5918 Federal Register / Vol. 87, No. 22 / Wednesday, February 2, 2022 / Notices 

16 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). A proposed rule change 

may take effect upon filing with the Commission if 

it is designated by the exchange as ‘‘establishing or 

changing a due, fee, or other charge imposed by the 

self-regulatory organization on any person, whether 

or not the person is a member of the self-regulatory 

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

4See Securities Exchange Act Release Nos. 93771 

(December 14, 2021), 86 FR 71940 (December 20, 

2021) (SR–MIAX–2021–60) (‘‘MIAX Notice’’); 93772 

(December 14, 2021), 86 FR 71965 (December 20, 

2021) (SR–EMERALD–2021–43) (‘‘MIAX Emerald 

Notice’’). For ease of reference, citations to 

statements generally applicable to both notices are 

to the MIAX Notice. 

5 15 U.S.C. 78s(b)(3)(C). 

6 Defined at MIAX Rule 100 and MIAX Emerald 

Rule 100. 

7See, e.g., MIAX Notice, supra note 4, at 71941 

n.15. 

8The Exchanges initially filed the proposed fee 

changes on August 2, 2021. See Securities Exchange 

Act Release Nos. 92661 (August 13, 2021), 86 FR 

46737 (August 19, 2021) (SR–MIAX–2021–37); 

92662 (August 13, 2021), 86 FR 46726 (August 19, 

2021) (SR–EMERALD–2021–25). These filings were 

withdrawn by the Exchanges. The Exchanges filed 

new proposed fee changes with additional 

justification (SR–MIAX–2021–43 and SR– 

EMERALD–2021–31, which were the subject of a 

Suspension of and Order Instituting Proceedings. 

See Securities Exchange Act Release No. 93640 

(November 22, 2021), 86 FR 67745 (November 29, 

2021). The Exchanges subsequently withdrew those 

filings and replaced them with the instant filings to 

provide additional information and a revised 

justification for the proposals, which are discussed 

herein. See also Securities Exchange Act Release 

No. 91857 (May 12, 2021), 86 FR 26973 (May 18, 

2021) (MIAX–2021–19) (allowing purchase of any 

number of additional Limited Service MEI Ports 

and stating that, at a continued monthly fee of $100 

for each additional port, the Exchange anticipates 

generating an annual loss from the provision). 

9See MIAX Notice, supra note 4, at 71941. 

10See MIAX Emerald Notice, supra note 4, at 

71966–67. The MIAX Emerald Fee Schedule states 

that Market Makers are limited to twelve additional 

Limited Service MEI Ports per matching engine, for 

a total of fourteen per matching engine. See MIAX 

Emerald Fee Schedule 5.d.ii. 

11 15 U.S.C. 78s(b)(3)(C). 

12 15 U.S.C. 78s(b)(1). 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–NYSE–2022–03, and 

should be submitted on or before 

February 23, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–02076 Filed 2–1–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94087; File Nos. SR–MIAX– 

2021–60, SR–EMERALD–2021–43] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC, MIAX Emerald, LLC; Suspension 

of and Order Instituting Proceedings 

To Determine Whether To Approve or 

Disapprove Proposed Rule Changes 

To Amend Fee Schedules To Adopt 

Tiered-Pricing Structures for 

Additional Limited Service MIAX and 

MIAX Emerald Express Interface Ports 

January 27, 2022. 

I. Introduction 

On December 1, 2021, Miami 

International Securities Exchange, LLC 

(‘‘MIAX’’) and MIAX Emerald, LLC 

(‘‘MIAX Emerald’’) (each an 

‘‘Exchange’’; collectively, the 

‘‘Exchanges’’) each filed with the 

Securities and Exchange Commission 

(‘‘Commission’’), pursuant to Section 

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

of 1934 (‘‘Act’’),1 and Rule 19b–4 

thereunder,2 a proposed rule change 

(File Numbers SR–MIAX–2021–60 and 

SR–EMERALD–2021–43) to amend the 

MIAX Options Fee Schedule and MIAX 

Emerald Fee Schedule (collectively, the 

‘‘Fee Schedules’’) to adopt a tieredpricing structure for additional limited 

service express interface ports. Each 

proposed rule change was immediately 

effective upon filing with the 

Commission pursuant to Section 

19(b)(3)(A) of the Act.3 The proposed 

rule changes were published for 

comment in the Federal Register on 

December 20, 2021.4 Under Section 

19(b)(3)(C) of the Act,5 the Commission 

is hereby: (i) Temporarily suspending 

File Numbers SR–MIAX–2021–60 and 

SR–EMERALD–2021–43; and (ii) 

instituting proceedings to determine 

whether to approve or disapprove File 

Numbers SR–MIAX–2021–60 and SR– 

EMERALD–2021–43. 

II. Background and Description of the 

Proposed Rule Changes 

Limited Service MIAX Express 

Interface Ports and Limited Service 

MIAX Emerald Express Interface Ports 

(collectively, ‘‘Limited Service MEI 

Ports’’) provide Market Makers 6 with 

the ability to send eQuotes and quote 

purge messages, and are also capable of 

receiving administrative information.7

Currently, each Exchange allocates two 

Limited Service MEI Ports, free of 

charge, per matching engine to which a 

Market Maker connects. Market Makers 

may request additional Limited Service 

MEI Ports for each matching engine to 

which they connect for an additional 

monthly fee for each such additional 

port. Prior to the proposed rule changes, 

each Exchange charged a flat $100 

monthly fee for each such additional 

port. Each Exchange has proposed to 

adopt a tiered-pricing structure.8 For 

both MIAX and MIAX Emerald, the first 

and second Limited Service MEI Ports 

for each matching engine would remain 

free of charge. For MIAX, the additional 

Limited Service MEI Port fees for each 

matching engine would increase from 

$100 to: (i) $150 for the third and fourth 

Limited Service MEI Ports; (ii) $200 for 

the fifth and sixth Limited Service MEI 

Ports; and (iii) $250 for the seventh or 

more Limited Service MEI Ports.9 For 

MIAX Emerald, the additional Limited 

Service MEI Port fees for each matching 

engine would increase from $100 to: (i) 

$200 for the third and fourth Limited 

Service MEI Ports; (ii) $300 for the fifth 

and sixth Limited Service MEI Ports; 

and (iii) $400 for the seventh to 

fourteenth Limited Service MEI Ports.10

III. Suspension of the Proposed Rule 

Changes 

Pursuant to Section 19(b)(3)(C) of the 

Act,11 at any time within 60 days of the 

date of filing of an immediately effective 

proposed rule change pursuant to 

Section 19(b)(1) of the Act,12 the 

Commission summarily may 

temporarily suspend the change in the 

rules of a self-regulatory organization 

(‘‘SRO’’) 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. As discussed below, the 

Commission believes a temporary 

suspension of the proposed rule changes 

is necessary and appropriate to allow for 

additional analysis of the proposed rule 

changes’ consistency with the Act and 

the rules thereunder. 

In support of the proposed tieredpricing structures and associated fee 

increases, the Exchanges state that such 

fees (which they refer to as ‘‘Proposed 

Access Fees’’) are reasonable because 


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13See, e.g., MIAX Notice, supra note 4, at 71942. 14See, e.g., id. 15See, e.g., id. 16See, e.g., id. at 71943. Each Exchange also 

states that no expense amount is allocated twice; 

and the expenses in each Exchange’s analysis only 

cover its own options market, not those of any 

affiliate. See, e.g., id. at 71945. 17See, e.g., id. at 71943. Each Exchange also 

states that its projected total annual expense is 

‘‘directly related to the access services associated 

with the Proposed Access Fees, and not any other 

product or service offered by the Exchange,’’ and 

does not include general costs of operating 

matching engines and other trading technology. 

See, e.g., id. at 71944. 

18See MIAX Notice, supra note 4, at 71943; MIAX 

Emerald Notice, supra note 4, at 71969. 

19See, e.g., MIAX Notice, supra note 4, at 71944– 

47. 

20See MIAX Notice, supra note 4, at 71943. 

21See MIAX Emerald Notice, supra note 4, at 

71969. 

22See, e.g., MIAX Notice, supra note 4, at 71947. 

23See, e.g., id. at 71943. 

24See, e.g., id. at 71948–49. 

25See, e.g., id. at 71948. 

26See, e.g., id. at 71947. 

27See, e.g., id. at 71948. 

they will permit recovery of the 

Exchanges’ costs in providing access 

services to supply additional Limited 

Service MEI Ports and will not result in 

the Exchanges generating a supracompetitive profit.13 Specifically, the 

Exchanges state that the Proposed 

Access Fees are based on a ‘‘cost-plus 

model,’’ designed to result in ‘‘cost 

recovery plus present the possibility of 

a reasonable return.’’ 14 Each Exchange 

provides an analysis of its revenues, 

costs, and profitability associated with 

the Proposed Access Fees, which they 

argue employs a ‘‘conservative 

methodology’’ that ‘‘strictly considers 

only those costs that are most clearly 

directly related to the provision and 

maintenance of additional Limited 

Service MEI Ports.’’ 15 The Exchanges 

state that this analysis reflects an 

extensive cost review in which the 

Exchanges analyzed nearly every 

expense item in the Exchanges’ general 

expense ledgers to determine whether 

each such expense relates to the 

Proposed Access Fees, and, if such 

expense did so relate, what portion (or 

percentage) of such expense actually 

supports the access services associated 

with the Proposed Access Fees.16 They 

state that this process entailed 

discussions with each Exchange 

department head to identify the 

expenses that support the access 

services associated with the Proposed 

Access Fees, review of the expenses 

holistically on an Exchange-wide level 

with assistance from the internal 

finance department, and then 

assessment of the total expense, with no 

expense allocated twice.17

For 2021, the total annual cost for 

providing the access services associated 

with the Proposed Access Fees is 

projected by the Exchanges to be 

approximately $1.32 million for MIAX 

(or approximately $110,000 per month 

on average) and $0.88 million for MIAX 

Emerald (or approximately $73,333.33 

per month on average).18 As described 

in more detail in the MIAX Notice and 

MIAX Emerald Notice, the total annual 

cost for each Exchange is comprised of 

the following, all of which the 

Exchanges state are directly related to 

the access services associated with the 

Proposed Access Fees: 19

• Third-party expense, relating to fees 

paid by the Exchanges to third-parties 

for certain products and services. This 

included allocating a portion of fees 

paid to: (1) Equinix for data center 

services; (2) Zayo Group Holdings, Inc. 

for network services; (3) Secure 

Financial Transaction Infrastructure, 

which supports connectivity and feeds; 

(4) various other service providers for 

content, connectivity, and infrastructure 

services; and (5) various other hardware 

and software providers; and 

• internal expense, relating to the 

internal costs of the Exchanges to 

provide the access services associated 

with the Proposed Access Fees. This 

included allocating a portion of the 

Exchanges’: (1) Employee compensation 

and benefits expenses for full-time 

employees that support the access 

services associated with the Proposed 

Access Fees; (2) depreciation and 

amortization of hardware and software 

used to provide the access services 

associated with the Proposed Access 

Fees; and (3) occupancy expenses for 

leased office space for staff that provide 

the access services associated with the 

Proposed Access Fees. 

MIAX estimated its baseline revenues 

from additional Limited Service MEI 

Ports in July 2021 (the month prior to 

the implementation of the Proposed 

Access Fees) to be approximately 

$124,800 (for a baseline profit margin of 

approximately 12 percent); and 

estimated its revenues from additional 

Limited Service MEI Ports in November 

2021 to be approximately $248,950 (a 

profit margin of approximately 56 

percent).20 MIAX Emerald estimated its 

baseline revenues from additional 

Limited Services MEI Ports in July 2021 

to be approximately $62,500 (for a 

baseline loss margin of approximately 

17.3 percent); and estimated its 

revenues from additional Limited 

Service MEI Ports in November 2021 to 

be approximately $216,600 (a profit 

margin of approximately 66 percent).21

Each Exchange believes its profit margin 

will allow it to begin to recoup its 

expenses and continue to invest in its 

technology infrastructure, and believes 

that the proposed profit margin increase 

(44 percent increase for MIAX, 83.3 

percent increase for MIAX Emerald) is 

reasonable because it represents a 

reasonable rate of return.22 The 

Exchanges add that the profit margin: (i) 

May fluctuate from month to month 

based on the uncertainty of predicting 

how many ports may be purchased as 

Members and non-Members add and 

drop ports at any time based on their 

own business decisions, which they 

frequently do; (ii) may decrease due to 

future increased costs to procure the 

third-party services; and (iii) may 

decrease due to inflationary pressure on 

capital items that the Exchanges need to 

purchase to maintain their technology 

and systems, which have resulted in 

price increases upwards of 30 percent 

on network equipment due to supply 

chain shortages, and in turn resulted in 

higher overall costs associated with 

ongoing system maintenance.23

In addition, although the Exchanges 

do not assert that competitive forces 

constrain the Proposed Access Fees, 

they maintain that the Proposed Access 

Fees are reasonable when compared to 

the fees of other options exchanges. The 

Exchanges provide port fees for 

competing exchanges which, according 

to the Exchanges, demonstrate that the 

Proposed Access Fees are similar to or 

significantly lower than fees charged by 

competing options exchanges with 

similar market share.24

The Exchanges also argue that the 

proposed tiered-pricing structures result 

in an equitable allocation of fees that are 

not unfairly discriminatory. The 

Exchanges state that they sought to 

design their proposed tiered-pricing 

structures to set the amount of the fee 

to relate to the number of ports a firm 

purchases.25 The Exchanges state that 

the fees will ‘‘apply to all Members and 

non-Members in the same manner based 

on the amount of additional Limited 

Service MEI Ports they require based on 

their own business decisions and usage 

of Exchange resources.’’ 26 The 

Exchanges states that firms that 

primarily route orders seeking bestexecution generally do not utilize 

additional Limited Service MEI Ports 

and ‘‘also generally send less orders and 

messages over those connections, 

resulting in less strain on Exchange 

resources.’’ 27 By contrast, the 

Exchanges contend that those firms that 

purchase higher amounts of Limited 

Service MEI Ports are primarily those 

that engage in advanced trading 

strategies, rather than order-routing 


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28See, e.g., id. 

29See, e.g., id. 

30See, e.g., id. at 71947–48. 

31See, e.g., id. at 71948. 

32See, e.g., id. 

33See, e.g., id. at 71947. 

34Comments received on the previous filings are 

available on the Commission’s website at: https:// 

www.sec.gov/comments/sr-miax-2021-37/ 

srmiax202137.htm (SR–MIAX–2021–37); https://

www.sec.gov/comments/sr-emerald-2021-25/ 

sremerald202125.htm (SR–EMERALD–2021–25); 

https://www.sec.gov/comments/sr-miax-2021-43/ 

srmiax202143.htm (SR–MIAX–2021–43); https://

www.sec.gov/comments/sr-emerald-2021-31/ 

sremerald202131.htm (SR–EMERALD–2021–31). 

35See 17 CFR 240.19b–4 (General Instructions for 

Form 19b–4—Information to be Included in the 

Complete Form—Item 3 entitled ‘‘Self-Regulatory 

Organization’s Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule Change’’). 

36See id. 

37 15 U.S.C. 78f(b)(4). 

38 15 U.S.C. 78f(b)(5). 

39 15 U.S.C. 78f(b)(8). 

40See 15 U.S.C. 78f(b)(4), (5), and (8), 

respectively. 

41For purposes of temporarily suspending the 

proposed rule changes, the Commission has 

considered the proposed rules’ impact on 

efficiency, competition, and capital formation. See 

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

42 15 U.S.C. 78s(b)(3)(C). Once the Commission 

temporarily suspends a proposed rule change, 

Section 19(b)(3)(C) of the Act requires that the 

Commission institute proceedings under Section 

19(b)(2)(B) to determine whether a proposed rule 

change should be approved or disapproved. 

43 15 U.S.C. 78s(b)(2)(B). 

44 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the 

Act also provides that proceedings to determine 

whether to disapprove a proposed rule change must 

be concluded within 180 days of the date of 

publication of notice of the filing of the proposed 

rule change. See id. The time for conclusion of the 

proceedings may be extended for up to 60 days if 

the Commission finds good cause for such 

extension and publishes its reasons for so finding, 

or if the exchange consents to the longer period. See 

id. 

45 15 U.S.C. 78f(b)(4). 

46 15 U.S.C. 78f(b)(5). 

47 15 U.S.C. 78f(b)(8). 

firms seeking best execution; 28 that 

such firms ‘‘essentially do so for 

competitive reasons amongst themselves 

and choose to utilize numerous ports 

based on their business needs and 

desire to attempt to access the market 

quicker by using the connection with 

the least amount of latency;’’ 29 that 

such firms typically generate a 

disproportionate amount of messages 

and order traffic, usually billions per 

day across the Exchanges, which 

consume the Exchanges’ resources and 

significantly contribute to the overall 

network access expense for storage and 

network transport capabilities; 30 that 

such firms tend to frequently add and 

drop ports mid-month to determine 

which ports have the least latency, 

which results in increased costs to the 

Exchanges to constantly make changes 

in their data centers and a 

‘‘disproportionate pull’’ on Exchange 

resources to provide the additional port 

access; 31 and that the more ports 

purchased by a Market Maker ‘‘likely 

results in greater expenditures of 

Exchange resources and increased cost 

to the Exchange.’’ 32

In addition, the Exchanges state that 

the proposed tiered-pricing structures 

result in an equitable allocation of fees 

that are not unfairly discriminatory 

because they are designed to encourage 

Members and non-Members to be more 

efficient and economical when 

determining how to connect to the 

Exchanges and would enable the 

Exchanges to better monitor and provide 

access to the Exchanges’ networks to 

ensure sufficient capacity and headroom 

in their systems.33

To date, the Commission has not 

received any comment letters on the 

revised justifications for the Proposed 

Access Fees.34

When exchanges file their proposed 

rule changes with the Commission, 

including fee filings like the Exchanges’ 

present proposals, they are required to 

provide a statement supporting the 

proposals’ basis under the Act and the 

rules and regulations thereunder 

applicable to the exchanges.35 The 

instructions to Form 19b–4, on which 

exchanges file their proposed rule 

changes, specify that such statement 

‘‘should be sufficiently detailed and 

specific to support a finding that the 

proposed rule change is consistent with 

[those] requirements.’’ 36

Section 6 of the Act, including 

Sections 6(b)(4), (5), and (8), require, 

among other things, that the rules of an 

exchange: (1) Provide for the equitable 

allocation of reasonable fees among 

members, issuers, and other persons 

using the exchange’s facilities; 37 (2) be 

designed to perfect the mechanism of a 

free and open market and a national 

market system and to protect investors 

and the public interest, and not be 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers; 38 and (3) 

not impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the Act.39

In temporarily suspending the 

Exchanges’ proposed rule changes, the 

Commission intends to further consider 

whether the proposed additional 

Limited Service MEI Port fees are 

consistent with the statutory 

requirements applicable to a national 

securities exchange under the Act. In 

particular, the Commission will 

consider whether the proposed rule 

changes satisfy the standards under the 

Act and the rules thereunder requiring, 

among other things, that an exchange’s 

rules provide for the equitable 

allocation of reasonable fees among 

members, issuers, and other persons 

using its facilities; not permit unfair 

discrimination between customers, 

issuers, brokers or dealers; and do not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.40

Therefore, the Commission finds that 

it is appropriate in the public interest, 

for the protection of investors, and 

otherwise in furtherance of the purposes 

of the Act, to temporarily suspend the 

proposed rule changes.41

IV. Proceedings To Determine Whether 

To Approve or Disapprove the 

Proposed Rule Changes 

In addition to temporarily suspending 

the proposals, the Commission also 

hereby institutes proceedings pursuant 

to Sections 19(b)(3)(C) 42 and 

19(b)(2)(B) 43 of the Act to determine 

whether the Exchanges’ proposed rule 

changes should be approved or 

disapproved. Institution of such 

proceedings is appropriate at this time 

in view of the legal and policy issues 

raised by the proposed rule changes. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, as 

described below, the Commission seeks 

and encourages interested persons to 

provide comments on the proposed rule 

changes to inform the Commission’s 

analysis of whether to approve or 

disapprove the proposed rule changes. 

Pursuant to Section 19(b)(2)(B) of the 

Act,44 the Commission is providing 

notice of the grounds for possible 

disapproval under consideration. The 

Commission is instituting proceedings 

to allow for additional analysis of 

whether the Exchanges have sufficiently 

demonstrated how the proposed rule 

changes are consistent with Sections 

6(b)(4),45 6(b)(5),46 and 6(b)(8) 47 of the 

Act. Section 6(b)(4) of the Act requires 

that the rules of a national securities 

exchange provide for the equitable 

allocation of reasonable dues, fees, and 

other charges among its members and 

issuers and other persons using its 

facilities. Section 6(b)(5) of the Act 

requires that the rules of a national 

securities exchange be designed, among 

other things, to promote just and 

equitable principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system and, in 

general, to protect investors and the 

public interest, and not be designed to 


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48See, e.g., MIAX Notice, supra note 4, at 71942. 49See, e.g., id. at 71943. 

50See, e.g., id. 

51See, e.g., id. at 71943, 71947. 

52See, e.g., id. at 71943–44. 

permit unfair discrimination between 

customers, issuers, brokers, or dealers. 

Section 6(b)(8) of the Act requires that 

the rules of a national securities 

exchange not impose any burden on 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The Commission asks that 

commenters address the sufficiency of 

the Exchanges’ statements in support of 

the proposals, which are set forth in the 

MIAX Notice and MIAX Emerald 

Notice, in addition to any other 

comments they may wish to submit 

about the proposed rule changes. In 

particular, the Commission seeks 

comment on the following aspects of the 

proposals and asks commenters to 

submit data where appropriate to 

support their views: 

1. Cost Estimates and Allocation. The 

Exchanges state that they are not 

asserting that the Proposed Access Fees 

are constrained by competitive forces, 

but rather set forth a ‘‘cost-plus model,’’ 

employing a ‘‘conservative 

methodology’’ that ‘‘strictly considers 

only those costs that are most clearly 

directly related to the provision and 

maintenance of additional Limited 

Service MEI Ports.’’ 48 As summarized in 

greater detail above, MIAX and MIAX 

Emerald project $1.32 million and $0.88 

million, respectively, in aggregate 

annual estimated costs for 2021 for 

additional Limited Service MEI Ports. 

Do commenters believe that the 

Exchanges have provided sufficient 

detail about how they determined (a) 

which categories and sub-categories of 

third-party and internal expenses are 

most clearly directly associated with 

providing and maintaining additional 

Limited Service MEI Ports, (b) the total 

annual expenses associated with such 

categories/sub-categories, and (c) what 

percentage of each such expense should 

be allocated as actually supporting the 

additional Limited Service MEI Ports (as 

opposed to, for example, allocated to the 

first two ‘‘free’’ Limited Service MEI 

Ports or other types of ports or 

connectivity services offered by the 

Exchanges)? The Exchanges describe a 

process involving all Exchange 

department heads, including the finance 

department, but do not specify further 

what principles were applied in making 

these determinations or arriving at 

particular allocations. Do commenters 

believe further explanation is necessary? 

For employee compensation and benefit 

costs, for example, the Exchanges 

calculated an allocation of employee 

time in several departments, including 

Technology, Back Office, Systems 

Operations, Networking, Business 

Strategy Development, and Trade 

Operations, but do not provide the job 

titles and salaries of persons whose time 

was accounted for, or explain the 

methodology used to determine how 

much of an employee’s time is devoted 

to providing and maintaining additional 

Limited Service MEI Ports. What are 

commenters’ views on whether the 

Exchanges have provided sufficient 

detail on the identity and nature of 

services provided by third parties? 

Across all of the categories and subcategories of third-party and internal 

expenses that the Exchanges identified 

as being clearly directly associated with 

providing and maintaining additional 

Limited Service MEI Ports, what are 

commenters’ views on whether the 

Exchanges have provided sufficient 

detail on how they selected such 

categories/sub-categories and how 

shared costs within or among such 

categories/sub-categories are allocated 

to additional Limited Service MEI Ports, 

to permit an independent review and 

assessment of the reasonableness of 

purported cost-based fees and the 

corresponding profit margin thereon? 

Should the Exchanges be required to 

identify the categories/sub-categories of 

expenses that they deemed not to be 

clearly directly associated with 

additional Limited Service MEI Ports, 

and/or what Exchange products or 

services account for the un-allocated 

percentage of those categories/subcategories of expenses that were deemed 

to be associated with additional Limited 

Service MEI Ports (e.g., what products 

or services are associated with the 

approximately 95 percent and 98 

percent, respectively, of applicable 

depreciation and amortization expenses 

that MIAX and MIAX Emerald do not 

allocate to the Proposed Access Fees)? 

Do commenters believe that the costs 

projected for 2021 are generally 

representative of expected costs going 

forward (to the extent commenters 

consider 2021 to be a typical or atypical 

year), or should an exchange present an 

estimated range of costs with an 

explanation of how profit margins could 

vary along the range of estimated costs? 

2. Revenue Estimates and Profit 

Margin Range. MIAX and MIAX 

Emerald use a single monthly revenue 

figure (November 2021) as the basis for 

calculating their projected profit 

margins of 56 percent and 66 percent, 

respectively. Yet the Exchanges 

acknowledge that the number of ports 

purchased fluctuates from month to 

month as Members and non-Members 

add and drop ports.49 Do commenters 

believe a single month provides a 

reasonable basis for a revenue 

projection? If not, why not? The profit 

margin is also dependent on the 

accuracy of the cost projections which, 

if inflated (intentionally or 

unintentionally), may render the 

projected profit margin meaningless. 

The Exchanges acknowledge that the 

profit margin may decrease if costs 

increase,50 but they do not account for 

the possibility of cost decreases. What 

are commenters’ views on the extent to 

which actual costs (or revenues) deviate 

from projected costs (or revenues)? Do 

commenters believe that the Exchanges’ 

methodology for estimating the profit 

margin is reasonable? Should the 

Exchanges provide a range of profit 

margins that they believe are reasonably 

possible, and the reasons therefor? 

3. Reasonable Rate of Return. The 

Exchanges state that their Proposed 

Access Fees are ‘‘designed to cover 

[their] costs with a limited return in 

excess of such costs,’’ and believe that 

their 56 percent and 66 percent profit 

margins are such a limited return over 

such costs.51 Do commenters agree with 

the Exchanges that their expected 56 

percent and 66 percent profit margins 

would constitute reasonable rates of 

return over costs for additional Limited 

Service MEI Ports? If not, what would 

commenters consider to be a reasonable 

rate of return and/or what methodology 

would they consider to be appropriate 

for determining a reasonable rate of 

return? The Exchanges state that they 

chose to initially provide additional 

Limited Service MEI Ports at a 

discounted price and to forego revenue 

that they otherwise could have 

generated from assessing higher fees.52

Do commenters believe that this should 

be considered in the ‘‘reasonableness’’ 

assessment? Do commenters believe it 

relevant to an assessment of 

reasonableness that, according to the 

Exchanges, the Exchanges’ Proposed 

Access Fees are similar to or lower than 

fees charged by competing options 

exchanges with similar market share? 

Should an assessment of reasonable rate 

of return include consideration of 

factors other than costs; and if so, what 

factors should be considered, and why? 

4. Periodic Reevaluation. The 

Exchanges have not addressed whether 

they believe a material deviation from 

the anticipated profit margin would 

warrant the need to make a rule filing 

pursuant to Section 19(b) of the Act to 

increase or decrease the fees 

accordingly. In light of the impact that 


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53See, e.g., id. at 71948. 

54See, e.g., id. at 71947. 

55See, e.g., id. at 71947–48. 

56See, e.g., id. at 71948. 

57See, e.g., id. at 71947. 

58 17 CFR 201.700(b)(3). 

59See id. 

60See id. 

61See Susquehanna Int’l Group, LLP v. Securities 

and Exchange Commission, 866 F.3d 442, 446–47 

(D.C. Cir. 2017) (rejecting the Commission’s reliance 

on an SRO’s own determinations without sufficient 

evidence of the basis for such determinations). 

62 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act 

grants the Commission flexibility to determine what 

type of proceeding—either oral or notice and 

opportunity for written comments—is appropriate 

for consideration of a particular proposal by an 

SRO. See Securities Acts Amendments of 1975, 

Report of the Senate Committee on Banking, 

Housing and Urban Affairs to Accompany S. 249, 

S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 

the number of ports purchased has on 

profit margins, and the potential for 

costs to decrease (or increase) over time, 

what are commenters’ views on the 

need for exchanges to commit to 

reevaluate, on an ongoing and periodic 

basis, their cost-based connectivity fees 

to ensure that the fees stay in line with 

their stated profitability projections and 

do not become unreasonable over time, 

for example, by failing to adjust for 

efficiency gains, cost increases or 

decreases, and changes in subscribers? 

How formal should that process be, how 

often should that reevaluation occur, 

and what metrics and thresholds should 

be considered? How soon after a new 

connectivity fee change is implemented 

should an exchange assess whether its 

revenue and/or cost estimates were 

accurate and at what threshold should 

an exchange commit to file a fee change 

if its estimates were inaccurate? Should 

an initial review take place within the 

first 30 days after a connectivity fee is 

implemented? 60 days? 90 days? Some 

other period? 

5. Tiered Structure for Additional 

Limited Service MEI Ports. The 

Exchanges state that the proposed tiered 

fee structures are designed to set the 

amount of the fees to relate to the 

number of ports a firm purchases 53 and 

that ‘‘[c]harging a higher fee to a Market 

Maker that utilizes numerous ports is 

directly related to the increased costs 

the [Exchanges incur] in providing and 

maintaining those additional ports.’’ 54

According to the Exchanges, firms that 

purchase numerous Limited Service 

MEI Ports are primarily those that 

engage in advanced trading strategies, 

typically generate a disproportionate 

amount of messages and order traffic, 

and frequently add or drop ports midmonth, and thus that ‘‘it is equitable for 

these firms to experience increased port 

costs based on their disproportionate 

pull on Exchange resources to provide 

the additional port access.’’ 55 The 

Proposed Access Fees would not just 

increase the previous $100 per 

additional Limited Service MEI Port fee, 

but would progressively increase the fee 

up to 2.5-fold on MIAX (up to $250 per 

port for seven or more ports), and up to 

four-fold on MIAX Emerald (up to $400 

per port for seven or more ports). 

However, the Exchanges have not 

specifically asserted that it is, for 

example, 2.5 times more costly for 

MIAX, or four times more costly for 

MIAX Emerald, to provide the seventh 

or more ports. Instead, the Exchanges 

argue generally that the more ports 

purchased by a Market Maker ‘‘likely’’ 

results in greater expenditure of 

Exchange resources and increased cost 

to the Exchange.56 Do commenters 

believe that the fees for each tier, as well 

as the fee differences between the tiers, 

are supported by the Exchanges’ 

assertions that they set the tieredpricing structure in a manner that is 

equitable and not unfairly 

discriminatory? Do commenters believe 

that the Exchanges should demonstrate 

how the proposed tiered fee levels 

correlate with tiered costs (e.g., by 

providing cost information broken down 

by tier, messaging volumes through the 

additional Limited Service MEI Ports by 

tier, and/or mid-month add/drop rates 

by tier) to better substantiate, by tier, the 

‘‘disproportionate pull’’ on the 

Exchanges’ resources as a firm increases 

the number of additional Limited 

Service MEI Ports that it purchases and 

to permit an assessment of the 

Exchanges’ statement that the Proposed 

Access Fees ‘‘are solely determined by 

the individual Member’s or nonMember’s business needs and its impact 

on the Exchanges resources’’? 57

Under the Commission’s Rules of 

Practice, the ‘‘burden to demonstrate 

that a proposed rule change is 

consistent with the Exchange Act and 

the rules and regulations issued 

thereunder . . . is on the [SRO] that 

proposed the rule change.’’ 58 The 

description of a proposed rule change, 

its purpose and operation, its effect, and 

a legal analysis of its consistency with 

applicable requirements must all be 

sufficiently detailed and specific to 

support an affirmative Commission 

finding,59 and any failure of an SRO to 

provide this information may result in 

the Commission not having a sufficient 

basis to make an affirmative finding that 

a proposed rule change is consistent 

with the Act and the applicable rules 

and regulations.60 Moreover, 

‘‘unquestioning reliance’’ on an SRO’s 

representations in a proposed rule 

change would not be sufficient to justify 

Commission approval of a proposed rule 

change.61

The Commission believes it is 

appropriate to institute proceedings to 

allow for additional consideration and 

comment on the issues raised herein, 

including as to whether the proposals 

are consistent with the Act, any 

potential comments or supplemental 

information provided by the Exchanges, 

and any additional independent 

analysis by the Commission. 

V. Request for Written Comments 

The Commission requests written 

views, data, and arguments with respect 

to the concerns identified above, as well 

as any other relevant concerns. In 

particular, the Commission invites the 

written views of interested persons 

concerning whether the proposal is 

consistent with Sections 6(b)(4), 6(b)(5), 

and 6(b)(8), or any other provision of the 

Act, or the rules and regulations 

thereunder. The Commission asks that 

commenters address the sufficiency and 

merit of the Exchanges’ statements in 

support of the proposals, in addition to 

any other comments they may wish to 

submit about the proposed rule changes. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4, any 

request for an opportunity to make an 

oral presentation.62

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposals should be approved or 

disapproved by February 23, 2022. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by March 9, 2022. 

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 Nos. SR– 

MIAX–2021–60 and SR–EMERALD– 

2021–43 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 

Numbers SR–MIAX–2021–60 and SR– 

EMERALD–2021–43. These file 

numbers should be included on the 


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63 15 U.S.C. 78s(b)(3)(C). 

64 17 CFR 200.30–3(a)(57) and (58). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Exchange originally filed to amend the Fee 

Schedule on December 29, 2021 (SR–NYSEAmer– 

2021–51), with an effective date of January 3, 2022, 

then withdrew such filing and amended the Fee 

Schedule on January 12, 2022 (SR–NYSEAmer– 

2022–03), which latter filing the Exchange 

withdrew on January 21, 2022. 

5See Fee Schedule, Section I.C., NYSE American 

Options Market Maker Sliding Scale—Electronic, 

available at: https://www.nyse.com/publicdocs/ 

nyse/markets/american-options/NYSE_American_

Options_Fee_Schedule.pdf. 

6 In calculating Market Maker Electronic monthly 

volumes, the Exchange will exclude any volumes 

attributable to QCC trades, CUBE Auctions, or 

Strategy Execution Fee Caps as these transactions 

are subject to separate pricing described in Sections 

I.F., I.G. and I.J. of the Fee Schedule, respectively. 

Id. 

7See Fee Schedule, Section I.D., Prepayment 

Program. 

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 

changes that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule changes between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

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

filings also will be available for 

inspection and copying at the principal 

office of each Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Numbers SR–MIAX–2021–60 and SR– 

EMERALD–2021–43 and should be 

submitted on or before February 23, 

2022. Rebuttal comments should be 

submitted by March 9, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,63 that File 

Numbers SR–MIAX–2021–60 and SR– 

EMERALD–2021–43 be, and hereby are, 

temporarily suspended. In addition, the 

Commission is instituting proceedings 

to determine whether the proposed rule 

changes should be approved or 

disapproved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.64

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–02082 Filed 2–1–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94083; File No. SR– 

NYSEAMER–2022–07] 

Self-Regulatory Organizations; NYSE 

American LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the NYSE 

American Options Fee Schedule 

January 27, 2022. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on January 

21, 2022, NYSE American LLC (‘‘NYSE 

American’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. 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 proposes to amend the 

NYSE American Options Fee Schedule 

(‘‘Fee Schedule’’) to modify certain 

Market Maker incentives. The Exchange 

proposes to implement the fee change 

effective January 21, 2022.4 The 

proposed change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, 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 

self-regulatory organization 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 those 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 parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this filing is to modify 

certain incentives available to NYSE 

American Options Market Makers 

(‘‘Market Makers’’), as set forth below. 

Currently, Market Makers are entitled 

to reduced per contract rates for 

Electronic options transactions as set 

forth in Section I.C. of the Fee Schedule, 

NYSE American Options Market Maker 

Sliding Scale—Electronic (the ‘‘Sliding 

Scale’’).5 These lower per contract rates 

are applicable to monthly volume 

within a given tier (expressed as Market 

Maker Electronic ADV as a percentage 

of TCADV), such that the lower per 

contract rate applies to volume that falls 

within the range specified for each tier.6

The Exchange also offers a 

prepayment program to Market Makers, 

in which Market Maker firms may 

prepay a portion of the fees they incur 

on Electronic transactions, including 

CUBE transactions, ATP Fees, and other 

fees (the ‘‘Prepayment Program’’). 

Market Makers who participate in the 

Prepayment Program are entitled to 

further reduced rates on the Sliding 

Scale.7

The Exchange now proposes to 

modify the requirements to qualify for 

the Market Maker rates set forth in Tiers 

1 through 4 of the Sliding Scale and to 

adjust the Prepayment Program 

Participant Rate for non-take volume in 

Tier 1, as modified. The Exchange also 

proposes to eliminate Tier 5 of the 

Sliding Scale. These proposed changes 

are reflected in the table below with 

deletions in brackets and new text in 

italics. 


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