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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Notices
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total annual expense that the Exchange projects to incur in connection with providing these services versus the total annual revenue that the Exchange projects to collect in connection with providing these services. For 2020,42 the total annual expense for providing the services associated with the Proposed Access Fees for MIAX Emerald is projected to be approximately $9.3
million. The $9.3 million in expense includes expense associated with providing all ports and all connectivity alternatives. The Exchange is unable to separate out its expense by connectivity alternative, as all connectivity alternatives are intricately combined in a single network infrastructure.
Nevertheless, the Exchange attributes the majority of connectivity expense to the 10Gb ULL connections because the majority of network capacity is used by 10Gb ULL purchasers.43 The $9.3
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: 1 Third-party expense, relating to fees paid by MIAX Emerald to third-parties for certain products and services; and 2 internal expense, relating to the internal costs of MIAX
Emerald 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 revenue and costs, which utilize the same presentation methodology as set forth in the Exchanges previously-issued Audited Unconsolidated Financial Statements.44
The $9.3 million in projected total annual expense is directly related to the services associated with the Proposed Access Fees, 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 42 The Exchange has not yet finalized its 2020
year end results.
43 See supra note 40.
44 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. 87877 December 31, 2019, 85 FR 738 January 7, 2020 SREMERALD
201939. Accordingly, the third-part 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 item in the Exchanges general 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 of the Exchange to provide services associated with the Proposed Access Fees.
For 2020, total third-party expense, relating to fees paid by MIAX Emerald to third-parties for certain products and services for the Exchange to be able to provide the services associated with the Proposed Access Fees, is projected to be $1,932,519. 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 Emerald trading system infrastructure; 2 Zayo Group Holdings, Inc. Zayo for network services fiber and bandwidth products and services linking MIAX
Emeralds office locations in Princeton, NJ and Miami, FL to all data center locations; 3 Secure Financial Transaction Infrastructure SFTI,45
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 network services; 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 Emerald does not allocate its entire information technology and communication costs to 45 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 the services associated with the Proposed Access Fees, only that portion which the Exchange identified as being specifically mapped to providing the services associated with the Proposed Access Fees, approximately 73% of the total Equinix expense 68% allocated towards the cost of providing the provision of network connectivity and 5% allocated towards the cost of providing ports. 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 Emerald with its affiliates, Miami International Securities Exchange, LLC MIAX and MIAX
PEARL, LLC MIAX PEARL, 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. The Exchange did not allocate all of the Zayo expense toward the cost of providing the services associated with the Proposed Access Fees, only the portion which the
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