23648 Federal Register / Vol. 87, No. 76 / Wednesday, April 20, 2022 / Notices 

inflation, and multiplied by 5.35 to account for 

bonuses, firm size, employee benefits and overhead. 

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

2 17 CFR 240.19b–4. 

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

organization approved to exercise the trading rights 

associated with a Trading Permit. Members are 

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

Exchange Rule 100. 

4The Exchange’s System Networks consist of the 

Exchange’s extranet, internal network, and external 

network. 

5The Exchange initially filed a proposal on July 

30, 2021 to adopt a tiered-pricing structure for the 

10Gb ULL fiber connections. The proposal to adopt 

a tiered pricing structure was withdrawn and 

refiled several times, each time providing more 

detail and additional justification in response to 

questions raised by the Commission in its 

Suspension Orders and in response to comments 

received. Ultimately, in response to questions 

raised by the Commission in its Suspension Orders 

and comment letters submitted by SIG on the 

proposed tiered pricing structure, the Exchange 

reluctantly withdrew that proposal on March 30, 

2022, despite the fact that the proposed a tieredpricing structure reduced the monthly 10Gb ULL 

connectivity fees for approximately 60% of the 

Exchange’s subscribers. See Securities Exchange 

Act Release Nos. 92645 (August 11, 2021), 86 FR 

46048 (August 17, 2021) (SR–EMERALD–2021–23); 

93166 (September 28, 2021), 86 FR 54760 (October 

4, 2021) (SR–EMERALD–2021–29); 93644 

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

2021); 93776 (December 14, 2021), 86 FR 71983 

(December 20, 2021) (SR–EMERALD–2021–42); 

94089 (January 27, 2022); 94257 (February 15, 

2022), 87 FR 9678 (February 22, 2022) (SR– 

EMERALD–2022–04). See also letters from Richard 

J. McDonald, Susquehanna International Group, 

LLC (‘‘SIG’’), to Vanessa Countryman, Secretary, 

Commission, dated September 7, 2021, October 1, 

2021, October 26, 2021, and March 15, 2022. See 

letters from Richard J. McDonald, SIG, to Vanessa 

Countryman, Secretary, Commission, dated October 

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

Letter 3’’). See also letter from Tyler Gellasch, 

Executive Director, Healthy Markets Association 

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

Commission, dated October 29, 2021 (commenting 

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

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

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

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

‘‘MIAX has repeatedly filed to change its 

connectivity fees in a way that will materially lower 

costs for many users, while increasing the costs for 

some of its heaviest of users. These filings have 

been withdrawn and repeatedly refiled. Each time, 

however, the filings contain significantly greater 

information about who is impacted and how than 

other filings that have been permitted to take effect 

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

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

Equity and Options Market Structure, Securities 

Industry and Financial Markets Association 

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

Commission, dated November 26, 2021 (‘‘SIFMA 

Letter’’). 

that there is no cost burden associated 

with the information collection 

requirement of rule 22e–3 other than 

this cost. 

The estimate of average burden hours 

is made solely for the purposes of the 

Paperwork Reduction Act, and is not 

derived from a comprehensive or even 

a representative survey or study of the 

costs of Commission rules and forms. 

Compliance with the collection of 

information requirements of the rule is 

necessary to obtain the benefit of relying 

on the rule. An agency may not conduct 

or sponsor, and a person is not required 

to respond to, a collection of 

information unless it displays a 

currently valid control number. 

The public may view the background 

documentation for this information 

collection at the following website, 

www.reginfo.gov. Comments should be 

directed to: (i) Desk Officer for the 

Securities and Exchange Commission, 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10102, New Executive 

Office Building, Washington, DC 20503, 

or by sending an email to: 

Lindsay.M.Abate@omb.eop.gov; and (ii) 

David Bottom, Director/Chief 

Information Officer, Securities and 

Exchange Commission, c/o Cynthia 

Roscoe, 100 F Street NE, Washington, 

DC 20549 or send an email to: PRA_

Mailbox@sec.gov. Written comments 

and recommendations for the proposed 

information collection should be sent 

within 30 days May 20, 2022 of 

publication of this notice to 

www.reginfo.gov/public/do/PRAMain. 

Find this particular information 

collection by selecting ‘‘Currently under 

30-day Review—Open for Public 

Comments’’ or by using the search 

function. 

Dated: April 14, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–08402 Filed 4–19–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94717; File No. SR– 

EMERALD–2022–13] 

Self-Regulatory Organizations; MIAX 

Emerald LLC; Notice of Filing of a 

Proposed Rule Change To Amend the 

MIAX Emerald Fee Schedule To 

Increase Certain Connectivity Fees; 

Suspension of and Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove the Proposed 

Rule Change 

April 14, 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 April 1, 

2022, MIAX Emerald, LLC (‘‘MIAX 

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

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I and II below, 

which Items have been prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and is, pursuant 

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

(i) Temporarily suspending the rule 

change; and (ii) instituting proceedings 

to determine whether to approve or 

disapprove the proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange is filing a proposal to 

amend the MIAX Emerald 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/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 [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 increase the fees for 

Members 3 and non-Members to access 

the Exchange’s System Networks 4 via a 

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

(‘‘ULL’’) fiber connection.5 Specifically, 

the Exchange proposes to amend 

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

increase the 10Gb ULL fee for Members 


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6See ‘‘The market at a glance,’’ available at 

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

29, 2022). 

7See NASDAQ Rules, General 8: Connectivity, 

Section 1. Co-Location Services. 

8See supra note 6. 

9See ISE Rules, General 8: Connectivity. 

10See supra note 6. 

11See NYSE American Options Fee Schedule, 

Section IV. 

12See supra note 6. 

13See GEMX Rules, General 8: Connectivity. 

14See supra note 6. 

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

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

17 15 U.S.C. 78f(b)(5). 

18See 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). 

19See 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’’). 

and non-Members from $10,000 per 

month to $12,000 per month (‘‘10Gb 

ULL Fee’’). Prior to the proposed fee 

change, the Exchange assessed Members 

and non-Members a flat monthly fee of 

$10,000 per 10Gb ULL connection for 

access to the Exchange’s primary and 

secondary facilities. 

The Exchange believes that other 

exchanges’ connectivity fees offer useful 

examples of alternative approaches to 

providing and charging for connectivity 

and includes the below table for 

comparison purposes only to show how 

its proposed fees compare to fees 

currently charged by other options 

exchanges for similar connectivity. As 

shown by the below table, the 

Exchange’s proposed fees are less than 

fees charged for similar connectivity 

provided by other options exchanges 

with comparable market share. 

Exchange Type of connection Monthly fee 

(per connection) 

MIAX Emerald (as proposed) (equity options market share of 3.95% as of March 29, 2022 for the 

month of March) 6.

10Gb ULL ................... $12,000.00 

The NASDAQ Stock Market LLC (‘‘NASDAQ’’) 7 (equity options market share of 8.62% as of 

March 29, 2022 for the month of March) 8.

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

Nasdaq ISE LLC (‘‘ISE’’) 9 (equity options market share of 5.83% as of March 29, 2022 for the 

month of March) 10.

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

NYSE American LLC (‘‘Amex’’) 11 (equity options market share of 7.15% as of March 29, 2022 for 

the month of March) 12.

10Gb LX LCN ............. 22,000.00 

Nasdaq GEMX, LLC (‘‘GEMX’’) 13 (equity options market share of 2.48% as of March 29, 2022 

for the month of March) 14.

10Gb Ultra .................. 15,000.00 

The Exchange will continue to assess 

monthly Member and non-Member 

network connectivity fees for 

connectivity to the primary and 

secondary facilities in any month the 

Member or non-Member is credentialed 

to use any of the Exchange APIs or 

market data feeds in the production 

environment. The Exchange proposes to 

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

connectivity (by adding or deleting 

connections) with such pro-rated fees 

based on the number of trading days 

that the Member or non-Member has 

been credentialed to utilize any of the 

Exchange APIs or market data feeds in 

the production environment through 

such connection, divided by the total 

number of trading days in such month 

multiplied by the applicable monthly 

rate. The Exchange will continue to 

assess monthly Member and nonMember network connectivity fees for 

connectivity to the disaster recovery 

facility in each month during which the 

Member or non-Member has established 

connectivity with the disaster recovery 

facility. 

2. Statutory Basis 

The Exchange believes that the 

proposed increase to the 10Gb ULL Fee 

is consistent with Section 6(b) of the 

Act 15 in general, and furthers the 

objectives of Section 6(b)(4) of the Act 16

in particular, in that it provides for the 

equitable allocation of reasonable dues, 

fees and other charges among Members 

and other persons using any facility or 

system that the Exchange operates or 

controls. The Exchange also believes the 

proposed increase to the 10Gb ULL Fee 

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

of the Act 17 in that it is designed to 

promote just and equitable principles of 

trade, remove impediments to and 

perfect the mechanism of a free and 

open market and a national market 

system, and, in general, protect 

investors and the public interest and are 

not designed to permit unfair 

discrimination between customers, 

issuers, brokers and dealers. 

The Exchange believes that the 

information provided to justify the 

proposed increase to the 10Gb ULL Fee 

meets or exceeds the amount of detail 

required in respect of proposed fee 

changes as set forth in recent 

Commission and Commission Staff 

guidance. 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’’).18 On May 

21, 2019, the Commission Staff issued 

guidance ‘‘to assist the national 

securities exchanges and FINRA . . . in 

preparing Fee Filings that meet their 

burden to demonstrate that proposed 

fees are consistent with the 

requirements of the Securities Exchange 

Act.’’ 19 Based on both the BOX Order 

and the Guidance, the Exchange 

believes that the proposed increase to 

the 10Gb ULL Fee is consistent with the 

Act because it (i) is reasonable, 

equitably allocated, not unfairly 

discriminatory, and not an undue 

burden on competition; (ii) complies 

with the BOX Order and the Guidance; 

and (iii) is supported by evidence 

(including comprehensive revenue and 

cost data and analysis) that the 

proposed increase to the 10Gb ULL Fee 

is fair and reasonable and will not result 

in excessive pricing or supracompetitive profit. 

The Proposed Increase to the 10Gb ULL 

Fee Will Not Result in a SupraCompetitive Profit 

The Exchange believes that 

exchanges, in setting fees of all types, 

should meet very high standards of 

transparency to demonstrate why each 

new fee or fee amendment meets the 

requirements of the Act that fees be 

reasonable, equitably allocated, not 

unfairly discriminatory, and not create 

an undue burden on competition among 

market participants. The Exchange 

believes this high standard is especially 

important when an exchange imposes 

various fees for market participants to 

access an exchange’s marketplace. 


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20 Id. 

21 Id. 

22 Id. 

23 Id. 

24 Id. 

In the Guidance, the Commission 

Staff states that, ‘‘[a]s an initial step in 

assessing the reasonableness of a fee, 

staff considers whether the fee is 

constrained by significant competitive 

forces.’’ 20 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.’’ 21 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.’’ 22 The Exchange does not 

assert that the 10Gb ULL Fee is 

constrained by competitive forces. 

Rather, the Exchange asserts that the 

proposed increase to the 10Gb ULL Fee 

is reasonable because it will permit 

recovery of the Exchange’s costs in 

providing access services to supply 

10Gb ULL connectivity and will not 

result in the Exchange generating a 

supra-competitive profit. 

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

exceed the profits that can be obtained 

in a competitive market.’’ 23 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.’’ 24 The Exchange provides 

this analysis below. 

The proposed 10Gb ULL Fee is based 

on a cost-plus model. A 10Gb ULL 

connection provides access to each of 

the three Exchange networks, extranet, 

internal network, and external network, 

all of which are necessary for Exchange 

operations. The Exchange’s extranet 

provides the means by which the 

Exchange communicates with market 

participants and includes access to the 

Member portal and the ability to send 

and receive daily communications and 

reports. The internal network connects 

the extranet to the rest of the Exchange’s 

systems and includes trading systems, 

market data systems, and network 

monitoring. The external network 

includes connectivity between the 

Exchange and other national securities 

exchanges, market data providers, and 

between the Exchange’s locations in 

Princeton, New Jersey, Secaucus, New 

Jersey (NY4), Miami, Florida, and 

Chicago, Illinois (CH4). In determining 

the appropriate fees to charge Members 

and non-Members to access the 

Exchange’s System Networks via a 10Gb 

ULL fiber connection, the Exchange 

considered its costs to provide and 

maintain its System Networks and 

connectivity to those System Networks, 

using costs that are related to providing 

and maintaining access the Exchange’s 

System Networks via a 10Gb ULL fiber 

connection to estimate such costs, and 

set fees that are designed to cover its 

costs with a limited return in excess of 

such costs. The Exchange believes that 

it is important to demonstrate that the 

10Gb ULL Fee is based on its costs and 

reasonable business needs and believes 

the proposed increase to the 10Gb ULL 

Fee will allow the Exchange to continue 

to offset expenses. 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 access to the 

Exchange’s System Networks via a 10Gb 

ULL fiber connection because of the 

uncertainty of forecasting subscriber 

decision making with respect to firms’ 

connectivity needs. The Exchange 

believes that the proposed increase to 

the 10Gb ULL Fee will not result in 

excessive pricing or supra-competitive 

profit based on the total expenses the 

Exchange incurs versus the total 

revenue the Exchange projects to 

collect, and therefore meets the 

standards in the Act as interpreted by 

the Commission and the Commission 

Staff in the BOX Order and the 

Guidance. 

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 10Gb ULL Fee, 

and, if such expense did so relate, what 

portion (or percentage) of such expense 

actually supports access to the 

Exchange’s System Networks via a 10Gb 

ULL fiber connection associated with 

the 10Gb ULL Fee. In determining what 

portion (or percentage) to allocate to 

access services, each Exchange 

department head, in coordination with 

other Exchange personnel, determined 

the expenses that support access 

services and System Networks 

associated with the 10Gb ULL Fee. 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 analysis also 

included each department head meeting 

with the divisions of teams within each 

department to determine the amount of 

time and resources allocated by 

employees within each division towards 

the access services and System 

Networks associated with the 10Gb ULL 

Fee. The Exchange reviewed each 

individual expense to determine if such 

expense was related to the 10Gb ULL 

Fee. Once the expenses were identified, 

the Exchange department heads, with 

the assistance of our internal finance 

department, reviewed such expenses 

holistically on an Exchange-wide level 

to determine what portion of that 

expense supports providing access 

services and the System Networks. The 

sum of all such portions of expenses 

represents the total cost to the Exchange 

to provide access services associated 

with the 10Gb ULL Fee. For the 

avoidance of doubt, no expense amount 

is allocated twice. 

The 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 

access services associated with the 10Gb 

ULL Fee. 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 historically, and on 

an ongoing annual basis, reviews its 

costs and resource allocations to ensure 

it appropriately allocates resources to 

properly provide services to the 

Exchange’s constituents. 

The Exchange believes exchanges, 

like all businesses, should be provided 

flexibility when developing and 

applying a methodology to allocate 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. 

The Exchange notes that there are 

material costs associated with providing 


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25The 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. 26For example, the Exchange previously noted 

that all third-party expense described in its prior fee 

filing was contained in the information technology 

and communication costs line item under the 

section titled ‘‘Operating Expenses Incurred 

Directly or Allocated From Parent,’’ in the 

Exchange’s 2019 Form 1 Amendment containing its 

financial statements for 2018. See Securities 

Exchange Act Release No. 87877 (December 31, 

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

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

described in this filing is attributed to the same line 

item for the Exchange’s 2022 Form 1 Amendment, 

which will be filed in 2023. 27The Exchange does not believe it is appropriate 

to disclose the actual amount it pays to each 

individual third-party provider as those fee 

arrangements are competitive or the Exchange is 

contractually prohibited from disclosing that 

number. 

the infrastructure and headcount to 

fully support access to the Exchange 

and its System Networks via a 10Gb 

ULL fiber connection. The Exchange 

incurs technology expense related to 

establishing and maintaining 

Information Security services, enhanced 

network monitoring and customer 

reporting, as well as Regulation SCImandated processes associated with its 

network technology. Both fixed and 

variable expenses have significant 

impact on the Exchange’s overall costs 

to provide and maintain access to the 

Exchange’s System Networks via a 10Gb 

ULL fiber connection. For example, to 

accommodate new Members, the 

Exchange may need to purchase 

additional hardware to support those 

Members as well as provide enhanced 

monitoring and reporting of customer 

performance that the Exchange and its 

affiliates currently 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 thirdparty 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 10Gb ULL Fee is a 

reasonable attempt to offset a portion of 

those costs associated with providing 

access to and maintaining its System 

Networks’ infrastructure and related 

10Gb ULL fiber connection. 

The Exchange estimated its total 

annual expense to provide and maintain 

access to the Exchange’s System 

Networks via a 10Gb ULL fiber 

connection based on the following 

general expense categories: (1) External 

expenses, which include fees paid to 

third parties for certain products and 

services; (2) internal expenses relating 

to the internal costs to provide the 

services associated with the 10Gb ULL 

Fee; and (3) general shared expenses.25

The Guidance does not include any 

information regarding the methodology 

that an exchange should use to 

determine its cost associated with a 

proposed fee change. The Exchange 

utilized a methodology in this proposed 

fee change that it believes is reasonable 

because the Exchange analyzed its 

entire cost structure, allocated a 

percentage of each cost attributable to 

maintaining its System Networks, then 

divided those costs according to the cost 

methodology outlined below. 

For 2022, the total annual expense for 

providing the access services associated 

with the 10Gb ULL Fee is estimated to 

be $9,088,382, or $757,365 per month. 

The Exchange believes it is more 

appropriate to analyze the 10Gb ULL 

Fee utilizing its estimated 2022 revenue 

and costs, which utilize the same 

presentation methodology as set forth in 

the Exchange’s previously-issued 

Audited Unconsolidated Financial 

Statements.26 The $9,088,382 estimated 

total annual expense is directly related 

to the access to the Exchange’s System 

Networks via a 10Gb ULL fiber 

connection, and not any other product 

or service offered by the Exchange. For 

example, it does not include general 

costs of operating matching engines and 

other trading technology. No expense 

amount was allocated twice. Each of the 

categories of expenses are set forth in 

the following table and details of the 

individual line-item costs considered by 

the Exchange for each category are 

described further below. 

External expenses 

Category 

Percentage of 

total expense 

amount allocated 

Data Center Provider ................................................................................................................................................................... 62% 

Fiber Connectivity Provider ......................................................................................................................................................... 62% 

Security Financial Transaction Infrastructure (‘‘SFTI’’), and Other Connectivity and Content Service Providers ...................... 89% 

Hardware and Software Providers .............................................................................................................................................. 51% 

Total of External Expenses ......................................................................................................................................................... 27 $1,946,869 

Internal Expenses 

Category Expense amount 

allocated 

Employee Compensation ............................................................................................................................................................. $3,259,251 

Depreciation and Amortization .................................................................................................................................................... 2,164,610 

Occupancy ................................................................................................................................................................................... 284,947 

Total of Internal Expenses ................................................................................................................................................... 5,708,808 

Allocated Shared Expenses ........................................................................................................................................................ 1,432,705 

The Exchange notes that it only has 

two primary sources of revenue, 

connectivity and port fees, to recover 

those costs associated with providing 

and maintaining access to the 

Exchange’s System Networks. The 

Exchange notes that, without the 

specific third-party and internal 

expense items, the Exchange would not 

be able to provide and maintain the 

System Networks and access to the 

System Networks via a 10Gb ULL fiber 

connection to Members and nonMembers. Each of these expense items, 

including physical hardware, software, 

employee compensation and benefits, 

occupancy costs, and the depreciation 

and amortization of equipment, has 


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28The Exchange notes that the expense 

allocations differ from the Exchange’s filing earlier 

in 2021, SR–EMERALD–2021–11, because that prior 

filing pertained to several different access fees, 

which the Exchange had not been charging for since 

the Exchange launched operations in March 2019. 

See Securities Exchange Act Release No. 91460 

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

EMERALD–2021–11). In SR–EMERALD–2021–11, 

the Exchange sought to adopt fees for FIX Ports, 

MEI Ports, Purge Ports, Clearing Trade Drop Ports, 

and FIX Drop Copy Ports, all of which had been free 

for market participants for over two years since 

inception. 

been identified through a line-by-line 

item analysis to be integral to providing 

and maintaining the System Networks 

and access to System Networks via a 

10Gb ULL fiber connection. 

For clarity, the Exchange took a 

conservative approach in determining 

the expense and the percentage of that 

expense to be allocated to providing and 

maintaining the System Networks and 

access to System Networks in 

connection with 10Gb ULL fiber 

connectivity. The Exchange describes 

the analysis conducted for each expense 

and the resources or determinations that 

were considered when determining the 

amount necessary to allocate to each 

expense. Only a portion of all fees paid 

to such third-parties is included in the 

third-party expenses described herein, 

and no expense amount is allocated 

twice. Accordingly, the Exchange does 

not allocate its entire information 

technology and communication costs to 

providing and maintaining the System 

Networks and access to Exchange’s 

System Networks via a 10Gb ULL fiber 

connection. This may result in the 

Exchange under allocating an expense 

to provide and maintain its System 

Networks and access to the System 

Networks via a 10Gb ULL fiber 

connection, and such expenses may 

actually be higher than what the 

Exchange allocated as part of this 

proposal. The Exchange notes that 

expenses associated with its affiliates, 

MIAX and MIAX Pearl (the options and 

equities markets), are accounted for 

separately and are not included within 

the scope of this filing. 

Further, as part its ongoing 

assessment of costs and expenses, the 

Exchange recently conducted a periodic, 

thorough review of its expenses and 

resource allocations which resulted in 

revised percentage allocations in this 

filing. The revised percentages are, 

among other things, the result of the 

shuffling of internal resources in 

response to business objectives and 

changes to fees charged and services 

provided by third parties. Therefore, the 

percentage allocations used in this 

proposed rule change may differ from 

past filings from the Exchange or its 

affiliates due to, among other things, 

changes in expenses charged by thirdparties, adjustments to internal resource 

allocations, and different system 

architecture of the Exchange as 

compared to its affiliates.28

External Expense Allocations 

For 2022, expenses relating to fees 

paid by the Exchange to third parties for 

products and services necessary to 

provide and maintain the System 

Networks and access to the System 

Networks via a 10Gb ULL fiber 

connection are estimated to be 

$1,946,869. This includes, but is not 

limited to, a portion of the fees paid to: 

(1) A third-party data center provider, 

including for the primary, secondary, 

and disaster recovery locations of the 

Exchange’s trading system 

infrastructure; (2) a fiber connectivity 

provider for network services (fiber and 

bandwidth products and services) 

linking the Exchange’s and its affiliates’ 

office locations in Princeton, New Jersey 

and Miami, Florida, to all data center 

locations; (3) SFTI, which supports 

connectivity feeds for the entire U.S. 

options industry; (4) various other 

content and connectivity service 

providers, 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 that support the 

production environment in which 

Members and non-Members connect to 

the network to trade and receive market 

data. 

Data Center Space and Operations 

Provider 

The Exchange does not own the 

primary data center or the secondary 

data center, but instead leases space in 

data centers operated by third parties 

where the Exchange houses servers, 

switches and related equipment. Data 

center costs include an allocation of the 

costs the Exchange incurs to provide 

physical connectivity in the third-party 

data centers where it maintains its 

equipment as well as related costs. The 

data center provider operates the data 

centers (primary, secondary, and 

disaster recovery) that host the 

Exchange’s network infrastructure. 

Without the retention of a third-party 

data center, the Exchange would not be 

able to operate its systems and provide 

a trading platform for market 

participants. The Exchange does not 

employ a separate fee to cover its data 

center expense and recoups that 

expense, in part, by charging for 10Gb 

ULL connectivity. 

The Exchange reviewed its data center 

footprint, including its total rack space, 

cage usage, number of servers, switches, 

cabling within the data center, heating 

and cooling of physical space, storage 

space, and monitoring and divided its 

data center expenses among providing 

transaction services, market data, and 

connectivity. Based on this review, the 

Exchange determined that 62% of the 

total applicable data center provider 

expense is applicable to providing and 

maintaining access services and System 

Networks associated with the 10Gb ULL 

Fee. The Exchange believes this 

allocation is reasonable because 10Gb 

ULL connectivity is a core means of 

access to the Exchange’s network, 

providing one method for market 

participants to send and receive order 

and trade messages, as well as receive 

market data. A large portion of the 

Exchange’s data center expense is due to 

providing and maintaining connectivity 

to the Exchange’s System Networks, 

including providing cabling within the 

data center between market participants 

and the Exchange. The Exchange 

excluded from this allocation servers 

that are dedicated to market data. The 

Exchange also did not allocate the 

remainder of the data center expense 

because it pertains to other areas of the 

Exchange’s operations, such as ports, 

market data, and transaction services. 

Fiber Connectivity Provider 

The Exchange engages a third-party 

service provider that provides the 

internet, fiber and bandwidth 

connections between the Exchange’s 

networks, primary and secondary data 

center, and office locations in Princeton 

and Miami. Fiber connectivity is 

necessary for the Exchange to switch to 

its secondary data center in the case of 

an outage in its primary data center. 

Fiber connectivity also allows the 

Exchange’s National Operations & 

Control Center (‘‘NOCC’’) and Security 

Operations Center (‘‘SOC’’) in Princeton 

to communicate with the Exchange’s 

primary and secondary data centers. As 

such, all trade data, including the 

billions of messages each day, flow 

through this third-party provider’s 

infrastructure over the Exchange’s 

network. Without these services, the 

Exchange would not be able to operate 

and support the network and provide 

and maintain access services and 

System Networks associated with the 

10Gb ULL Fee to its Members and their 

customers. Without the retention of a 

third-party fiber connectivity provider, 

the Exchange would not be able to 

communicate between its data centers 

and office locations. The Exchange does 

not employ a separate fee to cover its 


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fiber connectivity expense and recoups 

that expense, in part, by charging for 

10Gb ULL connectivity. 

The Exchange reviewed it costs to 

retain fiber connectivity from a third 

party, including the ongoing costs to 

support fiber connectivity, ensuring 

adequate bandwidth and infrastructure 

maintenance to support exchange 

operations, and ongoing network 

monitoring and maintenance and 

determined that 62% of the total fiber 

connectivity expense was applicable to 

providing and maintaining access 

services and System Networks 

associated with the 10Gb ULL Fee. The 

Exchange believes this allocation is 

reasonable because 10Gb ULL 

connectivity is a core means of access to 

the Exchange’s network, providing one 

method for market participants to send 

and receive order and trade messages, as 

well as receive market data. A large 

portion of the Exchange’s fiber 

connectivity expense is due to 

providing and maintaining connectivity 

between the Exchange’s System 

Networks, data centers, and office 

locations and is core to the daily 

operation of the Exchange. Fiber 

connectivity is a necessary integral 

means to disseminate information from 

the Exchange’s primary data center to 

other Exchange locations. The Exchange 

excluded from this allocation fiber 

connectivity usage related to market 

data or other business lines. The 

Exchange also did not allocate the 

remainder of this expense because it 

pertains to other areas of the Exchange’s 

operations and does not directly relate 

to providing and maintaining access 

services and System Networks 

associated with the 10Gb ULL Fee. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s actual cost to retain fiber 

connectivity and maintain and provide 

access to its System Networks via a 

10Gb ULL fiber connectivity. 

Connectivity and Content Services 

Provided by SFTI and Other Providers 

The Exchange relies on SFTI and 

various other connectivity and content 

service providers for connectivity and 

data feeds for the entire U.S. options 

industry, as well as content, 

connectivity, and infrastructure services 

for critical components of the network 

that are necessary to provide and 

maintain its System Networks and 

access to its System Networks via a 

10Gb ULL fiber connection. 

Specifically, the Exchange utilizes SFTI 

and other content service provider to 

connect to other national securities 

exchanges, the Options Price Reporting 

Authority (‘‘OPRA’’), and to receive 

market data from other exchanges and 

market data providers. SFTI is operated 

by the Intercontinental Exchange, the 

parent company of five registered 

exchanges, and has become integral to 

the U.S. markets. The Exchange 

understands SFTI provides services to 

most, if not all, of the other U.S. 

exchanges and other market 

participants. Without services from 

SFTI and various other service 

providers, the Exchange would not be 

able to connect to other national 

securities exchanges, market data 

providers, or OPRA and, therefore, 

would not be able to operate and 

support its System Networks. The 

Exchange does not employ a separate 

fee to cover its SFTI and content service 

provider expense and recoups that 

expense, in part, by charging for 10Gb 

ULL connectivity. 

The Exchange reviewed it costs to 

retain SFTI and other content service 

providers, including network 

monitoring and maintenance, 

remediation of connectivity related 

issues, and ongoing administrative 

activities related to connectivity 

management and determined that 89% 

of the total applicable SFTI and other 

service provider expense is allocated to 

providing the access services associated 

with the 10Gb ULL Fee. SFTI and other 

content service providers are key 

vendors and necessary components in 

providing connectivity to the Exchange. 

The primary service SFTI provides for 

the Exchange is connectivity to other 

national securities exchanges and their 

disaster recovery facilities and, 

therefore, a vast portion of this expense 

is allocated to providing access to the 

System Networks via a 10Gb ULL 

connection. Connectivity via SFTI is 

necessary for purposes of order routing 

and accessing disaster recovery facilities 

in the case of a system outage. Engaging 

SFTI and other like vendors provides 

purchasers of 10Gb ULL connectivity to 

other national securities exchanges for 

purposes of order routing and disaster 

recovery. The Exchange did not allocate 

a portion of this expense that relates to 

the receipt of market data from other 

national securities exchange and OPRA. 

The Exchange also did not allocate the 

remainder of this expense because it 

pertains to other areas of the Exchange’s 

operations and does not directly relate 

to providing and maintaining the 

System Networks or access to its System 

Networks via 10Gb ULL fiber 

connection. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s actual cost to 

provide and maintain its System 

Networks and access to its System 

Networks via a 10Gb ULL fiber 

connection, and not any other service, 

as supported by its cost review. 

Hardware and Software Providers 

The Exchange relies on dozens of 

third-party hardware and software 

providers for equipment necessary to 

operate its System Networks. This 

includes either the purchase or 

licensing of physical equipment, such as 

servers, switches, cabling, and 

monitoring devices. It also includes the 

purchase or license of software 

necessary for security monitoring, data 

analysis and Exchange operations. 

Hardware and software providers are 

necessary to maintain its System 

Networks and provide access to its 

System Networks via a 10Gb ULL fiber 

connection. Hardware and software 

equipment and licenses for that 

equipment are also necessary to operate 

and monitor physical assets necessary to 

offer physical connectivity to the 

Exchange. Hardware and software 

equipment and licenses are key to the 

operation of the Exchange and, without 

them, the Exchange would not be able 

to operate and support its System 

Networks and provide access to its 

Members and their customers. The 

Exchange does not employ a separate 

fee to cover its hardware and software 

expense and recoups that expense, in 

part, by charging for 10Gb ULL 

connectivity. 

The Exchange reviewed it hardware 

and software related costs, including 

software patch management, 

vulnerability management, 

administrative activities related to 

equipment and software management, 

professional services for selection, 

installation and configuration of 

equipment and software supporting 

exchange operations and determined 

that 51% of the total applicable 

hardware and software expense is 

allocated to providing and maintaining 

access services and System Networks 

associated with the 10Gb ULL Fee. 

Hardware and software equipment and 

licenses are key to the operation of the 

Exchange and its System Networks. 

Without them, market participants 

would not be able to access the System 

Networks via a 10Gb ULL connection. 

The Exchange only allocated the portion 

of this expense to the hardware and 

software that is related to a market 

participant’s use of a 10Gb ULL 

connection, such as operating its 

matching engines. The Exchange, 

therefore, did not allocate portions of its 

hardware and software expense that 

related to other areas of the Exchange’s 

business, such as hardware and software 

used for market data or unrelated 


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29For purposes of this allocation, the Exchange 

did not consider expenses related to supporting 

employees who support 10Gb ULL connectivity, 

such as office space and supplies. The Exchange 

determined cost allocation for employees who 

perform work in support of offering access services 

and System Networks to arrive at a full time 

equivalent (‘‘FTE’’) of 9.9 FTEs across all the 

identified personnel. The Exchange then multiplied 

the FTE times a blended compensation rate for all 

relevant Exchange personnel to determine the 

personnel costs associated with providing the 

access services and System Networks associated 

with the 10Gb ULL Fee. 

30All of the expenses outlined in this proposed 

fee change refer to the operating expenses of the 

Exchange. The Exchange did not included any 

future capital expenditures within these costs. 

Depreciation and amortization represent the 

expense of previously purchased hardware and 

internally developed software spread over the 

useful life of the assets. Due to the fact that the 

Exchange has only included operating expense and 

historical purchases, there is no double counting of 

expenses in the Exchange’s cost estimates. 

administrative services. The Exchange 

also did not allocate the remainder of 

this expense because it pertains to other 

areas of the Exchange’s operations, such 

as ports or transaction services, and 

does not directly relate to providing and 

maintaining its System Networks and 

access to its System Networks via a 

10Gb ULL fiber connection. The 

Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s cost to provide and maintain 

its System Networks and access to its 

System Networks via a 10Gb ULL fiber 

connection, and not any other service, 

as supported by its cost review. 

Internal Expense Allocations 

For 2022, total internal expenses 

relating to the Exchange providing and 

maintaining its System Networks and 

access to its System Networks via a 

10Gb ULL fiber connection are 

estimated to be $5,708,808. This 

includes, but is not limited to, costs 

associated with: (1) Employee 

compensation and benefits for full-time 

employees that support the System 

Networks and access to System 

Networks via a 10Gb ULL fiber 

connection, 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 as well 

as important system upgrades; (2) 

depreciation and amortization of 

hardware and software used to provide 

and maintain access services and 

System Networks associated with the 

10Gb ULL Fee, 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 and maintain the 

System Networks and access to System 

Networks via 10G ULL fiber 

connections. The breakdown of these 

costs is more fully described below. 

Employee Compensation and Benefits 

Human personnel are key to exchange 

operations and supporting the 

Exchange’s ongoing provision and 

maintenance of the System Networks 

and access to System Networks via 10Gb 

ULL fiber connections. The Exchange 

reviewed its employee compensation 

and benefits expense and the portion of 

that expense allocated to providing and 

maintaining the System Networks and 

access to System Networks via 10Gb 

ULL fiber connections. As part of this 

review, the Exchange considered 

employees whose functions include 

providing and maintaining the System 

Networks and 10Gb ULL connectivity 

and used a blended rate of 

compensation reflecting salary, stock 

and bonus compensation, bonuses, 

benefits, payroll taxes, and 401K 

matching contributions.29

Based on this review, the Exchange 

determined to allocate $3,259,251 in 

employee compensation and benefits 

expense to providing access to the 

System Networks. To determine the 

appropriate allocation the Exchange 

reviewed the time employees allocated 

to supporting its System Networks and 

access to its System Networks via 10Gb 

ULL fiber connections. Senior staff also 

reviewed these time allocations with 

department heads and team leaders to 

determine whether those allocations 

were appropriate. These employees are 

critical to the Exchange to provide and 

maintain access to its System Networks 

via 10Gb ULL fiber connections for its 

Members, non-Members and their 

customers. The Exchange determined 

the above allocation based on the 

personnel whose work focused on 

functions necessary to provide and 

maintain the System Networks and 

access to System Networks via 10Gb 

ULL fiber connections. The Exchange 

does not charge a separate fee regarding 

employees who support 10Gb ULL 

connectivity and the Exchange seeks to 

recoup that expense, in part, by 

charging for 10Gb ULL connections. 

Depreciation and Amortization 

A key expense incurred by the 

Exchange relates to the depreciation and 

amortization of equipment that the 

Exchange procured to provide and 

maintain the System Networks and 

access to System Networks via 10Gb 

ULL fiber connections. The Exchange 

reviewed all of its physical assets and 

software, owned and leased, and 

determined whether each asset is 

related to providing and maintaining its 

System Networks and access to its 

System Networks via 10Gb ULL fiber 

connections, and added up the 

depreciation of those assets. All 

physical assets and software, which 

includes assets used for testing and 

monitoring of Exchange infrastructure, 

were valued at cost, depreciated or 

leased over periods ranging from three 

to five years. In determining the amount 

of depreciation and amortization to 

apply to providing 10Gb ULL 

connectivity and the System Networks, 

the Exchange considered the 

depreciation of hardware and software 

that are key to the operation of the 

Exchange and its System Networks. This 

includes servers, computers, laptops, 

monitors, information security 

appliances and storage, and network 

switching infrastructure equipment, 

including switches and taps, that were 

previously purchased to maintain and 

provide access to its System Networks 

via 10Gb ULL fiber connections. 

Without them, market participants 

would not be able to access the System 

Networks. The Exchange seeks to 

recoup a portion of its depreciation 

expense by charging for 10Gb ULL 

connectivity. 

Based on this review, the Exchange 

determined to allocate $2,164,610 in 

depreciation and amortization expense 

to providing access to the System 

Networks via a 10Gb ULL connection. 

The Exchange only allocated the portion 

of this depreciation expense to the 

hardware and software related to a 

market participant’s use of a 10GB ULL 

connection. The Exchange, therefore, 

did not allocate portions of depreciation 

expense that relates to other areas of the 

Exchange’s business, such as the 

depreciation of hardware and software 

used for market data or unrelated 

administrative services.30

Occupancy 

The Exchange rents and maintains 

multiple physical locations to house 

staff and equipment necessary to 

support access services, System 

Networks, and exchange operations. The 

Exchange’s occupancy expense is not 

limited to the housing of personnel and 

includes locations used to store 

equipment necessary for Exchange 

operations. In determining the amount 

of its occupancy related expense, the 

Exchange considered actual physical 

space used to house employees whose 

functions include providing and 

maintaining the System Networks and 

10Gb ULL connectivity. Similarly, the 


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31See supra note 19. 

32The Exchange has incurred a cumulative loss 

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

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

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

for Registration or Exemption from Registration as 

a National Securities Exchange, filed July 28, 2021, 

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

9999999997-21-004557/. 

Exchange also considered the actual 

physical space used to house hardware 

and other equipment necessary to 

provide and maintain the System 

Networks and 10Gb ULL connectivity. 

This equipment includes computers, 

servers, and accessories necessary to 

support the System Networks and 10Gb 

ULL connectivity. Based on this review, 

the Exchange determined to allocate 

$284,947 of its occupancy expense to 

provide and maintain the System 

Networks and 10Gb ULL connectivity. 

The Exchange believes this allocation is 

reasonable because it represents the 

Exchange’s cost to rent and maintain a 

physical location for the Exchange’s 

staff who operate and support the 

System Networks, including providing 

and maintaining access to its System 

Networks via 10Gb ULL fiber 

connections. The Exchange considered 

the rent paid for the Exchange’s 

Princeton and Miami offices, as well as 

various related costs, such as physical 

security, property management fees, 

property taxes, and utilities at each of 

those locations. The Exchange did not 

include occupancy expenses related to 

housing employees and equipment 

related to other Exchange operations, 

such as market data and administrative 

services. 

* * * * * 

The Exchange notes that a material 

portion of its total overall expense is 

allocated to the provision and 

maintenance of access services 

(including connectivity and ports). The 

Exchange believes this is reasonable as 

the Exchange operates a technologybased business that differentiates itself 

from its competitors based on its more 

deterministic and resilient trading 

systems that rely on access to a high 

performance network, resulting in 

significant technology expense. Over 

two-thirds of Exchange staff are 

technology-related employees. The 

majority of the Exchange’s expense is 

technology-based. Thus, the Exchange 

believes it is reasonable to allocate a 

material portion of its total overall 

expense towards providing and 

maintaining its System Networks and 

access to its System Networks via 10Gb 

ULL fiber connections. 

Allocated Shared Expense 

Finally, a limited portion of general 

shared expenses was allocated to overall 

10Gb ULL connectivity costs as without 

these general shared costs, the Exchange 

would not be able to operate in the 

manner that it does and provide 10Gb 

ULL connectivity. The costs included in 

general shared expenses include 

recruiting and training, marketing and 

advertising costs, professional fees for 

legal, tax and accounting services, and 

telecommunications costs. For 2022, the 

Exchange’s general shared expense 

allocated to 10Gb ULL connectivity and 

the System Networks that support those 

connections is estimated to be 

$1,432,705. The Exchange used the 

weighted average of the above 

allocations to determine the amount of 

general shared expenses to allocate to 

the Exchange. Next, based on additional 

management and expense analysis, 

these fees are allocated to the proposal. 

Revenue and Estimated Profit Margin 

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 10Gb ULL Fee), 

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. 

To determine the Exchange’s 

estimated revenue associated with the 

10Gb ULL Fee, the Exchange analyzed 

the number of Members and nonMembers currently utilizing the 10Gb 

ULL fiber connection and used a recent 

monthly billing cycle representative of 

current monthly revenue. The Exchange 

also provided its baseline by analyzing 

March 2022, the monthly billing cycle 

prior to the proposed 10Gb ULL Fee and 

compared this to its expenses for that 

month. As discussed below, the 

Exchange does not believe it is 

appropriate to factor into its analysis 

future revenue growth or decline into its 

estimates for purposes of these 

calculations, given the uncertainty of 

such estimates due to the continually 

changing access needs of market 

participants and potential changes in 

internal and third-party expenses. 

For March 2022, prior to the proposed 

10Gb ULL Fee, Members and nonMembers purchased a total of 98 10Gb 

ULL connections for which the 

Exchange anticipates charging $980,000 

(depending on whether Members and 

non-Members drop or add connections 

mid-month, resulting in pro-rated 

charges). This will result in a profit of 

$222,635 for that month (a profit margin 

of 33%). For April 2022, the Exchange 

anticipates Members and non-Members 

purchasing a total of 98 10Gb ULL 

connections. Assuming the Exchange 

charges its proposed monthly rate of 

$12,000 per connection, the Exchange 

would generate revenue of $1,176,000 

for that month (not including potential 

pro-rated connection charges for midmonth connections). This would result 

in a profit of $418,6335 ($1,176,000 

minus $757,365) for that month (a 

modest 3% profit margin increase from 

March 2022 to April 2022 from 33% to 

36%). 

The Exchange believes that 

conducting the above analysis on a per 

month basis is reasonable as the revenue 

generated from access services subject to 

the proposed fee generally remains 

static from month to month. The 

Exchange also conducted the above 

analysis on a per month basis to comply 

with the Commission Staff’s Guidance, 

which requires a baseline analysis to 

assist in determining whether the 

proposal generates a supra-competitive 

profit. The Exchange cautions that this 

profit margin may also fluctuate from 

month to month based on the 

uncertainty of predicting how many 

connections may be purchased from 

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

connections at any time based on their 

own business decisions. 

The Exchange believes the proposed 

profit margin is reasonable and will not 

result in a ‘‘supra-competitive’’ profit. 

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

exceed the profits that can be obtained 

in a competitive market.’’ 31 Until 

recently, the Exchange has operated at 

a cumulative net annual loss since it 

launched operations in 2019.32 The 

Exchange has operated at a net loss due 

to a number of factors, one of which is 

choosing to forgo revenue by offering 

certain products, such as connectivity, 

at lower rates than other options 

exchanges to attract order flow and 

encourage market participants to 

experience the high determinism, low 

latency, and resiliency of the Exchange’s 

trading systems. The Exchange should 

not now be penalized for now seeking 

to raise it fees to near market rates after 

offering such products as discounted 

prices. 

The Exchange notes that its revenue 

estimate is based on projections and 

will only be realized to the extent such 

revenue actually produces the revenue 

estimated. As a generally new entrant to 

the hyper-competitive exchange 

environment, and an exchange focused 

on driving competition, the Exchange 

does not yet know whether such 

expectations will be realized. For 

instance, in order to generate the 


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33See supra note 6. 

34See supra note 6. 

35See supra note 7. 

36See supra note 6. 

37See supra note 9. 

38See supra note 6. 

39See supra note 11. 

40See supra note 6. 

41See supra note 13. 

42See supra note 6. 

revenue expected from 10 GB ULL 

connectivity, the Exchange will have to 

be successful in retaining existing 

clients that wish to maintain physical 

connectivity or obtaining new clients 

that will purchase such services. To the 

extent the Exchange is successful in 

encouraging new clients to connect 

directly to the Exchange, the Exchange 

does not believe it should be penalized 

for such success. The Exchange, like 

other exchanges, is, after all, a for-profit 

business. While the Exchange believes 

in transparency around costs and 

potential margins, the Exchange does 

not believe that these estimates should 

form the sole basis of whether or not a 

proposed fee is reasonable or can be 

adopted. Instead, the Exchange believes 

that the information should be used 

solely to confirm that an Exchange is 

not earning supra-competitive profits, 

and the Exchange believes its cost 

analysis and related estimates 

demonstrate this fact. 

Further, the proposed profit margin 

reflects the Exchange’s efforts to control 

its costs. A profit margin should not be 

judged alone based on its size, but 

whether the ultimate fee reflects the 

value of the services provided and is in 

line with other exchanges. A profit 

margin on one exchange should not be 

deemed excessive where that exchange 

has been successful in controlling costs, 

but not excessive where an exchange is 

charging the same fee but has a lower 

profit margin due to higher costs. 

The expected profit margin is 

reasonable because the Exchange offers 

a premium System Network, System 

Networks connectivity, and a highly 

deterministic trading environment. The 

Exchange is recognized as a leader in 

network monitoring, determinism, risk 

protections, and network stability. For 

example, the Exchange experiences 

approximately a 95% determinism rate, 

system throughput of approximately 18 

million quotes and average round trip 

latency rate of approximately 18 

microseconds for a single quote. The 

Exchange provides extreme performance 

and radical scalability designed to 

match the unique needs of trading 

differing asset class/market model 

combinations. Exchange systems offer 

two customer interfaces, FIX gateway 

for orders, and ULL interfaces and data 

feeds with best-in-class wire order 

determinism. The Exchange also offers 

automated continuous testing to ensure 

high reliability, advanced monitoring 

and systems security, and employs a 

software architecture that results in 

minimizing the demands on power, 

space, and cooling while allowing for 

rapid scalability, resiliency and fault 

isolation. The Exchange also provides 

latency equalized cross-connects in the 

primary data center ensures fair and 

cost efficient access to the MIAX 

systems. The Exchange, therefore, 

believes the anticipated profit margin is 

reasonable because it reflects the 

Exchange’s cost controls and the quality 

of the Exchanges systems. 

The Exchange also believes its 

proposed profit margin does not exceed 

what can be obtained in a competitive 

market. The Exchange is one of sixteen 

registered U.S. options exchanges and 

maintains an average market share of 

approximately 3.50%.33 The anticipated 

rate of return is reasonable because it is 

based on a rate that likely remains lower 

than what other exchanges with 

comparable market share charge for 

similar connectivity. For example the 

below table is provided for comparison 

purposes only to show how the 

Exchange’s proposed fees compare to 

fees currently charged by other options 

exchanges for similar connectivity. As 

shown by the below table, the 

Exchange’s proposed fee remains less 

than fees charged for similar 

connectivity provided by other options 

exchanges with similar market share, 

notwithstanding that the competing 

exchanges may have different system 

architectures that may result in different 

cost structures for the provision of 

connectivity. 

Exchange Type of connection Monthly fee 

(per connection) 

MIAX Emerald (as proposed) (equity options market share of 3.95% as of March 29, 2022 for the 

month of March) 34.

10Gb ULL ................... $12,000.00 

NASDAQ 35 (equity options market share of 8.62% as of March 29, 2022 for the month of 

March) 36.

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

ISE37 (equity options market share of 5.83% as of March 29, 2022 for the month of March) 38 ..... 10Gb Ultra fiber .......... 15,000.00 

Amex 39 (equity options market share of 7.15% as of March 29, 2022 for the month of March) 40 .. 10Gb LX LCN ............. 22,000.00 

GEMX41 (equity options market share of 2.48% as of March 29, 2022 for the month of March) 42 10Gb Ultra .................. 15,000.00 

Lastly, the Exchange notes that this is 

a singular potential profit margin from 

a single revenue source and is not 

reflective of the Exchange’s overall 

profit margin. This profit margin may be 

offset by lower or negative profit 

margins generated by other areas of the 

Exchange’s operations that are not 

subject to this proposed fee change. 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 10Gb ULL Fee), 

regulatory fees, and market data fees. A 

potential profit margin in one area may 

be used to offset a potential loss in 

another area, and, therefore, a potential 

profit margin from a single product is 

not representative of the Exchange’s 

overall profitability and whether that 

singular profit exceeds the profits that 

can be obtained in a competitive market. 

The Proposed Fees Are Reasonable 

When Compared to the Fees of Other 

Options Exchanges With Similar Market 

Share 

The Exchange does not have visibility 

into other equities exchanges’ costs to 

provide connectivity or their fee markup 

over those costs, and therefore cannot 

use other exchange’s connectivity fees 

as a benchmark to determine a 

reasonable markup over the costs of 

providing connectivity. Nevertheless, 

the Exchange believes the other 

exchanges’ connectivity fees are a useful 

example of alternative approaches to 

providing and charging for connectivity 

notwithstanding that the competing 

exchanges may have different system 

architectures that may result in different 

cost structures for the provision of 

connectivity. To that end, the Exchange 

believes the proposed 10Gb ULL Fee is 

reasonable because the proposed fee is 

still less than fees charged for similar 

connectivity provided by other options 


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43See Specialized Quote Interface Specification, 

Nasdaq PHLX, Nasdaq Options Market, Nasdaq BX 

Options, Version 6.5a, Section 2, Architecture 

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

www.nasdaqtrader.com/content/technicalsupport/ 

specifications/TradingProducts/SQF6.5a-2019- 

Aug.pdf. The Exchange notes that it is unclear 

whether the NASDAQ exchanges include 

connectivity to each matching engine for the single 

fee or charge per connection, per matching engine. 

See also NYSE Technology FAQ and Best Practices: 

Options, Section 5.1 (How many matching engines 

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

Exchange notes that NYSE provides a link to an 

Excel file detailing the number of matching engines 

per options exchange, with Arca and Amex having 

19 and 17 matching engines, respectively. 

44 15 U.S.C. 78s(b)(3)(C). 

exchanges with comparable market 

shares. 

As described in the above table, the 

Exchange’s proposed fee remains less 

than fees charged for similar 

connectivity provided by other options 

exchanges with similar market share. In 

each of the above cases, the Exchange’s 

proposed fee is still significantly lower 

than that of competing options 

exchanges with similar market share. 

Despite proposing lower or similar fees 

to that of competing options exchanges 

with similar market share, the Exchange 

believes that it provides a premium 

network experience to its Members and 

non-Members via a highly deterministic 

System, enhanced network monitoring 

and customer reporting, and a superior 

network infrastructure than markets 

with higher market shares and more 

expensive connectivity alternatives. 

Each of the connectivity rates in place 

at competing options exchanges were 

filed with the Commission for 

immediate effectiveness and remain in 

place today. 

The Proposed Fees Are Equitably 

Allocated 

The Exchange believes that the 

proposed 10Gb ULL fees are equitably 

allocated among users of the network 

connectivity alternatives, as the users of 

the 10Gb ULL connections consume the 

most bandwidth and resources of the 

network. Specifically, the Exchange 

notes that these users account for 

approximately greater than 99% of 

message traffic over the network, while 

the users of the 1Gb connections 

account for approximately less than 1% 

of message traffic over the network. In 

the Exchange’s experience, users of the 

1Gb connections do not have a business 

need for the high performance network 

solutions required by 10Gb ULL users. 

The Exchange’s high performance 

network solutions and supporting 

infrastructure (including employee 

support), provides unparalleled system 

throughput and the capacity to handle 

approximately 18 million quote 

messages per second. On an average 

day, the Exchange handles over 

approximately 3 billion total messages. 

Of those, users of the 10Gb ULL 

connections generate approximately 3 

billion messages, and users of the 1Gb 

connections generate 500,000 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 network connectivity 

expense for storage and network 

transport capabilities. Given this 

difference in network utilization rate, 

the Exchange believes that it is 

reasonable, equitable, and not unfairly 

discriminatory that the 10Gb ULL users 

pay for the vast majority of the shared 

network resources from which all 

Member and non-Member users benefit, 

but is designed and maintained from a 

capacity standpoint to specifically 

handle the message rate and 

performance requirements of 10Gb ULL 

users. 

The Exchange also believes that the 

connectivity fees are equitably allocated 

amongst users of the network 

connectivity alternatives, when these 

fees are viewed in the context of the 

overall trading volume on the Exchange. 

To illustrate, the purchasers of the 10Gb 

ULL connectivity account for 

approximately 98% of the volume on 

the Exchange. This overall volume 

percentage (98% of total Exchange 

volume) is in line with the amount of 

network connectivity revenue collected 

from 10Gb ULL purchasers (99% of total 

Exchange connectivity revenue). For 

example, utilizing a recent billing cycle, 

Exchange Members and non-Members 

that purchased 10Gb ULL connections 

accounted for approximately 99% of the 

total network connectivity revenue 

collected by the Exchange from all 

connectivity alternatives; and (ii) 

Members and non-Members that 

purchased 1Gb connections accounted 

for approximately 1% of the revenue 

collected by the Exchange from all 

connectivity alternatives. 

Lastly, the Exchange further believes 

that the 10Gb ULL Fee are reasonable, 

equitably allocated and not unfairly 

discriminatory because, for one 10Gb 

ULL connection, the Exchange provides 

each Member or non-Member access to 

all twelve (12) matching engines on 

MIAX Emerald and a vast majority 

choose to connect to all twelve (12) 

matching engines. The Exchange 

believes that other exchanges require 

firms to connect to multiple matching 

engines.43

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 is 

the case with the current proposed flat 

fee, the proposed fee would apply 

uniformly to all market participants 

regardless of the number of connections 

they choose to purchase. The proposed 

fee does not favor certain categories of 

market participants in a manner that 

would impose an undue burden on 

competition. 

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. There is no reason to believe 

that our proposed price increase will 

harm another exchange’s ability to 

compete. 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. Market participants are free 

to choose which exchange or reseller to 

use to satisfy their business needs. 

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. Suspension of the Proposed Rule 

Change 

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

Act,44 at any time within 60 days of the 

date of filing of a proposed rule change 

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


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45 15 U.S.C. 78s(b)(1). 

46See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

47 Id. 

48 15 U.S.C. 78f(b)(4). 

49 15 U.S.C. 78f(b)(5). 

50 15 U.S.C. 78f(b)(8). 

51See 15 U.S.C. 78f(b)(4), (5), and (8), 

respectively. 

52For 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). 

53 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. 

54 15 U.S.C. 78s(b)(2)(B). 

55 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. 

56 15 U.S.C. 78f(b)(4). 

57 15 U.S.C. 78f(b)(5). 

58 15 U.S.C. 78f(b)(8). 

59See supra Section II.A.2. 

Act,45 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. 

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.46 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.’’ 47

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; 48 (2) perfect the mechanism of 

a free and open market and a national 

market system, protect investors and the 

public interest, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers; 49 and (3) not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.50

In temporarily suspending the 

Exchange’s fee change, the Commission 

intends to further consider whether the 

proposal to modify fees for certain 

connectivity options is consistent with 

the statutory requirements applicable to 

a national securities exchange under the 

Act. In particular, the Commission will 

consider whether the proposed rule 

change satisfies the standards under the 

Act and the rules thereunder requiring, 

among other things, that an exchange’s 

rules provide for the equitable 

allocation of reasonable fees among 

members, issuers, and other persons 

using its facilities; not permit unfair 

discrimination between customers, 

issuers, brokers or dealers; and do not 

impose any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act.51

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.52

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) 53 and 19(b)(2)(B) 54 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,55 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),56 6(b)(5),57 and 6(b)(8) 58 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 10Gb ULL Fee is 

constrained by competitive forces, but 

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

employing a ‘‘conservative approach’’ in 

determining the expense and the 

percentage of that expense to be 

allocated to providing and maintaining 

the System Networks and access to 

System Networks in connection with 

10Gb ULL fiber connectivity.59 Setting 

forth its costs in providing 10Gb ULL 

connectivity, and as summarized in 

greater detail above, the Exchange 

projects that the total combined annual 

expense for providing the access 

services associated with the 10Gb ULL 

Fee in 2022 will be $9,088,382, the sum 

of: (1) $1,946,869 in third-party 

expenses paid in total to their Data 

Center Provider (62% of the total 

applicable expense) for data center 

services; Fiber Connectivity Provider, 

for network services (62% of the total 

applicable expense); SFTI and other 

connectivity and content service 


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60See id. 

61See supra Section II.A.2. 

62See id. 

63 17 CFR 201.700(b)(3). 

64See id. 

65See id. 

providers for connectivity support (89% 

of the total applicable expense); and 

various other hardware and software 

providers (51% of the total applicable 

expense), (2) $5,708,808 in internal 

expenses, allocated to (a) employee 

compensation and benefit costs 

($3,259,251); (b) depreciation and 

amortization ($2,164,610); and (c) 

occupancy costs ($284,947) and (3) 

$1,432,705 of allocated general shared 

expenses that include recruiting and 

training, marketing and advertising 

costs, professional fees for legal, tax and 

accounting services, and 

telecommunications costs. Do 

commenters believe that these 

allocations are reasonable? Should the 

Exchange be required to provide more 

specific information regarding the 

allocation of third-party expenses, such 

as the overall estimated cost for each 

category of external expenses or at 

minimum the total applicable thirdparty expenses? Should the Exchange 

have provided either a percentage 

allocation or statements regarding the 

Exchange’s overall estimated costs for 

the internal expense categories and 

general shared expenses figure? Do 

commenters believe that the Exchange 

has provided sufficient detail about how 

it determined which costs are associated 

with providing and maintaining 10Gb 

ULL connectivity and why? Do 

commenters believe that the Exchange 

has provided sufficient detail about how 

it determined ‘‘general shared 

expenses’’ and how it determined what 

portion should be associated with 

providing and maintaining 10Gb ULL 

connectivity? Do commenters believe 

that the Exchange provided sufficient 

detail or explanation to support its 

claim that ‘‘no expense amount is 

allocated twice,’’ 60 whether among the 

sub-categories of expenses in this filing, 

across the Exchange’s fee filings for 

other products or services, or over time? 

The Exchange describes a ‘‘proprietary’’ 

process that was applied in making 

these determinations or arriving at 

particular allocations. Do commenters 

believe further explanation is necessary? 

What are commenters’ views on 

whether the Exchange has provided 

sufficient detail on the identity and 

nature of services provided by third 

parties? Across all of the Exchange’s 

projected costs, what are commenters’ 

views on whether the Exchange has 

provided sufficient detail on the 

elements that go into connectivity costs, 

including how shared costs are 

allocated and attributed to connectivity 

expenses, to permit an independent 

review and assessment of the 

reasonableness of purported cost-based 

fees and the corresponding profit 

margin thereon? 

2. Revenue Estimates and Profit 

Margin Range. The Exchange provides a 

single monthly revenue figure from 

March 2022 as the basis for calculating 

the profit margin of 36%. 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 believes that a 36% margin is a 

limited return over such costs.61 The 

profit margin is also dependent on the 

accuracy of the cost projections which, 

if inflated (intentionally or 

unintentionally), may render the 

projected profit margin meaningless. 

The Exchange acknowledges that this 

margin may fluctuate from month to 

month due to changes in the number of 

connections purchased, and that costs 

may increase, but that the number of 

connections has not materially changed 

over the prior months and so the 

months that the Exchange has used as 

a baseline to perform its assessment are 

representative of reasonably anticipated 

costs and expenses.62 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 36% profit margin 

would constitute a reasonable rate of 

return over cost for 10GB ULL 

connectivity, and is not a ‘‘supracompetitive’’ profit that exceeds the 

profits that can be obtained in a 

competitive market? If not, what would 

commenters consider to be a reasonable 

rate of return and/or what methodology 

would they consider to be appropriate 

for determining a reasonable rate of 

return? What are commenters’ views 

regarding what factors should be 

considered in determining what 

constitutes a reasonable rate of return 

for 10Gb ULL connectivity fees? Do 

commenters believe it relevant to an 

assessment of reasonableness that the 

Exchange’s proposed fees for 10Gb ULL 

connections are lower than those of 

other options exchanges to which the 

Exchange has compared the 10Gb ULL 

connectivity 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 not stated that it would 

re-evaluate the appropriate level of 

10Gb ULL fees if there is a material 

deviation from the anticipated profit 

margin. In light of the impact that the 

number of subscribers has on 

connectivity profit margins, and the 

potential for costs to decrease (or 

increase) over time, what are 

commenters’ views on the need for 

exchanges to commit to reevaluate, on 

an ongoing and periodic basis, their 

cost-based connectivity fees to ensure 

that they stay in line with their stated 

profitability target and do not become 

unreasonable over time, for example, by 

failing to adjust for efficiency gains, cost 

increases or decreases, and changes in 

subscribers? How formal should that 

process be, how often should that 

reevaluation occur, and what metrics 

and thresholds should be considered? 

How soon after a new connectivity fee 

change is implemented should an 

exchange assess whether its subscriber 

estimates were accurate and at what 

threshold should an exchange commit 

to file a fee change if its estimates were 

inaccurate? Should an initial review 

take place within the first 30 days after 

a connectivity fee is implemented? 60 

days? 90 days? Some other period? 

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.’’ 63 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,64 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.65 Moreover, 

‘‘unquestioning reliance’’ on an SRO’s 

representations in a proposed rule 

change would not be sufficient to justify 


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66See 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). 

67 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). 

68 15 U.S.C. 78s(b)(3)(C). 

69 17 CFR 200.30–3(a)(12), (57) and (58). 

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

2 17 CFR 240.19b–4. 

3 ‘‘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. 

Commission approval of a proposed rule 

change.66

The Commission believes it is 

appropriate to institute proceedings to 

allow for additional consideration and 

comment on the issues raised herein, 

including as to whether the proposal is 

consistent with the Act, any potential 

comments or supplemental information 

provided by the Exchange, and any 

additional independent analysis by the 

Commission. 

V. Commission’s Solicitation of 

Comments 

The Commission requests written 

views, data, and arguments with respect 

to the concerns identified above as well 

as any other relevant concerns. In 

particular, the Commission invites the 

written views of interested persons 

concerning whether the proposal is 

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

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

Act, or the rules and regulations 

thereunder. The Commission asks that 

commenters address the sufficiency and 

merit of the Exchange’s statements in 

support of the proposal, in addition to 

any other comments they may wish to 

submit about the proposed rule change. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4, any 

request for an opportunity to make an 

oral presentation.67

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by May 11, 2022. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by May 25, 2022. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File No. SR– 

EMERALD–2022–13 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–EMERALD–2022–13. This 

file number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

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

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

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

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549, on official 

business days between the hours of 

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

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–EMERALD–2022–13 and 

should be submitted on or before May 

11, 2022. Rebuttal comments should be 

submitted by May 25, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,68 that File 

Number SR–EMERALD–2022–13 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.69

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–08381 Filed 4–19–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94722; File No. SR– 

PEARL–2022–12] 

Self-Regulatory Organizations; MIAX 

PEARL LLC; Notice of Filing of a 

Proposed Rule Change To Amend the 

MIAX PEARL Options Fee Schedule To 

Increase the Monthly Fees for MIAX 

Express Network Full Service Port; 

Suspension of and Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove the Proposed 

Rule Change 

April 14, 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 April 1, 

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 

amend the fees for the Exchange’s MIAX 

Express Network Full Service (‘‘MEO’’) 3

Ports. 

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 


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