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Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
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2021,13 the total annual expense for providing the access services associated with the Proposed Access Fees that is, the shared network connectivity of the Exchange and MIAX, but excluding MIAX Emerald is projected to be approximately $15.9 million. The approximately $15.9 million in projected total annual expense is comprised of the following, all of which are directly related to the access services associated with the Proposed Access Fees: 1 Third-party expense, relating to fees paid by the Exchange to thirdparties for certain products and services;
and 2 internal expense, relating to the internal costs of the Exchange and MIAX to provide the services associated with the Proposed Access Fees.14 As noted above, the Exchange believes it is more appropriate to analyze the Proposed Access Fees utilizing its 2021
revenue and costs, which utilize the same presentation methodology as set forth in the Exchanges previouslyissued Audited Unconsolidated Financial Statements.15 The $15.9
million in projected total annual expense is directly related to the access 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 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 access 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 13 The Exchange has not yet finalized its 2021
year end results.
14 The percentage allocations used in this proposed rule change may differ from past filings from the Exchange or its affiliates due to, among other things, changes in expenses charged by thirdparties, adjustments to internal resource allocations, and different system architecture of the Exchange as compared to its affiliates.
15 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 87876 December 31, 2019, 85 FR 757 January 7, 2020 SRPEARL
201936. Accordingly, the third-party expense described in this filing is attributed to the same line item for the Exchanges 2021 Form 1 Amendment, which will be filed in 2022.

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services. The sum of all such portions of expenses represents the total cost of the Exchange to provide access services associated with the Proposed Access Fees.
For 2021, total third-party expense, relating to fees paid by the Exchange and MIAX to third-parties for certain products and services for the Exchange to be able to provide the access services associated with the Proposed Access Fees, is projected to be $3.9 million.
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 Exchanges trading system infrastructure; 2 Zayo Group Holdings, Inc. Zayo for network services fiber and bandwidth products and services linking the Exchanges and MIAXs office locations in Princeton, New Jersey and Miami, Florida, to all data center locations; 3 Secure Financial Transaction Infrastructure SFTI,16 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 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, the Exchange and MIAX
do not allocate their entire information technology and communication costs to the access services associated with the Proposed Access Fees. Further, the Exchange notes that, with respect to the MIAX Pearl expenses included herein, those expenses only cover the MIAX
Pearl options market; expenses associated with MIAX Pearl Equities are accounted for separately and are not included within the scope of this filing.
The Exchange believes it is reasonable to allocate such third-party expense 16 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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described above towards the total cost to the Exchange and MIAX to provide the access 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 access services associated with the Proposed Access Fees to its Members and their customers. The Exchange did not allocate all of the Equinix expense toward the cost of providing the access services associated with the Proposed Access Fees, only that portion which the Exchange identified as being specifically mapped to providing the access services associated with the Proposed Access Fees, approximately 62% of the total applicable Equinix 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 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 the Exchange with its affiliates, MIAX and MIAX Emerald, 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 access services associated with the Proposed Access Fees. The Exchange did not allocate all of the Zayo 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 Proposed Access Fees, approximately 62% of the total applicable Zayo expense. The Exchange believes this allocation is reasonable because it represents the Exchanges
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