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Federal Register / Vol. 86, No. 39 / Tuesday, March 2, 2021 / Notices
of the $3,812,590 total projected expense for depreciation and amortization. The Exchange believes it is reasonable to allocate the identified portion of such expense because such expense includes the actual cost of the computer equipment, such as dedicated servers, computers, laptops, monitors, information security appliances and storage, and network switching infrastructure equipment, including switches and taps that were purchased to operate and support the network and provide the services associated with the Proposed Access Fees. Without this equipment, the Exchange would not be able to operate 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 depreciation and amortization expense toward the cost of providing the services associated with the Proposed Access Fees, only the portion which the Exchange identified as being specifically mapped to providing the services associated with the Proposed Access Fees, approximately 69% of the total depreciation and amortization expense, as these services would not be possible without relying on such equipment 65% 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.
MIAX Emeralds occupancy expense relating to providing the services associated with the Proposed Access Fees is projected to be $246,648, which is only a portion of the $474,323 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
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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 the services associated with the Proposed Access Fees, only the portion which the Exchange identified as being specifically mapped to operating and supporting the network, approximately 52% of the total occupancy expense 48% 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 cost to provide the services associated with the Proposed Access Fees, and not any other service, as supported by its cost review.
The Exchange notes that a material portion of its total overall expense is allocated to the provision of services associated with the Proposed Access Fees. The Exchange believes this is reasonable and in line, as the Exchange operates a technology-based business that differentiates itself from its competitors based on its trading systems that rely on its high performance network, resulting in significant technology expense. Over two-thirds of Exchange staff are technology-related employees. The majority of the Exchanges expense is technologybased. As described above, the Exchange has only four primary sources of fees in to recover its costs, thus the Exchange believes it is reasonable to allocate a material portion of its total overall expense towards the Proposed Access Fees.
The Exchanges monthly projected revenue for the Proposed Access Fees is based on the following projected purchases by Members and nonMembers, which is based on a recent
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billing cycle: i 63 10Gb ULL
connections; ii 14 CTD Ports; iii 8
FXD Ports; iv 113 FIX Ports; v 352
Limited Service MEI Ports; vi 37 Full Service MEI Ports; 47 and vii 10 Purge Ports. As described above, the fee charged to each Market Maker for MEI
Ports can vary from month to month depending on the number of classes in which the Market Maker was assigned to quote on any given day within the calendar month, and upon certain class volume percentages. The Exchange also provides a further discount for a Market Makers MEI Port fees if the Market Makers total monthly executed volume during the relevant month is less than 0.025% of the total monthly executed volume reported by OCC in the customer account type for MIAX
Emerald-listed option classes for that month. The Exchange has at least one Member consistently quoting in the highest tier for MEI Port fees, but receiving this discount, resulting in lower revenue for the Exchange.
Further, the projected revenue from FIX
Port fees is subject to change from month to month depending on the number of FIX Ports purchased.
Accordingly, based on current assumptions and approximations, the Exchange projects total monthly Port revenue of approximately $285,000 and total 10Gb ULL connectivity revenue of approximately $630,000. The Exchange notes that the port revenue projections are subject to change depending on the number of classes that Market Makers are quoting in and the tiers achieved. As such, the projection of $285,000 per month is not a static number and fluctuates month to month. Further, as noted above, one Member recently dropped its connections and ports as a direct result of the introduction of the Proposed Access Fees. Accordingly, reflecting that cancellation, which took effect following the recent billing cycle, the Exchange projects annualized revenue of $10.9 million from all connectivity alternatives and port types.48
47 The Exchanges projections included 9 firms or their affiliates purchasing Full Service MEI Ports.
Of those firms, the Exchange projects that 6 firms will achieve the highest tier in the MEI Port fee table, 2 firms will achieve the lowest tier in the MEI
Port fee table, and 1 firm will achieve the middle tier in the MEI Port fee table.
48 This $10.2 million revenue projection includes revenue from all connectivity sources, including all 10Gb ULL connections discussed above after giving effect to the recent cancellation, two 1Gb connections the Exchange is not increasing fees for 1Gb connections, however, those connections are included in total connectivity revenue in order to have a true comparison between all connectivity revenue and all connectivity expense, and all port types discussed above after giving effect to the recent cancellation.

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