[Federal Register Volume 87, Number 95 (Tuesday, May 17, 2022)]
[Notices]
[Pages 29892-29911]
[FR Doc No: 2022-10514]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94888; File No. SR-PEARL-2022-18]

Self-Regulatory Organizations; MIAX PEARL LLC; Notice of Filing
of a Proposed Rule Change To Amend the MIAX PEARL Options Fee Schedule
To Increase Certain Connectivity Fees and To Increase the Monthly Fees
for MIAX Express Network Full Service Port; Suspension of and Order
Instituting Proceedings To Determine Whether To Approve or Disapprove
the Proposed Rule Change

May 11, 2022.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on May 2, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'') filed
with the Securities and Exchange Commission (``Commission'') a proposed
rule change as described in Items I and II below, which Items have been
prepared by the Exchange. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons
and is, pursuant to Section 19(b)(3)(C) of the Act, hereby: (i)
Temporarily suspending the proposed rule change; and (ii) instituting
proceedings to determine whether to approve or disapprove the proposed
rule change.
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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 Pearl Options
Fee Schedule (the ``Fee Schedule'') to amend certain connectivity fees.
    The text of the proposed rule change is available on the Exchange's
website at http://www.miaxoptions.com/rule-filings/pearl at MIAX
Pearl's principal office, and at the Commission's Public Reference
Room.

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

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

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to increase the
fees for a 10 gigabit (``Gb'') ultra-low latency (``ULL'') fiber
connection and the fees for the Exchange's MIAX Express Network Full
Service (``MEO'') \3\ Ports. The Exchange last increased the fees for
its 10Gb ULL fiber connections in a filing that became effective
beginning January 1, 2021 (subsequently withdrawn and refiled one
time).\4\ The Exchange increased the fee for 10Gb ULL fiber connections
from $9,300 to $10,000 per month. Also, in connection with that fee
change, the Exchange's affiliate, Miami International Securities
Exchange, LLC (``MIAX''), increased its 10Gb ULL connectivity fee to
$10,000 per month.\5\ The Exchange and MIAX shared a combined cost
analysis in those filings. In those filings, the Exchange and MIAX
allocated a combined total of $17.9 million in expenses to providing
10Gb ULL fiber connectivity.
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    \3\ The term ``MEO Interface'' or ``MEO'' means a binary order
interface for certain order types as set forth in Rule 516 into the
MIAX Pearl System. See the Definitions Section of the Fee Schedule
and Exchange Rule 100.
    \4\ See Securities Exchange Act Release No. 90981 (January 25,
2021), 86 FR 7582 (January 29, 2021) (SR-PEARL-2021-01).
    \5\ See Securities Exchange Act Release No. 90980 (January 25,
2021), 86 FR 7602 (January 29, 2021) (SR-MIAX-2021-02).
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    Since the time of that filing, the Exchange and MIAX have
experienced an increase in expenses, particularly regarding internal
expenses. For example, from January 2021 to March 2022 expenses related
to employee compensation for 10Gb ULL connectivity increased from a
combined $6,892,689 to $7,063,801 and occupancy increased from $560,408
to $701,437. In addition, from January 2021 to March 2022, the
Exchange's third party related expense increased as well. In January
2021, the Exchange and MIAX allocated a combined $4,079,910 of their
shared third party expenses to providing the 10Gb ULL fiber
connectivity. As described more fully below, the Exchange and MIAX are
now allocating $4,382,307 of their shared third party expense to 10Gb
ULL fiber connectivity, which represents only a portion of the total
combined third party expense of $7,575,888.\6\
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    \6\ The Exchange notes that it last filed to amend the fees for
Full Service MEO Ports (Bulk and Single) in 2018, prior to which the
Exchange provided Full Service MEO Ports (Bulk and Single) free of
charge since the Exchange launched operations in 2017 and had
absorbed all costs since that time. See Securities Exchange Act
Release No. 82867 (March 13, 2018), 83 FR 12044 (March 19, 2018)
(SR-PEARL-2018-07). This prior filing did not include a cost
analysis.
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    As discussed more fully below, the Exchange and MIAX recently
calculated the combined annual aggregate costs for providing 10Gb ULL
connectivity, plus the cost of providing Full Service MEO Ports (on
MIAX Pearl Options only) to be $22,589,805, or $1,882,484 per month.
The Exchange now proposes to amend the Fee Schedule to amend the fees
for 10Gb ULL connectivity and Full Service MEO Ports (Bulk and Single)
in order to recoup these ongoing costs and as a result of the increase
in expenses described above.\7\
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    \7\ The Exchange notes that MIAX will make a similar filing to
increase its 10Gb ULL connectivity fees (plus the fees for MIAX's
Limited Service MEI Ports).
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    First, the Exchange proposes to amend the Fee Schedule to increase
the fees for Members \8\ and non-Members to access the Exchange's
System Networks \9\ 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 $12,000 per month (``10Gb ULL Fee''). Prior to the
proposed fee change, the Exchange assessed Members and non-Members a
flat monthly fee of $10,000 per 10Gb ULL connection for access to the
Exchange's primary and secondary facilities.\10\
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    \8\ The term ``Member'' means an individual or organization that
is registered with the Exchange pursuant to Chapter II of these
Rules for purposes of trading on the Exchange as an ``Electronic
Exchange Member'' or ``Market Maker.'' Members are deemed
``members'' under the Exchange Act. See Exchange Rule 100.
    \9\ The Exchange's System Networks consist of the Exchange's
extranet, internal network, and external network.
    \10\ The Exchange notes that it employed a tiered pricing
structure for 10Gb ULL connectivity from August 2021 through March
2022. See infra notes 25-27.
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    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 proposes 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. The Exchange will
continue to assess monthly Member and non-Member network connectivity
fees for connectivity to the disaster recovery facility in each month
during which the Member or non-Member has established connectivity with
the disaster recovery facility.
    The Exchange's MIAX Express Network Interconnect (``MENI'') can be
configured to provide Members and non-Members of the Exchange network
connectivity to the trading platforms, market data systems, test
systems, and disaster recovery facilities of both the Exchange and its
affiliate, MIAX, via a single, shared connection. Members and non-
Members utilizing the MENI to connect to the trading platforms, market
data systems, test systems, and disaster recovery facilities of the
Exchange and MIAX via a single, shared connection will continue to only
be assessed one monthly connectivity fee per connection, regardless of
the trading platforms, market data systems, test systems, and disaster
recovery facilities accessed via such connection.
    Second, the Exchange proposes to amend Section (5)(d) of the Fee
Schedule to amend the fees for Full Service MEO Ports. The Exchange
currently offers different types of MEO Ports depending on the services
required by the Member, including a Full Service MEO Port-Bulk,\11\ a
Full Service MEO Port-Single,\12\ and a

Limited Service MEO Port.\13\ For one monthly price, a Member may be
allocated two (2) Full-Service MEO Ports of either type per matching
engine \14\ and may request Limited Service MEO Ports for which MIAX
Pearl will assess Members Limited Service MEO Port fees per matching
engine based on a sliding scale for the number of Limited Service MEO
Ports utilized each month. The two (2) Full-Service MEO Ports that may
be allocated per matching engine to a Member may consist of: (a) Two
(2) Full Service MEO Ports--Bulk; (b) two (2) Full Service MEO Ports--
Single; or (c) one (1) Full Service MEO Port--Bulk and one (1) Full
Service MEO Port--Single.
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    \11\ ``Full Service MEO Port--Bulk'' means an MEO port that
supports all MEO input message types and binary bulk order entry.
See the Definitions Section of the Fee Schedule.
    \12\ ``Full Service MEO Port--Single'' means an MEO port that
supports all MEO input message types and binary order entry on a
single order-by-order basis, but not bulk orders. See the
Definitions Section of the Fee Schedule.
    \13\ ``Limited Service MEO Port'' means an MEO port that
supports all MEO input message types, but does not support bulk
order entry and only supports limited order types, as specified by
the Exchange via Regulatory Circular. See the Definitions Section of
the Fee Schedule.
    \14\ A ``Matching Engine'' is a part of the MIAX Pearl
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. 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.
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    Unlike other options exchanges that provide similar port
functionality and charge fees on a per port basis,\15\ the Exchange
offers Full Service MEO Ports as a package and provides Members with
the option to receive up to two Full Service MEO Ports (described
above) per matching engine to which that Member connects. The Exchange
currently has twelve (12) matching engines, which means Members may
receive up to twenty-four (24) Full Service MEO Ports for a single
monthly fee, that can vary based on certain volume percentages, as
described below. For illustrative purposes and as described in more
detail below, the Exchange currently assesses a fee of $5,000 per month
for Members that reach the highest Full Service MEO Port--Bulk Tier,
regardless of the number of Full Service MEO Ports allocated to the
Member. For example, assuming a Member connects to all twelve (12)
matching engines during a month, with two Full Service MEO Ports per
matching engine, this results in a cost of $208.33 per Full Service MEO
Port ($5,000 divided by 24) for the month. This fee had been unchanged
since the Exchange adopted Full Service MEO Port fees in 2018.\16\ The
Exchange proposes to increase Full Service MEO Port fees as further
described below, with the highest monthly fee of $10,000 for the Full
Service MEO Port--Bulk. Members will continue to receive two (2) Full
Service MEO Ports to each matching engine to which they connect for the
single flat monthly fee. Assuming a Member connects to all twelve (12)
matching engines during the month, with two Full Service MEO Ports per
matching engine, this would result in a cost of $416.67 per Full
Service MEO Port ($10,000 divided by 24).
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    \15\ See NYSE American Options Fee Schedule, Section V.A., Port
Fees (each port charged on a per matching engine basis, with NYSE
American having 17 match engines). See NYSE Technology FAQ and Best
Practices: Options, Section 5.1 (How many matching engines are used
by each exchange?) (September 2020) (providing a link to an Excel
file detailing the number of matching engines per options exchange);
NYSE Arca Options Fee Schedule, Port Fees (each port charged on a
per matching engine basis, NYSE Arca having 19 match engines); and
NYSE Technology FAQ and Best Practices: Options, Section 5.1 (How
many matching engines are used by each exchange?) (September 2020)
(providing a link to an Excel file detailing the number of matching
engines per options exchange). See NASDAQ Fee Schedule, Nasdaq
Options 7 Pricing Schedule, Section 3, Nasdaq Options Market--Ports
and Other Services (each port charged on a per matching engine
basis, with Nasdaq having multiple matching engines). See Nasdaq
Specialized Quote Interface (SQF) Specification, Version 6.5b
(updated February 13, 2020), Section 2, Architecture, available at
https://www.nasdaq.com/docs/2020/02/18/Specialized-Quote-Interface-SQI-6.5b.pdf (the ``NASDAQ SQF Interface Specification''). The
NASDAQ SQF Interface Specification also provides that NASDAQ's
affiliates, Nasdaq PHLX LLC (``Nasdaq Phlx'') and Nasdaq BX, Inc.
(``Nasdaq BX''), have trading infrastructures that may consist of
multiple matching engines with each matching engine trading only a
range of option underlyings. Further, the NASDAQ SQF Interface
Specification provides that the SQF infrastructure is such that the
firms connect to one or more servers residing directly on the
matching engine infrastructure. Since there may be multiple matching
engines, firms will need to connect to each engine's infrastructure
in order to establish the ability to quote the symbols handled by
that engine.
    \16\ See Securities Exchange Act Release No. 82867 (March 13,
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
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    The Exchange assesses Members Full Service MEO Port Fees, either
for a Full Service MEO Port--Bulk and/or for a Full Service MEO Port--
Single, based upon the monthly total volume executed by a Member and
its Affiliates \17\ on the Exchange across all origin types, not
including Excluded Contracts,\18\ as compared to the Total Consolidated
Volume (``TCV''),\19\ in all MIAX Pearl-listed options. The Exchange
adopted a tier-based fee structure based upon the volume-based tiers
detailed in the definition of ``Non-Transaction Fees Volume-Based
Tiers'' described in the Definitions section of the Fee Schedule. The
Exchange assesses these and other monthly Port fees to Members in each
month the market participant is credentialed to use a Port in the
production environment.
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    \17\ ``Affiliate'' means (i) an affiliate of a Member of at
least 75% common ownership between the firms as reflected on each
firm's Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX Pearl Market
Maker (who does not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has been appointed by an EEM
and an ``Appointed EEM'' is an EEM (who does not otherwise have a
corporate affiliation based upon common ownership with a MIAX Pearl
Market Maker) that has been appointed by a MIAX Pearl Market Maker,
pursuant to the following process. A MIAX Pearl Market Maker
appoints an EEM and an EEM appoints a MIAX Pearl Market Maker, for
the purposes of the Fee Schedule, by each completing and sending an
executed Volume Aggregation Request Form by email to
[email protected] no later than 2 business days prior to
the first business day of the month in which the designation is to
become effective. Transmittal of a validly completed and executed
form to the Exchange along with the Exchange's acknowledgement of
the effective designation to each of the Market Maker and EEM will
be viewed as acceptance of the appointment. The Exchange will only
recognize one designation per Member. A Member may make a
designation not more than once every 12 months (from the date of its
most recent designation), which designation shall remain in effect
unless or until the Exchange receives written notice submitted 2
business days prior to the first business day of the month from
either Member indicating that the appointment has been terminated.
Designations will become operative on the first business day of the
effective month and may not be terminated prior to the end of the
month. Execution data and reports will be provided to both parties.
See the Definitions Section of the Fee Schedule.
    \18\ ``Excluded Contracts'' means any contracts routed to an
away market for execution. See the Definitions Section of the Fee
Schedule.
    \19\ ``TCV'' means total consolidated volume calculated as the
total national volume in those classes listed on MIAX Pearl for the
month for which the fees apply, excluding consolidated volume
executed during the period of time in which the Exchange experiences
an Exchange System Disruption (solely in the option classes of the
affected Matching Engine). See the Definitions Section of the Fee
Schedule.
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    Current Full Service MEO Port--Bulk Fees. The Exchange currently
assesses Members monthly Full Service MEO Port--Bulk fees as follows:
    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $3,000;
    (ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to
0.60%, $4,500; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $5,000.
    Proposed Full Service MEO Port--Bulk Fees. The Exchange proposes to
assess Members monthly Full Service MEO Port--Bulk fees as follows:
    (i) If its volume falls within the parameters of Tier 1 of the Non-

Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $5,000;
    (ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to
0.60%, $7,500; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $10,000.
    Current Full Service MEO Port--Single Fees. The Exchange currently
assesses Members monthly Full Service MEO Port--Single fees as follows:
    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $2,000;
    (ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to
0.60%, $3,375; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $3,750.
    Proposed Full Service MEO Port--Single Fees. The Exchange proposes
to assess Members monthly Full Service MEO Port--Single fees as
follows:
    (i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $2,500;
    (ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to
0.60%, $3,500; and
    (iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $4,500.
    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, MEO ports allow for a higher throughput and can handle
much higher quote/order rates than FIX ports. Members that are Market
Makers \20\ or high frequency trading firms utilize these ports
(typically coupled with 10Gb ULL connectivity) because they transact in
significantly higher amounts of messages being sent to and from the
Exchange, versus FIX port users, who are traditionally customers
sending only orders to the Exchange (typically coupled with 1Gb
connectivity). The different types of ports cater to the different
types of Exchange Memberships and different capabilities of the various
Exchange Members. Certain Members need ports and connections that can
handle using far more of the network's capacity for message throughput,
risk protections, and the amount of information that the System has to
assess. Those Members may account for the vast majority of network
capacity utilization and volume executed on the Exchange, as discussed
throughout.
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    \20\ The term ``Market Maker'' means a Member registered with
the Exchange for the purpose of making markets in options contracts
traded on the Exchange and that is vested with the rights and
responsibilities specified in Chapter VI of Exchange Rules. See the
Definitions Section of the Fee Schedule and Exchange Rule 100.
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    The Exchange proposes to increase its monthly Full Service MEO Port
fees since it has not done so since the fees were adopted in 2018,\21\
which are designed to recover a portion of the costs associated with
directly accessing the Exchange. The Exchange notes that its
affiliates, Miami International Securities Exchange, LLC (``MIAX'') and
MIAX Emerald, LLC (``MIAX Emerald''), charge fees for their high
throughput, low latency MIAX Express Interface (``MEI'') Ports in a
similar fashion as the Exchange charges for its MEO Ports--generally,
the more active user the Member (i.e., the greater number/greater
national ADV of classes assigned to quote on MIAX and MIAX Emerald),
the higher the MEI Port fee.\22\ This concept is not new or novel.
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    \21\ See supra note 6.
    \22\ See MIAX Fee Schedule, Section (5)(d)(ii); MIAX Emerald Fee
Schedule, Section (5)(d)(ii).
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    The Exchange believes that other exchanges' connectivity and port
fees are useful examples and provides the following table for
comparison purposes only to show how the Exchange's proposed fees
compare to fees currently charged by other options exchanges for
similar connectivity and port access. As shown by the below table, the
Exchange's proposed fees are similar to or less than fees charged for
similar access to other options exchanges.
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    \23\ See ``The market at a glance,'' available at https://www.miaxoptions.com/ (last visited April 29, 2022).
    \24\ See NASDAQ Pricing Schedule, Options 7, Section 3, Ports
and Other Services and NASDAQ Rules, General 8: Connectivity,
Section 1. Co-Location Services.
    \25\ See supra note 23.
    \26\ See ISE Pricing Schedule, Options 7, Section 7,
Connectivity Fees and ISE Rules, General 8: Connectivity.
    \27\ See supra note 23.
    \28\ See NYSE American Options Fee Schedule, Section V.A. Port
Fees and Section V.B. Co-Location Fees.
    \29\ See supra note 23.
    \30\ See GEMX Pricing Schedule, Options 7, Section 6,
Connectivity Fees and GEMX Rules, General 8: Connectivity.
    \31\ See supra note 23.

------------------------------------------------------------------------
                                       Type of        Monthly fee (per
             Exchange               connection or     connection or per
                                         port               port)
------------------------------------------------------------------------
MIAX Pearl (as proposed) (equity   10Gb ULL         $12,000.
 options market share of 4.61% as   connection.     Tier 1: $5,000 (or
 of April 29, 2022 for the month   Full Service      $208.33 per
 of April).\23\                     MEO Port         Matching Engine).
                                    (Bulk).         Tier 2: $7,500 (or
                                                     $312.50 per
                                                     Matching Engine).
                                                    Tier 3: $10,000 (or
                                                     $416.66 per
                                                     Matching Engine).
                                   Full Service     Tier 1: $2,500 (or
                                    MEO Port         $104.16 per
                                    (Single).        Matching Engine).
                                                    Tier 2: $3,500 (or
                                                     $145.83 per
                                                     Matching Engine).
                                                    Tier 3: $4,500 (or
                                                     $187.50 per
                                                     Matching Engine).
The NASDAQ Stock Market LLC        10Gb Ultra       $15,000.
 (``NASDAQ'') \24\ (equity          fiber           1-5 ports. $1,500.
 options market share of 8.47% as   connection.     6-20 ports. $1,000.
 of April 29, 2022 for the month   SQF Port.......  21 or more ports.
 of April).\25\                                      $500.
Nasdaq ISE LLC (``ISE'') \26\      10Gb Ultra       $15,000.
 (equity options market share of    fiber           $1,100.
 5.48% as of April 29, 2022 for     connection.
 the month of April).\27\          SQF Port.......
NYSE American LLC (``NYSE          10Gb LX LCN      $22,000.
 American'') \28\ (equity options   connection.     Ports 1-40. $450
 market share of 8.13% as of       Order/Quote      Ports 41 and
 April 29, 2022 for the month of    Entry Port.      greater. $150.
 April).\29\

Nasdaq GEMX, LLC (``GEMX'') \30\   10Gb Ultra       $15,000.
 (equity options market share of    connection.     $1,250.
 2.36% as of April 29, 2022 for    SQF Port.......
 the month of April).\31\
------------------------------------------------------------------------

Implementation and Procedural History
    The proposed rule change will be effective May 2, 2022. The
Exchange initially filed proposals to adopt tiered-pricing structures
for the 10Gb ULL connections and amend the fees for Full Service MEO
Ports, with the proposed fees being effective beginning August 1, 2021.
Between August 2021 and February 2022, the Exchange withdrew and
refiled the proposed rule changes, each time to meaningfully attempt to
provide additional justification for the proposed fee changes, provide
enhanced details regarding the Exchange's cost methodology, and address
questions contained in the Commission's suspension orders. The Exchange
received six comment letters from three separate commenters on the
filings.\32\ This revised proposal provided additional details
regarding the Exchange's cost methodology, revenue projections, and
responded to various questions and requests for information contained
in the Commission's suspension orders.\33\ On April 1, 2022, the
Exchange submitted revised proposals to provide additional clarity
regarding the Exchange's cost justification and those proposals were
subsequently suspended by the Commission.\34\ The Exchange withdrew
those revised proposals and submitted this filing on May 2, 2022. This
newest revised filing builds upon the additional details regarding the
Exchange's cost methodology and revenue projections, as well as the
Exchange's responses to various questions and requests for information
contained in the Commission's suspension orders.
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    \32\ See letters from Richard J. McDonald, Susquehanna
International Group, LLC (``SIG''), to Vanessa Countryman,
Secretary, Commission, dated September 7, 2021, October 1, 2021,
October 26, 2021, and March 15, 2022 (``SIG Letters''). See also
letter from Tyler Gellasch, Executive Director, Healthy Markets
Association (``HMA''), to Hon. Gary Gensler, Chair, Commission,
dated October 29, 2021 (``HMA Letter''); and letter from Ellen
Green, Managing Director, Equity and Options Market Structure,
Securities Industry and Financial Markets Association (``SIFMA''),
to Vanessa Countryman, Secretary, Commission, dated November 26,
2021 (``SIFMA Letter'').
    \33\ See Securities Exchange Act Release Nos. 92644 (August 11,
2021), 86 FR 46055 (August 17, 2021) (SR-PEARL-2021-36); 92798
(August 27, 2021), 86 FR 49360 (September 2, 2021) (SR-PEARL-2021-
33); 93162 (September 28, 2021), 86 FR 54739 (October 4, 2021) (SR-
PEARL-2021-45); 93556 (November 10, 2021), 86 FR 64235 (November 17,
2021) (SR-PEARL-2021-53); 93639 (November 22, 2021), 86 FR 67758
(November 29, 2021) (SR-PEARL-2021-45); 93774 (December 14, 2021),
86 FR 71952 (December 20, 2021) (SR-PEARL-2021-57); 94088 (January
27, 2022), 87 FR 5901 (February 2, 2022) (SR-PEARL-2021-57); 94258
(February 15, 2022), 87 FR 9659 (February 22, 2022) (SR-PEARL-2022-
03).
    \34\ See Securities Exchange Act Release Nos. 94721 (April 14,
2022), 87 FR 23573 (April 20, 2022) (SR-PEARL-2022-11) and 94722
(April 14, 2022), 87 FR 23660 (April 20, 2022) (SR-PEARL-2022-12).
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2. Statutory Basis
    The Exchange believes that the proposed fees are consistent with
Section 6(b) of the Act \35\ in general, and furthers the objectives of
Section 6(b)(4) of the Act \36\ 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 \37\ 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.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(4).
    \37\ 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 as set forth in recent Commission and
Commission Staff guidance. On March 29, 2019, the Commission issued an
Order disapproving a proposed fee change by the BOX Market LLC Options
Facility to establish connectivity fees for its BOX Network (the ``BOX
Order'').\38\ 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.'' \39\ Based on both the BOX Order and the Guidance, 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 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.
---------------------------------------------------------------------------

    \38\ 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).
    \39\ See Staff Guidance on SRO Rule Filings Relating to Fees
(May 21, 2019), at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (the ``Guidance'').
---------------------------------------------------------------------------

The Proposed Fees Will Not Result in a Supra-Competitive Profit
    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 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 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.''
\40\ The 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.'' \41\ In the 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, or
will not result in excessive pricing or supra-competitive profit,
specific information, including quantitative information, should be
provided to support that

argument.'' \42\ The Exchange does not assert that the proposed fees
are constrained by competitive forces. Rather, the Exchange asserts
that the proposed fees are reasonable because they will permit recovery
of the Exchange's costs in providing access services to supply 10Gb ULL
connectivity and Full Service MEO Ports and will not result in the
Exchange generating a supra-competitive profit.
---------------------------------------------------------------------------

    \40\ See id.
    \41\ Id.
    \42\ Id.
---------------------------------------------------------------------------

    The Guidance defines ``supra-competitive profit'' as ``profits that
exceed the profits that can be obtained in a competitive market.'' \43\
The Commission Staff further states in the Guidance that ``the SRO
should provide an analysis of the SRO's baseline revenues, costs, and
profitability (before the proposed fee change) and the SRO's expected
revenues, costs, and profitability (following the proposed fee change)
for the product or service in question.'' \44\ The Exchange provides
this analysis below.
---------------------------------------------------------------------------

    \43\ Id.
    \44\ Id.
---------------------------------------------------------------------------

    The proposed fees are based on a cost-plus model. The Exchange
believes that it is important to demonstrate that the proposed fees are
based on its costs and reasonable business needs and believes the
proposed fees will allow the Exchange to begin to offset expenses.
However, as discussed more fully below, such fees may also result in
the Exchange recouping less than, or more than, all of its costs of
providing 10Gb ULL connectivity and Full Service MEO Ports because of
the uncertainty of forecasting subscriber decision making with respect
to firms' access needs. The Exchange believes that the proposed fees
will not result in excessive pricing or supra-competitive profit based
on the total expenses the Exchange incurs versus the total revenue the
Exchange projects to collect, and therefore meets the standards in the
Act as interpreted by the Commission and the Commission Staff in the
BOX Order and the Guidance.
    The suspension orders sought additional information and comments on
various aspects of the prior proposed fee changes. In many respects,
the Commission's questions about the prior proposed fee changes raise
broader questions around the factors the Commission should consider and
the type of data and analysis an exchange should provide in considering
whether market data, port fees, or connectivity fees are fair and
reasonable under a cost-based methodology. The suspension orders also
sought more specific information regarding the allocation of third-
party expenses, such as the overall estimated cost for each category of
external expenses or at minimum the total applicable third-party
expenses and percentage allocation or statements regarding the
Exchange's overall estimated costs for the internal expense categories
and general shared expenses figure. The Exchange added this additional
information below.
    In this filing, the Exchange offers a conceptual framework for
further considering the Commission's questions that draws on the
Exchange's own experience over several years of analyzing its own
costs. The elements of that framework are as follows:
    First, the Exchange proposes a flat, simple 10Gb ULL Fee that
imposes a single monthly fee for Members and non-Members. The Exchange
believes this relatively simple, flat fee structure is transparent and
easy for users to apply, and also helps show that it meets the
objectives of the Act. The Exchange also proposes to amend the fees for
Full Service MEO Ports, which tiered-pricing structure has been in
place since 2018. Accordingly, the pricing structure for Full Service
MEO Ports is already transparent and easy for users to apply, and is a
common pricing method used by the other options exchanges when charging
for port connectivity.\45\
---------------------------------------------------------------------------

    \45\ See MIAX Fee Schedule, Section (5)(d)(ii); MIAX Emerald Fee
Schedule, Section (5)(d)(ii); see also supra notes 24, 26, 28, and
30.
---------------------------------------------------------------------------

    The Exchange then conducted an extensive cost review in which the
Exchange analyzed nearly every expense item in the Exchange's general
expense ledger to determine whether each such expense relates to
providing 10Gb ULL connectivity and Full Service MEO Ports. That
methodology does not allow for ``double-counting'' of the same costs
for different classes of exchange products--for example transaction
services, market data, physical connectivity, ``logical'' port
connections or regulatory resources. As a result of this review, the
Exchange determined that it experienced an increase in costs since
January 2021 as set forth above and determined to propose to increase
select connectivity fees as described herein to attempt to recoup this
increased expense.
    The Exchange then sought to narrowly allocate specific costs to
10Gb ULL connectivity and Full Service MEO Ports to which the proposed
fees would apply. In this filing, the Exchange provided more detail
about how that allocation was determined and included information about
tangential cost items that were not included. In determining what
portion (or percentage) to allocate to access services, each Exchange
department head, in coordination with other Exchange personnel,
determined the expenses that support access services and System
Networks associated with 10Gb ULL connectivity and Full Service MEO
Ports. This included numerous meetings between the Exchange's Chief
Information Officer, Chief Financial Officer, Head of Strategic
Planning and Operations, Chief Technology Officer, various members of
the Legal Department, and other group leaders. The analysis also
included each department head meeting with the divisions of teams
within each department to determine the amount of time and resources
allocated by employees within each division towards the access services
and System Networks associated with 10Gb ULL connectivity and Full
Service MEO Ports. The Exchange reviewed each individual expense to
determine if such expense was related to 10Gb ULL connectivity and Full
Service MEO Ports. Once the expenses were identified, the Exchange
department heads, with the assistance of the Exchange's internal
finance department, reviewed such expenses holistically on an Exchange-
wide level to determine what portion of that expense supports providing
access services and the System Networks. The sum of all such portions
of expenses represents the total cost to the Exchange to provide access
services associated with 10Gb ULL connectivity and Full Service MEO
Ports. For the avoidance of doubt, no expense amount is allocated
twice. Specifically, no expense amount is allocated to more than one
expense category within this filing and no expense amount that is
allocated as a cost to provide and maintain access to the 10Gb ULL
connectivity and Full Service MEO Ports in this filing have been or
will be allocated as a cost to provide any other exchange product or
service in any other fee filing. In the suspension orders, the
Commission questioned whether further explanation of the Exchange's
cost analysis was necessary. The Exchange provides further details
concerning its cost analysis in response to this question.
    The Exchange believes exchanges, like all businesses, should be
provided flexibility when developing and applying a methodology to
allocate costs and resources they deem necessary to operate their
business, including providing market data and access services. The
Exchange notes that costs and resource allocations may vary from
business to business and, likewise, costs

and resource allocations may differ from exchange to exchange when it
comes to providing market data and access services. It is a business
decision that must be evaluated by each exchange as to how to allocate
internal resources and what costs to incur internally or via third
parties that it may deem necessary to support its business and its
provision of market data and access services to market participants.
    Finally, the Exchange acknowledges that it is difficult to predict
how much revenue the Exchange will receive from the proposed fees with
precision. The analysis conducted by the Exchange is designed to make a
fair and reasonable assessment of costs and resources allocated to
support the provision of access services associated with the proposed
fees. The Exchange further acknowledges that this assessment can only
capture a moment in time and that costs and resource allocations may
change. That is why the Exchange historically, and on an ongoing basis,
reviews its costs and resource allocations to ensure it appropriately
allocates resources to properly provide services to the Exchange's
constituents. As part of this proposed rule change, and as described
further below, the Exchange is committing to conduct an annual cost
review with respect to fees that are cost justified in this proposed
rule change beginning one year from the date of this proposal, and
annually thereafter. The Exchange expects that it may propose to adjust
fees at that time, either to increase fees in the event that revenues
fail to reasonably cover costs at the estimated margin set forth below,
or to decrease fees in the event that revenue materially exceeds the
Exchange's current projections. In the event that the Exchange
determines to propose a fee change, updated cost estimates will be
included in a rule filing proposing the fee change.
    The Exchange believes applying this framework to the proposed fees
shows that they are consistent with the requirements of the Act,
leaving aside that the proposed fees are relatively similar to fees
charged by other exchanges for connectivity and port access.
Exchange Costs and Cost Methodology
    The Exchange notes that there are material costs associated with
providing the infrastructure and headcount to fully support access to
the Exchange via connectivity and ports. As described below, the
Exchange incurs technology expense related to establishing and
maintaining Information Security services, enhanced network monitoring
and customer reporting, as well as Regulation SCI-mandated processes
associated with its network technology. Both fixed and variable
expenses have significant impact on the Exchange's overall costs to
provide 10Gb ULL connectivity and Full Service MEO Ports. For example,
to accommodate new Members, the Exchange may need to purchase
additional hardware to support those Members and provide access through
10Gb ULL connectivity and Full Service MEO Ports.\46\ Further, as the
total number of Members increases, the Exchange and its affiliates may
need to increase their data center footprint and consume more power,
resulting in increased costs charged by their third-party data center
provider. Accordingly, the cost to the Exchange and its affiliates to
provide access to its Members is not fixed. The Exchange believes the
proposed fees are a reasonable attempt to offset those costs associated
with providing access to and maintaining its System Networks'
infrastructure.
---------------------------------------------------------------------------

    \46\ The Exchange is not considering future costs associated
with accommodating new 10Gb ULL connectivity and Full Service MEO
Ports subscriptions.
---------------------------------------------------------------------------

    The Exchange estimated its total annual expense to provide 10Gb ULL
connectivity and Full Service MEO Ports based on the following general
expense categories: (1) External expenses, which include fees paid to
third parties for certain products and services; (2) internal expenses
relating to the internal costs to provide the services associated with
10Gb ULL connectivity and Full Service MEO Ports; and (3) general
shared expenses.\47\ The below table details each of these individual
external and internal annual costs considered by the Exchange to be
directly related to offering 10Gb ULL connectivity and Full Service MEO
Ports, and not any other product or service offered by the Exchange.
The below table also details the general shared expense allocated to
this proposal. Each of these expenses are discussed in more detail
further below.
---------------------------------------------------------------------------

    \47\ The percentage allocations used in this proposed rule
change may differ from past filings from the Exchange or its
affiliates due to adjustments to internal resource allocations, and
different system architecture of the Exchange as compared to its
affiliates.
---------------------------------------------------------------------------

    For 2022, the total annual expense for providing the access
services associated with providing 10Gb ULL connectivity for MIAX and
MIAX Pearl Options combined, and Full Service MEO Ports for MIAX Pearl
Options only, is estimated to be $22,589,805, or $1,882,484 per month.
The Exchange utilized its estimated 2022 revenue and costs, which
utilize the same methodology set forth in the Exchange's previously-
issued Audited Unconsolidated Financial Statements.\48\
---------------------------------------------------------------------------

    \48\ For example, the Exchange previously noted that all third-
party expense described in its prior fee filing was contained in the
information technology and communication costs line item under the
section titled ``Operating Expenses Incurred Directly or Allocated
From Parent,'' in the Exchange's 2019 Form 1 Amendment containing
its financial statements for 2018. See Securities Exchange Act
Release No. 87876 (December 31, 2019), 85 FR 757 (January 7, 2020)
(SR-PEARL-2019-36). Accordingly, the third-party expense described
in this filing is attributed to the same line item for the
Exchange's 2022 Form 1 Amendment, which will be filed in 2023. In
its suspension orders, the Commission also asked should the Exchange
use cost projections or actual costs estimated for 2021 in a filing
made in 2022, or make cost projections for 2022. The Exchange
utilized expenses from its most recent audited financial statement
as those numbers are more reliable than more recent unaudited
numbers, which may be subject to change.

----------------------------------------------------------------------------------------------------------------
                                                External expenses
-----------------------------------------------------------------------------------------------------------------
                                                      Percentage of total expense amount allocated
                                      --------------------------------------------------------------------------
               Category                                                                   Full service MEO ports
                                        10Gb ULL connectivity    10Gb ULL connectivity     (MIAX pearl options
                                                (MIAX)            (MIAX pearl options)            only)
----------------------------------------------------------------------------------------------------------------
Data Center Provider.................  61%....................  61%....................  10.8%.
Fiber Connectivity Provider..........  61%....................  61%....................  5.4%.
Security Financial Transaction         73.6%..................  73.6%..................  4.4%.
 Infrastructure (``SFTI''), and Other
 Connectivity and Content Service
 Providers.
Hardware and Software Providers......  50%....................  50%....................  6.4%.
                                      --------------------------------------------------------------------------
    Total of External Expenses.......  $4,677,491. \49\
----------------------------------------------------------------------------------------------------------------

                                                Internal expenses
-----------------------------------------------------------------------------------------------------------------
                                                                Expense amount allocated
                                      --------------------------------------------------------------------------
               Category                                                                   Full service MEO ports
                                        10Gb ULL connectivity    10Gb ULL connectivity     (MIAX pearl options
                                                (MIAX)            (MIAX pearl options)            only)
----------------------------------------------------------------------------------------------------------------
Employee Compensation................  $4,108,382               $2,955,419               $2,066,488
                                        (representing 27.5% of   (representing 27.5% of   (representing 19.2% of
                                        total $14,957,861        total $10,760,135        total $10,760,135
                                        expense).                expense).                expense).
Depreciation and Amortization........  $2,724,062               $1,460,789               $161,579 (representing
                                        (representing 66% of     (representing 61.3% of   6.8% of total
                                        total $4,135,294         total $2,382,314         $2,382,314 expense).
                                        expense).                expense).
Occupancy............................  $399,859 (representing   $301,578 (representing   $62,531 (representing
                                        52% of total $769,108    52% of total $580,068    10.8% of total
                                        expense).                expense).                $580,068 expense).
                                      --------------------------------------------------------------------------
    Total of Internal Expenses.......  $14,240,687.
                                      --------------------------------------------------------------------------
Allocated Shared Expenses............  $1,982,793               $1,351,081               $337,753 (representing
                                        (representing 49% of     (representing 44% of     11% of total
                                        total $4,042,629         total $3,060,734         $3,060,734 expense).
                                        expense).                expense).
                                      --------------------------------------------------------------------------
    Total of Allocated Shared          $3,671,627.
     Expenses.
                                      --------------------------------------------------------------------------
        Total External + Internal +    $22,589,805.
         Allocated Shared Expenses.
----------------------------------------------------------------------------------------------------------------

    In its suspension orders, the Commission solicited commenters'
views on whether the Exchange has provided sufficient detail on the
identity and nature of services provided by third parties. The
Commission further solicited commenters' views on whether the Exchange
has provided sufficient detail on the elements that go into
connectivity and port costs, including how shared costs are allocated
and attributed to connectivity and port expenses, to permit an
independent review and assessment of the reasonableness of purported
cost-based fees and the corresponding profit margin thereon. In
response, the Exchange provides additional detail regarding the
identity and nature of services provided by third parties, the elements
that go into connectivity and port costs, and how expenses are
allocated. The Exchange believes this additional detail is sufficient
to support a finding that the proposed fees are consistent with the
Exchange Act.
---------------------------------------------------------------------------

    \49\ The Exchange does not believe it is appropriate to disclose
the actual amount it pays to each individual third party provider as
those fee arrangements are competitive or the Exchange is
contractually prohibited from disclosing that number.
---------------------------------------------------------------------------

    For clarity, the Exchange took a conservative approach in
determining the expense and the percentage of that expense to be
allocated to providing 10Gb ULL connectivity and Full Service MEO
Ports. The Exchange describes below the analysis conducted for each
expense and the resources or determinations that were considered when
determining the amount necessary to allocate to each expense. The
Exchange notes that, without the specific external and internal expense
items, the Exchange would not be able to provide access to its System
Networks through 10Gb ULL connectivity and Full Service MEO Ports. Each
of these expense items, including physical hardware, software, employee
compensation and benefits, occupancy costs, and the depreciation and
amortization of equipment, were identified through a line-by-line cost
analysis and determined to be integral to providing access to its
System Networks through 10Gb ULL connectivity and Full Service MEO
Ports for the reasons discussed below. Only a portion of all fees paid
to such third parties are included in the third party expenses
described herein, and, again, no expense amount is allocated twice. For
example, the Exchange does not allocate its entire information
technology and communication costs to providing access to its System
Networks through 10Gb ULL connectivity and Full Service MEO Ports
because it determined that a portion of those costs are attributable to
other areas of the Exchange's operations, such as transaction services,
market data, and other forms of connectivity offered by the Exchange.
This may result in the Exchange under allocating an expense to provide
access to its System Networks through 10Gb ULL connectivity and Full
Service MEO Ports, and such expenses may actually be higher than what
the Exchange allocated as part of this proposal.\50\
---------------------------------------------------------------------------

    \50\ The Exchange notes that expenses associated with its
affiliates, MIAX Emerald and MIAX Pearl (the equities market), are
accounted for separately and are not included within the scope of
this filing.
---------------------------------------------------------------------------

    Further, as part its ongoing assessment of costs and expenses, the
Exchange recently conducted a periodic thorough review of its expenses
and resource allocations, which resulted in revised percentage
allocations in this filing as compared to prior versions of this
proposed fee change that were previously withdrawn by the Exchange. The
revised percentages are, among other things, the result of the shifting
of internal resources in response to business objectives. Therefore,
the percentage allocations used in this proposed rule change may differ
from past filings from the Exchange or its affiliates due to
adjustments to internal resource allocations, and different system
architecture of the Exchange as compared to its affiliates.\51\
---------------------------------------------------------------------------

    \51\ See supra notes 4 and 5.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to consider the expense and
revenue for 10Gb ULL connectivity and Full Service MEO Ports together
because ports and connectivity are inextricably linked components of
the network infrastructure, and that both are necessary for a market
participant to access the Exchange. The various types of connectivity
and port alternatives that the Exchange offers provide a wide array of
access alternatives necessary for a market participant to conduct its
business using the Exchange, which is a business decision to be made by
each

particular type of market participant. The different types of
connectivity and port alternatives allows Members to conduct their
different business strategies--some Members put an emphasis on speed,
while others emphasize other strategies, such as redundancy and
certainty of execution. The Exchange does not require a Member to have
a certain framework for accessing the Exchange, but provides various
connectivity and port alternatives for each Member's distinct business
lines.
External Expense Allocations
    For 2022, annual expenses relating to fees paid by the Exchange to
third parties for products and services necessary to provide 10Gb ULL
connectivity and Full Service MEO Ports are estimated to be $4,677,491.
This includes a portion of the fees paid to: (1) A third party data
center provider, including for the primary, secondary, and disaster
recovery locations of the Exchange's trading system infrastructure; (2)
a fiber connectivity provider for network services (fiber and bandwidth
products and services) linking the Exchange's and its affiliates'
office locations in Princeton, New Jersey and Miami, Florida, to all
data center locations; (3) SFTI, which supports connectivity feeds for
the entire U.S. options industry, and various other content and
connectivity service providers, which provide content, connectivity
services, and infrastructure services for critical components of
options connectivity and network services; and (4) hardware and
software providers, which support the production environment in which
Members and non-Members connect to the network to trade and receive
market data.
Data Center Space and Operations Provider
    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 where the Exchange houses servers, switches and related
equipment. Data center costs include an allocation of the costs the
Exchange incurs to provide physical connectivity in the third-party
data centers where it maintains its equipment as well as related costs.
The data center provider operates the data centers (primary, secondary,
and disaster recovery) that host the Exchange's network infrastructure.
Without the retention of a third party data center, the Exchange would
not be able to operate its systems, provide a trading platform for
market participants, and produce and distribute market data. The
Exchange does not employ a separate fee to cover its data center
expense and recoups that expense, in part, by charging for 10Gb ULL
connectivity and Full Service MEO Ports.
    The Exchange reviewed its data center footprint and space utilized,
including its total rack space, cage usage, number of servers,
switches, cabling within the data center, heating and cooling of
physical space, storage space, and monitoring and divided its data
center expenses among providing transaction services, market data,
connectivity (10Gb ULL and 1Gb ULL separately), and ports based on
space utilized by each area.\52\ Based on this review, the Exchange and
MIAX determined that 61% of the total applicable data center provider
expense for each is applicable to providing 10Gb ULL connectivity and
10.8% for Full Service MEO Ports for MIAX Pearl Options. The Exchange
reviewed space utilized to house rack space, cage usage, servers,
switches, cabling, storage space, heating and cooling of physical
space, and monitoring, and identified that a small portion of that
footprint is dedicated to equipment used to support 10Gb ULL
connectivity and Full Service MEO Ports.
---------------------------------------------------------------------------

    \52\ The Investors Exchange, Inc. (``IEX'') also allocated data
center costs to produce market data based on space utilized. See
Securities Exchange Act Release No. 94630 (April 7, 2022), 87 FR
21945, at page 21949 (April 13, 2022) (SR-IEX-2022-02) (``IEX Market
Data Fee Proposal'') (noting that ``[d]ata Center costs consist of
the fees charged by the third-party data centers used by IEX and
represent less than 10% the Exchange's total data center costs based
on space utilized'' (emphasis added)).
---------------------------------------------------------------------------

    The Exchange believes this allocation is reasonable because it
represents the costs associated with housing the Exchange's equipment
dedicated to supporting 10Gb ULL connectivity and Full Service MEO
Ports. 10Gb ULL connectivity and Full Service MEO Ports are core means
of access to the Exchange's network, providing several methods for
market participants to send and receive order and trade messages, as
well as receive market data. A large portion of the Exchange's data
center expense is due to space utilized to provide and maintain
connectivity and port access to the Exchange's System Networks,
including providing cabling within the data center between market
participants and the Exchange. The Exchange excluded from this
allocation servers and space that are dedicated to market data. The
Exchange also did not allocate the remainder of the data center expense
because it pertains to space utilized by other areas of the Exchange's
operations, such as 1Gb ULL connectivity, other types of ports, market
data, and transaction services.
Fiber Connectivity Provider
    The Exchange engages a third-party service provider that provides
the internet, fiber and bandwidth connections between the Exchange's
networks, primary and secondary data center, and office locations in
Princeton and Miami. Fiber connectivity is necessary for the Exchange
to switch to its secondary data center in the case of an outage in its
primary data center. Fiber connectivity also allows the Exchange's
National Operations & Control Center (``NOCC'') and Security Operations
Center (``SOC'') in Princeton to communicate with the Exchange's
primary and secondary data centers. As such, all trade data, including
the billions of messages each day, flow through this third party
provider's infrastructure over the Exchange's network. Fiber
connectivity is also necessary for personnel responsible for overseeing
and providing customer service related to supporting 10Gb ULL
connectivity and Full Service MEO Ports, receiving relevant data and
being able to communicate between the Exchange's various locations and
data centers. Without these services, the Exchange would not be able to
operate and support the network and provide and maintain access
services and System Networks associated with the 10Gb ULL connectivity
and Full Service MEO Ports to its Members and their customers. Without
the retention of a third party fiber connectivity provider, the
Exchange would not be able to communicate between its data centers and
office locations in a manner necessary to maintain and support 10Gb ULL
connectivity and Full Service MEO Ports. Fiber connectivity is a
necessary integral means to disseminate information, including data
related to supporting 10Gb ULL connectivity and Full Service MEO Ports,
from the Exchange's primary data center to other Exchange locations. It
is necessary for Exchange employees located in various locations to be
able to communicate and receive the necessary data to maintain and
provide customer support related to 10Gb ULL connectivity and Full
Service MEO Ports. The Exchange would not be able to operate and
support the network and provide and maintain access services and System
Networks associated with 10Gb ULL connectivity and Full Service MEO
Ports without third party fiber connectivity. The Exchange does not
employ a separate fee to cover its fiber connectivity expense and
recoups that expense, in

part, by charging for 10Gb ULL connectivity and Full Service MEO Ports.
    The Exchange reviewed it costs to retain fiber connectivity from a
third party, including the ongoing costs to support fiber connectivity,
ensuring adequate bandwidth and infrastructure maintenance to support
exchange operations, and ongoing network monitoring and maintenance.
Based on this review, the Exchange and MIAX determined that 61% of the
total fiber connectivity expense for each was applicable to providing
and maintaining access services and System Networks associated with
10Gb ULL connectivity and 5.4% for Full Service MEO Ports for MIAX
Pearl Options. The Exchange reviewed its total fiber connectivity
expense and allocated it among transaction services, connectivity,
ports, market data, and administrative operations, based on usage. The
Exchange then further divided up its fiber connectivity costs related
to connectivity and ports and identified the portion that is
attributable to supporting 10Gb ULL connectivity and Full Service MEO
Ports, also based on usage. This allocation is, therefore, based on the
amount of bandwidth and fiber connectivity the Exchange calculated is
utilized to support exchange operations, and ongoing network monitoring
and maintenance that are necessary to provide 10Gb ULL connectivity and
Full Service MEO Ports. The Exchange believes this allocation is
reasonable because 10Gb ULL connectivity and Full Service MEO Ports are
core means of access to the Exchange's network, providing several
methods for market participants to send and receive order and trade
messages, as well as receive market data. A large portion of the
Exchange's fiber connectivity expense is due to providing and
maintaining connectivity between the Exchange's System Networks, data
centers, and office locations and is core to the daily operation of the
Exchange. The Exchange also excluded from this allocation fiber
connectivity usage related to other business lines, such as transaction
services, market data, and other forms of connectivity offered by the
Exchange, or unrelated administrative services. The Exchange also did
not allocate the remainder of this expense because it pertains to other
areas of the Exchange's operations and does not directly relate to
providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and Full Service MEO Ports. The
Exchange believes this allocation is reasonable because it represents
the Exchange's cost to providing and maintaining access services and
System Networks associated with 10Gb ULL connectivity and Full Service
MEO Ports.
Connectivity and Content Services Provided by SFTI and Other Providers
    The Exchange relies on SFTI and various other connectivity and
content service providers for connectivity and data feeds for the
entire U.S. options industry, as well as content, connectivity, 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 and Full Service MEO Ports.
Specifically, the Exchange utilizes SFTI and other content service
provider to connect to other national securities exchanges, the Options
Price Reporting Authority (``OPRA''), and to receive market data from
other exchanges and market data providers. SFTI is operated by the
Intercontinental Exchange, the parent company of five registered
exchanges, and has become integral to the U.S. markets. The Exchange
understands SFTI provides services to most, if not all, of the other
U.S. exchanges and other market participants. Connectivity and market
data provided by SFTI and other service is critical to the Exchanges
daily operations and performance of its System Networks to which market
participants connect to via 10Gb ULL connectivity and Full Service MEO
Ports. Without services from SFTI and various other service 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 SFTI and content service provider
expense and recoups that expense, in part, by charging for 10Gb ULL
connectivity and Full Service MEO Ports.
    The Exchange reviewed it costs to retain SFTI and other content
service providers, including network monitoring and maintenance,
remediation of connectivity related issues, and ongoing administrative
activities related to connectivity management. Based on this review,
the Exchange and MIAX determined that 73.6% of the total applicable
SFTI and other service provider expense for each is allocated to
providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and 4.4% for Full Service MEO
Ports for MIAX Pearl Options. The Exchange reviewed its total SFTI and
other service provider expense and allocated it among transaction
services, connectivity, ports, other market data products, and
administrative operations, based on usage. The Exchange then further
divided up its SFTI and other service provider costs related to
connectivity and ports and identified the portion that is attributable
to supporting 10Gb ULL connectivity and Full Service MEO Ports, also
based on usage. This allocation is, therefore, based on the amount of
SFTI and other service provider resources utilized to support exchange
operations, and ongoing network monitoring and maintenance that are
necessary to provide 10Gb ULL connectivity and Full Service MEO Ports.
SFTI and other content service providers are key vendors and necessary
components in providing access to the Exchange. The primary service
SFTI provides for the Exchange is connectivity to other national
securities exchanges and their disaster recovery facilities and,
therefore, a vast portion of this expense is allocated to providing
access to the System Networks via 10Gb ULL connectivity and Full
Service MEO Ports. Connectivity via SFTI is necessary for purposes of
order routing and accessing disaster recovery facilities in the case of
a system outage. Engaging SFTI and other like vendors provides
purchasers of 10Gb ULL connectivity to other national securities
exchanges for purposes of order routing and disaster recovery. The
Exchange did not allocate a portion of this expense that relates to the
receipt of market data from other national securities exchanges and
OPRA. The Exchange also did not allocate the remainder of this expense
because it pertains to other areas of the Exchange's operations and
does not directly relate to providing and maintaining the System
Networks or access to its System Networks via 10Gb ULL connectivity or
Full Service MEO Ports, such as transaction services, market data,
other forms of connectivity offered by the Exchange, or unrelated
administrative services. The Exchange believes this allocation is
reasonable because it represents the Exchange's cost to provide and
maintain its System Networks and access to its System Networks via 10Gb
ULL connectivity and Full Service MEO Ports, and not any other service,
as supported by its cost review.
Hardware and Software Providers
    The Exchange relies on dozens of third-party hardware and software
providers for equipment necessary to

operate its System Networks. This includes either the purchase or
licensing of physical equipment, such as servers, switches, cabling,
and devices needed by Exchange personnel to monitor servers and the
health 10Gb ULL connectivity and Full Service MEO Ports. This consists
of real-time monitoring of system performance, integrity, and latency
of 10Gb ULL connectivity and Full Service MEO Ports. It also includes
the Exchange purchasing or licensing software necessary for security
monitoring, data analysis and Exchange operations. Hardware and
software providers are necessary to maintain its System Networks and
provide access to its System Networks via a 10Gb ULL connectivity and
Full Service MEO Ports. Hardware and software equipment and licenses
for that equipment are also necessary to operate and monitor physical
assets necessary to offer physical connectivity to the Exchange.
Hardware and software equipment and licenses are key to the operation
of the Exchange and, without them, the Exchange would not be able to
operate and support its System Networks and provide access to its
Members and their customers. The Exchange does not employ a separate
fee to cover its hardware and software expense and recoups that
expense, in part, by charging for 10Gb ULL connectivity and Full
Service MEO Ports.
    The Exchange reviewed its hardware and software related costs,
including software patch management, vulnerability management,
administrative activities related to equipment and software management,
professional services for selection, installation and configuration of
equipment and software supporting exchange operations. The Exchange
then divided those costs among transaction services, ports,
connectivity, market data, and other Exchange operations based on
whether all of that hardware or software is based on usage. The
Exchange then reviewed the amount allocated to connectivity and ports
generally and what portion of that hardware and software equipment or
license is used to support 10Gb ULL connectivity and Full Service MEO
Ports specifically. Based on this review, the Exchange and MIAX
determined that 50% of the total applicable hardware and software
expense for each is allocated to providing and maintaining access
services and System Networks associated with 10Gb ULL connectivity and
6.4% for Full Service MEO Ports for MIAX Pearl Options. These
percentages reflect the amount of hardware and software equipment and
licenses dedicated to support 10Gb ULL connectivity and Full Service
MEO Ports.\53\ Hardware and software equipment and licenses are key to
the operation of the Exchange and its System Networks. Without them,
the Exchange would not be able to provide and maintain access services
and System Networks associated with 10Gb ULL connectivity and Full
Service MEO Ports. The Exchange only allocated the portion of this
expense to the hardware and software that is related to 10Gb ULL
connectivity and Full Service MEO Ports, such as operating servers and
equipment necessary to provide and maintain access services and System
Networks associated with 10Gb ULL connectivity and Full Service MEO
Ports. The Exchange, therefore, did not allocate portions of its
hardware and software expense that related to other areas of the
Exchange's business, such as hardware and software used for market data
or unrelated administrative services. The Exchange also did not
allocate the remainder of this expense because it pertains to other
areas of the Exchange's operations, such as transaction services,
market data, and other forms of connectivity offered by the Exchange,
and is not directly relate to providing 10Gb ULL connectivity or Full
Service MEO Ports. The Exchange believes this allocation is reasonable
because it represents the Exchange's cost to provide and maintain
access services and System Networks associated with 10Gb ULL
connectivity and Full Service MEO Ports, and not any other service, as
supported by its cost review.
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    \53\ The Exchange notes that IEX used a similar methodology to
allocate hardware costs to market data. See IEX Market Data Fee
Proposal, supra note 52 at page 21950 (noting that ``IEX only
included hardware specifically dedicated to the market data feeds in
calculating the costs of providing market data'').
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Internal Expense Allocations
    For 2022, total combined internal annual expense relating to the
Exchange and MIAX to provide and maintain their System Networks and
access to their System Networks for 10Gb ULL connectivity, and for
access via Full Service MEO Ports for MIAX Pearl Options, is estimated
to be $14,240,687. This includes costs associated with: (1) Employee
compensation and benefits for full-time employees that support the
System Networks and access to System Networks via 10Gb ULL connectivity
and Full Service MEO Ports, including staff in network operations,
trading operations, development, system operations, business, as well
as staff in general corporate departments (such as legal, regulatory,
and finance) that support those employees and functions as well as
important system upgrades; (2) depreciation and amortization of
hardware and software used to provide and maintain access services and
System Networks associated with the 10Gb ULL connectivity and Full
Service MEO Ports, including equipment, servers, cabling, purchased
software and internally developed software used in the production
environment to support the network for trading; and (3) occupancy costs
for leased office space for staff that provide and maintain the System
Networks and access to System Networks via 10Gb ULL connectivity and
Full Service MEO Ports.
Employee Compensation and Benefits
    Human personnel are key to exchange operations and supporting the
Exchange's ongoing provision of 10Gb ULL connectivity and Full Service
MEO Ports. The Exchange reviewed its employee compensation and benefits
expense and the portion of that expense allocated to providing 10Gb ULL
connectivity and Full Service MEO Ports. As part of this review, the
Exchange considered employees whose functions include providing and
maintaining access services and System Networks associated with 10Gb
ULL connectivity and Full Service MEO Ports and used a blended rate of
compensation reflecting salary, stock and bonus compensation, bonuses,
benefits, payroll taxes, and 401K matching contributions.\54\
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    \54\ For purposes of this allocation, the Exchange did not
consider expenses related to office space, supplies, or equipment
use by employees who support 10Gb ULL connectivity and Full Service
MEO Ports.
---------------------------------------------------------------------------

    In its suspension orders, the Commission asked the Exchange provide
more detail about the methodology the Exchange used to determine how
much of an employee's time is devoted to connectivity and port related
activities. In considering the cost of personnel, the Exchange
generally considered the time spent on various access service projects
and initiatives through project management tracking tools and analysis
of employee resource allocations, among its Technology Team in the
following areas: Technical Operations, Software Engineering, Quality
Assurance, and Infrastructure. The Exchange did not consider non-
Technology Teams such as Market Operations, Project Management,

Regulatory, Legal, and Accounting/Finance.\55\
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    \55\ The Exchange notes that IEX used a similar methodology to
allocate employee compensation related costs to market data. See IEX
Market Data Fee Proposal, supra note 52 at page 29150 (noting that
``[f]or personnel costs, IEX calculated an allocation of employee
time for employees whose functions include providing and maintaining
IEX Data and/or the proprietary market data feeds used to transmit
IEX Data, and used a blended rate of compensation reflecting salary,
stock and bonus compensation, benefits, payroll taxes, and 401(k)
matching contributions'').
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    Based on this review, the Exchange and MIAX determined to allocate
a combined $9,130,289 in combined employee compensation and benefits
expense to provide and maintain access services and System Networks
associated with 10Gb ULL connectivity and Full Service MEO Ports. This
is only a portion of the $25,717,996 total projected combined expense
for employee compensation and benefits for MIAX and MIAX Pearl Options.
Of that total, the Exchange and MIAX allocated approximately 27.5% of
the total applicable employee compensation and benefits expense for
each to providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and 19.2% for Full Service MEO
Ports for MIAX Pearl Options. The Exchange and MIAX determined the cost
allocations for employees who perform work in support of providing and
maintaining access services and System Networks associated with 10Gb
ULL connectivity and Full Service MEO Ports to arrive at full time
equivalents (``FTE'') of 12.0 FTEs for MIAX and 8.9 FTEs for MIAX Pearl
Options across all the identified personnel related to 10Gb ULL
connectivity, and 6.3 FTEs across all the identified personnel related
to Full Service MEO Ports for MIAX Pearl Options. The Exchange then
multiplied the FTE times a blended compensation rate for all relevant
Exchange personnel to determine the personnel costs associated with
providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and Full Service MEO Ports.
Senior staff also reviewed these time allocations with department heads
and team leaders to determine whether those allocations were
appropriate. These employees are critical to the Exchange to providing
and maintaining access services and System Networks associated with
10Gb ULL connectivity and Full Service MEO Ports. The Exchange
determined the above allocation based on the personnel whose work
focused on functions necessary to providing and maintaining access
services and System Networks associated with 10Gb ULL connectivity and
Full Service MEO Ports. The Exchange does not charge a separate fee
regarding employees who support 10Gb ULL connectivity and Full Service
MEO Ports and the Exchange seeks to recoup those expenses, in part, by
charging for 10Gb ULL connectivity and Full Service MEO Ports.
    The Exchange believes it is appropriate to include incentive
compensation in the blended personnel compensation rate on the same
basis as other personnel costs for in-scope employees because incentive
compensation is a part of the total personnel costs associated with the
Exchange's provision of 10Gb ULL connectivity and Full Service MEO
Ports. Moreover, the Exchange notes that it has taken a conservative
approach in determining which employees to include in its cost
analysis, in terms of function and percent allocation, so that the
included personnel costs are directly and closely tied to the costs of
providing 10Gb ULL connectivity and Full Service MEO Ports. The FTE
allocations represent just 36% of the Exchange's and MIAX's overall
personnel costs. Consistent with the Exchange's conservative
methodology to limit costs allocated to 10Gb ULL connectivity and Full
Service MEO Ports, this approach includes only a de minimis personnel
cost allocation for senior level executives and no allocation for
members of the Exchange's board of directors. Accordingly, the Exchange
believes that the allocated personnel expenses included are
appropriately attributable to 10Gb ULL connectivity and Full Service
MEO Ports.
Depreciation and Amortization
    A key expense incurred by the Exchange relates to the depreciation
and amortization of equipment that the Exchange procured to provide and
maintain access services and System Networks associated with 10Gb ULL
connectivity and Full Service MEO Ports. The Exchange reviewed all of
its physical assets and software, owned and leased, and determined
whether each asset is related to providing and maintaining the 10Gb ULL
connectivity and Full Service MEO Ports, and added up the depreciation
of those assets. All physical assets and software, which 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. Based on the Exchange's experience, this
depreciation period equals the typical life expectancy of those assets.
In determining the amount of depreciation and amortization to apply to
providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and Full Service MEO Ports, the
Exchange considered the depreciation of hardware and software that are
key to the operation of the Exchange and its provision of 10Gb ULL
connectivity and Full Service MEO Ports. This includes servers,
computers, laptops, monitors, information security appliances and
storage, and network switching infrastructure equipment, including
switches and taps that were previously purchased to provide and
maintain access services and System Networks associated with 10Gb ULL
connectivity and Full Service MEO Ports. Without them, market
participants would not be able to access the Exchange. The Exchange
seeks to recoup a portion of its depreciation expense by charging for
10Gb ULL connectivity and Full Service MEO Ports.
    Based on this review, the Exchange and MIAX determined to allocate
a combined $4,346,430 in combined depreciation and amortization expense
to provide and maintain access services and System Networks associated
with 10Gb ULL connectivity and Full Service MEO Ports. This is only a
portion of the $6,517,608 total projected combined expense for
depreciation and amortization for MIAX and MIAX Pearl Options. This
allocation represents approximately 66% for MIAX and 61.3% for MIAX
Pearl Options of the total applicable depreciation expenses to
providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and 6.8% for Full Service MEO
Ports for MIAX Pearl Options. For purposes of the allocation of these
costs to 10Gb ULL connectivity and Full Service MEO Ports, the Exchange
allocates the annual depreciation (i.e., one-third or one-fifth of the
initial asset value based on the typical life expectancy of those
assets). One-third or one-fifth of the cost of each asset is included
in the annual costs allocated to 10Gb ULL connectivity and Full Service
MEO Ports. The Exchange only included assets specifically dedicated to
10Gb ULL connectivity and Full Service MEO Ports in calculating the
costs of providing 10Gb ULL connectivity and Full Service MEO Ports.
This means that physical assets used for such as transaction services,
market data, other forms of connectivity offered by the Exchange, or
other Exchange operations were excluded

from the calculation.\56\ The Exchange, therefore, did not allocate
portions of depreciation expense that relates to other areas of the
Exchange's business, such as the depreciation of hardware and software
used for market data, unrelated administrative services, or other
connectivity or ports offered by the Exchange. All of the expenses
outlined in this proposed fee change refer to the operating expenses of
the Exchange. In the suspension orders, the Commission asked for
additional detail or explanation to ensure that no expense amount is
allocated twice. The Exchange did not included any future capital
expenditures within these costs ensuring that no cost is counted twice.
Depreciation and amortization represent the expense of previously
purchased hardware and internally developed software spread over the
useful life of the assets. Due to the fact that the Exchange has only
included operating expense and historical purchases, there is no double
counting of expenses in the Exchange's cost estimates.
---------------------------------------------------------------------------

    \56\ The Exchange notes that IEX used a similar methodology to
allocate hardware costs to market data. See IEX Market Data Fee
Proposal at note 54, supra note 52 at page 21950 (noting that
``[h]ardware is depreciated on a straight-line three-year period,
which in IEX's experience, is equal to the typical life expectancy
of those assets. As noted above, one-third of the cost of each
hardware asset is included in the annual costs allocated to market
data. IEX only included hardware specifically dedicated to the
market data feeds in calculating the costs of providing market data.
This means that physical assets used for both order entry and market
data were excluded from the calculation'').
---------------------------------------------------------------------------

Occupancy
    The Exchange rents and maintains multiple physical locations to
house staff and equipment necessary to support access to System
Networks via 10Gb ULL connectivity and Full Service MEO Ports. The
Exchange's occupancy expense is not limited to the housing of personnel
and includes locations used to store equipment necessary for Exchange
operations. In determining the amount of its occupancy related expense,
the Exchange considered actual physical space used to house employees
whose functions include providing and maintaining access services and
System Networks associated with 10Gb ULL connectivity and Full Service
MEO Ports. Similarly, the Exchange also considered the actual physical
space used to house hardware and other equipment necessary to provide
and maintain the 10Gb ULL connectivity and Full Service MEO Ports. The
Exchange maintains staff that support 10Gb ULL connectivity and Full
Service MEO Ports in various locations and needs to provide workplaces
for that staff as well as space to house hardware and equipment
necessary for those employees to perform those functions.\57\ This
equipment includes computers, servers, and accessories necessary to
support the access to the System Networks via 10Gb ULL connectivity and
Full Service MEO Ports. Based on this review, the Exchange and MIAX
determined to allocate a combined $763,968 in occupancy expense to
providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and Full Service MEO Ports for
MIAX Pearl Options. According to the Exchange's calculations, MIAX and
MIAX Pearl Options each allocated approximately 52% of their total
applicable occupancy expense to providing and maintaining access
services and System Networks associated with 10Gb ULL connectivity and
10.8% for Full Service MEO Ports for MIAX Pearl Options. This is only a
portion of the $1,349,176 total projected combined expense for
occupancy for MIAX and MIAX Pearl Options. The Exchange believes this
allocation is reasonable because it represents the Exchange's cost to
rent and maintain a physical location for the Exchange's staff who
operate and support 10Gb ULL connectivity and Full Service MEO Ports.
The Exchange considered the rent paid for the Exchange's Princeton and
Miami offices, as well as various related costs, such as physical
security, property management fees, property taxes, and utilities at
each of those locations. The Exchange did not include occupancy
expenses related to housing employees and equipment related to other
Exchange operations, such as transaction and administrative services.
---------------------------------------------------------------------------

    \57\ For the avoidance of doubt, the Exchange did not include
within this cost any portion of its costs related to third party
fiber connectivity used by Exchange staff in different office
locations to communicate as part of their role in supporting 10Gb
ULL connectivity and Full Service MEO Ports.
---------------------------------------------------------------------------

Allocated Shared Expense
    Finally, a limited portion of general shared expenses was allocated
to providing and maintaining access services and System Networks
associated with 10Gb ULL connectivity and Full Service MEO Ports as
without these general shared costs, the Exchange would not be able to
operate in the manner that it does. The costs included in general
shared expenses include recruiting and training, marketing and
advertising costs, professional fees for legal, tax and accounting
services, and telecommunications costs. For 2022, the Exchange's and
MIAX Pearl Option's combined general shared expense allocated to 10Gb
ULL connectivity and Full Service MEO Ports for MIAX Pearl Options is
estimated to be $3,671,627. This represents approximately 49% for MIAX
and 44% for MIAX Pearl Options for 10Gb ULL connectivity, and 11% for
MIAX Pearl Options for Full Service MEO Ports, of the $7,103,363 total
projected combined general shared expense for MIAX and MIAX Pearl
Options. The Exchange used the weighted average of the above
allocations to determine the amount of general shared expenses to
allocate to the Exchange. Next, based on additional management and
expense analysis, these fees are allocated to the proposal.
Revenue and Estimated Profit Margin
    The Exchange only has four primary sources of revenue and cost
recovery mechanisms to fund all of its operations: Transaction fees,
access fees, regulatory fees, and market data fees. Accordingly, the
Exchange must cover all of its expenses from these four primary sources
of revenue and cost recovery mechanisms.
    To determine the Exchange's and MIAX's estimated revenue associated
with 10Gb ULL connectivity and Full Service MEO Ports for MIAX Pearl
Options, the Exchange and MIAX analyzed the number of subscribers
currently utilizing 10Gb ULL connectivity (for both on the shared
network) and Full Service MEO Ports (for MIAX Pearl Options) and used a
recent monthly billing cycle representative of current monthly revenue.
The Exchange also provided its baseline by analyzing March 2022, the
monthly billing cycle prior to the proposed fees, and compared this to
its expenses for that month. As discussed below, the Exchange does not
believe it is appropriate to factor into its analysis future revenue
growth or decline into its estimates for purposes of these
calculations, given the uncertainty of such estimates due to the
continually changing access needs of market participants and potential
changes in internal and external expenses, as well as because the
Exchange is committing to review this cost analysis for these fees on
an annual basis going forward.
    For March 2022, prior to the proposed fees, the Exchange and MIAX
had a combined 173 10Gb ULL connections and MIAX Pearl Options had 15
Full Service MEO Ports (Bulk) and 4 Full Service MEO Ports (Single)
purchased, for which the Exchange and MIAX charged a total of
$1,787,712 (including charges for connections that were dropped or
added mid-month, resulting in pro-rated charges). This resulted in a
loss of $94,772 for that month (a margin

of -5.3%). For April 2022, the Exchange and MIAX anticipate that a
combined 174 10Gb ULL connections and, for MIAX Pearl Options, 15 Full
Service MEO Ports (Bulk) and 4 Full Service MEO Ports (Single) will be
charged for (as of the date of this filing).\58\ Assuming the Exchange
and MIAX charge the proposed monthly rate of $12,000 per 10Gb ULL
connection and the proposed rates for Full Service MEO Ports for MIAX
Pearl Options, the Exchange and MIAX would generate revenue of
$2,213,500 for April 2022 (not including potential pro-rated connection
charges for mid-month connections) for 10Gb ULL connectivity for both
exchanges and Full Service MEO Ports for MIAX Pearl Options combined.
This would result in a profit of $331,016 ($2,213,500 minus $1,882,484)
for that month (a 15% profit margin). As discussed above, the Exchange
believes it is reasonable to consider the expense and revenue for 10Gb
ULL connectivity and Full Service MEO Ports together because ports and
connectivity are inextricably linked components of the network
infrastructure, and that both are necessary for a market participant to
access the Exchange.
---------------------------------------------------------------------------

    \58\ The Exchange notes that the number of subscribers of 10Gb
ULL connections and Full Service MEO Ports may change over time. For
example, from June 2021 to April 2022, MIAX and MIAX Pearl Options
had the following number of combined subscribers of 10Gb ULL
connectivity per month: June (152); July (156); August (154);
September (154); October (154); November (152); December (159);
January (174); February (171); March (173); April (174). From June
2021 to April 2022, MIAX had the following number of Full Service
MEO Ports utilized per month (Bulk and Single combined): June (20);
July (20); August (19); September (19); October (19); November (19);
December (19); January (19); February (19); March (19); April (19).
---------------------------------------------------------------------------

    The Exchange believes that conducting the above analysis on a per
month basis is reasonable as the revenue generated from access services
subject to the proposed fee generally remains static from month to
month. The Exchange also conducted the above analysis on a per month
basis to comply with the Commission Staff's Guidance, which requires a
baseline analysis to assist in determining whether the proposal
generates a supra-competitive profit. The Exchange cautions that this
profit margin may also fluctuate from month to month based on the
uncertainty of predicting how many connections and ports may be
purchased from month to month as Members and non-Members are free to
add and drop connections and ports at any time based on their own
business decisions.
    The Exchange believes the proposed profit margin is reasonable and
will not result in a ``supra-competitive'' profit. The Guidance defines
``supra-competitive profit'' as ``profits that exceed the profits that
can be obtained in a competitive market.'' \59\ Until recently, the
Exchange has operated at a cumulative net annual loss since it launched
operations in 2017.\60\ The Exchange has operated at a net loss due to
a number of factors, one of which is choosing to forgo revenue by
offering certain products, such as connectivity, at lower rates than
other options exchanges to attract order flow and encourage market
participants to experience the high determinism, low latency, and
resiliency of the Exchange's trading systems. The Exchange should not
now be penalized for seeking to raise it fees to near market rates
after offering such products as discounted prices. Therefore, the
Exchange believes the proposed fees are reasonable because they are
based on both relative costs to the Exchange to provide 10Gb ULL
connectivity and Full Service MEO Ports, the extent to which the
product drives the Exchange's overall costs and the relative value of
the product, as well as the Exchange's objective to make access to its
Systems broadly available to market participants. The Exchange also
believes the proposed fees are reasonable because they are designed to
generate annual revenue to recoup the Exchange's costs of providing
10Gb ULL connectivity and Full Service MEO Ports.
---------------------------------------------------------------------------

    \59\ See supra note 39.
    \60\ The Exchange has incurred a cumulative loss of $86 million
since its inception in 2017 to 2020. See Exchange's Form 1/A,
Application for Registration or Exemption from Registration as a
National Securities Exchange, filed July 28, 2021, available at
https://www.sec.gov/Archives/edgar/vprr/2100/21000461.pdf.
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    The Exchange notes that its revenue estimate is based on
projections and will only be realized to the extent such revenue
actually produces the revenue estimated. As a competitor in the hyper-
competitive exchange environment, and an exchange focused on driving
competition, the Exchange does not yet know whether such expectations
will be realized. For instance, in order to generate the revenue
expected from 10Gb ULL connectivity and Full Service MEO Ports, the
Exchange will have to be successful in retaining existing clients that
wish to utilize 10Gb ULL connectivity and Full Service MEO Ports or
obtaining new clients that will purchase such access. To the extent the
Exchange is successful in encouraging new clients to utilize 10Gb ULL
connectivity and Full Service MEO Ports, the Exchange does not believe
it should be penalized for such success. The Exchange, like other
exchanges, is, after all, a for-profit business. While the Exchange
believes in transparency around costs and potential margins, the
Exchange does not believe that these estimates should form the sole
basis of whether or not a proposed fee is reasonable or can be adopted.
Instead, the Exchange believes that the information should be used
solely to confirm that an Exchange is not earning supra-competitive
profits, and the Exchange believes this proposal demonstrates this
fact.
    Further, the proposed profit margin reflects the Exchange's efforts
to control its costs. A profit margin should not be judged alone based
on its size, but whether the ultimate fee reflects the value of the
services provided and is in line with other exchanges. A profit margin
on one exchange should not be deemed excessive where that exchange has
been successful in controlling costs, but not excessive where an
exchange is charging the same fee but has a lower profit margin due to
higher costs.
    The expected profit margin is reasonable because the Exchange
offers a premium System Network, System Networks connectivity, and a
highly deterministic trading environment. The Exchange is recognized as
a leader in network monitoring, determinism, risk protections, and
network stability. For example, the Exchange experiences approximately
a 95% determinism rate, system throughput of approximately 10.8 million
quotes per second and average round trip latency rate of approximately
30.76 microseconds for a single quote. The Exchange provides extreme
performance and radical scalability designed to match the unique needs
of trading differing asset class/market model combinations. Exchange
systems offer two customer interfaces, FIX gateway for orders, and
ultra-low latency interfaces and data feeds with best-in-class wire
order determinism. The Exchange also offers automated continuous
testing to ensure high reliability, advanced monitoring and systems
security, and employs a software architecture that results in
minimizing the demands on power, space, and cooling while allowing for
rapid scalability, resiliency and fault isolation. The Exchange also
provides latency equalized cross-connects in the primary data center
ensures fair and cost efficient access to the Exchange's Systems. The
Exchange, therefore, believes the anticipated profit margin is
reasonable because it reflects the Exchange's cost controls and the
quality of the Exchanges systems.

    Finally, the Exchange believes that the proposed fees are
reasonable because they will not impose onerous audit requirements on
subscribers, because there will be no need to substantiate the number
of users of 10Gb ULL connectivity and Full Service MEO Ports or the
manner in which it is being used.
Annual Review of Fees
    In its suspension orders, the Commission asks whether exchanges
should periodically reevaluate fees on an ongoing and periodic basis in
order to assure that actual revenue aligns with a reasonable cost-plus
model. As described above and as part of this proposed rule change, the
Exchange is committing to conduct a one year review of the fees that
are cost justified as part of this proposed rule change after the date
of this proposal, and annually thereafter. The Exchange expects that it
may propose to adjust fees at that time, either to increase fees in the
event that revenues fail to reasonably cover costs at the estimated
margin set forth below [sic], or to decrease fees in the event that
revenue materially exceeds the Exchange's current projections. In the
event that the Exchange determines to propose a fee change, updated
cost estimates will be included in a rule filing proposing the fee
change. The Exchange believes this approach will further increase
transparency around market data costs and help to ensure that Exchange
fees continue to be reasonably related to costs.
The Proposed Fees Are Reasonable When Compared to the Fees of Other
Options Exchanges With Similar Market Share
    The Exchange does not have visibility into other options exchanges'
costs to provide connectivity and port access or their fee markup over
those costs, and therefore cannot use other exchange's connectivity and
port fees as benchmarks to determine a reasonable markup over the costs
of providing such access. Nevertheless, the Exchange believes the other
exchanges' 10Gb connectivity and port fees are useful examples of
alternative approaches to providing and charging for access
notwithstanding that the competing exchanges may have different system
architectures that may result in different cost structures for the
provision of connectivity and ports. To that end, the Exchange believes
the proposed fees are 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 described in the table below, 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. In the each of the below cases, the Exchange's proposed fees are
still significantly lower than that of competing options exchanges with
similar market share. Each of the market data rates in place at
competing options exchanges were filed with the Commission for
immediate effectiveness and remain in place today.

------------------------------------------------------------------------
                                       Type of        Monthly fee (per
             Exchange               connection or     connection or per
                                         port               port)
------------------------------------------------------------------------
MIAX Pearl (as proposed) (equity   10Gb ULL         $12,000.
 options market share of 5.67% as   connection.     Tier 1: $5,000 (or
 of April 29, 2022 for the month   Full Service      $208.33 per
 of April) \61\.                    MEO Port         Matching Engine).
                                    (Bulk).         Tier 2: $7,500 (or
                                   ...............   $312.50 per
                                   ...............   Matching Engine).
                                   Full Service     Tier 3: $10,000 (or
                                    MEO Port         $416.66 per
                                    (Single).        Matching Engine).
                                                    Tier 1: $2,500 (or
                                                     $104.16 per
                                                     Matching Engine).
                                                    Tier 2: $3,500 (or
                                                     $145.83 per
                                                     Matching Engine).
                                                    Tier 3: $4,500 (or
                                                     $187.50 per
                                                     Matching Engine).
NASDAQ \62\ (equity options        10Gb Ultra       $15,000.
 market share of 8.47% as of        fiber           1-5 ports. $1,500.
 April 29, 2022 for the month of    connection.     6-20 ports. $1,000.
 April) \63\.                      SQF Port.......  21 or more ports.
                                                     $500.
ISE \64\ (equity options market    10Gb Ultra       $15,000.
 share of 5.48% as of April 29,     fiber           $1,100.
 2022 for the month of April)       connection.
 \65\.                             SQF Port.......
NYSE American \66\ (equity         10Gb LX LCN      $22,000.
 options market share of 8.13% as   connection.     Ports 1-40. $450.
 of April 29, 2022 for the month   Order/Quote      Ports 41 and
 of April) \67\.                    Entry Port.      greater. $150.
GEMX \68\ (equity options market   10Gb Ultra       $15,000.
 share of 2.36% as of April 29,     connection.     $1,250
 2022 for the month of April)      SQF Port.......
 \69\.
------------------------------------------------------------------------

The Proposed Pricing Is Not Unfairly Discriminatory and Provides for
the Equitable Allocation of Fees, Dues, and Other Charges
---------------------------------------------------------------------------

    \61\ See supra note 23.
    \62\ See supra note 24.
    \63\ See supra note 23.
    \64\ See supra note 26.
    \65\ See supra note 23.
    \66\ See supra note 28.
    \67\ See supra note 23.
    \68\ See supra note 30.
    \69\ See supra note 23.
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees are reasonable, fair,
equitable, and not unfairly discriminatory because they are designed to
align fees with services provided and will apply equally to all
subscribers.
10Gb ULL Connectivity
    The Exchange believes that the proposed fees are reasonable,
equitably allocated and not unfairly discriminatory because, for one
10Gb ULL connection, the Exchange provides each Member or non-Member
access to all twelve (12) matching engines on MIAX Pearl and a vast
majority choose to connect to all twelve (12) matching engines. The
Exchange believes that

other exchanges require firms to connect to multiple matching
engines.\70\
---------------------------------------------------------------------------

    \70\ See Specialized Quote Interface Specification, Nasdaq PHLX,
Nasdaq Options Market, Nasdaq BX Options, Version 6.5a, Section 2,
Architecture (revised August 16, 2019), available at http://www.nasdaqtrader.com/content/technicalsupport/specifications/TradingProducts/SQF6.5a-2019-Aug.pdf. The Exchange notes that it is
unclear whether the NASDAQ exchanges include connectivity to each
matching engine for the single fee or charge per connection, per
matching engine. See also NYSE Technology FAQ and Best Practices:
Options, Section 5.1 (How many matching engines are used by each
exchange?) (September 2020). The Exchange notes that NYSE provides a
link to an Excel file detailing the number of matching engines per
options exchange, with Arca and Amex having 19 and 17 matching
engines, respectively.
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees are equitably
allocated among users of the network connectivity and port
alternatives, as the users of 10Gb ULL connections consume the more
bandwidth and network resources than users of 1Gb ULL connection.
Specifically, the Exchange notes that 10Gb ULL connection users account
for approximately more than 99% of message traffic over the network,
while the users of the 1Gb ULL connections account for approximately
less than 1% of message traffic over the network. In the Exchange's
experience, users of the 1Gb connections do not have a business need
for the high performance network solutions required by 10Gb ULL users.
The Exchange's high performance network solutions and supporting
infrastructure (including employee support), provides unparalleled
system throughput with the network ability to support access to several
distinct options markets and the capacity to handle approximately 38
million quote messages per second. On an average day, the Exchange and
MIAX handle over approximately 8,304,500,000 billion total messages. Of
that total, users of the 10Gb ULL connections generate approximately
8.3 billion messages, and users of the 1Gb connections generate
approximately 4.5 million messages. 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.\71\ Thus, as
the number of messages an entity 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. Given this difference in network
utilization rate, the Exchange believes that it is reasonable,
equitable, and not unfairly discriminatory that the 10Gb ULL users pay
for the vast majority of the shared network resources from which all
market participants' benefit.
---------------------------------------------------------------------------

    \71\ 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 also believes that the connectivity fees are equitably
allocated amongst users of the network connectivity alternatives, when
these fees are viewed in the context of the overall trading volume on
the Exchange. To illustrate, the purchasers of the 10Gb ULL
connectivity account for approximately 91.95% of the volume on the
Exchange. This overall volume percentage (91.95% of total Exchange
volume) is in line with the amount of network connectivity revenue
collected from 10Gb ULL purchasers (98% of total Exchange connectivity
revenue). For example, utilizing a recent billing cycle, Exchange
Members and non-Members that purchased 10Gb ULL connections accounted
for approximately 98% of the total network connectivity revenue
collected by the Exchange from all connectivity alternatives; and
Members and non-Members that purchased 1Gb and 10Gb connections
accounted for approximately 2% of the revenue collected by the Exchange
from all connectivity alternatives.
Full Service MEO Ports
    The Exchange believes that the proposed fees are equitably
allocated among users of the network connectivity alternatives, as the
Members that are frequently in the highest Tier for Full Service MEO
Ports consume the most bandwidth and resources of the network.
Specifically, like above for the 10Gb ULL connectivity, the Exchange
notes that the Market Makers who reach the highest tier for Full
Service MEO Ports (Bulk) account for approximately greater than 84% of
average daily volume (``ADV'') on the Exchange, while Market Makers
that are typically in the lowest Tier for Full Service MEO Ports,
account for approximately less than 14% of ADV on the Exchange. The
remaining 1% if accounted for by Market Makers who are frequently in
the middle Tier for Full Service MEO Ports (Bulk), which is usually one
firm. 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.\72\ 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. The Exchange further
believes that the proposed fees are reasonable, equitably allocated and
not unfairly discriminatory because, for the flat fee, the Exchange
provides each Member two (2) Full Service MEO Ports for each matching
engine to which that Member is connected. Unlike other options
exchanges that provide similar port functionality and charge fees on a
per port basis,\73\ the Exchange offers Full Service MEO Ports as a
package and provides Members with the option to receive up to two Full
Service MEO Ports per matching engine to which it connects. The
Exchange currently has twelve (12) matching engines, which means
Members may receive up to twenty-four (24) Full Service MEO Ports for a
single monthly fee, that can vary based on certain volume percentages.
The Exchange currently assesses Members a fee of $5,000 per month in
the highest Full Service MEO Port--Bulk Tier, regardless of the number
of Full Service MEO Ports allocated to the Member. Assuming a Member
connects to all twelve (12) matching engines during a month, with two
Full Service

MEO Ports per matching engine, this results in a cost of $208.33 per
Full Service MEO Port--Bulk ($5,000 divided by 24) for the month. This
fee has been unchanged since the Exchange adopted Full Service MEO Port
fees in 2018.\74\ The Exchange now proposes to increase the Full
Service MEO Port fees, with the highest Tier fee for a Full Service MEO
Port--Bulk of $10,000 per month. Members will continue to receive two
(2) Full Service MEO Ports to each matching engine to which they are
connected for the single flat monthly fee. Assuming a Member connects
to all twelve (12) matching engines during the month, and achieves the
highest Tier for that month, with two Full Service MEO Ports--Bulk per
matching engine, this would result in a cost of $416.67 per Full
Service MEO Port ($10,000 divided by 24).
---------------------------------------------------------------------------

    \72\ 17 CFR 240.17a-1 (recordkeeping rule for national
securities exchanges, national securities associations, registered
clearing agencies and the Municipal Securities Rulemaking Board).
    \73\ See supra notes 24, 26, 28, and 30.
    \74\ See supra note 6.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
Intra-Market Competition
    The Exchange believes the proposed fees will not result in any
burden on intra-market competition that is not necessary or appropriate
in furtherance of the purposes of the Act because the proposed fees
will allow the Exchange to recoup some of its costs in providing 10Gb
ULL connectivity and Full Service MEO Ports at below market rates to
market participants since the Exchange launched operations. As
described above, the Exchange has operated at a cumulative net annual
loss since it launched operations in 2017 \75\ due to providing a low
cost alternative to attract order flow and encourage market
participants to experience the high determinism and resiliency of the
Exchange's trading Systems. To do so, the Exchange chose to waive the
fees for some non-transaction related services and Exchange products or
provide them at a very marginal cost, which was not profitable to the
Exchange. This resulted in the Exchange forgoing revenue it could have
generated from assessing any fees or higher fees. The Exchange could
have sought to charge higher fees at the outset, but that could have
served to discourage participation on the Exchange. Instead, the
Exchange chose to provide a low cost exchange alternative to the
options industry, which resulted in lower initial revenues. Examples of
this are 10Gb ULL connectivity and Full Service MEO Ports, for which
the Exchange only now seeks to adopt fees at a level similar to or
lower than those of other options exchanges.
---------------------------------------------------------------------------

    \75\ See supra note 60.
---------------------------------------------------------------------------

    Further, the Exchange does not believe that the proposed fee
increase for the 10Gb ULL connection change would place certain market
participants at the Exchange at a relative disadvantage compared to
other market participants or affect the ability of such market
participants to compete. As is the case with the current proposed flat
fee, the proposed fee would apply uniformly to all market participants
regardless of the number of connections they choose to purchase. The
proposed fee does not favor certain categories of market participants
in a manner that would impose an undue burden on competition.
Inter-Market Competition
    The Exchange also does not believe that the proposed rule change
will result in any burden on inter-market competition that is not
necessary or appropriate in furtherance of the purposes of the Act. As
discussed above, options market participants are not forced to connect
to all options exchanges. There is no reason to believe that our
proposed price increase will harm another exchange's ability to
compete. There are other options markets of which market participants
may connect to trade options. There is also a possible range of
alternative strategies, including routing to the exchange through
another participant or market center or accessing the Exchange
indirectly. Market participants are free to choose which exchange or
reseller to use to satisfy their business needs. Accordingly, the
Exchange does not believe its proposed fee changes impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    The Exchange responded to the comment letters submitted on prior