Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX PEARL Equities Fee Schedule To Adopt Connectivity Fees, Port Fees, a Technical Support Request Fee, and a Historical Market Data Fee, 9096-9108 [2021-02776]
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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Notices
public interest, and Section 6(b)(8) of
the Act 17 which requires that the
Exchange’s rules not impose any burden
on competition that is not necessary or
appropriate.
IEX believes that this proposal is
consistent with the Act because it is
consistent with, and implements, the
Allocation Exemption, and is designed
to assist the Exchange and its Industry
Members in meeting regulatory
obligations pursuant to the Plan. In
approving the Plan, the SEC noted that
the Plan ‘‘is necessary and appropriate
in the public interest, for the protection
of investors and the maintenance of fair
and orderly markets, to remove
impediments to, and perfect the
mechanism of a national market system,
or is otherwise in furtherance of the
purposes of the Act.’’ 18 To the extent
that this proposal implements the Plan,
and applies specific requirements to
Industry Members, the Exchange
believes that this proposal furthers the
objectives of the Plan, as identified by
the SEC, and is therefore consistent with
the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
IEX 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. The
Exchange notes that the proposed rule
change is consistent with the Allocation
Exemption, and is designed to assist the
Exchange in meeting its regulatory
obligations pursuant to the Plan. The
Exchange also notes that the proposed
rule change will apply equally to all
Industry Members. In addition, all
national securities exchanges and
FINRA are proposing this amendment to
their Compliance Rules. Therefore, this
is not a competitive rule filing and does
not impose a burden on competition.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments on the proposed
rule change were neither solicited nor
received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change
does not: (i) Significantly affect the
protection of investors or the public
interest; (ii) impose any significant
17 15
U.S.C. 78f(b)(8).
Securities Exchange Act Release No. 79318
(November 15, 2016), 81 FR 84696, 84697
(November 23, 2016).
18 See
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burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A) of the Act and Rule 19b–
4(f)(6) 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
under Section 19(b)(2)(B) 19 of the Act to
determine whether the proposed rule
change 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–
IEX–2021–02 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–IEX–2021–02. 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–IEX–2021–02, and should
be submitted on or before March 4,
2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02778 Filed 2–10–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91073; File No. SR–
PEARL–2021–02]
Self-Regulatory Organizations; MIAX
PEARL, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the MIAX
PEARL Equities Fee Schedule To
Adopt Connectivity Fees, Port Fees, a
Technical Support Request Fee, and a
Historical Market Data Fee
February 5, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January
29, 2021, MIAX PEARL, LLC (‘‘MIAX
PEARL’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX PEARL Equities Fee
Schedule (the ‘‘Fee Schedule’’) by
adopting fees applicable to participants
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
19 15
PO 00000
U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Notices
trading equity securities on and/or using
services provided by MIAX PEARL
Equities.3
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/pearl at MIAX PEARL’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
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
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1. Purpose
On August 14, 2020, the Commission
approved the Exchange’s proposal to
adopt rules governing the trading of
equity securities, referred to as MIAX
PEARL Equities.4 The Exchange
launched MIAX PEARL Equities on
September 25, 2020. The Exchange
proposes to adopt a Definitions section
in the Fee Schedule, as well as the
following fees: (1) Connectivity fees for
Equity Members 5 and non-Members; (2)
Port fees (together with the proposed
connectivity fees, the ‘‘Proposed Access
Fees’’); (3) a Technical Support Request
fee; and (4) a fee for Historical Market
Data (collectively, the ‘‘Proposed Fees’’).
The Exchange initially filed the
proposal on September 24, 2020.6 The
Exchange withdrew the First Proposed
3 See Exchange Rule 1901. The Exchange notes
that it submitted a separate filing with the
Commission pursuant to Section 19(b)(3)(A) of the
Act to establish the Fee Schedule and adopt
transaction fees. See Securities Exchange Act
Release No. 90102 (October 6, 2020), 85 FR 64559
(October 13, 2020) (SR–PEARL–2020–17).
4 See Securities Exchange Act Release No. 89563
(August 14, 2020), 85 FR 51510 (August 20, 2020)
(SR–PEARL–2020–03) (Order Approving a
Proposed Rule Change, as Modified by Amendment
No. 1, To Establish Rules Governing the Trading of
Equity Securities) (‘‘Approval Order’’).
5 The term ‘‘Equity Member’’ means a Member
authorized by the Exchange to transact business on
MIAX PEARL Equities. See Exchange Rule 1901.
6 The Exchange initially filed the proposed fee
changes on September 24, 2020 (SR–PEARL–2020–
18). See SR–PEARL–2020–18 (the ‘‘First Proposed
Rule Change’’).
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Rule Change on October 5, 2020 and
submitted SR–PEARL–2020–19
(‘‘Second Proposed Rule Change’’).7 The
Second Proposed Rule Change was
published for comment in the Federal
Register on October 20, 2020 8 and no
comment letters were received. The
Exchange withdrew the Second
Proposed Rule Change 9 and submitted
SR–PEARL–2020–33 (‘‘Third Proposed
Rule Change’’).10 The Third Proposed
Rule Change was published in the
Federal Register on December 17, 2020
and no comment letters were received.
The Exchange withdrew the Third
Proposed Rule Change 11 and now
replaces it with this filing to provide
further clarification regarding the
Exchange’s cost justification analysis for
the Proposed Fees.12
The Exchange believes that
exchanges, in setting fees of all types,
should meet very high standards of
transparency to demonstrate why each
new fee or fee increase meets the
requirements of the Act that fees be
reasonable, equitably allocated, not
unfairly discriminatory, and not create
an undue burden on competition among
members and markets. The Exchange
believes this high standard is especially
important when an exchange imposes
various access fees on market
participants to access an exchange’s
marketplace, as well as other nontransaction fees. MIAX PEARL deems
Port fees and Connectivity fees to be
access fees, and that Ports and
Connectivity are inextricably linked
components of the Exchange’s network.
Accordingly, the Exchange believes that
it is reasonable and appropriate that the
costs and revenues for both should be
considered together, as the services
associated with connectivity and ports
are linked pieces of the network’s
infrastructure, both of which are
necessary for a market participant to
access and use the trading System of the
Exchange. Both Connectivity fee and
Port fee revenue are consolidated into a
single line item (Access Fees) on the
Exchange’s financial statements. The
7 See Securities Exchange Act Release No. 90186
(October 14, 2020), 85 FR 66656 (October 20, 2020).
8 See id.
9 See letter from Chris Solgan, VP, Senior
Counsel, the Exchange, dated November 20, 2020,
notifying the Commission that the Exchange would
withdraw SR–PEARL–2020–19.
10 See Securities Exchange Act Release No. 90651
(December 11, 2020), 85 FR 81971 (December 17,
2020).
11 See letter from Joseph W. Ferraro, SVP, Deputy
General Counsel, the Exchange, dated January 15,
2021, notifying the Commission that the Exchange
would withdraw SR–PEARL–2020–33.
12 In this filing, the Exchange also corrects an
error in the earlier filings by replacing references to
the term ‘‘Priority Purge Ports’’ with simply ‘‘Purge
Ports.’’
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Exchange believes that it is important to
demonstrate that the Proposed Fees are
based on its costs to provide the services
associated with the Proposed Fees and
reasonable business needs. Accordingly,
the Exchange believes the Proposed
Fees, in general, and the Proposed
Access Fees, in particular, will allow
the Exchange to offset a portion of the
expenses the Exchange has and will
incur, and that the Exchange has
provided sufficient transparency (as
described below) into how the Exchange
determined to charge such fees.
Accordingly, the Exchange is providing
an analysis of its revenues, costs, and
profitability associated with the
Proposed Access Fees. This analysis
includes information regarding its
methodology for determining the costs
and revenues associated with the
Proposed Access Fees.
Definitions
The Exchange proposes to include a
Definitions section at the beginning of
the Fee Schedule, before the General
Notes section. The purpose of the
Definitions section is to provide market
participants greater clarity and
transparency regarding the applicability
of fees and rebates by defining terms
used within the Fee Schedule in a single
location. The Exchange notes that other
equities exchanges include Definitions
sections in their respective fee
schedules,13 and the Exchange believes
that including a Definitions section in
the front of the Fee Schedule makes the
Fee Schedule more user-friendly and
makes the Fee Schedule more
comprehensive.
Unless included in the Definition
section, capitalized terms used in the
Fee Schedule are defined in the MIAX
PEARL Equities Rules. Each of the
definitions proposed to be included in
the Fee Schedule are based on
definitions included in the existing
MIAX PEARL fee schedule applicable to
options (‘‘Options Fee Schedule’’) 14 or
those of another exchange. In particular,
the Exchange propose to offer and
define ports and interfaces that provide
connectivity to MIAX PEARL Equities.
The Exchange notes that each of these
offerings are not novel or unique, are
available on other equity exchanges, and
are currently offered by the Exchange
for options trading and provided for in
13 See Cboe BZX Exchange, Inc. Fee Schedule,
Definitions section; Cboe BYX Exchange, Inc.,
Definitions section; Cboe EDGA Exchange, Inc.,
Definitions section; Cboe EDGX Exchange, Inc.,
Definitions section.
14 See the Options Fee Schedule available at
https://www.miaxoptions.com/sites/default/files/
fee_schedule-files/MIAX_PEARL_Fee_Schedule_
11052020.pdf.
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the Exchange’s Options Fee Schedule.
The Exchange proposes to define the
following terms in the Fee Schedule:
• ‘‘Cross-connect’’ occurs when the
affected third-party system is sited at
the same data center where MIAX
PEARL Equities systems are sited, and
the third-party connects to MIAX
PEARL Equities through the data center,
rather than connecting directly to MIAX
PEARL Equities outside of the data
center.
• ‘‘Exchange System Disruption’’
means an outage of a Matching Engine
or collective Matching Engines for a
period of two consecutive hours or
more, during trading hours.
• ‘‘Extranet Provider’’ means a
technology provider that connects with
MIAX PEARL Equities systems and in
turn provides such connectivity to
MIAX PEARL Equities participants that
do not connect directly with MIAX
PEARL Equities.
• ‘‘FIX Order by Order’’ means a type
of FXD Port that sends all order
activities other than reject message,
including Execution Reports and Trade
Cancel/Correct messages. FIX Order by
Order is currently offered by the
Exchange for options trading and
provided for in the Exchange’s Options
Fee Schedule.
• ‘‘FIX Order Interface’’ or ‘‘FOI’’
means the Financial Information
Exchange interface for certain order
types as set forth in Exchange Rule
2614. FOI is currently offered by the
Exchange for options trading and
provided for in the Exchange’s Options
Fee Schedule.
• ‘‘FIX Port’’ means a FIX port that
allows Equity Members to send orders
and other messages using the FIX
protocol. FIX is currently offered by the
Exchange for options trading and
provided for in the Exchange’s Options
Fee Schedule.
• ‘‘Full Service Port’’ or ‘‘FSP’’ means
an MEO port that supports all MEO
order input message types. FSP is
currently offered by the Exchange for
options trading and provided for in the
Exchange’s Options Fee Schedule.
• ‘‘FIX Drop Port’’ or ‘‘FXD’’ means a
messaging interface that provides realtime order activities of firms’ MEO and
FOI orders. MIAX PEARL Equities offers
two types of FXD ports: (1) Standard
FIX Drop; and (2) FIX Order by Order
Drop. FXD Ports may be used by
Equities Market Makers, Order Entry
Firms and clearing firms. FXD is
currently offered by the Exchange for
options trading and provided for in the
Exchange’s Options Fee Schedule.
• ‘‘MENI’’ means the MIAX Express
Network Interconnect, which is a
network infrastructure which provides
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Equity Members and non-Members
network connectivity to the trading
platforms, market data systems, test
systems, and disaster recovery facilities
of the Exchange. The MENI consists of
the low latency and ultra-low latency
(‘‘ULL’’) connectivity options set forth
in the Exchange’s Fee Schedule. MENI
is currently offered by the Exchange for
options trading and provided for in the
Exchange’s Options Fee Schedule.
• ‘‘MEO Interface’’ or ‘‘MEO’’ means
a binary order interface for certain order
types as set forth in Rule 516 into the
MIAX PEARL System. See Exchange
Rule 100.
• ‘‘Service Bureau’’ means a
technology provider that offers and
supplies technology and technology
services to a trading firm that does not
have its own proprietary system.
• ‘‘Standard FIX Drop’’ means an
FXD Port that only sends trade
information, including Execution
Reports and Trade Cancel/Correct
messages. Standard FIX Drop is
currently offered by the Exchange for
options trading and provided for in the
Exchange’s Options Fee Schedule.
• ‘‘Third Party Vendor’’ means a
subscriber of MIAX PEARL Equities’
market and other data feeds, which they
in turn use for redistribution purposes.
• ‘‘Waiver Period’’ means, for each
applicable fee, the period of time from
the initial effective date of the MIAX
PEARL Equities Fee Schedule until such
time that MIAX PEARL has an effective
fee filing establishing the applicable fee.
MIAX PEARL Equities will issue a
Regulatory Circular announcing the
establishment of an applicable fee that
was subject to a Waiver Period at least
fifteen (15) days prior to the termination
of the Waiver Period and effective date
of any such applicable fee.
Proposed Access Fees
To provide market participants with a
better understanding of how the
Exchange has established the levels of
the Proposed Access Fees, the Exchange
is providing information in this
proposal regarding the costs incurred by
the Exchange to provide services
associated with the Proposed Access
Fees, including the Exchange’s cost
allocation methodology (information
that explains the Exchange’s rationale
for determining that it was reasonable to
allocate certain expenses described in
this filing towards the total cost to the
Exchange to provide the services
associated with the Proposed Access
Fees). The Exchange is also providing
an analysis of its expected revenues and
profitability for the services associated
with the Proposed Access Fees.
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In order to determine the Exchange’s
costs for providing the services
associated with the Proposed Access
Fees, the Exchange conducted an
extensive review in which the Exchange
analyzed every expense item in the
Exchange’s general expense ledger to
determine whether each such expense
relates to the services associated with
the Proposed Access Fees, and, if such
expense did so relate, what portion (or
percentage) of such expense actually
supports those services. The sum of all
such portions of expenses represents the
total cost of the Exchange to provide the
services associated with the Proposed
Access Fees. For the avoidance of doubt,
no expense amount was allocated twice.
The Exchange is also providing detailed
information regarding the Exchange’s
cost allocation methodology—namely,
information that explains the
Exchange’s rationale for determining
that it was reasonable to allocate certain
expenses described in this filing
towards the total cost to the Exchange
to provide the Proposed Access Fees.
Since MIAX PEARL Equities did not
exist in 2019 (operations only just
launched on September 25, 2020), the
Exchange’s most recent publicly
available financial statement (2019
Audited Unconsolidated Financial
Statement) is not an accurate reflection
of the total annual costs associated with
the development and operation of MIAX
PEARL Equities. Accordingly, the
Exchange believes it is more appropriate
to justify its fees using cost figures that
are isolated specifically for MIAX
PEARL Equities on an annualized basis,
and, utilizing a recent monthly billing
cycle representative of 2020 monthly
revenue, extrapolated annualized
revenue on a going-forward basis. The
Exchange does not believe it is
appropriate to factor into its analysis
future revenue growth or decline into its
projections for purposes of these
calculations, given the uncertainty of
such projections due to the continually
changing access needs of market
participants, discounts that can be
achieved through reaching certain tiers,
uncertainty relating to the timing of the
expiration of certain fee waivers,
uncertainty relating to the actual fee
amounts to be established upon
expiration of said fee waivers, market
participant consolidation, etc.
Additionally, the Exchange similarly
does not factor into its analysis future
cost growth or decline. The purpose of
presenting it in this manner is to
provide greater transparency into the
Exchange’s actual and expected
revenues, costs, and profitability
associated with providing the services
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associated with the Proposed Access
Fees. Based on this analysis, the
Exchange believes that the Proposed
Access Fees are fair and reasonable
because they will permit recovery of
less than all of the Exchange’s costs for
providing the services associated with
the Proposed Access Fees and will not
result in excessive pricing or supracompetitive profit when comparing the
Exchange’s total annual expense
associated with providing the services
associated with the Proposed Access
Fees versus the total projected annual
revenue the Exchange will collect for
providing those services.
Connectivity Fees
Specifically, proposed Sections (2a)
and (b) of the Fee Schedule describe
network connectivity fees for the 1
Gigabit (‘‘Gb’’) ultra-low latency
(‘‘ULL’’) fiber connection and the 10 Gb
ULL fiber connection, which are to be
charged to both Equity Members and
non-Members of MIAX PEARL Equities
for connectivity to the Exchange’s
primary/secondary facility. The
Exchange also proposes to adopt
network connectivity fees for the 1 Gb
ULL and 10 Gb ULL fiber connections
for connectivity to the Exchange’s
disaster recovery facility.
The Exchange will offer to both
Equity Members and non-Members
various bandwidth alternatives for
connectivity to MIAX PEARL Equities,
to its primary and secondary facilities,
which consists of a 1 Gb ULL fiber
connection and a 10 Gb ULL fiber
connection. The Exchange also offers to
both Equity Members and non-Members
various bandwidth alternatives for
connectivity to the disaster recovery
facility of MIAX PEARL Equities, which
consists of a 1 Gb ULL fiber connection
and a 10 Gb ULL connection.
The Exchange proposes to establish
the monthly network connectivity fees
for such connections for both Equity
Members and non-Members. The
Exchange proposes to adopt the
following fees for connectivity to MIAX
PEARL Equities’ primary/secondary
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Port Fees
Proposed Section (2)(d), Port Fees, of
the Fee Schedule describes fees for
access and services used by Equity
Members and non-Members. MIAX
PEARL Equities provides three Port
types: (i) The Financial Information
Exchange Port (‘‘FIX Port’’), which
allows Equity Members to send orders
and other messages using the FIX
protocol; 15 (ii) the MIAX Express
Orders Interface (‘‘MEO Port’’), which
allows Equity Members order entry
capabilities to all MIAX PEARL Equities
Matching Engines; 16 and (iii) the FIX
Drop Port (‘‘FXD Port’’), which provides
real-time order activities firms’ MEO
and FOI orders. MIAX PEARL Equities
offers two types of FXD ports: (1)
Standard FIX Drop; 17 and (2) FIX Order
by Order.18 FXD Ports may be used by
Equities Market Makers,19 Order Entry
Firms 20 and clearing firms.
The Exchange proposes to assess
monthly Port fees to Equity Members in
each month the Equity Member is
credentialed to use a Port in the
production environment. MIAX PEARL
Equities has primary and secondary data
centers and a disaster recovery center.
Each Port provides access to all
Exchange data centers for a single fee.
The Exchange notes that, unless
otherwise specifically set forth in the
Fee Schedule, the Port fees include the
information communicated through the
Port. That is, unless otherwise
specifically set forth in the Fee
Schedule, there is no additional charge
for the information that is
communicated through the Port apart
from what the user is assessed for each
Port. The Exchange proposes to assess
Port Fees for FIX Ports, MEO Ports, and
FXD Ports as set forth in the following
table:
Per Port:
1st–5th Fee Waived for the Waiver Period.
15 ‘‘FIX Order Interface’’ or ‘‘FOI’’ means the
Financial Information Exchange interface for certain
order types as set forth in Exchange Rule 2614. See
the Definitions section of the Fee Schedule.
16 Each MEO interface will have one Full Service
Port (‘‘FSP’’) and one Purge Port. ‘‘Full Service
Port’’ or ‘‘FSP’’ means an MEO port that supports
all MEO order input message types. See the
Definitions section of the Fee Schedule. Purge Ports
are described in Exchange Rule 2618(a)(7)(b).
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external connectivity fees passed
through can include one-time set-up
fees, monthly charges, and other fees
charged to MIAX PEARL Equities by a
third-party for the benefit of an Equity
Member or non-Member.
Monthly port fees
includes connectivity to the primary, secondary and disaster recovery data centers
Type of port
FIX Port ∧ .............................
facility for both Equity Members and
non-Members: (a) $1,000 for the 1 Gb
ULL connection; and (b) $3,500 for the
10 Gb ULL connection. The Exchange
proposes to adopt the following fees for
connectivity to MIAX PEARL Equities’
disaster recovery facility for both Equity
Members and non-Members: (a) $1,000
for the 1 Gb ULL connection; and (b)
$3,000 for the 10 Gb ULL connection.
Monthly network connectivity fees for
Equity Members and non-Members for
connectivity with the primary/
secondary facility will be assessed in
any month the Equity Member or nonMembers is credentialed to use any of
the MIAX PEARL Equities Application
Programming Interfaces (‘‘APIs’’) or
market data feeds in the production
environment and will be pro-rated when
an Equity Member or non-Member
makes a change to the connectivity (by
adding or deleting connections) with
such pro-rated fees based on the number
of trading days that the Equity Member
or non-Member has been credentialed to
utilize any of the MIAX PEARL Equities’
APIs or market data feeds in the
production environment through such
connection, divided by the total number
of trading days in such month
multiplied by the applicable monthly
rate. Monthly network connectivity fees
for Equity Members and non-Members
for connectivity to the Disaster Recovery
Facility will be assessed in each month
during which the Equity Member or
non-Member has established
connectivity to the Disaster Recovery
Facility.
Proposed Section (2)(c) of the Fee
Schedule, Pass-Through of External
Connectivity Fees, provides for the pass
through of external connectivity fees
(described below) to Equity Members
and non-Members that establish
connections with MIAX PEARL Equities
through a third-party. Fees assessed to
MIAX PEARL Equities by third-party
external vendors on behalf of an Equity
Member or non-Member connecting to
MIAX PEARL Equities (including crossconnects), will be passed through to the
Equity Member or non-Member. The
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17 ‘‘Standard FIX Drop’’ means an FXD Port that
only sends trade information, including Execution
Reports and Trade Cancel/Correct messages. See the
Definitions section of the Fee Schedule.
18 ‘‘FIX Order by Order’’ means a type of FXD Port
that sends all order activities other than reject
message, including Execution Reports and Trade
Cancel/Correct messages. See the Definitions
section of the Fee Schedule.
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19 The term ‘‘Equities Market Maker’’ shall mean
an Equity Member that acts as a Market Maker in
equity securities, pursuant to Chapter XXVI. See
Exchange Rule 1901.
20 The term ‘‘Equities Order Entry Firm’’, ‘‘Order
Entry Firm’’, or ‘‘OEF’’, shall mean those Equity
Members representing orders as agent on MIAX
PEARL Equities and those non-Equity Market
Maker Members conducting proprietary trading. See
Exchange Rule 1901.
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Monthly port fees
includes connectivity to the primary, secondary and disaster recovery data centers
Type of port
MEO Port ∧ * .........................
FXD Port ∧ ............................
6th–10th Fee Waived for the Waiver Period.
11th–25th Fee Waived for the Waiver Period.
26th–50th $450.
51st–75th $400.
76th–100th $350.
101st or more $300.
Per Port:
1st–5th Fee Waived for the Waiver Period.
6th–10th Fee Waived for the Waiver Period.
11th–25th Fee Waived for the Waiver Period.
26th–50th $450.
51st–75th $400.
76th–100th $350.
101st or more $300.
Fee Waived for the Waiver Period.
∧ Each port will have access to all Matching Engines.
* The rates set forth above for MEO Ports entitle an Equity Member to one (1) FSP and one (1) Purge Port 21 for all Matching Engines for a
single port fee.
• MEO and FIX Portsare counted
separately for the tiers in the table.
The Exchange proposes to waive the
fee for the 1st through the 25th FIX
Ports and MEO Ports that Equity
Members are credentialed to use, as well
as the fees for all FXD Ports, for the
Waiver Period.22 For all Port fees that
the Exchange initially proposes to be
subject to the Waiver Period, the
Exchange will submit a rule filing to the
Commission to establish the fee amount
and any related requirements, and
provide notice to terminate the
applicable Waiver Period. Even though
most of the Port fees are waived during
the Waiver Period, the Exchange
believes that is appropriate to provide
market participants with the overall
structure of the fee by outlining the
structure on the Fee Schedule without
setting forth a specific fee amount in
certain areas, so that there is general
awareness that the Exchange intends to
assess such a fee in the future, should
the Waiver Period terminate and the
Exchange establish an applicable fee.
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Equity Member and Non-Member
Technical Support Request Fee
Proposed Section (2)(e), Member and
Non-Member Technical Support
Request Fee, of the Fee Schedule
describes the technical support request
fee to be charged to both Equity
Members and non-Members that request
21 Purge Ports are described in Exchange Rule
2618(a)(7)(b).
22 ‘‘Waiver Period’’ means, for each applicable
fee, the period of time from the initial effective date
of the MIAX PEARL Equities Fee Schedule until
such time that MIAX PEARL has an effective fee
filing establishing the applicable fee. MIAX PEARL
Equities will issue a Regulatory Circular
announcing the establishment of an applicable fee
that was subject to a Waiver Period at least fifteen
(15) days prior to the termination of the Waiver
Period and effective date of any such applicable fee.
See the Definitions section of the Fee Schedule.
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technical support at any of the MIAX
PEARL Equities data centers. MIAX
PEARL Equities proposes to charge a fee
of $200 per hour for requested technical
support. The Exchange intends to
provide Equity Members and nonMembers access to the Exchange’s onsite data center personnel for technical
support as a convenience to the Equity
Members and non-Members to test or
otherwise assess their connectivity to
the Exchange. Currently, the Exchange
charges the same fee amount for the
same services for options trading, as
well as at its affiliate option exchanges,
Miami International Securities
Exchange, LLC (‘‘MIAX’’) and MIAX
Emerald, LLC (‘‘MIAX Emerald’’).23
Market Data Fees
Proposed Sections (3)(a)–(c) describe
the fee to be charged for the Exchange’s
proprietary market data products. MIAX
PEARL Equities intends to offer the
following three proprietary market data
products: (a) Top of Market (‘‘ToM’’)
feed; (b) Depth of Market (‘‘DoM’’) feed;
and (c) the Historical Market Data feed.
The ToM feed is a data feed that
contains the price and aggregate size of
displayed top of book quotations, order
execution information, and
administrative messages for orders
entered on MIAX PEARL Equities. The
DoM feed is a data feed that contains the
displayed price and size of each order
entered on MIAX PEARL Equities, as
well as order execution information,
order cancellations, order modifications,
order identification numbers, and
administrative messages.
23 See MIAX Fee Schedule, Section (5)(f), Member
and non-Member Technical Support Request Fee;
MIAX PEARL Fee Schedule, Section (5)(f), Member
and non-Member Technical Support Request Fee;
and MIAX Emerald Fee Schedule, Section (5)(f),
Member and non-Member Technical Support
Request Fee.
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The Exchange proposes to provide
under Sections (3)(a) and (3)(b) of the
Fee Schedule that the ToM and DoM
would be offered free of charge during
the Waiver Period. Even though the fees
for the ToM and DoM data feeds are
waived during the Waiver Period, the
Exchange believes that is appropriate to
provide market participants with notice
of these feeds on the Fee Schedule
without setting forth a specific fee
amount, so that there is general
awareness that the Exchange intends to
assess such a fee in the future, should
the Waiver Period terminate and the
Exchange establish an applicable fee.
The Exchange will also offer
Historical Data for MIAX PEARL
Equities, which is a data product that
offers historical market data for orders
entered on MIAX PEARL Equities upon
request. The Exchange proposes to
charge a fee for the Historical Data,
which will be based on the cost
incurred by the Exchange in providing
that data. Proposed Section (3)(c) of the
Fee Schedule describes the fee to be
charged market participants that request
Historical Data from MIAX PEARL
Equities. Historical Data is intended to
aid market participants in analyzing
trade and volume data, evaluating
historical trends in the trading activity
of a particular security, and enabling
those market participants to test trading
models and analytical strategies.
Specifically, Historical Data includes all
data that is captured and disseminated
on ToM and DoM feeds and is available
on a T+1 basis.24
The Exchange will only assess the fee
for Historical Data on a user (whether
Equity Member or non-Member) that
specifically requests such Historical
Data. Historical Data will be uploaded
24 See
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Fee Schedule, Section (3)(c).
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onto an Exchange-provided device,
which the Exchange will incur a cost to
procure and provide to those that
request the data.
The Exchange proposed to charge a
flat fee of $500 per device requested.
Each device shall have a maximum
storage capacity of 8 terabytes. Users
may request up to six months of
Historical Data per device, subject to the
device’s storage capacity. Historical
Data will be made available beginning
from the time of launch of MIAX PEARL
Equities on September 25, 2020 (always
on a T+1 basis). However, only the most
recent six months of Historical Data
shall be available for purchase from the
request date.
2. Statutory Basis
The Exchange believes that its
proposal to amend its Fee Schedule is
consistent with Section 6(b) of the Act 25
in general, and furthers the objectives of
Section 6(b)(4) of the Act 26 in
particular, in that it provides for the
equitable allocation of reasonable dues,
fees and other charges among Exchange
Members and issuers and other persons
using any facility or system which the
Exchange operates or controls. The
Exchange also believes the proposal
furthers the objectives of Section 6(b)(5)
of the Act 27 in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest and is
not designed to permit unfair
discrimination between customer,
issuers, brokers and dealers.
On March 29, 2019, the Commission
issued its Order Disapproving Proposed
Rule Changes to Amend the Fee
Schedule on the BOX Market LLC
Options Facility to Establish BOX
Connectivity Fees for Participants and
Non-Participants Who Connect to the
BOX Network (the ‘‘BOX Order’’).28 On
May 21, 2019, the Commission issued
the Staff Guidance on SRO Rule Filings
Relating to Fees.29
The Exchange believes that the
Proposed Fees are consistent with the
Act because they (i) are reasonable,
equitably allocated, not unfairly
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25 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
27 15 U.S.C. 78f(b)(5).
28 See Securities Exchange Act Release No. 85459
(March 29, 2019), 84 FR 13363 (April 4, 2019) (SR–
BOX–2018–24, SR–BOX–2018–37, and SR–BOX–
2019–04).
29 See Staff Guidance on SRO Rule Filings
Relating to Fees (May 21, 2019), at https://
www.sec.gov/tm/staff-guidance-sro-rule-filings-fees
(the ‘‘Guidance’’).
26 15
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discriminatory, and not an undue
burden on competition; (ii) comply with
the BOX Order and the Guidance; (iii)
are supported by evidence (including
comprehensive revenue and cost data
and analysis) that they are fair and
reasonable because they do not result in
excessive pricing or supra-competitive
profit; and (iv) utilize a cost-based
justification framework that is
substantially similar to a framework
previously used by the Exchange (and
its affiliates) to establish comparable
access fees, including connectivity fees
and port fees, for its options market.
Accordingly, the Exchange believes that
the Commission should find that the
Proposed Fees are consistent with the
Act.
The Exchange is not aware of any
reason why market participants could
not simply drop their connections to an
exchange (or not connect to an
exchange) if an exchange were to
establish prices for its non-transaction
fees that, in the determination of such
market participant, did not make
business or economic sense for such
market participant to connect to such
exchange. No market participant is
required by rule, regulation, or
competitive forces to be a Member of the
Exchange or MIAX PEARL Equities. As
evidence of the fact that market
participants can and do disconnect from
exchanges based on non-transaction fee
pricing, R2G Services LLC (‘‘R2G’’) filed
a comment letter after BOX’s proposed
rule changes to increase its connectivity
fees (SR–BOX–2018–24, SR–BOX–
2018–37, and SR–BOX–2019–04).30 The
R2G Letter stated, ‘‘[w]hen BOX
instituted a $10,000/month price
increase for connectivity; we had no
choice but to terminate connectivity
into them as well as terminate our
market data relationship. The cost
benefit analysis just didn’t make any
sense for us at those new levels.’’ 31 As
further evidence of the fact that market
participants can and do disconnect from
exchanges based on non-transaction fee
pricing, a member of the Exchange’s
affiliate, MIAX Emerald, recently
discontinued the use of MIAX Emerald’s
connectivity and port services as a
result of MIAX Emerald increasing
connectivity fees and establishing
certain port fees. Accordingly, these
examples show that if an exchange sets
too high of a fee for connectivity and/
or other non-transaction fees for its
relevant marketplace, market
30 See Letter from Stefano Durdic, R2G, to
Vanessa Countryman, Acting Secretary,
Commission, dated March 27, 2019 (the ‘‘R2G
Letter’’).
31 See id.
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9101
participants can choose to disconnect
from such exchange.
The Exchange believes its proposal to
include a Definitions section in the Fee
Schedule promotes just and equitable
principles of trade, removes
impediments to and perfects the
mechanism of a free and open market
and a national market system, and, in
general protects investors and the public
interest and is not designed to permit
unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes that the proposal
to adopt a Definitions section in the
beginning of the Fee Schedule will
provide greater clarity to Equity
Members, non-Members, market
participants and the public regarding
the Exchange’s fees and rebates, and it
is in the public interest for the Fee
Schedule to be transparent,
comprehensive and user-friendly so as
to eliminate the potential for confusion.
The Exchange believes that its
proposal is consistent with Section
6(b)(4) of the Act because the Proposed
Access Fees will permit recovery (less
than all) of the Exchange’s costs and
will not result in excessive or supracompetitive profit. The Proposed Access
Fees will allow the Exchange to recover
a portion (less than all) of the costs
incurred by the Exchange associated
with providing and maintaining the
necessary hardware and other
infrastructure as well as network
monitoring and support services in
order to provide the services associated
with the Proposed Access Fees. The
Exchange believes that it is reasonable
and appropriate to establish its fees
charged for the services associated with
the Proposed Access Fees at levels that
will partially offset the costs to the
Exchange associated with maintaining
and enhancing a state-of-the-art
exchange network infrastructure in the
U.S. equities industry.
The costs associated with building out
and maintaining a state-of-the-art
network infrastructure are extensive.
This is due to several factors, including
costs associated with maintaining and
expanding a team of highly-skilled
network engineers, fees charged by the
Exchange’s third-party data center
operator, costs associated with projects
and initiatives designed to improve
overall network performance and
stability through the Exchange’s
research and development (‘‘R&D’’)
efforts, and costs associated with fullysupporting advances in infrastructure
and expansion of network level services,
including customer monitoring, alerting
and reporting. The Exchange incurs
significant technology expense related
to establishing and maintaining
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Information Security services, enhanced
network monitoring and customer
reporting, as well as Regulation SCI
mandated processes, associated with its
network technology. While some of the
expense is fixed, much of the expense
is not fixed, and thus increases as the
number of connections and ports
increase. For example, new 1Gb ULL
and 10Gb ULL connections require the
purchase of additional hardware to
support those connections as well as
enhanced monitoring and reporting of
customer performance that the
Exchange and its affiliates provide.
Further, 10Gb ULL connections require
the purchase of specialized, more costly
hardware. As the total number of all
connections increase, the Exchange
needs to increase its data center
footprint and consume more power,
resulting in increased costs charged by
its third-party data center providers.
Accordingly, the cost to the Exchange to
provide access to its network and
trading infrastructure is not entirely
fixed.
Further, because the costs of operating
a data center are significant and not
economically feasible for the Exchange,
the Exchange does not operate its own
data centers, and instead contracts with
a third-party data center provider. The
Exchange notes that larger, wellestablished exchange operators own/
operate their data centers, which offers
them greater control over their data
center costs. Because those exchanges
own and operate their data centers as
profit centers, the Exchange is subject to
additional costs. Fees for the services
associated with the Proposed Access
Fees, which are charged for accessing
the Exchange’s data center network
infrastructure, are directly related to the
network and offset such costs.
Further, the Exchange invests
significant resources in network R&D to
continuously improve the overall
performance and stability of its network.
For example, the Exchange has a
number of network monitoring tools
(some of which were developed inhouse, and some of which are licensed
from third-parties), that continually
monitor, detect, and report network
performance, many of which serve as
significant value-adds to Equity
Members and enable the Exchange to
provide a high level of customer service.
These tools detect and report
performance issues, and thus enable the
Exchange to proactively notify an Equity
Member (and the SIPs) when the
Exchange detects a problem with an
Equity Member’s connectivity. In fact,
the Exchange’s affiliate options
exchanges, MIAX and MIAX Emerald,
often receive inquiries from other
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industry participants regarding the
status of networking issues outside of
the Exchange’s own network
environment that are impacting the
industry as a whole via the SIPs,
including inquiries from regulators,
because the Exchange has a superior,
state-of the-art network that, through its
enhanced monitoring and reporting
solutions, often detects and identifies
industry-wide networking issues ahead
of the SIPs. The Exchange also incurs
costs associated with the maintenance
and improvement of existing tools and
the development of new tools.
Also, routine R&D projects to improve
the performance of the network’s
hardware infrastructure result in
additional cost. In sum, the costs
associated with maintaining and
enhancing a state-of-the-art exchange
network in the U.S. equity securities
industry is a significant expense for the
Exchange that is projected to increase
year-over-year, and thus the Exchange
believes that it is reasonable to offset a
portion of those costs through
establishing the Proposed Access Fees,
which are designed to recover those
costs, as described herein. Overall, the
Proposed Access Fees are projected to
offset only a portion of the Exchange’s
services associated with the Proposed
Access Fees. The Exchange invests in
and offers a superior network
infrastructure as part of its overall
exchange services offering, resulting in
significant costs associated with
maintaining this network infrastructure,
which are directly tied to the amount of
the Proposed Access Fees that must be
charged to access it, in order to recover
those costs.
The Exchange believes it is reasonable
to consider the expense and revenue for
ports and connectivity alternatives
together because ports and connectivity
are inextricably linked components of
the network infrastructure, and that
both are necessary for a market
participant to access the Exchange. The
various types of connectivity and port
alternatives that the Exchange offers
provide a wide array of access
alternatives necessary for a market
participant to conduct its business using
the Exchange, which is a business
decision to be made by each particular
type of market participant. The different
types of connectivity and port
alternatives allows Equity Members to
conduct their different business
strategies—some Equity Members put an
emphasis on speed, while others
emphasize other strategies, such as
redundancy and certainty of execution.
The Exchange does not require an
Equity Member to have a certain
framework for accessing the Exchange,
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but provides various connectivity and
port alternatives for each Equity
Member’s distinct business lines.
The Exchange offers various types of
ports with differing prices because each
port accomplishes different tasks, are
suited to different types of Equity
Members, and consume varying
capacity amounts of the network. For
instance, MEO ports allow for a higher
throughput and can handle much higher
order rates than FIX ports. Equity
Members that are Market Makers or high
frequency trading firms utilize these
ports (typically coupled with 10Gb ULL
connectivity) because they transact in
significantly higher amounts of
messages being sent to and from the
Exchange, versus FIX port users, who
are traditionally customers sending only
orders to the Exchange (typically
coupled with 1Gb connectivity). The
different types of ports cater to the
different types of Exchange
Memberships and different capabilities
of the various Exchange Members.
Market Makers have quoting and other
obligations that traditional customers do
not. Market Makers, therefore, need
ports and connections that can handle
using far more of the network’s capacity
for message throughput, risk
protections, and the amount of
information that has to be assessed.
Market Makers account for the vast
majority of network capacity utilization
and volume executed on the Exchange.
The Exchange only has four primary
sources of revenue: Transaction fees,
access fees (of which the Proposed
Access Fees constitute the majority),
regulatory fees, and market data fees.
Accordingly, the Exchange must cover
all of its expenses from these four
primary sources of revenue.
The Exchange believes that the
Proposed Access Fees are fair and
reasonable because they will not result
in excessive pricing or supracompetitive profit, when comparing the
total annual expense that the Exchange
projects to incur in connection with
providing the services associated with
the Proposed Access Fees versus the
total annual revenue of the Exchange
projects to collect in connection with
providing those services. For 2020,32 the
total annual expense 33 for providing the
services associated with the Proposed
Access Fees for MIAX PEARL Equities
is projected to be approximately $8.4
32 The Exchange has not yet finalized its 2020
year end results.
33 The Exchange notes that the total expense
figures for each of the external and internal
expenses described herein relate only to the
Exchange’s equities market. No expense relating to
the Exchange’s options market is included in this
filing.
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million. The $8.4 million in expense
includes expense associated with
providing all ports and all connectivity
alternatives. The Exchange is unable to
separate out its expense by connectivity
alternative, as all connectivity
alternatives are intricately combined in
a single network infrastructure.
Nevertheless, the Exchange attributes
the majority of connectivity expense to
the 10Gb ULL connections because the
majority of network capacity is used by
10Gb ULL purchasers. The $8.4 million
in projected total annual expense is
comprised of the following, all of which
are directly related to the services
associated with the Proposed Access
Fees by MIAX PEARL Equities to its
Equity Members and non-Members: (1)
Third-party expense, relating to fees
paid by MIAX PEARL Equities to thirdparties for certain products and services;
and (2) internal expense, relating to the
internal costs of MIAX PEARL Equities
to provide the services associated with
the Proposed Access Fees. The $8.4
million in projected total annual
expense is directly related to the
services associated with the Proposed
Access Fees and not any other product
or service offered by the Exchange. It
does not include general costs of
operating matching systems and other
trading technology, and no expense
amount was allocated twice.
As discussed, the Exchange
conducted an extensive 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 services associated with
the Proposed Access Fees, and, if such
expense did so relate, what portion (or
percentage) of such expense actually
supports those services, and thus bears
a relationship that is, ‘‘in nature and
closeness,’’ directly related to those
services. The sum of all such portions
of expenses represents the total cost of
the Exchange to provide the services
associated with the Proposed Access
Fees.
For 2020, total actual and projected
third-party expense, relating to fees paid
by the Exchange to third-parties for
certain products and services for the
Exchange to be able to provide the
services associated with the Proposed
Access Fees, was $1,492,112. 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 MIAX PEARL Equities
trading system infrastructure; (2) Zayo
Group Holdings, Inc. (‘‘Zayo’’) for
connectivity services (fiber and
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bandwidth connectivity) linking MIAX
PEARL Equities’ office locations in
Princeton, New Jersey and Miami,
Florida to all data center locations; (3)
Secure Financial Transaction
Infrastructure (‘‘SFTI’’), which supports
connectivity and feeds for the entire
equity securities industry; (4) various
other services providers (including
Thompson Reuters, NYSE, Nasdaq,
Internap, and Options IT), which
provide content, connectivity services,
infrastructure services, and market data
services; and (5) various other hardware
and software providers (including Dell
and Cisco, which support the
production environment).
For clarity, only a portion of all fees
paid to such third-parties is included in
the third-party expense herein (only the
portions that actually support the
services associated with the Proposed
Access Fees), and no expense amount is
allocated twice. Accordingly, the
Exchange does not allocate its entire
information technology and
communication costs to the services
associated with the Proposed Access
Fees.
The Exchange believes it is reasonable
to allocate such third-party expense
described above towards the total cost to
the Exchange to operate and support the
network, including providing the
services associated with the Proposed
Access Fees.34 In particular, the
Exchange believes it is reasonable to
allocate the identified portions of the
Equinix expense because Equinix
operates the data centers (primary,
secondary, and disaster recovery) that
host the Exchange’s network
infrastructure, which enables the
services associated with the Proposed
Access Fees. 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
Proposed Access Fees to Equity
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 Proposed Access
Fees, only the portions which the
Exchange identified as being
specifically mapped to operating and
34 The Exchange notes the that the below
allocation percentages are the percentage of the
total cost incurred by MIAX PEARL Equities and
not costs related to operating the Exchange’s
options trading platform. See also id.
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9103
supporting the network, approximately
73% of the total Equinix expense (68%
allocated towards the cost of providing
the provision of network connectivity
and 5% allocated towards the cost of
providing ports). The Exchange believes
these allocations are reasonable because
they represent the Exchange’s actual
cost to provide the services associated
with the Proposed Access Fees, and not
any other service, as supported by its
cost review.
The Exchange believes it is reasonable
to allocate the identified portions of the
Zayo expense because Zayo provides
the internet, fiber and bandwidth
connections with respect to the
network, linking MIAX PEARL Equities
with the Exchange’s affiliates, MIAX
and MIAX Emerald, as well as the data
center and disaster recovery locations.
As such, all of the trade data 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 Proposed Access
Fees to Equity Members and nonMembers and their customers. The
Exchange did not allocate all of the
Zayo expense toward the cost of
providing the services associated with
the Proposed Access Fees, only the
portions which the Exchange identified
as being specifically mapped to
providing the services associated with
the Proposed Access Fees,
approximately 66% of the total Zayo
expense (62% allocated towards the cost
of providing the provision of network
connectivity and 4% allocated towards
the cost of providing ports). The
Exchange believes these allocations are
reasonable because they represent the
Exchange’s actual cost to provide the
services associated with the Proposed
Access Fees, 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, Internap, and
Options IT) expense because those
entities provide connectivity and feeds
for the entire U.S. securities industry as
well as the content, connectivity
services, infrastructure services, and
market data 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 the
services associated with the Proposed
Access Fees to Equity Members and
non-Members and their customers. The
Exchange did not allocate all of the SFTI
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and other service providers’ expense
toward the cost of providing the services
associated with the Proposed Access
Fees, only the portions which the
Exchange identified as being
specifically mapped to providing the
services associated with the Proposed
Access Fees, approximately 94% of the
total SFTI and other service providers’
expense (89% allocated towards the cost
of providing the provision of network
connectivity and 5% allocated towards
the cost of providing ports). The
Exchange believes these allocations are
reasonable because they represent the
Exchange’s actual cost to provide the
services associated with the Proposed
Access Fees, and not any other service,
as supported by its cost review.
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 the services associated with
the Proposed Access Fees to Equity
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 Proposed Access Fees, only the
portions which the Exchange identified
as being specifically mapped to
providing the services associated with
the Proposed Access Fees,
approximately 57% of the total
hardware and software provider
expense (54% allocated towards the cost
of providing the provision of network
connectivity and 3% allocated towards
the cost of providing ports). The
Exchange believes these allocations are
reasonable because they represent the
Exchange’s actual cost to provide the
services associated with the Proposed
Access Fees, and not any other service,
as supported by its cost review.
For 2020, total projected internal
expense, relating to the internal costs of
the Exchange to provide the services
associated with the Proposed Access
Fees, is projected to be $6,905,858. This
includes, but is not limited to, costs
associated with: (1) Employee
compensation and benefits for full-time
employees that support the services
associated with the Proposed Access
Fees, including staff in network
operations, trading operations,
development, system operations,
business, etc., as well as staff in general
corporate departments (such as legal,
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regulatory, and finance) that support
those employees and functions; (2)
depreciation and amortization of
hardware and software used to provide
the services associated with the
Proposed Access Fees, including
equipment, servers, cabling, purchased
software and internally developed
software used in the production
environment to support those services
for trading; and (3) occupancy costs for
leased office space for staff that support
the services associated with the
Proposed Access Fees. The breakdown
of these costs is more fully-described
below.
For clarity, only a portion of all such
internal expenses are included in the
internal expense herein (only the
portions that support the services
associated with the Proposed Access
Fees), and no expense amount is
allocated twice. Accordingly, the
Exchange does not allocate its entire
costs contained in those line items to
the services associated with the
Proposed Access Fees.
The Exchange believes it is reasonable
to allocate such internal expense
described above towards the total cost to
the Exchange to operate and support the
network, including providing the
services associated with the Proposed
Access Fees. In particular, MIAX PEARL
Equities’ employee compensation and
benefits expense relating to providing
the services associated with the
Proposed Access Fees is projected to be
$4,317,667, which is only a portion of
the $13,492,708 total projected expense
for employee compensation and
benefits. The Exchange believes it is
reasonable to allocate the identified
portions of each expense because they
include 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), and
Legal (who provide legal services, 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
operation and support of the network,
including the services associated with
the Proposed Access Fees. Without
these employees, the Exchange would
not be able to operate and support the
network and provide the services
associated with the Proposed Access
Fees to Equity Members and non-
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Members and their customers. The
Exchange did not allocate all of the
employee compensation and benefits
expense toward the cost of providing
the services associated with the
Proposed Access Fees, only that portion
which the Exchange identified as being
specifically mapped to providing the
services associated with Proposed
Access Fees, approximately 32% of the
total employee compensation and
benefits expense (29% allocated
towards the cost of providing the
provision of network connectivity and
3% allocated towards the cost of
providing ports). The Exchange believes
these allocations are reasonable because
they represent the Exchange’s actual
cost to provide the services associated
with the Proposed Access Fees, and not
any other service, as supported by its
cost review.
MIAX PEARL Equities’ depreciation
and amortization expense relating to
providing the services associated with
the Proposed Access Fees is projected to
be $2,131,411, which is only a portion
of the $2,664,264 total projected
expense for depreciation and
amortization. The Exchange believes it
is reasonable to allocate the identified
portions of such projected 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. Without this equipment, the
Exchange would not be able to operate
the network and provide the services
associated with the Proposed Access
Fees to Equity Members and nonMembers and their customers. The
Exchange did not allocate all of the
projected depreciation and amortization
expense toward the cost of providing
the services associated with the
Proposed Access Fees, only the portions
which the Exchange identified as being
specifically mapped to providing the
services associated with the Proposed
Access Fees, approximately 80% of the
total depreciation and amortization
expense (76% allocated towards the cost
of providing the provision of network
connectivity and 4% allocated towards
the cost of providing ports). The
services associated with the Proposed
Access Fees would not be possible
without relying on such equipment. The
Exchange believes these allocations are
reasonable because they represent the
Exchange’s actual cost to provide the
services associated with the Proposed
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Access Fees, and not any other service,
as supported by its cost review.
MIAX PEARL Equities’ occupancy
expense relating to providing the
services associated with the Proposed
Access Fees is projected to be $456,780,
which is only a portion of the $878,423
total projected expense for occupancy.
The Exchange believes it is reasonable
to allocate the identified portions of
such projected 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 Proposed
Access Fees. These amounts consist
primarily of rent for the Exchange’s
Princeton, New Jersey office, as well as
various related costs, such as physical
security, property management fees,
property taxes, and utilities. The
Exchange operates its Network
Operations Center (‘‘NOC’’) and
Security Operations Center (‘‘SOC’’)
from its Princeton, New Jersey office
location. A centralized office space is
required to house the staff that operates
and supports the network. The
Exchange currently has approximately
150 employees (and continues to
increase its headcount to support the
network as the Exchange, and its
affiliates, grow the network).
Approximately two-thirds of the
Exchange’s staff are in the Technology
department, and the majority of those
staff members have some role in the
operation and performance of the
network. Without this office space, the
Exchange would not be able to operate
and support the network and provide
the services associated with the
Proposed Access Fees to Equity
Members and non-Members and their
customers. Accordingly, the Exchange
believes it is reasonable to allocate the
identified portions of its occupancy
expense because such amounts
represent the Exchange’s actual cost to
house the equipment and personnel
who operate and support the Exchange’s
network infrastructure for the services
associated with the Proposed Access
Fees. The Exchange did not allocate all
of the projected occupancy expense
toward the cost of providing the services
associated with the Proposed Access
Fees, only the portions which the
Exchange identified as being
specifically mapped to providing the
services associated with the Proposed
Access, approximately 52% of the total
occupancy expense (48% allocated
towards the cost of providing the
provision of network connectivity and
4% allocated towards the cost of
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providing ports). The Exchange believes
these allocations are reasonable because
they represent the Exchange’s actual
cost to provide the services associated
with the Proposed Access Fees, and not
any other service, as supported by its
cost review.
The Exchange notes that a material
portion of its total overall expense is
allocated to the provision of services
associated with the Proposed Access
Fees. The Exchange believes this is
reasonable and in line, as the Exchange
operates a technology-based business
that differentiates itself from its
competitors based on its trading systems
that rely on its high performance
network, resulting in significant
technology expense. Over two-thirds of
Exchange staff are technology-related
employees. The majority of the
Exchange’s expense is technologybased. As described above, the
Exchange has only four primary sources
of fees in to recover its costs, thus the
Exchange believes it is reasonable to
allocate a material portion of its total
overall expense towards the Proposed
Access Fees.
The Exchange’s monthly revenue for
the Proposed Access Fees is based on
the following purchases by Equity
Members and non-Members during a
recent billing cycle: (i) 12 1Gb ULL
connections; (ii) 81 10Gb ULL
connections; and (iii) 103 MEO Ports.
The monthly revenue from Port fees is
subject to change from month to month
depending on the number of Ports
purchased. Accordingly, the Exchange’s
total monthly Port revenue was $22,800
and total 1 Gb and 10Gb ULL
connectivity revenue was $295,500. The
Exchange notes that the port revenue
projections are subject to change
depending on market participant needs
and the tiers achieved. As such, the
projection of $295,500 per month is not
a static number and may fluctuate from
month to month.
Accordingly, based on the facts and
circumstances presented, the Exchange
believes that its provision of the services
associated with the Proposed Access
Fees will not result in excessive pricing
or supra-competitive profit. To
illustrate, on a going-forward, fullyannualized basis, the Exchange projects
that its annualized revenue for
providing the services associated with
the Proposed Access Fees would be
approximately $3,600,000 per annum,
based on a recent billing cycle. The
Exchange projects that its annualized
expense for providing the services
associated with the Proposed Access
Fees would be approximately
$8,400,000 per annum. Accordingly, on
a fully-annualized basis, the Exchange
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9105
believes its total projected revenue for
the providing the services associated
with the Proposed Access Fees will not
result in excessive pricing or supracompetitive profit, as the Exchange will
incur a loss of $4,800,000 on the
Proposed Access Fees ($3.6 million ¥
$8.4 million = ($4.8 million per
annum)).
For the avoidance of doubt, none of
the expenses included herein relating to
the services associated with the
Proposed Access Fees relate to any other
services offered by MIAX PEARL
Equities. Stated differently, no expense
amount of the Exchange is allocated
twice. The Exchange notes that, with
respect to MIAX PEARL Equities
expenses included herein, those
expenses only cover the MIAX PEARL
Equities market; expenses associated
with the Exchange’s options trading
platform, its affiliate exchanges, MIAX
and MIAX Emerald, are accounted for
separately and are not included within
the scope of this filing. Stated
differently, no expense amount of the
Exchange is also allocated to its options
trading platform, MIAX or MIAX
Emerald.
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 Proposed Access Fees, 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,
including the services associated with
the Proposed Access Fees. 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 the services associated with
the Proposed Access Fees to Equity
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.
The Proposed Access Fees are intended
to recover the Exchange’s costs (less
than all) of operating and supporting the
network, including providing the
services associated with the Proposed
Access Fees.
Accordingly, the Proposed Access
Fees are fair and reasonable because
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they do not result in excessive pricing
or supra-competitive profit, when
comparing the actual network operation
and support costs to the Exchange
versus the projected revenue for the
services associated with the Proposed
Access Fees.
The Exchange notes that other
equities exchanges have similar
connectivity alternatives for their
participants, including similar lowlatency connectivity. For example, the
Nasdaq Stock Market LLC (‘‘Nasdaq’’),
Nasdaq PHLX LLC (‘‘Phlx’’), and Nasdaq
ISE, LLC (‘‘ISE’’) all offer a 1Gb, 10Gb
and 10Gb low latency ethernet
connectivity alternatives to each of their
participants.35 NYSE Arca, Inc. (‘‘NYSE
Arca’’), NYSE American LLC (‘‘NYSE
American’’), NYSE Chicago, Inc.
(‘‘NYSE Chicago’’) and NYSE National,
Inc. (‘‘NYSE National’’) all offer a 1Gb
and 10Gb low latency ethernet
connectivity alternatives to each of their
participants.36 The Exchange notes that
all the other equities exchanges
described above charge higher rates for
such similar connectivity to primary
and secondary facilities. While the
Exchange’s proposed connectivity fees
are substantially lower than the fees
charged by Nasdaq, Phlx, ISE, NYSE
America, NYSE Arca, NYSE Chicago
and NYSE National, the Exchange
believes that it can offer significant
value to Equity Members over other
exchanges in terms of network
monitoring and reporting, which the
Exchange believes is a competitive
advantage, and differentiates its access
services versus access services at other
exchanges. Additionally, the Exchange’s
proposed connectivity fees to its
disaster recovery facility are within the
range of the fees charged by other
exchanges for similar connectivity
alternatives.37 The Exchange also notes
that other equities exchanges have
similar port alternatives for their
35 See Nasdaq, Phlx and ISE General Rules,
General 8, Section 1(b). Nasdaq, Phlx and ISE each
charge a monthly fee of $2,500 for each 1Gb
connection, $10,000 for each 10Gb connection and
$15,000 for each 10Gb Ultra connection, which is
the equivalent of the Exchange’s 10Gb ULL
connection.
36 See NYSE American Fee Schedule, NYSE Arca
Fee Schedule, NYSE Chicago Fee Schedule and
NYSE National Fee Schedule, Co-Location Fees.
NYSE American, NYSE Arca, NYSE Chicago and
NYSE National each charge a monthly fee of $5,000
for each 1Gb circuit and $22,000 for each 10Gb LX
circuit, which is the equivalent of the Exchange’s
10Gb ULL connection.
37 See Cboe EDGA Exchange, Inc. (‘‘EDGA’’) and
Cboe EDGX Exchange, Inc. (‘‘EDGX’’) Fee
Schedules, Physical Connectivity Fees, (charging a
monthly fee of $2,000 for a 1Gb disaster recovery
network access port and a monthly fee of $6,000 for
a 10Gb disaster recovery network access port).
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participants, with similar or
substantially higher fees.38
Historical Data
The Exchange believes the proposed
fee for Historical Data is a reasonable
allocation of its costs and expenses
among its Equity Members and other
persons using its facilities since it is
recovering the costs associated with
distributing such data should an Equity
Member request Historical Data. Access
to the Exchange is provided on fair and
non-discriminatory terms. The
Exchange believes the proposed fee for
Historical Data is equitable and not
unfairly discriminatory because the fee
level results in a reasonable and
equitable allocation of fees amongst
users for similar services. Moreover, the
decision as to whether or not to
purchase Historical Data is entirely
optional to all users. Potential
purchasers are not required to purchase
the Historical Data, and the Exchange is
not required to make the Historical Data
available. Purchasers may request the
data at any time or may decline to
purchase such data. The allocation of
fees among users is fair and reasonable
because, if the market deems the
proposed fees to be unfair or
inequitable, firms can diminish or
discontinue their use of this data.
The Exchange believes that the
proposed fee for Historical Data is
consistent with Section 6(b)(4) of the
Act because the Proposed Access Fees
will permit recovery of the Exchange’s
costs and will not result in excessive or
supra-competitive profit. The proposed
fee for Historical Data will allow the
Exchange to recover a portion (less than
all) of the costs incurred by the
Exchange associated with providing and
maintaining the necessary hardware and
other infrastructure as well as network
monitoring and support services in
order to provide Historical Data. The
Exchange believes that it is reasonable
and appropriate to establish a fee for
Historical Data at a level that will
partially offset the costs to the Exchange
associated with maintaining and
providing Historical Data. For example,
Historical Market Data is uploaded onto
an Exchange-provided device. Each
device shall have a maximum storage
capacity of 8 terabytes. The Exchange
incurs costs in providing the device,
storing the historical data, and utilizing
38 See Nasdaq Fee Schedule, Equity Rules, Equity
7, Pricing Schedule, Ports (charging $575 per FIX
port per month); Phlx Fee Schedule, Equity Rules,
Equity 7, Pricing Schedule, Section 3 Nasdaq PSX
Fees (charging $400 per FIX port per month); EDGX
Fee Schedule, Logical Port Fees (charging $550 per
Logical Port per month and $650 per Purge port per
month).
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resources to upload the data onto the
device. Specifically, the device
provided by the Exchange costs
approximately $200 to $300. Moreover,
the Exchange tracks the number of
hours spent by Exchange personnel
procuring Historical Market Data. Based
on the average number of person hours
spent by the Exchange on procuring
Historical Market Data, and based on the
Exchange’s average cost per full-time
employee (‘‘FTE’’) of approximately
$250,000 (inclusive of all compensation
and employee benefits) per year, the
Exchange represents that its cost to
provide this service is reasonably
related to (and often exceeds) the
amount of the Historical Market Data fee
the Exchange proposes to charge for
such service. Therefore, the FTE cost to
the Exchange on average $130 an hour
and it takes approximately four FTE
hours to process a request for Historical
Market Data. Accordingly, the proposed
Historical Market Data fee would enable
the Exchange to recover a material
portion of its costs to provide Historical
Market Data. The Exchange believes this
is a conservative cost allocation because
the Exchange is not allocating any
additional costs beyond the employee
compensation for employees directly
involved in this process and the cost of
the device. These unallocated addition
costs include technology costs of
employees, office space costs of
employees, costs associated with
supporting departments’ time for things
such as internal meetings, project
management coordination among the
individuals who indirectly support the
provision of Historical Market Data, and
various other indirectly-related costs.
The Exchange also notes that its
proposed fee is identical to that it
charges today for options historical data
and less than that charged by other
exchanges for their own historical data.
For example, all four of the Cboe equity
exchanges charge a fee of $500 for one
month of historical data and $2,500 for
one terabyte drive of data.39
Pass-Through of External Connectivity
Fees
The Exchange believes that the
proposed pass-through of external
connectivity fees constitutes an
equitable allocation of fees, and is not
unfairly discriminatory, because it
allows the Exchange to recover costs
associated with offering access through
the network connections, responding to
customer requests, configuring MIAX
PEARL Equities’ systems, programming
39 See, e.g., Cboe BZX Exchange, Inc. fee schedule
available at https://markets.cboe.com/us/equities/
membership/fee_schedule/bzx/.
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API user specifications and
administering the various services.
Access to the MIAX PEARL Equities
market is offered on fair and nondiscriminatory terms.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to pass-through External
Connectivity fees to Equity Members
and non-Members that establish
connections with MIAX PEARL Equities
through a third-party. MIAX PEARL
Equities will only pass-through the
actual costs it is charged by third-party
external vendors. The Exchange believes
it is reasonable and equitable to recover
costs charged it on behalf of an Equity
Member or non-Member that establishes
connections with MIAX PEARL Equities
through a third party. Other exchanges,
including EDGX and EDGA, charge a fee
for similar services to their members
and non-members.
Technical Support Request Fee
The Exchange believes that the
proposed Technical Support Request fee
is fair, equitable and not unreasonably
discriminatory, because it is assessed
equally to all Equity Members and nonMembers who request technical
support. Furthermore, Equity Members
and non-Members are not required to
use the service but instead it is offered
as a convenience to all Equity Members
and non-Members. The proposed fee is
reasonably designed because it will
permit both Equity Members and nonMembers to request the use of the
Exchange’s on-site data center personnel
as technical support and as a
convenience in order to test or
otherwise assess their connectivity to
the Exchange and the fee is within the
range of the fee charged by other
exchanges for similar services and is
identical to the same fee assessed by the
Exchange today for options as well as
the Exchange’s affiliates, MIAX and
MIAX Emerald.
As discussed above, the Exchange’s
average cost per FTE of approximately
$250,000 (inclusive of all compensation
and employee benefits) per year, the
Exchange represents that its cost to
provide this service is reasonably
related to (and often exceeds) the
amount of the Technical Support fee the
Exchange proposes to charge for such
service. Therefore, the cost to the
Exchange to provide an employee to
provide technical support is
approximately $130 per FTE. Also, more
than one FTE may be involved
depending on the nature of the request.
Accordingly, the proposed per hour fee
for technical support would enable the
Exchange to recover a material portion
of such cost. The Exchange believes this
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is a conservative cost allocation because
the Exchange is not allocating any
additional costs beyond the employee
compensation costs for employees
directly involved in this process. These
unallocated addition costs include costs
associated with potential management
review and sign off, technology costs of
employees, office space costs of
employees, costs associated with
supporting departments’ time for things
such as internal meetings, project
management coordination among the
individuals who indirectly support the
technology support process, and various
other indirectly-related costs.
*
*
*
*
*
Finally, the Exchange notes that it
operates in a highly competitive market
in which market participants can
readily favor competing venues. In such
an environment, the Exchange must
establish fees that are competitive with
other exchanges. For the reasons
described above, the Exchange believes
that the proposed fees in the MIAX
PEARL Equities Fee Schedule
appropriately reflect this competitive
environment.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange believes that the
Proposed Fees do not place certain
market participants at a relative
disadvantage to other market
participants because the pricing of the
Proposed Fees is associated with
relative usage of the various market
participants and does not impose a
barrier to entry to smaller participants.
The Exchange believes the Proposed
Fees do not favor certain categories of
market participants in a manner that
would impose a burden on competition;
rather, the allocation of the Proposed
Fees reflects the network and access
resources consumed by various market
participants.
The Exchange believes the Proposed
Fees do not place an undue burden on
competition on other SROs that is not
necessary or appropriate. Additionally,
other equity exchanges have similar
connectivity and port alternatives for
their participants, including similar
low-latency connectivity, but with
much higher rates to connect.40 The
Exchange is also unaware of any
assertion that the Proposed Fees would
somehow unduly impair its competition
with other equities exchanges. To the
contrary, if the fees charged are deemed
too high by market participants, they
can simply not connect to the Exchange
or not use the services associated with
the Proposed Access Fees.
While the Exchange recognizes the
distinction between connecting to an
exchange and trading at the exchange,
the Exchange notes that it plans to
operate in a highly competitive market
in which market participants can
readily connect and trade with venues
they desire. In such an environment, the
Exchange must continually adjust its
fees to remain competitive with other
exchanges. The Exchange believes that
the Proposed Fees reflect this
competitive environment.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,41 and Rule
19b–4(f)(2) 42 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–
PEARL–2021–02 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.
41 15
40 See
PO 00000
supra notes 35 through 38.
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9107
42 17
E:\FR\FM\11FEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
11FEN1
9108
Federal Register / Vol. 86, No. 27 / Thursday, February 11, 2021 / Notices
All submissions should refer to File
Number SR–PEARL–2021–02. 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–2021–02 and
should be submitted on or before March
4, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.43
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–02776 Filed 2–10–21; 8:45 am]
khammond on DSKJM1Z7X2PROD with NOTICES
[Release No. 34–91067; File No. SR–CBOE–
2020–116]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, To Add Options on
the Mini-Russell 2000 Index to Its P.M.
Pilot Program
February 5, 2021.
I. Introduction
On December 18, 2020, Cboe
Exchange, Inc. (‘‘Cboe’’ or ‘‘Exchange’’)
CFR 200.30–3(a)(12).
16:39 Feb 10, 2021
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 90749
(December 21, 2020), 85 FR 85752 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange (i)
represented that its existing surveillance and
reporting safeguards in place are adequate to deter
and detect possible manipulative behavior which
might arise from listing and trading P.M.-settled
MRUT options and (ii) stated that the trading of
P.M.-settled MRUT options will be subject to
Exchange Rules governing customer accounts,
position and exercise limits, margin requirements
and trading halt procedures. Because Amendment
No. 1 to the proposed rule change does not
materially alter the substance of the proposed rule
change and makes conforming and technical
changes, Amendment No. 1 is not subject to notice
and comment. Amendment No. 1 is available at:
https://www.sec.gov/comments/sr-cboe-2020-116/
srcboe2020116-8302266-228358.pdf.
5 See Securities Exchange Act Release No. 90263
(October 23, 2020), 85 FR 68611 (October 29, 2020)
(CBOE–2020–100). See also Securities Exchange
Act Release No. 70087 (July 31, 2013), 78 FR 47809
(August 6, 2013) (SR–CBOE–2013–055) (‘‘P.M.settled XSP Approval Order’’).
2 17
SECURITIES AND EXCHANGE
COMMISSION
VerDate Sep<11>2014
II. Description of the Proposal, as
Modified by Amendment No. 1
The Exchange is proposing to amend
its rules to permit it to list and trade, on
a pilot basis, cash-settled MRUT options
with Expiration Friday expiration dates,
for which the exercise settlement value
will be based on the index value derived
from the closing prices of the
component securities (‘‘P.M.-settled’’).
MRUT options are options on the MiniRUT Index, the value of which is 1/10th
the value of the Russell 2000 (‘‘RUT’’)
Index.
The Exchange proposes to add P.M.settled MRUT options to the Exchange’s
pilot program under Interpretation and
Policy .13 to Rule 4.13 that allows the
listing of P.M. settled options that
expire on Expiration Friday (‘‘P.M. Pilot
Program’’). The Exchange notes that the
existing P.M. Pilot Program, which is set
to end on May 3, 2021, includes options
on the Mini-SPX Index (‘‘XSP’’), the
value of which is 1/10th the value of the
S&P 500 Index.5 Cboe has proposed to
1 15
BILLING CODE 8011–01–P
43 17
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 a proposed rule
change to add Mini-Russell 2000 Index
(‘‘Mini-RUT’’ or ‘‘MRUT’’) options to
the Exchange’s pilot program for P.M.
settled options with third-Friday-of-themonth expiration dates (‘‘Expiration
Friday’’). The proposed rule change was
published for comment in the Federal
Register on December 29, 2020.3 On
January 28, 2021, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 The Commission received no
comment letters on the proposed rule
change. The Commission is approving
the proposed rule change.
Jkt 253001
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
add P.M.-settled MRUT options to that
pilot so that the end of the pilot period
for P.M.-settled MRUT options would
also be May 3, 2021.
The Exchange notes that trading in
P.M.-settled MRUT options would
operate in the same manner as provided
in the proposal to list and trade MiniRUT options on the Exchange. That is,
P.M.-settled MRUT options would have
the same European-style exercise, same
number of permissible expirations, same
exercise interval prices and limitations,
same position and exercise limits, and
will trade in the same minimum price
increment.6
The Exchange proposes to abide by
the same reporting requirements for the
trading of P.M.-settled MRUT options
that it does for the trading of P.M.settled XSP options.7 The Exchange
proposes to include data regarding P.M.settled MRUT options as it does for
P.M.-settled XSP options in the pilot
program report that it submits to the
Commission at least two months prior to
the expiration date of the P.M. Pilot
Program (the ‘‘annual report’’).8
Specifically, the Exchange submits
annual reports to the Commission that
contain an analysis of volume, open
interest, and trading patterns in
connection with products in the P.M.
Pilot Program. The analysis examines
trading in products in the P.M. Pilot
Program, as well as trading in the
securities that comprise the underlying
index. Additionally, for series that
exceed certain minimum open interest
parameters, the annual reports provide
analysis of index price volatility and
share trading activity.
Going forward, the Exchange would
include the same analysis of P.M.settled MRUT options, as well as trading
in securities that comprise the RUT
Index (as MRUT options are based on 1/
10th the value of the RUT Index), in the
annual reports. Also, like it currently
does for P.M.-settled XSP options, the
Exchange would submit periodic
interim reports for P.M.-settled MRUT
options that contain some, but not all,
of the information contained in the
annual reports.
The pilot reports will both contain the
following volume and open interest
data:
6 See Notice, supra note 3, fn. 3 at 85753. The
Exchange represents that its existing surveillance
and reporting safeguards in place are adequate to
deter and detect possible manipulative behavior
which might arise from listing and trading P.M.settled MRUT options. See Amendment No. 1,
supra note 4.
7 See P.M.-settled XSP Approval Order supra note
4.
8 See P.M.-settled XSP Approval Order, supra
note 4.
E:\FR\FM\11FEN1.SGM
11FEN1
]]>Agencies
[Federal Register Volume 86, Number 27 (Thursday, February 11, 2021)]
[Notices]
[Pages 9096-9108]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02776]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91073; File No. SR-PEARL-2021-02]
Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
PEARL Equities Fee Schedule To Adopt Connectivity Fees, Port Fees, a
Technical Support Request Fee, and a Historical Market Data Fee
February 5, 2021.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 29, 2021, MIAX PEARL, LLC (``MIAX PEARL'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to amend the MIAX PEARL Equities
Fee Schedule (the ``Fee Schedule'') by adopting fees applicable to
participants
[[Page 9097]]
trading equity securities on and/or using services provided by MIAX
PEARL Equities.\3\
---------------------------------------------------------------------------
\3\ See Exchange Rule 1901. The Exchange notes that it submitted
a separate filing with the Commission pursuant to Section
19(b)(3)(A) of the Act to establish the Fee Schedule and adopt
transaction fees. See Securities Exchange Act Release No. 90102
(October 6, 2020), 85 FR 64559 (October 13, 2020) (SR-PEARL-2020-
17).
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings/pearl at MIAX
PEARL's principal office, and at the Commission's Public Reference
Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for 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
On August 14, 2020, the Commission approved the Exchange's proposal
to adopt rules governing the trading of equity securities, referred to
as MIAX PEARL Equities.\4\ The Exchange launched MIAX PEARL Equities on
September 25, 2020. The Exchange proposes to adopt a Definitions
section in the Fee Schedule, as well as the following fees: (1)
Connectivity fees for Equity Members \5\ and non-Members; (2) Port fees
(together with the proposed connectivity fees, the ``Proposed Access
Fees''); (3) a Technical Support Request fee; and (4) a fee for
Historical Market Data (collectively, the ``Proposed Fees'').
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 89563 (August 14,
2020), 85 FR 51510 (August 20, 2020) (SR-PEARL-2020-03) (Order
Approving a Proposed Rule Change, as Modified by Amendment No. 1, To
Establish Rules Governing the Trading of Equity Securities)
(``Approval Order'').
\5\ The term ``Equity Member'' means a Member authorized by the
Exchange to transact business on MIAX PEARL Equities. See Exchange
Rule 1901.
---------------------------------------------------------------------------
The Exchange initially filed the proposal on September 24, 2020.\6\
The Exchange withdrew the First Proposed Rule Change on October 5, 2020
and submitted SR-PEARL-2020-19 (``Second Proposed Rule Change'').\7\
The Second Proposed Rule Change was published for comment in the
Federal Register on October 20, 2020 \8\ and no comment letters were
received. The Exchange withdrew the Second Proposed Rule Change \9\ and
submitted SR-PEARL-2020-33 (``Third Proposed Rule Change'').\10\ The
Third Proposed Rule Change was published in the Federal Register on
December 17, 2020 and no comment letters were received. The Exchange
withdrew the Third Proposed Rule Change \11\ and now replaces it with
this filing to provide further clarification regarding the Exchange's
cost justification analysis for the Proposed Fees.\12\
---------------------------------------------------------------------------
\6\ The Exchange initially filed the proposed fee changes on
September 24, 2020 (SR-PEARL-2020-18). See SR-PEARL-2020-18 (the
``First Proposed Rule Change'').
\7\ See Securities Exchange Act Release No. 90186 (October 14,
2020), 85 FR 66656 (October 20, 2020).
\8\ See id.
\9\ See letter from Chris Solgan, VP, Senior Counsel, the
Exchange, dated November 20, 2020, notifying the Commission that the
Exchange would withdraw SR-PEARL-2020-19.
\10\ See Securities Exchange Act Release No. 90651 (December 11,
2020), 85 FR 81971 (December 17, 2020).
\11\ See letter from Joseph W. Ferraro, SVP, Deputy General
Counsel, the Exchange, dated January 15, 2021, notifying the
Commission that the Exchange would withdraw SR-PEARL-2020-33.
\12\ In this filing, the Exchange also corrects an error in the
earlier filings by replacing references to the term ``Priority Purge
Ports'' with simply ``Purge Ports.''
---------------------------------------------------------------------------
The Exchange believes that exchanges, in setting fees of all types,
should meet very high standards of transparency to demonstrate why each
new fee or fee increase meets the requirements of the Act that fees be
reasonable, equitably allocated, not unfairly discriminatory, and not
create an undue burden on competition among members and markets. The
Exchange believes this high standard is especially important when an
exchange imposes various access fees on market participants to access
an exchange's marketplace, as well as other non-transaction fees. MIAX
PEARL deems Port fees and Connectivity fees to be access fees, and that
Ports and Connectivity are inextricably linked components of the
Exchange's network. Accordingly, the Exchange believes that it is
reasonable and appropriate that the costs and revenues for both should
be considered together, as the services associated with connectivity
and ports are linked pieces of the network's infrastructure, both of
which are necessary for a market participant to access and use the
trading System of the Exchange. Both Connectivity fee and Port fee
revenue are consolidated into a single line item (Access Fees) on the
Exchange's financial statements. The Exchange believes that it is
important to demonstrate that the Proposed Fees are based on its costs
to provide the services associated with the Proposed Fees and
reasonable business needs. Accordingly, the Exchange believes the
Proposed Fees, in general, and the Proposed Access Fees, in particular,
will allow the Exchange to offset a portion of the expenses the
Exchange has and will incur, and that the Exchange has provided
sufficient transparency (as described below) into how the Exchange
determined to charge such fees. Accordingly, the Exchange is providing
an analysis of its revenues, costs, and profitability associated with
the Proposed Access Fees. This analysis includes information regarding
its methodology for determining the costs and revenues associated with
the Proposed Access Fees.
Definitions
The Exchange proposes to include a Definitions section at the
beginning of the Fee Schedule, before the General Notes section. The
purpose of the Definitions section is to provide market participants
greater clarity and transparency regarding the applicability of fees
and rebates by defining terms used within the Fee Schedule in a single
location. The Exchange notes that other equities exchanges include
Definitions sections in their respective fee schedules,\13\ and the
Exchange believes that including a Definitions section in the front of
the Fee Schedule makes the Fee Schedule more user-friendly and makes
the Fee Schedule more comprehensive.
---------------------------------------------------------------------------
\13\ See Cboe BZX Exchange, Inc. Fee Schedule, Definitions
section; Cboe BYX Exchange, Inc., Definitions section; Cboe EDGA
Exchange, Inc., Definitions section; Cboe EDGX Exchange, Inc.,
Definitions section.
---------------------------------------------------------------------------
Unless included in the Definition section, capitalized terms used
in the Fee Schedule are defined in the MIAX PEARL Equities Rules. Each
of the definitions proposed to be included in the Fee Schedule are
based on definitions included in the existing MIAX PEARL fee schedule
applicable to options (``Options Fee Schedule'') \14\ or those of
another exchange. In particular, the Exchange propose to offer and
define ports and interfaces that provide connectivity to MIAX PEARL
Equities. The Exchange notes that each of these offerings are not novel
or unique, are available on other equity exchanges, and are currently
offered by the Exchange for options trading and provided for in
[[Page 9098]]
the Exchange's Options Fee Schedule. The Exchange proposes to define
the following terms in the Fee Schedule:
---------------------------------------------------------------------------
\14\ See the Options Fee Schedule available at https://www.miaxoptions.com/sites/default/files/fee_schedule-files/MIAX_PEARL_Fee_Schedule_11052020.pdf.
---------------------------------------------------------------------------
``Cross-connect'' occurs when the affected third-party
system is sited at the same data center where MIAX PEARL Equities
systems are sited, and the third-party connects to MIAX PEARL Equities
through the data center, rather than connecting directly to MIAX PEARL
Equities outside of the data center.
``Exchange System Disruption'' means an outage of a
Matching Engine or collective Matching Engines for a period of two
consecutive hours or more, during trading hours.
``Extranet Provider'' means a technology provider that
connects with MIAX PEARL Equities systems and in turn provides such
connectivity to MIAX PEARL Equities participants that do not connect
directly with MIAX PEARL Equities.
``FIX Order by Order'' means a type of FXD Port that sends
all order activities other than reject message, including Execution
Reports and Trade Cancel/Correct messages. FIX Order by Order is
currently offered by the Exchange for options trading and provided for
in the Exchange's Options Fee Schedule.
``FIX Order Interface'' or ``FOI'' means the Financial
Information Exchange interface for certain order types as set forth in
Exchange Rule 2614. FOI is currently offered by the Exchange for
options trading and provided for in the Exchange's Options Fee
Schedule.
``FIX Port'' means a FIX port that allows Equity Members
to send orders and other messages using the FIX protocol. FIX is
currently offered by the Exchange for options trading and provided for
in the Exchange's Options Fee Schedule.
``Full Service Port'' or ``FSP'' means an MEO port that
supports all MEO order input message types. FSP is currently offered by
the Exchange for options trading and provided for in the Exchange's
Options Fee Schedule.
``FIX Drop Port'' or ``FXD'' means a messaging interface
that provides real-time order activities of firms' MEO and FOI orders.
MIAX PEARL Equities offers two types of FXD ports: (1) Standard FIX
Drop; and (2) FIX Order by Order Drop. FXD Ports may be used by
Equities Market Makers, Order Entry Firms and clearing firms. FXD is
currently offered by the Exchange for options trading and provided for
in the Exchange's Options Fee Schedule.
``MENI'' means the MIAX Express Network Interconnect,
which is a network infrastructure which provides Equity Members and
non-Members network connectivity to the trading platforms, market data
systems, test systems, and disaster recovery facilities of the
Exchange. The MENI consists of the low latency and ultra-low latency
(``ULL'') connectivity options set forth in the Exchange's Fee
Schedule. MENI is currently offered by the Exchange for options trading
and provided for in the Exchange's Options Fee Schedule.
``MEO Interface'' or ``MEO'' means a binary order
interface for certain order types as set forth in Rule 516 into the
MIAX PEARL System. See Exchange Rule 100.
``Service Bureau'' means a technology provider that offers
and supplies technology and technology services to a trading firm that
does not have its own proprietary system.
``Standard FIX Drop'' means an FXD Port that only sends
trade information, including Execution Reports and Trade Cancel/Correct
messages. Standard FIX Drop is currently offered by the Exchange for
options trading and provided for in the Exchange's Options Fee
Schedule.
``Third Party Vendor'' means a subscriber of MIAX PEARL
Equities' market and other data feeds, which they in turn use for
redistribution purposes.
``Waiver Period'' means, for each applicable fee, the
period of time from the initial effective date of the MIAX PEARL
Equities Fee Schedule until such time that MIAX PEARL has an effective
fee filing establishing the applicable fee. MIAX PEARL Equities will
issue a Regulatory Circular announcing the establishment of an
applicable fee that was subject to a Waiver Period at least fifteen
(15) days prior to the termination of the Waiver Period and effective
date of any such applicable fee.
Proposed Access Fees
To provide market participants with a better understanding of how
the Exchange has established the levels of the Proposed Access Fees,
the Exchange is providing information in this proposal regarding the
costs incurred by the Exchange to provide services associated with the
Proposed Access Fees, including the Exchange's cost allocation
methodology (information that explains the Exchange's rationale for
determining that it was reasonable to allocate certain expenses
described in this filing towards the total cost to the Exchange to
provide the services associated with the Proposed Access Fees). The
Exchange is also providing an analysis of its expected revenues and
profitability for the services associated with the Proposed Access
Fees.
In order to determine the Exchange's costs for providing the
services associated with the Proposed Access Fees, the Exchange
conducted an extensive review in which the Exchange analyzed every
expense item in the Exchange's general expense ledger to determine
whether each such expense relates to the services associated with the
Proposed Access Fees, and, if such expense did so relate, what portion
(or percentage) of such expense actually supports those services. The
sum of all such portions of expenses represents the total cost of the
Exchange to provide the services associated with the Proposed Access
Fees. For the avoidance of doubt, no expense amount was allocated
twice. The Exchange is also providing detailed information regarding
the Exchange's cost allocation methodology--namely, information that
explains the Exchange's rationale for determining that it was
reasonable to allocate certain expenses described in this filing
towards the total cost to the Exchange to provide the Proposed Access
Fees.
Since MIAX PEARL Equities did not exist in 2019 (operations only
just launched on September 25, 2020), the Exchange's most recent
publicly available financial statement (2019 Audited Unconsolidated
Financial Statement) is not an accurate reflection of the total annual
costs associated with the development and operation of MIAX PEARL
Equities. Accordingly, the Exchange believes it is more appropriate to
justify its fees using cost figures that are isolated specifically for
MIAX PEARL Equities on an annualized basis, and, utilizing a recent
monthly billing cycle representative of 2020 monthly revenue,
extrapolated annualized revenue on a going-forward basis. The Exchange
does not believe it is appropriate to factor into its analysis future
revenue growth or decline into its projections for purposes of these
calculations, given the uncertainty of such projections due to the
continually changing access needs of market participants, discounts
that can be achieved through reaching certain tiers, uncertainty
relating to the timing of the expiration of certain fee waivers,
uncertainty relating to the actual fee amounts to be established upon
expiration of said fee waivers, market participant consolidation, etc.
Additionally, the Exchange similarly does not factor into its analysis
future cost growth or decline. The purpose of presenting it in this
manner is to provide greater transparency into the Exchange's actual
and expected revenues, costs, and profitability associated with
providing the services
[[Page 9099]]
associated with the Proposed Access Fees. Based on this analysis, the
Exchange believes that the Proposed Access Fees are fair and reasonable
because they will permit recovery of less than all of the Exchange's
costs for providing the services associated with the Proposed Access
Fees and will not result in excessive pricing or supra-competitive
profit when comparing the Exchange's total annual expense associated
with providing the services associated with the Proposed Access Fees
versus the total projected annual revenue the Exchange will collect for
providing those services.
Connectivity Fees
Specifically, proposed Sections (2a) and (b) of the Fee Schedule
describe network connectivity fees for the 1 Gigabit (``Gb'') ultra-low
latency (``ULL'') fiber connection and the 10 Gb ULL fiber connection,
which are to be charged to both Equity Members and non-Members of MIAX
PEARL Equities for connectivity to the Exchange's primary/secondary
facility. The Exchange also proposes to adopt network connectivity fees
for the 1 Gb ULL and 10 Gb ULL fiber connections for connectivity to
the Exchange's disaster recovery facility.
The Exchange will offer to both Equity Members and non-Members
various bandwidth alternatives for connectivity to MIAX PEARL Equities,
to its primary and secondary facilities, which consists of a 1 Gb ULL
fiber connection and a 10 Gb ULL fiber connection. The Exchange also
offers to both Equity Members and non-Members various bandwidth
alternatives for connectivity to the disaster recovery facility of MIAX
PEARL Equities, which consists of a 1 Gb ULL fiber connection and a 10
Gb ULL connection.
The Exchange proposes to establish the monthly network connectivity
fees for such connections for both Equity Members and non-Members. The
Exchange proposes to adopt the following fees for connectivity to MIAX
PEARL Equities' primary/secondary facility for both Equity Members and
non-Members: (a) $1,000 for the 1 Gb ULL connection; and (b) $3,500 for
the 10 Gb ULL connection. The Exchange proposes to adopt the following
fees for connectivity to MIAX PEARL Equities' disaster recovery
facility for both Equity Members and non-Members: (a) $1,000 for the 1
Gb ULL connection; and (b) $3,000 for the 10 Gb ULL connection.
Monthly network connectivity fees for Equity Members and non-
Members for connectivity with the primary/secondary facility will be
assessed in any month the Equity Member or non-Members is credentialed
to use any of the MIAX PEARL Equities Application Programming
Interfaces (``APIs'') or market data feeds in the production
environment and will be pro-rated when an Equity Member or non-Member
makes a change to the connectivity (by adding or deleting connections)
with such pro-rated fees based on the number of trading days that the
Equity Member or non-Member has been credentialed to utilize any of the
MIAX PEARL Equities' APIs or market data feeds in the production
environment through such connection, divided by the total number of
trading days in such month multiplied by the applicable monthly rate.
Monthly network connectivity fees for Equity Members and non-Members
for connectivity to the Disaster Recovery Facility will be assessed in
each month during which the Equity Member or non-Member has established
connectivity to the Disaster Recovery Facility.
Proposed Section (2)(c) of the Fee Schedule, Pass-Through of
External Connectivity Fees, provides for the pass through of external
connectivity fees (described below) to Equity Members and non-Members
that establish connections with MIAX PEARL Equities through a third-
party. Fees assessed to MIAX PEARL Equities by third-party external
vendors on behalf of an Equity Member or non-Member connecting to MIAX
PEARL Equities (including cross-connects), will be passed through to
the Equity Member or non-Member. The external connectivity fees passed
through can include one-time set-up fees, monthly charges, and other
fees charged to MIAX PEARL Equities by a third-party for the benefit of
an Equity Member or non-Member.
Port Fees
Proposed Section (2)(d), Port Fees, of the Fee Schedule describes
fees for access and services used by Equity Members and non-Members.
MIAX PEARL Equities provides three Port types: (i) The Financial
Information Exchange Port (``FIX Port''), which allows Equity Members
to send orders and other messages using the FIX protocol; \15\ (ii) the
MIAX Express Orders Interface (``MEO Port''), which allows Equity
Members order entry capabilities to all MIAX PEARL Equities Matching
Engines; \16\ and (iii) the FIX Drop Port (``FXD Port''), which
provides real-time order activities firms' MEO and FOI orders. MIAX
PEARL Equities offers two types of FXD ports: (1) Standard FIX Drop;
\17\ and (2) FIX Order by Order.\18\ FXD Ports may be used by Equities
Market Makers,\19\ Order Entry Firms \20\ and clearing firms.
---------------------------------------------------------------------------
\15\ ``FIX Order Interface'' or ``FOI'' means the Financial
Information Exchange interface for certain order types as set forth
in Exchange Rule 2614. See the Definitions section of the Fee
Schedule.
\16\ Each MEO interface will have one Full Service Port
(``FSP'') and one Purge Port. ``Full Service Port'' or ``FSP'' means
an MEO port that supports all MEO order input message types. See the
Definitions section of the Fee Schedule. Purge Ports are described
in Exchange Rule 2618(a)(7)(b).
\17\ ``Standard FIX Drop'' means an FXD Port that only sends
trade information, including Execution Reports and Trade Cancel/
Correct messages. See the Definitions section of the Fee Schedule.
\18\ ``FIX Order by Order'' means a type of FXD Port that sends
all order activities other than reject message, including Execution
Reports and Trade Cancel/Correct messages. See the Definitions
section of the Fee Schedule.
\19\ The term ``Equities Market Maker'' shall mean an Equity
Member that acts as a Market Maker in equity securities, pursuant to
Chapter XXVI. See Exchange Rule 1901.
\20\ The term ``Equities Order Entry Firm'', ``Order Entry
Firm'', or ``OEF'', shall mean those Equity Members representing
orders as agent on MIAX PEARL Equities and those non-Equity Market
Maker Members conducting proprietary trading. See Exchange Rule
1901.
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The Exchange proposes to assess monthly Port fees to Equity Members
in each month the Equity Member is credentialed to use a Port in the
production environment. MIAX PEARL Equities has primary and secondary
data centers and a disaster recovery center. Each Port provides access
to all Exchange data centers for a single fee. The Exchange notes that,
unless otherwise specifically set forth in the Fee Schedule, the Port
fees include the information communicated through the Port. That is,
unless otherwise specifically set forth in the Fee Schedule, there is
no additional charge for the information that is communicated through
the Port apart from what the user is assessed for each Port. The
Exchange proposes to assess Port Fees for FIX Ports, MEO Ports, and FXD
Ports as set forth in the following table:
------------------------------------------------------------------------
Monthly port fees includes connectivity
Type of port to the primary, secondary and disaster
recovery data centers
------------------------------------------------------------------------
FIX Port [caret]............. Per Port:
1st-5th Fee Waived for the Waiver Period.
[[Page 9100]]
6th-10th Fee Waived for the Waiver
Period.
11th-25th Fee Waived for the Waiver
Period.
26th-50th $450.
51st-75th $400.
76th-100th $350.
101st or more $300.
MEO Port [caret] *........... Per Port:
1st-5th Fee Waived for the Waiver Period.
6th-10th Fee Waived for the Waiver
Period.
11th-25th Fee Waived for the Waiver
Period.
26th-50th $450.
51st-75th $400.
76th-100th $350.
101st or more $300.
FXD Port [caret]............. Fee Waived for the Waiver Period.
------------------------------------------------------------------------
[caret] Each port will have access to all Matching Engines.
* The rates set forth above for MEO Ports entitle an Equity Member to
one (1) FSP and one (1) Purge Port \21\ for all Matching Engines for a
single port fee.
MEO and FIX Portsare counted separately for the tiers in
the table.
---------------------------------------------------------------------------
\21\ Purge Ports are described in Exchange Rule 2618(a)(7)(b).
---------------------------------------------------------------------------
The Exchange proposes to waive the fee for the 1st through the 25th
FIX Ports and MEO Ports that Equity Members are credentialed to use, as
well as the fees for all FXD Ports, for the Waiver Period.\22\ For all
Port fees that the Exchange initially proposes to be subject to the
Waiver Period, the Exchange will submit a rule filing to the Commission
to establish the fee amount and any related requirements, and provide
notice to terminate the applicable Waiver Period. Even though most of
the Port fees are waived during the Waiver Period, the Exchange
believes that is appropriate to provide market participants with the
overall structure of the fee by outlining the structure on the Fee
Schedule without setting forth a specific fee amount in certain areas,
so that there is general awareness that the Exchange intends to assess
such a fee in the future, should the Waiver Period terminate and the
Exchange establish an applicable fee.
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\22\ ``Waiver Period'' means, for each applicable fee, the
period of time from the initial effective date of the MIAX PEARL
Equities Fee Schedule until such time that MIAX PEARL has an
effective fee filing establishing the applicable fee. MIAX PEARL
Equities will issue a Regulatory Circular announcing the
establishment of an applicable fee that was subject to a Waiver
Period at least fifteen (15) days prior to the termination of the
Waiver Period and effective date of any such applicable fee. See the
Definitions section of the Fee Schedule.
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Equity Member and Non-Member Technical Support Request Fee
Proposed Section (2)(e), Member and Non-Member Technical Support
Request Fee, of the Fee Schedule describes the technical support
request fee to be charged to both Equity Members and non-Members that
request technical support at any of the MIAX PEARL Equities data
centers. MIAX PEARL Equities proposes to charge a fee of $200 per hour
for requested technical support. The Exchange intends to provide Equity
Members and non-Members access to the Exchange's on-site data center
personnel for technical support as a convenience to the Equity Members
and non-Members to test or otherwise assess their connectivity to the
Exchange. Currently, the Exchange charges the same fee amount for the
same services for options trading, as well as at its affiliate option
exchanges, Miami International Securities Exchange, LLC (``MIAX'') and
MIAX Emerald, LLC (``MIAX Emerald'').\23\
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\23\ See MIAX Fee Schedule, Section (5)(f), Member and non-
Member Technical Support Request Fee; MIAX PEARL Fee Schedule,
Section (5)(f), Member and non-Member Technical Support Request Fee;
and MIAX Emerald Fee Schedule, Section (5)(f), Member and non-Member
Technical Support Request Fee.
---------------------------------------------------------------------------
Market Data Fees
Proposed Sections (3)(a)-(c) describe the fee to be charged for the
Exchange's proprietary market data products. MIAX PEARL Equities
intends to offer the following three proprietary market data products:
(a) Top of Market (``ToM'') feed; (b) Depth of Market (``DoM'') feed;
and (c) the Historical Market Data feed.
The ToM feed is a data feed that contains the price and aggregate
size of displayed top of book quotations, order execution information,
and administrative messages for orders entered on MIAX PEARL Equities.
The DoM feed is a data feed that contains the displayed price and size
of each order entered on MIAX PEARL Equities, as well as order
execution information, order cancellations, order modifications, order
identification numbers, and administrative messages.
The Exchange proposes to provide under Sections (3)(a) and (3)(b)
of the Fee Schedule that the ToM and DoM would be offered free of
charge during the Waiver Period. Even though the fees for the ToM and
DoM data feeds are waived during the Waiver Period, the Exchange
believes that is appropriate to provide market participants with notice
of these feeds on the Fee Schedule without setting forth a specific fee
amount, so that there is general awareness that the Exchange intends to
assess such a fee in the future, should the Waiver Period terminate and
the Exchange establish an applicable fee.
The Exchange will also offer Historical Data for MIAX PEARL
Equities, which is a data product that offers historical market data
for orders entered on MIAX PEARL Equities upon request. The Exchange
proposes to charge a fee for the Historical Data, which will be based
on the cost incurred by the Exchange in providing that data. Proposed
Section (3)(c) of the Fee Schedule describes the fee to be charged
market participants that request Historical Data from MIAX PEARL
Equities. Historical Data is intended to aid market participants in
analyzing trade and volume data, evaluating historical trends in the
trading activity of a particular security, and enabling those market
participants to test trading models and analytical strategies.
Specifically, Historical Data includes all data that is captured and
disseminated on ToM and DoM feeds and is available on a T+1 basis.\24\
---------------------------------------------------------------------------
\24\ See Fee Schedule, Section (3)(c).
---------------------------------------------------------------------------
The Exchange will only assess the fee for Historical Data on a user
(whether Equity Member or non-Member) that specifically requests such
Historical Data. Historical Data will be uploaded
[[Page 9101]]
onto an Exchange-provided device, which the Exchange will incur a cost
to procure and provide to those that request the data.
The Exchange proposed to charge a flat fee of $500 per device
requested. Each device shall have a maximum storage capacity of 8
terabytes. Users may request up to six months of Historical Data per
device, subject to the device's storage capacity. Historical Data will
be made available beginning from the time of launch of MIAX PEARL
Equities on September 25, 2020 (always on a T+1 basis). However, only
the most recent six months of Historical Data shall be available for
purchase from the request date.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \25\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \26\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among Exchange Members and
issuers and other persons using any facility or system which the
Exchange operates or controls. The Exchange also believes the proposal
furthers the objectives of Section 6(b)(5) of the Act \27\ in that it
is designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in general to protect
investors and the public interest and is not designed to permit unfair
discrimination between customer, issuers, brokers and dealers.
---------------------------------------------------------------------------
\25\ 15 U.S.C. 78f(b).
\26\ 15 U.S.C. 78f(b)(4).
\27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
On March 29, 2019, the Commission issued its Order Disapproving
Proposed Rule Changes to Amend the Fee Schedule on the BOX Market LLC
Options Facility to Establish BOX Connectivity Fees for Participants
and Non-Participants Who Connect to the BOX Network (the ``BOX
Order'').\28\ On May 21, 2019, the Commission issued the Staff Guidance
on SRO Rule Filings Relating to Fees.\29\
---------------------------------------------------------------------------
\28\ See Securities Exchange Act Release No. 85459 (March 29,
2019), 84 FR 13363 (April 4, 2019) (SR-BOX-2018-24, SR-BOX-2018-37,
and SR-BOX-2019-04).
\29\ See Staff Guidance on SRO Rule Filings Relating to Fees
(May 21, 2019), at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (the ``Guidance'').
---------------------------------------------------------------------------
The Exchange believes that the Proposed Fees are consistent with
the Act because they (i) are reasonable, equitably allocated, not
unfairly discriminatory, and not an undue burden on competition; (ii)
comply with the BOX Order and the Guidance; (iii) are supported by
evidence (including comprehensive revenue and cost data and analysis)
that they are fair and reasonable because they do not result in
excessive pricing or supra-competitive profit; and (iv) utilize a cost-
based justification framework that is substantially similar to a
framework previously used by the Exchange (and its affiliates) to
establish comparable access fees, including connectivity fees and port
fees, for its options market. Accordingly, the Exchange believes that
the Commission should find that the Proposed Fees are consistent with
the Act.
The Exchange is not aware of any reason why market participants
could not simply drop their connections to an exchange (or not connect
to an exchange) if an exchange were to establish prices for its non-
transaction fees that, in the determination of such market participant,
did not make business or economic sense for such market participant to
connect to such exchange. No market participant is required by rule,
regulation, or competitive forces to be a Member of the Exchange or
MIAX PEARL Equities. As evidence of the fact that market participants
can and do disconnect from exchanges based on non-transaction fee
pricing, R2G Services LLC (``R2G'') filed a comment letter after BOX's
proposed rule changes to increase its connectivity fees (SR-BOX-2018-
24, SR-BOX-2018-37, and SR-BOX-2019-04).\30\ The R2G Letter stated,
``[w]hen BOX instituted a $10,000/month price increase for
connectivity; we had no choice but to terminate connectivity into them
as well as terminate our market data relationship. The cost benefit
analysis just didn't make any sense for us at those new levels.'' \31\
As further evidence of the fact that market participants can and do
disconnect from exchanges based on non-transaction fee pricing, a
member of the Exchange's affiliate, MIAX Emerald, recently discontinued
the use of MIAX Emerald's connectivity and port services as a result of
MIAX Emerald increasing connectivity fees and establishing certain port
fees. Accordingly, these examples show that if an exchange sets too
high of a fee for connectivity and/or other non-transaction fees for
its relevant marketplace, market participants can choose to disconnect
from such exchange.
---------------------------------------------------------------------------
\30\ See Letter from Stefano Durdic, R2G, to Vanessa Countryman,
Acting Secretary, Commission, dated March 27, 2019 (the ``R2G
Letter'').
\31\ See id.
---------------------------------------------------------------------------
The Exchange believes its proposal to include a Definitions section
in the Fee Schedule promotes just and equitable principles of trade,
removes impediments to and perfects the mechanism of a free and open
market and a national market system, and, in general protects investors
and the public interest and is not designed to permit unfair
discrimination between customers, issuers, brokers and dealers. The
Exchange believes that the proposal to adopt a Definitions section in
the beginning of the Fee Schedule will provide greater clarity to
Equity Members, non-Members, market participants and the public
regarding the Exchange's fees and rebates, and it is in the public
interest for the Fee Schedule to be transparent, comprehensive and
user-friendly so as to eliminate the potential for confusion.
The Exchange believes that its proposal is consistent with Section
6(b)(4) of the Act because the Proposed Access Fees will permit
recovery (less than all) of the Exchange's costs and will not result in
excessive or supra-competitive profit. The Proposed Access Fees will
allow the Exchange to recover a portion (less than all) of the costs
incurred by the Exchange associated with providing and maintaining the
necessary hardware and other infrastructure as well as network
monitoring and support services in order to provide the services
associated with the Proposed Access Fees. The Exchange believes that it
is reasonable and appropriate to establish its fees charged for the
services associated with the Proposed Access Fees at levels that will
partially offset the costs to the Exchange associated with maintaining
and enhancing a state-of-the-art exchange network infrastructure in the
U.S. equities industry.
The costs associated with building out and maintaining a state-of-
the-art network infrastructure are extensive. This is due to several
factors, including costs associated with maintaining and expanding a
team of highly-skilled network engineers, fees charged by the
Exchange's third-party data center operator, costs associated with
projects and initiatives designed to improve overall network
performance and stability through the Exchange's research and
development (``R&D'') efforts, and costs associated with fully-
supporting advances in infrastructure and expansion of network level
services, including customer monitoring, alerting and reporting. The
Exchange incurs significant technology expense related to establishing
and maintaining
[[Page 9102]]
Information Security services, enhanced network monitoring and customer
reporting, as well as Regulation SCI mandated processes, associated
with its network technology. While some of the expense is fixed, much
of the expense is not fixed, and thus increases as the number of
connections and ports increase. For example, new 1Gb ULL and 10Gb ULL
connections require the purchase of additional hardware to support
those connections as well as enhanced monitoring and reporting of
customer performance that the Exchange and its affiliates provide.
Further, 10Gb ULL connections require the purchase of specialized, more
costly hardware. As the total number of all connections increase, the
Exchange needs to increase its data center footprint and consume more
power, resulting in increased costs charged by its third-party data
center providers. Accordingly, the cost to the Exchange to provide
access to its network and trading infrastructure is not entirely fixed.
Further, because the costs of operating a data center are
significant and not economically feasible for the Exchange, the
Exchange does not operate its own data centers, and instead contracts
with a third-party data center provider. The Exchange notes that
larger, well-established exchange operators own/operate their data
centers, which offers them greater control over their data center
costs. Because those exchanges own and operate their data centers as
profit centers, the Exchange is subject to additional costs. Fees for
the services associated with the Proposed Access Fees, which are
charged for accessing the Exchange's data center network
infrastructure, are directly related to the network and offset such
costs.
Further, the Exchange invests significant resources in network R&D
to continuously improve the overall performance and stability of its
network. For example, the Exchange has a number of network monitoring
tools (some of which were developed in-house, and some of which are
licensed from third-parties), that continually monitor, detect, and
report network performance, many of which serve as significant value-
adds to Equity Members and enable the Exchange to provide a high level
of customer service. These tools detect and report performance issues,
and thus enable the Exchange to proactively notify an Equity Member
(and the SIPs) when the Exchange detects a problem with an Equity
Member's connectivity. In fact, the Exchange's affiliate options
exchanges, MIAX and MIAX Emerald, often receive inquiries from other
industry participants regarding the status of networking issues outside
of the Exchange's own network environment that are impacting the
industry as a whole via the SIPs, including inquiries from regulators,
because the Exchange has a superior, state-of the-art network that,
through its enhanced monitoring and reporting solutions, often detects
and identifies industry-wide networking issues ahead of the SIPs. The
Exchange also incurs costs associated with the maintenance and
improvement of existing tools and the development of new tools.
Also, routine R&D projects to improve the performance of the
network's hardware infrastructure result in additional cost. In sum,
the costs associated with maintaining and enhancing a state-of-the-art
exchange network in the U.S. equity securities industry is a
significant expense for the Exchange that is projected to increase
year-over-year, and thus the Exchange believes that it is reasonable to
offset a portion of those costs through establishing the Proposed
Access Fees, which are designed to recover those costs, as described
herein. Overall, the Proposed Access Fees are projected to offset only
a portion of the Exchange's services associated with the Proposed
Access Fees. The Exchange invests in and offers a superior network
infrastructure as part of its overall exchange services offering,
resulting in significant costs associated with maintaining this network
infrastructure, which are directly tied to the amount of the Proposed
Access Fees that must be charged to access it, in order to recover
those costs.
The Exchange believes it is reasonable to consider the expense and
revenue for ports and connectivity alternatives together because ports
and connectivity are inextricably linked components of the network
infrastructure, and that both are necessary for a market participant to
access the Exchange. The various types of connectivity and port
alternatives that the Exchange offers provide a wide array of access
alternatives necessary for a market participant to conduct its business
using the Exchange, which is a business decision to be made by each
particular type of market participant. The different types of
connectivity and port alternatives allows Equity Members to conduct
their different business strategies--some Equity Members put an
emphasis on speed, while others emphasize other strategies, such as
redundancy and certainty of execution. The Exchange does not require an
Equity Member to have a certain framework for accessing the Exchange,
but provides various connectivity and port alternatives for each Equity
Member's distinct business lines.
The Exchange offers various types of ports with differing prices
because each port accomplishes different tasks, are suited to different
types of Equity Members, and consume varying capacity amounts of the
network. For instance, MEO ports allow for a higher throughput and can
handle much higher order rates than FIX ports. Equity Members that are
Market Makers or high frequency trading firms utilize these ports
(typically coupled with 10Gb ULL connectivity) because they transact in
significantly higher amounts of messages being sent to and from the
Exchange, versus FIX port users, who are traditionally customers
sending only orders to the Exchange (typically coupled with 1Gb
connectivity). The different types of ports cater to the different
types of Exchange Memberships and different capabilities of the various
Exchange Members. Market Makers have quoting and other obligations that
traditional customers do not. Market Makers, therefore, need ports and
connections that can handle using far more of the network's capacity
for message throughput, risk protections, and the amount of information
that has to be assessed. Market Makers account for the vast majority of
network capacity utilization and volume executed on the Exchange.
The Exchange only has four primary sources of revenue: Transaction
fees, access fees (of which the Proposed Access Fees constitute the
majority), regulatory fees, and market data fees. Accordingly, the
Exchange must cover all of its expenses from these four primary sources
of revenue.
The Exchange believes that the Proposed Access Fees are fair and
reasonable because they will not result in excessive pricing or supra-
competitive profit, when comparing the total annual expense that the
Exchange projects to incur in connection with providing the services
associated with the Proposed Access Fees versus the total annual
revenue of the Exchange projects to collect in connection with
providing those services. For 2020,\32\ the total annual expense \33\
for providing the services associated with the Proposed Access Fees for
MIAX PEARL Equities is projected to be approximately $8.4
[[Page 9103]]
million. The $8.4 million in expense includes expense associated with
providing all ports and all connectivity alternatives. The Exchange is
unable to separate out its expense by connectivity alternative, as all
connectivity alternatives are intricately combined in a single network
infrastructure. Nevertheless, the Exchange attributes the majority of
connectivity expense to the 10Gb ULL connections because the majority
of network capacity is used by 10Gb ULL purchasers. The $8.4 million in
projected total annual expense is comprised of the following, all of
which are directly related to the services associated with the Proposed
Access Fees by MIAX PEARL Equities to its Equity Members and non-
Members: (1) Third-party expense, relating to fees paid by MIAX PEARL
Equities to third-parties for certain products and services; and (2)
internal expense, relating to the internal costs of MIAX PEARL Equities
to provide the services associated with the Proposed Access Fees. The
$8.4 million in projected total annual expense is directly related to
the services associated with the Proposed Access Fees and not any other
product or service offered by the Exchange. It does not include general
costs of operating matching systems and other trading technology, and
no expense amount was allocated twice.
---------------------------------------------------------------------------
\32\ The Exchange has not yet finalized its 2020 year end
results.
\33\ The Exchange notes that the total expense figures for each
of the external and internal expenses described herein relate only
to the Exchange's equities market. No expense relating to the
Exchange's options market is included in this filing.
---------------------------------------------------------------------------
As discussed, the Exchange conducted an extensive 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 services
associated with the Proposed Access Fees, and, if such expense did so
relate, what portion (or percentage) of such expense actually supports
those services, and thus bears a relationship that is, ``in nature and
closeness,'' directly related to those services. The sum of all such
portions of expenses represents the total cost of the Exchange to
provide the services associated with the Proposed Access Fees.
For 2020, total actual and projected third-party expense, relating
to fees paid by the Exchange to third-parties for certain products and
services for the Exchange to be able to provide the services associated
with the Proposed Access Fees, was $1,492,112. 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 MIAX PEARL Equities trading system infrastructure; (2)
Zayo Group Holdings, Inc. (``Zayo'') for connectivity services (fiber
and bandwidth connectivity) linking MIAX PEARL Equities' office
locations in Princeton, New Jersey and Miami, Florida to all data
center locations; (3) Secure Financial Transaction Infrastructure
(``SFTI''), which supports connectivity and feeds for the entire equity
securities industry; (4) various other services providers (including
Thompson Reuters, NYSE, Nasdaq, Internap, and Options IT), which
provide content, connectivity services, infrastructure services, and
market data services; and (5) various other hardware and software
providers (including Dell and Cisco, which support the production
environment).
For clarity, only a portion of all fees paid to such third-parties
is included in the third-party expense herein (only the portions that
actually support the services associated with the Proposed Access
Fees), and no expense amount is allocated twice. Accordingly, the
Exchange does not allocate its entire information technology and
communication costs to the services associated with the Proposed Access
Fees.
The Exchange believes it is reasonable to allocate such third-party
expense described above towards the total cost to the Exchange to
operate and support the network, including providing the services
associated with the Proposed Access Fees.\34\ In particular, the
Exchange believes it is reasonable to allocate the identified portions
of the Equinix expense because Equinix operates the data centers
(primary, secondary, and disaster recovery) that host the Exchange's
network infrastructure, which enables the services associated with the
Proposed Access Fees. 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
Proposed Access Fees to Equity 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 Proposed
Access Fees, only the portions which the Exchange identified as being
specifically mapped to operating and supporting the network,
approximately 73% of the total Equinix expense (68% allocated towards
the cost of providing the provision of network connectivity and 5%
allocated towards the cost of providing ports). The Exchange believes
these allocations are reasonable because they represent the Exchange's
actual cost to provide the services associated with the Proposed Access
Fees, and not any other service, as supported by its cost review.
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\34\ The Exchange notes the that the below allocation
percentages are the percentage of the total cost incurred by MIAX
PEARL Equities and not costs related to operating the Exchange's
options trading platform. See also id.
---------------------------------------------------------------------------
The Exchange believes it is reasonable to allocate the identified
portions of the Zayo expense because Zayo provides the internet, fiber
and bandwidth connections with respect to the network, linking MIAX
PEARL Equities with the Exchange's affiliates, MIAX and MIAX Emerald,
as well as the data center and disaster recovery locations. As such,
all of the trade data 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 Proposed Access Fees to Equity Members and
non-Members and their customers. The Exchange did not allocate all of
the Zayo expense toward the cost of providing the services associated
with the Proposed Access Fees, only the portions which the Exchange
identified as being specifically mapped to providing the services
associated with the Proposed Access Fees, approximately 66% of the
total Zayo expense (62% allocated towards the cost of providing the
provision of network connectivity and 4% allocated towards the cost of
providing ports). The Exchange believes these allocations are
reasonable because they represent the Exchange's actual cost to provide
the services associated with the Proposed Access Fees, 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, Internap, and Options IT)
expense because those entities provide connectivity and feeds for the
entire U.S. securities industry as well as the content, connectivity
services, infrastructure services, and market data 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 the services associated
with the Proposed Access Fees to Equity Members and non-Members and
their customers. The Exchange did not allocate all of the SFTI
[[Page 9104]]
and other service providers' expense toward the cost of providing the
services associated with the Proposed Access Fees, only the portions
which the Exchange identified as being specifically mapped to providing
the services associated with the Proposed Access Fees, approximately
94% of the total SFTI and other service providers' expense (89%
allocated towards the cost of providing the provision of network
connectivity and 5% allocated towards the cost of providing ports). The
Exchange believes these allocations are reasonable because they
represent the Exchange's actual cost to provide the services associated
with the Proposed Access Fees, and not any other service, as supported
by its cost review.
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 the services associated with the Proposed Access Fees to Equity
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 Proposed Access
Fees, only the portions which the Exchange identified as being
specifically mapped to providing the services associated with the
Proposed Access Fees, approximately 57% of the total hardware and
software provider expense (54% allocated towards the cost of providing
the provision of network connectivity and 3% allocated towards the cost
of providing ports). The Exchange believes these allocations are
reasonable because they represent the Exchange's actual cost to provide
the services associated with the Proposed Access Fees, and not any
other service, as supported by its cost review.
For 2020, total projected internal expense, relating to the
internal costs of the Exchange to provide the services associated with
the Proposed Access Fees, is projected to be $6,905,858. This includes,
but is not limited to, costs associated with: (1) Employee compensation
and benefits for full-time employees that support the services
associated with the Proposed Access Fees, including staff in network
operations, trading operations, development, system operations,
business, etc., as well as staff in general corporate departments (such
as legal, regulatory, and finance) that support those employees and
functions; (2) depreciation and amortization of hardware and software
used to provide the services associated with the Proposed Access Fees,
including equipment, servers, cabling, purchased software and
internally developed software used in the production environment to
support those services for trading; and (3) occupancy costs for leased
office space for staff that support the services associated with the
Proposed Access Fees. The breakdown of these costs is more fully-
described below.
For clarity, only a portion of all such internal expenses are
included in the internal expense herein (only the portions that support
the services associated with the Proposed Access Fees), and no expense
amount is allocated twice. Accordingly, the Exchange does not allocate
its entire costs contained in those line items to the services
associated with the Proposed Access Fees.
The Exchange believes it is reasonable to allocate such internal
expense described above towards the total cost to the Exchange to
operate and support the network, including providing the services
associated with the Proposed Access Fees. In particular, MIAX PEARL
Equities' employee compensation and benefits expense relating to
providing the services associated with the Proposed Access Fees is
projected to be $4,317,667, which is only a portion of the $13,492,708
total projected expense for employee compensation and benefits. The
Exchange believes it is reasonable to allocate the identified portions
of each expense because they include 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), and Legal (who provide legal
services, 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 operation and support of the
network, including the services associated with the Proposed Access
Fees. Without these employees, the Exchange would not be able to
operate and support the network and provide the services associated
with the Proposed Access Fees to Equity Members and non-Members and
their customers. The Exchange did not allocate all of the employee
compensation and benefits expense toward the cost of providing the
services associated with the Proposed Access Fees, only that portion
which the Exchange identified as being specifically mapped to providing
the services associated with Proposed Access Fees, approximately 32% of
the total employee compensation and benefits expense (29% allocated
towards the cost of providing the provision of network connectivity and
3% allocated towards the cost of providing ports). The Exchange
believes these allocations are reasonable because they represent the
Exchange's actual cost to provide the services associated with the
Proposed Access Fees, and not any other service, as supported by its
cost review.
MIAX PEARL Equities' depreciation and amortization expense relating
to providing the services associated with the Proposed Access Fees is
projected to be $2,131,411, which is only a portion of the $2,664,264
total projected expense for depreciation and amortization. The Exchange
believes it is reasonable to allocate the identified portions of such
projected 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. Without this
equipment, the Exchange would not be able to operate the network and
provide the services associated with the Proposed Access Fees to Equity
Members and non-Members and their customers. The Exchange did not
allocate all of the projected depreciation and amortization expense
toward the cost of providing the services associated with the Proposed
Access Fees, only the portions which the Exchange identified as being
specifically mapped to providing the services associated with the
Proposed Access Fees, approximately 80% of the total depreciation and
amortization expense (76% allocated towards the cost of providing the
provision of network connectivity and 4% allocated towards the cost of
providing ports). The services associated with the Proposed Access Fees
would not be possible without relying on such equipment. The Exchange
believes these allocations are reasonable because they represent the
Exchange's actual cost to provide the services associated with the
Proposed
[[Page 9105]]
Access Fees, and not any other service, as supported by its cost
review.
MIAX PEARL Equities' occupancy expense relating to providing the
services associated with the Proposed Access Fees is projected to be
$456,780, which is only a portion of the $878,423 total projected
expense for occupancy. The Exchange believes it is reasonable to
allocate the identified portions of such projected 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 Proposed Access Fees. These amounts consist primarily of rent for
the Exchange's Princeton, New Jersey office, as well as various related
costs, such as physical security, property management fees, property
taxes, and utilities. The Exchange operates its Network Operations
Center (``NOC'') and Security Operations Center (``SOC'') from its
Princeton, New Jersey office location. A centralized office space is
required to house the staff that operates and supports the network. The
Exchange currently has approximately 150 employees (and continues to
increase its headcount to support the network as the Exchange, and its
affiliates, grow the network). Approximately two-thirds of the
Exchange's staff are in the Technology department, and the majority of
those staff members have some role in the operation and performance of
the network. Without this office space, the Exchange would not be able
to operate and support the network and provide the services associated
with the Proposed Access Fees to Equity Members and non-Members and
their customers. Accordingly, the Exchange believes it is reasonable to
allocate the identified portions of its occupancy expense because such
amounts represent the Exchange's actual cost to house the equipment and
personnel who operate and support the Exchange's network infrastructure
for the services associated with the Proposed Access Fees. The Exchange
did not allocate all of the projected occupancy expense toward the cost
of providing the services associated with the Proposed Access Fees,
only the portions which the Exchange identified as being specifically
mapped to providing the services associated with the Proposed Access,
approximately 52% of the total occupancy expense (48% allocated towards
the cost of providing the provision of network connectivity and 4%
allocated towards the cost of providing ports). The Exchange believes
these allocations are reasonable because they represent the Exchange's
actual cost to provide the services associated with the Proposed Access
Fees, and not any other service, as supported by its cost review.
The Exchange notes that a material portion of its total overall
expense is allocated to the provision of services associated with the
Proposed Access Fees. The Exchange believes this is reasonable and in
line, as the Exchange operates a technology-based business that
differentiates itself from its competitors based on its trading systems
that rely on its high performance network, resulting in significant
technology expense. Over two-thirds of Exchange staff are technology-
related employees. The majority of the Exchange's expense is
technology-based. As described above, the Exchange has only four
primary sources of fees in to recover its costs, thus the Exchange
believes it is reasonable to allocate a material portion of its total
overall expense towards the Proposed Access Fees.
The Exchange's monthly revenue for the Proposed Access Fees is
based on the following purchases by Equity Members and non-Members
during a recent billing cycle: (i) 12 1Gb ULL connections; (ii) 81 10Gb
ULL connections; and (iii) 103 MEO Ports. The monthly revenue from Port
fees is subject to change from month to month depending on the number
of Ports purchased. Accordingly, the Exchange's total monthly Port
revenue was $22,800 and total 1 Gb and 10Gb ULL connectivity revenue
was $295,500. The Exchange notes that the port revenue projections are
subject to change depending on market participant needs and the tiers
achieved. As such, the projection of $295,500 per month is not a static
number and may fluctuate from month to month.
Accordingly, based on the facts and circumstances presented, the
Exchange believes that its provision of the services associated with
the Proposed Access Fees will not result in excessive pricing or supra-
competitive profit. To illustrate, on a going-forward, fully-annualized
basis, the Exchange projects that its annualized revenue for providing
the services associated with the Proposed Access Fees would be
approximately $3,600,000 per annum, based on a recent billing cycle.
The Exchange projects that its annualized expense for providing the
services associated with the Proposed Access Fees would be
approximately $8,400,000 per annum. Accordingly, on a fully-annualized
basis, the Exchange believes its total projected revenue for the
providing the services associated with the Proposed Access Fees will
not result in excessive pricing or supra-competitive profit, as the
Exchange will incur a loss of $4,800,000 on the Proposed Access Fees
($3.6 million - $8.4 million = ($4.8 million per annum)).
For the avoidance of doubt, none of the expenses included herein
relating to the services associated with the Proposed Access Fees
relate to any other services offered by MIAX PEARL Equities. Stated
differently, no expense amount of the Exchange is allocated twice. The
Exchange notes that, with respect to MIAX PEARL Equities expenses
included herein, those expenses only cover the MIAX PEARL Equities
market; expenses associated with the Exchange's options trading
platform, its affiliate exchanges, MIAX and MIAX Emerald, are accounted
for separately and are not included within the scope of this filing.
Stated differently, no expense amount of the Exchange is also allocated
to its options trading platform, MIAX or MIAX Emerald.
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 Proposed Access Fees, 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, including the services associated
with the Proposed Access Fees. 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 the services associated with the Proposed Access Fees to
Equity 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. The Proposed Access Fees are intended to recover the
Exchange's costs (less than all) of operating and supporting the
network, including providing the services associated with the Proposed
Access Fees.
Accordingly, the Proposed Access Fees are fair and reasonable
because
[[Page 9106]]
they do not result in excessive pricing or supra-competitive profit,
when comparing the actual network operation and support costs to the
Exchange versus the projected revenue for the services associated with
the Proposed Access Fees.
The Exchange notes that other equities exchanges have similar
connectivity alternatives for their participants, including similar
low-latency connectivity. For example, the Nasdaq Stock Market LLC
(``Nasdaq''), Nasdaq PHLX LLC (``Phlx''), and Nasdaq ISE, LLC (``ISE'')
all offer a 1Gb, 10Gb and 10Gb low latency ethernet connectivity
alternatives to each of their participants.\35\ NYSE Arca, Inc. (``NYSE
Arca''), NYSE American LLC (``NYSE American''), NYSE Chicago, Inc.
(``NYSE Chicago'') and NYSE National, Inc. (``NYSE National'') all
offer a 1Gb and 10Gb low latency ethernet connectivity alternatives to
each of their participants.\36\ The Exchange notes that all the other
equities exchanges described above charge higher rates for such similar
connectivity to primary and secondary facilities. While the Exchange's
proposed connectivity fees are substantially lower than the fees
charged by Nasdaq, Phlx, ISE, NYSE America, NYSE Arca, NYSE Chicago and
NYSE National, the Exchange believes that it can offer significant
value to Equity Members over other exchanges in terms of network
monitoring and reporting, which the Exchange believes is a competitive
advantage, and differentiates its access services versus access
services at other exchanges. Additionally, the Exchange's proposed
connectivity fees to its disaster recovery facility are within the
range of the fees charged by other exchanges for similar connectivity
alternatives.\37\ The Exchange also notes that other equities exchanges
have similar port alternatives for their participants, with similar or
substantially higher fees.\38\
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\35\ See Nasdaq, Phlx and ISE General Rules, General 8, Section
1(b). Nasdaq, Phlx and ISE each charge a monthly fee of $2,500 for
each 1Gb connection, $10,000 for each 10Gb connection and $15,000
for each 10Gb Ultra connection, which is the equivalent of the
Exchange's 10Gb ULL connection.
\36\ See NYSE American Fee Schedule, NYSE Arca Fee Schedule,
NYSE Chicago Fee Schedule and NYSE National Fee Schedule, Co-
Location Fees. NYSE American, NYSE Arca, NYSE Chicago and NYSE
National each charge a monthly fee of $5,000 for each 1Gb circuit
and $22,000 for each 10Gb LX circuit, which is the equivalent of the
Exchange's 10Gb ULL connection.
\37\ See Cboe EDGA Exchange, Inc. (``EDGA'') and Cboe EDGX
Exchange, Inc. (``EDGX'') Fee Schedules, Physical Connectivity Fees,
(charging a monthly fee of $2,000 for a 1Gb disaster recovery
network access port and a monthly fee of $6,000 for a 10Gb disaster
recovery network access port).
\38\ See Nasdaq Fee Schedule, Equity Rules, Equity 7, Pricing
Schedule, Ports (charging $575 per FIX port per month); Phlx Fee
Schedule, Equity Rules, Equity 7, Pricing Schedule, Section 3 Nasdaq
PSX Fees (charging $400 per FIX port per month); EDGX Fee Schedule,
Logical Port Fees (charging $550 per Logical Port per month and $650
per Purge port per month).
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Historical Data
The Exchange believes the proposed fee for Historical Data is a
reasonable allocation of its costs and expenses among its Equity
Members and other persons using its facilities since it is recovering
the costs associated with distributing such data should an Equity
Member request Historical Data. Access to the Exchange is provided on
fair and non-discriminatory terms. The Exchange believes the proposed
fee for Historical Data is equitable and not unfairly discriminatory
because the fee level results in a reasonable and equitable allocation
of fees amongst users for similar services. Moreover, the decision as
to whether or not to purchase Historical Data is entirely optional to
all users. Potential purchasers are not required to purchase the
Historical Data, and the Exchange is not required to make the
Historical Data available. Purchasers may request the data at any time
or may decline to purchase such data. The allocation of fees among
users is fair and reasonable because, if the market deems the proposed
fees to be unfair or inequitable, firms can diminish or discontinue
their use of this data.
The Exchange believes that the proposed fee for Historical Data is
consistent with Section 6(b)(4) of the Act because the Proposed Access
Fees will permit recovery of the Exchange's costs and will not result
in excessive or supra-competitive profit. The proposed fee for
Historical Data will allow the Exchange to recover a portion (less than
all) of the costs incurred by the Exchange associated with providing
and maintaining the necessary hardware and other infrastructure as well
as network monitoring and support services in order to provide
Historical Data. The Exchange believes that it is reasonable and
appropriate to establish a fee for Historical Data at a level that will
partially offset the costs to the Exchange associated with maintaining
and providing Historical Data. For example, Historical Market Data is
uploaded onto an Exchange-provided device. Each device shall have a
maximum storage capacity of 8 terabytes. The Exchange incurs costs in
providing the device, storing the historical data, and utilizing
resources to upload the data onto the device. Specifically, the device
provided by the Exchange costs approximately $200 to $300. Moreover,
the Exchange tracks the number of hours spent by Exchange personnel
procuring Historical Market Data. Based on the average number of person
hours spent by the Exchange on procuring Historical Market Data, and
based on the Exchange's average cost per full-time employee (``FTE'')
of approximately $250,000 (inclusive of all compensation and employee
benefits) per year, the Exchange represents that its cost to provide
this service is reasonably related to (and often exceeds) the amount of
the Historical Market Data fee the Exchange proposes to charge for such
service. Therefore, the FTE cost to the Exchange on average $130 an
hour and it takes approximately four FTE hours to process a request for
Historical Market Data. Accordingly, the proposed Historical Market
Data fee would enable the Exchange to recover a material portion of its
costs to provide Historical Market Data. The Exchange believes this is
a conservative cost allocation because the Exchange is not allocating
any additional costs beyond the employee compensation for employees
directly involved in this process and the cost of the device. These
unallocated addition costs include technology costs of employees,
office space costs of employees, costs associated with supporting
departments' time for things such as internal meetings, project
management coordination among the individuals who indirectly support
the provision of Historical Market Data, and various other indirectly-
related costs.
The Exchange also notes that its proposed fee is identical to that
it charges today for options historical data and less than that charged
by other exchanges for their own historical data. For example, all four
of the Cboe equity exchanges charge a fee of $500 for one month of
historical data and $2,500 for one terabyte drive of data.\39\
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\39\ See, e.g., Cboe BZX Exchange, Inc. fee schedule available
at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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Pass-Through of External Connectivity Fees
The Exchange believes that the proposed pass-through of external
connectivity fees constitutes an equitable allocation of fees, and is
not unfairly discriminatory, because it allows the Exchange to recover
costs associated with offering access through the network connections,
responding to customer requests, configuring MIAX PEARL Equities'
systems, programming
[[Page 9107]]
API user specifications and administering the various services. Access
to the MIAX PEARL Equities market is offered on fair and non-
discriminatory terms.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to pass-through External Connectivity fees to Equity
Members and non-Members that establish connections with MIAX PEARL
Equities through a third-party. MIAX PEARL Equities will only pass-
through the actual costs it is charged by third-party external vendors.
The Exchange believes it is reasonable and equitable to recover costs
charged it on behalf of an Equity Member or non-Member that establishes
connections with MIAX PEARL Equities through a third party. Other
exchanges, including EDGX and EDGA, charge a fee for similar services
to their members and non-members.
Technical Support Request Fee
The Exchange believes that the proposed Technical Support Request
fee is fair, equitable and not unreasonably discriminatory, because it
is assessed equally to all Equity Members and non-Members who request
technical support. Furthermore, Equity Members and non-Members are not
required to use the service but instead it is offered as a convenience
to all Equity Members and non-Members. The proposed fee is reasonably
designed because it will permit both Equity Members and non-Members to
request the use of the Exchange's on-site data center personnel as
technical support and as a convenience in order to test or otherwise
assess their connectivity to the Exchange and the fee is within the
range of the fee charged by other exchanges for similar services and is
identical to the same fee assessed by the Exchange today for options as
well as the Exchange's affiliates, MIAX and MIAX Emerald.
As discussed above, the Exchange's average cost per FTE of
approximately $250,000 (inclusive of all compensation and employee
benefits) per year, the Exchange represents that its cost to provide
this service is reasonably related to (and often exceeds) the amount of
the Technical Support fee the Exchange proposes to charge for such
service. Therefore, the cost to the Exchange to provide an employee to
provide technical support is approximately $130 per FTE. Also, more
than one FTE may be involved depending on the nature of the request.
Accordingly, the proposed per hour fee for technical support would
enable the Exchange to recover a material portion of such cost. The
Exchange believes this is a conservative cost allocation because the
Exchange is not allocating any additional costs beyond the employee
compensation costs for employees directly involved in this process.
These unallocated addition costs include costs associated with
potential management review and sign off, technology costs of
employees, office space costs of employees, costs associated with
supporting departments' time for things such as internal meetings,
project management coordination among the individuals who indirectly
support the technology support process, and various other indirectly-
related costs.
* * * * *
Finally, the Exchange notes that it operates in a highly
competitive market in which market participants can readily favor
competing venues. In such an environment, the Exchange must establish
fees that are competitive with other exchanges. For the reasons
described above, the Exchange believes that the proposed fees in the
MIAX PEARL Equities Fee Schedule appropriately reflect this competitive
environment.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes that the Proposed Fees do not place certain
market participants at a relative disadvantage to other market
participants because the pricing of the Proposed Fees is associated
with relative usage of the various market participants and does not
impose a barrier to entry to smaller participants. The Exchange
believes the Proposed Fees do not favor certain categories of market
participants in a manner that would impose a burden on competition;
rather, the allocation of the Proposed Fees reflects the network and
access resources consumed by various market participants.
The Exchange believes the Proposed Fees do not place an undue
burden on competition on other SROs that is not necessary or
appropriate. Additionally, other equity exchanges have similar
connectivity and port alternatives for their participants, including
similar low-latency connectivity, but with much higher rates to
connect.\40\ The Exchange is also unaware of any assertion that the
Proposed Fees would somehow unduly impair its competition with other
equities exchanges. To the contrary, if the fees charged are deemed too
high by market participants, they can simply not connect to the
Exchange or not use the services associated with the Proposed Access
Fees.
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\40\ See supra notes 35 through 38.
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While the Exchange recognizes the distinction between connecting to
an exchange and trading at the exchange, the Exchange notes that it
plans to operate in a highly competitive market in which market
participants can readily connect and trade with venues they desire. In
such an environment, the Exchange must continually adjust its fees to
remain competitive with other exchanges. The Exchange believes that the
Proposed Fees reflect this competitive environment.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\41\ and Rule 19b-4(f)(2) \42\ 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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\41\ 15 U.S.C. 78s(b)(3)(A)(ii).
\42\ 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-PEARL-2021-02 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.
[[Page 9108]]
All submissions should refer to File Number SR-PEARL-2021-02. 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-2021-02 and should be submitted on
or before March 4, 2021.
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\43\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\43\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02776 Filed 2-10-21; 8:45 am]
BILLING CODE 8011-01-P
