Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices 46055 

25 15 U.S.C. 78s(b)(3)(A)(ii). 

26 17 CFR 240.19b–4(f)(2). 

27 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

technical preferences, such options 

provide far more capacity and are 

purchased by those that consume more 

resources from the network. 

Accordingly, the proposed tieredpricing structure does not favor certain 

categories of market participants in a 

manner that would impose a burden on 

competition; rather, the allocation 

reflects the network resources 

consumed by the various usage of 

market participants—lowest bandwidth 

consuming members pay the least, and 

highest bandwidth consuming members 

pays the most, particularly since higher 

bandwidth consumption translates to 

higher costs to the Exchange. 

The Exchange also does not believe 

that the proposed rule change will result 

in any burden on inter-market 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. As discussed 

above, options market participants are 

not forced to connect to all options 

exchanges. The Exchange operates in a 

highly competitive environment, and as 

discussed above, its ability to price 

access and connectivity is constrained 

by competition among exchanges and 

third parties. There are other options 

markets of which market participants 

may connect to trade options. There is 

also a possible range of alternative 

strategies, including routing to the 

exchange through another participant or 

market center or accessing the Exchange 

indirectly. For example, there are 15 

other U.S. options exchanges, which the 

Exchange must consider in its pricing 

discipline in order to compete for 

market participants. In this competitive 

environment, market participants are 

free to choose which competing 

exchange or reseller to use to satisfy 

their business needs. As a result, the 

Exchange believes this proposed rule 

change permits fair competition among 

national securities exchanges. 

Accordingly, the Exchange does not 

believe its proposed fee changes impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,25 and Rule 

19b–4(f)(2) 26 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

EMERALD–2021–23 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–EMERALD–2021–23. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–EMERALD–2021–23 and 

should be submitted on or before 

September 7, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17539 Filed 8–16–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92644; File No. SR– 

PEARL–2021–36] 

Self-Regulatory Organizations; MIAX 

PEARL, LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the MIAX Pearl 

Options Fee Schedule To Adopt a 

Tiered-Pricing Structure for Certain 

Connectivity Fees 

August 11, 2021. 

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 July 30, 

2021, MIAX PEARL, LLC (‘‘MIAX Pearl’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

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

which Items have been prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

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 

amend certain connectivity fees. 

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. 


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3The 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 the Definitions Section of the 

Fee Schedule and Exchange Rule 100. 

4The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

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

6 15 U.S.C. 78f(b)(4). 

7 15 U.S.C. 78f(b)(5). 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

MIAX Pearl Options Fee Schedule to 

adopt a tiered-pricing structure for the 

10 gigabit (‘‘Gb’’) ultra-low latency 

(‘‘ULL’’) fiber connection available to 

Members 3 and non-Members. The 

Exchange believes a tiered-pricing 

structure will encourage Members and 

non-Members to be more efficient and 

economical when determining how to 

connect to the Exchange. This should 

also enable the Exchange to better 

monitor and provide access to the 

Exchange’s network to ensure sufficient 

capacity and headroom in the System.4

10Gb ULL Tiered-Pricing Structure 

The Exchange proposes to amend 

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

provide for a tiered-pricing structure for 

10Gb ULL connections for Members and 

non-Members. Currently, the Exchange 

assesses Members and non-Members a 

flat monthly fee of $10,000 per 10Gb 

ULL connection for access to the 

Exchange’s primary and secondary 

facilities. 

The Exchange now proposes to move 

from a flat monthly fee per connection 

to a tiered-pricing structure per 

connection under which the monthly 

fee would vary depending on the 

number of 10Gb ULL connections each 

Member or non-Member elects to 

purchase per exchange. Specifically, the 

Exchange proposes to decrease the fee 

for the first and second 10Gb ULL 

connections for each Member and nonMember from the current flat monthly 

fee of $10,000 to $9,000 per connection. 

To encourage more efficient 

connectivity usage, the Exchange 

proposes to increase the per connection 

fee for Members and non-Members that 

purchase more than two 10Gb ULL 

connections. Specifically, (i) the third 

and fourth 10Gb ULL connections for 

each Member or non-Member will 

increase from the current flat monthly 

fee of $10,000 to $11,000 per 

connection; and (ii) for the fifth 10Gb 

ULL connection, and for each 10Gb ULL 

connection for each Member and nonMember purchased thereafter, the fee 

will increase from the flat monthly fee 

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

The proposed 10Gb ULL tiered-pricing 

structure and fees are collectively 

referred to herein as the ‘‘Proposed 

Access Fees.’’ 

The Exchange will continue to assess 

monthly Member and non-Member 

network connectivity fees for 

connectivity to the primary and 

secondary facilities in any month the 

Member or non-Member is credentialed 

to use any of the MIAX Pearl APIs or 

market data feeds in the production 

environment. The Exchange proposes to 

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

connectivity (by adding or deleting 

connections) with such pro-rated fees 

based on the number of trading days 

that the Member or non-Member has 

been credentialed to utilize any of the 

MIAX Pearl APIs or market data feeds 

in the production environment through 

such connection, divided by the total 

number of trading days in such month 

multiplied by the applicable monthly 

rate. The Exchange will continue to 

assess monthly Member and nonMember network connectivity fees for 

connectivity to the disaster recovery 

facility in each month during which the 

Member or non-Member has established 

connectivity with the disaster recovery 

facility. 

The Exchange’s MIAX Express 

Network Interconnect (‘‘MENI’’) can be 

configured to provide Members and 

non-Members of the Exchange network 

connectivity to the trading platforms, 

market data systems, test systems, and 

disaster recovery facilities of both the 

Exchange and its affiliate, Miami 

International Securities Exchange, LLC 

(‘‘MIAX’’), via a single, shared 

connection. Members and non-Members 

utilizing the MENI to connect to the 

trading platforms, market data systems, 

test systems, and disaster recovery 

facilities of the Exchange and MIAX via 

a single, shared connection will 

continue to only be assessed one 

monthly connectivity fee per 

connection, regardless of the trading 

platforms, market data systems, test 

systems, and disaster recovery facilities 

accessed via such connection. 

Further, utilizing the proposed tieredpricing structure, any firm that is a 

Member of both MIAX Pearl Options 

and MIAX and purchases three or four 

total 10Gb ULL connections, can 

effectively allocate one or two 10Gb 

ULL connections to the Exchange at the 

lowest rate and the other one or two 

10Gb ULL connections to MIAX at the 

lowest rate, providing additional cost 

saving benefits to those Members and 

non-Members, due to the shared MENI 

infrastructure of MIAX Pearl and MIAX. 

Implementation Date 

The proposed fee changes will 

become effective on August 1, 2021. 

2. Statutory Basis 

The Exchange believes that its 

proposal to amend its Fee Schedule is 

consistent with Section 6(b) of the Act 5

in general, and furthers the objectives of 

Section 6(b)(4) of the Act 6 in particular, 

in that it provides for the equitable 

allocation of reasonable dues, fees and 

other charges among Exchange Members 

and issuers and other persons using any 

facility or system which the Exchange 

operates or controls. The Exchange also 

believes the proposal furthers the 

objectives of Section 6(b)(5) of the Act 7

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. 

The Exchange notes that it operates in 

a highly competitive market in which 

market participants can readily favor 

competing venues if they deem fee 

levels at a particular venue to be 

excessive. In such an environment, the 

Exchange must continually adjust its 

fees for services and products, in 

addition to order flow, to remain 

competitive with other exchanges. The 

Exchange believes that the proposed 

changes reflect this competitive 

environment. 

The Exchange believes the proposal to 

move from a flat fee per month for the 

10Gb ULL connection to a tiered-pricing 

structure is reasonable, equitably 

allocated and not unfairly 


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discriminatory because the Exchange 

believes the proposed structure would 

encourage firms to be more economical 

and efficient in the number of 

connections they purchase. The 

Exchange believes this will enable the 

Exchange to better monitor and provide 

access to the Exchange’s network to 

ensure sufficient capacity and headroom 

in the System. 

The Exchange believes that the 

proposal to move to a tiered-pricing 

structure for its 10Gb ULL connections 

is reasonable, equitably allocated and 

not unfairly discriminatory because the 

majority of Members and non-Members 

that purchase 10Gb ULL connections 

will either save money or pay the same 

amount after the tiered-pricing structure 

is implemented. Based on a recently 

completed billing cycle, of the firms that 

purchased at least one 10Gb ULL 

connection, approximately 80% will see 

a proposed decrease in their monthly 

fees and approximately 20% will see a 

proposed increase in their monthly fees 

as a result of the proposed tiered-pricing 

structure versus the current flat monthly 

fee structure. To illustrate, firms that 

purchase only one 10Gb ULL 

connection per month currently pay the 

flat rate of $10,000 per month for that 

one 10Gb ULL connection. Pursuant to 

the proposed tiered-pricing structure, 

these firms will now pay $9,000 per 

month for that one 10Gb ULL 

connection, saving $1,000 per month or 

$12,000 annually. Further, firms that 

purchase two 10Gb ULL connections 

per month currently pay the flat rate of 

$20,000 per month ($10,000 × 2) for 

those two 10Gb ULL connections. 

Pursuant to the proposed tiered-pricing 

structure, these firms will now pay 

$18,000 per month ($9,000 × 2) for those 

two 10Gb ULL connections, saving 

$2,000 per month or $24,000 annually. 

Additionally, any firm that is a Member 

of both MIAX Pearl Options and MIAX 

and purchases four total 10Gb ULL 

connections, can effectively allocate two 

10Gb ULL connections to MIAX Pearl 

Options at the $9,000 rate (saving 

$2,000 per month as compared to the 

flat fee) and two 10Gb ULL connections 

to MIAX at the $9,000 rate (saving an 

additional $2,000 per month as 

compared to the flat fee), for a total 

savings of $4,000 per month, or $48,000 

annually over the current flat monthly 

fee structure, due to the shared MENI 

infrastructure of MIAX Pearl Options 

and MIAX. 

The Exchange also notes that, for 

firms that primarily route orders seeking 

best-execution, a limited number of 

connections are needed. Therefore, the 

connectivity costs will likely be lower 

for these firms based on the proposed 

tiered-pricing structure. The firms that 

engage in advanced trading strategies 

typically require multiple connections 

and, therefore, generate higher costs by 

utilizing more of the Exchange’s 

resources. These firms will absorb the 

increased connectivity cost based on the 

proposed tiered-pricing structure, as 

shown by the 20% of firms that will 

likely see an increase in their monthly 

fees. Additionally, the firms that 

purchase a higher amount of 10Gb ULL 

connections tend to have specific 

business oriented market making and 

taking strategies, as opposed to firms 

simply engaging in best-execution order 

routing business. 

The Exchange also notes that, for 

firms that are primarily order routers 

seeking best-execution, a limited 

number of connections are needed. 

Therefore, the connectivity costs will 

likely be lower for these firms based on 

the proposed tiered-pricing structure. 

The firms that engage in advanced 

trading strategies typically require 

multiple connections and, therefore, 

generate higher costs by utilizing more 

of the Exchange’s resources. These firms 

will absorb the increased connectivity 

cost based on the proposed tieredpricing structure, as shown by the 20% 

of firms that will likely see an increase 

in their monthly fees. Additionally, the 

firms that purchase a higher amount of 

10Gb ULL connections tend to have 

specific business oriented market 

making and taking strategies, as 

opposed to firms simply engaging in 

best-execution order routing business. 

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 deems 

connectivity to be access fees. It records 

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

revenue in its financial statements. 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. 

In order 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 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. For the avoidance of doubt, 

no expense amount was allocated twice. 

The Exchange is also providing detailed 

information regarding the Exchange’s 

cost allocation methodology—namely, 

information that explains the 

Exchange’s rationale for determining 

that it was reasonable to allocate certain 

expenses described in this filing 

towards the cost to the Exchange to 

provide the access services associated 

with the Proposed Access Fees. 

In order to determine the Exchange’s 

projected revenue associated with the 

Proposed Access Fees, the Exchange 

analyzed the number of Members and 

non-Members currently utilizing the 

10Gb ULL fiber connection, and, 

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 future revenue growth 

or decline into its projections for 

purposes of these calculations, given the 

uncertainty of such projections due to 

the continually changing access needs 

of market participants, discounts that 

can be achieved due to lower trading 

volume and vice versa, market 

participant consolidation, etc. 

Additionally, the Exchange similarly 

does not factor into its analysis future 

cost growth or decline. 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 


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8See 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). 

9See 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’’). 

10See Securities Exchange Act Release Nos. 

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); 90980 

(January 25, 2021), 86 FR 7602 (January 29, 2021) 

(SR–MIAX–2021–02) (proposal to increase 

connectivity fees). 

11See ‘‘The market at a glance,’’ available at 

https://www.miaxoptions.com/ (last visited July 29, 

2021). 

12See Securities Exchange Act Release No. 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) (adopting tiered MEI Port fee 

structure ranging from $5,000 to $20,500 per 

month). 

in place in 2020 or for the first seven 

months of 2021, the Exchange believes 

its 2020 Audited Unconsolidated 

Financial Statement is not useful for 

analyzing the reasonableness of the total 

annual 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. 

* * * * * 

On March 29, 2019, the Commission 

issued its Order Disapproving Proposed 

Rule Changes to Amend the Fee 

Schedule on the BOX Market LLC 

Options Facility to Establish BOX 

Connectivity Fees for Participants and 

Non-Participants Who Connect to the 

BOX Network (the ‘‘BOX Order’’).8 On 

May 21, 2019, the Commission issued 

the Staff Guidance on SRO Rule Filings 

Relating to Fees.9 Accordingly, the 

Exchange believes that the Proposed 

Access Fees are consistent with the Act 

because they (i) are reasonable, 

equitably allocated, not unfairly 

discriminatory, and not an undue 

burden on competition; (ii) comply with 

the BOX Order and the Guidance; (iii) 

are supported by evidence (including 

comprehensive revenue and cost data 

and analysis) that they are fair and 

reasonable because they will not result 

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

cost-based justification framework that 

is substantially similar to a framework 

previously used by the Exchange, and 

its affiliates MIAX and MIAX Emerald, 

LLC (‘‘MIAX Emerald’’), to establish or 

increase other non-transaction fees.10

Accordingly, the Exchange believes that 

the Proposed Access Fees are consistent 

with the Act. 

* * * * * 

As of July 29, 2021, the Exchange had 

a market share of only 4.52% of the U.S. 

equity options industry for the month of 

July 2021.11 The Exchange is not aware 

of any evidence that a market share of 

approximately 4–5% provides the 

Exchange with anti-competitive pricing 

power. If the Exchange were to attempt 

to establish unreasonable pricing, then 

no market participant would join or 

connect, and existing market 

participants would disconnect. 

Separately, the Exchange is not aware 

of any reason why market participants 

could not simply drop their access (or 

not initially access an exchange) if an 

exchange were to establish prices for its 

non-transaction fees that, in the 

determination of such market 

participant, did not make business or 

economic sense for such market 

participant to access such exchange. No 

options market participant is required 

by rule, regulation, or competitive forces 

to be a Member of the Exchange. As 

evidence of the fact that market 

participants can and do drop their 

access to exchanges based on nontransaction fee pricing, R2G Services 

LLC (‘‘R2G’’) filed a comment letter after 

BOX’s proposed rule changes to 

increase its connectivity fees (SR–BOX– 

2018–24, SR–BOX–2018–37, and SR– 

BOX–2019–04). The R2G Letter stated, 

‘‘[w]hen BOX instituted a $10,000/ 

month price increase for connectivity; 

we had no choice but to terminate 

connectivity into them as well as 

terminate our market data relationship. 

The cost benefit analysis just didn’t 

make any sense for us at those new 

levels.’’ Similarly, the Exchange’s 

affiliate, MIAX Emerald, noted in a 

recent filing that once MIAX Emerald 

issued a notice that it was instituting 

MEI Port fees, among other nontransaction fees, one MIAX Emerald 

Member dropped its access to MIAX 

Emerald as a result of those fees.12

Accordingly, these examples show that 

if an exchange sets too high of a fee for 

connectivity and/or other nontransaction fees for its relevant 

marketplace, market participants can 

choose to drop their access to such 

exchange. 

In order to provide more detail and to 

quantify the Exchange’s costs associated 

with providing access to the Exchange 

in general, the Exchange notes that there 

are material costs associated with 

providing the infrastructure and 

headcount to fully-support access to the 

Exchange. The Exchange incurs 

technology expense related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting, as well as Regulation SCI 

mandated processes, associated with its 

network technology. While some of the 

expense is fixed, much of the expense 

is not fixed, and thus increases 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 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 Exchange only has four primary 

sources of revenue: 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. 

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 

and MIAX project 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 


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13The Exchange has not yet finalized its 2021 

year end results. 

14The 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. 

15For 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 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. 

16 In fact, on October 22, 2019, the Exchange was 

notified by SFTI that it is again raising its fees 

charged to the Exchange by approximately 11%, 

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 

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

CFR 240.19b–4, respectively. 

2021,13 the total annual expense for 

providing the access services associated 

with the Proposed Access Fees (that is, 

the shared network connectivity of the 

Exchange and MIAX, but excluding 

MIAX Emerald) is projected to be 

approximately $15.9 million. The 

approximately $15.9 million 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 and 

MIAX to provide the services associated 

with the Proposed Access Fees.14 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 previouslyissued Audited Unconsolidated 

Financial Statements.15 The $15.9 

million 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 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. 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. 

For 2021, total third-party expense, 

relating to fees paid by the Exchange 

and MIAX 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 $3.9 million. 

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 and 

MIAX’s office locations in Princeton, 

New Jersey and Miami, Florida, to all 

data center locations; (3) Secure 

Financial Transaction Infrastructure 

(‘‘SFTI’’),16 which supports connectivity 

and feeds for the entire U.S. options 

industry; (4) various other services 

providers (including Thompson Reuters, 

NYSE, Nasdaq, and Internap), which 

provide content, connectivity services, 

and infrastructure services for critical 

components of options connectivity and 

network services; and (5) various other 

hardware and software providers 

(including Dell and Cisco, which 

support the production environment in 

which Members connect to the network 

to trade, receive market data, etc.). 

For clarity, 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 and MIAX 

do not allocate their entire information 

technology and communication costs to 

the access services associated with the 

Proposed Access Fees. 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 MIAX Pearl Equities are 

accounted for separately and are not 

included within the scope of this filing. 

The Exchange believes it is reasonable 

to allocate such third-party expense 

described above towards the total cost to 

the Exchange and MIAX 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, approximately 

62% of the total applicable Equinix 

expense. 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. 

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, 

approximately 62% of the total 

applicable Zayo expense. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 


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actual cost to provide the access 

services associated with the Proposed 

Access Fees, and not any other service, 

as supported by its cost review. 

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, approximately 

75% of the total applicable SFTI and 

other service providers’ expense. 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. 

The Exchange believes it is reasonable 

to allocate the identified portion of the 

other hardware and software provider 

expense because this includes costs for 

dedicated hardware licenses for 

switches and servers, as well as 

dedicated software licenses for security 

monitoring and reporting across the 

network. Without this hardware and 

software, the Exchange would not be 

able to operate and support the network 

and provide access to its Members and 

their customers. The Exchange did not 

allocate all of the hardware and software 

provider expense toward the cost of 

providing the access services associated 

with the Proposed Access Fees, only the 

portions which the Exchange identified 

as being specifically mapped to 

providing the access services associated 

with the Proposed Access Fees, 

approximately 51% of the total 

applicable hardware and software 

provider expense. 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. 

For 2021, total projected internal 

expense, relating to the internal costs of 

the Exchange and MIAX to provide the 

access services associated with the 

Proposed Access Fees, is projected to be 

approximately $12 million. This 

includes, but is not limited to, costs 

associated with: (1) Employee 

compensation and benefits for full-time 

employees that support the access 

services associated with the Proposed 

Access Fees, including staff in network 

operations, trading operations, 

development, system operations, 

business, as well as staff in general 

corporate departments (such as legal, 

regulatory, and finance) that support 

those employees and functions 

(including an increase as a result of the 

higher determinism project); (2) 

depreciation and amortization of 

hardware and software used to provide 

the access services associated with the 

Proposed Access Fees, including 

equipment, servers, cabling, purchased 

software and internally developed 

software used in the production 

environment to support the network for 

trading; and (3) occupancy costs for 

leased office space for staff that provide 

the access services associated with the 

Proposed Access Fees. The breakdown 

of these costs is more fully-described 

below. For clarity, 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 and MIAX 

do not allocate their entire costs 

contained in those items to the access 

services associated with the Proposed 

Access Fees. 

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 and MIAX’s combined 

employee compensation and benefits 

expense relating to providing the access 

services associated with the Proposed 

Access Fees is projected to be 

approximately $6.1 million, which is 

only a portion of the approximately 

$12.6 million (for MIAX) and $9.2 

million (for MIAX Pearl) 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, approximately 

28% of the total applicable employee 

compensation and benefits expense. 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. 

The Exchange’s and MIAX’s 

combined depreciation and 

amortization expense relating to 

providing the services associated with 

the Proposed Access Fees is projected to 

be $5.3 million, which is only a portion 

of the $4.8 million (for MIAX) and $2.9 

million (for MIAX Pearl) 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, approximately 


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17The Exchange and MIAX also project 

approximately $69,550 in monthly revenue through 

1Gb connections; however, the Exchange and MIAX 

do not propose to adjust the fees for those 

connections at this time. 

70% of the total applicable depreciation 

and amortization expense, 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. 

The Exchange’s and MIAX’s 

combined occupancy expense relating 

to providing the services associated 

with the Proposed Access Fees is 

projected to be approximately $0.6 

million, which is only a portion of the 

$0.6 million (for MIAX) and $0.5 

million (for MIAX Pearl) total projected 

expense for occupancy. The Exchange 

believes it is reasonable to allocate the 

identified portion of such expense 

because such expense represents the 

portion of the Exchange’s cost to rent 

and maintain a physical location for the 

Exchange’s staff who operate and 

support the network, including 

providing the access services associated 

with the Proposed Access Fees. This 

amount consists primarily of rent for the 

Exchange’s Princeton, NJ 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 

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

Technology department, and the 

majority of those staff have some role in 

the operation and performance of the 

access services associated with the 

Proposed Access Fees. 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, approximately 

53% of the total applicable occupancy 

expense. 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. 

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 and MIAX have only four 

primary sources of fees to recover their 

costs; thus, the Exchange and MIAX 

believe it is reasonable to allocate a 

material portion of their total overall 

expense towards access fees. 

Accordingly, based on the facts and 

circumstances presented, the Exchange 

believes that its provision of the access 

services associated with the Proposed 

Access Fees will not result in excessive 

pricing or supra-competitive profit. To 

illustrate, on a going-forward, fullyannualized basis, the Exchange and 

MIAX project that annualized revenue 

for providing the access services 

associated with the Proposed Access 

Fees would be approximately $22 

million per annum, based on a recent 

billing cycle.17 The Exchange and MIAX 

project that their annualized revenue for 

providing network connectivity services 

(all connectivity alternatives) to be 

approximately $22.8 million per annum. 

The Exchange and MIAX project that 

their annualized expense for providing 

network connectivity services (all 

connectivity alternatives) to be 

approximately 15.9 million per annum. 

Accordingly, on a fully-annualized 

basis, the Exchange and MIAX believe 

their total projected revenue for the 

providing the access services associated 

with the Proposed Access Fees will not 

result in excessive pricing or supracompetitive profit, as the Exchange and 

MIAX will make a profit margin of only 

approximately 30% inclusive of the 

Proposed Access Fees and all other 

connectivity alternatives ($22.8 million 

in total connectivity revenue minus 

$15.9 million in expense = $6.9 million 

in profit per annum). Additionally, this 

profit margin does not take into account 

the cost of capital expenditures 

(‘‘CapEx’’) the Exchange and MIAX 

historically spent or are projected to 

spend each year on CapEx going 

forward. 

For the avoidance of doubt, none of 

the expenses included herein relating to 

the access services associated with the 

Proposed Access Fees relate to the 

provision of any other services offered 

by the Exchange or MIAX. Stated 

differently, no expense amount of the 

Exchange is allocated twice. 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 and the Exchange’s affiliate, 

MIAX Emerald, are accounted for 

separately and are not included within 

the scope of this filing. Stated 

differently, no expense amount of the 

Exchange is also allocated to MIAX 

Pearl Equites or MIAX Emerald. 

The Exchange believes it is 

reasonable, equitable and not unfairly 

discriminatory to allocate the respective 

percentages of each expense category 

described above towards the total cost to 

the Exchange of operating and 

supporting the network, including 

providing the access services associated 

with the Proposed Access Fees because 

the Exchange performed a line-by-line 

item analysis of all the expenses of the 

Exchange, and has determined the 

expenses that directly relate to 

providing access to the Exchange and 

MIAX. 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 and MIAX’s costs of 

providing access to their 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 


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18See supra note 9. 

19See id. 

20See The Nasdaq Stock Market LLC 

(‘‘NASDAQ’’) Rules, General 8: Connectivity, 

Section 1. Co-Location Services (charging a monthly 

fee of $10,000 per 10Gb fiber connection, $15,000 

per 10Gb Ultra fiber connection, and $20,000 per 

40Gb fiber connection, plus installation fees ranging 

from $1,000 to $1,500). The Exchange notes that the 

same connectivity fees described above for 

NASDAQ also apply to its affiliates, Nasdaq ISE, 

LLC and NASDAQ PHLX LLC. See Nasdaq ISE 

Rules, General 8: Connectivity and NASDAQ PHLX 

Rules, General 8: Connectivity (both incorporating 

by reference the fees in NASDAQ Rules, General 8: 

Connectivity). See also NYSE American LLC 

Options Fee Schedule, Section IV (charging the 

following connectivity fees: $6,000 per connection 

initial charge plus $5,000 monthly per 1Gb circuit 

connection; $15,000 per connection initial charge 

plus $22,000 monthly per 10Gb LX LCN circuit 

connection; and $15,000 per connection initial 

charge plus $22,000 monthly charge per 40Gb LCN 

circuit connection). 

21See Exchange Rule 210. The Sponsored User is 

subject to the fees, if any, of the Sponsoring 

Member. The Exchange notes that the Sponsoring 

Member is not required to publicize, let alone 

justify or file with the Commission its fees, and as 

such could charge the Sponsored User any fees it 

deems appropriate, even if such fees would 

otherwise be considered supra-competitive, or 

otherwise potentially unreasonable or 

uncompetitive. 

22See Securities Exchange Act Release No. 90333 

(November 4, 2020), 85 FR 71666 (November 10, 

2020) (SR–CBOE–2020–105) (the ‘‘Cboe Fee 

Filing’’). The Cboe Fee Filing cited to the October 

2020 Active Broker Dealer Report, provided by the 

Commission’s Office of Managing Executive, on 

October 8, 2020. 

23 Id. 

24The Exchange notes that resellers are not 

required to publicize, let alone justify or file with 

the Commission their fees, and as such could 

charge the market participant any fees it deems 

appropriate (including connectivity fees higher than 

the Exchange’s connectivity fees), even if such fees 

annual revenue from the Proposed 

Access Fees. 

The Exchange believes the proposed 

changes are reasonable, equitably 

allocated and not unfairly 

discriminatory, and do not result in a 

‘‘supra-competitive’’ 18 profit. Of note, 

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

exceed the profits that can be obtained 

in a competitive market.19 With the 

proposed changes, the Exchange and 

MIAX anticipate they will have a profit 

margin of approximately 30%, inclusive 

of the Proposed Access Fees and all 

other connectivity alternatives. Based 

on the 2020 Audited Financial 

Statements of competing options 

exchanges (since the 2021 Audited 

Financial Statements will likely not 

become publicly available until early 

July 2022, after the Exchange has 

submitted this filing), the Exchange’s 

profit margin is well below the 

operating profit margins of other 

competing exchanges. For example, 

Nasdaq ISE, LLC’s (‘‘ISE’’) operating 

profit margin for all of 2020 was 

approximately 85%; Nasdaq PHLX 

LLC’s (‘‘PHLX’’) operating profit margin 

for all of 2020 was approximately 49%; 

the Nasdaq Stock Market LLC’s 

(‘‘Nasdaq’’) operating profit margin for 

all of 2020 was approximately 62%; 

NYSE Arca, Inc.’s (‘‘Arca’’) operating 

profit margin for all of 2020 was 

approximately 55%; NYSE American 

LLC’s (‘‘Amex’’) operating profit margin 

for all of 2020 was approximately 59%; 

Cboe Exchange, Inc.’s (‘‘Cboe’’) 

operating profit margin for all of 2020 

was approximately 74%; and Cboe BZX 

Exchange, Inc.’s (‘‘BZX’’) operating 

profit margin for all of 2020 was 

approximately 52%. 

The Exchange believes that the 

Proposed Access Fees are reasonable, 

equitably allocated and not unfairly 

discriminatory because, for one 10Gb 

ULL connection, the Exchange provides 

each Member or non-Member access to 

all twelve (12) matching engines on the 

Exchange. Under the proposed pricingstructure, the Exchange will assess each 

Member or non-Member $9,000 for the 

first 10Gb ULL connection. For that 

$9,000 monthly fee, each Member or 

non-Member has access to all twelve 

matching engines each month. This 

results in a per matching engine 

connectivity cost of only $750 ($9,000 

divided by 12). The Exchange believes 

its connectivity cost to be less than or 

similar to connectivity fees charged by 

competing options exchanges.20

The Exchange further believes its 

proposed fees are reasonable, equitably 

allocated and not unfairly 

discriminatory because the Exchange 

believes that it benefits overall 

competition in the marketplace to allow 

relatively new entrants like the 

Exchange and its affiliates, MIAX and 

MIAX Emerald, to propose fees that may 

help these new entrants recoup their 

substantial investment in building out 

costly infrastructure. The Exchange and 

its affiliates have historically set their 

fees purposefully low in order to attract 

business and market share, and the 

proposed tiered-pricing structure will 

help make the rates consistent with 

other exchanges while not raising costs 

for a majority of the Exchange’s 

Members and non-Members. 

The Guidance provides that in 

determining whether a proposed fee is 

constrained by significant competitive 

forces, the Commission will consider 

whether there are reasonable substitutes 

for the product or service that is the 

subject of a proposed fee. As described 

below, the Exchange believes substitute 

products and services are available to 

market participants, including, among 

other things, other options exchanges 

that market participants may connect to 

in lieu of the Exchange, indirect 

connectivity to the Exchange via a thirdparty reseller and/or trading of any 

options products, including proprietary 

products, in the Over-the-Counter 

(‘‘OTC’’) markets. 

There is also no regulatory 

requirement that any market participant 

connect to any one options exchange, 

that any market participant connect at a 

particular connection speed or act in a 

particular capacity on the Exchange, or 

trade any particular product offered on 

an exchange. Moreover, membership is 

not a requirement to participate on the 

Exchange. A market participant may 

submit orders to the Exchange via a 

Sponsored User.21 Indeed, the Exchange 

is unaware of any one options exchange 

whose membership includes every 

registered broker-dealer. Based on a 

recent analysis conducted by the Cboe 

Exchange, Inc. (‘‘Cboe’’), as of October 

21, 2020, only three (3) of the brokerdealers, out of approximately 250 

broker-dealers, were members of at least 

one exchange that lists options for 

trading and were members of all 16 

options exchanges.22 Additionally, the 

Cboe Fee Filing found that several 

broker-dealers were members of only a 

single exchange that lists options for 

trading and that the number of members 

at each exchange that trades options 

varies greatly.23

The Exchange notes that non-Member 

third-parties, such as Service Bureaus 

and Extranets, resell the Exchange’s 

connectivity. This indirect connectivity 

is another viable alternative for market 

participants to trade on the Exchange 

without connecting directly to the 

Exchange (and thus not pay the 

Exchange’s connectivity fees), which 

alternative is already being used by nonMembers and further constrains the 

price that the Exchange is able to charge 

for connectivity and other access fees to 

its market. The Exchange notes that it 

could, but chooses not to, preclude 

market participants from reselling its 

connectivity. The Exchange also 

chooses not to adopt fees that would be 

assessed to third-party resellers on a per 

customer basis (i.e., fees based on the 

number of firms that connect to the 

Exchange indirectly via the third-party). 

Indeed, the Exchange does not receive 

any connectivity revenue when 

connectivity is resold by a third-party, 

which often is resold to multiple 

customers, some of whom are agency 

broker-dealers that have numerous 

customers of their own.24 In sum, the 


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would otherwise be considered potentially 

unreasonable or uncompetitive fees. 

25 15 U.S.C. 78s(b)(3)(A)(ii). 

26 17 CFR 240.19b–4(f)(2). 27 17 CFR 200.30–3(a)(12). 

Exchange believes this creates and 

fosters a competitive environment and 

subjects the Exchange to competitive 

forces in pricing its connectivity and 

access fees. Particularly, in the event 

that a market participant views the 

Exchange’s direct connectivity and 

access fees as more or less attractive 

than competing markets, that market 

participant can choose to connect to the 

Exchange indirectly or may choose not 

to connect to the Exchange and connect 

instead to one or more of the other 15 

options markets. Accordingly, the 

Exchange believes that the Proposed 

Access Fees are fair and reasonable and 

do not result in excessive pricing or 

supra-competitive profit. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

With respect to intra-market 

competition, the Exchange does not 

believe that the proposed rule change 

would place certain market participants 

at the Exchange at a relative 

disadvantage compared to other market 

participants or affect the ability of such 

market participants to compete. As 

stated above, the Exchange does not 

believe its proposed pricing will impose 

a barrier to entry to smaller participants 

and notes that its proposed connectivity 

pricing structure for its 10Gb ULL 

connections is associated with relative 

usage of the various market participants. 

Further, the majority of firms that 

purchase 10Gb ULL connections may 

either save money or pay the same 

amount after the tiered-pricing structure 

is implemented. While total cost may be 

increased for market participants with 

larger capacity needs or for business/ 

technical preferences, such options 

provide far more capacity and are 

purchased by those that consume more 

resources from the network. 

Accordingly, the proposed tieredpricing structure does not favor certain 

categories of market participants in a 

manner that would impose a burden on 

competition; rather, the allocation 

reflects the network resources 

consumed by the various usage of 

market participants—lowest bandwidth 

consuming members pay the least, and 

highest bandwidth consuming members 

pays the most, particularly since higher 

bandwidth consumption translates to 

higher costs to the Exchange. 

The Exchange also does not believe 

that the proposed rule change will result 

in any burden on inter-market 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. As discussed 

above, options market participants are 

not forced to connect to all options 

exchanges. The Exchange operates in a 

highly competitive environment, and as 

discussed above, its ability to price 

access and connectivity is constrained 

by competition among exchanges and 

third parties. There are other options 

markets of which market participants 

may connect to trade options. There is 

also a possible range of alternative 

strategies, including routing to the 

exchange through another participant or 

market center or accessing the Exchange 

indirectly. For example, there are 15 

other U.S. options exchanges, which the 

Exchange must consider in its pricing 

discipline in order to compete for 

market participants. In this competitive 

environment, market participants are 

free to choose which competing 

exchange or reseller to use to satisfy 

their business needs. As a result, the 

Exchange believes this proposed rule 

change permits fair competition among 

national securities exchanges. 

Accordingly, the Exchange does not 

believe its proposed fee changes impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act,25 and Rule 

19b–4(f)(2) 26 thereunder. At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

PEARL–2021–36 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–2021–36. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (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–2021–36 and 

should be submitted on or before 

September 7, 2021. 


khammond on DSKJM1Z7X2PROD with NOTICES
46064 Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.27

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–17537 Filed 8–16–21; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

Meeting of the Advisory Committee on 

Veterans Business Affairs 

AGENCY: U.S. Small Business 

Administration (SBA). 

ACTION: Notice of open Federal Advisory 

Committee meeting. 

SUMMARY: The SBA is issuing this notice 

to announce the date, time, and agenda 

for a meeting of the Advisory Committee 

on Veterans Business Affairs (ACVBA). 

DATES: Thursday, September 2, 2021, 

from 9:00 a.m. to 4:00 p.m. EDT. 

ADDRESSES: Due to the coronavirus 

pandemic, the meeting will be held via 

Microsoft Teams using a call-in number 

listed below. 

FOR FURTHER INFORMATION CONTACT: The 

meeting is open to the public; however 

advance notice of attendance is strongly 

encouraged. To RSVP and confirm 

attendance, the general public should 

email veteransbusiness@sba.gov with 

subject line—‘‘RSVP for 09/02/2021 

ACVBA Public Meeting.’’ To submit a 

written comment, individuals should 

email veteransbusiness@sba.gov with 

subject line—‘‘Response for 09/2/2021 

ACVBA Public Meeting’’ no later than 

August 25, or contact Timothy Green, 

Deputy Associate Administrator, Office 

of Veterans Business Development 

(OVBD) at (202) 205–6773. 

Comments received in advanced will 

be addressed as time allows during the 

public comment period. All other 

submitted comments will be included in 

the meeting record. During the live 

meeting, those who wish to comment 

will be able to do so during the public 

comment period. 

To join the ACVBA meeting— 

September 2, 2021, 9:00 a.m.–4:00 p.m. 

ET Participants may join ACVBA 

meeting via computer https://bit.ly/ 

SeptACVBA or phone. Call in (audio 

only): Dial In: 202–765–1264: Phone 

Conference ID: 583747012#. 

Special accommodation requests 

should be directed to OVBD at (202) 

205–6773 or veteransbusiness@sba.gov. 

All applicable documents will be posted 

on the ACVBA website prior to the 

meeting: https://www.sba.gov/page/ 

advisory-committee-veterans-businessaffairs. For more information on 

veteran-owned small business programs, 

please visit www.sba.gov/ovbd. 

SUPPLEMENTARY INFORMATION: Pursuant 

to section 10(a)(2) of the Federal 

Advisory Committee Act (5 U.S.C., 

Appendix 2), SBA announces the 

meeting of the Advisory Committee on 

Veterans Business Affairs. The ACVBA 

is established pursuant to 15 U.S.C. 

657(b) note and serves as an 

independent source of advice and 

policy. The purpose of this meeting is 

to discuss efforts that support veteranowned small businesses, updates on 

past and current events, and the 

ACVBA’s objectives for fiscal year 2021. 

Dated: August 11, 2021. 

Andrienne Johnson, 

Committee Management Officer. 

[FR Doc. 2021–17589 Filed 8–16–21; 8:45 am] 

BILLING CODE P 

SMALL BUSINESS ADMINISTRATION 

Meeting of the Interagency Task Force 

on Veterans Small Business 

Development 

AGENCY: U.S. Small Business 

Administration (SBA). 

ACTION: Notice of open Federal Advisory 

Committee meeting. 

SUMMARY: The SBA is issuing this notice 

to announce the date, time, and agenda 

for the next meeting of the Interagency 

Task Force on Veterans Small Business 

Development (IATF). 

DATES: Wednesday, September 1, 2021, 

from 1:00 p.m. to 3:15 p.m. EDT. 

ADDRESSES: Due to the coronavirus 

pandemic, the meeting will be held via 

Microsoft Teams. 

FOR FURTHER INFORMATION CONTACT: The 

meeting is open to the public; however 

advance notice of attendance is strongly 

encouraged. To RSVP and confirm 

attendance, the general public should 

email veteransbusiness@sba.gov with 

subject line—‘‘RSVP for September 1, 

2021, IATF Public Meeting.’’ To submit 

a written comment, individuals should 

email veteransbusiness@sba.gov with 

subject line—‘‘Response for 09/01/2021 

IATF Public Meeting’’ no later than 

August 25, 2021, or contact Timothy 

Green, Deputy Associate Administrator, 

Office of Veterans Business 

Development (OVBD) at (202) 205–6773. 

Comments received in advanced will be 

addressed as time allows during the 

public comment period. All other 

submitted comments will be included in 

the meeting record. During the live 

meeting, those who wish to comment 

will be able to do so during the public 

comment period. 

Participants can join the meeting via 

computer https://bit.ly/SeptIATF or 

phone. Call in (audio only): Dial In: 

202–765–1264: Phone Conference ID: 

324086449#. 

Special accommodation requests 

should be directed to OVBD at (202) 

205–6773 or veteransbusiness@sba.gov. 

All applicable documents will be posted 

on the IATF website prior to the 

meeting: https://www.sba.gov/page/ 

interagency-task-force-veterans-smallbusiness-development. For more 

information on veteran-owned small 

business programs, please visit 

www.sba.gov/ovbd. 

SUPPLEMENTARY INFORMATION: Pursuant 

to section 10(a)(2) of the Federal 

Advisory Committee Act (5 U.S.C., 

Appendix 2), SBA announces the 

meeting of the Interagency Task Force 

on Veterans Small Business 

Development (IAFT). The IATF is 

established pursuant to Executive Order 

13540 to coordinate the efforts of 

Federal agencies to improve capital, 

business development opportunities, 

and pre-established federal contracting 

goals for small business concerns owned 

and controlled by veterans and servicedisabled veterans. 

The purpose of this meeting is to 

discuss efforts that support veteranowned small businesses, updates on 

past and current events, and the IATF’s 

objectives for fiscal year 2021. 

Dated: August 11, 2021. 

Andrienne Johnson, 

Committee Management Officer. 

[FR Doc. 2021–17588 Filed 8–16–21; 8:45 am] 

BILLING CODE P 

DEPARTMENT OF STATE 

[Public Notice: 11502] 

60-Day Notice of Proposed Information 

Collection: Congress-Bundestag Youth 

Exchange (CBYX) Evaluation 

ACTION: Notice of request for public 

comment. 

SUMMARY: The Department of State is 

seeking Office of Management and 

Budget (OMB) approval for the 

information collection described below. 

In accordance with the Paperwork 

Reduction Act of 1995, we are 

requesting comments on this collection 

from all interested individuals and 

organizations. The purpose of this 

notice is to allow 60 days for public 

comment preceding submission of the 

collection to OMB. 

DATES: The Department will accept 

comments from the public up to October 

18, 2021. 


khammond on DSKJM1Z7X2PROD with NOTICES