Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt Fees for Dedicated Cross Connection Access to the Testing Systems Environment, 102989-102994 [2024-29923]
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Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices
in each relevant currency for which
DTC has payment obligations owed to
its Participants.31
As described above, the proposed
Debt Issuance would provide DTC with
an additional resource of prefunded
default liquidity, which it would use to
complete system-wide settlement every
business day, including following a
Participant default. The proceeds of the
Debt Issuance would be cash held by
DTC at either its cash deposit account
at the FRBNY or at a creditworthy
commercial bank, pursuant to the
Clearing Agency Investment Policy.32
Therefore, the proceeds of the Debt
Issuance would be considered a
qualifying liquid resource, as defined by
Rule 17ad–22(a)(14).33 As such, the
proposed Debt Issuance would support
DTC’s ability to hold sufficient
qualifying liquid resources to meet its
minimum liquidity resource
requirement under Rule 17ad–22(e)(7)(i)
under the Act.34
For these reasons, DTC believes the
proposal would support DTC’s
compliance with Rule 17ad–22(e)(7)(i)
and (ii) under the Act by providing it
with an additional qualifying liquid
resource.35
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III. Date of Effectiveness of the Advance
Notice, and Timing for Commission
Action
The proposed change may be
implemented if the Commission does
not object to the proposed change
within 60 days of the later of (i) the date
that the proposed change was filed with
the Commission or (ii) the date that any
additional information requested by the
Commission is received. The clearing
agency shall not implement the
proposed change if the Commission has
any objection to the proposed change.
The Commission may extend the
period for review by an additional 60
days if the proposed change raises novel
or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension. A proposed change may
be implemented in less than 60 days
from the date the advance notice is
filed, or the date further information
requested by the Commission is
received, if the Commission notifies the
clearing agency in writing that it does
31 17 CFR 240.17ad–22(e)(7)(ii). For purposes of
this Rule, ‘‘qualifying liquid resources’’ are defined
in Rule 17ad–22(a)(14) as including, in part, cash
held either at the central bank of issue or at
creditworthy commercial banks. 17 CFR 240.17ad–
22(a)(14).
32 Supra note 14.
33 17 CFR 240.17ad–22(a)(14).
34 17 CFR 240.17ad–22(e)(7)(i).
35 17 CFR 240.17ad–22(e)(7)(i), (ii).
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not object to the proposed change and
authorizes the clearing agency to
implement the proposed change on an
earlier date, subject to any conditions
imposed by the Commission.
The clearing agency shall post notice
on its website of proposed changes that
are implemented.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the Advance Notice
is consistent with the Clearing
Supervision 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-regulations/self-regulatoryorganization-rulemaking); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
DTC–2023–801 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–DTC–2023–801. 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 Advance Notice that
are filed with the Commission, and all
written communications relating to the
Advance Notice 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 DTC
and on DTCC’s website (www.dtcc.com/
legal/sec-rule-filings).
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
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102989
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–DTC–2023–801 and
should be submitted on or before
January 8, 2025.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–29919 Filed 12–17–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101894; File No. SR–MIAX–
2024–45]
Self-Regulatory Organizations; Miami
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Adopt Fees for Dedicated
Cross Connection Access to the
Testing Systems Environment
December 12, 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 November
29, 2024, Miami International Securities
Exchange, LLC (‘‘MIAX’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
establish a fee for market participants
that choose to utilize the Exchange’s
testing systems environment via a
dedicated cross connection.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/all-options-exchanges/rulefilings, at MIAX’s principal office, and
at the Commission’s Public Reference
Room.
36 17
CFR 200.30–3(a)(91).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices
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
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The Exchange proposes to establish a
fee for market participants that choose
to utilize the Exchange’s testing systems
environment via a dedicated cross
connection. The testing systems
environment is a virtual trading system
environment for Members 3 and nonMembers to test (i) upcoming Exchange
software and code releases, (ii) product
enhancements, and (iii) firm-developed
software, prior to implementation in the
Exchange’s production (e.g., live
trading) environment. Further, the
testing systems environment allows
unlimited testing of existing
functionality, such as order types, order
entry, order management, order
throughput, acknowledgements, risk
settings, mass cancelations, and purge
requests. The testing systems
environment is built to closely
approximate the production
environment to enable Members and
non-Members the ability to test their
systems and mimics the live trading
environment.4
There are currently three methods by
which Members and non-Members may
access the Exchange’s testing systems
environment. One, Members and nonMembers may access the Exchange’s
testing systems environment via a
virtual private network (‘‘VPN’’) that
operates over the internet and provides
site-to-site access. VPN access is
provided for free to all Members and
non-Members.
3 The term ‘‘Member’’ means an individual or
organization approved to exercise the trading rights
associated with a Trading Permit. Members are
deemed ‘‘members’’ under the Exchange Act. See
Exchange Rule 100.
4 Business continuity and disaster recovery
testing is performed separately and not within the
testing systems environment that is the subject of
this filing.
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A second method is via a dedicated
cross connection that allows Members
and non-Members to access the testing
systems environment and is available as
either a 1 gigabit (‘‘Gb’’) or 10Gb
connection. Members and non-Members
that utilize a VPN or a dedicated cross
connection to access the testing systems
environment of the Exchange are also
able to access the testing systems
environments of each of the Exchange’s
affiliated options markets—MIAX
Sapphire, LLC (‘‘MIAX Sapphire’’),
MIAX PEARL, LLC 5 (‘‘MIAX Pearl
Options’’), and MIAX Emerald, LLC
(‘‘MIAX Emerald’’). This dedicated cross
connection would provide subscribers
access to the testing systems
environment of the Exchange, as well as
each of its affiliate options exchanges,
via a single connection.
Third, access is also provided through
the production connections for each
1Gb or 10Gb ULL connection for the
applicable fee 6 for such connection and
no additional charge. These 1Gb and
10Gb ULL connections provide access to
the Exchange’s production environment
(i.e., live trading) and allow the receipt
of proprietary real-time market data.
However, the Exchange previously
announced that it will phase out the
ability to connect to the testing systems
environment via the existing 1Gb and
10Gb ULL production connections by
February 28, 2025.7
*
*
*
*
*
The Exchange now proposes to amend
the Fee Schedule to establish a monthly
fee for Members and non-Members that
choose to access the testing systems
environment via a dedicated cross
connect. In particular, the Exchange
proposes to establish a monthly fee of
$1,000 per dedicated cross connection
to the testing systems environment for
Members and non-Members. The
5 All references to ‘‘MIAX PEARL’’ in this filing
are to the options trading facility of MIAX PEARL,
LLC, referred to herein as ‘‘MIAX Pearl Options.’’
Members and non-Members that choose to utilize
the testing systems environment of MIAX Pearl
Equities, the equities trading facility of MIAX
PEARL, LLC, must utilize a separate dedicated cross
connection as MIAX Pearl Equities’ testing systems
environment operates on a separate network from
the affiliated options markets.
6 See MIAX Fee Schedule, Sections 5)a)–b) for the
fees for 1Gb and 10Gb ULL production
connectivity.
7 See MIAX Options, MIAX Pearl Options and
MIAX Emerald Options Exchanges—Announcing
New Extranet Access to Firm Test Beds (FTB1 and
FTB2) and Decommissioning of Access via
Production Connections Beginning in October 2024,
dated September 12, 2024, available at https://
www.miaxglobal.com/alert/2024/09/12/miaxoptions-miax-pearl-options-and-miax-emeraldoptions-exchanges-2?nav=all; and Securities
Exchange Act Release No. 100854 (August 28,
2024), 89 FR 71953 (September 4, 2024) (SR–
MIAX–2024–35).
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proposed fee is the same whether a
Member or non-Member chooses to
connect to the testing systems
environment via a 1Gb or 10Gb cross
connect. The proposed fees would be set
forth under new Sections 4)e) and 4)f)
of the Fee Schedule. Proposed Sections
4)e) and 4)f) would also codify that VPN
access to the test environment is
provided for free for all Members and
non-Members.
*
*
*
*
*
Members and non-Members that
access the testing systems environment
through any one of the available access
methods, including a dedicated cross
connection, receive functionally the
same testing experience. Each Member
or non-Member is free to decide how to
access the testing systems environment
based on their own needs and trading
architecture or not utilize the testing
systems environment at all. Again,
accessing the testing systems
environment via a dedicated direct
connection is entirely optional and no
Member or non-Member is required by
rule or regulation to make use of the
testing systems environment via a
dedicated direct connection. Regardless
of access method, all Members and nonMembers are provided the same testing
systems environment experience and
are able to perform all of the same
functions.
Implementation
The proposed fee change will be
effective December 1, 2024.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,8 in general, and
furthers the objectives of Section 6(b)(5)
of the Act,9 in particular, in that it is not
designed to permit unfair
discrimination among customers,
brokers, or dealers. The Exchange also
believes that its proposal is consistent
with Section 6(b)(4) of the Act 10
because it represents an equitable
allocation of reasonable dues, fees and
other charges among market participants
using any facility or system which the
Exchange operates or controls.
Free VPN Access to the Firm Test Bed
Is a Reasonable Substitute
In 2019, Commission staff published
guidance suggesting the types of
information that self-regulatory
organizations (‘‘SROs’’) may use to
demonstrate that their fee filings comply
with the standards of the Exchange Act
8 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
10 15 U.S.C. 78f(b)(4).
9 15
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Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices
(the ‘‘Staff Guidance’’).11 The Staff
Guidance provides that in assessing the
reasonableness of a fee, the Staff would
consider whether the fee is constrained
by significant competitive forces. To
determine whether a proposed fee is
constrained by significant competitive
forces, the Staff Guidance further
provides that the Staff would consider
whether the evidence provided by an
SRO in a Fee Filing proposal
demonstrates (i) that there are
reasonable substitutes for the product or
service that is the subject of a proposed
fee; (ii) that ‘‘platform’’ competition
constrains the fee; and/or (iii) that the
revenue and cost analysis provided by
the SRO otherwise demonstrates that
the proposed fee would not result in the
SRO taking supra-competitive profits.12
The proposed fee is reasonable because
there is a reasonable substitute for the
service that is the subject of this
proposed fee as set forth below.
This filing includes the following
evidence that demonstrates that there is
a reasonable substitute to purchasing a
dedicated cross connection to access the
Exchange’s testing systems
environment. That reasonable substitute
is VPN access, which is provided for
free and will continue to be free for all
Members and non-Members. Members
and non-Members may access the
testing systems environment through
either a VPN or a dedicated cross
connection and will receive functionally
the same testing environment and are
able to perform all of the same
functions. The testing systems
environment, whether accessed via a
dedicated cross connection or VPN,
provides Members and non-Members
the same scope of abilities to test their
systems and software in the Exchange’s
testing systems environment, which
replicates the Exchange’s production
trading environment. Like a dedicated
cross connection, a VPN provides access
to the testing systems environment of
not only the Exchange, but also each of
its affiliate options exchanges over the
same single access point. Accessing the
testing systems environment via a
dedicated cross connection provides no
advantage to Members and nonMembers compared to those market
participants that elect to access the
testing systems environment via a VPN
for free.
Each Member or non-Member is free
to decide how to access the testing
systems environment based on their
own needs and trading architecture.
11 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.
12 Id.
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Again, accessing the testing systems
environment via a dedicated direct
connection is entirely optional and no
Member or non-Member is required by
rule or regulation to make use of the
testing systems environment via a
dedicated direct connection. Accessing
the testing systems environment via the
proposed dedicated cross connection
may not provide utility to all Members
and non-Members based on their
business models and needs, and such
users may choose to access the testing
systems environment for free through
the VPN and perform the same testing
functions. As such, the Exchange
believes that the proposed fee for access
to the testing systems environment is
reasonable and Members and nonMembers have the choice, but are not
obligated to access the testing systems
environment via a dedicated cross
connection. Otherwise, a user may
choose to access the test environment
via a VPN for free to test system
functionality. For example, of the
Exchange’s forty-six Members 13 and
nine non-Members that provide
connectivity to the Exchange, sixteen
Members and non-Members currently
use a VPN to access the Exchange’s
testing systems environment instead of
the other two currently available
options, i.e., a dedicated cross
connection or their existing 1Gb or 10Gb
ULL connection to the production
environment. Some Members and nonMembers also choose not to access the
testing systems environment at all.
Lastly, supporting a proposed nontransaction fee change by arguing the
availability of reasonable substitutes is
not novel. Commission Staff has
published for immediate effectiveness
filings regarding non-transaction fees by
exchanges who argued that the fees
were consistent with the Exchange Act
because of reasonable substitutes were
available as provided for in the
Commission Staff Guidance.14
Fee Is Constrained by Competition and
the Availability of Free VPN Access
If the Exchange prices the fee for
dedicated cross connection access to the
testing systems environment too high,
Members and non-Members may choose
not to subscribe and contiue to perform
13 See the Exchange’s Membership Directory
available at https://www.miaxglobal.com/miax_
options_exchange_members.pdf.
14 See, e.g., Securities Exchange Act Release Nos.
101096 (September 18, 2024), 89 FR 77913
(September 24, 2024) (SR–ISE–2024–46); 98974
(November 16, 2023), 88 FR 81468 (November 22,
2023) (SR–NYSEARCA–2023–78); 87795 (December
18, 2019), 84 FR 71043 (December 26, 2019) (SR–
NYSEArca–2019–88); and 90409 (November 12,
2020), 85 FR 73522 (November 18, 2020) (SR–
NYSEArca–2020–95).
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102991
the same testing functions via VPN
internet access for no fee if they do not
find the fee for accessing the testing
systems environment via a dedicated
cross connection to be of value. Again,
the Exchange notes that accessing the
testing systems environment via a
dedicated cross connection would be
completely voluntary and is simply an
additional optional means to access the
test environment. The Exchange also
has Members and non-Members that do
not utilize the testing systems
environment at all.
The Exchange operates in a highly
competitive environment in which 18
U.S. registered equity options exchanges
compete for market share. Based on
publicly available information for the
month of October 2024, no single
options exchange had more than
approximately 12–13% of the equity
options market share and the Exchange
represented only approximately 6.17%
of the market share of equity options for
that month.15 The Commission has
repeatedly expressed its preference for
competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Particularly, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
and recognized that current regulation
of the market system ‘‘has been
remarkably successful in promoting
market competition in its broader forms
that are most important to investors and
listed companies.’’ 16 The proposed fee
for optional access via a dedicated cross
connection to the test environment is
the result of the competitive
environment of the U.S. options
industry.
Exchanges compete for order flow by
providing testing opportunities and
robust testing environments. Services
like a testing environment provide
Members and non-Members with the
opportunity to test Exchange
functionality prior to sending real order
flow to be executed in the Exchange’s
production environment. As mentioned
above, numerous exchanges provide
testing environments to market
participants to test functionality and
gain comfort with their exchange
offering.17 This is intended to attract
15 See the ‘‘Market Share’’ section of the
Exchange’s website, available at https://
www.miaxglobal.com/ (last visited November 5,
2024).
16 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
17 The Exchange notes that other exchange
families offer a similar dedicated connection to
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market share by offering a risk free way
to gain comfort that their orders would
be handled within the Exchange’s
production environment as expected.
Exchanges seek to further encourage
market participants to utilize their
testing environments by providing
multiple methods to connect. Some are
provided for free while others and
require a fee. Providing multiple
methods to connect to a test
environment provides market
participants a choice on how to engage
with the testing environment and a
choice regarding the access method that
best meets their business and
operational needs.
If the Exchange proposed a fee that
Members and non-Members viewed as
excessively high, then the proposed fee
would simply serve to reduce demand
for access via a dedicated cross
connection to the test environment,
which as noted, is entirely optional as
the Exchange will continue to provide
free access to the test environment
through VPN through the internet for
site-to-site access. This could, in turn,
reduce the attractiveness of the
Exchange’s live trading production
environment because Members and nonMembers may be unwilling to test
functionality prior to entering live
orders. Again, other options exchanges
currently offer, or are able to introduce
at their own cost, their own comparable
testing environments with lower prices
to better compete with the Exchange’s
offering and several competing
exchanges already provide a similar
service.
Selling different products and
services, such as proposed herein, is a
means by which exchanges compete to
attract business. To the extent that the
Exchange is successful in attracting
market participants to purchase the
dedicated cross connection to the test
environment proposed herein, the
Exchange may earn revenue and further
enhance market participants’
their testing environment for their members and
non-members. See, e.g., Nasdaq Options Test
Facility (NTF) Abstract, Version 1.4.4 (March 2024),
available at https://www.nasdaq.com/Nasdaq_Test_
Facility_NTF_Guide (last visited July 16, 2024)
(‘‘. . . the Nasdaq Test Facility . . . where market
participants can test their trading applications with
the INET trading system. The NTF environment
allows members to test sending and executing
quotes and orders offered by our six options
exchanges . . .’’); see also Securities Exchange Act
Release No. 100442 (June 27, 2024), 89 FR 55296
(July 3, 2024) (SR–CboeBZX–2024–058) (‘‘. . . the
Exchange also offers corresponding ports which
provide Members and non-Members access to the
Exchange’s certification environment to test
proprietary systems and applications . . . The
certification environment facilitates testing using
replicas of the Exchange’s production environment
process configurations which provide for a robust
and realistic testing experience . . .’’).
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interactions on the Exchange, which
would increase value of its other
products and services to all market
participants. If the market deems the
proposed fee to be too high, Members
and non-Members can choose not to use
or discontinue their use of dedicated
cross connection to the test environment
and perform the same testing functions
via the VPN internet access for free. The
Exchange, therefore, believes that the
proposed fee for dedicated cross
connection to the test environment
reflects the competitive environment of
U.S. options exchanges and would be
properly assessed to Members and nonMembers that subscribe.
The Proposed Fee Is Reasonable
Because it Is Similar to or Lower Than
Like Fees Charged by Other Exchanges
The Exchange believes the proposed
fees are reasonable as the proposed fees
are similar to or lower than fees charged
by competing exchanges for similar
services. For example, The Nasdaq
Stock Market, LLC assesses a fee of
$1,000 per hand-off, per month for
subscribers to the testing facility via
either a 1Gb or 10Gb switch port plus
a one-time installation fee of $1,000 per
hand-off.18 The Exchange’s proposed fee
is, therefore, lower because it does not
charge a separate installation fee. Cboe
BZX Exchange, Inc. (‘‘Cboe BZX’’)
Options assesses a lower fee of $250 per
month for each certification logical port,
which only provides access to the Cboe
BZX testing environment, and not to the
testing environment of any of Cboe
BZX’s affiliates.19 The fee to access the
Cboe BZX testing environment and the
testing environment of each of its three
affiliated options exchange becomes
18 See, e.g., Nasdaq, Options 7: Pricing Schedule,
Section 13 Testing Facilities, available at https://
listingcenter.nasdaq.com/rulebook/nasdaq/rules/
Nasdaq%20Options%207. Nasdaq’s affiliates, like
Nasdaq PHLX LLC (‘‘PHLX’’), also charge the same
fee. See e.g., PHLX Options 7: Pricing Schedule,
Section 9. Other Member Fees, E. Testing Facilities,
available at https://listingcenter.nasdaq.com/
rulebook/phlx/rules/Phlx%20Options%207
(assessing a fee of $1,000 per hand-off, per month
for subscribers to the testing facility via either a 1Gb
or 10Gb switch port and a one-time installation fee
of $1,000 per hand-off). See also Securities
Exchange Act Release No. 76259 (October 26, 2015),
80 FR 66947 (October 30, 2015) (SR–NASDAQ–
2015–117) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change to Options
Testing Facility). Like the Exchange’s testing
environment, a single connection to Nasdaq’s test
environment provides access to the other test
environments of its affiliate options markets, PHLX
and Nasdaq BX, Inc.
19 See also Cboe BZX Options Fee Schedule,
Options Logical Port Fees, Certification Logical
Ports, available at https://www.cboe.com/us/
options/membership/fee_schedule/bzx/. See, e.g.,
Cboe EDGX Exchange, Inc. Options Fee Schedule,
Options Logical Port Fees, Certification Logical
Ports, available at https://www.cboe.com/us/
options/membership/fee_schedule/edgx/.
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incrementally higher with each Cboe
BZX affiliate charging a $250 monthly
fee to access each testing environment,
totaling as much as $1,000.00 per
month.20 Accordingly, the Exchange
believes that comparable and
competitive pricing are key factors in
determining whether a proposed fee
meets the requirements of the Act.
The Proposed Fee Is Not Unfairly
Discriminatory
The Exchange also believes the
proposed fee is equitable and not
unfairly discriminatory as the fee would
apply equally to all Members and nonMembers who choose to subscribe. It is
a business and operational decision of
each Member or non-Member that
chooses to subscribe. The Exchange’s
proposed fee would not differentiate
between Members and non-Members or
connectivity types and is set at a modest
level that would allow any interested
Member and non-Member to subscribe
based on their business and operational
needs.
The Exchange also believes the
proposal furthers the objectives of
Section 6(b)(5) of the Act 21 in that it is
designed to promote just and equitable
principles of trade, remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general protect investors and the public
interest and is not designed to permit
unfair discrimination between
customer, issuers, brokers and dealers.
The Exchange does not believe that the
proposed fee is unfairly discriminatory
to subscribers to the test environment
via a dedicated cross connection
because, unlike the live trading
environment where the capacity of
connectivity to the Exchange may confer
a competitive advantage to a market
participant and therefore price
differentiation is appropriate for the
benefit conferred, there is no such
benefit conferred in the testing systems
environment.
The Exchange does not believe that
the proposed fee is unfairly
discriminatory among subscribers to the
test environment because all Members
and non-Members that subscribe to the
service will be assessed the same fee.
20 See also Cboe EDGX Exchange, Inc. Options
Fee Schedule, Options Logical Port Fees,
Certification Logical Ports, available at https://
www.cboe.com/us/options/membership/fee_
schedule/edgx/; Cboe Exchange, Inc. Fee Schedule,
Logical Connectivity Fees, Certification Logical
Ports, available at Cboe_FeeSchedule.pdf; and Cboe
C2 Exchange, Inc. Options Fee Schedule, Options
Logical Port Fees, Certification Logical Ports,
available at https://www.cboe.com/us/options/
membership/fee_schedule/c2/.
21 15 U.S.C. 78f(b)(5).
E:\FR\FM\18DEN1.SGM
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Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices
Because the proposed fee does not
discriminate between 1Gb and 10Gb
cross connection options, Members and
non-Members are able to subscribe to
the test environment without regard to
the cost of their capacity election. The
Exchange believes that not
discriminating on this basis will
encourage participants to connect to the
test environment in the same manner as
they do to the live trading environment,
and thereby help the test environment
more closely mirror the live trading
environment. Providing a more useful
and accurate test environment will serve
to improve live trading on the Exchange
and the national market system by
permitting Members and non-Members
the ability to accurately test changes
prior to implementing them in the live
trading environment, thereby reducing
the likelihood of a potentially disruptive
system failure in the live trading
environment, which has the potential to
affect all market participants.
khammond on DSK9W7S144PROD with NOTICES
The Proposed Fee Is Equitable
The Exchange believes that the
proposed fee is equitably allocated
because all Members and non-Members
that choose to connect to the test
environment will be assessed a uniform
fee for those services. The Exchange
believes that offering subscribers the
option to subscribe to either a 1Gb or
10Gb dedicated cross connection for the
same fee is an equitable allocation of
fees because, unlike the live trading
environment, there is no competitive
advantage to possessing a higher
capacity connection in the test
environment. The test environment is
designed to closely mirror the live
trading environment for Members and
non-Members, including matching the
capacity of the live trading environment
connection of each Member and nonMember. In the absence of any
competitive advantage, charging a
uniform fee for both a 1Gb or 10Gb
dedicated cross connection is an
equitable allocation of fees. The
Exchange believes that charging a
uniform fee rather than mirroring the
fees for the live trading environment
will encourage Members and nonMembers to subscribe to the test
environment and further encourage
those that subscribe to use the same
hardware as is used by them for
connectivity to the live trading
environment.
*
*
*
*
*
Finally, and as noted above, the
Exchange’s test environment provides a
robust and realistic testing experience
using a replica of the Exchange’s
production environment process
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18:09 Dec 17, 2024
Jkt 265001
configurations. This environment
enables market participants to test
upcoming Exchange software and code
releases, product enhancements, as well
as test firm software prior to
implementation in the production
environment. Further, the test
environment allows unlimited firmlevel testing of order types, order entry,
order management, order throughput,
acknowledgements, risk settings, mass
cancelations, and purge requests. By
providing firms the ability to test all of
these features in the test environment
prior to implementing them in the live
trading environment, the Exchange
believes this will reduce the likelihood
of a potentially disruptive system failure
in the live trading environment, which
has the potential to affect all market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange made connectivity access to
the test environment available to keep
pace with technological changes in the
industry and evolving customer needs
and demands, and believes the product
will contribute to robust competition
among national securities exchanges. As
a result, the Exchange believes this
proposed rule change permits fair
competition among national securities
exchanges.
The Exchange believes the proposed
fee would not cause any unnecessary or
inappropriate burden on intermarket
competition as other exchanges are free
to introduce their own comparable
testing environments for free or lower
prices, which several competing
exchanges already provide.22 The
Exchange operates in a highly
competitive environment, and its ability
to price access to the test environment
is constrained by the optional nature of
accessing the test environment via a
dedicated cross connect. Providing
access to the test environment via
dedicated cross connection is provided
purely for convenience, in response to
Member demand, and, again, would be
entirely optional. The Exchange notes
that use of accessing the test
environment via a dedicated cross
connection would be completely
voluntary and is simply an additional
optional means to access the test
environment. Members who do not
prefer the to access the test environment
via a dedicated cross connection and
pay the applicable fee will be able to
continue to perform the same testing
functions when accessing the test
environment via the existing VPN
internet access for free. The Exchange
must consider this in its pricing
discipline in order to attract subscribers.
The Exchange believes that if it were to
propose a fee that is excessively high, it
would simply serve to reduce demand
for the Exchange’s product, which as
discussed, Members and non-Members
are under no obligation to utilize.
The Exchange does not believe the
proposed rule change would cause any
unnecessary or inappropriate burden on
intramarket competition. Particularly,
the proposed fee applies uniformly to
any purchaser in that the Exchange does
not differentiate between subscribers
that wish to access the testing systems
environment via a dedicated cross
connect via either a 1Gb or 10Gb
connection. The proposed fee is set at a
modest level that would allow any
interested market participant to
purchase access to the test environment
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,23 and Rule
19b–4(f)(2) 24 thereunder. At any time
within 60 days of the filing of the
proposed rule change, the Commission
summarily may temporarily suspend
such rule change if it appears to the
Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. If the Commission
takes such action, the Commission shall
institute proceedings to determine
whether the proposed rule should be
approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
23 15
22 See
PO 00000
supra note 18.
Frm 00142
Fmt 4703
24 17
Sfmt 4703
102993
E:\FR\FM\18DEN1.SGM
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
18DEN1
102994
Federal Register / Vol. 89, No. 243 / Wednesday, December 18, 2024 / Notices
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
MIAX–2024–45 on the subject line.
Paper Comments
khammond on DSK9W7S144PROD with NOTICES
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–MIAX–2024–45. 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–MIAX–2024–45 and should be
submitted on or before January 8, 2025.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–29923 Filed 12–17–24; 8:45 am]
BILLING CODE 8011–01–P
25 17
CFR 200.30–3(a)(12).
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18:09 Dec 17, 2024
Jkt 265001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101892; File No. SR–
NASDAQ–2024–078]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Lower the
Options Regulatory Fee (ORF) and
Adopt a New Approach to ORF in 2025
December 12, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
27, 2024, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the 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 proposes to amend The
Nasdaq Options Market LLC (‘‘NOM’’)
Pricing Schedule at Options 7, Section
5, Options Regulatory Fee.3
While the changes proposed herein
are effective upon filing, the Exchange
has designated certain amendments to
be operative on November 1, 2024, and
other amendments to be operative on
January 1, 2025, as noted in the Exhibit
5 and herein.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, 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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 On October 31, 2024, SR–NASDAQ–2024–058
was filed to amend ORF. On November 27, 2024,
SR–NASDAQ–2024–058 was withdrawn and this
rule change was filed. The current proposal amends
the ORF Rate for Local Customer ‘‘C’’ Origin Code
transactions executed on NOM, Local Firm ‘‘F’’
Origin Code transactions executed on NOM, and
Away ORF Rate Firm ‘‘F’’ Origin Code multi-list
transactions executed on non-NOM exchanges.
2 17
PO 00000
Frm 00143
Fmt 4703
Sfmt 4703
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
NOM proposes to amend its current
ORF in several respects. In summary,
first, NOM proposes to reduce its ORF
from $0.0016 to $0.0014 per contract
side from November 1, 2024, through
December 31, 2024. Second, as of
January 1, 2025, NOM proposes to
amend its methodology of collection to:
(1) exclude options transactions in
proprietary products; and (2) assess ORF
in all clearing ranges except market
makers who clear as ‘‘M’’ at The
Options Clearing Corporation (‘‘OCC’’).
Additionally, NOM will assess a
different rate for trades executed on
NOM (‘‘Local ORF Rate’’) and trades
executed on non-NOM exchanges
(‘‘Away ORF Rate’’). Each change will
be described below in greater detail.
Background on Current ORF
Today, NOM assesses its ORF for each
Customer 4 option transaction that is
either: (1) executed by a Participant 5 on
NOM; or (2) cleared by a NOM
Participant at OCC in the Customer
range,6 even if the transaction was
executed by a non-member of NOM,
regardless of the exchange on which the
transaction occurs.7 If the OCC clearing
member is a NOM Participant, ORF is
assessed and collected on all ultimately
cleared Customer contracts (after
adjustment for CMTA 8); and (2) if the
OCC clearing member is not a NOM
Participant, ORF is collected only on the
cleared Customer contracts executed at
4 Today, ORF is collected from Customers,
Professionals and broker-dealers that are not
affiliated with a clearing member that clear in the
‘‘C’’ range at OCC. See supra notes 18 and 19 for
descriptions of Customers and Professionals.
5 The term ‘‘Options Participant’’ or ‘‘Participant’’
mean a firm, or organization that is registered with
the Exchange pursuant to Options 2A of these Rules
for purposes of participating in options trading on
NOM as a ‘‘Nasdaq Options Order Entry Firm’’ or
‘‘Nasdaq Options Market Maker’’. See Options 1,
Section 1(a)(39).
6 Participants must record the appropriate
account origin code on all orders at the time of
entry of the order. The Exchange represents that it
has surveillances in place to verify that Participants
mark orders with the correct account origin code.
7 The Exchange uses reports from OCC when
assessing and collecting the ORF.
8 CMTA or Clearing Member Trade Assignment is
a form of ‘‘give-up’’ whereby the position will be
assigned to a specific clearing firm at OCC.
E:\FR\FM\18DEN1.SGM
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]]>Agencies
[Federal Register Volume 89, Number 243 (Wednesday, December 18, 2024)]
[Notices]
[Pages 102989-102994]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-29923]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101894; File No. SR-MIAX-2024-45]
Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing and Immediate Effectiveness of a
Proposed Rule Change To Adopt Fees for Dedicated Cross Connection
Access to the Testing Systems Environment
December 12, 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 November 29, 2024, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing a proposal to establish a fee for market
participants that choose to utilize the Exchange's testing systems
environment via a dedicated cross connection.
The text of the proposed rule change is available on the Exchange's
website at https://www.miaxglobal.com/markets/us-options/all-options-exchanges/rule-filings, at MIAX's principal office, and at the
Commission's Public Reference Room.
[[Page 102990]]
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to establish a fee for market participants
that choose to utilize the Exchange's testing systems environment via a
dedicated cross connection. The testing systems environment is a
virtual trading system environment for Members \3\ and non-Members to
test (i) upcoming Exchange software and code releases, (ii) product
enhancements, and (iii) firm-developed software, prior to
implementation in the Exchange's production (e.g., live trading)
environment. Further, the testing systems environment allows unlimited
testing of existing functionality, such as order types, order entry,
order management, order throughput, acknowledgements, risk settings,
mass cancelations, and purge requests. The testing systems environment
is built to closely approximate the production environment to enable
Members and non-Members the ability to test their systems and mimics
the live trading environment.\4\
---------------------------------------------------------------------------
\3\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
\4\ Business continuity and disaster recovery testing is
performed separately and not within the testing systems environment
that is the subject of this filing.
---------------------------------------------------------------------------
There are currently three methods by which Members and non-Members
may access the Exchange's testing systems environment. One, Members and
non-Members may access the Exchange's testing systems environment via a
virtual private network (``VPN'') that operates over the internet and
provides site-to-site access. VPN access is provided for free to all
Members and non-Members.
A second method is via a dedicated cross connection that allows
Members and non-Members to access the testing systems environment and
is available as either a 1 gigabit (``Gb'') or 10Gb connection. Members
and non-Members that utilize a VPN or a dedicated cross connection to
access the testing systems environment of the Exchange are also able to
access the testing systems environments of each of the Exchange's
affiliated options markets--MIAX Sapphire, LLC (``MIAX Sapphire''),
MIAX PEARL, LLC \5\ (``MIAX Pearl Options''), and MIAX Emerald, LLC
(``MIAX Emerald''). This dedicated cross connection would provide
subscribers access to the testing systems environment of the Exchange,
as well as each of its affiliate options exchanges, via a single
connection.
---------------------------------------------------------------------------
\5\ All references to ``MIAX PEARL'' in this filing are to the
options trading facility of MIAX PEARL, LLC, referred to herein as
``MIAX Pearl Options.'' Members and non-Members that choose to
utilize the testing systems environment of MIAX Pearl Equities, the
equities trading facility of MIAX PEARL, LLC, must utilize a
separate dedicated cross connection as MIAX Pearl Equities' testing
systems environment operates on a separate network from the
affiliated options markets.
---------------------------------------------------------------------------
Third, access is also provided through the production connections
for each 1Gb or 10Gb ULL connection for the applicable fee \6\ for such
connection and no additional charge. These 1Gb and 10Gb ULL connections
provide access to the Exchange's production environment (i.e., live
trading) and allow the receipt of proprietary real-time market data.
However, the Exchange previously announced that it will phase out the
ability to connect to the testing systems environment via the existing
1Gb and 10Gb ULL production connections by February 28, 2025.\7\
---------------------------------------------------------------------------
\6\ See MIAX Fee Schedule, Sections 5)a)-b) for the fees for 1Gb
and 10Gb ULL production connectivity.
\7\ See MIAX Options, MIAX Pearl Options and MIAX Emerald
Options Exchanges--Announcing New Extranet Access to Firm Test Beds
(FTB1 and FTB2) and Decommissioning of Access via Production
Connections Beginning in October 2024, dated September 12, 2024,
available at https://www.miaxglobal.com/alert/2024/09/12/miax-options-miax-pearl-options-and-miax-emerald-options-exchanges-2?nav=all; and Securities Exchange Act Release No. 100854 (August
28, 2024), 89 FR 71953 (September 4, 2024) (SR-MIAX-2024-35).
---------------------------------------------------------------------------
* * * * *
The Exchange now proposes to amend the Fee Schedule to establish a
monthly fee for Members and non-Members that choose to access the
testing systems environment via a dedicated cross connect. In
particular, the Exchange proposes to establish a monthly fee of $1,000
per dedicated cross connection to the testing systems environment for
Members and non-Members. The proposed fee is the same whether a Member
or non-Member chooses to connect to the testing systems environment via
a 1Gb or 10Gb cross connect. The proposed fees would be set forth under
new Sections 4)e) and 4)f) of the Fee Schedule. Proposed Sections 4)e)
and 4)f) would also codify that VPN access to the test environment is
provided for free for all Members and non-Members.
* * * * *
Members and non-Members that access the testing systems environment
through any one of the available access methods, including a dedicated
cross connection, receive functionally the same testing experience.
Each Member or non-Member is free to decide how to access the testing
systems environment based on their own needs and trading architecture
or not utilize the testing systems environment at all. Again, accessing
the testing systems environment via a dedicated direct connection is
entirely optional and no Member or non-Member is required by rule or
regulation to make use of the testing systems environment via a
dedicated direct connection. Regardless of access method, all Members
and non-Members are provided the same testing systems environment
experience and are able to perform all of the same functions.
Implementation
The proposed fee change will be effective December 1, 2024.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\9\ in particular, in that it
is not designed to permit unfair discrimination among customers,
brokers, or dealers. The Exchange also believes that its proposal is
consistent with Section 6(b)(4) of the Act \10\ because it represents
an equitable allocation of reasonable dues, fees and other charges
among market participants using any facility or system which the
Exchange operates or controls.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Free VPN Access to the Firm Test Bed Is a Reasonable Substitute
In 2019, Commission staff published guidance suggesting the types
of information that self-regulatory organizations (``SROs'') may use to
demonstrate that their fee filings comply with the standards of the
Exchange Act
[[Page 102991]]
(the ``Staff Guidance'').\11\ The Staff Guidance provides that in
assessing the reasonableness of a fee, the Staff would consider whether
the fee is constrained by significant competitive forces. To determine
whether a proposed fee is constrained by significant competitive
forces, the Staff Guidance further provides that the Staff would
consider whether the evidence provided by an SRO in a Fee Filing
proposal demonstrates (i) that there are reasonable substitutes for the
product or service that is the subject of a proposed fee; (ii) that
``platform'' competition constrains the fee; and/or (iii) that the
revenue and cost analysis provided by the SRO otherwise demonstrates
that the proposed fee would not result in the SRO taking supra-
competitive profits.\12\ The proposed fee is reasonable because there
is a reasonable substitute for the service that is the subject of this
proposed fee as set forth below.
---------------------------------------------------------------------------
\11\ 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.
\12\ Id.
---------------------------------------------------------------------------
This filing includes the following evidence that demonstrates that
there is a reasonable substitute to purchasing a dedicated cross
connection to access the Exchange's testing systems environment. That
reasonable substitute is VPN access, which is provided for free and
will continue to be free for all Members and non-Members. Members and
non-Members may access the testing systems environment through either a
VPN or a dedicated cross connection and will receive functionally the
same testing environment and are able to perform all of the same
functions. The testing systems environment, whether accessed via a
dedicated cross connection or VPN, provides Members and non-Members the
same scope of abilities to test their systems and software in the
Exchange's testing systems environment, which replicates the Exchange's
production trading environment. Like a dedicated cross connection, a
VPN provides access to the testing systems environment of not only the
Exchange, but also each of its affiliate options exchanges over the
same single access point. Accessing the testing systems environment via
a dedicated cross connection provides no advantage to Members and non-
Members compared to those market participants that elect to access the
testing systems environment via a VPN for free.
Each Member or non-Member is free to decide how to access the
testing systems environment based on their own needs and trading
architecture. Again, accessing the testing systems environment via a
dedicated direct connection is entirely optional and no Member or non-
Member is required by rule or regulation to make use of the testing
systems environment via a dedicated direct connection. Accessing the
testing systems environment via the proposed dedicated cross connection
may not provide utility to all Members and non-Members based on their
business models and needs, and such users may choose to access the
testing systems environment for free through the VPN and perform the
same testing functions. As such, the Exchange believes that the
proposed fee for access to the testing systems environment is
reasonable and Members and non-Members have the choice, but are not
obligated to access the testing systems environment via a dedicated
cross connection. Otherwise, a user may choose to access the test
environment via a VPN for free to test system functionality. For
example, of the Exchange's forty-six Members \13\ and nine non-Members
that provide connectivity to the Exchange, sixteen Members and non-
Members currently use a VPN to access the Exchange's testing systems
environment instead of the other two currently available options, i.e.,
a dedicated cross connection or their existing 1Gb or 10Gb ULL
connection to the production environment. Some Members and non-Members
also choose not to access the testing systems environment at all.
---------------------------------------------------------------------------
\13\ See the Exchange's Membership Directory available at
https://www.miaxglobal.com/miax_options_exchange_members.pdf.
---------------------------------------------------------------------------
Lastly, supporting a proposed non-transaction fee change by arguing
the availability of reasonable substitutes is not novel. Commission
Staff has published for immediate effectiveness filings regarding non-
transaction fees by exchanges who argued that the fees were consistent
with the Exchange Act because of reasonable substitutes were available
as provided for in the Commission Staff Guidance.\14\
---------------------------------------------------------------------------
\14\ See, e.g., Securities Exchange Act Release Nos. 101096
(September 18, 2024), 89 FR 77913 (September 24, 2024) (SR-ISE-2024-
46); 98974 (November 16, 2023), 88 FR 81468 (November 22, 2023) (SR-
NYSEARCA-2023-78); 87795 (December 18, 2019), 84 FR 71043 (December
26, 2019) (SR-NYSEArca-2019-88); and 90409 (November 12, 2020), 85
FR 73522 (November 18, 2020) (SR-NYSEArca-2020-95).
---------------------------------------------------------------------------
Fee Is Constrained by Competition and the Availability of Free VPN
Access
If the Exchange prices the fee for dedicated cross connection
access to the testing systems environment too high, Members and non-
Members may choose not to subscribe and contiue to perform the same
testing functions via VPN internet access for no fee if they do not
find the fee for accessing the testing systems environment via a
dedicated cross connection to be of value. Again, the Exchange notes
that accessing the testing systems environment via a dedicated cross
connection would be completely voluntary and is simply an additional
optional means to access the test environment. The Exchange also has
Members and non-Members that do not utilize the testing systems
environment at all.
The Exchange operates in a highly competitive environment in which
18 U.S. registered equity options exchanges compete for market share.
Based on publicly available information for the month of October 2024,
no single options exchange had more than approximately 12-13% of the
equity options market share and the Exchange represented only
approximately 6.17% of the market share of equity options for that
month.\15\ The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. Particularly, in
Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and recognized that
current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \16\ The
proposed fee for optional access via a dedicated cross connection to
the test environment is the result of the competitive environment of
the U.S. options industry.
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\15\ See the ``Market Share'' section of the Exchange's website,
available at https://www.miaxglobal.com/ (last visited November 5,
2024).
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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Exchanges compete for order flow by providing testing opportunities
and robust testing environments. Services like a testing environment
provide Members and non-Members with the opportunity to test Exchange
functionality prior to sending real order flow to be executed in the
Exchange's production environment. As mentioned above, numerous
exchanges provide testing environments to market participants to test
functionality and gain comfort with their exchange offering.\17\ This
is intended to attract
[[Page 102992]]
market share by offering a risk free way to gain comfort that their
orders would be handled within the Exchange's production environment as
expected. Exchanges seek to further encourage market participants to
utilize their testing environments by providing multiple methods to
connect. Some are provided for free while others and require a fee.
Providing multiple methods to connect to a test environment provides
market participants a choice on how to engage with the testing
environment and a choice regarding the access method that best meets
their business and operational needs.
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\17\ The Exchange notes that other exchange families offer a
similar dedicated connection to their testing environment for their
members and non-members. See, e.g., Nasdaq Options Test Facility
(NTF) Abstract, Version 1.4.4 (March 2024), available at https://www.nasdaq.com/Nasdaq_Test_Facility_NTF_Guide (last visited July 16,
2024) (``. . . the Nasdaq Test Facility . . . where market
participants can test their trading applications with the INET
trading system. The NTF environment allows members to test sending
and executing quotes and orders offered by our six options exchanges
. . .''); see also Securities Exchange Act Release No. 100442 (June
27, 2024), 89 FR 55296 (July 3, 2024) (SR-CboeBZX-2024-058) (``. . .
the Exchange also offers corresponding ports which provide Members
and non-Members access to the Exchange's certification environment
to test proprietary systems and applications . . . The certification
environment facilitates testing using replicas of the Exchange's
production environment process configurations which provide for a
robust and realistic testing experience . . .'').
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If the Exchange proposed a fee that Members and non-Members viewed
as excessively high, then the proposed fee would simply serve to reduce
demand for access via a dedicated cross connection to the test
environment, which as noted, is entirely optional as the Exchange will
continue to provide free access to the test environment through VPN
through the internet for site-to-site access. This could, in turn,
reduce the attractiveness of the Exchange's live trading production
environment because Members and non-Members may be unwilling to test
functionality prior to entering live orders. Again, other options
exchanges currently offer, or are able to introduce at their own cost,
their own comparable testing environments with lower prices to better
compete with the Exchange's offering and several competing exchanges
already provide a similar service.
Selling different products and services, such as proposed herein,
is a means by which exchanges compete to attract business. To the
extent that the Exchange is successful in attracting market
participants to purchase the dedicated cross connection to the test
environment proposed herein, the Exchange may earn revenue and further
enhance market participants' interactions on the Exchange, which would
increase value of its other products and services to all market
participants. If the market deems the proposed fee to be too high,
Members and non-Members can choose not to use or discontinue their use
of dedicated cross connection to the test environment and perform the
same testing functions via the VPN internet access for free. The
Exchange, therefore, believes that the proposed fee for dedicated cross
connection to the test environment reflects the competitive environment
of U.S. options exchanges and would be properly assessed to Members and
non-Members that subscribe.
The Proposed Fee Is Reasonable Because it Is Similar to or Lower Than
Like Fees Charged by Other Exchanges
The Exchange believes the proposed fees are reasonable as the
proposed fees are similar to or lower than fees charged by competing
exchanges for similar services. For example, The Nasdaq Stock Market,
LLC assesses a fee of $1,000 per hand-off, per month for subscribers to
the testing facility via either a 1Gb or 10Gb switch port plus a one-
time installation fee of $1,000 per hand-off.\18\ The Exchange's
proposed fee is, therefore, lower because it does not charge a separate
installation fee. Cboe BZX Exchange, Inc. (``Cboe BZX'') Options
assesses a lower fee of $250 per month for each certification logical
port, which only provides access to the Cboe BZX testing environment,
and not to the testing environment of any of Cboe BZX's affiliates.\19\
The fee to access the Cboe BZX testing environment and the testing
environment of each of its three affiliated options exchange becomes
incrementally higher with each Cboe BZX affiliate charging a $250
monthly fee to access each testing environment, totaling as much as
$1,000.00 per month.\20\ Accordingly, the Exchange believes that
comparable and competitive pricing are key factors in determining
whether a proposed fee meets the requirements of the Act.
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\18\ See, e.g., Nasdaq, Options 7: Pricing Schedule, Section 13
Testing Facilities, available at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules/Nasdaq%20Options%207. Nasdaq's affiliates,
like Nasdaq PHLX LLC (``PHLX''), also charge the same fee. See e.g.,
PHLX Options 7: Pricing Schedule, Section 9. Other Member Fees, E.
Testing Facilities, available at https://listingcenter.nasdaq.com/rulebook/phlx/rules/Phlx%20Options%207 (assessing a fee of $1,000
per hand-off, per month for subscribers to the testing facility via
either a 1Gb or 10Gb switch port and a one-time installation fee of
$1,000 per hand-off). See also Securities Exchange Act Release No.
76259 (October 26, 2015), 80 FR 66947 (October 30, 2015) (SR-NASDAQ-
2015-117) (Notice of Filing and Immediate Effectiveness of Proposed
Rule Change to Options Testing Facility). Like the Exchange's
testing environment, a single connection to Nasdaq's test
environment provides access to the other test environments of its
affiliate options markets, PHLX and Nasdaq BX, Inc.
\19\ See also Cboe BZX Options Fee Schedule, Options Logical
Port Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/membership/fee_schedule/bzx/. See, e.g.,
Cboe EDGX Exchange, Inc. Options Fee Schedule, Options Logical Port
Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/membership/fee_schedule/edgx/.
\20\ See also Cboe EDGX Exchange, Inc. Options Fee Schedule,
Options Logical Port Fees, Certification Logical Ports, available at
https://www.cboe.com/us/options/membership/fee_schedule/edgx/; Cboe
Exchange, Inc. Fee Schedule, Logical Connectivity Fees,
Certification Logical Ports, available at Cboe_FeeSchedule.pdf; and
Cboe C2 Exchange, Inc. Options Fee Schedule, Options Logical Port
Fees, Certification Logical Ports, available at https://www.cboe.com/us/options/membership/fee_schedule/c2/.
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The Proposed Fee Is Not Unfairly Discriminatory
The Exchange also believes the proposed fee is equitable and not
unfairly discriminatory as the fee would apply equally to all Members
and non-Members who choose to subscribe. It is a business and
operational decision of each Member or non-Member that chooses to
subscribe. The Exchange's proposed fee would not differentiate between
Members and non-Members or connectivity types and is set at a modest
level that would allow any interested Member and non-Member to
subscribe based on their business and operational needs.
The Exchange also believes the proposal furthers the objectives of
Section 6(b)(5) of the Act \21\ in that it is designed to promote just
and equitable principles of trade, remove impediments to and perfect
the mechanism of a free and open market and a national market system,
and, in general protect investors and the public interest and is not
designed to permit unfair discrimination between customer, issuers,
brokers and dealers. The Exchange does not believe that the proposed
fee is unfairly discriminatory to subscribers to the test environment
via a dedicated cross connection because, unlike the live trading
environment where the capacity of connectivity to the Exchange may
confer a competitive advantage to a market participant and therefore
price differentiation is appropriate for the benefit conferred, there
is no such benefit conferred in the testing systems environment.
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\21\ 15 U.S.C. 78f(b)(5).
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The Exchange does not believe that the proposed fee is unfairly
discriminatory among subscribers to the test environment because all
Members and non-Members that subscribe to the service will be assessed
the same fee.
[[Page 102993]]
Because the proposed fee does not discriminate between 1Gb and 10Gb
cross connection options, Members and non-Members are able to subscribe
to the test environment without regard to the cost of their capacity
election. The Exchange believes that not discriminating on this basis
will encourage participants to connect to the test environment in the
same manner as they do to the live trading environment, and thereby
help the test environment more closely mirror the live trading
environment. Providing a more useful and accurate test environment will
serve to improve live trading on the Exchange and the national market
system by permitting Members and non-Members the ability to accurately
test changes prior to implementing them in the live trading
environment, thereby reducing the likelihood of a potentially
disruptive system failure in the live trading environment, which has
the potential to affect all market participants.
The Proposed Fee Is Equitable
The Exchange believes that the proposed fee is equitably allocated
because all Members and non-Members that choose to connect to the test
environment will be assessed a uniform fee for those services. The
Exchange believes that offering subscribers the option to subscribe to
either a 1Gb or 10Gb dedicated cross connection for the same fee is an
equitable allocation of fees because, unlike the live trading
environment, there is no competitive advantage to possessing a higher
capacity connection in the test environment. The test environment is
designed to closely mirror the live trading environment for Members and
non-Members, including matching the capacity of the live trading
environment connection of each Member and non-Member. In the absence of
any competitive advantage, charging a uniform fee for both a 1Gb or
10Gb dedicated cross connection is an equitable allocation of fees. The
Exchange believes that charging a uniform fee rather than mirroring the
fees for the live trading environment will encourage Members and non-
Members to subscribe to the test environment and further encourage
those that subscribe to use the same hardware as is used by them for
connectivity to the live trading environment.
* * * * *
Finally, and as noted above, the Exchange's test environment
provides a robust and realistic testing experience using a replica of
the Exchange's production environment process configurations. This
environment enables market participants to test upcoming Exchange
software and code releases, product enhancements, as well as test firm
software prior to implementation in the production environment.
Further, the test environment allows unlimited firm-level testing of
order types, order entry, order management, order throughput,
acknowledgements, risk settings, mass cancelations, and purge requests.
By providing firms the ability to test all of these features in the
test environment prior to implementing them in the live trading
environment, the Exchange believes this will reduce the likelihood of a
potentially disruptive system failure in the live trading environment,
which has the potential to affect all market participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
made connectivity access to the test environment available to keep pace
with technological changes in the industry and evolving customer needs
and demands, and believes the product will contribute to robust
competition among national securities exchanges. As a result, the
Exchange believes this proposed rule change permits fair competition
among national securities exchanges.
The Exchange believes the proposed fee would not cause any
unnecessary or inappropriate burden on intermarket competition as other
exchanges are free to introduce their own comparable testing
environments for free or lower prices, which several competing
exchanges already provide.\22\ The Exchange operates in a highly
competitive environment, and its ability to price access to the test
environment is constrained by the optional nature of accessing the test
environment via a dedicated cross connect. Providing access to the test
environment via dedicated cross connection is provided purely for
convenience, in response to Member demand, and, again, would be
entirely optional. The Exchange notes that use of accessing the test
environment via a dedicated cross connection would be completely
voluntary and is simply an additional optional means to access the test
environment. Members who do not prefer the to access the test
environment via a dedicated cross connection and pay the applicable fee
will be able to continue to perform the same testing functions when
accessing the test environment via the existing VPN internet access for
free. The Exchange must consider this in its pricing discipline in
order to attract subscribers. The Exchange believes that if it were to
propose a fee that is excessively high, it would simply serve to reduce
demand for the Exchange's product, which as discussed, Members and non-
Members are under no obligation to utilize.
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\22\ See supra note 18.
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The Exchange does not believe the proposed rule change would cause
any unnecessary or inappropriate burden on intramarket competition.
Particularly, the proposed fee applies uniformly to any purchaser in
that the Exchange does not differentiate between subscribers that wish
to access the testing systems environment via a dedicated cross connect
via either a 1Gb or 10Gb connection. The proposed fee is set at a
modest level that would allow any interested market participant to
purchase access to the test environment 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,\23\ and Rule 19b-4(f)(2) \24\ thereunder.
At any time within 60 days of the filing of the proposed rule change,
the Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act. If the Commission takes such
action, the Commission shall institute proceedings to determine whether
the proposed rule should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(3)(A)(ii).
\24\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
[[Page 102994]]
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-MIAX-2024-45 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-MIAX-2024-45. 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-MIAX-2024-45 and should be
submitted on or before January 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-29923 Filed 12-17-24; 8:45 am]
BILLING CODE 8011-01-P
