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Federal Register / Vol. 86, No. 189 / Monday, October 4, 2021 / Notices transaction fees.13 Accordingly, the Exchange believes that the Proposed Access Fees are consistent with the Act.

As of September 23, 2021, the Exchange had a market share of only 5.01% of the U.S. equity options industry for the month of September 2021.14 The Exchange is not aware of any evidence that a market share of approximately 56% provides the Exchange with anti-competitive pricing power. If the Exchange were to attempt to establish unreasonable pricing for any of its means provided to access the Exchange, market participants may look to access the Exchange via other means such as through a third party service provider, or look to connect to the Exchange via a competing exchange with cheaper access alternatives that also provides routing services to the Exchange. In addition, existing market participants that are connected to the Exchange may choose to disconnect from the Exchange or reduce their number of connections to the Exchange as a means to reduce their overall costs.
The Exchange believes the proposed tiered-pricing structure for 10Gb ULL
connections is equitable and reasonable because the proposed highest tier is still less than fees charged for similar connectivity provided by other options exchanges with comparable market shares. For example, The Nasdaq Stock Market LLC NASDAQ equity options market share of 7.79% as of September 22, 2021 for the month of September 15 charges a monthly fee of $10,000 per 10Gb fiber connection and $15,000 per 10Gb Ultra fiber connection.16 The highest tier of the Exchanges proposed fee structure for a 10Gb ULL connection is $2,000 per month less than NASDAQ and, unlike NASDAQ, the Exchange does not charge installation fees. The Exchange notes that the same connectivity fees described above for NASDAQ also apply to its affiliates, Nasdaq ISE, LLC ISE
equity options market share of 6.47%
as of September 22, 2021 for the month of September 17 and NASDAQ PHLX
13 See Securities Exchange Act Release Nos.
90981 January 25, 2021, 86 FR 7582 January 29, 2021 SRPEARL202101 proposal to increase connectivity fees; 90980 January 25, 2021, 86 FR
7602 January 29, 2021 SRMIAX202102
proposal to increase connectivity fees.
14 See The market at a glance, available at https www.miaxoptions.com/ last visited September 23, 2021.
15 See The market at a glance, available at https www.miaxoptions.com/ last visited September 22, 2021.
16 See Nasdaq Stock Market LLC Rules, General 8: Connectivity, Section 1. Co-Location Services;
Nasdaq ISE Rules, General 8: Connectivity.
17 See supra note 15.

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LLC PHLX equity options market share of 11.25% as of September 22, 2021 for the month of September.18
NYSE American LLC Amex equity options market share of 7.89% as of September 22, 2021 for the month of September 19 charges $15,000 per connection initially plus $22,000
monthly per 10Gb LX LCN circuit connection.20 Again, the highest tier of the Exchanges proposed fee structure for a 10Gb ULL connection is $9,000 per month lower than the Amex connectivity fee after the first month.
In the each of the above cases, the Exchanges highest tier in the proposed tiered-pricing structure is significantly lower than that of competing options exchanges with similar market share.
Further, as described in more detail below, those exchanges generate higher operating profit margins and higher access fees than the Exchange, even with this proposed fee change. Despite proposing lower or similar fees to that of competing options exchanges with similar market share, the Exchange believes that it provides a premium network experiencer to its Members and non-Members via a highly deterministic system, enhanced network monitoring and customer reporting, and a superior network infrastructure than markets with higher market shares and more expensive connectivity alternatives.
Each of the connectivity rates in place at competing options exchanges were filed with the Commission for immediate effectiveness and remain in place today.
The Exchange also notes that the higher connectivity fees described above for competing exchanges have been in place for years over 8 years in some cases, allowing those exchanges to derive significantly more revenue from their access fees. For example, in 2013, Amex adopted the pricing for its 10Gb LX LCN connection of $15,000 as an initial charge per connection and then a monthly fee of $20,000 per connection.
The initial fee per connection is higher than the Exchanges highest proposed tier of $13,000 per connection, notwithstanding the fact that the monthly fee is $7,000 more than the Exchanges highest proposed tier and Amexs fees have been in place for nearly 8 years.21 NYSE Arca, Inc.
Arca also adopted the exact same fees as Amex in 2013 and has been 18 See id. See also PHLX Rules, General 8:
Connectivity.
19 See supra note 15.
20 See NYSE American Options Fee Schedule, Section IV.
21 See Securities Exchange Act Release No. 70982
December 4, 2013, 78 FR 74197 December 10, 2013 SRNYSEMKT201397.

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collecting higher fees than the Exchanges current proposal for nearly 8
years as well initial charge of $15,000
per connection and then a monthly fee of $20,000 per connection.22 Not only were the fees that Amex and Arca adopted in 2013 significantly higher than the fees the Exchange currently proposes, in 2016, Amex and Arca raised the monthly fees even higher to $22,000 per connection.23 Similarly, in 2013, NASDAQ adopted the pricing for its 10Gb Ultra connection of $1,500 per connection as a one-time installation fee and then a monthly fee of $15,000 per connection.24 The Exchanges current proposal does not contemplate any sort of installation fee or one-time fee and the monthly fee for the Exchanges highest connectivity tier $13,000 is $2,000 lower than the fees adopted 8
years ago by Amex, Arca and NASDAQ.
Separately, the Exchange is not aware of any reason why market participants could not simply drop their access or not initially access an exchange if an exchange were to establish prices for its non-transaction fees that, in the determination of such market participant, did not make business or economic sense for such market participant to access such exchange. No options market participant is required by rule, regulation, or competitive forces to be a Member of the Exchange. As evidence of the fact that market participants can and do drop their access to exchanges based on nontransaction fee pricing, R2G Services LLC R2G filed a comment letter after BOXs proposed rule changes to increase its connectivity fees SRBOX
201824, SRBOX201837, and SR
BOX201904. The R2G Letter stated, when BOX instituted a $10,000/
month price increase for connectivity;
we had no choice but to terminate connectivity into them as well as terminate our market data relationship.
The cost benefit analysis just didnt make any sense for us at those new levels. Similarly, the Exchange noted in a recent filing that once MIAX
Emerald issued a notice that it was instituting MEI Port fees, among other non-transaction fees, one MIAX Emerald Member dropped its access to MIAX
22 See Securities Exchange Act Release No. 70981
December 4, 2013, 78 FR 74203 December 10, 2013 SRNYSEARCA2013131.
23 See Securities Exchange Act Release Nos.
79729 January 4, 2017, 82 FR 3061 January 10, 2017 SRNYSEARCA2016172; 79728 January 4, 2017, 82 FR 3035 January 10, 2017 SR
NYSEMKT2016126.
24 See Securities Exchange Act Release No. 70129
August 7, 2013, 78 FR 49308 August 13, 2013
SRNASDAQ2013099.

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