Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices 73137 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 100539 

(July 15, 2024), 89 FR 58848 (July 19, 2024) (File 

No. 10–240) (order approving application of MIAX 

Sapphire, LLC for registration as a national 

securities exchange). 

4The term ‘‘Market Maker’’ or ‘‘MM’’ means a 

Member registered with the Exchange for the 

purpose of making markets in options contracts 

traded on the Exchange and that is vested with the 

rights and responsibilities specified in Chapter VI 

of the Exchange Rules. See the Definitions Section 

of the Fee Schedule and Exchange Rule 100. 

(‘‘Commission’’) is soliciting comments 

on the existing collection of information 

provided for in Rule 301 of Regulation 

ATS (17 CFR 242.301) under the 

Securities Exchange Act of 1934 (15 

U.S.C. 78a et seq.). The Commission 

plans to submit this existing collection 

of information to the Office of 

Management and Budget (‘‘OMB’’) for 

extension and approval. 

Regulation ATS provides a regulatory 

structure for alternative trading systems. 

Rule 301 of Regulation ATS contains 

certain record keeping and reporting 

requirements, as well as additional 

obligations that apply only to alternative 

trading systems with significant volume. 

The Rule requires all alternative trading 

systems that wish to comply with 

Regulation ATS to file an initial 

operation report on Form ATS. 

Alternative trading systems are also 

required to supply updates on Form 

ATS to the Commission describing 

material changes to the system, file 

quarterly transaction reports on Form 

ATS–R, and file cessation of operations 

reports on Form ATS. An alternative 

trading system with significant volume 

is required to comply with requirements 

for fair access and systems capacity, 

integrity, and security. 

The Commission staff estimates that 

entities subject to the requirements of 

Rule 301 will spend a total of 

approximately 2,983 hours a year to 

comply with the Rule. 

Regulation ATS requires ATSs to 

preserve any records, for at least three 

years, made in the process of complying 

with the system’s capacity, integrity and 

security requirements. 

Written comments are invited on: (a) 

whether the proposed collection of 

information is necessary for the proper 

performance of the functions of the 

Commission, including whether the 

information shall have practical utility; 

(b) the accuracy of the Commission’s 

estimates of the burden of the proposed 

collection of information; (c) ways to 

enhance the quality, utility, and clarity 

of the information collected; and (d) 

ways to minimize the burden of the 

collection of information on 

respondents, including through the use 

of automated collection techniques or 

other forms of information technology. 

Consideration will be given to 

comments and suggestions submitted by 

November 8, 2024. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

Please direct your written comments 

to: Austin Gerig, Director/Chief Data 

Officer, Securities and Exchange 

Commission, c/o Oluwaseun Ajayi, 100 

F Street NE, Washington, DC 20549, or 

send an email to: PRA_Mailbox@

sec.gov. 

Dated: September 3, 2024. 

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–20199 Filed 9–6–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–100901; File No. SR– 

SAPPHIRE–2024–26] 

Self-Regulatory Organizations; MIAX 

Sapphire, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Establish Fees for 

Purge Ports 

September 3, 2024. 

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 

21, 2024, MIAX Sapphire, LLC (‘‘MIAX 

Sapphire’’ or ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I, II, and III below, 

which Items have been prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Sapphire Fee 

Schedule (the ‘‘Fee Schedule’’) to adopt 

certain non-transaction fees for Purge 

Ports as described below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://www.miaxglobal.com/markets/ 

us-options/miax-sapphire/rule-filings, at 

the Exchange’s principal office, and at 

the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On July 15, 2024, the U.S. Securities 

and Exchange Commission 

(‘‘Commission’’) approved the 

Exchange’s Form 1 application to 

register as a national securities exchange 

under Section 6 of the Exchange Act,3

and the Exchange began operations on 

August 12, 2024. The Exchange initially 

filed this proposal on August 9, 2024 

(SR–SAPPHIRE–2024–15) to establish 

fees for Purge Ports, which is 

functionality that enables Marker 

Makers 4 to cancel all open orders or a 

subset of open orders through a single 

cancel message. The Exchange 

withdrew SR–SAPPHIRE–2024–15 on 

August 21, 2024, and submitted this 

proposal. 


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5The term ‘‘Initial Waiver Period’’ means, for 

each applicable fee, the period of time from the 

initial effective date of the MIAX Sapphire Fee 

Schedule plus an additional six (6) full calendar 

months after the completion of the partial month of 

the Exchange launch. See the Definitions Section of 

the Fee Schedule. 

6See MIAX Pearl Options Fee Schedule, Section 

5) d) Port Fees available at https://

www.miaxglobal.com/markets/us-options/pearloptions/fees. See also Securities Exchange Act 

Release No. 100037 (April 26, 2024), 89 FR 35899 

(May 2, 2024) (SR–PEARL–2024–20). 

7 ‘‘Matching Engine’’ is a part of the MIAX 

Sapphire electronic system that processes options 

orders and trades on a symbol-by-symbol basis. See 

the Definitions Section of the Fee Schedule. 

8 ‘‘Member’’ means an individual or organization 

that is registered with the Exchange pursuant to 

Chapter II of MIAX Sapphire Exchange Rules for 

purposes of trading on the Exchange as an 

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

See the Definitions Section of the Fee Schedule. 

9See Exchange Rule 519C(a) and (b). 

10Current Exchange port functionality supports 

cancelation rates that exceed one thousand 

messages per second and the Exchange’s research 

indicates that certain market participants rely on 

such functionality and at times utilize such 

cancelation rates. 

11See Exchange Rule 519C(c). 

12See Exchange Rule 517. 

13See supra note 6. 

14 15 U.S.C. 78f(b). 

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

16 15 U.S.C. 78f(b)(4). 

Despite proposing to adopt fees 

herein, the Exchange also proposes to 

waive the proposed Purge Port fees for 

an Initial Waiver Period,5 which began 

on the date the Exchange began 

operations and which is the same date 

that the Fee Schedule became effective. 

However, even though the Exchange 

proposes to fully waive Purge Port fees 

for the Initial Waiver Period, the 

Exchange believes that it is appropriate 

to provide market participants with the 

overall structure of Purge Port fees by 

outlining the structure and amounts in 

the Fee Schedule, so that there is 

general awareness that the Exchange 

intends to assess such fees upon the 

expiration of the defined period of the 

Initial Waiver Period. Additionally, the 

Exchange notes that the proposed fees 

for Purge Ports on MIAX Sapphire are 

identical to Purge Port fees assessed by 

the Exchange’s affiliated options 

exchange, MIAX PEARL, LLC (‘‘MIAX 

Pearl Options’’).6

Purge Ports 

The Exchange proposes to amend 

Section 5) d) iii), which was reserved for 

use by an earlier proposal, to adopt 

Purge Port Fees to provide that a MIAX 

Sapphire Market Maker may request and 

be allocated two (2) Purge Ports per 

Matching Engine 7 to which it connects 

and will be charged a monthly fee of 

$600 per Matching Engine. The 

Exchange believes that the proposed fee 

provides Market Makers with flexibility 

to control their Purge Port costs based 

on the number of Matching Engines 

each Marker Maker elects to connect to 

based on each Market Maker’s business 

needs. 

A logical port represents a port 

established by the Exchange within the 

Exchange’s System for trading and 

billing purposes. Each logical port 

grants a Member 8 the ability to 

accomplish a specific function, such as 

order entry, order cancellation, access to 

execution reports, and other 

administrative information. 

Purge Ports are designed to assist 

Market Makers in the management of, 

and risk control over, their orders, 

particularly if the firm is dealing with 

a large number of securities. For 

example, if a Market Maker detects 

market indications that may influence 

the execution potential of their orders, 

the Market Maker may use Purge Ports 

to reduce uncertainty and to manage 

risk by purging all orders in a number 

of securities. This allows Market Makers 

to seamlessly avoid unintended 

executions, while continuing to evaluate 

the market, their positions, and their 

risk levels. Purge Ports are used by 

Market Makers that conduct business 

activity that exposes them to a large 

amount of risk across a number of 

securities. Purge Ports enable Market 

Makers to cancel all open orders, or a 

subset of open orders through a single 

cancel message. The Exchange notes 

that Purge Ports increase efficiency of 

already existing functionality enabling 

the cancellation of orders. 

The Exchange will operate a highly 

performant system with significant 

throughput and determinism which 

should allow participants to enter, 

update and cancel orders at high rates. 

Market Makers will have the ability to 

cancel individual orders through the 

existing functionality, such as through 

the use of a mass cancel message by 

which a Market Maker may request that 

the Exchange remove all or a subset of 

its quotations and block all or a subset 

of its new inbound quotations.9 Other 

than Purge Ports being a dedicated line 

for cancelling quotations, Purge Ports 

operate in the same manner as a mass 

cancel message being sent over a 

different type of port. For example, like 

Purge Ports, mass cancellations sent 

over a logical port may be done at either 

the firm or MPID level. As a result, 

Market Makers can currently cancel 

orders in rapid succession across their 

existing logical ports 10 or through a 

single cancel message, all open orders or 

a subset of open orders. 

Similarly, Members may also use 

cancel-on-disconnect control when they 

experience a disruption in connection to 

the Exchange to automatically cancel all 

orders, as configured or instructed by 

the Member or Market Maker.11 In 

addition, the Exchange already provides 

similar ability to mass cancel orders 

through the Exchange’s risk controls, 

which are offered at no charge and 

enables Market Makers to establish predetermined levels of risk exposure, and 

can be used to cancel all open orders.12

Accordingly, the Exchange believes that 

the Purge Ports provide an efficient 

option as an alternative to available 

services and enhance a Market Maker’s 

ability to manage their risk. 

The Exchange believes that market 

participants benefit from a dedicated 

purge mechanism for specific Members 

and to the market as a whole. Market 

Makers will have the benefit of efficient 

risk management and purge tools. The 

market will benefit from potential 

increased quoting and liquidity as 

Market Makers may use Purge Ports to 

manage their risk more robustly. Only 

Market Makers that request Purge Ports 

would be subject to the proposed fees, 

and other Market Makers can operate 

without dedicated Purge Ports, but with 

the additional purging capabilities 

described above. Further, the Exchange 

notes that this functionality is similar to 

functionality on the Exchange’s affiliate, 

MIAX Pearl Options.13

Implementation 

The proposed fee change is 

immediately effective. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,14 in general, and 

furthers the objectives of Section 6(b)(5) 

of the Act,15 in particular, in that it is 

not designed to permit unfair 

discrimination among customers, 

brokers, or dealers. The Exchange also 

believes that its proposed fee is 

consistent with Section 6(b)(4) of the 

Act 16 because it represents an equitable 

allocation of reasonable dues, fees and 

other charges among market 

participants. 

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 


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17 15 U.S.C. 78s(b)(1). 

18 17 CFR 240.19b–4. 

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

20 15 U.S.C. 78f(b)(4). 

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

22 15 U.S.C. 78f(b)(8). 

23See 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’’). 

24The affiliated markets include Miami 

International Securities Exchange, LLC (‘‘MIAX’’); 

separately, the options and equities markets of 

MIAX PEARL, LLC (‘‘MIAX Pearl’’); and MIAX 

Emerald, LLC (‘‘MIAX Emerald’’). 

25See Securities Exchange Act Release Nos. 

100036 (April 26, 2024), 89 FR 35909 (May 2, 2024) 

(SR–MIAX–2024–22); 100037 (April 26, 2024), 89 

FR 35899 (May 2, 2024) (SR–PEARL–2024–20); 

100039 (April 26, 2024), 89 FR 35891 (May 2, 2024) 

(SR–EMERALD–2024–14). The Exchange frequently 

updates it Cost Analysis as strategic initiatives 

change, costs increase or decrease, and market 

participant needs and trading activity (once live 

trading begins) changes. The Exchange’s most 

recent Cost Analysis was conducted ahead of this 

filing. 

26For example, MIAX Sapphire maintains 8 

matching engines, MIAX maintains 24 matching 

engines, MIAX Pearl Options maintains 12 

matching engines, MIAX Pearl Equities maintains 

24 matching engines, and MIAX Emerald maintains 

12 matching engines. 

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 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 

Members—both generally and in 

relation to other 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 

Members and competition among 

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,17 and Rule 19b–4 thereunder,18

with respect to the types of information 

exchanges should provide when filing 

fee changes, and Section 6(b) of the 

Act,19 which requires, among other 

things, that exchange fees be reasonable 

and equitably allocated,20 not designed 

to permit unfair discrimination,21 and 

that they not impose a burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.22 The Exchange 

reiterates that the legacy exchanges with 

whom the Exchange will vigorously 

compete 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 Staff 

Guidance.23

As detailed below, the Exchange 

recently calculated its aggregate annual 

costs for providing Purge Ports to be 

$426,238 (or approximately $35,518 per 

month, rounded to the nearest dollar 

when dividing the annual cost by 12 

months). To recoup the costs of 

providing Purge Ports to its Market 

Makers going forward, as described 

below, the Exchange proposes to amend 

its Fee Schedule to charge a fee of $600 

per Matching Engine for Purge Ports. 

The Exchange notes that the projected 

revenue will not be greater than the 

costs to the Exchange to provide Purge 

Ports, however the Exchange believes 

that it is necessary to accept this 

condition in order to successfully 

launch MIAX Sapphire. 

The Exchange’s affiliates 24 previously 

completed a study of their aggregate 

costs to produce market data and 

provide connectivity and port services, 

defined above as its Cost Analysis.25

Personnel began to plan for and develop 

the Exchange beginning in early 2023, 

and costs included in this Cost Analysis 

are related to the development and 

buildout of the Exchange since that 

time. During the Exchange’s 

development and buildout that occurred 

throughout 2023 and continues to today, 

the Exchange routinely studied its 

aggregate costs to develop and 

implement the Exchange. 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 

administrative expenses (‘‘cost 

drivers’’). 

As an initial step, the Exchange 

determined the total cost for the 

Exchange and its affiliated markets for 

each cost driver as part of the 

Exchange’s 2024 budget review process. 

The 2024 budget review is a companywide 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,26 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 five 

(including MIAX Sapphire) 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 cost drivers are the 

same at each individual marketplace 

and dividing total cost by five (5) 

(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. 

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., market data, 

connectivity, ports, and transaction 


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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. 

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 it 

has five primary sources of revenue that 

it can potentially use to fund its 

operations: transaction fees, 

connectivity and port service fees, 

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 

Members and parties that they sponsor 

to participate directly on the Exchange 

may submit orders to the Exchange; 

some 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 cost-justified potential fee 

proposals. In the absence of the 

Commission attempting to specify a 

methodology for the allocation of 

exchanges’ interdependent costs, the 

Exchange will continue to be left with 

its best efforts to 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 Purge Port 

services, and thus bears a relationship 

that is, ‘‘in nature and closeness,’’ 

directly related to Purge 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 Purge 

Port services is $35,518, as further 

detailed below. 

Costs Related to Offering Purge Ports 

The following chart details the 

individual line-item costs considered by 

the Exchange to be related to offering 

Purge Ports 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 3.5% of its 

overall Human Resources cost to 

offering Purge Ports). 

Cost drivers Allocated 

annual cost a

Allocated 

monthly cost b % of all 

Human Resources ....................................................................................................................... $363,954 $30,329 3.6 

Connectivity (external fees, cabling, switches, etc.) ................................................................... 112 9 0.4 

Internet Services and External Market Data ............................................................................... 654 54 0.4 

Data Center ................................................................................................................................. 6,764 564 1.1 

Hardware and Software Maintenance and Licenses .................................................................. 2,185 182 0.4 

Depreciation ................................................................................................................................. 19,518 1,626 1.6 

Allocated Shared Expenses ........................................................................................................ 33,051 2,754 1.2 

Total ...................................................................................................................................... 426,238 35,518 2.7 

aThe Annual Cost includes figures rounded to the nearest dollar. 

bThe 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. 

Below are additional details regarding 

each of the line-item costs considered 

by the Exchange to be related to offering 

Purge 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 Purge 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. 

Human Resources 

The Exchange notes that it and its 

affiliated markets anticipate that by 

year-end 2024, there will be 289 

employees (excluding employees at 


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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 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 Purge Ports 

and performance thereof (primarily the 

Exchange’s network infrastructure team, 

which spends most of their time 

performing functions necessary to 

provide port and connectivity services). 

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 port 

services. From that portion allocated to 

the Exchange that applied to ports, the 

Exchange then allocated a weighted 

average of 4.8% of each employee’s time 

from the above group to Purge Ports. 

The Exchange also allocated Human 

Resources costs to provide Purge Ports 

to a limited subset of personnel with 

ancillary functions related to 

establishing and maintaining such ports 

(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 Purge 

Ports) and then applied a smaller 

allocation to such employees’ time to 

Purge Ports (2.2%). This other group of 

personnel with a smaller allocation of 

Human Resources costs also have a 

direct nexus to Purge Ports, whether it 

is a sales person selling port services, 

finance personnel billing for port 

services or providing budget analysis, or 

information security ensuring that such 

ports are secure and adequately 

defended from an outside intrusion. 

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 Purge Ports, 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 Purge Ports: 

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 4.8% of each of their 

employee’s time assigned to the 

Exchange for Purge Ports, as stated 

above. Employees from these 

departments perform numerous 

functions to support Purge Ports, such 

as the installation, re-location, 

configuration, and maintenance of Purge 

Ports 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 Purge Ports and 

design, and support the development 

and on-going maintenance of internallydeveloped 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 Purge Ports, 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 Purge Ports related 

Human Resources costs to the extent 

that they are involved in overseeing 

tasks related to providing Purge Ports. 

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. 

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 

vendors is required in order to receive 

market data 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. options 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 10Gb ULL 

connectivity. Specifically, the Exchange 

utilizes connectivity providers to 

connect to other national securities 

exchanges and the Options Price 

Reporting Authority (‘‘OPRA’’). 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 which includes Purge 

Ports. Without these services providers, 

the Exchange would not be able to 

connect to other national securities 

exchanges, market data providers or 

OPRA and, therefore, would not be able 

to operate and support its System 

Networks, including Purge Ports. In 

addition, the connectivity is necessary 

for the Exchange to notify OPRA and 

other market participants that an order 

has been cancelled, and that quotes may 

have been cancelled as a result of a 

Market Maker purging quotes via their 

Purge Port. Also, like other types of 

ports offered by the Exchange, Purge 

Ports leverage the Exchange’s existing 

10Gb ULL connectivity, which also 

relies on connectivity to other national 

securities exchanges and OPRA. The 

Exchange does not employ a separate 

fee to cover its connectivity provider 

expense and recoups that expense, in 

part, by charging for Purge Ports. 

Internet Services and External Market 

Data 

The next cost driver consists of 

internet services and external market 

data. Internet services includes thirdparty service providers that provide the 


ddrumheller on DSK120RN23PROD with NOTICES1
73142 Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices 

27The term ‘‘NBBO’’ means the national best bid 

or offer as calculated by the Exchange based on 

market information received by the Exchange from 

OPRA. See Exchange Rule 100. 

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 

Purge 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 OPRA, to receive and 

consume market data from other 

markets. The Exchange includes 

external market data costs towards 

Purge Ports because such market data is 

necessary to offer certain services 

related to such ports, such as checking 

for market conditions (e.g., halted 

securities). External market data is also 

consumed at the Matching Engine level 

for, among other things, as validating 

quotes on entry against the national best 

bid or offer (‘‘NBBO’’).27 Purge Ports are 

a component of the Matching Engine, 

and used by Market Makers to cancel 

multiple resting quotes within the 

Matching Engine. While resting, the 

Exchange uses external market data to 

manage those quotes, such as preventing 

trade-throughs, and those quotes are 

also reported to OPRA for inclusion in 

this consolidated data stream. The 

Exchange also must notify OPRA and 

other market participants that an order 

has been cancelled, and that quotes may 

have been cancelled as a result of a 

Market Maker purging quotes via their 

Purge Port. Thus, since market data 

from other exchanges is consumed by 

the Matching Engine to validate quotes 

and check market conditions, the 

Exchange believes it is reasonable to 

allocate a small amount of such costs to 

Purge Ports. 

For the reasons set forth above, the 

Exchange believes it is reasonable to 

allocate a small amount of such costs to 

Purge Ports since market data from other 

exchanges is consumed at the 

Exchange’s Purge Port level to validate 

purge messages and the necessity to 

cancel a resting quote via a purge 

message or via some other means. 

Data Center 

Data Center costs includes an 

allocation of the costs the Exchange 

incurs to provide Purge Ports in the 

third-party data centers where it 

maintains its equipment as well as 

related costs for market data to then 

enter the Exchange’s System. 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. The 

Exchange has allocated a percentage of 

its Data Center cost (1.1%) to Purge 

Ports because the third-party data 

centers and the Exchange’s physical 

equipment contained therein are 

necessary for providing Purge Ports. In 

other words, for the Exchange to operate 

in a dedicated physical space with 

direct connectivity by market 

participants to its trading platform, the 

data centers are a critical component to 

the provision of Purge Ports. If the 

Exchange did not maintain such a 

presence, then Purge Ports would be of 

little value to market participants. 

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 Purge Ports for 

each Matching Engine of the Exchange. 

This hardware includes servers, 

network switches, cables, optics, 

protocol data units, and cabinets, to 

maintain a state-of-the-art technology 

platform. Without hardware and 

software licenses, Purge Ports would not 

be able to be offered to market 

participants because hardware and 

software are necessary to operate the 

Exchange’s Matching Engines, which 

are necessary to enable the purging of 

quotes. The Exchange also routinely 

works to improve the performance of 

the hardware and software used to 

operate the Exchange’s network and 

System. The costs associated with 

maintaining and enhancing a state-ofthe-art exchange network is a significant 

expense for the Exchange, and thus the 

Exchange believes that it is reasonable 

and appropriate to allocate a certain 

percentage of its hardware and software 

expense to help offset those costs of 

providing Purge Port connectivity to its 

Matching Engines. 

Depreciation 

The vast majority of the software the 

Exchange uses to provide 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 

Purge 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 0.8% [sic] of all depreciation 

costs to providing Purge Ports. The 

Exchange allocated depreciation costs 

for depreciated software necessary to 

operate the Exchange because such 

software is related to the provision of 

Purge Ports. As with the other allocated 

costs in the Exchange’s updated Cost 

Analysis, the Depreciation cost driver 

was therefore narrowly tailored to 

depreciation related to Purge Ports. 

Allocated Shared Expenses 

Finally, a portion of general shared 

expenses was allocated to overall Purge 

Port costs as without these general 

shared costs the Exchange would not be 

able to operate in the manner that it 

does and provide Purge Ports. 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 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 2% of the overall cost for 

directors was allocated to providing 

Purge Ports. 

Approximate Cost for Purge Port per 

Month 

Based on projected 2024 data, the 

total monthly cost allocated to Purge 

Ports is $35,518. This total is divided by 

the total number of Matching Engines 

(8) in which Market Makers may use 

Purge Ports for each month, divided by 

the anticipated number of Market 

Makers results in an approximate cost of 

$634 per Matching Engine per month for 

Purge Port usage (when rounding to the 

nearest dollar). The Exchange notes that 

the flat fee of $600 per month per 

Matching Engine entitles each Market 

Maker to two Purge Ports per Matching 

Engine. The Exchange anticipates that 

the majority of Market Makers will 

connect to all eight of the Exchange’s 

Matching Engines and utilize Purge 

Ports on each Matching Engine. The 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices 73143 

28For purposes of calculating projected 2024 

revenue for Purge Ports, the Exchange is using 

estimated projections. 

Exchange recognizes that costs are 

greater than anticipated revenues but 

accepts this condition as a necessary 

cost to be incurred when launching a 

new exchange. 

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 Purge 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. For instance, in calculating 

the Human Resources expenses to be 

allocated to Purge Ports 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 higher 

percentage of the cost of such personnel 

(21.7%) given their focus on functions 

necessary to provide Ports. The salaries 

of those same personnel were allocated 

only 4.8% to Purge Ports and the 

remaining 95.2% was allocated to 

connectivity, other port services, 

transaction services, membership 

services and market data. The Exchange 

did not allocate any other Human 

Resources expense for providing Purge 

Ports to any other employee group, 

outside of a smaller allocation of 2.2% 

for Purge Ports, of the cost associated 

with certain specified personnel who 

work closely with and support network 

infrastructure personnel. This is because 

a much wider range of personnel are 

involved in functions necessary to offer, 

monitor and maintain Purge Ports but 

the tasks necessary to do so are not a 

primary or full-time function. 

In total, the Exchange allocated 3.6% 

of its personnel costs to providing Purge 

Ports. In turn, the Exchange allocated 

the remaining 96.4% of its Human 

Resources expense to membership 

services, transaction services, 

connectivity services, other port 

services and market data. 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 Purge Ports, but 

in different amounts. The Exchange 

believes it is reasonable to allocate the 

identified portion of such expense 

because such expense includes the 

actual cost of the computer equipment, 

such as dedicated servers, computers, 

laptops, monitors, information security 

appliances and storage, and network 

switching infrastructure equipment, 

including switches and taps that were 

purchased to operate and support the 

network. Without this equipment, the 

Exchange would not be able to operate 

the network and provide Purge Port 

services to its Market Makers. However, 

the Exchange did not allocate all of the 

depreciation and amortization expense 

toward the cost of providing Purge Port 

services, but instead allocated 

approximately 0.8% [sic] of the 

Exchange’s overall depreciation and 

amortization expense to Purge Ports. 

The Exchange allocated the remaining 

depreciation and amortization expense 

(approximately 99.2% [sic]) toward the 

cost of providing transaction services, 

membership services, connectivity 

services, other port 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 

Purge Ports, the Exchange will have to 

be successful in retaining existing 

Market Makers that wish to maintain 

Purge Ports or in obtaining new Market 

Makers 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 

2024 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 

port 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 thencurrent 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 

and a reasonable mark-up, 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 28

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 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 Purge Port services. 

Subscribers, particularly those of Purge 

Ports, 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. As detailed above, the 

Exchange has five primary sources of 


ddrumheller on DSK120RN23PROD with NOTICES1
73144 Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices 

29See Exchange Rule 604. See also generally 

Chapter VI of the Exchange’s Rules. 

30 Id. 

31 15 U.S.C. 78s(b)(3)(A)(ii). 

32 17 CFR 240.19b–4(f)(2). 

revenue that it can potentially use to 

fund its operations: transaction fees, 

fees for connectivity services 

(connections and ports), membership 

and regulatory fees, and market data 

fees. Accordingly, the Exchange must 

cover its expenses from these five 

primary sources of revenue. 

The Exchange’s Cost Analysis 

estimates the annual cost to provide 

Purge Port services will equal $426,238. 

Based on projected Purge Port services 

usage, the Exchange would generate 

annual revenue of approximately 

$403,200. The Exchange estimates it 

will incur a 5.7% loss when comparing 

revenues to the cost of providing Purge 

Port services. 

Based on the above discussion, the 

Exchange believes that 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 pricing 

that deviates from that of other 

exchanges or a supra-competitive profit, 

when comparing the total expense of the 

Exchange associated with providing 

Purge Port services versus the total 

projected revenue of the Exchange 

associated with network Purge Port 

services. 

The Proposed Fees Are Also Equitable, 

Reasonable, and Not Unfairly 

Discriminatory 

The Exchange believes that the 

proposed rule change would promote 

just and equitable principles of trade 

and remove impediments to and perfect 

the mechanism of a free and open 

market because offering Market Makers 

optional Purge Port services with a 

flexible fee structure promotes choice, 

flexibility, and efficiency. The Exchange 

believes Purge Ports enhance Market 

Makers’ ability to manage orders, which 

would, in turn, improve their risk 

controls to the benefit of all market 

participants. The Exchange believes that 

Purge Ports foster cooperation and 

coordination with persons engaged in 

facilitating transactions in securities 

because designating Purge Ports for 

purge messages may encourage better 

use of such ports. This may, concurrent 

with the ports that carry orders and 

other information necessary for market 

making activities, enable more efficient, 

as well as fair and reasonable, use of 

Market Makers’ resources. The 

Exchange believes that proper risk 

management, including the ability to 

efficiently cancel multiple orders 

quickly when necessary is valuable to 

all firms, including Market Makers that 

have heightened quoting obligations 

that are not applicable to other market 

participants. 

Purge Ports do not relieve Market 

Makers of their quoting obligations or 

firm quote obligations under Regulation 

NMS Rule 602.29 Specifically, any 

interest that is executable against a 

Member’s or Market Maker’s orders that 

is received by the Exchange prior to the 

time of the removal of orders request 

will automatically execute. Market 

Makers that purge their orders will not 

be relieved of the obligation to provide 

continuous two-sided orders on a daily 

basis, nor will it prohibit the Exchange 

from taking disciplinary action against a 

Market Maker for failing to meet their 

continuous quoting obligation each 

trading day.30

The Exchange also believes that 

offering Purge Ports at the Matching 

Engine level promotes risk management 

across the industry, and thereby 

facilitates investor protection. Some 

market participants, in particular the 

larger firms, could and do build similar 

risk functionality in their trading 

systems that permit the flexible 

cancellation of orders entered on the 

Exchange at a high rate. Offering 

Matching Engine level protections 

ensures that such functionality is 

widely available to all firms, including 

smaller firms that may otherwise not be 

willing to incur the costs and 

development work necessary to support 

their own customized mass cancel 

functionality. 

The Exchange also believes that 

moving to a per Matching Engine fee for 

Purge Ports is reasonable due to the 

Exchange’s architecture that provides 

the Exchange the ability to provide two 

(2) Purge Ports per Matching Engine. 

The Exchange believes that the 

proposed Purge Port fees are equitable 

because the proposed Purge Ports are 

completely voluntary as they relate 

solely to optional risk management 

functionality. 

The Exchange also believes that the 

proposed amendments to its Fee 

Schedule are not unfairly 

discriminatory because they will apply 

uniformly to all Market Makers that 

choose to use the optional Purge Ports. 

Purge Ports are completely voluntary 

and, as they relate solely to optional risk 

management functionality, no Market 

Maker is required or under any 

regulatory obligation to utilize them. All 

Market Makers that voluntarily select 

this service option will be charged the 

same amount for the same services. 

Market Makers have the option to select 

any port or connectivity option, and 

there is no differentiation among Market 

Makers with regard to the fees charged 

for the services offered by the Exchange. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. Purge Ports 

are completely voluntary and are 

available to all Market Makers on an 

equal basis at the same cost. While the 

Exchange believes that Purge Ports 

provide a valuable service, Market 

Makers can choose to purchase, or not 

purchase, these ports based on their 

own determination of the value and 

their business needs. No Market Maker 

is required or under any regulatory 

obligation to utilize Purge Ports. 

Accordingly, the Exchange believes that 

Purge Ports offer appropriate risk 

management functionality to firms that 

trade on the Exchange without imposing 

an unnecessary or inappropriate burden 

on competition. 

The Exchange also does not believe 

the proposal would cause any 

unnecessary or inappropriate burden on 

intermarket competition as other 

exchanges are free to introduce their 

own purge port functionality and lower 

their prices to better compete with the 

Exchange’s offering. The Exchange does 

not believe the proposed rule change 

would cause any unnecessary or 

inappropriate burden on intramarket 

competition. Particularly, the proposal 

would apply uniformly to any market 

participant, in that it does not 

differentiate between Market Makers. 

The proposal would allow any 

interested Market Maker to purchase 

Purge Port functionality based on their 

business needs. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,31 and Rule 

19b–4(f)(2) 32 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 


ddrumheller on DSK120RN23PROD with NOTICES1
Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices 73145 

33 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(6). 

5Capitalized terms not defined herein shall have 

the meaning assigned to such terms in the Rules, 

available at www.dtcc.com/legal/rules-andprocedures. 

6NSCC Procedure XIII defines ‘‘Real-time’’ to 

mean the ‘‘submission of trade data on a trade-bytrade basis promptly after trade execution, in any 

format and by any communication method 

acceptable to [NSCC].’’ See NSCC Procedure XIII, 

supra note 5. 

7NSCC’s UTC system validates and reports equity 

transactions that are submitted to NSCC throughout 

the trading day by an exchange or by a Qualified 

Special Representative that is an NSCC Member. 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

SAPPHIRE–2024–26 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to file 

number SR–SAPPHIRE–2024–26. 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–SAPPHIRE–2024–26 and should be 

submitted on or before September 30, 

2024. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Vanessa A. Countryman, 

Secretary. 

[FR Doc. 2024–20172 Filed 9–6–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–100897; File No. SR– 

NSCC–2024–007] 

Self-Regulatory Organizations; 

National Securities Clearing 

Corporation; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify the NSCC 

Rules & Procedures To Accommodate 

Fractional Share Trading Programs 

September 3, 2024. 

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 

21, 2024, National Securities Clearing 

Corporation (‘‘NSCC’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II and III 

below, which Items have been prepared 

by the clearing agency. NSCC filed the 

proposed rule change pursuant to 

Section 19(b)(3)(A) of the Act 3 and Rule 

19b–4(f)(6) thereunder.4 The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

modifications to the NSCC Rules & 

Procedures (‘‘Rules’’) to accommodate 

the Member submission and trade 

recording of certain trades executed in 

connection with fractional share trading 

programs, as described in greater detail 

below.5

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The purpose of this proposed rule 

change is to amend the real-time trade 

submission requirements in NSCC Rule 

7 and Procedure II to accommodate the 

Member submission and trade recording 

of certain trades representing 

transactions from fractional share 

trading programs. The proposed rule 

change is discussed in detail below. 

Background 

NSCC Rule 7, Section 7 requires that 

trade data submitted to NSCC for trade 

recording be submitted in ‘‘Real-time,’’ 6

and on a trade-by-trade basis, in the 

form executed without any form of ‘‘prenetting’’ of such trades prior to their 

submission (collectively, the ‘‘Real-time 

Trade Submission Requirement’’). 

Cleared contract information is then 

reported out to submitting firms by 

NSCC’s Universal Trade Capture 

(‘‘UTC’’) system 7 upon trade 

comparison and validation. The receipt 

of trade data in real-time enables NSCC 

to report to Members trade data as it is 

received, thereby promoting intra-day 

reconciliation of transactions at the 

Member level, and also facilitates 

efficient risk management for both 

NSCC and its Members. 

From an operational perspective, 

NSCC is only able to accept trades for 

clearing in units of full shares. 

Moreover, stocks do not trade on 

exchanges in units of less than one 

share, and trades may only be reported 

to a trade reporting facility in multiples 


ddrumheller on DSK120RN23PROD with NOTICES1