29892 Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 

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

2 17 CFR 240.19b–4. 

investor qualifications and review of 

educational materials (Rule 303), 

providing investor questionnaires (Rule 

303), providing communication 

channels with third parties and among 

investors (Rule 303), notifying investors 

of investment commitments (Rule 303), 

confirming completed transactions 

(Rule 303) and confirming or 

reconfirming offering cancellations 

(Rule 304). 

The Commission staff estimates that 

there will be 136 intermediaries engaged 

in crowdfunding activity and therefore 

subject to Rules 300–304. The 

Commission staff estimates the 

annualized industry burden will be 

38,317 hours to comply with Rules 300– 

304. The Commission staff further 

estimates that the costs associated with 

complying with Rules 300–304 will be 

a total amount of $18,750,000. 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

under the PRA unless it displays a 

currently valid OMB control number. 

The public may view background 

documentation for this information 

collection at the following website: 

>www.reginfo.gov<. Find this particular 

information collection by selecting 

‘‘Currently under 30-day Review—Open 

for Public Comments’’ or by using the 

search function. Written comments and 

recommendations for the proposed 

information collection should be sent by 

June 16, 2022 to (i) 

>MBX.OMB.OIRA.SEC_desk_officer@

omb.eop.gov< and (ii) David Bottom, 

Director/Chief Information Officer, 

Securities and Exchange Commission, c/ 

o John Pezzullo, 100 F Street NE, 

Washington, DC 20549, or by sending an 

email to: PRA_Mailbox@sec.gov. 

Dated: May 11, 2022. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–10503 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Investment Company Act Release No. 

34582; File No. 812–15079] 

WCB Investment Pool LLC; Notice of 

Application 

May 12, 2022. 

AGENCY: Securities and Exchange 

Commission (‘‘Commission’’). 

ACTION: Notice of application for an 

order under section 6(c) of the 

Investment Company Act of 1940 (the 

‘‘Act’’) for an exemption from all 

provisions of the Act and all rules and 

regulations thereunder. 

SUMMARY OF APPLICATION: Applicant 

requests an order for an exemption from 

all provisions of the Act and all rules 

and regulations thereunder, as 

Applicant is a private investment 

company wholly owned and controlled 

by a single family. 

APPLICANT: WCB Investment Pool LLC 

(‘‘Applicant’’). 

FILING DATES: The application was filed 

on December 2, 2019 and amended on 

June 11, 2021 and May 10, 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 by emailing the 

Commission’s Secretary at SecretarysOffice@sec.gov and serving Applicant 

with a copy of the request by email. 

Hearing requests should be received by 

the Commission by 5:30 p.m. on June 6, 

2022, and should be accompanied by 

proof of service on applicant, 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 

writing to the Commission’s Secretary. 

ADDRESSES: The Commission: 

Secretarys-Office@sec.gov. Applicant: c/ 

o Steven Boehm, by email to 

stevenboehm@evershedssutherland.com. 

FOR FURTHER INFORMATION CONTACT: 

Joseph Toner, Senior Counsel, at (202) 

551–7595, or Marc Mehrespand, 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 

the Applicant’s most recently filed 

application, dated May 10, 2022, which 

may be obtained via the Commission’s 

website by searching for the file number 

at the top of this document, or for the 

Applicant using the Company name 

search field, on the SEC’s EDGAR 

system. The SEC’s EDGAR system may 

be searched at https://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. 

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–10588 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94888; File No. SR– 

PEARL–2022–18] 

Self-Regulatory Organizations; MIAX 

PEARL LLC; Notice of Filing of a 

Proposed Rule Change To Amend the 

MIAX PEARL Options Fee Schedule To 

Increase Certain Connectivity Fees and 

To Increase the Monthly Fees for MIAX 

Express Network Full Service Port; 

Suspension of and Order Instituting 

Proceedings To Determine Whether To 

Approve or Disapprove the Proposed 

Rule Change 

May 11, 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 May 2, 

2022, MIAX PEARL, LLC (‘‘MIAX Pearl’’ 

or ‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

as described in Items I and II below, 

which Items have been prepared by the 

Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and is, pursuant 

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

(i) Temporarily suspending the 

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 Pearl Options Fee 

Schedule (the ‘‘Fee Schedule’’) to 

amend certain connectivity fees. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings/pearl at MIAX Pearl’s principal 

office, and at the Commission’s Public 

Reference Room. 


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Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 29893 

3The term ‘‘MEO Interface’’ or ‘‘MEO’’ means a 

binary order interface for certain order types as set 

forth in Rule 516 into the MIAX Pearl System. See 

the Definitions Section of the Fee Schedule and 

Exchange Rule 100. 

4See Securities Exchange Act Release No. 90981 

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

(SR–PEARL–2021–01). 

5See Securities Exchange Act Release No. 90980 

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

(SR–MIAX–2021–02). 

6The Exchange notes that it last filed to amend 

the fees for Full Service MEO Ports (Bulk and 

Single) in 2018, prior to which the Exchange 

provided Full Service MEO Ports (Bulk and Single) 

free of charge since the Exchange launched 

operations in 2017 and had absorbed all costs since 

that time. See Securities Exchange Act Release No. 

82867 (March 13, 2018), 83 FR 12044 (March 19, 

2018) (SR–PEARL–2018–07). This prior filing did 

not include a cost analysis. 

7The Exchange notes that MIAX will make a 

similar filing to increase its 10Gb ULL connectivity 

fees (plus the fees for MIAX’s Limited Service MEI 

Ports). 

8The term ‘‘Member’’ means an individual or 

organization that is registered with the Exchange 

pursuant to Chapter II of these Rules for purposes 

of trading on the Exchange as an ‘‘Electronic 

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

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

See Exchange Rule 100. 

9The Exchange’s System Networks consist of the 

Exchange’s extranet, internal network, and external 

network. 

10The Exchange notes that it employed a tiered 

pricing structure for 10Gb ULL connectivity from 

August 2021 through March 2022. See infra notes 

25–27. 

11 ‘‘Full Service MEO Port—Bulk’’ means an MEO 

port that supports all MEO input message types and 

binary bulk order entry. See the Definitions Section 

of the Fee Schedule. 

12 ‘‘Full Service MEO Port—Single’’ means an 

MEO port that supports all MEO input message 

types and binary order entry on a single order-byorder basis, but not bulk orders. See the Definitions 

Section of the Fee Schedule. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV [sic] below. 

The Exchange has prepared summaries, 

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

of the most significant aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

Fee Schedule to increase the fees for a 

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

(‘‘ULL’’) fiber connection and the fees 

for the Exchange’s MIAX Express 

Network Full Service (‘‘MEO’’) 3 Ports. 

The Exchange last increased the fees for 

its 10Gb ULL fiber connections in a 

filing that became effective beginning 

January 1, 2021 (subsequently 

withdrawn and refiled one time).4 The 

Exchange increased the fee for 10Gb 

ULL fiber connections from $9,300 to 

$10,000 per month. Also, in connection 

with that fee change, the Exchange’s 

affiliate, Miami International Securities 

Exchange, LLC (‘‘MIAX’’), increased its 

10Gb ULL connectivity fee to $10,000 

per month.5 The Exchange and MIAX 

shared a combined cost analysis in 

those filings. In those filings, the 

Exchange and MIAX allocated a 

combined total of $17.9 million in 

expenses to providing 10Gb ULL fiber 

connectivity. 

Since the time of that filing, the 

Exchange and MIAX have experienced 

an increase in expenses, particularly 

regarding internal expenses. For 

example, from January 2021 to March 

2022 expenses related to employee 

compensation for 10Gb ULL 

connectivity increased from a combined 

$6,892,689 to $7,063,801 and occupancy 

increased from $560,408 to $701,437. In 

addition, from January 2021 to March 

2022, the Exchange’s third party related 

expense increased as well. In January 

2021, the Exchange and MIAX allocated 

a combined $4,079,910 of their shared 

third party expenses to providing the 

10Gb ULL fiber connectivity. As 

described more fully below, the 

Exchange and MIAX are now allocating 

$4,382,307 of their shared third party 

expense to 10Gb ULL fiber connectivity, 

which represents only a portion of the 

total combined third party expense of 

$7,575,888.6

As discussed more fully below, the 

Exchange and MIAX recently calculated 

the combined annual aggregate costs for 

providing 10Gb ULL connectivity, plus 

the cost of providing Full Service MEO 

Ports (on MIAX Pearl Options only) to 

be $22,589,805, or $1,882,484 per 

month. The Exchange now proposes to 

amend the Fee Schedule to amend the 

fees for 10Gb ULL connectivity and Full 

Service MEO Ports (Bulk and Single) in 

order to recoup these ongoing costs and 

as a result of the increase in expenses 

described above.7

First, the Exchange proposes to 

amend the Fee Schedule to increase the 

fees for Members 8 and non-Members to 

access the Exchange’s System 

Networks 9 via a 10Gb ULL fiber 

connection. Specifically, the Exchange 

proposes to amend Sections 5(a)–(b) of 

the Fee Schedule to increase the 10Gb 

ULL connectivity fee for Members and 

non-Members from $10,000 per month 

to $12,000 per month (‘‘10Gb ULL 

Fee’’). Prior to the proposed fee change, 

the Exchange assessed Members and 

non-Members a flat monthly fee of 

$10,000 per 10Gb ULL connection for 

access to the Exchange’s primary and 

secondary facilities.10

The Exchange will continue to assess 

monthly Member and non-Member 

network connectivity fees for 

connectivity to the primary and 

secondary facilities in any month the 

Member or non-Member is credentialed 

to use any of the Exchange APIs or 

market data feeds in the production 

environment. The Exchange proposes to 

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

connectivity (by adding or deleting 

connections) with such pro-rated fees 

based on the number of trading days 

that the Member or non-Member has 

been credentialed to utilize any of the 

Exchange APIs or market data feeds in 

the production environment through 

such connection, divided by the total 

number of trading days in such month 

multiplied by the applicable monthly 

rate. The Exchange will continue to 

assess monthly Member and nonMember network connectivity fees for 

connectivity to the disaster recovery 

facility in each month during which the 

Member or non-Member has established 

connectivity with the disaster recovery 

facility. 

The Exchange’s MIAX Express 

Network Interconnect (‘‘MENI’’) can be 

configured to provide Members and 

non-Members of the Exchange network 

connectivity to the trading platforms, 

market data systems, test systems, and 

disaster recovery facilities of both the 

Exchange and its affiliate, MIAX, via a 

single, shared connection. Members and 

non-Members utilizing the MENI to 

connect to the trading platforms, market 

data systems, test systems, and disaster 

recovery facilities of the Exchange and 

MIAX via a single, shared connection 

will continue to only be assessed one 

monthly connectivity fee per 

connection, regardless of the trading 

platforms, market data systems, test 

systems, and disaster recovery facilities 

accessed via such connection. 

Second, the Exchange proposes to 

amend Section (5)(d) of the Fee 

Schedule to amend the fees for Full 

Service MEO Ports. The Exchange 

currently offers different types of MEO 

Ports depending on the services 

required by the Member, including a 

Full Service MEO Port-Bulk,11 a Full 

Service MEO Port-Single,12 and a 


khammond on DSKJM1Z7X2PROD with NOTICES
29894 Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 

13 ‘‘Limited Service MEO Port’’ means an MEO 

port that supports all MEO input message types, but 

does not support bulk order entry and only 

supports limited order types, as specified by the 

Exchange via Regulatory Circular. See the 

Definitions Section of the Fee Schedule. 

14A ‘‘Matching Engine’’ is a part of the MIAX 

Pearl electronic system that processes options 

orders and trades on a symbol-by-symbol basis. 

Some Matching Engines will process option classes 

with multiple root symbols, and other Matching 

Engines may be dedicated to one single option root 

symbol. 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 the Definitions 

Section of the Fee Schedule. 

15See NYSE American Options Fee Schedule, 

Section V.A., Port Fees (each port charged on a per 

matching engine basis, with NYSE American having 

17 match engines). See NYSE Technology FAQ and 

Best Practices: Options, Section 5.1 (How many 

matching engines are used by each exchange?) 

(September 2020) (providing a link to an Excel file 

detailing the number of matching engines per 

options exchange); NYSE Arca Options Fee 

Schedule, Port Fees (each port charged on a per 

matching engine basis, NYSE Arca having 19 match 

engines); and NYSE Technology FAQ and Best 

Practices: Options, Section 5.1 (How many 

matching engines are used by each exchange?) 

(September 2020) (providing a link to an Excel file 

detailing the number of matching engines per 

options exchange). See NASDAQ Fee Schedule, 

Nasdaq Options 7 Pricing Schedule, Section 3, 

Nasdaq Options Market—Ports and Other Services 

(each port charged on a per matching engine basis, 

with Nasdaq having multiple matching engines). 

See Nasdaq Specialized Quote Interface (SQF) 

Specification, Version 6.5b (updated February 13, 

2020), Section 2, Architecture, available at https:// 

www.nasdaq.com/docs/2020/02/18/SpecializedQuote-Interface-SQI-6.5b.pdf (the ‘‘NASDAQ SQF 

Interface Specification’’). The NASDAQ SQF 

Interface Specification also provides that 

NASDAQ’s affiliates, Nasdaq PHLX LLC (‘‘Nasdaq 

Phlx’’) and Nasdaq BX, Inc. (‘‘Nasdaq BX’’), have 

trading infrastructures that may consist of multiple 

matching engines with each matching engine 

trading only a range of option underlyings. Further, 

the NASDAQ SQF Interface Specification provides 

that the SQF infrastructure is such that the firms 

connect to one or more servers residing directly on 

the matching engine infrastructure. Since there may 

be multiple matching engines, firms will need to 

connect to each engine’s infrastructure in order to 

establish the ability to quote the symbols handled 

by that engine. 

16See Securities Exchange Act Release No. 82867 

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

(SR–PEARL–2018–07). 

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

of at least 75% common ownership between the 

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

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

Appointed EEM (or, conversely, the Appointed 

EEM of an Appointed Market Maker). An 

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

Maker (who does not otherwise have a corporate 

affiliation based upon common ownership with an 

EEM) that has been appointed by an EEM and an 

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

otherwise have a corporate affiliation based upon 

common ownership with a MIAX Pearl Market 

Maker) that has been appointed by a MIAX Pearl 

Market Maker, pursuant to the following process. A 

MIAX Pearl Market Maker appoints an EEM and an 

EEM appoints a MIAX Pearl Market Maker, for the 

purposes of the Fee Schedule, by each completing 

and sending an executed Volume Aggregation 

Request Form by email to membership@

miaxoptions.com no later than 2 business days 

prior to the first business day of the month in which 

the designation is to become effective. Transmittal 

of a validly completed and executed form to the 

Exchange along with the Exchange’s 

acknowledgement of the effective designation to 

each of the Market Maker and EEM will be viewed 

as acceptance of the appointment. The Exchange 

will only recognize one designation per Member. A 

Member may make a designation not more than 

once every 12 months (from the date of its most 

recent designation), which designation shall remain 

in effect unless or until the Exchange receives 

written notice submitted 2 business days prior to 

the first business day of the month from either 

Member indicating that the appointment has been 

terminated. Designations will become operative on 

the first business day of the effective month and 

may not be terminated prior to the end of the 

month. Execution data and reports will be provided 

to both parties. See the Definitions Section of the 

Fee Schedule. 

18 ‘‘Excluded Contracts’’ means any contracts 

routed to an away market for execution. See the 

Definitions Section of the Fee Schedule. 

19 ‘‘TCV’’ means total consolidated volume 

calculated as the total national volume in those 

classes listed on MIAX Pearl for the month for 

which the fees apply, excluding consolidated 

volume executed during the period of time in 

which the Exchange experiences an Exchange 

System Disruption (solely in the option classes of 

the affected Matching Engine). See the Definitions 

Section of the Fee Schedule. 

Limited Service MEO Port.13 For one 

monthly price, a Member may be 

allocated two (2) Full-Service MEO 

Ports of either type per matching 

engine 14 and may request Limited 

Service MEO Ports for which MIAX 

Pearl will assess Members Limited 

Service MEO Port fees per matching 

engine based on a sliding scale for the 

number of Limited Service MEO Ports 

utilized each month. The two (2) FullService MEO Ports that may be allocated 

per matching engine to a Member may 

consist of: (a) Two (2) Full Service MEO 

Ports—Bulk; (b) two (2) Full Service 

MEO Ports—Single; or (c) one (1) Full 

Service MEO Port—Bulk and one (1) 

Full Service MEO Port—Single. 

Unlike other options exchanges that 

provide similar port functionality and 

charge fees on a per port basis,15 the 

Exchange offers Full Service MEO Ports 

as a package and provides Members 

with the option to receive up to two Full 

Service MEO Ports (described above) 

per matching engine to which that 

Member connects. The Exchange 

currently has twelve (12) matching 

engines, which means Members may 

receive up to twenty-four (24) Full 

Service MEO Ports for a single monthly 

fee, that can vary based on certain 

volume percentages, as described below. 

For illustrative purposes and as 

described in more detail below, the 

Exchange currently assesses a fee of 

$5,000 per month for Members that 

reach the highest Full Service MEO 

Port—Bulk Tier, regardless of the 

number of Full Service MEO Ports 

allocated to the Member. For example, 

assuming a Member connects to all 

twelve (12) matching engines during a 

month, with two Full Service MEO 

Ports per matching engine, this results 

in a cost of $208.33 per Full Service 

MEO Port ($5,000 divided by 24) for the 

month. This fee had been unchanged 

since the Exchange adopted Full Service 

MEO Port fees in 2018.16 The Exchange 

proposes to increase Full Service MEO 

Port fees as further described below, 

with the highest monthly fee of $10,000 

for the Full Service MEO Port—Bulk. 

Members will continue to receive two 

(2) Full Service MEO Ports to each 

matching engine to which they connect 

for the single flat monthly fee. 

Assuming a Member connects to all 

twelve (12) matching engines during the 

month, with two Full Service MEO 

Ports per matching engine, this would 

result in a cost of $416.67 per Full 

Service MEO Port ($10,000 divided by 

24). 

The Exchange assesses Members Full 

Service MEO Port Fees, either for a Full 

Service MEO Port—Bulk and/or for a 

Full Service MEO Port—Single, based 

upon the monthly total volume 

executed by a Member and its 

Affiliates 17 on the Exchange across all 

origin types, not including Excluded 

Contracts,18 as compared to the Total 

Consolidated Volume (‘‘TCV’’),19 in all 

MIAX Pearl-listed options. The 

Exchange adopted a tier-based fee 

structure based upon the volume-based 

tiers detailed in the definition of ‘‘NonTransaction Fees Volume-Based Tiers’’ 

described in the Definitions section of 

the Fee Schedule. The Exchange 

assesses these and other monthly Port 

fees to Members in each month the 

market participant is credentialed to use 

a Port in the production environment. 

Current Full Service MEO Port—Bulk 

Fees. The Exchange currently assesses 

Members monthly Full Service MEO 

Port—Bulk fees as follows: 

(i) If its volume falls within the 

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

or volume up to 0.30%, $3,000; 

(ii) if its volume falls within the 

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

or volume above 0.30% up to 0.60%, 

$4,500; and 

(iii) if its volume falls with the 

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

or volume above 0.60%, $5,000. 

Proposed Full Service MEO Port— 

Bulk Fees. The Exchange proposes to 

assess Members monthly Full Service 

MEO Port—Bulk fees as follows: 

(i) If its volume falls within the 

parameters of Tier 1 of the NonVerDate Sep<11>2014 17:02 May 16, 2022 Jkt 256001 PO 00000 Frm 00048 Fmt 4703 Sfmt 4703 E:\FR\FM\17MYN1.SGM 17MYN1

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20The term ‘‘Market Maker’’ means a Member 

registered with the Exchange for the purpose of 

making markets in options contracts traded on the 

Exchange and that is vested with the rights and 

responsibilities specified in Chapter VI of Exchange 

Rules. See the Definitions Section of the Fee 

Schedule and Exchange Rule 100. 

21See supra note 6. 

22See MIAX Fee Schedule, Section (5)(d)(ii); 

MIAX Emerald Fee Schedule, Section (5)(d)(ii). 

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

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

29, 2022). 24See NASDAQ Pricing Schedule, Options 7, 

Section 3, Ports and Other Services and NASDAQ 

Rules, General 8: Connectivity, Section 1. CoLocation Services. 25See supra note 23. 26See ISE Pricing Schedule, Options 7, Section 7, 

Connectivity Fees and ISE Rules, General 8: 

Connectivity. 

27See supra note 23. 

28See NYSE American Options Fee Schedule, 

Section V.A. Port Fees and Section V.B. CoLocation Fees. 

29See supra note 23. 

30See GEMX Pricing Schedule, Options 7, 

Section 6, Connectivity Fees and GEMX Rules, 

General 8: Connectivity. 

31See supra note 23. 

Transaction Fees Volume-Based Tiers, 

or volume up to 0.30%, $5,000; 

(ii) if its volume falls within the 

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

or volume above 0.30% up to 0.60%, 

$7,500; and 

(iii) if its volume falls with the 

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

or volume above 0.60%, $10,000. 

Current Full Service MEO Port— 

Single Fees. The Exchange currently 

assesses Members monthly Full Service 

MEO Port—Single fees as follows: 

(i) If its volume falls within the 

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

or volume up to 0.30%, $2,000; 

(ii) if its volume falls within the 

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

or volume above 0.30% up to 0.60%, 

$3,375; and 

(iii) if its volume falls with the 

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

or volume above 0.60%, $3,750. 

Proposed Full Service MEO Port— 

Single Fees. The Exchange proposes to 

assess Members monthly Full Service 

MEO Port—Single fees as follows: 

(i) If its volume falls within the 

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

or volume up to 0.30%, $2,500; 

(ii) if its volume falls within the 

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

or volume above 0.30% up to 0.60%, 

$3,500; and 

(iii) if its volume falls with the 

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

or volume above 0.60%, $4,500. 

The Exchange offers various types of 

ports with differing prices because each 

port accomplishes different tasks, are 

suited to different types of Members, 

and consume varying capacity amounts 

of the network. For instance, MEO ports 

allow for a higher throughput and can 

handle much higher quote/order rates 

than FIX ports. Members that are Market 

Makers 20 or high frequency trading 

firms utilize these ports (typically 

coupled with 10Gb ULL connectivity) 

because they transact in significantly 

higher amounts of messages being sent 

to and from the Exchange, versus FIX 

port users, who are traditionally 

customers sending only orders to the 

Exchange (typically coupled with 1Gb 

connectivity). The different types of 

ports cater to the different types of 

Exchange Memberships and different 

capabilities of the various Exchange 

Members. Certain Members need ports 

and connections that can handle using 

far more of the network’s capacity for 

message throughput, risk protections, 

and the amount of information that the 

System has to assess. Those Members 

may account for the vast majority of 

network capacity utilization and volume 

executed on the Exchange, as discussed 

throughout. 

The Exchange proposes to increase its 

monthly Full Service MEO Port fees 

since it has not done so since the fees 

were adopted in 2018,21 which are 

designed to recover a portion of the 

costs associated with directly accessing 

the Exchange. The Exchange notes that 

its affiliates, Miami International 

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

MIAX Emerald, LLC (‘‘MIAX Emerald’’), 

charge fees for their high throughput, 

low latency MIAX Express Interface 

(‘‘MEI’’) Ports in a similar fashion as the 

Exchange charges for its MEO Ports— 

generally, the more active user the 

Member (i.e., the greater number/greater 

national ADV of classes assigned to 

quote on MIAX and MIAX Emerald), the 

higher the MEI Port fee.22 This concept 

is not new or novel. 

The Exchange believes that other 

exchanges’ connectivity and port fees 

are useful examples and provides the 

following table for comparison purposes 

only to show how the Exchange’s 

proposed fees compare to fees currently 

charged by other options exchanges for 

similar connectivity and port access. As 

shown by the below table, the 

Exchange’s proposed fees are similar to 

or less than fees charged for similar 

access to other options exchanges. 

Exchange Type of connection or port Monthly fee 

(per connection or per port) 

MIAX Pearl (as proposed) (equity options market 

share of 4.61% as of April 29, 2022 for the 

month of April).23

10Gb ULL connection .........................

Full Service MEO Port (Bulk) .............

$12,000. 

Tier 1: $5,000 (or $208.33 per Matching Engine). 

Tier 2: $7,500 (or $312.50 per Matching Engine). 

Tier 3: $10,000 (or $416.66 per Matching Engine). 

Full Service MEO Port (Single) .......... Tier 1: $2,500 (or $104.16 per Matching Engine). 

Tier 2: $3,500 (or $145.83 per Matching Engine). 

Tier 3: $4,500 (or $187.50 per Matching Engine). 

The NASDAQ Stock Market LLC (‘‘NASDAQ’’) 24

(equity options market share of 8.47% as of April 

29, 2022 for the month of April).25

10Gb Ultra fiber connection ................

SQF Port .............................................

$15,000. 

1–5 ports. $1,500. 

6–20 ports. $1,000. 

21 or more ports. $500. 

Nasdaq ISE LLC (‘‘ISE’’) 26 (equity options market 

share of 5.48% as of April 29, 2022 for the 

month of April).27

10Gb Ultra fiber connection ................

SQF Port .............................................

$15,000. 

$1,100. 

NYSE American LLC (‘‘NYSE American’’) 28 (equity 

options market share of 8.13% as of April 29, 

2022 for the month of April).29

10Gb LX LCN connection ...................

Order/Quote Entry Port .......................

$22,000. 

Ports 1–40. $450 

Ports 41 and greater. $150. 


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32See letters from Richard J. McDonald, 

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

Vanessa Countryman, Secretary, Commission, dated 

September 7, 2021, October 1, 2021, October 26, 

2021, and March 15, 2022 (‘‘SIG Letters’’). See also 

letter from Tyler Gellasch, Executive Director, 

Healthy Markets Association (‘‘HMA’’), to Hon. 

Gary Gensler, Chair, Commission, dated October 29, 

2021 (‘‘HMA Letter’’); and letter from 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’’). 33See Securities Exchange Act Release Nos. 

92644 (August 11, 2021), 86 FR 46055 (August 17, 

2021) (SR–PEARL–2021–36); 92798 (August 27, 

2021), 86 FR 49360 (September 2, 2021) (SR– 

PEARL–2021–33); 93162 (September 28, 2021), 86 

FR 54739 (October 4, 2021) (SR–PEARL–2021–45); 

93556 (November 10, 2021), 86 FR 64235 

(November 17, 2021) (SR–PEARL–2021–53); 93639 

(November 22, 2021), 86 FR 67758 (November 29, 

2021) (SR–PEARL–2021–45); 93774 (December 14, 

2021), 86 FR 71952 (December 20, 2021) (SR– 

PEARL–2021–57); 94088 (January 27, 2022), 87 FR 

5901 (February 2, 2022) (SR–PEARL–2021–57); 

94258 (February 15, 2022), 87 FR 9659 (February 

22, 2022) (SR–PEARL–2022–03). 

34See Securities Exchange Act Release Nos. 

94721 (April 14, 2022), 87 FR 23573 (April 20, 

2022) (SR–PEARL–2022–11) and 94722 (April 14, 

2022), 87 FR 23660 (April 20, 2022) (SR–PEARL– 

2022–12). 

35 15 U.S.C. 78f(b). 36 15 U.S.C. 78f(b)(4). 37 15 U.S.C. 78f(b)(5). 38See 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). 

39See 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’’). 

40See id. 

41 Id. 

Exchange Type of connection or port Monthly fee 

(per connection or per port) 

Nasdaq GEMX, LLC (‘‘GEMX’’) 30 (equity options 

market share of 2.36% as of April 29, 2022 for 

the month of April).31

10Gb Ultra connection ........................

SQF Port .............................................

$15,000. 

$1,250. 

Implementation and Procedural History 

The proposed rule change will be 

effective May 2, 2022. The Exchange 

initially filed proposals to adopt tieredpricing structures for the 10Gb ULL 

connections and amend the fees for Full 

Service MEO Ports, with the proposed 

fees being effective beginning August 1, 

2021. Between August 2021 and 

February 2022, the Exchange withdrew 

and refiled the proposed rule changes, 

each time to meaningfully attempt to 

provide additional justification for the 

proposed fee changes, provide enhanced 

details regarding the Exchange’s cost 

methodology, and address questions 

contained in the Commission’s 

suspension orders. The Exchange 

received six comment letters from three 

separate commenters on the filings.32

This revised proposal provided 

additional details regarding the 

Exchange’s cost methodology, revenue 

projections, and responded to various 

questions and requests for information 

contained in the Commission’s 

suspension orders.33 On April 1, 2022, 

the Exchange submitted revised 

proposals to provide additional clarity 

regarding the Exchange’s cost 

justification and those proposals were 

subsequently suspended by the 

Commission.34 The Exchange withdrew 

those revised proposals and submitted 

this filing on May 2, 2022. This newest 

revised filing builds upon the additional 

details regarding the Exchange’s cost 

methodology and revenue projections, 

as well as the Exchange’s responses to 

various questions and requests for 

information contained in the 

Commission’s suspension orders. 

2. Statutory Basis 

The Exchange believes that the 

proposed fees are consistent with 

Section 6(b) of the Act 35 in general, and 

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

of the Act 36 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 which the 

Exchange operates or controls. The 

Exchange also believes the proposed 

fees further the objectives of Section 

6(b)(5) of the Act 37 in that they are 

designed to promote just and equitable 

principles of trade, remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general protect investors and the public 

interest and are not designed to permit 

unfair discrimination between 

customers, issuers, brokers and dealers. 

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’’).38 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.’’ 39 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 

they are fair and reasonable and will not 

result in excessive pricing or supracompetitive 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. 

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.’’ 40 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.’’ 41 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 


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42 Id. 

43 Id. 

44 Id. 

45See MIAX Fee Schedule, Section (5)(d)(ii); 

MIAX Emerald Fee Schedule, Section (5)(d)(ii); see 

also supra notes 24, 26, 28, and 30. 

argument.’’ 42 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 10Gb ULL 

connectivity and Full Service MEO 

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.’’ 43 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.’’ 44 The Exchange provides 

this analysis below. 

The proposed fees are based on a costplus model. The Exchange believes that 

it is important to demonstrate that the 

proposed fees are based on its costs and 

reasonable business needs and believes 

the proposed fees will allow the 

Exchange to begin to offset expenses. 

However, as discussed more fully 

below, such fees may also result in the 

Exchange recouping less than, or more 

than, all of its costs of providing 10Gb 

ULL connectivity and Full Service MEO 

Ports because of the uncertainty of 

forecasting subscriber decision making 

with respect to firms’ access needs. The 

Exchange believes that the proposed 

fees will not result in excessive pricing 

or supra-competitive profit based on the 

total expenses the Exchange incurs 

versus the total revenue the Exchange 

projects to collect, and therefore meets 

the standards in the Act as interpreted 

by the Commission and the Commission 

Staff in the BOX Order and the 

Guidance. 

The suspension orders sought 

additional information and comments 

on various aspects of the prior proposed 

fee changes. In many respects, the 

Commission’s questions about the prior 

proposed fee changes raise broader 

questions around the factors the 

Commission should consider and the 

type of data and analysis an exchange 

should provide in considering whether 

market data, port fees, or connectivity 

fees are fair and reasonable under a costbased methodology. The suspension 

orders also sought more specific 

information regarding the allocation of 

third-party expenses, such as the overall 

estimated cost for each category of 

external expenses or at minimum the 

total applicable third-party expenses 

and percentage allocation or statements 

regarding the Exchange’s overall 

estimated costs for the internal expense 

categories and general shared expenses 

figure. The Exchange added this 

additional information below. 

In this filing, the Exchange offers a 

conceptual framework for further 

considering the Commission’s questions 

that draws on the Exchange’s own 

experience over several years of 

analyzing its own costs. The elements of 

that framework are as follows: 

First, the Exchange proposes a flat, 

simple 10Gb ULL Fee that imposes a 

single monthly fee for Members and 

non-Members. The Exchange believes 

this relatively simple, flat fee structure 

is transparent and easy for users to 

apply, and also helps show that it meets 

the objectives of the Act. The Exchange 

also proposes to amend the fees for Full 

Service MEO Ports, which tiered-pricing 

structure has been in place since 2018. 

Accordingly, the pricing structure for 

Full Service MEO Ports is already 

transparent and easy for users to apply, 

and is a common pricing method used 

by the other options exchanges when 

charging for port connectivity.45

The Exchange then 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 providing 

10Gb ULL connectivity and Full Service 

MEO Ports. That methodology does not 

allow for ‘‘double-counting’’ of the same 

costs for different classes of exchange 

products—for example transaction 

services, market data, physical 

connectivity, ‘‘logical’’ port connections 

or regulatory resources. As a result of 

this review, the Exchange determined 

that it experienced an increase in costs 

since January 2021 as set forth above 

and determined to propose to increase 

select connectivity fees as described 

herein to attempt to recoup this 

increased expense. 

The Exchange then sought to 

narrowly allocate specific costs to 10Gb 

ULL connectivity and Full Service MEO 

Ports to which the proposed fees would 

apply. In this filing, the Exchange 

provided more detail about how that 

allocation was determined and included 

information about tangential cost items 

that were not included. 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 10Gb ULL connectivity 

and Full Service MEO 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 10Gb ULL 

connectivity and Full Service MEO 

Ports. The Exchange reviewed each 

individual expense to determine if such 

expense was related to 10Gb ULL 

connectivity and Full Service MEO 

Ports. Once the expenses were 

identified, the Exchange department 

heads, with the assistance of the 

Exchange’s internal finance department, 

reviewed such expenses holistically on 

an Exchange-wide level to determine 

what portion of that expense supports 

providing access services 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 10Gb ULL 

connectivity and Full Service MEO 

Ports. For the avoidance of doubt, no 

expense amount is allocated twice. 

Specifically, no expense amount is 

allocated to more than one expense 

category within this filing and no 

expense amount that is allocated as a 

cost to provide and maintain access to 

the 10Gb ULL connectivity and Full 

Service MEO Ports in this filing have 

been or will be allocated as a cost to 

provide any other exchange product or 

service in any other fee filing. In the 

suspension orders, the Commission 

questioned whether further explanation 

of the Exchange’s cost analysis was 

necessary. The Exchange provides 

further details concerning its cost 

analysis in response to this question. 

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 


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46The Exchange is not considering future costs 

associated with accommodating new 10Gb ULL 

connectivity and Full Service MEO Ports 

subscriptions. 

47The percentage allocations used in this 

proposed rule change may differ from past filings 

from the Exchange or its affiliates due to 

adjustments to internal resource allocations, and 

different system architecture of the Exchange as 

compared to its affiliates. 

48For example, the Exchange previously noted 

that all third-party expense described in its prior fee 

filing was contained in the information technology 

and communication costs line item under the 

section titled ‘‘Operating Expenses Incurred 

Directly or Allocated From Parent,’’ in the 

Exchange’s 2019 Form 1 Amendment containing its 

financial statements for 2018. See Securities 

Exchange Act Release No. 87876 (December 31, 

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

2019–36). Accordingly, the third-party expense 

described in this filing is attributed to the same line 

item for the Exchange’s 2022 Form 1 Amendment, 

which will be filed in 2023. In its suspension 

orders, the Commission also asked should the 

Exchange use cost projections or actual costs 

estimated for 2021 in a filing made in 2022, or make 

cost projections for 2022. The Exchange utilized 

expenses from its most recent audited financial 

statement as those numbers are more reliable than 

more recent unaudited numbers, which may be 

subject to change. 

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. 

Finally, the Exchange acknowledges 

that it is difficult to predict how much 

revenue the Exchange will receive from 

the proposed fees with precision. The 

analysis conducted by the Exchange is 

designed to make a fair and reasonable 

assessment of costs and resources 

allocated to support the provision of 

access services associated with the 

proposed fees. The Exchange further 

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 basis, 

reviews its costs and resource 

allocations to ensure it appropriately 

allocates resources to properly provide 

services to the Exchange’s constituents. 

As part of this proposed rule change, 

and as described further below, the 

Exchange is committing to conduct an 

annual cost review with respect to fees 

that are cost justified in this proposed 

rule change beginning one year from the 

date of this proposal, and annually 

thereafter. The Exchange expects that it 

may propose to adjust fees at that time, 

either to increase fees in the event that 

revenues fail to reasonably cover costs 

at the estimated margin set forth below, 

or to decrease fees in the event that 

revenue materially exceeds the 

Exchange’s current projections. In the 

event that the Exchange determines to 

propose a fee change, updated cost 

estimates will be included in a rule 

filing proposing the fee change. 

The Exchange believes applying this 

framework to the proposed fees shows 

that they are consistent with the 

requirements of the Act, leaving aside 

that the proposed fees are relatively 

similar to fees charged by other 

exchanges for connectivity and port 

access. 

Exchange Costs and Cost Methodology 

The Exchange notes that there are 

material costs associated with providing 

the infrastructure and headcount to 

fully support access to the Exchange via 

connectivity and ports. As described 

below, the Exchange incurs technology 

expense related to establishing and 

maintaining Information Security 

services, enhanced network monitoring 

and customer reporting, as well as 

Regulation SCI-mandated processes 

associated with its network technology. 

Both fixed and variable expenses have 

significant impact on the Exchange’s 

overall costs to provide 10Gb ULL 

connectivity and Full Service MEO 

Ports. For example, to accommodate 

new Members, the Exchange may need 

to purchase additional hardware to 

support those Members and provide 

access through 10Gb ULL connectivity 

and Full Service MEO Ports.46 Further, 

as the total number of Members 

increases, the Exchange and its affiliates 

may need to increase their data center 

footprint and consume more power, 

resulting in increased costs charged by 

their third-party data center provider. 

Accordingly, the cost to the Exchange 

and its affiliates to provide access to its 

Members is not fixed. The Exchange 

believes the proposed fees are a 

reasonable attempt to offset those costs 

associated with providing access to and 

maintaining its System Networks’ 

infrastructure. 

The Exchange estimated its total 

annual expense to provide 10Gb ULL 

connectivity and Full Service MEO 

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 10Gb ULL 

connectivity and Full Service MEO 

Ports; and (3) general shared expenses.47

The below table details each of these 

individual external and internal annual 

costs considered by the Exchange to be 

directly related to offering 10Gb ULL 

connectivity and Full Service MEO 

Ports, and not any other product or 

service offered by the Exchange. The 

below table also details the general 

shared expense allocated to this 

proposal. Each of these expenses are 

discussed in more detail further below. 

For 2022, the total annual expense for 

providing the access services associated 

with providing 10Gb ULL connectivity 

for MIAX and MIAX Pearl Options 

combined, and Full Service MEO Ports 

for MIAX Pearl Options only, is 

estimated to be $22,589,805, or 

$1,882,484 per month. The Exchange 

utilized its estimated 2022 revenue and 

costs, which utilize the same 

methodology set forth in the Exchange’s 

previously-issued Audited 

Unconsolidated Financial Statements.48

External expenses 

Category 

Percentage of total expense amount allocated 

10Gb ULL connectivity 

(MIAX) 

10Gb ULL connectivity 

(MIAX pearl options) 

Full service MEO ports 

(MIAX pearl options only) 

Data Center Provider ....................................................... 61% ................................... 61% ................................... 10.8%. 

Fiber Connectivity Provider ............................................. 61% ................................... 61% ................................... 5.4%. 

Security Financial Transaction Infrastructure (‘‘SFTI’’), 

and Other Connectivity and Content Service Providers.

73.6% ................................ 73.6% ................................ 4.4%. 

Hardware and Software Providers .................................. 50% ................................... 50% ................................... 6.4%. 

Total of External Expenses ...................................... $4,677,491. 49


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49The 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. 

50The Exchange notes that expenses associated 

with its affiliates, MIAX Emerald and MIAX Pearl 

(the equities market), are accounted for separately 

and are not included within the scope of this filing. 

51See supra notes 4 and 5. 

Internal expenses 

Category 

Expense amount allocated 

10Gb ULL connectivity 

(MIAX) 

10Gb ULL connectivity 

(MIAX pearl options) 

Full service MEO ports 

(MIAX pearl options only) 

Employee Compensation ................................................ $4,108,382 (representing 

27.5% of total 

$14,957,861 expense).

$2,955,419 (representing 

27.5% of total 

$10,760,135 expense).

$2,066,488 (representing 

19.2% of total 

$10,760,135 expense). 

Depreciation and Amortization ........................................ $2,724,062 (representing 

66% of total $4,135,294 

expense).

$1,460,789 (representing 

61.3% of total 

$2,382,314 expense).

$161,579 (representing 

6.8% of total $2,382,314 

expense). 

Occupancy ....................................................................... $399,859 (representing 

52% of total $769,108 

expense).

$301,578 (representing 

52% of total $580,068 

expense).

$62,531 (representing 

10.8% of total $580,068 

expense). 

Total of Internal Expenses ....................................... $14,240,687. 

Allocated Shared Expenses ............................................ $1,982,793 (representing 

49% of total $4,042,629 

expense).

$1,351,081 (representing 

44% of total $3,060,734 

expense).

$337,753 (representing 

11% of total $3,060,734 

expense). 

Total of Allocated Shared Expenses ........................ $3,671,627. 

Total External + Internal + Allocated Shared 

Expenses.

$22,589,805. 

In its suspension orders, the 

Commission solicited commenters’ 

views on whether the Exchange has 

provided sufficient detail on the 

identity and nature of services provided 

by third parties. The Commission 

further solicited commenters’ views on 

whether the Exchange has provided 

sufficient detail on the elements that go 

into connectivity and port costs, 

including how shared costs are 

allocated and attributed to connectivity 

and port expenses, to permit an 

independent review and assessment of 

the reasonableness of purported costbased fees and the corresponding profit 

margin thereon. In response, the 

Exchange provides additional detail 

regarding the identity and nature of 

services provided by third parties, the 

elements that go into connectivity and 

port costs, and how expenses are 

allocated. The Exchange believes this 

additional detail is sufficient to support 

a finding that the proposed fees are 

consistent with the Exchange Act. 

For clarity, the Exchange took a 

conservative approach in determining 

the expense and the percentage of that 

expense to be allocated to providing 

10Gb ULL connectivity and Full Service 

MEO Ports. The Exchange describes 

below the analysis conducted for each 

expense and the resources or 

determinations that were considered 

when determining the amount necessary 

to allocate to each expense. The 

Exchange notes that, without the 

specific external and internal expense 

items, the Exchange would not be able 

to provide access to its System 

Networks through 10Gb ULL 

connectivity and Full Service MEO 

Ports. Each of these expense items, 

including physical hardware, software, 

employee compensation and benefits, 

occupancy costs, and the depreciation 

and amortization of equipment, were 

identified through a line-by-line cost 

analysis and determined to be integral 

to providing access to its System 

Networks through 10Gb ULL 

connectivity and Full Service MEO 

Ports for the reasons discussed below. 

Only a portion of all fees paid to such 

third parties are included in the third 

party expenses described herein, and, 

again, no expense amount is allocated 

twice. For example, the Exchange does 

not allocate its entire information 

technology and communication costs to 

providing access to its System Networks 

through 10Gb ULL connectivity and 

Full Service MEO Ports because it 

determined that a portion of those costs 

are attributable to other areas of the 

Exchange’s operations, such as 

transaction services, market data, and 

other forms of connectivity offered by 

the Exchange. This may result in the 

Exchange under allocating an expense 

to provide access to its System 

Networks through 10Gb ULL 

connectivity and Full Service MEO 

Ports, and such expenses may actually 

be higher than what the Exchange 

allocated as part of this proposal.50

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 as compared to prior versions of 

this proposed fee change that were 

previously withdrawn by the Exchange. 

The revised percentages are, among 

other things, the result of the shifting of 

internal resources in response to 

business objectives. Therefore, the 

percentage allocations used in this 

proposed rule change may differ from 

past filings from the Exchange or its 

affiliates due to adjustments to internal 

resource allocations, and different 

system architecture of the Exchange as 

compared to its affiliates.51

The Exchange believes it is reasonable 

to consider the expense and revenue for 

10Gb ULL connectivity and Full Service 

MEO Ports together because ports and 

connectivity are inextricably linked 

components of the network 

infrastructure, and that both are 

necessary for a market participant to 

access the Exchange. The various types 

of connectivity and port alternatives 

that the Exchange offers provide a wide 

array of access alternatives necessary for 

a market participant to conduct its 

business using the Exchange, which is 

a business decision to be made by each 


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52The Investors Exchange, Inc. (‘‘IEX’’) also 

allocated data center costs to produce market data 

based on space utilized. See Securities Exchange 

Act Release No. 94630 (April 7, 2022), 87 FR 21945, 

at page 21949 (April 13, 2022) (SR–IEX–2022–02) 

(‘‘IEX Market Data Fee Proposal’’) (noting that 

‘‘[d]ata Center costs consist of the fees charged by 

the third-party data centers used by IEX and 

represent less than 10% the Exchange’s total data 

center costs based on space utilized’’ (emphasis 

added)). 

particular type of market participant. 

The different types of connectivity and 

port alternatives allows Members to 

conduct their different business 

strategies—some Members put an 

emphasis on speed, while others 

emphasize other strategies, such as 

redundancy and certainty of execution. 

The Exchange does not require a 

Member to have a certain framework for 

accessing the Exchange, but provides 

various connectivity and port 

alternatives for each Member’s distinct 

business lines. 

External Expense Allocations 

For 2022, annual expenses relating to 

fees paid by the Exchange to third 

parties for products and services 

necessary to provide 10Gb ULL 

connectivity and Full Service MEO 

Ports are estimated to be $4,677,491. 

This includes 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, and 

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 (4) hardware and 

software providers, which 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, provide a 

trading platform for market participants, 

and produce and distribute market data. 

The Exchange does not employ a 

separate fee to cover its data center 

expense and recoups that expense, in 

part, by charging for 10Gb ULL 

connectivity and Full Service MEO 

Ports. 

The Exchange reviewed its data center 

footprint and space utilized, 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, connectivity 

(10Gb ULL and 1Gb ULL separately), 

and ports based on space utilized by 

each area.52 Based on this review, the 

Exchange and MIAX determined that 

61% of the total applicable data center 

provider expense for each is applicable 

to providing 10Gb ULL connectivity and 

10.8% for Full Service MEO Ports for 

MIAX Pearl Options. The Exchange 

reviewed space utilized to house rack 

space, cage usage, servers, switches, 

cabling, storage space, heating and 

cooling of physical space, and 

monitoring, and identified that a small 

portion of that footprint is dedicated to 

equipment used to support 10Gb ULL 

connectivity and Full Service MEO 

Ports. 

The Exchange believes this allocation 

is reasonable because it represents the 

costs associated with housing the 

Exchange’s equipment dedicated to 

supporting 10Gb ULL connectivity and 

Full Service MEO Ports. 10Gb ULL 

connectivity and Full Service MEO 

Ports are core means of access to the 

Exchange’s network, providing several 

methods 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 space utilized to 

provide and maintain connectivity and 

port access 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 and space that are dedicated to 

market data. The Exchange also did not 

allocate the remainder of the data center 

expense because it pertains to space 

utilized by other areas of the Exchange’s 

operations, such as 1Gb ULL 

connectivity, other types of 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. Fiber connectivity is also 

necessary for personnel responsible for 

overseeing and providing customer 

service related to supporting 10Gb ULL 

connectivity and Full Service MEO 

Ports, receiving relevant data and being 

able to communicate between the 

Exchange’s various locations and data 

centers. Without these services, the 

Exchange would not be able to operate 

and support the network and provide 

and maintain access services and 

System Networks associated with the 

10Gb ULL connectivity and Full Service 

MEO 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 in a manner 

necessary to maintain and support 10Gb 

ULL connectivity and Full Service MEO 

Ports. Fiber connectivity is a necessary 

integral means to disseminate 

information, including data related to 

supporting 10Gb ULL connectivity and 

Full Service MEO Ports, from the 

Exchange’s primary data center to other 

Exchange locations. It is necessary for 

Exchange employees located in various 

locations to be able to communicate and 

receive the necessary data to maintain 

and provide customer support related to 

10Gb ULL connectivity and Full Service 

MEO Ports. The Exchange would not be 

able to operate and support the network 

and provide and maintain access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports without 

third party fiber connectivity. The 

Exchange does not employ a separate 

fee to cover its fiber connectivity 

expense and recoups that expense, in 


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part, by charging for 10Gb ULL 

connectivity and Full Service MEO 

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. Based on 

this review, the Exchange and MIAX 

determined that 61% of the total fiber 

connectivity expense for each was 

applicable to providing and maintaining 

access services and System Networks 

associated with 10Gb ULL connectivity 

and 5.4% for Full Service MEO Ports for 

MIAX Pearl Options. The Exchange 

reviewed its total fiber connectivity 

expense and allocated it among 

transaction services, connectivity, ports, 

market data, and administrative 

operations, based on usage. The 

Exchange then further divided up its 

fiber connectivity costs related to 

connectivity and ports and identified 

the portion that is attributable to 

supporting 10Gb ULL connectivity and 

Full Service MEO Ports, also based on 

usage. This allocation is, therefore, 

based on the amount of bandwidth and 

fiber connectivity the Exchange 

calculated is utilized to support 

exchange operations, and ongoing 

network monitoring and maintenance 

that are necessary to provide 10Gb ULL 

connectivity and Full Service MEO 

Ports. The Exchange believes this 

allocation is reasonable because 10Gb 

ULL connectivity and Full Service MEO 

Ports are core means of access to the 

Exchange’s network, providing several 

methods 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. The 

Exchange also excluded from this 

allocation fiber connectivity usage 

related to other business lines, such as 

transaction services, market data, and 

other forms of connectivity offered by 

the Exchange, 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 and 

does not directly relate to providing and 

maintaining access services and System 

Networks associated with 10Gb ULL 

connectivity and Full Service MEO 

Ports. The Exchange believes this 

allocation is reasonable because it 

represents the Exchange’s cost to 

providing and maintaining access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO 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 10Gb 

ULL connectivity and Full Service MEO 

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. Connectivity and market 

data provided by SFTI and other service 

is critical to the Exchanges daily 

operations and performance of its 

System Networks to which market 

participants connect to via 10Gb ULL 

connectivity and Full Service MEO 

Ports. Without services from SFTI and 

various other service providers, the 

Exchange would not be able to connect 

to other national securities exchanges, 

market data providers, or OPRA and, 

therefore, would not be able to operate 

and support its System Networks. The 

Exchange does not employ a separate 

fee to cover its SFTI and content service 

provider expense and recoups that 

expense, in part, by charging for 10Gb 

ULL connectivity and Full Service MEO 

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. Based on this review, the 

Exchange and MIAX determined that 

73.6% of the total applicable SFTI and 

other service provider expense for each 

is allocated to providing and 

maintaining access services and System 

Networks associated with 10Gb ULL 

connectivity and 4.4% for Full Service 

MEO Ports for MIAX Pearl Options. The 

Exchange reviewed its total SFTI and 

other service provider expense and 

allocated it among transaction services, 

connectivity, ports, other market data 

products, and administrative operations, 

based on usage. The Exchange then 

further divided up its SFTI and other 

service provider costs related to 

connectivity and ports and identified 

the portion that is attributable to 

supporting 10Gb ULL connectivity and 

Full Service MEO Ports, also based on 

usage. This allocation is, therefore, 

based on the amount of SFTI and other 

service provider resources utilized to 

support exchange operations, and 

ongoing network monitoring and 

maintenance that are necessary to 

provide 10Gb ULL connectivity and Full 

Service MEO Ports. SFTI and other 

content service providers are key 

vendors and necessary components in 

providing access 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 10Gb ULL 

connectivity and Full Service MEO 

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 10Gb ULL connectivity to 

other national securities exchanges for 

purposes of order routing and disaster 

recovery. The Exchange did not allocate 

a portion of this expense that relates to 

the receipt of market data from other 

national securities exchanges and 

OPRA. The Exchange also did not 

allocate the remainder of this expense 

because it pertains to other areas of the 

Exchange’s operations and does not 

directly relate to providing and 

maintaining the System Networks or 

access to its System Networks via 10Gb 

ULL connectivity or Full Service MEO 

Ports, such as transaction services, 

market data, other forms of connectivity 

offered by the Exchange, or unrelated 

administrative services. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

cost to provide and maintain its System 

Networks and access to its System 

Networks via 10Gb ULL connectivity 

and Full Service MEO 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 


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53The Exchange notes that IEX used a similar 

methodology to allocate hardware costs to market 

data. See IEX Market Data Fee Proposal, supra note 

52 at page 21950 (noting that ‘‘IEX only included 

hardware specifically dedicated to the market data 

feeds in calculating the costs of providing market 

data’’). 

54For purposes of this allocation, the Exchange 

did not consider expenses related to office space, 

supplies, or equipment use by employees who 

support 10Gb ULL connectivity and Full Service 

MEO Ports. 

operate its System Networks. This 

includes either the purchase or 

licensing of physical equipment, such as 

servers, switches, cabling, and devices 

needed by Exchange personnel to 

monitor servers and the health 10Gb 

ULL connectivity and Full Service MEO 

Ports. This consists of real-time 

monitoring of system performance, 

integrity, and latency of 10Gb ULL 

connectivity and Full Service MEO 

Ports. It also includes the Exchange 

purchasing or licensing software 

necessary for security monitoring, data 

analysis and Exchange operations. 

Hardware and software providers are 

necessary to maintain its System 

Networks and provide access to its 

System Networks via a 10Gb ULL 

connectivity and Full Service MEO 

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 10Gb ULL 

connectivity and Full Service MEO 

Ports. 

The Exchange reviewed its 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. The Exchange 

then divided those costs among 

transaction services, ports, connectivity, 

market data, and other Exchange 

operations based on whether all of that 

hardware or software is based on usage. 

The Exchange then reviewed the 

amount allocated to connectivity and 

ports generally and what portion of that 

hardware and software equipment or 

license is used to support 10Gb ULL 

connectivity and Full Service MEO 

Ports specifically. Based on this review, 

the Exchange and MIAX determined 

that 50% of the total applicable 

hardware and software expense for each 

is allocated to providing and 

maintaining access services and System 

Networks associated with 10Gb ULL 

connectivity and 6.4% for Full Service 

MEO Ports for MIAX Pearl Options. 

These percentages reflect the amount of 

hardware and software equipment and 

licenses dedicated to support 10Gb ULL 

connectivity and Full Service MEO 

Ports.53 Hardware and software 

equipment and licenses are key to the 

operation of the Exchange and its 

System Networks. Without them, the 

Exchange would not be able to provide 

and maintain access services and 

System Networks associated with 10Gb 

ULL connectivity and Full Service MEO 

Ports. The Exchange only allocated the 

portion of this expense to the hardware 

and software that is related to 10Gb ULL 

connectivity and Full Service MEO 

Ports, such as operating servers and 

equipment necessary to provide and 

maintain access services and System 

Networks associated with 10Gb ULL 

connectivity and Full Service MEO 

Ports. 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 

transaction services, market data, and 

other forms of connectivity offered by 

the Exchange, and is not directly relate 

to providing 10Gb ULL connectivity or 

Full Service MEO Ports. The Exchange 

believes this allocation is reasonable 

because it represents the Exchange’s 

cost to provide and maintain access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports, and not 

any other service, as supported by its 

cost review. 

Internal Expense Allocations 

For 2022, total combined internal 

annual expense relating to the Exchange 

and MIAX to provide and maintain their 

System Networks and access to their 

System Networks for 10Gb ULL 

connectivity, and for access via Full 

Service MEO Ports for MIAX Pearl 

Options, is estimated to be $14,240,687. 

This includes costs associated with: (1) 

Employee compensation and benefits 

for full-time employees that support the 

System Networks and access to System 

Networks via 10Gb ULL connectivity 

and Full Service MEO 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 the 

10Gb ULL connectivity and Full Service 

MEO 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 10Gb ULL connectivity 

and Full Service MEO Ports. 

Employee Compensation and Benefits 

Human personnel are key to exchange 

operations and supporting the 

Exchange’s ongoing provision of 10Gb 

ULL connectivity and Full Service MEO 

Ports. The Exchange reviewed its 

employee compensation and benefits 

expense and the portion of that expense 

allocated to providing 10Gb ULL 

connectivity and Full Service MEO 

Ports. As part of this review, the 

Exchange considered employees whose 

functions include providing and 

maintaining access services and System 

Networks associated with 10Gb ULL 

connectivity and Full Service MEO 

Ports and used a blended rate of 

compensation reflecting salary, stock 

and bonus compensation, bonuses, 

benefits, payroll taxes, and 401K 

matching contributions.54

In its suspension orders, the 

Commission asked the Exchange 

provide more detail about the 

methodology the Exchange used to 

determine how much of an employee’s 

time is devoted to connectivity and port 

related activities. In considering the cost 

of personnel, the Exchange generally 

considered the time spent on various 

access service projects and initiatives 

through project management tracking 

tools and analysis of employee resource 

allocations, among its Technology Team 

in the following areas: Technical 

Operations, Software Engineering, 

Quality Assurance, and Infrastructure. 

The Exchange did not consider nonTechnology Teams such as Market 

Operations, Project Management, 


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55The Exchange notes that IEX used a similar 

methodology to allocate employee compensation 

related costs to market data. See IEX Market Data 

Fee Proposal, supra note 52 at page 29150 (noting 

that ‘‘[f]or personnel costs, IEX calculated an 

allocation of employee time for employees whose 

functions include providing and maintaining IEX 

Data and/or the proprietary market data feeds used 

to transmit IEX Data, and used a blended rate of 

compensation reflecting salary, stock and bonus 

compensation, benefits, payroll taxes, and 401(k) 

matching contributions’’). 

Regulatory, Legal, and Accounting/ 

Finance.55

Based on this review, the Exchange 

and MIAX determined to allocate a 

combined $9,130,289 in combined 

employee compensation and benefits 

expense to provide and maintain access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports. This is 

only a portion of the $25,717,996 total 

projected combined expense for 

employee compensation and benefits for 

MIAX and MIAX Pearl Options. Of that 

total, the Exchange and MIAX allocated 

approximately 27.5% of the total 

applicable employee compensation and 

benefits expense for each to providing 

and maintaining access services and 

System Networks associated with 10Gb 

ULL connectivity and 19.2% for Full 

Service MEO Ports for MIAX Pearl 

Options. The Exchange and MIAX 

determined the cost allocations for 

employees who perform work in 

support of providing and maintaining 

access services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports to arrive at 

full time equivalents (‘‘FTE’’) of 12.0 

FTEs for MIAX and 8.9 FTEs for MIAX 

Pearl Options across all the identified 

personnel related to 10Gb ULL 

connectivity, and 6.3 FTEs across all the 

identified personnel related to Full 

Service MEO Ports for MIAX Pearl 

Options. The Exchange then multiplied 

the FTE times a blended compensation 

rate for all relevant Exchange personnel 

to determine the personnel costs 

associated with providing and 

maintaining access services and System 

Networks associated with 10Gb ULL 

connectivity and Full Service MEO 

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 providing and maintaining 

access services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports. The 

Exchange determined the above 

allocation based on the personnel whose 

work focused on functions necessary to 

providing and maintaining access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports. The 

Exchange does not charge a separate fee 

regarding employees who support 10Gb 

ULL connectivity and Full Service MEO 

Ports and the Exchange seeks to recoup 

those expenses, in part, by charging for 

10Gb ULL connectivity and Full Service 

MEO Ports. 

The Exchange believes it is 

appropriate to include incentive 

compensation in the blended personnel 

compensation rate on the same basis as 

other personnel costs for in-scope 

employees because incentive 

compensation is a part of the total 

personnel costs associated with the 

Exchange’s provision of 10Gb ULL 

connectivity and Full Service MEO 

Ports. Moreover, the Exchange notes 

that it has taken a conservative 

approach in determining which 

employees to include in its cost 

analysis, in terms of function and 

percent allocation, so that the included 

personnel costs are directly and closely 

tied to the costs of providing 10Gb ULL 

connectivity and Full Service MEO 

Ports. The FTE allocations represent just 

36% of the Exchange’s and MIAX’s 

overall personnel costs. Consistent with 

the Exchange’s conservative 

methodology to limit costs allocated to 

10Gb ULL connectivity and Full Service 

MEO Ports, this approach includes only 

a de minimis personnel cost allocation 

for senior level executives and no 

allocation for members of the 

Exchange’s board of directors. 

Accordingly, the Exchange believes that 

the allocated personnel expenses 

included are appropriately attributable 

to 10Gb ULL connectivity and Full 

Service MEO 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 access services and System 

Networks associated with 10Gb ULL 

connectivity and Full Service MEO 

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 the 10Gb ULL connectivity 

and Full Service MEO 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 and depreciated or 

leased over periods ranging from three 

to five years. Based on the Exchange’s 

experience, this depreciation period 

equals the typical life expectancy of 

those assets. In determining the amount 

of depreciation and amortization to 

apply to providing and maintaining 

access services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports, the 

Exchange considered the depreciation of 

hardware and software that are key to 

the operation of the Exchange and its 

provision of 10Gb ULL connectivity and 

Full Service MEO Ports. 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 provide and maintain 

access services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports. Without 

them, market participants would not be 

able to access the Exchange. The 

Exchange seeks to recoup a portion of 

its depreciation expense by charging for 

10Gb ULL connectivity and Full Service 

MEO Ports. 

Based on this review, the Exchange 

and MIAX determined to allocate a 

combined $4,346,430 in combined 

depreciation and amortization expense 

to provide and maintain access services 

and System Networks associated with 

10Gb ULL connectivity and Full Service 

MEO Ports. This is only a portion of the 

$6,517,608 total projected combined 

expense for depreciation and 

amortization for MIAX and MIAX Pearl 

Options. This allocation represents 

approximately 66% for MIAX and 

61.3% for MIAX Pearl Options of the 

total applicable depreciation expenses 

to providing and maintaining access 

services and System Networks 

associated with 10Gb ULL connectivity 

and 6.8% for Full Service MEO Ports for 

MIAX Pearl Options. For purposes of 

the allocation of these costs to 10Gb 

ULL connectivity and Full Service MEO 

Ports, the Exchange allocates the annual 

depreciation (i.e., one-third or one-fifth 

of the initial asset value based on the 

typical life expectancy of those assets). 

One-third or one-fifth of the cost of each 

asset is included in the annual costs 

allocated to 10Gb ULL connectivity and 

Full Service MEO Ports. The Exchange 

only included assets specifically 

dedicated to 10Gb ULL connectivity and 

Full Service MEO Ports in calculating 

the costs of providing 10Gb ULL 

connectivity and Full Service MEO 

Ports. This means that physical assets 

used for such as transaction services, 

market data, other forms of connectivity 

offered by the Exchange, or other 

Exchange operations were excluded 


khammond on DSKJM1Z7X2PROD with NOTICES
29904 Federal Register / Vol. 87, No. 95 / Tuesday, May 17, 2022 / Notices 

56The Exchange notes that IEX used a similar 

methodology to allocate hardware costs to market 

data. See IEX Market Data Fee Proposal at note 54, 

supra note 52 at page 21950 (noting that 

‘‘[h]ardware is depreciated on a straight-line threeyear period, which in IEX’s experience, is equal to 

the typical life expectancy of those assets. As noted 

above, one-third of the cost of each hardware asset 

is included in the annual costs allocated to market 

data. IEX only included hardware specifically 

dedicated to the market data feeds in calculating the 

costs of providing market data. This means that 

physical assets used for both order entry and market 

data were excluded from the calculation’’). 

57For the avoidance of doubt, the Exchange did 

not include within this cost any portion of its costs 

related to third party fiber connectivity used by 

Exchange staff in different office locations to 

communicate as part of their role in supporting 

10Gb ULL connectivity and Full Service MEO Ports. 

from the calculation.56 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, 

unrelated administrative services, or 

other connectivity or ports offered by 

the Exchange. All of the expenses 

outlined in this proposed fee change 

refer to the operating expenses of the 

Exchange. In the suspension orders, the 

Commission asked for additional detail 

or explanation to ensure that no expense 

amount is allocated twice. The 

Exchange did not included any future 

capital expenditures within these costs 

ensuring that no cost is counted twice. 

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. 

Occupancy 

The Exchange rents and maintains 

multiple physical locations to house 

staff and equipment necessary to 

support access to System Networks via 

10Gb ULL connectivity and Full Service 

MEO Ports. 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 access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports. Similarly, 

the Exchange also considered the actual 

physical space used to house hardware 

and other equipment necessary to 

provide and maintain the 10Gb ULL 

connectivity and Full Service MEO 

Ports. The Exchange maintains staff that 

support 10Gb ULL connectivity and Full 

Service MEO Ports in various locations 

and needs to provide workplaces for 

that staff as well as space to house 

hardware and equipment necessary for 

those employees to perform those 

functions.57 This equipment includes 

computers, servers, and accessories 

necessary to support the access to the 

System Networks via 10Gb ULL 

connectivity and Full Service MEO 

Ports. Based on this review, the 

Exchange and MIAX determined to 

allocate a combined $763,968 in 

occupancy expense to providing and 

maintaining access services and System 

Networks associated with 10Gb ULL 

connectivity and Full Service MEO 

Ports for MIAX Pearl Options. 

According to the Exchange’s 

calculations, MIAX and MIAX Pearl 

Options each allocated approximately 

52% of their total applicable occupancy 

expense to providing and maintaining 

access services and System Networks 

associated with 10Gb ULL connectivity 

and 10.8% for Full Service MEO Ports 

for MIAX Pearl Options. This is only a 

portion of the $1,349,176 total projected 

combined expense for occupancy for 

MIAX and MIAX Pearl Options. 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 10Gb ULL 

connectivity and Full Service MEO 

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 

transaction and administrative services. 

Allocated Shared Expense 

Finally, a limited portion of general 

shared expenses was allocated to 

providing and maintaining access 

services and System Networks 

associated with 10Gb ULL connectivity 

and Full Service MEO Ports as without 

these general shared costs, the Exchange 

would not be able to operate in the 

manner that it does. 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 and MIAX Pearl Option’s 

combined general shared expense 

allocated to 10Gb ULL connectivity and 

Full Service MEO Ports for MIAX Pearl 

Options is estimated to be $3,671,627. 

This represents approximately 49% for 

MIAX and 44% for MIAX Pearl Options 

for 10Gb ULL connectivity, and 11% for 

MIAX Pearl Options for Full Service 

MEO Ports, of the $7,103,363 total 

projected combined general shared 

expense for MIAX and MIAX Pearl 

Options. 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, 

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 and 

MIAX’s estimated revenue associated 

with 10Gb ULL connectivity and Full 

Service MEO Ports for MIAX Pearl 

Options, the Exchange and MIAX 

analyzed the number of subscribers 

currently utilizing 10Gb ULL 

connectivity (for both on the shared 

network) and Full Service MEO Ports 

(for MIAX Pearl Options) 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 external expenses, as well 

as because the Exchange is committing 

to review this cost analysis for these fees 

on an annual basis going forward. 

For March 2022, prior to the proposed 

fees, the Exchange and MIAX had a 

combined 173 10Gb ULL connections 

and MIAX Pearl Options had 15 Full 

Service MEO Ports (Bulk) and 4 Full 

Service MEO Ports (Single) purchased, 

for which the Exchange and MIAX 

charged a total of $1,787,712 (including 

charges for connections that were 

dropped or added mid-month, resulting 

in pro-rated charges). This resulted in a 

loss of $94,772 for that month (a margin 


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58The Exchange notes that the number of 

subscribers of 10Gb ULL connections and Full 

Service MEO Ports may change over time. For 

example, from June 2021 to April 2022, MIAX and 

MIAX Pearl Options had the following number of 

combined subscribers of 10Gb ULL connectivity per 

month: June (152); July (156); August (154); 

September (154); October (154); November (152); 

December (159); January (174); February (171); 

March (173); April (174). From June 2021 to April 

2022, MIAX had the following number of Full 

Service MEO Ports utilized per month (Bulk and 

Single combined): June (20); July (20); August (19); 

September (19); October (19); November (19); 

December (19); January (19); February (19); March 

(19); April (19). 

59See supra note 39. 

60The Exchange has incurred a cumulative loss 

of $86 million since its inception in 2017 to 2020. 

See Exchange’s Form 1/A, Application for 

Registration or Exemption from Registration as a 

National Securities Exchange, filed July 28, 2021, 

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

vprr/2100/21000461.pdf. 

of ¥5.3%). For April 2022, the 

Exchange and MIAX anticipate that a 

combined 174 10Gb ULL connections 

and, for MIAX Pearl Options, 15 Full 

Service MEO Ports (Bulk) and 4 Full 

Service MEO Ports (Single) will be 

charged for (as of the date of this 

filing).58 Assuming the Exchange and 

MIAX charge the proposed monthly rate 

of $12,000 per 10Gb ULL connection 

and the proposed rates for Full Service 

MEO Ports for MIAX Pearl Options, the 

Exchange and MIAX would generate 

revenue of $2,213,500 for April 2022 

(not including potential pro-rated 

connection charges for mid-month 

connections) for 10Gb ULL connectivity 

for both exchanges and Full Service 

MEO Ports for MIAX Pearl Options 

combined. This would result in a profit 

of $331,016 ($2,213,500 minus 

$1,882,484) for that month (a 15% profit 

margin). As discussed above, the 

Exchange believes it is reasonable to 

consider the expense and revenue for 

10Gb ULL connectivity and Full Service 

MEO Ports together because ports and 

connectivity are inextricably linked 

components of the network 

infrastructure, and that both are 

necessary for a market participant to 

access the Exchange. 

The Exchange believes that 

conducting the above analysis on a per 

month basis is reasonable as the revenue 

generated from access services subject to 

the proposed fee generally remains 

static from month to month. The 

Exchange also conducted the above 

analysis on a per month basis to comply 

with the Commission Staff’s Guidance, 

which requires a baseline analysis to 

assist in determining whether the 

proposal generates a supra-competitive 

profit. The Exchange cautions that this 

profit margin may also fluctuate from 

month to month based on the 

uncertainty of predicting how many 

connections and ports may be 

purchased from month to month as 

Members and non-Members are free to 

add and drop connections and ports at 

any time based on their own business 

decisions. 

The Exchange believes the proposed 

profit margin is reasonable and will not 

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

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

exceed the profits that can be obtained 

in a competitive market.’’ 59 Until 

recently, the Exchange has operated at 

a cumulative net annual loss since it 

launched operations in 2017.60 The 

Exchange has operated at a net loss due 

to a number of factors, one of which is 

choosing to forgo revenue by offering 

certain products, such as connectivity, 

at lower rates than other options 

exchanges to attract order flow and 

encourage market participants to 

experience the high determinism, low 

latency, and resiliency of the Exchange’s 

trading systems. The Exchange should 

not now be penalized for seeking to 

raise it fees to near market rates after 

offering such products as discounted 

prices. Therefore, the Exchange believes 

the proposed fees are reasonable 

because they are based on both relative 

costs to the Exchange to provide 10Gb 

ULL connectivity and Full Service MEO 

Ports, the extent to which the product 

drives the Exchange’s overall costs and 

the relative value of the product, as well 

as the Exchange’s objective to make 

access to its Systems broadly available 

to market participants. The Exchange 

also believes the proposed fees are 

reasonable because they are designed to 

generate annual revenue to recoup the 

Exchange’s costs of providing 10Gb ULL 

connectivity and Full Service MEO 

Ports. 

The Exchange notes that its revenue 

estimate is based on projections and 

will only be realized to the extent such 

revenue actually produces the revenue 

estimated. As a competitor in the hypercompetitive 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 

10Gb ULL connectivity and Full Service 

MEO Ports, the Exchange will have to be 

successful in retaining existing clients 

that wish to utilize 10Gb ULL 

connectivity and Full Service MEO 

Ports or obtaining new clients that will 

purchase such access. To the extent the 

Exchange is successful in encouraging 

new clients to utilize 10Gb ULL 

connectivity and Full Service MEO 

Ports, the Exchange does not believe it 

should be penalized for such success. 

The Exchange, like other exchanges, is, 

after all, a for-profit business. While the 

Exchange believes in transparency 

around costs and potential margins, the 

Exchange does not believe that these 

estimates should form the sole basis of 

whether or not a proposed fee is 

reasonable or can be adopted. Instead, 

the Exchange believes that the 

information should be used solely to 

confirm that an Exchange is not earning 

supra-competitive profits, and the 

Exchange believes this proposal 

demonstrates this fact. 

Further, the proposed profit margin 

reflects the Exchange’s efforts to control 

its costs. A profit margin should not be 

judged alone based on its size, but 

whether the ultimate fee reflects the 

value of the services provided and is in 

line with other exchanges. A profit 

margin on one exchange should not be 

deemed excessive where that exchange 

has been successful in controlling costs, 

but not excessive where an exchange is 

charging the same fee but has a lower 

profit margin due to higher costs. 

The expected profit margin is 

reasonable because the Exchange offers 

a premium System Network, System 

Networks connectivity, and a highly 

deterministic trading environment. The 

Exchange is recognized as a leader in 

network monitoring, determinism, risk 

protections, and network stability. For 

example, the Exchange experiences 

approximately a 95% determinism rate, 

system throughput of approximately 

10.8 million quotes per second and 

average round trip latency rate of 

approximately 30.76 microseconds for a 

single quote. The Exchange provides 

extreme performance and radical 

scalability designed to match the unique 

needs of trading differing asset class/ 

market model combinations. Exchange 

systems offer two customer interfaces, 

FIX gateway for orders, and ultra-low 

latency 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 Exchange’s 

Systems. The Exchange, therefore, 

believes the anticipated profit margin is 

reasonable because it reflects the 

Exchange’s cost controls and the quality 

of the Exchanges systems. 


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61See supra note 23. 

62See supra note 24. 

63See supra note 23. 

64See supra note 26. 

65See supra note 23. 

66See supra note 28. 

67See supra note 23. 

68See supra note 30. 

69See supra note 23. 

Finally, the Exchange believes that 

the proposed fees are reasonable 

because they will not impose onerous 

audit requirements on subscribers, 

because there will be no need to 

substantiate the number of users of 

10Gb ULL connectivity and Full Service 

MEO Ports or the manner in which it is 

being used. 

Annual Review of Fees 

In its suspension orders, the 

Commission asks whether exchanges 

should periodically reevaluate fees on 

an ongoing and periodic basis in order 

to assure that actual revenue aligns with 

a reasonable cost-plus model. As 

described above and as part of this 

proposed rule change, the Exchange is 

committing to conduct a one year 

review of the fees that are cost justified 

as part of this proposed rule change 

after the date of this proposal, and 

annually thereafter. The Exchange 

expects that it may propose to adjust 

fees at that time, either to increase fees 

in the event that revenues fail to 

reasonably cover costs at the estimated 

margin set forth below [sic], or to 

decrease fees in the event that revenue 

materially exceeds the Exchange’s 

current projections. In the event that the 

Exchange determines to propose a fee 

change, updated cost estimates will be 

included in a rule filing proposing the 

fee change. The Exchange believes this 

approach will further increase 

transparency around market data costs 

and help to ensure that Exchange fees 

continue to be reasonably related to 

costs. 

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 options exchanges’ costs to 

provide connectivity and port access or 

their fee markup over those costs, and 

therefore cannot use other exchange’s 

connectivity and port fees as 

benchmarks to determine a reasonable 

markup over the costs of providing such 

access. Nevertheless, the Exchange 

believes the other exchanges’ 10Gb 

connectivity and port fees are useful 

examples of alternative approaches to 

providing and charging for access 

notwithstanding that the competing 

exchanges may have different system 

architectures that may result in different 

cost structures for the provision of 

connectivity and ports. To that end, the 

Exchange believes the proposed fees are 

reasonable because the proposed fees 

are similar to or less than fees charged 

for similar connectivity and port access 

provided by other options exchanges 

with comparable market shares. 

As described in the table below, the 

Exchange’s proposed fees remain 

similar to or less than fees charged for 

similar connectivity and port access 

provided by other options exchanges 

with similar market share. In the each 

of the below cases, the Exchange’s 

proposed fees are still significantly 

lower than that of competing options 

exchanges with similar market share. 

Each of the market data rates in place at 

competing options exchanges were filed 

with the Commission for immediate 

effectiveness and remain in place today. 

Exchange Type of connection or port Monthly fee 

(per connection or per port) 

MIAX Pearl (as proposed) 

(equity options market 

share of 5.67% as of 

April 29, 2022 for the 

month of April) 61.

10Gb ULL connection .........................................

Full Service MEO Port (Bulk) .............................

Full Service MEO Port (Single).

$12,000. 

Tier 1: $5,000 (or $208.33 per Matching Engine). 

Tier 2: $7,500 (or $312.50 per Matching Engine). 

Tier 3: $10,000 (or $416.66 per Matching Engine). 

Tier 1: $2,500 (or $104.16 per Matching Engine). 

Tier 2: $3,500 (or $145.83 per Matching Engine). 

Tier 3: $4,500 (or $187.50 per Matching Engine). 

NASDAQ 62 (equity options 

market share of 8.47% as 

of April 29, 2022 for the 

month of April) 63.

10Gb Ultra fiber connection ................................

SQF Port .............................................................

$15,000. 

1–5 ports. $1,500. 

6–20 ports. $1,000. 

21 or more ports. $500. 

ISE64 (equity options market share of 5.48% as of 

April 29, 2022 for the 

month of April) 65.

10Gb Ultra fiber connection ................................

SQF Port .............................................................

$15,000. 

$1,100. 

NYSE American 66 (equity 

options market share of 

8.13% as of April 29, 

2022 for the month of 

April) 67.

10Gb LX LCN connection ...................................

Order/Quote Entry Port .......................................

$22,000. 

Ports 1–40. $450. 

Ports 41 and greater. $150. 

GEMX68 (equity options 

market share of 2.36% as 

of April 29, 2022 for the 

month of April) 69.

10Gb Ultra connection ........................................

SQF Port .............................................................

$15,000. 

$1,250 

The Proposed Pricing Is Not Unfairly 

Discriminatory and Provides for the 

Equitable Allocation of Fees, Dues, and 

Other Charges 

The Exchange believes that the 

proposed fees are reasonable, fair, 

equitable, and not unfairly 

discriminatory because they are 

designed to align fees with services 

provided and will apply equally to all 

subscribers. 

10Gb ULL Connectivity 

The Exchange believes that the 

proposed fees are reasonable, equitably 

allocated and not unfairly 

discriminatory because, for one 10Gb 

ULL connection, the Exchange provides 

each Member or non-Member access to 

all twelve (12) matching engines on 

MIAX Pearl and a vast majority choose 

to connect to all twelve (12) matching 

engines. The Exchange believes that 


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70See Specialized Quote Interface Specification, 

Nasdaq PHLX, Nasdaq Options Market, Nasdaq BX 

Options, Version 6.5a, Section 2, Architecture 

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

www.nasdaqtrader.com/content/technicalsupport/ 

specifications/TradingProducts/SQF6.5a-2019- 

Aug.pdf. The Exchange notes that it is unclear 

whether the NASDAQ exchanges include 

connectivity to each matching engine for the single 

fee or charge per connection, per matching engine. 

See also NYSE Technology FAQ and Best Practices: 

Options, Section 5.1 (How many matching engines 

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

Exchange notes that NYSE provides a link to an 

Excel file detailing the number of matching engines 

per options exchange, with Arca and Amex having 

19 and 17 matching engines, respectively. 

71 17 CFR 240.17a–1 (recordkeeping rule for 

national securities exchanges, national securities 

associations, registered clearing agencies and the 

Municipal Securities Rulemaking Board). 

72 17 CFR 240.17a–1 (recordkeeping rule for 

national securities exchanges, national securities 

associations, registered clearing agencies and the 

Municipal Securities Rulemaking Board). 

73See supra notes 24, 26, 28, and 30. 

other exchanges require firms to connect 

to multiple matching engines.70

The Exchange believes that the 

proposed fees are equitably allocated 

among users of the network connectivity 

and port alternatives, as the users of 

10Gb ULL connections consume the 

more bandwidth and network resources 

than users of 1Gb ULL connection. 

Specifically, the Exchange notes that 

10Gb ULL connection users account for 

approximately more than 99% of 

message traffic over the network, while 

the users of the 1Gb ULL connections 

account for approximately less than 1% 

of message traffic over the network. In 

the Exchange’s experience, users of the 

1Gb connections do not have a business 

need for the high performance network 

solutions required by 10Gb ULL users. 

The Exchange’s high performance 

network solutions and supporting 

infrastructure (including employee 

support), provides unparalleled system 

throughput 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 handle 

over approximately 8,304,500,000 

billion total messages. Of that total, 

users of the 10Gb ULL connections 

generate approximately 8.3 billion 

messages, and users of the 1Gb 

connections generate approximately 4.5 

million messages. 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. The Exchange 

must also purchase additional storage 

capacity on an ongoing basis to ensure 

it has sufficient capacity to store these 

messages as part of it surveillance 

program and to satisfy its record 

keeping requirements under the 

Exchange Act.71 Thus, as the number of 

messages an entity increases, certain 

other costs incurred by the Exchange 

that are correlated to, though not 

directly affected by, connection costs 

(e.g., storage costs, surveillance costs, 

service expenses) also increase. Given 

this difference in network utilization 

rate, the Exchange believes that it is 

reasonable, equitable, and not unfairly 

discriminatory that the 10Gb ULL users 

pay for the vast majority of the shared 

network resources from which all 

market participants’ benefit. 

The Exchange also believes that the 

connectivity fees are equitably allocated 

amongst users of the network 

connectivity alternatives, when these 

fees are viewed in the context of the 

overall trading volume on the Exchange. 

To illustrate, the purchasers of the 10Gb 

ULL connectivity account for 

approximately 91.95% of the volume on 

the Exchange. This overall volume 

percentage (91.95% of total Exchange 

volume) is in line with the amount of 

network connectivity revenue collected 

from 10Gb ULL purchasers (98% of total 

Exchange connectivity revenue). For 

example, utilizing a recent billing cycle, 

Exchange Members and non-Members 

that purchased 10Gb ULL connections 

accounted for approximately 98% of the 

total network connectivity revenue 

collected by the Exchange from all 

connectivity alternatives; and Members 

and non-Members that purchased 1Gb 

and 10Gb connections accounted for 

approximately 2% of the revenue 

collected by the Exchange from all 

connectivity alternatives. 

Full Service MEO Ports 

The Exchange believes that the 

proposed fees are equitably allocated 

among users of the network connectivity 

alternatives, as the Members that are 

frequently in the highest Tier for Full 

Service MEO Ports consume the most 

bandwidth and resources of the 

network. Specifically, like above for the 

10Gb ULL connectivity, the Exchange 

notes that the Market Makers who reach 

the highest tier for Full Service MEO 

Ports (Bulk) account for approximately 

greater than 84% of average daily 

volume (‘‘ADV’’) on the Exchange, 

while Market Makers that are typically 

in the lowest Tier for Full Service MEO 

Ports, account for approximately less 

than 14% of ADV on the Exchange. The 

remaining 1% if accounted for by 

Market Makers who are frequently in 

the middle Tier for Full Service MEO 

Ports (Bulk), which is usually one firm. 

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. The Exchange must also 

purchase additional storage capacity on 

an ongoing basis to ensure it has 

sufficient capacity to store these 

messages as part of it surveillance 

program and to satisfy its record 

keeping requirements under the 

Exchange Act.72 Thus, as the number of 

connections a Market Maker has 

increases, certain other costs incurred 

by the Exchange that are correlated to, 

though not directly affected by, 

connection costs (e.g., storage costs, 

surveillance costs, service expenses) 

also increase. The Exchange sought to 

design the proposed tiered-pricing 

structure to set the amount of the fees 

to relate to the number of connections 

a firm purchases. The more connections 

purchased by a Market Maker likely 

results in greater expenditure of 

Exchange resources and increased cost 

to the Exchange. The Exchange further 

believes that the proposed fees are 

reasonable, equitably allocated and not 

unfairly discriminatory because, for the 

flat fee, the Exchange provides each 

Member two (2) Full Service MEO Ports 

for each matching engine to which that 

Member is connected. Unlike other 

options exchanges that provide similar 

port functionality and charge fees on a 

per port basis,73 the Exchange offers 

Full Service MEO Ports as a package 

and provides Members with the option 

to receive up to two Full Service MEO 

Ports per matching engine to which it 

connects. The Exchange currently has 

twelve (12) matching engines, which 

means Members may receive up to 

twenty-four (24) Full Service MEO Ports 

for a single monthly fee, that can vary 

based on certain volume percentages. 

The Exchange currently assesses 

Members a fee of $5,000 per month in 

the highest Full Service MEO Port— 

Bulk Tier, regardless of the number of 

Full Service MEO Ports allocated to the 

Member. Assuming a Member connects 

to all twelve (12) matching engines 

during a month, with two Full Service 


khammond on DSKJM1Z7X2PROD with NOTICES
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74See supra note 6. 

75See supra note 60. 

76See, e.g., SR–PEARL–2022–03, SR–PEARL– 

2022–04, SR–PEARL–2022–11. 

77 15 U.S.C. 78s(b)(3)(C). 

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

79See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

80See Id. 

81 15 U.S.C. 78f(b)(4). 

82 15 U.S.C. 78f(b)(5). 

83 15 U.S.C. 78f(b)(8). 

MEO Ports per matching engine, this 

results in a cost of $208.33 per Full 

Service MEO Port—Bulk ($5,000 

divided by 24) for the month. This fee 

has been unchanged since the Exchange 

adopted Full Service MEO Port fees in 

2018.74 The Exchange now proposes to 

increase the Full Service MEO Port fees, 

with the highest Tier fee for a Full 

Service MEO Port—Bulk of $10,000 per 

month. Members will continue to 

receive two (2) Full Service MEO Ports 

to each matching engine to which they 

are connected for the single flat monthly 

fee. Assuming a Member connects to all 

twelve (12) matching engines during the 

month, and achieves the highest Tier for 

that month, with two Full Service MEO 

Ports—Bulk per matching engine, this 

would result in a cost of $416.67 per 

Full Service MEO Port ($10,000 divided 

by 24). 

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. 

Intra-Market Competition 

The Exchange believes the proposed 

fees will not result in any burden on 

intra-market competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act because the 

proposed fees will allow the Exchange 

to recoup some of its costs in providing 

10Gb ULL connectivity and Full Service 

MEO Ports at below market rates to 

market participants since the Exchange 

launched operations. As described 

above, the Exchange has operated at a 

cumulative net annual loss since it 

launched operations in 2017 75 due to 

providing a low cost alternative to 

attract order flow and encourage market 

participants to experience the high 

determinism and resiliency of the 

Exchange’s trading Systems. To do so, 

the Exchange chose to waive the fees for 

some non-transaction related services 

and Exchange products or provide them 

at a very marginal cost, which was not 

profitable to the Exchange. This resulted 

in the Exchange forgoing revenue it 

could have generated from assessing any 

fees or higher fees. The Exchange could 

have sought to charge higher fees at the 

outset, but that could have served to 

discourage participation on the 

Exchange. Instead, the Exchange chose 

to provide a low cost exchange 

alternative to the options industry, 

which resulted in lower initial 

revenues. Examples of this are 10Gb 

ULL connectivity and Full Service MEO 

Ports, for which the Exchange only now 

seeks to adopt fees at a level similar to 

or lower than those of other options 

exchanges. 

Further, the Exchange does not 

believe that the proposed fee increase 

for the 10Gb ULL connection change 

would place certain market participants 

at the Exchange at a relative 

disadvantage compared to other market 

participants or affect the ability of such 

market participants to compete. As is 

the case with the current proposed flat 

fee, the proposed fee would apply 

uniformly to all market participants 

regardless of the number of connections 

they choose to purchase. The proposed 

fee does not favor certain categories of 

market participants in a manner that 

would impose an undue burden on 

competition. 

Inter-Market Competition 

The Exchange also does not believe 

that the proposed rule change will result 

in any burden on inter-market 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act. As discussed 

above, options market participants are 

not forced to connect to all options 

exchanges. There is no reason to believe 

that our proposed price increase will 

harm another exchange’s ability to 

compete. There are other options 

markets of which market participants 

may connect to trade options. There is 

also a possible range of alternative 

strategies, including routing to the 

exchange through another participant or 

market center or accessing the Exchange 

indirectly. Market participants are free 

to choose which exchange or reseller to 

use to satisfy their business needs. 

Accordingly, the Exchange does not 

believe its proposed fee changes impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The Exchange responded to the 

comment letters submitted on prior 

versions of these proposed fee 

changes.76

III. Suspension of the Proposed Rule 

Change 

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

Act,77 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,78 the Commission summarily may 

temporarily suspend the change in the 

rules of a self-regulatory organization 

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

that such action is necessary or 

appropriate in the public interest, for 

the protection of investors, or otherwise 

in furtherance of the purposes of the 

Act. As discussed below, the 

Commission believes a temporary 

suspension of the proposed rule change 

is necessary and appropriate to allow for 

additional analysis of the proposed rule 

change’s consistency with the Act and 

the rules thereunder. 

When exchanges file their proposed 

rule changes with the Commission, 

including fee filings like the Exchange’s 

present proposal, they are required to 

provide a statement supporting the 

proposal’s basis under the Act and the 

rules and regulations thereunder 

applicable to the exchange.79 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.’’ 80

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; 81 (2) perfect the mechanism of 

a free and open market and a national 

market system, protect investors and the 

public interest, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers; 82 and (3) not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.83

In temporarily suspending the 

Exchange’s fee change, the Commission 

intends to further consider whether the 

proposed 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, 


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84See 15 U.S.C. 78f(b)(4), (5), and (8), 

respectively. 

85For 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). 

86 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. 

87 15 U.S.C. 78s(b)(2)(B). 

88 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. 

89 15 U.S.C. 78f(b)(4). 

90 15 U.S.C. 78f(b)(5). 

91 15 U.S.C. 78f(b)(8). 

92See supra Section II.A.2. 

93See id. 

94See id. 

95See id. 

96See id. 

97See id. 

98See id. 

99See id. 

100See id. 

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 do not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act.84

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.85

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) 86 and 19(b)(2)(B) 87 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,88 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),89 6(b)(5),90 and 6(b)(8) 91 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.92 Rather, the 

Exchange states that its proposed fees 

are based on a ‘‘cost-plus model,’’ 

employing a ‘‘conservative approach,’’ 

and that the expenses are ‘‘directly 

related’’ to 10Gb ULL connectivity and 

Full Service MEO Ports, and not any 

other product or service offered by the 

Exchange.93 In explaining its costs, 

should the Exchange identify more 

specifically which, if any, of its costs are 

incurred solely to provide 10Gb ULL 

connectivity and solely to provide Full 

Service MEO Ports? Regarding the 

allocations provided by the Exchange as 

described in greater detail above, do 

commenters believe that the Exchange 

provided sufficient detail about how it 

determined these allocations and why 

they are reasonable? 94 Why or why not? 

Do commenters believe that the 

Exchange provided sufficient context to 

permit an independent review and 

assessment of the reasonableness of the 

allocations? Do commenters believe that 

the Exchange provided sufficient detail 

or explanation to support its claim that 

‘‘no expense amount is allocated 

twice,’’ 95 whether among the subcategories of expenses in this filing, 

across the Exchange’s fee filings for 

other products or services, or over time? 

2. Revenue Estimates and Profit 

Margin Range. The Exchange uses a 

single monthly revenue figure (April 

2022) as the basis for calculating its 

projected combined profit margin of 

15%.96 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.’’ 97 Yet the 

Exchange also acknowledges that ‘‘profit 

margin may also fluctuate from month 

to month based on the uncertainty of 

predicting how many connections and 

ports may be purchased from month to 

month as Members and non-Members 

are free to add and drop connections 

and ports at any time based on their 

own business decisions.’’ 98 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 2022.99

Do commenters believe that March 2022 

is an appropriate month for a baseline? 

What are commenters’ views on the 

Exchange providing a combined profit 

margin for both 10Gb ULL connectivity 

and Full Service MEO Ports, rather than 

separate margins for each? 

3. Reasonableness. The Exchange 

states that its proposed fees are 

‘‘reasonable because they will permit 

recovery of the Exchange’s costs in 

providing access services to supply 

10Gb ULL connectivity and Full Service 

MEO Ports and will not result in the 

Exchange generating a supracompetitive profit.’’ 100 The Exchange 

offers several justifications for why its 

estimated profit margin (which is 

blended and not discussed separately 

for each service) is not a supracompetitive profit, including: (a) When 

it launched operations in 2017, it chose 


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101See id. 

102See id. 

103 17 CFR 201.700(b)(3). 

104See id. 

105See id. 

106See 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). 

107 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). 

to forgo revenue by offering certain 

products 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 (d) the Exchange’s 

proposed fees remain similar to or less 

than fees charged for access provided by 

other options exchanges with similar 

market share. Do commenters agree that 

these factors are relevant to assessment 

of whether the fees are reasonable for 

each service? Should such an 

assessment include consideration of any 

factors other than costs; and if so, what 

factors should be considered, and why? 

4. Periodic Reevaluation. The 

Exchange has stated that it will conduct 

a review of the cost-based fees subject 

to this proposal one year after the date 

of the proposal, and annually 

thereafter.101 In light of the impact that 

the number of connections and 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 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 amounts 

purchased? 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 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? 

5. Tiered Structure for Full Service 

MEO Ports Fees. The Exchange states 

that proposed tiered-pricing structure is 

reasonable, equitably allocated, and not 

unfairly discriminatory because for a 

flat fee the Exchange provides each 

Member two Full Service MEO Ports for 

each matching engine to which the 

Member is connected, and further, it is 

the model adopted by the Exchange 

when it launched operations for its Full 

Service MEO Port fees.102 What are 

commenters’ views on the adequacy of 

the information the Exchange provides 

regarding the proposed differentials in 

fees? Do commenters believe that the 

proposed price differences are 

supported by the Exchange’s assertions 

that it set the level of each proposed 

new fee in a manner that it equitable 

and not unfairly discriminatory? 

Under the Commission’s Rules of 

Practice, the ‘‘burden to demonstrate 

that a proposed rule change is 

consistent with the Exchange Act and 

the rules and regulations issued 

thereunder . . . is on the [SRO] that 

proposed the rule change.’’ 103 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,104 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.105 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.106

The Commission believes it is 

appropriate to institute proceedings to 

allow for additional consideration and 

comment on the issues raised herein, 

including as to whether the proposal is 

consistent with the Act, any potential 

comments or supplemental information 

provided by the Exchange, and any 

additional independent analysis by the 

Commission. 

V. Commission’s Solicitation of 

Comments 

The Commission requests written 

views, data, and arguments with respect 

to the concerns identified above as well 

as any other relevant concerns. In 

particular, the Commission invites the 

written views of interested persons 

concerning whether the proposal is 

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

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

Act, or the rules and regulations 

thereunder. The Commission asks that 

commenters address the sufficiency and 

merit of the Exchange’s statements in 

support of the proposal, in addition to 

any other comments they may wish to 

submit about the proposed rule change. 

Although there do not appear to be any 

issues relevant to approval or 

disapproval that would be facilitated by 

an oral presentation of views, data, and 

arguments, the Commission will 

consider, pursuant to Rule 19b–4, any 

request for an opportunity to make an 

oral presentation.107

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposal should be approved or 

disapproved by June 7, 2022. Any 

person who wishes to file a rebuttal to 

any other person’s submission must file 

that rebuttal by June 21, 2022. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File No. SR– 

PEARL–2022–18 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–PEARL–2022–18. 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 


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108 15 U.S.C. 78s(b)(3)(C). 

109 17 CFR 200.30–3(a)(12), (57) and (58). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Fee Schedule, NYSE Arca Options: Trade– 

Related Charges for Standard Options, Customer 

Penny Posting Credit Tiers. 

5For purposes of this filing, activity in the NYSE 

Arca Equity Market is referred to as ‘‘cross asset 

activity.’’ 

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

7 15 U.S.C. 78f(b)(4) and (5). 

8See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(S7–10–04) (‘‘Reg NMS Adopting Release’’). 

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–PEARL–2022–18 and should be 

submitted on or before June 7, 2022. 

Rebuttal comments should be submitted 

by June 21, 2022. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,108 that 

File No. SR–PEARL–2022–18 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.109

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2022–10514 Filed 5–16–22; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–94895; No. SR–NYSEArca2022–26] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Modify the NYSE Arca 

Options Fee Schedule 

May 11, 2022. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on April 29, 

2022, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to modify the 

NYSE Arca Options Fee Schedule (‘‘Fee 

Schedule’’) regarding the Customer 

Penny Posting Tiers. The Exchange 

proposes to implement the fee change 

effective May 2, 2022. The proposed 

rule change is available on the 

Exchange’s website at www.nyse.com, at 

the principal office of the Exchange, 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 

self-regulatory organization 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 those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of this filing is to amend 

the Fee Schedule to modify the 

Customer Penny Posting Credit Tiers. 

Currently, the Fee Schedule provides 

that OTP Holders and OTP Firms 

(collectively, ‘‘OTP Holders’’) can 

qualify for tiered credits applied to 

electronic executions of Customer 

posted interest in Penny issues by 

meeting specified increasing volume 

levels in Customer Penny Posting Credit 

Tiers 1 through 6.4 Currently, an OTP 

Holder that achieves 0.10% of TCADV 

from Customer posted interest in all 

issues will qualify for Customer Penny 

Posting Credit Tier 1 (‘‘Tier 1’’) and earn 

a credit of $0.27 per contract applied to 

electronic executions of Customer 

posted interest in Penny issues. 

The Exchange now proposes to 

modify the qualification basis for Tier 1 

and increase the credit offered to OTP 

Holders that achieve Tier 1. 

Specifically, the Exchange proposes that 

an OTP Holder would qualify for Tier 1 

by executing at least 0.20% of TCADV 

from Customer posted interest, plus 

executed ADV of 0.30% of U.S. equity 

market share posted and executed on 

the NYSE Arca Equity Market,5 and 

such qualifying OTP Holder would earn 

a $0.36 per contract credit applied to 

electronic executions of Customer 

posted interest in Penny issues. 

The Exchange notes that the credit 

currently offered in Tier 1 has not 

sufficiently encouraged OTP Holders to 

increase their Customer posting interest. 

Thus, although the proposed 

modifications to the qualifying criteria 

for Tier 1 would increase the volume 

requirement and add a cross asset 

activity component, the Exchange 

believes that the proposed change 

would encourage OTP Holders to 

execute Customer posted interest on the 

Exchange and also incent OTP Holders 

to use the Exchange as a primary 

destination for both options and equity 

order flow in order to earn the 

significantly increased credit that would 

be available in Tier 1. 

The Exchange proposes to implement 

the rule change on May 2, 2022. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

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

furthers the objectives of Sections 

6(b)(4) and (5) of the Act,7 in particular, 

because it provides for the equitable 

allocation of reasonable dues, fees, and 

other charges among its members, 

issuers and other persons using its 

facilities and does not unfairly 

discriminate between customers, 

issuers, brokers or dealers. 

The Proposed Rule Change Is 

Reasonable 

The Exchange operates in a highly 

competitive market. The Commission 

has repeatedly expressed its preference 

for competition over regulatory 

intervention in determining prices, 

products, and services in the securities 

markets. In Regulation NMS, the 

Commission highlighted the importance 

of market forces in determining prices 

and SRO revenues and, also, recognized 

that current regulation of the market 

system ‘‘has been remarkably successful 

in promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 8

There are currently 16 registered 

options exchanges competing for order 


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