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Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
described below into how the Exchange determined to charge such fees.
Accordingly, the Exchange is providing an analysis of its revenues, costs, and profitability associated with the Proposed Access Fees. This analysis includes information regarding its methodology for determining the costs and revenues associated with the Proposed Access Fees.
In order to determine the Exchanges costs to provide the access services associated with the Proposed Access Fees, the Exchange conducted an extensive cost review in which the Exchange analyzed every expense item in the Exchanges general expense ledger to determine whether each such expense relates to the Proposed Access Fees, and, if such expense did so relate, what portion or percentage of such expense actually supports the access services. The sum of all such portions of expenses represents the total cost of the Exchange to provide the access services associated with the Proposed Access Fees. For the avoidance of doubt, no expense amount was allocated twice.
The Exchange is also providing detailed information regarding the Exchanges cost allocation methodologynamely, information that explains the Exchanges rationale for determining that it was reasonable to allocate certain expenses described in this filing towards the cost to the Exchange to provide the access services associated with the Proposed Access Fees.
In order to determine the Exchanges projected revenue associated with the Proposed Access Fees, the Exchange analyzed the number of Members and non-Members currently utilizing the 10Gb ULL fiber connection, and, utilizing a recent monthly billing cycle representative of 2021 monthly revenue, extrapolated annualized revenue on a going-forward basis. The Exchange does not believe it is appropriate to factor into its analysis future revenue growth or decline into its projections for purposes of these calculations, given the uncertainty of such projections due to the continually changing access needs of market participants, discounts that can be achieved due to lower trading volume and vice versa, market participant consolidation, etc.
Additionally, the Exchange similarly does not factor into its analysis future cost growth or decline. The Exchange is presenting its revenue and expense associated with the Proposed Access 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 Exchanges most recent Audited Unconsolidated Financial
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Statement is for 2020. However, since the revenue and expense associated with the Proposed Access Fees were not in place in 2020 or for the first seven months of 2021, the Exchange believes its 2020 Audited Unconsolidated Financial Statement is not useful for analyzing the reasonableness of the total annual revenue and costs associated with the Proposed Access Fees.
Accordingly, the Exchange believes it is more appropriate to analyze the Proposed Access Fees utilizing its 2021
revenue and costs, as described herein, which utilize the same presentation methodology as set forth in the Exchanges previously-issued Audited Unconsolidated Financial Statements.
Based on this analysis, the Exchange believes that the Proposed Access Fees are fair and reasonable because they will not result in excessive pricing or supracompetitive profit when comparing the Exchanges total annual expense associated with providing the services associated with the Proposed Access Fees versus the total projected annual revenue the Exchange will collect for providing those services.

On March 29, 2019, the Commission issued its Order Disapproving Proposed Rule Changes to Amend the Fee Schedule on the BOX Market LLC
Options Facility to Establish BOX
Connectivity Fees for Participants and Non-Participants Who Connect to the BOX Network the BOX Order.8 On May 21, 2019, the Commission issued the Staff Guidance on SRO Rule Filings Relating to Fees.9 Accordingly, the Exchange believes that the Proposed Access 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 supracompetitive 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 Pearl and MIAX
Emerald, LLC MIAX Emerald, to establish or increase other non8 See Securities Exchange Act Release No. 85459
March 29, 2019, 84 FR 13363 April 4, 2019 SR
BOX201824, SRBOX201837, and SRBOX
201904.
9 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.

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transaction fees.10 Accordingly, the Exchange believes that the Proposed Access Fees are consistent with the Act.

As of July 27, 2021, the Exchange had a market share of only 6.22% of the U.S.
equity options industry for the month of July 2021.11 The Exchange is not aware of any evidence that a market share of approximately 67% provides the Exchange with anti-competitive pricing power. If the Exchange were to attempt to establish unreasonable pricing, then no market participant would join or connect, and existing market participants would disconnect.
Separately, the Exchange is not aware of any reason why market participants could not simply drop their access or not initially access an exchange if an exchange were to establish prices for its non-transaction fees that, in the determination of such market participant, did not make business or economic sense for such market participant to access such exchange. No options market participant is required by rule, regulation, or competitive forces to be a Member of the Exchange. As evidence of the fact that market participants can and do drop their access to exchanges based on nontransaction fee pricing, R2G Services LLC R2G filed a comment letter after BOXs proposed rule changes to increase its connectivity fees SRBOX
201824, SRBOX201837, and SR
BOX201904. The R2G Letter stated, when BOX instituted a $10,000/
month price increase for connectivity;
we had no choice but to terminate connectivity into them as well as terminate our market data relationship.
The cost benefit analysis just didnt make any sense for us at those new levels. Similarly, the Exchanges affiliate, MIAX Emerald, noted in a recent filing that once MIAX Emerald issued a notice that it was instituting MEI Port fees, among other nontransaction fees, one MIAX Emerald Member dropped its access to MIAX
Emerald as a result of those fees.12
10 See Securities Exchange Act Release Nos.
90981 January 25, 2021, 86 FR 7582 January 29, 2021 SRPEARL202101 proposal to increase connectivity fees; 91460 April 2, 2021, 86 FR
18349 SREMERALD202111 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
EMERALD202103 proposal to adopt trading permit fees.
11 See The market at a glance, available at https www.miaxoptions.com/ last visited July 27, 2021.
12 See Securities Exchange Act Release No. 91460
April 2, 2021, 86 FR 18349 April 8, 2021 SR
EMERALD202111 Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Adopt Port Fees,
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