Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices 10837 

13 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

issued by the Exchange that confers the ability to 

transact on the Exchange. See Exchange Rule 100. 

4The term ‘‘Member’’ means an individual or 

organization that is registered with the Exchange 

pursuant to Chapter II of Exchange Rules for 

purposes of trading on the Exchange as an 

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

Members are deemed ‘‘members’’ under the 

Exchange Act. See Exchange Rule 100 and the 

Definitions Section of the Fee Schedule. 

5See Securities Exchange Act Release No. 92366 

(July 9, 2021), 86 FR 37379 (SR–PEARL–2021–32). 

6See id. 

7See Letter from Richard J. McDonald, 

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

Vanessa Countryman, Secretary, Commission, dated 

September 28, 2021 (‘‘SIG Letter’’). 

8See Securities Exchange Act Release No. 92797 

(August 27, 2021), 86 FR 49399 (September 2, 

2021). 

9See Securities Exchange Act Release No. 93555 

(November 10, 2021), 86 FR 64254 (November 17, 

2021) (SR–PEARL–2021–54). 

10See id. 

11Securities Exchange Act Release No. 93895 

(January 4, 2022), 87 FR 1217 (January 10, 2022) 

(SR–PEARL–2021–59). 

12 Id. 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

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

filings will also be available for 

inspection and copying at the principal 

office of ICE Clear Europe and on ICE 

Clear Europe’s website at https://

www.theice.com/clear-europe/ 

regulation. 

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–ICEEU–2022–005 

and should be submitted on or before 

March 18, 2022. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.13

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03961 Filed 2–24–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94287; File No. SR– 

PEARL–2022–05] 

Self-Regulatory Organizations; MIAX 

PEARL LLC; Notice of Filing of a 

Proposed Rule Change To Amend the 

MIAX PEARL Options Fee Schedule To 

Remove Certain Credits and Increase 

Trading Permit Fees; Suspension of 

and Order Instituting Proceedings To 

Determine Whether To Approve or 

Disapprove the Proposed Rule Change 

February 18, 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 

15, 2022, MIAX PEARL, LLC (‘‘MIAX 

Pearl’’ 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 Pearl Options Fee 

Schedule (the ‘‘Fee Schedule’’) to 

remove certain credits and amend the 

monthly Trading Permit 3 fees for 

Exchange Members.4

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’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 remove certain credits 

and amend the monthly Trading Permit 

fees (the ‘‘Proposed Access Fees’’) for 

Exchange Members. The Exchange 

initially filed this proposal on July 1, 

2021, with the proposed fee changes 

being immediately effective (‘‘First 

Proposed Rule Change’’).5 The First 

Proposed Rule Change was published 

for comment in the Federal Register on 

July 15, 2021.6 The Commission 

received one comment letter on the First 

Proposed Rule Change 7 and 

subsequently suspended the Frist [sic] 

Proposed Rule Change on August 27, 

2021.8 The Exchange withdrew First 

Proposed Rule Change on October 12, 

2021 and re-submitted the proposal on 

October 29, 2021, with the proposed fee 

changes being effective beginning 

November 1, 2021 (‘‘Second Proposed 

Rule Change’’).9 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 Second Proposed 

Rule Change was published for 

comment in the Federal Register on 

November 17, 2021.10 The Commission 

received no comment letters on the 

Second Proposed Rule Change. 

Nonetheless, the Exchange withdrew 

the Second Proposed Rule Change on 

December 20, 2021 and submitted a 

revised proposal for immediate 

effectiveness (‘‘Third Proposed Rule 

Change’’).11 The Third Proposed Rule 

Change was published for comment in 

the Federal Register on January 10, 

2022.12 The Third Proposed Rule 

Change meaningfully attempted to 

provide additional justification and 

explanation for the proposed fee 

changes, directly respond to the points 

raised in the single comment letter 

submitted on the First Proposed Rule 

Change, and respond to feedback 

provided by Commission Staff during a 

telephone conversation on November 

18, 2021 relating to the Second 

Proposed Rule Change. Although the 

Commission again did not receive any 

comment letters on the Third Proposed 


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10838 Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices 

13See Securities Exchange Act Release No. 82867 

(March 13, 2018), 83 FR 12044 (March 19, 2018) 

(SR–PEARL–2018–07). 

14The term ‘‘Priority Customer’’ means a person 

or entity that (i) is not a broker or dealer in 

securities, and (ii) does not place more than 390 

orders in listed options per day on average during 

a calendar month for its own beneficial accounts(s). 

The number of orders shall be counted in 

accordance with Interpretation and Policy .01 of 

Exchange Rule 100. See the Definitions Section of 

the Fee Schedule and Exchange Rule 100, including 

Interpretation and Policy .01. 

15The term ‘‘FIX Interface’’ means the Financial 

Information Exchange interface for certain order 

types as set forth in Exchange Rule 516. See the 

Definitions Section of the Fee Schedule and 

Exchange Rule 100. 

16The term ‘‘MEO Interface’’ or ‘‘MEO’’ means a 

binary order interface for certain order types as set 

forth in Rule 516 into the MIAX Pearl System. See 

the Definitions Section of the Fee Schedule and 

Exchange Rule 100. 

17 ‘‘Affiliate’’ means (i) an affiliate of a Member 

of at least 75% common ownership between the 

firms as reflected on each firm’s Form BD, Schedule 

A, or (ii) the Appointed Market Maker of an 

Appointed EEM (or, conversely, the Appointed 

EEM of an Appointed Market Maker). An 

‘‘Appointed Market Maker’’ is a MIAX Pearl Market 

Maker (who does not otherwise have a corporate 

affiliation based upon common ownership with an 

EEM) that has been appointed by an EEM and an 

‘‘Appointed EEM’’ is an EEM (who does not 

otherwise have a corporate affiliation based upon 

common ownership with a MIAX Pearl Market 

Maker) that has been appointed by a MIAX Pearl 

Market Maker, pursuant to the following process. A 

MIAX Pearl Market Maker appoints an EEM and an 

EEM appoints a MIAX Pearl Market Maker, for the 

purposes of the Fee Schedule, by each completing 

and sending an executed Volume Aggregation 

Request Form by email to membership@

miaxoptions.com no later than 2 business days 

prior to the first business day of the month in which 

the designation is to become effective. Transmittal 

of a validly completed and executed form to the 

Exchange along with the Exchange’s 

acknowledgement of the effective designation to 

each of the Market Maker and EEM will be viewed 

as acceptance of the appointment. The Exchange 

will only recognize one designation per Member. A 

Member may make a designation not more than 

once every 12 months (from the date of its most 

recent designation), which designation shall remain 

in effect unless or until the Exchange receives 

written notice submitted 2 business days prior to 

the first business day of the month from either 

Member indicating that the appointment has been 

terminated. Designations will become operative on 

the first business day of the effective month and 

may not be terminated prior to the end of the 

month. Execution data and reports will be provided 

to both parties. See the Definitions Section of the 

Fee Schedule. 

18 ‘‘Excluded Contracts’’ means any contracts 

routed to an away market for execution. See the 

Definitions Section of the Fee Schedule. 

19 ‘‘TCV’’ means total consolidated volume 

calculated as the total national volume in those 

classes listed on MIAX Pearl for the month for 

which the fees apply, excluding consolidated 

volume executed during the period of time in 

which the Exchange experiences an Exchange 

System Disruption (solely in the option classes of 

the affected Matching Engine). See the Definitions 

Section of the Fee Schedule. 

20The term ‘‘Electronic Exchange Member’’ or 

‘‘EEM’’ means the holder of a Trading Permit who 

is a Member representing as agent Public Customer 

Orders or Non-Customer Orders on the Exchange 

and those non-Market Maker Members conducting 

proprietary trading. Electronic Exchange Members 

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

See the Definitions Section of the Fee Schedule. 

21The term ‘‘Market Maker’’ or ‘‘MM’’ means a 

Member registered with the Exchange for the 

purpose of making markets in options contracts 

traded on the Exchange and that is vested with the 

rights and responsibilities specified in Chapter VI 

of these Rules. See the Definitions Section of the 

Fee Schedule. 

Rule Change, the Exchange withdrew 

the Third Proposed Rule Change on 

February 15, 2022 and now submits this 

revised proposal for immediate 

effectiveness (‘‘Fourth Proposed Rule 

Change’’). This Fourth Proposed Rule 

Change provides additional justification 

and explanation for the proposed fee 

changes. 

Removal of the ‘‘Monthly Volume 

Credit’’ 

The Exchange proposes to amend the 

Definitions section of the Fee Schedule 

to delete the definition and remove the 

credits applicable to the Monthly 

Volume Credit for Members. The 

Exchange established the Monthly 

Volume Credit in 2018 13 to encourage 

Members to send increased Priority 

Customer 14 order flow to the Exchange, 

which the Exchange applied to the 

assessment of certain non-transaction 

rebates and fees for that Member. The 

Exchange applies a different Monthly 

Volume Credit depending on whether 

the Member connects to the Exchange 

via the FIX Interface 15 or MEO 

Interface.16 Currently, the Exchange 

assesses the Monthly Volume Credit to 

each Member that has executed Priority 

Customer volume along with that of its 

Affiliates,17 not including Excluded 

Contracts,18 of at least 0.30% of MIAX 

Pearl-listed Total Consolidated Volume 

(‘‘TCV’’),19 as set forth in the following 

table: 

Type of member connection 

Monthly 

volume 

credit 

Member that connects via the FIX 

Interface .................................... $250 

Member that connects via the 

MEO Interface ........................... 1,000 

If a Member connects via both the 

MEO Interface and FIX Interface and 

qualifies for the Monthly Volume Credit 

based upon its Priority Customer 

volume, the greater Monthly Volume 

Credit shall apply to such Member. 

Prior to the First Proposed Rule Change, 

the Monthly Volume Credit was a 

single, once-per-month credit towards 

the aggregate monthly total of nontransaction fees assessable to a Member. 

Beginning with the First Proposed 

Rule Change, the Exchange proposes to 

amend the Definitions section of the Fee 

Schedule to delete the definition and 

remove the Monthly Volume Credit. The 

Exchange established the Monthly 

Volume Credit when it first launched 

operations to attract order flow by 

lowering the initial fixed cost for 

Members. The Monthly Volume Credit 

has achieved its purpose and the 

Exchange believes it is appropriate to 

remove this credit. The Exchange 

believes that the Exchange’s existing 

Priority Customer rebates and fees will 

continue to allow the Exchange to 

remain highly competitive and continue 

to attract order flow and maintain 

market share. 

Removal of the Trading Permit Fee 

Credit 

The Exchange proposes to amend 

Section (3)(b) of the Fee Schedule to 

remove the Trading Permit fee credit 

that is denoted in footnote ‘‘*’’ below 

the Trading Permit fee table. Prior to the 

First Proposed Rule Change, the Trading 

Permit fee credit was applicable to 

Members that connect via both the MEO 

and FIX Interfaces. Members who 

connect via both the MEO and FIX 

Interfaces are assessed the rates for both 

types of Trading Permits, but these 

Members received a $100 monthly 

credit towards the Trading Permit fees 

applicable to the MEO Interface prior to 

the First Proposed Rule Change. The 

Exchange proposes to remove the 

Trading Permit fee credit and delete 

footnote ‘‘*’’ from Section (3)(b) of the 

Fee Schedule. 

The Exchange established the Trading 

Permit fee credit when it first launched 

operations to attract order flow and 

increase membership by lowering the 

costs for Members that connect via both 

the MEO Interface and FIX Interface. 

The Trading Permit fee credit has 

achieved its purpose and the Exchange 

now believes that it is appropriate to 

remove this credit in light of the current 

operating conditions and membership 

population on the Exchange. 

Amendment of Trading Permit Fees 

The Exchange proposes to amend 

Section (3)(b) of the Fee Schedule to 

increase the amount of the monthly 

Trading Permit fees. The Exchange 

issues Trading Permits to Members who 

are either Electronic Exchange 

Members 20 (‘‘EEMs’’) or Market 

Makers.21 The Exchange assesses 

Trading Permit fees based upon the 

monthly total volume executed by the 

Member and its Affiliates on the 

Exchange across all origin types, not 

including Excluded Contracts, as 

compared to the total TCV in all MIAX 

Pearl-listed options. The Exchange 

adopted a tier-based fee structure based 


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22See the Definitions Section of the Fee Schedule 

for the monthly volume thresholds associated with 

each Tier. 

23The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

24See supra note 13. 

25See the MIAX Fee Schedule, Section 3)b); 

MIAX Emerald Fee Schedule, Section 3)b). 

upon the volume-based tiers detailed in 

the definition of ‘‘Non-Transaction Fees 

Volume-Based Tiers’’ 22 in the 

Definitions section of the Fee Schedule. 

The Exchange also assesses Trading 

Permit fees based upon the type of 

interface used by the Member to connect 

to the Exchange—the FIX Interface and/ 

or the MEO Interface. 

Current Trading Permit Fees. Prior to 

the First Proposed Rule Change, each 

Member who connected to the System 23

via the FIX Interface was assessed the 

following monthly Trading Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

or volume up to 0.30%, $250; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.30% up to 0.60%, 

$350; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.60%, $450. 

Prior to the First Proposed Rule 

Change, each Member who connected to 

the System via the MEO Interface was 

assessed the following monthly Trading 

Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

or volume up to 0.30%, $300; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.30% up to 0.60%, 

$400; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

or volume above 0.60%, $500. 

Proposed Trading Permit Fees. Since 

the First Proposed Rule Change, the 

Exchange proposes to amend its Trading 

Permit fees as follows. Each Member 

who connects to the System via the FIX 

Interface is assessed the following 

monthly Trading Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

$500; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

$1,000; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

$1,500. 

Each Member who connects to the 

System via the MEO Interface is 

assessed the following monthly Trading 

Permit fees: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonTransaction Fees Volume-Based Tiers, 

$2,500; 

(ii) if its volume falls within the 

parameters of Tier 2 of the NonTransaction Fees Volume-Based Tiers, 

$4,000; and 

(iii) if its volume falls with the 

parameters of Tier 3 of the NonTransaction Fees Volume-Based Tiers, 

$6,000. 

Members who use the MEO Interface 

may also connect to the System through 

the FIX Interface as well, and vice versa. 

The Exchange notes that the Trading 

Permit fees for Members who connect 

through the MEO Interface are higher 

than the Trading Permit fees for 

Members who connect through the FIX 

Interface, since the FIX Interface utilizes 

less capacity and resources of the 

Exchange. The MEO Interface offers 

lower latency and higher throughput, 

which utilizes greater capacity and 

resources of the Exchange. The FIX 

Interface offers lower bandwidth 

requirements and an industry-wide 

uniform message format. Both EEMs and 

Market Makers may connect to the 

Exchange using either interface. 

Trading Permits grant access to the 

Exchange, thus providing the ability to 

submit orders and trade on the 

Exchange, in the manner defined in the 

relevant Trading Permit. Without a 

Trading Permit, a Member cannot 

directly trade on the Exchange. 

Therefore, a Trading Permit is a means 

to directly access the Exchange (which 

offers meaningful value), and the 

Exchange proposes to increase its 

monthly fees since it had not done so 

since the fees were first adopted in 

2018 24 and are designed to recover a 

portion of the costs associated with 

directly accessing the Exchange. The 

Exchange notes that the its affiliates, 

Miami International Securities 

Exchange, LLC (‘‘MIAX’’) and MIAX 

Emerald, LLC (‘‘MIAX Emerald’’), 

charge a similar, fixed trading permit fee 

to certain users, and a similar, varying 

trading permit fee to other users, based 

upon the number of assignments of 

option classes or the percentage of 

volume in option classes.25

As illustrated by the table below, the 

Exchange notes that the proposed fees 

for the Exchange’s Trading Permits are 

in line with, or cheaper than, the similar 

trading permits and access fees for 

similar membership fees charged by 

other options exchanges. The below 

table also illustrates how the Exchange 

has historically undercharged for access 

via Trading Permits as compared to 

other options exchanges. The Exchange 

believes other exchanges’ access and 

trading permit fees are useful examples 

of alternative approaches to providing 

and charging for access and provides the 

below table for comparison purposes 

only to show how the Exchange’s 

proposed fees compare to fees currently 

charged by other options exchanges for 

similar access. 

Exchange Type of membership or trading permit 

fees Monthly fee 

MIAX Pearl (as proposed) ...................................... Trading Permit access via FIX Interface Tier 1: $500. 

Tier 2: $1,000. 

Tier 3: $1,500. 

Trading Permit access via MEO Interface.Tier 1: $2,500. 

Tier 2: $4,000. 

Tier 3: $6,000. 

NYSE Arca, Inc. (‘‘NYSE Arca’’) 26 ......................... Options Trading Permits (‘‘OTP’’) ......... $6,000 for up to 175 option issues. 

Additional $5,000 for up to 350 option issues. 

Additional $4,000 for up to 1,000 option issues. 

Additional $3,000 for all option issues. 

Additional $1,000 for the 5th OTP and each OTP 

thereafter. 


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26NYSE Arca Options Fees and Charges, OTP 

Trading Participant Rights, p.1. 

27NYSE American Options Fee Schedule, Section 

III, Monthly Trading Permit, Rights, Floor Access 

and Premium Product Fees, p. 23–24. 

28Nasdaq PHLX Options 7 Pricing Schedule, 

Section 8. Membership Fees. 

29Nasdaq ISE Options 7 Pricing Schedule, 

Section 8.A. Access Services. 

30Cboe C2 Fee Schedule, Access Fees. 

31 15 U.S.C. 78f(b). 

32 15 U.S.C. 78f(b)(4) and (5). 

33See 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). 

Exchange Type of membership or trading permit 

fees Monthly fee 

NYSE American, LLC (‘‘NYSE American’’) 27 ........ ATP Trading Permits ............................. $8,000 for up to 60 plus the bottom 45% of option 

issues. 

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

45% of option issues. 

Additional $5,000 for up to 500 plus the bottom 

45% of option issues. 

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

45% of option issues. 

Additional $3,000 for all option issues. 

Additional $2,000 for 6th to 9th ATPs (plus additional fee for premium products). 

Nasdaq PHLX LLC (‘‘Nasdaq PHLX’’) 28 ................ Streaming Quote Trader permit fees .... Tier 1 (up to 200 option classes): $0.00. 

Tier 2 (up to 400 option classes): $2,200. 

Tier 3 (up to 600 option classes): $3,200. 

Tier 4 (up to 800 option classes): $4,200. 

Tier 5 (up to 1,000 option classes): $5,200. 

Tier 6 (up to 1,200 option classes): $6,200. 

Tier 7 (all option classes): $7,200. 

Remote Market Maker Organization 

permit fees.

Tier 1 (less than 100 option classes): $5,500. 

Tier 2 (more than 100 and less than 999 option 

classes): $8,000. 

Tier 3 (1,000 or more option classes): $11,000. 

Nasdaq ISE LLC (‘‘Nasdaq ISE’’) 29 ....................... Access Fees .......................................... Primary Market Maker: $5,000 per membership. 

Competitive Market Maker: $2,500 per membership. 

Cboe C2 Exchange, Inc. (‘‘Cboe C2’’) 30 ................ Access Permit Fees .............................. Market Makers: $5,000. 

Electronic Access Permits: $1,000. 

Implementation 

The proposed fees are immediately 

effective. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 31

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 32 in 

particular, in that it is an equitable 

allocation of reasonable dues, fees and 

other charges among its members and 

issuers and other persons using its 

facilities. The Exchange also believes 

the proposal furthers the objectives of 

Section 6(b)(5) of the Act in that it is 

designed to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general to protect investors and the 

public interest and is not designed to 

permit unfair discrimination between 

customers, issuers, brokers and dealers. 

Removal of Monthly Volume Credit and 

Trading Permit Fee Credit 

The Exchange believes its proposal to 

remove the Monthly Volume Credit is 

reasonable, equitable and not unfairly 

discriminatory because all market 

participants will no longer be offered 

the ability to achieve the extra credits 

associated with the Monthly Volume 

Credit for submitting Priority Customer 

volume to the Exchange and access to 

the Exchange is offered on terms that are 

not unfairly discriminatory. The 

Exchange believes it is equitable and not 

unfairly discriminatory to remove the 

Monthly Volume Credit from the Fee 

Schedule for business and competitive 

reasons because, in order to attract order 

flow when the Exchange first launched 

operations, the Exchange established the 

Monthly Volume Credit to lower the 

initial fixed cost for Members. The 

Exchange now believes that it is 

appropriate to remove this credit in 

light of the current operating conditions 

and the current type and amount of 

Priority Customer volume executed on 

the Exchange. The Exchange believes 

that the Exchange’s Priority Customer 

rebates and fees will still allow the 

Exchange to remain highly competitive 

such that the Exchange should continue 

to attract order flow and maintain 

market share. 

The Exchange believes its proposal to 

remove the Trading Permit fee credit for 

Members that connect via both the MEO 

Interface and FIX Interface is 

reasonable, equitable and not unfairly 

discriminatory because all market 

participants will no longer be offered 

the ability to receive the credit and 

access to the Exchange is offered on 

terms that are not unfairly 

discriminatory. The Exchange believes 

it is equitable and not unfairly 

discriminatory to remove the Trading 

Permit fee credit for business and 

competitive reasons because, in order to 

attract order flow and membership after 

the Exchange first launched operations, 

the Exchange established the Trading 

Permit fee credit to lower the costs for 

Members that connect via both the MEO 

Interface and FIX Interface. The 

Exchange now believes that it is 

appropriate to remove this credit in 

light of the current operating conditions 

and membership on the Exchange. 

Trading Permit Fee Increase 

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’’).33 On May 21, 2019, 

the Commission Staff issued guidance 

‘‘to assist the national securities 


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Federal Register / Vol. 87, No. 38 / Friday, February 25, 2022 / Notices 10841 

34See 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’’). 

35See Securities Exchange Act Release Nos. 

91145 (February 17, 2021), 86 FR 11033 (February 

23, 2021) (SR–EMERALD–2021–05) (proposal to 

establish market data fees for MIAX Emerald ToM, 

Administrative Information Subscriber feed, and 

MIAX Emerald Order Feed); 90981 (January 25, 

2021), 86 FR 7582 (January 29, 2021) (SR–PEARL– 

2021–01) (proposal to increase connectivity fees); 

91460 (April 2, 2021), 86 FR 18349 (SR–EMERALD– 

2021–11) (proposal to adopt port fees, increase 

connectivity fees, and increase additional limited 

service ports); 91033 (February 1, 2021), 86 FR 8455 

(February 5, 2021) (SR–EMERALD–2021–03) 

(proposal to adopt trading permit fees). 

36See Guidance, supra note 34. 

37 Id. 

38 Id. 

39 Id. 

40 Id. 

41 Id. 

42For example, the Exchange only included the 

costs associated with providing and supporting the 

access services associated with the Proposed Access 

Fees and excluded from its cost calculations any 

cost not directly associated with providing and 

maintaining such services. Thus, the Exchange 

notes that this methodology underestimates the 

total costs of providing and maintaining the access 

services associated with the Proposed Access Fees. 

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.’’ 34 Based on 

both the BOX Order and the Guidance, 

the Exchange believes that it has clearly 

met its burden to demonstrate that the 

proposed 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 MIAX and MIAX Emerald, 

to adopt or amend non-transaction fees 

(including port and connectivity fees) 

and market data fees.35

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 are 

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 the 

Trading Permit fees to be access fees. It 

records these fees as part of its ‘‘Access 

Fees’’ revenue in its financial 

statements. 

In the 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.’’ 36 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.’’ 37 In the 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.’’ 38 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 via Trading 

Permits 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.’’ 39 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.’’ 40 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’’ 41 profit. The 

Exchange believes that it is important to 

demonstrate that these fees are based on 

its costs and reasonable business needs. 

The Exchange believes the Proposed 

Access Fees will allow the Exchange to 

offset expense the Exchange has and 

will incur, and that the Exchange is 

providing sufficient transparency (as 

described below) into how the Exchange 

determined to charge such fees. 

Accordingly, the Exchange is providing 

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 Trading 

Permit access 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 the 

services associated with Trading 

Permits, 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 Trading 

Permits) to estimate such costs,42 as 

well as the relative costs of providing 

and maintaining Trading Permits, 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 

the services associated with Trading 

Permits because of the uncertainty of 

forecasting subscriber decision making 

with respect to firms’ needs and the 

likely potential for increased costs to 

procure the third-party services 

described below. 

To determine the Exchange’s costs to 

provide the access services associated 

with the Proposed Access Fees, the 

Exchange conducted an extensive cost 

review in which the Exchange analyzed 

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 the access services. 

The sum of all such portions of 

expenses represents the total cost of the 

Exchange to provide the access services 

associated with the Proposed Access 

Fees. 

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 


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43See, e.g., Securities Exchange Act Release Nos. 

93293 (October 12, 2021), 86 FR 57716 (October 18, 

2021) (SR–PHLX–2021–58) (increasing several 

market data fees and adopting new market data fee 

without providing a cost based justification); 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). 

44See 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). 

45See id. at 57909. 

46See Securities Exchange Act Release No. 93883 

(December 30, 2021), 87 FR 523 (January 5, 2021) 

(SR–IEX–2021–14) (the ‘‘IEX Order’’). 47See letters to Ms. Venessa A. Countryman, 

Secretary, Commission, from Douglas A. Cifu, Chief 

Executive Officer, Virtu Financial, Inc., dated 

January 26, 2022 (the ‘‘Virtu Letter’’), Tyler 

Gellasch, Executive Director, Healthy Markets 

Association (‘‘HMA’’), dated January 26, 2022 (the 

‘‘HMA Letter 2’’), and Erika Moore, Vice President 

and Corporate Secretary, The Nasdaq Stock Market 

LLC, dated January 27, 2022 (the ‘‘Nasdaq Letter’’). 

48See Virtu Letter at page 3, id. 49HMA previously expressed their ‘‘worry that 

the Commission’s process for reviewing and 

evaluating exchange filings may be inconsistently 

applied.’’ See letter from Tyler Gellasch, Executive 

Director, 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 1’’). 

50See HMA Letter 2 at 2–3. The Exchange has 

provided further examples to support HMA’s 

assertion above. See supra note 39 and 

accompanying text. 

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 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 fees. Once the expenses 

were identified, the Exchange 

department heads, with the assistance of 

the Exchange’s 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 

reasonable assessment of costs and 

resources allocated to support the 

provision of services associated with the 

proposed 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 pending fee proposals such 

as this filing. In order to be fairly 

applied, such a mandate should be 

applied to existing market data 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 Commission 

determination that it is unable to make 

a finding that this proposed rule change 

is consistent 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.43 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, an access fee.44 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.’’ 45 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 notes that the Investors 

Exchange, Inc. (‘‘IEX’’) recently 

submitted a proposed rule change to 

adopt fees for two real-time proprietary 

market data feeds, TOPS and DEEP 

(‘‘IEX Fee Proposal’’). IEX previously 

provided its TOP and DEEP market data 

feeds for free and proposed to adopt 

modest, below market fees. The IEX Fee 

Proposal included a detailed subscriber 

data and cost-based analysis in 

compliance with the Guidance. 

Nonetheless, on December 30, 2021, the 

Commission suspended the IEX Fee 

Proposal and instituted proceedings to 

determine whether to approve or 

disapprove the IEX Fee Proposal.46

The Commission received three 

comment letters on the IEX Order.47 The 

Virtu Letter and HMA Letter 2 

specifically applaud the amount of 

detail included in the IEX Fee Proposal. 

Specifically, the Virtu Letter states that 

‘‘[i]n significant detail, IEX provides 

data about three cost components: ‘(1) 

direct costs, such as servers, 

infrastructure, and monitoring; (2) 

enhancement initiative costs (e.g., new 

functionality for IEX Data and increased 

capacity for the proprietary market data 

feeds . . . ); and (3) personnel costs.’ ’’ 48

HMA Letter 2 similarly commends the 

level of detail included in the IEX Fee 

Proposal and also highlights the 

disparate treatment by Commission Staff 

of exchange fee filings.49 HMA Letter 2 

provides three examples to support this 

assertion.50 The Nasdaq Letter urges the 


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51See Nasdaq Letter at page 13, id. 

52See Securities Exchange Act Release No. 91033 

(February 1, 2021), 86 FR 8455 (February 5, 2021) 

(SR–EMERALD–2021–03) (Notice of Filing and 

Immediate Effectiveness of a Proposed Rule Change 

To Amend Its Fee Schedule To Adopt Monthly 

Trading Permit Fees) (adopting tiered trading 

permit fee structure for Market Makers ranging from 

$7,000 to $22,000 per month and flat fee of $1,500 

per month for EEMs). 

53The Exchange notes that one Member dropped 

one Trading Permit between June 2021 and 

November 2021, as a result of the Proposed Access 

Fees. 

54The Exchange notes that this profit margin 

differs from the First and Second Proposed Rule 

Changes because the Exchange now has the benefit 

of using a more recent billing cycle under the 

Proposed Access Fees (November 2021) and 

comparing it to a baseline month (June 2021) from 

before the Proposed Access Fees were in effect. 

55See ‘‘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). 

56For 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 

Continued 

Commission to approve the IEX Fee 

Proposal promptly and raises concern 

the questions asked by the Commission 

in the IEX Order imply that they are 

exercising rate making authority that 

they clearly do not possess. The Nasdaq 

Letter states that ‘‘[i]f the Commission 

believes it has authority to conduct costplus ratemaking, the Administrative 

Procedure Act dictates that it must 

propose a rule for notice and comment 

and that its final rule must be prepared 

to withstand judicial scrutiny.’’ 51 The 

Exchange agrees. 

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. 

To determine the Exchange’s 

projected revenues associated with the 

Proposed Access Fees in the instant 

filing, the Exchange analyzed the 

number of Members currently utilizing 

Trading Permits, and, utilizing a recent 

monthly billing cycle representative of 

2021 monthly revenue, extrapolated 

annualized revenue on a going-forward 

basis. The Exchange does not believe it 

is appropriate to factor into its analysis 

projected or estimated future revenue 

growth or decline 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 majority 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 fair and reasonable because they will 

not result in excessive pricing or supracompetitive profit when comparing the 

Exchange’s total annual expense 

associated with providing the services 

associated with the Proposed Access 

Fees versus the total projected annual 

revenue the Exchange will collect for 

providing those services. The Exchange 

notes that this is the same justification 

process utilized by the Exchange’s 

affiliate, MIAX Emerald, in a filing 

recently noticed and not suspended by 

the Commission when MIAX Emerald 

adopted trading permit fees.52

As outlined in more detail below, the 

Exchange projects that the final 

annualized expense for 2021 to provide 

the services associated with Trading 

Permits to be approximately $844,741 

per annum or an average of $70,395 per 

month. The Exchange implemented the 

Proposed Access Fees on July 1, 2021 in 

the First Proposed Rule Change. For 

June 2021, prior to the Proposed Access 

Fees, Members and non-Members 

purchased a total of 48 Trading Permits, 

for which the Exchange charged a total 

of $15,500. This resulted in a loss of 

$54,895 for that month (a margin of 

–354%). For the month of November 

2021, which includes the Proposed 

Access Fees, Members and nonMembers purchased a total of 47 

Trading Permits,53 for which the 

Exchange charged a total of 

approximately $93,500 for that month. 

This resulted in a profit of $23,105 for 

that month, representing a profit margin 

of approximately 24%. The Exchange 

believes that the Proposed Access Fees 

are reasonable because they are 

designed to approximately generate a 

modest profit margin of 24% permonth.54 The Exchange cautions that 

this profit margin is likely to fluctuate 

from month to month based on the 

uncertainty of predicting how many 

Trading Permits may be purchased from 

month to month as Members and nonMembers are able to add and drop 

permits at any time based on their own 

business decisions, which they 

frequently do. 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.55 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 the final annualized 

expense for 2021 to provide the services 

associated with the Proposed Access 

Fees to be approximately $844,741 per 

annum or an average of $70,395 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.56 The Exchange notes that there 


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to the Exchange by approximately 11% for the SFTI 

network. 

57The Exchange has incurred a cumulative loss 

of $86 million since its inception in 2017 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://www.sec.gov/Archives/edgar/ 

vprr/2100/21000461.pdf. 

58The Exchange has not yet finalized its 2021 

year end results. 

59The 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. 

60For 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. 87876 (December 31, 

2019), 85 FR 757 (January 7, 2020) (SR–PEARL– 

2019–36). 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. 

61 In fact, 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. 

This fee increase by ICE data services, while not 

subject to Commission review, has a material 

impact on costs to exchanges and other market 

participants that provide downstream access to 

other market participants. The Exchange 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, without having to show that such fee 

change complies with the Act by being reasonable, 

equitably allocated, and not unfairly 

discriminatory. It is unfathomable to the Exchange 

that, given the critical nature of the infrastructure 

services provided by SFTI, that its fees are not 

required to be rule-filed with the Commission 

pursuant to Section 19(b)(1) of the Act and Rule 

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 of 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 and indeed is 

likely to increase rather than decrease 

over time. 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 2017.57 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. 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. For 

2021,58 the total annual expense for 

providing the access services associated 

with the Proposed Access Fees for the 

Exchange is projected to be 

approximately $844,741 or an average of 

$70,395 per month. The $844,741 in 

projected total annual expense is 

comprised of the following, all of which 

are directly related to the access services 

associated with the Proposed Access 

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

fees paid by the Exchange to thirdparties 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.59 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.60 The $844,741 in projected 

total annual expense is directly related 

to the access services associated with 

the Proposed Access Fees, and not any 

other product or service offered by the 

Exchange. It does not include general 

costs of operating matching systems and 

other trading technology, and no 

expense amount was allocated twice. 

As discussed, the Exchange 

conducted an extensive cost review in 

which the Exchange analyzed 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 

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, total third-party expense, 

relating to fees paid by the Exchange to 

third-parties for certain products and 

services for the Exchange to be able to 

provide the access services associated 

with the Proposed Access Fees, is 

projected to be $188,815. This includes, 

but is not limited to, a portion of the 

fees paid to: (1) Equinix, for data center 

services, for the primary, secondary, and 

disaster recovery locations of the 

Exchange’s trading system 

infrastructure; (2) Zayo Group Holdings, 

Inc. (‘‘Zayo’’) for network services (fiber 

and bandwidth products and services) 

linking the Exchange’s office locations 

in Princeton, New Jersey and Miami, 

Florida, to all data center locations; (3) 

Secure Financial Transaction 

Infrastructure (‘‘SFTI’’),61 which 


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19b–4 thereunder. See 15 U.S.C. 78s(b)(1) and 17 

CFR 240.19b–4, respectively. 

62As 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. 

63 Id. 

64 Id. 

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 the 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 expense 

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, with 

respect to the MIAX Pearl expenses 

included herein, those expenses only 

cover the MIAX Pearl options market; 

expenses associated with the MIAX 

Pearl equities market are accounted for 

separately and are not included within 

the scope of this filing. As 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 thirdparties, adjustments to internal resource 

allocations, and different system 

architecture of the Exchange as 

compared to its affiliates. Further, 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. 

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 third-parties, adjustments to 

internal resource allocations, and 

different system architecture of the 

Exchange as compared to its affiliates. 

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 

8% of the total applicable Equinix 

expense to providing the services 

associated with the proposed 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.62

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 and MIAX Emerald, 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 

calculations, it allocated approximately 

4% of the total applicable Zayo expense 

to providing the services associated 

with the proposed 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.63

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 3% of the total 

applicable SFTI and other service 

providers’ expense to providing the 

services associated with the proposed 

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.64

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 


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65 Id. 

66 Id. 

67 Id. 

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 

5% of the total applicable hardware and 

software provider expense to providing 

the services associated with the 

proposed 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.65

Internal Expense Allocations 

For 2021, total projected internal 

expenses relating to the Exchange 

providing the access services associated 

with the Proposed Access Fees, is 

projected to be $655,925. 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; 

(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 the 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 

$549,834, which is only a portion of the 

$9,163,894 total projected expense for 

employee compensation and benefits. 

The Exchange believes it is reasonable 

to allocate the identified portion of such 

expense because this includes the time 

spent by employees of several 

departments, including Technology, 

Back Office, Systems Operations, 

Networking, Business Strategy 

Development (who create the business 

requirement documents that the 

Technology staff use to develop network 

features and enhancements), Trade 

Operations, Finance (who provide 

billing and accounting services relating 

to the network), and Legal (who provide 

legal services relating to the network, 

such as rule filings and various license 

agreements and other contracts). As part 

of the extensive cost review conducted 

by the Exchange, the Exchange reviewed 

the amount of time spent by each 

employee on matters relating to the 

provision of access services associated 

with the Proposed Access Fees. Without 

these employees, the Exchange would 

not be able to provide the access 

services associated with the Proposed 

Access Fees to its Members and their 

customers. The Exchange did not 

allocate all of the employee 

compensation and benefits expense 

toward the cost of the access services 

associated with the Proposed Access 

Fees, only the portions which the 

Exchange identified as being 

specifically mapped to providing the 

access services associated with the 

Proposed Access Fees. According to the 

Exchange’s calculations, it allocated 

approximately 6% of the total 

applicable employee compensation and 

benefits expense to providing the 

services associated with the proposed 

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.66

The Exchange’s depreciation and 

amortization expense relating to 

providing the access services associated 

with the Proposed Access Fees is 

projected to be $66,316, which is only 

a portion of the $1,326,325 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 5% of the total 

applicable depreciation and 

amortization expense to providing the 

services associated with the proposed 

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.67

The Exchange’s occupancy expense 

relating to providing the access services 

associated with the Proposed Access 

Fees is projected to be $39,775, which 

is only a portion of the $497,180 total 

projected expense for occupancy. The 

Exchange believes it is reasonable to 


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68 Id. 

69The Exchange notes that one Member dropped 

one Trading Permit between June 2021 and 

November 2021, as a result of the Proposed Access 

Fees. 70See supra note 55. 

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 two-thirds of the 

Exchange’s staff are in the Technology 

department, and the majority of those 

staff have some role in the operation 

and performance of the access services 

associated with the proposed Trading 

Permit fees. Without this office space, 

the Exchange would not be able to 

operate and support the network and 

provide the access services associated 

with the Proposed Access Fees to its 

Members and their customers. 

Accordingly, the Exchange believes it is 

reasonable to allocate the identified 

portion of its occupancy expense 

because such amount represents the 

Exchange’s actual cost to house the 

equipment and personnel who operate 

and support the Exchange’s network 

infrastructure and the access services 

associated with the Proposed Access 

Fees. The Exchange did not allocate all 

of the occupancy expense toward the 

cost of providing the access services 

associated with the Proposed Access 

Fees, only the portion which the 

Exchange identified as being 

specifically mapped to operating and 

supporting the network. According to 

the Exchange’s calculations, it allocated 

approximately 8% of the total 

applicable occupancy expense to 

providing the services associated with 

the proposed 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.68

The Exchange notes that a material 

portion of its total overall expense is 

allocated to the provision of access 

services (including connectivity, ports, 

and trading permits). The Exchange 

believes this is reasonable and in line, 

as the Exchange operates a technologybased business that differentiates itself 

from its competitors based on its trading 

systems that rely on access to a high 

performance network, resulting in 

significant technology expense. Over 

two-thirds of Exchange staff are 

technology-related employees. The 

majority of the Exchange’s expense is 

technology-based. As described above, 

the Exchange has only four primary 

sources of fees to recover its 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 

described above, the Exchange projects 

that the annualized expense for 2021 to 

provide the services associated with 

Trading Permit to be approximately 

$844,741 per annum or an average of 

$70,395 per month. The Exchange 

implemented the Proposed Access Fees 

on July 1, 2021 in the First Proposed 

Rule Change. For June 2021, prior to the 

Proposed Access Fees, Members and 

non-Members purchased a total of 48 

Trading Permits, for which the 

Exchange charged a total of $15,500. 

This resulted in a loss of $54,895 for 

that month (a margin of ¥354%). For 

the month of November 2021, which 

includes the Proposed Access Fees, 

Members and non-Members purchased a 

total of 47 Trading Permits,69 for which 

the Exchange charged a total of 

approximately $93,500 for that month. 

This resulted in a profit of $23,105 for 

that month, representing a profit margin 

of approximately 24%. The Exchange 

believes that the Proposed Access Fees 

are reasonable because they are 

designed to approximately generate a 

modest profit margin of 24% per-month. 

The Exchange believes this modest 

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 is likely to fluctuate from 

month to month based in the 

uncertainty of predicting how many 

Trading Permits may be purchased from 

month to month as Members and nonMembers are free to add and drop 

permits 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 the number of Trading 

Permits utilized and volume conducted 

on the Exchange, as well as changes to 

the Exchange’s expenses, the number of 

Trading Permits utilized has not 

materially changed over previous 

months. Consequently, the Exchange 

believes that the months it has 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.70

Accordingly, the Exchange believes its 

total projected revenue for 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 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, 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 services 

subject to the proposed 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 


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71Over the period from April 2021 until 

September 2021, the Exchange processed 3.15 

billion messages via the FIX interface (0.43% of 

total messages received). Over that same time 

period, the Exchange processed 731.4 billion 

messages (99.57% of total messages received) over 

the MEO interface. This marked difference between 

the number of FIX and MEO messages processed, 

when mapped to servers, software, storage, and 

networking results in a much higher allocation of 

total capital and operational expense to support the 

MEO interface. For one, the Exchange incurs greater 

expense in maintaining the resilience of the MEO 

interface to ensure its ongoing operation in 

accordance with Regulation SCI. Another, the 

Exchange must purchase and expand its storage 

capacity to retain these increased messages in 

compliance with its record keeping obligations. The 

Exchange has also seen significant inflationary 

pressure on capital items that it needs to purchase 

to maintain its technology. The Exchange has seen 

pricing increases upwards of 30% on network 

equipment due to supply chain shortages. 

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 items listed above, the 

Exchange would not be able to provide 

the access services associated with the 

Proposed Access Fees to its Members 

and their customers. Each of these 

expense items, including physical 

hardware, software, employee 

compensation and benefits, occupancy 

costs, and the depreciation and 

amortization of equipment, have been 

identified through a line-by-line item 

analysis to be integral to providing 

access services. The Proposed Access 

Fees are intended to recover the 

Exchange’s costs of providing access to 

Exchange Systems. Accordingly, the 

Exchange believes that the Proposed 

Access Fees are fair and reasonable 

because they do not result in excessive 

pricing or supra-competitive profit, 

when comparing the actual costs to the 

Exchange versus the projected annual 

revenue from the Proposed Access Fees. 

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 is the model 

adopted by the Exchange when it 

launched operations for its Trading 

Permit fees. Moreover, the tiered pricing 

structure for Trading Permits is not a 

new proposal and has been in place 

since 2018, well prior to the filing of the 

First Proposed Rule Change. The 

proposed tiers of Trading Permit fees 

will continue to apply to all Members 

and non-Members in the same manner 

based upon the monthly total volume 

executed by a Member and its Affiliates 

on the Exchange across all origin types, 

not including Excluded Contracts, as 

compared to the TCV in all MIAX Pearllisted options. Members and nonMembers may choose to purchase more 

than the one Trading Permit based on 

their own business decisions and needs. 

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 

their 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 

access the Exchange and the amount of 

the fees are based on the number of 

Trading Permits utilized using the FIX 

and MEO Interfaces, in addition to the 

amount of volume conducted on the 

Exchange. 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 proposed tiered-pricing structure 

is not unfairly discriminatory and 

provides for the equitable allocation of 

fees, dues, and other charges because 

the amount of the fee is directly related 

to the Member or non-Member’s TCV 

resulting in higher fees for greater TCV. 

The higher the volume, the greater pull 

on Exchange resources. The Exchange’s 

high performance network solutions and 

supporting infrastructure (including 

employee support), provides 

unparalleled system throughput and the 

capacity to handle approximately 10.7 

million order messages per second. On 

an average day, the Exchange handles 

over approximately 2.7 billion total 

messages. However, in order to achieve 

a consistent, premium network 

performance, the Exchange must build 

out and maintain a network that has the 

capacity to handle the message rate 

requirements of its most heavy network 

consumers. These billions of messages 

per day consume the Exchange’s 

resources and significantly contribute to 

the overall expense for storage and 

network transport capabilities.71

There are material costs associated 

with providing the infrastructure and 

headcount to fully-support access to the 

Exchange. The Exchange incurs 

technology expense related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting, as well as Regulation SCI 

mandated processes, associated with its 

network technology. While some of the 

expense is fixed, much of the expense 

is not fixed, and thus increases as the 

services associated with the Proposed 

Access Fees increase. For example, new 

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 of 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 

reasonable in order to offset a portion of 

the costs to the Exchange associated 

with providing access to its network 

infrastructure. 

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 access or their fee markup over 

those costs, and therefore cannot use 

other exchanges’ membership and 

access fees as a benchmark to determine 

a reasonable markup over the costs of 

providing the services associated with 

the Proposed Access Fees. Nevertheless, 

the Exchange believes the other 

exchanges’ membership and 

participation fees are a useful example 

of alternative approaches to providing 

and charging for similar types of access. 

To that end, the Exchange believes the 

proposed tiered-pricing structure for its 

Trading Permits is reasonable because 

the proposed highest tier is still less 

than or similar to fees charged for 

similar access provided by other options 

exchanges with comparable market 

shares. The below table further 

illustrates this comparison. 


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72See supra note 26. 

73See supra note 27. 

74See supra note 28. 

75See supra note 29. 

76See supra note 30. 

Exchange Type of membership or trading permit 

fees Monthly fee 

MIAX Pearl (as proposed) ...................................... Trading Permit access via FIX Interface Tier 1: $500. 

Tier 2: $1,000. 

Tier 3: $1,500. 

Trading Permit access via MEO Interface.Tier 1: $2,500. 

Tier 2: $4,000. 

Tier 3: $6,000. 

NYSE Arca 72 .......................................................... Options Trading Permits (‘‘OTP’’) ......... $6,000 for up to 175 option issues. 

Additional $5,000 for up to 350 option issues. 

Additional $4,000 for up to 1,000 option issues. 

Additional $3,000 for all option issues. 

Additional $1,000 for the 5th OTP and each OTP 

thereafter. 

NYSE American 73 .................................................. ATP Trading Permits ............................. $8,000 for up to 60 plus the bottom 45% of option 

issues. 

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

45% of option issues. 

Additional $5,000 for up to 500 plus the bottom 

45% of option issues. 

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

45% of option issues. 

Additional $3,000 for all option issues. 

Additional $2,000 for 6th to 9th ATPs (plus additional fee for premium products). 

Nasdaq PHLX74 ..................................................... Streaming Quote Trader permit fees .... Tier 1 (up to 200 option classes): $0.00. 

Tier 2 (up to 400 option classes): $2,200. 

Tier 3 (up to 600 option classes): $3,200. 

Tier 4 (up to 800 option classes): $4,200. 

Tier 5 (up to 1,000 option classes): $5,200. 

Tier 6 (up to 1,200 option classes): $6,200. 

Tier 7 (all option classes): $7,200. 

Remote Market Maker Organization 

permit fees.

Tier 1 (less than 100 option classes): $5,500. 

Tier 2 (more than 100 and less than 999 option 

classes): $8,000. 

Tier 3 (1,000 or more option classes): $11,000. 

Nasdaq ISE75 ......................................................... Access Fees .......................................... Primary Market Maker: $5,000 per membership. 

Competitive Market Maker: $2,500 per membership. 

Cboe C2 76 .............................................................. Access Permit Fees .............................. Market Makers: $5,000. 

Electronic Access Permits: $1,000. 

In each of the above cases, the 

Exchange’s highest tiered Trading 

Permit fee, as proposed, is similar to or 

less than the fees of competing options 

exchanges with like market share for 

similar access. Further, as described in 

more detail below, many competing 

exchanges generate higher overall 

operating profit margins and higher 

‘‘access fees’’ than the Exchange, 

inclusive of the projected revenues 

associated with the proposed fees. 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 access fees. Each of the 

membership, trading permit and 

participation fee rates in place at 

competing options exchanges were filed 

with the Commission for immediate 

effectiveness and remain in place today. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

Intra-Market Competition 

The Exchange believes that the 

Proposed Access Fees do not place 

certain market participants at a relative 

disadvantage to other market 

participants because the Proposed 

Access Fees do not favor certain 

categories of market participants in a 

manner that would impose a burden on 

competition; rather, the fee rates are 

designed in order to provide objective 

criteria for users that connect via the 

MEO Interface of different sizes and 

business models that best matches their 

activity on the Exchange. 

The Exchange believes the removal of 

the Monthly Volume Credit and Trading 

Permit fee credit will not place certain 

market participants at a relative 

disadvantage to other market 

participants because, in order to attract 

order flow when the Exchange first 

launched operations, the Exchange 

established these credits to lower the 

initial fixed cost for Members. The 

Exchange now believes that it is 

appropriate to remove this credit in 

light of the current operating conditions, 

including the Exchange’s overall 

membership and the current type and 

amount of volume executed on the 

Exchange. The Exchange believes that 

the Exchange’s rebates and fees will still 

allow the Exchange to remain highly 

competitive such that the Exchange 

should continue to attract order flow 

and maintain market share. 


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77See ‘‘The market at a glance,’’ available at 

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

December 20, 2021). 

78See supra note 7. 

79 17 CFR 201.700(b)(3). 

80The Exchange has incurred a cumulative loss 

of $86 million since its inception in 2017 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 29, 2021, 

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

9999999997-21-004367/. 

81See 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). 

82See, 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 

Inter-Market Competition 

The Exchange believes the Proposed 

Access Fees do not place an undue 

burden on competition on other options 

exchanges that is not necessary or 

appropriate. In particular, options 

market participants are not forced to 

become members of all options 

exchanges. The Exchange notes that it 

has far less Members as compared to the 

much greater number of members at 

other options exchanges. There are a 

number of large users that connect via 

the MEO Interface and broker-dealers 

that are members of other options 

exchange but not Members of the 

Exchange. The Exchange is also 

unaware of any assertion that its 

existing fee levels or the Proposed 

Access Fees would somehow unduly 

impair its competition with other 

options exchanges. To the contrary, if 

the fees charged are deemed too high by 

market participants, they can simply 

discontinue their membership with the 

Exchange. 

The Exchange operates in a highly 

competitive market in which market 

participants can readily favor one of the 

15 competing options venues if they 

deem fee levels at a particular venue to 

be excessive. Based on publiclyavailable information, and excluding 

index-based options, no single exchange 

has more than approximately 16% 

market share. Therefore, no exchange 

possesses significant pricing power in 

the execution of multiply-listed equity 

and ETF options order flow. Over the 

course of 2021, the Exchange’s market 

share has fluctuated between 

approximately 3–6% of the U.S. equity 

options industry.77 The Exchange is not 

aware of any evidence that a market 

share of approximately 3–6% provides 

the Exchange with anti-competitive 

pricing power. The Exchange believes 

that the ever-shifting market share 

among exchanges from month to month 

demonstrates that market participants 

can discontinue or reduce use of certain 

categories of products, or shift order 

flow, in response to fee changes. In such 

an environment, the Exchange must 

continually adjust its fees to remain 

competitive with other exchanges and to 

attract order flow to the Exchange. 

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 Guidance has 

served an important policy goal of 

improving disclosures in proposed rule 

changes and requiring exchanges to 

more clearly justify that their market 

data and access fee proposals are fair 

and reasonable, it has also been 

inconsistently applied and therefore 

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 78 and no 

comment letters on the Second or Third 

Proposed Rule Changes. The SIG Letter 

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.’’ 79

The SIG Letter’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 has 

operated at a net annual loss since it 

launched operations in 2017.80 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 and Second Proposed 

Rules Changes. 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 Emerald and MIAX, 

and SIG did not submit a comment 

letter on those filings.81 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 supported an assertion that those 

proposed fee changes were consistent 

with the Act.82 The Exchange leveraged 


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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 that proposal as SR–PEARL–2021–23. See 

Securities Exchange Act Release No. 91858 (May 

12, 2021), 86 FR 26967 (May 18, 2021) (SR–PEARL– 

2021–23). 

83See letter from Tyler Gellasch, Executive 

Director, Healthy Markets Association, to Hon. Gary 

Gensler, Chair, Commission, dated October 29, 

2021. 

84 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). 

85See SIG Letter, supra note 7. 

86See ‘‘Miami International Holdings Receives 

Approval from SEC to Launch MIAX PEARL; 

Targets February 6, 2017 Launch’’ (December 14, 

2016) available at https://www.miaxoptions.com/ 

sites/default/files/press_release-files/MIAX_Press_

Release_12142016.pdf (last visited October 18, 

2021) (stating that the Exchange ‘‘plans to launch 

with an initial moratorium on most non-transaction 

fees.’’) 

87See, e.g., ‘‘Members Exchange Unveils 

Transaction Pricing’’ (September 10, 2020), 

available at https://www.businesswire.com/news/ 

home/20200910005183/en/Members-ExchangeUnveils-Transaction-Pricing (last visited October 

18, 2021) (quoting Jonathan Kellner, CEO of 

Members Exchange, ‘‘[t]o further incentivize 

participants to connect to a new destination, we are 

implementing initial pricing that generates a net 

loss for the exchange on each transaction. We are 

confident that as participants experience the 

benefits of our platform, they will continue to 

incorporate MEMX in their routing strategies.’’); 

and ‘‘Miami International Holdings Announces 

Fully Subscribed Strategic Equity Rights 

Transaction with Leading Equities Firms to Trade 

on MIAX PEARL Equities Trading to Begin 

September 25, 2020’’ available at https://

www.miaxoptions.com/sites/default/files/press_

release-files/Press_Release_09142020.pdf (last 

visited October 18, 2021) (quoting Douglas M. 

Schafer, Jr., Executive Vice President and Chief 

Information Officer of MIH, MIAX PEARL Equities, 

‘‘[w]e are excited to be offering a simpler, 

transparent, low cost venue to market participants 

and have no doubt that MIAX PEARL Equities will 

become a competitive alternative venue following 

our launch on September 25th.’’) 

88See supra note 82. 

89See supra note 83. 

90 Id. (providing examples where non-transaction 

fee filings by other exchanges have been permitted 

to remain effective and not suspended by the 

Continued 

its past work with Commission Staff to 

ensure the justification provided herein 

and in the First, Second, and Third 

Proposed Rule Changes included 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 that have been 

permitted to take effect without 

suspension.’’ 83 That same industry 

group also noted their ‘‘worry that the 

Commission’s process for reviewing and 

evaluating exchange filings may be 

inconsistently applied.’’ 84 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 changes should 

satisfy, and is not warranted here. 

In addition, the arguments in the SIG 

Letter 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 a comment 

letter. 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 further 

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. 

MIAX Pearl Provided More Than 

Sufficient Justification for the Proposed 

Fees 

The SIG Letter asserts that the 

Exchange provided ‘‘no affirmative 

justifiable reason that its legacy fees are 

no longer sufficient.’’ 85 This statement 

assumes that the previous fees were 

‘‘sufficient’’ and does not state how the 

legacy fees might have been sufficient to 

cover the Exchange’s expenses. As 

evidenced above, the previous fees were 

not sufficient to cover the costs the 

Exchange incurred in providing access 

to the Exchange. However, the previous 

fees were sufficient to attract order flow 

as the pricing was set to not discourage 

participation on the Exchange. The 

Exchange is relatively new as it only 

began operations in 2017.86 Like other 

new exchange entrants, the Exchange 

chose to charge lower fees than other 

more established exchanges to attract 

order flow and increase membership.87

The Exchange chose that approach by 

setting the price of its Trading Permits 

(as well as other access-type fees) below 

market rates. SIG’s statement assumes 

that exchanges should charge at market 

rates that are sufficient to cover its costs. 

This statement ignores pricing 

incentives exchanges may offer to attract 

order flow and that exchanges, like 

many businesses including SIG, may 

make a business decision to price 

certain offerings at a loss or ‘‘on sale’’ 

as they build their business. Further, a 

vast majority of the Exchange’s 

Members, if not all, benefited from these 

lower fees. 

As a new entrant in the market, the 

Exchange chose to forgo any potential 

additional revenue that may have been 

generated by higher Trading Permit fees 

to encourage participation on the new 

platform. This served to attract 

participation on the Exchange so market 

participants could evaluate the 

Exchange’s quality, technology and the 

quality of their overall customer/user 

experience. Setting higher rates for nontransaction fees could have served to 

dissuade market participants from 

trading on the Exchange and not 

experiencing the high quality 

technological system the Exchange 

built. 

Nonetheless, the Exchange provided 

significant cost based justification for 

the proposed fees not only in this filing, 

but also in the First and Second 

Proposed Rule Changes. The SIG Letter 

conveniently ignores this fact. In fact, 

the level of disclosure the Exchange 

provided in this filing and in the First, 

Second, and Third Proposed Rule 

Changes has been worked on with 

Commission Staff over numerous past 

filings that have been published for 

comment and remain effect.88 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 

that have been permitted to take effect 

without suspension.’’ 89 That same 

industry group also noted their ‘‘worry 

that the Commission’s process for 

reviewing and evaluating exchange 

filings may be inconsistently 

applied.’’ 90


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Commission despite less disclosure and 

justification). 

91See supra note 55. 92See id. 

93See supra note 13. 

94See supra note 77. 

95See supra notes 26–30, and accompanying 

table. The below market share numbers are as of 

December 20, 2021. Id. Cboe C2 had a market share 

of 3.72% and charges a monthly Access Fee of 

$5,000 for market makers and $1,000 per month for 

an additional Electronic Access Permit regardless of 

trading volume or options traded. See supra note 

28. Nasdaq ISE had a market share of 6.95% and 

charges a monthly Access Fee to Primary Market 

Makers of $5,000 and Competitive Market Maker of 

$2,500 regardless of trading volume or options 

traded. See supra note 77. 

The Exchange believes the proposed 

fees will allow the Exchange to offset 

expenses the Exchange has and will 

incur, and that the Exchange provided 

sufficient transparency into how the 

Exchange determined to charge such 

fees. Accordingly, the Exchange 

provided an analysis of its revenues, 

costs, and profitability associated with 

the proposed fees. This analysis 

included information regarding its 

methodology for determining the costs 

and revenues associated with the 

proposal. 

To determine the Exchange’s costs to 

provide the access services associated 

with the proposed 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 fees, and, if such expense 

did so relate, what portion (or 

percentage) of such expense actually 

supports the access services. The sum of 

all such portions of expenses represents 

the total cost of the Exchange to provide 

the access services associated with the 

proposed fees. 

Furthermore, the Exchange is 

beginning to see significant inflationary 

pressure on capital items that it needs 

to purchase to maintain the Exchange’s 

technology and systems.91 The 

Exchange has seen pricing increases 

upwards of 30% 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. 

The Proposed Fee Increases Are Not 

Part of a Discriminatory Fee Structure 

and Tiered Fee Structures Are 

Commonplace Amongst Exchanges 

The SIG Letter correctly notes that the 

proposed Trading Permit fees are higher 

for Members who connect through the 

MEO Interface than for Members who 

connect through the FIX Interface. 

Members who use the MEO Interface 

may also connect to the System through 

the FIX Interface as well, and vice versa. 

The Exchange notes that the Trading 

Permit fees for Members who connect 

through the MEO Interface are higher 

than the Trading Permit fees for 

Members who connect through the FIX 

Interface, since the FIX Interface utilizes 

less capacity and resources of the 

Exchange. The MEO Interface offers 

lower latency and higher throughput, 

which utilizes greater capacity and 

resources of the Exchange. The FIX 

Interface offers lower bandwidth 

requirements and an industry-wide 

uniform message format. Both EEMs and 

Market Makers may connect to the 

Exchange using either interface. 

The SIG Letter asserts that the 

Exchange ‘‘provides no description of 

the ‘capacity and resources’ being 

utilized, and no information on the 

nature or extent of the disparity in such 

utilization between the two Interface 

types.’’ As a MEO user, SIG is uniquely 

positioned to understand and appreciate 

the differences between the MEO and 

FIX interfaces and why rates for the 

MEO interface are justifiably higher. 

Nonetheless, the Exchange is providing 

the below additional data to address the 

statements made in the SIG Letter. 

Orders on the Exchange are supplied 

by Members via two different interfaces, 

FIX and MEO. MEO is the Exchange’s 

proprietary binary order interface. Over 

the period from April 2021 until 

September 2021, 3.15 billion messages 

were processed via the FIX interface 

(0.43% of total messages received). Over 

that same time period, 731.4 billion 

messages (99.57% of total messages 

received) were processed over the MEO 

interface. Also, the MEO interface 

allows for mass purging of orders which 

has a significant impact on the number 

of messages processed. This marked 

difference between the number of FIX 

and MEO messages processed, when 

mapped to servers, software, storage, 

and networking results in a much higher 

allocation of total capital and 

operational expense to support the MEO 

interface. For one, the Exchange incurs 

greater expense in maintaining the 

resilience of the MEO interface to 

ensure its ongoing operation in 

accordance with Regulation SCI. 

Another, the Exchange must purchase 

and expand its storage capacity to retain 

these increased messages in compliance 

with its record keeping obligations. As 

noted above, the Exchange has seen 

significant inflationary pressure on 

capital items that it needs to purchase 

to maintain its technology.92 The 

Exchange has seen pricing increases 

upwards of 30% on network equipment 

due to supply chain shortages. 

SIG is also uniquely positioned to 

know that the fee structure utilized by 

the Exchange, which charges different 

Trading Permit fees for MEO interface 

users than FIX interface users is not a 

new proposal. In fact, it was first 

adopted by the Exchange over 31⁄2 years 

ago in March 2018, published by the 

Commission and received no comment 

letters, not even by SIG.93 SIG claims a 

fee structure that they have been subject 

to for years as an MEO interface user is 

just now unfairly discriminatory. 

The Proposed Fees Are in Line With, or 

Cheaper Than, the Trading Permit Fees 

or Similar Membership/Access Fees 

Charged by Other Options Exchanges 

The Exchange correctly asserts herein 

and in the Initial Proposed Fee Change 

that it’s proposed Trading Permit fees 

‘‘are in line with, or cheaper than, the 

trading permit fees or similar 

membership fees charged by other 

options exchanges.’’ The SIG letter 

challenges this assertion is an ‘‘apples to 

oranges’’ comparison because NYSE 

American and NYSE Arca based their 

rates on the number of options issued to 

the member and not trading volume, 

like the exchange does. In fact, the 

number of options traded by a member 

of NYSE American or NYSE Arca is an 

appropriate proxy for trading volume as 

the more options issued to the member 

would result in higher volumes traded 

by that member. Firms that trade more 

liquid options generate increased 

message traffic and greater pull on 

exchange resources. Therefore, 

comparing options traded to trading 

volume is an ‘‘apples to apples’’ 

comparison. 

The Exchange proposes a range of fees 

from $500 to $6,000 per month 

depending on trading volume and the 

type of interface that is utilized by the 

Member. These rates are undoubtedly 

similar to or lower than the rates 

charged by NYSE Arca and NYSE 

American. As of December 20, 2021, the 

Exchange maintained a market share of 

approximately 4.03%.94 Among 

Exchanges with similar market share, 

the Exchange’s proposed Trading Permit 

Fees remain similar to or lower than 

fees charged by other options exchanges 

with comparable market share for 

access/membership fees.95 The 

proposed rates are also lower than those 

of its affiliates, MIAX and MIAX 


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96See MIAX Fee Schedule, Section 3(b); MIAX 

Emerald Fee Schedule, Section 3(b). 

97See SIG Letter, supra note 7. 

98See id. 

99 15 U.S.C. 78s(b)(3)(C). 

100 15 U.S.C. 78s(b)(1). 

101See Securities Exchange Act Release No. 

92366 (July 9, 2021), 86 FR 37379 (SR–PEARL– 

2021–32). The Commission received one comment 

letter on that proposal. Comment for SR–PEARL– 

2021–32 can be found at: https://www.sec.gov/ 

comments/sr-pearl-2021-32/srpearl202132.htm. 

102See Securities Exchange Act Release No. 

92797 (August 27, 2021), 86 FR 49399 (September 

2, 2021). 

103See Securities Exchange Act Release No. 

93555 (November 10, 2021), 86 FR 64254 

(November 17, 2021) (SR–PEARL–2021–54). 

104See text accompanying supra note 10. 

105See Securities Exchange Act Release No. 

93895 (January 4, 2022), 87 FR 1217 (January 10, 

2022) (SR–PEARL–2021–59). 

106See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

107 Id. 

108 15 U.S.C. 78f(b)(4). 

109 15 U.S.C. 78f(b)(5). 

110 15 U.S.C. 78f(b)(8). 

Emerald, which remain in effect 

today.96

The SIG Letter states that ‘‘[the 

Exchange] offers no information about 

the capacity and resource costs of access 

to the other exchanges or any other basis 

to support the reasonability of those 

fees, let alone compare such costs to 

those of MIAX Pearl.’’ 97 This statement 

is misleading as SIG should be aware 

that the Exchange does not have access 

to this information and when it asked 

SIG to assist the Exchange in better 

understanding the access structure of 

other exchanges, SIG refused. 

The SIG Letter further asserts that the 

Exchange ‘‘has not established that the 

other exchange fees are reasonable, nor 

that this would mean that the MIAX 

Pearl fees are reasonable as well.98 SIG 

should be aware that it is not the 

Exchange’s obligation to justify why 

another exchange’s fees are reasonable 

and it is presumed that such fees were 

deemed reasonable by the Commission 

when filed by the exchange that 

proposed said fee. If SIG felt another 

exchange’s fees were or are 

unreasonable, they are free to share that 

concern with the Commission and were 

provided an opportunity to submit 

comment letter on those earlier 

proposals from other exchanges. It is the 

Exchange’s responsibility to show that 

its own proposed fee change is 

reasonable and consistent with the Act, 

and that assertion is amply supported 

by the statements made in this Item 5 

and elsewhere herein. 

The Proposed Fees Are Consistent With 

Section 6(b)(4) of the Act Because the 

Proposed Fees Will Not Result in 

Excessive Pricing or Supra-Competitive 

Profit 

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 the SIG Letter. 

Recoupment of Exchange Infrastructure 

Costs 

Nowhere in this proposal or in the 

First Proposed Rule 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. 

III. Suspension of the Proposed Rule 

Change 

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

Act,99 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,100 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 1, 2021, with 

the proposed fee changes being 

immediately effective. That proposal, 

SR–PEARL–2021–32, was published for 

comment in the Federal Register on July 

15, 2021.101 On August 27, 2021, 

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

Act, the Commission: (1) Temporarily 

suspended the proposed rule change 

(SR–PEARL–2021–32) and (2) instituted 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change.102 On October 12, 2021, the 

Exchange withdrew SR–PEARL–2021– 

32. On November 1, 2021, the Exchange 

filed a proposed rule change proposing 

fee changes as proposed herein. That 

proposal, SR–PEARL–2021–54, was 

published for comment in the Federal 

Register on November 17, 2021.103 On 

December 20, 2021, the Exchange 

withdrew SR–PEARL–2021–54 and filed 

a proposed rule change proposing fee 

changes as proposed herein on 

December 20, 2021. That filing, SR– 

PEARL–2021–59,104 was published for 

comment in the Federal Register on 

January 10, 2022.105 On February 15, 

2022 the Exchange withdrew SR– 

PEARL–2021–59 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.106 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.’’ 107

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; 108 (2) perfect the mechanism 

of a free and open market and a national 

market system, protect investors and the 

public interest, and not permit unfair 

discrimination between customers, 

issuers, brokers, or dealers; 109 and (3) 

not impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the 

Act.110

In temporarily suspending the 

Exchange’s fee change, the Commission 

intends to further consider whether the 

proposal to remove certain credits and 


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111See 15 U.S.C. 78f(b)(4), (5), and (8), 

respectively. 

112For 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). 

113 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. 

114 15 U.S.C. 78s(b)(2)(B). 

115 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. 

116 15 U.S.C. 78f(b)(4). 

117 15 U.S.C. 78f(b)(5). 

118 15 U.S.C. 78f(b)(8). 

119See supra Section II.A.2. 

increase the monthly Trading Permits 

fees are consistent with the statutory 

requirements applicable to a national 

securities exchange under the Act. In 

particular, the Commission will 

consider whether the proposed rule 

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 be designed to 

permit unfair discrimination between 

customers, issuers, brokers or dealers; 

and not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.111

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.112

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) 113 and 19(b)(2)(B) 114 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,115 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),116 6(b)(5),117 and 6(b)(8) 118 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: 

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 Trading Permits.’’ 119

Setting forth its costs in providing the 

Proposed Access Fees, and as 

summarized in greater detail above, the 

Exchange projects $844,741 in aggregate 

annual estimated costs for 2021 as the 

sum of: (1) $188,815 in third-party 

expenses paid in total to Equinix (8% of 

the total applicable expense) for data 

center services; Zayo Group Holdings, 

for network services (4% of the total 

applicable expense); SFTI for 

connectivity support, Thompson 

Reuters, NYSE, Nasdaq, and Internap 

and others (3% of the total applicable 

expense) for content, connectivity 

services, and infrastructure services; 

and various other hardware and 

software providers (5% of the total 

applicable expense) supporting the 

production environment, and (2) 

$655,925 in internal expenses, allocated 

to (a) employee compensation and 

benefit costs ($549,824, approximately 

6% of the Exchange’s total applicable 

employee compensation and benefits 

expense); (b) depreciation and 

amortization ($66,316, approximately 

5% of the Exchange’s total applicable 

depreciation and amortization expense); 

and (c) occupancy costs ($39,775 

approximately 8% 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 the Proposed 

Access Fees? 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 Trading Permit 

costs, including how shared costs are 


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120See supra Section II.A.2. 

121See id. 122See supra Section II.A.2. 

123See id. 

124 17 CFR 201.700(b)(3). 

125See id. 

126See id. 

127See 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). 

allocated and attributed to Trading 

Permit expenses, to permit an 

independent review and assessment of 

the reasonableness of purported costbased fees and the corresponding profit 

margin thereon? Should the Exchange 

be required to identify for what services 

or fees the remaining percentage of unallocated expenses are attributable to? 

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 

24%. 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 services subject to the 

proposed fees,’’ and believes that a 24% 

margin is a limited return over such 

costs.120 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 Trading 

Permits purchased, and that costs may 

increase. They also state that the 

number of Trading Permits 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.121 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 24% profit margin 

would constitute a reasonable rate of 

return over cost for Trading Permits? 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 Trading 

Permits? Do commenters believe it 

relevant to an assessment of 

reasonableness that the Exchange’s 

proposed fees for Trading Permits, even 

at the highest tier, are lower than those 

of other options exchanges to which the 

Exchange has compared the Proposed 

Access Fees? 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 pending fee 

proposals, such as this filing,’’ and that 

‘‘[i]n order to be fairly applied, such a 

mandate should be applied to existing 

market data fees as well.’’ 122 In light of 

the impact that the number of 

subscribers has on Trading Permit 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 Trading Permit 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 Trading Permit 

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 Trading Permit fee is implemented? 60 

days? 90 days? Some other period? 

5. Tiered Structure for Trading 

Permits. The Exchange states that 

proposed tiered-pricing structure is 

reasonable, fair, equitable, and not 

unfairly discriminatory because it is the 

model adopted by the Exchange when it 

launched operations for its Trading 

Permit fees, and further, that the amount 

of the fee is directly related to the 

Member or non-Member’s TCV resulting 

in higher fees for greater TCV.123 What 

are commenters’ views on the adequacy 

of the information the Exchange 

provides regarding the proposed 

differentials in fees? Do commenters 

believe that the proposed price 

differences are supported by the 

Exchange’s assertions that it set the 

level of each proposed new fee in a 

manner that it equitable and not 

unfairly discriminatory? 

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.’’ 124 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,125 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.126 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.127

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 


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128 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). 

129 15 U.S.C. 78s(b)(3)(C). 

130 17 CFR 200.30–3(a)(12), (57) and (58). 

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

2 17 CFR 240.19b–4. 

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.128

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by March 18, 2022. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by April 1, 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– 

PEARL–2022–05 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–PEARL–2022–05. 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–PEARL–2022–05 and 

should be submitted on or before March 

18, 2022. Rebuttal comments should be 

submitted by April 1, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,129 that 

File Numbers SR–PEARL–2022–05 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. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.130

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–03965 Filed 2–24–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94284; File No. SR– 

EMERALD–2022–07] 

Self-Regulatory Organizations; MIAX 

EMERALD, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend Its Fee 

Schedule 

February 18, 2022. 

Pursuant to the provisions of 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 9, 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, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Emerald Fee Schedule 

(the ‘‘Fee Schedule’’). 

The text of the proposed rule change 

is available on the Exchange’s website at 

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

office, and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Section 1)a)i) of the Fee Schedule to: (i) 

Modify the application of the per 


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