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Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Notices
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Proposed Access Fees, regulatory fees, and market data fees. Accordingly, the Exchange must cover all of its expenses from these four primary sources of revenue.
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 total annual expense of MIAX and MIAX PEARL associated with providing these services versus the total projected annual revenue for both exchanges from these services. For 2020, the total annual expense for providing network connectivity services that is, the shared network connectivity of MIAX and MIAX PEARL, but excluding MIAX
Emerald is projected to be approximately $17.9 million. The $17.9
million in projected total annual expense is comprised of the following, all of which are directly related to the services associated with the Proposed Access Fees for MIAX and MIAX
PEARL: 1 Third-party expense, relating to fees paid by MIAX and MIAX
PEARL to third-parties for certain products and services; and 2 internal expense, relating to the internal costs of MIAX and MIAX PEARL to provide the services associated with the Proposed Access Fees. As noted above, 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, which utilize the same presentation methodology as set forth in the Exchanges previouslyissued Audited Unconsolidated Financial Statements.13 The $17.9
million in projected total annual expense is directly related to the services associated with providing network connectivity services, and not any other product or service offered by the Exchange. It does not include general costs of operating matching systems and other trading technology, and no expense amount was allocated twice. As discussed, the Exchange conducted an extensive cost review in which the Exchange analyzed every expense item in the Exchanges general 13 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 Exchanges 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 SRMIAX
201951. Accordingly, the third-party expense described in this filing is attributed to the same line item for the Exchanges 2020 Form 1 Amendment, which will be filed in 2021.

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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 Access 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. The sum of all such portions of expenses represents the total cost to the Exchange to provide the services associated with the Proposed Access Fees.
For 2020, total third-party expense, relating to fees paid by MIAX and MIAX
PEARL to third-parties for certain products and services for the Exchange to be able to provide network connectivity services, is projected to be $4,079,910. 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 MIAX and MIAX PEARL trading system infrastructure; 2 Zayo Group Holdings, Inc. Zayo for connectivity services fiber and bandwidth connectivity linking MIAX and MIAX PEARL office locations in Princeton, NJ and Miami, FL to all data center locations; 3
Secure Financial Transaction Infrastructure SFTI,14 which supports connectivity and feeds for the entire U.S. options industry; 4 various other services providers including Thompson Reuters, NYSE, Nasdaq, and Internap, which provide content, connectivity services, and infrastructure services for critical components of options connectivity; and 5 various other hardware and software providers including Dell and Cisco, which support the production environment in which Members and non-Members connect to the network to trade, receive market data, etc..
For clarity, only a portion of all fees paid to such third-parties is included in the third-party expense herein, and no expense amount is allocated twice.
Accordingly, MIAX and MIAX PEARL
do not allocate their entire information technology and communication costs to 14 In fact, on October 22, 2019, the Exchange was notified by SFTI that it is again raising its fees charged to the Exchange by approximately 11%, without having to show that such fee change complies with the Act by being reasonable, equitably allocated, and not unfairly discriminatory. It is unfathomable to the Exchange that, given the critical nature of the infrastructure services provided by SFTI, that its fees are not required to be rule-filed with the Commission pursuant to Section 19b1 of the Act and Rule 19b4 thereunder. See 15 U.S.C. 78sb1 and 17
CFR 240.19b4, respectively.

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the services associated with the Proposed Access Fees.
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 Access 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 Exchanges 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 Exchanges network infrastructure maintains stability.
Without these services from Equinix, the Exchange would not be able to operate and support the network and provide the services associated with the Proposed Access Fees to its Members and non-Members and their customers.
The Exchange did not allocate all of the Equinix expense toward the cost of providing network connectivity services, only that portion which the Exchange identified as being specifically mapped to providing network connectivity services, approximately 68% of the total Equinix expense. The Exchange believes this allocation is reasonable because it represents the Exchanges actual cost to provide the services associated with the Proposed Access Fees, and not any other service, as supported by its cost review.
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 MIAX 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 Zayos infrastructure over the Exchanges network. Without these services from Zayo, the Exchange would not be able to operate and support the network and provide the services associated with the Proposed Access Fees to its Members and non-Members and their customers. The Exchange did not allocate all of the Zayo expense toward the cost of providing network connectivity services, only that portion which the Exchange identified as being specifically mapped to providing network connectivity services, approximately 62% of the total Zayo expense. The Exchange believes this
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