of classes assigned or 

national ADV, but who do not otherwise 

execute a significant amount of volume 

on the Exchange. The Exchange believes 

that, by offering lower fixed costs to 

Market Makers that execute less volume, 

the Exchange will retain and attract 

smaller-scale Market Makers, which are 

an integral component of the option 

marketplace, but have been decreasing 

in number in recent years, due to 

industry consolidation and lower 

market maker profitability. Since these 

smaller-scale Market Makers utilize less 

Exchange capacity due to lower overall 

volume executed, the Exchange believes 

it is reasonable and equitable to offer 

such Market Makers a lower fixed cost. 

The Exchange notes that the Exchange’s 

affiliate, MIAX, provides a similar 

alternative lower Trading Permit fee for 

Market Makers who quote the entire 

MIAX market (or substantial amount of 

the MIAX market), as objectively 

measured by either number of classes 

assigned or national ADV, but who do 

not otherwise execute a significant 

amount of volume on MIAX.21 The 

Exchange also notes that other options 

exchanges assess certain of their 

membership fees at different rates, 

based upon a member’s participation on 

that exchange,22 and, as such, this 

concept is not new or novel. The 

proposed changes to the Trading Permit 

fees for Market Makers who fall within 

the 3rd and 4th levels of the fee table 

are based upon a business 

determination of current Market Maker 

assignments and trading volume. 

MIAX Emerald 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. MIAX Emerald 

believes this high standard is especially 

important when an exchange imposes 

various access fees for market 

participants to access an exchange’s 

marketplace. MIAX Emerald deems 

Trading Permit fees to be access fees. It 

records these fees as part of its ‘‘Access 

Fees’’ revenue in its financial 

statements. The Exchange believes that 

it is important to demonstrate that these 

fees are based on its costs and 

reasonable business needs. 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 


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8458 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices 

23See 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). 

24See 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’’). 

25 15 U.S.C. 78f(b). 

26 15 U.S.C. 78f(b)(4) and (5). 

27See 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. 

an analysis of its revenues, costs, and 

profitability associated with 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 to provide the access services 

associated with 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 access 

services. The sum of all such portions 

of expenses represents the total cost of 

the Exchange to provide the access 

services associated with 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 cost to the Exchange to 

provide the access services associated 

with the Proposed Access Fees. 

In order to determine the Exchange’s 

projected revenues associated with the 

Proposed Access Fees, the Exchange 

analyzed the number of Members 

currently utilizing the Trading Permits, 

and, utilizing a recent monthly billing 

cycle representative of 2020 monthly 

revenue, extrapolated annualized 

revenue on a going-forward basis. The 

Exchange does not believe it is 

appropriate to factor into its analysis 

future revenue growth or decline into its 

projections for purposes of these 

calculations, given the uncertainty of 

such projections due to the continually 

changing access needs of market 

participants, discounts that can be 

achieved due to lower trading volume 

and vice versa, market participant 

consolidation, etc. Additionally, the 

Exchange similarly does not factor into 

its analysis future cost growth or 

decline. 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 for the first three quarters of 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 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 

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’’).23 On 

May 21, 2019, the Commission issued 

the Staff Guidance on SRO Rule Filings 

Relating to Fees.24 Accordingly, 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 

comprehensive revenue and cost data 

and analysis) that they are fair and 

reasonable because they not result in 

excessive pricing or supra-competitive 

profit; and (iv) utilize a cost-based 

justification framework that is 

substantially similar to a framework 

previously used by the Exchange to 

establish other non-transaction fees. 

Accordingly, the Exchange believes that 

the Commission should find that the 

Proposed Access Fees are consistent 

with the Act. 

The proposed rule change is 

immediately effective upon filing with 

the Commission pursuant to Section 

19(b)(3)(A) of 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 25

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 26 in 

particular, in that it is an equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

issuers and other persons using its 

facilities. The Exchange also believes 

the proposal furthers the objectives of 

Section 6(b)(5) of the Act 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 launched trading on 

March 1, 2019. For the month of 

December 2020, the Exchange had only 

a 3.58% market share of the U.S. 

options industry.27 The Exchange is not 

aware of any evidence that a market 

share of approximately 3.6% provides 

the Exchange with anti-competitive 

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 access to an 

exchange (or not initially access an 

exchange) if an exchange were to 

establish prices for its non-transaction 

fees that, in the determination of such 

market participant, did not make 

business or economic sense for such 

market participant to access such 

exchange. 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 drop 

their access to exchanges based on nontransaction fee 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). The R2G Letter stated, 

‘‘[w]hen BOX instituted a $10,000/ 

month price increase for connectivity; 


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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.’’ Since the Exchange issued its 

notice instituting the Proposed Access 

Fees, one Member dropped its access to 

the Exchange as a result of the Proposed 

Access Fees. Accordingly, these 

examples show that if an exchange sets 

too high of a fee for connectivity and/ 

or other non-transaction fees for its 

relevant marketplace, market 

participants can choose to drop their 

access to such 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. In particular, the 

Exchange has experienced a material 

increase in its costs in 2020, in 

connection with a project to make its 

network environment more transparent 

and deterministic, based on customer 

demand. This project will allow the 

Exchange to enhance its network 

architecture with the intent of ensuring 

a best-in-class, transparent and 

deterministic trading system while 

maintaining its industry leading latency 

and throughput capabilities. In order to 

provide this greater amount of 

transparency and higher determinism, 

MIAX Emerald has made significant 

capital expenditures (‘‘CapEx’’), 

incurred increased ongoing operational 

expenditures (‘‘OpEx’’), and undertaken 

additional engineering research and 

development (‘‘R&D’’) in the following 

areas: (i) Implementing an improved 

network design to ensure the minimum 

latency between multicast market data 

signals disseminated by the Exchange 

across the extranet switches, improving 

the unicast jitter profile to reduce the 

occurrence of message sequence 

inversions from Members to the 

Exchange quoting gateway processors, 

and introducing a new optical fiber 

network infrastructure that ensures the 

optical fiber path for participants within 

extremely tight tolerances; (ii) 

introducing a re-architected and 

engineered participant quoting gateway 

that ensures the delivery of messages to 

the match engine with absolute 

determinism, eliminating the message 

processing inversions that can occur 

with messages received nanoseconds 

apart; and (iii) designing an improved 

monitoring platform to better measure 

the performance of the network and 

systems at extremely tight tolerances 

and to provide Members with reporting 

on the performance of their systems. 

The CapEx associated with only phase 

1 of this project in 2020 was 

approximately $1.85 million. This 

expense does not include the significant 

increase in employee time and other 

resources necessary to maintain and 

service this network, which expense is 

captured in the operating expense 

discussed below. This project, which 

results in a material increase in expense 

of the Exchange, is, among other things, 

intended to enhance the overall trading 

experience at the Exchange, making it a 

venue that market participants want to 

access. 

The Exchange believes the proposed 

Trading Permit fees are equitably 

allocated between EEMs and Market 

Makers, when these fees are viewed in 

the context of the overall trading 

volume on the Exchange, as Market 

Makers: (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. Further, the Exchange 

believes the Proposed Access Fees are 

equitably allocated because of customer 

demand for an even more transparent 

and deterministic network, as described 

above, which has resulted in higher 

CapEx, increasingly higher OpEx, and 

increased costs to engineering R&D. The 

Proposed Access Fees are equitably 

allocated in this regard because the 

majority of customer demand is coming 

from Market Makers, who transact the 

vast majority of volume on the 

Exchange. Accordingly, the Exchange 

believes it is reasonable, equitably 

allocated and not unfairly 

discriminatory to recoup the majority of 

its costs associated with providing 

Trading Permits from Market Makers 

quoting the most classes on the 

Exchange. 

The Exchange believes that the 

proposed Trading Permit fees are 

equitably allocated between EEMs and 

Market Makers, as Market Makers 

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 EEMs account for approximately 

less than 1% of message traffic over the 

network. In the Exchange’s experience, 

most EEMs do not have a business need 

for the high performance network 

solutions required by Market Makers. 

The Exchange’s high performance 

network solutions and supporting 

infrastructure (including employee 

support), provides unparalleled system 

throughput and the capacity to handle 

approximately 18 million quote 

messages per second. On an average 

day, the Exchange handles over 

approximately 3 billion total messages. 

Of those, Market Makers generate 

approximately 3 billion messages, and 

EEMs generate 500,000 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 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 Market Makers pay 

for the vast majority of the access costs 

designed to be recovered via Trading 

Permit fees. 

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 

Market Makers to the Exchange may 

require the purchase of additional 

hardware to support those Members as 

well as enhanced monitoring and 

reporting of customer performance that 

MIAX Emerald and its affiliates provide. 

Further, as the total number Market 

Makers increase, MIAX Emerald and its 

affiliates may 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 

Emerald and its affiliates to provide 

access to its Members is not fixed. The 

Exchange believes the Proposed Access 


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28The Exchange has not yet finalized its 2020 

year end results. 

29For 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. 87877 (December 31, 

2019), 85 FR 738 (January 7, 2020) (SR–EMERALD– 

2019–39). Accordingly, the third-part 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. 

30 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. 

Fees are reasonable in order to offset a 

portion of the costs to the Exchange 

associated with providing access to its 

network infrastructure. 

Market Makers account for the vast 

majority of network capacity utilization 

and volume executed on the Exchange, 

as discussed throughout. Accordingly, 

the Exchange believes that it is 

reasonable and appropriate to charge 

Market Makers more than EEMs for 

Trading Permits to access the Exchange. 

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 that the Exchange 

projects to incur in connection with 

providing these access services versus 

the total annual revenue that the 

Exchange projects to collect in 

connection with the associated Trading 

Permit fees. For 2020,28 the total annual 

expense for providing the access 

services associated with the Proposed 

Access Fees for MIAX Emerald is 

projected to be approximately $2.5 

million. The $2.5 million in projected 

total annual expense is comprised of the 

following, all of which are directly 

related to the access services associated 

with the Proposed Access Fees: (1) 

Third-party expense, relating to fees 

paid by MIAX Emerald to third-parties 

for certain products and services; and 

(2) internal expense, relating to the 

internal costs of MIAX Emerald 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 revenue 

and costs, which utilize the same 

presentation methodology as set forth in 

the Exchange’s previously-issued 

Audited Unconsolidated Financial 

Statements.29 The $2.5 million in 

projected total annual expense is 

directly related to the access services 

associated with the Proposed Access 

Fees, 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 access 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 of 

the Exchange to provide access services 

associated with the Proposed Access 

Fees. 

For 2020, total third-party expense, 

relating to fees paid by MIAX Emerald 

to third-parties for certain products and 

services for the Exchange to be able to 

provide the access services associated 

with the Proposed Access Fees, is 

projected to be $190,621. 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 

Emerald trading system infrastructure; 

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

for network services (fiber and 

bandwidth products and services) 

linking MIAX Emerald’s office locations 

in Princeton, NJ and Miami, FL to all 

data center locations; (3) Secure 

Financial Transaction Infrastructure 

(‘‘SFTI’’),30, 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 network services; and 

(5) various other hardware and software 

providers (including Dell and Cisco, 

which support the production 

environment in which 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 Emerald does not 

allocate its entire information 

technology and communication costs to 

the access 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 access 

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. 

Without these services from Equinix, 

the Exchange would not be able to 

operate and support the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. The 

Exchange did not allocate all of the 

Equinix expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only 

that portion which the Exchange 

identified as being specifically mapped 

to providing the access services 

associated with the Proposed Access 

Fees, approximately 10% of the total 

Equinix expense. The Exchange believes 

this allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the access 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 Emerald with its 

affiliates, MIAX and MIAX PEARL, LLC 

(‘‘MIAX PEARL’’), 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 


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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 access services associated 

with the Proposed Access Fees. The 

Exchange did not allocate all of the 

Zayo expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only the 

portion which the Exchange identified 

as being specifically mapped to 

providing the Proposed Access Fees, 

approximately 1% of the total Zayo 

expense. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the access 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 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, 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 access 

to its Members and their customers. The 

Exchange did not allocate all of the SFTI 

and other service providers’ expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portions which 

the Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees, approximately 

1% 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 access 

services associated with the Proposed 

Access Fees. 

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 

their customers. The Exchange did not 

allocate all of the hardware and software 

provider expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only the 

portions which the Exchange identified 

as being specifically mapped to 

providing the access services associated 

with the Proposed Access Fees, 

approximately 10% 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 access services associated 

with the Proposed Access Fees. 

For 2020, total projected internal 

expense, relating to the internal costs of 

MIAX Emerald to provide the access 

services associated with the Proposed 

Access Fees, is projected to be 

$2,046,137. This includes, but is not 

limited to, costs associated with: (1) 

employee compensation and benefits for 

full-time employees that support the 

access 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 

(including an increase as a result of the 

higher determinism project); (2) 

depreciation and amortization of 

hardware and software used to provide 

the access 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 access 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, MIAX Emerald does not 

allocate its entire costs contained in 

those items to the access 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 access 

services associated with the Proposed 

Access Fees. In particular, MIAX 

Emerald’s employee compensation and 

benefits expense relating to providing 

the access services associated with the 

Proposed Access Fees is projected to be 

$1,403,101, which is only a portion of 

the $9,354,009 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 access services associated 

with the Proposed Access Fees. Without 

these employees, the Exchange would 

not be able to provide the access 

services associated with the Proposed 

Access Fees to its Members and their 

customers. The Exchange did not 

allocate all of the employee 

compensation and benefits expense 

toward the cost of the access services 

associated with the Proposed Access 

Fees, only the portions which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees, approximately 

15% 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 

access services associated with the 

Proposed Access Fees, and not any 

other service, as supported by its cost 

review. 

MIAX Emerald’s depreciation and 

amortization expense relating to 

providing the access services associated 

with the Proposed Access Fees is 

projected to be $571,888, which is only 

a portion of the $3,812,590 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 access services associated 

with the Proposed Access Fees. Without 

this equipment, the Exchange would not 

be able to operate the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. The 


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Exchange did not allocate all of the 

depreciation and amortization expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portion which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees, approximately 

15% of the total depreciation and 

amortization expense, as these access 

services would not be possible without 

relying on such. The Exchange believes 

this allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the access services associated 

with the Proposed Access Fees, and not 

any other service, as supported by its 

cost review. 

MIAX Emerald’s occupancy expense 

relating to providing the access services 

associated with the Proposed Access 

Fees is projected to be $71,148, which 

is only a portion of the $474,323 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 access 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 

access services associated with the 

proposed Trading Permit fees. Without 

this office space, the Exchange would 

not be able to operate and support the 

network and provide the access services 

associated with the Proposed Access 

Fees to its 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 access 

services associated with the Proposed 

Access Fees. The Exchange did not 

allocate all of the occupancy expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portion which the 

Exchange identified as being 

specifically mapped to operating and 

supporting the network, approximately 

15% of the total occupancy expense. 

The Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s cost to provide the access 

services associated with the Proposed 

Access Fees, and not any other service, 

as supported by its cost review. 

The Exchange notes that a material 

portion of its total overall expense is 

allocated to the provision of access 

services (including connectivity, ports, 

and trading permits). The Exchange 

believes this is reasonable and in line, 

as the Exchange operates a technologybased business that differentiates itself 

from its competitors based on its trading 

systems that rely on access to a high 

performance network, resulting in 

significant technology expense. Over 

two-thirds of Exchange staff are 

technology-related employees. The 

majority of the Exchange’s expense is 

technology-based. As described above, 

the Exchange has only four primary 

sources of fees in to recover its costs, 

thus the Exchange believes it is 

reasonable to allocate a material portion 

of its total overall expense towards 

access fees. 

Accordingly, based on the facts and 

circumstances presented, the Exchange 

believes that its provision of the access 

services associated with the Proposed 

Access Fees will not result in excessive 

pricing or supra-competitive profit. To 

illustrate, on a going-forward, fullyannualized basis, the Exchange projects 

that its annualized revenue for 

providing the access services associated 

with the Proposed Access Fees would 

be approximately $2.5 million per 

annum, based on a recent billing cycle. 

The Exchange projects that its 

annualized expense for providing the 

access services associated with the 

Proposed Access Fees would be 

approximately $2,236,758 per annum. 

Accordingly, on a fully-annualized 

basis, the Exchange believes its total 

projected revenue for the providing the 

access services associated with the 

Proposed Access Fees will not result in 

excessive pricing or supra-competitive 

profit, as the Exchange will make only 

a 10% profit margin on the Proposed 

Access Fees ($2.5 million¥$2,236,758 = 

$263,242 per annum). The Exchange 

notes that the fee charged to each 

Market Maker for Trading Permits can 

vary from month to month depending 

on the number of classes in which the 

Market Maker was assigned to quote on 

any given day within the calendar 

month, and upon certain class volume 

percentages. The Exchange also 

provides a further discount for a Market 

Maker’s Trading Permit fees if the 

Market Maker’s total monthly executed 

volume during the relevant month is 

less than 0.025% of the total monthly 

executed volume reported by OCC in 

the customer account type for MIAX 

Emerald-listed option classes for that 

month. As such, the revenue projection 

is not a static number, with monthly 

Trading Permit fees likely to fluctuate 

month to month. 

For the avoidance of doubt, none of 

the expenses included herein relating to 

the access services associated with the 

Proposed Access Fees relate to the 

provision of any other services offered 

by MIAX Emerald. Stated differently, no 

expense amount of the Exchange is 

allocated twice. The Exchange notes 

that, with respect to the MIAX Emerald 

expenses included herein, those 

expenses only cover the MIAX Emerald 

market; expenses associated with the 

Exchange’s affiliate exchanges, MIAX 

and MIAX PEARL, are accounted for 

separately and are not included within 

the scope of this filing. Stated 

differently, no expense amount of the 

Exchange is also allocated to MIAX or 

MIAX PEARL. 

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 access 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 

providing access to the Exchange. 

Further, the Exchange notes that, 

without the specific third-party and 

internal items listed above, the 

Exchange would not be able to provide 

the access services associated with the 

Proposed Access Fees to its 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 providing 

access services. The Proposed Access 

Fees are intended to recover the 

Exchange’s costs of providing access to 

Exchange Systems. Accordingly, the 

Exchange believes that the Proposed 

Access Fees are fair and reasonable 


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31See supra note 18. 

32See supra note 22. 

33See https://www.miaxoptions.com/exchangemembers/emerald. 34See supra note 27. 

because they do not result in excessive 

pricing or supra-competitive profit, 

when comparing the actual costs to the 

Exchange versus the projected annual 

revenue from the Proposed Access Fees. 

Further, the Exchange no longer 

believes it is necessary to waive these 

fees to attract market participants to 

MIAX Emerald since this market is now 

established and MIAX Emerald no 

longer needs to rely on such waivers to 

attract market participants. The 

Exchange believes that the proposal is 

equitable and not unfairly 

discriminatory because the elimination 

of the fee waiver for the Proposed 

Access Fees will uniformly apply to all 

EEMs and Market Makers of the 

Exchange. The Exchange also notes that 

the Exchange’s affiliate, MIAX, charges 

a similar, fixed trading permit fee to its 

EEMs, and a similar, varying trading 

permit fee to its Market Makers, based 

upon the number of assignments of 

option classes or the percentage of 

volume in option classes.31

The Exchange believes that the 

Proposed Access Fees are reasonable, 

equitable and not unfairly 

discriminatory because they are within 

the range of comparable fees at other 

competing options exchanges.32 The 

Proposed Access Fees are fair and 

equitable and not unreasonably 

discriminatory because they 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 designed 

the fee rates in order to provide 

objective criteria for Market Makers of 

different sizes and business models that 

best matches their quoting activity on 

the Exchange. The Exchange notes that 

trading volume and quoting activity in 

the options market tends to be 

concentrated in the top ranked options 

classes; with the vast majority of options 

classes being thinly quoted and traded. 

The Exchange believes that the 

proposed fee rates and criteria provide 

an objective and flexible framework that 

will encourage Market Makers to be 

assigned and quote in option classes 

with lower total national average daily 

volume while also equitably allocating 

the fees in a reasonable manner amongst 

Market Maker assignments to account 

for quoting and trading activity. 

Finally, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues if they 

deem fee levels at a particular venue to 

be excessive. In such an environment, 

the Exchange must continually adjust its 

fees for services and products, in 

addition to order flow, to remain 

competitive with other exchanges. The 

Exchange believes that the proposed 

changes reflect this competitive 

environment. 

The Exchange also points out that it 

is not seeking to recoup any of its past 

costs associated with the provision of 

any Trading Permits during the Waiver 

Period. The Exchange currently has 35 

Members,33 all of whom did not pay 

Trading Permit fees during the Waiver 

Period from the time these firms all 

became Members of the Exchange. 

Further, the majority of firms that are 

Members of the Exchange’s affiliate 

options exchanges, MIAX and MIAX 

PEARL, also became Members of those 

exchanges during similar Waiver 

Periods for the MIAX and MIAX PEARL 

Trading Permit fees. Accordingly, the 

Exchange (and MIAX and MIAX 

PEARL) have assumed approximately 

100% of the costs associated with 

providing Trading Permits for the 

majority of Member firms of the 

Exchange, MIAX, and MIAX PEARL 

during their respective Waiver Periods. 

Accordingly, the Exchange believes that 

it is reasonable, equitable, and not 

unfairly discriminatory to now adopt 

Trading Permit fees that are reasonably 

related to (and designed to recover) the 

Exchange’s cost associated with the 

provision of such Trading Permits. 

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 believes that the 

Proposed Access Fees do not place 

certain market participants at a relative 

disadvantage to other market 

participants because the Proposed 

Access Fees do not favor certain 

categories of market participants in a 

manner that would impose a burden on 

competition; rather, the fee rates are 

designed in order to provide objective 

criteria for Market Makers of different 

sizes and business models that best 

matches their quoting activity on the 

Exchange. The Exchange notes that 

trading volume and quoting activity in 

the options market tends to be 

concentrated in the top ranked options 

classes; with the vast majority of options 

classes being thinly quoted and traded. 

The Exchange believes that the 

proposed fee rates and criteria provide 

an objective and flexible framework that 

will encourage Market Makers to be 

assigned and quote in option classes 

with lower total national average daily 

volume while also equitably allocating 

the fees in a reasonable manner amongst 

Market Maker assignments to account 

for quoting and trading activity. 

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 become members of all 

options exchanges. The Exchange notes 

that it has far less Members as compared 

to the much greater number of members 

at other options exchanges. There are a 

number of large market makers and 

broker-dealers that are members of other 

options exchange but not Members of 

MIAX Emerald. 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 

discontinue their membership with the 

Exchange. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily favor one of the 

15 competing options venues if they 

deem fee levels at a particular venue to 

be excessive. Based on publiclyavailable information, and excluding 

index-based options, no single exchange 

has more than 16% market share. 

Therefore, no exchange possesses 

significant pricing power in the 

execution of multiply-listed equity and 

ETF options order flow. For the month 

of December 2020, the Exchange had a 

market share of approximately 3.6% of 

executed multiply-listed equity 

options 34 and the Exchange believes 

that the ever-shifting market share 

among exchanges from month to month 

demonstrates that market participants 

can discontinue or reduce use of certain 

categories of products, or shift order 

flow, in response to fee changes. In such 

an environment, the Exchange must 

continually adjust its fees and fee 

waivers to remain competitive with 

other exchanges and to attract order 

flow to the Exchange. 


jbell on DSKJLSW7X2PROD with NOTICES
8464 Federal Register / Vol. 86, No. 23 / Friday, February 5, 2021 / Notices 

35 15 U.S.C. 78s(b)(3)(A)(ii). 

36 17 CFR 240.19b–4(f)(2). 

37 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 90443 

(November 17, 2020), 85 FR 74778. 

4 In Amendment No. 1, the Exchange clarified 

certain of the website disclosure requirements and 

their origins, provided additional support for 

certain arguments supporting its proposal, and 

made technical changes. Because Amendment No. 

1 clarified and neither materially altered the 

substance of the proposed rule change nor raised 

any unique or novel regulatory issue, Amendment 

No. 1 is not subject to notice and comment. 

Amendment No. 1 to the proposed rule change is 

available at: https://www.sec.gov/comments/srnysearca-2020-98/srnysearca202098-8218328- 

227679.pdf. 

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

6See Securities Exchange Act Release No. 90816, 

86 FR 0353 (January 5, 2021) (designating February 

21, 2021 as the date by which the Commission shall 

approve the proposed rule change, disapprove the 

proposed rule change, or institute proceedings to 

determine whether to disapprove the proposed rule 

change). 

7See, e.g., Securities Exchange Act Release No. 

56041 (July 11, 2007), 72 FR 39114 (July 17, 2007) 

(SR–NYSEArca–2007–43) (approving the listing and 

trading of shares of the iShares COMEX Gold Trust) 

(‘‘NYSE Arca Gold Order’’); Securities Exchange 

Act Release No. 90547 (December 2, 2020), 85 FR 

79060 (December 8, 2020) (SR–NYSEArca–2020–99) 

(notice of certain changes regarding the availability 

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,35 and Rule 

19b–4(f)(2) 36 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– 

EMERALD–2021–03 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–EMERALD–2021–03. 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–EMERALD–2021–03 and 

should be submitted on or before 

February 26, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.37

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–02405 Filed 2–4–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–91031; File No. SR– 

NYSEArca–2020–98] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Approving a 

Proposed Rule Change, as Modified by 

Amendment No. 1, Regarding the 

Availability of Information for the 

iShares Gold Trust, the iShares Silver 

Trust, and the iShares S&P GSCI 

Commodity-Indexed Trust 

February 1, 2021. 

I. Introduction 

On November 12, 2020, NYSE Arca, 

Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change regarding the availability of 

information for the iShares Gold Trust, 

the iShares Silver Trust, and the iShares 

S&P GSCI Commodity-Indexed Trust 

(each, ‘‘Trust’’ and collectively, 

‘‘Trusts’’). The proposed rule change 

was published for comment in the 

Federal Register on November 23, 

2020.3 On January 8, 2021, NYSE Arca 

filed Amendment No. 1 to the proposed 

rule change, which replaced the 

proposed rule change in its entirety.4

On December 29, 2020, pursuant to 

Section 19(b)(2) of the Exchange Act,5

the Commission designated a longer 

period within which to approve the 

proposed rule change, disapprove the 

proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.6

The Commission has received no 

comments on the proposal. This order 

approves the proposed rule change, as 

modified by Amendment No. 1. 

II. The Exchange’s Description of the 

Proposal, as Modified by Amendment 

No. 1 

The Exchange lists shares 

(collectively, ‘‘Shares’’) of the iShares 

Gold Trust (formerly the iShares 

COMEX Gold Trust), the iShares Silver 

Trust, and the iShares S&P GSCI 

Commodity-Indexed Trust. The listing 

and trading of shares of the iShares Gold 

Trust and the iShares Silver Trust are 

subject to NYSE Arca Rule 8.201–E, 

which governs the listing and trading of 

Commodity-Based Trust Shares on the 

Exchange; the listing and trading of 

shares of the iShares S&P GSCI 

Commodity-Indexed Trust are subject to 

NYSE Arca Rule 8.203–E, which 

governs the listing and trading of 

Commodity Index Trust Shares on the 

Exchange. The listing and trading of the 

Shares by the Exchange also are subject 

to Exchange representations referenced 

in various Commission releases.7 As 


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