23586 Federal Register / Vol. 87, No. 76 / Wednesday, April 20, 2022 / Notices 

67 15 U.S.C. 78s(b)(3)(C). 

68 17 CFR 200.30–3(a)(12), (57) and (58). 

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

2 17 CFR 240.19b–4. 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–PEARL–2022–11 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,67 that File 

Number SR–PEARL–2022–11 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.68

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–08386 Filed 4–19–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

34559; File No. 812–15291] 

AGL Separate Account VL–R, et al; 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’ or ‘‘SEC’’). 

ACTION: Notice. 

Notice of application for an order 

(‘‘Order’’) approving the substitution of 

certain securities pursuant to section 

26(c) of the Investment Company Act of 

1940 (the ‘‘Act’’). 

SUMMARY OF APPLICATION: Applicants 

request an order pursuant to Section 

26(c) of the Act approving the proposed 

substitution of shares of the Fidelity VIP 

Government Money Market Portfolio, 

Initial Class of Variable Insurance 

Products Fund V for shares of the 

VALIC Company I Government Money 

Market I Fund of VALIC Company I 

held by certain separate accounts as 

investment options for certain variable 

life insurance and variable annuity 

contracts issued by American General 

Life Insurance Company and The 

United States Life Insurance Company 

in the City of New York. 

APPLICANTS: American General Life 

Insurance Company, The United States 

Life Insurance Company in the City of 

New York, AGL Separate Account VL– 

R, AGL Separate Account D, USL 

Separate Account USL A, and USL 

Separate Account USL VL–R. 

FILING DATES: The application was filed 

on December 21, 2021 and amended on 

March 28, 2022. 

HEARING OR NOTIFICATION OF HEARING: An 

order granting the requested relief will 

be issued unless the Commission orders 

a hearing. Interested persons may 

request a hearing on any application by 

emailing the SEC’s Secretary at 

Secretarys-Office@sec.gov and serving 

the Applicants with a copy of the 

request by email, if an email address is 

listed for the relevant Applicant below, 

or personally or by mail, if a physical 

address is listed for the relevant 

Applicant below. Hearing requests 

should be received by the Commission 

by 5:30 p.m. on May 10, 2022, and 

should be accompanied by proof of 

service on applicants, in the form of an 

affidavit or, for lawyers, a certificate of 

service. Pursuant to rule 0–5 under the 

Act, hearing requests should state the 

nature of the writer’s interest, any facts 

bearing upon the desirability of a 

hearing on the matter, the reason for the 

request, and the issues contested. 

Persons who wish to be notified of a 

hearing may request notification by 

emailing the Commission’s Secretary at 

Secretarys-Office@sec.gov. 

ADDRESSES: The Commission: 

Secretarys-Office@sec.gov. Applicants: 

Suzanne Ragsdale, suzanne.ragsdale@

aglife.com. 

FOR FURTHER INFORMATION CONTACT: Jill 

Ehrlich, Senior Counsel, or Lisa Reid 

Ragen, Branch Chief, at (202) 551–6825 

(Division of Investment Management, 

Chief Counsel’s Office). 

SUPPLEMENTARY INFORMATION: For 

Applicants’ representations, legal 

analysis, and conditions, please refer to 

Applicants’ amended and restated 

application, dated March 28, 2022, 

which may be obtained via the 

Commission’s website by searching for 

the file number at the top of this 

document, or for an Applicant using the 

Company name search field, on the 

SEC’s EDGAR system. The SEC’s 

EDGAR system may be searched at, at 

http://www.sec.gov/edgar/searchedgar/ 

legacy/companysearch.html. You may 

also call the SEC’s Public Reference 

Room at (202) 551–8090. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Dated: April 15, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–08475 Filed 4–19–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34 94720; File No. SR–MIAX– 

2022–16] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Notice of Filing of a Proposed 

Rule Change To Amend Its Fee 

Schedule To Adopt a Tiered-Pricing 

Structure for Additional Limited 

Service MIAX Express Interface Ports; 

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, Miami International Securities 

Exchange, LLC (‘‘MIAX’’ 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 proposed 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 Options Fee Schedule 

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

port fees. 

The text of the proposed rule change 

is available on the Exchange’s website at 

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

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV [sic] below. 

The Exchange has prepared summaries, 


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Federal Register / Vol. 87, No. 76 / Wednesday, April 20, 2022 / Notices 23587 

3MIAX Express Interface is a connection to MIAX 

systems that enables Market Makers to submit 

simple and complex electronic quotes to MIAX. See 

Fee Schedule, note 26. 

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

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

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

(‘‘RMMs’’) collectively. See Exchange Rule 100. 

5The term ‘‘System’’ means the automated 

trading system used by the Exchange for the trading 

of securities. See Exchange Rule 100. 

6See Securities Exchange Act Release No. 92661 

(August 13, 2021), 86 FR 46737 (August 19, 2021) 

(SR–MIAX–2021–37). 

7 Id. 

8See Letter from Richard J. McDonald, 

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

Vanessa Countryman, Secretary, Commission, dated 

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

9See Securities Exchange Act Release No. 93185 

(September 29, 2021), 86 FR 55093 (October 5, 

2021) (SR–MIAX–2021–43). 

10 Id. 

11See letters from Richard J. McDonald, SIG, to 

Vanessa Countryman, Secretary, Commission, dated 

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

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

Director, Equity and Options Market Structure, 

Securities Industry and Financial Markets 

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

Secretary, Commission, dated November 26, 2021 

(‘‘SIFMA Letter’’). 

The Exchange notes that the Healthy Markets 

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

on a related filing to amend fees for 10Gb ULL 

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

well as the SIFMA Letter also commented. See 

letter from Tyler Gellasch, Executive Director, HMA 

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

Commission, dated October 29, 2021 (commenting 

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

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

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

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

‘‘MIAX has repeatedly filed to change its 

connectivity fees in a way that will materially lower 

costs for many users, while increasing the costs for 

some of its heaviest of users. These filings have 

been withdrawn and repeatedly refiled. Each time, 

however, the filings contain significantly greater 

information about who is impacted and how than 

other filings that have been permitted to take effect 

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

Letter’’). 

12See Securities Exchange Act Release No. 93640 

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

2021). 

13See Securities Exchange Act Release No. 93771 

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

2021) (SR–MIAX–2021–60). 

14The Exchange notes that while the HMA Letter 

applauds the level of disclosure the Exchange 

included in the First and Second Proposed Rule 

Changes, the HMA Letter does not raise specific 

issues with the First or Second Proposed Rule 

Changes. Rather, it references the Exchange’s 

proposals by way of comparison to show the 

varying levels of transparency in exchange fees 

filings and recommends changes to the 

Commission’s review process of exchange fee 

filings generally. Therefore, the Exchange does not 

feel it is necessary to address the issues raised in 

the HMA Letter. 

15See supra note 13. 

16See Securities Exchange Act Release No. 94087 

(January 27, 2022), 87 FR 5918 (February 2, 2022) 

(SR–MIAX–2021–60, SR–EMERALD–2021–43) 

(Suspension of and Order Instituting Proceedings to 

Determine Whether to Approve or Disapprove 

Proposed Rule Changes to Amend Fee Schedules to 

Adopt Tiered-Pricing Structures for Additional 

Limited Service MIAX and MIAX Emerald Express 

Interface Ports). 

17See Securities Exchange Act Release No. 94259 

(February 15, 2022), 87 FR 9747 (February 22, 2022) 

(SR–MIAX–2022–08) (Notice of Filing of a Proposed 

Rule Change to Amend Its Fee Schedule to Adopt 

a Tiered-Pricing Structure for Additional Limited 

Service MIAX Express Interface Ports; Suspension 

of and Order Instituting Proceedings to Determine 

Whether to Approve or Disapprove the Proposed 

Rule Change). 

18See Letter from Richard J. McDonald, SIG, to 

Vanessa Countryman, Secretary, Commission, dated 

March 15, 2022 (‘‘SIG Letter 4’’). 

19Full Service MEI Ports provide Market Makers 

with the ability to send Market Maker quotes, 

eQuotes, and quote purge messages to the MIAX 

System. Full Service MEI Ports are also capable of 

receiving administrative information. Market 

Makers are limited to two Full Service MEI Ports 

per matching engine. See Fee Schedule, Section 

5(d)(ii), note 27. 

20Limited Service MEI Ports provide Market 

Makers with the ability to send eQuotes and quote 

purge messages only, but not Market Maker Quotes, 

to the MIAX System. Limited Service MEI Ports are 

also capable of receiving administrative 

information. Market Makers initially receive two 

Limited Service MEI Ports per matching engine. See 

Fee Schedule, Section 5(d)(ii), note 28. 

21A ‘‘matching engine’’ is a part of the MIAX 

electronic system that processes options quotes and 

trades on a symbol-by-symbol basis. Some matching 

engines will process option classes with multiple 

root symbols, and other matching engines will be 

dedicated to one single option root symbol (for 

example, options on SPY will be processed by one 

single matching engine that is dedicated only to 

SPY). A particular root symbol may only be 

assigned to a single designated matching engine. A 

particular root symbol may not be assigned to 

multiple matching engines. See Fee Schedule, 

Section 5(d)(ii), note 29. 

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

of the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to adopt a tiered-pricing 

structure for additional Limited Service 

MIAX Express Interface (‘‘MEI’’) Ports 3

available to Market Makers.4 The 

Exchange believes a tiered-pricing 

structure will encourage Market Makers 

to be more efficient and economical 

when determining how to connect to the 

Exchange. This should also enable the 

Exchange to better monitor and provide 

access to the Exchange’s network to 

ensure sufficient capacity and headroom 

in the System.5

The Exchange initially filed the 

proposed fee changes on August 2, 

2021, with the changes being 

immediately effective (‘‘First Proposed 

Rule Change’’).6 The First Proposed 

Rule Change was published for 

comment in the Federal Register on 

August 19, 2021.7 The Commission 

received one comment letter on the First 

Proposed Rule Change.8 The Exchange 

withdrew the First Proposed Rule 

Change on September 28, 2021 and 

resubmitted its proposal (‘‘Second 

Proposed Rule Change’’).9 The Second 

Proposed Rule Change was published 

for comment in the Federal Register on 

October 5, 2021.10 The Second Proposed 

Rule Change provided additional 

justification for the proposed fee 

changes and addressed certain points 

raised in the single comment letter that 

was submitted on the First Proposed 

Rule Change. The Commission received 

four comment letters from three separate 

commenters on the Second Proposed 

Rule Change.11 The Commission 

suspended the Second Proposed Rule 

Change on November 22, 2021.12 The 

Exchange withdrew the Second 

Proposed Rule Change on December 1, 

2021 and submitted a revised proposal 

for immediate effectiveness (‘‘Third 

Proposed Rule Change’’).13 The Third 

Proposed Rule Change meaningfully 

attempted to address issues or questions 

that have been raised by providing 

additional justification and explanation 

for the proposed fee changes and 

directly respond to the points raised in 

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

SIFMA Letter submitted on the First and 

Second Proposed Rule Changes,14 and 

feedback provided by Commission Staff 

during a telephone conversation on 

November 18, 2021 relating to the 

Second Proposed Rule Change. The 

Third Proposed Rule Change was 

published for comment in the Federal 

Register on December 20, 2021.15

Although the Commission did not 

receive any comment letters on the 

Third Proposed Rule Change, the 

Commission suspended the Third 

Proposed Rule Change on January 27, 

2022.16 The Exchange withdrew the 

Third Proposed Rule Change on 

February 1, 2022 and submitted a 

revised proposal for immediate 

effectiveness, which was noticed and 

immediately suspended by the 

Commission on February 15, 2022 

(‘‘Fourth Proposed Rule Change’’).17

The Commission received one comment 

letter on the Fourth Proposed Rule 

Change.18 The Exchange withdrew the 

Fourth Proposed Rule Change on March 

30, 2022 and submits this revised 

proposal to be effective April 1, 2022 

(‘‘Fifth Proposed Rule Change’’). 

Additional Limited Service MEI Port 

Tiered-Pricing Structure 

The Exchange proposes to amend the 

fees for additional Limited Service MEI 

Ports. Currently, the Exchange allocates 

two (2) Full Service MEI Ports 19 and 

two (2) Limited Service MEI Ports 20 per 

matching engine 21 to which each 


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22See Securities Exchange Act Release No. 79666 

(December 22, 2016), 81 FR 96133 (December 29, 

2016) (SR–MIAX–2016–47). 

23See ‘‘The market at a glance,’’ available at 

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

29, 2022). 

24See NYSE American Options Fee Schedule, 

Section V.A., Port Fees. 

25See supra note 23. 

26See Nasdaq Stock Market, Nasdaq Options 7 

Pricing Schedule, Section 3, Nasdaq Options 

Market—Ports and Other Services. 

27See supra note 23. 

28 15 U.S.C. 78f(b). 

29 15 U.S.C. 78f(b)(4). 

30 15 U.S.C. 78f(b)(5). 

31See 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). 

32See 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’’). 

Market Maker connects. Market Makers 

may also request additional Limited 

Service MEI Ports for each matching 

engine to which they connect. The Full 

Service MEI Ports, Limited Service MEI 

Ports and the additional Limited Service 

MEI Ports all include access to the 

Exchange’s primary and secondary data 

centers and its disaster recovery center. 

Market Makers may request additional 

Limited Service MEI Ports. Prior to the 

First Proposed Rule Change, Market 

Makers were assessed a $100 monthly 

fee for each additional Limited Service 

MEI Port for each matching engine. This 

fee was unchanged since 2016.22

The Exchange now proposes to move 

from a flat monthly fee per additional 

Limited Service MEI Port for each 

matching engine to a tiered-pricing 

structure for additional Limited Service 

MEI Ports for each matching engine 

under which the monthly fee would 

vary depending on the number of 

additional Limited Service MEI Ports 

the Market Maker elects to purchase. 

Specifically, the Exchange will continue 

to provide the first and second 

additional [sic] Limited Service MEI 

Ports for each matching engine free of 

charge, as described above, per the 

initial allocation of Limited Service MEI 

Ports that Market Makers receive. The 

Exchange proposes the following tieredpricing structure: (i) The third and 

fourth additional [sic] Limited Service 

MEI Ports for each matching engine will 

increase from the current flat monthly 

fee of $100 to $150 per port; (ii) the fifth 

and sixth additional [sic] Limited 

Service MEI Ports for each matching 

engine will increase from the current 

flat monthly fee of $100 to $200 per 

port; and (iii) the seventh to the twelfth 

[sic] additional [sic] Limited Service 

MEI Ports will increase from the current 

monthly flat fee of $100 to $250 per 

port. 

The Exchange believes the other 

exchanges’ port fees are useful examples 

of alternative approaches to providing 

and charging for port access and 

provides the below table for comparison 

purposes only to show how its proposed 

fees compare to fees currently charged 

by other options exchanges for similar 

port access. As shown by the below 

table, the Exchange’s proposed highest 

tier is still less than fees charged for 

similar port access provided by other 

options exchanges. 

Exchange Type of port Monthly fee 

(per port) 

MIAX (as proposed) (equity options market share of 5.63% as 

of March 29, 2022 for the month of March).23

Limited Service MEI Port ........ 1–2 ports. FREE (not changed in this proposal); 3–4 ports. $150; 5–6 ports. $200; 7 

or more ports. $250. 

NYSE American, LLC (‘‘Amex’’) 24 (equity options market share 

of 7.15% as of March 29, 2022 for the month of March).25

Order/Quote Entry Port ........... $450. 

The NASDAQ Stock Market LLC (‘‘NASDAQ’’) 26 (equity options market share of 8.62% as of March 29, 2022 for the 

month of March).27

SQF Port ................................. 1–5 ports. $1,500.00; 6–20 ports. $1,000.00; 

21 or more ports. $500. 

2. Statutory Basis 

The Exchange believes that the 

proposed fees are consistent with 

Section 6(b) of the Act 28 in general, and 

furthers the objectives of Section 6(b)(4) 

of the Act 29 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 proposal 

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

of the Act 30 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 fees 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’’).31 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.’’ 32 Based on both the BOX Order 

and the Guidance, the Exchange 

believes that the proposed fees are 

consistent with the Act because they are 

(i) reasonable, equitably allocated, not 

unfairly discriminatory, and not an 

undue burden on competition; (ii) 

comply with the BOX Order and the 

Guidance; and (iii) supported by 

evidence (including comprehensive 

revenue and cost data and analysis) that 

the proposed fees are fair and 

reasonable and will not result in 

excessive pricing or supra-competitive 

profit. 

The Proposed Fees Will Not Result in a 

Supra-Competitive Profit 

The Exchange believes that 

exchanges, in setting fees of all types, 

should meet very high standards of 

transparency to demonstrate why each 

new fee or fee amendment meets the 

requirements of the Act that fees be 

reasonable, equitably allocated, not 

unfairly discriminatory, and not create 

an undue burden on competition among 

market participants. The Exchange 

believes this high standard is especially 

important when an exchange imposes 

various fees for market participants to 

access an exchange’s marketplace. 


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33 Id. 

34 Id. 

35 Id. 

36 Id. 

37 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.’’ 33 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.’’ 34 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.’’ 35 The Exchange does not 

assert that the proposed fees are 

constrained by competitive forces. 

Rather, the Exchange asserts that the 

proposed fees are reasonable because 

they will permit recovery of the 

Exchange’s costs in providing access 

services to supply Limited Service MEI 

Ports and will not result in the 

Exchange generating a supracompetitive profit. 

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

exceed the profits that can be obtained 

in a competitive market.’’ 36 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.’’ 37 The Exchange provides 

this analysis below. 

The proposed fees are based on a costplus model. A Limited Service MEI Port 

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 

Limited Service MEI Ports, 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 Limited Service 

MEI Ports 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 

proposed fees are based on the 

Exchange’s costs and reasonable 

business needs and believes the 

proposed fees 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 

Limited Service MEI Ports because of 

the uncertainty of forecasting subscriber 

decision making with respect to firms’ 

port and access needs. The Exchange 

believes that the proposed fees will not 

result in excessive pricing or supracompetitive 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 Limited Service MEI 

Ports, and, if such expense did so relate, 

what portion (or percentage) of such 

expense actually supports access to the 

Exchange’s System Networks via 

Limited Service MEI Ports. 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 

Limited Service MEI Ports. 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 Limited 

Service MEI Ports. The Exchange 

reviewed each individual expense to 

determine if such expense was related 

to Limited Service MEI Ports. 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 Limited Service 

MEI Ports. 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 Limited 

Service MEI Ports. 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 

the infrastructure and headcount to 


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38The 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. 

39For 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. 87875 (December 31, 

2019), 85 FR 770 (January 7, 2020) (SR–MIAX– 

2019–15). 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. 

40The 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. 

fully support access to the Exchange 

and its System Networks via Limited 

Service MEI Ports. 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 

Limited Service MEI Ports. 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 proposed fees are a 

reasonable attempt to offset a portion of 

those costs associated with providing 

access to and maintaining its System 

Networks’ infrastructure and related 

Limited Service MEI Ports. 

The Exchange estimated its total 

annual expense to provide and maintain 

access to the Exchange’s System 

Networks via Limited Service MEI Ports 

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 Limited Service MEI Ports; and (3) 

general shared expenses.38 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 Limited Service MEI Ports is 

estimated to be $1,741,458, or $145,121 

per month. The Exchange believes it is 

more appropriate to analyze the 

proposed fees utilizing its estimated 

2022 revenue and costs, which utilize 

the same presentation methodology as 

set forth in the Exchange’s previouslyissued Audited Unconsolidated 

Financial Statements.39 The $1,741,458 

estimated total annual expense is 

directly related to the access to the 

Exchange’s System Networks via 

Limited Service MEI Ports 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 lineitem costs considered by the Exchange 

for each category are described further 

below. 

External expenses 

Category 

Percentage of 

total expense 

amount allocated 

Data Center Provider ................................................................................................................................................................... 4.95% 

Fiber Connectivity Provider ......................................................................................................................................................... 2.64% 

Security Financial Transaction Infrastructure (‘‘SFTI’’), and Other Connectivity and Content Service Providers ...................... 4.95% 

Hardware and Software Providers .............................................................................................................................................. 4.95% 

Total of External Expenses ......................................................................................................................................................... 40 $174,427 

Internal Expenses 

Category Expense amount 

allocated 

Employee Compensation ............................................................................................................................................................. $1,057,907 

Depreciation and Amortization .................................................................................................................................................... 186,118 

Occupancy ................................................................................................................................................................................... 37,088 

Total of Internal Expenses ........................................................................................................................................................... 1,281,113 

Allocated Shared Expenses ........................................................................................................................................................ 285,918 

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 Limited Service MEI Ports 

to Members. Each of these expense 

items, including physical hardware, 

software, employee compensation and 


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benefits, occupancy costs, and the 

depreciation and amortization of 

equipment, has 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 Limited Service 

MEI Ports. 

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 Limited Service MEI 

Ports. 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 Limited Service 

MEI Ports. This may result in the 

Exchange under allocating an expense 

to provide and maintain its System 

Networks and access to the System 

Networks via Limited Service MEI Ports, 

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 Pearl and MIAX 

Emerald, 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 third 

parties, adjustments to internal resource 

allocations, and different system 

architecture of the Exchange as 

compared to its affiliates. 

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 Limited Service MEI Ports 

are estimated to be $174,427. 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 Limited 

Service MEI Ports. 

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 4.95% of the 

total applicable data center provider 

expense is applicable to providing and 

maintaining access services and System 

Networks associated with Limited 

Service MEI Ports. The Exchange 

believes this allocation is reasonable 

because Limited Service MEI Ports are 

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 port 

access and 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 other 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 

Limited Service MEI Ports 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 fiber 

connectivity expense and recoups that 

expense, in part, by charging for Limited 

Service MEI Ports. 

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 


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determined that 2.64% of the total fiber 

connectivity expense was applicable to 

providing and maintaining access 

services and System Networks 

associated with Limited Service MEI 

Ports. The Exchange believes this 

allocation is reasonable because Limited 

Service MEI Ports are 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 Limited Service MEI 

Ports. 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 Limited Service MEI Ports. 

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 

Limited Service MEI Ports. 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 Limited 

Service MEI Ports. 

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 4.95% 

of the total applicable SFTI and other 

service provider expense is allocated to 

providing the access services associated 

with Limited Service MEI Ports. 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 

Limited Service MEI Ports. 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 

Limited Service MEI Ports 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 

Limited Service MEI Ports. 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 

Limited Service MEI Ports, 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 Limited Service 

MEI Ports. 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 Limited Service 

MEI Ports. 

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 4.95% of the total applicable 

hardware and software expense is 

allocated to providing and maintaining 

access services and System Networks 

associated with Limited Service MEI 

Ports. 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 Limited 

Service MEI Ports. The Exchange only 

allocated the portion of this expense to 

the hardware and software that is 

related to a market participant’s use of 

Limited Service MEI Ports, 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 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 Limited Service MEI Ports. 

The Exchange believes this allocation is 


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41For purposes of this allocation, the Exchange 

did not consider expenses related to supporting 

employees who support Limited Service MEI Ports, 

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 3.1 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 Limited Service MEI Ports. 

42All 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. 

reasonable because it represents the 

Exchange’s cost to provide and maintain 

its System Networks and access to its 

System Networks via Limited Service 

MEI Ports, 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 

Limited Service MEI Ports is estimated 

to be $1,281,113. 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 Limited Service MEI Ports, 

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 

Limited Service MEI Ports, 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 Limited 

Service MEI Ports. 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 

Limited Service MEI Ports. 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 Limited Service MEI Ports. 

As part of this review, the Exchange 

considered employees whose functions 

include providing and maintaining the 

System Networks and Limited Service 

MEI Ports and used a blended rate of 

compensation reflecting salary, stock 

and bonus compensation, bonuses, 

benefits, payroll taxes, and 401K 

matching contributions.41

Based on this review, the Exchange 

determined to allocate $1,057,907 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 

Limited Service MEI Ports. 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 Limited Service MEI Ports 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 Limited 

Service MEI Ports. The Exchange does 

not charge a separate fee regarding 

employees who support Limited Service 

MEI Ports and the Exchange seeks to 

recoup that expense, in part, by 

charging for Limited Service MEI Ports. 

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 Limited 

Service MEI Ports. 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 Limited Service 

MEI Ports, 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 Limited Service MEI 

Ports 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 

Limited Service MEI Ports. 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 

Limited Service MEI Ports. 

Based on this review, the Exchange 

determined to allocate $186,118 in 

depreciation and amortization expense 

to providing access to the System 

Networks via Limited Service MEI Ports. 

The Exchange only allocated the portion 

of this depreciation expense to the 

hardware and software related to a 

market participant’s use of M [sic] 

Limited Service MEI E.O. [sic] Ports. 

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.42

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 

Limited Service MEI Ports. Similarly, 

the Exchange also considered the actual 

physical space used to house hardware 

and other equipment necessary to 

provide and maintain the System 

Networks and Limited Service MEI 

Ports. This equipment includes 

computers, servers, and accessories 

necessary to support the System 

Networks and Limited Service MEI 

Ports. Based on this review, the 


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43See supra note 32. 

44The Exchange has incurred a cumulative loss 

of $175 million since its inception in 2008 to 2020, 

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

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

for Registration or Exemption from Registration as 

a National Securities Exchange, filed July 28, 2021, 

available at https://www.sec.gov/Archives/edgar/ 

vprr/2100/21000460.pdf. 

Exchange determined to allocate 

$37,088 of its occupancy expense to 

provide and maintain the System 

Networks and Limited Service MEI 

Ports. 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 Limited Service 

MEI Ports. 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 

Limited Service MEI Ports. 

Allocated Shared Expense 

Finally, a limited portion of general 

shared expenses was allocated to overall 

Limited Service MEI Port costs as 

without these general shared costs, the 

Exchange would not be able to operate 

in the manner that it does and provide 

Limited Service MEI Ports. 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 Limited Service MEI Ports 

and the System Networks that support 

those connections is estimated to be 

$285,918. 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 Limited Service MEI 

Ports), 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 

Limited Service MEI Ports, the 

Exchange analyzed the number of 

Members currently utilizing Limited 

Service MEI Ports 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 fees 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 

fees, Members purchased 1,645 Limited 

Service MEI Ports, for which the 

Exchange anticipates charging $113,300. 

This will result in a loss of $32,121 

($113,000 in Limited Service MEI Port 

revenue, minus $145,121 in monthly 

Limited Service MEI Port expenses). For 

April 2022, assuming the Exchange 

charges the proposed fees described 

herein, the Exchange anticipates 

Members purchasing 1,645 Limited 

Service MEI Ports, for which the 

Exchange anticipates charging $241,450. 

This will result in a profit of $96,329 

($241,450 in Limited Service MEI Port 

revenue, minus $145,121 in monthly 

Limited Service MEI Port expenses) for 

that month (a 40% profit margin). 

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 

ports may be purchased from month to 

month as Members are free to add and 

drop ports at any time based on their 

own business decisions. 

The Exchange believes the proposed 

margin is reasonable and will not result 

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

Guidance defines ‘‘supra-competitive 

profit’’ as ‘‘profits that exceed the profits 

that can be obtained in a competitive 

market.’’ 43 Until recently, the Exchange 

has operated at a cumulative net annual 

loss since it launched operations in 

2008.44 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 

Limited Service MEI Ports, 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 estimates 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 

revenue expected from Limited Service 

MEI Ports, 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 


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45See supra note 23. 

46 Id. 

47See supra note 24. 

48See supra note 23. 

49See supra note 26. 

50See supra note 23. 

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 keep 

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 control costs, but 

not excessive where an exchange is 

charging the same fee but has a lower 

profit margin due to higher costs. 

The expected 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 36 

million quotes per second and average 

round trip latency rate of approximately 

19 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 

combination. Exchange systems offer 

two customer interfaces, FIX gateway 

for orders, and MEI 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 margin is 

reasonable because it reflect the 

Exchange cost controls and the quality 

of the Exchanges systems. 

The Exchange also believes its 

proposed 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 5.63%.45 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 port access. As 

shown by the below table, the 

Exchange’s proposed fee remains less 

than fees charged for similar port access 

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 ports. 

Exchange Type of port Monthly fee 

(per port) 

MIAX (as proposed) (equity options market share of 5.63% as of 

March 29, 2022 for the month of March) 46.

Limited Service MEI Port ............... 1–2 ports. FREE (not changed in 

this proposal). 

3–4 ports. $150. 

5–6 ports. $200. 

7 or more ports. $250. 

Amex 47 (equity options market share of 7.15% as of March 29, 2022 

for the month of March) 48.

Order/Quote Entry Port ................. $450. 

NASDAQ 49 (equity options market share of 8.62% as of March 29, 

2022 for the month of March) 50.

SQF Port ........................................ 1–5 ports. $1,500.00. 

6–20 ports. $1,000.00. 

21 or more ports. $500. 

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 Limited Service MEI 

Ports), 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 exchanges’ costs to provide 

ports or their fee markup over those 

costs, and therefore cannot use other 

exchange’s port fees as a benchmark to 

determine a reasonable markup over the 

costs of providing ports. Nevertheless, 

the Exchange believes the other 

exchanges’ port fees are useful examples 

of alternative approaches to providing 

and charging for ports 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 fees 

are reasonable because the proposed 

fees are still less than fees charged for 

similar ports provided by other options 

exchanges with comparable market 

shares. 

As described in the above table, the 

Exchange’s proposed fees remain less 

than fees charged for similar ports 

provided by other options exchanges 

with similar market share. In the each 

of the above cases, the Exchange’s 

proposed fees are still significantly 

lower than that of competing options 

exchanges with similar market share. 

Despite proposing lower or similar fees 


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51See supra note 18. 

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 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 fees are equitably allocated 

among users of the network connectivity 

alternatives, as the users of the Limited 

Service MEI Ports consume the most 

bandwidth and resources of the 

network. Specifically, the Exchange 

notes that the users who take the 

maximum amount of Limited Service 

MEI Ports account for approximately 

greater than 99% of message traffic over 

the network, while the users of fewer 

Limited Service MEI Ports account for 

approximately less than 1% of message 

traffic over the network. In the 

Exchange’s experience, users who only 

utilize the two free Limited Service MEI 

Ports do not have a business need for 

the high performance network solutions 

required by users who take the 

maximum amount of Limited Service 

MEI Ports. The Exchange’s high 

performance network solutions and 

supporting infrastructure (including 

employee support), provides 

unparalleled system throughput with 

the network ability to support access to 

several distinct options markets and the 

capacity to handle approximately 38 

million quote messages per second. On 

an average day, the Exchange and MIAX 

Pearl handle over approximately 

8,304,500,000 billion total messages. Of 

that total, users of the maximum amount 

of Limited Service MEI Ports generate 

approximately 8.3 billion messages, and 

users who utilize the two free Limited 

Service MEI Ports generate 

approximately 4.5 million 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 users who take the 

most Limited Service MEI Ports 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 those 

users. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

With respect to intra-market 

competition, the Exchange does not 

believe that the proposed rule change 

would place certain market participants 

at the Exchange at a relative 

disadvantage compared to other market 

participants or affect the ability of such 

market participants to compete. As 

stated above, the Exchange does not 

believe its proposed pricing will impose 

a barrier to entry to smaller participants 

and notes that the proposed pricing 

structure is associated with relative 

usage of the various market participants. 

Firms that are primarily order routers 

seeking best-execution do not utilize 

Limited Service MEI Ports on MIAX and 

therefore will not pay the fees 

associated with the tiered-pricing 

structure. Rather, the fees described in 

the proposed tiered-pricing structure 

will only be allocated to Market Making 

firms that engage in advanced trading 

strategies and typically request multiple 

Limited Service MEI Ports, beyond the 

two that are free. Accordingly, the firms 

engaged in a Market Making business 

generate higher costs by utilizing more 

of the Exchange’s resources. Those 

Market Making firms that purchase 

higher amounts of additional Limited 

Service MEI Ports tend to have specific 

business oriented market making and 

trading strategies, as opposed to firms 

engaging solely in best-execution order 

routing business. Additionally, the use 

of such additional Limited Service MEI 

Ports is entirely voluntary. 

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 access all options 

exchanges. There is no reason to believe 

that our proposed price increase will 

harm another exchange’s ability to 

compete. The Exchange operates in a 

highly competitive environment, and as 

discussed above, its ability to price 

access and ports is constrained by 

competition among exchanges and third 

parties. There are other options markets 

of which market participants may access 

in order 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. 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 

One comment letter was submitted on 

the Fourth Proposed Rule Change 51 and 

the Exchange responds to issues raised 

in that comment letter here. 

First, SIG Letter 4 asserts that the 

Exchange’s motivation for the proposed 

fees is not a proper justification and 

refers to statements included in 

withdrawn filings about the Exchange’s 

need to recoup initial capital 

expenditures. SIG Letter 4 does not 

provided a reason why recoupment of 

initial capital expenditures is not a 

proper justification for a proposed rule 

change. SIG Letter 4 also asserts that 

enhancing profitability is not an 

appropriate justification for the 

proposed fee change. The Exchange 

never asserted in any of the preceding 

versions of this proposed fee change 

that enhancing profitability was a 

motivation for the proposed fee change. 

Rather, the Exchange provided 

numerous reasons for the proposed fee 

change, including the need to cover 

ongoing internal and external expenses 

and anticipated increases in those costs 

due to ongoing inflationary pressures. 

Second, SIG Letter 4 claims that the 

Exchange omitted the data necessary to 

assess the proposed fee change under 

the Exchange Act. SIG Letter 4 also 

asserts that the Exchange’s disclosed 

cost data is not reliable. With each 

iteration of this proposed fee change, 

the Exchange provided more detail 

about its cost based analysis and 

rationale. In accordance with the 

Guidance, the Exchange has provided 

sufficient detail to support a finding that 

the proposed fees are consistent with 

the Exchange Act. The proposal 

includes a detailed description of the 

Exchange’s costs and how the Exchange 


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52See supra note 11. 

53 15 U.S.C. 78f(b)(4). 

54 15 U.S.C. 78s(b)(3)(C). 

55 15 U.S.C. 78s(b)(1). 

56See Securities Exchange Act Release No. 92661 

(August 13, 2021), 86 FR 46737. The Commission 

received one comment letter on that proposal. 

Comment on SR–MIAX–2021–37 can be found at: 

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

srmiax202137.htm. 

57See Securities Exchange Act Release No. 93185 

(September 29, 2021), 86 FR 55093. 

58Comment on SR–MIAX–2021–43 can be found 

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

srmiax202143.htm. 

59See Securities Exchange Act Release No. 93640, 

86 FR 67745 (November 29, 2021). 

60See Securities Exchange Act Release No. 93771 

(December 14, 2021), 86 FR 71940. 

61See Securities Exchange Act Release No. 94087, 

87 FR 5918 (February 2, 2022). 

62See Securities Exchange Act Release No. 94259, 

87 FR 9747 (February 22, 2022). 

63Comment on SR–MIAX–2022–08 can be found 

at: https://www.sec.gov/comments/sr-miax-2022-08/ 

srmiax202208.htm. 

64See 17 CFR 240.19b&4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

65See id. 

66 15 U.S.C. 78f(b)(4). 

determined to allocate those costs 

related to the proposed fees. The 

Exchange was commended by an 

industry group regarding the level of 

transparency and disclosure included in 

the proposed fee changes and that group 

was supportive of the efforts made by 

the Exchange and its affiliates to 

provide increased transparency and 

justification for their proposed fees. The 

commenter specifically noted that: 

MIAX has repeatedly filed to change its 

connectivity fees in a way that will 

materially lower costs for many users, while 

increasing the costs for some of its heaviest 

of users. These filings have been withdrawn 

and repeatedly refiled. Each time, however, 

the filings contain significantly greater 

information about who is impacted and how 

than other filings that have been permitted to 

take effect without suspension. For example, 

MIAX detailed the associated projected 

revenues generated from the connectivity 

fees by user class, again in a clear attempt to 

comply with the SRO Fee Filing Guidance. 52

Despite the Exchange refiling its fee 

proposals to include significantly 

greater information about the impact of 

the proposed fees on Members and nonMembers, primarily at the request of the 

Commission Staff and in response to 

comments from SIG, SIG argues that the 

data the Exchange provided is 

insufficient or unreliable. Section 

6(b)(4) of the Act 53 requires an 

exchange to ‘‘provide for the equitable 

allocation of reasonable dues, fees and 

other charges.’’ The standard set by 

Congress for the Exchange to establish 

or amend a certain fee is 

‘‘reasonableness,’’ and the Exchange 

provided significant detail in this filing 

and past filings to support a finding that 

the proposed fees are reasonable under 

the Exchange Act. 

SIG Letter 4 also claims that the 

Exchange has not shown that the 

estimated profit margin is reasonable. In 

this filing, the Exchange enhanced its 

justification and support to find that the 

projected margin is reasonable and 

would not result in a supra-competitive 

profit. SIG Letter 4 states that SIG 

believes exchanges are utilities and 

utilities should only generate single to 

low double digit profit margins. This 

statement assumes that the projected 

profit margin is reflective of the 

Exchange’s overall profit margin and 

ignores that this is a single profit margin 

from a single offering that is offset by 

lower or negative profit margins for 

other products and services offered by 

the Exchange. SIG’s statement that 

utilities should only generate single to 

low double digit profit margins ignores 

SIG’s own reference to a 14.4%, low 

double digit profit margin from one of 

the Exchange’s recent proposed fee 

changes, as well as single digit to 

negative profit margins in other 

Exchange filings currently pending 

before the Commission. 

III. Suspension of the Proposed Rule 

Change 

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

Act,54 at any time within 60 days of the 

date of filing of a proposed rule change 

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

Act,55 the Commission summarily may 

temporarily suspend the change in the 

rules of a self-regulatory organization 

(‘‘SRO’’) if it appears to the Commission 

that such action is necessary or 

appropriate in the public interest, for 

the protection of investors, or otherwise 

in furtherance of the purposes of the 

Act. As discussed below, the 

Commission believes a temporary 

suspension of the proposed rule change 

is necessary and appropriate to allow for 

additional analysis of the proposed rule 

change’s consistency with the Act and 

the rules thereunder. 

As the Exchange further details above, 

the Exchange first filed a proposed rule 

change proposing fee changes as 

proposed herein on August 2, 2021. 

That proposal, SR–MIAX–2021–37, was 

published for comment in the Federal 

Register on August 19, 2021.56 On 

September 28, 2021, the Exchange 

withdrew SR–MIAX–2021–37 and filed 

a proposed rule change proposing fee 

changes as proposed herein (SR–MIAX– 

2021–43). That proposal, SR–MIAX– 

2021–43, was published for comment in 

the Federal Register on October 5, 

2021.57 The Commission received three 

comment letters from two separate 

commenters on SR–MIAX–2021–43.58

On November 22, 2021, pursuant to 

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

Commission: (1) Temporarily 

suspended the proposed rule change; 

and (2) instituted proceedings to 

determine whether to approve or 

disapprove the proposed rule change.59

On December 1, 2021, the Exchange 

withdrew SR–MIAX–2021–43 and filed 

a proposed rule change proposing fee 

changes as proposed herein (SR–MIAX– 

2021–60). That filing, SR–MIAX–2021– 

60, was published for comment in the 

Federal Register on December 20, 

2021.60 On January 27, 2022, pursuant 

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

Commission: (1) Temporarily 

suspended the proposed rule change 

(SR–MIAX–2021–60); and (2) instituted 

proceedings to determine whether to 

approve or disapprove the proposal.61

On February 1, 2022, the Exchange 

withdrew SR–MIAX–2021–60 and filed 

a proposed rule change proposing fee 

changes as proposed herein (SR–MIAX– 

2022–08). On February 15, 2022, 

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

Act, the Commission: (1) Temporarily 

suspended the proposed rule change 

(SR–MIAX–2022–08); and (2) instituted 

proceedings to determine whether to 

approve or disapprove the proposal.62

The Commission received one comment 

letter on SR–MIAX–2022–08.63 On 

March 30, 2022, the Exchange withdrew 

SR–MIAX–2022–08 and on April 1, 

2022, filed the instant filing, which is 

substantially similar. 

When exchanges file their proposed 

rule changes with the Commission, 

including fee filings like the Exchange’s 

present proposal, they are required to 

provide a statement supporting the 

proposal’s basis under the Act and the 

rules and regulations thereunder 

applicable to the exchange.64 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.’’ 65

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; 66 (2) perfect the mechanism of 

a free and open market and a national 

market system, protect investors and the 


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67 15 U.S.C. 78f(b)(5). 

68 15 U.S.C. 78f(b)(8). 

69See 15 U.S.C. 78f(b)(4), (5), and (8), 

respectively. 

70For 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). 

71 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. 

72 15 U.S.C. 78s(b)(2)(B). 

73 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. 

74 15 U.S.C. 78f(b)(4). 

75 15 U.S.C. 78f(b)(5). 

76 15 U.S.C. 78f(b)(8). 77See supra Section II.A.2. 

public interest, and not permit unfair 

discrimination between customers, 

issuers, brokers, or dealers; 67 and (3) 

not impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the Act.68

In temporarily suspending the 

Exchange’s fee change, the Commission 

intends to further consider whether the 

proposed additional Limited Service 

MEI Port fees are consistent with the 

statutory requirements applicable to a 

national securities exchange under the 

Act. In particular, the Commission will 

consider whether the proposed rule 

change satisfies the standards under the 

Act and the rules thereunder requiring, 

among other things, that an exchange’s 

rules provide for the equitable 

allocation of reasonable fees among 

members, issuers, and other persons 

using its facilities; not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or dealers; 

and not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.69

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.70

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) 71 and 19(b)(2)(B) 72 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,73 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),74 6(b)(5),75 and 6(b)(8) 76 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 fees are constrained 

by competitive forces. Rather, the 

Exchange states that its proposed fees 

are based on a ‘‘cost-plus model,’’ 

employing a ‘‘conservative approach,’’ 

and that the $1,741,458 estimated total 

annual expense (comprised of $174,427 

in allocated third-party expenses, 

$1,281,113 in allocated internal 

expenses, and $285,918 in allocated 

general shared expenses) is ‘‘directly 

related to the access to the Exchange’s 

System Networks via Limited Service 

MEI Ports and not any other product or 

service offered by the Exchange.’’ 77 With 

respect to third-party and internal 

expenses: Do commenters believe that 

the Exchange provided sufficient detail 

about how it determined which subcategories of third-party and internal 

expenses are directly related to Limited 

Service MEI Ports? Should the Exchange 

be required to identify the subcategories of expenses that it deemed 

not to be directly related to Limited 

Service MEI Ports? Do commenters 

believe that the Exchange provided 

sufficient detail about how it 

determined what percentage or portion 

of each such sub-category’s total annual 

expense should be allocated as actually 

supporting access to the Exchange’s 

Systems Networks via Limited Service 

MEI Ports? The Exchange provided 

either the percentage or the portion of a 

sub-category’s total annual expense that 

it allocated as supporting access to the 

Exchange’s Systems Networks via 

Limited Service MEI Ports, but not both. 

Nor did the Exchange provide the total 

annual expense for each sub-category to 

which these percentages or portions 

apply. Do commenters believe that the 

Exchange provided sufficient context to 

permit an independent review and 

assessment of the reasonableness of the 

selected percentages/portions allocated 

to Limited Service MEI Ports? Do 

commenters believe the percentages/ 

portions allocated to Limited Service 

MEI Ports are reasonable? With respect 

to general shared expenses: Do 

commenters believe that the Exchange 

provided sufficient detail about the 

components of general shared expenses, 

and why a portion of general shared 

expenses should be allocated to Limited 

Service MEI Ports? Do commenters 

believe that the Exchange provided 

sufficient detail about how it 

determined to allocate $285,918 of 

general shared expenses to Limited 

Service MEI Ports? Do commenters 

believe that the Exchange provided 

sufficient context to permit an 

independent review and assessment of 

the reasonableness of this allocation? Do 

commenters believe that the allocation 

is reasonable? In general: Do 

commenters believe that the Exchange 

provided sufficient detail or explanation 

to support its claim that ‘‘no expense 


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Federal Register / Vol. 87, No. 76 / Wednesday, April 20, 2022 / Notices 23599 

78See id. 

79See id. 

80See id. 

81See id. 

82See id. 

83See id. 

84See id. 

85See id. 

86 17 CFR 201.700(b)(3). 

87See id. 

88See id. 

89See 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). 

amount is allocated twice,’’ 78 whether 

among the sub-categories of expenses in 

this filing, across the Exchange’s fee 

filings for other products or services, or 

over time? Do commenters believe that 

the costs projected for 2022 are 

generally representative of expected 

costs going forward, or should an 

exchange present an estimated range of 

costs with an explanation of how profit 

margins could vary along the range of 

estimated costs? 

2. Revenue Estimates and Profit 

Margin Range. The Exchange uses a 

single monthly revenue figure (April 

2022) as the basis for calculating its 

projected profit margin of 40%. The 

Exchange argues that projecting 

revenues 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.’’ 79 Yet the 

Exchange also acknowledges that ‘‘profit 

margin may also fluctuate from month 

to month based on the uncertainty of 

predicting how many ports may be 

purchased from month to month as 

Members are free to add and drop ports 

at any time based on their own business 

decisions.’’ 80 Do commenters believe a 

single month provides a reasonable 

basis for a revenue projection? If not, 

why not? Should the Exchange provide 

a range of profit margins that it believes 

are reasonably possible, and the reasons 

therefor? The Exchange also provided 

its baseline by analyzing March 2022, 

the monthly billing cycle prior to the 

proposed fees. Do commenters believe 

that March 2022 is an appropriate 

month for a baseline, given that the 

proposed fees were first introduced in 

August 2021? 

3. Reasonable Rate of Return. The 

Exchange states that its proposed fees 

are ‘‘designed to cover its costs with a 

limited return in excess of such 

costs.’’ 81 The Exchange offers several 

justifications for why its 40% estimated 

profit margin is not a supra-competitive 

profit, including: (a) When it launched 

operations in 2008, it chose to forgo 

revenue by offering certain products, 

such as Limited Service MEI Ports, at 

lower rates than other options 

exchanges to attract order flow; (b) the 

Exchange has been successful in 

controlling its costs; (c) a profit margin 

should not be judged alone based on its 

size, but on whether the ultimate fee 

reflects the value of the services 

provided, and Exchange offers a 

premium System Network, System 

Networks connectivity, and a highly 

deterministic trading environment; (d) 

the Exchange’s proposed fees remain 

less than fees charged for similar port 

access provided by other options 

exchanges with similar market share; 

and (e) this is a singular potential profit 

margin from a single revenue source, 

and is not reflective of the Exchange’s 

overall profit margin.82 Do commenters 

agree with the Exchange that its 

estimated 40% profit margin would 

constitute a reasonable rate of return 

over costs for additional Limited Service 

MEI Ports? If not, what would 

commenters consider to be a reasonable 

rate of return and/or what factors would 

they consider to be appropriate for 

determining whether a rate of return is 

reasonable? 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. In light of 

the impact that the number of ports 

purchased has on profit margins, and 

the potential for costs to decrease (or 

increase) over time, what are 

commenters’ views on the need for 

exchanges to commit to reevaluate, on 

an ongoing and periodic basis, their 

cost-based connectivity fees to ensure 

that the fees stay in line with their 

stated profitability projections and do 

not become unreasonable over time, for 

example, by failing to adjust for 

efficiency gains, cost increases or 

decreases, and changes in subscribers? 

How formal should that process be, how 

often should that reevaluation occur, 

and what metrics and thresholds should 

be considered? How soon after a new 

connectivity fee change is implemented 

should an exchange assess whether its 

revenue and/or cost estimates were 

accurate and at what threshold should 

an exchange commit to file a fee change 

if its estimates were inaccurate? Should 

an initial review take place within the 

first 30 days after a connectivity fee is 

implemented? 60 days? 90 days? Some 

other period? 

5. Tiered Structure for Additional 

Limited Service MEI Ports. The 

Exchange states that the proposed tiered 

fee structure is equitably allocated 

among users of the network connectivity 

alternatives, because users of Limited 

Service MEI Ports ‘‘consume the most 

bandwidth and resources of the 

network.’’ 83 The Exchange states that 

users of the ‘‘maximum amount of 

Limited Service MEI Ports’’ account for 

approximately greater than 99% of 

message traffic over the network 

(approximately 8.3 billion messages per 

day handled by the Exchange and its 

affiliate, MIAX Pearl), while users of 

‘‘fewer Limited Service MEI Ports’’ 

account for approximately less than 1% 

of message traffic over the network 

(users of the two free Limited Service 

MEI Ports generate approximately 4.5 

million messages per day).84 According 

to the Exchange, these billions of 

messages per day consume the 

Exchange’s resources and significantly 

contribute to the overall network 

connectivity expense for storage and 

network transport capabilities. Given 

this difference in network utilization 

rate, the Exchange believes that its 

tiered structure is reasonable, equitable, 

and not unfairly discriminatory.85 Do 

commenters believe that the fees for 

each tier (including the intermediary 

tiers), as well as the fee differences 

between the tiers, are supported by the 

Exchange’s assertions? If not, what 

information do commenters believe 

would better substantiate, by tier, the 

demands on the Exchange’s resources as 

a firm increases the number of 

additional Limited Service MEI Ports 

that it purchases? 

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.’’ 86 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,87 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.88 Moreover, 

‘‘unquestioning reliance’’ on an SRO’s 

representations in a proposed rule 

change would not be sufficient to justify 

Commission approval of a proposed rule 

change.89

The Commission believes it is 

appropriate to institute proceedings to 

allow for additional consideration and 

comment on the issues raised herein, 


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23600 Federal Register / Vol. 87, No. 76 / Wednesday, April 20, 2022 / Notices 

90 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). 

91 15 U.S.C. 78s(b)(3)(C). 

92 17 CFR 200.30–3(a)(12), (57) and (58). 

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

2 17 CFR 240.19b–4. 

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.90

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– 

MIAX–2022–16 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 No. 

SR–MIAX–2022–16. 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 No. 

SR–MIAX–2022–16 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,91 that File 

No. SR–MIAX–2022–16 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.92

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–08385 Filed 4–19–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94719; File No. SR–MIAX– 

2022–14] 

Self-Regulatory Organizations; Miami 

International Securities Exchange, 

LLC; Notice of Filing of a Proposed 

Rule Change To Amend the MIAX 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, Miami International Securities 

Exchange, LLC (‘‘MIAX’’ 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 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, 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, 


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