Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee Schedule, 34003-34012 [2019-15025]
Download as PDF
<![CDATA[
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
amending cross-references will bring
greater transparency to GEMX’s Rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act 13 and Rule 19b–
4(f)(6) thereunder.14
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 15 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 16
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has
requested that the Commission waive
the 30-day operative delay so that the
proposed rule change may become
operative upon filing. As the proposed
rule change raises no novel issues and
is largely organizational, the
Commission believes that waiver of the
30-day operative delay is consistent
with the protection of investors and the
public interest. Accordingly, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.17
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
13 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
15 17 CFR 240.19b–4(f)(6).
16 17 CFR 240.19b–4(f)(6)(iii).
17 For purposes only of waiving the 30-day
operative delay, the Commission also has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
jspears on DSK30JT082PROD with NOTICES
14 17
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
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
change should be approved or
disapproved.
34003
should be submitted on or before
August 6, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Eduardo A. Aleman,
Deputy Secretary.
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:
[FR Doc. 2019–15028 Filed 7–15–19; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
GEMX–2019–08 on the subject line.
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Fee Schedule
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–GEMX–2019–08. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–GEMX–2019–08, and
PO 00000
Frm 00100
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86343; File No. SR–
PEARL–2019–21]
July 10, 2019.
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 June 26,
2019, MIAX PEARL, LLC (‘‘MIAX
PEARL’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX PEARL Fee Schedule
(the ‘‘Fee Schedule’’) to modify certain
of the Exchange’s system connectivity
fees.
The Exchange previously filed the
proposal on April 30, 2019 (SR–PEARL–
2019–17). That filing has been
withdrawn and replaced with the
current filing (SR–PEARL–2019–21).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\16JYN1.SGM
16JYN1
34004
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
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
jspears on DSK30JT082PROD with NOTICES
1. Purpose
The Exchange proposes to amend the
Fee Schedule regarding connectivity to
the Exchange. Specifically, the
Exchange proposes to amend Sections
5(a) and (b) of the Fee Schedule to
increase the network connectivity fees
for the 1 Gigabit (‘‘Gb’’) fiber
connection, the 10Gb fiber connection,
and the 10Gb ultra-low latency (‘‘ULL’’)
fiber connection, which are charged to
both Members 3 and non-Members of the
Exchange for connectivity to the
Exchange’s primary/secondary facility.
The Exchange also proposes to increase
the network connectivity fees for the
1Gb and 10Gb fiber connections for
connectivity to the Exchange’s disaster
recovery facility. Each of these
connections are shared connections, and
thus can be utilized to access both the
Exchange and the Exchange’s affiliate,
Miami International Securities
Exchange, LLC (‘‘MIAX’’). These
proposed fee increases are collectively
referred to herein as the ‘‘Proposed Fee
Increases.’’
The Exchange initially filed the
Proposed Fee Increases on July 31, 2018,
designating the Proposed Fee Increases
effective August 1, 2018.4 The First
Proposed Rule Change was published
for comment in the Federal Register on
August 13, 2018.5 The Commission
received one comment letter on the
proposal.6 The Proposed Fee Increases
remained in effect until they were
temporarily suspended pursuant to a
suspension order (the ‘‘Suspension
Order’’) issued by the Commission on
3 The term ‘‘Member’’ means an individual or
organization that is registered with the Exchange
pursuant to Chapter II of the Exchange’s 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.
4 See Securities Exchange Act Release No. 83785
(August 7, 2018), 83 FR 40101 (August 13, 2018)
(SR–PEARL–2018–16) (the ‘‘First Proposed Rule
Change’’).
5 Id.
6 See Letter from Tyler Gellasch, Executive
Director, The Healthy Markets Association, to Brent
J. Fields, Secretary, Commission, dated September
4, 2018 (‘‘Healthy Markets Letter’’).
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
September 17, 2018.7 The Suspension
Order also instituted proceedings to
determine whether to approve or
disapprove the proposed rule change.8
The Healthy Markets Letter argued
that the Exchange did not provide
sufficient information in its filing to
support a finding that the proposal is
consistent with the Act. Specifically, the
Healthy Markets Letter objected to the
Exchange’s reliance on the fees of other
exchanges to demonstrate that its fee
increases are consistent with the Act. In
addition, the Healthy Markets Letter
argued that the Exchange did not offer
any details to support its basis for
asserting that the Proposed Fee
Increases are consistent with the Act.
On October 5, 2018, the Exchange
withdrew the First Proposed Rule
Change.9 The Exchange refiled the
Proposed Fee Increases on September
18, 2018, designating the Proposed Fee
Increases immediately effective.10 The
Second Proposed Rule Change was
published for comment in the Federal
Register on October 10, 2018.11 The
Commission received one comment
letter on the proposal.12 The Proposed
Fee Increases remained in effect until
they were temporarily suspended
pursuant to a suspension order (the
‘‘Second Suspension Order’’) issued by
the Commission on October 3, 2018.13
The Second Suspension Order also
instituted proceedings to determine
whether to approve or disapprove the
Second Proposed Rule Change.14
The SIFMA Letter argued that the
Exchange did not provide sufficient
information in its filing to support a
finding that the proposal should be
approved by the Commission after
further review of the proposed fee
increases. Specifically, the SIFMA
Letter objected to the Exchange’s
reliance on the fees of other exchanges
to justify its own fee increases. In
addition, the SIFMA Letter argued that
the Exchange did not offer any details
to support its basis for asserting that the
7 See Securities Exchange Act Release No. 34–
84177 (September 17, 2018).
8 Id.
9 See Securities Exchange Act Release No. 84397
(October 10, 2018), 83 FR 52272 (October 16, 2018)
(SR–PEARL–2018–16).
10 See Securities Exchange Act Release No. 84358
(October 3, 2018), 83 FR 51022 (October 10, 2018)
(SR–PEARL–2018–19) (the ‘‘Second Proposed Rule
Change’’).
11 Id.
12 See Letter from Theodore R. Lazo, Managing
Director and Associate General Counsel, and Ellen
Greene, Managing Director Financial Services
Operations, The Securities Industry and Financial
Markets Association (‘‘SIFMA’’), to Brent J. Fields,
Secretary, Commission, dated October 15, 2018
(‘‘SIFMA Letter’’).
13 See supra note 10.
14 Id.
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
Proposed Fee Increases are reasonable.
On November 23, 2018, the Exchange
withdrew the Second Proposed Rule
Change.15
The Exchange refiled the Proposed
Fee Increases on March 1, 2019,
designating the Proposed Fee Increases
immediately effective.16 The Third
Proposed Rule Change was published
for comment in the Federal Register on
March 20, 2019.17 The Third Proposed
Rule Change provided new information,
including additional detail about the
market participants impacted by the
Proposed Fee Increases, as well as the
additional costs incurred by the
Exchange associated with providing the
connectivity alternatives, in order to
provide more transparency and support
relating to the Exchange’s belief that the
Proposed Fee Increases are reasonable,
equitable, and non-discriminatory, and
to provide sufficient information for the
Commission to determine that the
Proposed Fee Increases are consistent
with the Act.
On March 29, 2019, the Commission
issued its Order Disapproving Proposed
Rule Changes to Amend the Fee
Schedule on the BOX Market LLC
Options Facility to Establish BOX
Connectivity Fees for Participants and
Non-Participants Who Connect to the
BOX Network (the ‘‘BOX Order’’).18 In
the BOX Order, the Commission
highlighted a number of deficiencies it
found in three separate rule filings by
BOX Exchange LLC (‘‘BOX’’) to increase
BOX’s connectivity fees that prevented
the Commission from finding that
BOX’s proposed connectivity fees were
consistent with the Act. These
deficiencies relate to topics that the
Commission believes should be
discussed in a connectivity fee filing.
After the BOX Order was issued, the
Commission received four comment
letters on the Third Proposed Rule
Change.19
15 See Securities Exchange Act Release No. 84651
(November 26, 2018), 83 FR 61687 (November 30,
2018) (SR–PEARL–2018–19).
16 See Securities Exchange Act Release No. 85317
(March 14, 2019), 84 FR 10380 (March 20, 2019)
(SR–PEARL–2019–08) (the ‘‘Third Proposed Rule
Change’’) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend
the MIAX PEARL Fee Schedule).
17 Id.
18 See 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).
19 See Letter from Joseph W. Ferraro III, SVP &
Deputy General Counsel, MIAX, to Vanessa
Countryman, Acting Secretary, Commission, dated
April 5, 2019 (‘‘MIAX Letter’’); Letter from
Theodore R. Lazo, Managing Director and Associate
General Counsel, SIFMA, to Vanessa Countryman,
Acting Secretary, Commission, dated April 10, 2019
(‘‘Second SIFMA Letter’’); Letter from John Ramsay,
Chief Market Policy Officer, Investors Exchange
E:\FR\FM\16JYN1.SGM
16JYN1
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
The Second SIFMA Letter argued that
the Exchange did not provide sufficient
information in its Third Proposed Rule
Change to support a finding that the
proposal should be approved by the
Commission after further review of the
proposed fee increases. Specifically, the
Second SIFMA Letter argued that the
Exchange’s market data fees and
connectivity fees were not constrained
by competitive forces, the Exchange’s
filing lacked sufficient information
regarding cost and competition, and that
the Commission should establish a
framework for determining whether fees
for exchange products and services are
reasonable when those products and
services are not constrained by
significant competitive forces.
The IEX Letter argued that the
Exchange did not provide sufficient
information in its Third Proposed Rule
Change to support a finding that the
proposal should be approved by the
Commission and that the Commission
should extend the time for public
comment on the Third Proposed Rule
Change. Despite the objection to the
Proposed Fee Increases, the IEX Letter
did find that ‘‘MIAX has provided more
transparency and analysis in these
filings than other exchanges have sought
to do for their own fee increases.’’ 20 The
IEX Letter specifically argued that the
Proposed Fee Increases were not
constrained by competition, the
Exchange should provide data on the
Exchange’s actual costs and how those
costs relate to the product or service in
question, and whether and how MIAX
considered changes to transaction fees
as an alternative to offsetting exchange
costs.
The Second Healthy Markets Letter
did not object to the Third Proposed
Rule Change and the information
provided by the Exchange in support of
the Proposed Fee Increases. Specifically,
the Second Healthy Markets Letter
stated that the Third Proposed Rule
Change was ‘‘remarkably different,’’ and
went on to further state as follows:
jspears on DSK30JT082PROD with NOTICES
The instant MIAX filings—along with their
April 5th supplement—provide much greater
detail regarding users of connectivity, the
market for connectivity, and costs than the
Initial MIAX Filings. They also appear to
address many of the issues raised by the
Commission staff’s BOX disapproval order.
This third round of MIAX filings suggests
that MIAX is operating in good faith to
LLC, to Vanessa Countryman, Acting Secretary,
Commission, dated April 10, 2019 (‘‘IEX Letter’’);
and Letter from Tyler Gellasch, Executive Director,
Healthy Markets, to Brent J. Fields, Secretary,
Commission, dated April 18, 2019 (‘‘Second
Healthy Markets Letter’’).
20 See IEX Letter, pg. 1.
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
provide what the Commission and staff
seek.21
On April 29, 2019, the Exchange
withdrew the Third Proposed Rule
Change.22
The Exchange refiled the Proposed
Fee Increases on April 30, 2019,
designating the Proposed Fee Increases
immediately effective.23 The Fourth
Proposed Rule Change was published
for comment in the Federal Register on
May 16, 2019.24 The Fourth Proposed
Rule Change provided further cost
analysis information to squarely and
comprehensively address each and
every topic raised for discussion in the
BOX Order, the IEX Letter and the
Second SIFMA Letter to ensure that the
Proposed Fee Increases are reasonable,
equitable, and non-discriminatory, and
that the Commission should find that
the Proposed Fee Increases are
consistent with the Act.
On May 21, 2019, the Commission
issued the Staff Guidance on SRO Rule
Filings Relating to Fees (the
‘‘Guidance’’).25
The Commission received two
comment letters on the Fourth Proposed
Rule Change, after the Guidance was
released.26 The Second IEX Letter and
the Third SIFMA Letter argued that the
Exchange did not provide sufficient
information in its Fourth Proposed Rule
Change to justify the Proposed Fee
Increases based on the Guidance and the
BOX Order. Of note, however, is that
unlike their previous comment letter,
the Third SIFMA Letter did not call for
the Commission to suspend the Fourth
Proposed Rule Change. Also, Healthy
Markets did not comment on the Fourth
Proposed Rule Change.
The Exchange is now re-filing the
Proposed Fee Increases (the ‘‘Fifth
Proposed Rule Change’’) to bolster its
cost-based discussion to support its
claim that the Proposed Fee Increases
are fair and reasonable because they will
permit recovery of the Exchange’s costs
Second Healthy Markets Letter, pg. 2.
SR–PEARL–2019–08.
23 See Securities Exchange Act Release No. 85837
(May 10, 2019), 84 FR 22214 (May 16, 2019) (SR–
PEARL–2019–17) (the ‘‘Fourth Proposed Rule
Change’’) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend
the MIAX PEARL Fee Schedule).
24 Id.
25 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.
26 See Letter from John Ramsay, Chief Market
Policy Officer, Investors Exchange LLC, to Vanessa
Countryman, Acting Secretary, Commission, dated
June 5, 2019 (the ‘‘Second IEX Letter’’) and Letter
from Theodore R. Lazo, Managing Director and
Associate General Counsel, and Ellen Greene,
Managing Director, SIFMA, to Vanessa
Countryman, Acting Secretary, Commission, dated
June 6, 2019 (the ‘‘Third SIFMA Letter’’).
PO 00000
21 See
22 See
Frm 00102
Fmt 4703
Sfmt 4703
34005
and will not result in excessive pricing
or supracompetitive profit, in light of
the Guidance issued by Commission
staff subsequent to the Fourth Proposed
Rule Change. The Exchange believes
that the Proposed Fee Increases are
consistent with the Act because they (i)
are reasonable, equitably allocated, not
unfairly discriminatory, and not an
undue burden on competition; (ii)
comply with the BOX Order and the
Guidance; (iii) are, as demonstrated in
the Fifth Proposed Rule Change and
supported by evidence (including data
and analysis), constrained by significant
competitive forces; and (iv) are, as
demonstrated in the Fifth Proposed Rule
Change and supported by specific
information (including quantitative
information), fair and reasonable
because they will permit recovery of the
Exchange’s costs and will not result in
excessive pricing or supracompetitive
profit. Accordingly, the Exchange
believes that the Commission should
find that the Proposed Fee Increases are
consistent with the Act. The proposed
rule change is immediately effective
upon filing with the Commission
pursuant to Section 19(b)(3)(A) of the
Act.
The Exchange currently offers various
bandwidth alternatives for connectivity
to the Exchange to its primary and
secondary facilities, consisting of a 1Gb
fiber connection, a 10Gb fiber
connection, and a 10Gb ULL fiber
connection. The 10Gb ULL offering uses
an ultra-low latency switch, which
provides faster processing of messages
sent to it in comparison to the switch
used for the other types of connectivity.
The Exchange currently assesses the
following monthly network connectivity
fees to both Members and non-Members
for connectivity to the Exchange’s
primary/secondary facility: (a) $1,100
for the 1Gb connection; (b) $5,500 for
the 10Gb connection; and (c) $8,500 for
the 10Gb ULL connection. The
Exchange also assesses to both Members
and non-Members a monthly per
connection network connectivity fee of
$500 for each 1Gb connection to the
disaster recovery facility and a monthly
per connection network connectivity fee
of $2,500 for each 10Gb connection to
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
E:\FR\FM\16JYN1.SGM
16JYN1
34006
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
data systems, test systems and disaster
recovery facilities of the Exchange and
MIAX via a single, shared connection
are assessed only one monthly network
connectivity fee per connection,
regardless of the trading platforms,
market data systems, test systems, and
disaster recovery facilities accessed via
such connection.
The Exchange proposes to increase
the monthly network connectivity fees
for such connections for both Members
and non-Members. The network
connectivity fees for connectivity to the
Exchange’s primary/secondary facility
will be increased as follows: (a) From
$1,100 to $1,400 for the 1Gb connection;
(b) from $5,500 to $6,100 for the 10Gb
connection; and (c) from $8,500 to
$9,300 for the 10Gb ULL connection.
The network connectivity fees for
connectivity to the Exchange’s disaster
recovery facility will be increased as
follows: (a) From $500 to $550 for the
1Gb connection; and (b) from $2,500 to
$2,750 for the 10Gb connection.
jspears on DSK30JT082PROD with NOTICES
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 27
in general, and furthers the objectives of
Section 6(b)(4) of the Act 28 in
particular, in that it provides for the
equitable allocation of reasonable dues,
fees and other charges among Exchange
Members and issuers and other persons
using any facility or system which the
Exchange operates or controls. The
Exchange also believes the proposal
furthers the objectives of Section 6(b)(5)
of the Act 29 in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest and is
not designed to permit unfair
discrimination between customer,
issuers, brokers and dealers.
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
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
29 15 U.S.C. 78f(b)(5).
broader forms that are most important to
investors and listed companies.’’ 30
First, the Exchange believes that its
proposal is consistent with Section
6(b)(4) of the Act, in that the Proposed
Fee Increases are fair, equitable and not
unreasonably discriminatory, because
the fees for the connectivity alternatives
available on the Exchange, as proposed
to be increased, are constrained by
significant competitive forces. The U.S.
options markets are highly competitive
(there are currently 16 options markets)
and a reliance on competitive markets is
an appropriate means to ensure
equitable and reasonable prices.
The Exchange acknowledges that
there is no regulatory requirement that
any market participant connect to the
Exchange, or that any participant
connect at any specific connection
speed. The rule structure for options
exchanges are, in fact, fundamentally
different from those of equities
exchanges. In particular, options market
participants are not forced to connect to
(and purchase market data from) all
options exchanges, as shown by the
number of Members of MIAX PEARL as
compared to the much greater number
of members at other options exchanges
(as further detailed below). Not only
does MIAX PEARL have less than half
the number of members as certain other
options exchanges, but there are also a
number of the Exchange’s Members that
do not connect directly to MIAX
PEARL. Further, of the number of
Members that connect directly to MIAX
PEARL, many such Members do not
purchase market data from MIAX
PEARL. There are a number of large
market makers and broker-dealers that
are members of other options exchange
but not Members of MIAX PEARL. For
example, the following are not Members
of MIAX PEARL: The D.E. Shaw Group,
CTC, XR Trading LLC, Hardcastle
Trading AG, Ronin Capital LLC,
Belvedere Trading, LLC, Bluefin
Trading, and HAP Capital LLC. In
addition, of the market makers that are
connected to MIAX PEARL, it is the
individual needs of the market maker
that require whether they need one
connection or multiple connections to
the Exchange. The Exchange has market
maker Members that only purchase one
connection (10Gb or 10Gb ULL) and the
Exchange has market maker Members
that purchase multiple connections. It is
all driven by the business needs of the
market maker. Market makers that are
consolidators that target resting order
flow tend to purchase more connectivity
that market makers that simply quote all
symbols on the Exchange. Even though
non-Members purchase and resell 10Gb
and 10Gb ULL connections to both
Members and non-Members, no market
makers currently connect to the
Exchange indirectly through such
resellers.
SIFMA’s argument that all brokerdealers are required to connect to all
exchanges is not true in the options
markets. The options markets have
evolved differently than the equities
markets both in terms of market
structure and functionality. For
example, there are many order types
that are available in the equities markets
that are not utilized in the options
markets, which relate to mid-point
pricing and pegged pricing which
require connection to the SIPs and each
of the equities exchanges in order to
properly execute those orders in
compliance with best execution
obligations. In addition, in the options
markets there is a single SIP (OPRA)
versus two SIPs in the equities markets,
resulting in fewer hops and thus
alleviating the need to connect directly
to all the options exchanges.
Additionally, in the options markets,
the linkage routing and trade through
protection are handled by the
exchanges, not by the individual
members. Thus not connecting to an
options exchange or disconnecting from
an options exchange does not
potentially subject a broker-dealer to
violate order protection requirements as
suggested by SIFMA. Gone are the days
when the retail brokerage firms (the
Fidelity’s, the Schwab’s, the eTrade’s)
were members of the options
exchanges—they are not members of
MIAX PEARL or its affiliates, MIAX and
MIAX Emerald, they do not purchase
connectivity to MIAX PEARL, and they
do not purchase market data from MIAX
PEARL. The Exchange further
recognizes that the decision of whether
to connect to the Exchange is separate
and distinct from the decision of
whether and how to trade on the
Exchange. The Exchange acknowledges
that many firms may choose to connect
to the Exchange, but ultimately not
trade on it, based on their particular
business needs.
To assist prospective Members or
firms considering connecting to MIAX
PEARL, the Exchange provides
information about the Exchange’s
available connectivity alternatives in a
Connectivity Guide, which contains
detailed specifications regarding, among
other things, throughput and latency for
each available connection.31 The
30 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
31 See the MIAX Connectivity Guide at https://
www.miaxoptions.com/sites/default/files/page-
27 15
28 15
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
E:\FR\FM\16JYN1.SGM
16JYN1
jspears on DSK30JT082PROD with NOTICES
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
decision of which type of connectivity
to purchase, or whether to purchase
connectivity at all for a particular
exchange, is based on the business
needs of the firm. For example, if the
firm wants to receive the top-of-market
data feed product or depth data feed
product, due to the amount/size of data
contained in those feeds, such firm
would need to purchase either the 10Gb
or 10Gb ULL connection. The 1Gb
connection is too small to support those
data feed products. MIAX PEARL notes
that there are twelve (12) Members that
only purchase the 1Gb connectivity
alternative. Thus, while there is a
meaningful percentage of purchasers of
only 1Gb connections (12 of 33), by
definition, those twelve (12) members
purchase connectivity that cannot
support the top-of-market data feed
product or depth data feed product and
thus they do not purchase such data
feed products. Accordingly, purchasing
market data is a business decision/
choice, and thus the pricing for it is
constrained by competition.
Contrary to SIFMA’s argument, there
is competition for connectivity to MIAX
PEARL and its affiliates. MIAX PEARL
competes with nine (9) non-Members
who resell MIAX PEARL connectivity.
These are resellers of MIAX PEARL
connectivity—they are not arrangements
between broker-dealers to share
connectivity costs, as SIFMA suggests.
Those non-Members resell that
connectivity to multiple market
participants over that same connection,
including both Members and nonMembers of MIAX PEARL (typically
extranets and service bureaus). When
connectivity is re-sold by a third-party,
MIAX PEARL does not receive any
connectivity revenue from that sale. It is
entirely between the third-party and the
purchaser, thus constraining the ability
of MIAX PEARL to set its connectivity
pricing as indirect connectivity is a
substitute for direct connectivity. There
are currently nine (9) non-Members that
purchase connectivity to MIAX PEARL
and/or MIAX. Those non-Members
resell that connectivity to eleven (11)
customers, some of whom are agency
broker-dealers that have tens of
customers of their own. Some of those
eleven (11) customers also purchase
connectivity directly from MIAX PEARL
and/or MIAX. Accordingly, indirect
connectivity is a viable alternative that
is already being used by non-Members
of MIAX PEARL, constraining the price
that MIAX PEARL is able to charge for
connectivity to its Exchange.
files/MIAX_Connectivity_Guide_v3.6_
01142019.pdf.
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
The Exchange 32 and MIAX 33 are
comprised of 41 distinct Members
between the two exchanges, excluding
any additional affiliates of such
Members that are also Members of
MIAX PEARL, MIAX, or both. Of those
41 distinct Members, 33 Members have
purchased the 1Gb, 10Gb, 10Gb ULL
connections or some combination of
multiple various connections.
Furthermore, every Member who has
purchased at least one connection also
trades on the Exchange, MIAX, or both,
with the exception of one new Member
who is currently in the on-boarding
process. The 8 remaining Members who
have not purchased any connectivity to
the Exchange are still able to trade on
the Exchange indirectly through other
Members or non-Member service
bureaus that are connected. These 8
Members who have not purchased
connectivity are not forced or compelled
to purchase connectivity, and they
retain all of the other benefits of
Membership with the Exchange.
Accordingly, Members have the choice
to purchase connectivity and are not
compelled to do so in any way.
The Exchange believes that the
Proposed Fee Increases are fair,
equitable and not unreasonably
discriminatory because the connectivity
pricing is associated with relative usage
of the various market participants and
does not impose a barrier to entry to
smaller participants. Accordingly, the
Exchange offers three direct
connectivity alternatives and various
indirect connectivity (via third-party)
alternatives, as described above. MIAX
PEARL recognizes that there are various
business models and varying sizes of
market participants conducting business
on the Exchange. The 1Gb direct
connectivity alternative is 1/10th the
size of the 10Gb direct connectivity
alternative. Because it is 1/10th of the
size, it does not offer access to many of
the products and services offered by the
Exchange, such as the ability to quote or
receive certain market data products.
Thus, the value of the 1Gb alternative is
much lower than value of a 10Gb
alternative, when measured based on
the type of Exchange access it offers,
which is the basis for difference in price
between a 1Gb connection and a 10Gb
connection. Approximately just less
than half of MIAX PEARL and MIAX
Members that connect (14 out of 33)
32 MIAX PEARL has 36 distinct Members,
excluding affiliated entities. See MIAX PEARL
Exchange Member Directory, available at https://
www.miaxoptions.com/exchange-members/pearl.
33 MIAX has 38 distinct Members, excluding
affiliated entities. See MIAX Exchange Member
Directory, available at https://
www.miaxoptions.com/exchange-members.
PO 00000
Frm 00104
Fmt 4703
Sfmt 4703
34007
purchase 1Gb connections. The 1Gb
direct connection can support the
sending of orders and the consumption
of all market data feed products, other
than the top-of-market data feed product
or depth data feed product (which
require a 10Gb connection). The 1Gb
direct connection is generally purchased
by market participants that utilize less
bandwidth. The market participants that
purchase 10Gb ULL direct connections
utilize the most bandwidth, and those
are the participants that consume the
most resources from the network.
Accordingly, the Exchange believes the
allocation of the Proposed Fee Increases
($9,300 for a 10Gb ULL connection
versus $1,400 for a 1Gb connection) are
reasonable based on the network
resources consumed by the market
participants—lowest bandwidth
consuming members pay the least, and
highest bandwidth consuming members
pays the most, particularly since higher
bandwidth consumption translates to
higher costs to the Exchange. The 10Gb
ULL connection offers optimized
connectivity for latency sensitive
participants and is approximately single
digit microseconds faster in round trip
time for connection oriented traffic to
the Exchange than the 10Gb connection.
This lower latency is achieved through
more advanced network equipment,
such as advanced hardware and
switching components, which translates
to increased costs to the Exchange.
Market participants that are less latency
sensitive can purchase 10Gb direct
connections and quote in all products
on the Exchange and consume all
market data feeds, and such 10Gb direct
connections are priced lower than the
10Gb ULL direct connections, offering
smaller sized market makers a lower
cost alternative.
With respect to options trading, the
Exchange had only 4.84% market share
of the U.S. options industry in Equity/
ETF classes according to the OCC in
May 2019.34 For May of 2019, the
Exchange’s affiliate, MIAX, had only
3.75% market share of the U.S. options
industry in Equity/ETF classes
according to the OCC.35 For May 2019,
the Exchange’s affiliate, MIAX Emerald,
had only 0.77% market share of the U.S.
options industry in Equity/ETF classes
according to the OCC.36 The Exchange
is aware of no evidence that a combined
market share of less than 10% provides
the Exchange with anti-competitive
34 See Exchange Market Share of Equity
Products—2019, The Options Clearing Corporation,
available at https://www.theocc.com/webapps/
exchange-volume.
35 Id.
36 Id.
E:\FR\FM\16JYN1.SGM
16JYN1
34008
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
jspears on DSK30JT082PROD with NOTICES
pricing power. This, in addition to the
fact that not all broker-dealers are
required to connect to all options
exchanges, supports the Exchange’s
conclusion that its pricing is
constrained by competition.
Separately, the Exchange is not aware
of any reason why market participants
could not simply drop their connections
and cease being Members of the
Exchange if the Exchange were to
establish unreasonable and
uncompetitive price increases for its
connectivity alternatives. Market
participants choose to connect to a
particular exchange and because it is a
choice, MIAX PEARL must set
reasonable connectivity pricing,
otherwise prospective members would
not connect and existing members
would disconnect or connect through a
third-party reseller of connectivity. No
options market participant is required
by rule, regulation, or competitive forces
to be a Member of the Exchange. Several
market participants choose not to be
Members of the Exchange and choose
not to access the Exchange, and several
market participants also access the
Exchange indirectly through another
market participant. To illustrate, the
Exchange has only 41 Members
(including all such Members’ affiliate
Members). However, Cboe Exchange,
Inc. (‘‘Cboe’’) has over 200 members,37
Nasdaq ISE, LLC has approximately 100
members,38 and NYSE American LLC
has over 80 members.39 If all market
participants were required to be
Members of the Exchange and connect
directly to the Exchange, the Exchange
would have over 200 Members, in line
with Cboe’s total membership. But it
does not. The Exchange only has 41
Members (inclusive of Members’
affiliates).
The Exchange finds it compelling that
all of the Exchange’s existing Members
continued to purchase the Exchange’s
connectivity services during the period
for which the Proposed Fee Increases
took effect in August 2018. In particular,
the Exchange believes that the Proposed
Fee Increases are reasonable because the
Exchange did not lose any Members (or
37 See Form 1/A, filed August 30, 2018 (https://
www.sec.gov/Archives/edgar/vprr/1800/
18002831.pdf); Form 1/A, filed August 30, 2018
(https://www.sec.gov/Archives/edgar/vprr/1800/
18002833.pdf); Form 1/A, filed July 24, 2018
(https://www.sec.gov/Archives/edgar/vprr/1800/
18002781.pdf); Form 1/A, filed August 30, 2018
(https://www.sec.gov/Archives/edgar/data/
1473845/999999999718007832/9999999997-18007832-index.htm).
38 See Form 1/A, filed July 1, 2016 (https://
www.sec.gov/Archives/edgar/vprr/1601/
16019243.pdf).
39 See https://www.nyse.com/markets/americanoptions/membership#directory.
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
the number of connections each
Member purchased) or non-Member
connections due to the Exchange
increasing its connectivity fees through
the First Proposed Rule Change, which
fee increase became effective August 1,
2018. For example, in July 2018,
fourteen (14) Members purchased 1Gb
connections, ten (10) Members
purchased 10Gb connections, and
fifteen (15) Members purchased 10Gb
ULL connections. (The Exchange notes
that 1Gb connections are purchased
primarily by EEM Members; 10Gb ULL
connections are purchased primarily by
higher volume Market Makers quoting
all products across both MIAX PEARL
and MIAX; and 10Gb connections are
purchased by higher volume EEMs and
lower volume Market Makers.) The vast
majority of those Members purchased
multiple such connections with the
actual number of connections
depending on the Member’s throughput
requirements based on the volume of
their quote/order traffic and market data
needs associated with their business
model. After the fee increase, beginning
August 1, 2018, the same number of
Members purchased the same number of
connections.40 Furthermore, the total
number of connections did not decrease
from July to August 2018, and in fact
one Member even purchased two (2)
additional 10Gb ULL connections in
August 2018, after the fee increase.
Also, in July 2018, four (4) nonMembers purchased 1Gb connections,
two (2) non-Members purchased 10Gb
connections, and one (1) non-Member
purchased 10Gb ULL connections. After
the fee increase, beginning August 1,
2018, the same non-Members purchased
the same number of connections across
all available alternatives and two (2)
additional non-Members purchased
three (3) more connections after the fee
increase. These non-Members freely
purchased their connectivity with the
Exchange in order to offer trading
services to other firms and customers, as
well as access to the market data
services that their connections to the
Exchange provide them, but they are not
required or compelled to purchase any
of the Exchange’s connectivity options.
MIAX PEARL did not experience any
noticeable change (increase or decrease)
in order flow sent by its market
participants as a result of the fee
increase.
40 The Exchange notes that one Member
downgraded one connection in July of 2018,
however such downgrade was done well ahead of
notice of the Proposed Fee Increase and was the
result of a change to the Member’s business
operation that was completely independent of, and
unrelated to, the Proposed Fee Increases.
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
Of those Members and non-Members
that bought multiple connections, no
firm dropped any connections
beginning August 1, 2018, when the
Exchange increased its fees. Nor did the
Exchange lose any Members.
Furthermore, the Exchange did not
receive any comment letters or official
complaints from any Member or nonMember purchaser of connectivity
regarding the increased fees regarding
how the fee increase was unreasonable,
unduly burdensome, or would
negatively impact their competitiveness
amongst other market participants.
These facts, coupled with the discussion
above, showing that it is not necessary
to join and/or connect to all options
exchanges, demonstrate that the
Exchange’s fees are constrained by
competition and are reasonable and not
contrary to the Law of Demand as
SIFMA suggests. Therefore, the
Exchange believes that the Proposed Fee
Increases are fair, equitable, and nondiscriminatory, as the fees are
competitive.
The Exchange believes that the
Proposed Fee Increases are equitably
allocated among Members and nonMembers, as evidenced by the fact that
the fee increases are allocated across all
connectivity alternatives, and there is
not a disproportionate number of
Members purchasing any alternative—
fourteen (14) Members purchased 1Gb
connections, ten (10) Members
purchased 10Gb connections, fifteen
(15) Members purchased 10Gb ULL
connections, four (4) non-Members
purchased 1Gb connections, two (2)
non-Members purchased 10Gb
connections, and one (1) non-Member
purchased 10Gb ULL connections. The
Exchange recognizes that the relative fee
increases are 27% for the 1Gb
connection, 10.9% for the 10Gb
connection, and 9.4% for the 10Gb ULL
connection, but the Exchange believes
that percentage increase differentiation
is appropriate, given the different levels
of service provided and the largest
percentage increase being associated
with the lowest cost connection.
Further, the Exchange believes that the
fees are reasonably allocated as the
users of the higher bandwidth
connections consume the most
resources of the Exchange’s network. It
is these firms that account that also
account for the vast majority of the
Exchange’s trading volume. The
purchasers of the 10Gb ULL
connectivity account for approximately
80% of the volume on the Exchange. For
example, in June of 2019, to date,
approximately 11.3 million contracts of
the approximately 13.6 million
E:\FR\FM\16JYN1.SGM
16JYN1
jspears on DSK30JT082PROD with NOTICES
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
contracts executed were done by the top
market making firms of the Exchange’s
total volume. The Exchange considered
whether to increase transaction fees and
other fees in order to offset its costs as
an alternative to increasing connectivity
fees, however, the Exchange determined
that increasing its connectivity fees was
the only viable alternative. This is
because the increased costs are more
closely associated with connectivity, as
well as the intense level of competition
among the options exchanges for order
flow through transaction fees.
Second, the Exchange believes that its
proposal is consistent with Section
6(b)(4) of the Act because the Proposed
Fee Increases will permit recovery of the
Exchange’s costs and will not result in
excessive pricing or supracompetitive
profit. The Proposed Fee Increases will
allow the Exchange to recover a portion
(less than all) of the increased costs
incurred by the Exchange associated
with providing and maintaining the
necessary hardware and other network
infrastructure to support this technology
since Exchange launched operations in
February 2017. Put simply, the costs of
the Exchange to provide these services
have increased considerably over this
time, as more fully-detailed and
quantified below. The Exchange
believes that it is reasonable and
appropriate to increase its fees charged
for use of its connectivity to partially
offset the increased costs the Exchange
incurred during this time associated
with maintaining and enhancing a stateof-the-art exchange network
infrastructure in the U.S. options
industry.
In particular, the Exchange’s
increased costs associated with
supporting its network are due to
several factors, including increased
costs associated with maintaining and
expanding a team of highly-skilled
network engineers (the Exchange also
hired additional network engineering
staff in 2017 and 2018), increasing fees
charged by the Exchange’s third-party
data center operator, and costs
associated with projects and initiatives
designed to improve overall network
performance and stability, through the
Exchange’s research and development
(‘‘R&D’’) efforts.
In order to provide more detail and to
quantify the Exchange’s increased costs,
the Exchange notes that increased costs
are associated with the infrastructure
and increased headcount to fullysupport the advances in infrastructure
and expansion of network level services,
including customer monitoring, alerting
and reporting. Additional technology
expenses were incurred related to the
expanding its Information Security
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
services, network monitoring and
customer reporting, as well as
Regulation SCI mandated processes
associated with network technology. All
of these additional expenses have been
incurred by the Exchange since became
operational in February 2017.
Additionally, while some of the expense
is fixed, much of the expense is not
fixed, and thus increases as the number
of connections increase. For example,
new 1Gb, 10Gb, and 10Gb ULL
connections require the purchase of
additional hardware to support those
connections as well as enhanced
monitoring and reporting of customer
performance that MIAX PEARL and its
affiliates provide. And 10Gb ULL
connections require the purchase of
specialized, more costly hardware.
Further, as the total number of all
connections increase, MIAX PEARL and
its affiliates need to increase their data
center footprint and consume more
power, resulting in increased costs
charged by their third-party data center
provider. Accordingly, cost to MIAX
PEARL and its affiliates is not entirely
fixed. Just the initial fixed cost buildout
of the network infrastructure of MIAX
PEARL and its affiliates, including both
primary/secondary sites and disaster
recovery, was over $30 million. These
costs have increased over 10% since the
Exchange became operational in
February 2017. As these network
connectivity-related expenses increase,
MIAX PEARL and its affiliates look to
offset those costs through increased
connectivity fees.
A more detailed breakdown of the
expense increases since February 2017
include an approximate 70% increase in
technology-related personnel costs in
infrastructure, due to expansion of
services/support (increase of
approximately $800,000); an
approximate 10% increase in datacenter
costs due to price increases and
footprint expansion (increase of
approximately $500,000); an
approximate 5% increase in vendorsupplied dark fiber due to price
increases and expanded capabilities
(increase of approximately $25,000);
and a 30% increase in market data
connectivity fees (increase of
approximately $200,000). Of note,
regarding market data connectivity fee
increased cost, this is the cost associated
with MIAX PEARL consuming
connectivity/content from the equities
markets in order to operate the
Exchange, causing MIAX PEARL to
effectively pay its competitors for this
connectivity. While the Exchange and
MIAX have incurred a total increase in
connectivity expenses since January
PO 00000
Frm 00106
Fmt 4703
Sfmt 4703
34009
2017 (the last time connectivity fees
were raised) of approximately $1.5
million per year (as described above),
the total increase in connectivity
revenue amount as a result of the
Proposed Fee Increases is projected to
be approximately $1.2 million per year
for MIAX PEARL and MIAX.
Accordingly, the total projected MIAX
PEARL and MIAX connectivity revenue
as a result of the proposed increase, on
an annualized basis, is less than total
annual actual MIAX PEARL and MIAX
connectivity expense. Accordingly, the
Proposed Fee Increases are fair and
reasonable because they will not result
in excessive pricing or supracompetitive
profit, when comparing the increase in
actual costs to the Exchange (since
February 2017) versus the projected
increase in annual revenue. The
Exchange also incurred additional
significant capital expenditures over
this same period to upgrade and
enhance the underlying technology
components, as more fully-detailed
below.
Further, because the costs of operating
a data center are significant and not
economically feasible for the Exchange,
the Exchange does not operate its own
data centers, and instead contracts with
a third-party data center provider. The
Exchange notes that larger, dominant
exchange operators own/operate their
data centers, which offers them greater
control over their data center costs.
Because those exchanges own and
operate their data centers as profit
centers, the Exchange is subject to
additional costs. As a result, the
Exchange is subject to fee increases from
its data center provider, which the
Exchange experienced in 2017 and 2018
of approximately 10%, as cited above.
Connectivity fees, which are charged for
accessing the Exchange’s data center
network infrastructure, are directly
related to the network and offset such
costs.
Further, the Exchange invests
significant resources in network R&D,
which are not included in direct
expenses to improve the overall
performance and stability of its network.
For example, the Exchange has a
number of network monitoring tools
(some of which were developed inhouse, and some of which are licensed
from third-parties), that continually
monitor, detect, and report network
performance, many of which serve as
significant value-adds to the Exchange’s
Members and enable the Exchange to
provide a high level of customer service.
These tools detect and report
performance issues, and thus enable the
Exchange to proactively notify a
Member (and the SIPs) when the
E:\FR\FM\16JYN1.SGM
16JYN1
jspears on DSK30JT082PROD with NOTICES
34010
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
Exchange detects a problem with a
Member’s connectivity. The costs
associated with the maintenance and
improvement of existing tools and the
development of new tools resulted in
significant increased cost to the
Exchange since February 2017.
Certain recently developed network
aggregation and monitoring tools
provide the Exchange with the ability to
measure network traffic with a much
more granular level of variability. This
is important as Exchange Members
demand a higher level of network
determinism and the ability to measure
variability in terms of single digit
nanoseconds. Also, the Exchange
routinely conducts R&D projects to
improve the performance of the
network’s hardware infrastructure. As
an example, in the last year, the
Exchange’s R&D efforts resulted in a
performance improvement, requiring
the purchase of new equipment to
support that improvement, and thus
resulting in increased costs in the
hundreds of thousands of dollars range.
In sum, the costs associated with
maintaining and enhancing a state-ofthe-art exchange network infrastructure
in the U.S. options industry is a
significant expense for the Exchange
that continues to increase, and thus the
Exchange believes that it is reasonable
to offset a portion of those increased
costs by increasing its network
connectivity fees, as proposed herein.
The Exchange invests in and offers a
superior network infrastructure as part
of its overall options exchange services
offering, resulting in significant costs
associated with maintaining this
network infrastructure, which are
directly tied to the amount of the
connectivity fees that must be charged
to access it, in order to recover those
costs. As detailed in the Exchange’s
2018 audited financial statements which
will be publicly available as part of the
Exchange’s Form 1 Amendment, the
Exchange only has four primary sources
of revenue: Transaction fees, access fees
(of which network connectivity
constitute the majority), regulatory fees,
and market data fees. Accordingly, the
Exchange must cover all of its expenses
from these four primary sources of
revenue.
The Proposed Fee Increases are fair
and reasonable because they will not
result in excessive pricing or
supracompetitive profit, when
comparing the total annual expense of
the Exchange associated with providing
the network connectivity services versus
the total projected annual revenue of the
Exchange associated with providing the
network connectivity services. For 2018,
the annual expense associated with
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
providing the network connectivity
services (that is, the shared network
connectivity of MIAX PEARL and
MIAX, but excluding MIAX Emerald)
was approximately $20.8 million. This
amount is comprised of both direct and
indirect expense. The direct expense
(which relates 100% to the network
infrastructure, associated data center
processing equipment required to
support various connections, network
monitoring systems and associated
software required to support the various
forms of connectivity) was
approximately $8.5 million (constituting
primarily Information Technology
expense in the Exchange’s 2018
financial statements). The indirect
expense (which includes expense from
such areas as trading operations,
software development, business
development, information technology,
marketing, human resources, legal and
regulatory, finance and accounting) that
the Exchange allocates to the
maintenance and support of network
connectivity services was approximately
$12.3 million. This indirect expense
amount of $12.3 million represents
approximately 20% of the total annual
expense of MIAX PEARL and MIAX for
2018 of approximately $70 million, less
direct expense of $8.5 million ($70
million less $8.5 million equals $61.5
million multiplied by 20% equals $12.3
million). Total projected annualized
revenue of the Exchange associated with
selling the network connectivity
services (reflecting the Proposed Fee
Increases on a fully-annualized basis,
using May 2019 data) for MIAX PEARL
and MIAX is projected to be
approximately $14.5 million. This
projected revenue amount of $14.5
million represents approximately 20%
of total net revenue of MIAX PEARL and
MIAX for 2018 of approximately $72
million. The Exchange believes that an
indirect expense allocation of 20% of
total expense (less direct expense) to
network connectivity services is fair and
reasonable, as total projected network
connectivity revenue represents
approximately 20% of total net revenue
for 2018. That is, direct expense of $8.5
million plus indirect expense of $12.3
million fairly reflects the total annual
expense associated with providing the
network connectivity services, both
from the perspective of similar revenue
and expense percentages (connectivity
to total), as well as matching
connectivity resources to connectivity
expenses. The Exchange believes that
this is a conservative allocation of
indirect expense. Accordingly, the total
projected MIAX PEARL and MIAX
connectivity revenue, reflective of the
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
proposed increase, on an annualized
basis, of $14.5 million, is less than total
annual actual MIAX PEARL and MIAX
connectivity expense for 2018 of $20.8
million. The Exchange projects
comparable network connectivity
revenue and expense for 2019 for MIAX
PEARL and MIAX. Accordingly, the
Proposed Fee Increases are fair and
reasonable because they do not result in
excessive pricing or supracompetitive
profit, when comparing the actual
network connectivity costs to the
Exchange versus the projected network
connectivity annual revenue, including
the increase amount. Additional
information on overall revenue and
expense of the Exchange can be found
in the Exchange’s 2018 audited financial
results, which will be publicly available
as part of the Exchange’s Form 1 filed
with the Commission by June 30, 2019.
The Exchange notes that other
exchanges have similar connectivity
alternatives for their participants,
including similar low-latency
connectivity. For example, Nasdaq
PHLX LLC (‘‘Phlx’’), NYSE Arca, Inc.
(‘‘Arca’’), NYSE American LLC (‘‘NYSE
American’’) and Nasdaq ISE, LLC
(‘‘ISE’’) all offer a 1Gb, 10Gb and 10Gb
low latency ethernet connectivity
alternatives to each of their
participants.41 The Exchange further
notes that Phlx, ISE, Arca and NYSE
American each charge higher rates for
such similar connectivity to primary
and secondary facilities.42 While MIAX
PEARL’s proposed connectivity fees are
substantially lower than the fees
charged by Phlx, ISE, Arca and NYSE
American, MIAX PEARL believes that it
offers significant value to Members over
other exchanges in terms of network
monitoring and reporting, which MIAX
PEARL believes is a competitive
advantage, and differentiates its
connectivity versus connectivity to
other exchanges. Additionally, the
Exchange’s proposed connectivity fees
to its disaster recovery facility are
within the range of the fees charged by
other exchanges for similar connectivity
alternatives.43
41 See Phlx and ISE Rules, General Equity and
Options Rules, General 8, Section 1(b). Phlx and ISE
each charge a monthly fee of $2,500 for each 1Gb
connection, $10,000 for each 10Gb connection and
$15,000 for each 10Gb Ultra connection, which the
equivalent of the Exchange’s 10Gb ULL connection.
See also NYSE American Fee Schedule, Section
V.B, and Arca Fees and Charges, Co-Location Fees.
NYSE American and Arca each charge a monthly
fee of $5,000 for each 1Gb circuit, $14,000 for each
10Gb circuit and $22,000 for each 10Gb LX circuit,
which the equivalent of the Exchange’s 10Gb ULL
connection.
42 Id.
43 See Nasdaq ISE, Options Rules, Options 7,
Pricing Schedule, Section 11.D. (charging $3,000 for
disaster recovery testing & relocation services); see
E:\FR\FM\16JYN1.SGM
16JYN1
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX PEARL does not believe that
the proposed rule changes will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.
jspears on DSK30JT082PROD with NOTICES
Intra-Market Competition
The Exchange does not believe that
the proposed rule change would place
certain market participants at the
Exchange at a relative disadvantage
compared to other market participants
or affect the ability of such market
participants to compete. In particular,
the Exchange has received no official
complaints from Members, nonMembers (extranets and service
bureaus), third-parties that purchase the
Exchange’s connectivity and resell it,
and customers of those resellers, that
the Exchange’s fees or the Proposed Fee
Increases are negatively impacting or
would negatively impact their abilities
to compete with other market
participants or that they are placed at a
disadvantage. The Exchange believes
that the Proposed Fee Increases do not
place certain market participants at a
relative disadvantage to other market
participants because the connectivity
pricing is associated with relative usage
of the various market participants and
does not impose a barrier to entry to
smaller participants. As described
above, the less expensive 1Gb direct
connection is generally purchased by
market participants that utilize less
bandwidth. The market participants that
purchase 10Gb ULL direct connections
utilize the most bandwidth, and those
are the participants that consume the
most resources from the network.
Accordingly, the Proposed Fee Increases
do not favor certain categories of market
participants in a manner that would
impose a burden on competition; rather,
the allocation of the Proposed Fee
Increases reflects the network resources
consumed by the various size of market
participants—lowest bandwidth
consuming members pay the least, and
highest bandwidth consuming members
pays the most, particularly since higher
bandwidth consumption translates to
higher costs to the Exchange.
Inter-Market Competition
The Exchange believes the Proposed
Fee Increases do not place an undue
burden on competition on other SROs
that is not necessary or appropriate. In
also Cboe Exchange, Inc. (‘‘Cboe’’) Fees Schedule,
p. 14, Cboe Command Connectivity Charges
(charging a monthly fee of $2,000 for a 1Gb disaster
recovery network access port and a monthly fee of
$6,000 for a 10Gb disaster recovery network access
port).
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
particular, options market participants
are not forced to connect to (and
purchase market data from) all options
exchanges, as shown by the number of
Members of MIAX PEARL as compared
to the much greater number of members
at other options exchanges (as described
above). Not only does MIAX PEARL
have less than half the number of
members as certain other options
exchanges, but there are also a number
of the Exchange’s Members that do not
connect directly to MIAX PEARL. There
are a number of large market makers and
broker-dealers that are members of other
options exchange but not Members of
MIAX PEARL. Additionally, the
Exchange other exchanges have similar
connectivity alternatives for their
participants, including similar lowlatency connectivity, but with much
higher rates to connect.44 The Exchange
is also unaware of any assertion that its
existing fee levels or the Proposed Fee
Increases would somehow unduly
impair its competition with other
options exchanges. To the contrary, if
the fees charged are deemed too high by
market participants, they can simply
disconnect. While the Exchange
recognizes the distinction between
connecting to an exchange and trading
at the exchange, the Exchange notes that
it operates in a highly competitive
options market in which market
participants can readily connect and
trade with venues they desire. In such
an environment, the Exchange must
continually adjust its fees to remain
competitive with other exchanges. The
Exchange believes that the proposed
changes reflect this competitive
environment.
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,45 and Rule
19b–4(f)(2) 46 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,
PO 00000
44 See
supra note 41.
U.S.C. 78s(b)(3)(A)(ii).
46 17 CFR 240.19b–4(f)(2).
45 15
Frm 00108
Fmt 4703
Sfmt 4703
34011
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
PEARL–2019–21 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–PEARL–2019–21. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–PEARL–2019–21 and
E:\FR\FM\16JYN1.SGM
16JYN1
34012
Federal Register / Vol. 84, No. 136 / Tuesday, July 16, 2019 / Notices
should be submitted on or before
August 6, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.47
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–15025 Filed 7–15–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–86342; File No. SR–MIAX–
2019–31]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
July 10, 2019.
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 June 26,
2019, Miami International Securities
Exchange LLC (‘‘MIAX Options’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
jspears on DSK30JT082PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Options Fee Schedule
(the ‘‘Fee Schedule’’) to modify certain
of the Exchange’s system connectivity
fees.
The Exchange previously filed the
proposal on April 30, 2019 (SR–MIAX–
2019–23). That filing has been
withdrawn and replaced with the
current filing (SR–MIAX–2019–31).
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
47 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:33 Jul 15, 2019
Jkt 247001
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Fee Schedule regarding connectivity to
the Exchange. Specifically, the
Exchange proposes to amend Sections
(5a) and (b) of the Fee Schedule to
increase the network connectivity fees
for the 1 Gigabit (‘‘Gb’’) fiber
connection, the 10Gb fiber connection,
and the 10Gb ultra-low latency (‘‘ULL’’)
fiber connection, which are charged to
both Members 3 and non-Members of the
Exchange for connectivity to the
Exchange’s primary/secondary facility.
The Exchange also proposes to increase
the network connectivity fees for the
1Gb and 10Gb fiber connections for
connectivity to the Exchange’s disaster
recovery facility. Each of these
connections are shared connections, and
thus can be utilized to access both the
Exchange and the Exchange’s affiliate,
MIAX PEARL, LLC (‘‘MIAX PEARL’’).
These proposed fee increases are
collectively referred to herein as the
‘‘Proposed Fee Increases.’’
The Exchange initially filed the
Proposed Fee Increases on July 31, 2018,
designating the Proposed Fee Increases
effective August 1, 2018.4 The First
Proposed Rule Change was published
for comment in the Federal Register on
August 13, 2018.5 The Commission
received one comment letter on the
proposal.6 The Proposed Fee Increases
remained in effect until they were
temporarily suspended pursuant to a
suspension order (the ‘‘Suspension
Order’’) issued by the Commission on
3 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
4 See Securities Exchange Act Release No. 83786
(August 7, 2018), 83 FR 40106 (August 13,
2018)(SR–MIAX–2018–19) (the ‘‘First Proposed
Rule Change’’).
5 Id.
6 See Letter from Tyler Gellasch, Executive
Director, The Healthy Markets Association
(‘‘Healthy Markets’’), to Brent J. Fields, Secretary,
Commission, dated September 4, 2018 (‘‘Healthy
Markets Letter’’).
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
September 17, 2018.7 The Suspension
Order also instituted proceedings to
determine whether to approve or
disapprove the First Proposed Rule
Change.8
The Healthy Markets Letter argued
that the Exchange did not provide
sufficient information in its filing to
support a finding that the proposal is
consistent with the Act. Specifically, the
Healthy Markets Letter objected to the
Exchange’s reliance on the fees of other
exchanges to demonstrate that its fee
increases are consistent with the Act. In
addition, the Healthy Markets Letter
argued that the Exchange did not offer
any details to support its basis for
asserting that the proposed fee increases
are consistent with the Act.
On October 5, 2018, the Exchange
withdrew the First Proposed Rule
Change.9 The Exchange refiled the
Proposed Fee Increases on September
18, 2018, designating the Proposed Fee
Increases immediately effective.10 The
Second Proposed Rule Change was
published for comment in the Federal
Register on October 10, 2018.11 The
Commission received one comment
letter on the proposal.12 The Proposed
Fee Increases remained in effect until
they were temporarily suspended
pursuant to a suspension order (the
‘‘Second Suspension Order’’) issued by
the Commission on October 3, 2018.13
The Second Suspension Order also
instituted proceedings to determine
whether to approve or disapprove the
Second Proposed Rule Change.14
7 See Securities Exchange Act Release No. 34–
84175 (September 17, 2018), 83 FR 47955
(September 21, 2018) (SR–MIAX–2018–19)
(Suspension of and Order Instituting Proceedings
To Determine Whether To Approve or Disapprove
a Proposed Rule Change To Amend the Fee
Schedule Regarding Connectivity Fees for Members
and Non-Members).
8 Id.
9 See Securities Exchange Act Release No. 84398
(October 10, 2018), 83 FR 52264 (October 16, 2018)
(SR–MIAX–2018–19 (Notice of Withdrawal of a
Proposed Rule Change To Amend the Fee Schedule
Regarding Connectivity Fees for Members and NonMembers).
10 See Securities Exchange Act Release No. 84357
(October 3, 2018), 83 FR 50976 (October 10, 2018)
(SR–MIAX–2018–25) (the ‘‘Second Proposed Rule
Change’’) (Notice of Filing of a Proposed Rule
Change To Amend the Fee Schedule Regarding
Connectivity Fees for Members and Non-Members;
Suspension of and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove the
Proposed Rule Change).
11 Id.
12 See Letter from Theodore R. Lazo, Managing
Director and Associate General Counsel, and Ellen
Greene, Managing Director Financial Services
Operations, The Securities Industry and Financial
Markets Association (‘‘SIFMA’’), to Brent J. Fields,
Secretary, Commission, dated October 15, 2018
(‘‘SIFMA Letter’’).
13 See supra note 10.
14 Id.
E:\FR\FM\16JYN1.SGM
16JYN1
]]>Agencies
[Federal Register Volume 84, Number 136 (Tuesday, July 16, 2019)]
[Notices]
[Pages 34003-34012]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-15025]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-86343; File No. SR-PEARL-2019-21]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Fee Schedule
July 10, 2019.
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 June 26, 2019, MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
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 Fee
Schedule (the ``Fee Schedule'') to modify certain of the Exchange's
system connectivity fees.
The Exchange previously filed the proposal on April 30, 2019 (SR-
PEARL-2019-17). That filing has been withdrawn and replaced with the
current filing (SR-PEARL-2019-21).
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for
[[Page 34004]]
the proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule regarding
connectivity to the Exchange. Specifically, the Exchange proposes to
amend Sections 5(a) and (b) of the Fee Schedule to increase the network
connectivity fees for the 1 Gigabit (``Gb'') fiber connection, the 10Gb
fiber connection, and the 10Gb ultra-low latency (``ULL'') fiber
connection, which are charged to both Members \3\ and non-Members of
the Exchange for connectivity to the Exchange's primary/secondary
facility. The Exchange also proposes to increase the network
connectivity fees for the 1Gb and 10Gb fiber connections for
connectivity to the Exchange's disaster recovery facility. Each of
these connections are shared connections, and thus can be utilized to
access both the Exchange and the Exchange's affiliate, Miami
International Securities Exchange, LLC (``MIAX''). These proposed fee
increases are collectively referred to herein as the ``Proposed Fee
Increases.''
---------------------------------------------------------------------------
\3\ The term ``Member'' means an individual or organization that
is registered with the Exchange pursuant to Chapter II of the
Exchange's 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.
---------------------------------------------------------------------------
The Exchange initially filed the Proposed Fee Increases on July 31,
2018, designating the Proposed Fee Increases effective August 1,
2018.\4\ The First Proposed Rule Change was published for comment in
the Federal Register on August 13, 2018.\5\ The Commission received one
comment letter on the proposal.\6\ The Proposed Fee Increases remained
in effect until they were temporarily suspended pursuant to a
suspension order (the ``Suspension Order'') issued by the Commission on
September 17, 2018.\7\ The Suspension Order also instituted proceedings
to determine whether to approve or disapprove the proposed rule
change.\8\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 83785 (August 7,
2018), 83 FR 40101 (August 13, 2018) (SR-PEARL-2018-16) (the ``First
Proposed Rule Change'').
\5\ Id.
\6\ See Letter from Tyler Gellasch, Executive Director, The
Healthy Markets Association, to Brent J. Fields, Secretary,
Commission, dated September 4, 2018 (``Healthy Markets Letter'').
\7\ See Securities Exchange Act Release No. 34-84177 (September
17, 2018).
\8\ Id.
---------------------------------------------------------------------------
The Healthy Markets Letter argued that the Exchange did not provide
sufficient information in its filing to support a finding that the
proposal is consistent with the Act. Specifically, the Healthy Markets
Letter objected to the Exchange's reliance on the fees of other
exchanges to demonstrate that its fee increases are consistent with the
Act. In addition, the Healthy Markets Letter argued that the Exchange
did not offer any details to support its basis for asserting that the
Proposed Fee Increases are consistent with the Act.
On October 5, 2018, the Exchange withdrew the First Proposed Rule
Change.\9\ The Exchange refiled the Proposed Fee Increases on September
18, 2018, designating the Proposed Fee Increases immediately
effective.\10\ The Second Proposed Rule Change was published for
comment in the Federal Register on October 10, 2018.\11\ The Commission
received one comment letter on the proposal.\12\ The Proposed Fee
Increases remained in effect until they were temporarily suspended
pursuant to a suspension order (the ``Second Suspension Order'') issued
by the Commission on October 3, 2018.\13\ The Second Suspension Order
also instituted proceedings to determine whether to approve or
disapprove the Second Proposed Rule Change.\14\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 84397 (October 10,
2018), 83 FR 52272 (October 16, 2018) (SR-PEARL-2018-16).
\10\ See Securities Exchange Act Release No. 84358 (October 3,
2018), 83 FR 51022 (October 10, 2018) (SR-PEARL-2018-19) (the
``Second Proposed Rule Change'').
\11\ Id.
\12\ See Letter from Theodore R. Lazo, Managing Director and
Associate General Counsel, and Ellen Greene, Managing Director
Financial Services Operations, The Securities Industry and Financial
Markets Association (``SIFMA''), to Brent J. Fields, Secretary,
Commission, dated October 15, 2018 (``SIFMA Letter'').
\13\ See supra note 10.
\14\ Id.
---------------------------------------------------------------------------
The SIFMA Letter argued that the Exchange did not provide
sufficient information in its filing to support a finding that the
proposal should be approved by the Commission after further review of
the proposed fee increases. Specifically, the SIFMA Letter objected to
the Exchange's reliance on the fees of other exchanges to justify its
own fee increases. In addition, the SIFMA Letter argued that the
Exchange did not offer any details to support its basis for asserting
that the Proposed Fee Increases are reasonable. On November 23, 2018,
the Exchange withdrew the Second Proposed Rule Change.\15\
---------------------------------------------------------------------------
\15\ See Securities Exchange Act Release No. 84651 (November 26,
2018), 83 FR 61687 (November 30, 2018) (SR-PEARL-2018-19).
---------------------------------------------------------------------------
The Exchange refiled the Proposed Fee Increases on March 1, 2019,
designating the Proposed Fee Increases immediately effective.\16\ The
Third Proposed Rule Change was published for comment in the Federal
Register on March 20, 2019.\17\ The Third Proposed Rule Change provided
new information, including additional detail about the market
participants impacted by the Proposed Fee Increases, as well as the
additional costs incurred by the Exchange associated with providing the
connectivity alternatives, in order to provide more transparency and
support relating to the Exchange's belief that the Proposed Fee
Increases are reasonable, equitable, and non-discriminatory, and to
provide sufficient information for the Commission to determine that the
Proposed Fee Increases are consistent with the Act.
---------------------------------------------------------------------------
\16\ See Securities Exchange Act Release No. 85317 (March 14,
2019), 84 FR 10380 (March 20, 2019) (SR-PEARL-2019-08) (the ``Third
Proposed Rule Change'') (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee
Schedule).
\17\ Id.
---------------------------------------------------------------------------
On March 29, 2019, the Commission issued its Order Disapproving
Proposed Rule Changes to Amend the Fee Schedule on the BOX Market LLC
Options Facility to Establish BOX Connectivity Fees for Participants
and Non-Participants Who Connect to the BOX Network (the ``BOX
Order'').\18\ In the BOX Order, the Commission highlighted a number of
deficiencies it found in three separate rule filings by BOX Exchange
LLC (``BOX'') to increase BOX's connectivity fees that prevented the
Commission from finding that BOX's proposed connectivity fees were
consistent with the Act. These deficiencies relate to topics that the
Commission believes should be discussed in a connectivity fee filing.
---------------------------------------------------------------------------
\18\ See 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).
---------------------------------------------------------------------------
After the BOX Order was issued, the Commission received four
comment letters on the Third Proposed Rule Change.\19\
---------------------------------------------------------------------------
\19\ See Letter from Joseph W. Ferraro III, SVP & Deputy General
Counsel, MIAX, to Vanessa Countryman, Acting Secretary, Commission,
dated April 5, 2019 (``MIAX Letter''); Letter from Theodore R. Lazo,
Managing Director and Associate General Counsel, SIFMA, to Vanessa
Countryman, Acting Secretary, Commission, dated April 10, 2019
(``Second SIFMA Letter''); Letter from John Ramsay, Chief Market
Policy Officer, Investors Exchange LLC, to Vanessa Countryman,
Acting Secretary, Commission, dated April 10, 2019 (``IEX Letter'');
and Letter from Tyler Gellasch, Executive Director, Healthy Markets,
to Brent J. Fields, Secretary, Commission, dated April 18, 2019
(``Second Healthy Markets Letter'').
---------------------------------------------------------------------------
[[Page 34005]]
The Second SIFMA Letter argued that the Exchange did not provide
sufficient information in its Third Proposed Rule Change to support a
finding that the proposal should be approved by the Commission after
further review of the proposed fee increases. Specifically, the Second
SIFMA Letter argued that the Exchange's market data fees and
connectivity fees were not constrained by competitive forces, the
Exchange's filing lacked sufficient information regarding cost and
competition, and that the Commission should establish a framework for
determining whether fees for exchange products and services are
reasonable when those products and services are not constrained by
significant competitive forces.
The IEX Letter argued that the Exchange did not provide sufficient
information in its Third Proposed Rule Change to support a finding that
the proposal should be approved by the Commission and that the
Commission should extend the time for public comment on the Third
Proposed Rule Change. Despite the objection to the Proposed Fee
Increases, the IEX Letter did find that ``MIAX has provided more
transparency and analysis in these filings than other exchanges have
sought to do for their own fee increases.'' \20\ The IEX Letter
specifically argued that the Proposed Fee Increases were not
constrained by competition, the Exchange should provide data on the
Exchange's actual costs and how those costs relate to the product or
service in question, and whether and how MIAX considered changes to
transaction fees as an alternative to offsetting exchange costs.
---------------------------------------------------------------------------
\20\ See IEX Letter, pg. 1.
---------------------------------------------------------------------------
The Second Healthy Markets Letter did not object to the Third
Proposed Rule Change and the information provided by the Exchange in
support of the Proposed Fee Increases. Specifically, the Second Healthy
Markets Letter stated that the Third Proposed Rule Change was
``remarkably different,'' and went on to further state as follows:
The instant MIAX filings--along with their April 5th
supplement--provide much greater detail regarding users of
connectivity, the market for connectivity, and costs than the
Initial MIAX Filings. They also appear to address many of the issues
raised by the Commission staff's BOX disapproval order. This third
round of MIAX filings suggests that MIAX is operating in good faith
to provide what the Commission and staff seek.\21\
---------------------------------------------------------------------------
\21\ See Second Healthy Markets Letter, pg. 2.
On April 29, 2019, the Exchange withdrew the Third Proposed Rule
Change.\22\
---------------------------------------------------------------------------
\22\ See SR-PEARL-2019-08.
---------------------------------------------------------------------------
The Exchange refiled the Proposed Fee Increases on April 30, 2019,
designating the Proposed Fee Increases immediately effective.\23\ The
Fourth Proposed Rule Change was published for comment in the Federal
Register on May 16, 2019.\24\ The Fourth Proposed Rule Change provided
further cost analysis information to squarely and comprehensively
address each and every topic raised for discussion in the BOX Order,
the IEX Letter and the Second SIFMA Letter to ensure that the Proposed
Fee Increases are reasonable, equitable, and non-discriminatory, and
that the Commission should find that the Proposed Fee Increases are
consistent with the Act.
---------------------------------------------------------------------------
\23\ See Securities Exchange Act Release No. 85837 (May 10,
2019), 84 FR 22214 (May 16, 2019) (SR-PEARL-2019-17) (the ``Fourth
Proposed Rule Change'') (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Fee
Schedule).
\24\ Id.
---------------------------------------------------------------------------
On May 21, 2019, the Commission issued the Staff Guidance on SRO
Rule Filings Relating to Fees (the ``Guidance'').\25\
---------------------------------------------------------------------------
\25\ 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 Commission received two comment letters on the Fourth Proposed
Rule Change, after the Guidance was released.\26\ The Second IEX Letter
and the Third SIFMA Letter argued that the Exchange did not provide
sufficient information in its Fourth Proposed Rule Change to justify
the Proposed Fee Increases based on the Guidance and the BOX Order. Of
note, however, is that unlike their previous comment letter, the Third
SIFMA Letter did not call for the Commission to suspend the Fourth
Proposed Rule Change. Also, Healthy Markets did not comment on the
Fourth Proposed Rule Change.
---------------------------------------------------------------------------
\26\ See Letter from John Ramsay, Chief Market Policy Officer,
Investors Exchange LLC, to Vanessa Countryman, Acting Secretary,
Commission, dated June 5, 2019 (the ``Second IEX Letter'') and
Letter from Theodore R. Lazo, Managing Director and Associate
General Counsel, and Ellen Greene, Managing Director, SIFMA, to
Vanessa Countryman, Acting Secretary, Commission, dated June 6, 2019
(the ``Third SIFMA Letter'').
---------------------------------------------------------------------------
The Exchange is now re-filing the Proposed Fee Increases (the
``Fifth Proposed Rule Change'') to bolster its cost-based discussion to
support its claim that the Proposed Fee Increases are fair and
reasonable because they will permit recovery of the Exchange's costs
and will not result in excessive pricing or supracompetitive profit, in
light of the Guidance issued by Commission staff subsequent to the
Fourth Proposed Rule Change. The Exchange believes that the Proposed
Fee Increases are consistent with the Act because they (i) are
reasonable, equitably allocated, not unfairly discriminatory, and not
an undue burden on competition; (ii) comply with the BOX Order and the
Guidance; (iii) are, as demonstrated in the Fifth Proposed Rule Change
and supported by evidence (including data and analysis), constrained by
significant competitive forces; and (iv) are, as demonstrated in the
Fifth Proposed Rule Change and supported by specific information
(including quantitative information), fair and reasonable because they
will permit recovery of the Exchange's costs and will not result in
excessive pricing or supracompetitive profit. Accordingly, the Exchange
believes that the Commission should find that the Proposed Fee
Increases are consistent with the Act. The proposed rule change is
immediately effective upon filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.
The Exchange currently offers various bandwidth alternatives for
connectivity to the Exchange to its primary and secondary facilities,
consisting of a 1Gb fiber connection, a 10Gb fiber connection, and a
10Gb ULL fiber connection. The 10Gb ULL offering uses an ultra-low
latency switch, which provides faster processing of messages sent to it
in comparison to the switch used for the other types of connectivity.
The Exchange currently assesses the following monthly network
connectivity fees to both Members and non-Members for connectivity to
the Exchange's primary/secondary facility: (a) $1,100 for the 1Gb
connection; (b) $5,500 for the 10Gb connection; and (c) $8,500 for the
10Gb ULL connection. The Exchange also assesses to both Members and
non-Members a monthly per connection network connectivity fee of $500
for each 1Gb connection to the disaster recovery facility and a monthly
per connection network connectivity fee of $2,500 for each 10Gb
connection to 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
[[Page 34006]]
data systems, test systems and disaster recovery facilities of the
Exchange and MIAX via a single, shared connection are assessed only one
monthly network connectivity fee per connection, regardless of the
trading platforms, market data systems, test systems, and disaster
recovery facilities accessed via such connection.
The Exchange proposes to increase the monthly network connectivity
fees for such connections for both Members and non-Members. The network
connectivity fees for connectivity to the Exchange's primary/secondary
facility will be increased as follows: (a) From $1,100 to $1,400 for
the 1Gb connection; (b) from $5,500 to $6,100 for the 10Gb connection;
and (c) from $8,500 to $9,300 for the 10Gb ULL connection. The network
connectivity fees for connectivity to the Exchange's disaster recovery
facility will be increased as follows: (a) From $500 to $550 for the
1Gb connection; and (b) from $2,500 to $2,750 for the 10Gb connection.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \27\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \28\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among Exchange Members and
issuers and other persons using any facility or system which the
Exchange operates or controls. The Exchange also believes the proposal
furthers the objectives of Section 6(b)(5) of the Act \29\ in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest and is not designed to permit unfair
discrimination between customer, issuers, brokers and dealers.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(4).
\29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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.'' \30\
---------------------------------------------------------------------------
\30\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
---------------------------------------------------------------------------
First, the Exchange believes that its proposal is consistent with
Section 6(b)(4) of the Act, in that the Proposed Fee Increases are
fair, equitable and not unreasonably discriminatory, because the fees
for the connectivity alternatives available on the Exchange, as
proposed to be increased, are constrained by significant competitive
forces. The U.S. options markets are highly competitive (there are
currently 16 options markets) and a reliance on competitive markets is
an appropriate means to ensure equitable and reasonable prices.
The Exchange acknowledges that there is no regulatory requirement
that any market participant connect to the Exchange, or that any
participant connect at any specific connection speed. The rule
structure for options exchanges are, in fact, fundamentally different
from those of equities exchanges. In particular, options market
participants are not forced to connect to (and purchase market data
from) all options exchanges, as shown by the number of Members of MIAX
PEARL as compared to the much greater number of members at other
options exchanges (as further detailed below). Not only does MIAX PEARL
have less than half the number of members as certain other options
exchanges, but there are also a number of the Exchange's Members that
do not connect directly to MIAX PEARL. Further, of the number of
Members that connect directly to MIAX PEARL, many such Members do not
purchase market data from MIAX PEARL. There are a number of large
market makers and broker-dealers that are members of other options
exchange but not Members of MIAX PEARL. For example, the following are
not Members of MIAX PEARL: The D.E. Shaw Group, CTC, XR Trading LLC,
Hardcastle Trading AG, Ronin Capital LLC, Belvedere Trading, LLC,
Bluefin Trading, and HAP Capital LLC. In addition, of the market makers
that are connected to MIAX PEARL, it is the individual needs of the
market maker that require whether they need one connection or multiple
connections to the Exchange. The Exchange has market maker Members that
only purchase one connection (10Gb or 10Gb ULL) and the Exchange has
market maker Members that purchase multiple connections. It is all
driven by the business needs of the market maker. Market makers that
are consolidators that target resting order flow tend to purchase more
connectivity that market makers that simply quote all symbols on the
Exchange. Even though non-Members purchase and resell 10Gb and 10Gb ULL
connections to both Members and non-Members, no market makers currently
connect to the Exchange indirectly through such resellers.
SIFMA's argument that all broker-dealers are required to connect to
all exchanges is not true in the options markets. The options markets
have evolved differently than the equities markets both in terms of
market structure and functionality. For example, there are many order
types that are available in the equities markets that are not utilized
in the options markets, which relate to mid-point pricing and pegged
pricing which require connection to the SIPs and each of the equities
exchanges in order to properly execute those orders in compliance with
best execution obligations. In addition, in the options markets there
is a single SIP (OPRA) versus two SIPs in the equities markets,
resulting in fewer hops and thus alleviating the need to connect
directly to all the options exchanges. Additionally, in the options
markets, the linkage routing and trade through protection are handled
by the exchanges, not by the individual members. Thus not connecting to
an options exchange or disconnecting from an options exchange does not
potentially subject a broker-dealer to violate order protection
requirements as suggested by SIFMA. Gone are the days when the retail
brokerage firms (the Fidelity's, the Schwab's, the eTrade's) were
members of the options exchanges--they are not members of MIAX PEARL or
its affiliates, MIAX and MIAX Emerald, they do not purchase
connectivity to MIAX PEARL, and they do not purchase market data from
MIAX PEARL. The Exchange further recognizes that the decision of
whether to connect to the Exchange is separate and distinct from the
decision of whether and how to trade on the Exchange. The Exchange
acknowledges that many firms may choose to connect to the Exchange, but
ultimately not trade on it, based on their particular business needs.
To assist prospective Members or firms considering connecting to
MIAX PEARL, the Exchange provides information about the Exchange's
available connectivity alternatives in a Connectivity Guide, which
contains detailed specifications regarding, among other things,
throughput and latency for each available connection.\31\ The
[[Page 34007]]
decision of which type of connectivity to purchase, or whether to
purchase connectivity at all for a particular exchange, is based on the
business needs of the firm. For example, if the firm wants to receive
the top-of-market data feed product or depth data feed product, due to
the amount/size of data contained in those feeds, such firm would need
to purchase either the 10Gb or 10Gb ULL connection. The 1Gb connection
is too small to support those data feed products. MIAX PEARL notes that
there are twelve (12) Members that only purchase the 1Gb connectivity
alternative. Thus, while there is a meaningful percentage of purchasers
of only 1Gb connections (12 of 33), by definition, those twelve (12)
members purchase connectivity that cannot support the top-of-market
data feed product or depth data feed product and thus they do not
purchase such data feed products. Accordingly, purchasing market data
is a business decision/choice, and thus the pricing for it is
constrained by competition.
---------------------------------------------------------------------------
\31\ See the MIAX Connectivity Guide at https://www.miaxoptions.com/sites/default/files/page-files/MIAX_Connectivity_Guide_v3.6_01142019.pdf.
---------------------------------------------------------------------------
Contrary to SIFMA's argument, there is competition for connectivity
to MIAX PEARL and its affiliates. MIAX PEARL competes with nine (9)
non-Members who resell MIAX PEARL connectivity. These are resellers of
MIAX PEARL connectivity--they are not arrangements between broker-
dealers to share connectivity costs, as SIFMA suggests. Those non-
Members resell that connectivity to multiple market participants over
that same connection, including both Members and non-Members of MIAX
PEARL (typically extranets and service bureaus). When connectivity is
re-sold by a third-party, MIAX PEARL does not receive any connectivity
revenue from that sale. It is entirely between the third-party and the
purchaser, thus constraining the ability of MIAX PEARL to set its
connectivity pricing as indirect connectivity is a substitute for
direct connectivity. There are currently nine (9) non-Members that
purchase connectivity to MIAX PEARL and/or MIAX. Those non-Members
resell that connectivity to eleven (11) customers, some of whom are
agency broker-dealers that have tens of customers of their own. Some of
those eleven (11) customers also purchase connectivity directly from
MIAX PEARL and/or MIAX. Accordingly, indirect connectivity is a viable
alternative that is already being used by non-Members of MIAX PEARL,
constraining the price that MIAX PEARL is able to charge for
connectivity to its Exchange.
The Exchange \32\ and MIAX \33\ are comprised of 41 distinct
Members between the two exchanges, excluding any additional affiliates
of such Members that are also Members of MIAX PEARL, MIAX, or both. Of
those 41 distinct Members, 33 Members have purchased the 1Gb, 10Gb,
10Gb ULL connections or some combination of multiple various
connections. Furthermore, every Member who has purchased at least one
connection also trades on the Exchange, MIAX, or both, with the
exception of one new Member who is currently in the on-boarding
process. The 8 remaining Members who have not purchased any
connectivity to the Exchange are still able to trade on the Exchange
indirectly through other Members or non-Member service bureaus that are
connected. These 8 Members who have not purchased connectivity are not
forced or compelled to purchase connectivity, and they retain all of
the other benefits of Membership with the Exchange. Accordingly,
Members have the choice to purchase connectivity and are not compelled
to do so in any way.
---------------------------------------------------------------------------
\32\ MIAX PEARL has 36 distinct Members, excluding affiliated
entities. See MIAX PEARL Exchange Member Directory, available at
https://www.miaxoptions.com/exchange-members/pearl.
\33\ MIAX has 38 distinct Members, excluding affiliated
entities. See MIAX Exchange Member Directory, available at https://www.miaxoptions.com/exchange-members.
---------------------------------------------------------------------------
The Exchange believes that the Proposed Fee Increases are fair,
equitable and not unreasonably discriminatory because the connectivity
pricing is associated with relative usage of the various market
participants and does not impose a barrier to entry to smaller
participants. Accordingly, the Exchange offers three direct
connectivity alternatives and various indirect connectivity (via third-
party) alternatives, as described above. MIAX PEARL recognizes that
there are various business models and varying sizes of market
participants conducting business on the Exchange. The 1Gb direct
connectivity alternative is 1/10th the size of the 10Gb direct
connectivity alternative. Because it is 1/10th of the size, it does not
offer access to many of the products and services offered by the
Exchange, such as the ability to quote or receive certain market data
products. Thus, the value of the 1Gb alternative is much lower than
value of a 10Gb alternative, when measured based on the type of
Exchange access it offers, which is the basis for difference in price
between a 1Gb connection and a 10Gb connection. Approximately just less
than half of MIAX PEARL and MIAX Members that connect (14 out of 33)
purchase 1Gb connections. The 1Gb direct connection can support the
sending of orders and the consumption of all market data feed products,
other than the top-of-market data feed product or depth data feed
product (which require a 10Gb connection). The 1Gb direct connection is
generally purchased by market participants that utilize less bandwidth.
The market participants that purchase 10Gb ULL direct connections
utilize the most bandwidth, and those are the participants that consume
the most resources from the network. Accordingly, the Exchange believes
the allocation of the Proposed Fee Increases ($9,300 for a 10Gb ULL
connection versus $1,400 for a 1Gb connection) are reasonable based on
the network resources consumed by the market participants--lowest
bandwidth consuming members pay the least, and highest bandwidth
consuming members pays the most, particularly since higher bandwidth
consumption translates to higher costs to the Exchange. The 10Gb ULL
connection offers optimized connectivity for latency sensitive
participants and is approximately single digit microseconds faster in
round trip time for connection oriented traffic to the Exchange than
the 10Gb connection. This lower latency is achieved through more
advanced network equipment, such as advanced hardware and switching
components, which translates to increased costs to the Exchange. Market
participants that are less latency sensitive can purchase 10Gb direct
connections and quote in all products on the Exchange and consume all
market data feeds, and such 10Gb direct connections are priced lower
than the 10Gb ULL direct connections, offering smaller sized market
makers a lower cost alternative.
With respect to options trading, the Exchange had only 4.84% market
share of the U.S. options industry in Equity/ETF classes according to
the OCC in May 2019.\34\ For May of 2019, the Exchange's affiliate,
MIAX, had only 3.75% market share of the U.S. options industry in
Equity/ETF classes according to the OCC.\35\ For May 2019, the
Exchange's affiliate, MIAX Emerald, had only 0.77% market share of the
U.S. options industry in Equity/ETF classes according to the OCC.\36\
The Exchange is aware of no evidence that a combined market share of
less than 10% provides the Exchange with anti-competitive
[[Page 34008]]
pricing power. This, in addition to the fact that not all broker-
dealers are required to connect to all options exchanges, supports the
Exchange's conclusion that its pricing is constrained by competition.
---------------------------------------------------------------------------
\34\ See Exchange Market Share of Equity Products--2019, The
Options Clearing Corporation, available at https://www.theocc.com/webapps/exchange-volume.
\35\ Id.
\36\ Id.
---------------------------------------------------------------------------
Separately, the Exchange is not aware of any reason why market
participants could not simply drop their connections and cease being
Members of the Exchange if the Exchange were to establish unreasonable
and uncompetitive price increases for its connectivity alternatives.
Market participants choose to connect to a particular exchange and
because it is a choice, MIAX PEARL must set reasonable connectivity
pricing, otherwise prospective members would not connect and existing
members would disconnect or connect through a third-party reseller of
connectivity. No options market participant is required by rule,
regulation, or competitive forces to be a Member of the Exchange.
Several market participants choose not to be Members of the Exchange
and choose not to access the Exchange, and several market participants
also access the Exchange indirectly through another market participant.
To illustrate, the Exchange has only 41 Members (including all such
Members' affiliate Members). However, Cboe Exchange, Inc. (``Cboe'')
has over 200 members,\37\ Nasdaq ISE, LLC has approximately 100
members,\38\ and NYSE American LLC has over 80 members.\39\ If all
market participants were required to be Members of the Exchange and
connect directly to the Exchange, the Exchange would have over 200
Members, in line with Cboe's total membership. But it does not. The
Exchange only has 41 Members (inclusive of Members' affiliates).
---------------------------------------------------------------------------
\37\ See Form 1/A, filed August 30, 2018 (https://www.sec.gov/Archives/edgar/vprr/1800/18002831.pdf); Form 1/A, filed August 30,
2018 (https://www.sec.gov/Archives/edgar/vprr/1800/18002833.pdf);
Form 1/A, filed July 24, 2018 (https://www.sec.gov/Archives/edgar/vprr/1800/18002781.pdf); Form 1/A, filed August 30, 2018 (https://www.sec.gov/Archives/edgar/data/1473845/999999999718007832/9999999997-18-007832-index.htm).
\38\ See Form 1/A, filed July 1, 2016 (https://www.sec.gov/Archives/edgar/vprr/1601/16019243.pdf).
\39\ See https://www.nyse.com/markets/american-options/membership#directory.
---------------------------------------------------------------------------
The Exchange finds it compelling that all of the Exchange's
existing Members continued to purchase the Exchange's connectivity
services during the period for which the Proposed Fee Increases took
effect in August 2018. In particular, the Exchange believes that the
Proposed Fee Increases are reasonable because the Exchange did not lose
any Members (or the number of connections each Member purchased) or
non-Member connections due to the Exchange increasing its connectivity
fees through the First Proposed Rule Change, which fee increase became
effective August 1, 2018. For example, in July 2018, fourteen (14)
Members purchased 1Gb connections, ten (10) Members purchased 10Gb
connections, and fifteen (15) Members purchased 10Gb ULL connections.
(The Exchange notes that 1Gb connections are purchased primarily by EEM
Members; 10Gb ULL connections are purchased primarily by higher volume
Market Makers quoting all products across both MIAX PEARL and MIAX; and
10Gb connections are purchased by higher volume EEMs and lower volume
Market Makers.) The vast majority of those Members purchased multiple
such connections with the actual number of connections depending on the
Member's throughput requirements based on the volume of their quote/
order traffic and market data needs associated with their business
model. After the fee increase, beginning August 1, 2018, the same
number of Members purchased the same number of connections.\40\
Furthermore, the total number of connections did not decrease from July
to August 2018, and in fact one Member even purchased two (2)
additional 10Gb ULL connections in August 2018, after the fee increase.
---------------------------------------------------------------------------
\40\ The Exchange notes that one Member downgraded one
connection in July of 2018, however such downgrade was done well
ahead of notice of the Proposed Fee Increase and was the result of a
change to the Member's business operation that was completely
independent of, and unrelated to, the Proposed Fee Increases.
---------------------------------------------------------------------------
Also, in July 2018, four (4) non-Members purchased 1Gb connections,
two (2) non-Members purchased 10Gb connections, and one (1) non-Member
purchased 10Gb ULL connections. After the fee increase, beginning
August 1, 2018, the same non-Members purchased the same number of
connections across all available alternatives and two (2) additional
non-Members purchased three (3) more connections after the fee
increase. These non-Members freely purchased their connectivity with
the Exchange in order to offer trading services to other firms and
customers, as well as access to the market data services that their
connections to the Exchange provide them, but they are not required or
compelled to purchase any of the Exchange's connectivity options. MIAX
PEARL did not experience any noticeable change (increase or decrease)
in order flow sent by its market participants as a result of the fee
increase.
Of those Members and non-Members that bought multiple connections,
no firm dropped any connections beginning August 1, 2018, when the
Exchange increased its fees. Nor did the Exchange lose any Members.
Furthermore, the Exchange did not receive any comment letters or
official complaints from any Member or non-Member purchaser of
connectivity regarding the increased fees regarding how the fee
increase was unreasonable, unduly burdensome, or would negatively
impact their competitiveness amongst other market participants. These
facts, coupled with the discussion above, showing that it is not
necessary to join and/or connect to all options exchanges, demonstrate
that the Exchange's fees are constrained by competition and are
reasonable and not contrary to the Law of Demand as SIFMA suggests.
Therefore, the Exchange believes that the Proposed Fee Increases are
fair, equitable, and non-discriminatory, as the fees are competitive.
The Exchange believes that the Proposed Fee Increases are equitably
allocated among Members and non-Members, as evidenced by the fact that
the fee increases are allocated across all connectivity alternatives,
and there is not a disproportionate number of Members purchasing any
alternative--fourteen (14) Members purchased 1Gb connections, ten (10)
Members purchased 10Gb connections, fifteen (15) Members purchased 10Gb
ULL connections, four (4) non-Members purchased 1Gb connections, two
(2) non-Members purchased 10Gb connections, and one (1) non-Member
purchased 10Gb ULL connections. The Exchange recognizes that the
relative fee increases are 27% for the 1Gb connection, 10.9% for the
10Gb connection, and 9.4% for the 10Gb ULL connection, but the Exchange
believes that percentage increase differentiation is appropriate, given
the different levels of service provided and the largest percentage
increase being associated with the lowest cost connection. Further, the
Exchange believes that the fees are reasonably allocated as the users
of the higher bandwidth connections consume the most resources of the
Exchange's network. It is these firms that account that also account
for the vast majority of the Exchange's trading volume. The purchasers
of the 10Gb ULL connectivity account for approximately 80% of the
volume on the Exchange. For example, in June of 2019, to date,
approximately 11.3 million contracts of the approximately 13.6 million
[[Page 34009]]
contracts executed were done by the top market making firms of the
Exchange's total volume. The Exchange considered whether to increase
transaction fees and other fees in order to offset its costs as an
alternative to increasing connectivity fees, however, the Exchange
determined that increasing its connectivity fees was the only viable
alternative. This is because the increased costs are more closely
associated with connectivity, as well as the intense level of
competition among the options exchanges for order flow through
transaction fees.
Second, the Exchange believes that its proposal is consistent with
Section 6(b)(4) of the Act because the Proposed Fee Increases will
permit recovery of the Exchange's costs and will not result in
excessive pricing or supracompetitive profit. The Proposed Fee
Increases will allow the Exchange to recover a portion (less than all)
of the increased costs incurred by the Exchange associated with
providing and maintaining the necessary hardware and other network
infrastructure to support this technology since Exchange launched
operations in February 2017. Put simply, the costs of the Exchange to
provide these services have increased considerably over this time, as
more fully-detailed and quantified below. The Exchange believes that it
is reasonable and appropriate to increase its fees charged for use of
its connectivity to partially offset the increased costs the Exchange
incurred during this time associated with maintaining and enhancing a
state-of-the-art exchange network infrastructure in the U.S. options
industry.
In particular, the Exchange's increased costs associated with
supporting its network are due to several factors, including increased
costs associated with maintaining and expanding a team of highly-
skilled network engineers (the Exchange also hired additional network
engineering staff in 2017 and 2018), increasing fees charged by the
Exchange's third-party data center operator, and costs associated with
projects and initiatives designed to improve overall network
performance and stability, through the Exchange's research and
development (``R&D'') efforts.
In order to provide more detail and to quantify the Exchange's
increased costs, the Exchange notes that increased costs are associated
with the infrastructure and increased headcount to fully-support the
advances in infrastructure and expansion of network level services,
including customer monitoring, alerting and reporting. Additional
technology expenses were incurred related to the expanding its
Information Security services, network monitoring and customer
reporting, as well as Regulation SCI mandated processes associated with
network technology. All of these additional expenses have been incurred
by the Exchange since became operational in February 2017.
Additionally, while some of the expense is fixed, much of the expense
is not fixed, and thus increases as the number of connections increase.
For example, new 1Gb, 10Gb, and 10Gb ULL connections require the
purchase of additional hardware to support those connections as well as
enhanced monitoring and reporting of customer performance that MIAX
PEARL and its affiliates provide. And 10Gb ULL connections require the
purchase of specialized, more costly hardware. Further, as the total
number of all connections increase, MIAX PEARL and its affiliates need
to increase their data center footprint and consume more power,
resulting in increased costs charged by their third-party data center
provider. Accordingly, cost to MIAX PEARL and its affiliates is not
entirely fixed. Just the initial fixed cost buildout of the network
infrastructure of MIAX PEARL and its affiliates, including both
primary/secondary sites and disaster recovery, was over $30 million.
These costs have increased over 10% since the Exchange became
operational in February 2017. As these network connectivity-related
expenses increase, MIAX PEARL and its affiliates look to offset those
costs through increased connectivity fees.
A more detailed breakdown of the expense increases since February
2017 include an approximate 70% increase in technology-related
personnel costs in infrastructure, due to expansion of services/support
(increase of approximately $800,000); an approximate 10% increase in
datacenter costs due to price increases and footprint expansion
(increase of approximately $500,000); an approximate 5% increase in
vendor-supplied dark fiber due to price increases and expanded
capabilities (increase of approximately $25,000); and a 30% increase in
market data connectivity fees (increase of approximately $200,000). Of
note, regarding market data connectivity fee increased cost, this is
the cost associated with MIAX PEARL consuming connectivity/content from
the equities markets in order to operate the Exchange, causing MIAX
PEARL to effectively pay its competitors for this connectivity. While
the Exchange and MIAX have incurred a total increase in connectivity
expenses since January 2017 (the last time connectivity fees were
raised) of approximately $1.5 million per year (as described above),
the total increase in connectivity revenue amount as a result of the
Proposed Fee Increases is projected to be approximately $1.2 million
per year for MIAX PEARL and MIAX. Accordingly, the total projected MIAX
PEARL and MIAX connectivity revenue as a result of the proposed
increase, on an annualized basis, is less than total annual actual MIAX
PEARL and MIAX connectivity expense. Accordingly, the Proposed Fee
Increases are fair and reasonable because they will not result in
excessive pricing or supracompetitive profit, when comparing the
increase in actual costs to the Exchange (since February 2017) versus
the projected increase in annual revenue. The Exchange also incurred
additional significant capital expenditures over this same period to
upgrade and enhance the underlying technology components, as more
fully-detailed below.
Further, because the costs of operating a data center are
significant and not economically feasible for the Exchange, the
Exchange does not operate its own data centers, and instead contracts
with a third-party data center provider. The Exchange notes that
larger, dominant exchange operators own/operate their data centers,
which offers them greater control over their data center costs. Because
those exchanges own and operate their data centers as profit centers,
the Exchange is subject to additional costs. As a result, the Exchange
is subject to fee increases from its data center provider, which the
Exchange experienced in 2017 and 2018 of approximately 10%, as cited
above. Connectivity fees, which are charged for accessing the
Exchange's data center network infrastructure, are directly related to
the network and offset such costs.
Further, the Exchange invests significant resources in network R&D,
which are not included in direct expenses to improve the overall
performance and stability of its network. For example, the Exchange has
a number of network monitoring tools (some of which were developed in-
house, and some of which are licensed from third-parties), that
continually monitor, detect, and report network performance, many of
which serve as significant value-adds to the Exchange's Members and
enable the Exchange to provide a high level of customer service. These
tools detect and report performance issues, and thus enable the
Exchange to proactively notify a Member (and the SIPs) when the
[[Page 34010]]
Exchange detects a problem with a Member's connectivity. The costs
associated with the maintenance and improvement of existing tools and
the development of new tools resulted in significant increased cost to
the Exchange since February 2017.
Certain recently developed network aggregation and monitoring tools
provide the Exchange with the ability to measure network traffic with a
much more granular level of variability. This is important as Exchange
Members demand a higher level of network determinism and the ability to
measure variability in terms of single digit nanoseconds. Also, the
Exchange routinely conducts R&D projects to improve the performance of
the network's hardware infrastructure. As an example, in the last year,
the Exchange's R&D efforts resulted in a performance improvement,
requiring the purchase of new equipment to support that improvement,
and thus resulting in increased costs in the hundreds of thousands of
dollars range. In sum, the costs associated with maintaining and
enhancing a state-of-the-art exchange network infrastructure in the
U.S. options industry is a significant expense for the Exchange that
continues to increase, and thus the Exchange believes that it is
reasonable to offset a portion of those increased costs by increasing
its network connectivity fees, as proposed herein. The Exchange invests
in and offers a superior network infrastructure as part of its overall
options exchange services offering, resulting in significant costs
associated with maintaining this network infrastructure, which are
directly tied to the amount of the connectivity fees that must be
charged to access it, in order to recover those costs. As detailed in
the Exchange's 2018 audited financial statements which will be publicly
available as part of the Exchange's Form 1 Amendment, the Exchange only
has four primary sources of revenue: Transaction fees, access fees (of
which network connectivity constitute the majority), regulatory fees,
and market data fees. Accordingly, the Exchange must cover all of its
expenses from these four primary sources of revenue.
The Proposed Fee Increases are fair and reasonable because they
will not result in excessive pricing or supracompetitive profit, when
comparing the total annual expense of the Exchange associated with
providing the network connectivity services versus the total projected
annual revenue of the Exchange associated with providing the network
connectivity services. For 2018, the annual expense associated with
providing the network connectivity services (that is, the shared
network connectivity of MIAX PEARL and MIAX, but excluding MIAX
Emerald) was approximately $20.8 million. This amount is comprised of
both direct and indirect expense. The direct expense (which relates
100% to the network infrastructure, associated data center processing
equipment required to support various connections, network monitoring
systems and associated software required to support the various forms
of connectivity) was approximately $8.5 million (constituting primarily
Information Technology expense in the Exchange's 2018 financial
statements). The indirect expense (which includes expense from such
areas as trading operations, software development, business
development, information technology, marketing, human resources, legal
and regulatory, finance and accounting) that the Exchange allocates to
the maintenance and support of network connectivity services was
approximately $12.3 million. This indirect expense amount of $12.3
million represents approximately 20% of the total annual expense of
MIAX PEARL and MIAX for 2018 of approximately $70 million, less direct
expense of $8.5 million ($70 million less $8.5 million equals $61.5
million multiplied by 20% equals $12.3 million). Total projected
annualized revenue of the Exchange associated with selling the network
connectivity services (reflecting the Proposed Fee Increases on a
fully-annualized basis, using May 2019 data) for MIAX PEARL and MIAX is
projected to be approximately $14.5 million. This projected revenue
amount of $14.5 million represents approximately 20% of total net
revenue of MIAX PEARL and MIAX for 2018 of approximately $72 million.
The Exchange believes that an indirect expense allocation of 20% of
total expense (less direct expense) to network connectivity services is
fair and reasonable, as total projected network connectivity revenue
represents approximately 20% of total net revenue for 2018. That is,
direct expense of $8.5 million plus indirect expense of $12.3 million
fairly reflects the total annual expense associated with providing the
network connectivity services, both from the perspective of similar
revenue and expense percentages (connectivity to total), as well as
matching connectivity resources to connectivity expenses. The Exchange
believes that this is a conservative allocation of indirect expense.
Accordingly, the total projected MIAX PEARL and MIAX connectivity
revenue, reflective of the proposed increase, on an annualized basis,
of $14.5 million, is less than total annual actual MIAX PEARL and MIAX
connectivity expense for 2018 of $20.8 million. The Exchange projects
comparable network connectivity revenue and expense for 2019 for MIAX
PEARL and MIAX. Accordingly, the Proposed Fee Increases are fair and
reasonable because they do not result in excessive pricing or
supracompetitive profit, when comparing the actual network connectivity
costs to the Exchange versus the projected network connectivity annual
revenue, including the increase amount. Additional information on
overall revenue and expense of the Exchange can be found in the
Exchange's 2018 audited financial results, which will be publicly
available as part of the Exchange's Form 1 filed with the Commission by
June 30, 2019.
The Exchange notes that other exchanges have similar connectivity
alternatives for their participants, including similar low-latency
connectivity. For example, Nasdaq PHLX LLC (``Phlx''), NYSE Arca, Inc.
(``Arca''), NYSE American LLC (``NYSE American'') and Nasdaq ISE, LLC
(``ISE'') all offer a 1Gb, 10Gb and 10Gb low latency ethernet
connectivity alternatives to each of their participants.\41\ The
Exchange further notes that Phlx, ISE, Arca and NYSE American each
charge higher rates for such similar connectivity to primary and
secondary facilities.\42\ While MIAX PEARL's proposed connectivity fees
are substantially lower than the fees charged by Phlx, ISE, Arca and
NYSE American, MIAX PEARL believes that it offers significant value to
Members over other exchanges in terms of network monitoring and
reporting, which MIAX PEARL believes is a competitive advantage, and
differentiates its connectivity versus connectivity to other exchanges.
Additionally, the Exchange's proposed connectivity fees to its disaster
recovery facility are within the range of the fees charged by other
exchanges for similar connectivity alternatives.\43\
---------------------------------------------------------------------------
\41\ See Phlx and ISE Rules, General Equity and Options Rules,
General 8, Section 1(b). Phlx and ISE each charge a monthly fee of
$2,500 for each 1Gb connection, $10,000 for each 10Gb connection and
$15,000 for each 10Gb Ultra connection, which the equivalent of the
Exchange's 10Gb ULL connection. See also NYSE American Fee Schedule,
Section V.B, and Arca Fees and Charges, Co-Location Fees. NYSE
American and Arca each charge a monthly fee of $5,000 for each 1Gb
circuit, $14,000 for each 10Gb circuit and $22,000 for each 10Gb LX
circuit, which the equivalent of the Exchange's 10Gb ULL connection.
\42\ Id.
\43\ See Nasdaq ISE, Options Rules, Options 7, Pricing Schedule,
Section 11.D. (charging $3,000 for disaster recovery testing &
relocation services); see also Cboe Exchange, Inc. (``Cboe'') Fees
Schedule, p. 14, Cboe Command Connectivity Charges (charging a
monthly fee of $2,000 for a 1Gb disaster recovery network access
port and a monthly fee of $6,000 for a 10Gb disaster recovery
network access port).
---------------------------------------------------------------------------
[[Page 34011]]
B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX PEARL does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange does not believe that the proposed rule change would
place certain market participants at the Exchange at a relative
disadvantage compared to other market participants or affect the
ability of such market participants to compete. In particular, the
Exchange has received no official complaints from Members, non-Members
(extranets and service bureaus), third-parties that purchase the
Exchange's connectivity and resell it, and customers of those
resellers, that the Exchange's fees or the Proposed Fee Increases are
negatively impacting or would negatively impact their abilities to
compete with other market participants or that they are placed at a
disadvantage. The Exchange believes that the Proposed Fee Increases do
not place certain market participants at a relative disadvantage to
other market participants because the connectivity pricing is
associated with relative usage of the various market participants and
does not impose a barrier to entry to smaller participants. As
described above, the less expensive 1Gb direct connection is generally
purchased by market participants that utilize less bandwidth. The
market participants that purchase 10Gb ULL direct connections utilize
the most bandwidth, and those are the participants that consume the
most resources from the network. Accordingly, the Proposed Fee
Increases do not favor certain categories of market participants in a
manner that would impose a burden on competition; rather, the
allocation of the Proposed Fee Increases reflects the network resources
consumed by the various size of market participants--lowest bandwidth
consuming members pay the least, and highest bandwidth consuming
members pays the most, particularly since higher bandwidth consumption
translates to higher costs to the Exchange.
Inter-Market Competition
The Exchange believes the Proposed Fee Increases do not place an
undue burden on competition on other SROs that is not necessary or
appropriate. In particular, options market participants are not forced
to connect to (and purchase market data from) all options exchanges, as
shown by the number of Members of MIAX PEARL as compared to the much
greater number of members at other options exchanges (as described
above). Not only does MIAX PEARL have less than half the number of
members as certain other options exchanges, but there are also a number
of the Exchange's Members that do not connect directly to MIAX PEARL.
There are a number of large market makers and broker-dealers that are
members of other options exchange but not Members of MIAX PEARL.
Additionally, the Exchange other exchanges have similar connectivity
alternatives for their participants, including similar low-latency
connectivity, but with much higher rates to connect.\44\ The Exchange
is also unaware of any assertion that its existing fee levels or the
Proposed Fee Increases would somehow unduly impair its competition with
other options exchanges. To the contrary, if the fees charged are
deemed too high by market participants, they can simply disconnect.
While the Exchange recognizes the distinction between connecting to an
exchange and trading at the exchange, the Exchange notes that it
operates in a highly competitive options market in which market
participants can readily connect and trade with venues they desire. In
such an environment, the Exchange must continually adjust its fees to
remain competitive with other exchanges. The Exchange believes that the
proposed changes reflect this competitive environment.
---------------------------------------------------------------------------
\44\ See supra note 41.
---------------------------------------------------------------------------
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,\45\ and Rule 19b-4(f)(2) \46\ 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.
---------------------------------------------------------------------------
\45\ 15 U.S.C. 78s(b)(3)(A)(ii).
\46\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-PEARL-2019-21 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-PEARL-2019-21. 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 (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2019-21 and
[[Page 34012]]
should be submitted on or before August 6, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\47\
---------------------------------------------------------------------------
\47\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-15025 Filed 7-15-19; 8:45 am]
BILLING CODE 8011-01-P
