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khammond on DSKJM1Z7X2PROD with NOTICES

Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices 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 access services associated with the Proposed Access Fees. Without these employees, the Exchange would not be able to provide the access services associated with the Proposed Access Fees to its Members and their customers. The Exchange did not allocate all of the employee compensation and benefits expense toward the cost of the access services associated with the Proposed Access Fees, only the portions which the Exchange identified as being specifically mapped to providing the access services associated with the Proposed Access Fees, approximately 28% of the total applicable employee compensation and benefits expense. The Exchange believes this allocation is reasonable because it represents the Exchanges actual cost to provide the access services associated with the Proposed Access Fees, and not any other service, as supported by its cost review.
The Exchanges and MIAX Pearls combined depreciation and amortization expense relating to providing the services associated with the Proposed Access Fees is projected to be $5.3 million, which is only a portion of the $4.8 million for MIAX and $2.9
million for MIAX Pearl 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 access services associated with the Proposed Access Fees. Without this equipment, the Exchange would not be able to operate the network and provide the access services associated with the Proposed Access Fees to its Members and their customers. The Exchange did not allocate all of the depreciation and amortization expense toward the cost of providing the access services associated with the Proposed
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Access Fees, only the portion which the Exchange identified as being specifically mapped to providing the access services associated with the Proposed Access Fees, approximately 70% of the total applicable depreciation and amortization expense, as these access services would not be possible without relying on such. The Exchange believes this allocation is reasonable because it represents the Exchanges actual cost to provide the access services associated with the Proposed Access Fees, and not any other service, as supported by its cost review.
The Exchanges and MIAX Pearls combined occupancy expense relating to providing the services associated with the Proposed Access Fees is projected to be approximately $0.6
million, which is only a portion of the $0.6 million for MIAX and $0.5
million 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 access 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 access 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 access services associated with the Proposed Access Fees to its 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 access services associated with the Proposed Access Fees. The Exchange did not
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allocate all of the occupancy expense toward the cost of providing the access 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 53% of the total applicable occupancy expense. The Exchange believes this allocation is reasonable because it represents the Exchanges cost to provide the access 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 access services including connectivity, ports, and trading permits. The Exchange believes this is reasonable and in line, as the Exchange operates a technologybased business that differentiates itself from its competitors based on its trading systems that rely on access to a 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 technology-based. As described above, the Exchange and MIAX Pearl have only four primary sources of fees to recover their costs; thus, the Exchange and MIAX Pearl believe it is reasonable to allocate a material portion of their total overall expense towards access fees.
Accordingly, based on the facts and circumstances presented, the Exchange believes that its provision of the access services associated with the Proposed Access Fees will not result in excessive pricing or supra-competitive profit. To illustrate, on a going-forward, fullyannualized basis, the Exchange and MIAX Pearl project that annualized revenue for providing the access services associated with the Proposed Access Fees would be approximately $22 million per annum, based on a recent billing cycle.17 The Exchange and MIAX Pearl project that their annualized revenue for providing network connectivity services all connectivity alternatives to be approximately $22.8 million per annum.
The Exchange and MIAX Pearl project that their annualized expense for providing network connectivity services all connectivity alternatives to be approximately 15.9 million per annum.
Accordingly, on a fully-annualized basis, the Exchange and MIAX Pearl believe their total projected revenue for 17 The Exchange and MIAX Pearl also project approximately $69,550 in monthly revenue through 1Gb connections; however, the Exchange and MIAX
Pearl do not propose to adjust the fees for those connections at this time.

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