Document ID: SEC-2021-1794-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: MIAX Emerald, LLC
Posted Date: 2021-12-23T05:00Z

[Federal Register Volume 86, Number 244 (Thursday, December 23, 2021)]
[Notices]
[Pages 73051-73060]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27816]

[[Page 73051]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93811; File No. SR-EMERALD-2021-44]

Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To 
Establish Fees for the cToM Market Data Product

December 17, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on December 10, 2021, MIAX Emerald, LLC (``MIAX Emerald'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 Exchange's Fee 
Schedule (``Fee Schedule'') to establish fees for the market data 
product known as MIAX Emerald Complex Top of Market (``cToM'').
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX's 
principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend Section (6)(a) of the Fee Schedule 
to establish fees for the cToM data product. The Exchange initially 
filed this proposal on June 30, 2021 with the proposed fees to be 
effective beginning July 1, 2021 (``First Proposed Rule Change'').\3\ 
The First Proposed Rule Change was published for comment in the Federal 
Register on July 15, 2021.\4\ Although the Commission did not receive 
any comment letters on the First Proposed Rule Change, on August 27, 
2021, the Commission issued its Suspension of and Order Instituting 
Proceedings to Determine Whether to Approve or Disapprove Proposed Rule 
Changes to Establish Fees for the Exchanges' cToM Market Data Products 
(relating to the First Proposed Rule Change and a similar filing by the 
Exchange's affiliate, Miami International Securities Exchange, LLC 
(``MIAX''), to also adopt cToM fees).\5\ The Exchange withdrew the 
First Proposed Rule Change on September 30, 2021 \6\ and re-submitted 
the proposal, with the proposed fee changes being immediately effective 
(``Second Proposed Rule Change'').\7\ The Second Proposed Rule Change 
provided additional justification for the proposed fee changes and 
addressed comments provided by the Commission Staff. On October 14, 
2021, the Exchange withdrew the Second Proposed Rule Change and 
submitted its proposal to adopt cToM fees to again provide additional 
justification for the proposed fee changes and address comments 
provided by the Commission Staff (``Third Proposed Rule Change'').\8\ 
The Third Proposed Rule Change was published for comment in the Federal 
Register on November 1, 2021.\9\ Although the Commission did not again 
receive any comment letters on the Third Proposed Rule Change, the 
Exchange withdrew the Third Proposed Rule Change on December 10, 2021 
and now submits this proposal for immediate effectiveness (``Fourth 
Proposed Rule Change''). This Fourth Proposed Rule Change meaningfully 
attempts to provide additional justification and explanation for the 
proposed fee changes in response to a telephone conversation with 
Commission Staff on December 7, 2021 relating to the Third Proposed 
Rule Change.
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    \3\ See Securities Exchange Act Release No. 92358 (July 9, 
2021), 86 FR 37361 (July 15, 2021) (SR-EMERALD-2021-21).
    \4\ Id.
    \5\ See Securities Exchange Act Release No. 92789 (August 27, 
2021), 86 FR 49364 (September 2, 2021) (SR-MIAX-2021-28, SR-EMERALD-
2021-21) (the ``Suspension Order'').
    \6\ See Securities Exchange Act Release No. 93471 (October 29, 
2021), 86 FR 60947 (November 4, 2021).
    \7\ See SR-EMERALD-2021-32.
    \8\ Securities Exchange Act Release No. 93427 (October 26, 
2021), 86 FR 60310 (November 1, 2021) (SR-EMERALD-2021-34).
    \9\ Id.
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Background
    The Exchange previously adopted rules governing the trading of 
Complex Orders \10\ on the Emerald System \11\ in 2018,\12\ ahead of 
the Exchange's planned launch, which took place on March 1, 2019. 
Shortly thereafter, the Exchange also adopted the market data product 
cToM and expressly waived fees for cToM to provide an incentive to 
prospective market participants to subscribe to that market data 
feed.\13\ The Exchange has not charged fees to cToM subscribers in the 
nearly three years since it was first available for subscription.
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    \10\ See Exchange Rule 518(a)(5) for the definition of Complex 
Orders.
    \11\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \12\ See Securities Exchange Act Release Nos. 84891 (December 
20, 2018), 83 FR 67421 (December 28, 2018) (In the Matter of the 
Application of MIAX EMERALD, LLC for Registration as a National 
Securities Exchange; Findings, Opinion, and Order of the 
Commission); and 85345 (March 18, 2019), 84 FR 10848 (March 22, 
2019) (SR-EMERALD-2019-13) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change To Amend Exchange Rule 518, 
Complex Orders).
    \13\ See Securities Exchange Act Release No. 85207 (February 27, 
2019), 84 FR 7963 (March 5, 2019) (SR-EMERALD-2019-09) (providing a 
complete description of the cToM data feed).
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    In summary, cToM provides subscribers with the same information as 
the MIAX Emerald Top of Market (``ToM'') data product as it relates to 
the Strategy Book,\14\ i.e., the Exchange's best bid and offer for a 
complex strategy, with aggregate size, based on displayable order and 
quoting interest in the complex strategy on the Exchange. However, cToM 
provides subscribers with the following additional information that is 
not included in ToM: (i) The identification of the complex strategies 
currently trading on the Exchange; (ii) complex strategy last sale 
information; and (iii) the status of securities underlying the complex 
strategy (e.g., halted, open, or resumed). cToM is a distinct market 
data product from ToM. ToM subscribers are not required to subscribe

[[Page 73052]]

to cToM, and cToM subscribers are not required to subscribe to ToM.\15\
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    \14\ The ``Strategy Book'' is the Exchange's electronic book of 
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \15\ See supra note 13.
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Proposal
    The Exchange now proposes to amend Section (6)(a) of the Fee 
Schedule to charge monthly fees to Distributors \16\ of cToM. 
Specifically, the Exchange proposes to assess Internal Distributors 
$1,250 per month and External Distributors $1,750 per month for the 
cToM data feed.\17\ The Exchange notes that the proposed monthly cToM 
fees for Internal and External Distributor are the same prices that the 
Exchange charges for its ToM data product and are identical to the 
prices the Exchange's affiliate, MIAX, proposes to charge for its cToM 
product.
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    \16\ A ``Distributor'' of MIAX Emerald data is any entity that 
receives a feed or file of data either directly from MIAX Emerald or 
indirectly through another entity and then distributes it either 
internally (within that entity) or externally (outside that entity). 
All Distributors are required to execute a MIAX Emerald Distributor 
Agreement. See Section (6)(a) of the Fee Schedule.
    \17\ The Exchange also proposes to make a minor related change 
to remove the phrase ``(as applicable)'' from the explanatory 
paragraph in Section (6)(a).
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    Like it does today for ToM, the Exchange proposes to assess cToM 
fees on Internal and External Distributors in each month the 
Distributor is credentialed to use cToM in the production environment. 
Also, like the Exchange does today for ToM, market data fees for cToM 
will be reduced for new Distributors for the first month during which 
they subscribe to cToM, based on the number of trading days that have 
been held during the month prior to the date on which that subscriber 
has been credentialed to use cToM in the production environment. Such 
new Distributors will be assessed a pro-rata percentage of the fees in 
the table in Section (6)(a) of the Fee Schedule, which is the 
percentage of the number of trading days remaining in the affected 
calendar month as of the date on which they have been credentialed to 
use cToM in the production environment, divided by the total number of 
trading days in the affected calendar month.
    The Exchange believes that other exchange's fees for complex market 
data are useful examples and provides the below table for comparison 
purposes only to show how the Exchange's proposed fees compare to fees 
currently charged by other options exchanges for similar data. As shown 
by the below table, the Exchange's proposed fees similar to or less 
than fees charged for similar data products provided by other options 
exchanges.

------------------------------------------------------------------------
           Exchange                            Monthly fee
------------------------------------------------------------------------
MIAX Emerald (as proposed)....  $1,250--Internal Distributor.
                                $1,750--External Distributor.
NYSE American, LLC (``Amex'')   $1,500 Access Fee.
 \18\.
                                $1,000 Redistribution Fee.
NYSE Arca, Inc. (``Arca'')      $1,500 Access Fee.
 \19\.
                                $1,000 Redistribution Fee.
NASDAQ PHLX LLC (``PHLX'')      $3,000--Internal Distributor.
 \20\.
                                $3,500--External Distributor.
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    \18\ See NYSE American Options Priprietary Market Data Fees, 
American Options Complex Fees, at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Proprietary_Data_Fee_Schedule.pdf.
    \19\ See NYSE Area Options Proprietary Market Data Fees, Arca 
Options Complex Fees, at https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf.
    \20\ See PHLX Price List--U.S. Deriatives Data, PHLX Orders 
Fees, at http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#PHLX.
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    The Exchange also proposes to amend the paragraph below the table 
of fees for ToM and cToM in Section (6)(a) of the Fee Schedule to make 
a minor, non-substantive corrective edit. In particular, the Exchange 
proposes to delete the phrase ``(as applicable)'' in the first sentence 
following the table of fees for ToM and cToM. The purpose of this 
proposed change is to remove unnecessary text from the Fee Schedule.
cToM Content Is Available From Alternative Sources
    cToM is also not the exclusive source for Complex Order information 
from the Exchange and market participants may choose to subscribe to 
the Exchange's other data products to receive such information. It is a 
business decision of market participants whether to subscribe to the 
cToM data product or not. Market participants that choose not to 
subscribe to cToM can derive much, if not all, of the same information 
provided in the cToM feed from other Exchange sources, including, for 
example, the MIAX Emerald Order Feed (``MOR'').\21\ The following cToM 
information is provided to subscribers of MOR: The Exchange's best bid 
and offer for a complex strategy, with aggregate size, based on 
displayable order and quoting interest in the complex strategy on the 
Exchange; the identification of the complex strategies currently 
trading on the Exchange; and the status of securities underlying the 
complex strategy (e.g., halted, open, or resumed). In addition to the 
cToM information contained in MOR, complex strategy last sale 
information can be derived from the Exchange's ToM feed. Specifically, 
market participants may deduce that last sale information for multiple 
trades in related options series that are disseminated via the ToM feed 
with the same timestamp are likely part of a Complex Order transaction 
and last sale.
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    \21\ See MIAX website, Market Data & Offerings, at https://www.miaxoptions.com/market-data-offerings (last visited December 10, 
2021). In general, MOR provides real-time ulta-low [sic] latency 
updates on the following information: New Simple Orders added to the 
MIAX Emerald Order Book; updates to Simple Orders resting on the 
MIAX Emerald Order Book; new Complex Orders added to the Strategy 
Book (i.e., the book of Complex Orders); updates to Complex Orders 
resting on the Strategy Book; MIAX Emerald listed series updates; 
MIAX Emerald Complex Strategy definitions; the state of the MIAX 
Emerald System; and MIAX Emerald's underlying trading state.
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Implementation
    The proposed rule change is immediately effective.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \22\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \23\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees and other charges among its members and issuers and other persons 
using its facilities. The Exchange also believes the proposal furthers 
the objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the

[[Page 73053]]

mechanism of a free and open market and a national market system, and, 
in general protect investors and the public interest and is not 
designed to permit unfair discrimination between customers, issuers, 
brokers and dealers.
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    \22\ 15 U.S.C. 78f(b).
    \23\ 15 U.S.C. 78f(b)(4) and (5).
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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 increase meets the requirements of the Act that fees be 
reasonable, equitably allocated, not unfairly discriminatory, and not 
create an undue burden on competition among market participants. The 
Exchange believes this high standard is especially important when an 
exchange sets certain non-transaction fees, including market data fees. 
The Exchange believes that it is important to demonstrate that these 
fees are based on its costs to provide these products and reasonable 
business needs.
    In its Guidance, the Commission Staff stated that, ``[a]s an 
initial step in assessing the reasonableness of a fee, staff considers 
whether the fee is constrained by significant competitive forces.'' 
\24\ The Commission Staff 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.'' \25\ In its Guidance, the Commission staff further 
states that, ``[i]f an SRO seeks to support its claims that a proposed 
fee is fair and reasonable because it will permit recovery of the SRO's 
costs, or will not result in excessive pricing or supracompetitive 
profit, specific information, including quantitative information, 
should be provided to support that argument.'' \26\ 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 cToM data and will not result in the Exchange generating a 
supra-competitive profit.
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    \24\ See 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'').
    \25\ Id.
    \26\ Id.
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    The Guidance defines ``supra-competitive profit'' as ``profits that 
exceed the profits that can be obtained in a competitive market.'' \27\ 
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.'' \28\ The Exchange provides 
this analysis below.
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    \27\ Id.
    \28\ Id.
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    Based on this analysis, the Exchange believes the proposed fees are 
reasonable and do not result in a ``supra-competitive'' \29\ profit. 
The Exchange believes that it is important to demonstrate that the 
proposed fees are based on its costs and reasonable business needs. The 
Exchange believes the proposed fees will allow the Exchange to offset 
expenses the Exchange has and will incur, and that the Exchange 
provides sufficient transparency (described below) into the costs and 
revenue underlying the proposed fees. Accordingly, the Exchange 
provides an analysis of its revenues, costs, and profitability 
associated with the proposed fees. This analysis includes information 
regarding its methodology for determining the costs and revenues 
associated with the proposed fees. As a result of this analysis, the 
Exchange believes the proposed fees are fair and reasonable as a form 
of cost recovery plus present the possibility of a reasonable return 
for the Exchange's aggregate costs of offering cToM data, which has 
been offered for free for nearly three years.
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    \29\ Id.
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    The proposed fees are based on a cost-plus model. In determining 
the appropriate fees to charge, the Exchange considered its costs to 
provide cToM data, using what it believes to be a conservative 
methodology (i.e., that strictly considers only those costs that are 
most clearly directly related to the provision and maintenance of cToM 
data) to estimate such costs,\30\ as well as the relative costs of 
providing and maintaining cToM data feeds, and set fees that are 
designed to cover its costs with a limited return in excess of such 
costs. However, as discussed more fully below, such fees may also 
result in the Exchange recouping less than all of its costs of 
providing and maintaining cToM data feeds because of the uncertainty of 
forecasting subscriber decision making with respect to firms' needs for 
cToM data and the likely potential for increased costs to procure the 
third-party services described below.
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    \30\ For example, the Exchange only included the costs 
associated with providing and supporting cToM data feeds and 
excluded from its cost calculations any cost not directly associated 
with providing and maintaining such cToM data feeds. Thus, the 
Exchange notes that this methodology underestimates the total costs 
of providing and maintaining cToM data feeds.
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    To determine the Exchange's costs to provide cToM data associated 
with the proposed fees, the Exchange conducted an extensive cost review 
in which the Exchange analyzed nearly every expense item in the 
Exchange's general expense ledger to determine whether each such 
expense relates to the proposed fees, and, if such expense did so 
relate, what portion (or percentage) of such expense actually supports 
the cToM data product associated with the proposed fees.
    The Exchange also provides detailed information regarding the 
Exchange's cost allocation methodology--namely, information that 
explains the Exchange's rationale for determining that it was 
reasonable to allocate certain expenses described in this filing 
towards the cost to the Exchange to provide the services associated 
with the proposed fees. The Exchange conducted a thorough internal 
analysis to determine the portion (or percentage) of each expense to 
allocate to the support of services associated with the proposed fees. 
This analysis included discussions with each Exchange department head 
to determine the expenses that support services associated with the 
proposed fees. Once the expenses were identified, the Exchange 
department heads, with the assistance of the Exchange's internal 
finance department, reviewed such expenses holistically on an Exchange-
wide level to determine what portion of that expense supports providing 
services for the proposed fees. The sum of all such portions of 
expenses represents the total cost to the Exchange to provide services 
associated with the proposed fees. For the avoidance of doubt, no 
expense amount was allocated twice.
    To determine the Exchange's projected revenue associated with the 
proposed fees, the Exchange analyzed the number of Members and non-
Members currently subscribing to the cToM data feeds and used a recent 
monthly billing cycle representative of 2021 monthly revenue. The 
Exchange also provided its baseline by analyzing June 2021, the monthly 
billing cycle prior to the proposed fees going into effect, and 
compared it 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 projections for purposes of 
these

[[Page 73054]]

calculations, given the uncertainty of such projections due to the 
continually changing market data needs of market participants and 
potential increase in internal and third party expenses. The Exchange 
is presenting its revenue and expense associated with the proposed fees 
in this filing in a manner that is consistent with how the Exchange 
presents its revenue and expense in its Audited Unconsolidated 
Financial Statements. The Exchange's most recent Audited Unconsolidated 
Financial Statement is for 2020. However, since the revenue and expense 
associated with the proposed fees were not in place in 2020 or for the 
first six months of 2021, the Exchange believes its 2020 Audited 
Unconsolidated Financial Statement is not representative of its current 
total annualized revenue and costs associated with the proposed fees. 
Accordingly, the Exchange believes it is more appropriate to analyze 
the proposed fees utilizing its 2021 revenue and costs, as described 
herein, which utilize the same presentation methodology as set forth in 
the Exchange's previously-issued Audited Unconsolidated Financial 
Statements. Based on this analysis, the Exchange believes that the 
proposed fees are reasonable because they will allow the Exchange to 
recover its costs associated with providing services related to the 
proposed fees and not result in excessive pricing or supra-competitive 
profit. Since 2019, when the Exchange launched operations with Complex 
Order functionality, the Exchange has spent time and resources building 
out various Complex Order functionality in its System to provide better 
trading strategies and risk functionality for market participants in 
order to better compete with other exchanges' complex functionality and 
similar data products focused on complex orders.\31\ The cToM data 
product allows market participants to better utilize the Exchange's 
Complex Order functionality by providing insights into the Exchange's 
Complex Order flow. The Exchange notes that no market participant 
ceased subscribing to the cToM feed since July 1, 2021, the date on 
which the fees became effective when proposed in the First Proposed 
Rule Change.
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    \31\ See Securities Exchange Act Release Nos. 79405 (November 
28, 2016), 81 FR 87086 (December 2, 2016) (SR-MIAX-2016-44) 
(amendment to clarify the manner in which the System allocates 
contracts at the end of a Complex Auction); 80089 (February 22, 
2017), 82 FR 12153 (February 28, 2017) (SR-MIAX-2017-06) (adopting 
the Complex MIAX Options Price Collar, an additional price 
protection feature); 81229 (July 27, 2017), 82 FR 36023 (August 2, 
2017) (SR-MIAX-2017-34) (amendment to ensure price and trade 
protections apply to Complex Orders); 89085 (June 17, 2020), 85 FR 
37719 (June 23, 2020) (SR-MIAX-2020-16) (adopting new order type, 
Complex Attributable Order).
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    As outlined in more detail below, the Exchange projects that its 
annualized expense for 2021 to provide cToM data to be approximately 
$202,657 per annum or an average of $16,888 per month. The Exchange 
implemented the proposed fees on July 1, 2021 in the First Proposed 
Rule Change. For June 2021, prior to the proposed fees, Exchange 
Members and non-Members subscribed to a total of 14 cToM data feeds for 
which the Exchange charged $0, as it has for the past three years. This 
resulted in a loss of approximately $16,888 for that month. For the 
month of November 2021, which includes the proposed fees, Exchange 
Members and non-Members purchased 14 cToM data feeds, for which the 
Exchange charged approximately $17,500 for that month. This resulted in 
a profit of $612 for that month (a margin of approximately 3.5%). The 
Exchange cautions that this margin may fluctuate from month to month 
based on the uncertainty of predicting how many cToM data feeds may be 
purchased from month to month as Members and non-Members are able to 
add and drop subscriptions at any time based on their own business 
decisions. This margin may also decrease due to the significant 
inflationary pressure on capital items that the Exchange needs to 
purchase to maintain the Exchange's technology and systems.\32\ The 
Exchange has been subject to price increases upwards of 30% on network 
equipment due to supply chain shortages. This, in turn, results in 
higher overall costs for ongoing system maintenance, but also to 
purchase the items necessary to ensure ongoing system resiliency, 
performance, and determinism. These costs are expected to continue to 
go up as the U.S. economy continues to struggle with supply chain and 
inflation related issues.
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    \32\ See ``Supply chain chaos is already hitting global growth. 
And it's about to get worse'', by Holly Ellyatt, CNBC, available at 
https://www.cnbc.com/2021/10/18/supply-chain-chaos-is-hitting-global-growth-and-could-get-worse.html (October 18, 2021); and 
``There will be things that people can't get, at Christmas, White 
House warns'' by Jarrett Renshaw and Trevor Hunnicutt, Reuters, 
available at https://www.reuters.com/world/us/americans-may-not-get-some-christmas-treats-white-house-officials-warn-2021-10-12/ 
(October 12, 2021).
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    Further, the Exchange chose to provide cToM data for free for the 
past three years to attract order flow and encourage market 
participants to experience the determinism and resiliency of the 
Exchange's trading systems and market data products. This resulted in 
the Exchange forgoing revenue it could have generated from assessing 
any fees. The Exchange could have sought to charge some fees at the 
outset, but that could have served to discourage participation on the 
Exchange. Instead, the Exchange chose to provide a free exchange 
product to the options industry, which resulted in no initial revenues, 
going on three years. The Exchange now proposes to amend its fee 
structure to enable it to continue to maintain and improve its overall 
market and systems while also providing a highly reliable and 
deterministic trading system to the marketplace, complete with robust 
market data products, including cToM.
    As mentioned above, the Exchange projects that its annualized 
expense for 2021 to provide cToM data to be approximately $202,657 per 
annum or an average of $16,888 per month and that these costs are 
expected to increase not only due to anticipated significant 
inflationary pressure, but also periodic fee increases by third 
parties.\33\ The Exchange notes that there are material costs 
associated with providing the infrastructure and headcount to fully-
support access to the Exchange and various Exchange products. The 
Exchange incurs technology expense related to establishing and 
maintaining Information Security services, enhanced network monitoring 
and customer reporting, as well as Regulation SCI mandated processes, 
associated with its network technology. While some of the expense is 
fixed, much of the expense is not fixed, and thus increases the cost to 
the Exchange to provide services associated with the proposed fees. For 
example, new Members to the Exchange may require the purchase of 
additional hardware to support those Members as well as enhanced 
monitoring and reporting of customer performance that the Exchange and 
its affiliates provide. Further, as the total number 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 services and

[[Page 73055]]

products to its Members is not fixed. The Exchange believes the 
proposed fees are a reasonable attempt to offset a portion of the costs 
to the Exchange associated with providing certain Exchange products.
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    \33\ For example, on October 20, 2021, ICE Data Services 
announced a 3.5% price increase effective January 1, 2022 for most 
services. The price increase by ICE Data Services includes their 
Secure Financial Transaction Infrastructure (``SFTI'') network, 
which is relied on by a majority of market participants, including 
the Exchange. See email from ICE Data Services to the Exchange, 
dated October 20, 2021. The Exchange further notes that on October 
22, 2019, the Exchange was notified by ICE Data Services that it was 
raising its fees charged to the Exchange by approximately 11% for 
the SFTI network.
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    The Exchange only has four primary sources of revenue and cost 
recovery mechanisms: Transaction fees, access fees, regulatory fees, 
and market data fees. Accordingly, the Exchange must cover all of its 
expenses from these four primary sources of revenue and cost recovery 
mechanisms. Until recently, the Exchange has operated at a cumulative 
net annual loss since it launched operations in 2019.\34\ This is a 
result of providing a low cost alternative to attract order flow and 
encourage market participants to experience the high determinism and 
resiliency of the Exchange's trading Systems. To do so, the Exchange 
chose to waive the fees for some non-transaction related services and 
market data products or provide them at a very marginal cost, which has 
not been profitable to the Exchange, but beneficial to the overall 
options industry. This resulted in the Exchange forgoing revenue it 
could have generated from assessing any amount of fees.
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    \34\ The Exchange has incurred a cumulative loss of $22 million 
since its inception in 2019 to 2020, the last year for which the 
Exchange's Form 1 data is available. See Exchange's Form 1/A, 
Application for Registration or Exemption from Registration as a 
National Securities Exchange, filed July 28 [sic], 2021, available 
at https://sec.report/Document/9999999997-21-004557/.
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    The Exchange believes that the proposed fees are fair and 
reasonable because they will not result in excessive pricing or supra-
competitive profit, when comparing the total annual expense that the 
Exchange projects to incur in connection with providing these services 
versus the total annual revenue that the Exchange projects to collect 
in connection with services associated with the proposed fees. As 
mentioned above, for 2021,\35\ the total annual expense for providing 
the services associated with the proposed fees is projected to be 
approximately $202,657, or approximately $16,888 per month. This 
projected total annual expense is comprised of the following, all of 
which are directly related to the services associated with the proposed 
fees: (1) Third-party expense, relating to fees paid by the Exchange to 
third-parties for certain products and services; and (2) internal 
expense, relating to the internal costs of the Exchange to provide the 
services associated with the proposed fees.\36\ As noted above, the 
Exchange believes it is more appropriate to analyze the proposed fees 
utilizing its 2021 revenue and costs, which utilize the same 
presentation methodology as set forth in the Exchange's previously-
issued Audited Unconsolidated Financial Statements.\37\ The $202,657 
projected total annual expense is directly related to the services 
associated with the proposed fees, and not any other product or service 
offered by the Exchange. It does not include general costs of operating 
matching engines and other trading technology. No expense amount was 
allocated twice.
---------------------------------------------------------------------------

    \35\ The Exchange has not yet finalized its 2021 year end 
results.
    \36\ The percentage allocations used in this proposed rule 
change may differ from past filings from the Exchange or its 
affiliates due to, among other things, changes in expenses charged 
by third-parties, adjustments to internal resource allocations, and 
different system architecture of the Exchange as compared to its 
affiliates.
    \37\ For example, the Exchange previously noted that all third-
party expense described in its prior fee filing was contained in the 
information technology and communication costs line item under the 
section titled ``Operating Expenses Incurred Directly or Allocated 
From Parent,'' in the Exchange's 2019 Form 1 Amendment containing 
its financial statements for 2018. See Securities Exchange Act 
Release No. 87877 (December 31, 2019), 85 FR 738 (January 7, 2020) 
(SR-EMERALD-2019-39). Accordingly, the third-party expense described 
in this filing is attributed to the same line item for the 
Exchange's 2021 Form 1 Amendment, which will be filed in 2022.
---------------------------------------------------------------------------

    As discussed above, the Exchange conducted an extensive cost review 
in which the Exchange analyzed nearly every expense item in the 
Exchange's general expense ledger (this includes over 150 separate and 
distinct expense items) to determine whether each such expense relates 
to the services associated with the proposed fees, and, if such expense 
did so relate, what portion (or percentage) of such expense actually 
supports those services, and thus bears a relationship that is, ``in 
nature and closeness,'' directly related to those services. The sum of 
all such portions of expenses represents the total cost of the Exchange 
to provide services associated with the proposed fees.
External Expense Allocations
    For 2021, total third-party expense, relating to fees paid by the 
Exchange to third-parties for certain products and services for the 
Exchange to be able to provide the services associated with the 
proposed fees, is projected to be $4,160. This includes, but is not 
limited to, a portion of the fees paid to: (1) Equinix, for data center 
services, for the primary, secondary, and disaster recovery locations 
of the Exchange's trading system infrastructure; (2) Zayo Group 
Holdings, Inc. (``Zayo'') for network services (fiber and bandwidth 
products and services) linking the Exchange's office locations in 
Princeton, New Jersey and Miami, Florida, to all data center locations; 
and (3) various other hardware and software providers (including Dell 
and Cisco, which support the production environment in which Members 
connect to the network to trade, receive market data, etc.). For 
clarity, only a portion of all fees paid to such third-parties is 
included in the third-party expense herein, and no expense amount is 
allocated twice. Accordingly, the Exchange does not allocate its entire 
information technology and communication costs to the services 
associated with the proposed fees.
    For clarity, only a portion of all fees paid to such third-parties 
is included in the third-party expense herein, and no expense amount is 
allocated twice. Accordingly, the Exchange does not allocate its entire 
information technology and communication costs to the market data 
product associated with the proposed fees. Further, the Exchange notes 
that, with respect to the expenses included herein, those expenses only 
cover the MIAX market; expenses associated with MIAX PEARL, LLC (``MIAX 
Pearl'') for its options and equities markets and MIAX, are accounted 
for separately and are not included within the scope of this filing. As 
noted above, the percentage allocations used in this proposed rule 
change may differ from past filings from the Exchange or its affiliates 
due to, among other things, changes in expenses charged by third-
parties, adjustments to internal resource allocations, and different 
system architecture of the Exchange as compared to its affiliates. 
Further, as part its ongoing assessment of costs and expenses, the 
Exchange recently conducted a periodic thorough review of its expenses 
and resource allocations, which, in turn, resulted in a revised 
percentage allocations in this filing.
    The Exchange believes it is reasonable to allocate such third-party 
expense described above towards the total cost to the Exchange to 
provide the services associated with the proposed fees. In particular, 
the Exchange believes it is reasonable to allocate the identified 
portion of the Equinix expense because Equinix operates the data 
centers (primary, secondary, and disaster recovery) that host the 
Exchange's network infrastructure. This includes, among other things, 
the necessary storage space, which continues to expand and increase in 
cost, power to operate the network infrastructure, and cooling 
apparatuses to ensure the Exchange's network infrastructure maintains 
stability. Without these

[[Page 73056]]

services from Equinix, the Exchange would not be able to operate and 
support the network and provide the cToM product associated with the 
proposed fees to its Members, non-Members and their customers. The 
Exchange did not allocate all of the Equinix expense toward the cost of 
providing the cToM product associated with the proposed fees, only that 
portion which the Exchange identified as being specifically mapped to 
providing the cToM product associated with the proposed fees, 
approximately 0.20% of the total applicable Equinix expense. The 
Exchange believes this allocation is reasonable because it represents 
the Exchange's actual cost to provide the cToM product associated with 
the proposed fees, and not any other service, as supported by its cost 
review.\38\
---------------------------------------------------------------------------

    \38\ As noted above, the percentage allocations used in this 
proposed rule change may differ from past filings from the Exchange 
or its affiliates due to, among other things, changes in expenses 
charged by third-parties, adjustments to internal resource 
allocations, and different system architecture of the Exchange as 
compared to its affiliates. Again, as part its ongoing assessment of 
costs and expenses, the Exchange recently conducted a periodic 
thorough review of its expenses and resource allocations which, in 
turn, resulted in a revised percentage allocations in this filing.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to allocate the identified 
portion of the Zayo expense because Zayo provides the internet, fiber 
and bandwidth connections with respect to the network, linking the 
Exchange with its affiliates, MIAX Pearl and MIAX, as well as the data 
center and disaster recovery locations. As such, all of the trade data, 
including the billions of messages each day per exchange, flow through 
Zayo's infrastructure over the Exchange's network. Without these 
services from Zayo, the Exchange would not be able to operate and 
support the network and provide the cToM data associated with the 
proposed fees. The Exchange did not allocate all of the Zayo expense 
toward the cost of providing the cToM data associated with the proposed 
fees, only the portion which the Exchange identified as being 
specifically mapped to providing the cToM data associated with the 
proposed fees, approximately 0.20% of the total applicable Zayo 
expense. The Exchange believes this allocation is reasonable because it 
represents the Exchange's actual cost to provide the cToM data 
associated with the proposed fees, and not any other service, as 
supported by its cost review.\39\
---------------------------------------------------------------------------

    \39\ Id.
---------------------------------------------------------------------------

    The Exchange did not allocate any expense associated with the 
proposed fees towards SFTI and various other service providers' 
(including Thompson Reuters, NYSE, Nasdaq, and Internap) because the 
MIAX Emerald architecture takes advantage of an advance in design to 
eliminate the need for a market data distribution gateway layer. The 
computation and dissemination via an API is done solely within the 
match engine environment and is then delivered via the member and non-
member connectivity infrastructure. This architecture delivers a market 
data system that is more efficient both in cost and performance. 
Accordingly, the Exchange determined not to allocate any expense 
associated with SFTI and various other service providers.
    The Exchange believes it is reasonable to allocate the identified 
portion of the other hardware and software provider expense because 
this includes costs for dedicated hardware licenses for switches and 
servers, as well as dedicated software licenses for security monitoring 
and reporting across the network. Without this hardware and software, 
the Exchange would not be able to operate and support the network and 
provide cToM data to its Members, non-Members and their customers. The 
Exchange did not allocate all of the hardware and software provider 
expense toward the cost of providing the cToM data associated with the 
proposed fees, only the portions which the Exchange identified as being 
specifically mapped to providing the cToM data associated with the 
proposed fees, approximately 0.20% of the total applicable hardware and 
software provider expense. The Exchange believes this allocation is 
reasonable because it represents the Exchange's actual cost to provide 
the cToM data associated with the proposed fees.\40\
---------------------------------------------------------------------------

    \40\ Id.
---------------------------------------------------------------------------

Internal Expense Allocations
    For 2021, total projected internal expense, relating to the 
internal costs of the Exchange to provide the cToM data associated with 
the proposed fees, is projected to be $198,497. This includes, but is 
not limited to, costs associated with: (1) Employee compensation and 
benefits for full-time employees that support the cToM data associated 
with the proposed fees, including staff in network operations, trading 
operations, development, system operations, and business that support 
those employees and functions; (2) depreciation and amortization of 
hardware and software used to provide the cToM data associated with the 
proposed fees, including equipment, servers, cabling, purchased 
software and internally developed software used in the production 
environment to support the network for trading; and (3) occupancy costs 
for leased office space for staff that provide the cToM data associated 
with the proposed fees. The breakdown of these costs is more fully-
described below. For clarity, only a portion of all such internal 
expenses are included in the internal expense herein, and no expense 
amount is allocated twice. Accordingly, the Exchange does not allocate 
its entire costs contained in those items to the cToM data associated 
with the proposed fees.
    The Exchange believes it is reasonable to allocate such internal 
expense described above towards the total cost to the Exchange to 
provide the cToM data associated with the proposed fees. In particular, 
the Exchange's employee compensation and benefits expense relating to 
providing the cToM data associated with the proposed fees is projected 
to be approximately $185,002, which is only a portion of the $9.74 
million total projected expense for employee compensation and benefits. 
The Exchange believes it is reasonable to allocate the identified 
portion of such expense because this includes the time spent by 
employees of several departments, including Technology, Back Office, 
Systems Operations, Networking, Business Strategy Development (who 
create the business requirement documents that the Technology staff use 
to develop network features, products and enhancements), and Trade 
Operations. As part of the extensive cost review conducted by the 
Exchange, the Exchange reviewed the amount of time spent by nearly 
every employee on matters relating to cToM. Without these employees, 
the Exchange would not be able to provide the cToM product to its 
Members, non-Members and their customers. The Exchange did not allocate 
all of the employee compensation and benefits expense toward the cost 
of the cToM product, only the portion which the Exchange identified as 
being specifically mapped to providing the cToM product associated with 
the proposed fees, approximately 2.0% of the total applicable employee 
compensation and benefits expense. The Exchange believes this 
allocation is reasonable because it represents the Exchange's actual 
cost to provide the cToM data associated with the proposed fees, and 
not any other service, as supported by its cost review.\41\
---------------------------------------------------------------------------

    \41\ Id.
---------------------------------------------------------------------------

    The Exchange's depreciation and amortization expense relating to 
providing the cToM data associated

[[Page 73057]]

with the proposed fees is projected to be $3,635, which is only a 
portion of the $1.9 million total projected expense for depreciation 
and amortization. The Exchange believes it is reasonable to allocate 
the identified portion of such expense because such expense includes 
the actual cost of the computer equipment, such as dedicated servers, 
computers, laptops, monitors, information security appliances and 
storage, and network switching infrastructure equipment, including 
switches and taps that were purchased to operate and support the 
network and provide the cToM product. Without this equipment, the 
Exchange would not be able to operate the network and provide the cToM 
product to its Members, non-Members and their customers. The Exchange 
did not allocate all of the depreciation and amortization expense 
toward the cost of providing the cToM product, only the portion which 
the Exchange identified as being specifically mapped to providing the 
cToM product, approximately 0.20% of the total applicable depreciation 
and amortization expense, as this product would not be possible without 
relying on such. The Exchange believes this allocation is reasonable 
because it represents the Exchange's actual cost to provide the cToM 
product associated with the proposed fees, and not any other service, 
as supported by its cost review.\42\
---------------------------------------------------------------------------

    \42\ Id.
---------------------------------------------------------------------------

    The Exchange's occupancy expense relating to providing the cToM 
product associated with the proposed fees is projected to be $9,860, 
which is only a portion of the $0.60 million total projected expense 
for occupancy. The Exchange believes it is reasonable to allocate the 
identified portion of such expense because such expense represents the 
portion of the Exchange's cost to rent and maintain a physical location 
for the Exchange's staff who operate and support the network, including 
providing the cToM product. This amount consists primarily of rent for 
the Exchange's Princeton, New Jersey office, as well as various related 
costs, such as physical security, property management fees, property 
taxes, and utilities. The Exchange operates its Network Operations 
Center (``NOC'') and Security Operations Center (``SOC'') from its 
Princeton, New Jersey office location. A centralized office space is 
required to house the staff that operates and supports the network and 
Exchange products. The Exchange currently has approximately 200 
employees. Approximately two-thirds of the Exchange's staff are in the 
Technology department, and the majority of those staff have some role 
in the operation and performance of the services associated with the 
proposed fees. Accordingly, the Exchange believes it is reasonable to 
allocate the identified portion of its occupancy expense because such 
amount represents the Exchange's actual cost to house the equipment and 
personnel who operate and support the Exchange's network infrastructure 
and the market data services associated with the proposed fees. The 
Exchange did not allocate all of the occupancy expense toward the cost 
of providing the market data services associated with the proposed 
fees, only the portion which the Exchange identified as being 
specifically mapped to operating and supporting the network, 
approximately 2.0% of the total applicable occupancy expense. The 
Exchange believes this allocation is reasonable because it represents 
the Exchange's cost to provide the market data services associated with 
the proposed fees, and not any other service, as supported by its cost 
review.\43\
---------------------------------------------------------------------------

    \43\ Id.
---------------------------------------------------------------------------

    Based on the above, the Exchange believes that its provision of 
market data services associated with the proposed fees will not result 
in excessive pricing or supra-competitive profit. As discussed above, 
the Exchange projects that its annualized expense for 2021 to provide 
the cToM data associated with the proposed fees is projected to be 
approximately $202,657, or approximately $16,888 per month on average. 
The Exchange implemented the proposed fees on July 1, 2021 in the First 
Proposed Rule Change. For June 2021, prior to the proposed fees, 
Members and non-Members subscribed to a total of 14 cToM data feeds, 
for which the Exchange charged $0, for the past three years. This 
resulted in a month over month loss of $16,888. For the month of 
November 2021, which includes the proposed fees, Members and non-
Members subscribed to 14 cToM data feeds, for which the Exchange 
charged approximately $17,500 for that month. This resulted in a profit 
of $612 for that month (a margin of approximately 3.5%). The Exchange 
believes this margin will allow it to begin to recoup its expenses and 
continue to invest in its technology infrastructure. Therefore, the 
Exchange also believes that this proposed margin is reasonable because 
it represents a reasonable rate of return.
    Again, the Exchange cautions that this margin may fluctuate from 
month to month based in the uncertainty of predicting how many market 
data feeds may be purchased from month to month as Members and non-
Members are free to add and drop subscriptions at any time based on 
their own business decisions. This margin may also decrease due to the 
significant inflationary pressure on capital items that it needs to 
purchase to maintain the Exchange's technology and systems. 
Accordingly, the Exchange believes its total projected revenue for the 
providing the market data services associated with the proposed fees 
will not result in excessive pricing or supra-competitive profit.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to allocate the respective percentages of each expense 
category described above towards the total cost to the Exchange of 
operating and supporting the network, including providing the market 
data services associated with the proposed fees because the Exchange 
performed a line-by-line item analysis of nearly every expense of the 
Exchange, and has determined the expenses that directly relate to 
providing market data services to the Exchange. Further, the Exchange 
notes that, without the specific third-party and internal expense items 
listed above, the Exchange would not be able to provide the market data 
services associated with the proposed fees to its Members, non-Members 
and their customers. Each of these expense items, including physical 
hardware, software, employee compensation and benefits, occupancy 
costs, and the depreciation and amortization of equipment, have been 
identified through a line-by-line item analysis to be integral to 
providing market data services. The proposed fees are intended to 
recover the costs of providing cToM data. Accordingly, the Exchange 
believes that the proposed fees are fair and reasonable because they do 
not result in excessive pricing or supra-competitive profit, when 
comparing the actual costs to the Exchange versus the projected annual 
revenue from the proposed fees.
    No market participant is required by any rule or regulation to 
utilize the Exchange's Complex Order functionality or subscribe to the 
cToM data feed. Further, unlike orders on the Exchange's Simple Order 
Book, Complex Orders are not protected and will never trade through 
Priority Customer \44\ orders,

[[Page 73058]]

thus protecting the priority that is established in the Simple Order 
Book.\45\ Additionally, unlike the continuous quoting requirements of 
Market Makers in the simple order market, there are no continuous 
quoting requirements respecting Complex Orders. It is a business 
decision whether market participants utilize Complex Order strategies 
on the Exchange and whether to purchase cToM data to help effect those 
strategies.
---------------------------------------------------------------------------

    \44\ The term ``Priority Customer'' means a person or entity 
that (i) is not a broker or dealer in securities and (ii) does not 
place more than 390 orders in listed options per day on average 
during a calendar month for its own beneficial accounts(s). The term 
``Priority Customer Order'' means an order for the account of a 
Priority Customer. See Exchange Rule 100.
    \45\ The ``Simple Order Book'' is the Exchange's regular 
electronic book of orders and quotes. See Exchange Rule 518(a)(5) 
[sic].
---------------------------------------------------------------------------

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 market data or their fee markup over those costs, and 
therefore cannot use other exchange's market data fees as a benchmark 
to determine a reasonable markup over the costs of providing market 
data. Nevertheless, the Exchange believes the other exchange's market 
data fees are a useful examples [sic] of alternative approaches to 
providing and charging for market data. To that end, the Exchange 
believes the proposed pricing is reasonable because the proposed rates 
are similar to or less than the fees charged by other options exchanges 
for similar data products.\46\
---------------------------------------------------------------------------

    \46\ See supra notes 18, 19 and 20.
---------------------------------------------------------------------------

    Until recently, the Exchange has operated at a cumulative net 
annual loss since it launched operations in 2019.\47\ This is a result 
of providing a low cost alternative to attract order flow and encourage 
market participants to experience the high determinism and resiliency 
of the Exchange's trading Systems. To do so, the Exchange chose to 
waive the fees for some non-transaction related services or 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. An 
example of this is cToM, for which the Exchange only now seeks to adopt 
fees at a level similar to or lower than those of other options 
exchanges.
---------------------------------------------------------------------------

    \47\ See supra note 34.
---------------------------------------------------------------------------

    Since, the Exchange initially established the cToM data product 
when it launched trading operations on March 1, 2019, all Exchange 
Members and non-Members have had the ability to receive the Exchange's 
cToM data free of charge for the past three years.\48\ Since 2019, when 
the Exchange launched operations with Complex Order functionality, the 
Exchange has spent time and resources building out various Complex 
Order functionality in its System to provide better trading strategies 
and risk functionality for market participants in order to better 
compete with other exchanges' complex functionality and similar data 
products focused on complex orders.\49\ The cToM data product allows 
market participants to better utilize the Exchange's Complex Order 
functionality by providing insights into the Exchange's Complex Order 
flow. The Exchange currently has 14 subscribers (12 Members and 2 non-
Members) for its cToM data product. Each one of these subscribers have 
not paid any cToM data fees (other than the five months in which the 
First, Second and Third Proposed Rule Changes were in effect) but have 
received the benefit of the Exchange building out its Complex Order 
functionality to better compete with other exchanges complex 
functionality. The Exchange notes that no market participant ceased 
subscribing to the cToM feed since July 1, 2021, the date on which the 
fees became effective when proposed in the First Proposed Rule Change.
---------------------------------------------------------------------------

    \48\ See supra note 13.
    \49\ See Securities Exchange Act Release Nos. 85345 (March 18, 
2019), 84 FR 10848 (March 22, 2019) (SR-EMERALD-2019-13) (adopting 
complex stock-option order functionality); 85346 (March 18, 2019), 
84 FR 10854 (March 22, 2019) (SR-EMERALD-2019-14) (adopting 
additional price protection during a Complex Auction and the Complex 
Liquidity Exposure Process to provide additional price discovery).
---------------------------------------------------------------------------

The Proposed Pricing Is Not Unfairly Discriminatory and Provides for 
the Equitable Allocation of Fees, Dues, and Other Charges
    The Exchange believes that it is reasonable, equitable and not 
unfairly discriminatory to assess Internal Distributors fees that are 
less than the fees assessed for External Distributors for subscriptions 
to the cToM data feed because Internal Distributors have limited, 
restricted usage rights to the market data, as compared to External 
Distributors, which have more expansive usage rights. All Members and 
non-Members that determine to receive any market data feed of the 
Exchange (or its affiliates, MIAX Pearl and MIAX), must first execute, 
among other things, the MIAX Exchange Group Exchange Data Agreement 
(the ``Exchange Data Agreement'').\50\ Pursuant to the Exchange Data 
Agreement, Internal Distributors are restricted to the ``internal use'' 
of any market data they receive. This means that Internal Distributors 
may only distribute the Exchange's market data to the recipient's 
officers and employees and its affiliates.\51\ External Distributors 
may distribute the Exchange's market data to persons who are not 
officers, employees or affiliates of the External Distributor,\52\ and 
may charge their own fees for the distribution of such market data. 
Accordingly, the Exchange believes it is fair, reasonable and not 
unfairly discriminatory to assess External Distributors a higher fee 
for the Exchange's market data products as External Distributors have 
greater usage rights to commercialize such market data. The Exchange 
also utilizes more resources to support External Distributors versus 
Internal Distributors, as External Distributors have reporting and 
monitoring obligations that Internal Distributors do not have, thus 
requiring additional time and effort of Exchange staff. The Exchange 
believes the proposed cToM fees are equitable and not unfairly 
discriminatory because the fee level results in a reasonable and 
equitable allocation of fees amongst subscribers for similar services, 
depending on whether the subscribers is an Internal or External 
Distributor. Moreover, the decision as to whether or not to purchase 
market data is entirely optional to all market participants. Potential 
purchasers are not required to purchase the market data, and the 
Exchange is not required to make the market data available. Purchasers 
may request the data at any time or may decline to purchase such data. 
The allocation of fees among users is fair and reasonable because, if 
market participants deem the proposed fees to be unfair or inequitable, 
firms can discontinue their use of the cToM data.
---------------------------------------------------------------------------

    \50\ See Exchange Data Agreement, available at https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf.
    \51\ See id.
    \52\ See id.
---------------------------------------------------------------------------

    Further, the Exchange believes that the proposal is equitable and 
not unfairly discriminatory because the proposed cToM fees will apply 
to all market participants of the Exchange on a uniform basis. The 
Exchange also notes that the proposed monthly cToM fees for Internal 
and External Distributors are the same prices that the

[[Page 73059]]

Exchange charges for its ToM data product.
    The Exchange believes the proposed change to delete certain text 
from Section (6)(a) of the Fee Schedule promotes just and equitable 
principles of trade and removes impediments to and perfects the 
mechanism of a free and open market and a national market system 
because the proposed change is a non-substantive edit to the Fee 
Schedule to remove unnecessary text. The Exchange believes that this 
proposed change will provide greater clarity to Members and the public 
regarding the Exchange's Fee Schedule and that it is in the public 
interest for the Fee Schedule to be accurate and concise so as to 
eliminate the potential for confusion.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in 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 cToM 
to market participants. As described above, the Exchange has operated 
at a cumulative net annual loss since it launched operations in 2019 
\53\ 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. An 
example of this is cToM, for which the Exchange only now seeks to adopt 
fees at a level similar to or lower than those of other options 
exchanges.
---------------------------------------------------------------------------

    \53\ See supra note 34.
---------------------------------------------------------------------------

    Since the Exchange initially launched operations with the cToM data 
product in 2019, all Exchange Members and non-Members have had the 
ability to receive the Exchange's cToM data free of charge for the past 
three years.\54\ Since 2019, when the Exchange adopted Complex Order 
functionality, the Exchange has spent time and resources building out 
various Complex Order functionality in its System to provide better 
trading strategies and risk functionality for market participants in 
order to better compete with other exchanges' complex functionality and 
similar data products focused on complex orders.\55\ The Exchange now 
seeks to recoup its costs for providing cToM to market participants and 
believes the proposed fees will not result in excessive pricing or 
supracompetitive profit.
---------------------------------------------------------------------------

    \54\ See supra note 13.
    \55\ See supra note 49.
---------------------------------------------------------------------------

Inter-Market Competition
    The Exchange also does not believe the proposed fees would cause 
any unnecessary or in appropriate burden on intermarket competition as 
other exchanges are free to introduce their own comparable data product 
and lower their prices to better compete with the Exchange's offering. 
The Exchange does not believe the proposed rule change would cause any 
unnecessary or inappropriate burden on intramarket competition. 
Particularly, the proposed product and fees apply uniformly to any 
purchaser, in that it does not differentiate between subscribers that 
purchase cToM. The proposed fees are set at a modest level that would 
allow any interested Member or non-Member to purchase such data based 
on their business needs.
    The Exchange does not believe that the proposed rule change to make 
a minor, non-substantive edit to Section (6)(a) of the Fee Schedule by 
deleting unnecessary text will result in any burden on competition that 
is not necessary or appropriate in furtherance of the purposes of the 
Act. This proposed rule change is not being made for competitive 
reasons, but rather is designed to remedy a minor non-substantive issue 
and will provide added clarity to the Fee Schedule. The Exchange 
believes that it is in the public interest for the Fee Schedule to be 
accurate and concise so as to eliminate the potential for confusion on 
the part of market participants. In addition, the Exchange does not 
believe the proposal will impose any burden on inter-market competition 
as the proposal does not address any competitive issues and is intended 
to protect investors by providing further transparency regarding the 
Exchange's Fee Schedule.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\56\ and Rule 19b-4(f)(2) \57\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \57\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-EMERALD-2021-44 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-EMERALD-2021-44. 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

[[Page 73060]]

with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-EMERALD-2021-44, and should be submitted 
on or before January 13, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\58\
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    \58\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-27816 Filed 12-22-21; 8:45 am]
BILLING CODE 8011-01-P