[Federal Register Volume 87, Number 35 (Tuesday, February 22, 2022)]
[Notices]
[Pages 9733-9747]
[FR Doc No: 2022-03656]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94262; File No. SR-MIAX-2022-10]

Self-Regulatory Organizations; Miami International Securities
Exchange, LLC; Notice of Filing of a Proposed Rule Change To Establish
Fees for the Exchange's cToM Market Data Product; Suspension of and
Order Instituting Proceedings To Determine Whether To Approve or
Disapprove the Proposed Rule Change

February 15, 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 February 7, 2022, Miami International Securities Exchange, LLC
(``MIAX'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') a proposed rule change as described in Item
II below, which Item has been prepared by the Exchange. The Exchange
filed the proposed rule change pursuant to Section 19(b)(3)(A)(ii) of
the Act,\3\ and Rule 19b-4(f)(2) thereunder.\4\ 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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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 Options Fee
Schedule (the ``Fee Schedule'') to establish fees for the market data
product known as MIAX Complex Top of Market (``cToM''). The fees became
operative on February 7, 2022. The text of the proposed rule change is
available on the Exchange's website at http://www.miaxoptions.com/rule-filings, at MIAX's principal office, and at the Commission's Public
Reference Room.

II. Self-Regulatory Organization's Description of 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 Section 6)a) of the Fee Schedule to
establish fees for the cToM data product. The Exchange initially filed
this proposal on June 30, 2021 with the proposed fees to be effective
beginning July 1, 2021 (``First Proposed Rule Change'').\5\ The First
Proposed Rule Change was published for comment in the Federal Register
on July 15, 2021.\6\ Although the Commission did not receive any
comment letters on the First Proposed Rule Change, on August 27, 2021,
the Commission issued its Suspension of and Order Instituting
Proceedings to Determine Whether to Approve or Disapprove Proposed Rule
Changes to Establish Fees for the Exchanges' cToM Market Data Products
(relating to the First Proposed Rule Change and a similar filing by the
Exchange's affiliate, MIAX Emerald, LLC (``MIAX Emerald''), to also
adopt cToM fees).\7\ The Exchange withdrew the First Proposed Rule
Change on September 30, 2021 \8\ and re-submitted the proposal, with
the proposed fee changes being immediately effective (``Second Proposed
Rule Change'').\9\ The Second Proposed Rule Change provided additional
justification for the proposed fee changes and addressed comments
provided by the Commission Staff. On October 14, 2021, the Exchange
withdrew the Second Proposed Rule Change and submitted its proposal to
adopt cToM fees to again provide additional justification for the
proposed fee changes and address comments provided by the Commission
Staff (``Third Proposed Rule Change'').\10\ The Third Proposed Rule
Change was published for comment in the Federal Register on November 1,
2021.\11\ Although the Commission did not again receive any comment
letters on the Third Proposed Rule Change, the Exchange withdrew the
Third Proposed Rule Change on December 10, 2021 and submitted a revised
proposal for immediate effectiveness (``Fourth Proposed Rule
Change'').\12\ The Fourth Proposed Rule Change was published for
comment in the Federal Register on December 23, 2021.\13\ The Fourth
Proposed Rule Change meaningfully attempted to provide additional
justification and explanation for the proposed fee change in response
to a telephone conversation with Commission Staff on December 7, 2021
relating to the Third Proposed Rule Change. Although the Commission
again did not receive any comment letters on the Fourth Proposed Rule
Change, the Exchange withdrew the Fourth Proposed Rule Change on
February 7, 2022 and now submits this revised proposal for immediate
effectiveness (``Fifth Proposed Rule Change''). This Fifth Proposed
Rule Change provides additional justification and explanation for the
proposed fee changes.
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    \5\ See Securities Exchange Act Release No. 92359 (July 9,
2021), 86 FR 37393 (July 15, 2021) (SR-MIAX-2021-28).
    \6\ Id.
    \7\ See Securities Exchange Act Release No. 92789 (August 27,
2021), 86 FR 49364 (September 2, 2021) (SR-MIAX-2021-28, SR-EMERALD-
2021-21) (the ``Suspension Order'').
    \8\ See Securities Exchange Act Release No. 93471 (October 29,
2021), 86 FR 60947 (November 4, 2021).
    \9\ See SR-MIAX-2021-44.
    \10\ Securities Exchange Act Release No. 93426 (October 26,
2021), 86 FR 60314 (November 1, 2021) (SR-MIAX-2021-50).
    \11\ Id.
    \12\ Securities Exchange Act Release No. 93808 (December 17,
2021), 86 FR 73011 (December 23, 2021) (SR-MIAX-2021-62).
    \13\ Id.
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Background
    The Exchange previously adopted rules governing the trading of
Complex Orders \14\ on the MIAX System \15\ in 2016.\16\ At that time,
the Exchange also adopted the market data product cToM and expressly
waived fees for cToM to provide an incentive to prospective market
participants to subscribe to that market data feed.\17\ Prior to the
First Proposed Rule Change, the Exchange did not charge fees to cToM
subscribers during the nearly five years since it was first available
for subscription.
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    \14\ See Exchange Rule 518(a)(5) for the definition of Complex
Orders.
    \15\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
    \16\ See Securities Exchange Act Release No. 79072 (October 7,
2016), 81 FR 71131 (October 14, 2016) (SR-MIAX-2016-26) (Order
Approving a Proposed Rule Change to Adopt New Rules to Govern the
Trading of Complex Orders).
    \17\ See Securities Exchange Act Release No. 79146 (October 24,
2016), 81 FR 75171 (October 28, 2016) (SR-MIAX-2016-36) (providing a
complete description of the cToM data feed).
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    In summary, cToM provides subscribers with the same information as
the MIAX Top of Market (``ToM'') data product as it relates to the
Strategy Book,\18\ i.e., the Exchange's best bid and offer for a
complex strategy, with aggregate size, based on displayable order and
quoting interest in the complex strategy on the Exchange. However, cToM
provides subscribers with the following additional information that is
not included in ToM: (i) The identification of the complex strategies
currently trading on the Exchange; (ii) complex strategy last sale
information; and (iii) the status of securities underlying the complex
strategy (e.g., halted, open, or resumed). cToM is therefore a distinct
market data product from ToM in that it includes additional information
that is not available to subscribers that receive only the ToM data
feed. ToM subscribers are not required to subscribe to cToM, and cToM
subscribers are not required to subscribe to ToM.\19\
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    \18\ The ``Strategy Book'' is the Exchange's electronic book of
complex orders and complex quotes. See Exchange Rule 518(a)(17).
    \19\ See supra note 14.
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Proposal
    The Exchange now proposes to amend Section (6)(a) of the Fee
Schedule to charge monthly fees to Distributors \20\ of cToM.
Specifically, the Exchange proposes to assess Internal Distributors

$1,250 per month and External Distributors $1,750 per month for the
cToM data feed.\21\ The Exchange notes that the proposed monthly cToM
fees for Internal and External Distributors are the same prices that
the Exchange charges for its ToM data product, and are identical to the
prices the Exchange's affiliate, MIAX Emerald, proposes to charge for
its cToM product.
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    \20\ A ``Distributor'' of MIAX data is any entity that receives
a feed or file of data either directly from MIAX or indirectly
through another entity and then distributes it either internally
(within that entity) or externally (outside that entity). All
Distributors are required to execute a MIAX Distributor Agreement.
See Section (6)(a) of the Fee Schedule.
    \21\ The Exchange also proposes to make a minor related change
to remove ``(as applicable)'' from the explanatory paragraph in
Section (6)(a) as it will not change fees for both the ToM and cToM
data feeds.
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    As it does today for ToM, MIAX proposes to assess cToM fees on
Internal and External Distributors in each month the Distributor is
credentialed to use cToM in the production environment. Also, as the
Exchange does today for ToM, market data fees, the fee for cToM will be
reduced for new Distributors for the first month during which they
subscribe to cToM, based on the number of trading days that have been
held during the month prior to the date on which that subscriber has
been credentialed to use cToM in the production environment. Such new
Distributors will be assessed a pro-rata percentage of the fees in the
table in Section (6)(a) of the Fee Schedule, which is the percentage of
the number of trading days remaining in the affected calendar month as
of the date on which they have been credentialed to use cToM in the
production environment, divided by the total number of trading days in
the affected calendar month.
    The Exchange believes that other exchanges' fees for complex market
data are useful examples and provides the below table for comparison
purposes only to show how the Exchange's proposed fees compare to fees
currently charged by other options exchanges for similar complex market
data. As shown by the below table, the Exchange's proposed fees for
cToM are similar to or less than fees charged for similar data products
provided by other options exchanges.
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    \22\ See NYSE American Options Proprietary Market Data Fees,
American Options Complex Fees, at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Options_Market_Data_Fee_Schedule.pdf.
    \23\ See NYSE Arca Options Proprietary Market Data Fees, Arca
Options Complex Fees, at https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Options_Proprietary_Data_Fee_Schedule.pdf.
    \24\ See PHLX Price List--U.S. Derivatives Data, PHLX Orders
Fees, at http://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#PHLX.

------------------------------------------------------------------------
             Exchange                            Monthly fee
------------------------------------------------------------------------
MIAX (as proposed)................  $1,250--Internal Distributor;
                                     $1,750--External Distributor.
NYSE American, LLC (``Amex'') \22\  $1,500--Access Fee; $1,000--
                                     Redistribution Fee.
NYSE Arca, Inc. (``Arca'') \23\...  $1,500--Access Fee; $1,000--
                                     Redistribution Fee.
NASDAQ PHLX LLC (``PHLX'') \24\...  $3,000--Internal Distributor;
                                     $3,500--External Distributor.
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    The Exchange also proposes to amend the paragraph below the table
of fees for ToM and cToM in Section (6)(a) of the Fee Schedule to make
a minor, non-substantive corrective edit. In particular, the Exchange
proposes to delete the phrase ``(as applicable)'' in the first sentence
following the table of fees for ToM and cToM. The purpose of this
proposed change is to remove unnecessary text from the Fee Schedule.
cToM Content Is Available From Alternative Sources
    cToM is also not the exclusive source for Complex Order information
from the Exchange, and market participants may choose to subscribe to
the Exchange's other data products to receive such information. It is a
business decision of market participants whether to subscribe to the
cToM data product or not. Market participants that choose not to
subscribe to cToM can derive much, if not all, of the same information
provided in the cToM feed from other Exchange sources, including, for
example, the MIAX Options Order Feed (``MOR'').\25\ The following cToM
information is provided to subscribers of MOR: The Exchange's best bid
and offer for a complex strategy, with aggregate size, based on
displayable order and quoting interest in the complex strategy on the
Exchange; the identification of the complex strategies currently
trading on the Exchange; and the status of securities underlying the
complex strategy (e.g., halted, open, or resumed). In addition to the
cToM information contained in MOR, complex strategy last sale
information can be derived from the Exchange's ToM data feed.
Specifically, market participants may deduce that last sale information
for multiple trades in related options series that are disseminated via
the ToM data feed with the same timestamp are likely part of a Complex
Order transaction and last sale.
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    \25\ See MIAX website, Market Data & Offerings, at https://www.miaxoptions.com/market-data-offerings (last visited December 10,
2021). In general, MOR provides real-time ultra-low latency updates
on the following information: New Simple Orders added to the MIAX
Order Book; updates to Simple Orders resting on the MIAX Order Book;
new Complex Orders added to the Strategy Book (i.e., the book of
Complex Orders); updates to Complex Orders resting on the Strategy
Book; MIAX listed series updates; MIAX Complex Strategy definitions;
the state of the MIAX System; and MIAX's underlying trading state.
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Implementation
    The proposed rule change is immediately effective.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \26\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \27\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among its members and issuers and other persons
using its facilities. The Exchange also believes the proposal furthers
the objectives of Section 6(b)(5) of the Act in that it is designed to
promote just and equitable principles of trade, remove impediments to
and perfect the mechanism of a free and open market and a national
market system, and, in general protect investors and the public
interest and is not designed to permit unfair discrimination between
customers, issuers, brokers and dealers.
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    \26\ 15 U.S.C. 78f(b).
    \27\ 15 U.S.C. 78f(b)(4) and (5).
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    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'').\28\ 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.'' \29\ Based on

both the BOX Order and the Guidance, the Exchange believes that it has
clearly met its burden to demonstrate that the proposed fees are
consistent with the Act because they (i) are reasonable, equitably
allocated, not unfairly discriminatory, and not an undue burden on
competition; (ii) comply with the BOX Order and the Guidance; (iii) are
supported by evidence (including comprehensive revenue and cost data
and analysis) that they are fair and reasonable because they will not
result in excessive pricing or supra-competitive profit; and (iv)
utilize a cost-based justification framework that is substantially
similar to a framework previously used by the Exchange, and its
affiliates MIAX Emerald and MIAX PEARL, LLC (``MIAX Pearl''), to adopt
or amend market data and non-transaction fees.\30\
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    \28\ 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).
    \29\ 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'').
    \30\ See Securities Exchange Act Release Nos. 91145 (February
17, 2021), 86 FR 11033 (February 23, 2021) (SR-EMERALD-2021-05)
(proposal to establish market data fees for MIAX Emerald ToM,
Administrative Information Subscriber feed, and MIAX Emerald Order
Feed); 90981 (January 25, 2021), 86 FR 7582 (January 29, 2021) (SR-
PEARL-2021-01) (proposal to increase connectivity fees); 91460
(April 2, 2021), 86 FR 18349 (SR-EMERALD-2021-11) (proposal to adopt
port fees, increase connectivity fees, and increase additional
limited service ports); 91033 (February 1, 2021), 86 FR 8455
(February 5, 2021) (SR-EMERALD-2021-03) (proposal to adopt trading
permit fees).
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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 sets certain non-transaction fees, including market data fees.
The Exchange believes that it is important to demonstrate that these
fees are based on its costs to provide these products and reasonable
business needs.
    In the Guidance, the Commission Staff stated that, ``[a]s an
initial step in assessing the reasonableness of a fee, staff considers
whether the fee is constrained by significant competitive forces.''
\31\ 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.'' \32\ 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.'' \33\ 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 services to
supply cToM data and will not result in the Exchange generating a
supra-competitive profit.
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    \31\ See the Guidance, supra note 27.
    \32\ Id.
    \33\ Id.
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    The Guidance defines ``supra-competitive profit'' as ``profits that
exceed the profits that can be obtained in a competitive market.'' \34\
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.'' \35\ The Exchange provides
this analysis below.
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    \34\ Id.
    \35\ Id.
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    Based on this analysis, the Exchange believes the proposed fees are
reasonable and do not result in a ``supra-competitive'' \36\ profit.
The Exchange believes that it is important to demonstrate that the
proposed fees are based on its costs and reasonable business needs. The
Exchange believes the proposed fees will allow the Exchange to offset
expenses the Exchange has and will incur, and that the Exchange
provides sufficient transparency (described below) into the costs and
revenue underlying the proposed fees. Accordingly, the Exchange
provides an analysis of its revenues, costs, and profitability
associated with the proposed fees. This analysis includes information
regarding its methodology for determining the costs and revenues
associated with the proposed fees. As a result of this analysis, the
Exchange believes the proposed fees are fair and reasonable as a form
of cost recovery plus present the possibility of a reasonable return
for the Exchange's aggregate costs of offering cToM data, which has
been offered for free for over five years.
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    \36\ Id.
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    The proposed fees are based on a cost-plus model. In determining
the appropriate fees to charge, the Exchange considered its costs to
provide cToM data, using what it believes to be a conservative
methodology (i.e., that strictly considers only those costs that are
most clearly directly related to the provision and maintenance of cToM
data) to estimate such costs,\37\ as well as the relative costs of
providing and maintaining cToM data feeds, and set fees that are
designed to cover its costs with a limited return in excess of such
costs. However, as discussed more fully below, such fees may also
result in the Exchange recouping less than all of its costs of
providing and maintaining cToM data feeds because of the uncertainty of
forecasting subscriber decision making with respect to firms' needs for
cToM data and the likely potential for increased costs to procure the
third-party services described below.
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    \37\ For example, the Exchange only included the costs
associated with providing and supporting cToM data feeds and
excluded from its cost calculations any cost not directly associated
with providing and maintaining such cToM data feeds. Thus, the
Exchange notes that this methodology underestimates the total costs
of providing and maintaining cToM data feeds.
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    To determine the Exchange's costs to provide cToM data associated
with the proposed fees, the Exchange 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 the proposed fees, and, if such expense did so
relate, what portion (or percentage) of such expense actually supports
the cToM data product associated with the proposed fees.
    The Exchange also provides detailed information regarding the
Exchange's cost allocation methodology--namely, information that
explains the Exchange's rationale for determining that it was
reasonable to allocate certain expenses described in this filing
towards the cost to the Exchange to provide the services associated
with the proposed fees. The Exchange conducted a thorough internal
analysis to determine the portion (or percentage) of each expense to
allocate to the support of services associated with the proposed fees.
This analysis included discussions with each Exchange department head
to determine the expenses that support services associated with the
proposed fees. 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 Exchange reviewed each individual expense to determine if
such expense was related to the proposed fees. Once the expenses were
identified, the Exchange department heads, with the assistance of our
internal finance department, reviewed such expenses holistically on an
Exchange-wide level to determine what portion of that expense supports
providing services for the proposed fees. The sum of all such portions
of expenses represents the total cost to the Exchange to provide
services associated with the proposed fees. For the avoidance of doubt,
no expense amount was allocated twice.
    The internal cost analysis conducted by the Exchange is a
proprietary process that is designed to make a fair and reasonable
assessment of costs and resources allocated to support the provision of
services associated with the proposed fees. The Exchange acknowledges
that this assessment can only capture a moment in time and that costs
and resource allocations may change. That is why the Exchange has
historically, and on an ongoing basis, periodically revisits its costs
and resource allocations to ensure it is appropriately allocating
resources to properly provide services to the Exchange's constituents.
Any requirement that an exchange should conduct a periodic re-
evaluation on a set timeline of its cost justification and amend its
fees accordingly should be established by the Commission holistically,
applied to all exchanges and not just pending fee proposals such as
this filing. In order to be fairly applied, such a mandate should be
applied to existing market data fees as well.
    In accordance with the Guidance, the Exchange has provided
sufficient detail to support a finding that the proposed fees are
consistent with the Exchange Act. The proposal includes a detailed
description of the Exchange's costs and how the Exchange determined to
allocate those costs related to the proposed fees. In fact, the detail
and analysis provided in this proposed rule change far exceed the level
of disclosure provided in other exchange fee filings that have not been
suspended by the Commission during its 60-day suspension period. A
Commission determination that it is unable to make a finding that this
proposed rule change is consistent with the Exchange Act would run
contrary to the Commission Staff's treatment of other recent exchange
fee proposals that have not been suspended and remain in effect
today.\38\ For example, a proposed fee filing that closely resembles
the Exchange's current filing was submitted in 2021 by Nasdaq PHLX LLC
(``PHLX''), which increased fees for PHLX's end of day, intra-day and
historical market data, and adopted fees for external distribution of
PHLX's derived data.\39\ This filing was submitted on September 30,
2021, over two years after the Staff's Guidance was issued. In that
filing, PHLX argued that the proposed fees were subject to competing
products' fees at other exchanges and that there were available
substitutes. This filing provided no cost based data or revenue
analysis to support the amount of the proposed fees. Among other
things, PHLX did not provide a description of the costs underlying its
market data feeds to show that these particular fees did not generate
supra-competitive profits or describe how any potential profit may be
offset by increased costs associated with another fee included in its
proposal. This filing, nonetheless, was not suspended by the Commission
and remains in effect today.
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    \38\ See, e.g., Securities Exchange Act Release Nos. 93293
(October 12, 2021), 86 FR 57716 (October 18, 2021) (SR-PHLX-2021-58)
(increasing several market data fees and adopting new market data
fee without providing a cost based justification); 91339 (March 17,
2021), 86 FR 15524 (March 23, 2021) (SR-CboeBZX-2021-020)
(increasing fees for a market data product while not providing a
cost based justification for the increase); 93293 (October 21,
2021), 86 FR 57716 (October 18, 2021) (SR-PHLX-2021-058) (increasing
fees for historical market data while not providing a cost based
justification for the increase); 92970 (September 14, 2021), 86 FR
52261 (September 20, 2021) (SR-CboeBZX-2021-047) (adopting fees for
a market data related product while not providing a cost based
justification for the fees); and 89826 (September 10, 2021), 85 FR
57900 (September 16, 2021) (SR-CBOE-2020-086) (increasing
connectivity fees without including a cost based justification).
    \39\ See Securities Exchange Act Release No. 93293 (October 12,
2021), 86 FR 57716 (October 18, 2021) (SR-PHLX-2021-58) (increasing
several market data fees and adopting new market data fee without
providing a cost based justification).
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    The Exchange notes that the Investors Exchange, Inc. (``IEX'')
recently submitted a proposed rule change to adopt fees for two real-
time proprietary market data feeds, TOPS and DEEP (``IEX Fee
Proposal''). Like the Exchange proposes herein, IEX previously provided
its TOP and DEEP market data feeds for free and proposed to adopt
modest, below market fees. Also like in this proposal, the IEX Fee
Proposal included a detailed subscriber data and cost-based analysis in
compliance with the Guidance. Nonetheless, on December 30, 2021, the
Commission suspended the IEX Fee Proposal and instituted proceedings to
determine whether to approve or disapprove the IEX Fee Proposal.\40\
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    \40\ See Securities Exchange Act Release No. 93883 (December 30,
2021), 87 FR 523 (January 5, 2021) (SR-IEX-2021-14) (the ``IEX
Order'').
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    The Commission received three comment letters on the IEX Order.\41\
The Virtu Letter and HMA Letter 2 specifically applaud the amount of
detail included in the IEX Fee Proposal. Specifically, the Virtu Letter
states that ``[i]n significant detail, IEX provides data about three
cost components: `(1) Direct costs, such as servers, infrastructure,
and monitoring; (2) enhancement initiative costs (e.g., new
functionality for IEX Data and increased capacity for the proprietary
market data feeds . . .); and (3) personnel costs.' '' \42\ HMA Letter
2 similarly commends the level of detail included in the IEX Fee
Proposal and also highlights the disparate treatment by Commission
Staff of exchange fee filings.\43\ HMA Letter 2 provides three examples
to support this assertion.\44\ The Nasdaq Letter urges the Commission
to approve the IEX Fee Proposal promptly and raises concern the
questions asked by the Commission in the IEX Order imply that they are
exercising rate making authority that they clearly do not possess. The
Nasdaq Letter states that ``[i]f the Commission believes it has
authority to conduct cost-plus ratemaking, the Administrative Procedure
Act dictates that it must propose a rule for notice and comment and
that its final rule must be prepared

to withstand judicial scrutiny.'' \45\ The Exchange agrees.
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    \41\ See letters to Ms. Venessa A. Countryman, Secretary,
Commission, from Douglas A. Cifu, Chief Executive Officer, Virtu
Financial, Inc., dated January 26, 2022 (the ``Virtu Letter''),
Tyler Gellasch, Executive Director, Healthy Markets Association
(``HMA''), dated January 26, 2022 (the ``HMA Letter 2''), and Erika
Moore, Vice President and Corporate Secretary, The Nasdaq Stock
Market LLC, dated January 27, 2022 (the ``Nasdaq Letter'').
    \42\ See Virtu Letter at page 3, id.
    \43\ HMA previously expressed their ``worry that the
Commission's process for reviewing and evaluating exchange filings
may be inconsistently applied.'' See letter from Tyler Gellasch,
Executive Director, HMA, to Hon. Gary Gensler, Chair, Commission,
dated October 29, 2021 (commenting on SR-CboeEDGA-2021-017, SR-
CboeBYX-2021-020, SR-Cboe-BZX-2021-047, SR-CboeEDGX-2021-030, SR-
MIAX-2021-41, SR-PEARL-2021-45, and SR-EMERALD-2021-29 and stating
that ``MIAX has repeatedly filed to change its connectivity fees in
a way that will materially lower costs for many users, while
increasing the costs for some of its heaviest of users. These
filings have been withdrawn and repeatedly refiled. Each time,
however, the filings contain significantly greater information about
who is impacted and how than other filings that have been permitted
to take effect without suspension'') (emphasis added) (``HMA Letter
1'').
    \44\ See HMA Letter 2 at 2-3. The Exchange has provided further
examples to support HMA's assertion above. See supra note 39 and
accompanying text.
    \45\ See Nasdaq Letter at page 13, id.
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    The Exchange believes exchanges, like all businesses, should be
provided flexibility when allocating 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. An exchange's
costs may also vary based on fees charged by third parties and periodic
increases to those fees that may be outside of the control of an
exchange.
    To determine the Exchange's projected revenue associated with the
proposed fees in the instant filing, the Exchange analyzed the number
of Members and non-Members currently subscribing to the cToM data feeds
and used a recent monthly billing cycle representative of 2021 monthly
revenue. The Exchange also provided its baseline by analyzing June
2021, the monthly billing cycle prior to the proposed fees going into
effect, and compared it to its expenses for that month. As discussed
below, the Exchange does not believe it is appropriate to factor into
its analysis projected or estimated future revenue growth or decline
for purposes of these calculations, given the uncertainty of such
projections due to the continually changing market data needs of market
participants and potential increase in internal and third party
expenses. The Exchange is presenting its revenue and expense associated
with the proposed fees in this filing in a manner that is consistent
with how the Exchange presents its revenue and expense in its Audited
Unconsolidated Financial Statements. The Exchange's most recent Audited
Unconsolidated Financial Statement is for 2020. However, since the
revenue and expense associated with the proposed fees were not in place
in 2020 or for the first six months of 2021, the Exchange believes its
2020 Audited Unconsolidated Financial Statement is not representative
of its current total annualized revenue and costs associated with the
proposed fees. Accordingly, the Exchange believes it is more
appropriate to analyze the proposed fees utilizing its 2021 revenue and
costs, as described herein, which utilize the same presentation
methodology as set forth in the Exchange's previously-issued Audited
Unconsolidated Financial Statements. Based on this analysis, the
Exchange believes that the proposed fees are reasonable because they
will allow the Exchange to recover its costs associated with providing
services related to the proposed fees and not result in excessive
pricing or supra-competitive profit. Since 2016, when the Exchange
adopted Complex Order functionality, the Exchange has spent time and
resources building out various Complex Order functionality in its
System to provide better trading strategies and risk functionality for
market participants in order to better compete with other exchanges'
complex functionality and similar data products focused on complex
orders.\46\ The cToM data product allows market participants to better
utilize the Exchange's Complex Order functionality by providing
insights into the Exchange's Complex Order flow. The Exchange notes
that one market participant ceased subscribing to the cToM feed since
July 1, 2021, the date on which the fees became effective pursuant to
the First Proposed Rule Change.
---------------------------------------------------------------------------

    \46\ See Securities Exchange Act Release Nos. 79405 (November
28, 2016), 81 FR 87086 (December 2, 2016) (SR-MIAX-2016-44)
(amendment to clarify the manner in which the System allocates
contracts at the end of a Complex Auction); 80089 (February 22,
2017), 82 FR 12153 (February 28, 2017) (SR-MIAX-2017-06) (adopting
the Complex MIAX Options Price Collar, an additional price
protection feature); 81229 (July 27, 2017), 82 FR 36023 (August 2,
2017) (SR-MIAX-2017-34) (amendment to ensure price and trade
protections apply to Complex Orders); 89085 (June 17, 2020), 85 FR
37719 (June 23, 2020) (SR-MIAX-2020-16) (adopting new order type,
Complex Attributable Order).
---------------------------------------------------------------------------

    As outlined in more detail below, the Exchange projects that the
final annualized expense for 2021 to provide cToM data to be $273,494
per annum or an average of $22,791.17 per month. The Exchange
implemented the proposed fees on July 1, 2021 in the First Proposed
Rule Change. For June 2021, prior to the proposed fees, Exchange
Members and non-Members subscribed to a total of 17 cToM data feeds for
which the Exchange charged $0, as it has for the past five years. This
resulted in a loss of approximately $22,791.17 for that month. For the
month of November 2021, which includes the proposed fees, Exchange
Members and non-Members purchased 16 cToM data feeds, for which the
Exchange charged approximately $21,000 for that month.\47\ This
resulted in a loss of approximately $1,791.17 for that month (a margin
of approximately -8.5%). The Exchange cautions that this margin is
likely to fluctuate from month to month based on the uncertainty of
predicting how many cToM data feeds may be purchased from month to
month as Members and non-Members are able to add and drop subscriptions
at any time based on their own business decisions. This margin may also
decrease due to the significant inflationary pressure on capital items
that the Exchange needs to purchase to maintain the Exchange's
technology and systems.\48\ The Exchange has been subject to price
increases upwards of 30% during the past year on network equipment due
to supply chain shortages. This, in turn, results in higher overall
costs for ongoing system maintenance, but also to purchase the items
necessary to ensure ongoing system resiliency, performance, and
determinism. These costs are expected to continue to go up as the U.S.
economy continues to struggle with supply chain and inflation related
issues.
---------------------------------------------------------------------------

    \47\ The Exchange notes that one market participant cancelled
its cToM subscription since the First Proposed Rule change became
effective on July 1, 2021.
    \48\ See ``Supply chain chaos is already hitting global growth.
And it's about to get worse'', by Holly Ellyatt, CNBC, available at
https://www.cnbc.com/2021/10/18/supply-chain-chaos-is-hitting-global-growth-and-could-get-worse.html (October 18, 2021); and
``There will be things that people can't get, at Christmas, White
House warns'' by Jarrett Renshaw and Trevor Hunnicutt, Reuters,
available at https://www.reuters.com/world/us/americans-may-not-get-some-christmas-treats-white-house-officials-warn-2021-10-12/
(October 12, 2021).
---------------------------------------------------------------------------

    Further, the Exchange chose to provide cToM data for free for the
past five years to attract order flow and encourage market participants
to experience the determinism and resiliency of the Exchange's trading
systems and market data products. This resulted in the Exchange
forgoing revenue it could have generated from assessing any fees. The
Exchange could have sought to charge fees for the cToM data feed at the
outset, but that could have served to discourage participation on the
Exchange. Instead, the Exchange chose to provide a free exchange data
product to the options industry, which resulted in no revenues for
providing this service for five years. The Exchange now proposes to
amend its fee structure to enable it to continue to maintain and
improve its overall market and systems while also providing a highly
reliable and deterministic trading system to the marketplace, complete
with robust market data products, including cToM.
    As mentioned above, the Exchange projects that the final annualized

expense for 2021 to provide cToM data to be approximately $273,494 per
annum or an average of $22,791.17 per month and that these costs are
expected to increase not only due to anticipated significant
inflationary pressure, but also periodic fee increases by third
parties.\49\ The Exchange notes that there are material costs
associated with providing the infrastructure and headcount to fully-
support access to the Exchange and various Exchange products. 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. While some of the expense is
fixed, much of the expense is not fixed, and thus increases the cost to
the Exchange to provide services associated with the proposed fees. For
example, new Members to the Exchange may require the purchase of
additional hardware to support those Members as well as enhanced
monitoring and reporting of customer performance that the Exchange and
its affiliates provide. 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 services and
products to its Members is not fixed and indeed is likely to increase
rather than decrease over time. The Exchange believes the proposed fees
are a reasonable attempt to offset a portion of the costs to the
Exchange associated with providing certain Exchange products.
---------------------------------------------------------------------------

    \49\ For example, on October 20, 2021, ICE Data Services
announced a 3.5% price increase effective January 1, 2022 for most
services. The price increase by ICE Data Services includes their
Secure Financial Transaction Infrastructure (``SFTI'') network,
which is relied on by a majority of market participants, including
the Exchange. See email from ICE Data Services to the Exchange,
dated October 20, 2021. The Exchange further notes that on October
22, 2019, the Exchange was notified by ICE Data Services that it was
raising its fees charged to the Exchange by approximately 11% for
the SFTI network.
---------------------------------------------------------------------------

    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. Until recently, the Exchange
has operated at a cumulative net annual loss since it launched
operations in 2008.\50\ This is a result of 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 market data products or
provide them at a very marginal cost, which has not been profitable to
the Exchange, but beneficial to the overall options industry. This
resulted in the Exchange forgoing revenue it could have generated from
assessing any amount of fees.
---------------------------------------------------------------------------

    \50\ The Exchange has incurred a cumulative loss of $175 million
since its inception in 2008 to 2020, the last year for which the
Exchange's Form 1 data is available. 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/2100/21000460.pdf.
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees are fair and
reasonable because they will not result in excessive pricing or supra-
competitive profit, when comparing the total annual expense that the
Exchange projects to incur in connection with providing these services
versus the total annual revenue that the Exchange projects to collect
in connection with services associated with the proposed fees. As
mentioned above, for 2021,\51\ the total annual expense for providing
the services associated with the proposed fees is projected to be
approximately $273,494 per annum, or approximately $22,791.17 per
month. This projected total annual expense is comprised of the
following, all of which are directly related to the services associated
with the proposed fees: (1) Third-party expense, relating to fees paid
by the Exchange to third-parties for certain products and services; and
(2) internal expense, relating to the internal costs of the Exchange to
provide the services associated with the proposed fees.\52\ As noted
above, the Exchange believes it is more appropriate to analyze the
proposed fees utilizing its 2021 revenue and costs, which utilize the
same presentation methodology as set forth in the Exchange's
previously-issued Audited Unconsolidated Financial Statements.\53\ The
$273,494 projected total annual expense is directly related to the
services associated with the proposed fees, and not any other product
or service offered by the Exchange. It does not include general costs
of operating matching engines and other trading technology. No expense
amount was allocated twice.
---------------------------------------------------------------------------

    \51\ The Exchange has not yet finalized its 2021 year end
results.
    \52\ The percentage allocations used in this proposed rule
change may differ from past filings from the Exchange or its
affiliates due to, among other things, changes in expenses charged
by third-parties, adjustments to internal resource allocations, and
different system architecture of the Exchange as compared to its
affiliates.
    \53\ 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. 87875 (December 31, 2019), 85 FR 770 (January 7, 2020)
(SR-MIAX-2019-51). Accordingly, the third-party expense described in
this filing is attributed to the same line item for the Exchange's
2021 Form 1 Amendment, which will be filed in 2022.
---------------------------------------------------------------------------

    As discussed above, the Exchange conducted an extensive cost review
in which the Exchange analyzed nearly every expense item in the
Exchange's general expense ledger (this includes over 150 separate and
distinct expense items) to determine whether each such expense relates
to the services associated with the proposed fees, and, if such expense
did so relate, what portion (or percentage) of such expense actually
supports those services, and thus bears a relationship that is, ``in
nature and closeness,'' directly related to those services. In
performing this calculation, the Exchange considered other services and
to which the expense may be applied and how much of the expense is
directly or indirectly utilized in providing those other services. The
sum of all such portions of expenses represents the total cost of the
Exchange to provide services associated with the proposed fees.
External Expense Allocations
    For 2021, total third-party expense relating to fees paid by the
Exchange to third-parties for certain products and services for the
Exchange to be able to provide the services associated with the
proposed fees, is projected to be $5,398. This includes, but is not
limited to, a portion of the fees paid to: (1) Equinix, for data center
services, for the primary, secondary, and disaster recovery locations
of the Exchange's trading system infrastructure; (2) Zayo Group
Holdings, Inc. (``Zayo'') for network services (fiber and bandwidth
products and services) linking the Exchange's office locations in
Princeton, New Jersey and Miami, Florida, to all data center locations;
and (3) various other hardware and software providers (including Dell
and Cisco, which support the production environment in which Members
connect to the network to trade, receive market data, etc.). For
clarity, the Exchange took a

conservative approach in determining the expense and the percentage of
that expense to be allocated to providing the services associated with
the proposed fees. Only a portion of all fees paid to such third-
parties is included in the third-party expenses described herein, and
no expense amount is allocated twice. Accordingly, the Exchange does
not allocate its entire information technology and communication costs
to the market data product associated with the proposed fees. Further,
the Exchange notes that, with respect to the expenses included herein,
those expenses only cover the MIAX market; expenses associated with
MIAX Pearl for its options and equities markets and MIAX Emerald, are
accounted for separately and are not included within the scope of this
filing. As noted above, the percentage allocations used in this
proposed rule change may differ from past filings from the Exchange or
its affiliates due to, among other things, changes in expenses charged
by third-parties, adjustments to internal resource allocations, and
different system architecture of the Exchange as compared to its
affiliates. 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, in turn, resulted in
revised percentage allocations in this filing.
    The Exchange believes it is reasonable to allocate such third-party
expense described above towards the total cost to the Exchange to
provide the services associated with the proposed fees. In particular,
the Exchange believes it is reasonable to allocate the identified
portion of the Equinix expense because Equinix operates the data
centers (primary, secondary, and disaster recovery) that host the
Exchange's network infrastructure. This includes, among other things,
the necessary storage space, which continues to expand and increase in
cost, power to operate the network infrastructure, and cooling
apparatuses to ensure the Exchange's network infrastructure maintains
stability. Without these services from Equinix, the Exchange would not
be able to operate and support the network and provide the cToM product
associated with the proposed fees to its Members, non-Members and their
customers. The Exchange did not allocate all of the Equinix expense
toward the cost of providing the cToM product associated with the
proposed fees, only that portion which the Exchange identified as being
specifically mapped to providing the cToM product associated with the
proposed fees. According to the Exchange's calculations, it allocated
approximately 0.20% of the total applicable Equinix expense to
providing the services associated with the proposed fees. The Exchange
believes this allocation is reasonable because it represents the
Exchange's actual cost to provide the cToM product associated with the
proposed fees, and not any other service, as supported by its cost
review.\54\
---------------------------------------------------------------------------

    \54\ As noted above, the percentage allocations used in this
proposed rule change may differ from past filings from the Exchange
or its affiliates due to, among other things, changes in expenses
charged by third-parties, adjustments to internal resource
allocations, and different system architecture of the Exchange as
compared to its affiliates. Again, as part its ongoing assessment of
costs and expenses, the Exchange recently conducted a periodic
thorough review of its expenses and resource allocations which, in
turn, resulted in a revised percentage allocations in this filing.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to allocate the identified
portion of the Zayo expense because Zayo provides the internet, fiber
and bandwidth connections with respect to the network, linking the
Exchange with its affiliates, MIAX Pearl and MIAX Emerald, as well as
the data center and disaster recovery locations. As such, all of the
trade data, including the billions of messages each day per exchange,
flow through Zayo's infrastructure over the Exchange's network. Without
these services from Zayo, the Exchange would not be able to operate and
support the network and provide the cToM data associated with the
proposed fees. The Exchange did not allocate all of the Zayo expense
toward the cost of providing the cToM data associated with the proposed
fees, only the portion which the Exchange identified as being
specifically mapped to providing the cToM data associated with the
proposed fees. According to the Exchange's calculations, it allocated
approximately 0.20% of the total applicable Zayo expense to providing
the services associated with the proposed fees. The Exchange believes
this allocation is reasonable because it represents the Exchange's
actual cost to provide the cToM data associated with the proposed fees,
and not any other service, as supported by its cost review.\55\
---------------------------------------------------------------------------

    \55\ Id.
---------------------------------------------------------------------------

    The Exchange did not allocate any expense associated with the
proposed fees towards SFTI and various other service providers'
(including Thompson Reuters, NYSE, Nasdaq, and Internap) because the
MIAX architecture takes advantage of an advance in design to eliminate
the need for a market data distribution gateway layer. The computation
and dissemination via an API is done solely within the match engine
environment and is then delivered via the Member and non-Member
connectivity infrastructure. This architecture delivers a market data
system that is more efficient both in cost and performance.
Accordingly, the Exchange determined not to allocate any expense
associated with SFTI and various other service providers.
    The Exchange believes it is reasonable to allocate the identified
portion of the other hardware and software provider expense because
this includes costs for dedicated hardware licenses for switches and
servers, as well as dedicated software licenses for security monitoring
and reporting across the network. Without this hardware and software,
the Exchange would not be able to operate and support the network and
provide cToM data to its Members, non-Members and their customers. The
Exchange did not allocate all of the hardware and software provider
expense toward the cost of providing the cToM data associated with the
proposed fees, only the portions which the Exchange identified as being
specifically mapped to providing the cToM data associated with the
proposed fees. According to the Exchange's calculations, it allocated
approximately 0.20% of the total applicable hardware and software
provider expense to providing the services associated with the proposed
fees. The Exchange believes this allocation is reasonable because it
represents the Exchange's actual cost to provide the cToM data
associated with the proposed fees.\56\
---------------------------------------------------------------------------

    \56\ Id.
---------------------------------------------------------------------------

Internal Expense Allocations
    For 2021, total projected internal expenses relating to the
Exchange providing the cToM data associated with the proposed fees, is
projected to be $268,096. This includes, but is not limited to, costs
associated with: (1) Employee compensation and benefits for full-time
employees that support the cToM data product associated with the
proposed fees, including staff in network operations, trading
operations, development, system operations, and business that support
those employees and functions; (2) depreciation and amortization of
hardware and software used to provide the cToM data product associated
with the proposed fees, 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 the cToM
data associated with

the proposed fees. The breakdown of these costs is more fully described
below.
    For clarity, and as stated above, the Exchange took a conservative
approach in determining the expense and the percentage of that expense
to be allocated to providing services in connection with the proposed
fees. Only a portion of all such internal expenses are included in the
internal expense herein, and no expense amount is allocated twice.
Accordingly, the Exchange does not allocate its entire costs contained
in those items to the cToM data associated with the proposed fees. This
may result in the Exchange under allocating an expense to the provision
of access services in connection with the proposed fees and such
expenses may actually be higher or increase above what the Exchange
utilizes within this proposal. Further, as part its ongoing assessment
of costs and expenses (described above), the Exchange recently
conducted a periodic thorough review of its expenses and resource
allocations which, in turn, resulted in a revised percentage
allocations in this filing.
    The Exchange believes it is reasonable to allocate such internal
expense described above towards the total cost to the Exchange to
provide the cToM data associated with the proposed fees. In particular,
the Exchange's employee compensation and benefits expense relating to
providing the cToM data associated with the proposed fees is projected
to be approximately $251,427, which is only a portion of the $12.6
million total projected expense for employee compensation and benefits.
The Exchange believes it is reasonable to allocate the identified
portion of such expense because this includes the time spent by
employees of several departments, including Technology, Back Office,
Systems Operations, Networking, Business Strategy Development (who
create the business requirement documents that the Technology staff use
to develop network features, products and enhancements), and Trade
Operations. As part of the extensive cost review conducted by the
Exchange, the Exchange reviewed the amount of time spent by nearly
every employee on matters relating to cToM. Without these employees,
the Exchange would not be able to provide the cToM product to its
Members, non-Members and their customers. The Exchange did not allocate
all of the employee compensation and benefits expense toward the cost
of the cToM product, only the portion which the Exchange identified as
being specifically mapped to providing the cToM product associated with
the proposed fees. According to the Exchange's calculations, it
allocated approximately 2.0% of the total applicable employee
compensation and benefits expense to providing the services associated
with the proposed fees. The Exchange believes this allocation is
reasonable because it represents the Exchange's actual cost to provide
the cToM data associated with the proposed fees, and not any other
service, as supported by its cost review.\57\
---------------------------------------------------------------------------

    \57\ Id.
---------------------------------------------------------------------------

    The Exchange's depreciation and amortization expense relating to
providing the cToM data associated with the proposed fees is projected
to be $3,884, which is only a portion of the $4.8 million total
projected expense for depreciation and amortization. The Exchange
believes it is reasonable to allocate the identified portion of such
expense because such expense includes the actual cost of the computer
equipment, such as dedicated servers, computers, laptops, monitors,
information security appliances and storage, and network switching
infrastructure equipment, including switches and taps that were
purchased to operate and support the network and provide the cToM
product. Without this equipment, the Exchange would not be able to
operate the network and provide the cToM product to its Members, non-
Members and their customers. The Exchange did not allocate all of the
depreciation and amortization expense toward the cost of providing the
cToM product, only the portion which the Exchange identified as being
specifically mapped to providing the cToM product. According to the
Exchange's calculations, it allocated approximately 0.20% of the total
applicable depreciation and amortization expense to providing the
services associated with the proposed fees, as this product would not
be possible without relying on such. The Exchange believes this
allocation is reasonable because it represents the Exchange's actual
cost to provide the cToM product associated with the proposed fees, and
not any other service, as supported by its cost review.\58\
---------------------------------------------------------------------------

    \58\ Id.
---------------------------------------------------------------------------

    The Exchange's occupancy expense relating to providing the cToM
product associated with the proposed fees is projected to be $12,785,
which is only a portion of the $0.60 million total projected expense
for occupancy. The Exchange believes it is reasonable to allocate the
identified portion of such expense because such expense represents the
portion of the Exchange's cost to rent and maintain a physical location
for the Exchange's staff who operate and support the network, including
providing the cToM product. This amount consists primarily of rent for
the Exchange's Princeton, New Jersey office, as well as various related
costs, such as physical security, property management fees, property
taxes, and utilities. The Exchange operates its Network Operations
Center (``NOC'') and Security Operations Center (``SOC'') from its
Princeton, New Jersey office location. A centralized office space is
required to house the staff that operates and supports the network and
Exchange products. The Exchange currently has approximately 200
employees. Approximately two-thirds of the Exchange's staff are in the
Technology department, and the majority of those staff have some role
in the operation and performance of the services associated with the
proposed fees. Accordingly, the Exchange believes it is reasonable to
allocate the identified portion of its occupancy expense because such
amount represents the Exchange's actual cost to house the equipment and
personnel who operate and support the Exchange's network infrastructure
and the market data services associated with the proposed fees. The
Exchange did not allocate all of the occupancy expense toward the cost
of providing the market data services associated with the proposed
fees, only the portion which the Exchange identified as being
specifically mapped to operating and supporting the network. According
to the Exchange's calculations, it allocated approximately 2.0% of the
total applicable occupancy expense to providing the services associated
with the proposed fees. The Exchange believes this allocation is
reasonable because it represents the Exchange's cost to provide the
market data services associated with the proposed fees, and not any
other service, as supported by its cost review.\59\
---------------------------------------------------------------------------

    \59\ Id.
---------------------------------------------------------------------------

    Based on the above, the Exchange believes that its provision of
market data services associated with the proposed fees will not result
in excessive pricing or supra-competitive profit. As discussed above,
the Exchange projects that its annualized expense for 2021 to provide
the cToM data associated with the proposed fees is projected to be
approximately $273,494, or approximately $22,791.17 per month on
average. The Exchange implemented the proposed fees on July 1, 2021 in
the First Proposed Rule Change. For June

2021, prior to the proposed fees, Members and non-Members subscribed to
a total of 17 cToM data feeds, for which the Exchange charged $0, for
the past five years. This resulted in a month over month loss of
approximately $22,791.17. For the month of November 2021, which
includes the proposed fees, Members and non-Members subscribed to 16
cToM data feeds, for which the Exchange charged approximately $21,000
for that month. This resulted in a loss of $1,791.17 for that month (a
margin of approximately -8.5%). Therefore, the Exchange believes that
the proposed fees are reasonable because the Exchange is operating at a
negative margin for this product.
    Again, the Exchange cautions that this margin is likely to
fluctuate from month to month based in the uncertainty of predicting
how many market data feeds may be purchased from month to month as
Members and non-Members are free to add and drop subscriptions at any
time based on their own business decisions. Notwithstanding that the
revenue (and profit margin) may vary from month to month due to changes
in subscriptions and to changes to the Exchange's expenses, the number
of subscriptions has not materially changed over previous months.
Consequently, the Exchange believes that the months it has used as a
baseline to perform its assessment are representative of reasonably
anticipated costs and expenses. This margin may also decrease due to
the significant inflationary pressure on capital items that it needs to
purchase to maintain the Exchange's technology and systems.
Accordingly, the Exchange believes its total projected revenue for the
providing the market data services associated with the proposed fees
will not result in excessive pricing or supra-competitive profit.
    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 Guidance which requires a baseline analysis to
assist in determining whether the proposal generates a supra-
competitive profit. This monthly analysis was also provided in response
to comment received on prior submissions of this proposed rule change.
    The Exchange reiterates that it only has four primary sources of
revenue and cost recovery mechanisms: 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. As a result, each of these fees cannot be
``flat'' and cover only the expenses directly related to the fee that
is charged. The above revenue and associated profit margin therefore
are not solely intended to cover the costs associated with providing
services subject to the proposed fees. Moreover, as noted above,
because the Exchange was previously offering the cToM data feed at no
cost, the provision of the feed during the time in which it generated
no revenue was being subsidized by other fees charged by the Exchange.
The Exchange believes establishing a separate fee for the cToM feed is
therefore reasonable and equitable so that the provision of the cToM
data feed is no longer subsidized by other fees less directly related
to providing cToM. Instead, the cToM feed will be supported primarily
through fees charged only to users who choose to subscribe to cToM.
    The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to allocate the respective percentages of each expense
category described above towards the total cost to the Exchange of
operating and supporting the network, including providing the market
data services associated with the proposed fees because the Exchange
performed a line-by-line item analysis of nearly every expense of the
Exchange, and has determined the expenses that directly relate to
providing market data services to the Exchange. Further, the Exchange
notes that, without the specific third-party and internal expense items
listed above, the Exchange would not be able to provide the market data
services associated with the proposed fees to its Members, non-Members
and their customers. Each of these expense items, including physical
hardware, software, employee compensation and benefits, occupancy
costs, and the depreciation and amortization of equipment, have been
identified through a line-by-line item analysis to be integral to
providing market data services. The proposed fees are intended to
recover the costs of providing cToM data. Accordingly, the Exchange
believes that the proposed fees are fair and reasonable because they do
not result in excessive pricing or supra-competitive profit, when
comparing the actual costs to the Exchange versus the projected annual
revenue from the proposed fees.
    No market participant is required by any rule or regulation to
utilize the Exchange's Complex Order functionality or subscribe to the
cToM data feed. Further, unlike orders on the Exchange's Simple Order
Book, Complex Orders are not protected and will never trade through
Priority Customer \60\ orders, thus protecting the priority that is
established in the Simple Order Book.\61\ Additionally, unlike the
continuous quoting requirements of Market Makers in the simple order
market, there are no continuous quoting requirements respecting Complex
Orders. It is a business decision whether market participants utilize
Complex Order strategies on the Exchange and whether to purchase cToM
data to help effect those strategies.
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    \60\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial accounts(s). The term
``Priority Customer Order'' means an order for the account of a
Priority Customer. See Exchange Rule 100.
    \61\ The ``Simple Order Book'' is the Exchange's regular
electronic book of orders and quotes. See Exchange Rule 100.
---------------------------------------------------------------------------

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 market data or their fee markup over those costs, and
therefore cannot use other exchange's market data fees as a benchmark
to determine a reasonable markup over the costs of providing market
data. Nevertheless, the Exchange believes the other exchange's market
data fees are a useful example of alternative approaches to providing
and charging for market data. To that end, the Exchange believes the
proposed pricing is reasonable because the proposed rates are similar
to or less than the fees charged by other options exchanges for similar
data products.\62\
---------------------------------------------------------------------------

    \62\ See supra notes 20, 21 and 22.
---------------------------------------------------------------------------

    Until recently, the Exchange has operated at a cumulative net
annual loss since it launched operations in 2008.\63\ This is a result
of 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 (including the cToM data feed) 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. An example of this is cToM, for which the Exchange only now
seeks to adopt fees at a level similar to or lower than those of other
options exchanges.
---------------------------------------------------------------------------

    \63\ See supra notes 48.
---------------------------------------------------------------------------

    Since the Exchange initially established the cToM data product in
2016, all Exchange Members and non-Members have had the ability to
receive the Exchange's cToM data free of charge for the past five
years.\64\ Since 2016, when the Exchange adopted Complex Order
functionality, the Exchange has spent time and resources building out
various Complex Order functionality in its System to provide better
trading strategies and risk functionality for market participants in
order to better compete with other exchanges' complex functionality and
similar data products focused on complex orders.\65\ The cToM data
product allows market participants to better utilize the Exchange's
Complex Order functionality by providing insights into the Exchange's
Complex Order flow. The Exchange currently has 16 subscribers (14
Members and 2 non-Members) for its cToM data product. None of these
subscribers has paid a specific fee to receive cToM data (other than
the five months in which the First, Second and Third Proposed Rule
Changes were in effect) but has received the benefit of the Exchange
building out its Complex Order functionality to better compete with
other exchanges complex functionality. The Exchange notes that one
market participant ceased subscribing to the cToM feed since July 1,
2021, the date on which the fees became effective when established in
the First Proposed Rule Change.
---------------------------------------------------------------------------

    \64\ See supra note 15.
    \65\ See Securities Exchange Act Release Nos. 79405 (November
28, 2016), 81 FR 87086 (December 2, 2016) (SR-MIAX-2016-44)
(amendment to clarify the manner in which the System allocates
contracts at the end of a Complex Auction); 80089 (February 22,
2017), 82 FR 12153 (February 28, 2017) (SR-MIAX-2017-06) (adopting
the Complex MIAX Options Price Collar, an additional price
protection feature); 81229 (July 27, 2017), 82 FR 36023 (August 2,
2017) (SR-MIAX-2017-34) (amendment to ensure price and trade
protections apply to Complex Orders); 89085 (June 17, 2020), 85 FR
37719 (June 23, 2020) (SR-MIAX-2020-16) (adopting new order type,
Complex Attributable Order).
---------------------------------------------------------------------------

The Proposed Pricing Is Not Unfairly Discriminatory and Provides for
the Equitable Allocation of Fees, Dues, and Other Charges
    The Exchange believes that it is reasonable, equitable and not
unfairly discriminatory to assess Internal Distributors fees that are
less than the fees assessed for External Distributors for subscriptions
to the cToM data feed because Internal Distributors have limited,
restricted usage rights to the market data, as compared to External
Distributors, which have more expansive usage rights. All Members and
non-Members that determine to receive any market data feed of the
Exchange (or its affiliates, MIAX Pearl and MIAX Emerald), must first
execute, among other things, the MIAX Exchange Group Exchange Data
Agreement (the ``Exchange Data Agreement'').\66\ Pursuant to the
Exchange Data Agreement, Internal Distributors are restricted to the
``internal use'' of any market data they receive. This means that
Internal Distributors may only distribute the Exchange's market data to
the recipient's officers and employees and its affiliates.\67\ External
Distributors may distribute the Exchange's market data to persons who
are not officers, employees or affiliates of the External
Distributor,\68\ and may charge their own fees for the redistribution
of such market data. Accordingly, the Exchange believes it is fair,
reasonable and not unfairly discriminatory to assess External
Distributors a higher fee for the Exchange's market data products as
External Distributors have greater usage rights to commercialize such
market data and can adjust their own fee structures if necessary. The
Exchange also utilizes more resources to support External Distributors
versus Internal Distributors, as External Distributors have reporting
and monitoring obligations that Internal Distributors do not have, thus
requiring additional time and effort of Exchange staff. The Exchange
believes the proposed cToM fees are equitable and not unfairly
discriminatory because the fee level results in a reasonable and
equitable allocation of fees amongst subscribers for similar services,
depending on whether the subscriber is an Internal or External
Distributor. Moreover, the decision as to whether or not to purchase
market data is entirely optional to all market participants. Potential
purchasers are not required to purchase the market data, and the
Exchange is not required to make the market data available. Purchasers
may request the data at any time or may decline to purchase such data.
The allocation of fees among users is fair and reasonable because, if
market participants determine not to subscribe to the data feed, firms
can discontinue their use of the cToM data.
---------------------------------------------------------------------------

    \66\ See Exchange Data Agreement, available at https://miaxweb2.pairsite.com/sites/default/files/page-files/MIAX_Exchange_Group_Data_Agreement_09032020.pdf.
    \67\ See id.
    \68\ See id.
---------------------------------------------------------------------------

    Further, the Exchange believes that the proposal is equitable and
not unfairly discriminatory because the proposed cToM fees will apply
to all market participants of the Exchange on a uniform basis. The
Exchange also notes that the proposed monthly cToM fees for Internal
and External Distributors are the same prices that the Exchange charges
for its ToM data product.
    The Exchange believes the proposed change to delete certain text
from Section 6)a) of the Fee Schedule promotes just and equitable
principles of trade and removes impediments to and perfects the
mechanism of a free and open market and a national market system
because the proposed change is a non-substantive edit to the Fee
Schedule to remove unnecessary text. The Exchange believes that this
proposed change will provide greater clarity to Members and the public
regarding the Exchange's Fee Schedule and that it is in the public
interest for the Fee Schedule to be accurate and concise so as to
eliminate the potential for confusion.

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

    The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
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 cToM
to market participants. As described above, the Exchange has operated
at a cumulative net annual loss since it launched operations in 2008
\69\ 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. An example of this is cToM, for which the
Exchange only now seeks to adopt fees at a level similar to or lower
than those of other options exchanges.
---------------------------------------------------------------------------

    \69\ See supra notes 48.
---------------------------------------------------------------------------

    Since the Exchange initially established the cToM data product in
2016, all Exchange Members and non-Members have had the ability to
receive the Exchange's cToM data free of charge for the past five
years.\70\ Since 2016, when the Exchange adopted Complex Order
functionality, the Exchange has spent time and resources building out
various Complex Order functionality in its System to provide better
trading strategies and risk functionality for market participants in
order to better compete with other exchanges' complex functionality and
similar data products focused on complex orders.\71\ The Exchange now
seeks to recoup its costs for providing cToM to market participants and
believes the proposed fees will not result in excessive pricing or
supra-competitive profit.
---------------------------------------------------------------------------

    \70\ See supra note 15.
    \71\ See supra note 63.
---------------------------------------------------------------------------

Inter-Market Competition
    The Exchange also does not believe the proposed fees would cause
any unnecessary or in appropriate burden on intermarket competition as
other exchanges are free to introduce their own comparable data product
and lower their prices to better compete with the Exchange's offering.
The Exchange does not believe the proposed rule change would cause any
unnecessary or inappropriate burden on inter-market competition.
Particularly, the proposed product and fees apply uniformly to any
purchaser, in that it does not differentiate between subscribers that
purchase cToM. The proposed fees are set at a modest level that would
allow any interested Member or non-Member to purchase such data based
on their business needs.
    The Exchange does not believe that the proposed rule change to make
a minor, non-substantive edit to Section 6)a) of the Fee Schedule by
deleting unnecessary text will result in any burden on competition that
is not necessary or appropriate in furtherance of the purposes of the
Act. This proposed rule change is not being made for competitive
reasons, but rather is designed to remedy a minor non-substantive issue
and will provide added clarity to the Fee Schedule. The Exchange
believes that it is in the public interest for the Fee Schedule to be
accurate and concise so as to eliminate the potential for confusion on
the part of market participants. In addition, the Exchange does not
believe the proposal will impose any burden on inter-market competition
as the proposal does not address any competitive issues and is intended
to protect investors by providing further transparency regarding the
Exchange's Fee Schedule.
    Regrettably, the Exchange believes that the application of the
Guidance to date has adversely affected inter-market competition by
impeding the ability of smaller, low cost exchanges to adopt or
increase fees for their market data and access services (including
connectivity and port products and services). Since the adoption of the
Guidance, and even more so recently, it has become harder, particularly
for smaller, low cost exchanges, to adopt or increase fees to generate
revenue necessary to invest in systems, provide innovative trading
products and solutions, and improve competitive standing to the benefit
of the affected exchanges' market participants. Although the Guidance
has served an important policy goal of improving disclosures in
proposed rule changes and requiring exchanges to more clearly justify
that their market data and access fee proposals are fair and
reasonable, it has also been inconsistently applied and therefore
negatively impacted exchanges, and particularly many smaller, low cost
exchanges, that seek to adopt or increase fees despite providing
enhanced disclosures and rationale to support their proposed fee
changes.

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

    Written comments were neither solicited nor received.

III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\72\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the Act,\73\ the Commission summarily may
temporarily suspend the change in the rules of a self-regulatory
organization (``SRO'') if it appears to the Commission that such action
is necessary or appropriate in the public interest, for the protection
of investors, or otherwise in furtherance of the purposes of the Act.
As discussed below, the Commission believes a temporary suspension of
the proposed rule change is necessary and appropriate to allow for
additional analysis of the proposed rule change's consistency with the
Act and the rules thereunder.
---------------------------------------------------------------------------

    \72\ 15 U.S.C. 78s(b)(3)(C).
    \73\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    As the Exchange further details above, the Exchange first filed a
proposed rule change proposing fee changes as proposed herein on June
30, 2021, with the proposed fee changes effective beginning July 1,
2021. That proposal, MIAX-2021-28, was published for comment in the
Federal Register on July 15, 2021.\74\ On August 27, 2021, pursuant to
Section 19(b)(3)(C) of the Act, the Commission: (1) Temporarily
suspended the proposed rule change; and (2) instituted proceedings to
determine whether to approve or disapprove the proposal.\75\ On
September 30, 2021, the Exchange withdrew the proposed rule change,\76\
and filed two other proposed rule changes proposing fee changes as
proposed herein,\77\ which were each also subsequently withdrawn. The
instant filing is substantially similar.\78\
---------------------------------------------------------------------------

    \74\ See supra note 5, and accompanying text.
    \75\ See Securities Exchange Act Release No. 92789, 86 FR 49364
(September 2, 2021) (``OIP'').
    \76\ See Securities Exchange Act Release No. 93471 (October 29,
2021), 86 FR 60947 (November 4, 2021).
    \77\ See Securities Exchange Act Release Nos. 93426 (October 26,
2021), 86 FR 60314 (November 1, 2021); 93808 (December 17, 2021), 86
FR 73011 (December 23, 2021).
    \78\ See OIP, supra note 75.
---------------------------------------------------------------------------

    When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\79\ The instructions to Form 19b-4, on which exchanges
file their proposed rule changes, specify that such statement ``should
be sufficiently detailed and specific to support a finding that the
proposed rule change is consistent with [those] requirements.'' \80\
---------------------------------------------------------------------------

    \79\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
    \80\ Id.
---------------------------------------------------------------------------

    Among other things, exchange proposed rule changes are subject to
Section 6 of the Act, including Sections 6(b)(4), (5), and (8), which
requires the rules of an exchange to (1) provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's

facilities; \81\ (2) perfect the mechanism of a free and open market
and a national market system, protect investors and the public
interest, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers; \82\ and (3) not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\83\
---------------------------------------------------------------------------

    \81\ 15 U.S.C. 78f(b)(4).
    \82\ 15 U.S.C. 78f(b)(5).
    \83\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether the proposed fees for the cToM
market data feed are consistent with the statutory requirements
applicable to a national securities exchange under the Act. In
particular, the Commission will consider whether the proposed rule
change satisfies the standards under the Act and the rules thereunder
requiring, among other things, that an exchange's rules provide for the
equitable allocation of reasonable fees among members, issuers, and
other persons using its facilities; not permit unfair discrimination
between customers, issuers, brokers or dealers; and do not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\84\
---------------------------------------------------------------------------

    \84\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\85\
---------------------------------------------------------------------------

    \85\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change

    In addition to temporarily suspending the proposal, the Commission
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C)
\86\ and 19(b)(2)(B) of the Act \87\ to determine whether the proposed
rule change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, the Commission seeks and
encourages interested persons to provide additional comment on the
proposed rule change to inform the Commission's analysis of whether to
disapprove the proposed rule change.
---------------------------------------------------------------------------

    \86\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
    \87\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\88\ the Commission is
providing notice of the grounds for possible disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of whether the Exchange has sufficiently
demonstrated how the proposed rule change is consistent with Sections
6(b)(4),\89\ 6(b)(5),\90\ and 6(b)(8) \91\ of the Act. Section 6(b)(4)
of the Act requires that the rules of a national securities exchange
provide for the equitable allocation of reasonable dues, fees, and
other charges among its members and issuers and other persons using its
facilities. Section 6(b)(5) of the Act requires that the rules of a
national securities exchange be designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system and, in general, to protect investors and the public
interest, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. Section 6(b)(8) of the Act
requires that the rules of a national securities exchange not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

    \88\ Id.
    \89\ 15 U.S.C. 78f(b)(4).
    \90\ 15 U.S.C. 78f(b)(5).
    \91\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, which are set forth
above, in addition to any other comments they may wish to submit about
the proposed rule change. In particular, the Commission seeks comment
on the following aspects of the proposal and asks commenters to submit
data where appropriate to support their views:

    1. Cost Estimates and Allocation. The Exchange states that it is
not asserting that the proposed fees are constrained by competitive
forces, but rather sets forth a ``cost-plus model,'' employing a
``conservative methodology'' that ``strictly considers only those
costs that are most clearly directly related to the provision and
maintenance of cToM data . . . .'' \92\ Setting forth its costs in
providing the cToM data product, and as summarized in greater detail
above, MIAX projects $273,494 in aggregate annual estimated costs
for 2021 as the sum of: (1) $5,398 in third-party expenses paid in
total to Equinix (0.20% of the total applicable expense) for data
center services; Zayo Group Holdings for network services (0.20% of
the total applicable expense); and various other hardware and
software providers (0.20% of the total applicable expense)
supporting the production environment, and (2) $268,096 in internal
expenses, allocated to (a) employee compensation and benefit costs
($251,427, approximately 2.0% of the Exchange's total applicable
employee compensation and benefits expense); (b) depreciation and
amortization ($3,884, approximately 0.20% of the Exchange's and
total applicable depreciation and amortization expense); and (c)
occupancy costs ($12,785, approximately 2.0% of the Exchange's total
applicable occupancy expense). Do commenters believe that the
Exchange has provided sufficient detail about how it determined
which costs are most clearly directly associated with providing and
maintaining the cToM data product? The Exchange describes a
``proprietary'' process involving all Exchange department heads,
including the finance department and 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,
but does not specify further what principles were applied in making
these determinations or arriving at particular allocations. Do
commenters believe further explanation is necessary? For employee
compensation and benefit costs, for example, the Exchange calculated
an allocation of employee time in several departments, including
Technology, Back Office, Systems Operations, Networking, Business
Strategy Development, and Trade Operations, but does not provide the
job titles and salaries of persons whose time was accounted for, nor
explain the methodology used to determine how much of an employee's
time is devoted to that specific activity. What are commenters'
views on whether the Exchange has provided sufficient detail on the
identity and nature of services provided by third parties? Across
all of the Exchange's projected costs, what are commenters' views on
whether the Exchange has provided sufficient detail on the elements
that go into market data costs, including how shared costs are
allocated and attributed to market data expenses, to permit an
independent review and assessment of the reasonableness of purported
cost-based fees and the corresponding profit margin thereon? Should
the Exchange be required to identify what Exchange products or
services the remaining percentage of un-allocated expenses are
attributable to (e.g., what products or services are associated with
the approximately 99.80% of applicable depreciation and amortization
expenses that MIAX does not allocate to the proposed fees)? Do
commenters believe that the costs projected for 2021 are generally
representative of expected costs going forward (to the extent
commenters consider 2021 to be a typical or atypical year), or
should an exchange present an estimated

range of costs with an explanation of how profit margins could vary
along the range of estimated costs? Should the Exchange use cost
projections or actual costs estimated for 2021 in a filing made in
2022, or make cost projections for 2022?
---------------------------------------------------------------------------

    \92\ See supra note 37 and accompanying text.
---------------------------------------------------------------------------

    2. Revenue Estimates and Profit Margin Range. The Exchange
provides a single monthly revenue figure as the basis for
calculating the profit margin of -8.5%. Do commenters believe this
is reasonable? If not, why not? The Exchange states that the
proposed fees are ``designed to cover its costs with a limited
return in excess of such costs,'' and that ``revenue and associated
profit margin . . . are not solely intended to cover the costs
associated with providing services subject to the proposed fees.''
\93\ The profit margin is also dependent on the accuracy of the cost
projections which, if inflated (intentionally or unintentionally),
may render the projected profit margin meaningless. The Exchange
acknowledges that this margin may fluctuate from month to month as
Members and non-Members add and drop subscriptions,\94\ and that
costs may increase. The Exchange also states that the number of
subscriptions has not materially changed over previous months and so
the months that the Exchange has used as a baseline to perform its
assessment are representative of reasonably anticipated costs and
expenses.\95\ The Exchange does not account for the possibility of
cost decreases, however. What are commenters' views on the extent to
which actual costs (or revenues) deviate from projected costs (or
revenues)? Do commenters believe that the Exchange's methodology for
estimating the profit margin is reasonable? Should the Exchange
provide a range of profit margins that it believes are reasonably
possible, and the reasons therefor?
---------------------------------------------------------------------------

    \93\ See supra Section II.A.2.
    \94\ See text accompanying supra notes 47-48.
    \95\ See supra Section II.A.2.
---------------------------------------------------------------------------

    3. Reasonable Rate of Return. The Exchange states that its
expected profit margin is -8.5% and that the proposed fees are
reasonable because the Exchange is operating at a negative margin
for this product. Further, the Exchange states that it chose to
initially provide the cToM data product for free and to forego
revenue that they otherwise could have generated from assessing any
fees.\96\ What are commenters' views regarding what factors should
be considered in determining what constitutes a reasonable rate of
return for the cToM market data product? Do commenters believe it
relevant to an assessment of reasonableness that, according to the
Exchange, the Exchange's proposed fees are similar to or lower than
fees charged by competing options exchanges with similar market
share? Should an assessment of reasonable rate of return include
consideration of factors other than costs; and if so, what factors
should be considered, and why?
---------------------------------------------------------------------------

    \96\ See text accompanying supra notes 70-71.
---------------------------------------------------------------------------

    4. Periodic Reevaluation. The Exchange addresses whether it
believes a material deviation from the anticipated profit margin
would warrant the need to make a rule filing pursuant to Section
19(b) of the Act to increase or decrease the fees accordingly,
stating that ``[a]ny requirement that an exchange should conduct a
periodic re-evaluation on a set timeline of its cost justification
and amend its fees accordingly should be established by the
Commission holistically, applied to all exchanges and not just
through pending fee proposals, such as this filing,'' and that
``[i]n order to be fairly applied, such a mandate should be applied
to existing access fees as well.'' \97\ In light of the impact that
the number of subscriptions has on profit margins, and the potential
for costs to decrease (or increase) over time, what are commenters'
views on the need for exchanges to commit to reevaluate, on an
ongoing and periodic basis, their cost-based data fees to ensure
that the fees stay in line with their stated profitability
projections and do not become unreasonable over time, for example,
by failing to adjust for efficiency gains, cost increases or
decreases, and changes in subscribers? How formal should that
process be, how often should that reevaluation occur, and what
metrics and thresholds should be considered? How soon after a new
data fee change is implemented should an exchange assess whether its
revenue and/or cost estimates were accurate and at what threshold
should an exchange commit to file a fee change if its estimates were
inaccurate? Should an initial review take place within the first 30
days after a data fee is implemented? 60 days? 90 days? Some other
period?
---------------------------------------------------------------------------

    \97\ See supra Section II.A.2.
---------------------------------------------------------------------------

    5. Fees for Internal Distributors versus External Distributors.
The Exchange argues that it is reasonable, equitable, and not
unfairly discriminatory to assess Internal Distributors fees that
are lower than the fees assessed for External Distributors for
subscriptions to the cToM data feed ($1,250 per month for Internal
Distributors versus $1,750 per month for External Distributors),
since Internal Distributors have limited, restricted usage rights to
the market data, as compared to External Distributors, which have
more expansive usage rights, including rights to commercialize such
market data.\98\ In addition, the Exchange states that it ``utilizes
more resources'' to support External Distributors as compared to
Internal Distributors, as External Distributors have reporting and
monitoring obligations that Internal Distributors do not have, thus
requiring ``additional time and effort'' of the Exchange's
staff.\99\ What are commenters' views on the adequacy of the
information the Exchange provides regarding the differential between
the Internal Distributor and External Distributor fees? Do
commenters believe that the fees for Internal Distributors and
External Distributors, as well as the fee differences between
Distributors, are supported by the Exchange's assertions that it
sets the differentiated pricing structure in a manner that is
equitable and not unfairly discriminatory? Do commenters believe
that the Exchange should demonstrate how the proposed Distributor
fee levels correlate with different costs to better substantiate how
the Exchange ``utilizes more resources'' to support External
Distributors versus Internal Distributors and permit an assessment
of the Exchange's statement that ``External Distributors have
reporting and monitoring obligations that Internal Distributors do
not have, thus requiring additional time and effort of Exchange
staff''? \100\
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    \98\ See text accompanying supra notes 66-68.
    \99\ See id.
    \100\ See id.

    Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \101\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\102\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\103\ Moreover,
``unquestioning reliance'' on an SRO's representations in a proposed
rule change would not be sufficient to justify Commission approval of a
proposed rule change.\104\
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    \101\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
    \102\ See id.
    \103\ See id.
    \104\ See Susquehanna Int'l Group, LLP v. Securities and
Exchange Commission, 866 F.3d 442, 446-47 (D.C. Cir. 2017)
(rejecting the Commission's reliance on an SRO's own determinations
without sufficient evidence of the basis for such determinations).
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    The Commission believes it is appropriate to institute proceedings
to allow for additional consideration and comment on the issues raised
herein, including as to whether the proposal is consistent with the
Act, any potential comments or supplemental information provided by the
Exchange, and any additional independent analysis by the Commission.

V. Request for Written Comments

    The Commission requests written views, data, and arguments with
respect to the concerns identified above, as well as any other relevant
concerns. In particular, the Commission invites the written views of
interested persons concerning whether the proposal is consistent with
Sections 6(b)(4), 6(b)(5), and 6(b)(8), or any other provision of the
Act, or the rules and regulations thereunder. The Commission asks that
commenters address the sufficiency and merit of the Exchange's
statements in support of the proposal, in addition to any other
comments they may wish to

submit about the proposed rule change. Although there do not appear to
be any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 19b-4, any request for an
opportunity to make an oral presentation.\105\
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    \105\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, including whether the
proposed rule change is consistent with the Act. Comments may be
submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include
File Number SR-MIAX-2022-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-MIAX-2022-10. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (http://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-MIAX-2022-10 and should be submitted on
or before March 15, 2022. Rebuttal comments should be submitted by
March 29, 2022.

VI. Conclusion

    It is Therefore Ordered, pursuant to Section 19(b)(3)(C) of the
Act,\106\ that File Number SR-MIAX-2022-10 be and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
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    \106\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\107\
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    \107\ 17 CFR 200.30-3(a)(12), (57), and (58).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03656 Filed 2-18-22; 8:45 am]
BILLING CODE 8011-01-P