Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Establish Fees for Purge Ports, 73137-73145 [2024-20172]
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Federal Register / Vol. 89, No. 174 / Monday, September 9, 2024 / Notices
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(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in Rule 301 of Regulation
ATS (17 CFR 242.301) under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.). The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget (‘‘OMB’’) for
extension and approval.
Regulation ATS provides a regulatory
structure for alternative trading systems.
Rule 301 of Regulation ATS contains
certain record keeping and reporting
requirements, as well as additional
obligations that apply only to alternative
trading systems with significant volume.
The Rule requires all alternative trading
systems that wish to comply with
Regulation ATS to file an initial
operation report on Form ATS.
Alternative trading systems are also
required to supply updates on Form
ATS to the Commission describing
material changes to the system, file
quarterly transaction reports on Form
ATS–R, and file cessation of operations
reports on Form ATS. An alternative
trading system with significant volume
is required to comply with requirements
for fair access and systems capacity,
integrity, and security.
The Commission staff estimates that
entities subject to the requirements of
Rule 301 will spend a total of
approximately 2,983 hours a year to
comply with the Rule.
Regulation ATS requires ATSs to
preserve any records, for at least three
years, made in the process of complying
with the system’s capacity, integrity and
security requirements.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimates of the burden of the proposed
collection of information; (c) ways to
enhance the quality, utility, and clarity
of the information collected; and (d)
ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
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comments and suggestions submitted by
November 8, 2024.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: Austin Gerig, Director/Chief Data
Officer, Securities and Exchange
Commission, c/o Oluwaseun Ajayi, 100
F Street NE, Washington, DC 20549, or
send an email to: PRA_Mailbox@
sec.gov.
Dated: September 3, 2024.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2024–20199 Filed 9–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100901; File No. SR–
SAPPHIRE–2024–26]
Self-Regulatory Organizations; MIAX
Sapphire, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Establish Fees for
Purge Ports
September 3, 2024.
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 August
21, 2024, MIAX Sapphire, LLC (‘‘MIAX
Sapphire’’ 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 Sapphire Fee
Schedule (the ‘‘Fee Schedule’’) to adopt
certain non-transaction fees for Purge
Ports as described below.
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/miax-sapphire/rule-filings, at
the Exchange’s principal office, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
On July 15, 2024, the U.S. Securities
and Exchange Commission
(‘‘Commission’’) approved the
Exchange’s Form 1 application to
register as a national securities exchange
under Section 6 of the Exchange Act,3
and the Exchange began operations on
August 12, 2024. The Exchange initially
filed this proposal on August 9, 2024
(SR–SAPPHIRE–2024–15) to establish
fees for Purge Ports, which is
functionality that enables Marker
Makers 4 to cancel all open orders or a
subset of open orders through a single
cancel message. The Exchange
withdrew SR–SAPPHIRE–2024–15 on
August 21, 2024, and submitted this
proposal.
3 See Securities Exchange Act Release No. 100539
(July 15, 2024), 89 FR 58848 (July 19, 2024) (File
No. 10–240) (order approving application of MIAX
Sapphire, LLC for registration as a national
securities exchange).
4 The term ‘‘Market Maker’’ or ‘‘MM’’ means a
Member registered with the Exchange for the
purpose of making markets in options contracts
traded on the Exchange and that is vested with the
rights and responsibilities specified in Chapter VI
of the Exchange Rules. See the Definitions Section
of the Fee Schedule and Exchange Rule 100.
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Despite proposing to adopt fees
herein, the Exchange also proposes to
waive the proposed Purge Port fees for
an Initial Waiver Period,5 which began
on the date the Exchange began
operations and which is the same date
that the Fee Schedule became effective.
However, even though the Exchange
proposes to fully waive Purge Port fees
for the Initial Waiver Period, the
Exchange believes that it is appropriate
to provide market participants with the
overall structure of Purge Port fees by
outlining the structure and amounts in
the Fee Schedule, so that there is
general awareness that the Exchange
intends to assess such fees upon the
expiration of the defined period of the
Initial Waiver Period. Additionally, the
Exchange notes that the proposed fees
for Purge Ports on MIAX Sapphire are
identical to Purge Port fees assessed by
the Exchange’s affiliated options
exchange, MIAX PEARL, LLC (‘‘MIAX
Pearl Options’’).6
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Purge Ports
The Exchange proposes to amend
Section 5) d) iii), which was reserved for
use by an earlier proposal, to adopt
Purge Port Fees to provide that a MIAX
Sapphire Market Maker may request and
be allocated two (2) Purge Ports per
Matching Engine 7 to which it connects
and will be charged a monthly fee of
$600 per Matching Engine. The
Exchange believes that the proposed fee
provides Market Makers with flexibility
to control their Purge Port costs based
on the number of Matching Engines
each Marker Maker elects to connect to
based on each Market Maker’s business
needs.
A logical port represents a port
established by the Exchange within the
Exchange’s System for trading and
billing purposes. Each logical port
grants a Member 8 the ability to
accomplish a specific function, such as
5 The term ‘‘Initial Waiver Period’’ means, for
each applicable fee, the period of time from the
initial effective date of the MIAX Sapphire Fee
Schedule plus an additional six (6) full calendar
months after the completion of the partial month of
the Exchange launch. See the Definitions Section of
the Fee Schedule.
6 See MIAX Pearl Options Fee Schedule, Section
5) d) Port Fees available at https://
www.miaxglobal.com/markets/us-options/pearloptions/fees. See also Securities Exchange Act
Release No. 100037 (April 26, 2024), 89 FR 35899
(May 2, 2024) (SR–PEARL–2024–20).
7 ‘‘Matching Engine’’ is a part of the MIAX
Sapphire electronic system that processes options
orders and trades on a symbol-by-symbol basis. See
the Definitions Section of the Fee Schedule.
8 ‘‘Member’’ means an individual or organization
that is registered with the Exchange pursuant to
Chapter II of MIAX Sapphire Exchange Rules for
purposes of trading on the Exchange as an
‘‘Electronic Exchange Member’’ or ‘‘Market Maker.’’
See the Definitions Section of the Fee Schedule.
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order entry, order cancellation, access to
execution reports, and other
administrative information.
Purge Ports are designed to assist
Market Makers in the management of,
and risk control over, their orders,
particularly if the firm is dealing with
a large number of securities. For
example, if a Market Maker detects
market indications that may influence
the execution potential of their orders,
the Market Maker may use Purge Ports
to reduce uncertainty and to manage
risk by purging all orders in a number
of securities. This allows Market Makers
to seamlessly avoid unintended
executions, while continuing to evaluate
the market, their positions, and their
risk levels. Purge Ports are used by
Market Makers that conduct business
activity that exposes them to a large
amount of risk across a number of
securities. Purge Ports enable Market
Makers to cancel all open orders, or a
subset of open orders through a single
cancel message. The Exchange notes
that Purge Ports increase efficiency of
already existing functionality enabling
the cancellation of orders.
The Exchange will operate a highly
performant system with significant
throughput and determinism which
should allow participants to enter,
update and cancel orders at high rates.
Market Makers will have the ability to
cancel individual orders through the
existing functionality, such as through
the use of a mass cancel message by
which a Market Maker may request that
the Exchange remove all or a subset of
its quotations and block all or a subset
of its new inbound quotations.9 Other
than Purge Ports being a dedicated line
for cancelling quotations, Purge Ports
operate in the same manner as a mass
cancel message being sent over a
different type of port. For example, like
Purge Ports, mass cancellations sent
over a logical port may be done at either
the firm or MPID level. As a result,
Market Makers can currently cancel
orders in rapid succession across their
existing logical ports 10 or through a
single cancel message, all open orders or
a subset of open orders.
Similarly, Members may also use
cancel-on-disconnect control when they
experience a disruption in connection to
the Exchange to automatically cancel all
orders, as configured or instructed by
the Member or Market Maker.11 In
9 See
Exchange Rule 519C(a) and (b).
Exchange port functionality supports
cancelation rates that exceed one thousand
messages per second and the Exchange’s research
indicates that certain market participants rely on
such functionality and at times utilize such
cancelation rates.
11 See Exchange Rule 519C(c).
10 Current
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addition, the Exchange already provides
similar ability to mass cancel orders
through the Exchange’s risk controls,
which are offered at no charge and
enables Market Makers to establish predetermined levels of risk exposure, and
can be used to cancel all open orders.12
Accordingly, the Exchange believes that
the Purge Ports provide an efficient
option as an alternative to available
services and enhance a Market Maker’s
ability to manage their risk.
The Exchange believes that market
participants benefit from a dedicated
purge mechanism for specific Members
and to the market as a whole. Market
Makers will have the benefit of efficient
risk management and purge tools. The
market will benefit from potential
increased quoting and liquidity as
Market Makers may use Purge Ports to
manage their risk more robustly. Only
Market Makers that request Purge Ports
would be subject to the proposed fees,
and other Market Makers can operate
without dedicated Purge Ports, but with
the additional purging capabilities
described above. Further, the Exchange
notes that this functionality is similar to
functionality on the Exchange’s affiliate,
MIAX Pearl Options.13
Implementation
The proposed fee change is
immediately effective.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,14 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,15 in particular, in that it is
not designed to permit unfair
discrimination among customers,
brokers, or dealers. The Exchange also
believes that its proposed fee is
consistent with Section 6(b)(4) of the
Act 16 because it represents an equitable
allocation of reasonable dues, fees and
other charges among market
participants.
Cost Analysis
In general, the Exchange believes that
exchanges, in setting fees of all types,
should meet very high standards of
transparency to demonstrate why each
new fee or fee increase meets the
Exchange Act requirements that fees be
reasonable, equitably allocated, not
unfairly discriminatory, and not create
an undue burden on competition among
members and markets. In particular, the
12 See
Exchange Rule 517.
supra note 6.
14 15 U.S.C. 78f(b).
15 15 U.S.C. 78f(b)(5).
16 15 U.S.C. 78f(b)(4).
13 See
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Exchange believes that each exchange
should take extra care to be able to
demonstrate that these fees are based on
its costs and reasonable business needs.
In proposing to charge fees for port
services, the Exchange is especially
diligent in assessing those fees in a
transparent way against its own
aggregate costs of providing the related
service, and in carefully and
transparently assessing the impact on
Members—both generally and in
relation to other Members, i.e., to assure
the fee will not create a financial burden
on any participant and will not have an
undue impact in particular on smaller
Members and competition among
Members in general. The Exchange
believes that this level of diligence and
transparency is called for by the
requirements of Section 19(b)(1) under
the Act,17 and Rule 19b–4 thereunder,18
with respect to the types of information
exchanges should provide when filing
fee changes, and Section 6(b) of the
Act,19 which requires, among other
things, that exchange fees be reasonable
and equitably allocated,20 not designed
to permit unfair discrimination,21 and
that they not impose a burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act.22 The Exchange
reiterates that the legacy exchanges with
whom the Exchange will vigorously
compete for order flow and market
share, were not subject to any such
diligence or transparency in setting their
baseline non-transaction fees, most of
which were put in place before the Staff
Guidance.23
As detailed below, the Exchange
recently calculated its aggregate annual
costs for providing Purge Ports to be
$426,238 (or approximately $35,518 per
month, rounded to the nearest dollar
when dividing the annual cost by 12
months). To recoup the costs of
providing Purge Ports to its Market
Makers going forward, as described
below, the Exchange proposes to amend
its Fee Schedule to charge a fee of $600
per Matching Engine for Purge Ports.
The Exchange notes that the projected
revenue will not be greater than the
costs to the Exchange to provide Purge
Ports, however the Exchange believes
that it is necessary to accept this
17 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(4).
21 15 U.S.C. 78f(b)(5).
22 15 U.S.C. 78f(b)(8).
23 See Staff Guidance on SRO Rule Filings
Relating to Fees (May 21, 2019), available at https://
www.sec.gov/tm/staff-guidance-sro-rule-filings-fees
(the ‘‘Staff Guidance’’).
18 17
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condition in order to successfully
launch MIAX Sapphire.
The Exchange’s affiliates 24 previously
completed a study of their aggregate
costs to produce market data and
provide connectivity and port services,
defined above as its Cost Analysis.25
Personnel began to plan for and develop
the Exchange beginning in early 2023,
and costs included in this Cost Analysis
are related to the development and
buildout of the Exchange since that
time. During the Exchange’s
development and buildout that occurred
throughout 2023 and continues to today,
the Exchange routinely studied its
aggregate costs to develop and
implement the Exchange. The Cost
Analysis required a detailed analysis of
the Exchange’s aggregate baseline costs,
including a determination and
allocation of costs for core services
provided by the Exchange—transaction
execution, market data, membership
services, physical connectivity, and port
access (which provide order entry,
cancellation and modification
functionality, risk functionality, the
ability to receive drop copies, and other
functionality). The Exchange separately
divided its costs between those costs
necessary to deliver each of these core
services, including infrastructure,
software, human resources (i.e.,
personnel), and certain general and
administrative expenses (‘‘cost
drivers’’).
As an initial step, the Exchange
determined the total cost for the
Exchange and its affiliated markets for
each cost driver as part of the
Exchange’s 2024 budget review process.
The 2024 budget review is a companywide process that occurs over the course
of many months, includes meetings
among senior management, department
heads, and the Finance Team. Each
department head is required to send a
‘‘bottom up’’ budget to the Finance
Team allocating costs at the profit and
loss account and vendor levels for the
Exchange and its affiliated markets
based on a number of factors, including
server counts, additional hardware and
24 The affiliated markets include Miami
International Securities Exchange, LLC (‘‘MIAX’’);
separately, the options and equities markets of
MIAX PEARL, LLC (‘‘MIAX Pearl’’); and MIAX
Emerald, LLC (‘‘MIAX Emerald’’).
25 See Securities Exchange Act Release Nos.
100036 (April 26, 2024), 89 FR 35909 (May 2, 2024)
(SR–MIAX–2024–22); 100037 (April 26, 2024), 89
FR 35899 (May 2, 2024) (SR–PEARL–2024–20);
100039 (April 26, 2024), 89 FR 35891 (May 2, 2024)
(SR–EMERALD–2024–14). The Exchange frequently
updates it Cost Analysis as strategic initiatives
change, costs increase or decrease, and market
participant needs and trading activity (once live
trading begins) changes. The Exchange’s most
recent Cost Analysis was conducted ahead of this
filing.
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software utilization, current or
anticipated functional or non-functional
development projects, capacity needs,
end-of-life or end-of-service intervals,
number of members, market model (e.g.,
price time or pro-rata, simple only or
simple and complex markets, auction
functionality, etc.), which may impact
message traffic, individual system
architectures that impact platform
size,26 storage needs, dedicated
infrastructure versus shared
infrastructure allocated per platform
based on the resources required to
support each platform, number of
available connections, and employees
allocated time. All of these factors result
in different allocation percentages
among the Exchange and its affiliated
markets, i.e., the different percentages of
the overall cost driver allocated to the
Exchange and its affiliated markets will
cause the dollar amount of the overall
cost allocated among the Exchange and
its affiliated markets to also differ.
Because the Exchange’s parent company
currently owns and operates five
(including MIAX Sapphire) separate and
distinct marketplaces, the Exchange
must determine the costs associated
with each actual market—as opposed to
the Exchange’s parent company simply
concluding that all cost drivers are the
same at each individual marketplace
and dividing total cost by five (5)
(evenly for each marketplace). Rather,
the Exchange’s parent company
determines an accurate cost for each
marketplace, which results in different
allocations and amounts across
exchanges for the same cost drivers, due
to the unique factors of each
marketplace as described above. This
allocation methodology also ensures
that no cost would be allocated twice or
double-counted between the Exchange
and its affiliated markets. The Finance
Team then consolidates the budget and
sends it to senior management,
including the Chief Financial Officer
and Chief Executive Officer, for review
and approval. Next, the budget is
presented to the Board of Directors and
the Finance and Audit Committees for
each exchange for their approval. The
above steps encompass the first step of
the cost allocation process.
The next step involves determining
what portion of the cost allocated to the
Exchange pursuant to the above
methodology is to be allocated to each
core service, e.g., market data,
connectivity, ports, and transaction
26 For example, MIAX Sapphire maintains 8
matching engines, MIAX maintains 24 matching
engines, MIAX Pearl Options maintains 12
matching engines, MIAX Pearl Equities maintains
24 matching engines, and MIAX Emerald maintains
12 matching engines.
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services. The Exchange and its affiliated
markets adopted an allocation
methodology with thoughtful and
consistently applied principles to guide
how much of a particular cost amount
allocated to the Exchange should be
allocated within the Exchange to each
core service. This is the final step in the
cost allocation process and is applied to
each of the cost drivers set forth below.
This next level of the allocation
methodology at the individual exchange
level also took into account factors
similar to those set forth under the first
step of the allocation methodology
process described above, to determine
the appropriate allocation to
connectivity or market data versus
allocations for other services. This
allocation methodology was developed
through an assessment of costs with
senior management intimately familiar
with each area of the Exchange’s
operations. After adopting this
allocation methodology, the Exchange
then applied an allocation of each cost
driver to each core service, resulting in
the cost allocations described below.
Each of the below cost allocations is
unique to the Exchange and represents
a percentage of overall cost that was
allocated to the Exchange pursuant to
the initial allocation described above.
By allocating segmented costs to each
core service, the Exchange was able to
estimate by core service the potential
margin it might earn based on different
fee models. The Exchange notes that it
has five primary sources of revenue that
it can potentially use to fund its
operations: transaction fees,
connectivity and port service fees,
membership fees, regulatory fees, and
market data fees. Accordingly, the
Exchange must cover its expenses from
these five primary sources of revenue.
The Exchange also notes that as a
general matter each of these sources of
revenue is based on services that are
interdependent. For instance, the
Exchange’s system for executing
transactions is dependent on physical
hardware and connectivity; only
Members and parties that they sponsor
to participate directly on the Exchange
may submit orders to the Exchange;
some Members (but not all) consume
market data from the Exchange in order
to trade on the Exchange; and, the
Exchange consumes market data from
external sources in order to comply with
regulatory obligations. Accordingly,
given this interdependence, the
allocation of costs to each service or
revenue source required judgment of the
Exchange and was weighted based on
estimates of the Exchange that the
Exchange believes are reasonable, as set
forth below. While there is no
standardized and generally accepted
methodology for the allocation of an
exchange’s costs, the Exchange’s
methodology is the result of an
extensive review and analysis and will
be consistently applied going forward
for any other cost-justified potential fee
proposals. In the absence of the
Commission attempting to specify a
methodology for the allocation of
exchanges’ interdependent costs, the
Exchange will continue to be left with
its best efforts to attempt to conduct
such an allocation in a thoughtful and
reasonable manner.
Through the Exchange’s extensive
updated Cost Analysis, which was again
recently further refined, the Exchange
analyzed every expense item in the
Exchange’s general expense ledger to
determine whether each such expense
relates to the provision of connectivity
and port services, and, if such expense
did so relate, what portion (or
percentage) of such expense actually
supports the provision of Purge Port
services, and thus bears a relationship
that is, ‘‘in nature and closeness,’’
directly related to Purge Port services. In
turn, the Exchange allocated certain
costs more to physical connectivity and
others to ports, while certain costs were
only allocated to such services at a very
low percentage or not at all, using
consistent allocation methodologies as
described above. Based on this analysis,
the Exchange estimates that the
aggregate monthly cost to provide Purge
Port services is $35,518, as further
detailed below.
Costs Related to Offering Purge Ports
The following chart details the
individual line-item costs considered by
the Exchange to be related to offering
Purge Ports as well as the percentage of
the Exchange’s overall costs that such
costs represent for each cost driver (e.g.,
as set forth below, the Exchange
allocated approximately 3.5% of its
overall Human Resources cost to
offering Purge Ports).
Allocated
annual cost a
Cost drivers
Allocated
monthly cost b
% of all
Human Resources .......................................................................................................................
Connectivity (external fees, cabling, switches, etc.) ...................................................................
Internet Services and External Market Data ...............................................................................
Data Center .................................................................................................................................
Hardware and Software Maintenance and Licenses ..................................................................
Depreciation .................................................................................................................................
Allocated Shared Expenses ........................................................................................................
$363,954
112
654
6,764
2,185
19,518
33,051
$30,329
9
54
564
182
1,626
2,754
3.6
0.4
0.4
1.1
0.4
1.6
1.2
Total ......................................................................................................................................
426,238
35,518
2.7
a The
Annual Cost includes figures rounded to the nearest dollar.
Monthly Cost was determined by dividing the Annual Cost for each line item by twelve (12) months and rounding up or down to the nearest dollar.
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b The
Below are additional details regarding
each of the line-item costs considered
by the Exchange to be related to offering
Purge Ports. While some costs were
attempted to be allocated as equally as
possible among the Exchange and its
affiliated markets, the Exchange notes
that some of its cost allocation
percentages for certain cost drivers
differ when compared to the same cost
drivers for the Exchange’s affiliated
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markets in their similar proposed fee
changes for Purge Ports. This is because
the Exchange’s cost allocation
methodology utilizes the actual
projected costs of the Exchange (which
are specific to the Exchange and are
independent of the costs projected and
utilized by the Exchange’s affiliated
markets) to determine its actual costs,
which may vary across the Exchange
and its affiliated markets based on
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factors that are unique to each
marketplace. The Exchange provides
additional explanation below (including
the reason for the deviation) for the
significant differences.
Human Resources
The Exchange notes that it and its
affiliated markets anticipate that by
year-end 2024, there will be 289
employees (excluding employees at
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non-options/equities exchange
subsidiaries of Miami International
Holdings, Inc. (‘‘MIH’’), the holding
company of the Exchange and its
affiliated markets), and each department
leader has direct knowledge of the time
spent by each employee with respect to
the various tasks necessary to operate
the Exchange. Specifically, twice a year,
and as needed with additional new
hires and new project initiatives, in
consultation with employees as needed,
managers and department heads assign
a percentage of time to every employee
and then allocate that time amongst the
Exchange and its affiliated markets to
determine each market’s individual
Human Resources expense. Then,
managers and department heads assign
a percentage of each employee’s time
allocated to the Exchange into buckets
including network connectivity, ports,
market data, and other exchange
services. This process ensures that every
employee is 100% allocated, ensuring
there is no double counting between the
Exchange and its affiliated markets.
For personnel costs (Human
Resources), the Exchange calculated an
allocation of employee time for
employees whose functions include
providing and maintaining Purge Ports
and performance thereof (primarily the
Exchange’s network infrastructure team,
which spends most of their time
performing functions necessary to
provide port and connectivity services).
As described more fully above, the
Exchange’s parent company allocates
costs to the Exchange and its affiliated
markets and then a portion of the
Human Resources costs allocated to the
Exchange is then allocated to port
services. From that portion allocated to
the Exchange that applied to ports, the
Exchange then allocated a weighted
average of 4.8% of each employee’s time
from the above group to Purge Ports.
The Exchange also allocated Human
Resources costs to provide Purge Ports
to a limited subset of personnel with
ancillary functions related to
establishing and maintaining such ports
(such as information security, sales,
membership, and finance personnel).
The Exchange allocated cost on an
employee-by-employee basis (i.e., only
including those personnel who support
functions related to providing Purge
Ports) and then applied a smaller
allocation to such employees’ time to
Purge Ports (2.2%). This other group of
personnel with a smaller allocation of
Human Resources costs also have a
direct nexus to Purge Ports, whether it
is a sales person selling port services,
finance personnel billing for port
services or providing budget analysis, or
information security ensuring that such
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ports are secure and adequately
defended from an outside intrusion.
The estimates of Human Resources
cost were therefore determined by
consulting with such department
leaders, determining which employees
are involved in tasks related to
providing Purge Ports, and confirming
that the proposed allocations were
reasonable based on an understanding
of the percentage of time such
employees devote to those tasks. This
includes personnel from the Exchange
departments that are predominately
involved in providing Purge Ports:
Business Systems Development, Trading
Systems Development, Systems
Operations and Network Monitoring,
Network and Data Center Operations,
Listings, Trading Operations, and
Project Management. Again, the
Exchange allocated 4.8% of each of their
employee’s time assigned to the
Exchange for Purge Ports, as stated
above. Employees from these
departments perform numerous
functions to support Purge Ports, such
as the installation, re-location,
configuration, and maintenance of Purge
Ports and the hardware they access.
This hardware includes servers, routers,
switches, firewalls, and monitoring
devices. These employees also perform
software upgrades, vulnerability
assessments, remediation and patch
installs, equipment configuration and
hardening, as well as performance and
capacity management. These employees
also engage in research and
development analysis for equipment
and software supporting Purge Ports and
design, and support the development
and on-going maintenance of internallydeveloped applications as well as data
capture and analysis, and Member and
internal Exchange reports related to
network and system performance. The
above list of employee functions is not
exhaustive of all the functions
performed by Exchange employees to
support Purge Ports, but illustrates the
breath of functions those employees
perform in support of the above cost and
time allocations.
Lastly, the Exchange notes that senior
level executives’ time was only
allocated to the Purge Ports related
Human Resources costs to the extent
that they are involved in overseeing
tasks related to providing Purge Ports.
The Human Resources cost was
calculated using a blended rate of
compensation reflecting salary, equity
and bonus compensation, benefits,
payroll taxes, and 401(k) matching
contributions.
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Connectivity (External Fees, Cabling,
Switches, etc.)
The Connectivity cost driver includes
external fees paid to connect to other
exchanges and third parties, cabling and
switches required to operate the
Exchange. The Connectivity cost driver
is more narrowly focused on technology
used to complete connections to the
Exchange and to connect to external
markets. The Exchange notes that its
connectivity to external markets
vendors is required in order to receive
market data to run the Exchange’s
matching engine and basic operations
compliant with existing regulations,
primarily Regulation NMS.
The Exchange relies on various
connectivity providers for connectivity
to the entire U.S. options industry, and
infrastructure services for critical
components of the network that are
necessary to provide and maintain its
System Networks and access to its
System Networks via 10Gb ULL
connectivity. Specifically, the Exchange
utilizes connectivity providers to
connect to other national securities
exchanges and the Options Price
Reporting Authority (‘‘OPRA’’). The
Exchange understands that these service
providers provide services to most, if
not all, of the other U.S. exchanges and
other market participants. Connectivity
provided by these service providers is
critical to the Exchanges daily
operations and performance of its
System Networks which includes Purge
Ports. Without these services providers,
the Exchange would not be able to
connect to other national securities
exchanges, market data providers or
OPRA and, therefore, would not be able
to operate and support its System
Networks, including Purge Ports. In
addition, the connectivity is necessary
for the Exchange to notify OPRA and
other market participants that an order
has been cancelled, and that quotes may
have been cancelled as a result of a
Market Maker purging quotes via their
Purge Port. Also, like other types of
ports offered by the Exchange, Purge
Ports leverage the Exchange’s existing
10Gb ULL connectivity, which also
relies on connectivity to other national
securities exchanges and OPRA. The
Exchange does not employ a separate
fee to cover its connectivity provider
expense and recoups that expense, in
part, by charging for Purge Ports.
Internet Services and External Market
Data
The next cost driver consists of
internet services and external market
data. Internet services includes thirdparty service providers that provide the
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internet, fiber and bandwidth
connections between the Exchange’s
networks, primary and secondary data
centers, and office locations in
Princeton and Miami. For purposes of
Purge Ports, the Exchange also includes
a portion of its costs related to external
market data. External market data
includes fees paid to third parties,
including OPRA, to receive and
consume market data from other
markets. The Exchange includes
external market data costs towards
Purge Ports because such market data is
necessary to offer certain services
related to such ports, such as checking
for market conditions (e.g., halted
securities). External market data is also
consumed at the Matching Engine level
for, among other things, as validating
quotes on entry against the national best
bid or offer (‘‘NBBO’’).27 Purge Ports are
a component of the Matching Engine,
and used by Market Makers to cancel
multiple resting quotes within the
Matching Engine. While resting, the
Exchange uses external market data to
manage those quotes, such as preventing
trade-throughs, and those quotes are
also reported to OPRA for inclusion in
this consolidated data stream. The
Exchange also must notify OPRA and
other market participants that an order
has been cancelled, and that quotes may
have been cancelled as a result of a
Market Maker purging quotes via their
Purge Port. Thus, since market data
from other exchanges is consumed by
the Matching Engine to validate quotes
and check market conditions, the
Exchange believes it is reasonable to
allocate a small amount of such costs to
Purge Ports.
For the reasons set forth above, the
Exchange believes it is reasonable to
allocate a small amount of such costs to
Purge Ports since market data from other
exchanges is consumed at the
Exchange’s Purge Port level to validate
purge messages and the necessity to
cancel a resting quote via a purge
message or via some other means.
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Data Center
Data Center costs includes an
allocation of the costs the Exchange
incurs to provide Purge Ports in the
third-party data centers where it
maintains its equipment as well as
related costs for market data to then
enter the Exchange’s System. The
Exchange does not own the Primary
Data Center or the Secondary Data
Center, but instead, leases space in data
27 The term ‘‘NBBO’’ means the national best bid
or offer as calculated by the Exchange based on
market information received by the Exchange from
OPRA. See Exchange Rule 100.
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centers operated by third parties. The
Exchange has allocated a percentage of
its Data Center cost (1.1%) to Purge
Ports because the third-party data
centers and the Exchange’s physical
equipment contained therein are
necessary for providing Purge Ports. In
other words, for the Exchange to operate
in a dedicated physical space with
direct connectivity by market
participants to its trading platform, the
data centers are a critical component to
the provision of Purge Ports. If the
Exchange did not maintain such a
presence, then Purge Ports would be of
little value to market participants.
Hardware and Software Maintenance
and Licenses
Hardware and Software Licenses
includes hardware and software licenses
used to operate and monitor physical
assets necessary to offer Purge Ports for
each Matching Engine of the Exchange.
This hardware includes servers,
network switches, cables, optics,
protocol data units, and cabinets, to
maintain a state-of-the-art technology
platform. Without hardware and
software licenses, Purge Ports would not
be able to be offered to market
participants because hardware and
software are necessary to operate the
Exchange’s Matching Engines, which
are necessary to enable the purging of
quotes. The Exchange also routinely
works to improve the performance of
the hardware and software used to
operate the Exchange’s network and
System. The costs associated with
maintaining and enhancing a state-ofthe-art exchange network is a significant
expense for the Exchange, and thus the
Exchange believes that it is reasonable
and appropriate to allocate a certain
percentage of its hardware and software
expense to help offset those costs of
providing Purge Port connectivity to its
Matching Engines.
Depreciation
The vast majority of the software the
Exchange uses to provide Ports has been
developed in-house and the cost of such
development, which takes place over an
extended period of time and includes
not just development work, but also
quality assurance and testing to ensure
the software works as intended, is
depreciated over time once the software
is activated in the production
environment. Hardware used to provide
Purge Ports includes equipment used for
testing and monitoring of order entry
infrastructure and other physical
equipment the Exchange purchased and
is also depreciated over time.
All hardware and software, which
also includes assets used for testing and
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monitoring of order entry infrastructure,
were valued at cost, depreciated or
leased over periods ranging from three
to five years. Thus, the depreciation cost
primarily relates to servers necessary to
operate the Exchange, some of which is
owned by the Exchange and some of
which is leased by the Exchange in
order to allow efficient periodic
technology refreshes. The Exchange
allocated 0.8% [sic] of all depreciation
costs to providing Purge Ports. The
Exchange allocated depreciation costs
for depreciated software necessary to
operate the Exchange because such
software is related to the provision of
Purge Ports. As with the other allocated
costs in the Exchange’s updated Cost
Analysis, the Depreciation cost driver
was therefore narrowly tailored to
depreciation related to Purge Ports.
Allocated Shared Expenses
Finally, a portion of general shared
expenses was allocated to overall Purge
Port costs as without these general
shared costs the Exchange would not be
able to operate in the manner that it
does and provide Purge Ports. The costs
included in general shared expenses
include general expenses of the
Exchange, including office space and
office expenses (e.g., occupancy and
overhead expenses), utilities, recruiting
and training, marketing and advertising
costs, professional fees for legal, tax and
accounting services (including external
and internal audit expenses), and
telecommunications costs. The
Exchange notes that the cost of paying
directors to serve on its Board of
Directors is included in the calculation
of Allocated Shared Expenses, and thus
a portion of such overall cost amounting
to less than 2% of the overall cost for
directors was allocated to providing
Purge Ports.
Approximate Cost for Purge Port per
Month
Based on projected 2024 data, the
total monthly cost allocated to Purge
Ports is $35,518. This total is divided by
the total number of Matching Engines
(8) in which Market Makers may use
Purge Ports for each month, divided by
the anticipated number of Market
Makers results in an approximate cost of
$634 per Matching Engine per month for
Purge Port usage (when rounding to the
nearest dollar). The Exchange notes that
the flat fee of $600 per month per
Matching Engine entitles each Market
Maker to two Purge Ports per Matching
Engine. The Exchange anticipates that
the majority of Market Makers will
connect to all eight of the Exchange’s
Matching Engines and utilize Purge
Ports on each Matching Engine. The
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ddrumheller on DSK120RN23PROD with NOTICES1
Exchange recognizes that costs are
greater than anticipated revenues but
accepts this condition as a necessary
cost to be incurred when launching a
new exchange.
Cost Analysis—Additional Discussion
In conducting its Cost Analysis, the
Exchange did not allocate any of its
expenses in full to any core services
(including Purge Ports) and did not
double-count any expenses. Instead, as
described above, the Exchange allocated
applicable cost drivers across its core
services and used the same Cost
Analysis to form the basis of this
proposal. For instance, in calculating
the Human Resources expenses to be
allocated to Purge Ports based upon the
above described methodology, the
Exchange has a team of employees
dedicated to network infrastructure and
with respect to such employees the
Exchange allocated network
infrastructure personnel with a higher
percentage of the cost of such personnel
(21.7%) given their focus on functions
necessary to provide Ports. The salaries
of those same personnel were allocated
only 4.8% to Purge Ports and the
remaining 95.2% was allocated to
connectivity, other port services,
transaction services, membership
services and market data. The Exchange
did not allocate any other Human
Resources expense for providing Purge
Ports to any other employee group,
outside of a smaller allocation of 2.2%
for Purge Ports, of the cost associated
with certain specified personnel who
work closely with and support network
infrastructure personnel. This is because
a much wider range of personnel are
involved in functions necessary to offer,
monitor and maintain Purge Ports but
the tasks necessary to do so are not a
primary or full-time function.
In total, the Exchange allocated 3.6%
of its personnel costs to providing Purge
Ports. In turn, the Exchange allocated
the remaining 96.4% of its Human
Resources expense to membership
services, transaction services,
connectivity services, other port
services and market data. Thus, again,
the Exchange’s allocations of cost across
core services were based on real costs of
operating the Exchange and were not
double-counted across the core services
or their associated revenue streams.
As another example, the Exchange
allocated depreciation expense to all
core services, including Purge Ports, but
in different amounts. 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,
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laptops, monitors, information security
appliances and storage, and network
switching infrastructure equipment,
including switches and taps that were
purchased to operate and support the
network. Without this equipment, the
Exchange would not be able to operate
the network and provide Purge Port
services to its Market Makers. However,
the Exchange did not allocate all of the
depreciation and amortization expense
toward the cost of providing Purge Port
services, but instead allocated
approximately 0.8% [sic] of the
Exchange’s overall depreciation and
amortization expense to Purge Ports.
The Exchange allocated the remaining
depreciation and amortization expense
(approximately 99.2% [sic]) toward the
cost of providing transaction services,
membership services, connectivity
services, other port services, and market
data.
The Exchange notes that its revenue
estimates are based on projections
across all potential revenue streams and
will only be realized to the extent such
revenue streams actually produce the
revenue estimated. The Exchange does
not yet know whether such expectations
will be realized. For instance, in order
to generate the revenue expected from
Purge Ports, the Exchange will have to
be successful in retaining existing
Market Makers that wish to maintain
Purge Ports or in obtaining new Market
Makers that will purchase such services.
Similarly, the Exchange will have to be
successful in retaining a positive net
capture on transaction fees in order to
realize the anticipated revenue from
transaction pricing.
The Exchange notes that the Cost
Analysis is based on the Exchange’s
2024 fiscal year of operations and
projections. It is possible, however, that
actual costs may be higher or lower. To
the extent the Exchange sees growth in
use of connectivity services it will
receive additional revenue to offset
future cost increases. However, if use of
port services is static or decreases, the
Exchange might not realize the revenue
that it anticipates or needs in order to
cover applicable costs. Accordingly, the
Exchange is committing to conduct a
one-year review after implementation of
these fees. The Exchange expects that it
may propose to adjust fees at that time,
to increase fees in the event that
revenues fail to cover costs and a
reasonable mark-up of such costs.
Similarly, the Exchange may propose to
decrease fees in the event that revenue
materially exceeds our current
projections. In addition, the Exchange
will periodically conduct a review to
inform its decision making on whether
a fee change is appropriate (e.g., to
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73143
monitor for costs increasing/decreasing
or subscribers increasing/decreasing,
etc. in ways that suggest the thencurrent fees are becoming dislocated
from the prior cost-based analysis) and
would propose to increase fees in the
event that revenues fail to cover its costs
and a reasonable mark-up, or decrease
fees in the event that revenue or the
mark-up materially exceeds our current
projections. In the event that the
Exchange determines to propose a fee
change, the results of a timely review,
including an updated cost estimate, will
be included in the rule filing proposing
the fee change. More generally, the
Exchange believes that it is appropriate
for an exchange to refresh and update
information about its relevant costs and
revenues in seeking any future changes
to fees, and the Exchange commits to do
so.
Projected Revenue 28
The proposed fees will allow the
Exchange to cover certain costs incurred
by the Exchange associated with
providing and maintaining necessary
hardware and other network
infrastructure as well as network
monitoring and support services;
without such hardware, infrastructure,
monitoring and support the Exchange
would be unable to provide port
services. Much of the cost relates to
monitoring and analysis of data and
performance of the network via the
subscriber’s connection(s). The above
cost, namely those associated with
hardware, software, and human capital,
enable the Exchange to measure
network performance with nanosecond
granularity. These same costs are also
associated with time and money spent
seeking to continuously improve the
network performance, improving the
subscriber’s experience, based on
monitoring and analysis activity. The
Exchange routinely works to improve
the performance of the network’s
hardware and software. The costs
associated with maintaining and
enhancing a state-of-the-art exchange
network is a significant expense for the
Exchange, and thus the Exchange
believes that it is reasonable and
appropriate to help offset those costs by
amending fees for Purge Port services.
Subscribers, particularly those of Purge
Ports, expect the Exchange to provide
this level of support so they continue to
receive the performance they expect.
This differentiates the Exchange from its
competitors. As detailed above, the
Exchange has five primary sources of
28 For purposes of calculating projected 2024
revenue for Purge Ports, the Exchange is using
estimated projections.
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ddrumheller on DSK120RN23PROD with NOTICES1
revenue that it can potentially use to
fund its operations: transaction fees,
fees for connectivity services
(connections and ports), membership
and regulatory fees, and market data
fees. Accordingly, the Exchange must
cover its expenses from these five
primary sources of revenue.
The Exchange’s Cost Analysis
estimates the annual cost to provide
Purge Port services will equal $426,238.
Based on projected Purge Port services
usage, the Exchange would generate
annual revenue of approximately
$403,200. The Exchange estimates it
will incur a 5.7% loss when comparing
revenues to the cost of providing Purge
Port services.
Based on the above discussion, the
Exchange believes that even if the
Exchange earns the above revenue or
incrementally more or less, the
proposed fees are fair and reasonable
because they will not result in pricing
that deviates from that of other
exchanges or a supra-competitive profit,
when comparing the total expense of the
Exchange associated with providing
Purge Port services versus the total
projected revenue of the Exchange
associated with network Purge Port
services.
The Proposed Fees Are Also Equitable,
Reasonable, and Not Unfairly
Discriminatory
The Exchange believes that the
proposed rule change would promote
just and equitable principles of trade
and remove impediments to and perfect
the mechanism of a free and open
market because offering Market Makers
optional Purge Port services with a
flexible fee structure promotes choice,
flexibility, and efficiency. The Exchange
believes Purge Ports enhance Market
Makers’ ability to manage orders, which
would, in turn, improve their risk
controls to the benefit of all market
participants. The Exchange believes that
Purge Ports foster cooperation and
coordination with persons engaged in
facilitating transactions in securities
because designating Purge Ports for
purge messages may encourage better
use of such ports. This may, concurrent
with the ports that carry orders and
other information necessary for market
making activities, enable more efficient,
as well as fair and reasonable, use of
Market Makers’ resources. The
Exchange believes that proper risk
management, including the ability to
efficiently cancel multiple orders
quickly when necessary is valuable to
all firms, including Market Makers that
have heightened quoting obligations
that are not applicable to other market
participants.
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Purge Ports do not relieve Market
Makers of their quoting obligations or
firm quote obligations under Regulation
NMS Rule 602.29 Specifically, any
interest that is executable against a
Member’s or Market Maker’s orders that
is received by the Exchange prior to the
time of the removal of orders request
will automatically execute. Market
Makers that purge their orders will not
be relieved of the obligation to provide
continuous two-sided orders on a daily
basis, nor will it prohibit the Exchange
from taking disciplinary action against a
Market Maker for failing to meet their
continuous quoting obligation each
trading day.30
The Exchange also believes that
offering Purge Ports at the Matching
Engine level promotes risk management
across the industry, and thereby
facilitates investor protection. Some
market participants, in particular the
larger firms, could and do build similar
risk functionality in their trading
systems that permit the flexible
cancellation of orders entered on the
Exchange at a high rate. Offering
Matching Engine level protections
ensures that such functionality is
widely available to all firms, including
smaller firms that may otherwise not be
willing to incur the costs and
development work necessary to support
their own customized mass cancel
functionality.
The Exchange also believes that
moving to a per Matching Engine fee for
Purge Ports is reasonable due to the
Exchange’s architecture that provides
the Exchange the ability to provide two
(2) Purge Ports per Matching Engine.
The Exchange believes that the
proposed Purge Port fees are equitable
because the proposed Purge Ports are
completely voluntary as they relate
solely to optional risk management
functionality.
The Exchange also believes that the
proposed amendments to its Fee
Schedule are not unfairly
discriminatory because they will apply
uniformly to all Market Makers that
choose to use the optional Purge Ports.
Purge Ports are completely voluntary
and, as they relate solely to optional risk
management functionality, no Market
Maker is required or under any
regulatory obligation to utilize them. All
Market Makers that voluntarily select
this service option will be charged the
same amount for the same services.
Market Makers have the option to select
any port or connectivity option, and
there is no differentiation among Market
29 See Exchange Rule 604. See also generally
Chapter VI of the Exchange’s Rules.
30 Id.
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Makers with regard to the fees charged
for the services offered by the Exchange.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. Purge Ports
are completely voluntary and are
available to all Market Makers on an
equal basis at the same cost. While the
Exchange believes that Purge Ports
provide a valuable service, Market
Makers can choose to purchase, or not
purchase, these ports based on their
own determination of the value and
their business needs. No Market Maker
is required or under any regulatory
obligation to utilize Purge Ports.
Accordingly, the Exchange believes that
Purge Ports offer appropriate risk
management functionality to firms that
trade on the Exchange without imposing
an unnecessary or inappropriate burden
on competition.
The Exchange also does not believe
the proposal would cause any
unnecessary or inappropriate burden on
intermarket competition as other
exchanges are free to introduce their
own purge port functionality and lower
their prices to better compete with the
Exchange’s offering. The Exchange does
not believe the proposed rule change
would cause any unnecessary or
inappropriate burden on intramarket
competition. Particularly, the proposal
would apply uniformly to any market
participant, in that it does not
differentiate between Market Makers.
The proposal would allow any
interested Market Maker to purchase
Purge Port functionality based on their
business needs.
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,31 and Rule
19b–4(f)(2) 32 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
31 15
32 17
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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:
ddrumheller on DSK120RN23PROD with NOTICES1
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–
SAPPHIRE–2024–26 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–SAPPHIRE–2024–26. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
VerDate Sep<11>2014
17:19 Sep 06, 2024
Jkt 262001
73145
SR–SAPPHIRE–2024–26 and should be
submitted on or before September 30,
2024.
II. Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.33
Vanessa A. Countryman,
Secretary.
In its filing with the Commission, the
clearing agency 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
clearing agency has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of such statements.
[FR Doc. 2024–20172 Filed 9–6–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100897; File No. SR–
NSCC–2024–007]
Self-Regulatory Organizations;
National Securities Clearing
Corporation; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Modify the NSCC
Rules & Procedures To Accommodate
Fractional Share Trading Programs
September 3, 2024.
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 August
21, 2024, National Securities Clearing
Corporation (‘‘NSCC’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the clearing agency. NSCC filed the
proposed rule change pursuant to
Section 19(b)(3)(A) of the Act 3 and Rule
19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Clearing Agency’s Statement of the
Terms of Substance of the Proposed
Rule Change
The proposed rule change consists of
modifications to the NSCC Rules &
Procedures (‘‘Rules’’) to accommodate
the Member submission and trade
recording of certain trades executed in
connection with fractional share trading
programs, as described in greater detail
below.5
33 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6).
5 Capitalized terms not defined herein shall have
the meaning assigned to such terms in the Rules,
available at www.dtcc.com/legal/rules-andprocedures.
1 15
PO 00000
Frm 00087
Fmt 4703
Sfmt 4703
(A) Clearing Agency’s Statement of the
Purpose of, and Statutory Basis for, the
Proposed Rule Change
1. Purpose
The purpose of this proposed rule
change is to amend the real-time trade
submission requirements in NSCC Rule
7 and Procedure II to accommodate the
Member submission and trade recording
of certain trades representing
transactions from fractional share
trading programs. The proposed rule
change is discussed in detail below.
Background
NSCC Rule 7, Section 7 requires that
trade data submitted to NSCC for trade
recording be submitted in ‘‘Real-time,’’ 6
and on a trade-by-trade basis, in the
form executed without any form of ‘‘prenetting’’ of such trades prior to their
submission (collectively, the ‘‘Real-time
Trade Submission Requirement’’).
Cleared contract information is then
reported out to submitting firms by
NSCC’s Universal Trade Capture
(‘‘UTC’’) system 7 upon trade
comparison and validation. The receipt
of trade data in real-time enables NSCC
to report to Members trade data as it is
received, thereby promoting intra-day
reconciliation of transactions at the
Member level, and also facilitates
efficient risk management for both
NSCC and its Members.
From an operational perspective,
NSCC is only able to accept trades for
clearing in units of full shares.
Moreover, stocks do not trade on
exchanges in units of less than one
share, and trades may only be reported
to a trade reporting facility in multiples
6 NSCC Procedure XIII defines ‘‘Real-time’’ to
mean the ‘‘submission of trade data on a trade-bytrade basis promptly after trade execution, in any
format and by any communication method
acceptable to [NSCC].’’ See NSCC Procedure XIII,
supra note 5.
7 NSCC’s UTC system validates and reports equity
transactions that are submitted to NSCC throughout
the trading day by an exchange or by a Qualified
Special Representative that is an NSCC Member.
E:\FR\FM\09SEN1.SGM
09SEN1
]]>Agencies
[Federal Register Volume 89, Number 174 (Monday, September 9, 2024)]
[Notices]
[Pages 73137-73145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-20172]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100901; File No. SR-SAPPHIRE-2024-26]
Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Establish Fees for Purge Ports
September 3, 2024.
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 August 21, 2024, MIAX Sapphire, LLC (``MIAX Sapphire'' 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 Sapphire Fee
Schedule (the ``Fee Schedule'') to adopt certain non-transaction fees
for Purge Ports as described below.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-options/miax-sapphire/rule-filings, at the Exchange's principal office, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
On July 15, 2024, the U.S. Securities and Exchange Commission
(``Commission'') approved the Exchange's Form 1 application to register
as a national securities exchange under Section 6 of the Exchange
Act,\3\ and the Exchange began operations on August 12, 2024. The
Exchange initially filed this proposal on August 9, 2024 (SR-SAPPHIRE-
2024-15) to establish fees for Purge Ports, which is functionality that
enables Marker Makers \4\ to cancel all open orders or a subset of open
orders through a single cancel message. The Exchange withdrew SR-
SAPPHIRE-2024-15 on August 21, 2024, and submitted this proposal.
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 100539 (July 15,
2024), 89 FR 58848 (July 19, 2024) (File No. 10-240) (order
approving application of MIAX Sapphire, LLC for registration as a
national securities exchange).
\4\ The term ``Market Maker'' or ``MM'' means a Member
registered with the Exchange for the purpose of making markets in
options contracts traded on the Exchange and that is vested with the
rights and responsibilities specified in Chapter VI of the Exchange
Rules. See the Definitions Section of the Fee Schedule and Exchange
Rule 100.
---------------------------------------------------------------------------
[[Page 73138]]
Despite proposing to adopt fees herein, the Exchange also proposes
to waive the proposed Purge Port fees for an Initial Waiver Period,\5\
which began on the date the Exchange began operations and which is the
same date that the Fee Schedule became effective. However, even though
the Exchange proposes to fully waive Purge Port fees for the Initial
Waiver Period, the Exchange believes that it is appropriate to provide
market participants with the overall structure of Purge Port fees by
outlining the structure and amounts in the Fee Schedule, so that there
is general awareness that the Exchange intends to assess such fees upon
the expiration of the defined period of the Initial Waiver Period.
Additionally, the Exchange notes that the proposed fees for Purge Ports
on MIAX Sapphire are identical to Purge Port fees assessed by the
Exchange's affiliated options exchange, MIAX PEARL, LLC (``MIAX Pearl
Options'').\6\
---------------------------------------------------------------------------
\5\ The term ``Initial Waiver Period'' means, for each
applicable fee, the period of time from the initial effective date
of the MIAX Sapphire Fee Schedule plus an additional six (6) full
calendar months after the completion of the partial month of the
Exchange launch. See the Definitions Section of the Fee Schedule.
\6\ See MIAX Pearl Options Fee Schedule, Section 5) d) Port Fees
available at https://www.miaxglobal.com/markets/us-options/pearl-options/fees. See also Securities Exchange Act Release No. 100037
(April 26, 2024), 89 FR 35899 (May 2, 2024) (SR-PEARL-2024-20).
---------------------------------------------------------------------------
Purge Ports
The Exchange proposes to amend Section 5) d) iii), which was
reserved for use by an earlier proposal, to adopt Purge Port Fees to
provide that a MIAX Sapphire Market Maker may request and be allocated
two (2) Purge Ports per Matching Engine \7\ to which it connects and
will be charged a monthly fee of $600 per Matching Engine. The Exchange
believes that the proposed fee provides Market Makers with flexibility
to control their Purge Port costs based on the number of Matching
Engines each Marker Maker elects to connect to based on each Market
Maker's business needs.
---------------------------------------------------------------------------
\7\ ``Matching Engine'' is a part of the MIAX Sapphire
electronic system that processes options orders and trades on a
symbol-by-symbol basis. See the Definitions Section of the Fee
Schedule.
---------------------------------------------------------------------------
A logical port represents a port established by the Exchange within
the Exchange's System for trading and billing purposes. Each logical
port grants a Member \8\ the ability to accomplish a specific function,
such as order entry, order cancellation, access to execution reports,
and other administrative information.
---------------------------------------------------------------------------
\8\ ``Member'' means an individual or organization that is
registered with the Exchange pursuant to Chapter II of MIAX Sapphire
Exchange Rules for purposes of trading on the Exchange as an
``Electronic Exchange Member'' or ``Market Maker.'' See the
Definitions Section of the Fee Schedule.
---------------------------------------------------------------------------
Purge Ports are designed to assist Market Makers in the management
of, and risk control over, their orders, particularly if the firm is
dealing with a large number of securities. For example, if a Market
Maker detects market indications that may influence the execution
potential of their orders, the Market Maker may use Purge Ports to
reduce uncertainty and to manage risk by purging all orders in a number
of securities. This allows Market Makers to seamlessly avoid unintended
executions, while continuing to evaluate the market, their positions,
and their risk levels. Purge Ports are used by Market Makers that
conduct business activity that exposes them to a large amount of risk
across a number of securities. Purge Ports enable Market Makers to
cancel all open orders, or a subset of open orders through a single
cancel message. The Exchange notes that Purge Ports increase efficiency
of already existing functionality enabling the cancellation of orders.
The Exchange will operate a highly performant system with
significant throughput and determinism which should allow participants
to enter, update and cancel orders at high rates. Market Makers will
have the ability to cancel individual orders through the existing
functionality, such as through the use of a mass cancel message by
which a Market Maker may request that the Exchange remove all or a
subset of its quotations and block all or a subset of its new inbound
quotations.\9\ Other than Purge Ports being a dedicated line for
cancelling quotations, Purge Ports operate in the same manner as a mass
cancel message being sent over a different type of port. For example,
like Purge Ports, mass cancellations sent over a logical port may be
done at either the firm or MPID level. As a result, Market Makers can
currently cancel orders in rapid succession across their existing
logical ports \10\ or through a single cancel message, all open orders
or a subset of open orders.
---------------------------------------------------------------------------
\9\ See Exchange Rule 519C(a) and (b).
\10\ Current Exchange port functionality supports cancelation
rates that exceed one thousand messages per second and the
Exchange's research indicates that certain market participants rely
on such functionality and at times utilize such cancelation rates.
---------------------------------------------------------------------------
Similarly, Members may also use cancel-on-disconnect control when
they experience a disruption in connection to the Exchange to
automatically cancel all orders, as configured or instructed by the
Member or Market Maker.\11\ In addition, the Exchange already provides
similar ability to mass cancel orders through the Exchange's risk
controls, which are offered at no charge and enables Market Makers to
establish pre-determined levels of risk exposure, and can be used to
cancel all open orders.\12\ Accordingly, the Exchange believes that the
Purge Ports provide an efficient option as an alternative to available
services and enhance a Market Maker's ability to manage their risk.
---------------------------------------------------------------------------
\11\ See Exchange Rule 519C(c).
\12\ See Exchange Rule 517.
---------------------------------------------------------------------------
The Exchange believes that market participants benefit from a
dedicated purge mechanism for specific Members and to the market as a
whole. Market Makers will have the benefit of efficient risk management
and purge tools. The market will benefit from potential increased
quoting and liquidity as Market Makers may use Purge Ports to manage
their risk more robustly. Only Market Makers that request Purge Ports
would be subject to the proposed fees, and other Market Makers can
operate without dedicated Purge Ports, but with the additional purging
capabilities described above. Further, the Exchange notes that this
functionality is similar to functionality on the Exchange's affiliate,
MIAX Pearl Options.\13\
---------------------------------------------------------------------------
\13\ See supra note 6.
---------------------------------------------------------------------------
Implementation
The proposed fee change is immediately effective.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\14\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\15\ in particular, in that it
is not designed to permit unfair discrimination among customers,
brokers, or dealers. The Exchange also believes that its proposed fee
is consistent with Section 6(b)(4) of the Act \16\ because it
represents an equitable allocation of reasonable dues, fees and other
charges among market participants.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Cost Analysis
In general, the Exchange believes that exchanges, in setting fees
of all types, should meet very high standards of transparency to
demonstrate why each new fee or fee increase meets the Exchange Act
requirements that fees be reasonable, equitably allocated, not unfairly
discriminatory, and not create an undue burden on competition among
members and markets. In particular, the
[[Page 73139]]
Exchange believes that each exchange should take extra care to be able
to demonstrate that these fees are based on its costs and reasonable
business needs.
In proposing to charge fees for port services, the Exchange is
especially diligent in assessing those fees in a transparent way
against its own aggregate costs of providing the related service, and
in carefully and transparently assessing the impact on Members--both
generally and in relation to other Members, i.e., to assure the fee
will not create a financial burden on any participant and will not have
an undue impact in particular on smaller Members and competition among
Members in general. The Exchange believes that this level of diligence
and transparency is called for by the requirements of Section 19(b)(1)
under the Act,\17\ and Rule 19b-4 thereunder,\18\ with respect to the
types of information exchanges should provide when filing fee changes,
and Section 6(b) of the Act,\19\ which requires, among other things,
that exchange fees be reasonable and equitably allocated,\20\ not
designed to permit unfair discrimination,\21\ and that they not impose
a burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\22\ The Exchange reiterates that the legacy
exchanges with whom the Exchange will vigorously compete for order flow
and market share, were not subject to any such diligence or
transparency in setting their baseline non-transaction fees, most of
which were put in place before the Staff Guidance.\23\
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(1).
\18\ 17 CFR 240.19b-4.
\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(4).
\21\ 15 U.S.C. 78f(b)(5).
\22\ 15 U.S.C. 78f(b)(8).
\23\ See Staff Guidance on SRO Rule Filings Relating to Fees
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (the ``Staff Guidance'').
---------------------------------------------------------------------------
As detailed below, the Exchange recently calculated its aggregate
annual costs for providing Purge Ports to be $426,238 (or approximately
$35,518 per month, rounded to the nearest dollar when dividing the
annual cost by 12 months). To recoup the costs of providing Purge Ports
to its Market Makers going forward, as described below, the Exchange
proposes to amend its Fee Schedule to charge a fee of $600 per Matching
Engine for Purge Ports. The Exchange notes that the projected revenue
will not be greater than the costs to the Exchange to provide Purge
Ports, however the Exchange believes that it is necessary to accept
this condition in order to successfully launch MIAX Sapphire.
The Exchange's affiliates \24\ previously completed a study of
their aggregate costs to produce market data and provide connectivity
and port services, defined above as its Cost Analysis.\25\ Personnel
began to plan for and develop the Exchange beginning in early 2023, and
costs included in this Cost Analysis are related to the development and
buildout of the Exchange since that time. During the Exchange's
development and buildout that occurred throughout 2023 and continues to
today, the Exchange routinely studied its aggregate costs to develop
and implement the Exchange. The Cost Analysis required a detailed
analysis of the Exchange's aggregate baseline costs, including a
determination and allocation of costs for core services provided by the
Exchange--transaction execution, market data, membership services,
physical connectivity, and port access (which provide order entry,
cancellation and modification functionality, risk functionality, the
ability to receive drop copies, and other functionality). The Exchange
separately divided its costs between those costs necessary to deliver
each of these core services, including infrastructure, software, human
resources (i.e., personnel), and certain general and administrative
expenses (``cost drivers'').
---------------------------------------------------------------------------
\24\ The affiliated markets include Miami International
Securities Exchange, LLC (``MIAX''); separately, the options and
equities markets of MIAX PEARL, LLC (``MIAX Pearl''); and MIAX
Emerald, LLC (``MIAX Emerald'').
\25\ See Securities Exchange Act Release Nos. 100036 (April 26,
2024), 89 FR 35909 (May 2, 2024) (SR-MIAX-2024-22); 100037 (April
26, 2024), 89 FR 35899 (May 2, 2024) (SR-PEARL-2024-20); 100039
(April 26, 2024), 89 FR 35891 (May 2, 2024) (SR-EMERALD-2024-14).
The Exchange frequently updates it Cost Analysis as strategic
initiatives change, costs increase or decrease, and market
participant needs and trading activity (once live trading begins)
changes. The Exchange's most recent Cost Analysis was conducted
ahead of this filing.
---------------------------------------------------------------------------
As an initial step, the Exchange determined the total cost for the
Exchange and its affiliated markets for each cost driver as part of the
Exchange's 2024 budget review process. The 2024 budget review is a
company-wide process that occurs over the course of many months,
includes meetings among senior management, department heads, and the
Finance Team. Each department head is required to send a ``bottom up''
budget to the Finance Team allocating costs at the profit and loss
account and vendor levels for the Exchange and its affiliated markets
based on a number of factors, including server counts, additional
hardware and software utilization, current or anticipated functional or
non-functional development projects, capacity needs, end-of-life or
end-of-service intervals, number of members, market model (e.g., price
time or pro-rata, simple only or simple and complex markets, auction
functionality, etc.), which may impact message traffic, individual
system architectures that impact platform size,\26\ storage needs,
dedicated infrastructure versus shared infrastructure allocated per
platform based on the resources required to support each platform,
number of available connections, and employees allocated time. All of
these factors result in different allocation percentages among the
Exchange and its affiliated markets, i.e., the different percentages of
the overall cost driver allocated to the Exchange and its affiliated
markets will cause the dollar amount of the overall cost allocated
among the Exchange and its affiliated markets to also differ. Because
the Exchange's parent company currently owns and operates five
(including MIAX Sapphire) separate and distinct marketplaces, the
Exchange must determine the costs associated with each actual market--
as opposed to the Exchange's parent company simply concluding that all
cost drivers are the same at each individual marketplace and dividing
total cost by five (5) (evenly for each marketplace). Rather, the
Exchange's parent company determines an accurate cost for each
marketplace, which results in different allocations and amounts across
exchanges for the same cost drivers, due to the unique factors of each
marketplace as described above. This allocation methodology also
ensures that no cost would be allocated twice or double-counted between
the Exchange and its affiliated markets. The Finance Team then
consolidates the budget and sends it to senior management, including
the Chief Financial Officer and Chief Executive Officer, for review and
approval. Next, the budget is presented to the Board of Directors and
the Finance and Audit Committees for each exchange for their approval.
The above steps encompass the first step of the cost allocation
process.
---------------------------------------------------------------------------
\26\ For example, MIAX Sapphire maintains 8 matching engines,
MIAX maintains 24 matching engines, MIAX Pearl Options maintains 12
matching engines, MIAX Pearl Equities maintains 24 matching engines,
and MIAX Emerald maintains 12 matching engines.
---------------------------------------------------------------------------
The next step involves determining what portion of the cost
allocated to the Exchange pursuant to the above methodology is to be
allocated to each core service, e.g., market data, connectivity, ports,
and transaction
[[Page 73140]]
services. The Exchange and its affiliated markets adopted an allocation
methodology with thoughtful and consistently applied principles to
guide how much of a particular cost amount allocated to the Exchange
should be allocated within the Exchange to each core service. This is
the final step in the cost allocation process and is applied to each of
the cost drivers set forth below.
This next level of the allocation methodology at the individual
exchange level also took into account factors similar to those set
forth under the first step of the allocation methodology process
described above, to determine the appropriate allocation to
connectivity or market data versus allocations for other services. This
allocation methodology was developed through an assessment of costs
with senior management intimately familiar with each area of the
Exchange's operations. After adopting this allocation methodology, the
Exchange then applied an allocation of each cost driver to each core
service, resulting in the cost allocations described below. Each of the
below cost allocations is unique to the Exchange and represents a
percentage of overall cost that was allocated to the Exchange pursuant
to the initial allocation described above.
By allocating segmented costs to each core service, the Exchange
was able to estimate by core service the potential margin it might earn
based on different fee models. The Exchange notes that it has five
primary sources of revenue that it can potentially use to fund its
operations: transaction fees, connectivity and port service fees,
membership fees, regulatory fees, and market data fees. Accordingly,
the Exchange must cover its expenses from these five primary sources of
revenue. The Exchange also notes that as a general matter each of these
sources of revenue is based on services that are interdependent. For
instance, the Exchange's system for executing transactions is dependent
on physical hardware and connectivity; only Members and parties that
they sponsor to participate directly on the Exchange may submit orders
to the Exchange; some Members (but not all) consume market data from
the Exchange in order to trade on the Exchange; and, the Exchange
consumes market data from external sources in order to comply with
regulatory obligations. Accordingly, given this interdependence, the
allocation of costs to each service or revenue source required judgment
of the Exchange and was weighted based on estimates of the Exchange
that the Exchange believes are reasonable, as set forth below. While
there is no standardized and generally accepted methodology for the
allocation of an exchange's costs, the Exchange's methodology is the
result of an extensive review and analysis and will be consistently
applied going forward for any other cost-justified potential fee
proposals. In the absence of the Commission attempting to specify a
methodology for the allocation of exchanges' interdependent costs, the
Exchange will continue to be left with its best efforts to attempt to
conduct such an allocation in a thoughtful and reasonable manner.
Through the Exchange's extensive updated Cost Analysis, which was
again recently further refined, the Exchange analyzed every expense
item in the Exchange's general expense ledger to determine whether each
such expense relates to the provision of connectivity and port
services, and, if such expense did so relate, what portion (or
percentage) of such expense actually supports the provision of Purge
Port services, and thus bears a relationship that is, ``in nature and
closeness,'' directly related to Purge Port services. In turn, the
Exchange allocated certain costs more to physical connectivity and
others to ports, while certain costs were only allocated to such
services at a very low percentage or not at all, using consistent
allocation methodologies as described above. Based on this analysis,
the Exchange estimates that the aggregate monthly cost to provide Purge
Port services is $35,518, as further detailed below.
Costs Related to Offering Purge Ports
The following chart details the individual line-item costs
considered by the Exchange to be related to offering Purge Ports as
well as the percentage of the Exchange's overall costs that such costs
represent for each cost driver (e.g., as set forth below, the Exchange
allocated approximately 3.5% of its overall Human Resources cost to
offering Purge Ports).
----------------------------------------------------------------------------------------------------------------
Allocated Allocated
Cost drivers annual cost monthly cost % of all
\a\ \b\
----------------------------------------------------------------------------------------------------------------
Human Resources................................................. $363,954 $30,329 3.6
Connectivity (external fees, cabling, switches, etc.)........... 112 9 0.4
Internet Services and External Market Data...................... 654 54 0.4
Data Center..................................................... 6,764 564 1.1
Hardware and Software Maintenance and Licenses.................. 2,185 182 0.4
Depreciation.................................................... 19,518 1,626 1.6
Allocated Shared Expenses....................................... 33,051 2,754 1.2
-----------------------------------------------
Total...................................................... 426,238 35,518 2.7
----------------------------------------------------------------------------------------------------------------
\a\ The Annual Cost includes figures rounded to the nearest dollar.
\b\ The Monthly Cost was determined by dividing the Annual Cost for each line item by twelve (12) months and
rounding up or down to the nearest dollar.
Below are additional details regarding each of the line-item costs
considered by the Exchange to be related to offering Purge Ports. While
some costs were attempted to be allocated as equally as possible among
the Exchange and its affiliated markets, the Exchange notes that some
of its cost allocation percentages for certain cost drivers differ when
compared to the same cost drivers for the Exchange's affiliated markets
in their similar proposed fee changes for Purge Ports. This is because
the Exchange's cost allocation methodology utilizes the actual
projected costs of the Exchange (which are specific to the Exchange and
are independent of the costs projected and utilized by the Exchange's
affiliated markets) to determine its actual costs, which may vary
across the Exchange and its affiliated markets based on factors that
are unique to each marketplace. The Exchange provides additional
explanation below (including the reason for the deviation) for the
significant differences.
Human Resources
The Exchange notes that it and its affiliated markets anticipate
that by year-end 2024, there will be 289 employees (excluding employees
at
[[Page 73141]]
non-options/equities exchange subsidiaries of Miami International
Holdings, Inc. (``MIH''), the holding company of the Exchange and its
affiliated markets), and each department leader has direct knowledge of
the time spent by each employee with respect to the various tasks
necessary to operate the Exchange. Specifically, twice a year, and as
needed with additional new hires and new project initiatives, in
consultation with employees as needed, managers and department heads
assign a percentage of time to every employee and then allocate that
time amongst the Exchange and its affiliated markets to determine each
market's individual Human Resources expense. Then, managers and
department heads assign a percentage of each employee's time allocated
to the Exchange into buckets including network connectivity, ports,
market data, and other exchange services. This process ensures that
every employee is 100% allocated, ensuring there is no double counting
between the Exchange and its affiliated markets.
For personnel costs (Human Resources), the Exchange calculated an
allocation of employee time for employees whose functions include
providing and maintaining Purge Ports and performance thereof
(primarily the Exchange's network infrastructure team, which spends
most of their time performing functions necessary to provide port and
connectivity services). As described more fully above, the Exchange's
parent company allocates costs to the Exchange and its affiliated
markets and then a portion of the Human Resources costs allocated to
the Exchange is then allocated to port services. From that portion
allocated to the Exchange that applied to ports, the Exchange then
allocated a weighted average of 4.8% of each employee's time from the
above group to Purge Ports.
The Exchange also allocated Human Resources costs to provide Purge
Ports to a limited subset of personnel with ancillary functions related
to establishing and maintaining such ports (such as information
security, sales, membership, and finance personnel). The Exchange
allocated cost on an employee-by-employee basis (i.e., only including
those personnel who support functions related to providing Purge Ports)
and then applied a smaller allocation to such employees' time to Purge
Ports (2.2%). This other group of personnel with a smaller allocation
of Human Resources costs also have a direct nexus to Purge Ports,
whether it is a sales person selling port services, finance personnel
billing for port services or providing budget analysis, or information
security ensuring that such ports are secure and adequately defended
from an outside intrusion.
The estimates of Human Resources cost were therefore determined by
consulting with such department leaders, determining which employees
are involved in tasks related to providing Purge Ports, and confirming
that the proposed allocations were reasonable based on an understanding
of the percentage of time such employees devote to those tasks. This
includes personnel from the Exchange departments that are predominately
involved in providing Purge Ports: Business Systems Development,
Trading Systems Development, Systems Operations and Network Monitoring,
Network and Data Center Operations, Listings, Trading Operations, and
Project Management. Again, the Exchange allocated 4.8% of each of their
employee's time assigned to the Exchange for Purge Ports, as stated
above. Employees from these departments perform numerous functions to
support Purge Ports, such as the installation, re-location,
configuration, and maintenance of Purge Ports and the hardware they
access. This hardware includes servers, routers, switches, firewalls,
and monitoring devices. These employees also perform software upgrades,
vulnerability assessments, remediation and patch installs, equipment
configuration and hardening, as well as performance and capacity
management. These employees also engage in research and development
analysis for equipment and software supporting Purge Ports and design,
and support the development and on-going maintenance of internally-
developed applications as well as data capture and analysis, and Member
and internal Exchange reports related to network and system
performance. The above list of employee functions is not exhaustive of
all the functions performed by Exchange employees to support Purge
Ports, but illustrates the breath of functions those employees perform
in support of the above cost and time allocations.
Lastly, the Exchange notes that senior level executives' time was
only allocated to the Purge Ports related Human Resources costs to the
extent that they are involved in overseeing tasks related to providing
Purge Ports. The Human Resources cost was calculated using a blended
rate of compensation reflecting salary, equity and bonus compensation,
benefits, payroll taxes, and 401(k) matching contributions.
Connectivity (External Fees, Cabling, Switches, etc.)
The Connectivity cost driver includes external fees paid to connect
to other exchanges and third parties, cabling and switches required to
operate the Exchange. The Connectivity cost driver is more narrowly
focused on technology used to complete connections to the Exchange and
to connect to external markets. The Exchange notes that its
connectivity to external markets vendors is required in order to
receive market data to run the Exchange's matching engine and basic
operations compliant with existing regulations, primarily Regulation
NMS.
The Exchange relies on various connectivity providers for
connectivity to the entire U.S. options industry, and infrastructure
services for critical components of the network that are necessary to
provide and maintain its System Networks and access to its System
Networks via 10Gb ULL connectivity. Specifically, the Exchange utilizes
connectivity providers to connect to other national securities
exchanges and the Options Price Reporting Authority (``OPRA''). The
Exchange understands that these service providers provide services to
most, if not all, of the other U.S. exchanges and other market
participants. Connectivity provided by these service providers is
critical to the Exchanges daily operations and performance of its
System Networks which includes Purge Ports. Without these services
providers, the Exchange would not be able to connect to other national
securities exchanges, market data providers or OPRA and, therefore,
would not be able to operate and support its System Networks, including
Purge Ports. In addition, the connectivity is necessary for the
Exchange to notify OPRA and other market participants that an order has
been cancelled, and that quotes may have been cancelled as a result of
a Market Maker purging quotes via their Purge Port. Also, like other
types of ports offered by the Exchange, Purge Ports leverage the
Exchange's existing 10Gb ULL connectivity, which also relies on
connectivity to other national securities exchanges and OPRA. The
Exchange does not employ a separate fee to cover its connectivity
provider expense and recoups that expense, in part, by charging for
Purge Ports.
Internet Services and External Market Data
The next cost driver consists of internet services and external
market data. Internet services includes third-party service providers
that provide the
[[Page 73142]]
internet, fiber and bandwidth connections between the Exchange's
networks, primary and secondary data centers, and office locations in
Princeton and Miami. For purposes of Purge Ports, the Exchange also
includes a portion of its costs related to external market data.
External market data includes fees paid to third parties, including
OPRA, to receive and consume market data from other markets. The
Exchange includes external market data costs towards Purge Ports
because such market data is necessary to offer certain services related
to such ports, such as checking for market conditions (e.g., halted
securities). External market data is also consumed at the Matching
Engine level for, among other things, as validating quotes on entry
against the national best bid or offer (``NBBO'').\27\ Purge Ports are
a component of the Matching Engine, and used by Market Makers to cancel
multiple resting quotes within the Matching Engine. While resting, the
Exchange uses external market data to manage those quotes, such as
preventing trade-throughs, and those quotes are also reported to OPRA
for inclusion in this consolidated data stream. The Exchange also must
notify OPRA and other market participants that an order has been
cancelled, and that quotes may have been cancelled as a result of a
Market Maker purging quotes via their Purge Port. Thus, since market
data from other exchanges is consumed by the Matching Engine to
validate quotes and check market conditions, the Exchange believes it
is reasonable to allocate a small amount of such costs to Purge Ports.
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\27\ The term ``NBBO'' means the national best bid or offer as
calculated by the Exchange based on market information received by
the Exchange from OPRA. See Exchange Rule 100.
---------------------------------------------------------------------------
For the reasons set forth above, the Exchange believes it is
reasonable to allocate a small amount of such costs to Purge Ports
since market data from other exchanges is consumed at the Exchange's
Purge Port level to validate purge messages and the necessity to cancel
a resting quote via a purge message or via some other means.
Data Center
Data Center costs includes an allocation of the costs the Exchange
incurs to provide Purge Ports in the third-party data centers where it
maintains its equipment as well as related costs for market data to
then enter the Exchange's System. The Exchange does not own the Primary
Data Center or the Secondary Data Center, but instead, leases space in
data centers operated by third parties. The Exchange has allocated a
percentage of its Data Center cost (1.1%) to Purge Ports because the
third-party data centers and the Exchange's physical equipment
contained therein are necessary for providing Purge Ports. In other
words, for the Exchange to operate in a dedicated physical space with
direct connectivity by market participants to its trading platform, the
data centers are a critical component to the provision of Purge Ports.
If the Exchange did not maintain such a presence, then Purge Ports
would be of little value to market participants.
Hardware and Software Maintenance and Licenses
Hardware and Software Licenses includes hardware and software
licenses used to operate and monitor physical assets necessary to offer
Purge Ports for each Matching Engine of the Exchange. This hardware
includes servers, network switches, cables, optics, protocol data
units, and cabinets, to maintain a state-of-the-art technology
platform. Without hardware and software licenses, Purge Ports would not
be able to be offered to market participants because hardware and
software are necessary to operate the Exchange's Matching Engines,
which are necessary to enable the purging of quotes. The Exchange also
routinely works to improve the performance of the hardware and software
used to operate the Exchange's network and System. The costs associated
with maintaining and enhancing a state-of-the-art exchange network is a
significant expense for the Exchange, and thus the Exchange believes
that it is reasonable and appropriate to allocate a certain percentage
of its hardware and software expense to help offset those costs of
providing Purge Port connectivity to its Matching Engines.
Depreciation
The vast majority of the software the Exchange uses to provide
Ports has been developed in-house and the cost of such development,
which takes place over an extended period of time and includes not just
development work, but also quality assurance and testing to ensure the
software works as intended, is depreciated over time once the software
is activated in the production environment. Hardware used to provide
Purge Ports includes equipment used for testing and monitoring of order
entry infrastructure and other physical equipment the Exchange
purchased and is also depreciated over time.
All hardware and software, which also includes assets used for
testing and monitoring of order entry infrastructure, were valued at
cost, depreciated or leased over periods ranging from three to five
years. Thus, the depreciation cost primarily relates to servers
necessary to operate the Exchange, some of which is owned by the
Exchange and some of which is leased by the Exchange in order to allow
efficient periodic technology refreshes. The Exchange allocated 0.8%
[sic] of all depreciation costs to providing Purge Ports. The Exchange
allocated depreciation costs for depreciated software necessary to
operate the Exchange because such software is related to the provision
of Purge Ports. As with the other allocated costs in the Exchange's
updated Cost Analysis, the Depreciation cost driver was therefore
narrowly tailored to depreciation related to Purge Ports.
Allocated Shared Expenses
Finally, a portion of general shared expenses was allocated to
overall Purge Port costs as without these general shared costs the
Exchange would not be able to operate in the manner that it does and
provide Purge Ports. The costs included in general shared expenses
include general expenses of the Exchange, including office space and
office expenses (e.g., occupancy and overhead expenses), utilities,
recruiting and training, marketing and advertising costs, professional
fees for legal, tax and accounting services (including external and
internal audit expenses), and telecommunications costs. The Exchange
notes that the cost of paying directors to serve on its Board of
Directors is included in the calculation of Allocated Shared Expenses,
and thus a portion of such overall cost amounting to less than 2% of
the overall cost for directors was allocated to providing Purge Ports.
Approximate Cost for Purge Port per Month
Based on projected 2024 data, the total monthly cost allocated to
Purge Ports is $35,518. This total is divided by the total number of
Matching Engines (8) in which Market Makers may use Purge Ports for
each month, divided by the anticipated number of Market Makers results
in an approximate cost of $634 per Matching Engine per month for Purge
Port usage (when rounding to the nearest dollar). The Exchange notes
that the flat fee of $600 per month per Matching Engine entitles each
Market Maker to two Purge Ports per Matching Engine. The Exchange
anticipates that the majority of Market Makers will connect to all
eight of the Exchange's Matching Engines and utilize Purge Ports on
each Matching Engine. The
[[Page 73143]]
Exchange recognizes that costs are greater than anticipated revenues
but accepts this condition as a necessary cost to be incurred when
launching a new exchange.
Cost Analysis--Additional Discussion
In conducting its Cost Analysis, the Exchange did not allocate any
of its expenses in full to any core services (including Purge Ports)
and did not double-count any expenses. Instead, as described above, the
Exchange allocated applicable cost drivers across its core services and
used the same Cost Analysis to form the basis of this proposal. For
instance, in calculating the Human Resources expenses to be allocated
to Purge Ports based upon the above described methodology, the Exchange
has a team of employees dedicated to network infrastructure and with
respect to such employees the Exchange allocated network infrastructure
personnel with a higher percentage of the cost of such personnel
(21.7%) given their focus on functions necessary to provide Ports. The
salaries of those same personnel were allocated only 4.8% to Purge
Ports and the remaining 95.2% was allocated to connectivity, other port
services, transaction services, membership services and market data.
The Exchange did not allocate any other Human Resources expense for
providing Purge Ports to any other employee group, outside of a smaller
allocation of 2.2% for Purge Ports, of the cost associated with certain
specified personnel who work closely with and support network
infrastructure personnel. This is because a much wider range of
personnel are involved in functions necessary to offer, monitor and
maintain Purge Ports but the tasks necessary to do so are not a primary
or full-time function.
In total, the Exchange allocated 3.6% of its personnel costs to
providing Purge Ports. In turn, the Exchange allocated the remaining
96.4% of its Human Resources expense to membership services,
transaction services, connectivity services, other port services and
market data. Thus, again, the Exchange's allocations of cost across
core services were based on real costs of operating the Exchange and
were not double-counted across the core services or their associated
revenue streams.
As another example, the Exchange allocated depreciation expense to
all core services, including Purge Ports, but in different amounts. 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. Without this
equipment, the Exchange would not be able to operate the network and
provide Purge Port services to its Market Makers. However, the Exchange
did not allocate all of the depreciation and amortization expense
toward the cost of providing Purge Port services, but instead allocated
approximately 0.8% [sic] of the Exchange's overall depreciation and
amortization expense to Purge Ports. The Exchange allocated the
remaining depreciation and amortization expense (approximately 99.2%
[sic]) toward the cost of providing transaction services, membership
services, connectivity services, other port services, and market data.
The Exchange notes that its revenue estimates are based on
projections across all potential revenue streams and will only be
realized to the extent such revenue streams actually produce the
revenue estimated. The Exchange does not yet know whether such
expectations will be realized. For instance, in order to generate the
revenue expected from Purge Ports, the Exchange will have to be
successful in retaining existing Market Makers that wish to maintain
Purge Ports or in obtaining new Market Makers that will purchase such
services. Similarly, the Exchange will have to be successful in
retaining a positive net capture on transaction fees in order to
realize the anticipated revenue from transaction pricing.
The Exchange notes that the Cost Analysis is based on the
Exchange's 2024 fiscal year of operations and projections. It is
possible, however, that actual costs may be higher or lower. To the
extent the Exchange sees growth in use of connectivity services it will
receive additional revenue to offset future cost increases. However, if
use of port services is static or decreases, the Exchange might not
realize the revenue that it anticipates or needs in order to cover
applicable costs. Accordingly, the Exchange is committing to conduct a
one-year review after implementation of these fees. The Exchange
expects that it may propose to adjust fees at that time, to increase
fees in the event that revenues fail to cover costs and a reasonable
mark-up of such costs. Similarly, the Exchange may propose to decrease
fees in the event that revenue materially exceeds our current
projections. In addition, the Exchange will periodically conduct a
review to inform its decision making on whether a fee change is
appropriate (e.g., to monitor for costs increasing/decreasing or
subscribers increasing/decreasing, etc. in ways that suggest the then-
current fees are becoming dislocated from the prior cost-based
analysis) and would propose to increase fees in the event that revenues
fail to cover its costs and a reasonable mark-up, or decrease fees in
the event that revenue or the mark-up materially exceeds our current
projections. In the event that the Exchange determines to propose a fee
change, the results of a timely review, including an updated cost
estimate, will be included in the rule filing proposing the fee change.
More generally, the Exchange believes that it is appropriate for an
exchange to refresh and update information about its relevant costs and
revenues in seeking any future changes to fees, and the Exchange
commits to do so.
Projected Revenue \28\
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\28\ For purposes of calculating projected 2024 revenue for
Purge Ports, the Exchange is using estimated projections.
---------------------------------------------------------------------------
The proposed fees will allow the Exchange to cover certain costs
incurred by the Exchange associated with providing and maintaining
necessary hardware and other network infrastructure as well as network
monitoring and support services; without such hardware, infrastructure,
monitoring and support the Exchange would be unable to provide port
services. Much of the cost relates to monitoring and analysis of data
and performance of the network via the subscriber's connection(s). The
above cost, namely those associated with hardware, software, and human
capital, enable the Exchange to measure network performance with
nanosecond granularity. These same costs are also associated with time
and money spent seeking to continuously improve the network
performance, improving the subscriber's experience, based on monitoring
and analysis activity. The Exchange routinely works to improve the
performance of the network's hardware and software. The costs
associated with maintaining and enhancing a state-of-the-art exchange
network is a significant expense for the Exchange, and thus the
Exchange believes that it is reasonable and appropriate to help offset
those costs by amending fees for Purge Port services. Subscribers,
particularly those of Purge Ports, expect the Exchange to provide this
level of support so they continue to receive the performance they
expect. This differentiates the Exchange from its competitors. As
detailed above, the Exchange has five primary sources of
[[Page 73144]]
revenue that it can potentially use to fund its operations: transaction
fees, fees for connectivity services (connections and ports),
membership and regulatory fees, and market data fees. Accordingly, the
Exchange must cover its expenses from these five primary sources of
revenue.
The Exchange's Cost Analysis estimates the annual cost to provide
Purge Port services will equal $426,238. Based on projected Purge Port
services usage, the Exchange would generate annual revenue of
approximately $403,200. The Exchange estimates it will incur a 5.7%
loss when comparing revenues to the cost of providing Purge Port
services.
Based on the above discussion, the Exchange believes that even if
the Exchange earns the above revenue or incrementally more or less, the
proposed fees are fair and reasonable because they will not result in
pricing that deviates from that of other exchanges or a supra-
competitive profit, when comparing the total expense of the Exchange
associated with providing Purge Port services versus the total
projected revenue of the Exchange associated with network Purge Port
services.
The Proposed Fees Are Also Equitable, Reasonable, and Not Unfairly
Discriminatory
The Exchange believes that the proposed rule change would promote
just and equitable principles of trade and remove impediments to and
perfect the mechanism of a free and open market because offering Market
Makers optional Purge Port services with a flexible fee structure
promotes choice, flexibility, and efficiency. The Exchange believes
Purge Ports enhance Market Makers' ability to manage orders, which
would, in turn, improve their risk controls to the benefit of all
market participants. The Exchange believes that Purge Ports foster
cooperation and coordination with persons engaged in facilitating
transactions in securities because designating Purge Ports for purge
messages may encourage better use of such ports. This may, concurrent
with the ports that carry orders and other information necessary for
market making activities, enable more efficient, as well as fair and
reasonable, use of Market Makers' resources. The Exchange believes that
proper risk management, including the ability to efficiently cancel
multiple orders quickly when necessary is valuable to all firms,
including Market Makers that have heightened quoting obligations that
are not applicable to other market participants.
Purge Ports do not relieve Market Makers of their quoting
obligations or firm quote obligations under Regulation NMS Rule
602.\29\ Specifically, any interest that is executable against a
Member's or Market Maker's orders that is received by the Exchange
prior to the time of the removal of orders request will automatically
execute. Market Makers that purge their orders will not be relieved of
the obligation to provide continuous two-sided orders on a daily basis,
nor will it prohibit the Exchange from taking disciplinary action
against a Market Maker for failing to meet their continuous quoting
obligation each trading day.\30\
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\29\ See Exchange Rule 604. See also generally Chapter VI of the
Exchange's Rules.
\30\ Id.
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The Exchange also believes that offering Purge Ports at the
Matching Engine level promotes risk management across the industry, and
thereby facilitates investor protection. Some market participants, in
particular the larger firms, could and do build similar risk
functionality in their trading systems that permit the flexible
cancellation of orders entered on the Exchange at a high rate. Offering
Matching Engine level protections ensures that such functionality is
widely available to all firms, including smaller firms that may
otherwise not be willing to incur the costs and development work
necessary to support their own customized mass cancel functionality.
The Exchange also believes that moving to a per Matching Engine fee
for Purge Ports is reasonable due to the Exchange's architecture that
provides the Exchange the ability to provide two (2) Purge Ports per
Matching Engine.
The Exchange believes that the proposed Purge Port fees are
equitable because the proposed Purge Ports are completely voluntary as
they relate solely to optional risk management functionality.
The Exchange also believes that the proposed amendments to its Fee
Schedule are not unfairly discriminatory because they will apply
uniformly to all Market Makers that choose to use the optional Purge
Ports. Purge Ports are completely voluntary and, as they relate solely
to optional risk management functionality, no Market Maker is required
or under any regulatory obligation to utilize them. All Market Makers
that voluntarily select this service option will be charged the same
amount for the same services. Market Makers have the option to select
any port or connectivity option, and there is no differentiation among
Market Makers with regard to the fees charged for the services offered
by the Exchange.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Purge Ports are completely
voluntary and are available to all Market Makers on an equal basis at
the same cost. While the Exchange believes that Purge Ports provide a
valuable service, Market Makers can choose to purchase, or not
purchase, these ports based on their own determination of the value and
their business needs. No Market Maker is required or under any
regulatory obligation to utilize Purge Ports. Accordingly, the Exchange
believes that Purge Ports offer appropriate risk management
functionality to firms that trade on the Exchange without imposing an
unnecessary or inappropriate burden on competition.
The Exchange also does not believe the proposal would cause any
unnecessary or inappropriate burden on intermarket competition as other
exchanges are free to introduce their own purge port functionality and
lower their prices to better compete with the Exchange's offering. The
Exchange does not believe the proposed rule change would cause any
unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposal would apply uniformly to any market
participant, in that it does not differentiate between Market Makers.
The proposal would allow any interested Market Maker to purchase Purge
Port functionality based on their business needs.
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,\31\ and Rule 19b-4(f)(2) \32\ 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
[[Page 73145]]
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.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78s(b)(3)(A)(ii).
\32\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-SAPPHIRE-2024-26 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-SAPPHIRE-2024-26. 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
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. Do not
include personal identifiable information in submissions; you should
submit only information that you wish to make available publicly. We
may redact in part or withhold entirely from publication submitted
material that is obscene or subject to copyright protection. All
submissions should refer to file number SR-SAPPHIRE-2024-26 and should
be submitted on or before September 30, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
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\33\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-20172 Filed 9-6-24; 8:45 am]
BILLING CODE 8011-01-P
