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Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
Exchange believes this allocation is reasonable because it represents the Exchanges actual cost to provide the access services associated with the Proposed Access Fees.
The Exchange believes it is reasonable to allocate the identified portion of the 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 their customers. The Exchange did not allocate all of the hardware and software provider expense toward the cost of providing 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 51% of the total applicable hardware and software provider 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.
For 2021, total projected internal expense, relating to the internal costs of the Exchange to provide the access services associated with the Proposed Access Fees, is projected to be approximately $5.5 million. This includes, but is not limited to, costs associated with: 1 Employee compensation and benefits for full-time employees that support the access 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 access 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 access 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
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the internal expense herein, and no expense amount is allocated twice.
Accordingly, the Exchange does not allocate its entire costs contained in those items to the access 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 access services associated with the Proposed Access Fees. In particular, the Exchanges employee compensation and benefits expense relating to providing the access services associated with the Proposed Access Fees is projected to be approximately $3.2 million, which is only a portion of the approximately $9.7
million 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 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 33% 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 depreciation and amortization expense relating to
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providing the services associated with the Proposed Access Fees is projected to be $2 million, which is only a portion of the $3.1 million 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 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 63% 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 occupancy expense relating to providing the services associated with the Proposed Access Fees is projected to be approximately $0.3 million, which is only a portion of the $0.5 million 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
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