[Federal Register Volume 88, Number 127 (Wednesday, July 5, 2023)]
[Notices]
[Pages 42976-42998]
[FR Doc No: 2023-14110]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97816; File No. SR-PEARL-2023-28]

Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX
Pearl Equities Fee Schedule To Modify Certain Connectivity and Port
Fees

June 28, 2023.
    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 June 16, 2023, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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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 fee schedule (the
``Fee Schedule'') applicable to MIAX Pearl Equities, an equities
trading facility, to amend certain connectivity and port fees.\3\
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    \3\ All references to the ``Exchange'' in this filing refer to
MIAX Pearl Equities. Any references to the options trading facility
of MIAX PEARL, LLC will specifically be referred to as ``MIAX Pearl
Options.''
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    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX
Pearl's principal office, and at the Commission's Public Reference
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these

statements may be examined at the places specified in Item IV below.
The Exchange has prepared summaries, set forth in sections A, B, and C
below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule to amend fees for:
(1) the 1 gigabit (``Gb'') and 10Gb ultra-low latency (``ULL'') fiber
connections for Equity Members \4\ and non-Members; (2) the Financial
Information Exchange (``FIX'') Ports,\5\ and the MIAX Express Orders
Interface (``MEO'') Ports.\6\ The Exchange adopted connectivity and
port fees in September 2020,\7\ and has not changed those fees since
they were adopted. Since that time, the Exchange experienced ongoing
increases in expenses, particularly internal expenses.\8\ As discussed
more fully below, the Exchange recently calculated increased annual
aggregate costs of $18,331,650 for providing 1Gb and 10Gb ULL
connectivity combined and $3,951,993 for providing FIX and MEO
Ports.\9\
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    \4\ The term ``Equity Member'' means a Member authorized by the
Exchange to transact business on MIAX PEARL Equities. See Exchange
Rule 1901.
    \5\ ``FIX Order Interface'' or ``FOI'' means the Financial
Information Exchange interface for certain order types as set forth
in Exchange Rule 2614. See the Definitions section of the Fee
Schedule.
    \6\ Each MEO interface will have one Full Service Port (``FSP'')
and one Purge Port. ``Full Service Port'' or ``FSP'' means an MEO
port that supports all MEO order input message types. See the
Definitions section of the Fee Schedule.
    \7\ See Securities Exchange Act Release No. 90651 (December 11,
2020), 85 FR 81971 (December 17, 2020) (SR-PEARL-2020-33).
    \8\ For example, the New York Stock Exchange, Inc.'s (``NYSE'')
Secure Financial Transaction Infrastructure (``SFTI'') network,
which contributes to the Exchange's connectivity cost, increased its
fees by approximately 9% since 2021. Similarly, since 2021, the
Exchange, and its affiliates, experienced an increase in data center
costs of approximately 17% and an increase in hardware and software
costs of approximately 19%. These percentages are based on the
Exchange's actual 2021 and proposed 2023 budgets.
    \9\ For the avoidance of doubt, all references to costs in this
filing, including the cost categories discussed below, refer to
costs incurred by MIAX Pearl Equities only and not MIAX Pearl
Options, the options trading facility.
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    Much of the cost relates to monitoring and analysis of data and
performance of the network via the subscriber's connection with
nanosecond granularity, and continuous improvements in network
performance with the goal of improving the subscriber's experience. The
costs associated with maintaining and enhancing a state-of-the-art
network is a significant expense for the Exchange, and thus the
Exchange believes that it is reasonable and appropriate to help offset
those increased costs by amending fees for connectivity and port
services. Subscribers 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.
    The Exchange now proposes to amend the Fee Schedule to amend the
fees for 1Gb connectivity, 10Gb ULL connectivity and FIX and MEO Ports
in order to recoup ongoing costs and increased expenses set forth below
in the Exchange's cost analysis. The Exchange proposes to implement the
changes to the Fee Schedule pursuant to this proposal immediately. The
Exchange initially filed the proposal on December 30, 2022 (SR-PEARL-
2022-61) (the ``Initial Proposal'').\10\ On February 23, 2023, the
Exchange withdrew the Initial Proposal and replaced it with a revised
proposal (SR-PEARL-2023-06) (the ``Second Proposal'').\11\ On April 20,
2023, the Exchange withdrew the Second Proposal and replaced it with a
revised proposal (SR-PEARL-2023-18) (the ``Third Proposal'').\12\ On
June 16, 2023, the Exchange withdrew the Third Proposal and replaced it
with this further revised proposal (SR-PEARL-2023-28).\13\
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    \10\ See Securities Exchange Act Release No. 96631 (January 10,
2023), 88 FR 2671 (January 17, 2023) (SR-PEARL-2022-61).
    \11\ See Securities Exchange Act Release No. 97077 (March 8,
2023), 88 FR 15746 (March 14, 2023) (SR-PEARL-2023-06).
    \12\ See Securities Exchange Act Release No. 97417 (May 2,
2023), 88 FR 29730 (May 8, 2023) (SR-PEARL-2023-18).
    \13\ The Exchange met with Commission Staff to discuss the Third
Proposal during which the Commission Staff provided feedback and
requested additional information, including, most recently,
information about total costs related to certain third party
vendors. Such vendor cost information is subject to confidentiality
restrictions. The Exchange has provided this information to
Commission Staff under separate cover with a request for
confidentiality. While the Exchange will continue to be responsive
to Commission Staff's information requests, the Exchange believes
that the Commission should, at this point, issue substantially more
detailed guidance for exchanges to follow in the process of pursuing
a cost-based approach to fee filings, and that, for the purposes of
fair competition, detailed disclosures by exchanges, such as those
that the Exchange is providing now, should be consistent across all
exchanges, including for those that have resisted a cost-based
approach to fee filings, in the interests of fair and even
disclosure and fair competition.
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    The Exchange previously included a cost analysis in the Initial
Proposal, Second, and Third Proposals. As described more fully below,
the Exchange provides an updated cost analysis that includes, among
other things, additional descriptions of how the Exchange allocated
costs among it and its affiliated exchanges (separately among MIAX
Pearl Options and MIAX Pearl Equities, MIAX,\14\ and MIAX Emerald,\15\
together with MIAX and MIAX Pearl Options, the ``affiliated markets'')
to ensure no cost was allocated more than once, as well as additional
detail supporting its cost allocation processes and explanations as to
why a cost allocation in this proposal may differ from the same cost
allocation in a similar proposal submitted by one of its affiliated
exchanges. Although the baseline cost analysis used to justify the
proposed fees was made in the Initial, Second, and Third Proposals, the
fees themselves have not changed since the Initial, Second, or Third
Proposals and the Exchange still proposes fees that are intended to
cover the Exchange's cost of providing 1Gb and 10Gb ULL connectivity
and FIX and MEO Ports.
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    \14\ The term ``MIAX'' means Miami International Securities
Exchange, LLC. See Exchange Rule 100.
    \15\ The term ``MIAX Emerald'' means MIAX Emerald, LLC. See
Exchange Rule 100.
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* * * * *
    Starting in 2017, following the United States Court of Appeals for
the District of Columbia's Susquehanna Decision \16\ and various other
developments, the Commission began to undertake a heightened review of
exchange filings, including non-transaction fee filings that was
substantially and materially different from it prior review process
(hereinafter referred to as the ``Revised Review Process''). In the
Susquehanna Decision, the D.C. Circuit Court stated that the Commission
could not maintain a practice of ``unquestioning reliance'' on claims
made by a self-regulatory organization (``SRO'') in the course of
filing a rule or fee change with the Commission.\17\ Then, on October
16, 2018, the Commission issued an opinion in Securities Industry and
Financial Markets Association finding that exchanges failed both to
establish that the challenged fees were constrained by significant
competitive forces and that these fees were consistent with the
Act.\18\ On that same day, the Commission issued an order remanding to
various exchanges and national market system (``NMS'') plans challenges
to over 400 rule changes and plan amendments that were asserted in 57
applications for review (the ``Remand

Order'').\19\ The Remand Order directed the exchanges to ``develop a
record,'' and to ``explain their conclusions, based on that record, in
a written decision that is sufficient to enable us to perform our
review.'' \20\ The Commission denied requests by various exchanges and
plan participants for reconsideration of the Remand Order.\21\ However,
the Commission did extend the deadlines in the Remand Order ``so that
they d[id] not begin to run until the resolution of the appeal of the
SIFMA Decision in the D.C. Circuit and the issuance of the court's
mandate.'' \22\ Both the Remand Order and the Order Denying
Reconsideration were appealed to the D.C. Circuit.
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    \16\ See Susquehanna International Group, LLP v. Securities &
Exchange Commission, 866 F.3d 442 (D.C. Circuit 2017) (the
``Susquehanna Decision'').
    \17\ Id.
    \18\ See Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 84432, 2018 WL 5023228 (October 16, 2018) (the ``SIFMA
Decision'').
    \19\ See Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 84433, 2018 WL 5023230 (Oct. 16, 2018). See 15 U.S.C.
78k-1, 78s; see also Rule 608(d) of Regulation NMS, 17 CFR
242.608(d) (asserted as an alternative basis of jurisdiction in some
applications).
    \20\ Id. at page 2.
    \21\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 85802, 2019 WL 2022819 (May 7, 2019) (the ``Order
Denying Reconsideration'').
    \22\ Order Denying Reconsideration, 2019 WL 2022819, at *13.
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    While the above appeal to the D.C. Circuit was pending, on March
29, 2019, the Commission issued an order disapproving a proposed fee
change by BOX Exchange LLC (``BOX'') to establish connectivity fees
(the ``BOX Order''), which significantly increased the level of
information needed for the Commission to believe that an exchange's
filing satisfied its obligations under the Act with respect to changing
a fee.\23\ Despite approving hundreds of access fee filings in the
years prior to the BOX Order (described further below) utilizing a
``market-based'' test, the Commission changed course and disapproved
BOX's proposal to begin charging connectivity at one-fourth the rate of
competing exchanges' pricing.
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    \23\ See Securities Exchange Act Release No. 85459 (March 29,
2019), 84 FR 13363 (April 4, 2019) (SR-BOX-2018-24, SR-BOX-2018-37,
and SR-BOX-2019-04) (Order Disapproving Proposed Rule Changes to
Amend the Fee Schedule on the BOX Market LLC Options Facility to
Establish BOX Connectivity Fees for Participants and Non-
Participants Who Connect to the BOX Network). The Commission noted
in the BOX Order that it ``historically applied a `market-based'
test in its assessment of market data fees, which [the Commission]
believe[s] present similar issues as the connectivity fees proposed
herein.'' Id. at page 16. Despite this admission, the Commission
disapproved BOX's proposal to begin charging $5,000 per month for
10Gb connections (while allowing legacy exchanges to charge rates
equal to 3-4 times that amount utilizing ``market-based'' fee
filings from years prior).
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    Also while the above appeal was pending, on May 21, 2019, the
Commission Staff issued guidance ``to assist the national securities
exchanges and FINRA . . . in preparing Fee Filings that meet their
burden to demonstrate that proposed fees are consistent with the
requirements of the Securities Exchange Act.'' \24\ In the Staff
Guidance, the Commission Staff states that, ``[a]s an initial step in
assessing the reasonableness of a fee, staff considers whether the fee
is constrained by significant competitive forces.'' \25\ The Staff
Guidance also states that, ``. . . even where an SRO cannot
demonstrate, or does not assert, that significant competitive forces
constrain the fee at issue, a cost-based discussion may be an
alternative basis upon which to show consistency with the Exchange
Act.'' \26\
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    \24\ 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'').
    \25\ Id.
    \26\ Id.
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    Following the BOX Order and Staff Guidance, on August 6, 2020, the
D.C. Circuit vacated the Commission's SIFMA Decision in NASDAQ Stock
Market, LLC v. SEC \27\ and remanded for further proceedings consistent
with its opinion.\28\ That same day, the D.C. Circuit issued an order
remanding the Remand Order to the Commission for reconsideration in
light of NASDAQ. The court noted that the Remand Order required the
exchanges and NMS plan participants to consider the challenges that the
Commission had remanded in light of the SIFMA Decision. The D.C.
Circuit concluded that because the SIFMA Decision ``has now been
vacated, the basis for the [Remand Order] has evaporated.'' \29\
Accordingly, on August 7, 2020, the Commission vacated the Remand Order
and ordered the parties to file briefs addressing whether the holding
in NASDAQ v. SEC that Exchange Act Section 19(d) does not permit
challenges to generally applicable fee rules requiring dismissal of the
challenges the Commission previously remanded.\30\ The Commission
further invited ``the parties to submit briefing stating whether the
challenges asserted in the applications for review . . . should be
dismissed, and specifically identifying any challenge that they contend
should not be dismissed pursuant to the holding of Nasdaq v. SEC.''
\31\ Without resolving the above issues, on October 5, 2020, the
Commission issued an order granting SIFMA and Bloomberg's request to
withdraw their applications for review and dismissed the
proceedings.\32\
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    \27\ NASDAQ Stock Mkt., LLC v. SEC, No 18-1324, --- Fed. App'x -
---, 2020 WL 3406123 (D.C. Cir. June 5, 2020). The court's mandate
was issued on August 6, 2020.
    \28\ Nasdaq v. SEC, 961 F.3d 421, at 424, 431 (D.C. Cir. 2020).
The court's mandate issued on August 6, 2020. The D.C. Circuit held
that Exchange Act ``Section 19(d) is not available as a means to
challenge the reasonableness of generally-applicable fee rules.''
Id. The court held that ``for a fee rule to be challengeable under
Section 19(d), it must, at a minimum, be targeted at specific
individuals or entities.'' Id. Thus, the court held that ``Section
19(d) is not an available means to challenge the fees at issue'' in
the SIFMA Decision. Id.
    \29\ Id. at *2; see also id. (``[T]he sole purpose of the
challenged remand has disappeared.'').
    \30\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 89504, 2020 WL 4569089 (August 7, 2020) (the ``Order
Vacating Prior Order and Requesting Additional Briefs'').
    \31\ Id.
    \32\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 90087 (October 5, 2020).
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    As a result of the Commission's loss of the NASDAQ vs. SEC case
noted above, the Commission never followed through with its intention
to subject the over 400 fee filings to ``develop a record,'' and to
``explain their conclusions, based on that record, in a written
decision that is sufficient to enable us to perform our review.'' \33\
As such, all of those fees remained in place and amounted to a baseline
set of fees for those exchanges that had the benefit of getting their
fees in place before the Commission Staff's fee review process
materially changed. The net result of this history and lack of
resolution in the D.C. Circuit Court resulted in an uneven competitive
landscape where the Commission subjects all new non-transaction fee
filings to the new Revised Review Process, while allowing the
previously challenged fee filings, mostly submitted by incumbent
exchanges prior to 2019, to remain in effect and not subject to the
``record'' or ``review'' earlier intended by the Commission.
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    \33\ See supra note 28, at page 2.
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    While the Exchange appreciates that the Staff Guidance articulates
an important policy goal of improving disclosures and requiring
exchanges to justify that their market data and access fee proposals
are fair and reasonable, the practical effect of the Revised Review
Process, Staff Guidance, and the Commission's related practice of
continuous suspension of new fee filings, is anti-competitive,
discriminatory, and has put in place an un-level playing field, which
has negatively impacted smaller, nascent, non-legacy exchanges (``non-
legacy exchanges''), while favoring larger, incumbent, entrenched,
legacy exchanges (``legacy exchanges'').\34\ The

legacy exchanges all established a significantly higher baseline for
access and market data fees prior to the Revised Review Process. From
2011 until the issuance of the Staff Guidance in 2019, national
securities exchanges filed, and the Commission Staff did not abrogate
or suspend (allowing such fees to become effective), at least 92
filings \35\ to amend exchange connectivity or port fees (or similar
access fees). The support for each of those filings was a simple
statement by the relevant exchange that the fees were constrained by
competitive forces.\36\ These fees remain in effect today.
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    \34\ Commission Chair Gary Gensler recently reiterated the
Commission's mandate to ensure competition in the equities markets.
See ``Statement on Minimum Price Increments, Access Fee Caps, Round
Lots, and Odd-Lots'', by Chair Gary Gensler, dated December 14, 2022
(stating ``[i]n 1975, Congress tasked the Securities and Exchange
Commission with responsibility to facilitate the establishment of
the national market system and enhance competition in the securities
markets, including the equity markets'' (emphasis added)). In that
same statement, Chair Gary Gensler cited the five objectives laid
out by Congress in 11A of the Exchange Act (15 U.S.C. 78-1),
including ensuring ``fair competition among brokers and dealers,
among exchange markets, and between exchange markets and markets
other than exchange markets. . . .'' (emphasis added). Id. at note
1. See also Securities Acts Amendments of 1975, available at https://www.govtrack.us/congress/bills/94/s249.
    \35\ This timeframe also includes challenges to over 400 rule
filings by SIFMA and Bloomberg discussed above. Sec. Indus. & Fin.
Mkts. Ass'n, Securities Exchange Act Release No. 84433, 2018 WL
5023230 (Oct. 16, 2018). Those filings were left to stand, while at
the same time, blocking newer exchanges from the ability to
establish competitive access and market data fees. See The Nasdaq
Stock Market, LLC v. SEC, Case No. 18-1292 (D.C. Cir. June 5, 2020).
The expectation at the time of the litigation was that the 400 rule
flings challenged by SIFMA and Bloomberg would need to be justified
under revised review standards.
    \36\ See, e.g., Securities Exchange Act Release Nos. 74417
(March 3, 2015), 80 FR 12534 (March 9, 2015) (SR-ISE-2015-06); 83016
(April 9, 2018), 83 FR 16157 (April 13, 2018) (SR-PHLX-2018-26);
70285 (August 29, 2013), 78 FR 54697 (September 5, 2013) (SR-
NYSEMKT-2013-71); 76373 (November 5, 2015), 80 FR 70024 (November
12, 2015) (SR-NYSEMKT-2015-90); 79729 (January 4, 2017), 82 FR 3061
(January 10, 2017) (SR-NYSEARCA-2016-172).
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    The net result is that the non-legacy exchanges are effectively now
blocked by the Commission Staff from adopting or increasing fees to
amounts comparable to the legacy exchanges (which were not subject to
the Revised Review Process and Staff Guidance), despite providing
enhanced disclosures and rationale to support their proposed fee
changes that far exceed any such support provided by legacy exchanges.
Simply put, legacy exchanges were able to increase their non-
transaction fees during an extended period in which the Commission
applied a ``market-based'' test that only relied upon the assumed
presence of significant competitive forces, while exchanges today are
subject to a cost-based test requiring extensive cost and revenue
disclosures, a process that is complex, inconsistently applied, and
rarely results in a successful outcome, i.e., non-suspension. The
Revised Review Process and Staff Guidance changed decades-long
Commission Staff standards for review, resulting in unfair
discrimination and placing an undue burden on inter-market competition
between legacy exchanges and non-legacy exchanges.
    Commission Staff now require exchange filings, including from non-
legacy exchanges such as the Exchange, to provide detailed cost-based
analysis in place of competition-based arguments to support such
changes. However, even with the added detailed cost and expense
disclosures, the Commission Staff continues to either suspend such
filings and institute disapproval proceedings, or put the exchanges in
the unenviable position of having to repeatedly withdraw and re-file
with additional detail in order to continue to charge those fees.\37\
By impeding any path forward for non-legacy exchanges to establish
commensurate non-transaction fees, or by failing to provide any
alternative means for smaller markets to establish ``fee parity'' with
legacy exchanges, the Commission is stifling competition: non-legacy
exchanges are, in effect, being deprived of the revenue necessary to
compete on a level playing field with legacy exchanges. This is
particularly harmful, given that the costs to maintain exchange systems
and operations continue to increase.
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    \37\ For example, the options exchange affiliates of MIAX Pearl
Equities, MIAX, MIAX Pearl Options, and MIAX Emerald, have filed,
and subsequently withdrawn, various forms of connectivity and port
fee changes at least seven (7) times since August 2021. Each of the
proposals contained hundreds of cost and revenue disclosures never
previously disclosed by legacy exchanges in their access and market
data fee filings prior to 2019.
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    The Commission Staff's change in position impedes the ability of
non-legacy exchanges to raise revenue to invest in their systems to
compete with the legacy exchanges who already enjoy disproportionate
non-transaction fee based revenue. For example, the Cboe Exchange, Inc.
(``Cboe'') reported ``access and capacity fee'' revenue of $70,893,000
for 2020 \38\ and $80,383,000 for 2021.\39\ Cboe C2 Exchange, Inc.
(``C2'') reported ``access and capacity fee'' revenue of $19,016,000
for 2020 \40\ and $22,843,000 for 2021.\41\ Cboe BZX Exchange, Inc.
(``BZX'') reported ``access and capacity fee'' revenue of $38,387,000
for 2020 \42\ and $44,800,000 for 2021.\43\ Cboe EDGX Exchange, Inc.
(``EDGX'') reported ``access and capacity fee'' revenue of $26,126,000
for 2020 \44\ and $30,687,000 for 2021.\45\ For 2021, the affiliated
Cboe, C2, BZX, and EDGX (the four largest exchanges of the Cboe
exchange group) reported $178,712,000 in ``access and capacity fees''
in 2021. NASDAQ Phlx, LLC (``NASDAQ Phlx'') reported ``Trade Management
Services'' revenue of $20,817,000 for 2019.\46\ The Exchange notes it
is unable to compare ``access fee'' revenues with NASDAQ Phlx (or other
affiliated NASDAQ exchanges) because after 2019, the ``Trade Management
Services'' line item was bundled into a much larger line item in PHLX's
Form 1, simply titled ``Market services.'' \47\
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    \38\ According to Cboe's 2021 Form 1 Amendment, access and
capacity fees represent fees assessed for the opportunity to trade,
including fees for trading-related functionality. See Cboe 2021 Form
1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000465.pdf.
    \39\ See Cboe 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001155.pdf.
    \40\ See C2 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000469.pdf.
    \41\ See C2 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001156.pdf.
    \42\ See BZX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000465.pdf.
    \43\ See BZX 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001152.pdf.
    \44\ See EDGX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000467.pdf.
    \45\ See EDGX 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001154.pdf.
    \46\ According to PHLX, ``Trade Management Services'' includes
``a wide variety of alternatives for connectivity to and accessing
[the PHLX] markets for a fee. These participants are charged monthly
fees for connectivity and support in accordance with [PHLX's]
published fee schedules.'' See PHLX 2020 Form 1 Amendment, available
at https://www.sec.gov/Archives/edgar/vprr/2001/20012246.pdf.
    \47\ See PHLX Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000475.pdf. The Exchanges
notes that this type of Form 1 accounting appears to be designed to
obfuscate the true financials of such exchanges and has the effect
of perpetuating fee and revenue advantages of legacy exchanges.
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    The much higher non-transaction fees charged by the legacy
exchanges provides them with two significant competitive advantages.
First, legacy exchanges are able to use their additional non-
transaction revenue for investments in infrastructure, vast marketing
and advertising on major media outlets,\48\ new products and other
innovations. Second, higher non-transaction fees provide the legacy
exchanges with greater flexibility to lower their transaction fees (or
use the revenue from the higher non-transaction fees to subsidize
transaction fee rates), which are more immediately impactful in
competition for order flow and

market share, given the variable nature of this cost on member firms.
The prohibition of a reasonable path forward denies the Exchange (and
other non-legacy exchanges) this flexibility, eliminates the ability to
remain competitive on transaction fees, and hinders the ability to
compete for order flow and market share with legacy exchanges. While
one could debate whether the pricing of non-transaction fees are
subject to the same market forces as transaction fees, there is little
doubt that subjecting one exchange to a materially different standard
than that historically applied to legacy exchanges for non-transaction
fees leaves that exchange at a disadvantage in its ability to compete
with its pricing of transaction fees.
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    \48\ See, e.g., CNBC Debuts New Set on NYSE Floor, available at
https://www.cnbc.com/id/46517876.
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    While the Commission has clearly noted that the Staff Guidance is
merely guidance and ``is not a rule, regulation or statement of the . .
. Commission . . . the Commission has neither approved nor disapproved
its content . . .'',\49\ this is not the reality experienced by
exchanges such as MIAX Pearl. As such, non-legacy exchanges are forced
to rely on an opaque cost-based justification standard. However,
because the Staff Guidance is devoid of detail on what must be
contained in cost-based justification, this standard is nearly
impossible to meet despite repeated good-faith efforts by the Exchange
to provide substantial amount of cost-related details. For example,
MIAX Pearl Options has attempted to increase similar fees using a cost-
based justification numerous times, having submitted over six
filings.\50\ However, despite providing 100+ page filings describing in
extensive detail its costs associated with providing the services
described in the filings, Commission Staff continues to suspend such
filings, with the rationale that the Exchange has not provided
sufficient detail of its costs and without ever being precise about
what additional data points are required. The Commission Staff appears
to be interpreting the reasonableness standard set forth in Section
6(b)(4) of the Act \51\ in a manner that is not possible to achieve.
This essentially nullifies the cost-based approach for exchanges as a
legitimate alternative as laid out in the Staff Guidance. By refusing
to accept a reasonable cost-based argument to justify non-transaction
fees (in addition to refusing to accept a competition-based argument as
described above), or by failing to provide the detail required to
achieve that standard, the Commission Staff is effectively preventing
non-legacy exchanges from making any non-transaction fee changes, which
benefits the legacy exchanges and is anticompetitive to the non-legacy
exchanges. This does not meet the fairness standard under the Act and
is discriminatory.
---------------------------------------------------------------------------

    \49\ See supra note 24, at note 1.
    \50\ See, e.g., Securities Exchange Act Release Nos. 92798
(August 27, 2021), 86 FR 49360 (September 2, 2021) (SR-PEARL-2021-
33); 92644 (August 11, 2021), 86 FR 46055 (August 17, 2021) (SR-
PEARL-2021-36); 93162 (September 28, 2021), 86 FR 54739 (October 4,
2021) (SR-PEARL-2021-45); 93556 (November 10, 2021), 86 FR 64235
(November 17, 2021) (SR-PEARL-2021-53); 93774 (December 14, 2021),
86 FR 71952 (December 20, 2021) (SR-PEARL-2021-57); 93894 (January
4, 2022), 87 FR 1203 (January 10, 2022) (SR-PEARL-2021-58); 94258
(February 15, 2022), 87 FR 9659 (February 22, 2022) (SR-PEARL-2022-
03); 94286 (February 18, 2022), 87 FR 10860 (February 25, 2022) (SR-
PEARL-2022-04); 94721 (April 14, 2022), 87 FR 23573 (April 20, 2022)
(SR-PEARL-2022-11); 94722 (April 14, 2022), 87 FR 23660 (April 20,
2022) (SR-PEARL-2022-12); 94888 (May 11, 2022), 87 FR 29892 (May 17,
2022) (SR-PEARL-2022-18).
    \51\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Because of the un-level playing field created by the Revised Review
Process and Staff Guidance, the Exchange believes that the Commission
Staff, at this point, should either (a) provide sufficient clarity on
how its cost-based standard can be met, including a clear and
exhaustive articulation of required data and its views on acceptable
margins,\52\ to the extent that this is pertinent; (b) establish a
framework to provide for commensurate non-transaction based fees among
competing exchanges to ensure fee parity; \53\ or (c) accept that
certain competition-based arguments are applicable given the linkage
between non-transaction fees and transaction fees, especially where
non-transaction fees among exchanges are based upon disparate standards
of review, lack parity, and impede fair competition. Considering the
absence of any such framework or clarity, the Exchange believes that
the Commission does not have a reasonable basis to deny the Exchange
this change in fees, where the proposed change would result in fees
meaningfully lower than comparable fees at competing exchanges and
where the associated non-transaction revenue is meaningfully lower than
competing exchanges.
---------------------------------------------------------------------------

    \52\ To the extent that the cost-based standard includes
Commission Staff making determinations as to the appropriateness of
certain profit margins, the Exchange believes that Staff should be
clear as to what they determine is an appropriate profit margin.
    \53\ In light of the arguments above regarding disparate
standards of review for historical legacy non-transaction fees and
current non-transaction fees for non-legacy exchanges, a fee parity
alternative would be one possible way to avoid the current unfair
and discriminatory effect of the Staff Guidance and Revised Review
Process. See, e.g., CSA Staff Consultation Paper 21-401, Real-Time
Market Data Fees, available at https://www.bcsc.bc.ca/-/media/PWS/Resources/Securities_Law/Policies/Policy2/21401_Market_Data_Fee_CSA_Staff_Consulation_Paper.pdf.
---------------------------------------------------------------------------

    In light of the above, disapproval of this would not meet the
fairness standard under the Act, would be discriminatory and place a
substantial burden on competition. The Exchange would be uniquely
disadvantaged by not being able to increase its access fees to
comparable levels (or lower levels than current market rates) to those
of other exchanges for connectivity. If the Commission Staff were to
disapprove this proposal, that action, and not market forces, would
substantially affect whether the Exchange can be successful in its
competition with other exchanges. Disapproval of this filing could also
be viewed as an arbitrary and capricious decision should the Commission
Staff continue to ignore its past treatment of non-transaction fee
filings before implementation of the Revised Review Process and Staff
Guidance and refuse to allow such filings to be approved despite
significantly enhanced arguments and cost disclosures.\54\
---------------------------------------------------------------------------

    \54\ The Exchange's costs have clearly increased and continue to
increase, particularly regarding capital expenditures, as well as
employee benefits provided by third parties (e.g., healthcare and
insurance). Yet, practically no fee change proposed by the Exchange
to cover its ever-increasing costs has been acceptable to the
Commission Staff since 2021. The only other fair and reasonable
alternative would be to require the numerous fee filings
unquestioningly approved before the Staff Guidance and Revised
Review Process to ``develop a record,'' and to ``explain their
conclusions, based on that record, in a written decision that is
sufficient to enable us to perform our review,'' and to ensure a
comparable review process with the Exchange's filing.
---------------------------------------------------------------------------

* * * * *
1Gb and 10Gb ULL Connectivity Fee Change
    Sections 2(a) and (b) of the Fee Schedule describe network
connectivity fees for the 1Gb ULL and 10Gb ULL fiber connections, which
are charged to both Equity Members and non-Members for connectivity to
the Exchange's primary and secondary facilities. The Exchange offers
its Equity Members the ability to connect to the Exchange in order to
transmit orders to and receive information from the Exchange. Equity
Members can also choose to connect to the Exchange indirectly through
physical connectivity maintained by a third-party extranet. Extranet
physical connections may provide access to one or multiple Equity
Members on a single connection. The number of physical connections
assigned to each User \55\ as

of March 31, 2023, ranges from one to thirteen, depending on the scope
and scale of the Equity Member's trading activity on the Exchange as
determined by the Equity Member, including the Equity Member's
determination of the need for redundant connectivity. The Exchange
notes that 40% of its Equity Members do not maintain a physical
connection directly with the Exchange in the Primary Data Center
(though many such Equity Members have connectivity through a third-
party provider) and another 46% have either one or two physical ports
to connect to the Exchange in the Primary Data Center. Thus, only a
limited number of Equity Members, 14%, maintain three or more physical
ports to connect to the Exchange in the Primary Data Center.
---------------------------------------------------------------------------

    \55\ The term ``User'' shall mean any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Exchange Rule 2602. See Exchange Rule 1901.
---------------------------------------------------------------------------

    In order to partially cover the continuous increase in aggregate
costs of providing physical connectivity to Equity Members and non-
Equity Members, as described below, the Exchange proposes to amend the
monthly connectivity fees as follows: (a) increase the 1Gb ULL
connection from $1,000 to $2,500; and (b) increase the 10Gb ULL
connection from $3,500 to $8,000.\56\
---------------------------------------------------------------------------

    \56\ The Exchange notes that while its proposed fee of $8,000
per 10Gb ULL connection is higher than MEMX's $6,000 monthly fee for
its xNet Physical Connection, MEMX does not offer any other physical
connectivity, such as a 1Gb connection, for a lower fee. See
Securities Exchange Act Release No. 95936 (September 27, 2022), 87
FR 59845 (October 3, 2022) (SR-MEMX-2022-26). See MEMX Fee Schedule,
Connectivity and Application Sessions, available at https://info.memxtrading.com/fee-schedule/ (last visited June 15, 2023).
---------------------------------------------------------------------------

FIX and MEO Ports
    Similar to other exchanges, the Exchange offers its Equity Members
application sessions, also known as ports, for order entry and receipt
of trade execution reports and order messages. Equity Members can also
choose to connect to the Exchange indirectly through a session
maintained by a third-party service bureau. Service bureau sessions may
provide access to one or multiple Equity Members on a single session.
The number of sessions assigned to each User as of April 18, 2023,
ranges from one to more than 100, depending on the scope and scale of
the Equity Member's trading activity on the Exchange (either through a
direct connection or through a service bureau) as determined by the
Equity Member. For example, by using multiple sessions, Equity Members
can segregate order flow from different internal desks, business lines,
or customers. The Exchange does not impose any minimum or maximum
requirements for how many application sessions an Equity Member or
service bureau can maintain, and does not propose to impose any minimum
or maximum session requirements for its Equity Members or their service
bureaus.
    Section 2)d), Port Fees, of the Fee Schedule describes fees for
access and services used by Equity Members and non-Members. The
Exchange provides the following types of ports: (i) FIX Ports, which
allow Equity Members to send orders and other messages using the FIX
protocol; and (ii) MEO Ports, which allow Equity Members order entry
capabilities to all Exchange matching engines.
    The Exchange operates a primary and secondary data center as well
as a disaster recovery center. Each Port provides access to all
Exchange data centers for a single fee. The Exchange currently provides
the first twenty-five (25) FIX and MEO Ports free of charge and
absorbed all associated costs since the launch of MIAX Pearl Equities.
The Exchange charges the following separate monthly fees for FIX and
MEO Ports: $450 for ports 26-50, $400 for ports 51-75, $350 for ports
76-100, and $300 for ports 101 and higher. The Exchange now proposes to
provide the first five (5) FIX or MEO Ports free of charge, then charge
a flat rate of $450 per port for port six (6) and above.\57\
---------------------------------------------------------------------------

    \57\ The Exchange notes that the proposed fee of $450 per port
equals the amount charged by MEMX for MEMX's application sessions
(order entry and drop copy ports), but MEMX does not offer any ports
free of charge. See MEMX Fee Schedule, Connectivity and Application
Sessions, available at https://info.memxtrading.com/fee-schedule/
(last visited June 15, 2023). See Securities Exchange Act Release
No. 95936 (September 27, 2022), 87 FR 59845 (October 3, 2022) (SR-
MEMX-2022-26). Unlike MEMX and other exchanges, the Exchange also
continues to provide FXD Ports (i.e., Drop Copy Ports) free of
charge.
---------------------------------------------------------------------------

Implementation
    The proposed fee changes are immediately effective.
2. Statutory Basis
    The Exchange believes that the proposed fees are consistent with
Section 6(b) of the Act \58\ in general, and furthers the objectives of
Section 6(b)(4) of the Act \59\ in particular, in that it provides for
the equitable allocation of reasonable dues, fees and other charges
among Equity Members and other persons using any facility or system
which the Exchange operates or controls. The Exchange also believes the
proposed fees further the objectives of Section 6(b)(5) of the Act \60\
in that they are 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 are not designed to permit unfair
discrimination between customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78f(b).
    \59\ 15 U.S.C. 78f(b)(4).
    \60\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the information provided to justify the
proposed fees meets or exceeds the amount of detail required in respect
of proposed fee changes under the Revised Review Process and as set
forth in recent Staff Guidance. Based on both the BOX Order \61\ and
the Staff Guidance,\62\ the Exchange believes that the proposed fees
are consistent with the Act because they are: (i) reasonable, equitably
allocated, not unfairly discriminatory, and not an undue burden on
competition; (ii) comply with the BOX Order and the Staff Guidance; and
(iii) supported by evidence (including comprehensive revenue and cost
data and analysis) that they are fair and reasonable and will not
result in excessive pricing or supra-competitive profit.
---------------------------------------------------------------------------

    \61\ See supra note 23.
    \62\ See supra note 24.
---------------------------------------------------------------------------

    The Exchange believes that exchanges, in setting fees of all types,
should meet high standards of transparency to demonstrate why each new
fee or fee amendment meets the requirements of the Act that fees be
reasonable, equitably allocated, not unfairly discriminatory, and not
create an undue burden on competition among market participants. The
Exchange believes this high standard is especially important when an
exchange imposes various fees for market participants to access an
exchange's marketplace.
    In the Staff Guidance, the Commission Staff states that, ``[a]s an
initial step in assessing the reasonableness of a fee, staff considers
whether the fee is constrained by significant competitive forces.''
\63\ The Staff Guidance further states that, ``. . . even where an SRO
cannot demonstrate, or does not assert, that significant competitive
forces constrain the fee at issue, a cost-based discussion may be an
alternative basis upon which to show consistency with the Exchange
Act.'' \64\ In the Staff Guidance, the Commission Staff further states
that, ``[i]f an SRO seeks to support its claims that a proposed fee is
fair and reasonable because it will permit recovery of the

SRO's costs, . . . , specific information, including quantitative
information, should be provided to support that argument.'' \65\
---------------------------------------------------------------------------

    \63\ Id.
    \64\ Id.
    \65\ Id.
---------------------------------------------------------------------------

    The proposed fees are reasonable because they promote parity among
exchange pricing for access, which promotes competition, including in
the Exchanges' ability to competitively price transaction fees, invest
in infrastructure, new products and other innovations, all while
allowing the Exchange to begin to recover its costs to provide
dedicated access via 1Gb and 10Gb ULL connectivity as well as FIX and
MEO Ports. As discussed above, the Revised Review Process and Staff
Guidance have created an uneven playing field between legacy and non-
legacy exchanges by severely restricting non-legacy exchanges from
being able to increase non-transaction relates fees to provide them
with additional necessary revenue to better compete with legacy
exchanges, which largely set fees prior to the Revised Review Process.
The much higher non-transaction fees charged by the legacy exchanges
provides them with two significant competitive advantages: (i)
additional non-transaction revenue that may be used to fund areas other
than the non-transaction service related to the fee, such as
investments in infrastructure, advertising, new products and other
innovations; and (ii) greater flexibility to lower their transaction
fees by using the revenue from the higher non-transaction fees to
subsidize transaction fee rates. The latter is more immediately
impactful in competition for order flow and market share, given the
variable nature of this cost on Equity Member firms. The absence of a
reasonable path forward to increase non-transaction fees to comparable
(or lower rates) limits the Exchange's flexibility to, among other
things, make additional investments in infrastructure and advertising,
diminishes the ability to remain competitive on transaction fees, and
hinders the ability to compete for order flow and market share. Again,
while one could debate whether the pricing of non-transaction fees are
subject to the same market forces as transaction fees, there is little
doubt that subjecting one exchange to a materially different standard
than that applied to other exchanges for non-transaction fees leaves
that exchange at a disadvantage in its ability to compete with its
pricing of transaction fees.
The Proposed Fees Ensure Parity Among Exchange Access Fees, Which
Promotes Competition
    The Exchange commenced operations in September 2020 and adopted its
initial fee schedule, with 1Gb ULL connectivity set at $1,000, 10Gb ULL
connectivity fees set at $3,500, and provided the first twenty-five
(25) FIX and MEO Ports for free.\66\ As a new exchange entrant, the
Exchange chose to offer such services at a discounted rate or free of
charge to encourage market participants to trade on the Exchange and
experience, among things, the quality of the Exchange's technology and
trading functionality. This practice is not uncommon. New exchanges
often do not charge fees or charge lower fees for certain services such
as memberships/trading permits to attract order flow to an exchange,
and later amend their fees to reflect the true value of those services,
absorbing all costs to provide those services in the meantime. Allowing
new exchange entrants time to build and sustain market share through
various pricing incentives before increasing non-transaction fees
encourages market entry and fee parity, which promotes competition
among exchanges. It also enables new exchanges to mature their markets
and allow market participants to trade on the new exchanges without
fees serving as a potential barrier to attracting memberships and order
flow.\67\
---------------------------------------------------------------------------

    \66\ See supra note 7.
    \67\ See Securities Exchange Act Release No. 94894 (May 11,
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (stating, ``[t]he
Exchange established this lower (when compared to other options
exchanges in the industry) Participant Fee in order to encourage
market participants to become Participants of BOX. . .''). See also
Securities Exchange Act Release No. 90076 (October 2, 2020), 85 FR
63620 (October 8, 2020) (SR-MEMX-2020-10) (proposing to adopt the
initial fee schedule and stating that ``[u]nder the initial proposed
Fee Schedule, the Exchange proposes to make clear that it does not
charge any fees for membership, market data products, physical
connectivity or application sessions.''). MEMX's market share has
increased and recently proposed to adopt numerous non-transaction
fees, including fees for membership, market data, and connectivity.
See Securities Exchange Act Release Nos. 93927 (January 7, 2022), 87
FR 2191 (January 13, 2022) (SR-MEMX-2021-19) (proposing to adopt
membership fees); 96430 (December 1, 2022), 87 FR 75083 (December 7,
2022) (SR-MEMX-2022-32) and 95936 (September 27, 2022), 87 FR 59845
(October 3, 2022) (SR-MEMX-2022-26) (proposing to adopt fees for
connectivity). See also, e.g., Securities Exchange Act Release No.
88211 (February 14, 2020), 85 FR 9847 (February 20, 2020) (SR-
NYSENAT-2020-05), available at https://www.nyse.com/publicdocs/nyse/markets/nyse-national/rule-filings/filings/2020/SR-NYSENat-2020-05.pdf (initiating market data fees for the NYSE National exchange
after initially setting such fees at zero).
---------------------------------------------------------------------------

    The Exchange has not amended any of its non-transaction fees since
its launch in September 2022. The Exchange balanced business and
competitive concerns with the need to financially compete with the
larger incumbent exchanges that charge higher fees for similar
connectivity and use that revenue to invest in their technology and
other service offerings.
    The proposed changes to the Fee Schedule are reasonable in several
respects. As a threshold matter, the Exchange is subject to significant
competitive forces, which constrains its pricing determinations for
transaction fees as well as non-transaction fees. The fact that the
market for order flow is competitive has long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the D.C.
Circuit stated, ``[n]o one disputes that competition for order flow is
`fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .'' \68\
---------------------------------------------------------------------------

    \68\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).
---------------------------------------------------------------------------

    The Commission and the courts have repeatedly expressed their
preference for competition over regulatory intervention to determine
prices, products, and services in the securities markets. In Regulation
NMS, while adopting a series of steps to improve the current market
model, the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also 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.'' \69\
---------------------------------------------------------------------------

    \69\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
---------------------------------------------------------------------------

    Congress directed the Commission to ``rely on `competition,
whenever possible, in meeting its regulatory responsibilities for
overseeing the SROs and the national market system.' '' \70\ As a
result, and as evidenced above, the Commission has historically relied
on competitive forces to determine whether a fee proposal is equitable,
fair,

reasonable, and not unreasonably or unfairly discriminatory. ``If
competitive forces are operative, the self-interest of the exchanges
themselves will work powerfully to constrain unreasonable or unfair
behavior.'' \71\ Accordingly, ``the existence of significant
competition provides a substantial basis for finding that the terms of
an exchange's fee proposal are equitable, fair, reasonable, and not
unreasonably or unfairly discriminatory.'' \72\ In the Revised Review
Process and Staff Guidance, Commission Staff indicated that they would
look at factors beyond the competitive environment, such as cost, only
if a ``proposal lacks persuasive evidence that the proposed fee is
constrained by significant competitive forces.'' \73\
---------------------------------------------------------------------------

    \70\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep.
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
    \71\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \72\ Id.
    \73\ See Staff Guidance, supra note 24.
---------------------------------------------------------------------------

    The Exchange believes the competing exchanges' connectivity and
port fees are useful examples of alternative approaches to providing
and charging for access and demonstrating how such fees are
competitively set and constrained. To that end, the Exchange believes
the proposed fees are competitive and reasonable because the proposed
fees are similar to or less than fees charged for similar connectivity
and port access provided by other exchanges with comparable market
shares. As such, the Exchange believes that denying its ability to
institute fees that allow the Exchange to recoup its costs with a
reasonable margin in a manner that is closer to parity with legacy
exchanges, in effect, impedes its ability to compete, including in its
pricing of transaction fees and ability to invest in competitive
infrastructure and other offerings.
    The following table shows how the Exchange's proposed fees remain
similar to or less than fees charged for similar connectivity and port
access provided by other exchanges with similar market share. Each of
the connectivity or port rates in place at competing exchanges were
filed with the Commission for immediate effectiveness and remain in
place today.

------------------------------------------------------------------------
                                     Type of          Monthly fee (per
           Exchange               connection or      connection or per
                                       port                port)
------------------------------------------------------------------------
MIAX Pearl Equities (as         1Gb ULL            $2,500.
 proposed) (market share of      connection.       $8,000
 1.49% for the month of May     10Gb ULL           1-5 ports: FREE; 6
 2023) \a\.                      connection.        ports or more: $450
                                FIX and MEO Ports   per port.
                                FXD Ports (i.e.,   FREE.
                                 Drop Copy Ports).
MEMX \b\ (market share of       1Gb connection...  Not available.
 2.63% for the month of May     xNet Physical      $6,000 per
 2023) \c\.                      connection.        connection.
                                Order Entry Ports  $450 per port.
                                Drop Copy Ports..  $450 per port.
NASDAQ PSX LLC (``PSX'') \d\    1Gb connection...  $2,500 per connection
 (market share of 0.37% for     10Gb connection..   (plus $1,500
 the month of May 2023) \e\.                        installation fee).
                                                   $7,500 per connection
                                                    (plus $1,500
                                                    installation fee).
                                Order Entry Ports  $400 per port.
                                Drop Copy Ports..  $400 per port.
NASDAQ BX LLC (``BX'') \f\      1Gb Ultra          $2,500 per connection
 (market share of 0.34% for      connection.        (plus $1,500
 the month of May 2023) \g\.    10Gb Ultra          installation fee).
                                 connection.       $15,000 (plus $1,500
                                                    installation fee).
                                Order Entry Ports  $500 per port.
                                Drop Copy Ports..  $500 per port.
------------------------------------------------------------------------
\a\ See the ``Market Share'' section of the Exchange's website,
  available at https://www.miaxglobal.com/.
\b\ See MEMX Fee Schedule, Connectivity and Application Sessions,
  available at https://info.memxtrading.com/fee-schedule/.
\c\ See supra note a.
\d\ See PSX Pricing Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing; and PSX Rules, General 8: Connectivity,
  Section 2, Direct Connectivity.
\e\ See supra note a.
\f\ See BX Pricing Schedule, available at https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; and BX Rules, General 8: Connectivity,
  Section 2, Direct Connectivity.
\g\ See supra note a.

    There is no requirement, regulatory or otherwise, that any broker-
dealer connect to and access any (or all of) the available equity
exchanges. Market participants may choose to become a member of one or
more equities exchanges based on the market participant's assessment of
the business opportunity relative to the costs of the Exchange. With
this, there is elasticity of demand for exchange membership. As an
example, one Market Maker of MIAX Pearl Options terminated their
membership effective January 1, 2023 as a direct result of the proposed
connectivity and port fee changes by MIAX Pearl Options.
    It is not a requirement for market participants to become members
of all equities exchanges; in fact, certain market participants conduct
an equities business as a member of only one market.\74\ A very small
number of market participants choose to become a member of all sixteen
(16) equities exchanges. Most firms that actively trade on equities
markets are not currently Equity Members of the Exchange and do not
purchase connectivity or port services at the Exchange. Connectivity
and ports are only available to Equity Members or service bureaus, and
only an Equity Member may utilize a port.\75\
---------------------------------------------------------------------------

    \74\ BOX recently adopted an electronic market maker trading
permit fee. See Securities Exchange Release No. 94894 (May 11,
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17). In that
proposal, BOX stated that, ``. . . it is not aware of any reason why
Market Makers could not simply drop their access to an exchange (or
not initially access an exchange) if an exchange were to establish
prices for its non-transaction fees that, in the determination of
such Market Maker, did not make business or economic sense for such
Market Maker to access such exchange. [BOX] again notes that no
market makers are required by rule, regulation, or competitive
forces to be a Market Maker on [BOX].'' Also in 2022, MEMX
established a monthly membership fee. See Securities Exchange Act
Release No. 93927 (January 7, 2022), 87 FR 2191 (January 13, 2022)
(SR-MEMX-2021-19). In that proposal, MEMX reasoned that that there
is value in becoming a member of the exchange and stated that it
believed that the proposed membership fee ``is not unfairly
discriminatory because no broker-dealer is required to become a
member of the Exchange'' and that ``neither the trade-through
requirements under Regulation NMS nor broker-dealers' best execution
obligations require a broker-dealer to become a member of every
exchange.''
    \75\ Service Bureaus may obtain ports on behalf of Equity
Members.
---------------------------------------------------------------------------

    BOX recently noted in a proposal to amend their own trading permit
fees

that of the 62 market making firms that are registered as Market Makers
across Cboe, MIAX, and BOX, 42 firms access only one of the three
exchanges.\76\ For equities, the Exchange currently has 45 Equity
Members. Also, MEMX noted in a January 2022 filing that it had only 66
members, and, based on publicly available information regarding a
sample of the Exchange's competitors, NYSE has 142 members, Cboe BZX
has 140 members, and Investors Exchange LLC (``IEX'') has 133
members.\77\ For options, the Exchange and its affiliates, MIAX and
MIAX Emerald, have a total of 47 members. Of those 47 total members, 35
are members of all three affiliated exchanges, four (4) are members of
only two (2) affiliated exchanges, and eight (8) are members of only
one affiliated exchange. The Exchange believes that significant
differences in membership numbers describes by the Exchange, BOX, and
MEMX demonstrate that firms can, and do, select which exchanges they
wish to access, and, accordingly, exchanges must take competitive
considerations into account when setting fees for such access. The
Exchange also notes that no firm is an Equity Member of the Exchange
only. The above data evidences that a broker-dealer need not have
direct connectivity to all exchanges, let alone the Exchange and its
affiliates, and broker-dealers may elect to do so based on their own
business decisions and need to directly access each exchange's
liquidity pool.
---------------------------------------------------------------------------

    \76\ See Securities Exchange Act Release No. 94894 (May 11,
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17).
    \77\ See Securities Exchange Act Release No. 93927 (January 7,
2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-2021-19).
---------------------------------------------------------------------------

    Not only is there not an actual regulatory requirement to connect
to every equities exchange, the Exchange believes there is also no ``de
facto'' or practical requirement as well, as further evidenced by the
broker-dealer membership analysis of exchanges discussed above. Indeed,
broker-dealers choose if and how to access a particular exchange and
because it is a choice, the Exchange must set reasonable pricing,
otherwise prospective members would not connect and existing members
would disconnect from the Exchange. The decision to become a member of
an exchange, is complex, and not solely based on the non-transactional
costs assessed by an exchange. As noted herein, specific factors
include, but are not limited to: (i) an exchange's available liquidity
in equities securities; (ii) trading functionality offered on a
particular market; (iii) product offerings; (iv) customer service on an
exchange; and (v) transactional pricing. Becoming a member of the
exchange does not ``lock'' a potential member into a market or diminish
the overall competition for exchange services.
    In lieu of becoming a member at each exchange, a market participant
may join one exchange and elect to have their orders routed in the
event that a better price is available on an away market. Nothing in
the Order Protection Rule requires a firm to become an Equity Member
at--or establish connectivity to--the Exchange.\78\ If the Exchange is
not at the national best bid and offer (``NBBO''),\79\ the Exchange
will route an order to any away market that is at the NBBO to ensure
that the order was executed at a superior price and prevent a trade-
through.\80\
---------------------------------------------------------------------------

    \78\ See 17 CFR 242.611.
    \79\ See Exchange Rule 1901.
    \80\ Equity Members may elect to not route their orders by
utilizing the Do Not Route or Post Only order type instructions. See
Exchange Rule 2614(c)(1) and (2).
---------------------------------------------------------------------------

    With respect to the submission of orders, Equity Members may also
choose not to purchase any connection from the Exchange, and instead
rely on the port of a third party to submit an order. For example, a
third-party broker-dealer Equity Member of the Exchange may be utilized
by a retail investor to submit orders into an exchange. An
institutional investor may utilize a broker-dealer, a service
bureau,\81\ or request sponsored access \82\ through a member of an
exchange in order to submit a trade directly to an equities
exchange.\83\ A market participant may either pay the costs associated
with becoming a member of an exchange or, in the alternative, a market
participant may elect to pay commissions to a broker-dealer, pay fees
to a service bureau to submit trades, or pay a member to sponsor the
market participant in order to submit trades directly to an exchange.
---------------------------------------------------------------------------

    \81\ Service Bureaus provide access to market participants to
submit and execute orders on an exchange. On the Exchange, a Service
Bureau may be an Equity Member. Some Equity Members utilize a
Service Bureau for connectivity and that Service Bureau may not be
an Equity Member. Some market participants utilize a Service Bureau
who is an Equity Member to submit orders.
    \82\ Sponsored Access is an arrangement whereby an Equity Member
permits its customers to enter orders into an exchange's system that
bypass the Equity Member's trading system and are routed directly to
the Exchange, including routing through a service bureau or other
third-party technology provider.
    \83\ This may include utilizing a floor broker and submitting
the trade to an equities trading floor.
---------------------------------------------------------------------------

    Non-Member third-parties, such as service bureaus and extranets,
resell the Exchange's connectivity. This indirect connectivity is
another viable alternative for market participants to trade on the
Exchange without connecting directly to the Exchange (and thus not pay
the Exchange's connectivity fees), which alternative is already being
used by non-Equity Members and further constrains the price that the
Exchange is able to charge for connectivity and other access fees to
its market. The Exchange notes that it could, but chooses not to,
preclude market participants from reselling its connectivity. Unlike
other exchanges, the Exchange also does not currently assess fees on
third-party resellers on a per customer basis (i.e., fees based on the
number of firms that connect to the Exchange indirectly via the third-
party).\84\ Indeed, the Exchange does not receive any connectivity
revenue when connectivity is resold by a third-party, which often is
resold to multiple customers, some of whom are agency broker-dealers
that have numerous customers of their own.\85\ Particularly, in the
event that a market participant views the Exchange's direct
connectivity and access fees as more or less attractive than competing
markets, that market participant can choose to connect to the Exchange
indirectly or may choose not to connect to the Exchange and connect
instead to one or more of the other 15 equities markets. Accordingly,
the Exchange believes that the proposed fees are fair and reasonable
and constrained by competitive forces.
---------------------------------------------------------------------------

    \84\ See, e.g., Nasdaq Price List--U.S. Direct Connection and
Extranet Fees, available at, US Direct-Extranet Connection
(nasdaqtrader.com); and Securities Exchange Act Release Nos. 74077
(January 16, 2022), 80 FR 3683 (January 23, 2022) (SR-NASDAQ-2015-
002); and 82037 (November 8, 2022), 82 FR 52953 (November 15, 2022)
(SR-NASDAQ-2017-114).
    \85\ The Exchange notes that resellers, such as SFTI, are not
required to publicize, let alone justify or file with the Commission
their fees, and as such could charge the market participant any fees
it deems appropriate (including connectivity fees higher than the
Exchange's connectivity fees), even if such fees would otherwise be
considered potentially unreasonable or uncompetitive fees.
---------------------------------------------------------------------------

    The Exchange is obligated to regulate its Equity Members and secure
access to its environment. To properly regulate its Equity Members and
secure the trading environment, the Exchange takes measures to ensure
access is monitored and maintained with various controls. Connectivity
and ports are methods utilized by the Exchange to grant Equity Members
secure access to communicate with the Exchange and exercise trading
rights. When a market participant elects to be an Equity Member, and is
approved for membership by the Exchange, the Equity Member is granted
trading rights to enter orders and/or quotes into Exchange through
secure connections.

    Again, there is no legal or regulatory requirement that a market
participant become an Equity Member of the Exchange, or, if it is an
Equity Member, to purchase connectivity beyond the one connection that
is necessary to quote or submit orders on the Exchange. Equity Members
may freely choose to rely on one or many connections, depending on
their business model. This is again evidenced by the fact that one MIAX
Pearl Options Market Maker terminated their MIAX Pearl Options
membership effective January 1, 2023 as a direct result of the proposed
connectivity and port fee changes by MIAX Pearl Options. If a market
participant chooses to become an Equity Member, they may then choose to
purchase connectivity beyond the one connection that is necessary to
quote or submit orders on the Exchange. Members may freely choose to
rely on one or many connections, depending on their business model.
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 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 connectivity and 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 Equity Members--both generally and in relation to other
Equity 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 Equity Members and competition among Equity
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,\86\ and Rule 19b-4 thereunder,\87\ with respect to the
types of information exchanges should provide when filing fee changes,
and Section 6(b) of the Act,\88\ which requires, among other things,
that exchange fees be reasonable and equitably allocated,\89\ not
designed to permit unfair discrimination,\90\ and that they not impose
a burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\91\ This rule change proposal addresses those
requirements, and the analysis and data in each of the sections that
follow are designed to clearly and comprehensively show how they are
met.\92\ The Exchange reiterates that the legacy exchanges with whom
the Exchange vigorously competes 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 Revised Review Process and Staff Guidance.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78s(b)(1).
    \87\ 17 CFR 240.19b-4.
    \88\ 15 U.S.C. 78f(b).
    \89\ 15 U.S.C. 78f(b)(4).
    \90\ 15 U.S.C. 78f(b)(5).
    \91\ 15 U.S.C. 78f(b)(8).
    \92\ See Staff Guidance, supra note 24.
---------------------------------------------------------------------------

    As detailed below, the Exchange recently calculated its aggregate
annual costs for providing physical 1Gb and 10Gb ULL connectivity to
the Exchange at $18,331,650 combined ($17,726,799 for 10Gb ULL
connectivity and $604,851 for 1Gb connectivity) (or approximately
$1,527,637 per month for combined connectivity costs, rounded to the
nearest dollar when dividing the combined annual cost by 12 months).
The Exchange also recently calculated its aggregate annual costs for
providing FIX and MEO Ports at $3,951,993 combined ($911,998 for FIX
Ports and $3,039,995 for MEO Ports) (or approximately $329,333 per
month for combined FIX and MEO Port costs, rounded to the nearest
dollar when dividing the combined annual cost by 12 months). In order
to cover a portion of the aggregate costs of providing connectivity to
its Users (both Equity Members and non-Equity Members \93\) going
forward, as described below, the Exchange proposes to modify its Fee
Schedule as described above.
---------------------------------------------------------------------------

    \93\ Types of market participants that obtain connectivity
services from the Exchange but are not Equity Members include
service bureaus and extranets. Service bureaus offer technology-
based services to other companies for a fee, including order entry
services, and thus, may access application sessions on behalf of one
or more Equity Members. Extranets offer physical connectivity
services to Equity Members and non-Equity Members.
---------------------------------------------------------------------------

    In 2020, the Exchange completed a study of its aggregate costs to
produce market data and connectivity (the ``Cost Analysis'').\94\ 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'').
---------------------------------------------------------------------------

    \94\ The Exchange frequently updates it Cost Analysis as
strategic initiatives change, costs increase or decrease, and market
participant needs and trading activity 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 the affiliated markets cost driver as part of its 2023
budget review process. The 2023 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,\95\ 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 four 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 costs drivers are the same at each
individual marketplace and dividing total cost by four (4) (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.
---------------------------------------------------------------------------

    \95\ For example, MIAX Pearl Equities maintains 24 matching
engines, MIAX Pearl Options maintains 12 matching engines, MIAX
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., connectivity and ports, market
data, and transaction 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. For
instance, fixed costs that are not driven by client activity (e.g.,
message rates), such as data center costs, were allocated more heavily
to the provision of physical connectivity (60.0% of total expense
amount allocated to 10Gb ULL connectivity), with smaller allocations to
FIX Ports (1.2%) and MEO Ports (3.8%), and the remainder to the
provision of other connectivity, other ports, transaction execution,
membership services and market data services (35%). 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 as a non-listing
venue it has five primary sources of revenue that it can potentially
use to fund its operations: transaction fees, fees for connectivity and
port services, 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
Equity Members and parties that they sponsor to participate directly on
the Exchange may submit orders to the Exchange; many Equity 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
potential fee proposals. In the absence of the Commission attempting to
specify a methodology for the allocation of exchanges' interdependent
costs, the Exchange is left with its best efforts 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
connectivity and port services, and thus bears a relationship that is,
``in nature and closeness,'' directly related to network connectivity
and 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 1Gb and10Gb ULL connectivity, as well as FIX and MEO Ports,
is $1,856,970, as further detailed below.
    Lastly, the Exchange notes that, based on: (i) the total expense
amounts contained in this filing (which are 2023 projected expenses),
and (ii) the total expense amounts contained in the related MIAX Pearl
Options filing (also 2023 projected expenses), MIAX PEARL, LLC's total
costs have increased at a greater rate over the last three years than
the total costs of MIAX PEARL, LLC's affiliated exchanges, MIAX and
MIAX Emerald. This is also reflected in the total costs reported in
MIAX PEARL, LLC's Form 1 filings over the last three years, when
comparing MIAX PEARL, LLC to MIAX PEARL, LLC's affiliated exchanges,
MIAX and MIAX Emerald. This is primarily because that MIAX PEARL, LLC
operates two markets, one for options and one for equities, while MIAX
and MIAX Emerald each operate only one market. This is also due to
higher current expense for MIAX PEARL, LLC for 2022 and 2023, due to a
hardware refresh (i.e., replacing old hardware with new equipment) for
MIAX Pearl Options, as well as higher costs associated with MIAX Pearl
Equities due to greater development efforts to grow that newer
marketplace, all of which are discussed in more detail below. MIAX
PEARL, LLC confirms that there is no double counting of expenses
between the options and equities platform of MIAX PEARL, LLC; the
greater expense amounts of MIAX PEARL, LLC (relative to its affiliated
exchanges, MIAX and MIAX Emerald) is solely attributed to the unique
factors of MIAX PEARL, LLC discussed above.
Costs Related to Offering Physical 1Gb and 10Gb ULL Connectivity
    The following charts detail the individual line-item costs
considered by the Exchange to be related to offering physical dedicated
1Gb and 10Gb ULL connectivity via an unshared network 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 47.6% of its overall Human Resources cost to offering
physical 1Gb and 10Gb ULL connectivity).

----------------------------------------------------------------------------------------------------------------
                                              10Gb ULL Connectivity
-----------------------------------------------------------------------------------------------------------------
                                                                     Allocated       Allocated
                          Cost drivers                              annual cost    monthly cost    Percentage of
                                                                        \h\             \i\             all
----------------------------------------------------------------------------------------------------------------
Human Resources.................................................      $5,936,741        $494,728            46.1
Connectivity (external fees, cabling, switches, etc.)...........          69,451           5,788            60.0
Internet Services and External Market Data......................       1,818,808         151,567            72.5
Data Center.....................................................       1,052,797          87,733            60.0
Hardware and Software Maintenance and Licenses..................         642,112          53,509            58.0
Depreciation....................................................       3,448,206         287,351            73.6
Allocated Shared Expenses.......................................       4,758,684         396,557            48.6
                                                                 -----------------------------------------------
    Total.......................................................      17,726,799       1,477,233              54
----------------------------------------------------------------------------------------------------------------
\h\ The Annual Cost includes figures rounded to the nearest dollar.
\i\ 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.

----------------------------------------------------------------------------------------------------------------
                                              1Gb ULL Connectivity
-----------------------------------------------------------------------------------------------------------------
                                                                     Allocated       Allocated
                          Cost drivers                              annual cost    monthly cost    Percentage of
                                                                        \j\             \k\             all
----------------------------------------------------------------------------------------------------------------
Human Resources.................................................        $202,566         $16,880             1.6
Connectivity (external fees, cabling, switches, etc.)...........           2,370             197             2.0
Internet Services and External Market Data......................          62,059           5,172             2.5
Data Center.....................................................          35,922           2,993             2.0
Hardware and Software Maintenance and Licenses..................          21,909           1,826             2.0
Depreciation....................................................         117,655           9,805             2.5
Allocated Shared Expenses.......................................         162,370          13,531             1.7
                                                                 -----------------------------------------------
    Total.......................................................         604,851          50,404             1.8
----------------------------------------------------------------------------------------------------------------
\j\ See supra note h.
\k\ See supra note i.

    Below are additional details regarding each of the line-item costs
considered by the Exchange to be related to offering physical 1Gb and
10Gb ULL connectivity. 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
cost drivers differ when compared to the same cost drivers described by
the Exchange's affiliated markets in their similar proposed fee changes
for connectivity and ports. This is because MIAX Pearl Equities' cost
allocation methodology utilizes the actual projected costs of MIAX
Pearl Equities (which are specific to MIAX Pearl Equities, and are
independent of the costs projected and utilized by MIAX Pearl Equities'
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
    For personnel costs (Human Resources), the Exchange calculated an
allocation of employee time for employees whose functions include
providing and maintaining physical connectivity and performance thereof
(primarily the Exchange's network infrastructure team, which spends
most of their time performing functions necessary to provide physical
connectivity) and for which the Exchange allocated weighted average
percentages of 58% for 10Gb ULL connectivity and 2.0% for 1Gb
connectivity of each employee's time from the above group assigned to
the Exchange based on the above-described allocation methodology. The
Exchange also allocated Human Resources costs to provide physical
connectivity to a limited subset of personnel with ancillary functions
related to establishing and maintaining such connectivity (such as
information security, sales, membership, and finance personnel), for
which the Exchange allocated cost on an employee-by-employee basis
(i.e., only including those personnel who support functions related to
providing physical connectivity) and then applied a smaller allocation
to such employees (less than 37%). The Exchange notes that it and its
affiliated markets have 184 employees (excluding employees at 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
each employee, 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, in consultation with each employee, 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.
    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 physical connectivity, and
confirming that the proposed allocations were reasonable based on an
understanding of the percentage of their time such employees devote to
tasks related to providing physical connectivity.\96\ This includes
personnel from the Exchange departments that are predominately involved
in providing 1Gb and 10Gb ULL connectivity: Business Systems
Development, Trading Systems Development, Systems Operations and
Network Monitoring, Network and Data Center Operations, Listings,
Trading Operations, and Project Management, of which the Exchange
allocated 58% for 10Gb ULL connectivity and 2.0% for 1Gb ULL
connectivity of each of their employee's time assigned to the Exchange,
as stated above. The Exchange notes that senior level executives' time
was only allocated to the Human Resources costs to the extent they are
involved in overseeing tasks related to providing physical
connectivity. 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.
---------------------------------------------------------------------------

    \96\ MIAX Pearl Equities notes that while 19.8 full time
equivalents (``FTEs'') were allocated in this filing to MIAX Pearl
Equities and a lower number of FTEs in similar filings by the
Exchange's affiliated markets, MIAX Emerald (11.7 FTEs), MIAX (12.9
FTEs) and MIAX Pearl Options (12.3 FTEs), the overall cost
percentage allocated for each differs due to the individual level of
compensation for each employee assigned to work on projects for the
exchanges.
---------------------------------------------------------------------------

    Lastly, the Exchange notes that the above allocation for 10Gb ULL
connectivity is greater than its affiliate options exchanges as MIAX
Pearl Equities allocated 46.1% of its Human Resources expense towards
10Gb ULL connectivity, while MIAX, MIAX Pearl Options and MIAX Emerald
allocated 25%, 26.3% and 28%, respectively, to the same category of
expense. This difference is due to meaningfully more current and
anticipated business and technology initiatives dedicated to MIAX Pearl
Equities than its affiliate options exchanges at the time of this
filing. These initiatives include: enhancements to routing options,
expanding the available order types, adding direct market data
connectivity to competing exchanges, and adopting additional risk
controls.\97\ MIAX Pearl Equities is a relatively new market (launched
in September of 2020), and, as a result, more personnel are allocated
to work on various business initiatives and enhancements to help the
market grow, add new functionality, and expand its product offerings.
These technology changes directly impact the Exchange's interface
specifications and matching engine which, in turn, impacts connectivity
by requiring additional coding, testing, and other updates necessary to
accommodate the above initiatives.
---------------------------------------------------------------------------

    \97\ See, e.g., Securities Exchange Act Release Nos. 94301
(February 23, 2022), 87 FR 11739 (March 2, 2022) (SR-PEARL-2022-06)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Rule 2617(b) To Adopt Two New Routing Options, and
To Make Related Changes and Clarifications to Rules 2614(a)(2)(B)
and 2617(b)(2)); 94851 (May 4, 2022), 87 FR 28077 (May 10, 2022)
(SR-PEARL-2022-15) (Notice of Filing and Immediate Effectiveness of
a Proposed Rule Change To Adopt Exchange Rule 532, Order Price
Protection Mechanisms and Risk Controls); 95298 (July 15, 2022), 87
FR 43579 (July 21, 2022) (SR-PEARL-2022-29) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change by MIAX PEARL, LLC
To Amend the Route to Primary Auction Routing Option Under Exchange
Rule 2617(b)(5)(B)); 95679 (September 6, 2022), 87 FR 55866
(September 12, 2022) (SR-PEARL-2022-34) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change To Amend Exchange
Rule 2614, Orders and Order Instructions, To Adopt the Primary Peg
Order Type); 96205 (November 1, 2022), 87 FR 67080 (November 7,
2022) (SR-PEARL-2022-43) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend Rule 2614, Orders
and Order Instructions and Rule 2618, Risk Settings and Trading Risk
Metrics To Enhance Existing Risk Controls); 96905 (February 13,
2023), 88 FR 10391 (February 17, 2023) (SR-PEARL-2023-03) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Exchange Rule 2618 To Add Optional Risk Control Settings);
97236 (March 31, 2023), 88 FR 20597 (April 6, 2023) (SR-PEARL-2023-
15) (Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Exchange Rules 2617 and 2626 Regarding Retail Orders
Routed Pursuant to the Route to Primary Auction Routing Option).
---------------------------------------------------------------------------

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 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. equities 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 1Gb and 10Gb ULL connectivity. Specifically, the Exchange
utilizes connectivity providers to connect to other national securities
exchanges, the NASDAQ UTP and CTA/CQ Plans. 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 to which market
participants connect to via 10Gb ULL connectivity. Without these
services providers, the Exchange would not be able to connect to other
national securities exchanges, market data providers, or the NASDAQ UTP
and CTA/CQ Plans and, therefore, would not be able to operate and
support its System Networks. The Exchange does not employ a separate
fee to cover its connectivity provider expense and recoups that
expense, in part, by charging for 1Gb and 10Gb ULL connectivity.
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 internet, fiber and bandwidth connections between the
Exchange's networks, primary and secondary data centers, and office
locations in Princeton and Miami.
    External market data includes fees paid to third parties, including
other exchanges, to receive and consume market data from other markets.
The Exchange included external market data fees to the provision of
physical connectivity as such market data is necessary here to offer
certain services related to such connectivity, such as certain risk
checks that are performed prior to execution, and checking for other
conditions (e.g., limit order price protection, trading collars).\98\
Thus, as

market data from other exchanges is consumed at the matching engine
level, (to which physical connectivity provides access to) in order to
validate orders before additional entering the matching engine or being
executed, the Exchange believes it is reasonable to allocate a small
amount of such costs to 1Gb ULL and 10Gb ULL connectivity.
---------------------------------------------------------------------------

    \98\ This allocation may differ from MIAX Pearl Options due to
the different amount of proprietary market data feeds purchased by
MIAX Pearl Equities compared to MIAX Pearl Options. For options
market data, MIAX Pearl Options primarily relies on data purchased
from OPRA. For equities market data, MIAX Pearl Equities does not
solely rely on data purchased from the consolidated tape plans
(e.g., Nasdaq UTP, CTA, and CQ plans), but rather purchases multiple
proprietary market data feeds from other equities exchanges. See,
e.g., Exchange Rule 2613 (setting forth the data feeds MIAX Pearl
Equities subscribes to for each equities exchange and trading
center).
---------------------------------------------------------------------------

    The Exchange relies on content service providers for data feeds for
the entire U.S. equities industry, as well as content 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 content service
providers to receive market data from Nasdaq UTP, CTA and CQ Plans, as
well as from other exchanges and market data providers. The Exchange
understands that these service providers provide services to most, if
not all, of the other U.S. exchanges and other market participants.
Market data provided these service providers and competing exchanges is
critical to the Exchange's daily operations and performance of its
System Networks to which market participants connect to via 1Gb ULL and
10Gb ULL connectivity. Without these services providers, the Exchange
would not be able to receive market data and, therefore, would not be
able to operate and support its System Networks. The Exchange does not
employ a separate fee to cover its content service provider expense and
recoups that expense, in part, by charging for 1Gb ULL and 10Gb ULL
connectivity.
    Lastly, the Exchange notes that the actual dollar amounts allocated
as part of the second step of the 2023 budget process differ among the
Exchange and its affiliated markets for the internet Services and
External Market Data cost driver, even though, but for MIAX Emerald,
the allocation percentages are generally consistent across markets
(e.g., MIAX Emerald, MIAX, MIAX Pearl Options and MIAX Pearl Equities
allocated 84.8%, 73.3%, 73.3% and 72.5%, respectively, to the same cost
driver). This is because: (i) a different percentage of the overall
internet Services and External Market Data cost driver was allocated to
MIAX Emerald and its affiliated markets due to the factors set forth
under the first step of the 2023 budget review process described above
(unique technical architecture, market structure, and business
requirements of each marketplace); and (ii) MIAX Emerald itself
allocated a larger portion of this cost driver to 10Gb ULL connectivity
because of recent initiatives to improve the latency and determinism of
its systems. The Exchange notes while the percentage MIAX Emerald
allocated to the internet Services and External Market Data cost driver
is greater than the Exchange and its other affiliated markets, the
overall dollar amount allocated to the Exchange under the initial step
of the 2023 budget process is lower than its affiliated markets.
Data Center
    Data Center costs includes an allocation of the costs the Exchange
incurs to provide physical connectivity in the third-party data centers
where it maintains its equipment (such as dedicated space, security
services, cooling and power). The Exchange notes that it 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 high percentage of the Data Center cost (62%) to
physical 1Gb and 10Gb ULL connectivity because the third-party data
centers and the Exchange's physical equipment contained therein is the
most direct cost in providing physical access to the Exchange. In other
words, for the Exchange to operate in a dedicated space with
connectivity by market participants to a physical trading platform, the
data centers are a very tangible cost, and in turn, if the Exchange did
not maintain such a presence then physical connectivity would be of no
value to market participants.
    Lastly, MIAX Emerald, MIAX, MIAX Pearl Options and MIAX Pearl
Equities allocated 61.9%, 60.60%, 60.60% and 60%, respectively, to the
Data Center cost driver. However, MIAX Pearl Equities was allocated a
larger dollar amount under the first step of the 2023 budget process.
This resulted in MIAX Pearl Equities allocating a larger dollar amount
to its Data Center cost driver than its affiliated options markets,
despite nearly identical percentage allocations. The dollar amount of
MIAX Pearl Equities' Data Center cost driver is higher than its
affiliated options markets due to the factors set forth under the first
step of the 2023 budget review process described above (unique
technical architecture, market structure, and business requirements of
each marketplace). As described herein, MIAX Pearl Equities connects
directly to multiple individual equities exchanges for trading and
market data. This, in turn, requires additional hardware and software
requiring an increased data center footprint. MIAX Pearl Equities also
maintains an additional gateway to support market participant's access
demands and maintains 24 matching engines, double the number of
matching engines on MIAX Emerald and MIAX Pearl Options.\99\ The
additional gateway coupled with the higher number of matching engines
results in higher data center costs.
---------------------------------------------------------------------------

    \99\ See supra note 95. MIAX Pearl Options also provides an
additional gateway but only maintains 12 matching engines. MIAX and
MIAX Emerald do not provide an additional gateway and maintain 24
and 12 matching engines, respectively.
---------------------------------------------------------------------------

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
physical connectivity to the Exchange.\100\ The Exchange notes that
this allocation is greater than MIAX and MIAX Emerald options exchanges
as MIAX Pearl Equities allocated 58% of its Hardware and Software
Maintenance and License expense towards 10Gb ULL connectivity, while
MIAX and MIAX Emerald allocated 49.8% and 50.9%, respectively, to the
same category of expense. Also, MIAX Pearl Options allocated a higher
percentage of the same category of expense (58.6%) towards its Hardware
and Software Maintenance and License expense for 10Gb ULL connectivity,
which MIAX Pearl Options explains in its own proposal to amend its 10Gb
ULL connectivity fees. This difference in allocation is because MIAX
Pearl Equities maintains software licenses that are unique to its
trading platform and used only for the trading of equity securities.
The cost for these licenses cannot be shared with MIAX Pearl Equities'
affiliated options markets because each of those platforms trade only
options, not equities. MIAX Pearl Equities' affiliates are able to
share the cost of many of their software licenses among the multiple
options platforms (thus lowering the cost to each individual options
platform), whereas MIAX Pearl Equities cannot share such cost and,
therefore, bears the entire cost.
---------------------------------------------------------------------------

    \100\ This allocation may be greater than the Exchange's
affiliated markets, specifically MIAX and MIAX Emerald, because,
unlike MIAX and MIAX Emerald, MIAX Pearl Equities and MIAX Pearl
Options both maintain an additional gateway to accommodate their
Members' and Equity Members' access and connectivity needs. This
added gateway contributes to the difference in allocation
percentages between MIAX Pearl Equities and MIAX Pearl Options and
MIAX and MIAX Emerald.
---------------------------------------------------------------------------

Depreciation
    All physical assets, software, and hardware used to provide 1Gb ULL
and 10Gb ULL connectivity, which also

includes assets used for testing and monitoring of Exchange
infrastructure, were valued at cost, and 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 are owned by the Exchange and some of which are leased by the
Exchange in order to allow efficient periodic technology refreshes. The
Exchange also included in the Depreciation cost driver certain budgeted
improvements that the Exchange intends to capitalize and depreciate
with respect to 10Gb ULL connectivity in the near-term. As with the
other allocated costs in the Exchange's updated Cost Analysis, the
Depreciation cost was therefore narrowly tailored to depreciation
related to 10Gb ULL connectivity. As noted above, the Exchange
allocated 73.6% of its allocated depreciation costs to providing
physical 10Gb ULL connectivity and 2.5% of all depreciation costs to
providing 1Gb connectivity. The Exchange also notes that this
allocation differs from its affiliated markets due to a number of
factors, such as the age of physical assets and software (e.g., older
physical assets and software were previously depreciated and removed
from the allocation), or certain system enhancements that required new
physical assets and software, thus providing a higher contribution to
the depreciated cost.
    Lastly, the Exchange notes that this allocation is greater than its
affiliate options exchanges as MIAX Pearl Equities allocated 73.6% of
its Depreciation expense towards 10Gb ULL connectivity, while MIAX,
MIAX Pearl Options and MIAX Emerald allocated 61.6%, 58.2% and 63.8%,
respectively, to the same category of expense. This is due to MIAX
Pearl Equities being a newer market and having newer physical assets
and software subject to depreciation than its affiliate options
exchanges. The Exchange's affiliate options exchanges are older markets
that have more software and equipment that have been fully depreciated
when compared to the newer software and hardware currently being
depreciated by MIAX Pearl Equities at higher rates.
Allocated Shared Expenses
    Finally, a limited portion of general shared expenses was allocated
to overall physical connectivity costs because without these general
shared costs the Exchange would not be able to operate in the manner
that it does and provide physical connectivity. 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. Similarly, the cost of paying directors to
serve on the Exchange's Board of Directors is also included in the
Exchange's general shared expense cost driver.\101\ The Exchange notes
that the 50% allocation of general shared expenses for physical
connectivity is higher than that allocated to general shared expenses
for FIX and MEO Ports based on its allocation methodology that weighted
costs attributable to each core service based on an understanding of
each area. While physical connectivity has several areas where certain
tangible costs are heavily weighted towards providing such service
(e.g., Data Center, as described above), FIX and MEO Ports do not
require as many broad or indirect resources as other core services.
---------------------------------------------------------------------------

    \101\ The Exchange notes that MEMX allocated a precise amount of
10% of the overall cost for directors to providing physical
connectivity. The Exchange does not calculate is expenses at that
granular a level. Instead, director costs are included as part of
the overall general allocation.
---------------------------------------------------------------------------

* * * * *
Approximate Cost per 1Gb ULL and 10Gb ULL Connection per Month
    After determining the approximate allocated monthly cost related to
10Gb connectivity, the, total monthly cost for 10Gb ULL connectivity of
$1,477,233 was divided by the number of physical 10Gb ULL connections
the Exchange maintained at the time that proposed pricing was
determined (90), to arrive at a cost of approximately $16,414 per
month, per physical 10Gb ULL connection. The total monthly cost for 1Gb
connectivity of $50,404 was divided by the number of physical 1Gb
connections the Exchange maintained at the time that proposed pricing
was determined (8), to arrive at a cost of approximately $6,301 per
month, per physical 1Gb connection. Due to the nature of this
particular cost, this allocation methodology results in an allocation
among the Exchange and its affiliated markets based on set quantifiable
criteria, i.e., actual number of 1Gb ULL and 10Gb ULL connections.
* * * * *
Costs Related to Offering FIX and MEO Ports
    The following chart details the individual line-item costs
considered by the Exchange to be related to offering FIX and MEO Ports
as well as the percentage of the Exchange's overall costs such costs
represent for such area (e.g., as set forth below, the Exchange
allocated approximately 22.4% of its overall Human Resources cost to
offering FIX and MEO Ports).

----------------------------------------------------------------------------------------------------------------
                                                    FIX Ports
-----------------------------------------------------------------------------------------------------------------
                                                                     Allocated       Allocated
                          Cost drivers                              annual cost    monthly cost    Percentage of
                                                                        \l\             \m\             all
----------------------------------------------------------------------------------------------------------------
Human Resources.................................................        $665,726         $55,476             5.2
Connectivity (external fees, cabling, switches, etc.)...........             535              45             0.5
Internet Services and External Market Data......................          11,574             965             0.5
Data Center.....................................................          20,262           1,689             1.2
Hardware and Software Maintenance and Licenses..................           5,108             426             0.5
Depreciation....................................................          92,114           7,676             2.0
Allocated Shared Expenses.......................................         116,679           9,723             1.2
                                                                 -----------------------------------------------
    Total.......................................................         911,998          76,000             2.8
----------------------------------------------------------------------------------------------------------------
\l\ See supra note h (describing rounding of Annual Costs).
\m\ See supra note i (describing rounding of Monthly Costs based on annual costs).

----------------------------------------------------------------------------------------------------------------
                                                    MEO Ports
-----------------------------------------------------------------------------------------------------------------
                                                                     Allocated       Allocated
                          Cost drivers                              annual cost    monthly cost    Percentage of
                                                                        \n\             \o\             all
----------------------------------------------------------------------------------------------------------------
Human Resources.................................................      $2,219,088        $184,924            17.2
Connectivity (external fees, cabling, switches, etc.)...........           1,782             149             1.5
Internet Services and External Market Data......................          38,582           3,215             1.5
Data Center.....................................................          67,538           5,628             3.8
Hardware and Software Maintenance and Licenses..................          17,026           1,419             1.5
Depreciation....................................................         307,048          25,587             6.6
Allocated Shared Expenses.......................................         388,931          32,411             4.0
                                                                 -----------------------------------------------
    Total.......................................................       3,039,995         253,333             9.3
----------------------------------------------------------------------------------------------------------------
\n\ See supra note h (describing rounding of Annual Costs). The Exchange notes that costs to provide MEO Ports
  are higher than the Exchange's costs to provide FIX Ports because it is more expensive to maintain and support
  the MEO network due to its high performance capabilities and supporting infrastructure (including employee
  support). The MEO interface is a customizable binary interface that the Exchange developed in-house and
  maintains on its own. The FIX interface is the industry standard for simple order entry, which requires less
  development, maintenance, and support than the MEO interface. The MEO interface provides best-in-class system
  throughput and capacity. Users of MEO Ports, which are primarily Equity Market Makers, consume the most
  bandwidth and resources of the network via MEO Ports. To achieve a consistent, premium network performance,
  the Exchange must build out and maintain a network that has the capacity to handle the message rate
  requirements of its most heavy network consumers, resulting in greater cost to provide and maintain MEO ports.
\o\ See supra note i (describing rounding of Monthly Costs based on annual costs).

    Below are additional details regarding each of the line-item costs
considered by the Exchange to be related to offering FIX and MEO 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 connectivity and
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
    With respect to FIX and MEO Ports, the Exchange calculated Human
Resources cost by taking an allocation of employee time for employees
whose functions include providing FIX and MEO Ports and maintaining
performance thereof (including a broader range of employees such as
technical operations personnel, market operations personnel, and
software engineering personnel) as well as a limited subset of
personnel with ancillary functions related to maintaining such
connectivity (such as sales, membership, and finance personnel). Just
as described above for 10Gb ULL connectivity, the estimates of Human
Resources cost were again determined by consulting with department
leaders, determining which employees are involved in tasks related to
providing FIX and MEO Ports and maintaining performance thereof, and
confirming that the proposed allocations were reasonable based on an
understanding of the percentage of their time such employees devote to
tasks related to providing FIX and MEO Ports and maintaining
performance thereof. The Exchange notes that senior level executives
were allocated Human Resources costs to the extent they are involved in
overseeing tasks specifically related to providing Full Service MEO
Ports.\102\ This includes personnel from the following Exchange
departments that are predominately involved in providing FIX and MEO
Ports: Business Systems Development, Trading Systems Development,
Systems Operations and Network Monitoring, Network and Data Center
Operations, Listings, Trading Operations, and Project Management.
Senior level executives' were only allocated Human Resources costs to
the extent that they are involved in managing personnel responsible for
tasks related to providing FIX and MEO Ports. The Human Resources cost
was again calculated using a blended rate of compensation reflecting
salary, equity and bonus compensation, benefits, payroll taxes, and
401(k) matching contributions.
---------------------------------------------------------------------------

    \102\ The Exchange notes that while 2.2 FTEs and 7.4 FTEs were
allocated in this filing to the Exchange related to FIX and MEO
Ports, respectively, and a similar number of FTEs in similar filings
by the Exchange's affiliates, MIAX Emerald (2.5 FTEs) and MIAX (3.0
FTEs) related to their Limited Service MEI Ports, the overall cost
percentage allocated for each differs due to the individual level of
compensation for each employee assigned to work on projects for the
exchanges.