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Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Notices connection, and a 10Gb ULL fiber connection. The 10Gb ULL offering uses an ultra-low latency switch, which provides faster processing of messages sent to it in comparison to the switch used for the other types of connectivity.
The Exchange currently assesses the following monthly network connectivity fees to both Members and non-Members for connectivity to the Exchanges primary/secondary facility: a $1,400
for the 1Gb connection; b $6,100 for the 10Gb connection; and c $9,300 for the 10Gb ULL connection.
The Exchanges MIAX Express Network Interconnect MENI can be configured to provide Members and non-Members of the Exchange network connectivity to the trading platforms, market data systems, test systems, and disaster recovery facilities of both the Exchange and its affiliate, MIAX
PEARL, LLC MIAX PEARL, via a single, shared connection. Members and non-Members utilizing the MENI to connect to the trading platforms, market data systems, test systems and disaster recovery facilities of the Exchange and MIAX PEARL via a single, shared connection are assessed only one monthly network connectivity fee per connection, regardless of the trading platforms, market data systems, test systems, and disaster recovery facilities accessed via such connection. The Exchange now proposes to increase the monthly network connectivity fees for its 10Gb ULL connections for both Members and non-Members from $9,300
to $10,000 per connection.

The Exchange believes that exchanges, in setting fees of all types, should meet very high standards of transparency to demonstrate why each new fee or fee increase meets the requirements of the Act that fees be reasonable, equitably allocated, not unfairly discriminatory, and not create an undue burden on competition among members and markets. The Exchange believes this high standard is especially important when an exchange imposes various access fees for market participants to access an exchanges marketplace. The Exchange deems connectivity fees to be access fees. The Exchange believes that it is important to demonstrate that these fees are based on its costs and reasonable business needs.
Accordingly, the Exchange believes the Proposed Access Fees will allow the Exchange to offset expense the Exchange has and will incur, and that the Exchange is providing sufficient transparency as described below into how the Exchange determined to charge such fees. Accordingly, the Exchange is
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providing an analysis of its revenues, costs, and profitability for 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 associated with providing 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 services included in the Proposed Access Fees. The sum of all such portions of expenses represents the total cost of the Exchange to provide 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 total cost to the Exchange to provide the Proposed Access Fees.
In order to determine the Exchanges projected revenues associated with providing the Proposed Access Fees, the Exchange analyzed the number of Members and non-Members currently utilizing the Exchanges services associated with the Proposed Access Fees during 2020, and, utilizing a recently completed monthly billing cycle, extrapolated annualized revenue on a going-forward basis. 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 Statement is for 2019. However, since the revenue and expense associated with the Proposed Access Fees were not in place in 2019 or 2020, the Exchange believes its 2019 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 2020 actual for the first 11
months and projected for the final 1
month revenue and costs, as described herein, which utilize the same
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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 supra-competitive 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.5 On May 21, 2019, the Commission issued the Staff Guidance on SRO Rule Filings Relating to Fees.6
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 data and analysis, constrained by significant competitive forces; and iv are supported by specific information including quantitative information, fair and reasonable because they will permit recovery of the Exchanges costs less than all and will not result in excessive pricing or supracompetitive profit. Accordingly, the Exchange believes that the Commission should find that the Proposed Access Fees are consistent with the Act.
2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6b of the Act 7
in general, and furthers the objectives of Section 6b4 of the Act 8 in particular, in that it provides for the equitable allocation of reasonable dues, fees and other charges among Exchange Members and issuers and other persons using any facility or system which the Exchange 5 See Securities Exchange Act Release No. 85459
March 29, 2019, 84 FR 13363 April 4, 2019 SR
BOX201824, SRBOX201837, and SRBOX
201904.
6 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.
7 15 U.S.C. 78fb.
8 15 U.S.C. 78fb4.

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