Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Remove the Cap on the Number of Additional Limited Service Ports Available to Market Makers, 26973-26979 [2021-10379]
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Federal Register / Vol. 86, No. 94 / Tuesday, May 18, 2021 / Notices
This estimated cost also includes
expense associated with providing the
necessary engineering and support
personnel to transition those Members
who wish to acquire two additional
Limited Service MEO Ports. Further, the
Exchange projects that the annualized
revenue from the two additional
Limited Service MEO Ports will be
approximately $67,200 (assuming seven
Members purchase the two additional
Limited Service MEO Ports). Therefore,
the Exchange’s upfront cost in
expanding its network to provide its
Members with two additional Limited
Service MEO Ports—approximately
$175,000—is significant relative to the
anticipated annualized revenue the
Exchange expects to bring in from two
additional Limited Service MEO Ports—
approximately $67,200. Further, the
Exchange anticipates it will incur
approximately $76,408 in annualized
ongoing operating expense (‘‘OpEx’’) in
order to support the expanded network
and two additional Limited Service
MEO Ports. Thus, even excluding the
upfront CapEx of $175,000, the
Exchange is not generating a supracompetitive profit from the provision of
two additional Limited Service MEO
Ports. In fact, even excluding the onetime CapEx cost of $175,000, the
Exchange anticipates generating an
annual loss from the provision of two
additional Limited Service MEO Ports of
($9,208)—that is, $67,200 in revenue
minus $76,408 in expense equates to a
loss of ($9,208) to support the additional
ports annually.
The Exchange also notes that no other
exchange has a similar cap on the
amount of ports that firms can purchase
in their rulebooks or fee schedules and
those exchanges have the same
requirements under Section 6(b)(5) of
the Exchange Act 36 as MIAX Pearl.37
resulting from greater marketplace
volatility. The Exchange also does not
believe that the proposed rule change
will impose a burden on intramarket
competition because additional Limited
Service MEO Ports are available to all
Members on an equal basis. It is a
business decision of each Member
whether to pay for the additional
Limited Service MEO Ports.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The proposed rule change will not
impose a burden on competition but
will benefit competition by enhancing
the Exchange’s ability to compete by
providing additional services to market
participants. It is not intended to
address a competitive issue. Rather, the
proposal is intended to allow the
Exchange to increase its inventory of
MEO Ports to meet increased Member
demand and increased message traffic
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–2021–23 on the subject line.
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,38 and Rule
19b–4(f)(2) 39 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:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–PEARL–2021–23. 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–2021–23 and
should be submitted on or before June
8, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.40
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–10380 Filed 5–17–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91857; File No. SR–MIAX–
2021–19]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To
Remove the Cap on the Number of
Additional Limited Service Ports
Available to Market Makers
May 12, 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 May 10,
2021, Miami International Securities
40 17
36 15
U.S.C. 78f(b)(5).
37 See supra note 14.
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38 15
U.S.C. 78s(b)(3)(A)(ii).
39 17 CFR 240.19b–4(f)(2).
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26973
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 86, No. 94 / Tuesday, May 18, 2021 / Notices
Exchange, LLC (‘‘MIAX’’ 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 Options Fee Schedule
(the ‘‘Fee Schedule’’) to remove the cap
on the number of additional Limited
Service MIAX Express Interface (‘‘MEI’’)
Ports (defined below) available to
Market Makers.3 The Exchange does not
propose to amend the fees for additional
Limited Service MEI Ports.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to delete
footnote 30 of Section 5)d)ii) of the Fee
Schedule to remove the cap on the
number of additional Limited Service
MEI Ports available to Market Makers.
The Exchange does not propose to
amend the fees charged for any
additional Limited Service MEI Ports
purchased by Market Makers.
The Exchange initially filed this
proposal to remove the cap on the
number of additional Limited Service
3 The term ‘‘Market Makers’’ refers to Lead Market
Makers (‘‘LMMs’’), Primary Lead Market Makers
(‘‘PLMMs’’), and Registered Market Makers
(‘‘RMMs’’) collectively. See Exchange Rule 100.
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MEI Ports available to Market Makers on
April 9, 2021.4 On April 12, 2021, the
Exchange withdrew the First Proposed
Rule Change and refiled this proposal to
make a technical correction.5 On April
22, 2021, the Exchange withdrew the
Second Proposed Rule Change and
refiled this proposal (without increasing
the actual fee amounts) to provide
further clarification regarding the
Exchange’s revenues, costs, and
profitability any time more Limited
Service MEI Ports become available, in
general, (including information
regarding the Exchange’s methodology
for determining the costs and revenues
for additional Limited Service MEI
Ports).6 On May 3, 2021, the Exchange
withdrew the Third Proposed Rule
Change and refiled this proposal to
further clarify its cost methodology.7 On
May 10, 2021, the Exchange withdrew
the Fourth Proposed Rule Change and
refiled this proposal.
Currently, the Exchange assesses
monthly MEI Port Fees on Market
Makers based upon the number of MIAX
matching engines 8 used by the Market
Maker. The Exchange allocates two (2)
Full Service MEI Ports 9 and two (2)
Limited Service MEI Ports 10 per
matching engine to which each Market
Maker connects. The Full Service MEI
Ports, Limited Service MEI Ports and the
additional Limited Service MEI Ports all
include access to the Exchange’s
primary and secondary data centers and
4 See
SR–MIAX–2021–10 (the ‘‘First Proposed
Rule Change’’).
5 See SR–MIAX–2021–11 (the ‘‘Second Proposed
Rule Change’’).
6 See SR–MIAX–2021–15 (the ‘‘Third Proposed
Rule Change’’).
7 See SR–MIAX–2021–17 (the ‘‘Fourth Proposed
Rule Change’’).
8 A ‘‘matching engine’’ is a part of the MIAX
electronic system that processes options quotes and
trades on a symbol-by-symbol basis. Some matching
engines will process option classes with multiple
root symbols, and other matching engines will be
dedicated to one single option root symbol (for
example, options on SPY will be processed by one
single matching engine that is dedicated only to
SPY). A particular root symbol may only be
assigned to a single designated matching engine. A
particular root symbol may not be assigned to
multiple matching engines. See Fee Schedule,
Section 5)d)ii), note 29.
9 Full Service MEI Ports provide Market Makers
with the ability to send Market Maker quotes,
eQuotes, and quote purge messages to the MIAX
System. Full Service MEI Ports are also capable of
receiving administrative information. Market
Makers are limited to two Full Service MEI Ports
per matching engine. See Fee Schedule, Section
5)d)ii), note 27.
10 Limited Service MEI Ports provide Market
Makers with the ability to send eQuotes and quote
purge messages only, but not Market Maker Quotes,
to the MIAX System. Limited Service MEI Ports are
also capable of receiving administrative
information. Market Makers initially receive two
Limited Service MEI Ports per matching engine. See
Fee Schedule, Section 5)d)ii), note 28.
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its disaster recovery center. Market
Makers may request additional Limited
Service MEI Ports for which they are
assessed the existing $100 monthly fee
for each additional port they request.
This fee has been unchanged since
2016.11
The Exchange originally added the
Limited Service MEI Ports to enhance
the MEI Port connectivity available to
Market Makers, and subsequently made
additional Limited Service MEI Ports
available to Market Makers.12 Limited
Service MEI Ports have been well
received by Market Makers since their
addition. Market Makers are currently
limited to purchasing eight (8)
additional Limited Service MEI Ports
per matching engine, for a total of ten
(10) per matching engine.13
The Exchange now proposes to delete
footnote 30 in Section 5)d)ii) of the Fee
Schedule to remove the cap on the
number of additional Limited Service
MEI Ports that are available to Market
Makers. The Exchange notes that no
other exchange provides similar caps
concerning connectivity and access in
their rulebooks or fee schedules.14
Including the cap on the number of
additional Limited Service MEI Ports in
the Fee Schedule unnecessarily
hampers the Exchange’s ability to adjust
access to the Exchange’s network in
order to ensure that the Exchange meets
its obligations under the Act such that
access to the Exchange is offered on
11 See Securities Exchange Act Release No. 79666
(December 22, 2016), 81 FR 96133 (December 29,
2016) (SR–MIAX–2016–47).
12 See Securities Exchange Act Release Nos.
70137 (August 8, 2013), 78 FR 49586 (August 14,
2013) (SR–MIAX–2013–39); 70903 (November 20,
2013), 78 FR 70615 (November 26, 2013) (SR–
MIAX–2013–52); 78950 (September 27, 2016), 81
FR 68084 (October 3, 2016) (SR–MIAX–2016–33);
and 79198 (October 31, 2016), 81 FR 76988
(November 4, 2016) (SR–MIAX–2016–37); 90811
(December 29, 2020), 86 FR 344 (January 5, 2021)
(SR–MIAX–2020–41).
13 See Fee Schedule, Section 5)d)ii).
14 See Cboe Exchange, Inc. Fee Schedule,
available at https://cdn.cboe.com/resources/
membership/Cboe_FeeSchedule.pdf; Cboe BZX
Exchange, Inc. Options Fee Schedule, available at
https://www.cboe.com/us/options/membership/fee_
schedule/bzx/; Cboe C2 Exchange, Inc. Fee
Schedule, available at https://www.cboe.com/us/
options/membership/fee_schedule/ctwo/; Cboe
EDGX Exchange, Inc. Options Fee Schedule,
available at https://www.cboe.com/us/options/
membership/fee_schedule/edgx/; The Nasdaq Stock
Market LLC Options Fee Schedule, available at
https://listingcenter.nasdaq.com/rulebook/nasdaq/
rules/Nasdaq%20Options%207; Nasdaq PHLX LLC
Options Fee Schedule, available at https://
listingcenter.nasdaq.com/rulebook/phlx/rules/
Phlx%20Options%207; NYSE Arca, Inc. Options
Fee Schedule, available at https://www.nyse.com/
publicdocs/nyse/markets/arca-options/NYSE_Arca_
Options_Fee_Schedule.pdf; NYSE American LLC
Options Fee Schedule, available at https://
www.nyse.com/publicdocs/nyse/markets/americanoptions/NYSE_American_Options_Fee_
Schedule.pdf.
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Federal Register / Vol. 86, No. 94 / Tuesday, May 18, 2021 / Notices
terms that are not unfairly
discriminatory 15 among its Members,16
as well as to ensure sufficient capacity
and headroom in the System.17 The
Exchange monitors the System’s
performance and makes adjustments to
its System based on market conditions
and Member demand. Accordingly, the
Exchange’s obligations under the Act to
provide access on terms that are not
unfairly discriminatory and market
conditions are key drivers of the
System’s architecture and expansion.
Thus the Exchange believes a cap in the
Fee Schedule is inconsistent with other
exchanges access offerings and not an
appropriate mechanism to govern access
to the Exchange.
The Exchange also notes that
adjusting the amount of available
Limited Service MEI Ports does not
change on a material basis the overall
profitability of Limited Service MEI
Ports. Any increase in revenue
associated with adding more Limited
Service MEI Ports is generally offset by
the cost of purchasing and operating
such new equipment and providing the
services associated with Limited Service
MEI Ports. When the Exchange provides
fewer Limited Service MEI Ports, its
overall expense is lower, but is
generally offset by lower revenues
associated with Limited Service MEI
Ports. The Exchange’s recent filing 18 to
increase the number of additional
Limited Service MEI Ports provides
clear evidence of that fact.
All fees related to MEI Ports shall
remain unchanged and Market Makers
that voluntarily purchase additional
Limited Service MEI Ports will remain
subject to the existing $100 monthly fee
per port.
The Exchange also proposes to make
corresponding changes to footnotes 31
and 32 in Sections 5)d)ii) and 5)d)iv) of
the Fee Schedule, respectively, in light
of the Exchange’s proposal to delete
current footnote 30. Accordingly, with
the proposed changes, footnote 31 will
be changed to footnote 30 and footnote
32 will be changed to footnote 31.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
15 See
15 U.S.C. 78f(b)(5).
term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
17 The term ‘‘System’’ means the automated
trading system used by the Exchange for the trading
of securities. See Exchange Rule 100.
18 See Securities Exchange Act Release No. 90811
(December 29, 2020), 86 FR 344 (January 5, 2021)
(SR–MIAX–2020–41) (the ‘‘Cost Analysis Filing’’).
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of the Act 19 in general, and furthers the
objectives of Section 6(b)(5) of the Act 20
in that it is designed to promote just and
equitable principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general protect investors and the public
interest and is not designed to permit
unfair discrimination between
customers, issuers, brokers and dealers.
The Exchange believes that its
proposal is consistent with the
objectives of Section 6(b)(5) of the Act 21
because the proposal to remove the cap
on the number of additional Limited
Service MEI Ports available to Market
Makers will apply equally to all Market
Makers, regardless of type or size, and
will allow the Exchange to offer access
to its System on terms that are not
unfairly discriminatory. The Exchange
does not propose to change the amount
of fees charged for additional Limited
Service MEI Ports. The existing fee of
$100 per month will apply equally to all
Market Makers that choose to purchase
additional Limited Service MEI Ports,
which is a business decision of each
Market Maker and not a requirement of
the Exchange.
The Exchange believes that its
proposal is consistent with the
requirements under Section 6(b)(5) of
the Exchange Act that the Exchange
provide access on terms that are not
unfairly discriminatory.22 Including the
cap on the number of additional Limited
Service MEI Ports in the Fee Schedule
unnecessarily burdens the Exchange
from being able to adjust the
connectivity and access to the
Exchange’s System in order to ensure
that the Exchange is able to provide
access 23 to Members on nondiscriminatory terms and ensure
sufficient capacity and headroom in the
System. The Exchange constantly
monitors the System’s performance
based on market conditions and needs
to make adjustments based on customer
demand. Adjusting the amount of
available Limited Service MEI Ports
does not change on a material basis the
overall profitability of Limited Service
MEI Ports. Any increase in revenue
associated with adding more Limited
Service MEI Ports is generally offset by
the cost of purchasing and operating
such new equipment and providing the
services associated with Limited Service
MEI Ports. When the Exchange provides
fewer Limited Service MEI Ports, its
overall expense is lower, but is
generally offset by lower revenues
associated with Limited Service MEI
Ports. The Exchange’s recent filing 24 to
increase the number of additional
Limited Service MEI Ports provides
clear evidence of that fact. Accordingly,
the Exchange’s obligations under
Section 6(b)(5) of the Act 25 and market
conditions are key drivers of the
System’s architecture and expansion
and thus the Exchange believes a cap in
the Fee Schedule is not an appropriate
mechanism to govern access to the
Exchange.
Other exchanges, like MIAX, are
required to provide access and
connectivity pursuant to the same
requirements under Section 6(b)(5) of
the Act regardless of whether a their
rules or fee schedules set forth caps on
access.26 Further, the Exchange
anticipates that it will continue to
expand its System and provide Market
Makers and other market participants
with additional access, including
Limited Service MEI Ports, based on
customer demand and in response to
changing market conditions. The
Exchange represents that any expansion
or reduction in the number of additional
Limited Service MEI Ports will be
conducted in a similar manner that
ensures fair access to its System.27 The
Exchange will also continuously assess
its connectivity options and availability
to ensure that they meet the needs of all
market participants seeking to access
the Exchange.
The Exchange believes that its
proposal is consistent with Section
6(b)(4) of the Act because only Market
Makers that voluntarily purchase
additional Limited Service MEI Ports
will be charged the existing $100
monthly fee per port, which has been
unchanged since 2016.28 The Exchange
does not propose to amend the fees
applicable to additional Limited Service
MEI Ports, which were filed with the
Commission and became effective after
notice and public comment.29 As stated
above, the Exchange anticipates that in
the future, it may provide more Limited
Service MEI Ports due to customer
demand and increased volatility in the
marketplace, which will result in
increased message traffic rates across
the network.
The Exchange further believes its
proposal is consistent with Section
6(b)(4) of the Act in that any time the
24 See
19 15
U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(5).
21 Id.
22 Id.
23 Id.
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25 See
supra note 18.
15 U.S.C. 78f(b).
26 Id.
27 Id.
28 See
29 See
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supra note 11.
supra notes 11 and 12.
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Federal Register / Vol. 86, No. 94 / Tuesday, May 18, 2021 / Notices
Exchange makes available more Limited
Service MEI Ports, such ports that are
voluntarily purchased by Market Makers
will not result in the Exchange making
a supracompetitive profit. The Exchange
recently conducted an extensive cost
review in which the Exchange analyzed
every expense item in the Exchange’s
general expense ledger (this includes
over 150 separate and distinct expense
items) to determine whether each such
expense relates to additional Limited
Service MEI Ports, and, if such expense
did so relate, what portion (or
percentage) of such expense actually
supports additional Limited Service
MEI Ports, and thus bears a relationship
that is, ‘‘in nature and closeness,’’
directly related to those services.
To provide continuity with the
Exchange’s most recent filing to add two
additional Limited Service MEI Ports 30
and this filing, the Exchange performed
this cost review anticipating that Market
Makers may purchase two additional
Limited Service MEI Ports.31 The sum of
all such portions of expenses represents
the total cost of the Exchange to provide
services associated with two additional
Limited Service MEI Ports pursuant to
this proposed rule change. Assuming
the costs outlined in this proposal
remain unchanged, the Exchange
represents that the below cost and
revenue analysis would continue to be
true should the Exchange make
additional Limited Service MEI Ports
available beyond the analysis for two
additional Limited Service MEI Ports
discussed below.32
For the avoidance of doubt, none of
the expenses included herein relating to
the services associated with providing
two additional Limited Service MEI
Ports also relate to the provision of any
other services offered by the Exchange.
Stated differently, no expense amount of
the Exchange is allocated twice. The
Exchange notes that it made certain
representations in a previous filing 33
regarding its expense allocation for the
provision of network connectivity
services. The Exchange represents that
none of the expenses allocated to the
provision of network connectivity
30 See
supra note 18.
cost review in this proposal is based on
two additional Limited Service MEI Ports because
two additional Limited Service MEI Ports were
purchased since the First Proposed Rule Change
was submitted on April 12, 2021.
32 As stated above, currently the number of
available Limited Service MEI Ports does not
change on a material basis the overall profitability
of Limited Service MEI Ports; however, the
Exchange represents that it will continue to monitor
its costs and revenue analysis for material changes.
33 See Securities Exchange Act Release No. 87875
(December 31, 2019), 85 FR 770 (January 7, 2020)
(SR–MIAX–2019–51).
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services are also allocated to the
provision of ports—that is, there is no
overlap of any such expenses that are
included in the costs associated with
services the Exchange provides for
connectivity and for the services the
Exchange provides for ports.
Specifically, utilizing 2020 34 expense
figures, total third-party expense
relating to fees paid by the Exchange to
third-parties for certain products and
services for the Exchange to be able to
provide two additional Limited Service
MEI Ports is approximately $12,537.
This includes, but is not limited to, a
portion of the fees paid to: (1) Equinix,
for data center services, for the primary,
secondary, and disaster recovery
locations of the Exchange’s trading
system infrastructure; (2) Zayo Group
Holdings, Inc. (‘‘Zayo’’) for network
services (fiber and bandwidth products
and services) linking the Exchange’s
office locations in Princeton, NJ and
Miami, FL to all data center locations;
(3) Secure Financial Transaction
Infrastructure (‘‘SFTI’’),35 which
supports network feeds for the entire
U.S. options industry; (4) various other
services providers (including Thompson
Reuters, NYSE, Nasdaq, and Internap),
which provide content, network
services, and infrastructure services for
critical components of options network
services; and (5) various other hardware
and software providers (including Dell
and Cisco, which support the
production environment in which
Members and non-Members connect to
the network to trade, receive market
data, etc.). For clarity, only a portion of
all fees paid to such third-parties is
included in the third-party expense
herein, and no expense amount is
allocated twice. Accordingly, the
Exchange does not allocate its entire
information technology and
communication costs to the services
associated with providing two
additional Limited Service MEI Ports.
The Exchange believes it is reasonable
to allocate such third-party expense
34 The Exchange is utilizing year-end 2020
expenses because expenses incurred within 2021
have not yet been reviewed and full year 2021
expenses have not yet been fully projected.
Therefore, the 2020 year-end expenses are the most
accurate to date.
35 In fact, on October 22, 2019, the Exchange was
notified by SFTI that it is again raising its fees
charged to the Exchange by approximately 11%,
without having to show that such fee change
complies with the Act by being reasonable,
equitably allocated, and not unfairly
discriminatory. It is unfathomable to the Exchange
that, given the critical nature of the infrastructure
services provided by SFTI, that its fees are not
required to be rule-filed with the Commission
pursuant to Section 19(b)(1) of the Act and Rule
19b–4 thereunder. See 15 U.S.C. 78s(b)(1) and 17
CFR 240.19b–4, respectively.
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Fmt 4703
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described above towards the total cost to
the Exchange to provide the services
associated with two additional Limited
Service MEI Ports. In particular, the
Exchange believes it is reasonable to
allocate the identified portion of the
Equinix expense because Equinix
operates the data centers (primary,
secondary, and disaster recovery) that
host the Exchange’s network
infrastructure. This includes, among
other things, the necessary storage
space, which continues to expand and
increase in cost, power to operate the
network infrastructure, and cooling
apparatuses to ensure the Exchange’s
network infrastructure maintains
stability. Without these services from
Equinix, the Exchange would not be
able to operate and support the network
and provide the services associated with
two additional Limited Service MEI
Ports to its Members and non-Members
and their customers. The Exchange did
not allocate all of the Equinix expense
toward the cost of providing the services
associated with two additional Limited
Service MEI Ports, only that portion
which the Exchange identified as being
specifically mapped to providing the
services associated with two additional
Limited Service MEI Ports,
approximately 0.5% of the total Equinix
expense. The Exchange believes this
allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with two
additional Limited Service MEI Ports,
and not any other service, as supported
by its cost review.
The Exchange believes it is reasonable
to allocate the identified portion of the
Zayo expense because Zayo provides
the internet, fiber and bandwidth
connections with respect to the
network, linking the Exchange with its
affiliates, MIAX Pearl and MIAX
Emerald, as well as the data center and
disaster recovery locations. As such, all
of the trade data, including the billions
of messages each day per exchange, flow
through Zayo’s infrastructure over the
Exchange’s network. Without these
services from Zayo, the Exchange would
not be able to operate and support the
network and provide the services
associated with two additional Limited
Service MEI Ports. The Exchange did
not allocate all of the Zayo expense
toward the cost of providing the services
associated with two additional Limited
Service MEI Ports, only the portion
which the Exchange identified as being
specifically mapped to providing two
additional Limited Service MEI Ports,
approximately 0.4% of the total Zayo
expense. The Exchange believes this
allocation is reasonable because it
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represents the Exchange’s actual cost to
provide the services associated with two
additional Limited Service MEI Ports,
and not any other service, as supported
by its cost review.
The Exchange believes it is reasonable
to allocate the identified portions of the
SFTI expense and various other service
providers’ (including Thompson
Reuters, NYSE, Nasdaq, and Internap)
expense because those entities provide
connectivity and feeds for the entire
U.S. options industry, as well as the
content, network services, and
infrastructure services for critical
components of the network. Without
these services from SFTI and various
other service providers, the Exchange
would not be able to operate and
support the network and provide access
to its Members and non-Members and
their customers. The Exchange did not
allocate all of the SFTI and other service
providers’ expense toward the cost of
providing the services associated with
two additional Limited Service MEI
Ports, only the portions which the
Exchange identified as being
specifically mapped to providing the
services associated with two additional
Limited Service MEI Ports,
approximately 0.5% of the total SFTI
and other service providers’ expense.
The Exchange believes this allocation is
reasonable because it represents the
Exchange’s actual cost to provide the
services associated with two additional
Limited Service MEI Ports.
The Exchange believes it is reasonable
to allocate the identified portion of the
other hardware and software provider
expense because this includes costs for
dedicated hardware licenses for
switches and servers, as well as
dedicated software licenses for security
monitoring and reporting across the
network. Without this hardware and
software, the Exchange would not be
able to operate and support the network
and provide access to its Members and
non-Members and their customers. The
Exchange did not allocate all of the
hardware and software provider
expense toward the cost of providing
the services associated with the two
additional Limited Service MEI Ports,
only the portions which the Exchange
identified as being specifically mapped
to providing the services associated
with two additional Limited Service
MEI Ports, approximately 0.3% of the
total hardware and software provider
expense. The Exchange believes this
allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with two
additional Limited Service MEI Ports.
For 2020, total projected internal
expense relating to the internal costs of
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16:40 May 17, 2021
Jkt 253001
the Exchange to provide the services
associated with two additional Limited
Service MEI Ports is approximately
$91,291. 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 providing two
additional Limited Service MEI Ports,
including staff in network operations,
trading operations, development, system
operations, business, as well as staff in
general corporate departments (such as
legal, regulatory, and finance) that
support those employees and functions
(including an increase as a result of the
higher determinism project); (2)
depreciation and amortization of
hardware and software used to provide
the services associated with two
additional Limited Service MEI Ports,
including equipment, servers, cabling,
purchased software and internally
developed software used in the
production environment to support the
network for trading; and (3) occupancy
costs for leased office space for staff that
provide the services associated with two
additional Limited Service MEI Ports.
The breakdown of these costs is more
fully-described below. For clarity, only
a portion of all such internal expenses
are included in the internal expense
herein, and no expense amount is
allocated twice. Accordingly, the
Exchange does not allocate its entire
costs contained in those items to the
services associated with providing two
additional Limited Service MEI Ports.
The Exchange believes it is reasonable
to allocate such internal expense
described above towards the total cost to
the Exchange to provide the services
associated with two additional Limited
Service MEI Ports. In particular, the
Exchange’s employee compensation and
benefits expense relating to providing
the services associated with two
additional Limited Service MEI Ports is
approximately $65,434, which is only a
portion of the $10,905,680 total
projected expense for employee
compensation and benefits. The
Exchange believes it is reasonable to
allocate the identified portion of such
expense because this includes the time
spent by employees of several
departments, including Technology,
Back Office, Systems Operations,
Networking, Business Strategy
Development (who create the business
requirement documents that the
Technology staff use to develop network
features and enhancements), Trade
Operations, Finance (who provide
billing and accounting services relating
to the network), and Legal (who provide
legal services relating to the network,
PO 00000
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Fmt 4703
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26977
such as rule filings and various license
agreements and other contracts). As part
of the extensive cost review conducted
by the Exchange, the Exchange reviewed
the amount of time spent by each
employee on matters relating to the
provision of services associated with
two additional Limited Service MEI
Ports. Without these employees, the
Exchange would not be able to provide
the services associated with two
additional Limited Service MEI Ports to
its Members and non-Members and their
customers. The Exchange did not
allocate all of the employee
compensation and benefits expense
toward the cost of the services
associated with providing two
additional Limited Service MEI Ports,
only the portions which the Exchange
identified as being specifically mapped
to providing the services associated
with two additional Limited Service
MEI Ports, approximately 0.6% of the
total employee compensation and
benefits expense. The Exchange believes
this allocation is reasonable because it
represents the Exchange’s actual cost to
provide the services associated with two
additional Limited Service MEI Ports,
and not any other service, as supported
by its cost review.
The Exchange’s depreciation and
amortization expense relating to
providing the services associated with
two additional Limited Service MEI
Ports is approximately $23,937, which
is only a portion of the $4,787,419 total
projected expense for depreciation and
amortization. The Exchange believes it
is reasonable to allocate the identified
portion of such expense because such
expense includes the actual cost of the
computer equipment, such as dedicated
servers, computers, laptops, monitors,
information security appliances and
storage, and network switching
infrastructure equipment, including
switches and taps that were purchased
to operate and support the network and
provide the services associated with two
additional Limited Service MEI Ports.
Without this equipment, the Exchange
would not be able to operate the
network and provide the services
associated with two additional Limited
Service MEI Ports to its Members and
non-Members and their customers. The
Exchange did not allocate all of the
depreciation and amortization expense
toward the cost of providing the services
associated with two additional Limited
Service MEI Ports, only the portion
which the Exchange identified as being
specifically mapped to providing the
services associated with the two
additional Limited Service MEI Ports,
approximately 0.5% of the total
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depreciation and amortization expense,
as these services would not be possible
without relying on such equipment. The
Exchange believes this allocation is
reasonable because it represents the
Exchange’s actual cost to provide the
services associated with two additional
Limited Service MEI Ports, and not any
other service, as supported by its cost
review.
The Exchange’s occupancy expense
relating to providing the services
associated with providing two
additional Limited Service MEI Ports is
approximately $1,920, which is only a
portion of the $480,036 total projected
expense for occupancy. The Exchange
believes it is reasonable to allocate the
identified portion of such expense
because such expense represents the
portion of the Exchange’s cost to rent
and maintain a physical location for the
Exchange’s staff who operate and
support the network, including
providing the services associated with
two additional Limited Service MEI
Ports. This amount consists primarily of
rent for the Exchange’s Princeton, NJ
office, as well as various related costs,
such as physical security, property
management fees, property taxes, and
utilities. The Exchange operates its
Network Operations Center (‘‘NOC’’)
and Security Operations Center (‘‘SOC’’)
from its Princeton, New Jersey office
location. A centralized office space is
required to house the staff that operates
and supports the network. The
Exchange currently has approximately
160 employees. Approximately twothirds of the Exchange’s staff are in the
Technology department, and the
majority of those staff have some role in
the operation and performance of the
services associated with providing
additional Limited Service MEI Ports.
Without this office space, the Exchange
would not be able to operate and
support the network and provide the
services associated with two additional
Limited Service MEI Ports to its
Members and non-Members and their
customers. Accordingly, the Exchange
believes it is reasonable to allocate the
identified portion of its occupancy
expense because such amount
represents the Exchange’s actual cost to
house the equipment and personnel
who operate and support the Exchange’s
network infrastructure and the services
associated with two additional Limited
Service MEI Ports. The Exchange did
not allocate all of the occupancy
expense toward the cost of providing
the services associated with two
additional Limited Service MEI Ports,
only the portion which the Exchange
identified as being specifically mapped
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16:40 May 17, 2021
Jkt 253001
to operating and supporting the
network, approximately 0.4% of the
total occupancy expense. The Exchange
believes this allocation is reasonable
because it represents the Exchange’s
cost to provide the services associated
with two additional Limited Service
MEI Ports, and not any other service, as
supported by its cost review.
Accordingly, based on the facts and
circumstances presented, the Exchange
believes that its provision of the services
associated with two additional Limited
Service MEI Ports will not result in
excessive pricing or supra-competitive
profit.
The Exchange believes it is
reasonable, equitable and not unfairly
discriminatory to allocate the respective
percentages of each expense category
described above towards the total cost to
the Exchange of operating and
supporting the network, including
providing the services associated with
two additional Limited Service MEI
Ports because the Exchange performed a
line-by-line item analysis of all the
expenses of the Exchange, and has
determined the expenses that directly
relate to operation and support of the
network. Further, the Exchange notes
that, without the specific third-party
and internal items listed above, the
Exchange would not be able to operate
and support the network, including
providing the services associated with
two additional Limited Service MEI
Ports to its Members and non-Members
and their customers. Each of these
expense items, including physical
hardware, software, employee
compensation and benefits, occupancy
costs, and the depreciation and
amortization of equipment, have been
identified through a line-by-line item
analysis to be integral to the operation
and support of the network.
To provide continuity with the
Exchange’s most recent filing to add two
additional Limited Service MEI Ports 36
and this filing, the Exchange is basing
its projected revenue from additional
Limited Service MEI Ports that may be
purchased by Market Makers as though
seven Market Makers purchased two
additional Limited Service MEI Ports
each. The Exchange notes that any time
it needs to expand its network by
making available two additional Limit
Service MEI Ports due to increased
customer demand and increased
volatility in the marketplace, which
translates into increased message traffic
rates across the network, there is an
initial build out cost. The cost to expand
the network in this manner is greater
than the revenue the Exchange
anticipates the additional Limited
Service MEI Ports will generate.
Specifically, the Exchange estimates it
will incur a one-time cost of
approximately $175,000 in capital
expenditures (‘‘CapEx’’) on hardware,
software, and other items to expand the
network to make available two
additional Limited Service MEI Ports.
This estimated cost also includes
expense associated with providing the
necessary engineering and support
personnel to transition those Market
Makers who wish to acquire two
additional Limited Service MEI Ports.
Further, the Exchange projects that the
annualized revenue from the two
additional Limited Service MEI Ports
will be approximately $16,800
(assuming seven Market Makers
purchase the two additional Limited
Service MEI Ports). Therefore, the
Exchange’s upfront cost in expanding its
network to provide its Members with
two additional Limited Service MEI
Ports—approximately $175,000—is
significant relative to the anticipated
annualized revenue the Exchange
expects to bring in from two additional
Limited Service MEI Ports—
approximately $16,800. Further, the
Exchange anticipates it will incur
approximately $103,828 in annualized
ongoing operating expense (‘‘OpEx’’) in
order to support the expanded network
and two additional Limited Service MEI
Ports. Thus, even excluding the upfront
CapEx of $175,000, the Exchange is not
generating a supra-competitive profit
from the provision of two additional
Limited Service MEI Ports. In fact, even
excluding the one-time CapEx cost of
$175,000, the Exchange anticipates
generating an annual loss from the
provision of two additional Limited
Service MEI Ports of ($87,028)—that is,
$16,800 in revenue minus $103,828 in
expense equates to a loss of ($87,028) to
support the additional ports annually.
The Exchange also notes that no other
exchange has a similar cap on the
amount of ports that firms can purchase
in their rulebooks or fee schedules and
those exchanges have the same
requirements under Section 6(b)(5) of
the Exchange Act 37 as MIAX.38
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The proposed rule change will not
impose a burden on competition but
37 15
36 See
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supra note 18.
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U.S.C. 78f(b)(5).
supra note 14.
38 See
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will benefit competition by enhancing
the Exchange’s ability to compete by
providing additional services to market
participants. It is not intended to
address a competitive issue. Rather, the
proposal is intended to allow the
Exchange to increase its inventory of
MEI Ports to meet increased Member
demand and increased message traffic
resulting from greater marketplace
volatility. The Exchange also does not
believe that the proposed rule change
will impose a burden on intramarket
competition because additional Limited
Service MEI Ports are available to all
Market Makers on an equal basis. It is
a business decision of each Market
Maker whether to pay for the additional
Limited Service MEI Ports.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act,39 and Rule
19b–4(f)(2) 40 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:
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
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U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
VerDate Sep<11>2014
16:40 May 17, 2021
[Release No. 34–91863; File No. SR–
NYSENAT–2021–13]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Continue Offering
Certain Connectivity Services That
Have Been Suspended by the
Securities and Exchange Commission
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
J. Matthew DeLesDernier,
Assistant Secretary.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2021–10379 Filed 5–17–21; 8:45 am]
BILLING CODE 8011–01–P
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
MIAX–2021–19 on the subject line.
40 17
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–MIAX–2021–19. 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–MIAX–2021–19 and should
be submitted on or before June 8, 2021.
Electronic Comments
39 15
May 12, 2021.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 7,
2021, NYSE National, Inc. (‘‘NYSE
National’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to continue
offering certain connectivity services
that have been suspended by the
Securities and Exchange Commission
(‘‘Commission’’) at no charge, for a
period of 14 days, in order to provide
affected Users time to acquire substitute
services before their connectivity is
terminated. The proposed rule change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
1 15
41 17
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 86, Number 94 (Tuesday, May 18, 2021)]
[Notices]
[Pages 26973-26979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10379]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91857; File No. SR-MIAX-2021-19]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Amend Its Fee Schedule To Remove the Cap on the
Number of Additional Limited Service Ports Available to Market Makers
May 12, 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 May 10, 2021, Miami International Securities
[[Page 26974]]
Exchange, LLC (``MIAX'' 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 Options Fee
Schedule (the ``Fee Schedule'') to remove the cap on the number of
additional Limited Service MIAX Express Interface (``MEI'') Ports
(defined below) available to Market Makers.\3\ The Exchange does not
propose to amend the fees for additional Limited Service MEI Ports.
---------------------------------------------------------------------------
\3\ The term ``Market Makers'' refers to Lead Market Makers
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered
Market Makers (``RMMs'') collectively. See Exchange Rule 100.
---------------------------------------------------------------------------
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxoptions.com/rule-filings, at MIAX's principal
office, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to delete footnote 30 of Section 5)d)ii) of
the Fee Schedule to remove the cap on the number of additional Limited
Service MEI Ports available to Market Makers. The Exchange does not
propose to amend the fees charged for any additional Limited Service
MEI Ports purchased by Market Makers.
The Exchange initially filed this proposal to remove the cap on the
number of additional Limited Service MEI Ports available to Market
Makers on April 9, 2021.\4\ On April 12, 2021, the Exchange withdrew
the First Proposed Rule Change and refiled this proposal to make a
technical correction.\5\ On April 22, 2021, the Exchange withdrew the
Second Proposed Rule Change and refiled this proposal (without
increasing the actual fee amounts) to provide further clarification
regarding the Exchange's revenues, costs, and profitability any time
more Limited Service MEI Ports become available, in general, (including
information regarding the Exchange's methodology for determining the
costs and revenues for additional Limited Service MEI Ports).\6\ On May
3, 2021, the Exchange withdrew the Third Proposed Rule Change and
refiled this proposal to further clarify its cost methodology.\7\ On
May 10, 2021, the Exchange withdrew the Fourth Proposed Rule Change and
refiled this proposal.
---------------------------------------------------------------------------
\4\ See SR-MIAX-2021-10 (the ``First Proposed Rule Change'').
\5\ See SR-MIAX-2021-11 (the ``Second Proposed Rule Change'').
\6\ See SR-MIAX-2021-15 (the ``Third Proposed Rule Change'').
\7\ See SR-MIAX-2021-17 (the ``Fourth Proposed Rule Change'').
---------------------------------------------------------------------------
Currently, the Exchange assesses monthly MEI Port Fees on Market
Makers based upon the number of MIAX matching engines \8\ used by the
Market Maker. The Exchange allocates two (2) Full Service MEI Ports \9\
and two (2) Limited Service MEI Ports \10\ per matching engine to which
each Market Maker connects. The Full Service MEI Ports, Limited Service
MEI Ports and the additional Limited Service MEI Ports all include
access to the Exchange's primary and secondary data centers and its
disaster recovery center. Market Makers may request additional Limited
Service MEI Ports for which they are assessed the existing $100 monthly
fee for each additional port they request. This fee has been unchanged
since 2016.\11\
---------------------------------------------------------------------------
\8\ A ``matching engine'' is a part of the MIAX electronic
system that processes options quotes and trades on a symbol-by-
symbol basis. Some matching engines will process option classes with
multiple root symbols, and other matching engines will be dedicated
to one single option root symbol (for example, options on SPY will
be processed by one single matching engine that is dedicated only to
SPY). A particular root symbol may only be assigned to a single
designated matching engine. A particular root symbol may not be
assigned to multiple matching engines. See Fee Schedule, Section
5)d)ii), note 29.
\9\ Full Service MEI Ports provide Market Makers with the
ability to send Market Maker quotes, eQuotes, and quote purge
messages to the MIAX System. Full Service MEI Ports are also capable
of receiving administrative information. Market Makers are limited
to two Full Service MEI Ports per matching engine. See Fee Schedule,
Section 5)d)ii), note 27.
\10\ Limited Service MEI Ports provide Market Makers with the
ability to send eQuotes and quote purge messages only, but not
Market Maker Quotes, to the MIAX System. Limited Service MEI Ports
are also capable of receiving administrative information. Market
Makers initially receive two Limited Service MEI Ports per matching
engine. See Fee Schedule, Section 5)d)ii), note 28.
\11\ See Securities Exchange Act Release No. 79666 (December 22,
2016), 81 FR 96133 (December 29, 2016) (SR-MIAX-2016-47).
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The Exchange originally added the Limited Service MEI Ports to
enhance the MEI Port connectivity available to Market Makers, and
subsequently made additional Limited Service MEI Ports available to
Market Makers.\12\ Limited Service MEI Ports have been well received by
Market Makers since their addition. Market Makers are currently limited
to purchasing eight (8) additional Limited Service MEI Ports per
matching engine, for a total of ten (10) per matching engine.\13\
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\12\ See Securities Exchange Act Release Nos. 70137 (August 8,
2013), 78 FR 49586 (August 14, 2013) (SR-MIAX-2013-39); 70903
(November 20, 2013), 78 FR 70615 (November 26, 2013) (SR-MIAX-2013-
52); 78950 (September 27, 2016), 81 FR 68084 (October 3, 2016) (SR-
MIAX-2016-33); and 79198 (October 31, 2016), 81 FR 76988 (November
4, 2016) (SR-MIAX-2016-37); 90811 (December 29, 2020), 86 FR 344
(January 5, 2021) (SR-MIAX-2020-41).
\13\ See Fee Schedule, Section 5)d)ii).
---------------------------------------------------------------------------
The Exchange now proposes to delete footnote 30 in Section 5)d)ii)
of the Fee Schedule to remove the cap on the number of additional
Limited Service MEI Ports that are available to Market Makers. The
Exchange notes that no other exchange provides similar caps concerning
connectivity and access in their rulebooks or fee schedules.\14\
Including the cap on the number of additional Limited Service MEI Ports
in the Fee Schedule unnecessarily hampers the Exchange's ability to
adjust access to the Exchange's network in order to ensure that the
Exchange meets its obligations under the Act such that access to the
Exchange is offered on
[[Page 26975]]
terms that are not unfairly discriminatory \15\ among its Members,\16\
as well as to ensure sufficient capacity and headroom in the
System.\17\ The Exchange monitors the System's performance and makes
adjustments to its System based on market conditions and Member demand.
Accordingly, the Exchange's obligations under the Act to provide access
on terms that are not unfairly discriminatory and market conditions are
key drivers of the System's architecture and expansion. Thus the
Exchange believes a cap in the Fee Schedule is inconsistent with other
exchanges access offerings and not an appropriate mechanism to govern
access to the Exchange.
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\14\ See Cboe Exchange, Inc. Fee Schedule, available at https://cdn.cboe.com/resources/membership/Cboe_FeeSchedule.pdf; Cboe BZX
Exchange, Inc. Options Fee Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/; Cboe C2
Exchange, Inc. Fee Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/ctwo/; Cboe EDGX Exchange, Inc.
Options Fee Schedule, available at https://www.cboe.com/us/options/membership/fee_schedule/edgx/; The Nasdaq Stock Market LLC Options
Fee Schedule, available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Options%207; Nasdaq PHLX LLC Options
Fee Schedule, available at https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207; NYSE Arca, Inc. Options Fee
Schedule, available at https://www.nyse.com/publicdocs/nyse/markets/arca-options/NYSE_Arca_Options_Fee_Schedule.pdf; NYSE American LLC
Options Fee Schedule, available at https://www.nyse.com/publicdocs/nyse/markets/american-options/NYSE_American_Options_Fee_Schedule.pdf.
\15\ See 15 U.S.C. 78f(b)(5).
\16\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\17\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
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The Exchange also notes that adjusting the amount of available
Limited Service MEI Ports does not change on a material basis the
overall profitability of Limited Service MEI Ports. Any increase in
revenue associated with adding more Limited Service MEI Ports is
generally offset by the cost of purchasing and operating such new
equipment and providing the services associated with Limited Service
MEI Ports. When the Exchange provides fewer Limited Service MEI Ports,
its overall expense is lower, but is generally offset by lower revenues
associated with Limited Service MEI Ports. The Exchange's recent filing
\18\ to increase the number of additional Limited Service MEI Ports
provides clear evidence of that fact.
---------------------------------------------------------------------------
\18\ See Securities Exchange Act Release No. 90811 (December 29,
2020), 86 FR 344 (January 5, 2021) (SR-MIAX-2020-41) (the ``Cost
Analysis Filing'').
---------------------------------------------------------------------------
All fees related to MEI Ports shall remain unchanged and Market
Makers that voluntarily purchase additional Limited Service MEI Ports
will remain subject to the existing $100 monthly fee per port.
The Exchange also proposes to make corresponding changes to
footnotes 31 and 32 in Sections 5)d)ii) and 5)d)iv) of the Fee
Schedule, respectively, in light of the Exchange's proposal to delete
current footnote 30. Accordingly, with the proposed changes, footnote
31 will be changed to footnote 30 and footnote 32 will be changed to
footnote 31.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \19\ in general, and furthers the objectives of Section
6(b)(5) of the Act \20\ in that it is designed to promote just and
equitable principles of trade, remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general protect investors and the public interest and is not
designed to permit unfair discrimination between customers, issuers,
brokers and dealers.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange believes that its proposal is consistent with the
objectives of Section 6(b)(5) of the Act \21\ because the proposal to
remove the cap on the number of additional Limited Service MEI Ports
available to Market Makers will apply equally to all Market Makers,
regardless of type or size, and will allow the Exchange to offer access
to its System on terms that are not unfairly discriminatory. The
Exchange does not propose to change the amount of fees charged for
additional Limited Service MEI Ports. The existing fee of $100 per
month will apply equally to all Market Makers that choose to purchase
additional Limited Service MEI Ports, which is a business decision of
each Market Maker and not a requirement of the Exchange.
---------------------------------------------------------------------------
\21\ Id.
---------------------------------------------------------------------------
The Exchange believes that its proposal is consistent with the
requirements under Section 6(b)(5) of the Exchange Act that the
Exchange provide access on terms that are not unfairly
discriminatory.\22\ Including the cap on the number of additional
Limited Service MEI Ports in the Fee Schedule unnecessarily burdens the
Exchange from being able to adjust the connectivity and access to the
Exchange's System in order to ensure that the Exchange is able to
provide access \23\ to Members on non-discriminatory terms and ensure
sufficient capacity and headroom in the System. The Exchange constantly
monitors the System's performance based on market conditions and needs
to make adjustments based on customer demand. Adjusting the amount of
available Limited Service MEI Ports does not change on a material basis
the overall profitability of Limited Service MEI Ports. Any increase in
revenue associated with adding more Limited Service MEI Ports is
generally offset by the cost of purchasing and operating such new
equipment and providing the services associated with Limited Service
MEI Ports. When the Exchange provides fewer Limited Service MEI Ports,
its overall expense is lower, but is generally offset by lower revenues
associated with Limited Service MEI Ports. The Exchange's recent filing
\24\ to increase the number of additional Limited Service MEI Ports
provides clear evidence of that fact. Accordingly, the Exchange's
obligations under Section 6(b)(5) of the Act \25\ and market conditions
are key drivers of the System's architecture and expansion and thus the
Exchange believes a cap in the Fee Schedule is not an appropriate
mechanism to govern access to the Exchange.
---------------------------------------------------------------------------
\22\ Id.
\23\ Id.
\24\ See supra note 18.
\25\ See 15 U.S.C. 78f(b).
---------------------------------------------------------------------------
Other exchanges, like MIAX, are required to provide access and
connectivity pursuant to the same requirements under Section 6(b)(5) of
the Act regardless of whether a their rules or fee schedules set forth
caps on access.\26\ Further, the Exchange anticipates that it will
continue to expand its System and provide Market Makers and other
market participants with additional access, including Limited Service
MEI Ports, based on customer demand and in response to changing market
conditions. The Exchange represents that any expansion or reduction in
the number of additional Limited Service MEI Ports will be conducted in
a similar manner that ensures fair access to its System.\27\ The
Exchange will also continuously assess its connectivity options and
availability to ensure that they meet the needs of all market
participants seeking to access the Exchange.
---------------------------------------------------------------------------
\26\ Id.
\27\ Id.
---------------------------------------------------------------------------
The Exchange believes that its proposal is consistent with Section
6(b)(4) of the Act because only Market Makers that voluntarily purchase
additional Limited Service MEI Ports will be charged the existing $100
monthly fee per port, which has been unchanged since 2016.\28\ The
Exchange does not propose to amend the fees applicable to additional
Limited Service MEI Ports, which were filed with the Commission and
became effective after notice and public comment.\29\ As stated above,
the Exchange anticipates that in the future, it may provide more
Limited Service MEI Ports due to customer demand and increased
volatility in the marketplace, which will result in increased message
traffic rates across the network.
---------------------------------------------------------------------------
\28\ See supra note 11.
\29\ See supra notes 11 and 12.
---------------------------------------------------------------------------
The Exchange further believes its proposal is consistent with
Section 6(b)(4) of the Act in that any time the
[[Page 26976]]
Exchange makes available more Limited Service MEI Ports, such ports
that are voluntarily purchased by Market Makers will not result in the
Exchange making a supracompetitive profit. The Exchange recently
conducted an extensive cost review in which the Exchange analyzed every
expense item in the Exchange's general expense ledger (this includes
over 150 separate and distinct expense items) to determine whether each
such expense relates to additional Limited Service MEI Ports, and, if
such expense did so relate, what portion (or percentage) of such
expense actually supports additional Limited Service MEI Ports, and
thus bears a relationship that is, ``in nature and closeness,''
directly related to those services.
To provide continuity with the Exchange's most recent filing to add
two additional Limited Service MEI Ports \30\ and this filing, the
Exchange performed this cost review anticipating that Market Makers may
purchase two additional Limited Service MEI Ports.\31\ The sum of all
such portions of expenses represents the total cost of the Exchange to
provide services associated with two additional Limited Service MEI
Ports pursuant to this proposed rule change. Assuming the costs
outlined in this proposal remain unchanged, the Exchange represents
that the below cost and revenue analysis would continue to be true
should the Exchange make additional Limited Service MEI Ports available
beyond the analysis for two additional Limited Service MEI Ports
discussed below.\32\
---------------------------------------------------------------------------
\30\ See supra note 18.
\31\ The cost review in this proposal is based on two additional
Limited Service MEI Ports because two additional Limited Service MEI
Ports were purchased since the First Proposed Rule Change was
submitted on April 12, 2021.
\32\ As stated above, currently the number of available Limited
Service MEI Ports does not change on a material basis the overall
profitability of Limited Service MEI Ports; however, the Exchange
represents that it will continue to monitor its costs and revenue
analysis for material changes.
---------------------------------------------------------------------------
For the avoidance of doubt, none of the expenses included herein
relating to the services associated with providing two additional
Limited Service MEI Ports also relate to the provision of any other
services offered by the Exchange. Stated differently, no expense amount
of the Exchange is allocated twice. The Exchange notes that it made
certain representations in a previous filing \33\ regarding its expense
allocation for the provision of network connectivity services. The
Exchange represents that none of the expenses allocated to the
provision of network connectivity services are also allocated to the
provision of ports--that is, there is no overlap of any such expenses
that are included in the costs associated with services the Exchange
provides for connectivity and for the services the Exchange provides
for ports.
---------------------------------------------------------------------------
\33\ See Securities Exchange Act Release No. 87875 (December 31,
2019), 85 FR 770 (January 7, 2020) (SR-MIAX-2019-51).
---------------------------------------------------------------------------
Specifically, utilizing 2020 \34\ expense figures, total third-
party expense relating to fees paid by the Exchange to third-parties
for certain products and services for the Exchange to be able to
provide two additional Limited Service MEI Ports is approximately
$12,537. This includes, but is not limited to, a portion of the fees
paid to: (1) Equinix, for data center services, for the primary,
secondary, and disaster recovery locations of the Exchange's trading
system infrastructure; (2) Zayo Group Holdings, Inc. (``Zayo'') for
network services (fiber and bandwidth products and services) linking
the Exchange's office locations in Princeton, NJ and Miami, FL to all
data center locations; (3) Secure Financial Transaction Infrastructure
(``SFTI''),\35\ which supports network feeds for the entire U.S.
options industry; (4) various other services providers (including
Thompson Reuters, NYSE, Nasdaq, and Internap), which provide content,
network services, and infrastructure services for critical components
of options network services; and (5) various other hardware and
software providers (including Dell and Cisco, which support the
production environment in which Members and non-Members connect to the
network to trade, receive market data, etc.). For clarity, only a
portion of all fees paid to such third-parties is included in the
third-party expense herein, and no expense amount is allocated twice.
Accordingly, the Exchange does not allocate its entire information
technology and communication costs to the services associated with
providing two additional Limited Service MEI Ports.
---------------------------------------------------------------------------
\34\ The Exchange is utilizing year-end 2020 expenses because
expenses incurred within 2021 have not yet been reviewed and full
year 2021 expenses have not yet been fully projected. Therefore, the
2020 year-end expenses are the most accurate to date.
\35\ In fact, on October 22, 2019, the Exchange was notified by
SFTI that it is again raising its fees charged to the Exchange by
approximately 11%, without having to show that such fee change
complies with the Act by being reasonable, equitably allocated, and
not unfairly discriminatory. It is unfathomable to the Exchange
that, given the critical nature of the infrastructure services
provided by SFTI, that its fees are not required to be rule-filed
with the Commission pursuant to Section 19(b)(1) of the Act and Rule
19b-4 thereunder. See 15 U.S.C. 78s(b)(1) and 17 CFR 240.19b-4,
respectively.
---------------------------------------------------------------------------
The Exchange believes it is reasonable to allocate such third-party
expense described above towards the total cost to the Exchange to
provide the services associated with two additional Limited Service MEI
Ports. In particular, the Exchange believes it is reasonable to
allocate the identified portion of the Equinix expense because Equinix
operates the data centers (primary, secondary, and disaster recovery)
that host the Exchange's network infrastructure. This includes, among
other things, the necessary storage space, which continues to expand
and increase in cost, power to operate the network infrastructure, and
cooling apparatuses to ensure the Exchange's network infrastructure
maintains stability. Without these services from Equinix, the Exchange
would not be able to operate and support the network and provide the
services associated with two additional Limited Service MEI Ports to
its Members and non-Members and their customers. The Exchange did not
allocate all of the Equinix expense toward the cost of providing the
services associated with two additional Limited Service MEI Ports, only
that portion which the Exchange identified as being specifically mapped
to providing the services associated with two additional Limited
Service MEI Ports, approximately 0.5% of the total Equinix expense. The
Exchange believes this allocation is reasonable because it represents
the Exchange's actual cost to provide the services associated with two
additional Limited Service MEI Ports, and not any other service, as
supported by its cost review.
The Exchange believes it is reasonable to allocate the identified
portion of the Zayo expense because Zayo provides the internet, fiber
and bandwidth connections with respect to the network, linking the
Exchange with its affiliates, MIAX Pearl and MIAX Emerald, as well as
the data center and disaster recovery locations. As such, all of the
trade data, including the billions of messages each day per exchange,
flow through Zayo's infrastructure over the Exchange's network. Without
these services from Zayo, the Exchange would not be able to operate and
support the network and provide the services associated with two
additional Limited Service MEI Ports. The Exchange did not allocate all
of the Zayo expense toward the cost of providing the services
associated with two additional Limited Service MEI Ports, only the
portion which the Exchange identified as being specifically mapped to
providing two additional Limited Service MEI Ports, approximately 0.4%
of the total Zayo expense. The Exchange believes this allocation is
reasonable because it
[[Page 26977]]
represents the Exchange's actual cost to provide the services
associated with two additional Limited Service MEI Ports, and not any
other service, as supported by its cost review.
The Exchange believes it is reasonable to allocate the identified
portions of the SFTI expense and various other service providers'
(including Thompson Reuters, NYSE, Nasdaq, and Internap) expense
because those entities provide connectivity and feeds for the entire
U.S. options industry, as well as the content, network services, and
infrastructure services for critical components of the network. Without
these services from SFTI and various other service providers, the
Exchange would not be able to operate and support the network and
provide access to its Members and non-Members and their customers. The
Exchange did not allocate all of the SFTI and other service providers'
expense toward the cost of providing the services associated with two
additional Limited Service MEI Ports, only the portions which the
Exchange identified as being specifically mapped to providing the
services associated with two additional Limited Service MEI Ports,
approximately 0.5% of the total SFTI and other service providers'
expense. The Exchange believes this allocation is reasonable because it
represents the Exchange's actual cost to provide the services
associated with two additional Limited Service MEI Ports.
The Exchange believes it is reasonable to allocate the identified
portion of the other hardware and software provider expense because
this includes costs for dedicated hardware licenses for switches and
servers, as well as dedicated software licenses for security monitoring
and reporting across the network. Without this hardware and software,
the Exchange would not be able to operate and support the network and
provide access to its Members and non-Members and their customers. The
Exchange did not allocate all of the hardware and software provider
expense toward the cost of providing the services associated with the
two additional Limited Service MEI Ports, only the portions which the
Exchange identified as being specifically mapped to providing the
services associated with two additional Limited Service MEI Ports,
approximately 0.3% of the total hardware and software provider expense.
The Exchange believes this allocation is reasonable because it
represents the Exchange's actual cost to provide the services
associated with two additional Limited Service MEI Ports.
For 2020, total projected internal expense relating to the internal
costs of the Exchange to provide the services associated with two
additional Limited Service MEI Ports is approximately $91,291. 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 providing two additional Limited Service MEI
Ports, including staff in network operations, trading operations,
development, system operations, business, as well as staff in general
corporate departments (such as legal, regulatory, and finance) that
support those employees and functions (including an increase as a
result of the higher determinism project); (2) depreciation and
amortization of hardware and software used to provide the services
associated with two additional Limited Service MEI Ports, including
equipment, servers, cabling, purchased software and internally
developed software used in the production environment to support the
network for trading; and (3) occupancy costs for leased office space
for staff that provide the services associated with two additional
Limited Service MEI Ports. The breakdown of these costs is more fully-
described below. For clarity, only a portion of all such internal
expenses are included in the internal expense herein, and no expense
amount is allocated twice. Accordingly, the Exchange does not allocate
its entire costs contained in those items to the services associated
with providing two additional Limited Service MEI Ports.
The Exchange believes it is reasonable to allocate such internal
expense described above towards the total cost to the Exchange to
provide the services associated with two additional Limited Service MEI
Ports. In particular, the Exchange's employee compensation and benefits
expense relating to providing the services associated with two
additional Limited Service MEI Ports is approximately $65,434, which is
only a portion of the $10,905,680 total projected expense for employee
compensation and benefits. The Exchange believes it is reasonable to
allocate the identified portion of such expense because this includes
the time spent by employees of several departments, including
Technology, Back Office, Systems Operations, Networking, Business
Strategy Development (who create the business requirement documents
that the Technology staff use to develop network features and
enhancements), Trade Operations, Finance (who provide billing and
accounting services relating to the network), and Legal (who provide
legal services relating to the network, such as rule filings and
various license agreements and other contracts). As part of the
extensive cost review conducted by the Exchange, the Exchange reviewed
the amount of time spent by each employee on matters relating to the
provision of services associated with two additional Limited Service
MEI Ports. Without these employees, the Exchange would not be able to
provide the services associated with two additional Limited Service MEI
Ports to its Members and non-Members and their customers. The Exchange
did not allocate all of the employee compensation and benefits expense
toward the cost of the services associated with providing two
additional Limited Service MEI Ports, only the portions which the
Exchange identified as being specifically mapped to providing the
services associated with two additional Limited Service MEI Ports,
approximately 0.6% of the total employee compensation and benefits
expense. The Exchange believes this allocation is reasonable because it
represents the Exchange's actual cost to provide the services
associated with two additional Limited Service MEI Ports, and not any
other service, as supported by its cost review.
The Exchange's depreciation and amortization expense relating to
providing the services associated with two additional Limited Service
MEI Ports is approximately $23,937, which is only a portion of the
$4,787,419 total projected expense for depreciation and amortization.
The Exchange believes it is reasonable to allocate the identified
portion of such expense because such expense includes the actual cost
of the computer equipment, such as dedicated servers, computers,
laptops, monitors, information security appliances and storage, and
network switching infrastructure equipment, including switches and taps
that were purchased to operate and support the network and provide the
services associated with two additional Limited Service MEI Ports.
Without this equipment, the Exchange would not be able to operate the
network and provide the services associated with two additional Limited
Service MEI Ports to its Members and non-Members and their customers.
The Exchange did not allocate all of the depreciation and amortization
expense toward the cost of providing the services associated with two
additional Limited Service MEI Ports, only the portion which the
Exchange identified as being specifically mapped to providing the
services associated with the two additional Limited Service MEI Ports,
approximately 0.5% of the total
[[Page 26978]]
depreciation and amortization expense, as these services would not be
possible without relying on such equipment. The Exchange believes this
allocation is reasonable because it represents the Exchange's actual
cost to provide the services associated with two additional Limited
Service MEI Ports, and not any other service, as supported by its cost
review.
The Exchange's occupancy expense relating to providing the services
associated with providing two additional Limited Service MEI Ports is
approximately $1,920, which is only a portion of the $480,036 total
projected expense for occupancy. The Exchange believes it is reasonable
to allocate the identified portion of such expense because such expense
represents the portion of the Exchange's cost to rent and maintain a
physical location for the Exchange's staff who operate and support the
network, including providing the services associated with two
additional Limited Service MEI Ports. This amount consists primarily of
rent for the Exchange's Princeton, NJ office, as well as various
related costs, such as physical security, property management fees,
property taxes, and utilities. The Exchange operates its Network
Operations Center (``NOC'') and Security Operations Center (``SOC'')
from its Princeton, New Jersey office location. A centralized office
space is required to house the staff that operates and supports the
network. The Exchange currently has approximately 160 employees.
Approximately two-thirds of the Exchange's staff are in the Technology
department, and the majority of those staff have some role in the
operation and performance of the services associated with providing
additional Limited Service MEI Ports. Without this office space, the
Exchange would not be able to operate and support the network and
provide the services associated with two additional Limited Service MEI
Ports to its Members and non-Members and their customers. Accordingly,
the Exchange believes it is reasonable to allocate the identified
portion of its occupancy expense because such amount represents the
Exchange's actual cost to house the equipment and personnel who operate
and support the Exchange's network infrastructure and the services
associated with two additional Limited Service MEI Ports. The Exchange
did not allocate all of the occupancy expense toward the cost of
providing the services associated with two additional Limited Service
MEI Ports, only the portion which the Exchange identified as being
specifically mapped to operating and supporting the network,
approximately 0.4% of the total occupancy expense. The Exchange
believes this allocation is reasonable because it represents the
Exchange's cost to provide the services associated with two additional
Limited Service MEI Ports, and not any other service, as supported by
its cost review. Accordingly, based on the facts and circumstances
presented, the Exchange believes that its provision of the services
associated with two additional Limited Service MEI Ports will not
result in excessive pricing or supra-competitive profit.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to allocate the respective percentages of each expense
category described above towards the total cost to the Exchange of
operating and supporting the network, including providing the services
associated with two additional Limited Service MEI Ports because the
Exchange performed a line-by-line item analysis of all the expenses of
the Exchange, and has determined the expenses that directly relate to
operation and support of the network. Further, the Exchange notes that,
without the specific third-party and internal items listed above, the
Exchange would not be able to operate and support the network,
including providing the services associated with two additional Limited
Service MEI Ports to its Members and non-Members and their customers.
Each of these expense items, including physical hardware, software,
employee compensation and benefits, occupancy costs, and the
depreciation and amortization of equipment, have been identified
through a line-by-line item analysis to be integral to the operation
and support of the network.
To provide continuity with the Exchange's most recent filing to add
two additional Limited Service MEI Ports \36\ and this filing, the
Exchange is basing its projected revenue from additional Limited
Service MEI Ports that may be purchased by Market Makers as though
seven Market Makers purchased two additional Limited Service MEI Ports
each. The Exchange notes that any time it needs to expand its network
by making available two additional Limit Service MEI Ports due to
increased customer demand and increased volatility in the marketplace,
which translates into increased message traffic rates across the
network, there is an initial build out cost. The cost to expand the
network in this manner is greater than the revenue the Exchange
anticipates the additional Limited Service MEI Ports will generate.
Specifically, the Exchange estimates it will incur a one-time cost of
approximately $175,000 in capital expenditures (``CapEx'') on hardware,
software, and other items to expand the network to make available two
additional Limited Service MEI Ports. This estimated cost also includes
expense associated with providing the necessary engineering and support
personnel to transition those Market Makers who wish to acquire two
additional Limited Service MEI Ports. Further, the Exchange projects
that the annualized revenue from the two additional Limited Service MEI
Ports will be approximately $16,800 (assuming seven Market Makers
purchase the two additional Limited Service MEI Ports). Therefore, the
Exchange's upfront cost in expanding its network to provide its Members
with two additional Limited Service MEI Ports--approximately $175,000--
is significant relative to the anticipated annualized revenue the
Exchange expects to bring in from two additional Limited Service MEI
Ports--approximately $16,800. Further, the Exchange anticipates it will
incur approximately $103,828 in annualized ongoing operating expense
(``OpEx'') in order to support the expanded network and two additional
Limited Service MEI Ports. Thus, even excluding the upfront CapEx of
$175,000, the Exchange is not generating a supra-competitive profit
from the provision of two additional Limited Service MEI Ports. In
fact, even excluding the one-time CapEx cost of $175,000, the Exchange
anticipates generating an annual loss from the provision of two
additional Limited Service MEI Ports of ($87,028)--that is, $16,800 in
revenue minus $103,828 in expense equates to a loss of ($87,028) to
support the additional ports annually.
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\36\ See supra note 18.
---------------------------------------------------------------------------
The Exchange also notes that no other exchange has a similar cap on
the amount of ports that firms can purchase in their rulebooks or fee
schedules and those exchanges have the same requirements under Section
6(b)(5) of the Exchange Act \37\ as MIAX.\38\
---------------------------------------------------------------------------
\37\ 15 U.S.C. 78f(b)(5).
\38\ See supra note 14.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
proposed rule change will not impose a burden on competition but
[[Page 26979]]
will benefit competition by enhancing the Exchange's ability to compete
by providing additional services to market participants. It is not
intended to address a competitive issue. Rather, the proposal is
intended to allow the Exchange to increase its inventory of MEI Ports
to meet increased Member demand and increased message traffic resulting
from greater marketplace volatility. The Exchange also does not believe
that the proposed rule change will impose a burden on intramarket
competition because additional Limited Service MEI Ports are available
to all Market Makers on an equal basis. It is a business decision of
each Market Maker whether to pay for the additional Limited Service MEI
Ports.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act,\39\ and Rule 19b-4(f)(2) \40\ 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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\39\ 15 U.S.C. 78s(b)(3)(A)(ii).
\40\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-MIAX-2021-19 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2021-19. 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-MIAX-2021-19 and should be submitted on
or before June 8, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
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\41\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10379 Filed 5-17-21; 8:45 am]
BILLING CODE 8011-01-P
