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Federal Register / Vol. 86, No. 18 / Friday, January 29, 2021 / Notices
without relying on such equipment. 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.
MIAXs and MIAX PEARLs combined occupancy expense relating to providing network connectivity services is projected to be $560,408, which is only a portion of the $615,264 for MIAX
and $528,425 for MIAX PEARL 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 Exchanges cost to rent and maintain a physical location for the Exchanges staff who operate and support the network, including providing the services associated with the Proposed Access Fees. This amount consists primarily of rent for the Exchanges Princeton, NJ
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. The Exchange currently has approximately 150 employees. Approximately twothirds of the Exchanges 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 Access Fees. Without this office space, 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.
Accordingly, the Exchange believes it is reasonable to allocate the identified portion of its occupancy expense because such amount represents the Exchanges actual cost to house the equipment and personnel who operate and support the Exchanges network infrastructure and the services associated with the Proposed Access Fees. The Exchange did not allocate all of the occupancy expense toward the cost of providing network connectivity services, only that portion which the Exchange identified as being specifically mapped to providing the services associated with the Proposed Access Fees, approximately 49% of the total occupancy expense. The Exchange believes this allocation is reasonable because it represents the Exchanges
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actual cost to provide the services associated with the Proposed Access Fees, and not any other service, as supported by its cost review.
The Exchanges monthly projected revenue for the Proposed Access Fees is based on MIAX and MIAX PEARL
Members and non-Members purchasing 140 10Gb ULL connections, based on a recent billing cycle. Accordingly, based on current assumptions and approximations, the Exchange and MIAX PEARL project total combined monthly revenue from 10Gb ULL
connections of approximately $1,400,000.15
On a going-forward, fully-annualized basis, the Exchange and MIAX PEARL
project that their annualized revenue for providing the services associated with the Proposed Access Fees to be approximately $16.8 million per annum, based on a most recently completed billing cycle. The Exchange and MIAX
PEARL project that their annualized revenue for providing network connectivity services all connectivity alternatives to be approximately $19.4
million per annum.16 The Exchange and MIAX PEARL project that their annualized expense for providing network connectivity services all connectivity alternatives to be approximately $17.9 million per annum.
Accordingly, on a fully-annualized basis, the Exchange believes its total projected revenue for the providing network connectivity services all additional connectivity alternatives will not result in excessive pricing or supra-competitive profit, as the Exchange will make only a 8% profit margin on network connectivity services $19.4 million $17.9 million = $1.5
million per annum. Additionally, this profit margin does not take into account the cost of capital expenditures CapEX the Exchange and MIAX
PEARL are projected to spend in each year on CapEx going forward.
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 services associated with the Proposed Access Fees because the Exchange performed a line-by-line item analysis of all the expenses of the Exchange, and has determined the expenses that directly relate to 15 The Exchange also projects an additional $215,000 in monthly revenue through non-10Gb ULL connections, however the Exchange is not proposing to adjust the fees for those connections at this time.
16 See id.

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operation and support of the network.
Further, the Exchange notes that, without the specific third-party and internal items listed above, the Exchange would not be able to operate and support the network, including providing the services associated with the Proposed Access Fees to its Members and 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 the operation and support of the network.
The Proposed Access Fees are intended to recover the Exchanges costs of operating and supporting the network.
Accordingly, the Exchange believes that the Proposed Access Fee increases are fair and reasonable because they do not result in excessive pricing or supracompetitive profit, when comparing the actual network operation and support costs to the Exchange versus the projected annual revenue from the Proposed Access Fees, including the increased amount.
B. Self-Regulatory Organizations Statement on Burden on Competition MIAX does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.
Intra-Market Competition The Exchange does not believe that the proposed rule change would place certain market participants at the Exchange at a relative disadvantage compared to other market participants or affect the ability of such market participants to compete. In particular, the Exchange has received no official complaints from Members, nonMembers extranets and service bureaus, third-parties that purchase the Exchanges connectivity and resell it, and customers of those resellers, that the Exchanges fees or the Proposed Access Fees are negatively impacting or would negatively impact their abilities to compete with other market participants or that they are placed at a disadvantage.
The Exchange believes that the Proposed Access Fees do not place certain market participants at a relative disadvantage to other market participants because the connectivity pricing is associated with relative usage of the various market participants and does not impose a barrier to entry to smaller participants. As described above, the less expensive 1Gb direct
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