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Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Notices 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 market data needs of market participants, 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 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 fees were not in place in 2019 or for the first three quarters of 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 fees. Accordingly, the Exchange believes it is more appropriate to analyze the proposed fees utilizing its 2020 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 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 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.19 On May 21, 2019, the Commission issued the Staff Guidance on SRO Rule Filings Relating to Fees.20 Accordingly, the 19 See Securities Exchange Act Release No. 85459
March 29, 2019, 84 FR 13363 April 4, 2019 SR
BOX201824, SRBOX201837, and SRBOX
201904.
20 See Staff Guidance on SRO Rule Filings Relating to Fees May 21, 2019, at https

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Exchange believes that the proposed 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 do not result in excessive pricing or supra-competitive profit; and iv utilize a cost-based justification framework. Accordingly, the Exchange believes that the Commission should find that the proposed fees are consistent with the Act.
The proposed rule change is immediately effective upon filing with the Commission pursuant to Section 19b3A of the Act.
2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6b of the Act 21
in general, and furthers the objectives of Section 6b4 of the Act 22 in particular, in that it is an equitable allocation of reasonable dues, fees and other charges among its members and issuers and other persons using its facilities. The Exchange also believes the proposal furthers the objectives of Section 6b5 of the Act in that it is designed to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest and is not designed to permit unfair discrimination between customers, issuers, brokers and dealers.
Separately, the Exchange is not aware of any reason why market participants could not simply drop their market data subscriptions to an exchange or not subscribe to market data feeds of an exchange if an exchange were to establish prices for its market data fees that, in the determination of such market participant, did not make business or economic sense for such market participant. No options market participant is required by rule or regulation to subscribe to market data feeds of an options exchange. As evidence of the fact that market participants can and do unsubscribe from an exchanges market data feeds based on pricing, the Exchange notes that, since it issued its notice for the www.sec.gov/tm/staff-guidance-sro-rule-filings-fees the Guidance.
21 15 U.S.C. 78fb.
22 15 U.S.C. 78fb4 and 5.

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proposed fees, one Member terminated its market data feed subscriptions as a result of the proposed fees. Accordingly, this example shows that if an exchange sets too high of a fee for its market data products, market participants can choose to not purchase market data or simply unsubscribe from an exchanges market data feeds.
The Exchange believes that its proposal is consistent with Section 6b4 of the Act because the proposed fees will not result in excessive or supra-competitive profit. The costs associated with providing market data to Exchange Members and nonMembers, as well as the general expansion of a state-of-the-art infrastructure, are extensive, have increased year-over-year, and are projected to increase year-over-year in the future. In particular, the Exchange has experienced a material increase in its costs in 2020, in connection with a project to make its network environment more transparent and deterministic, based on customer demand. This project will allow the Exchange to enhance its network architecture with the intent of ensuring a best-in-class, transparent and deterministic trading system while maintaining its industry leading latency and throughput capabilities. In order to provide this greater amount of transparency and higher determinism, MIAX Emerald has made significant capital expenditures CapEx, incurred increased ongoing operational expenditures OpEx, and undertaken additional engineering research and development R&D in the following areas: i Implementing an improved network design to ensure the minimum latency between multicast market data signals disseminated by the Exchange across the extranet switches, improving the unicast jitter profile to reduce the occurrence of message sequence inversions from Members to the Exchange quoting gateway processors, and introducing a new optical fiber network infrastructure that ensures the optical fiber path for participants within extremely tight tolerances; ii introducing a re-architected and engineered participant quoting gateway that ensures the delivery of messages to the match engine with absolute determinism, eliminating the message processing inversions that can occur with messages received nanoseconds apart; and iii designing an improved monitoring platform to better measure the performance of the network and systems at extremely tight tolerances and to provide Members with reporting on the performance of their systems.
The CapEx associated with only phase
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