Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Increase the Number of Additional Limited Service MIAX Express Interface Ports Available to Market Makers, 344-350 [2020-29132]
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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Notices
rule change will impose a burden on
intramarket competition because the
two additional Limited Service MEO
Ports will be available to all Members
on an equal basis. It is a business
decision of each Member whether to pay
for the additional Limited Service MEO
Ports.
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,27 and Rule
19b–4(f)(2) 28 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.
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:
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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–2020–35 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–2020–35. 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–2020–35 and
should be submitted on or before
January 26, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.29
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–29133 Filed 1–4–21; 8:45 am]
BILLING CODE P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90811; File No. SR–MIAX–
2020–41]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To
Increase the Number of Additional
Limited Service MIAX Express
Interface Ports Available to Market
Makers
December 29, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
21, 2020, Miami International Securities
Exchange, LLC (‘‘MIAX Options’’ or
29 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
27 15
U.S.C. 78s(b)(3)(A)(ii).
28 17 CFR 240.19b–4(f)(2).
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‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
increase the number of additional
Limited Service MIAX Express Interface
(‘‘MEI’’) Ports available to Market
Makers.3 The Exchange does not
propose to amend the fees for additional
Limited Service MEI Ports.
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
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 to offer two (2) additional
Limited Service MEI Ports to Market
Makers. The Exchange does not propose
to amend the fees charged for the
additional Limited Service MEI Ports.
The Exchange initially filed the
proposal to increase the number of
Limited Service MEI Ports available to
Market Makers on June 30, 2020, with
no change to the actual fee amounts
being charged.4 The First Proposed Rule
3 The term ‘‘Market Makers’’ refers to Lead Market
Makers (‘‘LMMs’’), Primary Lead Market Makers
(‘‘PLMMs’’), and Registered Market Makers
(‘‘RMMs’’) collectively. See Exchange Rule 100.
4 See Securities Exchange Act Release No. 89317
(July 14, 2020), 85 FR 43918 (July 20, 2020) (SR–
MIAX–2020–23) (the ‘‘First Proposed Rule
Change’’).
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Change was published for comment in
the Federal Register on July 20, 2020.5
The Exchange notes that the First
Proposed Rule Change did not receive
any comment letters. Nonetheless, the
Exchange withdrew the First Proposed
Rule Change on August 24, 2020.6 On
August 25, 2020, the Exchange refiled
its proposal to increase the number of
Limited Service MEI Ports available to
Market Makers (without increasing the
actual fee amounts) to provide further
clarification regarding the Exchange’s
annual cost for providing additional
Limited Service MEI Ports.7 The Second
Proposed Rule Change was published
for comment in the Federal Register on
September 11, 2020.8 Like the First
Proposed Rule Change, the Second
Proposed Rule Change did not receive
any comment letters. Nonetheless, the
Exchange withdrew the Second
Proposed Rule Change on October 23,
2020.9
On October 23, 2020, the Exchange
refiled its proposal to increase the
number of Limited Service MEI Ports
available to Market Makers (without
increasing the actual fee amounts) to
provide further clarification regarding
the Exchange’s revenues, costs, and
profitability for the two additional
Limited Service MEI Ports (including
information regarding the Exchange’s
methodology for determining the costs
and revenues for the two additional
Limited Service MEI Ports).10 The Third
Proposed Rule Change was published
for comment in the Federal Register on
November 12, 2020.11 Like the First and
Second Proposed Rule Changes, the
Third Proposed Rule Change did not
receive any comment letters.
Nonetheless, the Exchange withdrew
the Third Proposed Rule Change on
December 21, 2020.12
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5 Id.
6 See Comment Letter from Christopher Solgan,
VP, Senior Counsel, the Exchange, dated August 24,
2020, notifying the Commission that the Exchange
would withdraw the First Proposed Rule Change.
7 See Securities Exchange Act Release No. 89769
(September 4, 2020), 85 FR 55905 (September 10,
2020) (SR–MIAX–2020–29) (the ‘‘Second Proposed
Rule Change’’).
8 Id.
9 See Comment Letter from Christopher Solgan,
VP, Senior Counsel, the Exchange, dated October
19, 2020, notifying the Commission that the
Exchange would withdraw the Second Proposed
Rule Change.
10 See Securities Exchange Act Release No. 90354
(November 5, 2020), 85 FR 71958 (November 12,
2020) (SR–MIAX–2020–34) (the ‘‘Third Proposed
Rule Change’’).
11 Id.
12 See Comment Letter from Christopher Solgan,
VP, Senior Counsel, the Exchange, dated December
18, 2020, notifying the Commission that the
Exchange would withdraw the Third Proposed Rule
Change.
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The Exchange now submits this
proposed rule change to increase the
number of additional Limited Service
MEI Ports available to Market Makers
(without increasing the actual fee
amounts) to provide additional
information regarding the Exchange’s
cost analysis for the two additional
Limited Service MEI Ports.
Currently, MIAX assesses monthly
MEI Port Fees on Market Makers based
upon the number of MIAX matching
engines 13 used by the Market Maker.
Market Makers are allocated two (2) Full
Service MEI Ports 14 and two (2) Limited
Service MEI Ports 15 per matching
engine to which they connect. The Full
Service MEI Ports, Limited Service MEI
Ports, and the additional Limited
Service MEI Ports all include access to
MIAX’s primary and secondary data
centers and its disaster recovery center.
Market Makers may request additional
Limited Service MEI Ports for which
they will be assessed the existing $100
monthly fee for each additional port
they request. This fee has been
unchanged since 2016.16
The Exchange originally added the
Limited Service MEI Ports to enhance
the MEI Port connectivity made
available to Market Makers, and has
subsequently made additional Limited
Service MEI Ports available to Market
Makers.17 Limited Service MEI Ports
13 A ‘‘matching engine’’ is a part of the MIAX
electronic system that processes options quotes and
trades on a symbol-by-symbol basis. Some matching
engines will process option classes with multiple
root symbols, and other matching engines will be
dedicated to one single option root symbol (for
example, options on SPY will be processed by one
single matching engine that is dedicated only to
SPY). A particular root symbol may only be
assigned to a single designated matching engine. A
particular root symbol may not be assigned to
multiple matching engines. See Fee Schedule,
Section 5(d)(ii), note 29.
14 Full Service MEI Ports provide Market Makers
with the ability to send Market Maker quotes,
eQuotes, and quote purge messages to the MIAX
System. Full Service MEI Ports are also capable of
receiving administrative information. Market
Makers are limited to two Full Service MEI Ports
per matching engine. See Fee Schedule, Section
5(d)(ii), note 27.
15 Limited Service MEI Ports provide Market
Makers with the ability to send eQuotes and quote
purge messages only, but not Market Maker Quotes,
to the MIAX System. Limited Service MEI Ports are
also capable of receiving administrative
information. Market Makers initially receive two
Limited Service MEI Ports per matching engine. See
Fee Schedule, Section 5(d)(ii), note 28.
16 See Securities Exchange Act Release No. 79666
(December 22, 2016), 81 FR 96133 (December 29,
2016) (SR–MIAX–2016–47).
17 See Securities Exchange Act Release Nos.
70137 (August 8, 2013), 78 FR 49586 (August 14,
2013) (SR–MIAX–2013–39); 70903 (November 20,
2013), 78 FR 70615 (November 26, 2013) (SR–
MIAX–2013–52); 78950 (September 27, 2016), 81
FR 68084 (October 3, 2016) (SR–MIAX–2016–33);
and 79198 (October 31, 2016), 81 FR 76988
(November 4, 2016) (SR–MIAX–2016–37).
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345
have been well received by Market
Makers since their addition. The
Exchange now proposes to offer to
Market Makers the ability to purchase
an additional two (2) Limited Service
MEI Ports per matching engine over and
above the current six (6) additional
Limited Service MEI Ports per matching
engine that are available for purchase by
Market Makers. The Exchange proposes
making a corresponding change to
footnote 30 of the Exchange’s Fee
Schedule to specify that Market Makers
will now be limited to purchasing eight
(8) additional Limited Service MEI Ports
per matching engine, for a total of ten
(10) per matching engine. All fees
related to MEI Ports shall remain
unchanged and Market Makers that
voluntarily purchase the additional
Limited Service MEI Ports will remain
subject to the existing $100 monthly fee
per port.
The Exchange is increasing the
number of additional Limited Service
MEI Ports because the Exchange is
expanding its network. This network
expansion is necessary due to increased
customer demand and increased
volatility in the marketplace, both of
which have translated into increased
message traffic rates across the network.
Consequently, this network expansion,
which increases the number of switches
supporting customer facing systems, is
necessary in order to provide sufficient
access to new and existing Members,18
to maintain a sufficient amount of
network capacity head-room, and to
continue to provide the same level of
service across the Exchange’s lowlatency, high-throughput technology
environment.
Currently, the Exchange has 8
network switches that support the entire
customer base of MIAX. The Exchange
plans to increase this to 10 switches,
which will increase the number of
available customer ports by 25%. This
increase in the number of available
customer ports will enable the Exchange
to continue to provide sufficient and
equal access to MIAX Systems to all
Members. Absent the proposed increase
in available MEI Ports, the Exchange
projects that its current inventory will
be depleted and it will lack sufficient
capacity to continue to meet Members’
access needs.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
18 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.
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consistent with Section 6(b) of the Act 19
in general, and furthers the objectives of
Section 6(b)(5) of the Act 20 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
customers, issuers, brokers and dealers.
The Exchange believes that its
proposal is consistent with the
objectives of Section 6(b)(5) of the Act 21
because the proposed additional
Limited Service MEI Ports will be
available to all Market Makers and the
current fees for the additional Limited
Service MEI Ports apply equally to all
Market Makers regardless of type, and
access to the Exchange is offered on
terms that are not unfairly
discriminatory. The Exchange is
proposing to increase the number of
available Limited Service MEI Ports
because the Exchange is expanding its
network. This network expansion is
necessary due to increased customer
demand and increased volatility in the
marketplace, both of which have
translated into increased message traffic
rates across the network. Consequently,
this network expansion, which
increases the number of switches
supporting customer facing systems, is
necessary in order to provide sufficient
and equal access to new and existing
Members, to maintain a sufficient
amount of network capacity head-room,
and to continue to provide the same
level of service across the Exchange’s
low-latency, high-throughput
technology environment.
Currently, the Exchange has 8
network switches that support the entire
customer base of MIAX. The Exchange
plans to increase this to 10 switches,
which will increase the number of
available customer ports by 25%. This
increase in the number of available
customer ports will enable the Exchange
to continue to provide sufficient and
equal access to MIAX Systems for all
Members. Absent the proposed increase
in available MEI Ports, the Exchange
projects that its current inventory will
be depleted and it will lack sufficient
capacity to continue to meet Members’
access needs. Further, the Exchange
notes the decision of whether to
purchase two additional Limited
Service MEI Ports is completely
optional and it is a business decision for
each Market Maker to determine
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
21 15 U.S.C. 78f(b)(5).
whether the additional Limited Service
MEI Ports are necessary to meet their
business requirements.
The Exchange further believes that the
availability of the additional Limited
Service MEI Ports is equitable and not
unfairly discriminatory because it will
enable Market Makers to maintain
uninterrupted access to the MIAX
System and consequently enhance the
marketplace by helping Market Makers
to better manage risk, thus preserving
the integrity of the MIAX markets, all to
the benefit of and protection of investors
and the public as a whole.
The Exchange also believes that its
proposal is consistent with Section
6(b)(4) of the Act because only Market
Makers that voluntarily purchase the
two additional Limited Service MEI
Ports will be charged the existing $100
monthly fee per port, which has been
unchanged since 2016.22 The Exchange
does not propose to amend the fees
applicable to additional Limited Service
MEI Ports which have been previously
filed with the Commission and become
effective after notice and public
comment.23 As stated above, the
Exchange proposes to expand its
network by making available two
additional Limit Service MEI Ports due
to increased customer demand and
increased volatility in the marketplace,
both of which have translated into
increased message traffic rates across
the network. The cost to expand the
network in this manner is greater than
the revenue the Exchange anticipates
the additional Limited Service MEI
Ports will generate. Specifically, the
Exchange estimates it will incur a onetime cost of approximately $175,000 in
capital expenditures (‘‘CapEx’’) on
hardware, software, and other items to
expand the network to make available
the two additional Limited Service MEI
Ports. This estimated cost also includes
expense associated with providing the
necessary engineering and support
personnel to transition those Market
Makers who wish to acquire the two
additional Limited Service MEI Ports.
The Exchange projects that
approximately six to seven Market
Makers will purchase the additional
Limited Service MEI Ports, which will
be subject to the existing monthly fee of
$100 per port. Accordingly, the
Exchange projects that the annualized
revenue from the two additional
Limited Service MEI Ports will be
approximately $16,800 (assuming seven
Market Makers purchase the two
additional Limited Service MEI Ports).
Therefore, the Exchange’s upfront cost
19 15
20 15
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22 See
supra note 16.
23 See supra notes 16 and 17.
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in expanding its network to provide its
Members with the two additional
Limited Service MEI Ports—
approximately $175,000—is significant
relative to the anticipated annualized
revenue the Exchange expects to bring
in from the two additional Limited
Service MEI Ports—approximately
$16,800. Further, the Exchange
anticipates it will incur approximately
$100,371 in annualized ongoing
operating expense (‘‘OpEx’’) in order to
support the expanded network and the
two additional Limited Service MEI
Ports. Thus, even excluding the upfront
CapEx of $175,000, the Exchange is not
generating a supra-competitive profit
from the provision of these two
additional Limited Service MEI Ports. In
fact, even excluding the one-time CapEx
cost of $175,000, the Exchange
anticipates generating an annual loss
from the provision of these two
additional Limited Service MEI Ports of
($83,571)—that is, $16,800 in revenue
minus $100,371 in expense equates to a
loss of ($83,571) to support the
additional ports annually.
The Exchange conducted an extensive
cost review in which the Exchange
analyzed every expense item in the
Exchange’s general expense ledger (this
includes over 150 separate and distinct
expense items) to determine whether
each such expense relates to the
additional Limited Service MEI Ports,
and, if such expense did so relate, what
portion (or percentage) of such expense
actually supports the additional Limited
Service MEI Ports, and thus bears a
relationship that is, ‘‘in nature and
closeness,’’ directly related to those
services. The sum of all such portions
of expenses represents the total cost of
the Exchange to provide services
associated with the two additional
Limited Service MEI Ports. For the
avoidance of doubt, none of the
expenses included herein relating to the
services associated with providing the
two additional Limited Service MEI
Ports also relate to the provision of any
other services offered by the Exchange.
Stated differently, no expense amount of
the Exchange is allocated twice. The
Exchange notes that it made certain
representations in a previous filing 24
regarding its expense allocation for the
provision of network connectivity
services. The Exchange represents that
none of the expenses allocated to the
provision of network connectivity
services are also allocated to the
provision of ports—that is, there is no
overlap of any such expenses that are
24 See Securities Exchange Act Release No. 87875
(December 31, 2019), 85 FR 770 (January 7, 2020)
(SR–MIAX–2019–51).
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included in the costs associated with
services the Exchange provides for
connectivity and for the services the
Exchange provides for ports.
Specifically, utilizing 2019 expense
figures, total third-party expense,
relating to fees paid by the Exchange to
third-parties for certain products and
services for the Exchange to be able to
provide the two additional Limited
Service MEI Ports, was approximately
$12,393. This includes, but is not
limited to, a portion of the fees paid to:
(1) Equinix, for data center services, for
the primary, secondary, and disaster
recovery locations of the Exchange’s
trading system infrastructure; (2) Zayo
Group Holdings, Inc. (‘‘Zayo’’) for
network services (fiber and bandwidth
products and services) linking the
Exchange’s office locations in Princeton,
NJ and Miami, FL to all data center
locations; (3) Secure Financial
Transaction Infrastructure (‘‘SFTI’’),25
which supports network feeds for the
entire U.S. options industry; (4) various
other services providers (including
Thompson Reuters, NYSE, Nasdaq, and
Internap), which provide content,
network services, and infrastructure
services for critical components of
options network services; and (5)
various other hardware and software
providers (including Dell and Cisco,
which support the production
environment in which Members and
non-Members connect to the network to
trade, receive market data, etc.).
For clarity, only a portion of all fees
paid to such third-parties is included in
the third-party expense herein, and no
expense amount is allocated twice.
Accordingly, the Exchange does not
allocate its entire information
technology and communication costs to
the services associated with providing
the two additional Limited Service MEI
Ports.
The Exchange believes it is reasonable
to allocate such third-party expense
described above towards the total cost to
the Exchange to provide the services
associated with the two additional
Limited Service MEI Ports. In particular,
the Exchange believes it is reasonable to
allocate the identified portion of the
Equinix expense because Equinix
25 In fact, on October 22, 2019, the Exchange was
notified by SFTI that it is again raising its fees
charged to the Exchange by approximately 11%,
without having to show that such fee change
complies with the Act by being reasonable,
equitably allocated, and not unfairly
discriminatory. It is unfathomable to the Exchange
that, given the critical nature of the infrastructure
services provided by SFTI, that its fees are not
required to be rule-filed with the Commission
pursuant to Section 19(b)(1) of the Act and Rule
19b–4 thereunder. See 15 U.S.C. 78s(b)(1) and 17
CFR 240.19b–4, respectively.
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operates the data centers (primary,
secondary, and disaster recovery) that
host the Exchange’s network
infrastructure. This includes, among
other things, the necessary storage
space, which continues to expand and
increase in cost, power to operate the
network infrastructure, and cooling
apparatuses to ensure the Exchange’s
network infrastructure maintains
stability. Without these services from
Equinix, the Exchange would not be
able to operate and support the network
and provide the services associated with
the two additional Limited Service MEI
Ports to its Members and non-Members
and their customers. The Exchange did
not allocate all of the Equinix expense
toward the cost of providing the services
associated with the two additional
Limited Service MEI Ports, only that
portion which the Exchange identified
as being specifically mapped to
providing the services associated with
the two additional Limited Service MEI
Ports, approximately 0.5% of the total
Equinix expense. The Exchange believes
this allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with the
two additional Limited Service MEI
Ports, and not any other service, as
supported by its cost review.
The Exchange believes it is reasonable
to allocate the identified portion of the
Zayo expense because Zayo provides
the internet, fiber and bandwidth
connections with respect to the
network, linking the Exchange with its
affiliates, MIAX PEARL and MIAX
Emerald, as well as the data center and
disaster recovery locations. As such, all
of the trade data, including the billions
of messages each day per exchange, flow
through Zayo’s infrastructure over the
Exchange’s network. Without these
services from Zayo, the Exchange would
not be able to operate and support the
network and provide the services
associated with the two additional
Limited Service MEI Ports. The
Exchange did not allocate all of the
Zayo expense toward the cost of
providing the services associated with
the two additional Limited Service MEI
Ports, only the portion which the
Exchange identified as being
specifically mapped to providing the
two additional Limited Service MEI
Ports, approximately 0.4% of the total
Zayo expense. The Exchange believes
this allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with the
two additional Limited Service MEI
Ports, and not any other service, as
supported by its cost review.
The Exchange believes it is reasonable
to allocate the identified portions of the
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347
SFTI expense and various other service
providers’ (including Thompson
Reuters, NYSE, Nasdaq, and Internap)
expense because those entities provide
connectivity and feeds for the entire
U.S. options industry, as well as the
content, network services, and
infrastructure services for critical
components of the network. Without
these services from SFTI and various
other service providers, the Exchange
would not be able to operate and
support the network and provide access
to its Members and non-Members and
their customers. The Exchange did not
allocate all of the SFTI and other service
providers’ expense toward the cost of
providing the services associated with
the two additional Limited Service MEI
Ports, only the portions which the
Exchange identified as being
specifically mapped to providing the
services associated with the two
additional Limited Service MEI Ports,
approximately 0.5% of the total SFTI
and other service providers’ expense.
The Exchange believes this allocation is
reasonable because it represents the
Exchange’s actual cost to provide the
services associated with the two
additional Limited Service MEI Ports.
The Exchange believes it is reasonable
to allocate the identified portion of the
other hardware and software provider
expense because this includes costs for
dedicated hardware licenses for
switches and servers, as well as
dedicated software licenses for security
monitoring and reporting across the
network. Without this hardware and
software, the Exchange would not be
able to operate and support the network
and provide access to its Members and
non-Members and their customers. The
Exchange did not allocate all of the
hardware and software provider
expense toward the cost of providing
the services associated with the two
additional Limited Service MEI Ports,
only the portions which the Exchange
identified as being specifically mapped
to providing the services associated
with the two additional Limited Service
MEI Ports, approximately 0.3% of the
total hardware and software provider
expense. The Exchange believes this
allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with the
two additional Limited Service MEI
Ports.
For 2019, total internal expense,
relating to the internal costs of the
Exchange to provide the services
associated with the two additional
Limited Service MEI Ports was $87,978.
This includes, but is not limited to,
costs associated with: (1) Employee
compensation and benefits for full-time
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employees that support the services
associated with providing the two
additional Limited Service MEI Ports,
including staff in network operations,
trading operations, development, system
operations, business, as well as staff in
general corporate departments (such as
legal, regulatory, and finance) that
support those employees and functions
(including an increase as a result of the
higher determinism project); (2)
depreciation and amortization of
hardware and software used to provide
the services associated with the two
additional Limited Service MEI Ports,
including equipment, servers, cabling,
purchased software and internally
developed software used in the
production environment to support the
network for trading; and (3) occupancy
costs for leased office space for staff that
provide the services associated with the
two additional Limited Service MEI
Ports. The breakdown of these costs is
more fully-described below. For clarity,
only a portion of all such internal
expenses are included in the internal
expense herein, and no expense amount
is allocated twice. Accordingly, the
Exchange does not allocate its entire
costs contained in those items to the
services associated with providing the
two additional Limited Service MEI
Ports.
The Exchange believes it is reasonable
to allocate such internal expense
described above towards the total cost to
the Exchange to provide the services
associated with the two additional
Limited Service MEI Ports. In particular,
the Exchange’s employee compensation
and benefits expense relating to
providing the services associated with
the two additional Limited Service MEI
Ports was approximately $58,870, which
is only a portion of the $9,811,685 total
expense for employee compensation
and benefits. The Exchange believes it is
reasonable to allocate the identified
portion of such expense because this
includes the time spent by employees of
several departments, including
Technology, Back Office, Systems
Operations, Networking, Business
Strategy Development (who create the
business requirement documents that
the Technology staff use to develop
network features and enhancements),
Trade Operations, Finance (who provide
billing and accounting services relating
to the network), and Legal (who provide
legal services relating to the network,
such as rule filings and various license
agreements and other contracts). As part
of the extensive cost review conducted
by the Exchange, the Exchange reviewed
the amount of time spent by each
employee on matters relating to the
VerDate Sep<11>2014
17:09 Jan 04, 2021
Jkt 253001
provision of services associated with the
two additional Limited Service MEI
Ports. Without these employees, the
Exchange would not be able to provide
the services associated with the two
additional Limited Service MEI Ports to
its Members and non-Members and their
customers. The Exchange did not
allocate all of the employee
compensation and benefits expense
toward the cost of the services
associated with providing the two
additional Limited Service MEI Ports,
only the portions which the Exchange
identified as being specifically mapped
to providing the services associated
with the two additional Limited Service
MEI Ports, approximately 0.6% of the
total employee compensation and
benefits expense. The Exchange believes
this allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with the
two additional Limited Service MEI
Ports, and not any other service, as
supported by its cost review.
The Exchange’s depreciation and
amortization expense relating to
providing the services associated with
the two additional Limited Service MEI
Ports was $26,362, which is only a
portion of the $5,272,469 total expense
for depreciation and amortization. The
Exchange believes it is reasonable to
allocate the identified portion of such
expense because such expense includes
the actual cost of the computer
equipment, such as dedicated servers,
computers, laptops, monitors,
information security appliances and
storage, and network switching
infrastructure equipment, including
switches and taps that were purchased
to operate and support the network and
provide the services associated with the
two additional Limited Service MEI
Ports. Without this equipment, the
Exchange would not be able to operate
the network and provide the services
associated with the two additional
Limited Service MEI Ports to its
Members and non-Members and their
customers. The Exchange did not
allocate all of the depreciation and
amortization expense toward the cost of
providing the services associated with
the two additional Limited Service MEI
Ports, only the portion which the
Exchange identified as being
specifically mapped to providing the
services associated with the two
additional Limited Service MEI Ports,
approximately 0.5% of the total
depreciation and amortization expense,
as these services would not be possible
without relying on such equipment. The
Exchange believes this allocation is
reasonable because it represents the
PO 00000
Frm 00064
Fmt 4703
Sfmt 4703
Exchange’s actual cost to provide the
services associated with the two
additional Limited Service MEI Ports,
and not any other service, as supported
by its cost review.
The Exchange’s occupancy expense
relating to providing the services
associated with providing the two
additional Limited Service MEI Ports
was approximately $2,746, which is
only a portion of the $686,437 total
expense for occupancy. The Exchange
believes it is reasonable to allocate the
identified portion of such expense
because such expense represents the
portion of the Exchange’s cost to rent
and maintain a physical location for the
Exchange’s staff who operate and
support the network, including
providing the services associated with
the two additional Limited Service MEI
Ports. This amount consists primarily of
rent for the Exchange’s Princeton, NJ
office, as well as various related costs,
such as physical security, property
management fees, property taxes, and
utilities. The Exchange operates its
Network Operations Center (‘‘NOC’’)
and Security Operations Center (‘‘SOC’’)
from its Princeton, New Jersey office
location. A centralized office space is
required to house the staff that operates
and supports the network. The
Exchange currently has approximately
160 employees. Approximately twothirds of the Exchange’s staff are in the
Technology department, and the
majority of those staff have some role in
the operation and performance of the
services associated with providing the
two additional Limited Service MEI
Ports. Without this office space, the
Exchange would not be able to operate
and support the network and provide
the services associated with the two
additional Limited Service MEI Ports to
its Members and non-Members and their
customers. Accordingly, the Exchange
believes it is reasonable to allocate the
identified portion of its occupancy
expense because such amount
represents the Exchange’s actual cost to
house the equipment and personnel
who operate and support the Exchange’s
network infrastructure and the services
associated with the two additional
Limited Service MEI Ports. The
Exchange did not allocate all of the
occupancy expense toward the cost of
providing the services associated with
the two additional Limited Service MEI
Ports, only the portion which the
Exchange identified as being
specifically mapped to operating and
supporting the network, approximately
0.4% of the total occupancy expense.
The Exchange believes this allocation is
reasonable because it represents the
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Exchange’s cost to provide the services
associated with the two additional
Limited Service MEI Ports, and not any
other service, as supported by its cost
review.
Accordingly, based on the facts and
circumstances presented, the Exchange
believes that its provision of the services
associated with the two additional
Limited Service MEI Ports will not
result in excessive pricing or supracompetitive profit.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to allocate the respective
percentages of each expense category
described above towards the total cost to
the Exchange of operating and
supporting the network, including
providing the services associated with
the two additional Limited Service MEI
Ports because the Exchange performed a
line-by-line item analysis of all the
expenses of the Exchange, and has
determined the expenses that directly
relate to operation and support of the
network. Further, the Exchange notes
that, without the specific third-party
and internal items listed above, the
Exchange would not be able to operate
and support the network, including
providing the services associated with
the two additional Limited Service MEI
Ports to its Members and non-Members
and their customers. Each of these
expense items, including physical
hardware, software, employee
compensation and benefits, occupancy
costs, and the depreciation and
amortization of equipment, have been
identified through a line-by-line item
analysis to be integral to the operation
and support of the network. Providing
the two additional Limited Service MEI
Ports at the existing rates is intended to
recover the Exchange’s costs of
operating and supporting the network.
Accordingly, the Exchange believes
that providing the two additional
Limited Service MEI Ports at the
existing rate is fair and reasonable
because it does not result in excessive
pricing or supra-competitive profit,
when comparing the actual network
operation and support costs to the
Exchange versus the projected annual
revenue from providing the two
additional Limited Service MEI Ports.
Further, subjecting the two additional
Limited Service MEI Ports to the
existing $100 monthly fee per port is
also designed to encourage Market
Makers to be efficient with their port
usage, thereby resulting in a
corresponding increase in the efficiency
that the Exchange would be able to
realize in managing its aggregate costs
for providing the two additional ports.
There is no requirement that any Market
VerDate Sep<11>2014
17:09 Jan 04, 2021
Jkt 253001
Maker maintain a specific number of
Limited Service MEI Ports and a Market
Maker may choose to maintain as many
or as few of such ports as each Market
Maker deems appropriate.
Finally, subjecting the two additional
Limited Service MEI Ports to the
existing $100 monthly fee will help to
encourage Limited Service MEI Port
usage in a way that aligns with the
Exchange’s regulatory obligations. As a
national securities exchange, the
Exchange is subject to Regulation
Systems Compliance and Integrity
(‘‘Reg. SCI’’).26 Reg. SCI Rule 1001(a)
requires that the Exchange establish,
maintain, and enforce written policies
and procedures reasonably designed to
ensure (among other things) that its Reg.
SCI systems have levels of capacity
adequate to maintain the Exchange’s
operational capability and promote the
maintenance of fair and orderly
markets.27 By encouraging Members to
be efficient with their usage of Limited
MEI Ports, the current fee that will
continue to apply to the proposed two
(2) additional Limited Service MEI Ports
will support the Exchange’s Reg. SCI
obligations in this regard by ensuring
that unused ports are available to be
allocated based on individual Members
needs and as the Exchange’s overall
order and trade volumes increase.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
MIAX does not believe that the
proposed rule change will result in any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The proposed rule change will not
impose a burden on competition but
will benefit competition by enhancing
the Exchange’s ability to compete by
providing additional services to market
participants. It is not intended to
address a competitive issue. Rather, the
proposed increase in the number of
additional Limited Service MEI Ports
available per Market Maker is intended
to allow the Exchange to increase its
inventory of MEI Ports to meet
increased Member demand. The
Exchange is increasing the number of
available additional Limited Service
MEI Ports in response to Market Maker
demand for increased connectivity to
the MIAX System. The Exchange’s
current inventory may soon be
insufficient to meet those needs. Again,
the Exchange is not proposing to amend
the fees for MEI Ports, just to increase
the number of MEI Ports available per
Market Maker. The Exchange also does
26 17
27 17
PO 00000
CFR 242.1000–1007.
CFR 242.1001(a).
Frm 00065
Fmt 4703
Sfmt 4703
349
not believe that the proposed rule
change will impose a burden on
intramarket competition because the
two additional Limited Service MEI
Ports will be available to all Market
Makers on an equal basis. It is a
business decision of each Market Maker
whether to pay for the additional
Limited Service MEI Ports.
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,28 and Rule
19b–4(f)(2) 29 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.
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–
MIAX–2020–41 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–MIAX–2020–41. 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
28 15
29 17
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
05JAN1
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Federal Register / Vol. 86, No. 2 / Tuesday, January 5, 2021 / Notices
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–MIAX–2020–41, and
should be submitted on or before
January 26, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–29132 Filed 1–4–21; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–90818; File No. SR–MIAX–
2020–40]
Self-Regulatory Organizations; Miami
International Securities Exchange LLC;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule
jbell on DSKJLSW7X2PROD with NOTICES
December 29, 2020.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on December 21, 2020, Miami
International Securities Exchange LLC
(‘‘MIAX Options’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
17:09 Jan 04, 2021
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’’).
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
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
SECURITIES AND EXCHANGE
COMMISSION
VerDate Sep<11>2014
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.
Jkt 253001
The Exchange proposes to amend the
Fee Schedule to extend the cap waiver
of 1,000 contracts per leg for complex
PRIME (‘‘cPRIME’’) 3 Agency Order
rebates for all tiers under the Priority
Customer Rebate Program (‘‘PCRP’’) 4
until March 31, 2021.
3 ‘‘cPRIME’’ is the process by which a Member
may electronically submit a ‘‘cPRIME Order’’ (as
defined in Rule 518(b)(7)) it represents as agent (a
‘‘cPRIME Agency Order’’) against principal or
solicited interest for execution (a ‘‘cPRIME
Auction’’), subject to the restrictions set forth in
Exchange Rule 515A, Interpretation and Policy .12.
See Exchange Rule 515A.
4 Under the PCRP, MIAX credits each Member the
per contract amount resulting from each Priority
Customer order transmitted by that Member which
is executed electronically on the Exchange in all
multiply-listed option classes (excluding, in simple
or complex as applicable, QCC and cQCC Orders,
mini-options, Priority Customer-to-Priority
Customer Orders, C2C and cC2C Orders, PRIME and
cPRIME AOC Responses, PRIME and cPRIME
Contra-side Orders, PRIME and cPRIME Orders for
which both the Agency and Contra-side Order are
Priority Customers, and executions related to
contracts that are routed to one or more exchanges
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
Background
Exchange Rule 518(b)(7) defines a
cPRIME Order as a type of complex
order 5 that is submitted for
participation in a cPRIME Auction and
trading of cPRIME Orders is governed
by Rule 515A, Interpretation and Policy
.12.6 cPRIME Orders are processed and
executed in the Exchange’s PRIME
mechanism, the same mechanism that
the Exchange uses to process and
execute simple PRIME orders, pursuant
to Exchange Rule 515A.7 PRIME is a
process by which a Member may
electronically submit for execution an
order it represents as agent (an ‘‘Agency
Order’’) against principal interest and/or
solicited interest. The Member that
submits the Agency Order (‘‘Initiating
Member’’) agrees to guarantee the
execution of the Agency Order by
submitting a contra-side order
representing principal interest or
solicited interest (‘‘Contra-Side Order’’).
When the Exchange receives a properly
designated Agency Order for Auction
processing, a request for response
(‘‘RFR’’) detailing the option, side, size
and initiating price is broadcasted to
MIAX participants up to an optional
designated limit price. Members may
submit responses to the RFR, which can
be either an Auction or Cancel (‘‘AOC’’)
order or an AOC eQuote. A cPRIME
in connection with the Options Order Protection
and Locked/Crossed Market Plan referenced in
Exchange Rule 1400), provided the Member meets
certain percentage thresholds in a month as
described in the PCRP table. See Fee Schedule,
Section 1(a)(iii). ‘‘Priority Customer’’ means a
person or entity that (i) is not a broker or dealer in
securities, and (ii) does not place more than 390
orders in listed options per day on average during
a calendar month for its own beneficial accounts(s).
A ‘‘Priority Customer Order’’ means an order for the
account of a Priority Customer. See Exchange Rule
100.
5 A ‘‘complex order’’ is any order involving the
concurrent purchase and/or sale of two or more
different options in the same underlying security
(the ‘‘legs’’ or ‘‘components’’ of the complex order),
for the same account, in a ratio that is equal to or
greater than one-to-three (.333) and less than or
equal to three-to-one (3.00) and for the purposes of
executing a particular investment strategy. A
complex order can also be a ‘‘stock-option’’ order,
which is an order to buy or sell a stated number
of units of an underlying security coupled with the
purchase or sale of options contract(s) on the
opposite side of the market, subject to certain
contingencies set forth in the proposed rules
governing complex orders. For a complete
definition of a ‘‘complex order,’’ see Exchange Rule
518(a)(5). See also Securities Exchange Act Release
No. 78620 (August 18, 2016), 81 FR 58770 (August
25, 2016) (SR–MIAX–2016–26).
6 See Securities Exchange Act Release No. 81131
(July 12, 2017), 82 FR 32900 (July 18, 2017) (SR–
MIAX–2017–19) (Order Granting Approval of a
Proposed Rule Change to Amend MIAX Options
Rules 515, Execution of Orders and Quotes; 515A,
MIAX Price Improvement Mechanism (‘‘PRIME’’)
and PRIME Solicitation Mechanism; and 518,
Complex Orders).
7 Id.
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]]>Agencies
[Federal Register Volume 86, Number 2 (Tuesday, January 5, 2021)]
[Notices]
[Pages 344-350]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-29132]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90811; File No. SR-MIAX-2020-41]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule To Increase the Number
of Additional Limited Service MIAX Express Interface Ports Available to
Market Makers
December 29, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 21, 2020, Miami International Securities Exchange, LLC
(``MIAX Options'' or ``Exchange'') filed with the Securities and
Exchange Commission (``Commission'') the proposed rule change as
described in Items I, II, and III below, which Items have been prepared
by the Exchange. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 increase the number of
additional Limited Service MIAX Express Interface (``MEI'') Ports
available to Market Makers.\3\ The Exchange does not propose to amend
the fees for additional Limited Service MEI Ports.
---------------------------------------------------------------------------
\3\ The term ``Market Makers'' refers to Lead Market Makers
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered
Market Makers (``RMMs'') collectively. See Exchange Rule 100.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Fee Schedule to offer two (2)
additional Limited Service MEI Ports to Market Makers. The Exchange
does not propose to amend the fees charged for the additional Limited
Service MEI Ports.
The Exchange initially filed the proposal to increase the number of
Limited Service MEI Ports available to Market Makers on June 30, 2020,
with no change to the actual fee amounts being charged.\4\ The First
Proposed Rule
[[Page 345]]
Change was published for comment in the Federal Register on July 20,
2020.\5\ The Exchange notes that the First Proposed Rule Change did not
receive any comment letters. Nonetheless, the Exchange withdrew the
First Proposed Rule Change on August 24, 2020.\6\ On August 25, 2020,
the Exchange refiled its proposal to increase the number of Limited
Service MEI Ports available to Market Makers (without increasing the
actual fee amounts) to provide further clarification regarding the
Exchange's annual cost for providing additional Limited Service MEI
Ports.\7\ The Second Proposed Rule Change was published for comment in
the Federal Register on September 11, 2020.\8\ Like the First Proposed
Rule Change, the Second Proposed Rule Change did not receive any
comment letters. Nonetheless, the Exchange withdrew the Second Proposed
Rule Change on October 23, 2020.\9\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 89317 (July 14,
2020), 85 FR 43918 (July 20, 2020) (SR-MIAX-2020-23) (the ``First
Proposed Rule Change'').
\5\ Id.
\6\ See Comment Letter from Christopher Solgan, VP, Senior
Counsel, the Exchange, dated August 24, 2020, notifying the
Commission that the Exchange would withdraw the First Proposed Rule
Change.
\7\ See Securities Exchange Act Release No. 89769 (September 4,
2020), 85 FR 55905 (September 10, 2020) (SR-MIAX-2020-29) (the
``Second Proposed Rule Change'').
\8\ Id.
\9\ See Comment Letter from Christopher Solgan, VP, Senior
Counsel, the Exchange, dated October 19, 2020, notifying the
Commission that the Exchange would withdraw the Second Proposed Rule
Change.
---------------------------------------------------------------------------
On October 23, 2020, the Exchange refiled its proposal to increase
the number of Limited Service MEI Ports available to Market Makers
(without increasing the actual fee amounts) to provide further
clarification regarding the Exchange's revenues, costs, and
profitability for the two additional Limited Service MEI Ports
(including information regarding the Exchange's methodology for
determining the costs and revenues for the two additional Limited
Service MEI Ports).\10\ The Third Proposed Rule Change was published
for comment in the Federal Register on November 12, 2020.\11\ Like the
First and Second Proposed Rule Changes, the Third Proposed Rule Change
did not receive any comment letters. Nonetheless, the Exchange withdrew
the Third Proposed Rule Change on December 21, 2020.\12\
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 90354 (November 5,
2020), 85 FR 71958 (November 12, 2020) (SR-MIAX-2020-34) (the
``Third Proposed Rule Change'').
\11\ Id.
\12\ See Comment Letter from Christopher Solgan, VP, Senior
Counsel, the Exchange, dated December 18, 2020, notifying the
Commission that the Exchange would withdraw the Third Proposed Rule
Change.
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The Exchange now submits this proposed rule change to increase the
number of additional Limited Service MEI Ports available to Market
Makers (without increasing the actual fee amounts) to provide
additional information regarding the Exchange's cost analysis for the
two additional Limited Service MEI Ports.
Currently, MIAX assesses monthly MEI Port Fees on Market Makers
based upon the number of MIAX matching engines \13\ used by the Market
Maker. Market Makers are allocated two (2) Full Service MEI Ports \14\
and two (2) Limited Service MEI Ports \15\ per matching engine to which
they connect. The Full Service MEI Ports, Limited Service MEI Ports,
and the additional Limited Service MEI Ports all include access to
MIAX's primary and secondary data centers and its disaster recovery
center. Market Makers may request additional Limited Service MEI Ports
for which they will be assessed the existing $100 monthly fee for each
additional port they request. This fee has been unchanged since
2016.\16\
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\13\ A ``matching engine'' is a part of the MIAX electronic
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with
multiple root symbols, and other matching engines will be dedicated
to one single option root symbol (for example, options on SPY will
be processed by one single matching engine that is dedicated only to
SPY). A particular root symbol may only be assigned to a single
designated matching engine. A particular root symbol may not be
assigned to multiple matching engines. See Fee Schedule, Section
5(d)(ii), note 29.
\14\ Full Service MEI Ports provide Market Makers with the
ability to send Market Maker quotes, eQuotes, and quote purge
messages to the MIAX System. Full Service MEI Ports are also capable
of receiving administrative information. Market Makers are limited
to two Full Service MEI Ports per matching engine. See Fee Schedule,
Section 5(d)(ii), note 27.
\15\ Limited Service MEI Ports provide Market Makers with the
ability to send eQuotes and quote purge messages only, but not
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports
are also capable of receiving administrative information. Market
Makers initially receive two Limited Service MEI Ports per matching
engine. See Fee Schedule, Section 5(d)(ii), note 28.
\16\ See Securities Exchange Act Release No. 79666 (December 22,
2016), 81 FR 96133 (December 29, 2016) (SR-MIAX-2016-47).
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The Exchange originally added the Limited Service MEI Ports to
enhance the MEI Port connectivity made available to Market Makers, and
has subsequently made additional Limited Service MEI Ports available to
Market Makers.\17\ Limited Service MEI Ports have been well received by
Market Makers since their addition. The Exchange now proposes to offer
to Market Makers the ability to purchase an additional two (2) Limited
Service MEI Ports per matching engine over and above the current six
(6) additional Limited Service MEI Ports per matching engine that are
available for purchase by Market Makers. The Exchange proposes making a
corresponding change to footnote 30 of the Exchange's Fee Schedule to
specify that Market Makers will now be limited to purchasing eight (8)
additional Limited Service MEI Ports per matching engine, for a total
of ten (10) per matching engine. All fees related to MEI Ports shall
remain unchanged and Market Makers that voluntarily purchase the
additional Limited Service MEI Ports will remain subject to the
existing $100 monthly fee per port.
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\17\ See Securities Exchange Act Release Nos. 70137 (August 8,
2013), 78 FR 49586 (August 14, 2013) (SR-MIAX-2013-39); 70903
(November 20, 2013), 78 FR 70615 (November 26, 2013) (SR-MIAX-2013-
52); 78950 (September 27, 2016), 81 FR 68084 (October 3, 2016) (SR-
MIAX-2016-33); and 79198 (October 31, 2016), 81 FR 76988 (November
4, 2016) (SR-MIAX-2016-37).
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The Exchange is increasing the number of additional Limited Service
MEI Ports because the Exchange is expanding its network. This network
expansion is necessary due to increased customer demand and increased
volatility in the marketplace, both of which have translated into
increased message traffic rates across the network. Consequently, this
network expansion, which increases the number of switches supporting
customer facing systems, is necessary in order to provide sufficient
access to new and existing Members,\18\ to maintain a sufficient amount
of network capacity head-room, and to continue to provide the same
level of service across the Exchange's low-latency, high-throughput
technology environment.
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\18\ 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.
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Currently, the Exchange has 8 network switches that support the
entire customer base of MIAX. The Exchange plans to increase this to 10
switches, which will increase the number of available customer ports by
25%. This increase in the number of available customer ports will
enable the Exchange to continue to provide sufficient and equal access
to MIAX Systems to all Members. Absent the proposed increase in
available MEI Ports, the Exchange projects that its current inventory
will be depleted and it will lack sufficient capacity to continue to
meet Members' access needs.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is
[[Page 346]]
consistent with Section 6(b) of the Act \19\ in general, and furthers
the objectives of Section 6(b)(5) of the Act \20\ 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 customers, issuers, brokers and dealers.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposal is consistent with the
objectives of Section 6(b)(5) of the Act \21\ because the proposed
additional Limited Service MEI Ports will be available to all Market
Makers and the current fees for the additional Limited Service MEI
Ports apply equally to all Market Makers regardless of type, and access
to the Exchange is offered on terms that are not unfairly
discriminatory. The Exchange is proposing to increase the number of
available Limited Service MEI Ports because the Exchange is expanding
its network. This network expansion is necessary due to increased
customer demand and increased volatility in the marketplace, both of
which have translated into increased message traffic rates across the
network. Consequently, this network expansion, which increases the
number of switches supporting customer facing systems, is necessary in
order to provide sufficient and equal access to new and existing
Members, to maintain a sufficient amount of network capacity head-room,
and to continue to provide the same level of service across the
Exchange's low-latency, high-throughput technology environment.
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\21\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Currently, the Exchange has 8 network switches that support the
entire customer base of MIAX. The Exchange plans to increase this to 10
switches, which will increase the number of available customer ports by
25%. This increase in the number of available customer ports will
enable the Exchange to continue to provide sufficient and equal access
to MIAX Systems for all Members. Absent the proposed increase in
available MEI Ports, the Exchange projects that its current inventory
will be depleted and it will lack sufficient capacity to continue to
meet Members' access needs. Further, the Exchange notes the decision of
whether to purchase two additional Limited Service MEI Ports is
completely optional and it is a business decision for each Market Maker
to determine whether the additional Limited Service MEI Ports are
necessary to meet their business requirements.
The Exchange further believes that the availability of the
additional Limited Service MEI Ports is equitable and not unfairly
discriminatory because it will enable Market Makers to maintain
uninterrupted access to the MIAX System and consequently enhance the
marketplace by helping Market Makers to better manage risk, thus
preserving the integrity of the MIAX markets, all to the benefit of and
protection of investors and the public as a whole.
The Exchange also believes that its proposal is consistent with
Section 6(b)(4) of the Act because only Market Makers that voluntarily
purchase the two additional Limited Service MEI Ports will be charged
the existing $100 monthly fee per port, which has been unchanged since
2016.\22\ The Exchange does not propose to amend the fees applicable to
additional Limited Service MEI Ports which have been previously filed
with the Commission and become effective after notice and public
comment.\23\ As stated above, the Exchange proposes to expand its
network by making available two additional Limit Service MEI Ports due
to increased customer demand and increased volatility in the
marketplace, both of which have translated into increased message
traffic rates across the network. The cost to expand the network in
this manner is greater than the revenue the Exchange anticipates the
additional Limited Service MEI Ports will generate. Specifically, the
Exchange estimates it will incur a one-time cost of approximately
$175,000 in capital expenditures (``CapEx'') on hardware, software, and
other items to expand the network to make available the two additional
Limited Service MEI Ports. This estimated cost also includes expense
associated with providing the necessary engineering and support
personnel to transition those Market Makers who wish to acquire the two
additional Limited Service MEI Ports.
---------------------------------------------------------------------------
\22\ See supra note 16.
\23\ See supra notes 16 and 17.
---------------------------------------------------------------------------
The Exchange projects that approximately six to seven Market Makers
will purchase the additional Limited Service MEI Ports, which will be
subject to the existing monthly fee of $100 per port. Accordingly, the
Exchange projects that the annualized revenue from the two additional
Limited Service MEI Ports will be approximately $16,800 (assuming seven
Market Makers purchase the two additional Limited Service MEI Ports).
Therefore, the Exchange's upfront cost in expanding its network to
provide its Members with the two additional Limited Service MEI Ports--
approximately $175,000--is significant relative to the anticipated
annualized revenue the Exchange expects to bring in from the two
additional Limited Service MEI Ports--approximately $16,800. Further,
the Exchange anticipates it will incur approximately $100,371 in
annualized ongoing operating expense (``OpEx'') in order to support the
expanded network and the two additional Limited Service MEI Ports.
Thus, even excluding the upfront CapEx of $175,000, the Exchange is not
generating a supra-competitive profit from the provision of these two
additional Limited Service MEI Ports. In fact, even excluding the one-
time CapEx cost of $175,000, the Exchange anticipates generating an
annual loss from the provision of these two additional Limited Service
MEI Ports of ($83,571)--that is, $16,800 in revenue minus $100,371 in
expense equates to a loss of ($83,571) to support the additional ports
annually.
The Exchange conducted an extensive cost review in which the
Exchange analyzed every expense item in the Exchange's general expense
ledger (this includes over 150 separate and distinct expense items) to
determine whether each such expense relates to the additional Limited
Service MEI Ports, and, if such expense did so relate, what portion (or
percentage) of such expense actually supports the additional Limited
Service MEI Ports, and thus bears a relationship that is, ``in nature
and closeness,'' directly related to those services. The sum of all
such portions of expenses represents the total cost of the Exchange to
provide services associated with the two additional Limited Service MEI
Ports. For the avoidance of doubt, none of the expenses included herein
relating to the services associated with providing the two additional
Limited Service MEI Ports also relate to the provision of any other
services offered by the Exchange. Stated differently, no expense amount
of the Exchange is allocated twice. The Exchange notes that it made
certain representations in a previous filing \24\ regarding its expense
allocation for the provision of network connectivity services. The
Exchange represents that none of the expenses allocated to the
provision of network connectivity services are also allocated to the
provision of ports--that is, there is no overlap of any such expenses
that are
[[Page 347]]
included in the costs associated with services the Exchange provides
for connectivity and for the services the Exchange provides for ports.
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\24\ See Securities Exchange Act Release No. 87875 (December 31,
2019), 85 FR 770 (January 7, 2020) (SR-MIAX-2019-51).
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Specifically, utilizing 2019 expense figures, total third-party
expense, relating to fees paid by the Exchange to third-parties for
certain products and services for the Exchange to be able to provide
the two additional Limited Service MEI Ports, was approximately
$12,393. This includes, but is not limited to, a portion of the fees
paid to: (1) Equinix, for data center services, for the primary,
secondary, and disaster recovery locations of the Exchange's trading
system infrastructure; (2) Zayo Group Holdings, Inc. (``Zayo'') for
network services (fiber and bandwidth products and services) linking
the Exchange's office locations in Princeton, NJ and Miami, FL to all
data center locations; (3) Secure Financial Transaction Infrastructure
(``SFTI''),\25\ which supports network feeds for the entire U.S.
options industry; (4) various other services providers (including
Thompson Reuters, NYSE, Nasdaq, and Internap), which provide content,
network services, and infrastructure services for critical components
of options network services; and (5) various other hardware and
software providers (including Dell and Cisco, which support the
production environment in which Members and non-Members connect to the
network to trade, receive market data, etc.).
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\25\ In fact, on October 22, 2019, the Exchange was notified by
SFTI that it is again raising its fees charged to the Exchange by
approximately 11%, without having to show that such fee change
complies with the Act by being reasonable, equitably allocated, and
not unfairly discriminatory. It is unfathomable to the Exchange
that, given the critical nature of the infrastructure services
provided by SFTI, that its fees are not required to be rule-filed
with the Commission pursuant to Section 19(b)(1) of the Act and Rule
19b-4 thereunder. See 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b-4,
respectively.
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For clarity, only a portion of all fees paid to such third-parties
is included in the third-party expense herein, and no expense amount is
allocated twice. Accordingly, the Exchange does not allocate its entire
information technology and communication costs to the services
associated with providing the two additional Limited Service MEI Ports.
The Exchange believes it is reasonable to allocate such third-party
expense described above towards the total cost to the Exchange to
provide the services associated with the two additional Limited Service
MEI Ports. In particular, the Exchange believes it is reasonable to
allocate the identified portion of the Equinix expense because Equinix
operates the data centers (primary, secondary, and disaster recovery)
that host the Exchange's network infrastructure. This includes, among
other things, the necessary storage space, which continues to expand
and increase in cost, power to operate the network infrastructure, and
cooling apparatuses to ensure the Exchange's network infrastructure
maintains stability. Without these services from Equinix, the Exchange
would not be able to operate and support the network and provide the
services associated with the two additional Limited Service MEI Ports
to its Members and non-Members and their customers. The Exchange did
not allocate all of the Equinix expense toward the cost of providing
the services associated with the two additional Limited Service MEI
Ports, only that portion which the Exchange identified as being
specifically mapped to providing the services associated with the two
additional Limited Service MEI Ports, approximately 0.5% of the total
Equinix expense. The Exchange believes this allocation is reasonable
because it represents the Exchange's actual cost to provide the
services associated with the two additional Limited Service MEI Ports,
and not any other service, as supported by its cost review.
The Exchange believes it is reasonable to allocate the identified
portion of the Zayo expense because Zayo provides the internet, fiber
and bandwidth connections with respect to the network, linking the
Exchange with its affiliates, MIAX PEARL and MIAX Emerald, as well as
the data center and disaster recovery locations. As such, all of the
trade data, including the billions of messages each day per exchange,
flow through Zayo's infrastructure over the Exchange's network. Without
these services from Zayo, the Exchange would not be able to operate and
support the network and provide the services associated with the two
additional Limited Service MEI Ports. The Exchange did not allocate all
of the Zayo expense toward the cost of providing the services
associated with the two additional Limited Service MEI Ports, only the
portion which the Exchange identified as being specifically mapped to
providing the two additional Limited Service MEI Ports, approximately
0.4% of the total Zayo expense. The Exchange believes this allocation
is reasonable because it represents the Exchange's actual cost to
provide the services associated with the two additional Limited Service
MEI Ports, and not any other service, as supported by its cost review.
The Exchange believes it is reasonable to allocate the identified
portions of the SFTI expense and various other service providers'
(including Thompson Reuters, NYSE, Nasdaq, and Internap) expense
because those entities provide connectivity and feeds for the entire
U.S. options industry, as well as the content, network services, and
infrastructure services for critical components of the network. Without
these services from SFTI and various other service providers, the
Exchange would not be able to operate and support the network and
provide access to its Members and non-Members and their customers. The
Exchange did not allocate all of the SFTI and other service providers'
expense toward the cost of providing the services associated with the
two additional Limited Service MEI Ports, only the portions which the
Exchange identified as being specifically mapped to providing the
services associated with the two additional Limited Service MEI Ports,
approximately 0.5% of the total SFTI and other service providers'
expense. The Exchange believes this allocation is reasonable because it
represents the Exchange's actual cost to provide the services
associated with the two additional Limited Service MEI Ports.
The Exchange believes it is reasonable to allocate the identified
portion of the other hardware and software provider expense because
this includes costs for dedicated hardware licenses for switches and
servers, as well as dedicated software licenses for security monitoring
and reporting across the network. Without this hardware and software,
the Exchange would not be able to operate and support the network and
provide access to its Members and non-Members and their customers. The
Exchange did not allocate all of the hardware and software provider
expense toward the cost of providing the services associated with the
two additional Limited Service MEI Ports, only the portions which the
Exchange identified as being specifically mapped to providing the
services associated with the two additional Limited Service MEI Ports,
approximately 0.3% of the total hardware and software provider expense.
The Exchange believes this allocation is reasonable because it
represents the Exchange's actual cost to provide the services
associated with the two additional Limited Service MEI Ports.
For 2019, total internal expense, relating to the internal costs of
the Exchange to provide the services associated with the two additional
Limited Service MEI Ports was $87,978. This includes, but is not
limited to, costs associated with: (1) Employee compensation and
benefits for full-time
[[Page 348]]
employees that support the services associated with providing the two
additional Limited Service MEI Ports, including staff in network
operations, trading operations, development, system operations,
business, as well as staff in general corporate departments (such as
legal, regulatory, and finance) that support those employees and
functions (including an increase as a result of the higher determinism
project); (2) depreciation and amortization of hardware and software
used to provide the services associated with the two additional Limited
Service MEI Ports, including equipment, servers, cabling, purchased
software and internally developed software used in the production
environment to support the network for trading; and (3) occupancy costs
for leased office space for staff that provide the services associated
with the two additional Limited Service MEI Ports. The breakdown of
these costs is more fully-described below. For clarity, only a portion
of all such internal expenses are included in the internal expense
herein, and no expense amount is allocated twice. Accordingly, the
Exchange does not allocate its entire costs contained in those items to
the services associated with providing the two additional Limited
Service MEI Ports.
The Exchange believes it is reasonable to allocate such internal
expense described above towards the total cost to the Exchange to
provide the services associated with the two additional Limited Service
MEI Ports. In particular, the Exchange's employee compensation and
benefits expense relating to providing the services associated with the
two additional Limited Service MEI Ports was approximately $58,870,
which is only a portion of the $9,811,685 total expense for employee
compensation and benefits. The Exchange believes it is reasonable to
allocate the identified portion of such expense because this includes
the time spent by employees of several departments, including
Technology, Back Office, Systems Operations, Networking, Business
Strategy Development (who create the business requirement documents
that the Technology staff use to develop network features and
enhancements), Trade Operations, Finance (who provide billing and
accounting services relating to the network), and Legal (who provide
legal services relating to the network, such as rule filings and
various license agreements and other contracts). As part of the
extensive cost review conducted by the Exchange, the Exchange reviewed
the amount of time spent by each employee on matters relating to the
provision of services associated with the two additional Limited
Service MEI Ports. Without these employees, the Exchange would not be
able to provide the services associated with the two additional Limited
Service MEI Ports to its Members and non-Members and their customers.
The Exchange did not allocate all of the employee compensation and
benefits expense toward the cost of the services associated with
providing the two additional Limited Service MEI Ports, only the
portions which the Exchange identified as being specifically mapped to
providing the services associated with the two additional Limited
Service MEI Ports, approximately 0.6% of the total employee
compensation and benefits expense. The Exchange believes this
allocation is reasonable because it represents the Exchange's actual
cost to provide the services associated with the two additional Limited
Service MEI Ports, and not any other service, as supported by its cost
review.
The Exchange's depreciation and amortization expense relating to
providing the services associated with the two additional Limited
Service MEI Ports was $26,362, which is only a portion of the
$5,272,469 total expense for depreciation and amortization. The
Exchange believes it is reasonable to allocate the identified portion
of such expense because such expense includes the actual cost of the
computer equipment, such as dedicated servers, computers, laptops,
monitors, information security appliances and storage, and network
switching infrastructure equipment, including switches and taps that
were purchased to operate and support the network and provide the
services associated with the two additional Limited Service MEI Ports.
Without this equipment, the Exchange would not be able to operate the
network and provide the services associated with the two additional
Limited Service MEI Ports to its Members and non-Members and their
customers. The Exchange did not allocate all of the depreciation and
amortization expense toward the cost of providing the services
associated with the two additional Limited Service MEI Ports, only the
portion which the Exchange identified as being specifically mapped to
providing the services associated with the two additional Limited
Service MEI Ports, approximately 0.5% of the total depreciation and
amortization expense, as these services would not be possible without
relying on such equipment. The Exchange believes this allocation is
reasonable because it represents the Exchange's actual cost to provide
the services associated with the two additional Limited Service MEI
Ports, and not any other service, as supported by its cost review.
The Exchange's occupancy expense relating to providing the services
associated with providing the two additional Limited Service MEI Ports
was approximately $2,746, which is only a portion of the $686,437 total
expense for occupancy. The Exchange believes it is reasonable to
allocate the identified portion of such expense because such expense
represents the portion of the Exchange's cost to rent and maintain a
physical location for the Exchange's staff who operate and support the
network, including providing the services associated with the two
additional Limited Service MEI Ports. This amount consists primarily of
rent for the Exchange's Princeton, NJ office, as well as various
related costs, such as physical security, property management fees,
property taxes, and utilities. The Exchange operates its Network
Operations Center (``NOC'') and Security Operations Center (``SOC'')
from its Princeton, New Jersey office location. A centralized office
space is required to house the staff that operates and supports the
network. The Exchange currently has approximately 160 employees.
Approximately two-thirds of the Exchange's staff are in the Technology
department, and the majority of those staff have some role in the
operation and performance of the services associated with providing the
two additional Limited Service MEI Ports. Without this office space,
the Exchange would not be able to operate and support the network and
provide the services associated with the two additional Limited Service
MEI Ports to its Members and non-Members and their customers.
Accordingly, the Exchange believes it is reasonable to allocate the
identified portion of its occupancy expense because such amount
represents the Exchange's actual cost to house the equipment and
personnel who operate and support the Exchange's network infrastructure
and the services associated with the two additional Limited Service MEI
Ports. The Exchange did not allocate all of the occupancy expense
toward the cost of providing the services associated with the two
additional Limited Service MEI Ports, only the portion which the
Exchange identified as being specifically mapped to operating and
supporting the network, approximately 0.4% of the total occupancy
expense. The Exchange believes this allocation is reasonable because it
represents the
[[Page 349]]
Exchange's cost to provide the services associated with the two
additional Limited Service MEI Ports, and not any other service, as
supported by its cost review.
Accordingly, based on the facts and circumstances presented, the
Exchange believes that its provision of the services associated with
the two additional Limited Service MEI Ports will not result in
excessive pricing or supra-competitive profit.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to allocate the respective percentages of each expense
category described above towards the total cost to the Exchange of
operating and supporting the network, including providing the services
associated with the two additional Limited Service MEI Ports because
the Exchange performed a line-by-line item analysis of all the expenses
of the Exchange, and has determined the expenses that directly relate
to operation and support of the network. Further, the Exchange notes
that, without the specific third-party and internal items listed above,
the Exchange would not be able to operate and support the network,
including providing the services associated with the two additional
Limited Service MEI Ports to its Members and non-Members and their
customers. Each of these expense items, including physical hardware,
software, employee compensation and benefits, occupancy costs, and the
depreciation and amortization of equipment, have been identified
through a line-by-line item analysis to be integral to the operation
and support of the network. Providing the two additional Limited
Service MEI Ports at the existing rates is intended to recover the
Exchange's costs of operating and supporting the network.
Accordingly, the Exchange believes that providing the two
additional Limited Service MEI Ports at the existing rate is fair and
reasonable because it does not result in excessive pricing or supra-
competitive profit, when comparing the actual network operation and
support costs to the Exchange versus the projected annual revenue from
providing the two additional Limited Service MEI Ports.
Further, subjecting the two additional Limited Service MEI Ports to
the existing $100 monthly fee per port is also designed to encourage
Market Makers to be efficient with their port usage, thereby resulting
in a corresponding increase in the efficiency that the Exchange would
be able to realize in managing its aggregate costs for providing the
two additional ports. There is no requirement that any Market Maker
maintain a specific number of Limited Service MEI Ports and a Market
Maker may choose to maintain as many or as few of such ports as each
Market Maker deems appropriate.
Finally, subjecting the two additional Limited Service MEI Ports to
the existing $100 monthly fee will help to encourage Limited Service
MEI Port usage in a way that aligns with the Exchange's regulatory
obligations. As a national securities exchange, the Exchange is subject
to Regulation Systems Compliance and Integrity (``Reg. SCI'').\26\ Reg.
SCI Rule 1001(a) requires that the Exchange establish, maintain, and
enforce written policies and procedures reasonably designed to ensure
(among other things) that its Reg. SCI systems have levels of capacity
adequate to maintain the Exchange's operational capability and promote
the maintenance of fair and orderly markets.\27\ By encouraging Members
to be efficient with their usage of Limited MEI Ports, the current fee
that will continue to apply to the proposed two (2) additional Limited
Service MEI Ports will support the Exchange's Reg. SCI obligations in
this regard by ensuring that unused ports are available to be allocated
based on individual Members needs and as the Exchange's overall order
and trade volumes increase.
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\26\ 17 CFR 242.1000-1007.
\27\ 17 CFR 242.1001(a).
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B. Self-Regulatory Organization's Statement on Burden on Competition
MIAX does not believe that the proposed rule change will result in
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as amended. The proposed rule
change will not impose a burden on competition but will benefit
competition by enhancing the Exchange's ability to compete by providing
additional services to market participants. It is not intended to
address a competitive issue. Rather, the proposed increase in the
number of additional Limited Service MEI Ports available per Market
Maker is intended to allow the Exchange to increase its inventory of
MEI Ports to meet increased Member demand. The Exchange is increasing
the number of available additional Limited Service MEI Ports in
response to Market Maker demand for increased connectivity to the MIAX
System. The Exchange's current inventory may soon be insufficient to
meet those needs. Again, the Exchange is not proposing to amend the
fees for MEI Ports, just to increase the number of MEI Ports available
per Market Maker. The Exchange also does not believe that the proposed
rule change will impose a burden on intramarket competition because the
two additional Limited Service MEI Ports will be available to all
Market Makers on an equal basis. It is a business decision of each
Market Maker whether to pay for the additional Limited Service MEI
Ports.
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,\28\ and Rule 19b-4(f)(2) \29\ 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.
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\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 17 CFR 240.19b-4(f)(2).
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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-MIAX-2020-41 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-MIAX-2020-41. 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
[[Page 350]]
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-MIAX-2020-41, and should be submitted on
or before January 26, 2021.
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\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-29132 Filed 1-4-21; 8:45 am]
BILLING CODE 8011-01-P
