[Federal Register Volume 88, Number 126 (Monday, July 3, 2023)]
[Notices]
[Pages 42785-42807]
[FR Doc No: 2023-13997]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97813; File No. SR-EMERALD-2023-14]

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

June 27, 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 Emerald, LLC (``MIAX Emerald'' 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 MIAX Emerald Fee
Schedule (the ``Fee Schedule'') to amend certain connectivity and port
fees.
    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX's
principal office, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule as follows: (1)
increase the fees for a 10 gigabit (``Gb'') ultra-low latency (``ULL'')
fiber connection for Members \3\ and non-Members; and (2) adopt a
tiered-pricing structure for Limited Service MIAX Emerald Express
Interface (``MEI'') Ports \4\ available to Market Makers.\5\ The
Exchange last increased the fees for both 10Gb ULL fiber connections
and Limited Service MEI Ports beginning with a series of filings on
October 1, 2020 (with the final filing made on March 24, 2021).\6\
Prior to that fee change, the Exchange provided Limited Service MEI
Ports for $50 per port, after the first two Limited Service MEI Ports
that are provided free of charge, and the Exchange incurred all the
costs associated to provide those first two Limited Service MEI Ports
since it commenced operations in March 2019. The Exchange then
increased the fee by $50 to a modest $100 fee per Limited Service MEI
Port and increased the fee for 10Gb ULL fiber connections from $6,000
to $10,000 per month.
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    \3\ The term ``Member'' means an individual or organization
approved to exercise the trading rights associated with a Trading
Permit. Members are deemed ``members'' under the Exchange Act. See
Exchange Rule 100.
    \4\ The MIAX Emerald Exapress Interface (``MEI'') is a
connection to the MIAX Emerald System that enables Market Makers to
submit simple and complex electronic quotes to MIAX Emerald. See the
Definitions Section of the Fee Schedule.
    \5\ The term ``Market Makers'' refers to Lead Market Makers
(``LMMs''), Primary Lead Market Makers (``PLMMs''), and Registered
Market Makers (``RMMs'') collectively. See the Definitions Section
of the Fee Schedule and Exchange Rule 100.
    \6\ See Securities Exchange Act Release Nos. 91460 (April 1,
2021), 86 FR 18349 (April 8, 2021) (SR-EMERALD-2021-11); 90184
(October 14, 2020), 85 FR 66636 (October 20, 2020) (SR-EMERALD-2020-
12); 90600 (December 8, 2020), 85 FR 80831 (December 14, 2020) (SR-
EMERALD-2020-17); 91032 (February 1, 2021), 86 FR 8428 (February 5,
2021) (SR-EMERALD-2021-02); and 91200 (February 24, 2021), 86 FR
12221 (March 2, 2021) (SR-EMERALD-2021-07).
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    Also, in that fee change, the Exchange adopted fees for providing
five different types of ports for the first time. These ports were FIX
Ports, MEI Ports, Clearing Trade Drop Ports, FIX Drop Copy Ports, and
Purge Ports.\7\ Again, the Exchange absorbed all costs associated with
providing these ports since its launch in March 2019. As explained in
that filing, expenditures, as well as research and development
(``R&D'') in numerous areas resulted in a material increase in expense
to the Exchange and were the primary drivers for that proposed fee
change. In that filing, the Exchange allocated a total of $9.3 million
in expenses to providing 10Gb ULL fiber connectivity, additional
Limited Service MEI Ports, FIX Ports, MEI Ports, Clearing Trade Drop
Ports, FIX Drop Copy Ports, and Purge Ports.\8\ Since the time of the
2021 increase discussed above, the Exchange experienced ongoing
increases in expenses, particularly internal expenses.\9\ As discussed
more fully below, the Exchange recently calculated increased annual
aggregate costs of $11,361,586 for providing 10Gb ULL connectivity and
$1,779,066 for providing Limited Service MEI Ports.
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    \7\ See id. for a description of each of these ports.
    \8\ Id.
    \9\ 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.
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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 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 10Gb ULL connectivity and Limited Service MEI Ports in order
to recoup ongoing costs and increase in expenses set forth below in the
Exchange's cost analysis. The Exchange initially filed this proposal on
December 30, 2022 as SR-EMERALD-2022-38. On January 9, 2023, the
Exchange withdrew SR-EMERALD-2022-38 and resubmitted this proposal as
SR-EMERALD-2023-01 (the ``Initial Proposal'').\10\ On, February 23,
2023, the Exchange withdrew the Initial Proposal and replaced it with a
revised proposal (SR-EMERALD-2023-05) (the ``Second Proposal'').\11\ On
April 20, 2023, the Exchange withdrew the Second Proposal and replaced
it with a revised proposal (SR-EMERALD-2023-12) (the ``Third
Proposal'').\12\ On June 16, 2023, the Exchange withdrew the Third
Proposal and replaced it with this further revised proposal (SR-
EMERALD-2023-14).\13\
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    \10\ See Securities Exchange Act Release No. 96628 (January 10,
2023), 88 FR 2651 (January 17, 2023) (SR-EMERALD-2023-01).
    \11\ See Securities Exchange Act Release No. 97079 (March 8,
2023), 88 FR 15764 (March 14, 2023) (SR-EMERALD-2023-05).
    \12\ See Securities Exchange Act Release No. 97422 (May 2,
2023), 88 FR 29750 (May 8, 2023) (SR-EMERALD-2023-12).
    \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,
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 (MIAX PEARL, LLC (``MIAX Pearl'') (separately
among MIAX Pearl Options and MIAX Pearl Equities) and MIAX \14\
(together with MIAX Pearl Options and MIAX Pearl Equities, 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 10Gb ULL connectivity and Limited Service MEI Ports with a
reasonable mark-up over those costs.
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    \14\ The term ``MIAX'' means Miami International Securities
Exchange, 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 \15\ 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.\16\ 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.\17\ 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'').\18\ 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.'' \19\ The Commission
denied requests by various exchanges and plan participants for
reconsideration of the Remand Order.\20\ 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.'' \21\ Both the
Remand Order and the Order Denying Reconsideration were appealed to the
D.C. Circuit.
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    \15\ See Susquehanna International Group, LLP v. Securities &
Exchange Commission, 866 F.3d 442 (D.C. Circuit 2017) (the
``Susquehanna Decision'').
    \16\ Id.
    \17\ See Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 84432, 2018 WL 5023228 (October 16, 2018) (the ``SIFMA
Decision'').
    \18\ 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).
    \19\ Id. at page 2.
    \20\ Sec. Indus. & Fin. Mkts. Ass'n, Securities Exchange Act
Release No. 85802, 2019 WL 2022819 (May 7, 2019) (the ``Order
Denying Reconsideration'').
    \21\ 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.\22\ 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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    \22\ 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.'' \23\ 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.'' \24\ 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.'' \25\
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    \23\ See Staff Guidance on SRO Rule Filings Relating to Fees
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (the ``Staff Guidance'').
    \24\ Id.
    \25\ 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 \26\ and remanded for further proceedings consistent
with its opinion.\27\ 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.'' \28\
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.\29\ 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.'' \30\ 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.\31\
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    \26\ 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.
    \27\ 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.
    \28\ Id. at *2; see also id. (``[T]he sole purpose of the
challenged remand has disappeared.'').
    \29\ 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'').
    \30\ Id.
    \31\ 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 v. 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.'' \32\
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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    \32\ See supra note 27, 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'').\33\ 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 \34\ 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.\35\ These fees
remain in effect today.
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    \33\ 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. 78k-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.
    \34\ 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.
    \35\ 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.\36\
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. 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 \37\ and $80,383,000 for
2021.\38\ Cboe C2 Exchange, Inc. (``C2'') reported ``access and
capacity fee'' revenue of

$19,016,000 for 2020 \39\ and $22,843,000 for 2021.\40\ Cboe BZX
Exchange, Inc. (``BZX'') reported ``access and capacity fee'' revenue
of $38,387,000 for 2020 \41\ and $44,800,000 for 2021.\42\ Cboe EDGX
Exchange, Inc. (``EDGX'') reported ``access and capacity fee'' revenue
of $26,126,000 for 2020 \43\ and $30,687,000 for 2021.\44\ 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.\45\ 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.'' \46\
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    \36\ The Exchange has filed, and subsequently withdrawn, various
forms of this proposed fee numerous times since August 2021 with
each proposal containing hundreds of cost and revenue disclosures
never previously disclosed by legacy exchanges in their access and
market data fee filings prior to 2019.
    \37\ 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.
    \38\ See Cboe 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001155.pdf.
    \39\ See C2 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000469.pdf.
    \40\ See C2 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001156.pdf.
    \41\ See BZX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000465.pdf.
    \42\ See BZX 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001152.pdf.
    \43\ See EDGX 2021 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000467.pdf.
    \44\ See EDGX 2022 Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2200/22001154.pdf.
    \45\ 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.
    \46\ See PHLX Form 1 Amendment, available at https://www.sec.gov/Archives/edgar/vprr/2100/21000475.pdf. The Exchange
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,\47\ 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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    \47\ 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 . . .'',\48\ this is not the reality experienced by
exchanges such as MIAX Emerald. 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, the
Exchange has attempted to increase fees using a cost-based
justification numerous times, having submitted over six filings.\49\
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
\50\ 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.
---------------------------------------------------------------------------

    \48\ See supra note 23, at note 1.
    \49\ See Securities Exchange Act Release Nos. 94889 (May 11,
2022), 87 FR 29928 (May 17, 2022) (SR-EMERALD-2022-19); 94718 (April
14, 2022), 87 FR 23633 (April 20, 2022) (SR-EMERALD-2022-15); 94717
(April 14, 2022), 87 FR 23648 (April 20, 2022) (SR-EMERALD-2022-13);
94260 (February 15, 2022), 87 FR 9695 (February 22, 2022) (SR-
EMERALD-2022-05); 94257 (February 15, 2022), 87 FR 9678 (February
22, 2022) (SR-EMERALD-2022-04); 93772 (December 14, 2021), 86 FR
71965 (December 20, 2021) (SR-EMERALD-2021-43); 93776 (December 14,
2021), 86 FR 71983 (December 20, 2021) (SR-EMERALD-2021-42); 93188
(September 29, 2021), 86 FR 55052 (October 5, 2021) (SR-EMERALD-
2021-31); (SR-EMERALD-2021-30) (withdrawn without being noticed by
the Commission); 93166 (September 28, 2021), 86 FR 54760 (October 4,
2021) (SR-EMERALD-2021-29); 92662 (August 13, 2021), 86 FR 46726
(August 19, 2021) (SR-EMERALD-2021-25); 92645 (August 11, 2021), 86
FR 46048 (August 17, 2021) (SR-EMERALD-2021-23).
    \50\ 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,\51\ 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; \52\ 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.
---------------------------------------------------------------------------

    \51\ 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.
    \52\ 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 places 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 options 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 options 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.\53\
---------------------------------------------------------------------------

    \53\ 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.
---------------------------------------------------------------------------

* * * * *
10Gb ULL Connectivity Fee Change
    The Exchange proposes to amend the Fee Schedule to increase the
fees for Members and non-Members to access the Exchange's system
networks \54\ via a 10Gb ULL fiber connection. Specifically, the
Exchange proposes to amend Sections (5)(a)-(b) of the Fee Schedule to
increase the 10Gb ULL connectivity fee for Members and non-Members from
$10,000 per month to $13,500 per month (``10Gb ULL Fee'').\55\
---------------------------------------------------------------------------

    \54\ The Exchange's system networks consist of the Exchange's
extranet, internal network, and external network.
    \55\ Market participants that purchase additional 10Gb ULL
connections as a result of this change will not be subject to the
Exchange's Member Network Connectivity Testing and Certification Fee
under Section (4)(c) of the Exchange's Fee Schedule. See Section
(4)(c) of the Exchange's fee schedule available at https://www.miaxglobal.com/markets/us-options/miax-options/fees (providing
that ``Network Connectivity Testing and Certification Fees will not
be assessed in situations where the Exchange initiates a mandatory
change to the Exchange's system that requires testing and
certification. Member Network Connectivity Testing and Certification
Fees will not be assessed for testing and certification of
connectivity to the Exchange's Disaster Recovery Facility.'').
---------------------------------------------------------------------------

    The Exchange will continue to assess monthly Member and non-Member
network connectivity fees for connectivity to the primary and secondary
facilities in any month the Member or non-Member is credentialed to use
any of the Exchange APIs or market data feeds in the production
environment. The Exchange will continue to pro-rate the fees when a
Member or non-Member makes a change to the connectivity (by adding or
deleting connections) with such pro-rated fees based on the number of
trading days that the Member or non-Member has been credentialed to
utilize any of the Exchange APIs or market data feeds in the production
environment through such connection, divided by the total number of
trading days in such month multiplied by the applicable monthly rate.
Limited Service MEI Ports
Background
    The Exchange also proposes to amend Section (5)(d) of the Fee
Schedule to adopt a tiered-pricing structure for Limited Service MEI
Ports available to Market Makers. The Exchange allocates two (2) Full
Service MEI Ports \56\ and two (2) Limited Service MEI Ports \57\ per
matching engine \58\ to which each Market Maker connects. Market Makers
may also request additional Limited Service MEI Ports for each matching
engine to which they connect. The Full Service MEI Ports and Limited
Service MEI Ports all include access to the Exchange's primary and
secondary data centers and its disaster recovery center. Market Makers
may request additional Limited Service MEI Ports. Currently, Market
Makers are assessed a $100 monthly fee for each Limited Service MEI
Port for each matching engine above the first two Limited Service MEI
Ports that are included for free.
---------------------------------------------------------------------------

    \56\ The term ``Full Service MEI Ports'' means a port which
provides Market Makers with the ability to send Market Maker simple
and complex quotes, eQuotes, and quote purge messages to the MIAX
Emerald System. Full Service MEI Ports are also capable of receiving
administrative information. Market Makers are limited to two Full
Service MEI Ports per Matching Engine. See the Definitions Section
of the Fee Schedule.
    \57\ The term ``Limited Service MEI Ports'' means a port which
provides Market Makers with the ability to send simple and complex
eQuotes and quote purge messages only, but not Market Maker Quotes,
to the MIAX Emerald System. Limited Service MEI Ports are also
capable of receiving administrative information. Market Makers
initially receive two Limited Service MEI Ports per Matching Engine.
See the Definitions Section of the Fee Schedule.
    \58\ The term ``Matching Engine'' means a part of the MIAX
Emerald electronic system that processes options orders and trades
on a symbol-by-symbol basis. Some Matching Engines will process
option classes with multiple root symbols, and other Matching
Engines may be dedicated to one single option root symbol (for
example, options on SPY may be processed by one single Matching
Engine that is dedicated only to SPY). A particular root symbol may
only be assigned to a single designated Matching Engine. A
particular root symbol may not be assigned to multiple Matching
Engines. See the Definitions Section of the Fee Schedule.
---------------------------------------------------------------------------

Limited Service MEI Port Fee Changes
    The Exchange now proposes to move from a flat monthly fee per
Limited Service MEI Port for each matching engine to a tiered-pricing
structure for Limited Service MEI Ports for each matching engine under
which the monthly fee would vary depending on the number of Limited
Service MEI Ports each Market Maker elects to purchase. Specifically,
the Exchange will continue to provide the first and second Limited
Service MEI Ports for each matching engine free of charge. For Limited
Service MEI Ports, the Exchange proposes to adopt the following tiered-
pricing structure: (i) the third and fourth Limited Service MEI Ports
for each matching engine will increase from the current flat monthly
fee of $100 to $200 per port; (ii) the fifth and sixth Limited Service
MEI Ports for each matching engine will increase from the current flat
monthly fee of $100 to $300 per port; and (iii) the seventh or more
Limited Service MEI Ports will increase from the current monthly flat
fee of $100 to $400 per port.\59\ The Exchange believes a tiered-
pricing structure will encourage Market Makers to be more efficient
when determining how to connect to the Exchange. This should also
enable the Exchange to better monitor and provide access to the
Exchange's network to ensure sufficient capacity and headroom in the
System \60\

in accordance with its fair access requirements under Section 6(b)(5)
of the Act.\61\
---------------------------------------------------------------------------

    \59\ As noted in the Fee Schedule, Market Makers will continue
to be limited to fourteen Limited Service MEI Ports per Matching
Engine. The Exchange also proposes to make a ministerial clarifying
change to remove the defined term ``Additional Limited Service MEI
Ports'' as a result of moving to a tiered pricing structure where
the first two Limited Service MEI Ports continue to be provided free
of charge. The Exchange proposes to make a related change to add the
term ``Limited Service MEI Ports'' after the word ``fourteen'' in
the Fee Schedule.
    \60\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See the Definitions
Section of the Fee Schedule and Exchange Rule 100.
    \61\ See 15 U.S.C. 78f(b). The Exchange may offer access on
terms that are not unfairly discriminatory among its Members, and
ensure sufficient capacity and headroom in the System. The Exchange
monitors the System's performance and makes adjustments to its
System based on market conditions and Member demand.
---------------------------------------------------------------------------

    The Exchange offers various types of ports with differing prices
because each port accomplishes different tasks, are suited to different
types of Members, and consume varying capacity amounts of the network.
For instance, Market Makers who take the maximum amount of Limited
Service MEI Ports account for approximately greater than 99% of message
traffic over the network, while Market Makers with fewer Limited
Service MEI Ports account for approximately less than 1% of message
traffic over the network. In the Exchange's experience, Market Makers
who only utilize the two free Limited Service MEI Ports do not have a
business need for the high performance network solutions required by
Market Makers who take the maximum amount of Limited Service MEI Ports.
The Exchange's high performance network solutions and supporting
infrastructure (including employee support), provides unparalleled
system throughput and the capacity to handle approximately 18 million
quote messages per second. Based on May 2023 trading results, the
Exchange handles over approximately 8.6 billion quotes on an average
day, and more than 189 billion quotes over the entire month. Of that
total, Market Makers with the maximum amount of Limited Service MEI
Ports generated more than 111 billion quotes (and more than 5 billion
quotes on an average day), and Market Makers who utilized only the two
free Limited Service MEI Ports generated approximately 40 billion
quotes (and approximately 1.8 billion quotes on an average day). Also
for May 2023, Market Makers who utilized 7 to 9 Limited Service MEI
ports submitted an average of 936 million quotes per day; Market Makers
who utilized 5-6 Limited Service MEI Ports submitted an average of 578
million quotes on an average day; and Market Makers who utilized 3-4
Limited Service MEI Ports submitted an average of 176 million quotes on
an average day.
    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.
These billions of messages per day consume the Exchange's resources and
significantly contribute to the overall network connectivity expense
for storage and network transport capabilities. The Exchange must also
purchase additional storage capacity on an ongoing basis to ensure it
has sufficient capacity to store these messages as part of it
surveillance program and to satisfy its record keeping requirements
under the Exchange Act.\62\ Thus, as the number of connections a Market
Maker has increases, certain other costs incurred by the Exchange that
are correlated to, though not directly affected by, connection costs
(e.g., storage costs, surveillance costs, service expenses) also
increase. The Exchange sought to design the proposed tiered-pricing
structure to set the amount of the fees to relate to the number of
connections a firm purchases. The more connections purchased by a
Market Maker likely results in greater expenditure of Exchange
resources and increased cost to the Exchange. With this in mind, the
Exchange proposes no fee or lower fees for those Market Makers who
receive fewer Limited Service MEI Ports since those Market Makers
generally tend to send the least amount of orders and messages over
those connections. Given this difference in network utilization rate,
the Exchange believes that it is reasonable, equitable, and not
unfairly discriminatory that Market Makers who take the most Limited
Service MEI Ports pay for the vast majority of the shared network
resources from which all Member and non-Member users benefit, but is
designed and maintained from a capacity standpoint to specifically
handle the message rate and performance requirements of those Market
Makers.
---------------------------------------------------------------------------

    \62\ 17 CFR 240.17a-1 (recordkeeping rule for national
securities exchanges, national securities associations, registered
clearing agencies and the Municipal Securities Rulemaking Board).
---------------------------------------------------------------------------

    The Exchange proposes to increase its monthly Limited Service MEI
Port fees to recover a portion of the costs associated with directly
accessing the Exchange.
    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 \63\ in general, and furthers the objectives of
Section 6(b)(4) of the Act \64\ in particular, in that it provides for
the equitable allocation of reasonable dues, fees and other charges
among 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 \65\ 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.
---------------------------------------------------------------------------

    \63\ 15 U.S.C. 78f(b).
    \64\ 15 U.S.C. 78f(b)(4).
    \65\ 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 \66\ and
the Staff Guidance,\67\ 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.
---------------------------------------------------------------------------

    \66\ See supra note 22.
    \67\ See supra note 23.
---------------------------------------------------------------------------

    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.''
\68\ 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.'' \69\ 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.'' \70\
---------------------------------------------------------------------------

    \68\ Id.
    \69\ Id.
    \70\ 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 recover its costs to provide dedicated access
via 10Gb ULL connectivity and Limited Service MEI 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 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 initially adopted a fee of $50 per port, after the
first two Limited Service MEI Ports that are provided free of charge,
and the Exchange incurred all the costs associated to provide those
first two Limited Service MEI Ports since it commenced operations in
March 2019. At that same time, the Exchange only charged $6,000 per
month for each 10Gb ULL connection. As a new exchange entrant, the
Exchange chose to offer connectivity and ports at very low fees 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.\71\
---------------------------------------------------------------------------

    \71\ 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).
---------------------------------------------------------------------------

    Later in 2020, as the Exchange's market share increased,\72\ the
Exchange then increased the fee by $50 to a modest $100 fee per Limited
Service MEI Port and increased the fee for 10Gb ULL fiber connections
from $6,000 to $10,000 per month.\73\ 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.
---------------------------------------------------------------------------

    \72\ The Exchange experienced a monthly average trading volume
of 3.43% for the month of October 2020. See the ``Market Share''
section of the Exchange's website, available at https://www.miaxglobal.com/.
    \73\ See Securities Exchange Act Release Nos. 91460 (April 1,
2021), 86 FR 18349 (April 8, 2021) (SR-EMERALD-2021-11); 90184
(October 14, 2020), 85 FR 66636 (October 20, 2020) (SR-EMERALD-2020-
12); 90600 (December 8, 2020), 85 FR 80831 (December 14, 2020) (SR-
EMERALD-2020-17); 91032 (February 1, 2021), 86 FR 8428 (February 5,
2021) (SR-EMERALD-2021-02); and 91200 (February 24, 2021), 86 FR
12221 (March 2, 2021) (SR-EMERALD-2021-07).
---------------------------------------------------------------------------

    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'. . . .'' \74\
---------------------------------------------------------------------------

    \74\ 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.'' \75\
---------------------------------------------------------------------------

    \75\ 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.' '' \76\ 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.'' \77\ 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.'' \78\ 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.'' \79\
---------------------------------------------------------------------------

    \76\ 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.'').
    \77\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \78\ Id.
    \79\ See Staff Guidance, supra note 23.
---------------------------------------------------------------------------

    The Exchange believes the competing exchanges' 10Gb 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 options 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 options exchanges with similar market share.
Each of the connectivity or port rates in place at competing options
exchanges were filed with the Commission for immediate effectiveness
and remain in place today.

----------------------------------------------------------------------------------------------------------------
                                                                                Monthly fee (per
              Exchange                            Type of connection or port                 connection or per
                                                                                port)
----------------------------------------------------------------------------------------------------------------
MIAX Emerald (as proposed) (equity    10Gb ULL connection...............................  $13,500.
 options market share of 3.04% for    Limited Service MEI Ports.........................  1-2 ports: FREE (not
 the month of May 2023).\80\                                                               changed in this
                                                                                proposal).
                                                                                3-4 ports: $200 each.
                                                                                5-6 ports: $300 each.
                                                                                7 or more ports: $400
                                                                                each.
NASDAQ \81\ (equity options market    10Gb Ultra fiber connection.......................  $15,000 per
 share of 6.59% for the month of May  SQF Port..........................................   connection.
 2023).\82\                                                                               1-5 ports: $1,500 per
                                                                                port.
                                                                                6-20 ports: $1,000 per
                                                                                port.
                                                                                21 or more ports: $500
                                                                                per port.
NASDAQ ISE LLC (``ISE'') \83\         10Gb Ultra fiber connection.......................  $15,000 per
 (equity options market share of      SQF Port \85\.....................................   connection.
 6.18% for the month of May                                                               $1,100 per port.
 2023).\84\
NYSE American LLC (``NYSE             10Gb LX LCN connection............................  $22,000 per
 American'') \86\ (equity options     Order/Quote Entry Port............................   connection.
 market share of 7.34% for the month                                                      1-40 Ports: $450 per
 of May 2023).\87\                                                                         port.
                                                                                41 or more Ports: $150
                                                                                per port.
NASDAQ GEMX, LLC (``GEMX'') \88\      10Gb Ultra connection.............................  $15,000 per
 (equity options market share of      SQF Port..........................................   connection.
 2.00% for the month of May                                                               $1,250 per port.
 2023).\89\
----------------------------------------------------------------------------------------------------------------

    There is no requirement, regulatory or otherwise, that any broker-
dealer connect to and access any (or all of) the available options
exchanges. Market participants may choose to become a member of one or
more options 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, the Exchange's affiliate, MIAX Pearl Options, experienced a
decrease in membership as the result of similar fees proposed herein.
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 proposed by MIAX Pearl
Options.
---------------------------------------------------------------------------

    \80\ See supra note 72.
    \81\ See NASDAQ Pricing Schedule, Options 7, Section 3, Ports
and Other Services and NASDAQ Rules, General 8: Connectivity,
Section 1. Co-Location Services.
    \82\ See supra note 72.
    \83\ See ISE Pricing Schedule, Options 7, Section 7,
Connectivity Fees and ISE Rules, General 8: Connectivity.
    \84\ See supra note 72.
    \85\ Similar to the Exchange's MEI Ports, SQF ports are
primarily utilized by Market Makers.
    \86\ See NYSE American Options Fee Schedule, Section V.A. Port
Fees and Section V.B. Co-Location Fees.
    \87\ See supra note 72.
    \88\ See GEMX Pricing Schedule, Options 7, Section 6,
Connectivity Fees and GEMX Rules, General 8: Connectivity.
    \89\ See supra note 72.
---------------------------------------------------------------------------

    It is not a requirement for market participants to become members
of all options exchanges; in fact, certain market participants conduct
an options business as a member of only one options market.\90\ A very
small number of market participants choose to become a member of all
sixteen options

exchanges. Most firms that actively trade on options markets are not
currently Members of the Exchange and do not purchase connectivity or
port services at the Exchange. Connectivity and ports are only
available to Members or service bureaus, and only a Member may utilize
a port.\91\
---------------------------------------------------------------------------

    \90\ 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.''
    \91\ Service Bureaus may obtain ports on behalf of Members.
---------------------------------------------------------------------------

    One other exchange 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.\92\ The Exchange and its affiliates,
MIAX Pearl and MIAX, have a total of 47 members. Of those 47 total
members, 35 are members of all three affiliated exchanges, four are
members of only two (2) affiliated exchanges, and eight (8) are members
of only one affiliated exchange. The Exchange also notes that no firm
is a Member of the Exchange only. The above data evidences that a
broker-dealer need not have direct connectivity to all options
exchanges, let alone the Exchange and its two 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.
---------------------------------------------------------------------------

    \92\ See Securities Exchange Act Release No. 94894 (May 11,
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (Notice of Filing
and Immediate Effectiveness of a Proposed Rule Change to Amend the
Fee Schedule on the BOX Options Market LLC Facility To Adopt
Electronic Market Maker Trading Permit Fees). The Exchange believes
that BOX's observation demonstrates that market making firms can,
and do, select which exchanges they wish to access, and,
accordingly, options exchanges must take competitive considerations
into account when setting fees for such access.
---------------------------------------------------------------------------

    Not only is there not an actual regulatory requirement to connect
to every options 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 the options exchanges discussed
above. As noted above, this is evidenced by the fact that one MIAX
Options Pearl Market Maker terminated their MIAX Pearl Options
membership effective January 1, 2023 as a direct result of the proposed
connectivity and port fee changes on MIAX Pearl Options (which are
similar to the changes proposed herein). 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, particularly
for registered market makers, 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 options series; (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 options 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 a Member
at--or establish connectivity to--the Exchange.\93\ If the Exchange is
not at the national best bid or offer (``NBBO''),\94\ 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.\95\
---------------------------------------------------------------------------

    \93\ See Options Order Protection and Locked/Crossed Market Plan
(August 14, 2009), available at https://www.theocc.com/getmedia/7fc629d9-4e54-4b99-9f11-c0e4db1a2266/options_order_protection_plan.pdf.
    \94\ See Exchange Rule 100.
    \95\ Members may elect to not route their orders by utilizing
the Do Not Route order type. See Exchange Rule 516(g).
---------------------------------------------------------------------------

    With respect to the submission of orders, 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 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,\96\ or request sponsored
access \97\ through a member of an exchange in order to submit a trade
directly to an options exchange.\98\ 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.
---------------------------------------------------------------------------

    \96\ Service Bureaus provide access to market participants to
submit and execute orders on an exchange. On the Exchange, a Service
Bureau may be a Member. Some Members utilize a Service Bureau for
connectivity and that Service Bureau may not be a Member. Some
market participants utilize a Service Bureau who is a Member to
submit orders.
    \97\ Sponsored Access is an arrangement whereby a Member permits
its customers to enter orders into an exchange's system that bypass
the Member's trading system and are routed directly to the Exchange,
including routing through a service bureau or other third-party
technology provider.
    \98\ This may include utilizing a floor broker and submitting
the trade to one of the five options trading floors.
---------------------------------------------------------------------------

    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-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).\99\
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.\100\ 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 options markets. Accordingly, the Exchange
believes that the proposed fees are fair and reasonable and constrained
by competitive forces.
---------------------------------------------------------------------------

    \99\ See, e.g., Nasdaq Price List--U.S. Direct Connection and
Extranet Fees, available at, U.S. 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).
    \100\ 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 Members and secure access
to its environment. In order to properly regulate its 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 Members secure access to
communicate with the Exchange and exercise trading rights. When a
market participant elects to be a Member, and is approved for
membership by the Exchange, the 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 a Member of the Exchange. 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 on MIAX Pearl
Options. If a market participant chooses to become a 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 Members--both generally and in relation to other Members,
i.e., to assure the fee will not create a financial burden on any
participant and will not have an undue impact in particular on smaller
Members and competition among Members in general. The Exchange believes
that this level of diligence and transparency is called for by the
requirements of Section 19(b)(1) under the Act,\101\ and Rule 19b-4
thereunder,\102\ with respect to the types of information exchanges
should provide when filing fee changes, and Section 6(b) of the
Act,\103\ which requires, among other things, that exchange fees be
reasonable and equitably allocated,\104\ not designed to permit unfair
discrimination,\105\ and that they not impose a burden on competition
not necessary or appropriate in furtherance of the purposes of the
Act.\106\ 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.\107\ 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.
---------------------------------------------------------------------------

    \101\ 15 U.S.C. 78s(b)(1).
    \102\ 17 CFR 240.19b-4.
    \103\ 15 U.S.C. 78f(b).
    \104\ 15 U.S.C. 78f(b)(4).
    \105\ 15 U.S.C. 78f(b)(5).
    \106\ 15 U.S.C. 78f(b)(8).
    \107\ See Staff Guidance, supra note 23.
---------------------------------------------------------------------------

    As detailed below, the Exchange recently calculated its aggregate
annual costs for providing physical 10Gb ULL connectivity to the
Exchange at $11,361,586 (or approximately $946,799 per month, rounded
to the nearest dollar when dividing the annual cost by 12 months) and
its aggregate annual costs for providing Limited Service MEI Ports at
$1,799,066 (or approximately $148,255 per month, rounded to the nearest
dollar when dividing the annual cost by 12 months). In order to cover
the aggregate costs of providing connectivity to its users (both
Members and non-Members) \108\ going forward and to make a modest
profit, as described below, the Exchange proposes to modify its Fee
Schedule to charge a fee of $13,500 per month for each physical 10Gb
ULL connection. The Exchange also proposes to modify its Fee Schedule
to charge tiered rates for additional Limited Service MEI Ports.
---------------------------------------------------------------------------

    \108\ Types of market participants that obtain connectivity
services from the Exchange but are not 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 Limited Service MEI Ports on behalf
of one or more Members. Extranets offer physical connectivity
services to Members and non-Members.
---------------------------------------------------------------------------

    In 2020, the Exchange completed a study of its aggregate costs to
produce market data and connectivity (the ``Cost Analysis'').\109\ 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'').
---------------------------------------------------------------------------

    \109\ 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 for each 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,\110\ 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.
---------------------------------------------------------------------------

    \110\ For example, the Exchange maintains 12 matching engines,
MIAX Pearl Options maintains 12 matching engines, MIAX Pearl
Equities maintains 24 matching engines, and MIAX maintains 24
matching engines.
---------------------------------------------------------------------------

    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.
    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 (61.9% of total expense
amount allocated to 10Gb connectivity), with smaller allocations to
additional Limited Service MEI Ports (4.6%), and the remainder to the
provision of other connectivity, other ports, transaction execution,
membership services and market data services (33.5%). 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
Members and parties that they sponsor to participate directly on the
Exchange may submit orders to the Exchange; many 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 will continue to be left with its best efforts to attempt to
conduct such an allocation in a thoughtful and reasonable manner.
    Through the Exchange's extensive updated Cost Analysis, which was
again recently further refined, the Exchange analyzed every expense
item in the Exchange's general expense ledger to determine whether each
such expense relates to the provision of connectivity and port
services, and, if such expense did so relate, what portion (or
percentage) of such expense actually supports the provision of
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 10Gb ULL connectivity and Limited Service MEI Port services,
including both physical 10Gb connections and Limited Service MEI Ports,
is $1,095,054 (utilizing the rounded numbers when dividing the annual
cost for 10Gb ULL connectivity and annual cost for Limited Service MEI
Ports by 12 months, then adding both numbers together), as further
detailed below.
Costs Related to Offering Physical 10Gb ULL Connectivity
    The following chart details the individual line-item costs
considered by the Exchange to be related to offering physical dedicated
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
28.1% of its overall Human Resources cost to offering physical
connectivity).
---------------------------------------------------------------------------

    \111\ The Annual Cost includes figures rounded to the nearest
dollar.
    \112\ 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.

------------------------------------------------------------------------
                                    Allocated    Allocated
           Cost drivers            annual cost    monthly      % Of all
                                      \111\      cost \112\
------------------------------------------------------------------------
Human Resources..................   $3,520,856     $293,405           28

Connectivity (external fees,            71,675        5,973         61.9
 cabling, switches, etc.)........
Internet Services and External         373,249       31,104         84.8
 Market Data.....................
Data Center......................      752,545       62,712         61.9
Hardware and Software Maintenance      666,208       55,517         50.9
 and Licenses....................
Depreciation.....................    1,929,118      160,760         63.8
Allocated Shared Expenses........    4,047,935      337,328         51.3
                                  --------------------------------------
    Total........................   11,361,586      946,799         42.8
------------------------------------------------------------------------

    Below are additional details regarding each of the line-item costs
considered by the Exchange to be related to offering physical 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 certain
cost drivers differ when compared to the same cost drives 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
    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 a weighted average
of 42.4% 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 20%). 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
employees as needed, managers and department heads assign a percentage
of time to every employee and then allocate that time amongst the
Exchange and its affiliated markets to determine each market's
individual Human Resources expense. Then, managers and department heads
assign a percentage of each employee's time allocated to the Exchange
into buckets including network connectivity, ports, market data, and
other exchange services. This process ensures that every employee is
100% allocated, ensuring there is no double counting between the
Exchange and its affiliated markets.
    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.\113\ 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 42.4% of each of their employee's time assigned to the
Exchange, as stated above. The Exchange notes that senior level
executives' times was only allocated to the Human Resources costs to
the extent that 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.
---------------------------------------------------------------------------

    \113\ The Exchange notes that while 11.7 full time equivalents
(``FTEs'') were allocated in this filing to the Exchange and a
similar number of FTEs in a similar filing by the Exchange's
affiliate, MIAX (12.9 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.
---------------------------------------------------------------------------

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. options industry, and infrastructure
services for critical components of the network that are necessary to
provide and maintain its System Networks and access to its System
Networks via 10Gb ULL connectivity. Specifically, the Exchange utilizes
connectivity providers to connect to other national securities
exchanges and the Options Price Reporting Authority (``OPRA''). The
Exchange understands that these service providers provide services to
most, if

not all, of the other U.S. exchanges and other market participants.
Connectivity provided by these service providers is critical to the
Exchanges daily operations and performance of its System Networks 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 OPRA 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 10Gb ULL connectivity.
Internet Services and External Market Data
    The next cost driver consists of internet Services and external
market data. The internet services cost driver 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 market data. The Exchange includes external
market data fee costs towards the provision of 10Gb ULL connectivity
because such market data is necessary for certain services related to
connectivity, including pre-trade risk checks and checks for other
conditions (e.g., re-pricing of orders to avoid locked or crossed
markets and trading collars). Since external market data from other
exchanges is consumed at the Exchange's matching engine level, (to
which 10Gb ULL connectivity provides access) in order to validate
orders before additional orders enter the matching engine or are
executed, the Exchange believes it is reasonable to allocate a small
amount of such costs to 10Gb ULL connectivity.
    The Exchange relies on various content service providers for data
feeds for the entire U.S. options 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 OPRA, 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
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 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 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 the Exchange,
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
the Exchange 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) the Exchange 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 it allocated to
the internet Services and External Market Data cost driver is greater
than its 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. However, the Exchange believes that this
is not, in dollar amounts, a significant difference. This is because
the total dollar amount of expense covered by this cost driver is
relatively small compared to other cost drivers and is due to nuances
in exchange architecture that require different initial allocation
amount under the first step of the 2023 budget process described above.
Thus, non-significant differences in percentage allocation amounts in a
smaller cost driver create the appearance of a significant difference,
even though the actual difference in dollar amounts is small.
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 (61.9%) to
physical 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.
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.\114\
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    \114\ This expense may be less than the Exchange's affiliated
markets, specifically MIAX Pearl (the options and equities markets),
because, unlike the Exchange, MIAX Pearl (the options and equities
markets) maintains an additional gateway to accommodate its member's
access and connectivity needs. This added gateway contributes to the
difference in allocations between the Exchange and MIAX Pearl. This
expense also differs in dollar amount among the Exchange, MIAX Pearl
(options and equities), and MIAX because each market may maintain
and utilize a different amount of hardware and software based on its
market model and infrastructure needs. The Exchange allocated a
percentage of the overall cost based on actual amounts of hardware
and software utilized by that market, which resulted in different
cost allocations and dollar amounts.
---------------------------------------------------------------------------

Depreciation
    All physical assets, software, and hardware used to provide 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 63.8% of its allocated depreciation
costs to providing physical 10Gb ULL 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.
For example, the percentages the Exchange and its affiliate, MIAX,
allocated to the depreciation of hardware and software used to provide
10Gb ULL connectivity are nearly identical. However, the Exchange's
dollar amount is lower than that of MIAX by approximately $32,000 per
month due to two factors: first, MIAX has undergone a technology
refresh since the time MIAX Emerald launched in February 2019, leading
MIAX to have more hardware that software that is subject to
depreciation. Second, MIAX maintains 24 matching engines while MIAX
Emerald maintains only 12 matching engines. This also results in more
of MIAX's hardware and software being subject to depreciation than MIAX
Emerald's hardware and software due to the greater amount of equipment
and software necessary to support the greater number of matching
engines on MIAX.
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 expenses cost driver.\115\ The Exchange notes
that the 51.3% allocation of general shared expenses for physical 10Gb
ULL connectivity is higher than that allocated to general shared
expenses for Limited Service MEI 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), Limited
Service MEI Ports do not require as many broad or indirect resources as
other core services.
---------------------------------------------------------------------------

    \115\ 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 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
$946,799 was divided by the number of physical 10Gb ULL connections the
Exchange maintained at the time that proposed pricing was determined
(102), to arrive at a cost of approximately $9,282 per month, per
physical 10Gb ULL 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 10Gb ULL connections.
* * * * *
Costs Related to Offering Limited Service MEI Ports
    The following chart details the individual line-item costs
considered by the Exchange to be related to offering Limited Service
MEI 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 5.9% of its overall Human Resources
cost to offering Limited Service MEI Ports).

------------------------------------------------------------------------
                                    Allocated    Allocated
           Cost drivers            annual cost    monthly      % Of all
                                      \116\      cost \117\
------------------------------------------------------------------------
Human Resources..................     $737,784      $61,482          5.9
Connectivity (external fees,             3,713          309          3.2
 cabling, switches, etc.)........
Internet Services and External          14,102        1,175          3.2
 Market Data.....................
Data Center......................       55,686        4,641          4.6
Hardware and Software Maintenance       41,951        3,496          3.2
 and Licenses....................
Depreciation.....................      112,694        9,391          3.7
Allocated Shared Expenses........      813,136       67,761         10.3
                                  --------------------------------------
    Total........................    1,779,066      148,255          6.7
------------------------------------------------------------------------

    Below are additional details regarding each of the line-item costs
considered by the Exchange to be related to offering Limited Service
MEI 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 described by 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.
---------------------------------------------------------------------------

    \116\ See supra note 111 (describing rounding of Annual Costs).
    \117\ See supra note 112 (describing rounding of Monthly Costs
based on Annual Costs).
---------------------------------------------------------------------------

Human Resources
    With respect to Limited Service MEI Ports, the Exchange calculated
Human Resources cost by taking an allocation of employee time for
employees whose functions include providing Limited Service MEI 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 Limited Service MEI 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 Limited Service MEI
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 Limited Service MEI Ports.\118\ This includes personnel from
the following Exchange departments that are predominately involved in
providing Limited Service MEI 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 integral to providing and maintaining
Limited Service MEI 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.
---------------------------------------------------------------------------

    \118\ The Exchange notes that while 2.5 FTEs were allocated in
this filing to the Exchange and a similar number of FTEs in a
similar filing by the Exchange's affiliate, MIAX (3.0 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.
---------------------------------------------------------------------------

Connectivity (External Fees, Cabling, Switches, etc.)
    The Connectivity cost includes external fees paid to connect to
other exchanges and cabling and switches, as described above.
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. For purposes of Limited Service MEI
Ports, the Exchange also includes a portion of its costs related to
external market data. External market data includes fees paid to third
parties, including other exchanges, to receive and consume market data
from other markets. The Exchange includes external market data costs
towards the provision of Limited Service MEI Ports because such market
data is necessary (in addition to physical connectivity) to offer
certain services related to such ports, such as validating orders on
entry against the NBBO and checking for other conditions (e.g., halted
securities).\119\ Thus, since market data from other exchanges is
consumed at the Exchange's Limited Service MEI Port level in order to
validate orders, before additional processing occurs with respect to
such orders, the Exchange believes it is reasonable to allocate a small
amount of such costs to Limited Service MEI Ports.
---------------------------------------------------------------------------

    \119\ The Exchange notes that MEMX separately allocated 7.5% of
its external market data costs to providing physical connectivity.
---------------------------------------------------------------------------

    The Exchange notes that the allocation for the internet Services
and External Market Data cost driver is greater than that of its
affiliate, MIAX Pearl Options, as MIAX Emerald allocated 3.2% of its
internet Services and External Market Data expense towards Limited
Service MEI Ports, while MIAX Pearl Options allocated 1.4% to its Full
Service MEO Ports for the same cost driver. The allocation percentages
set forth above differ because they directly correspond with the number
of applicable ports utilized on each exchange. For March 2023, MIAX
Emerald Market Makers utilized 1,028 Limited Service MEI ports and MIAX
Market Makers utilized 1,782 Limited Service MEI ports. When compared
to Full Service Port (Bulk and Single) usage, for March 2023, MIAX
Pearl Options Members utilized only 432 Full Service MEO Ports (Bulk
and Single), far fewer than number of Limited Service MEI Ports
utilized by Market Makers on MIAX and MIAX Emerald, thus resulting in a
smaller cost allocation. There is increased cost associated with
supporting a higher number of ports (requiring more hardware and other
technical infrastructure and internet Service), thus the Exchange
allocates a higher percentage of expense than MIAX Pearl Options, which
has a lower port count.
Data Center
    Data Center costs includes an allocation of the costs the Exchange
incurs to provide Limited Service MEI Ports in the third-party data
centers where it maintains its equipment as well as related costs for
market data to then enter the Exchange's system via Limited Service MEI
Ports (the Exchange does not own the Primary Data Center or the
Secondary Data Center, but instead, leases space in data centers
operated by third parties).
Hardware and Software Maintenance and Licenses
    Hardware and Software Licenses includes hardware and software
licenses used to monitor the health of the order entry services
provided by the Exchange, as described above. The Exchange notes that
this allocation is greater than its affiliate, MIAX Pearl Options, as
MIAX Emerald allocated 3.2% of its Hardware and Software Maintenance
and License expense towards Limited Service MEI Ports, while MIAX Pearl
Options allocated 1.4% to its Full Service MEO Ports (Bulk and Single)
for the same category of expense. The allocation percentages set forth
above differ because they correspond with the number of applicable
ports utilized on each exchange. For March 2023, MIAX Market Makers
utilized 1,782 Limited Service MEI ports and MIAX Emerald Market Makers