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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Notices
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Exchange identified as being specifically mapped to providing the Proposed Access Fees, approximately 66% of the total Zayo expense 62%
allocated towards the cost of providing the provision of network connectivity and 4% 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 portions of the SFTI expense and various other service providers including Thompson Reuters, NYSE, Nasdaq, and Internap expense because those entities provide connectivity and feeds for the entire U.S. options industry, as well as the content, connectivity services, and infrastructure services for critical components of the network. Without these services from SFTI and various other service providers, the Exchange would not be able to operate and support the network and provide access to its Members and non-Members and their customers. The Exchange did not allocate all of the SFTI and other service providers expense toward the cost of providing the services associated with the Proposed Access Fees, only the portions which the Exchange identified as being specifically mapped to providing the services associated with the Proposed Access Fees, approximately 94% of the total SFTI
and other service providers expense 89% allocated towards the cost of providing the provision of network connectivity and 5% allocated towards the cost of providing ports.46 The Exchange believes this allocation is reasonable because it represents the Exchanges actual cost to provide the services associated with the Proposed Access Fees.
The Exchange believes it is reasonable to allocate the identified portion of the 46 The Exchange notes an increase to the SFTI and other service providers expense percentage contained herein versus the same expense category percentage the Exchange used in its initial filing to adopt connectivity fees. See Securities Exchange Act Release No. 87877 December 31, 2019, 85 FR
738 January 7, 2020 SREMERALD201939.
This is because at the time the Exchange performed its cost analysis for the initial connectivity fee filing, the Exchange was operational for only part of the year. Since that time, the Exchange has been fully operational, increased market share and number of market participants, and undertaken significant performance upgrades, resulting in increased expense. Accordingly, the Exchange believes it is appropriate to analyze its SFTI and other service providers expense more in line with its affiliate options exchanges, MIAX and MIAX
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other hardware and software provider expense because this includes costs for dedicated hardware licenses for switches and servers, as well as dedicated software licenses for security monitoring and reporting across the network. Without this hardware and software, the Exchange would not be able to operate and support the network and provide access to its Members and non-Members and their customers. The Exchange did not allocate all of the hardware and software provider expense toward the cost of providing the services associated with the Proposed Access Fees, only the portions which the Exchange identified as being specifically mapped to providing the services associated with the Proposed Access Fees, approximately 57% of the total hardware and software provider expense 54% allocated towards the cost of providing the provision of network connectivity and 3% 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.
For 2020, total projected internal expense, relating to the internal costs of MIAX Emerald to provide the services associated with the Proposed Access Fees, is projected to be $7,367,259. This includes, but is not limited to, costs associated with: 1 Employee compensation and benefits for full-time employees that support the services associated with the Proposed Access Fees, including staff in network operations, trading operations, development, system operations, business, as well as staff in general corporate departments such as legal, regulatory, and finance that support those employees and functions including an increase as a result of the higher determinism project; 2
depreciation and amortization of hardware and software used to provide the services associated with the Proposed Access Fees, including equipment, servers, cabling, purchased software and internally developed software used in the production environment to support the network for trading; and 3 occupancy costs for leased office space for staff that provide the services associated with the Proposed Access Fees. The breakdown of these costs is more fully-described below. For clarity, only a portion of all such internal expenses are included in the internal expense herein, and no expense amount is allocated twice.
Accordingly, MIAX Emerald does not allocate its entire costs contained in
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those items to the services associated with the Proposed Access Fees.
The Exchange believes it is reasonable to allocate such internal expense described above towards the total cost to the Exchange to provide the services associated with the Proposed Access Fees. In particular, MIAX Emeralds employee compensation and benefits expense relating to providing the services associated with the Proposed Access Fees is projected to be $4,489,924, which is only a portion of the $9,354,009 total projected expense for employee compensation and benefits. The Exchange believes it is reasonable to allocate the identified portion of such expense because this includes the time spent by employees of several departments, including Technology, Back Office, Systems Operations, Networking, Business Strategy Development who create the business requirement documents that the Technology staff use to develop network features and enhancements, Trade Operations, Finance who provide billing and accounting services relating to the network, and Legal who provide legal services relating to the network, such as rule filings and various license agreements and other contracts. As part of the extensive cost review conducted by the Exchange, the Exchange reviewed the amount of time spent by each employee on matters relating to the provision of services associated with the Proposed Access Fees. Without these employees, the Exchange would not be able to 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 employee compensation and benefits expense toward the cost of the services associated with the Proposed Access Fees, only the portions which the Exchange identified as being specifically mapped to providing the services associated with the Proposed Access Fees, approximately 48% of the total employee compensation and benefits expense 39% allocated towards the cost of providing the provision of network connectivity and 9% 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.
MIAX Emeralds depreciation and amortization expense relating to providing the services associated with the Proposed Access Fees is projected to be $2,630,687, which is only a portion
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