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khammond on DSKJM1Z7X2PROD with NOTICES

Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices 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 MIAXs 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 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
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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 have only four primary sources of fees to recover their costs; thus, the Exchange and MIAX
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 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
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 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 believe their total projected revenue for the providing the access services associated with the Proposed Access Fees will not result in excessive pricing or supracompetitive profit, as the Exchange and MIAX will make a profit margin of only approximately 30% inclusive of the 17 The Exchange and MIAX also project approximately $69,550 in monthly revenue through 1Gb connections; however, the Exchange and MIAX
do not propose to adjust the fees for those connections at this time.

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Proposed Access Fees and all other connectivity alternatives $22.8 million in total connectivity revenue minus $15.9 million in expense = $6.9 million in profit per annum. Additionally, this profit margin does not take into account the cost of capital expenditures CapEx the Exchange and MIAX
historically spent or are projected to spend each year on CapEx going forward.
For the avoidance of doubt, none of the expenses included herein relating to the access services associated with the Proposed Access Fees relate to the provision of any other services offered by the Exchange or MIAX. Stated differently, no expense amount of the Exchange is allocated twice. 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 the MIAX Pearl equities market and the Exchanges affiliate, MIAX Emerald, are accounted for separately and are not included within the scope of this filing. Stated differently, no expense amount of the Exchange is also allocated to MIAX
Pearl Equites or MIAX Emerald.
The Exchange believes it is reasonable, equitable and not unfairly discriminatory to allocate the respective percentages of each expense category described above towards the total cost to the Exchange of operating and supporting the network, including providing the access services associated with the Proposed Access Fees because the Exchange performed a line-by-line item analysis of all the expenses of the Exchange, and has determined the expenses that directly relate to providing access to the Exchange and MIAX. Further, the Exchange notes that, without the specific third-party and internal items listed above, the Exchange would not be able to provide the access services associated with the Proposed Access Fees to its Members and their customers. Each of these expense items, including physical hardware, software, employee compensation and benefits, occupancy costs, and the depreciation and amortization of equipment, have been identified through a line-by-line item analysis to be integral to providing access services. The Proposed Access Fees are intended to recover the Exchanges and MIAXs costs of providing access to their Systems.
Accordingly, the Exchange believes that the Proposed Access Fees are fair and reasonable because they do not result in excessive pricing or supra-competitive profit, when comparing the actual costs to the Exchange versus the projected
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