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Federal Register / Vol. 86, No. 168 / Thursday, September 2, 2021 / Notices not necessary or appropriate in furtherance of the purposes of the Act.18
In support of their proposals, the Exchanges state that the use of purge ports is completely optional, and no options market participant is required by rule, regulation, or competitive forces to use them.19 The Exchanges explain that members can use other protocols to purge or cancel messages, and that purge ports were designed as an optional service to enable firms to manage their quoting risk and meet their heightened quoting obligations.20 The Exchanges state that they are not aware of any reason why a market participant could not simply drop its purge ports if the Exchanges were to establish unreasonable prices for purge ports that, in the determination of such market participant, did not make business or economic sense for such participant.21
The Exchanges also state that they operate in a highly competitive environment, and if an exchange sets non-transaction fees that are too high for its relevant marketplace, market participants can choose to no longer access that particular exchange.22
The Exchanges further state that the increased monthly flat fee for purge ports is competitive with fees charged by other exchanges that offer comparable purge port services.23 The Exchanges state that they have historically undercharged for purge ports as compared to other exchanges, and that the proposed monthly fee increase would bring the Exchanges fees more in line with that of other options exchanges.24 The Exchanges argue that, when calculated on a per purge port basis, other exchanges charge higher monthly fees. MIAX states that, assuming a member receives 48 purge ports two per each of its 24 matching engines, this results in a cost of $156.25
per purge port $7,500 divided by 48.25
MIAX Emerald and MIAX Pearl state that, assuming a member receives 24
purge ports two per each of their 12
matching engines, this results in a cost of $312.50 per purge port $7,500
divided by 24.26 The Exchanges state that Cboe BZX Exchange, Inc. BZX, Cboe EDGX Exchange, Inc. EDGX, Cboe Exchange, Inc. Cboe, and Nasdaq GEMX, LLC GEMX charge 18 15

U.S.C. 78fb8.
e.g., MIAX Notice, supra note 4, at 37365

19 See,
lotter on DSK11XQN23PROD with NOTICES1

66.

27 See,
e.g., MIAX Notice, supra note 4, at 37365.
letter from Brian Sopinsky, General Counsel, Susquehanna International Group, LLP, dated August 5, 2021 SIG Letter.
29 See SIG Letter, supra note 28, at 2.
30 See id.
31 See id.
32 See id.
33 See 15 U.S.C. 78fb4, 5, and 8, respectively.
28 See
20 See
id. at 37366.
id.
22 See id. at 3736566.
23 See id. at 37365.
24 See id.
25 See MIAX Notice, supra note 4, at 37365.
26 See MIAX Emerald Notice, supra note 4, at 37374; MIAX Pearl Notice, supra note 4, at 37377.
21 See
VerDate Sep<11>2014

higher monthly per purge port fees of $750, $750, $850, and $1,250, respectively.27
The one comment letter received to date challenges several of the Exchanges assertions.28 The commenter states that the Exchanges argument that the proposed $7,500 monthly fee is lower on a per purge port basis than the fees assessed by other exchanges BZX, EDGX, Cboe, GEMX is disingenuous, because each of these other exchanges has one matching engine, and thus market participants require only two purge ports on each of these exchanges, resulting in significantly lower fees when calculated on a monthly basis.29
The commenter also states that the Exchanges argument that purge ports are optional functionality, which members are free to drop if priced too high, is without merit.30 The commenter asserts that the Exchanges know that market makers have no choice but to absorb these fees so as not to imperil their business with stale quotes.31 The commenter further states that the Exchanges did not provide any justification for the fee increase itself;
and that the Exchanges likely cannot assert that the cost of maintaining purge ports has increased at all, let alone fivefold.32
In temporarily suspending the Exchanges proposed rule changes, the Commission intends to further consider whether the proposed purge port fees 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 changes satisfy the standards under the Act and the rules thereunder requiring, among other things, that an exchanges rules provide for the equitable allocation of reasonable fees among members, issuers, and other persons using its facilities; are designed to perfect the mechanism of a free and open market and a national market system and to protect investors and the public interest, and are not designed to 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.33

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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 changes.34
IV. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Changes In addition to temporarily suspending the proposal, the Commission also hereby institutes proceedings pursuant to Sections 19b3C 35 and 19b2B
of the Act 36 to determine whether the Exchanges proposed rule changes should be approved or disapproved.
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 changes to inform the Commissions analysis of whether to approve or disapprove the proposed rule changes.
Pursuant to Section 19b2B of the Act,37 the Commission is providing notice of the grounds for possible disapproval under consideration:
Whether the Exchanges have demonstrated how the proposed fees are consistent with Section 6b4 of the Act, which 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; 38
Whether the Exchanges have demonstrated how the proposed fees are consistent with Section 6b5 of the Act, which requires, among other things, that the rules of a national securities exchange be designed to perfect the mechanism of a free and open market and a national market 34 For purposes of temporarily suspending the proposed rule changes, the Commission has considered the proposed rules impact on efficiency, competition, and capital formation. See 15 U.S.C. 78cf.
35 15 U.S.C. 78sb3C. Once the Commission temporarily suspends a proposed rule change, Section 19b3C of the Act requires that the Commission institute proceedings under Section 19b2B to determine whether a proposed rule change should be approved or disapproved.
36 15 U.S.C. 78sb2B.
37 15 U.S.C. 78sb2B. Section 19b2B of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. See id. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding, or if the exchange consents to the longer period. See id.
38 15 U.S.C. 78fb4.

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