9678 Federal Register / Vol. 87, No. 35 / Tuesday, February 22, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

3The term ‘‘Member’’ means an individual or 

organization approved to exercise the trading rights 

associated with a Trading Permit. Members are 

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

Exchange Rule 100. 

4See Securities Exchange Act Release No. 92645 

(August 11, 2021), 86 FR 46048 (August 17, 2021) 

(SR–EMERALD–2021–23). 

5 Id. 

6See Letter from Richard J. McDonald, 

Susquehanna International Group, LLC (‘‘SIG’’), to 

Vanessa Countryman, Secretary, Commission, dated 

September 7, 2021 (‘‘SIG Letter 1’’). 

7See Securities Exchange Act Release No. 93166 

(September 28, 2021), 86 FR 54760 (October 4, 

2021) (SR–EMERALD–2021–29). 

8 Id. 

9See letters from Richard J. McDonald, SIG, to 

Vanessa Countryman, Secretary, Commission, dated 

October 1, 2021 (‘‘SIG Letter 2’’) and October 26, 

2021 (‘‘SIG Letter 3’’). See also letter from Tyler 

Gellasch, Executive Director, Healthy Markets 

Association (‘‘HMA’’), to Hon. Gary Gensler, Chair, 

Commission, dated October 29, 2021 (commenting 

on SR–CboeEDGA–2021–017, SR–CboeBYX–2021– 

020, SR–Cboe–BZX–2021–047, SR–CboeEDGX– 

2021–030, SR–MIAX–2021–41, SR–PEARL–2021– 

45, and SR–EMERALD–2021–29 and stating that 

‘‘MIAX has repeatedly filed to change its 

connectivity fees in a way that will materially lower 

costs for many users, while increasing the costs for 

some of its heaviest of users. These filings have 

been withdrawn and repeatedly refiled. Each time, 

however, the filings contain significantly greater 

information about who is impacted and how than 

other filings that have been permitted to take effect 

without suspension’’) (emphasis added) (‘‘HMA 

Letter’’); and Ellen Green, Managing Director, 

Equity and Options Market Structure, Securities 

Industry and Financial Markets Association 

(‘‘SIFMA’’), to Vanessa Countryman, Secretary, 

Commission, dated November 26, 2021 (‘‘SIFMA 

Letter’’). 

10See Securities Exchange Act Release No. 93644 

(November 22, 2021), 86 FR 67750 (November 29, 

2021). 

11See Securities Exchange Act Release No. 93776 

(December 14, 2021), 86 FR 71983 (December 20, 

2021) (SR–EMERALD–2021–42). 

12The Exchange notes that while the HMA Letter 

applauds the level of disclosure the Exchange 

included in the First and Second Proposed Rule 

Changes, the HMA Letter does not raise specific 

issues with the First or Second Proposed Rule 

Changes. Rather, it references the Exchange’s 

proposals by way of comparison to show the 

varying levels of transparency in exchange fees 

filings and recommends changes to the 

Commission’s review process of exchange fee 

filings generally. Therefore, the Exchange does not 

feel it is necessary to address the issues raised in 

the HMA Letter. 

13See supra note 11. 

14See Securities Exchange Act Release No. 94089 

(January 27, 2022) (Suspension of and Order 

Instituting Proceedings to Determine Whether to 

Approve or Disapprove Proposed Rule Change to 

Amend the MIAX Emerald Fee Schedule to Adopt 

a Tiered Pricing Structure for Certain Connectivity 

Fees). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94257; File No. SR– 

EMERALD–2022–04] 

Self-Regulatory Organizations; MIAX 

Emerald LLC; Notice of Filing of a 

Proposed Rule Change To Amend the 

MIAX Emerald Fee Schedule To Adopt 

a Tiered-Pricing Structure for Certain 

Connectivity Fees; Suspension of and 

Order Instituting Proceedings To 

Determine Whether To Approve or 

Disapprove the Proposed Rule Change 

February 15, 2022. 

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 February 

1, 2022, MIAX Emerald, LLC (‘‘MIAX 

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

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I and II 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 and is, pursuant 

to Section 19(b)(3)(C) of the Act, hereby: 

(i) Temporarily suspending the rule 

change; and (ii) instituting proceedings 

to determine whether to approve or 

disapprove the proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Emerald Fee Schedule 

(the ‘‘Fee Schedule’’) to amend certain 

connectivity fees. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV [sic] below. 

The Exchange has prepared summaries, 

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

of the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to adopt a tiered-pricing 

structure for the 10 gigabit (‘‘Gb’’) ultralow latency (‘‘ULL’’) fiber connection 

available to Members 3 and nonMembers. The Exchange initially filed 

this proposal on July 30, 2021, with the 

proposed fee changes effective 

beginning August 1, 2021 (‘‘First 

Proposed Rule Change’’).4 The First 

Proposed Rule Change was published 

for comment in the Federal Register on 

August 17, 2021.5 The Commission 

received one comment letter on the First 

Proposed Rule Change.6 The Exchange 

withdrew the First Proposed Rule 

Change on September 24, 2021 and resubmitted the proposal on September 

24, 2021, with the proposed fee changes 

being immediately effective (‘‘Second 

Proposed Rule Change’’).7 The Second 

Proposed Rule Change was published 

for comment in the Federal Register on 

October 4, 2021.8 The Second Proposed 

Rule Change provided additional 

justification for the proposed fee 

changes and addressed certain points 

raised in the single comment letter that 

was submitted on the First Proposed 

Rule Change. The Commission received 

four comment letters from three separate 

commenters on the Second Proposed 

Rule Change.9 The Commission 

suspended the Second Proposed Rule 

Change on November 22, 2021.10 The 

Exchange withdrew the Second 

Proposed Rule Change on December 1, 

2021 and submitted a revised proposal 

for immediate effectiveness (‘‘Third 

Proposed Rule Change’’).11 The Third 

Proposed Rule Change meaningfully 

attempted to address issues or questions 

that have been raised by providing 

additional justification and explanation 

for the proposed fee changes and 

directly respond to the points raised in 

SIG Letters 1, 2, and 3, as well as the 

SIFMA Letter submitted on the First and 

Second Proposed Rule Changes,12 and 

feedback provided by Commission Staff 

during a telephone conversation on 

November 18, 2021 relating to the 

Second Proposed Rule Change. The 

Third Proposed Rule Change was 

published for comment in the Federal 

Register on December 20, 2021.13 The 

Exchange receive no comment letters on 

the Third Proposed Rule Change. The 

Commission suspended the Third 

Proposed Rule Change on January 27, 

2022.14 The Exchange withdrew the 

Third Proposed Rule Change on 

February 1, 2022 and now submits this 

proposal for immediate effectiveness 

(‘‘Fourth Proposed Rule Change’’). This 

Fourth Proposed Rule Change provides 

additional justification and explanation 

for the proposed fee changes. 

10Gb ULL Tiered-Pricing Structure 

The Exchange proposes to amend 

Sections 5)a)–b) of the Fee Schedule to 


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Federal Register / Vol. 87, No. 35 / Tuesday, February 22, 2022 / Notices 9679 

15See NASDAQ Rules, General 8: Connectivity, 

Section 1. Co-Location Services. 

16See PHLX Rules, General 8: Connectivity. 

17See ISE Rules, General 8: Connectivity. 

18See NYSE American Options Fee Schedule, 

Section IV. 

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

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

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

22See Securities Exchange Act Release No. 85459 

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

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

2019–04) (Order Disapproving Proposed Rule 

Changes to Amend the Fee Schedule on the BOX 

Market LLC Options Facility to Establish BOX 

Connectivity Fees for Participants and NonParticipants Who Connect to the BOX Network). 

23See Staff Guidance on SRO Rule Filings 

Relating to Fees (May 21, 2019), at https://

www.sec.gov/tm/staff-guidance-sro-rule-filings-fees 

(the ‘‘Guidance’’). 

24See Securities Exchange Act Release Nos. 

90981 (January 25, 2021), 86 FR 7582 (January 29, 

2021) (SR–PEARL–2021–01) (proposal to increase 

connectivity fees); 90980 (January 25, 2021), 86 FR 

7602 (January 29, 2021) (SR–MIAX–2021–02) 

(proposal to increase connectivity fees). 

provide for a tiered-pricing structure for 

10Gb ULL connections for Members and 

non-Members. Prior to the First 

Proposed Rule Change, the Exchange 

assessed Members and non-Members a 

flat monthly fee of $10,000 per 10Gb 

ULL connection for access to the 

Exchange’s primary and secondary 

facilities. 

The Exchange now proposes to move 

from a flat monthly fee per connection 

to a tiered-pricing structure under 

which the monthly fee would vary 

depending on the number of 10Gb ULL 

connections each Member or nonMember elects to purchase per 

exchange. Specifically, the Exchange 

proposes to decrease the fee for the first 

and second 10Gb ULL connections for 

each Member and non-Member from the 

current flat monthly fee of $10,000 to 

$9,000 per connection. To encourage 

more efficient connectivity usage, the 

Exchange proposes to increase the per 

connection fee for Members and nonMembers that purchase more than two 

10Gb ULL connections. In particular, (i) 

the third and fourth 10Gb ULL 

connections for each Member or nonMember will increase from the current 

flat monthly fee of $10,000 to $11,000 

per connection; and (ii) for the fifth 

10Gb ULL connection, and each 10Gb 

ULL connection purchased by Members 

and non-Members thereafter, the fee 

will increase from the flat monthly fee 

of $10,000 to $13,000 per connection. 

The proposed 10Gb ULL tiered-pricing 

structure and fees are collectively 

referred to herein as the ‘‘Proposed 

Access Fees.’’ 

The Exchange believes the other 

exchanges’ connectivity fees are a useful 

example of alternative approaches to 

providing and charging for connectivity 

and provides the below table for 

comparison purposes only to show how 

its proposed fees compare to fees 

currently charged by other options 

exchanges for similar connectivity. As 

shown by the below table, the 

Exchange’s proposed highest tier is still 

less than fees charged for similar 

connectivity provided by other options 

exchanges. 

Exchange Type of port Monthly fee 

MIAX Emerald (as proposed) ............................. 10Gb ULL ......................................................... 1–2 connection. $9,000.00 3–4 connections. 

$11,000.00 5 or more. $13,000.00. 

The NASDAQ Stock Market LLC 

(‘‘NASDAQ’’) 15.

10Gb Ultra fiber ............................................... $15,000.00 

Nasdaq ISE LLC (‘‘ISE’’) 16 ................................ 10Gb Ultra fiber ............................................... $15,000.00 

Nasdaq PHLX LLC (‘‘PHLX’’) 17 ......................... 10Gb Ultra Fiber .............................................. $15,000.00 

NYSE American LLC (‘‘Amex’’) 18 ...................... 10Gb LX LCN .................................................. $22,000.00 

The Exchange will continue to assess 

monthly Member and non-Member 

network connectivity fees for 

connectivity to the primary and 

secondary facilities in any month the 

Member or non-Member is credentialed 

to use any of the Exchange APIs or 

market data feeds in the production 

environment. The Exchange proposes to 

pro-rate the fees when a Member or nonMember makes a change to the 

connectivity (by adding or deleting 

connections) with such pro-rated fees 

based on the number of trading days 

that the Member or non-Member has 

been credentialed to utilize any of the 

Exchange APIs or market data feeds in 

the production environment through 

such connection, divided by the total 

number of trading days in such month 

multiplied by the applicable monthly 

rate. The Exchange will continue to 

assess monthly Member and nonMember network connectivity fees for 

connectivity to the disaster recovery 

facility in each month during which the 

Member or non-Member has established 

connectivity with the disaster recovery 

facility. 

2. Statutory Basis 

The Exchange believes that the 

Proposed Access Fees are consistent 

with Section 6(b) of the Act 19 in 

general, and furthers the objectives of 

Section 6(b)(4) of the Act 20 in 

particular, in that they provide for the 

equitable allocation of reasonable dues, 

fees and other charges among Members 

and other persons using any facility or 

system which the Exchange operates or 

controls. The Exchange also believes the 

Proposed Access Fees further the 

objectives of Section 6(b)(5) of the Act 21

in that they are designed to promote just 

and equitable principles of trade, 

remove impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general protect investors and the public 

interest and are not designed to permit 

unfair discrimination between 

customers, issuers, brokers and dealers. 

On March 29, 2019, the Commission 

issued an Order disapproving a 

proposed fee change by the BOX Market 

LLC Options Facility to establish 

connectivity fees for its BOX Network 

(the ‘‘BOX Order’’).22 On May 21, 2019, 

the Commission Staff issued guidance 

‘‘to assist the national securities 

exchanges and FINRA . . . in preparing 

Fee Filings that meet their burden to 

demonstrate that proposed fees are 

consistent with the requirements of the 

Securities Exchange Act.’’ 23 Based on 

both the BOX Order and the Guidance, 

the Exchange believes that the Proposed 

Access Fees are consistent with the Act 

because they (i) are reasonable, 

equitably allocated, not unfairly 

discriminatory, and not an undue 

burden on competition; (ii) comply with 

the BOX Order and the Guidance; (iii) 

are supported by evidence (including 

comprehensive revenue and cost data 

and analysis) that they are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit; and (iv) utilize a 

cost-based justification framework that 

is substantially similar to a framework 

previously used by the Exchange, and 

its affiliates Miami International 

Securities Exchange, LLC (‘‘MIAX’’) and 

MIAX PEARL, LLC (‘‘MIAX Pearl’’), to 

amend other non-transaction fees.24


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9680 Federal Register / Vol. 87, No. 35 / Tuesday, February 22, 2022 / Notices 

25See Guidance, supra note 23. 

26 Id. 

27 Id. 

28 Id. 

29 Id. 

30 Id. 

31For example, the Exchange only included the 

costs associated with providing and supporting 

connectivity and excluded from its connectivity 

cost calculations any cost not directly associated 

with providing and maintaining such connectivity. 

Thus, the Exchange notes that this methodology 

underestimates the total costs of providing and 

maintaining connectivity. 

32A description of the Exchange’s methodology 

for determining the portion (or percentage) of each 

expense to allocate to the Proposed Access Fee is 

being provide in response to comments from SIG 

and SIFMA. See SIG Letter 3 and SIFMA Letter, 

supra note 9. 

The Proposed Access Fees Will Not 

Result in a Supra-Competitive Profit 

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 amendment meets the 

requirements of the Act that fees be 

reasonable, equitably allocated, not 

unfairly discriminatory, and not create 

an undue burden on competition among 

market participants. The Exchange 

believes this high standard is especially 

important when an exchange imposes 

various access fees for market 

participants to access an exchange’s 

marketplace. The Exchange deems 

connectivity to be access fees. It records 

these fees as part of its ‘‘Access Fees’’ 

revenue in its financial statements. 

In Guidance, the Commission Staff 

stated that, ‘‘[a]s an initial step in 

assessing the reasonableness of a fee, 

staff considers whether the fee is 

constrained by significant competitive 

forces.’’ 25 The Guidance further states 

that, ‘‘. . . even where an SRO cannot 

demonstrate, or does not assert, that 

significant competitive forces constrain 

the fee at issue, a cost-based discussion 

may be an alternative basis upon which 

to show consistency with the Exchange 

Act.’’ 26 In its Guidance, the 

Commission Staff further states that, 

‘‘[i]f an SRO seeks to support its claims 

that a proposed fee is fair and 

reasonable because it will permit 

recovery of the SRO’s costs, or will not 

result in excessive pricing or supracompetitive profit, specific information, 

including quantitative information, 

should be provided to support that 

argument.’’ 27 The Exchange does not 

assert that the Proposed Access Fees are 

constrained by competitive forces. 

Rather, the Exchange asserts that the 

Proposed Access Fees are reasonable 

because they will permit recovery of the 

Exchange’s costs in providing access 

services to supply 10Gb ULL 

connectivity and will not result in the 

Exchange generating a supracompetitive profit. 

The Guidance defines ‘‘supracompetitive profit’’ as ‘‘profits that 

exceed the profits that can be obtained 

in a competitive market.’’ 28 The 

Commission Staff further states in the 

Guidance that ‘‘the SRO should provide 

an analysis of the SRO’s baseline 

revenues, costs, and profitability (before 

the proposed fee change) and the SRO’s 

expected revenues, costs, and 

profitability (following the proposed fee 

change) for the product or service in 

question.’’ 29 The Exchange provides 

this analysis below. 

Based on this analysis, the Exchange 

believes the Proposed Access Fees are 

reasonable and do not result in a 

‘‘supra-competitive’’ 30 profit. The 

Exchange believes that it is important to 

demonstrate that the Proposed Access 

Fees are based on its costs and 

reasonable business needs. The 

Exchange believes the Proposed Access 

Fees will allow the Exchange to offset 

expenses the Exchange has and will 

incur, and that the Exchange provides 

sufficient transparency (described 

below) into the costs and revenue 

underlying the Proposed Access Fees. 

Accordingly, the Exchange provides an 

analysis of its revenues, costs, and 

profitability associated with the 

Proposed Access Fees. This analysis 

includes information regarding its 

methodology for determining the costs 

and revenues associated with the 

Proposed Access Fees. As a result of this 

analysis, the Exchange believes the 

Proposed Access Fees are fair and 

reasonable as a form of cost recovery 

plus present the possibility of a 

reasonable return for the Exchange’s 

aggregate costs of offering connectivity 

to the Exchange. 

The Proposed Access Fees are based 

on a cost-plus model. In determining the 

appropriate fees to charge, the Exchange 

considered its costs to provide 

connectivity, using what it believes to 

be a conservative methodology (i.e., that 

strictly considers only those costs that 

are most clearly directly related to the 

provision and maintenance of 10Gb ULL 

connectivity) to estimate such costs,31 as 

well as the relative costs of providing 

and maintaining 10Gb ULL 

connectivity, and set fees that are 

designed to cover its costs with a 

limited return in excess of such costs. 

However, as discussed more fully 

below, such fees may also result in the 

Exchange recouping less than all of its 

costs of providing and maintaining 

10Gb ULL connectivity because of the 

uncertainty of forecasting subscriber 

decision making with respect to firms’ 

connectivity needs and the likely 

potential for increased costs to procure 

the third-party services described 

below. 

To determine the Exchange’s costs to 

provide access services associated with 

the Proposed Access Fees, the Exchange 

conducted an extensive cost review in 

which the Exchange analyzed nearly 

every expense item in the Exchange’s 

general expense ledger to determine 

whether each such expense relates to 

the Proposed Access Fees, and, if such 

expense did so relate, what portion (or 

percentage) of such expense actually 

supports access services associated with 

the Proposed Access Fees. 

The Exchange also provides detailed 

information regarding the Exchange’s 

cost allocation methodology—namely, 

information that explains the 

Exchange’s rationale for determining 

that it was reasonable to allocate certain 

expenses described in this filing 

towards the cost to the Exchange to 

provide the access services associated 

with the Proposed Access Fees. The 

Exchange conducted a thorough internal 

analysis to determine the portion (or 

percentage) of each expense to allocate 

to the support of access services 

associated with the Proposed Access 

Fees. This analysis 32 included 

discussions with each Exchange 

department head to determine the 

expenses that support access services 

associated with the Proposed Access 

Fees. This included numerous meetings 

between the Exchange’s Chief 

Information Officer, Chief Financial 

Officer, Head of Strategic Planning and 

Operations, Chief Technology Officer, 

various members of the Legal 

Department, and other group leaders. 

The Exchange reviewed each individual 

expense to determine if such expense 

was related to the Proposed Access 

Fees. Once the expenses were 

identified, the Exchange department 

heads, with the assistance of our 

internal finance department, reviewed 

such expenses holistically on an 

Exchange-wide level to determine what 

portion of that expense supports 

providing access services for the 

Proposed Access Fees. The sum of all 

such portions of expenses represents the 

total cost to the Exchange to provide 

access services associated with the 

Proposed Access Fees. For the 

avoidance of doubt, no expense amount 

was allocated twice. 

The internal cost analysis conducted 

by the Exchange is a proprietary process 

that is designed to make a fair and 


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33See, e.g., Securities Exchange Act Release Nos. 

91339 (March 17, 2021), 86 FR 15524 (March 23, 

2021) (SR–CboeBZX–2021–020) (increasing fees for 

a market data product while not providing a cost 

based justification for the increase); 93293 (October 

21, 2021), 86 FR 57716 (October 18, 2021) (SR– 

PHLX–2021–058) (increasing fees for historical 

market data while not providing a cost based 

justification for the increase); 92970 (September 14, 

2021), 86 FR 52261 (September 20, 2021) (SR– 

CboeBZX–2021–047) (adopting fees for a market 

data related product while not providing a cost 

based justification for the fees); and 89826 

(September 10, 2021), 85 FR 57900 (September 16, 

2021) (SR–CBOE–2020–086) (increasing 

connectivity fees without including a cost based 

justification). 

34See Securities Exchange Act Release No. 89826 

(September 10, 2020), 85 FR 57900 (September 16, 

2020) (SR–CBOE–2020–086) (increasing 

connectivity fees without including a cost based 

justification). 

35See id. at 57909. 

36See supra note 32. 

37 Id. 

reasonable assessment of costs and 

resources allocated to support the 

provision of access services associated 

with the Proposed Access Fees. The 

Exchange acknowledges that this 

assessment can only capture a moment 

in time and that costs and resource 

allocations may change. That is why the 

Exchange has historically, and on an 

ongoing basis, periodically revisits its 

costs and resource allocations to ensure 

it is appropriately allocating resources 

to properly provide services to the 

Exchange’s constituents. Any 

requirement that an exchange should 

conduct a periodic re-evaluation on a 

set timeline of its cost justification and 

amend its fees accordingly should be 

established by the Commission 

holistically, applied to all exchanges 

and not just through pending fee 

proposals, such as this filing. In order to 

be fairly applied, such a mandate 

should be applied to existing access fees 

as well. 

In accordance with the Guidance, the 

Exchange has provided sufficient detail 

to support a finding that the proposed 

fees are consistent with the Exchange 

Act. The proposal includes a detailed 

description of the Exchange’s costs and 

how the Exchange determined to 

allocate those costs related to the 

proposed fees. In fact, the detail and 

analysis provided in this proposed rule 

change far exceed the level of disclosure 

provided in other exchange fee filings 

that have not been suspended by the 

Commission during its 60-day 

suspension period. A finding that this 

proposed rule change is inconsistent 

with the Exchange Act would run 

contrary to the Commission Staff’s 

treatment of other recent exchange fee 

proposals that have not been suspended 

and remain in effect today.33 For 

example, a proposed fee filing that 

closely resembles the Exchange’s 

current filing was submitted in 2020 by 

the Cboe Exchange, Inc. (‘‘Cboe’’) and 

increased fees for Cboe’s 10Gb 

connections.34 This filing was 

submitted on September 2, 2020, nearly 

15 months after the Staff’s Guidance 

was issued. In that filing, the Cboe 

stated that the ‘‘proposed changes were 

not designed with the objective to 

generate an overall increase in access 

fee revenue.’’ 35 This filing provided no 

cost based data to support its assertion 

that the proposal was intended to be 

revenue neutral. Among other things, 

Cboe did not provide a description of 

the costs underlying its provision of 

10Gb connections to show that this 

particular fee did not generate a supracompetitive profit or describe how any 

potential profit may be offset by 

increased costs associated with another 

fee included in its proposal. This filing, 

nonetheless, was not suspended by the 

Commission and remains in effect 

today. 

The Exchange believes exchanges, 

like all businesses, should be provided 

flexibility when allocating costs and 

resources they deem necessary to 

operate their business, including 

providing market data and access 

services. The Exchange notes that costs 

and resource allocations may vary from 

business to business and, likewise, costs 

and resource allocations may differ from 

exchange to exchange when it comes to 

providing market data and access 

services. It is a business decision that 

must be evaluated by each exchange as 

to how to allocate internal resources and 

what costs to incur internally or via 

third parties that it may deem necessary 

to support its business and its provision 

of market data and access services to 

market participants. An exchange’s 

costs may also vary based on fees 

charged by third parties and periodic 

increases to those fees that may be 

outside of the control of an exchange.36

To determine the Exchange’s 

projected revenue associated with the 

Proposed Access Fees, the Exchange 

analyzed the number of Members and 

non-Members currently utilizing the 

10Gb ULL fiber connection and used a 

recent monthly billing cycle 

representative of 2021 monthly revenue. 

The Exchange also provided its baseline 

by analyzing July 2021, the monthly 

billing cycle prior to the Proposed 

Access Fees going into effect, and 

compared it to its expenses for that 

month.37 As discussed below, the 

Exchange does not believe it is 

appropriate to factor into its analysis 

future revenue growth or decline into its 

projections for purposes of these 

calculations, given the uncertainty of 

such projections due to the continually 

changing access needs of market 

participants and potential increase in 

internal and third party expenses. The 

Exchange is presenting its revenue and 

expense associated with the Proposed 

Access Fees in this filing in a manner 

that is consistent with how the 

Exchange presents its revenue and 

expense in its Audited Unconsolidated 

Financial Statements. The Exchange’s 

most recent Audited Unconsolidated 

Financial Statement is for 2020. 

However, since the revenue and 

expense associated with the Proposed 

Access Fees were not in place in 2020 

or for the first seven months of 2021, the 

Exchange believes its 2020 Audited 

Unconsolidated Financial Statement is 

not representative of its current total 

annualized revenue and costs associated 

with the Proposed Access Fees. 

Accordingly, the Exchange believes it is 

more appropriate to analyze the 

Proposed Access Fees utilizing its 2021 

revenue and costs, as described herein, 

which utilize the same presentation 

methodology as set forth in the 

Exchange’s previously-issued Audited 

Unconsolidated Financial Statements. 

Based on this analysis, the Exchange 

believes that the Proposed Access Fees 

are reasonable because they will allow 

the Exchange to recover its costs 

associated with providing access 

services related to the Proposed Access 

Fees and not result in excessive pricing 

or supra-competitive profit. 

As outlined in more detail below, the 

Exchange projects that the final 

annualized expense for 2021 to provide 

network connectivity services (all 

connectivity alternatives) to be 

approximately $7.2 million per annum 

or an average of $600,000 per month. 

The Exchange implemented the 

Proposed Access Fees on August 1, 2021 

in the First Proposed Rule Change. For 

July 2021, prior to the Proposed Access 

Fees, the Exchange Members and nonMembers purchased a total of 98 10Gb 

ULL connections for which the 

Exchange charged approximately 

$971,905 (this includes Members and 

non-Members dropping or adding 

connections mid-month, resulting a prorated charge at times). This resulted in 

a profit of $371,905 for that month (a 

profit margin of 38%). For the month of 

October 2021, which includes the 

varying rates for 10Gb ULL connectivity 

for the Proposed Access Fees, Exchange 

Members and non-Members purchased a 

total of 100 10Gb ULL connections for 

which the Exchange charged 

approximately $1,146,714 for that 


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38See ‘‘Supply chain chaos is already hitting 

global growth. And it’s about to get worse’’, by 

Holly Ellyatt, CNBC, available at https://

www.cnbc.com/2021/10/18/supply-chain-chaos-ishitting-global-growth-and-could-get-worse.html 

(October 18, 2021); and ‘‘There will be things that 

people can’t get, at Christmas, White House warns’’ 

by Jarrett Renshaw and Trevor Hunnicutt, Reuters, 

available at https://www.reuters.com/world/us/ 

americans-may-not-get-some-christmas-treatswhite-house-officials-warn-2021-10-12/ (October 12, 

2021). 

39For example, on October 20, 2021, ICE Data 

Services announced a 3.5% price increase effective 

January 1, 2022 for most services. The price 

increase by ICE Data Services includes their SFTI 

network, which is relied on by a majority of market 

participants, including the Exchange. See email 

from ICE Data Services to the Exchange, dated 

October 20, 2021. The Exchange further notes that 

on October 22, 2019, the Exchange was notified by 

ICE Data Services that it was raising its fees charged 

to the Exchange by approximately 11% for the SFTI 

network. 

40The Exchange has incurred a cumulative loss 

of $22 million since its inception in 2019 to 2020, 

the last year for which the Exchange’s Form 1 data 

is available. See Exchange’s Form 1/A, Application 

for Registration or Exemption from Registration as 

a National Securities Exchange, filed July 28, 2021, 

available at https://sec.report/Document/ 

9999999997-21-004557/. 41The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

42The Exchange has not yet finalized its 2021 

year end results. 

43The percentage allocations used in this 

proposed rule change may differ from past filings 

from the Exchange or its affiliates due to, among 

other things, changes in expenses charged by thirdparties, adjustments to internal resource allocations, 

and different system architecture of the Exchange 

as compared to its affiliates. 

44For example, the Exchange previously noted 

that all third-party expense described in its prior fee 

filing was contained in the information technology 

and communication costs line item under the 

section titled ‘‘Operating Expenses Incurred 

Directly or Allocated From Parent,’’ in the 

Exchange’s 2019 Form 1 Amendment containing its 

financial statements for 2018. See Securities 

Exchange Act Release No. 87877 (December 31, 

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

2019–39). Accordingly, the third-party expense 

described in this filing is attributed to the same line 

item for the Exchange’s 2021 Form 1 Amendment, 

which will be filed in 2022. 

month (also including pro-rated 

connection charges). This resulted in a 

profit of $546,714 for that month (a 

modest 9% profit margin increase from 

July 2021 to October 2021 from 38% to 

47%). The Exchange believes that the 

Proposed Access Fees are reasonable 

because they only generate an 

additional 9% of profit margin permonth (reflecting a 47% profit margin). 

The Exchange cautions that this profit 

margin is likely to fluctuate from month 

to month based on the uncertainty of 

predicting how many connections may 

be purchased from month to month as 

Members and non-Members are able to 

add and drop connections at any time 

based on their own business decisions. 

This profit margin may also decrease 

due to the significant inflationary 

pressure on capital items that the 

Exchange needs to purchase to maintain 

the Exchange’s technology and 

systems.38 The Exchange has been 

subject to price increases upwards of 

30% during the past year on network 

equipment due to supply chain 

shortages. This, in turn, results in higher 

overall costs for ongoing system 

maintenance, but also to purchase the 

items necessary to ensure ongoing 

system resiliency, performance, and 

determinism. These costs are expected 

to continue to go up as the U.S. 

economy continues to struggle with 

supply chain and inflation related 

issues. 

As mentioned above, the Exchange 

projects that its annualized expense for 

2021 to provide network connectivity 

services (all connectivity alternatives) to 

be approximately $7.2 million per 

annum or an average of $600,000 per 

month and that these costs are expected 

to increase not only due to anticipated 

significant inflationary pressure, but 

also periodic fee increases by third 

parties.39 The Exchange notes that there 

are material costs associated with 

providing the infrastructure and 

headcount to fully-support access to the 

Exchange. The Exchange incurs 

technology expense related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting, as well as Regulation SCI 

mandated processes, associated with its 

network technology. While some of the 

expense is fixed, much of the expense 

is not fixed, and thus increases the cost 

to the Exchange to provide access 

services associated with the Proposed 

Access Fees. For example, new 

Members to the Exchange may require 

the purchase of additional hardware to 

support those Members as well as 

enhanced monitoring and reporting of 

customer performance that the 

Exchange and its affiliates provide. 

Further, as the total number Members 

increases, the Exchange and its affiliates 

may need to increase their data center 

footprint and consume more power, 

resulting in increased costs charged by 

their third-party data center provider. 

Accordingly, the cost to the Exchange 

and its affiliates to provide access to its 

Members is not fixed. The Exchange 

believes the Proposed Access Fees are a 

reasonable attempt to offset a portion of 

the costs to the Exchange associated 

with providing access to its network 

infrastructure. 

The Exchange only has four primary 

sources of revenue and cost recovery 

mechanisms to fund all of its 

operations: Transaction fees, access fees 

(which includes the Proposed Access 

Fees), regulatory fees, and market data 

fees. Accordingly, the Exchange must 

cover all of its expenses from these four 

primary sources of revenue and cost 

recovery mechanisms. Until recently, 

the Exchange has operated at a 

cumulative net annual loss since it 

launched operations in 2019.40 This is 

a result of providing a low cost 

alternative to attract order flow and 

encourage market participants to 

experience the high determinism and 

resiliency of the Exchange’s trading 

Systems.41 To do so, the Exchange chose 

to waive the fees for some nontransaction related services or provide 

them at a very marginal cost, which was 

not profitable to the Exchange. This 

resulted in the Exchange forgoing 

revenue it could have generated from 

assessing higher fees. 

The Exchange believes that the 

Proposed Access Fees are fair and 

reasonable because they will not result 

in excessive pricing or supracompetitive profit, when comparing the 

total annual expense that the Exchange 

projects to incur in connection with 

providing these access services versus 

the total annual revenue that the 

Exchange projects to collect in 

connection with services associated 

with the Proposed Access Fees. As 

mentioned above, for 2021,42 the total 

annual expense for providing the access 

services associated with the Proposed 

Access Fees is projected to be 

approximately $7.2 million, or 

approximately $600,000 per month. 

This projected total annual expense is 

comprised of the following, all of which 

are directly related to the access services 

associated with the Proposed Access 

Fees: (1) Third-party expense, relating to 

fees paid by the Exchange to third 

parties for certain products and services; 

and (2) internal expense, relating to the 

internal costs of the Exchange to 

provide the services associated with the 

Proposed Access Fees.43 As noted 

above, the Exchange believes it is more 

appropriate to analyze the Proposed 

Access Fees utilizing its 2021 revenue 

and costs, which utilize the same 

presentation methodology as set forth in 

the Exchange’s previously-issued 

Audited Unconsolidated Financial 

Statements.44 The $7.2 million 

projected total annual expense is 

directly related to the access services 

associated with the Proposed Access 

Fees, and not any other product or 

service offered by the Exchange. It does 

not include general costs of operating 

matching engines and other trading 


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45See supra note 39. 

46See Securities Exchange Act Release No. 91460 

(April 2, 2021), 86 FR 18349 (April 8, 2021) (SR– 

EMERALD–2021–11). 

47As noted above, the percentage allocations used 

in this proposed rule change may differ from past 

filings from the Exchange or its affiliates due to, 

among other things, changes in expenses charged by 

third-parties, adjustments to internal resource 

allocations, and different system architecture of the 

Exchange as compared to its affiliates. Again, as 

part its ongoing assessment of costs and expenses, 

the Exchange recently conducted a periodic 

thorough review of its expenses and resource 

allocations which, in turn, resulted in a revised 

percentage allocations in this filing. 

technology. No expense amount was 

allocated twice. 

As discussed above, the Exchange 

conducted an extensive cost review in 

which the Exchange analyzed nearly 

every expense item in the Exchange’s 

general expense ledger (this includes 

over 150 separate and distinct expense 

items) to determine whether each such 

expense relates to the access services 

associated with the Proposed Access 

Fees, and, if such expense did so relate, 

what portion (or percentage) of such 

expense actually supports those 

services, and thus bears a relationship 

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

directly related to those services. In 

performing this calculation, the 

Exchange considered other services and 

to which the expense may be applied 

and how much of the expense is directly 

and/or indirectly utilized in providing 

those other services. The sum of all such 

portions of expenses represents the total 

cost of the Exchange to provide access 

services associated with the Proposed 

Access Fees. 

External Expense Allocations 

For 2021, expenses relating to fees 

paid by the Exchange to third-parties for 

products and services necessary to 

provide the access services associated 

with the Proposed Access Fees is 

projected to be $1.7 million. This 

includes, but is not limited to, a portion 

of the fees paid to: (1) Equinix for data 

center services, including for the 

primary, secondary, and disaster 

recovery locations of the Exchange’s 

trading system infrastructure; (2) Zayo 

Group Holdings, Inc. (‘‘Zayo’’) for 

network services (fiber and bandwidth 

products and services) linking the 

Exchange’s and its affiliates’ office 

locations in Princeton, New Jersey and 

Miami, Florida, to all data center 

locations; (3) Secure Financial 

Transaction Infrastructure (‘‘SFTI’’),45

which supports connectivity and feeds 

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

various other services providers 

(including Thompson Reuters, NYSE, 

Nasdaq, and Internap), which provide 

content, connectivity services, and 

infrastructure services for critical 

components of options connectivity and 

network services; and (5) various other 

hardware and software providers 

(including Dell and Cisco, which 

support the production environment in 

which Members connect to the network 

to trade, receive market data, etc.). 

For clarity, the Exchange took a 

conservative approach in determining 

the expense and the percentage of that 

expense to be allocated to providing 

access services in connection with the 

Proposed Access Fees. Only a portion of 

all fees paid to such third-parties is 

included in the third-party expenses 

described herein, and no expense 

amount is allocated twice. Accordingly, 

the Exchange does not allocate its entire 

information technology and 

communication costs to the access 

services associated with the Proposed 

Access Fees. This may result in the 

Exchange under allocating an expense 

to the provision of access services in 

connection with the Proposed Access 

Fees and such expenses may actually be 

higher or increase above what the 

Exchange utilizes within this proposal. 

Further, the Exchange notes that 

expenses associated with its affiliates, 

MIAX and MIAX Pearl (the options and 

equities markets), are accounted for 

separately and are not included within 

the scope of this filing. Further, as part 

its ongoing assessment of costs and 

expenses (described above), the 

Exchange recently conducted a periodic 

thorough review of its expenses and 

resource allocations which, in turn, 

resulted in revised percentage 

allocations in this filing. Therefore, the 

percentage allocations used in this 

proposed rule change may differ from 

past filings from the Exchange or its 

affiliates due to, among other things, 

changes in expenses charged by thirdparties, adjustments to internal resource 

allocations, and different system 

architecture of the Exchange as 

compared to its affiliates. The Exchange 

notes that the expense allocations differ 

from the Exchange’s filing earlier this 

year, SR–EMERALD–2021–11, because 

that prior filing pertained to several 

different access fees, which the 

Exchange had not been charging for 

since the Exchange launched operations 

in March 2019.46 In SR–EMERALD– 

2021–11, the Exchange sought to adopt 

fees for FIX Ports, MEI Ports, Purge 

Ports, Clearing Trade Drop Ports, and 

FIX Drop Copy Ports, all of which had 

been free for market participants for 

over two years. 

The Exchange believes it is reasonable 

to allocate such third-party expense 

described above towards the total cost to 

the Exchange to provide the access 

services associated with the Proposed 

Access Fees. In particular, the Exchange 

believes it is reasonable to allocate the 

identified portion of the Equinix 

expense because Equinix operates the 

data centers (primary, secondary, and 

disaster recovery) that host the 

Exchange’s network infrastructure. This 

includes, among other things, the 

necessary storage space, which 

continues to expand and increase in 

cost, power to operate the network 

infrastructure, and cooling apparatuses 

to ensure the Exchange’s network 

infrastructure maintains stability. 

Without these services from Equinix, 

the Exchange would not be able to 

operate and support the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. The 

Exchange did not allocate all of the 

Equinix expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only 

that portion which the Exchange 

identified as being specifically mapped 

to providing the access services 

associated with the Proposed Access 

Fees. According to the Exchange’s 

calculations, it allocated approximately 

62% of the total applicable Equinix 

expense to providing the access services 

associated with the Proposed Access 

Fees. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the access services associated 

with the Proposed Access Fees, and not 

any other service, as supported by its 

cost review.47

The Exchange believes it is reasonable 

to allocate the identified portion of the 

Zayo expense because Zayo provides 

the internet, fiber and bandwidth 

connections with respect to the 

network, linking the Exchange with its 

affiliates, MIAX Pearl and MIAX, as 

well as the data center and disaster 

recovery locations. As such, all of the 

trade data, including the billions of 

messages each day per exchange, flow 

through Zayo’s infrastructure over the 

Exchange’s network. Without these 

services from Zayo, the Exchange would 

not be able to operate and support the 

network and provide the access services 

associated with the Proposed Access 

Fees. The Exchange did not allocate all 

of the Zayo expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only the 

portion which the Exchange identified 

as being specifically mapped to 

providing the Proposed Access Fees. 

According to the Exchange’s 


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48 Id. 

49 Id. See also supra note 39 (regarding SFTI’s 

announced fee increases). 50See supra note 47. 

calculations, it allocated approximately 

62% of the total applicable Zayo 

expense to providing the access services 

associated with the Proposed Access 

Fees. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the access services associated 

with the Proposed Access Fees, and not 

any other service, as supported by its 

cost review.48

The Exchange believes it is reasonable 

to allocate the identified portions of the 

SFTI expense and various other service 

providers’ (including Thompson 

Reuters, NYSE, Nasdaq, and Internap) 

expense because those entities provide 

connectivity and feeds for the entire 

U.S. options industry, as well as the 

content, connectivity services, and 

infrastructure services for critical 

components of the network. Without 

these services from SFTI and various 

other service providers, the Exchange 

would not be able to operate and 

support the network and provide access 

to its Members and their customers. The 

Exchange did not allocate all of the SFTI 

and other service providers’ expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portions which 

the Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees. According to the 

Exchange’s calculations, it allocated 

approximately 89% of the total 

applicable SFTI and other service 

providers’ expense to providing the 

access services associated with the 

Proposed Access Fees. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

actual cost to provide the access 

services associated with the Proposed 

Access Fees.49

The Exchange believes it is reasonable 

to allocate the identified portion of the 

other hardware and software provider 

expense because this includes costs for 

dedicated hardware licenses for 

switches and servers, as well as 

dedicated software licenses for security 

monitoring and reporting across the 

network. Without this hardware and 

software, the Exchange would not be 

able to operate and support the network 

and provide access to its Members and 

their customers. The Exchange did not 

allocate all of the hardware and software 

provider expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only the 

portions which the Exchange identified 

as being specifically mapped to 

providing the access services associated 

with the Proposed Access Fees. 

According to the Exchange’s 

calculations, it allocated approximately 

51% of the total applicable hardware 

and software provider expense to 

providing the access services associated 

with the Proposed Access Fees. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to provide the 

access services associated with the 

Proposed Access Fees.50

Internal Expense Allocations 

For 2021, total projected internal 

expenses relating to the Exchange 

providing the access services associated 

with the Proposed Access Fees are 

projected to be approximately $5.5 

million. This includes, but is not 

limited to, costs associated with: (1) 

Employee compensation and benefits 

for full-time employees that support the 

access services associated with the 

Proposed Access Fees, including staff in 

network operations, trading operations, 

development, system operations, 

business, as well as staff in general 

corporate departments (such as legal, 

regulatory, and finance) that support 

those employees and functions 

(including an increase as a result of the 

higher determinism project); (2) 

depreciation and amortization of 

hardware and software used to provide 

the access services associated with the 

Proposed Access Fees, including 

equipment, servers, cabling, purchased 

software and internally developed 

software used in the production 

environment to support the network for 

trading; and (3) occupancy costs for 

leased office space for staff that provide 

the access services associated with the 

Proposed Access Fees. The breakdown 

of these costs is more fully-described 

below. 

For clarity, and as stated above, the 

Exchange took a conservative approach 

in determining the expense and the 

percentage of that expense to be 

allocated to providing access services in 

connection with the Proposed Access 

Fees. Only a portion of all such internal 

expenses are included in the internal 

expense herein, and no expense amount 

is allocated twice. Accordingly, the 

Exchange does not allocate its entire 

costs contained in those items to the 

access services associated with the 

Proposed Access Fees. This may result 

in the Exchange under allocating an 

expense to the provision of access 

services in connection with the 

Proposed Access Fees and such 

expenses may actually be higher or 

increase above what the Exchange 

utilizes within this proposal. Further, as 

part its ongoing assessment of costs and 

expenses (described above), the 

Exchange recently conducted a periodic 

thorough review of its expenses and 

resource allocations which, in turn, 

resulted in a revised percentage 

allocations in this filing. 

The Exchange believes it is reasonable 

to allocate such internal expense 

described above towards the total cost to 

the Exchange to provide the access 

services associated with the Proposed 

Access Fees. In particular, the 

Exchange’s employee compensation and 

benefits expense relating to providing 

the access services associated with the 

Proposed Access Fees is projected to be 

approximately $3.2 million, which is 

only a portion of the approximately $9.7 

million total projected expense for 

employee compensation and benefits. 

The Exchange believes it is reasonable 

to allocate the identified portion of such 

expense because this includes the time 

spent by employees of several 

departments, including Technology, 

Back Office, Systems Operations, 

Networking, Business Strategy 

Development (who create the business 

requirement documents that the 

Technology staff use to develop network 

features and enhancements), Trade 

Operations, Finance (who provide 

billing and accounting services relating 

to the network), and Legal (who provide 

legal services relating to the network, 

such as rule filings and various license 

agreements and other contracts). As part 

of the extensive cost review conducted 

by the Exchange, the Exchange reviewed 

the amount of time spent by employees 

on matters relating to the provision of 

access services associated with the 

Proposed Access Fees. Without these 

employees, the Exchange would not be 

able to provide the access services 

associated with the Proposed Access 

Fees to its Members and their 

customers. The Exchange did not 

allocate all of the employee 

compensation and benefits expense 

toward the cost of the access services 

associated with the Proposed Access 

Fees, only the portions which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees. According to the 

Exchange’s calculations, it allocated 

approximately 33% of the total 

applicable employee compensation and 

benefits expense to providing the access 

services associated with the Proposed 

Access Fees. The Exchange believes this 

allocation is reasonable because it 


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51 Id. 

52 Id. 53 Id. 

represents the Exchange’s actual cost to 

provide the access services associated 

with the Proposed Access Fees, and not 

any other service, as supported by its 

cost review.51

The Exchange’s depreciation and 

amortization expense relating to 

providing the services associated with 

the Proposed Access Fees is projected to 

be $2 million, which is only a portion 

of the $3.1 million total projected 

expense for depreciation and 

amortization. The Exchange believes it 

is reasonable to allocate the identified 

portion of such expense because such 

expense includes the actual cost of the 

computer equipment, such as dedicated 

servers, computers, laptops, monitors, 

information security appliances and 

storage, and network switching 

infrastructure equipment, including 

switches and taps that were purchased 

to operate and support the network and 

provide the access services associated 

with the Proposed Access Fees. Without 

this equipment, the Exchange would not 

be able to operate the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. The 

Exchange did not allocate all of the 

depreciation and amortization expense 

toward the cost of providing the access 

services associated with the Proposed 

Access Fees, only the portion which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees. According to the 

Exchange’s calculations, it allocated 

approximately 63% of the total 

applicable depreciation and 

amortization expense to providing the 

access services associated with the 

Proposed Access Fees, as these access 

services would not be possible without 

relying on such. The Exchange believes 

this allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide the access services associated 

with the Proposed Access Fees, and not 

any other service, as supported by its 

cost review.52

The Exchange’s occupancy expense 

relating to providing the services 

associated with the Proposed Access 

Fees is projected to be approximately 

$0.3 million, which is only a portion of 

the $0.5 million total projected expense 

for occupancy. The Exchange believes it 

is reasonable to allocate the identified 

portion of such expense because such 

expense represents the portion of the 

Exchange’s cost to rent and maintain a 

physical location for the Exchange’s 

staff who operate and support the 

network, including providing the access 

services associated with the Proposed 

Access Fees. This amount consists 

primarily of rent for the Exchange’s 

Princeton, New Jersey office, as well as 

various related costs, such as physical 

security, property management fees, 

property taxes, and utilities. The 

Exchange operates its Network 

Operations Center (‘‘NOC’’) and 

Security Operations Center (‘‘SOC’’) 

from its Princeton, New Jersey office 

location. A centralized office space is 

required to house the staff that operates 

and supports the network. The 

Exchange currently has approximately 

200 employees. Approximately twothirds of the Exchange’s staff are in the 

Technology department, and the 

majority of those staff have some role in 

the operation and performance of the 

access services associated with the 

Proposed Access Fees. Accordingly, the 

Exchange believes it is reasonable to 

allocate the identified portion of its 

occupancy expense because such 

amount represents the Exchange’s actual 

cost to house the equipment and 

personnel who operate and support the 

Exchange’s network infrastructure and 

the access services associated with the 

Proposed Access Fees. The Exchange 

did not allocate all of the occupancy 

expense toward the cost of providing 

the access services associated with the 

Proposed Access Fees, only the portion 

which the Exchange identified as being 

specifically mapped to operating and 

supporting the network. According to 

the Exchange’s calculations, it allocated 

approximately 53% of the total 

applicable occupancy expense to 

providing the access services associated 

with the Proposed Access Fees. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s cost to provide the access 

services associated with the Proposed 

Access Fees, and not any other service, 

as supported by its cost review.53

The Exchange notes that a material 

portion of its total overall expense is 

allocated to the provision of access 

services (including connectivity, ports, 

and trading permits). The Exchange 

believes this is reasonable and in line, 

as the Exchange operates a technologybased business that differentiates itself 

from its competitors based on its more 

deterministic and resilient trading 

systems that rely on access to a high 

performance network, resulting in 

significant technology expense. Over 

two-thirds of Exchange staff are 

technology-related employees. The 

majority of the Exchange’s expense is 

technology-based. As described above, 

the Exchange has only four primary 

sources of fees to recover their costs; 

thus, the Exchange believes it is 

reasonable to allocate a material portion 

of its total overall expense towards 

access fees. 

Based on the above, the Exchange 

believes that its provision of access 

services associated with the Proposed 

Access Fees will not result in excessive 

pricing or supra-competitive profit. As 

discussed above, the Exchange projects 

that its annualized expense for 2021 to 

provide network connectivity services 

(all connectivity alternatives) to be 

approximately $7.2 million per annum 

or an average of $600,000 per month. 

The Exchange implemented the 

Proposed Access Fees on August 1, 

2021. For July 2021, prior to the 

Proposed Access Fees, Exchange 

Members and non-Members purchased a 

total of 98 10Gb ULL connections for 

which the Exchange charged 

approximately $971,905. This resulted 

in a profit of $371,905 (a profit margin 

of 38%) for that month (including prorated charges). For the month of October 

2021, which includes the varying 10Gb 

ULL connectivity fees pursuant to the 

Proposed Access Fees, the Exchange 

had Members and non-Members 

purchasing a total of 100 10Gb ULL 

connections for which the Exchange 

charged approximately $1,146,714 

(including pro-rated charges). This 

resulted in a profit of $546,714 for that 

month (a modest 9% profit margin 

increase from July 2021 to October 2021 

from 38% to 47%). The Exchange 

believes that the Proposed Access Fees 

are reasonable because they only 

generate an additional 9% of profit 

margin per month (reflecting a 47% 

profit margin). The Exchange believes 

this modest increase in profit margin 

will allow it to continue to recoup its 

expenses and continue to invest in its 

technology infrastructure. Therefore, the 

Exchange also believes that this 

proposed profit margin increase is 

reasonable because it represents a 

reasonable rate of return. 

Again, the Exchange cautions that this 

profit margin may fluctuate from month 

to month based in the uncertainty of 

predicting how many connections may 

be purchased from month to month as 

Members and non-Members are free to 

add and drop connections at any time 

based on their own business decisions. 

Notwithstanding that the revenue (and 

profit margin) may vary from month to 

month due to changes in connections 

and to changes to the Exchange’s 

expenses, the number of connections 

has not materially changed over the 

prior months. Consequently, the 

Exchange believes that the months it has 


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54See supra note 38. 

used as a baseline to perform its 

assessment are representative of 

reasonably anticipated costs and 

expenses. This profit margin may also 

decrease due to the significant 

inflationary pressure on capital items 

that it needs to purchase to maintain the 

Exchange’s technology and systems.54

Accordingly, the Exchange believes its 

total projected revenue for the providing 

the access services associated with the 

Proposed Access Fees will not result in 

excessive pricing or supra-competitive 

profit. 

The Exchange believes that 

conducting the above analysis on a per 

month basis is reasonable as the revenue 

generated from access services subject to 

the proposed fee generally remains 

static from month to month. The 

Exchange also conducted the above 

analysis on a per month basis to comply 

with the Commission Staff’s Guidance, 

which requires a baseline analysis to 

assist in determining whether the 

proposal generates a supra-competitive 

profit. This monthly analysis was also 

provided in response to comment 

received on prior submissions of this 

proposed rule change. 

The Exchange reiterates that it only 

has four primary sources of revenue and 

cost recovery mechanisms: Transaction 

fees, access fees (which includes the 

Proposed Access Fees), regulatory fees, 

and market data fees. Accordingly, the 

Exchange must cover all of its expenses 

from these four primary sources of 

revenue and cost recovery mechanisms. 

As a result, each of these fees cannot be 

‘‘flat’’ and cover only the expenses 

directly related to the fee that is 

charged. The above revenue and 

associated profit margin therefore are 

not solely intended to cover the costs 

associated with providing access 

services subject to the Proposed Access 

Fees. 

The Exchange believes it is 

reasonable, equitable and not unfairly 

discriminatory to allocate the respective 

percentages of each expense category 

described above towards the total cost to 

the Exchange of operating and 

supporting the network, including 

providing the access services associated 

with the Proposed Access Fees because 

the Exchange performed a line-by-line 

item analysis of nearly every expense of 

the Exchange, and has determined the 

expenses that directly relate to 

providing access to the Exchange. 

Further, the Exchange notes that, 

without the specific third-party and 

internal expense items listed above, the 

Exchange would not be able to provide 

the access services associated with the 

Proposed Access Fees to its Members 

and their customers. Each of these 

expense items, including physical 

hardware, software, employee 

compensation and benefits, occupancy 

costs, and the depreciation and 

amortization of equipment, have been 

identified through a line-by-line item 

analysis to be integral to providing 

access services. The Proposed Access 

Fees are intended to recover the costs of 

providing access to the Exchange’s 

System. Accordingly, the Exchange 

believes that the Proposed Access Fees 

are fair and reasonable because they do 

not result in excessive pricing or supracompetitive profit, when comparing the 

actual costs to the Exchange versus the 

projected annual revenue from the 

Proposed Access Fees. 

The Proposed Tiered-Pricing Structure 

Is Not Unfairly Discriminatory and 

Provides for the Equitable Allocation of 

Fees, Dues, and Other Charges 

The Exchange believes the proposed 

tiered-pricing structure is reasonable, 

fair, equitable, and not unfairly 

discriminatory because it will apply to 

all Members and non-Members in the 

same manner based on the amount of 

10Gb ULL connectivity they require 

based on their own business decisions 

and usage of Exchange resources. All 

similarly situated Members and nonMembers would be subject to the same 

fees. The fees do not depend on any 

distinction between Members and nonMembers because they are solely 

determined by the individual Members’ 

or non-Members’ business needs and its 

impact on Exchange resources. 

The proposed tiered-pricing structure 

is not unfairly discriminatory and 

provides for the equitable allocation of 

fees, dues, and other charges because it 

is designed to encourage Members and 

non-Members to be more efficient and 

economical when determining how to 

connect to the Exchange and the amount 

of the fees are based on the number of 

connections a Member or non-Member 

utilizes. Charging an incrementally 

higher fee to a Member or non-Member 

that utilizes numerous connections is 

directly related to the increased costs 

the Exchange incurs in providing and 

maintaining those additional 

connections. The proposed tiered 

pricing structure should also enable the 

Exchange to better monitor and provide 

access to the Exchange’s network to 

ensure sufficient capacity and headroom 

in the System. 

The Exchange believes that the 

proposal to move to a tiered-pricing 

structure for its 10Gb ULL connections 

is reasonable, equitably allocated and 

not unfairly discriminatory because the 

majority of Members and non-Members 

that purchase 10Gb ULL connections 

will either save money or pay the same 

amount after the tiered-pricing structure 

is implemented. After the effective date 

of the First Proposed Rule Change on 

August 1, 2021, approximately 60% of 

the firms that purchased at least one 

10Gb ULL connection experienced a 

decrease in their monthly connectivity 

fees while only approximately 40% of 

firms experienced an increase in their 

monthly connectivity fees as a result of 

the proposed tiered-pricing structure 

when compared to the flat monthly fee 

structure. To illustrate, firms that 

purchase only one 10Gb ULL 

connection per month used to pay the 

flat rate of $10,000 per month for that 

one 10Gb ULL connection. Pursuant to 

the proposed tiered-pricing structure, 

these firms now pay $9,000 per month 

for that same one 10Gb ULL connection, 

saving $1,000 per month or $12,000 

annually. Further, firms that purchase 

two 10Gb ULL connections per month 

previously paid a flat rate of $20,000 per 

month ($10,000 × 2) for those two 10Gb 

ULL connections. Pursuant to the 

proposed tiered-pricing structure, these 

firms now pay $18,000 per month 

($9,000 × 2) for those two 10Gb ULL 

connections, saving $2,000 per month or 

$24,000 annually. 

To achieve a consistent, premium 

network performance, the Exchange 

must build out and continue to maintain 

a network that has the capacity to 

handle the message rate requirements of 

not only firms that consume minimal 

Exchange connectivity resources, but 

also those firms that most heavily 

consume Exchange connectivity 

resources, network consumers, and 

purchasers of 10Gb ULL connectivity. 

10Gb ULL connectivity is not an 

unlimited resource as the Exchange 

needs to purchase additional equipment 

to satisfy requests for additional 

connections. The Exchange also needs 

to provide personnel to set up new 

connections, service requests related to 

adding new and/or deleting existing 

connections, respond to performance 

queries from, and to maintain those 

connections on behalf of Members and 

non-Members. Also, those firms that 

utilize 10Gb ULL connectivity typically 

generate a disproportionate amount of 

messages and order traffic, usually 

billions per day across the Exchange. 

These billions of messages per day 

consume the Exchange’s resources and 

significantly contribute to the overall 

network connectivity expense for 

storage and network transport 

capabilities. The Exchange also has to 

purchase additional storage capacity on 


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55 17 CFR 240.17a–1 (recordkeeping rule for 

national securities exchanges, national securities 

associations, registered clearing agencies and the 

Municipal Securities Rulemaking Board). 56 15 U.S.C. 78f(b)(5). 

57See ‘‘The market at a glance,’’ available at 

https://www.miaxoptions.com/ (last visited 

November 26, 2021). 

58See NASDAQ Rules, General 8: Connectivity, 

Section 1. Co-Location Services. 

59See ISE Rules, General 8: Connectivity. 

60See supra note 57. 

an ongoing basis to ensure it has 

sufficient capacity to store these 

messages as part of it surveillance 

program and to satisfy its record 

keeping requirements under the 

Exchange Act.55 Thus, as the number of 

connections an entity has increases, 

certain other costs incurred by the 

Exchange that are correlated to, though 

not directly affected by, connection 

costs (e.g., storage costs, surveillance 

costs, service expenses) also increase. 

The Exchange sought to design the 

proposed tiered-pricing structure to set 

the amount of the fees to relate to the 

number of connections a firm 

purchases. The more connections 

purchased by a firm likely results in 

greater expenditure of Exchange 

resources and increased cost to the 

Exchange. With this in mind, the 

Exchange proposes to decrease the 

monthly fees for those firms who 

connect to the Exchange as part of their 

best execution obligations and generally 

tend to send the least amount of orders 

and messages over those connections. 

The Exchange notes that firms that 

primarily route orders seeking bestexecution generally only purchase a 

limited number of connections. Those 

firms also generally send fewer orders 

and messages over those connections, 

resulting in less strain on Exchange 

resources. Therefore, the connectivity 

costs will likely be lower for these firms 

based on the proposed tiered-pricing 

structure. 

On a similar note, the Exchange 

proposes to increase the fee for those 

firms that purchase more connections 

resulting in greater expenditure of 

Exchange resources and increased cost 

to the Exchange. The Exchange notes 

that these firms that purchase more than 

two to four 10Gb ULL connections 

essentially do so for competitive reasons 

amongst themselves and choose to 

utilize numerous connections based on 

their business needs and desire to 

attempt to access the market quicker by 

using the connection with the least 

amount of latency. These firms are 

generally engaged in sending liquidity 

removing orders to the Exchange and 

seek to add more connections so they 

can access resting liquidity ahead of 

their competitors. For instance, a 

Member may have just sent numerous 

messages and/or orders over one of their 

10Gb ULL connections that are in queue 

to be processed. That same Member 

then seeks to enter an order to remove 

liquidity from the Exchange’s Book. 

That Member may choose to send that 

order over one or more of their other 

10Gb ULL connections with less 

message and/or order traffic to ensure 

that their liquidity taking order accesses 

the Exchange quicker because that 

connection’s queue is shorter. These 

firms also tend to frequently add and 

drop connections mid-month to 

determine which connections have the 

least latency, which results in increased 

costs to the Exchange to frequently 

make changes in the data center and 

provide the additional technical and 

personnel support necessary to satisfy 

these requests. 

The firms that engage in the abovedescribed liquidity removing and 

advanced trading strategies typically 

require multiple connections and, 

therefore, generate higher costs by 

utilizing more of the Exchange’s 

resources. Those firms may also conduct 

other latency measurements over their 

connections and drop and 

simultaneously add connections midmonth based on their own assessment of 

their performance. This results in 

Exchange staff processing such requests, 

potentially purchasing additional 

equipment, and performing the 

necessary network engineering to 

replace those connections in the data 

center. Therefore, the Exchange believes 

it is equitable for these firms to 

experience increased connectivity costs 

based on their disproportionate pull on 

Exchange resources to provide the 

additional connectivity. 

In addition, the proposed tieredpricing structure is equitable because it 

is designed to encourage Members and 

non-Members to be more efficient and 

economical when determining how to 

connect to the Exchange. Section 6(b)(5) 

of the Exchange Act requires the 

Exchange to provide access on terms 

that are not unfairly discriminatory.56

As stated above, 10Gb ULL connectivity 

is not an unlimited resource and the 

Exchange’s network is limited in the 

amount of connections it can provide. 

However, the Exchange must 

accommodate requests for additional 

connectivity and access to the 

Exchange’s System to ensure that the 

Exchange is able to provide access on 

non-discriminatory terms and ensure 

sufficient capacity and headroom in the 

System. To accommodate requests for 

additional connectivity on top of 

current network capacity constraints, 

requires that the Exchange purchase 

additional equipment to satisfy these 

requests. The Exchange also needs to 

provide personnel to set up new 

connections and to maintain those 

connections on behalf of Members and 

non-Members. The proposed tieredpricing structure is equitable because it 

is designed to encourage Members and 

non-Members to be more efficient and 

economical in selecting the amount of 

connectivity they request while 

balancing that against the Exchange’s 

increased expenses when expanding its 

network to accommodate additional 

connectivity. 

The Proposed Fees Are Reasonable 

When Compared to the Fees of Other 

Options Exchanges With Similar Market 

Share 

The Exchange does not have visibility 

into other equities exchanges’ costs to 

provide connectivity or their fee markup 

over those costs, and therefore cannot 

use other exchange’s connectivity fees 

as a benchmark to determine a 

reasonable markup over the costs of 

providing connectivity. Nevertheless, 

the Exchange believes the other 

exchange’s connectivity fees are a useful 

example of alternative approaches to 

providing and charging for connectivity. 

To that end, the Exchange believes the 

proposed tiered-pricing structure for 

10Gb ULL connections is reasonable 

because the proposed highest tier is still 

less than fees charged for similar 

connectivity provided by other options 

exchanges with comparable market 

shares. For example, NASDAQ (equity 

options market share of 8.88% as of 

November 26, 2021 for the month of 

November) 57 charges a monthly fee of 

$10,000 per 10Gb fiber connection and 

$15,000 per 10Gb Ultra fiber 

connection.58 The highest tier of the 

Exchange’s proposed fee structure for a 

10Gb ULL connection is $13,000 for the 

fifth and subsequent connections, which 

is $2,000 per month less than NASDAQ 

and, unlike NASDAQ, the Exchange 

does not charge installation fees. For 

market participants with fewer 

connections, the difference is even more 

stark. For a market participant with two 

connections to the Exchange and two 

connections to NASDAQ, the difference 

in connection fees would be $12,000 per 

month. The Exchange notes that the 

same connectivity fees described above 

for NASDAQ also apply to its affiliates, 

ISE 59 (equity options market share of 

7.96% as of November 26, 2021 for the 

month of November) 60 and PHLX 

(equity options market share of 9.31% 

as of November 26, 2021 for the month 


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61See id. See also PHLX Rules, General 8: 

Connectivity. 62See supra note 57. 63See Amex Fee Schedule, Section IV. 64See Specialized Quote Interface Specification, 

Nasdaq PHLX, Nasdaq Options Market, Nasdaq BX 

Options, Version 6.5a, Section 2, Architecture 

(revised August 16, 2019), available at http://

www.nasdaqtrader.com/content/technicalsupport/ 

specifications/TradingProducts/SQF6.5a-2019- 

Aug.pdf. The Exchange notes that it is unclear 

whether the NASDAQ exchanges include 

connectivity to each matching engine for the single 

fee or charge per connection, per matching engine. 

See also NYSE Technology FAQ and Best Practices: 

Options, Section 5.1 (How many matching engines 

are used by each exchange?) (September 2020). The 

Exchange notes that NYSE provides a link to an 

Excel file detailing the number of matching engines 

per options exchange, with Arca and Amex having 

19 and 17 matching engines, respectively. 

65See supra note 9. 

66 15 U.S.C. 78s(b)(3)(A)(ii). 

67 17 CFR 240.19b–4. 

of November).61 Amex (equity options 

market share of 5.05% as of November 

26, 2021 for the month of November) 62

charges $15,000 per connection initially 

plus $22,000 monthly per 10Gb LX LCN 

circuit connection.63 Again, the highest 

tier of the Exchange’s proposed fee 

structure for a 10Gb ULL connection is 

$9,000 per month lower than the Amex 

connectivity fee after the first month. 

In the each of the above cases, the 

Exchange’s highest tier in the proposed 

tiered-pricing structure only applies to 

the fifth and additional connections and 

is still significantly lower than that of 

competing options exchanges with 

similar market share. Despite proposing 

lower or similar fees to that of 

competing options exchanges with 

similar market share, the Exchange 

believes that it provides a premium 

network experience to its Members and 

non-Members via a highly deterministic 

System, enhanced network monitoring 

and customer reporting, and a superior 

network infrastructure than markets 

with higher market shares and more 

expensive connectivity alternatives. 

Each of the connectivity rates in place 

at competing options exchanges were 

filed with the Commission for 

immediate effectiveness and remain in 

place today. 

The Exchange further believes that the 

Proposed Access Fees are reasonable, 

equitably allocated and not unfairly 

discriminatory because, for one 10Gb 

ULL connection, the Exchange provides 

each Member or non-Member access to 

all twelve (12) matching engines on 

MIAX Emerald and a vast majority 

choose to connect to all twelve (12) 

matching engines. The Exchange 

believes that other exchanges require 

firms to connect to multiple matching 

engines.64

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

With respect to intra-market 

competition, the Exchange does not 

believe that the proposed rule change 

would place certain market participants 

at the Exchange at a relative 

disadvantage compared to other market 

participants or affect the ability of such 

market participants to compete. As 

stated above, the Exchange does not 

believe its proposed pricing will impose 

a barrier to entry to smaller participants 

and notes that its proposed connectivity 

pricing structure for its 10Gb ULL 

connections is associated with relative 

usage of the various market participants. 

Further, the majority of firms that 

purchase 10Gb ULL connections may 

either save money or pay the same 

amount after the tiered-pricing structure 

is implemented. While total cost may be 

increased for market participants with 

larger capacity needs or for business/ 

technical preferences, such options 

provide far more capacity and are 

purchased by those that consume more 

resources from the network. 

Accordingly, the proposed tieredpricing structure does not favor certain 

categories of market participants in a 

manner that would impose an undue 

burden on competition; rather, the 

allocation reflects the network resources 

consumed by the various usage of 

market participants—lowest bandwidth 

consuming members pay the least, and 

highest bandwidth consuming members 

pay the most, particularly since higher 

bandwidth consumption translates to 

higher costs to the Exchange. 

The Exchange also does not believe 

that the proposed rule change will result 

in any burden on inter-market 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. As discussed 

above, options market participants are 

not forced to connect to all options 

exchanges. The Exchange operates in a 

highly competitive environment, and as 

discussed above, its ability to price 

access and connectivity is constrained 

by competition among exchanges and 

third parties. There are other options 

markets of which market participants 

may connect to trade options. There is 

also a possible range of alternative 

strategies, including routing to the 

exchange through another participant or 

market center or accessing the Exchange 

indirectly. For example, there are 15 

other U.S. options exchanges, which the 

Exchange must consider in its pricing 

discipline in order to compete for 

market participants. In this competitive 

environment, market participants are 

free to choose which competing 

exchange or reseller to use to satisfy 

their business needs. As a result, the 

Exchange believes this proposed rule 

change permits fair competition among 

national securities exchanges. 

Accordingly, the Exchange does not 

believe its proposed fee changes impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Regrettably, the Exchange believes 

that the application of the Guidance to 

date has adversely affected inter-market 

competition by impeding the ability of 

smaller, low cost exchanges to adopt or 

increase fees for their market data and 

access services (including connectivity 

and port products and services). Since 

the adoption of the Guidance, and even 

more so recently, it has become harder, 

particularly for smaller, low cost 

exchanges, to adopt or increase fees to 

generate revenue necessary to invest in 

systems, provide innovative trading 

products and solutions, and improve 

competitive standing to the benefit of 

the affected exchanges’ market 

participants. Although the Staff 

Guidance has served an important 

policy goal of improving disclosures 

and requiring exchanges to justify that 

their market data and access fee 

proposals are fair and reasonable, it has 

also negatively impacted exchanges, and 

particularly many smaller, low cost 

exchanges, that seek to adopt or increase 

fees despite providing enhanced 

disclosures and rationale to support 

their proposed fee changes. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

As described above, the Exchange 

received one comment letter on the First 

Proposed Rule Change and four 

comment letters on the Second 

Proposed Rule Change.65 The Exchange 

responded to the comment letters in the 

Third Proposed Rule Change and 

repeats its response in is filing. No 

comment letters were received in 

response to the Third Proposed Rule 

Change. 

HMA Letter 

The HMA Letter does not raise 

specific issues with the First or Second 

Proposed Rule Changes. Instead the 

HMA Letter is generally critical of the 

exchange fee filing process contained in 

Section 19(b)(3)(A)(ii) of the Act,66 and 

Rule 19b–4(f)(2) thereunder,67 and other 

exchanges’ fee filings in recent years. 


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68See HMA Letter, supra note 9. 

69See SIG Letter 2, supra note 9. 

70 17 CFR 201.700(b)(3). 

71See supra note 40. 

72See Securities Exchange Act Release Nos. 

91858 (May 12, 2021), 86 FR 26967 (May 18, 2021) 

(SR–PEARL–2021–23) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

to Amend the MIAX Pearl Fee Schedule to Remove 

the Cap on the Number of Additional Limited 

Service Ports Available to Market Makers); 91460 

(April 2, 2021), 86 FR 18349 (April 8, 2021) (SR– 

EMERALD–2021–11) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

To Amend Its Fee Schedule To Adopt Port Fees, 

Increase Certain Network Connectivity Fees, and 

Increase the Number of Additional Limited Service 

MIAX Emerald Express Interface Ports Available to 

Market Makers); and 91857 (May 12, 2021), 86 FR 

26973 (May 18, 2021) (SR–MIAX–2021–19) (Notice 

of Filing and Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Fee Schedule To 

Remove the Cap on the Number of Additional 

Limited Service Ports Available to Market Makers). 

73See, e.g., Securities Exchange Act Release No. 

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

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

and Immediate Effectiveness of a Proposed Rule 

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

Trading Permit Fees). See Securities Exchange Act 

Release Nos. 90601 (December 8, 2020), 85 FR 

80864 (December 14, 2020) (SR–EMERALD–2020– 

18) (re-filing with more detail added in response to 

Commission Staff’s feedback and after withdrawing 

SR–EMERALD–2020–11); and 91033 (February 1, 

2021), 86 FR 8455 (February 5, 2021) (SR– 

EMERALD–2021–03) (re-filing with more detail 

added in response to Commission Staff’s feedback 

and after withdrawing SR–EMERALD–2020–18). 

The Exchange initially filed a proposal to remove 

the cap on the number of additional Limited 

Service MEO Ports available to Members on April 

9, 2021. See SR–PEARL–2021–17. On April 22, 

2021, the Exchange withdrew SR–PEARL–2021–17 

and refiled that proposal (without increasing the 

actual fee amounts) to provide further clarification 

regarding the Exchange’s revenues, costs, and 

profitability any time more Limited Service MEO 

Ports become available, in general, (including 

information regarding the Exchange’s methodology 

for determining the costs and revenues for 

additional Limited Service MEO Ports). See SR– 

PEARL–2021–20. On May 3, 2021, the Exchange 

withdrew SR–PEARL–2021–20 and refiled that 

proposal to further clarify its cost methodology. See 

SR–PEARL–2021–22. On May 10, 2021, the 

Exchange withdrew SR–PEARL–2021–22 and 

refiled SR–PEARL–2021–23. See Securities 

Exchange Act Release No. 91858 (May 12, 2021), 86 

FR 26967 (May 18, 2021) (SR–PEARL–2021–23). 

The HMA Letter, however, applauds the 

level of disclosure the Exchange 

included in the First and Second 

Proposed Rule Changes and was 

supportive of the efforts made by the 

Exchange and its affiliates to provide 

transparency and justify their proposed 

fees. The HMA Letter specifically notes 

that: 

‘‘MIAX has repeatedly filed to change its 

connectivity fees in a way that will 

materially lower costs for many users, while 

increasing the costs for some of its heaviest 

of users. These filings have been withdrawn 

and repeatedly refiled. Each time, however, 

the filings contain significantly greater 

information about who is impacted and how 

than other filings that have been permitted to 

take effect without suspension. For example, 

MIAX detailed the associated projected 

revenues generated from the connectivity 

fees by user class, again in a clear attempt to 

comply with the SRO Fee Filing 

Guidance.’’ 68

As the HMA Letter notes, the 

Exchange refiled its same fee proposals 

to include significantly greater 

information about who is impacted and 

how, primarily at the request of the 

Commission Staff and in response to 

comments. The Exchange is again 

refiling its proposal to include more 

information surrounding the proposed 

fees and to respond to commenters. 

SIG Letter 2 

SIG Letter 2 argues that the Exchange, 

in withdrawing the First Proposed Rule 

Change and refiling the Second 

Proposed Rule Change, ‘‘improperly 

circumvent[ed] the procedural 

protections embedded in Exchange Act 

Section 19(b)(3)(C), and subvert[ed] the 

balance of interests upheld therein.’’ 69

SIG’s assertion that the Exchange’s 

entire reason for withdrawing and 

refiling was to subvert the protections of 

the Exchange Act are entirely without 

merit. The Exchange withdrew the First 

Proposed Rule Change and replaced it 

with the Second Proposed Rule Change 

in good faith to provide additional 

justification and explanation for the 

proposed fee changes and did so in 

compliance with the Exchange Act. The 

same is true in this filing, where the 

Exchange withdrew the Second 

Proposed Rule Change and submitted 

this filing to provide additional 

justification and explanation for the 

proposed fee changes and directly 

responds to certain points raised in SIG 

Letters 1, 2, and 3, as well as the SIFMA 

Letter submitted on the First and 

Second Proposed Rule Changes. 

As SIG well knows, exchanges are 

able withdraw and refile various 

proposals (including fee changes and 

other rule changes) with the 

Commission for a multitude of reasons, 

not the least of which is to address 

feedback and comments from market 

participants and Commission Staff. The 

Exchange is well within the bounds of 

the Act and the rules and regulations 

thereunder to withdraw a proposed rule 

change and replace it with a new 

proposed rule change in good faith and 

to enhance the filing to ensure it 

complies with the requirements of the 

Act. 

SIG Letters 1 and 3 

As an initial matter, SIG Letter 1 cites 

Rule 700(b)(3) of the Commission’s 

Rules of Fair Practice which places ‘‘the 

burden to demonstrate that a proposed 

rule change is consistent with the Act 

on the self-regulatory organization that 

proposed the rule change’’ and states 

that a ‘‘mere assertion that the proposed 

rule change is consistent with those 

requirements . . . is not sufficient.’’ 70

SIG Letter 1’s assertion that the 

Exchange has not met this burden is 

without merit, especially considering 

the overwhelming amounts of revenue 

and cost information the Exchange 

included in the First and Second 

Proposed Rule Changes and this filing. 

Until recently, the Exchange operated 

at a net annual loss since it launched 

operations in 2019.71 As stated above, 

the Exchange believes that exchanges in 

setting fees of all types should meet very 

high standards of transparency to 

demonstrate why each new fee or fee 

increase meets the requirements of the 

Act that fees be reasonable, equitably 

allocated, not unfairly discriminatory, 

and not create an undue burden on 

competition among market participants. 

The Exchange believes this high 

standard is especially important when 

an exchange imposes various access fees 

for market participants to access an 

exchange’s marketplace. The Exchange 

believes it has achieved this standard in 

this filing and in the First Proposed 

Rule Change, Second Proposed Rule 

Change. Similar justifications for the 

proposed fee change included in the 

First and Second Proposed Rule 

Changes, but also in this filing, were 

previously included in similar fee 

changes filed by the Exchange and its 

affiliates, MIAX and MIAX Pearl 

Options, and SIG did not submit a 

comment letter on those filings.72 Those 

filings were not suspended by the 

Commission and continue to remain in 

effect. The justification included in each 

of the prior filings was the result of 

numerous withdrawals and re-filings of 

the proposals to address comments 

received from Commission Staff over 

many months. The Exchange and its 

affiliates have worked diligently with 

Commission Staff on ensuring the 

justification included in past fee filings 

fully support an assertion that those fee 

changes are consistent with the Act.73

The Exchange leveraged its past work 

with Commission Staff to ensure the 

justification provided herein and in the 

First and Second Proposed Rule 

Changes include the same level of detail 

(or more) as the prior fee changes that 

survived Commission scrutiny. The 

Exchange’s detailed disclosures in fee 

filings have also been applauded by one 

industry group which noted, ‘‘[the 

Exchange’s] filings contain significantly 

greater information about who is 

impacted and how than other filings 


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74See HMA Letter, supra note 9. 

75 Id. (providing examples where non-transaction 

fee filings by other exchanges have been permitted 

to remain effective and not suspended by the 

Commission despite less disclosure and 

justification). 

76See SIG Letter 3, supra note 9. 

77 Id. 

78See Guidance, supra note 23. 

that have been permitted to take effect 

without suspension.’’ 74 That same 

commenter also noted their ‘‘worry that 

the Commission’s process for reviewing 

and evaluating exchange filings may be 

inconsistently applied.’’ 75

Therefore, a finding by the 

Commission that the Exchange has not 

met its burden to show that the 

proposed fee change is consistent with 

the Act would be different than the 

Commission’s treatment of similar past 

filings, would create further ambiguity 

regarding the standards exchange fee 

filings should satisfy, and is not 

warranted here. 

In addition, the arguments in SIG 

Letter 1 do not support their claim that 

the Exchange has not met its burden to 

show the proposed rule change is 

consistent with the Act. Prior to, and 

after submitting the First Proposed Rule 

Change, the Exchange solicited feedback 

from its Members, including SIG. SIG 

relayed their concerns regarding the 

proposed change. The Exchange then 

sought to work with SIG to address their 

concerns and gain a better 

understanding of the access/ 

connectivity/quoting infrastructure of 

other exchanges. In response, SIG 

provided no substantive suggestions on 

how to amend the First Proposed Rule 

Change to address their concerns and 

instead chose to submit three comment 

letters. One could argue that SIG is 

using the comment letter process not to 

raise legitimate regulatory concerns 

regarding the proposal, but to inhibit or 

delay proposed fee changes by the 

Exchange. 

Nonetheless, the Exchange has 

enhanced its cost and revenue analysis 

and data in this Third [sic] Proposed 

Rule Change to further justify that the 

Proposed Access Fees are reasonable in 

accordance with the Commission Staff’s 

Guidance. Among other things, these 

enhancements include providing 

baseline information in the form of data 

from the month before the Proposed 

Access Fees became effective. 

The Exchange now responds to SIG 

remaining claims below. SIG Letter 3 

first summarizes its arguments made in 

SIG Letters 1 and 2 and incorporates 

those arguments by reference. The 

Exchange responded to the arguments in 

SIG Letter 2 above. SIG Letter 3 

incorporates the following arguments 

from SIG Letter 1, which the Exchange 

will first respond to in turn, below: 

‘‘(1) The prospect that a member may 

withdraw from the Exchanges if a fee is too 

costly is not a basis for asserting that the fee 

is reasonable; (2) profit margin comparisons 

do not support the Exchanges’ claims that 

they will not realize a supracompetitive 

profit, the Exchanges’ respective profit 

margins of 30% (for MIAX and Pearl) and 

51% (for Emerald) in relation to connectivity 

fees are high in any event, and comparisons 

to competing exchanges’ overall operating 

profit margins are an inapt ‘‘apples-tooranges’’ comparison; (3) the Exchanges 

provide no support for their claim that their 

proposed tiered pricing structure is needed to 

encourage efficiency in connectivity usage; 

(4) the Exchanges provided no support for 

their claim that the tiered pricing structure 

allows them to better monitor connectivity 

usage, nor that this is an appropriate basis for 

the pricing structure in any event; (5) the 

Exchanges’ claim that firms who purchase 

more 10Gb ULL lines generate ‘‘higher’’ costs 

is misleading, and they offered no support for 

this claim in any event; (6) no other exchange 

has tiered connectivity pricing; (7) the 

recoupment of investment for exchange 

infrastructure has no supporting nexus with 

the claim that the proposed fees are 

reasonable, equitably allocated, and not 

unfairly discriminatory; and (8) the 

recoupment of investment claim belies the 

Exchanges’ claim of encouraging efficiency in 

connectivity usage.’’ 76

The Exchange’s Examples of Members 

Terminating Their Exchange Access 

Shows That Members Have Choice 

Whether To Connect to an Exchange 

Based on Fees 

SIG asserts that ‘‘the prospect that a 

member may withdraw from the 

Exchanges if a fee is too costly is not a 

basis for asserting that the fee is 

reasonable.’’ 77 SIG misinterprets the 

Exchange’s argument here. The 

Exchange provided the examples of 

firms terminating access to certain 

markets due to fees to support its 

assertion that firms, including market 

makers, are not required to connect to 

all markets and may drop access if fees 

become too costly for their business 

models and alternative or substitute 

forms of connectivity are available to 

those firms who choose to terminate 

access. The Commission Staff Guidance 

also provides that ‘‘[a] statement that 

substitute products or services are 

available to market participants in the 

relevant market (e.g., equities or 

options) can demonstrate competitive 

forces if supported by evidence that 

substitute products or services exist.’’ 78

Nonetheless, the Third [sic] Proposed 

Rule Change no longer makes this 

assertion as a basis for the proposed fee 

change and, therefore, the Exchange 

believes it is not necessary to respond 

to this portion of SIG Letters 1 and 3. 

The Proposed Fees Will Not Result in 

Excessive Pricing or Supra-Competitive 

Profit 

Next, SIG asserts that the Exchange’s 

‘‘profit margin comparisons do not 

support the Exchange’s claims that they 

will not realize a supracompetitive 

profit,’’ that ‘‘the Exchanges’ respective 

profit margins of 30% (for MIAX and 

Pearl) and 51% (for Emerald) in relation 

to connectivity fees are high in any 

event,’’ and ‘‘comparisons to competing 

exchanges’ overall operating profit 

margins are an inapt ‘apples-to-oranges’ 

comparison.’’ 

The Exchange has provided ample 

data that the proposed fees would not 

result in excessive pricing or a supracompetitive profit. In this Third [sic] 

Proposed Rule Change, the Exchange no 

longer utilizes a comparison of its profit 

margin to that of other options 

exchanges as a basis that the Proposed 

Access Fees are reasonable. Rather, the 

Exchange has enhanced its cost and 

revenue analysis and data in this Third 

[sic] Proposed Rule Change to further 

justify that the Proposed Access Fees are 

reasonable in accordance with the 

Commission Staff’s Guidance. 

Therefore, the Exchange believes it is no 

longer necessary to respond to this 

portion of SIG Letters 1 and 3. 

The Proposed Tiered Pricing Structure 

Is Not Unfairly Discriminatory 

SIG challenges the proposed fees by 

arguing that ‘‘the Exchange[ ] provide[s] 

no support for [its] claim that [the] 

proposed tiered pricing structure is 

needed to encourage efficiency in 

connectivity usage and the Exchange[ ] 

provided no support for [the] claim that 

the tiered pricing structure allows them 

to better monitor connectivity usage, nor 

that this is an appropriate basis for the 

pricing structure in any event.’’ The 

Exchange provided additional 

justification to support that the 

Proposed Access Fees are equitable and 

not unfairly discriminatory above in 

response to SIG’s assertions. 

Firms That Purchase More 10Gb ULL 

Generate Higher Exchange Costs 

SIG argues that ‘‘the Exchanges’ claim 

that firms who purchase more 10Gb 

ULL lines generate ‘higher’ costs is 

misleading,’’ and that the Exchange has 

‘‘offered no support for this claim in any 

event.’’ As described above, the 

Exchange sought to design the proposed 

tiered-pricing structure to set the 

amount of the fees to relate to the 

number of connections a firm purchases 

and the Exchange believes it provided 


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79See Cboe Exchange, Inc. Fee Schedule, Logical 

Connectivity Fees ($750 per port per month for the 

first 5 BOE/FIX Logical Ports and $800 per port per 

month for each port over 5; $1,500 per port per 

month for the first 5 BOE Bulk Logical Ports, $2,500 

per port per month for ports 6–30, and $3,000 per 

port per month for each port over 30); Cboe BXZ 

Exchange, Inc. Options Fee Schedule, Options 

Logical Port Fees, Ports with Bulk Quoting 

Capabilities ($1,500 per port per month for the first 

and second ports, $2,500 per port per month for 

three or more); Nasdaq Stock Market LLC, Options 

7, Pricing Schedule, Section 3 ($1,500 per port per 

month for the first 5 SQF ports; $1,000 per port per 

month for SQF ports 15–20; and $500 per port per 

month for all SQF ports over 21); NYSE American 

Options Fee Schedule, Section V.A., Port Fees and 

NYSE Arca Options Fee Schedule, Port Fees (both 

charging $450 per port for order/quote entry ports 

1–40 and $150 per port for ports 41 and greater). 

80See SIFMA Letter, supra note 9. 

81Pursuant to the Guidance, ‘‘platform theory 

generally asserts that when a business offers 

facilities that bring together two or more distinct 

types of customers, it is the overall return of the 

platform, rather than the return of any particular 

fees charged to a type of customer, that should be 

used to assess the competitiveness of the platform’s 

market.’’ See Guidance, supra note 23. 

82See SIFMA Letter, supra note 9. 

83 15 U.S.C. 78s(b)(3)(C). 

84 15 U.S.C. 78s(b)(1). 

85See Securities Exchange Act Release No. 92645 

(August 11, 2021), 86 FR 46048 (August 17, 2021) 

(SR–EMERALD–2021–23). The Commission 

received one comment letter on that proposal. 

Comment for SR–EMERALD–2021–23 can be found 

at: https://www.sec.gov/comments/sr-emerald-2021- 

23/sremerald202123.htm. 

ample justification for the proposed 

tiered-pricing structure in the First and 

Second Proposed Rule Changes. 

Nonetheless, the Exchange provides 

additional justification to support that 

the Proposed Access Fees are equitable 

and not unfairly discriminatory above in 

response to SIG’s assertions. 

The Proposed Tiered-Pricing Structure 

for 10Gb ULL Connectivity Will Provide 

Cost Savings for the Majority of 

Exchange Members 

The SIG Letter incorrectly asserts that 

no other exchange has tiered 

connectivity pricing. Numerous other 

exchanges provide tiered fee structures 

for various other types of access to their 

platforms, including trading permits 

and ports.79 The Exchange provided 

adequate evidence that most firms 

would incur cost savings under the 

Proposed Access Fees in the First and 

Second Proposed Rule Changes and this 

filing. Nonetheless, the Exchange 

believes it provided additional 

justification to support that the 

Proposed Access Fees are equitable and 

not unfairly discriminatory above in 

response to SIG’s assertions. 

Recoupment of Exchange Infrastructure 

Costs 

Nowhere in this proposal or in the 

First Proposed Fee change did the 

Exchange assert that it benefits 

competition to allow a new exchange 

entrant to recoup their infrastructure 

costs. Rather, the Exchange asserts 

above that its ‘‘proposed fees are 

reasonable, equitably allocated and not 

unfairly discriminatory because the 

Exchange, and its affiliates, are still 

recouping the initial expenditures from 

building out their systems while the 

legacy exchanges have already paid for 

and built their systems.’’ The Exchange 

no longer makes this assertion in this 

filing and, therefore, does not believe is 

it necessary to respond to SIG’s 

assertion here. 

SIFMA Letter 

In sum, the SIFMA Letter asserts that 

the Exchange has failed to demonstrate 

that the Proposed Access Fees are 

reasonable for three reasons: 

(i) ‘‘The Exchanges’ ‘‘platform 

competition’’ argument that competition for 

order flow constrains pricing for market data 

or other products and services exclusively 

offered by an exchange does not demonstrate 

that the fees are reasonable.’’ 

(ii) ‘‘. . . order flow competition alone 

between exchanges does not demonstrate that 

the fees for the products and services subject 

to the Proposal are reasonable.’’ 

(iii) ‘‘the Exchanges’ argument that the 

products and services subject to the 

Proposals are optional does not reflect 

marketplace reality, nor does it demonstrate 

that the proposed fees are reasonable.’’ 

The Exchange responds to each of 

SIFMA’s challenges in turn below. 

The Exchange Never Set Forth a 

‘‘Platform Competition’’ Argument 

The SIFMA Letter asserts that the 

Exchange’s ‘‘platform competition’’ 

argument that competition for order 

flow constrains pricing for market data 

or other products and services 

exclusively offered by an exchange does 

not demonstrate that the fees are 

reasonable.’’ 80 The Exchange does not 

believe it is necessary to respond to this 

assertion because it has never set forth 

a ‘‘platform competition’’ 81 argument to 

justify the Proposed Access Fees in the 

First or Second Proposed Rule Change 

nor does it do so in this filing. 

The Exchange Is Not Arguing That 

Order Flow Competition Alone 

Demonstrates That the Proposed Fees 

Are Reasonable 

The SIFMA Letter asserts that ‘‘order 

flow competition alone between 

exchanges does not demonstrate that the 

fees for the products and services 

subject to the Proposal are 

reasonable.’’ 82 The Exchange never 

directly asserted in the First or Second 

Proposed Rule Changes, nor does it do 

so in this filing, that order flow 

competition, alone, demonstrated that 

the Proposed Access Fees are reasonable 

and has removed any language that 

could imply this argument from this 

filing. 

Other SIFMA Assertions 

SIFMA also challenges or asserts: (i) 

The substitutability or optionality of 

10Gb ULL connections, (ii) whether the 

Exchange has shown that the fees are 

equitable and non-discriminatory; (iii) 

that a tiered pricing structure will 

impose higher cost on all market 

participants; (iv) that a tiered pricing 

structure will encourage market 

participants to be more economical with 

the usage; (v) greater number of 

connections use greater Exchange 

resources; and (vi) that the Exchange 

has not provided extensive information 

regarding its cost data and how it 

determined it cost analysis. The 

Exchange believes that these assertions 

by SIFMA basically echo assertions 

made in SIG Letters 1 and 3 and that it 

provided a response to these assertions 

under its response to SIG above or in 

provided enhanced transparency and 

justification in this filing. 

III. Suspension of the Proposed Rule 

Change 

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

Act,83 at any time within 60 days of the 

date of filing of a proposed rule change 

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

Act,84 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 change 

is necessary and appropriate to allow for 

additional analysis of the proposed rule 

change’s consistency with the Act and 

the rules thereunder. 

As the Exchange further details above, 

the Exchange first filed a proposed rule 

change proposing fee changes as 

proposed herein on July 30, 2021, with 

the proposed fee changes effective 

beginning August 1, 2021. That 

proposal, SR–EMERALD–2021–23, was 

published for comment in the Federal 

Register on August 17, 2021.85 On 

September 24, 2021 the Exchange 

withdrew SR–EMERALD–2021–23 and 

filed a proposed rule change proposing 

fee changes as proposed herein. That 

proposal, SR–EMERALD–2021–29, was 


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86See Securities Exchange Act Release No. 93166 

(September 28, 2021), 86 FR 54760 (October 4, 

2021) (SR–EMERALD–2021–29). 

87Comment on SR–EMERALD–2021–29 can be 

found at: https://www.sec.gov/comments/sremerald-2021-29/sremerald202129.htm. 

88See Securities Exchange Act Release No. 93644 

(November 22, 2021), 86 FR 67750 (November 29, 

2021). 

89See text accompanying supra note 12. 

90See Securities Exchange Act Release No. 93776 

(December 14, 2021), 86 FR 71983 (December 20, 

2021). 

91See Securities Exchange Act Release No. 94089 

(January 27, 2022), 87 FR 5910 (February 2, 2022). 

92See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

93 Id. 

94 15 U.S.C. 78f(b)(4). 

95 15 U.S.C. 78f(b)(5). 

96 15 U.S.C. 78f(b)(8). 

97Se 15 U.S.C. 78f(b)(4), (5), and (8), respectively. 

98For purposes of temporarily suspending the 

proposed rule change, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

99 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. 

100 15 U.S.C. 78s(b)(2)(B). 

101 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. 

102 15 U.S.C. 78f(b)(4). 

103 15 U.S.C. 78f(b)(5). 

104 15 U.S.C. 78f(b)(8). 

published for comment in the Federal 

Register on October 4, 2021.86 The 

Commission received four comment 

letters from three separate commenters 

on SR–EMERALD–2021–29.87 On 

November 22, 2021, pursuant to Section 

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

(1) Temporarily suspended the 

proposed rule change; and (2) instituted 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change.88 On December 1, 2021, the 

Exchange withdrew SR–EMERALD– 

2021–29 and filed a proposed rule 

change proposing fee changes as 

proposed herein. That filing, SR– 

EMERALD–2021–42,89 was published 

for comment in the Federal Register on 

December 20, 2021.90 On January 27, 

2022, pursuant to Section 19(b)(3)(C) of 

the Act, the Commission: (1) 

Temporarily suspended the proposed 

rule change (SR–EMERALD–2021–42) 

and (2) instituted proceedings to 

determine whether to approve or 

disapprove the proposal.91 On February 

1, 2022, the Exchange withdrew SR– 

EMERALD–2021–42 and filed the 

instant filing, which is substantially 

similar. 

When exchanges file their proposed 

rule changes with the Commission, 

including fee filings like the Exchange’s 

present proposal, they are required to 

provide a statement supporting the 

proposal’s basis under the Act and the 

rules and regulations thereunder 

applicable to the exchange.92 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.’’ 93

Among other things, exchange 

proposed rule changes are subject to 

Section 6 of the Act, including Sections 

6(b)(4), (5), and (8), which requires the 

rules of an exchange to: (1) Provide for 

the equitable allocation of reasonable 

fees among members, issuers, and other 

persons using the exchange’s 

facilities; 94 (2) perfect the mechanism of 

a free and open market and a national 

market system, protect investors and the 

public interest, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers; 95 and (3) not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.96

In temporarily suspending the 

Exchange’s fee change, the Commission 

intends to further consider whether the 

proposal to modify fees for certain 

connectivity options and implement a 

tiered pricing fee structure is consistent 

with the statutory requirements 

applicable to a national securities 

exchange under the Act. In particular, 

the Commission will consider whether 

the proposed rule change satisfies 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.97

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 change.98

IV. Proceedings To Determine Whether 

To Approve or Disapprove the 

Proposed Rule Change 

The Commission is instituting 

proceedings pursuant to Sections 

19(b)(3)(C) 99 and 19(b)(2)(B) 100 of the 

Act to determine whether the 

Exchange’s proposed rule change 

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 change. 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 

change to inform the Commission’s 

analysis of whether to approve or 

disapprove the proposed rule change. 

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

Act,101 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 Exchange has sufficiently 

demonstrated how the proposed rule 

change is consistent with Sections 

6(b)(4),102 6(b)(5),103 and 6(b)(8) 104 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 

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 Exchange’s statements in support of 

the proposal, in addition to any other 

comments they may wish to submit 

about the proposed rule change. In 

particular, the Commission seeks 

comment on the following aspects of the 

proposal and asks commenters to 

submit data where appropriate to 

support their views: 


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105See supra Section II.A.2. 

106See supra Section II.A.2. 

107See id. 108See supra Section II.A.2. 

1. Cost Estimates and Allocation. The 

Exchange states that it is 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 10Gb ULL connectivity to 

estimate such costs.’’ 105 Setting forth its 

costs in providing 10Gb ULL connectivity, 

and as summarized in greater detail above, 

the Exchange projects $7.2 million in 

aggregate annual estimated costs for 2021 as 

the sum of: (1) $1.7 million in third-party 

expenses paid in total to Equinix (62% of the 

total applicable expense) for data center 

services; Zayo Group Holdings, for network 

services (62% of the total applicable 

expense); SFTI for connectivity support, 

Thompson Reuters, NYSE, Nasdaq, and 

Internap and others (89% of the total 

applicable expense) for content, connectivity 

services, and infrastructure services; and 

various other hardware and software 

providers (51% of the total applicable 

expense) supporting the production 

environment, and (2) $5.5 million in internal 

expenses, allocated to (a) employee 

compensation and benefit costs ($3.2 million, 

approximately 33% of the Exchange’s total 

applicable employee compensation and 

benefits expense); (b) depreciation and 

amortization ($2 million, approximately 63% 

of the Exchange’s total applicable 

depreciation and amortization expense); and 

(c) occupancy costs ($0.3 million, 

approximately 53% of the Exchange’s total 

applicable occupancy expense). Do 

commenters believe that the Exchange has 

provided sufficient detail about how it 

determined which costs are most clearly 

directly associated with providing and 

maintaining 10Gb ULL connectivity? The 

Exchange describes a ‘‘proprietary’’ process 

involving all Exchange department heads, 

including the finance department and 

numerous meetings between the Exchange’s 

Chief Information Officer, Chief Financial 

Officer, Head of Strategic Planning and 

Operations, Chief Technology Officer, 

various members of the Legal Department, 

and other group leaders, 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 Exchange calculated an 

allocation of employee time in several 

departments, including Technology, Back 

Office, Systems Operations, Networking, 

Business Strategy Development, Trade 

Operations, Finance, and Legal, 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 that specific 

activity. What are commenters’ views on 

whether the Exchange has provided 

sufficient detail on the identity and nature of 

services provided by third parties? Across all 

of the Exchange’s projected costs, what are 

commenters’ views on whether the Exchange 

has provided sufficient detail on the 

elements that go into connectivity costs, 

including how shared costs are allocated and 

attributed to connectivity expenses, to permit 

an independent review and assessment of the 

reasonableness of purported cost-based fees 

and the corresponding profit margin thereon? 

Should the Exchange be required to identify 

for what services or fees the remaining 

percentage of un-allocated expenses are 

attributable to (e.g., what services or fees are 

associated with the 37% of applicable 

depreciation and amortization expenses the 

Exchange does 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? Should the Exchange use 

cost projections or actual costs estimated for 

2021 in a filing made in 2022, or make cost 

projections for 2022? 

2. Revenue Estimates and Profit Margin 

Range. The Exchange provides a single 

monthly revenue figure as the basis for 

calculating the profit margin of 47%. Do 

commenters believe this is reasonable? If not, 

why not? The Exchange states that their 

proposed fee structure is ‘‘designed to cover 

its costs with a limited return in excess of 

such costs,’’ and that ‘‘revenue and 

associated profit margin [ ] are not solely 

intended to cover the costs associated with 

providing access services subject to the 

Proposed Access Fees,’’ and believes that a 

47% margin is a limited return over such 

costs.106 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 Exchange 

acknowledges that this margin may fluctuate 

from month to month due to changes in the 

number of connections purchased, and that 

costs may increase. They also state that the 

number of connections has not materially 

changed over the prior months and so the 

months that the Exchange has used as a 

baseline to perform its assessment are 

representative of reasonably anticipated costs 

and expenses.107 The Exchange does not 

account for the possibility of cost decreases, 

however. What are commenters’ views on the 

extent to which actual costs (or revenues) 

deviate from projected costs (or revenues)? 

Do commenters believe that the Exchange’s 

methodology for estimating the profit margin 

is reasonable? Should the Exchange provide 

a range of profit margins that they believe are 

reasonably possible, and the reasons 

therefor? 

3. Reasonable Rate of Return. Do 

commenters agree with the Exchange that its 

expected 47% profit margin would constitute 

a reasonable rate of return over cost for 10GB 

ULL connectivity? 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? What 

are commenters’ views regarding what factors 

should be considered in determining what 

constitutes a reasonable rate of return for 

10Gb ULL connectivity fees? Do commenters 

believe it relevant to an assessment of 

reasonableness that the Exchange’s proposed 

fees for 10Gb ULL connections, even at the 

highest tier, are lower than those of other 

options exchanges to which the Exchange has 

compared the Proposed Access Fees? What 

are commenters’ views regarding the 

difference in profit margins between the 

Exchange, at 47%, and that of its affiliates 

(MIAX and PEARL Options), at 21.3%? Do 

commenters believe that this profit margin 

difference between affiliates for the same 

Proposed Access Fees is appropriate given 

the Exchange’s Proposed Access Fees are not 

for shared 10Gb ULL connectivity; why or 

why not? 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 Exchange 

has addressed whether it believes 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, 

stating that ‘‘[a]ny requirement that an 

exchange should conduct a periodic reevaluation on a set timeline of its cost 

justification and amend its fees accordingly 

should be established by the Commission 

holistically, applied to all exchanges and not 

just through pending fee proposals, such as 

this filing,’’ and that ‘‘[i]n order to be fairly 

applied, such a mandate should be applied 

to existing access fees as well.’’ 108 In light of 

the impact that the number of subscribers has 

on connectivity 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 they stay in line with their stated 

profitability target 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 

subscriber 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 10Gb ULL 

Connections. The Exchange states that the 

proposed tiered fee structure is designed to 

decrease the monthly fees for those firms that 

connect to the Exchange as part of their best 

execution obligations and generally tend to 

send the least amount of orders and messages 

over those connections, because such firms 

generally only purchase a limited number of 


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9694 Federal Register / Vol. 87, No. 35 / Tuesday, February 22, 2022 / Notices 

109See id. 

110See id. 

111See id. 

112 17 CFR 201.700(b)(3). 

113See id. 

114See id. 

115See 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). 

116 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). 117 15 U.S.C. 78s(b)(3)(C). 

connections, and also ‘‘generally send fewer 

orders and messages over those connections, 

resulting in less strain on Exchange 

resources.’’ 109 According to the Exchange, 

80% of firms have not experienced a fee 

increase as a result of the tiered structure. 

However, firms that purchase five or more 

connections will see a 30% increase in their 

fees for each connection above the fourth. 

Regarding these firms, the Exchange has not 

asserted that it is 30% more costly for the 

Exchange to offer such connections to these 

firms, but instead argues generally that these 

firms are ‘‘likely’’ to result in greater 

expenditure of Exchange resources and 

increased cost to the Exchange and that as 

the number of connections an entity has 

increases, certain other costs incurred by the 

Exchange that are correlated to, though not 

directly affected by, connection costs (e.g., 

storage costs, surveillance costs, service 

expenses) also increase.110 Do commenters 

believe that the price differences between the 

tiers are supported by the Exchange’s 

assertions that it set the level of its proposed 

fees in a manner that it is equitable and not 

unfairly discriminatory? Do commenters 

believes the Exchange should demonstrate 

how the proposed tiered fee levels correlate 

with tiered costs (e.g., by providing cost 

information broken down by tier, messaging 

and order volumes through the additional 

10Gb ULL connections by tier, and/or midmonth add/drop of connection rates by tier)? 

Do commenters believe that the Exchange 

should provide more detail about the costs 

that firms purchasing three or more or five 

or more 10Gb ULL connections impose on 

the Exchange, to permit an assessment of the 

Exchange’s statement that the Proposed 

Access Fees ‘‘do not depend on any 

distinction between Members and nonMembers because they are solely determined 

by the individual Members’ or non-Members’ 

business needs and its impact on Exchange 

resources?’’ 111

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.’’ 112 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,113 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.114 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.115

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 proposal is 

consistent with the Act, any potential 

comments or supplemental information 

provided by the Exchange, and any 

additional independent analysis by the 

Commission. 

V. Commission’s Solicitation of 

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 Exchange’s statements in 

support of the proposal, in addition to 

any other comments they may wish to 

submit about the proposed rule change. 

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.116

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by March 15, 2022. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by March 29, 2022. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File No. SR– 

EMERALD–2022–04 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–EMERALD–2022–04. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–EMERALD–2022–04 and 

should be submitted on or before March 

15, 2022. Rebuttal comments should be 

submitted by March 29, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,117 that 

File Numbers SR–EMERALD–2022–04 

be, and hereby is, temporarily 

suspended. In addition, the Commission 

is instituting proceedings to determine 

whether the proposed rule change 

should be approved or disapproved. 


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Federal Register / Vol. 87, No. 35 / Tuesday, February 22, 2022 / Notices 9695 

118 17 CFR 200.30–3(a)(12), (57) and (58). 

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

2 17 CFR 240.19b–4. 

3The MIAX Emerald Express Interface (‘‘MEI’’) is 

a connection to the MIAX Emerald System that 

enables Market Makers to submit simple and 

complex electronic quotes to MIAX Emerald. See 

the Definitions Section of the Fee Schedule 

4The term ‘‘Market Makers’’ refers to Lead Market 

Makers (‘‘LMMs’’), Primary Lead Market Makers 

(‘‘PLMMs’’), and Registered Market Makers 

(‘‘RMMs’’) collectively. See the Definitions Section 

of the Fee Schedule and Exchange Rule 100. 

5The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See the Definitions Section of the Fee 

Schedule and Exchange Rule 100. 

6See Securities Exchange Act Release No. 92662 

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

(SR–EMERALD–2021–25). 

7 Id. 

8See Letter from Richard J. McDonald, 

Susquehanna International Group, LLC (‘‘SIG’’), to 

Vanessa Countryman, Secretary, Commission, dated 

September 7, 2021 (‘‘SIG Letter 1’’). 

9See SR–EMERALD–2021–30. 

10See Securities Exchange Act Release No. 93188 

(September 29, 2021), 86 FR 55052 (October 5, 

2021) (SR–EMERALD–2021–31). 

11 Id. 

12See letters from Richard J. McDonald, SIG, to 

Vanessa Countryman, Secretary, Commission, dated 

October 1, 2021 (‘‘SIG Letter 2’’) and October 26, 

2021 (‘‘SIG Letter 3’’); and Ellen Green, Managing 

Director, Equity and Options Market Structure, 

Securities Industry and Financial Markets 

Association (‘‘SIFMA’’), to Vanessa Countryman, 

Secretary, Commission, dated November 26, 2021 

(‘‘SIFMA Letter’’). 

The Exchange notes that the Healthy Markets 

Association (‘‘HMA’’) submitted a comment letter 

on a related filing to amend fees for 10Gb ULL 

connections, on which SIG Letters 1, 2, and 3 as 

well as the SIFMA Letter also commented. See 

letter from Tyler Gellasch, Executive Director, HMA 

(‘‘HMA’’), to Hon. Gary Gensler, Chair, 

Commission, dated October 29, 2021 (commenting 

on SR–CboeEDGA–2021–017, SR–CboeBYX–2021– 

020, SR–Cboe–BZX–2021–047, SR–CboeEDGX– 

2021–030, SR–MIAX–2021–41, SR–PEARL–2021– 

45, and SR–EMERALD–2021–29 and stating that 

‘‘MIAX has repeatedly filed to change its 

connectivity fees in a way that will materially lower 

costs for many users, while increasing the costs for 

some of its heaviest of users. These filings have 

been withdrawn and repeatedly refiled. Each time, 

however, the filings contain significantly greater 

information about who is impacted and how than 

other filings that have been permitted to take effect 

without suspension’’) (emphasis added) (‘‘HMA 

Letter’’). 

13See Securities Exchange Act Release No. 93644 

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

2021). 

14See Securities Exchange Act Release No. 93772 

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

2021) (SR–EMERALD–2021–43). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.118

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03652 Filed 2–18–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94260; File No. SR– 

EMERALD–2022–05] 

Self-Regulatory Organizations; MIAX 

Emerald, LLC; Notice of Filing of a 

Proposed Rule Change To Amend Its 

Fee Schedule To Adopt a TieredPricing Structure for Additional 

Limited Service MIAX Emerald Express 

Interface Ports; Suspension of and 

Order Instituting Proceedings To 

Determine Whether To Approve or 

Disapprove the Proposed Rule Change 

February 15, 2022. 

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 February 

1, 2022, MIAX Emerald, LLC (‘‘MIAX 

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

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I and II 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 and is, pursuant 

to Section 19(b)(3)(C) of the Act, hereby: 

(i) Temporarily suspending the rule 

change; and (ii) instituting proceedings 

to determine whether to approve or 

disapprove the proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Emerald Fee Schedule 

(the ‘‘Fee Schedule’’) to amend certain 

port fees. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV [sic] below. 

The Exchange has prepared summaries, 

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

of the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to adopt a tiered-pricing 

structure for additional Limited Service 

MIAX Emerald Express Interface 

(‘‘MEI’’) Ports 3 available to Market 

Makers.4 The Exchange believes a 

tiered-pricing structure will encourage 

Market Makers to be more efficient and 

economical when determining how to 

connect to the Exchange. This should 

also enable the Exchange to better 

monitor and provide access to the 

Exchange’s network to ensure sufficient 

capacity and headroom in the System.5

The Exchange initially filed the 

proposed fee changes on August 2, 

2021, with the changes being 

immediately effective.6 The First 

Proposed Rule Change was published 

for comment in the Federal Register on 

August 19, 2021.7 The Commission 

received one comment letter on the First 

Proposed Rule Change.8 The Exchange 

withdrew the First Proposed Rule 

Change on September 27, 2021 and 

resubmitted its proposal (‘‘Second 

Proposed Rule Change’’).9 On 

September 28, 2021, the Exchange 

withdrew the Second Proposed Rule 

Change and re-submitted the proposal 

on September 28, 2021, with the 

proposed fee changes being immediately 

effective (‘‘Third Proposed Rule 

Change’’).10 The Third Proposed Rule 

Change was published for comment in 

the Federal Register on October 5, 

2021.11 The Third Proposed Rule 

Change provided additional justification 

for the proposed fee changes and 

addressed certain points raised in the 

single comment letter that was 

submitted on the First Proposed Rule 

Change. The Commission received four 

comment letters from three separate 

commenters on the Third Proposed Rule 

Change.12 The Commission suspended 

the Third Proposed Rule Change on 

November 22, 2021.13 The Exchange 

withdrew the Third Proposed Rule 

Change on December 1, 2021 and 

submitted a revised proposal for 

immediate effectiveness (‘‘Fourth 

Proposed Rule Change’’).14 The Fourth 

Proposed Rule Change meaningfully 

attempted to address issues or questions 

that have been raised by providing 

additional justification and explanation 

for the proposed fee changes and 

directly respond to the points raised in 


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