[Federal Register Volume 88, Number 163 (Thursday, August 24, 2023)]
[Notices]
[Pages 57982-58004]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-18191]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98170; File No. SR-PEARL-2023-36]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
Pearl Equities Fee Schedule To Modify Certain Connectivity and Port 
Fees

August 18, 2023.
    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 August 8, 2023, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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 fee schedule (the 
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities 
trading facility, to amend certain connectivity and port fees.\3\
---------------------------------------------------------------------------

    \3\ All references to the ``Exchange'' in this filing refer to 
MIAX Pearl Equities. Any references to the options trading facility 
of MIAX PEARL, LLC will specifically be referred to as ``MIAX Pearl 
Options.''
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxoptions.com/rule-filings, at MIAX Pearl's 
principal office,

[[Page 57983]]

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 amend fees for: 
(1) the 1 gigabit (``Gb'') and 10Gb ultra-low latency (``ULL'') fiber 
connections for Equity Members \4\ and non-Members; (2) the Financial 
Information Exchange (``FIX'') Ports,\5\ and the MIAX Express Orders 
Interface (``MEO'') Ports.\6\ The Exchange adopted connectivity and 
port fees in September 2020,\7\ and has not changed those fees since 
they were adopted. Since that time, the Exchange experienced ongoing 
increases in expenses, particularly internal expenses.\8\ As discussed 
more fully below, the Exchange recently calculated increased annual 
aggregate costs of $18,331,650 for providing 1Gb and 10Gb ULL 
connectivity combined and $3,951,993 for providing FIX and MEO 
Ports.\9\
---------------------------------------------------------------------------

    \4\ The term ``Equity Member'' means a Member authorized by the 
Exchange to transact business on MIAX PEARL Equities. See Exchange 
Rule 1901.
    \5\ ``FIX Order Interface'' or ``FOI'' means the Financial 
Information Exchange interface for certain order types as set forth 
in Exchange Rule 2614. See the Definitions section of the Fee 
Schedule.
    \6\ Each MEO interface will have one Full Service Port (``FSP'') 
and one Purge Port. ``Full Service Port'' or ``FSP'' means an MEO 
port that supports all MEO order input message types. See the 
Definitions section of the Fee Schedule.
    \7\ See Securities Exchange Act Release No. 90651 (December 11, 
2020), 85 FR 81971 (December 17, 2020) (SR-PEARL-2020-33).
    \8\ For example, the New York Stock Exchange, Inc.'s (``NYSE'') 
Secure Financial Transaction Infrastructure (``SFTI'') network, 
which contributes to the Exchange's connectivity cost, increased its 
fees by approximately 9% since 2021. Similarly, since 2021, the 
Exchange, and its affiliates, experienced an increase in data center 
costs of approximately 17% and an increase in hardware and software 
costs of approximately 19%. These percentages are based on the 
Exchange's actual 2021 and proposed 2023 budgets.
    \9\ For the avoidance of doubt, all references to costs in this 
filing, including the cost categories discussed below, refer to 
costs incurred by MIAX Pearl Equities only and not MIAX Pearl 
Options, the options trading facility.
---------------------------------------------------------------------------

    Much of the cost relates to monitoring and analysis of data and 
performance of the network via the subscriber's connection with 
nanosecond granularity, and continuous improvements in network 
performance with the goal of improving the subscriber's experience. The 
costs associated with maintaining and enhancing a state-of-the-art 
network is a significant expense for the Exchange, and thus the 
Exchange believes that it is reasonable and appropriate to help offset 
those increased costs by amending fees for connectivity and port 
services. Subscribers expect the Exchange to provide this level of 
support so they continue to receive the performance they expect. This 
differentiates the Exchange from its competitors.
    The Exchange now proposes to amend the Fee Schedule to amend the 
fees for 1Gb connectivity, 10Gb ULL connectivity and FIX and MEO Ports 
in order to recoup ongoing costs and increased expenses set forth below 
in the Exchange's cost analysis. The Exchange proposes to implement the 
changes to the Fee Schedule pursuant to this proposal immediately. The 
Exchange initially filed the proposal on December 30, 2022 (SR-PEARL-
2022-61) (the ``Initial Proposal'').\10\ On February 23, 2023, the 
Exchange withdrew the Initial Proposal and replaced it with a revised 
proposal (SR-PEARL-2023-06) (the ``Second Proposal'').\11\ On April 20, 
2023, the Exchange withdrew the Second Proposal and replaced it with a 
revised proposal (SR-PEARL-2023-18) (the ``Third Proposal'').\12\ On 
June 16, 2023, the Exchange withdrew the Third Proposal and replaced it 
with a revised proposal (SR-PEARL-2023-28) (the ``Fourth 
Proposal'').\13\ On August 8, 2023, the Exchange withdrew the Fourth 
Proposal and replaced it with this further revised proposal (SR-PEARL-
2023-36).
---------------------------------------------------------------------------

    \10\ See Securities Exchange Act Release No. 96631 (January 10, 
2023), 88 FR 2671 (January 17, 2023) (SR-PEARL-2022-61).
    \11\ See Securities Exchange Act Release No. 97077 (March 8, 
2023), 88 FR 15746 (March 14, 2023) (SR-PEARL-2023-06).
    \12\ See Securities Exchange Act Release No. 97417 (May 2, 
2023), 88 FR 29730 (May 8, 2023) (SR-PEARL-2023-18).
    \13\ The Exchange met with Commission Staff to discuss the Third 
Proposal during which the Commission Staff provided feedback and 
requested additional information, including, most recently, 
information about total costs related to certain third party 
vendors. Such vendor cost information is subject to confidentiality 
restrictions. The Exchange provided this information to Commission 
Staff under separate cover with a request for confidentiality. While 
the Exchange will continue to be responsive to Commission Staff's 
information requests, the Exchange believes that the Commission 
should, at this point, issue substantially more detailed guidance 
for exchanges to follow in the process of pursuing a cost-based 
approach to fee filings, and that, for the purposes of fair 
competition, detailed disclosures by exchanges, such as those that 
the Exchange is providing now, should be consistent across all 
exchanges, including for those that have resisted a cost-based 
approach to fee filings, in the interests of fair and even 
disclosure and fair competition. See Securities Exchange Act Release 
No. 97816 (June 28, 2023), 88 FR 42976 (July 5, 2023) (SR-PEARL-
2023-28).
---------------------------------------------------------------------------

    The Exchange previously included a cost analysis in the Initial 
Proposal, Second, Third, and Fourth Proposals. As described more fully 
below, the Exchange provides an updated cost analysis that includes, 
among other things, additional descriptions of how the Exchange 
allocated costs among it and its affiliated exchanges (separately among 
MIAX Pearl Options and MIAX Pearl Equities, MIAX,\14\ and MIAX 
Emerald,\15\ together with MIAX and MIAX Pearl Options, the 
``affiliated markets'') to ensure no cost was allocated more than once, 
as well as additional detail supporting its cost allocation processes 
and explanations as to why a cost allocation in this proposal may 
differ from the same cost allocation in a similar proposal submitted by 
one of its affiliated markets. Although the baseline cost analysis used 
to justify the proposed fees was made in the Initial, Second, Third, 
and Fourth Proposals, the fees themselves have not changed since the 
Initial, Second, Third, or Fourth Proposals and the Exchange still 
proposes fees that are intended to cover the Exchange's cost of 
providing 1Gb and 10Gb ULL connectivity and FIX and MEO Ports.
---------------------------------------------------------------------------

    \14\ The term ``MIAX'' means Miami International Securities 
Exchange, LLC. See Exchange Rule 100.
    \15\ The term ``MIAX Emerald'' means MIAX Emerald, LLC. See 
Exchange Rule 100.
---------------------------------------------------------------------------

* * * * *
    Starting in 2017, following the United States Court of Appeals for 
the District of Columbia's Susquehanna Decision \16\ and various other 
developments, the Commission began to undertake a heightened review of 
exchange filings, including non-transaction fee filings that was 
substantially and materially different from it prior review process 
(hereinafter referred to as the ``Revised Review Process''). In the 
Susquehanna Decision, the D.C. Circuit Court stated that the Commission 
could not maintain

[[Page 57984]]

a practice of ``unquestioning reliance'' on claims made by a self-
regulatory organization (``SRO'') in the course of filing a rule or fee 
change with the Commission.\17\ Then, on October 16, 2018, the 
Commission issued an opinion in Securities Industry and Financial 
Markets Association finding that exchanges failed both to establish 
that the challenged fees were constrained by significant competitive 
forces and that these fees were consistent with the Act.\18\ On that 
same day, the Commission issued an order remanding to various exchanges 
and national market system (``NMS'') plans challenges to over 400 rule 
changes and plan amendments that were asserted in 57 applications for 
review (the ``Remand Order'').\19\ The Remand Order directed the 
exchanges to ``develop a record,'' and to ``explain their conclusions, 
based on that record, in a written decision that is sufficient to 
enable us to perform our review.'' \20\ The Commission denied requests 
by various exchanges and plan participants for reconsideration of the 
Remand Order.\21\ However, the Commission did extend the deadlines in 
the Remand Order ``so that they d[id] not begin to run until the 
resolution of the appeal of the SIFMA Decision in the D.C. Circuit and 
the issuance of the court's mandate.'' \22\ Both the Remand Order and 
the Order Denying Reconsideration were appealed to the D.C. Circuit.
---------------------------------------------------------------------------

    \16\ See Susquehanna International Group, LLP v. Securities & 
Exchange Commission, 866 F.3d 442 (D.C. Circuit 2017) (the 
``Susquehanna Decision'').
    \17\ Id.
    \18\ See Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act 
Release No. 84432, 2018 WL 5023228 (October 16, 2018) (the ``SIFMA 
Decision'').
    \19\ See Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act 
Release No. 84433, 2018 WL 5023230 (Oct. 16, 2018). See 15 U.S.C. 
78k-1, 78s; see also Rule 608(d) of Regulation NMS, 17 CFR 
242.608(d) (asserted as an alternative basis of jurisdiction in some 
applications).
    \20\ Id. at page 2.
    \21\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act 
Release No. 85802, 2019 WL 2022819 (May 7, 2019) (the ``Order 
Denying Reconsideration'').
    \22\ Order Denying Reconsideration, 2019 WL 2022819, at *13.
---------------------------------------------------------------------------

    While the above appeal to the D.C. Circuit was pending, on March 
29, 2019, the Commission issued an order disapproving a proposed fee 
change by BOX Exchange LLC (``BOX'') to establish connectivity fees 
(the ``BOX Order''), which significantly increased the level of 
information needed for the Commission to believe that an exchange's 
filing satisfied its obligations under the Act with respect to changing 
a fee.\23\ Despite approving hundreds of access fee filings in the 
years prior to the BOX Order (described further below) utilizing a 
``market-based'' test, the Commission changed course and disapproved 
BOX's proposal to begin charging connectivity at one-fourth the rate of 
competing exchanges' pricing.
---------------------------------------------------------------------------

    \23\ See 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) (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 Commission noted 
in the BOX Order that it ``historically applied a `market-based' 
test in its assessment of market data fees, which [the Commission] 
believe[s] present similar issues as the connectivity fees proposed 
herein.'' Id. at page 16. Despite this admission, the Commission 
disapproved BOX's proposal to begin charging $5,000 per month for 
10Gb connections (while allowing legacy exchanges to charge rates 
equal to 3-4 times that amount utilizing ``market-based'' fee 
filings from years prior).
---------------------------------------------------------------------------

    Also while the above appeal was pending, on May 21, 2019, the 
Commission Staff issued guidance ``to assist the national securities 
exchanges and FINRA . . . in preparing Fee Filings that meet their 
burden to demonstrate that proposed fees are consistent with the 
requirements of the Securities Exchange Act.'' \24\ In the Staff 
Guidance, the Commission Staff states that, ``[a]s an initial step in 
assessing the reasonableness of a fee, staff considers whether the fee 
is constrained by significant competitive forces.'' \25\ The Staff 
Guidance also states that, ``. . . even where an SRO cannot 
demonstrate, or does not assert, that significant competitive forces 
constrain the fee at issue, a cost-based discussion may be an 
alternative basis upon which to show consistency with the Exchange 
Act.'' \26\
---------------------------------------------------------------------------

    \24\ See Staff Guidance on SRO Rule Filings Relating to Fees 
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (the ``Staff Guidance'').
    \25\ Id.
    \26\ Id.
---------------------------------------------------------------------------

    Following the BOX Order and Staff Guidance, on August 6, 2020, the 
D.C. Circuit vacated the Commission's SIFMA Decision in NASDAQ Stock 
Market, LLC v. SEC \27\ and remanded for further proceedings consistent 
with its opinion.\28\ That same day, the D.C. Circuit issued an order 
remanding the Remand Order to the Commission for reconsideration in 
light of NASDAQ. The court noted that the Remand Order required the 
exchanges and NMS plan participants to consider the challenges that the 
Commission had remanded in light of the SIFMA Decision. The D.C. 
Circuit concluded that because the SIFMA Decision ``has now been 
vacated, the basis for the [Remand Order] has evaporated.'' \29\ 
Accordingly, on August 7, 2020, the Commission vacated the Remand Order 
and ordered the parties to file briefs addressing whether the holding 
in NASDAQ v. SEC that Exchange Act section 19(d) does not permit 
challenges to generally applicable fee rules requiring dismissal of the 
challenges the Commission previously remanded.\30\ The Commission 
further invited ``the parties to submit briefing stating whether the 
challenges asserted in the applications for review . . . should be 
dismissed, and specifically identifying any challenge that they contend 
should not be dismissed pursuant to the holding of Nasdaq v. SEC.'' 
\31\ Without resolving the above issues, on October 5, 2020, the 
Commission issued an order granting SIFMA and Bloomberg's request to 
withdraw their applications for review and dismissed the 
proceedings.\32\
---------------------------------------------------------------------------

    \27\ NASDAQ Stock Mkt., LLC v. SEC, No 18-1324, --- Fed. App'x -
---, 2020 WL 3406123 (D.C. Cir. June 5, 2020). The court's mandate 
was issued on August 6, 2020.
    \28\ Nasdaq v. SEC, 961 F.3d 421, at 424, 431 (D.C. Cir. 2020). 
The court's mandate issued on August 6, 2020. The D.C. Circuit held 
that Exchange Act ``section 19(d) is not available as a means to 
challenge the reasonableness of generally-applicable fee rules.'' 
Id. The court held that ``for a fee rule to be challengeable under 
section 19(d), it must, at a minimum, be targeted at specific 
individuals or entities.'' Id. Thus, the court held that ``section 
19(d) is not an available means to challenge the fees at issue'' in 
the SIFMA Decision. Id.
    \29\ Id. at *2; see also id. (``[T]he sole purpose of the 
challenged remand has disappeared.'').
    \30\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act 
Release No. 89504, 2020 WL 4569089 (August 7, 2020) (the ``Order 
Vacating Prior Order and Requesting Additional Briefs'').
    \31\ Id.
    \32\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act 
Release No. 90087 (October 5, 2020).
---------------------------------------------------------------------------

    As a result of the Commission's loss of the NASDAQ vs. SEC case 
noted above, the Commission never followed through with its intention 
to subject the over 400 fee filings to ``develop a record,'' and to 
``explain their conclusions, based on that record, in a written 
decision that is sufficient to enable us to perform our review.'' \33\ 
As such, all of those fees remained in place and amounted to a baseline 
set of fees for those exchanges that had the benefit of getting their 
fees in place before the Commission Staff's fee review process 
materially changed. The net result of this history and lack of 
resolution in the D.C. Circuit Court resulted in an uneven competitive 
landscape where the Commission subjects all new non-transaction fee 
filings to the new Revised Review Process, while allowing the 
previously challenged fee filings, mostly submitted by incumbent 
exchanges prior to 2019, to remain in effect and not subject to the 
``record'' or ``review'' earlier intended by the Commission.
---------------------------------------------------------------------------

    \33\ See supra note 28, at page 2.

---------------------------------------------------------------------------

[[Page 57985]]

    While the Exchange appreciates that the Staff Guidance articulates 
an important policy goal of improving disclosures and requiring 
exchanges to justify that their market data and access fee proposals 
are fair and reasonable, the practical effect of the Revised Review 
Process, Staff Guidance, and the Commission's related practice of 
continuous suspension of new fee filings, is anti-competitive, 
discriminatory, and has put in place an un-level playing field, which 
has negatively impacted smaller, nascent, non-legacy exchanges (``non-
legacy exchanges''), while favoring larger, incumbent, entrenched, 
legacy exchanges (``legacy exchanges'').\34\ The legacy exchanges all 
established a significantly higher baseline for access and market data 
fees prior to the Revised Review Process. From 2011 until the issuance 
of the Staff Guidance in 2019, national securities exchanges filed, and 
the Commission Staff did not abrogate or suspend (allowing such fees to 
become effective), at least 92 filings \35\ to amend exchange 
connectivity or port fees (or similar access fees). The support for 
each of those filings was a simple statement by the relevant exchange 
that the fees were constrained by competitive forces.\36\ These fees 
remain in effect today.
---------------------------------------------------------------------------

    \34\ Commission Chair Gary Gensler recently reiterated the 
Commission's mandate to ensure competition in the equities markets. 
See ``Statement on Minimum Price Increments, Access Fee Caps, Round 
Lots, and Odd-Lots'', by Chair Gary Gensler, dated December 14, 2022 
(stating ``[i]n 1975, Congress tasked the Securities and Exchange 
Commission with responsibility to facilitate the establishment of 
the national market system and enhance competition in the securities 
markets, including the equity markets'' (emphasis added)). In that 
same statement, Chair Gary Gensler cited the five objectives laid 
out by Congress in 11A of the Exchange Act (15 U.S.C. 78k-1), 
including ensuring ``fair competition among brokers and dealers, 
among exchange markets, and between exchange markets and markets 
other than exchange markets. . . .'' (emphasis added). Id. at note 
1. See also Securities Acts Amendments of 1975, available at https://www.govtrack.us/congress/bills/94/s249.
    \35\ This timeframe also includes challenges to over 400 rule 
filings by SIFMA and Bloomberg discussed above. Sec. Indus. & Fin. 
Mkts. Ass'n, Securities Exchange Act Release No. 84433, 2018 WL 
5023230 (Oct. 16, 2018). Those filings were left to stand, while at 
the same time, blocking newer exchanges from the ability to 
establish competitive access and market data fees. See The Nasdaq 
Stock Market, LLC v. SEC, Case No. 18-1292 (D.C. Cir. June 5, 2020). 
The expectation at the time of the litigation was that the 400 rule 
flings challenged by SIFMA and Bloomberg would need to be justified 
under revised review standards.
    \36\ See, e.g., Securities Exchange Act Release Nos. 74417 
(March 3, 2015), 80 FR 12534 (March 9, 2015) (SR-ISE-2015-06); 83016 
(April 9, 2018), 83 FR 16157 (April 13, 2018) (SR-PHLX-2018-26); 
70285 (August 29, 2013), 78 FR 54697 (September 5, 2013) (SR-
NYSEMKT-2013-71); 76373 (November 5, 2015), 80 FR 70024 (November 
12, 2015) (SR-NYSEMKT-2015-90); 79729 (January 4, 2017), 82 FR 3061 
(January 10, 2017) (SR-NYSEARCA-2016-172).
---------------------------------------------------------------------------

    The net result is that the non-legacy exchanges are effectively now 
blocked by the Commission Staff from adopting or increasing fees to 
amounts comparable to the legacy exchanges (which were not subject to 
the Revised Review Process and Staff Guidance), despite providing 
enhanced disclosures and rationale to support their proposed fee 
changes that far exceed any such support provided by legacy exchanges. 
Simply put, legacy exchanges were able to increase their non-
transaction fees during an extended period in which the Commission 
applied a ``market-based'' test that only relied upon the assumed 
presence of significant competitive forces, while exchanges today are 
subject to a cost-based test requiring extensive cost and revenue 
disclosures, a process that is complex, inconsistently applied, and 
rarely results in a successful outcome, i.e., non-suspension. The 
Revised Review Process and Staff Guidance changed decades-long 
Commission Staff standards for review, resulting in unfair 
discrimination and placing an undue burden on inter-market competition 
between legacy exchanges and non-legacy exchanges.
    Commission Staff now require exchange filings, including from non-
legacy exchanges such as the Exchange, to provide detailed cost-based 
analysis in place of competition-based arguments to support such 
changes. However, even with the added detailed cost and expense 
disclosures, the Commission Staff continues to either suspend such 
filings and institute disapproval proceedings, or put the exchanges in 
the unenviable position of having to repeatedly withdraw and re-file 
with additional detail in order to continue to charge those fees.\37\ 
By impeding any path forward for non-legacy exchanges to establish 
commensurate non-transaction fees, or by failing to provide any 
alternative means for smaller markets to establish ``fee parity'' with 
legacy exchanges, the Commission is stifling competition: non-legacy 
exchanges are, in effect, being deprived of the revenue necessary to 
compete on a level playing field with legacy exchanges. This is 
particularly harmful, given that the costs to maintain exchange systems 
and operations continue to increase.
---------------------------------------------------------------------------

    \37\ For example, the options exchange affiliates of MIAX Pearl 
Equities, MIAX, MIAX Pearl Options, and MIAX Emerald, have filed, 
and subsequently withdrawn, various forms of connectivity and port 
fee changes at least seven (7) times since August 2021. Each of the 
proposals contained hundreds of cost and revenue disclosures never 
previously disclosed by legacy exchanges in their access and market 
data fee filings prior to 2019.
---------------------------------------------------------------------------

    The Commission Staff's change in position impedes the ability of 
non-legacy exchanges to raise revenue to invest in their systems to 
compete with the legacy exchanges who already enjoy disproportionate 
non-transaction fee based revenue. For example, the Cboe Exchange, Inc. 
(``Cboe'') reported ``access and capacity fee'' revenue of $70,893,000 
for 2020 \38\ and $80,383,000 for 2021.\39\ Cboe C2 Exchange, Inc. 
(``C2'') reported ``access and capacity fee'' revenue of $19,016,000 
for 2020 \40\ and $22,843,000 for 2021.\41\ Cboe BZX Exchange, Inc. 
(``BZX'') reported ``access and capacity fee'' revenue of $38,387,000 
for 2020 \42\ and $44,800,000 for 2021.\43\ Cboe EDGX Exchange, Inc. 
(``EDGX'') reported ``access and capacity fee'' revenue of $26,126,000 
for 2020 \44\ and $30,687,000 for 2021.\45\ For 2021, the affiliated 
Cboe, C2, BZX, and EDGX (the four largest exchanges of the Cboe 
exchange group) reported $178,712,000 in ``access and capacity fees'' 
in 2021. NASDAQ Phlx, LLC (``NASDAQ Phlx'') reported ``Trade Management 
Services'' revenue of $20,817,000 for 2019.\46\ The Exchange notes it 
is unable to compare ``access fee'' revenues with NASDAQ Phlx (or other 
affiliated NASDAQ exchanges) because after 2019, the ``Trade Management 
Services'' line item was bundled into a much larger line

[[Page 57986]]

item in PHLX's Form 1, simply titled ``Market services.'' \47\
---------------------------------------------------------------------------

    \38\ According to Cboe's 2021 Form 1 Amendment, access and 
capacity fees represent fees assessed for the opportunity to trade, 
including fees for trading-related functionality. See Cboe 2021 Form 
1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000465.pdf.
    \39\ See Cboe 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001155.pdf.
    \40\ See C2 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000469.pdf.
    \41\ See C2 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001156.pdf.
    \42\ See BZX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000465.pdf.
    \43\ See BZX 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001152.pdf.
    \44\ See EDGX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000467.pdf.
    \45\ See EDGX 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001154.pdf.
    \46\ According to PHLX, ``Trade Management Services'' includes 
``a wide variety of alternatives for connectivity to and accessing 
[the PHLX] markets for a fee. These participants are charged monthly 
fees for connectivity and support in accordance with [PHLX's] 
published fee schedules.'' See PHLX 2020 Form 1 Amendment, available 
at https://www.sec.gov/Archives/edgar/vprr/2001/20012246.pdf.
    \47\ See PHLX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000475.pdf. The Exchanges 
notes that this type of Form 1 accounting appears to be designed to 
obfuscate the true financials of such exchanges and has the effect 
of perpetuating fee and revenue advantages of legacy exchanges.
---------------------------------------------------------------------------

    The much higher non-transaction fees charged by the legacy 
exchanges provides them with two significant competitive advantages. 
First, legacy exchanges are able to use their additional non-
transaction revenue for investments in infrastructure, vast marketing 
and advertising on major media outlets,\48\ new products and other 
innovations. Second, higher non-transaction fees provide the legacy 
exchanges with greater flexibility to lower their transaction fees (or 
use the revenue from the higher non-transaction fees to subsidize 
transaction fee rates), which are more immediately impactful in 
competition for order flow and market share, given the variable nature 
of this cost on member firms. The prohibition of a reasonable path 
forward denies the Exchange (and other non-legacy exchanges) this 
flexibility, eliminates the ability to remain competitive on 
transaction fees, and hinders the ability to compete for order flow and 
market share with legacy exchanges. While one could debate whether the 
pricing of non-transaction fees are subject to the same market forces 
as transaction fees, there is little doubt that subjecting one exchange 
to a materially different standard than that historically applied to 
legacy exchanges for non-transaction fees leaves that exchange at a 
disadvantage in its ability to compete with its pricing of transaction 
fees.
---------------------------------------------------------------------------

    \48\ See, e.g., CNBC Debuts New Set on NYSE Floor, available at 
https://www.cnbc.com/id/46517876.
---------------------------------------------------------------------------

    While the Commission has clearly noted that the Staff Guidance is 
merely guidance and ``is not a rule, regulation or statement of the . . 
. Commission . . . the Commission has neither approved nor disapproved 
its content.ensp;. .'',\49\ this is not the reality experienced by 
exchanges such as MIAX Pearl. As such, non-legacy exchanges are forced 
to rely on an opaque cost-based justification standard. However, 
because the Staff Guidance is devoid of detail on what must be 
contained in cost-based justification, this standard is nearly 
impossible to meet despite repeated good-faith efforts by the Exchange 
to provide substantial amount of cost-related details. For example, 
MIAX Pearl Options has attempted to increase similar fees using a cost-
based justification numerous times, having submitted over six 
filings.\50\ However, despite providing 100+ page filings describing in 
extensive detail its costs associated with providing the services 
described in the filings, Commission Staff continues to suspend such 
filings, with the rationale that the Exchange has not provided 
sufficient detail of its costs and without ever being precise about 
what additional data points are required. The Commission Staff appears 
to be interpreting the reasonableness standard set forth in section 
6(b)(4) of the Act \51\ in a manner that is not possible to achieve. 
This essentially nullifies the cost-based approach for exchanges as a 
legitimate alternative as laid out in the Staff Guidance. By refusing 
to accept a reasonable cost-based argument to justify non-transaction 
fees (in addition to refusing to accept a competition-based argument as 
described above), or by failing to provide the detail required to 
achieve that standard, the Commission Staff is effectively preventing 
non-legacy exchanges from making any non-transaction fee changes, which 
benefits the legacy exchanges and is anticompetitive to the non-legacy 
exchanges. This does not meet the fairness standard under the Act and 
is discriminatory.
---------------------------------------------------------------------------

    \49\ See supra note 24, at note 1.
    \50\ See, e.g., Securities Exchange Act Release Nos. 92798 
(August 27, 2021), 86 FR 49360 (September 2, 2021) (SR-PEARL-2021-
33); 92644 (August 11, 2021), 86 FR 46055 (August 17, 2021) (SR-
PEARL-2021-36); 93162 (September 28, 2021), 86 FR 54739 (October 4, 
2021) (SR-PEARL-2021-45); 93556 (November 10, 2021), 86 FR 64235 
(November 17, 2021) (SR-PEARL-2021-53); 93774 (December 14, 2021), 
86 FR 71952 (December 20, 2021) (SR-PEARL-2021-57); 93894 (January 
4, 2022), 87 FR 1203 (January 10, 2022) (SR-PEARL-2021-58); 94258 
(February 15, 2022), 87 FR 9659 (February 22, 2022) (SR-PEARL-2022-
03); 94286 (February 18, 2022), 87 FR 10860 (February 25, 2022) (SR-
PEARL-2022-04); 94721 (April 14, 2022), 87 FR 23573 (April 20, 2022) 
(SR-PEARL-2022-11); 94722 (April 14, 2022), 87 FR 23660 (April 20, 
2022) (SR-PEARL-2022-12); 94888 (May 11, 2022), 87 FR 29892 (May 17, 
2022) (SR-PEARL-2022-18).
    \51\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Because of the un-level playing field created by the Revised Review 
Process and Staff Guidance, the Exchange believes that the Commission 
Staff, at this point, should either (a) provide sufficient clarity on 
how its cost-based standard can be met, including a clear and 
exhaustive articulation of required data and its views on acceptable 
margins,\52\ to the extent that this is pertinent; (b) establish a 
framework to provide for commensurate non-transaction based fees among 
competing exchanges to ensure fee parity; \53\ or (c) accept that 
certain competition-based arguments are applicable given the linkage 
between non-transaction fees and transaction fees, especially where 
non-transaction fees among exchanges are based upon disparate standards 
of review, lack parity, and impede fair competition. Considering the 
absence of any such framework or clarity, the Exchange believes that 
the Commission does not have a reasonable basis to deny the Exchange 
this change in fees, where the proposed change would result in fees 
meaningfully lower than comparable fees at competing exchanges and 
where the associated non-transaction revenue is meaningfully lower than 
competing exchanges.
---------------------------------------------------------------------------

    \52\ To the extent that the cost-based standard includes 
Commission Staff making determinations as to the appropriateness of 
certain profit margins, the Exchange believes that Staff should be 
clear as to what they determine is an appropriate profit margin.
    \53\ In light of the arguments above regarding disparate 
standards of review for historical legacy non-transaction fees and 
current non-transaction fees for non-legacy exchanges, a fee parity 
alternative would be one possible way to avoid the current unfair 
and discriminatory effect of the Staff Guidance and Revised Review 
Process. See, e.g., CSA Staff Consultation Paper 21-401, Real-Time 
Market Data Fees, available at https://www.bcsc.bc.ca/-/media/PWS/Resources/Securities_Law/Policies/Policy2/21401_Market_Data_Fee_CSA_Staff_Consulation_Paper.pdf.
---------------------------------------------------------------------------

    In light of the above, disapproval of this would not meet the 
fairness standard under the Act, would be discriminatory and place a 
substantial burden on competition. The Exchange would be uniquely 
disadvantaged by not being able to increase its access fees to 
comparable levels (or lower levels than current market rates) to those 
of other exchanges for connectivity. If the Commission Staff were to 
disapprove this proposal, that action, and not market forces, would 
substantially affect whether the Exchange can be successful in its 
competition with other exchanges. Disapproval of this filing could also 
be viewed as an arbitrary and capricious decision should the Commission 
Staff continue to ignore its past treatment of non-transaction fee 
filings before implementation of the Revised Review Process and Staff 
Guidance and refuse to allow such filings to be approved despite 
significantly enhanced arguments and cost disclosures.\54\
---------------------------------------------------------------------------

    \54\ The Exchange's costs have clearly increased and continue to 
increase, particularly regarding capital expenditures, as well as 
employee benefits provided by third parties (e.g., healthcare and 
insurance). Yet, practically no fee change proposed by the Exchange 
to cover its ever-increasing costs has been acceptable to the 
Commission Staff since 2021. The only other fair and reasonable 
alternative would be to require the numerous fee filings 
unquestioningly approved before the Staff Guidance and Revised 
Review Process to ``develop a record,'' and to ``explain their 
conclusions, based on that record, in a written decision that is 
sufficient to enable us to perform our review,'' and to ensure a 
comparable review process with the Exchange's filing.
---------------------------------------------------------------------------

* * * * *

[[Page 57987]]

1Gb and 10Gb ULL Connectivity Fee Change
    Sections 2a) and b) of the Fee Schedule describe network 
connectivity fees for the 1Gb ULL and 10Gb ULL fiber connections, which 
are charged to both Equity Members and non-Members for connectivity to 
the Exchange's primary and secondary facilities. The Exchange offers 
its Equity Members the ability to connect to the Exchange in order to 
transmit orders to and receive information from the Exchange. Equity 
Members can also choose to connect to the Exchange indirectly through 
physical connectivity maintained by a third-party extranet. Extranet 
physical connections may provide access to one or multiple Equity 
Members on a single connection. The number of physical connections 
assigned to each User \55\ as of May 31, 2023, ranges from one to 
thirteen, depending on the scope and scale of the Equity Member's 
trading activity on the Exchange as determined by the Equity Member, 
including the Equity Member's determination of the need for redundant 
connectivity. The Exchange notes that 40% of its Equity Members do not 
maintain a physical connection directly with the Exchange in the 
Primary Data Center (though many such Equity Members have connectivity 
through a third-party provider) and another 46% have either one or two 
physical ports to connect to the Exchange in the Primary Data Center. 
Thus, only a limited number of Equity Members, 14%, maintain three or 
more physical ports to connect to the Exchange in the Primary Data 
Center.
---------------------------------------------------------------------------

    \55\ The term ``User'' shall mean any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Exchange Rule 2602. See Exchange Rule 1901.
---------------------------------------------------------------------------

    In order to partially cover the continuous increase in aggregate 
costs of providing physical connectivity to Equity Members and non-
Equity Members, as described below, the Exchange proposes to amend the 
monthly connectivity fees as follows: (a) increase the 1Gb ULL 
connection from $1,000 to $2,500; and (b) increase the 10Gb ULL 
connection from $3,500 to $8,000.\56\
---------------------------------------------------------------------------

    \56\ The Exchange notes that while its proposed fee of $8,000 
per 10Gb ULL connection is higher than MEMX's $6,000 monthly fee for 
its xNet Physical Connection, MEMX does not offer any other physical 
connectivity, such as a 1Gb connection, for a lower fee. See 
Securities Exchange Act Release No. 95936 (September 27, 2022), 87 
FR 59845 (October 3, 2022) (SR-MEMX-2022-26). See MEMX Fee Schedule, 
Connectivity and Application Sessions, available at https://info.memxtrading.com/fee-schedule/ (last visited August 4, 2023).
---------------------------------------------------------------------------

FIX and MEO Ports
    Similar to other exchanges, the Exchange offers its Equity Members 
application sessions, also known as ports, for order entry and receipt 
of trade execution reports and order messages. Equity Members can also 
choose to connect to the Exchange indirectly through a session 
maintained by a third-party service bureau. Service bureau sessions may 
provide access to one or multiple Equity Members on a single session. 
The number of sessions assigned to each User as of April 18, 2023, 
ranges from one to more than 100, depending on the scope and scale of 
the Equity Member's trading activity on the Exchange (either through a 
direct connection or through a service bureau) as determined by the 
Equity Member. For example, by using multiple sessions, Equity Members 
can segregate order flow from different internal desks, business lines, 
or customers. The Exchange does not impose any minimum or maximum 
requirements for how many application sessions an Equity Member or 
service bureau can maintain, and does not propose to impose any minimum 
or maximum session requirements for its Equity Members or their service 
bureaus.
    Section 2)d), Port Fees, of the Fee Schedule describes fees for 
access and services used by Equity Members and non-Members. The 
Exchange provides the following types of ports: (i) FIX Ports, which 
allow Equity Members to send orders and other messages using the FIX 
protocol; and (ii) MEO Ports, which allow Equity Members order entry 
capabilities to all Exchange matching engines.
    The Exchange operates a primary and secondary data center as well 
as a disaster recovery center. Each Port provides access to all 
Exchange data centers for a single fee. The Exchange currently provides 
the first twenty-five (25) FIX and MEO Ports free of charge and 
absorbed all associated costs since the launch of MIAX Pearl Equities. 
The Exchange charges the following separate monthly fees for FIX and 
MEO Ports: $450 for ports 26-50, $400 for ports 51-75, $350 for ports 
76-100, and $300 for ports 101 and higher. The Exchange now proposes to 
provide the first five (5) FIX or MEO Ports free of charge, then charge 
a flat rate of $450 per port for port six (6) and above.\57\
---------------------------------------------------------------------------

    \57\ The Exchange notes that the proposed fee of $450 per port 
equals the amount charged by MEMX for MEMX's application sessions 
(order entry and drop copy ports), but MEMX does not offer any ports 
free of charge. See MEMX Fee Schedule, Connectivity and Application 
Sessions, available at https://info.memxtrading.com/fee-schedule/ 
(last visited August 4, 2023). See Securities Exchange Act Release 
No. 95936 (September 27, 2022), 87 FR 59845 (October 3, 2022) (SR-
MEMX-2022-26). Unlike MEMX and other exchanges, the Exchange also 
continues to provide FXD Ports (i.e., Drop Copy Ports) free of 
charge.
---------------------------------------------------------------------------

Implementation
    The proposed fee changes are immediately effective.
2. Statutory Basis
    The Exchange believes that the proposed fees are consistent with 
section 6(b) of the Act \58\ in general, and furthers the objectives of 
section 6(b)(4) of the Act \59\ in particular, in that it provides for 
the equitable allocation of reasonable dues, fees and other charges 
among Equity Members and other persons using any facility or system 
which the Exchange operates or controls. The Exchange also believes the 
proposed fees further the objectives of section 6(b)(5) of the Act \60\ 
in that they are designed to promote just and equitable principles of 
trade, remove impediments to and perfect the mechanism of a free and 
open market and a national market system, and, in general protect 
investors and the public interest and are not designed to permit unfair 
discrimination between customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b).
    \59\ 15 U.S.C. 78f(b)(4).
    \60\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the information provided to justify the 
proposed fees meets or exceeds the amount of detail required in respect 
of proposed fee changes under the Revised Review Process and as set 
forth in recent Staff Guidance. Based on both the BOX Order \61\ and 
the Staff Guidance,\62\ the Exchange believes that the proposed fees 
are consistent with the Act because they are: (i) reasonable, equitably 
allocated, not unfairly discriminatory, and not an undue burden on 
competition; (ii) comply with the BOX Order and the Staff Guidance; and 
(iii) supported by evidence (including comprehensive revenue and cost 
data and analysis) that they are fair and reasonable and will not 
result in excessive pricing or supra-competitive profit.
---------------------------------------------------------------------------

    \61\ See supra note 23.
    \62\ See supra note 24.
---------------------------------------------------------------------------

    The Exchange believes that exchanges, in setting fees of all types, 
should meet high standards of transparency to demonstrate why each new 
fee or fee amendment meets the requirements of the Act that fees be 
reasonable, equitably allocated, not unfairly discriminatory, and not 
create an undue burden on competition among market participants. The 
Exchange believes this high standard is especially

[[Page 57988]]

important when an exchange imposes various fees for market participants 
to access an exchange's marketplace.
    In the Staff Guidance, the Commission Staff states that, ``[a]s an 
initial step in assessing the reasonableness of a fee, staff considers 
whether the fee is constrained by significant competitive forces.'' 
\63\ The Staff Guidance further states that, ``. . . even where an SRO 
cannot demonstrate, or does not assert, that significant competitive 
forces constrain the fee at issue, a cost-based discussion may be an 
alternative basis upon which to show consistency with the Exchange 
Act.'' \64\ In the Staff Guidance, the Commission Staff further states 
that, ``[i]f an SRO seeks to support its claims that a proposed fee is 
fair and reasonable because it will permit recovery of the SRO's costs, 
. . ., specific information, including quantitative information, should 
be provided to support that argument.'' \65\
---------------------------------------------------------------------------

    \63\ Id.
    \64\ Id.
    \65\ Id.
---------------------------------------------------------------------------

    The proposed fees are reasonable because they promote parity among 
exchange pricing for access, which promotes competition, including in 
the Exchanges' ability to competitively price transaction fees, invest 
in infrastructure, new products and other innovations, all while 
allowing the Exchange to begin to recover its costs to provide 
dedicated access via 1Gb and 10Gb ULL connectivity as well as FIX and 
MEO Ports. As discussed above, the Revised Review Process and Staff 
Guidance have created an uneven playing field between legacy and non-
legacy exchanges by severely restricting non-legacy exchanges from 
being able to increase non-transaction related fees to provide them 
with additional necessary revenue to better compete with legacy 
exchanges, which largely set fees prior to the Revised Review Process. 
The much higher non-transaction fees charged by the legacy exchanges 
provides them with two significant competitive advantages: (i) 
additional non-transaction revenue that may be used to fund areas other 
than the non-transaction service related to the fee, such as 
investments in infrastructure, advertising, new products and other 
innovations; and (ii) greater flexibility to lower their transaction 
fees by using the revenue from the higher non-transaction fees to 
subsidize transaction fee rates. The latter is more immediately 
impactful in competition for order flow and market share, given the 
variable nature of this cost on Equity Member firms. The absence of a 
reasonable path forward to increase non-transaction fees to comparable 
(or lower rates) limits the Exchange's flexibility to, among other 
things, make additional investments in infrastructure and advertising, 
diminishes the ability to remain competitive on transaction fees, and 
hinders the ability to compete for order flow and market share. Again, 
while one could debate whether the pricing of non-transaction fees are 
subject to the same market forces as transaction fees, there is little 
doubt that subjecting one exchange to a materially different standard 
than that applied to other exchanges for non-transaction fees leaves 
that exchange at a disadvantage in its ability to compete with its 
pricing of transaction fees.
The Proposed Fees Ensure Parity Among Exchange Access Fees, Which 
Promotes Competition
    The Exchange commenced operations in September 2020 and adopted its 
initial fee schedule, with 1Gb ULL connectivity set at $1,000, 10Gb ULL 
connectivity fees set at $3,500, and provided the first twenty-five 
(25) FIX and MEO Ports for free.\66\ As a new exchange entrant, the 
Exchange chose to offer such services at a discounted rate or free of 
charge to encourage market participants to trade on the Exchange and 
experience, among things, the quality of the Exchange's technology and 
trading functionality. This practice is not uncommon. New exchanges 
often do not charge fees or charge lower fees for certain services such 
as memberships/trading permits to attract order flow to an exchange, 
and later amend their fees to reflect the true value of those services, 
absorbing all costs to provide those services in the meantime. Allowing 
new exchange entrants time to build and sustain market share through 
various pricing incentives before increasing non-transaction fees 
encourages market entry and fee parity, which promotes competition 
among exchanges. It also enables new exchanges to mature their markets 
and allow market participants to trade on the new exchanges without 
fees serving as a potential barrier to attracting memberships and order 
flow.\67\
---------------------------------------------------------------------------

    \66\ See supra note 7.
    \67\ See Securities Exchange Act Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (stating, ``[t]he 
Exchange established this lower (when compared to other options 
exchanges in the industry) Participant Fee in order to encourage 
market participants to become Participants of BOX. . .''). See also 
Securities Exchange Act Release No. 90076 (October 2, 2020), 85 FR 
63620 (October 8, 2020) (SR-MEMX-2020-10) (proposing to adopt the 
initial fee schedule and stating that ``[u]nder the initial proposed 
Fee Schedule, the Exchange proposes to make clear that it does not 
charge any fees for membership, market data products, physical 
connectivity or application sessions.''). MEMX's market share has 
increased and recently proposed to adopt numerous non-transaction 
fees, including fees for membership, market data, and connectivity. 
See Securities Exchange Act Release Nos. 93927 (January 7, 2022), 87 
FR 2191 (January 13, 2022) (SR-MEMX-2021-19) (proposing to adopt 
membership fees); 96430 (December 1, 2022), 87 FR 75083 (December 7, 
2022) (SR-MEMX-2022-32) and 95936 (September 27, 2022), 87 FR 59845 
(October 3, 2022) (SR-MEMX-2022-26) (proposing to adopt fees for 
connectivity). See also, e.g., Securities Exchange Act Release No. 
88211 (February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-
NYSENAT-2020-05), available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf (initiating market data fees for the NYSE National exchange 
after initially setting such fees at zero).
---------------------------------------------------------------------------

    The Exchange has not amended any of its non-transaction fees since 
its launch in September 2022. The Exchange balanced business and 
competitive concerns with the need to financially compete with the 
larger incumbent exchanges that charge higher fees for similar 
connectivity and use that revenue to invest in their technology and 
other service offerings.
    The proposed changes to the Fee Schedule are reasonable in several 
respects. As a threshold matter, the Exchange is subject to significant 
competitive forces, which constrains its pricing determinations for 
transaction fees as well as non-transaction fees. The fact that the 
market for order flow is competitive has long been recognized by the 
courts. In NetCoalition v. Securities and Exchange Commission, the D.C. 
Circuit stated, ``[n]o one disputes that competition for order flow is 
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .'' \68\
---------------------------------------------------------------------------

    \68\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting 
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).

---------------------------------------------------------------------------

[[Page 57989]]

    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention to determine 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues, and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \69\
---------------------------------------------------------------------------

    \69\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    Congress directed the Commission to ``rely on `competition, 
whenever possible, in meeting its regulatory responsibilities for 
overseeing the SROs and the national market system.' '' \70\ As a 
result, and as evidenced above, the Commission has historically relied 
on competitive forces to determine whether a fee proposal is equitable, 
fair, reasonable, and not unreasonably or unfairly discriminatory. ``If 
competitive forces are operative, the self-interest of the exchanges 
themselves will work powerfully to constrain unreasonable or unfair 
behavior.'' \71\ Accordingly, ``the existence of significant 
competition provides a substantial basis for finding that the terms of 
an exchange's fee proposal are equitable, fair, reasonable, and not 
unreasonably or unfairly discriminatory.'' \72\ In the Revised Review 
Process and Staff Guidance, Commission Staff indicated that they would 
look at factors beyond the competitive environment, such as cost, only 
if a ``proposal lacks persuasive evidence that the proposed fee is 
constrained by significant competitive forces.'' \73\
---------------------------------------------------------------------------

    \70\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep. 
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that 
the national market system evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed.'').
    \71\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \72\ Id.
    \73\ See Staff Guidance, supra note 24.
---------------------------------------------------------------------------

    The Exchange believes the competing exchanges' connectivity and 
port fees are useful examples of alternative approaches to providing 
and charging for access and demonstrating how such fees are 
competitively set and constrained. To that end, the Exchange believes 
the proposed fees are competitive and reasonable because the proposed 
fees are similar to or less than fees charged for similar connectivity 
and port access provided by other exchanges with comparable market 
shares. As such, the Exchange believes that denying its ability to 
institute fees that allow the Exchange to recoup its costs with a 
reasonable margin in a manner that is closer to parity with legacy 
exchanges, in effect, impedes its ability to compete, including in its 
pricing of transaction fees and ability to invest in competitive 
infrastructure and other offerings.
    The following table shows how the Exchange's proposed fees remain 
similar to or less than fees charged for similar connectivity and port 
access provided by other exchanges with similar market share. Each of 
the connectivity or port rates in place at competing exchanges were 
filed with the Commission for immediate effectiveness and remain in 
place today.

------------------------------------------------------------------------
                                                       Monthly fee (per
            Exchange              Type of connection   connection or per
                                        or port              port)
------------------------------------------------------------------------
MIAX Pearl Equities (as           1Gb ULL connection  $2,500.
 proposed) (market share of       10Gb ULL            $8,000.
 1.49% for the month of May        connection.
 2023) \a\.
                                  FIX and MEO Ports.  1-5 ports: FREE.
                                                      6 ports or more:
                                                       $450 per port.
                                  FXD Ports (i.e.,    FREE.
                                   Drop Copy Ports).
MEMX \b\ (market share of 2.63%   1Gb connection....  Not available.
 for the month of May 2023) \c\.  xNet Physical       $6,000 per
                                   connection.         connection.
                                  Order Entry Ports.  $450 per port.
                                  Drop Copy Ports...  $450 per port.
NASDAQ PSX LLC (``PSX'') \d\      1Gb connection....  $2,500 per
 (market share of 0.37% for the                        connection (plus
 month of May 2023) \e\.                               $1,500
                                                       installation
                                                       fee).
                                  10Gb connection...  $7,500 per
                                                       connection (plus
                                                       $1,500
                                                       installation
                                                       fee).
                                  Order Entry Ports.  $400 per port.
                                  Drop Copy Ports...  $400 per port.
NASDAQ BX LLC (``BX'') \f\        1Gb Ultra           $2,500 per
 (market share of 0.34% for the    connection.         connection (plus
 month of May 2023) \g\.                               $1,500
                                                       installation fee)
                                  10Gb Ultra          $15,000 (plus
                                   connection..        $1,500
                                                       installation
                                                       fee).
                                  Order Entry Ports.  $500 per port.
                                  Drop Copy Ports...  $500 per port.
------------------------------------------------------------------------
\a\ See the ``Market Share'' section of the Exchange's website,
  available at https://www.miaxglobal.com/.
\b\ See MEMX Fee Schedule, Connectivity and Application Sessions,
  available athttps://info.memxtrading.com/fee-schedule/.
\c\ See supra note a.
\d\ See PSX Pricing Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing; and PSX Rules, General 8: Connectivity,
  Section 2, Direct Connectivity.
\e\ See supra note a.
\f\ See BX Pricing Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; and BX Rules, General 8: Connectivity,
  Section 2, Direct Connectivity.
\g\ See supra note a.

    There is no requirement, regulatory or otherwise, that any broker-
dealer connect to and access any (or all of) the available equity 
exchanges. Market participants may choose to become a member of one or 
more equities exchanges based on the market participant's assessment of 
the business opportunity relative to the costs of the Exchange. With 
this, there is elasticity of demand for exchange membership. As an 
example, one Market Maker of

[[Page 57990]]

MIAX Pearl Options terminated their membership effective January 1, 
2023 as a direct result of the proposed connectivity and port fee 
changes by MIAX Pearl Options.
    It is not a requirement for market participants to become members 
of all equities exchanges; in fact, certain market participants conduct 
an equities business as a member of only one market.\74\ A very small 
number of market participants choose to become a member of all sixteen 
(16) equities exchanges. Most firms that actively trade on equities 
markets are not currently Equity Members of the Exchange and do not 
purchase connectivity or port services at the Exchange. Connectivity 
and ports are only available to Equity Members or service bureaus, and 
only an Equity Member may utilize a port.\75\
---------------------------------------------------------------------------

    \74\ BOX recently adopted an electronic market maker trading 
permit fee. See Securities Exchange Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17). In that 
proposal, BOX stated that, ``. . . it is not aware of any reason why 
Market Makers 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 Maker, did not make business or economic sense for such 
Market Maker to access such exchange. [BOX] again notes that no 
market makers are required by rule, regulation, or competitive 
forces to be a Market Maker on [BOX].'' Also in 2022, MEMX 
established a monthly membership fee. See Securities Exchange Act 
Release No. 93927 (January 7, 2022), 87 FR 2191 (January 13, 2022) 
(SR-MEMX-2021-19). In that proposal, MEMX reasoned that that there 
is value in becoming a member of the exchange and stated that it 
believed that the proposed membership fee ``is not unfairly 
discriminatory because no broker-dealer is required to become a 
member of the Exchange'' and that ``neither the trade-through 
requirements under Regulation NMS nor broker-dealers' best execution 
obligations require a broker-dealer to become a member of every 
exchange.''
    \75\ Service Bureaus may obtain ports on behalf of Equity 
Members.
---------------------------------------------------------------------------

    BOX recently noted in a proposal to amend their own trading permit 
fees that of the 62 market making firms that are registered as Market 
Makers across Cboe, MIAX, and BOX, 42 firms access only one of the 
three exchanges.\76\ MIAX Pearl Equities currently has 50 Equity 
Members. Also, MEMX noted in a January 2022 filing that it had only 66 
members, and, based on publicly available information regarding a 
sample of the Exchange's competitors, NYSE has 142 members, Cboe BZX 
has 140 members, and Investors Exchange LLC (``IEX'') has 133 
members.\77\ MIAX Pearl Options and its affiliated options markets, 
MIAX and MIAX Emerald, have a total of 46 members. Of those 46 total 
members, 37 are members of all three affiliated options markets, two 
are members of only two affiliated options markets, and seven are 
members of only one affiliated options market. The Exchange believes 
that significant differences in membership numbers describes by the 
Exchange, BOX, and MEMX demonstrate that firms can, and do, select 
which exchanges they wish to access, and, accordingly, exchanges must 
take competitive considerations into account when setting fees for such 
access. The Exchange also notes that no firm is an Equity Member of the 
Exchange only. The above data evidences that a broker-dealer need not 
have direct connectivity to all exchanges, let alone the Exchange and 
its affiliates, and broker-dealers may elect to do so based on their 
own business decisions and need to directly access each exchange's 
liquidity pool.
---------------------------------------------------------------------------

    \76\ See Securities Exchange Act Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17).
    \77\ See Securities Exchange Act Release No. 93927 (January 7, 
2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-2021-19).
---------------------------------------------------------------------------

    Not only is there not an actual regulatory requirement to connect 
to every equities exchange, the Exchange believes there is also no ``de 
facto'' or practical requirement as well, as further evidenced by the 
broker-dealer membership analysis of exchanges discussed above. Indeed, 
broker-dealers choose if and how to access a particular exchange and 
because it is a choice, the Exchange must set reasonable pricing, 
otherwise prospective members would not connect and existing members 
would disconnect from the Exchange. The decision to become a member of 
an exchange, is complex, and not solely based on the non-transactional 
costs assessed by an exchange. As noted herein, specific factors 
include, but are not limited to: (i) an exchange's available liquidity 
in equities securities; (ii) trading functionality offered on a 
particular market; (iii) product offerings; (iv) customer service on an 
exchange; and (v) transactional pricing. Becoming a member of the 
exchange does not ``lock'' a potential member into a market or diminish 
the overall competition for exchange services.
    In lieu of becoming a member at each exchange, a market participant 
may join one exchange and elect to have their orders routed in the 
event that a better price is available on an away market. Nothing in 
the Order Protection Rule requires a firm to become an Equity Member 
at--or establish connectivity to--the Exchange.\78\ If the Exchange is 
not at the national best bid and offer (``NBBO''),\79\ the Exchange 
will route an order to any away market that is at the NBBO to ensure 
that the order was executed at a superior price and prevent a trade-
through.\80\
---------------------------------------------------------------------------

    \78\ See 17 CFR 242.611.
    \79\ See Exchange Rule 1901.
    \80\ Equity Members may elect to not route their orders by 
utilizing the Do Not Route or Post Only order type instructions. See 
Exchange Rule 2614(c)(1) and (2).
---------------------------------------------------------------------------

    With respect to the submission of orders, Equity Members may also 
choose not to purchase any connection from the Exchange, and instead 
rely on the port of a third party to submit an order. For example, a 
third-party broker-dealer Equity Member of the Exchange may be utilized 
by a retail investor to submit orders into an exchange. An 
institutional investor may utilize a broker-dealer, a service 
bureau,\81\ or request sponsored access \82\ through a member of an 
exchange in order to submit a trade directly to an equities 
exchange.\83\ A market participant may either pay the costs associated 
with becoming a member of an exchange or, in the alternative, a market 
participant may elect to pay commissions to a broker-dealer, pay fees 
to a service bureau to submit trades, or pay a member to sponsor the 
market participant in order to submit trades directly to an exchange.
---------------------------------------------------------------------------

    \81\ Service Bureaus provide access to market participants to 
submit and execute orders on an exchange. On the Exchange, a Service 
Bureau may be an Equity Member. Some Equity Members utilize a 
Service Bureau for connectivity and that Service Bureau may not be 
an Equity Member. Some market participants utilize a Service Bureau 
who is an Equity Member to submit orders.
    \82\ Sponsored Access is an arrangement whereby an Equity Member 
permits its customers to enter orders into an exchange's system that 
bypass the Equity Member's trading system and are routed directly to 
the Exchange, including routing through a service bureau or other 
third-party technology provider.
    \83\ This may include utilizing a floor broker and submitting 
the trade to an equities trading floor.
---------------------------------------------------------------------------

    Non-Member third-parties, such as service bureaus and extranets, 
resell the Exchange's connectivity. This indirect connectivity is 
another viable alternative for market participants to trade on the 
Exchange without connecting directly to the Exchange (and thus not pay 
the Exchange's connectivity fees), which alternative is already being 
used by non-Equity Members and further constrains the price that the 
Exchange is able to charge for connectivity and other access fees to 
its market. The Exchange notes that it could, but chooses not to, 
preclude market participants from reselling its connectivity. Unlike 
other exchanges, the Exchange also does not currently assess fees on 
third-party resellers on a per customer basis (i.e., fees based on the 
number of firms that connect to the Exchange indirectly via the third-

[[Page 57991]]

party).\84\ Indeed, the Exchange does not receive any connectivity 
revenue when connectivity is resold by a third-party, which often is 
resold to multiple customers, some of whom are agency broker-dealers 
that have numerous customers of their own.\85\ Particularly, in the 
event that a market participant views the Exchange's direct 
connectivity and access fees as more or less attractive than competing 
markets, that market participant can choose to connect to the Exchange 
indirectly or may choose not to connect to the Exchange and connect 
instead to one or more of the other 15 equities markets. Accordingly, 
the Exchange believes that the proposed fees are fair and reasonable 
and constrained by competitive forces.
---------------------------------------------------------------------------

    \84\ See, e.g., Nasdaq Price List--U.S. Direct Connection and 
Extranet Fees, available at, US Direct-Extranet Connection 
(nasdaqtrader.com); and Securities Exchange Act Release Nos. 74077 
(January 16, 2022), 80 FR 3683 (January 23, 2022) (SR-NASDAQ-2015-
002); and 82037 (November 8, 2022), 82 FR 52953 (November 15, 2022) 
(SR-NASDAQ-2017-114).
    \85\ The Exchange notes that resellers, such as SFTI, are not 
required to publicize, let alone justify or file with the Commission 
their fees, and as such could charge the market participant any fees 
it deems appropriate (including connectivity fees higher than the 
Exchange's connectivity fees), even if such fees would otherwise be 
considered potentially unreasonable or uncompetitive fees.
---------------------------------------------------------------------------

    The Exchange is obligated to regulate its Equity Members and secure 
access to its environment. To properly regulate its Equity Members and 
secure the trading environment, the Exchange takes measures to ensure 
access is monitored and maintained with various controls. Connectivity 
and ports are methods utilized by the Exchange to grant Equity Members 
secure access to communicate with the Exchange and exercise trading 
rights. When a market participant elects to be an Equity Member, and is 
approved for membership by the Exchange, the Equity Member is granted 
trading rights to enter orders and/or quotes into Exchange through 
secure connections.
    Again, there is no legal or regulatory requirement that a market 
participant become an Equity Member of the Exchange, or, if it is an 
Equity Member, to purchase connectivity beyond the one connection that 
is necessary to quote or submit orders on the Exchange. Equity Members 
may freely choose to rely on one or many connections, depending on 
their business model. This is again evidenced by the fact that one MIAX 
Pearl Options Market Maker terminated their MIAX Pearl Options 
membership effective January 1, 2023 as a direct result of the proposed 
connectivity and port fee changes by MIAX Pearl Options. If a market 
participant chooses to become an Equity Member, they may then choose to 
purchase connectivity beyond the one connection that is necessary to 
quote or submit orders on the Exchange. Members may freely choose to 
rely on one or many connections, depending on their business model.
Cost Analysis
    In general, 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 Exchange Act 
requirements that fees be reasonable, equitably allocated, not unfairly 
discriminatory, and not create an undue burden on competition among 
members and markets. In particular, the Exchange believes that each 
exchange should take extra care to be able to demonstrate that these 
fees are based on its costs and reasonable business needs.
    In proposing to charge fees for connectivity and port services, the 
Exchange is especially diligent in assessing those fees in a 
transparent way against its own aggregate costs of providing the 
related service, and in carefully and transparently assessing the 
impact on Equity Members--both generally and in relation to other 
Equity Members, i.e., to assure the fee will not create a financial 
burden on any participant and will not have an undue impact in 
particular on smaller Equity Members and competition among Equity 
Members in general. The Exchange believes that this level of diligence 
and transparency is called for by the requirements of section 19(b)(1) 
under the Act,\86\ and Rule 19b-4 thereunder,\87\ with respect to the 
types of information exchanges should provide when filing fee changes, 
and section 6(b) of the Act,\88\ which requires, among other things, 
that exchange fees be reasonable and equitably allocated,\89\ not 
designed to permit unfair discrimination,\90\ and that they not impose 
a burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\91\ This rule change proposal addresses those 
requirements, and the analysis and data in each of the sections that 
follow are designed to clearly and comprehensively show how they are 
met.\92\ The Exchange reiterates that the legacy exchanges with whom 
the Exchange vigorously competes for order flow and market share, were 
not subject to any such diligence or transparency in setting their 
baseline non-transaction fees, most of which were put in place before 
the Revised Review Process and Staff Guidance.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78s(b)(1).
    \87\ 17 CFR 240.19b-4.
    \88\ 15 U.S.C. 78f(b).
    \89\ 15 U.S.C. 78f(b)(4).
    \90\ 15 U.S.C. 78f(b)(5).
    \91\ 15 U.S.C. 78f(b)(8).
    \92\ See Staff Guidance, supra note 24.
---------------------------------------------------------------------------

    As detailed below, the Exchange recently calculated its aggregate 
annual costs for providing physical 1Gb and 10Gb ULL connectivity to 
the Exchange at $18,331,650 combined ($17,726,799 for 10Gb ULL 
connectivity and $604,851 for 1Gb connectivity) (or approximately 
$1,527,637 per month for combined connectivity costs, rounded to the 
nearest dollar when dividing the combined annual cost by 12 months). 
The Exchange also recently calculated its aggregate annual costs for 
providing FIX and MEO Ports at $3,951,993 combined ($911,998 for FIX 
Ports and $3,039,995 for MEO Ports) (or approximately $329,333 per 
month for combined FIX and MEO Port costs, rounded to the nearest 
dollar when dividing the combined annual cost by 12 months). In order 
to cover a portion of the aggregate costs of providing connectivity to 
its Users (both Equity Members and non-Equity Members \93\) going 
forward, as described below, the Exchange proposes to modify its Fee 
Schedule as described above.
---------------------------------------------------------------------------

    \93\ Types of market participants that obtain connectivity 
services from the Exchange but are not Equity Members include 
service bureaus and extranets. Service bureaus offer technology-
based services to other companies for a fee, including order entry 
services, and thus, may access application sessions on behalf of one 
or more Equity Members. Extranets offer physical connectivity 
services to Equity Members and non-Equity Members.
---------------------------------------------------------------------------

    In 2020, the Exchange completed a study of its aggregate costs to 
produce market data and connectivity (the ``Cost Analysis'').\94\ The 
Cost Analysis required a detailed analysis of the Exchange's aggregate 
baseline costs, including a determination and allocation of costs for 
core services provided by the Exchange--transaction execution, market 
data, membership services, physical connectivity, and port access 
(which provide order entry, cancellation and modification 
functionality, risk functionality, the ability to receive drop copies, 
and other functionality). The Exchange separately divided its costs 
between those costs necessary to deliver each of these core services, 
including infrastructure, software, human resources (i.e., personnel), 
and certain general and

[[Page 57992]]

administrative expenses (``cost drivers'').
---------------------------------------------------------------------------

    \94\ The Exchange frequently updates it Cost Analysis as 
strategic initiatives change, costs increase or decrease, and market 
participant needs and trading activity changes. The Exchange's most 
recent Cost Analysis was conducted ahead of this filing.
---------------------------------------------------------------------------

    As an initial step, the Exchange determined the total cost for the 
Exchange and the affiliated markets for each cost driver as part of its 
2023 budget review process. The 2023 budget review is a company-wide 
process that occurs over the course of many months, includes meetings 
among senior management, department heads, and the Finance Team. Each 
department head is required to send a ``bottom up'' budget to the 
Finance Team allocating costs at the profit and loss account and vendor 
levels for the Exchange and its affiliated markets based on a number of 
factors, including server counts, additional hardware and software 
utilization, current or anticipated functional or non-functional 
development projects, capacity needs, end-of-life or end-of-service 
intervals, number of members, market model (e.g., price time or pro-
rata, simple only or simple and complex markets, auction functionality, 
etc.), which may impact message traffic, individual system 
architectures that impact platform size,\95\ storage needs, dedicated 
infrastructure versus shared infrastructure allocated per platform 
based on the resources required to support each platform, number of 
available connections, and employees allocated time. All of these 
factors result in different allocation percentages among the Exchange 
and its affiliated markets, i.e., the different percentages of the 
overall cost driver allocated to the Exchange and its affiliated 
markets will cause the dollar amount of the overall cost allocated 
among the Exchange and its affiliated markets to also differ. Because 
the Exchange's parent company currently owns and operates four separate 
and distinct marketplaces, the Exchange must determine the costs 
associated with each actual market--as opposed to the Exchange's parent 
company simply concluding that all costs drivers are the same at each 
individual marketplace and dividing total cost by four (4) (evenly for 
each marketplace). Rather, the Exchange's parent company determines an 
accurate cost for each marketplace, which results in different 
allocations and amounts across exchanges for the same cost drivers, due 
to the unique factors of each marketplace as described above. This 
allocation methodology also ensures that no cost would be allocated 
twice or double-counted between the Exchange and its affiliated 
markets. The Finance Team then consolidates the budget and sends it to 
senior management, including the Chief Financial Officer and Chief 
Executive Officer, for review and approval. Next, the budget is 
presented to the Board of Directors and the Finance and Audit 
Committees for each exchange for their approval. The above steps 
encompass the first step of the cost allocation process.
---------------------------------------------------------------------------

    \95\ For example, MIAX Pearl Equities maintains 24 matching 
engines, MIAX Pearl Options maintains 12 matching engines, MIAX 
maintains 24 matching engines and MIAX Emerald maintains 12 matching 
engines.
---------------------------------------------------------------------------

    The next step involves determining what portion of the cost 
allocated to the Exchange pursuant to the above methodology is to be 
allocated to each core service, e.g., connectivity and ports, market 
data, and transaction services. The Exchange and its affiliated markets 
adopted an allocation methodology with thoughtful and consistently 
applied principles to guide how much of a particular cost amount 
allocated to the Exchange should be allocated within the Exchange to 
each core service. This is the final step in the cost allocation 
process and is applied to each of the cost drivers set forth below. For 
instance, fixed costs that are not driven by client activity (e.g., 
message rates), such as data center costs, were allocated more heavily 
to the provision of physical connectivity (60.0% of total expense 
amount allocated to 10Gb ULL connectivity), with smaller allocations to 
FIX Ports (1.2%) and MEO Ports (3.8%), and the remainder to the 
provision of other connectivity, other ports, transaction execution, 
membership services and market data services (35%). This next level of 
the allocation methodology at the individual exchange level also took 
into account factors similar to those set forth under the first step of 
the allocation methodology process described above, to determine the 
appropriate allocation to connectivity or market data versus 
allocations for other services. This allocation methodology was 
developed through an assessment of costs with senior management 
intimately familiar with each area of the Exchange's operations. After 
adopting this allocation methodology, the Exchange then applied an 
allocation of each cost driver to each core service, resulting in the 
cost allocations described below. Each of the below cost allocations is 
unique to the Exchange and represents a percentage of overall cost that 
was allocated to the Exchange pursuant to the initial allocation 
described above.
    By allocating segmented costs to each core service, the Exchange 
was able to estimate by core service the potential margin it might earn 
based on different fee models. The Exchange notes that as a non-listing 
venue it has five primary sources of revenue that it can potentially 
use to fund its operations: transaction fees, fees for connectivity and 
port services, membership fees, regulatory fees, and market data fees. 
Accordingly, the Exchange must cover its expenses from these five 
primary sources of revenue. The Exchange also notes that as a general 
matter each of these sources of revenue is based on services that are 
interdependent. For instance, the Exchange's system for executing 
transactions is dependent on physical hardware and connectivity; only 
Equity Members and parties that they sponsor to participate directly on 
the Exchange may submit orders to the Exchange; many Equity Members 
(but not all) consume market data from the Exchange in order to trade 
on the Exchange; and the Exchange consumes market data from external 
sources in order to comply with regulatory obligations. Accordingly, 
given this interdependence, the allocation of costs to each service or 
revenue source required judgment of the Exchange and was weighted based 
on estimates of the Exchange that the Exchange believes are reasonable, 
as set forth below. While there is no standardized and generally 
accepted methodology for the allocation of an exchange's costs, the 
Exchange's methodology is the result of an extensive review and 
analysis and will be consistently applied going forward for any other 
potential fee proposals. In the absence of the Commission attempting to 
specify a methodology for the allocation of exchanges' interdependent 
costs, the Exchange is left with its best efforts attempt to conduct 
such an allocation in a thoughtful and reasonable manner.
    Through the Exchange's extensive updated Cost Analysis, which was 
again recently further refined, the Exchange analyzed every expense 
item in the Exchange's general expense ledger to determine whether each 
such expense relates to the provision of connectivity and port 
services, and, if such expense did so relate, what portion (or 
percentage) of such expense actually supports the provision of 
connectivity and port services, and thus bears a relationship that is, 
``in nature and closeness,'' directly related to network connectivity 
and port services. In turn, the Exchange allocated certain costs more 
to physical connectivity and others to ports, while certain costs were 
only allocated to such services at a very low percentage or not at all, 
using consistent allocation methodologies as described above. Based on 
this analysis, the Exchange estimates that the aggregate monthly cost 
to provide 1Gb

[[Page 57993]]

and10Gb ULL connectivity, as well as FIX and MEO Ports, is $1,856,970, 
as further detailed below.
    Lastly, the Exchange notes that, based on: (i) the total expense 
amounts contained in this filing (which are 2023 projected expenses), 
and (ii) the total expense amounts contained in the related MIAX Pearl 
Options filing (also 2023 projected expenses), MIAX PEARL, LLC's total 
costs have increased at a greater rate over the last three years than 
the total costs of MIAX PEARL, LLC's affiliated exchanges, MIAX and 
MIAX Emerald. This is also reflected in the total costs reported in 
MIAX PEARL, LLC's Form 1 filings over the last three years, when 
comparing MIAX PEARL, LLC to MIAX PEARL, LLC's affiliated exchanges, 
MIAX and MIAX Emerald. This is primarily because that MIAX PEARL, LLC 
operates two markets, one for options and one for equities, while MIAX 
and MIAX Emerald each operate only one market. This is also due to 
higher current expense for MIAX PEARL, LLC for 2022 and 2023, due to a 
hardware refresh (i.e., replacing old hardware with new equipment) for 
MIAX Pearl Options, as well as higher costs associated with MIAX Pearl 
Equities due to greater development efforts to grow that newer 
marketplace, all of which are discussed in more detail below. MIAX 
PEARL, LLC confirms that there is no double counting of expenses 
between the options and equities platform of MIAX PEARL, LLC; the 
greater expense amounts of MIAX PEARL, LLC (relative to its affiliated 
exchanges, MIAX and MIAX Emerald) is solely attributed to the unique 
factors of MIAX PEARL, LLC discussed above.
Costs Related to Offering Physical 1Gb and 10Gb ULL Connectivity
    The following charts detail the individual line-item costs 
considered by the Exchange to be related to offering physical dedicated 
1Gb and 10Gb ULL connectivity via an unshared network as well as the 
percentage of the Exchange's overall costs that such costs represent 
for each cost driver (e.g., as set forth below, the Exchange allocated 
approximately 47.6% of its overall Human Resources cost to offering 
physical 1Gb and 10Gb ULL connectivity).

                                              10Gb ULL Connectivity
----------------------------------------------------------------------------------------------------------------
                                                             Allocated annual  Allocated monthly
                       Cost drivers                              cost \h\           cost \i\      Percent of all
----------------------------------------------------------------------------------------------------------------
Human Resources...........................................         $5,936,741           $494,728            46.1
Connectivity (external fees, cabling, switches, etc.).....             69,451              5,788            60.0
Internet Services and External Market Data................          1,818,808            151,567            72.5
Data Center...............................................          1,052,797             87,733            60.0
Hardware and Software Maintenance and Licenses............            642,112             53,509            58.0
Depreciation..............................................          3,448,206            287,351            73.6
Allocated Shared Expenses.................................          4,758,684            396,557            48.6
                                                           -----------------------------------------------------
    Total.................................................         17,726,799          1,477,233              54
----------------------------------------------------------------------------------------------------------------
\h\ The Annual Cost includes figures rounded to the nearest dollar.
\i\ The Monthly Cost was determined by dividing the Annual Cost for each line item by twelve (12) months and
  rounding up or down to the nearest dollar.


                                              1Gb ULL Connectivity
----------------------------------------------------------------------------------------------------------------
                                                             Allocated annual  Allocated monthly
                       Cost drivers                              cost \j\           cost \k\      Percent of all
----------------------------------------------------------------------------------------------------------------
Human Resources...........................................           $202,566            $16,880             1.6
Connectivity (external fees, cabling, switches, etc.).....             $2,370               $197            2.0%
Internet Services and External Market Data................             62,059              5,172             2.5
Data Center...............................................             35,922              2,993             2.0
Hardware and Software Maintenance and Licenses............             21,909              1,826             2.0
Depreciation..............................................            117,655              9,805             2.5
Allocated Shared Expenses.................................            162,370             13,531             1.7
                                                           -----------------------------------------------------
    Total.................................................            604,851             50,404             1.8
----------------------------------------------------------------------------------------------------------------
\j\ See supra note h.
\k\ See supra note i.

    Below are additional details regarding each of the line-item costs 
considered by the Exchange to be related to offering physical 1Gb and 
10Gb ULL connectivity. While some costs were attempted to be allocated 
as equally as possible among the Exchange and its affiliated markets, 
the Exchange notes that some of its cost allocation percentages for 
cost drivers differ when compared to the same cost drivers described by 
the Exchange's affiliated markets in their similar proposed fee changes 
for connectivity and ports. This is because MIAX Pearl Equities' cost 
allocation methodology utilizes the actual projected costs of MIAX 
Pearl Equities (which are specific to MIAX Pearl Equities, and are 
independent of the costs projected and utilized by MIAX Pearl Equities' 
affiliated markets) to determine its actual costs, which may vary 
across the Exchange and its affiliated markets based on factors that 
are unique to each marketplace. The Exchange provides additional 
explanation below (including the reason for the deviation) for the 
significant differences.
Human Resources
    The Exchange notes that it and its affiliated markets have 184 
employees (excluding employees at non-options/equities exchange 
subsidiaries of Miami International Holdings, Inc. (``MIH''), the 
holding company of the Exchange and its affiliated markets), and each 
department leader has direct knowledge of the time spent by each 
employee with respect to the various tasks necessary to

[[Page 57994]]

operate the Exchange. Specifically, twice a year, and as needed with 
additional new hires and new project initiatives, in consultation with 
employees as needed, managers and department heads assign a percentage 
of time to every employee and then allocate that time amongst the 
Exchange and its affiliated markets to determine each market's 
individual Human Resources expense. Then, managers and department heads 
assign a percentage of each employee's time allocated to the Exchange 
into buckets including network connectivity, ports, market data, and 
other exchange services. This process ensures that every employee is 
100% allocated, ensuring there is no double counting between the 
Exchange and its affiliated markets.
    For personnel costs (Human Resources), the Exchange calculated an 
allocation of employee time for employees whose functions include 
providing and maintaining physical connectivity and performance thereof 
(primarily the Exchange's network infrastructure team, which spends 
most of their time performing functions necessary to provide physical 
connectivity). As described more fully above, the Exchange's parent 
company allocates costs to the Exchange and its affiliated markets and 
then a portion of the Human Resources costs allocated to the Exchange 
is then allocated to connectivity. From that portion allocated to the 
Exchange that applied to connectivity, the Exchange then allocated 
weighted average percentages of 58% for 10Gb ULL connectivity and 2.0% 
for 1Gb connectivity of each employee's time from the above group. The 
Exchange also allocated Human Resources costs to provide physical 
connectivity to a limited subset of personnel with ancillary functions 
related to establishing and maintaining such connectivity (such as 
information security, sales, membership, and finance personnel). The 
Exchange allocated cost on an employee-by-employee basis (i.e., only 
including those personnel who support functions related to providing 
physical connectivity) and then applied a smaller allocation to such 
employees (less than 37%).
    The estimates of Human Resources cost were therefore determined by 
consulting with such department leaders, determining which employees 
are involved in tasks related to providing physical connectivity, and 
confirming that the proposed allocations were reasonable based on an 
understanding of the percentage of time such employees devote to those 
tasks. This includes personnel from the Exchange departments that are 
predominately involved in providing 1Gb and 10Gb ULL connectivity: 
Business Systems Development, Trading Systems Development, Systems 
Operations and Network Monitoring, Network and Data Center Operations, 
Listings, Trading Operations, and Project Management. Again, the 
Exchange allocated 58% for 10Gb ULL connectivity and 2.0% for 1Gb ULL 
connectivity of each of their employee's time assigned to the Exchange 
for 10Gb ULL connectivity, as stated above. Employees from these 
departments perform numerous functions to support 10Gb ULL 
connectivity, such as the installation, re-location, configuration, and 
maintenance of 10Gb ULL connections and the hardware they access. This 
hardware includes servers, routers, switches, firewalls, and monitoring 
devices. These employees also perform software upgrades, vulnerability 
assessments, remediation and patch installs, equipment configuration 
and hardening, as well as performance and capacity management. These 
employees also engage in research and development analysis for 
equipment and software supporting 10Gb ULL connectivity and design, and 
support the development and on-going maintenance of internally-
developed applications as well as data capture and analysis, and Member 
and internal Exchange reports related to network and system 
performance. The above list of employee functions is not exhaustive of 
all the functions performed by Exchange employees to support 10Gb ULL 
connectivity, but illustrates the breath of functions those employees 
perform in support of the above cost and time allocations.
    Lastly, the Exchange notes that senior level executives' time was 
only allocated to the 10Gb ULL connectivity related Human Resources 
costs to the extent that they are involved in overseeing tasks related 
to providing physical connectivity. The Human Resources cost was 
calculated using a blended rate of compensation reflecting salary, 
equity and bonus compensation, benefits, payroll taxes, and 401(k) 
matching contributions.
    Lastly, the Exchange notes that the above allocation for 10Gb ULL 
connectivity is greater than its affiliate options exchanges as MIAX 
Pearl Equities allocated 46.1% of its Human Resources expense towards 
10Gb ULL connectivity, while MIAX, MIAX Pearl Options and MIAX Emerald 
allocated 25%, 26.3% and 28%, respectively, to the same category of 
expense. This difference is due to meaningfully more current and 
anticipated business and technology initiatives dedicated to MIAX Pearl 
Equities than its affiliate options exchanges at the time of this 
filing. These initiatives include: enhancements to routing options, 
expanding the available order types, adding direct market data 
connectivity to competing exchanges, and adopting additional risk 
controls.\96\ MIAX Pearl Equities is a relatively new market (launched 
in September of 2020), and, as a result, more personnel are allocated 
to work on various business initiatives and enhancements to help the 
market grow, add new functionality, and expand its product offerings. 
These technology changes directly impact the Exchange's interface 
specifications and matching engine which, in turn, impacts connectivity 
by requiring additional coding, testing, and other updates necessary to 
accommodate the above initiatives.
---------------------------------------------------------------------------

    \96\ See, e.g., Securities Exchange Act Release Nos. 94301 
(February 23, 2022), 87 FR 11739 (March 2, 2022) (SR-PEARL-2022-06) 
(Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Amend Rule 2617(b) To Adopt Two New Routing Options, and 
To Make Related Changes and Clarifications to Rules 2614(a)(2)(B) 
and 2617(b)(2)); 94851 (May 4, 2022), 87 FR 28077 (May 10, 2022) 
(SR-PEARL-2022-15) (Notice of Filing and Immediate Effectiveness of 
a Proposed Rule Change To Adopt Exchange Rule 532, Order Price 
Protection Mechanisms and Risk Controls); 95298 (July 15, 2022), 87 
FR 43579 (July 21, 2022) (SR-PEARL-2022-29) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC 
To Amend the Route to Primary Auction Routing Option Under Exchange 
Rule 2617(b)(5)(B)); 95679 (September 6, 2022), 87 FR 55866 
(September 12, 2022) (SR-PEARL-2022-34) (Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change To Amend Exchange 
Rule 2614, Orders and Order Instructions, To Adopt the Primary Peg 
Order Type); 96205 (November 1, 2022), 87 FR 67080 (November 7, 
2022) (SR-PEARL-2022-43) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend Rule 2614, Orders 
and Order Instructions and Rule 2618, Risk Settings and Trading Risk 
Metrics To Enhance Existing Risk Controls); 96905 (February 13, 
2023), 88 FR 10391 (February 17, 2023) (SR-PEARL-2023-03) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Exchange Rule 2618 To Add Optional Risk Control Settings); 
97236 (March 31, 2023), 88 FR 20597 (April 6, 2023) (SR-PEARL-2023-
15) (Notice of Filing and Immediate Effectiveness of a Proposed Rule 
Change To Amend Exchange Rules 2617 and 2626 Regarding Retail Orders 
Routed Pursuant to the Route to Primary Auction Routing Option).
---------------------------------------------------------------------------

Connectivity (External Fees, Cabling, Switches, etc.)
    The Connectivity cost driver includes external fees paid to connect 
to other exchanges and third parties, cabling and switches required to 
operate the Exchange. The Connectivity cost driver is more narrowly 
focused on technology used to complete connections to the Exchange and 
to connect to external markets. The Exchange notes that its 
connectivity to external markets is required in order to receive market 
data

[[Page 57995]]

to run the Exchange's matching engine and basic operations compliant 
with existing regulations, primarily Regulation NMS.
    The Exchange relies on various connectivity providers for 
connectivity to the entire U.S. equities industry, and infrastructure 
services for critical components of the network that are necessary to 
provide and maintain its System Networks and access to its System 
Networks via 1Gb and 10Gb ULL connectivity. Specifically, the Exchange 
utilizes connectivity providers to connect to other national securities 
exchanges, the NASDAQ UTP and CTA/CQ Plans. The Exchange understands 
that these service providers provide services to most, if not all, of 
the other U.S. exchanges and other market participants. Connectivity 
provided by these service providers is critical to the Exchanges daily 
operations and performance of its System Networks to which market 
participants connect to via 10Gb ULL connectivity. Without these 
services providers, the Exchange would not be able to connect to other 
national securities exchanges, market data providers, or the NASDAQ UTP 
and CTA/CQ Plans and, therefore, would not be able to operate and 
support its System Networks. The Exchange does not employ a separate 
fee to cover its connectivity provider expense and recoups that 
expense, in part, by charging for 1Gb and 10Gb ULL connectivity.
Internet Services and External Market Data
    The next cost driver consists of internet Services and external 
market data. Internet services includes third-party service providers 
that provide the internet, fiber and bandwidth connections between the 
Exchange's networks, primary and secondary data centers, and office 
locations in Princeton and Miami.
    External market data includes fees paid to third parties, including 
other exchanges, to receive and consume market data from other markets. 
The Exchange included external market data fees to the provision of 
physical connectivity as such market data is necessary here to offer 
certain services related to such connectivity, such as certain risk 
checks that are performed prior to execution, and checking for other 
conditions (e.g., limit order price protection, trading collars).\97\ 
Thus, as market data from other exchanges is consumed at the matching 
engine level, (to which physical connectivity provides access to) in 
order to validate orders before additional entering the matching engine 
or being executed, the Exchange believes it is reasonable to allocate 
an amount of such costs to 1Gb ULL and 10Gb ULL connectivity.
---------------------------------------------------------------------------

    \97\ This allocation may differ from MIAX Pearl Options due to 
the different amount of proprietary market data feeds purchased by 
MIAX Pearl Equities compared to MIAX Pearl Options. For options 
market data, MIAX Pearl Options primarily relies on data purchased 
from OPRA. For equities market data, MIAX Pearl Equities does not 
solely rely on data purchased from the consolidated tape plans 
(e.g., Nasdaq UTP, CTA, and CQ plans), but rather purchases multiple 
proprietary market data feeds from other equities exchanges. See, 
e.g., Exchange Rule 2613 (setting forth the data feeds MIAX Pearl 
Equities subscribes to for each equities exchange and trading 
center).
---------------------------------------------------------------------------

    The Exchange relies on content service providers for data feeds for 
the entire U.S. equities industry, as well as content for critical 
components of the network that are necessary to provide and maintain 
its System Networks and access to its System Networks via 10Gb ULL 
connectivity. Specifically, the Exchange utilizes content service 
providers to receive market data from Nasdaq UTP, CTA and CQ Plans, as 
well as from other exchanges and market data providers. The Exchange 
understands that these service providers provide services to most, if 
not all, of the other U.S. exchanges and other market participants. 
Market data provided these service providers and competing exchanges is 
critical to the Exchange's daily operations and performance of its 
System Networks to which market participants connect to via 1Gb ULL and 
10Gb ULL connectivity. Without these services providers, the Exchange 
would not be able to receive market data and, therefore, would not be 
able to operate and support its System Networks. The Exchange does not 
employ a separate fee to cover its content service provider expense and 
recoups that expense, in part, by charging for 1Gb ULL and 10Gb ULL 
connectivity.
    Lastly, the Exchange notes that the actual dollar amounts allocated 
as part of the second step of the 2023 budget process differ among the 
Exchange and its affiliated markets for the internet Services and 
External Market Data cost driver, even though, but for MIAX Emerald, 
the allocation percentages are generally consistent across markets 
(e.g., MIAX Emerald, MIAX, MIAX Pearl Options and MIAX Pearl Equities 
allocated 84.8%, 73.3%, 73.3% and 72.5%, respectively, to the same cost 
driver). This is because: (i) a different percentage of the overall 
internet Services and External Market Data cost driver was allocated to 
MIAX Emerald and its affiliated markets due to the factors set forth 
under the first step of the 2023 budget review process described above 
(unique technical architecture, market structure, and business 
requirements of each marketplace); and (ii) MIAX Emerald itself 
allocated a larger portion of this cost driver to 10Gb ULL connectivity 
because of recent initiatives to improve the latency and determinism of 
its systems. The Exchange notes while the percentage MIAX Emerald 
allocated to the internet Services and External Market Data cost driver 
is greater than the Exchange and its other affiliated markets, the 
overall dollar amount allocated to the Exchange under the initial step 
of the 2023 budget process is lower than its affiliated markets.
Data Center
    Data Center costs includes an allocation of the costs the Exchange 
incurs to provide physical connectivity in the third-party data centers 
where it maintains its equipment (such as dedicated space, security 
services, cooling and power). The Exchange notes that it does not own 
the Primary Data Center or the Secondary Data Center, but instead, 
leases space in data centers operated by third parties. The Exchange 
has allocated a high percentage of the Data Center cost (62%) to 
physical 1Gb and 10Gb ULL connectivity because the third-party data 
centers and the Exchange's physical equipment contained therein is the 
most direct cost in providing physical access to the Exchange. In other 
words, for the Exchange to operate in a dedicated space with 
connectivity by market participants to a physical trading platform, the 
data centers are a very tangible cost, and in turn, if the Exchange did 
not maintain such a presence then physical connectivity would be of no 
value to market participants.
    Lastly, MIAX Emerald, MIAX, MIAX Pearl Options and MIAX Pearl 
Equities allocated 61.9%, 60.60%, 60.60% and 60%, respectively, to the 
Data Center cost driver. However, MIAX Pearl Equities was allocated a 
larger dollar amount under the first step of the 2023 budget process. 
This resulted in MIAX Pearl Equities allocating a larger dollar amount 
to its Data Center cost driver than its affiliated options markets, 
despite nearly identical percentage allocations. The dollar amount of 
MIAX Pearl Equities' Data Center cost driver is higher than its 
affiliated options markets due to the factors set forth under the first 
step of the 2023 budget review process described above (unique 
technical architecture, market structure, and business requirements of 
each

[[Page 57996]]

marketplace). As described herein, MIAX Pearl Equities connects 
directly to multiple individual equities exchanges for trading and 
market data. This, in turn, requires additional hardware and software 
requiring an increased data center footprint. MIAX Pearl Equities also 
maintains an additional gateway to support market participant's access 
demands and maintains 24 matching engines, double the number of 
matching engines on MIAX Emerald and MIAX Pearl Options.\98\ The 
additional gateway coupled with the higher number of matching engines 
results in higher data center costs.
---------------------------------------------------------------------------

    \98\ See supra note 95. MIAX Pearl Options also provides an 
additional gateway but only maintains 12 matching engines. MIAX and 
MIAX Emerald do not provide an additional gateway and maintain 24 
and 12 matching engines, respectively.
---------------------------------------------------------------------------

Hardware and Software Maintenance and Licenses
    Hardware and Software Licenses includes hardware and software 
licenses used to operate and monitor physical assets necessary to offer 
physical connectivity to the Exchange.\99\ The Exchange notes that this 
allocation is greater than MIAX and MIAX Emerald options exchanges as 
MIAX Pearl Equities allocated 58% of its Hardware and Software 
Maintenance and License expense towards 10Gb ULL connectivity, while 
MIAX and MIAX Emerald allocated 49.8% and 50.9%, respectively, to the 
same category of expense. This difference in allocation is because MIAX 
Pearl Equities maintains software licenses that are unique to its 
trading platform and used only for the trading of equity securities. 
The cost for these licenses cannot be shared with MIAX Pearl Equities' 
affiliated options markets because each of those platforms trade only 
options, not equities. MIAX Pearl Equities' affiliates are able to 
share the cost of many of their software licenses among the multiple 
options platforms (thus lowering the cost to each individual options 
platform), whereas MIAX Pearl Equities cannot share such cost and, 
therefore, bears the entire cost. Also, MIAX Pearl Options allocated a 
higher percentage of the same category of expense (58.6%) towards its 
Hardware and Software Maintenance and License expense for 10Gb ULL 
connectivity, which MIAX Pearl Options explains in its own proposal to 
amend its 10Gb ULL connectivity fees.
---------------------------------------------------------------------------

    \99\ This allocation may be greater than the Exchange's 
affiliated markets, specifically MIAX and MIAX Emerald, because, 
unlike MIAX and MIAX Emerald, MIAX Pearl Equities and MIAX Pearl 
Options both maintain an additional gateway to accommodate their 
Members' and Equity Members' access and connectivity needs. This 
added gateway contributes to the difference in allocation 
percentages between MIAX Pearl Equities and MIAX Pearl Options and 
MIAX and MIAX Emerald.
---------------------------------------------------------------------------

Depreciation
    All physical assets, software, and hardware used to provide 1Gb ULL 
and 10Gb ULL connectivity, which also includes assets used for testing 
and monitoring of Exchange infrastructure, were valued at cost, and 
depreciated or leased over periods ranging from three to five years. 
Thus, the depreciation cost primarily relates to servers necessary to 
operate the Exchange, some of which are owned by the Exchange and some 
of which are leased by the Exchange in order to allow efficient 
periodic technology refreshes. The Exchange also included in the 
Depreciation cost driver certain budgeted improvements that the 
Exchange intends to capitalize and depreciate with respect to 10Gb ULL 
connectivity in the near-term. As with the other allocated costs in the 
Exchange's updated Cost Analysis, the Depreciation cost was therefore 
narrowly tailored to depreciation related to 10Gb ULL connectivity. As 
noted above, the Exchange allocated 73.6% of its allocated depreciation 
costs to providing physical 10Gb ULL connectivity and 2.5% of all 
depreciation costs to providing 1Gb connectivity. The Exchange also 
notes that this allocation differs from its affiliated markets due to a 
number of factors, such as the age of physical assets and software 
(e.g., older physical assets and software were previously depreciated 
and removed from the allocation), or certain system enhancements that 
required new physical assets and software, thus providing a higher 
contribution to the depreciated cost.
    Lastly, the Exchange notes that this allocation is greater than its 
affiliate options exchanges as MIAX Pearl Equities allocated 73.6% of 
its Depreciation expense towards 10Gb ULL connectivity, while MIAX, 
MIAX Pearl Options and MIAX Emerald allocated 61.6%, 58.2% and 63.8%, 
respectively, to the same category of expense. This is due to MIAX 
Pearl Equities being a newer market and having newer physical assets 
and software subject to depreciation than its affiliate options 
exchanges. The Exchange's affiliate options exchanges are older markets 
that have more software and equipment that have been fully depreciated 
when compared to the newer software and hardware currently being 
depreciated by MIAX Pearl Equities at higher rates.
Allocated Shared Expenses
    Finally, as with other exchange products and services, a portion of 
general shared expenses was allocated to overall physical connectivity 
costs. These general shared costs are integral to exchange operations, 
including its ability to provide physical connectivity. Costs included 
in general shared expenses include office space and office expenses 
(e.g., occupancy and overhead expenses), utilities, recruiting and 
training, marketing and advertising costs, professional fees for legal, 
tax and accounting services (including external and internal audit 
expenses), and telecommunications. Similarly, the cost of paying 
directors to serve on the Exchange's Board of Directors is also 
included in the Exchange's general shared expense cost driver.\100\ 
These general shared expenses are incurred by the Exchange's parent 
company, MIH, as a direct result of operating the Exchange and its 
affiliated markets.
---------------------------------------------------------------------------

    \100\ The Exchange notes that MEMX allocated a precise amount of 
10% of the overall cost for directors to providing physical 
connectivity. The Exchange does not calculate is expenses at that 
granular a level. Instead, director costs are included as part of 
the overall general allocation.
---------------------------------------------------------------------------

    The Exchange employed a process to determine a reasonable 
percentage to allocate general shared expenses to 10Gb ULL connectivity 
pursuant to its multi-layered allocation process. First, general 
expenses were allocated among the Exchange and affiliated markets as 
described above. Then, the general shared expense assigned to the 
Exchange was allocated across core services of the Exchange, including 
connectivity. Then, these costs were further allocated to sub-
categories within the final categories, i.e., 10Gb ULL connectivity as 
a sub-category of connectivity. In determining the percentage of 
general shared expenses allocated to connectivity that ultimately apply 
to 10Gb ULL connectivity, the Exchange looked at the percentage 
allocations of each of the cost drivers and determined a reasonable 
allocation percentage. The Exchange also held meetings with senior 
management, department heads, and the Finance Team to determine the 
proper amount of the shared general expense to allocate to 10Gb ULL 
connectivity. The Exchange, therefore, believes it is reasonable to 
assign an allocation, in the range of allocations for other cost 
drivers, while continuing to ensure that this expense is only allocated 
once. Again, the general shared expenses are incurred by the Exchange's 
parent company as a result of operating the Exchange and its affiliated 
markets and it is therefore

[[Page 57997]]

reasonable to allocate a percentage of those expenses to the Exchange 
and ultimately to specific product offerings such as 10Gb ULL 
connectivity.
    The Exchange notes that the 50% allocation of general shared 
expenses for physical 10Gb ULL connectivity is higher than that 
allocated to general shared expenses for MEO and FIX Ports. This is 
based on its allocation methodology that weighted costs attributable to 
each core service. While physical connectivity has several areas where 
certain tangible costs are heavily weighted towards providing such 
service (e.g., Data Center, as described above), FIX and MEO Ports do 
not require as many broad or indirect resources as other core services.
* * * * *
Approximate Cost Per 1Gb ULL and 10Gb ULL Connection Per Month
    After determining the approximate allocated monthly cost related to 
10Gb connectivity, the, total monthly cost for 10Gb ULL connectivity of 
$1,477,233 was divided by the number of physical 10Gb ULL connections 
the Exchange maintained at the time that proposed pricing was 
determined (90), to arrive at a cost of approximately $16,414 per 
month, per physical 10Gb ULL connection. The total monthly cost for 1Gb 
connectivity of $50,404 was divided by the number of physical 1Gb 
connections the Exchange maintained at the time that proposed pricing 
was determined (8), to arrive at a cost of approximately $6,301 per 
month, per physical 1Gb connection. Due to the nature of this 
particular cost, this allocation methodology results in an allocation 
among the Exchange and its affiliated markets based on set quantifiable 
criteria, i.e., actual number of 1Gb ULL and 10Gb ULL connections.
* * * * *
Costs Related to Offering FIX and MEO Ports
    The following chart details the individual line-item costs 
considered by the Exchange to be related to offering FIX and MEO Ports 
as well as the percentage of the Exchange's overall costs such costs 
represent for such area (e.g., as set forth below, the Exchange 
allocated approximately 22.4% of its overall Human Resources cost to 
offering FIX and MEO Ports).

                                                    FIX Ports
----------------------------------------------------------------------------------------------------------------
                                                             Allocated annual  Allocated monthly
                       Cost drivers                              cost \l\           cost \m\      Percent of all
----------------------------------------------------------------------------------------------------------------
Human Resources...........................................           $665,726            $55,476             5.2
Connectivity (external fees, cabling, switches, etc.).....               $535                $45             0.5
Internet Services and External Market Data................             11,574                965             0.5
Data Center...............................................             20,262              1,689             1.2
Hardware and Software Maintenance and Licenses............              5,108                426             0.5
Depreciation..............................................             92,114              7,676             2.0
Allocated Shared Expenses.................................            116,679              9,723             1.2
                                                           -----------------------------------------------------
    Total.................................................            911,998             76,000             2.8
----------------------------------------------------------------------------------------------------------------
\l \ See supra note h (describing rounding of Annual Costs).
\m\ See supra note i (describing rounding of Monthly Costs based on annual costs).


                                                    MEO Ports
----------------------------------------------------------------------------------------------------------------
                                                             Allocated annual  Allocated monthly
                       Cost drivers                              cost \n\          cost [deg]     Percent of all
----------------------------------------------------------------------------------------------------------------
Human Resources...........................................         $2,219,088           $184,924            17.2
Connectivity (external fees, cabling, switches, etc.).....              1,782                149             1.5
Internet Services and External Market Data................             38,582              3,215             1.5
Data Center...............................................             67,538              5,628             3.8
Hardware and Software Maintenance and Licenses............             17,026              1,419             1.5
Depreciation..............................................            307,048             25,587             6.6
Allocated Shared Expenses.................................            388,931             32,411             4.0
                                                           -----------------------------------------------------
    Total.................................................          3,039,995            253,333             9.3
----------------------------------------------------------------------------------------------------------------
\n\ See supra note h (describing rounding of Annual Costs). The Exchange notes that costs to provide MEO Ports
  are higher than the Exchange's costs to provide FIX Ports because it is more expensive to maintain and support
  the MEO network due to its high performance capabilities and supporting infrastructure (including employee
  support). The MEO interface is a customizable binary interface that the Exchange developed in-house and
  maintains on its own. The FIX interface is the industry standard for simple order entry, which requires less
  development, maintenance, and support than the MEO interface. The MEO interface provides best-in-class system
  throughput and capacity. Users of MEO Ports, which are primarily Equity Market Makers, consume the most
  bandwidth and resources of the network via MEO Ports. 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, resulting in greater cost to provide and maintain MEO ports.
\o \ See supra note i (describing rounding of Monthly Costs based on annual costs).

    Below are additional details regarding each of the line-item costs 
considered by the Exchange to be related to offering FIX and MEO Ports. 
While some costs were attempted to be allocated as equally as possible 
among the Exchange and its affiliated markets, the Exchange notes that 
some of its cost allocation percentages for certain cost drivers differ 
when compared to the same cost drivers for the Exchange's affiliated 
markets in their similar proposed fee changes for connectivity and 
ports. This is because the Exchange's cost allocation methodology 
utilizes the actual projected costs of the Exchange (which are specific 
to the Exchange, and are independent of the costs projected and 
utilized by the Exchange's affiliated markets) to determine its actual 
costs, which may vary across the Exchange and its affiliated markets 
based on factors that are unique to each marketplace. The Exchange 
provides additional explanation below (including the reason for the 
deviation) for the significant differences.

[[Page 57998]]

Human Resources
    With respect to FIX and MEO Ports, the Exchange calculated Human 
Resources cost by taking an allocation of employee time for employees 
whose functions include providing FIX and MEO Ports and maintaining 
performance thereof (including a broader range of employees such as 
technical operations personnel, market operations personnel, and 
software engineering personnel) as well as a limited subset of 
personnel with ancillary functions related to maintaining such 
connectivity (such as sales, membership, and finance personnel). Just 
as described above for 10Gb ULL connectivity, the estimates of Human 
Resources cost were again determined by consulting with department 
leaders, determining which employees are involved in tasks related to 
providing FIX and MEO Ports and maintaining performance thereof, and 
confirming that the proposed allocations were reasonable based on an 
understanding of the percentage of their time such employees devote to 
tasks related to providing FIX and MEO Ports and maintaining 
performance thereof. This includes personnel from the following 
Exchange departments that are predominately involved in providing FIX 
and MEO Ports: Business Systems Development, Trading Systems 
Development, Systems Operations and Network Monitoring, Network and 
Data Center Operations, Listings, Trading Operations, and Project 
Management. The Exchange notes that senior level executives were 
allocated Human Resources costs to the extent they are involved in 
overseeing tasks specifically related to providing Full Service MEO 
Ports. Senior level executives' were only allocated Human Resources 
costs to the extent that they are involved in managing personnel 
responsible for tasks related to providing FIX and MEO Ports. The Human 
Resources cost was again calculated using a blended rate of 
compensation reflecting salary, equity and bonus compensation, 
benefits, payroll taxes, and 401(k) matching contributions.
    Lastly, the Exchange notes that the Human Resource allocation for 
MEO Ports is greater than its Human Resource allocation for FIX Ports 
as MIAX Pearl Equities allocated 5.2% of its Human Resource expense 
towards FIX Ports and 17.2% of its Human Resource expense towards MEO 
Ports. This is because the MEO interface is a customized binary 
interface that the Exchange developed in-house and maintains on its 
own. The FIX interface is the industry standard for simple order entry 
which requires less development, maintenance, and support than the MEO 
interface. The MEO interface is performance oriented and designed to 
meet the needs of more latency sensitive Equity Members. Due to the in-
house development of the MEO interface, the Exchange was required to 
expend more internal personnel to support the MEO interface than the 
FIX interface. Because of the materially higher cost associated with 
maintaining and supporting MEO Ports versus FIX Ports, the Exchange 
allocates a materially higher percentage of Human Resource expense to 
MEO Ports versus FIX Ports.
Connectivity (external fees, cabling, switches, etc.)
    The Connectivity cost driver includes external fees paid to connect 
to other exchanges, cabling and switches, as described above.
Internet Services and External Market Data
    The next cost driver consists of internet services and external 
market data. Internet services includes third-party service providers 
that provide the internet, fiber and bandwidth connections between the 
Exchange's networks, primary and secondary data centers, and office 
locations in Princeton and Miami. For purposes of FIX and MEO Ports, 
the Exchange also includes a portion of its costs related to external 
market data. External Market Data includes fees paid to third parties, 
including other exchanges, to receive and consume market data from 
other markets. The Exchange includes external market data fees to the 
provision of FIX and MEO Ports as such market data is also necessary 
here (in addition to physical connectivity) to offer certain services 
related to such ports, such as validating orders on entry against the 
national best bid and national best offer and checking for other 
conditions (e.g., whether a symbol is halted or subject to a short sale 
circuit breaker).\101\ Thus, as market data from other exchanges is 
consumed at the port level in order to validate orders before 
additional processing occurs with respect to such orders, the Exchange 
believes it is reasonable to allocate a small amount of such costs to 
FIX and MEO Ports.
---------------------------------------------------------------------------

    \101\ This allocation may differ from MIAX Pearl Options due to 
the different amount of proprietary market data feeds the Exchange 
purchases for its options and equities trading platforms. MIAX Pearl 
Options primarily relies on data purchased from OPRA. MIAX Pearl 
Equities does not solely rely on data purchased from the 
consolidated tape plans (e.g., Nasdaq UTP, CTA, and CQ plans), but 
rather purchases multiple proprietary market data feeds from other 
equities exchanges. See, e.g., Exchange Rule 2613 (setting forth the 
data feeds the Exchange subscribes to for each equities exchange and 
trading center). The Exchange separately notes that MEMX separately 
allocated 7.5% of its external market data costs to providing 
physical connectivity.
---------------------------------------------------------------------------

Data Center
    Data Center costs includes an allocation of the costs the Exchange 
incurs to provide physical connectivity in the third-party data centers 
where it maintains its equipment as well as related costs (the Exchange 
does not own the Primary Data Center or the Secondary Data Center, but 
instead, leases space in data centers operated by third parties).
Hardware and Software Maintenance and Licenses
    Hardware and Software Licenses includes hardware and software 
licenses used to monitor the health of the order entry services 
provided by the Exchange, as described above.
Depreciation
    The vast majority of the software the Exchange uses to provide FIX 
and MEO Ports has been developed in-house and the cost of such 
development, which takes place over an extended period of time and 
includes not just development work, but also quality assurance and 
testing to ensure the software works as intended, is depreciated over 
time once the software is activated in the production environment. 
Hardware used to provide FIX and MEO Ports includes equipment used for 
testing and monitoring of order entry infrastructure and other physical 
equipment the Exchange purchased and is also depreciated over time.
    All hardware and software, which also includes assets used for 
testing and monitoring of order entry infrastructure, were valued at 
cost, depreciated or leased over periods ranging from three to five 
years. Thus, the depreciation cost primarily relates to servers 
necessary to operate the Exchange, some of which is owned by the 
Exchange and some of which is leased by the Exchange in order to allow 
efficient periodic technology refreshes. The Exchange allocated 8.6% of 
all depreciation costs to providing FIX and MEO Ports. The Exchange 
notes that this allocation differs from its affiliated markets due to a 
number of factors, such as the age of physical assets and software 
(e.g., older physical assets and software were previously depreciated 
and removed from the allocation), or certain system enhancements that 
required new physical assets and software, thus providing a higher 
contribution to the depreciated cost.

[[Page 57999]]

    Lastly, the Exchange notes that the Depreciation allocation for MEO 
Ports is greater than the Depreciation allocation for FIX Ports as MIAX 
Pearl Equities allocated 2.00% of its Depreciation expense towards FIX 
Ports and 6.60% of its Depreciation expense towards MEO Ports. As 
discussed above, this is because the MEO interface is a customized 
binary interface that the Exchange developed in-house and maintains on 
its own. The FIX interface is the industry standard for simple order 
entry which requires less development, maintenance, and support than 
the MEO interface. The Exchange maintains more dedicated hardware per 
port for the MEO interface compared to the FIX interface; MEO Ports sit 
on their own core server, whereas for the FIX interface, three (3) to 
five (5) connections may go onto a single server. As a result, the MEO 
interface is supported by more dedicated in-house hardware and software 
than the FIX interface that is subject to depreciation. Thus, there is 
a greater amount of equipment supporting the MEO interface than the FIX 
interface, resulting in higher depreciation costs than the FIX 
interface.
Allocated Shared Expenses
    Finally, a portion of general shared expenses was allocated to 
overall FIX and MEO Ports costs as without these general shared costs 
the Exchange would not be able to operate in the manner that it does 
and provide application sessions. The costs included in general shared 
expenses include general expenses of the Exchange, including office 
space and office expenses (e.g., occupancy and overhead expenses), 
utilities, recruiting and training, marketing and advertising costs, 
professional fees for legal, tax and accounting services (including 
external and internal audit expenses), and telecommunications costs. 
The Exchange again notes that the cost of paying directors to serve on 
its Board of Directors is included in the calculation of Allocated 
Shared Expenses, and thus a portion of such overall cost amounting to 
less than 20% of the overall cost for directors was allocated to 
providing FIX and MEO Ports. The Exchange notes that the 5.2% 
allocation of general shared expenses for FIX and MEO Ports is lower 
than that allocated to general shared expenses for physical 
connectivity based on its allocation methodology that weighted costs 
attributable to each Core Service based on an understanding of each 
area. While FIX and MEO Ports have several areas where certain tangible 
costs are heavily weighted towards providing such service (e.g., Data 
Centers, as described above), 1Gb and 10Gb ULL connectivity requires a 
broader level of support from Exchange personnel in different areas, 
which in turn leads to a broader general level of cost to the Exchange.
    Lastly, the Exchange notes that the Allocated Shared Expense 
allocation for MEO Ports is greater than the same allocation for FIX 
Ports as MIAX Pearl Equities allocated 1.20% of its Allocated Shared 
Expense towards FIX Ports and 4.00% of its Allocated Shared Expense 
towards MEO Ports. As discussed above, this is because the MEO 
interface is a customized binary interface that the Exchange developed 
in-house and maintains on its own. The FIX interface is the industry 
standard for simple order entry which requires less development, 
maintenance, and support than the MEO interface. The MEO interface is 
performance oriented and designed to meet the needs of more latency 
sensitive Equity Members. This required more internal personnel and 
resources to support than the FIX interface. Because of the materially 
higher cost associated with maintaining and supporting MEO Ports versus 
FIX Ports, the Exchange allocates a materially higher percentage of 
Allocated Shared expense to MEO Ports versus FIX Ports, which is a less 
complex, standardized solution.
* * * * *
Approximate Cost Per FIX and MEO Port Per Month
    The total monthly cost allocated to FIX Ports of $76,000 was 
divided by the number of chargeable FIX Ports the Exchange maintained 
at the time that proposed pricing was determined (142), to arrive at a 
cost of approximately $535 per month, per FIX Port (rounded to the 
nearest dollar when dividing the approximate monthly cost by the number 
of FIX Ports). The total monthly cost allocated to MEO Ports of 
$253,333 was divided by the number of chargeable MEO Ports the Exchange 
maintained at the time that proposed pricing was determined (336), to 
arrive at a cost of approximately $754 per month, per MEO Port (rounded 
to the nearest dollar when dividing the approximate monthly cost by the 
number of MEO Ports).
* * * * *
Cost Analysis--Additional Discussion
    In conducting its Cost Analysis, the Exchange did not allocate any 
of its expenses in full to any core services (including physical 
connectivity or FIX and MEO Ports) and did not double- count any 
expenses. Instead, as described above, the Exchange allocated 
applicable cost drivers across its core services and used the same Cost 
Analysis to form the basis of this proposal and the filings the 
Exchange submitted proposing fees for proprietary data feeds offered by 
the Exchange. For instance, in calculating the Human Resources expenses 
to be allocated to physical connections based upon the above described 
methodology, the Exchange has a team of employees dedicated to network 
infrastructure and with respect to such employees the Exchange 
allocated network infrastructure personnel with a high percentage of 
the cost of such personnel (60%) to 1Gb and 10Gb ULL connectivity given 
their focus on functions necessary to provide physical connections. The 
salaries of those same personnel were allocated only 25% to FIX and MEO 
Ports and the remaining 15% was allocated to transactions and market 
data. The Exchange did not allocate any other Human Resources expense 
for providing physical connections to any other employee group, outside 
of a smaller allocation of 37% for 1Gb and 10Gb ULL connectivity of the 
cost associated with certain specified personnel who work closely with 
and support network infrastructure personnel. In contrast, the Exchange 
allocated much smaller percentages of costs (less than 21%) across a 
wider range of personnel groups in order to allocate Human Resources 
costs to providing FIX and MEO Ports. This is because a much wider 
range of personnel are involved in functions necessary to offer, 
monitor and maintain FIX and MEO Ports but the tasks necessary to do so 
are not a primary or full-time function.
    In total, the Exchange allocated 47.6% of its personnel costs to 
providing physical connections and 22.4% of its personnel costs to 
providing FIX and MEO Ports, for a total allocation of 70% Human 
Resources expense to provide these specific connectivity services. In 
turn, the Exchange allocated the remaining 30% of its Human Resources 
expense to membership (less than 1%) and transactions and market data 
(9.5%). Thus, again, the Exchange's allocations of cost across core 
services were based on real costs of operating the Exchange and were 
not double-counted across the core services or their associated revenue 
streams.
    As another example, the Exchange allocated depreciation expense to 
all core services, including physical connections and FIX and MEO 
Ports, but in different amounts. The Exchange believes it is reasonable 
to allocate the identified portion of such expense because such expense 
includes the

[[Page 58000]]

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. Without this equipment, the Exchange would not be able to 
operate the network and provide connectivity services to its Equity 
Members and non-Equity Members and their customers. However, the 
Exchange did not allocate all of the depreciation and amortization 
expense toward the cost of providing connectivity services, but instead 
allocated approximately 85% of the Exchange's overall depreciation and 
amortization expense to connectivity services (76.185% attributed to 
1Gb and 10Gb ULL physical connections and 8.6% to FIX and MEO Ports). 
The Exchange allocated the remaining depreciation and amortization 
expense (approximately 15%) toward the cost of providing transaction 
services, membership services and market data.
    The Exchange notes that its revenue estimates are based on 
projections across all potential revenue streams and will only be 
realized to the extent such revenue streams actually produce the 
revenue estimated. The Exchange does not yet know whether such 
expectations will be realized. For instance, in order to generate the 
revenue expected from connectivity, the Exchange will have to be 
successful in retaining existing clients that wish to maintain physical 
connectivity and/or FIX and MEO Ports or in obtaining new clients that 
will purchase such services. Similarly, the Exchange will have to be 
successful in retaining a positive net capture on transaction fees in 
order to realize the anticipated revenue from transaction pricing.
    The Exchange notes that the Cost Analysis is based on the 
Exchange's 2023 fiscal year of operations and projections. It is 
possible, however, that actual costs may be higher or lower. To the 
extent the Exchange sees growth in use of connectivity services it will 
receive additional revenue to offset future cost increases.
    However, if use of connectivity services is static or decreases, 
the Exchange might not realize the revenue that it anticipates or needs 
in order to cover applicable costs. Accordingly, the Exchange is 
committing to conduct a one-year review after implementation of these 
fees. The Exchange expects that it may propose to adjust fees at that 
time, to increase fees in the event that revenues fail to cover costs 
and a reasonable mark-up of such costs. Similarly, the Exchange may 
propose to decrease fees in the event that revenue materially exceeds 
our current projections. In addition, the Exchange will periodically 
conduct a review to inform its decision making on whether a fee change 
is appropriate (e.g., to monitor for costs increasing/decreasing or 
subscribers increasing/decreasing, etc. in ways that suggest the then-
current fees are becoming dislocated from the prior cost-based 
analysis) and would propose to increase fees in the event that revenues 
fail to cover its costs, or decrease fees in the event that revenue or 
the mark-up materially exceeds our current projections. In the event 
that the Exchange determines to propose a fee change, the results of a 
timely review, including an updated cost estimate, will be included in 
the rule filing proposing the fee change. More generally, the Exchange 
believes that it is appropriate for an exchange to refresh and update 
information about its relevant costs and revenues in seeking any future 
changes to fees, and the Exchange commits to do so.
Projected Revenue
    The proposed fees will allow the Exchange to cover certain costs 
incurred by the Exchange associated with providing and maintaining 
necessary hardware and other network infrastructure as well as network 
monitoring and support services; without such hardware, infrastructure, 
monitoring and support the Exchange would be unable to provide the 
connectivity and port services. Much of the cost relates to monitoring 
and analysis of data and performance of the network via the 
subscriber's connection(s). The above cost, namely those associated 
with hardware, software, and human capital, enable the Exchange to 
measure network performance with nanosecond granularity. These same 
costs are also associated with time and money spent seeking to 
continuously improve the network performance, improving the 
subscriber's experience, based on monitoring and analysis activity. The 
Exchange routinely works to improve the performance of the network's 
hardware and software. The costs associated with maintaining and 
enhancing a state-of-the-art exchange network is a significant expense 
for the Exchange, and thus the Exchange believes that it is reasonable 
and appropriate to help offset those costs by amending fees for 
connectivity services. Subscribers, particularly those of 10Gb ULL 
connectivity, expect the Exchange to provide this level of support to 
connectivity so they continue to receive the performance they expect. 
This differentiates the Exchange from its competitors. As detailed 
above, the Exchange has five primary sources of revenue that it can 
potentially use to fund its operations: transaction fees, fees for 
connectivity services, membership and regulatory fees, and market data 
fees. Accordingly, the Exchange must cover its expenses from these five 
primary sources of revenue.
    <bullet> The Exchange's Cost Analysis estimates the annual cost to 
provide 10Gb ULL connectivity services will equal $17,726,799. Based on 
current 10Gb ULL connectivity services usage, the Exchange would 
generate annual revenue of approximately $9,144,000. This represents a 
negative margin when compared to the cost of providing 10Gb ULL 
connectivity services, which will decrease over time.\102\
---------------------------------------------------------------------------

    \102\ Assuming the U.S. inflation rate continues at its current 
rate, the Exchange believes that the projected profit margins in 
this proposal will decrease; however, the Exchange cannot predict 
with any certainty whether the U.S. inflation rate will continue at 
its current rate or its impact on the Exchange's future profits or 
losses. See, e.g., https://www.usinflationcalculator.com/inflation/current-inflation-rates/ (last visited August 4, 2023).
---------------------------------------------------------------------------

    <bullet> The Exchange's Cost Analysis estimates the annual cost to 
provide 1Gb connectivity services will equal $604,851. Based on current 
1Gb connectivity services usage, the Exchange would generate annual 
revenue of approximately $312,000. This represents a negative margin 
when compared to the cost of providing 1Gb connectivity services, which 
will decrease over time.\103\
---------------------------------------------------------------------------

    \103\ Id.
---------------------------------------------------------------------------

    <bullet> The Exchange's Cost Analysis estimates the annual cost to 
provide FIX Port services will equal $911,998. Based on current FIX 
Port services usage, the Exchange would generate annual revenue of 
approximately $388,800. This represents a negative margin when compared 
to the cost of providing FIX Port services, which will decrease over 
time.\104\
---------------------------------------------------------------------------

    \104\ Id.
---------------------------------------------------------------------------

    <bullet> The Exchange's Cost Analysis estimates the annual cost to 
provide MEO Port services will equal $3,039,995. Based on current MEO 
Port services usage, the Exchange would generate annual revenue of 
approximately $1,296,000. This represents a negative margin when 
compared to the cost of providing MEO Port services, which will 
decrease over time.\105\
---------------------------------------------------------------------------

    \105\ Id.
---------------------------------------------------------------------------

    Based on the above discussion, even if the Exchange earns the above 
revenue or incrementally more or less, the proposed fees are fair and 
reasonable because they will not result in excessive

[[Page 58001]]

pricing that deviates from that of other exchanges or supra-competitive 
profit, when comparing the total expense of the Exchange associated 
with providing 1Gb and 10Gb ULL connectivity and FIX and MEO Port 
services versus the total projected revenue of the Exchange associated 
with those services. In fact, the Exchange will generate negative 
margins on those connectivity and port services even with the proposed 
fees.
    The Exchange also notes that this the resultant margin differs from 
the profit margins set forth in similar fee filings by its affiliated 
markets. This is not atypical among exchanges and is due to a number of 
factors that differ between these four markets, including: different 
market models, market structures, and product offerings (equities, 
options, price-time, pro-rata, simple, and complex); different pricing 
models; different number of market participants and connectivity 
subscribers; different maintenance and operations costs, as described 
in the cost allocation methodology above; different technical 
architecture (e.g., the number of matching engines per exchange, i.e., 
MIAX Pearl Equities maintains 24 matching engines while MIAX Pearl 
Options maintains 12 matching engines); and different maturity phase of 
the Exchange and its affiliated markets (i.e., start-up versus growth 
versus more mature). All of these factors contribute to a unique and 
differing level of profit margin per exchange.
    Further, the Exchange proposes to charge rates that are comparable 
to, or lower than, similar fees for similar products charged by 
competing exchanges. For example, for 10Gb ULL connectivity, the 
Exchange proposes a lower fee than the fee charged by BX for its 
comparable 10Gb Ultra fiber connection ($8,000 per month for the 
Exchange vs. $15,000 per month for BX).\106\ PSX charges comparable 
rate for its 10Gb connection of $7,500.\107\ Accordingly, the Exchange 
believes that comparable and competitive pricing are key factors in 
determining whether a proposed fee meets the requirements of the Act, 
regardless of whether that same fee across the Exchange's affiliated 
markets leads to slightly different profit margins due to factors 
outside of the Exchange's control (i.e., more subscribers to 10Gb ULL 
connectivity on the Exchange than its affiliated markets or vice 
versa).
---------------------------------------------------------------------------

    \106\ See BX Pricing Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; and BX Rules, 
General 8: Connectivity, Section 2, Direct Connectivity.
    \107\ See PSX Pricing Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing; and PSX Rules, 
General 8: Connectivity, Section 2, Direct Connectivity.
---------------------------------------------------------------------------

    MIAX Pearl Equities is one of the newer equities exchange and only 
commenced operations in September 2020. New entrants like MIAX Pearl 
Equities propose fees that may help these new entrants recoup their 
substantial investment in building out costly infrastructure. However, 
it is not uncommon for start-ups, like MIAX Pearl Equities, to incur 
losses while they seek to build their businesses.\108\ In some cases, 
as is the case here, these start-ups set their fees purposefully low or 
offer products at no cost \109\ to attract business and build market 
share so that they can compete with the larger, well established 
incumbents that already charge higher fees. This is done while 
incurring losses by investing in future growth. Therefore, it is not 
uncommon for MIAX Pearl Equities to incur a negative profit margin even 
with the proposed fees while it continues to build its business and 
gain traction as a new exchange entrant that competing to attract 
market share from the larger, established incumbent equities exchanges.
---------------------------------------------------------------------------

    \108\ See Exchange Fee Schedule (offering market data for no 
cost).
    \109\ See, e.g., 5 Successful Companies that Didn't Make a 
Dollar for 5 Years, by Drew Hendricks, July 7, 2014, available at 
https://www.inc.com/drew-hendricks/5-successful-companies-that-didn-8217-t-make-a-dollar-for-5-years.html.
---------------------------------------------------------------------------

* * * * *
    MIAX Pearl Equities has operated at a cumulative net annual loss 
since it launched operations in 2020.\110\ This is due to a number of 
factors, one of which is choosing to forgo revenue by offering certain 
products, such as low latency connectivity, at lower rates than other 
exchanges to attract order flow and encourage market participants to 
experience the high determinism, low latency, and resiliency of the 
Exchange's trading systems. The Exchange does not believe it should now 
be penalized for seeking to raise its fees as it now needs to upgrade 
its technology and absorb increased costs. Therefore, the Exchange 
believes the proposed fees are reasonable because they are based on 
both relative costs to the Exchange to provide dedicated 1Gb and 10Gb 
ULL connectivity as well as FIX and MEO Ports, the extent to which the 
product drives the Exchange's overall costs and the relative value of 
the product, as well as the Exchange's objective to make access to its 
Systems broadly available to market participants. The Exchange also 
believes the proposed fees are reasonable because they are designed to 
generate annual revenue to recoup the Exchange's costs of providing 
dedicated 1Gb and 10Gb ULL connectivity as well as FIX and MEO Ports.
---------------------------------------------------------------------------

    \110\ The Exchange has incurred a cumulative loss of $83 million 
since its inception in 2020. See Exchange's Form 1/A, Application 
for Registration or Exemption from Registration as a National 
Securities Exchange, filed June 26, 2023, available at https://www.sec.gov/Archives/edgar/vprr/2300/23007741.pdf.
---------------------------------------------------------------------------

    The Exchange notes that its revenue estimate is based on 
projections and will only be realized to the extent customer activity 
produces the revenue estimated. As a competitor in the hyper-
competitive exchange environment, and an exchange focused on driving 
competition, the Exchange does not yet know whether such projections 
will be realized. For instance, in order to generate the revenue 
expected from 1Gb and 10Gb ULL connectivity as well as FIX and MEO 
Ports, the Exchange will have to be successful in retaining existing 
clients that wish to utilize 1Gb and 10Gb ULL connectivity as well as 
FIX and MEO Ports and/or obtaining new clients that will purchase such 
access. To the extent the Exchange has mispriced and experiences a net 
loss in connectivity clients or in transaction activity, the Exchange 
could experience a net reduction in revenue. While the Exchange is 
supportive of transparency around costs and potential margins (applied 
across all exchanges), as well as periodic review of revenues and 
applicable costs (as discussed below), the Exchange does not believe 
that these estimates should form the sole basis of whether or not a 
proposed fee is reasonable or can be adopted. Instead, the Exchange 
believes that the information should be used solely to confirm that an 
Exchange is not earning--or seeking to earn--supra-competitive profits. 
The Exchange believes the Cost Analysis and related projections in this 
filing demonstrate this fact.
    The Exchange is part of a holding company that operates four 
exchange markets and, therefore, the Exchange and its affiliated 
markets must allocate shared costs across all of those markets 
accordingly, pursuant to the above-described allocation methodology. In 
contrast, the Investors Exchange LLC (``IEX'') and MEMX, which are 
currently each operating only one exchange, in their recent non-
transaction fee filings can allocate the entire amount of that same 
cost to a single exchange. This can result in lower profit margins for 
the non-transaction fees proposed by IEX and MEMX because the single 
allocated cost does not experience the efficiencies and synergies that 
result from sharing costs across multiple platforms. The Exchange and 
its affiliated markets often share a single cost, which results in cost

[[Page 58002]]

efficiencies that can cause a broader gap between the allocated cost 
amount and projected revenue, even though the fee levels being proposed 
are lower or competitive with competing markets (as described above). 
To the extent that the application of a cost-based standard results in 
Commission Staff making determinations as to the appropriateness of 
certain profit margins, the Exchange believes that Commission Staff 
should also consider whether the proposed fee level is comparable to, 
or competitive with, the same fee charged by competing exchanges and 
how different cost allocation methodologies (such as across multiple 
markets) may result in different profit margins for comparable fee 
levels. Further, if Commission Staff is making determinations as to 
appropriate profit margins in their approval of exchange fees, the 
Exchange believes that the Commission should be clear to all market 
participants as to what they have determined is an appropriate profit 
margin and should apply such determinations consistently and, in the 
case of certain legacy exchanges, retroactively, if such standards are 
to avoid having a discriminatory effect.
    Further, as is reflected in the proposal, the Exchange continuously 
and aggressively works to control its costs as a matter of good 
business practice. A potential profit margin should not be evaluated 
solely on its size; that assessment should also consider cost 
management and whether the ultimate fee reflects the value of the 
services provided. For example, a profit margin on one exchange should 
not be deemed excessive where that exchange has been successful in 
controlling its costs, but not excessive on another exchange where that 
exchange is charging comparable fees but has a lower profit margin due 
to higher costs. Doing so could have the perverse effect of not 
incentivizing cost control where higher costs alone could be used to 
justify fees increases.
The Proposed Pricing Is Not Unfairly Discriminatory and Provides for 
the Equitable Allocation of Fees, Dues, and Other Charges
    The Exchange believes that the proposed fees are reasonable, fair, 
equitable, and not unfairly discriminatory because they are designed to 
align fees with services provided and will apply equally to all 
subscribers.
1Gb and 10Gb ULL Connectivity
    The Exchange believes that the proposed fees are equitably 
allocated among users of the network connectivity and port 
alternatives, as the users of 10Gb ULL connections consume 
substantially more bandwidth and network resources than users of 1Gb 
ULL connection. Specifically, the Exchange notes that 10Gb ULL 
connection users account for more than 99% of message traffic over the 
network, driving other costs that are linked to capacity utilization, 
as described above, while the users of the 1Gb ULL connections account 
for less than 1% of message traffic over the network. In the Exchange's 
experience, users of the 1Gb connections do not have the same business 
needs for the high-performance network as 10Gb ULL users.
    The Exchange's high-performance network and supporting 
infrastructure (including employee support), provides unparalleled 
system throughput with the network ability to support access to several 
distinct equities markets. 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. The Exchange must also purchase additional storage 
capacity on an ongoing basis to ensure it has sufficient capacity to 
store these messages to satisfy its record keeping requirements under 
the Exchange Act.\111\ Thus, as the number of messages an entity 
increases, certain other costs incurred by the Exchange that are 
correlated to, though not directly affected by, connection costs (e.g., 
storage costs, surveillance costs, service expenses) also increase. 
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 market participants' benefit.
---------------------------------------------------------------------------

    \111\ 17 CFR 240.17a-1 (recordkeeping rule for national 
securities exchanges, national securities associations, registered 
clearing agencies and the Municipal Securities Rulemaking Board).
---------------------------------------------------------------------------

FIX and MEO Ports
    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 
during anticipated peak market conditions. The need to support 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. The Exchange must also purchase 
additional storage capacity on an ongoing basis to ensure it has 
sufficient capacity to store these messages as part of it surveillance 
program and to satisfy its record keeping requirements under the 
Exchange Act.\112\ Thus, as the number of connections an Equity Member 
has increases, the related pull on Exchange resources also increases. 
The Exchange sought to design the proposed pricing structure to set the 
amount of the fees to relate to the number of connections a firm 
purchases, while continuing to provide the first five (5) ports for 
free. The more connections purchased by an Equity Member likely results 
in greater expenditure of Exchange resources and increased cost to the 
Exchange. The Exchange further believes that the proposed fees are 
reasonable, equitably allocated and not unfairly discriminatory 
because, for the flat fee, the Exchange provides each Equity Member 
their first five (5) ports for free, unlike other equity exchanges 
referenced above.
---------------------------------------------------------------------------

    \112\ Id.
---------------------------------------------------------------------------

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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes the proposed fees will not result in any 
burden on intra-market competition that is not necessary or appropriate 
in furtherance of the purposes of the Act because the proposed fees 
will allow the Exchange to recoup some of its costs in providing 1Gb 
and10Gb ULL connectivity as well as FIX and MEO Ports at below market 
rates to market participants since the Exchange launched operations. As 
described above, the Exchange has operated at a cumulative net annual 
loss since it launched operations in 2020 \113\ due to providing a low-
cost alternative to attract order flow and encourage market 
participants to experience the high determinism and resiliency of the 
Exchange's trading Systems. To do so, the Exchange chose to waive the 
fees for some non-transaction related services and Exchange products or 
provide them at a very lower fee, which was not profitable to the 
Exchange. This resulted in the Exchange forgoing revenue it

[[Page 58003]]

could have generated from assessing any fees or higher fees. The 
Exchange could have sought to charge higher fees at the outset, but 
that could have served to discourage participation on the Exchange. 
Instead, the Exchange chose to provide a low-cost exchange alternative 
to the industry, which resulted in lower initial revenues. Examples of 
this are 1Gb and 10Gb ULL connectivity as well as FIX and MEO Ports, 
for which the Exchange only now seeks to adopt fees at a level similar 
to or lower than those of other equity exchanges.
---------------------------------------------------------------------------

    \113\ See supra note 110.
---------------------------------------------------------------------------

    Further, the Exchange does not believe that the proposed fee 
increase for the 1Gb or 10Gb ULL connection 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. The proposed fees would apply uniformly to all 
market participants regardless of the number of connections they choose 
to purchase. The proposed fees do not favor certain categories of 
market participants in a manner that would impose an undue burden on 
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, Exchange 
personnel has been informally discussing potential fees for 
connectivity services with a diverse group of market participants that 
are connected to the Exchange (including large and small firms, firms 
with large connectivity service footprints and small connectivity 
service footprints, as well as extranets and service bureaus) for 
several months leading up to that time. The Exchange does not believe 
the proposed fees for connectivity services would negatively impact the 
ability of Equity Members, non-Equity Members (extranets or service 
bureaus), third-parties that purchase the Exchange's connectivity and 
resell it, and customers of those resellers to compete with other 
market participants or that they are placed at a disadvantage.
    The Exchange does anticipate, however, that some market 
participants may reduce or discontinue use of connectivity services 
provided directly by the Exchange in response to the proposed fees. In 
fact, as mentioned above, one MIAX Pearl Options Market Maker 
terminated their MIAX Pearl Options membership on January 1, 2023 as a 
direct result of the proposed fee changes for that market.\114\ The 
Exchange does not believe that the proposed fees for connectivity 
services place certain market participants at a relative disadvantage 
to other market participants because the proposed connectivity pricing 
is associated with relative usage of the Exchange by each market 
participant and does not impose a barrier to entry to smaller 
participants. The Exchange believes its proposed pricing is reasonable 
and, when coupled with the availability of third-party providers that 
also offer connectivity solutions, that participation on the Exchange 
is affordable for all market participants, including smaller trading 
firms. As described above, the connectivity services purchased by 
market participants typically increase based on their additional 
message traffic and/or the complexity of their operations. The market 
participants that utilize more connectivity services typically utilize 
the most bandwidth, and those are the participants that consume the 
most resources from the network. Accordingly, the proposed fees for 
connectivity services do not favor certain categories of market 
participants in a manner that would impose a burden on competition; 
rather, the allocation of the proposed connectivity fees reflects the 
network resources consumed by the various size of market participants 
and the costs to the Exchange of providing such connectivity services.
---------------------------------------------------------------------------

    \114\ The Exchange acknowledges that IEX included in its 
proposal to adopt market data fees after offering market data for 
free an analysis of what its projected revenue would be if all of 
its existing customers continued to subscribe versus what its 
projected revenue would be if a limited number of customers 
subscribed due to the new fees. See Securities Exchange Act Release 
No. 94630 (April 7, 2022), 87 FR 21945 (April 13, 2022) (SR-IEX-
2022-02). MEMX did not include a similar analysis in either of its 
recent non-transaction fee proposals. See, e.g., supra note 67. The 
Exchange does not believe a similar analysis would be useful here 
because it is amending existing fees, not proposing to charge a new 
fee where existing subscribers may terminate connections because 
they are no longer enjoying the service at no cost. In addition, 
despite the potential for existing subscribers to terminate 
connections due to the proposal, the Exchange anticipates its number 
of subscribers to remain generally static, resulting in an 
immaterial difference between a best case and worst case scenario.
---------------------------------------------------------------------------

Inter-Market Competition
    The Exchange also does not believe that the proposed rule change 
will result in any burden on inter-market competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. As 
discussed above, market participants are not forced to connect to all 
exchanges. There is no reason to believe that our proposed price 
increase will harm another exchange's ability to compete. There are 
other markets of which market participants may connect to trade 
equities at higher rates than the Exchange's. There is also a range of 
alternative strategies, including routing to the exchange through 
another participant or market center or accessing the Exchange 
indirectly. Market participants are free to choose which exchange or 
reseller to use to satisfy their business needs. Accordingly, the 
Exchange does not believe its proposed fee changes impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
* * * * *
    In conclusion, as discussed thoroughly above, the Exchange 
regrettably believes that the application of the Revised Review Process 
and Staff Guidance has adversely affected inter-market competition 
among legacy and non-legacy exchanges by impeding the ability of non-
legacy exchanges to adopt or increase fees for their market data and 
access services (including connectivity and port products and services) 
that are on parity or commensurate with fee levels previously 
established by legacy exchanges. Since the adoption of the Revised 
Review Process and Staff Guidance, and even more so recently, it has 
become extraordinarily difficult to adopt or increase fees to generate 
revenue necessary to invest in systems, provide innovative trading 
products and solutions, and improve competitive standing to the benefit 
of non-legacy exchanges' market participants. Although the Staff 
Guidance served an important policy goal of improving disclosures and 
requiring exchanges to justify that their market data and access fee 
proposals are fair and reasonable, it has also negatively impacted non-
legacy exchanges in particular in their efforts to adopt or increase 
fees that would enable them to more fairly compete with legacy 
exchanges, despite providing enhanced disclosures and rationale under 
both competitive and cost basis approaches provided for by the Revised 
Review Process and Staff Guidance to support their proposed fee 
changes.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange received one comment letter on the Initial Proposal, 
one comment letter on the Second Proposal, and one comment letter on 
the Fourth Proposal, all from the same

[[Page 58004]]

commenter.\115\ In their letters, the sole commenter seeks to 
incorporate comments submitted on previous Exchange proposals to which 
the Exchange has previously responded. To the extent the sole commenter 
has attempted to raise new issues in its letters, the Exchange believes 
those issues are not germane to this proposal in particular, but rather 
raise larger issues with the current environment surrounding exchange 
non-transaction fee proposals that should be addressed by the 
Commission through rule making, or Congress, more holistically and not 
through an individual exchange fee filings. Among other things, the 
commenter is requesting additional data and information that is both 
opaque and a moving target and would constitute a level of disclosure 
materially over and above that provided by any competitor exchanges.
---------------------------------------------------------------------------

    \115\ See letter from Brian Sopinsky, General Counsel, 
Susquehanna International Group, LLP (``SIG''), to Vanessa 
Countryman, Secretary, Commission, dated February 7, 2023 and 
letters from Gerald D. O'Connell, SIG, to Vanessa Countryman, 
Secretary, Commission, dated March 21, 2023 and July 24, 2023.
---------------------------------------------------------------------------

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,\116\ and Rule 19b-4(f)(2) \117\ 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.
---------------------------------------------------------------------------

    \116\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \117\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#bbc9ced7de96d8d4d6d6ded5cfc8fbc8ded895dcd4cd"><span class="__cf_email__" data-cfemail="dfadaab3baf2bcb0b2b2bab1abac9facbabcf1b8b0a9">[email protected]</span></a>. Please include 
file number SR-PEARL-2023-36 on the subject line.

Paper Comments

    <bullet> 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-2023-36. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-PEARL-2023-36 and should be 
submitted on or before September 14, 2023.
---------------------------------------------------------------------------

    \118\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\118\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-18191 Filed 8-23-23; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>