[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10350-10355]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05215]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85316; File No. SR-EMERALD-2019-11]


Self-Regulatory Organizations; MIAX Emerald, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Adopt 
System Connectivity Fees

March 14, 2019.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 1, 2019, MIAX Emerald, LLC (``MIAX Emerald'' or ``Exchange''), 
filed with the Securities and Exchange Commission (``Commission'') a 
proposed rule change as described in Items I, II, and III below, which 
Items have been prepared by the Exchange. The Commission is publishing 
this notice to solicit comments on the proposed rule change from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is filing a proposal to amend the MIAX Emerald Fee 
Schedule (the ``Fee Schedule'') to adopt the Exchange's system 
connectivity fees.
    The text of the proposed rule change is available on the Exchange's 
website at http://www.miaxoptions.com/rule-filings/emerald, at MIAX's 
principal office, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Fee Schedule regarding 
connectivity to the Exchange. Specifically, the Exchange proposes to 
amend Sections 5(a) and (b) of the Fee Schedule to adopt the network 
connectivity fees for the 1 Gigabit (``Gb'') fiber connection and the 
10Gb ultra-low latency (``ULL'') fiber connection, which are charged to 
both Members \3\ and non-Members of the Exchange for connectivity to 
the Exchange's primary/secondary facility. The Exchange also proposes 
to adopt network connectivity fees for the 1Gb and 10Gb fiber 
connections for connectivity to the Exchange's disaster recovery 
facility. Each of these

[[Page 10351]]

connections (with the exception of the 10Gb ULL) are shared connections 
(collectively, the ``Shared Connections''), and thus can be utilized to 
access the Exchange and both of the Exchange's affiliates, Miami 
International Securities Exchange, LLC (``MIAX Options'') and MIAX 
PEARL, LLC (``MIAX PEARL''). The 10Gb ULL connection is a dedicated 
connection (``Dedicated Connection''), which provides network 
connectivity solely to the trading platforms, market data systems, and 
test system facilities of MIAX Emerald. These proposed fees are 
collectively referred to herein as the ``Proposed Fees.'' The amounts 
of the Proposed Fees for the Shared Connections are the same amounts 
that are currently in place at MIAX Options and MIAX PEARL.\4\ While 
the Exchange is new and only launching trading on March 1, 2019, since: 
(i) All of the Proposed Fees (except for the fee relating to the 10Gb 
ULL connection) relate to Shared Connections, and thus are the same 
amounts as are currently in place at MIAX Options and MIAX PEARL; (ii) 
all of the Members of MIAX Emerald are also members of either MIAX 
Options and/or MIAX PEARL, and most of those Members already have 
connectivity to the Exchange via existing Shared Connections (without 
paying any new incremental connectivity fees), the Exchange is 
providing similar information to that which was provided in the MIAX 
and PEARL Fee Filings, including providing detail about the market 
participants impacted by the Proposed Fees, as well as the costs 
incurred by the Exchange associated with providing the connectivity 
alternatives, in order to provide transparency and support relating to 
the Exchange's belief that the Proposed Fees are reasonable, equitable, 
and non-discriminatory, and to provide sufficient information for the 
Commission to determine that the Proposed Fees are consistent with the 
Act. The proposed rule change is immediately effective upon filing with 
the Commission pursuant to Section 19(b)(3)(A) of the Act.
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    \3\ The term ``Member'' means an individual or organization 
approved to exercise the trading rights associated with a Trading 
Permit. Members are deemed ``members'' under the Exchange Act. See 
Exchange Rule 100.
    \4\ See SR-MIAX-2019-10 and SR-PEARL-2019-08 (the ``MIAX and 
PEARL Fee Filings'').
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    The Exchange proposes to offer to both Members and non-Members 
various bandwidth alternatives for connectivity to the Exchange, to its 
primary and secondary facilities, consisting of a 1Gb fiber connection 
and a 10Gb ULL fiber connection. The 10Gb ULL offering uses an ultra-
low latency switch, which provides faster processing of messages sent 
to it in comparison to the switch used for the other types of 
connectivity. The Exchange also proposes to offer to both Members and 
non-Members various bandwidth alternatives for connectivity to the 
Exchange, to its disaster recovery facility, consisting of a 1Gb fiber 
connection and a 10Gb connection.
    For the Shared Connections, the Exchange's MIAX Express Network 
Interconnect (``MENI'') can be configured to provide Members and non-
Members of the Exchange network connectivity to the trading platforms, 
market data systems, test systems, and disaster recovery facilities of 
the Exchange and its affiliates, MIAX Options and MIAX PEARL, via a 
single, shared connection. Any Member or non-Member can purchase a 
Shared Connection.
    For the Dedicated Connection, the Exchange's MENI is configured to 
provide Members and non-Members of the Exchange network connectivity to 
the trading platforms, market data systems, test systems, and disaster 
recovery facilities of the Exchange. Any Member or non-Member can 
purchase a Dedicated Connection. The Exchange determined to design its 
network architecture in a manner that offered 10Gb ULL connections as 
dedicated connections (as opposed to shared connections) in order to 
provide cost saving opportunities for itself and for its Members, by 
reducing the amount of equipment that the Exchange would have to 
purchase and to which the Members would have to connect.
    For the Shared Connections, Members and non-Members utilizing the 
MENI to connect to the trading platforms, market data systems, test 
systems and disaster recovery facilities of the Exchange, MIAX Options, 
and MIAX PEARL via a single, shared connection are assessed only one 
monthly network connectivity fee per connection, regardless of the 
trading platforms, market data systems, test systems, and disaster 
recovery facilities accessed via such connection. Thus, since all of 
the Members of MIAX Emerald are also members of either MIAX Options 
and/or MIAX PEARL, and most of those Members already have connectivity 
to the Exchange via existing Shared Connections, most Members of MIAX 
Emerald have instant connectivity to the Exchange without paying any 
new incremental connectivity fees, as more fully-detailed below.
    The Exchange proposes to establish the monthly network connectivity 
fees for such connections for both Members and non-Members. As 
discussed above, the amounts of the Proposed Fees for the Shared 
Connections are the same amounts that are currently in place at MIAX 
Options and MIAX PEARL. The amount of the Proposed Fee for the 
Dedicated Connection is offered at a substantial discount to the amount 
currently in place at MIAX Options and MIAX PEARL. The reason for the 
substantial discount is that the Dedicated Connection offers access to 
only a single market (the Exchange), whereas the 10Gb ULL connection 
offered by MIAX Options and MIAX PEARL offers access to two markets 
(MIAX Options and MIAX PEARL). The network connectivity fees for 
connectivity to the Exchange's primary/secondary facility will be as 
follows: (a) 1,400 for the 1Gb connection; and (b) $6,000 for the 10Gb 
ULL connection. The network connectivity fees for connectivity to the 
Exchange's disaster recovery facility will be as follows: (a) $550 for 
the 1Gb connection; and (b) $2,750 for the 10Gb connection.
2. Statutory Basis
    The Exchange believes that its proposal to amend its Fee Schedule 
is consistent with Section 6(b) of the Act \5\ in general, and furthers 
the objectives of Section 6(b)(4) of the Act \6\ in particular, in that 
it provides for the equitable allocation of reasonable dues, fees and 
other charges among Exchange Members and issuers and other persons 
using any facility or system which the Exchange operates or controls. 
The Exchange also believes the proposal furthers the objectives of 
Section 6(b)(5) of the Act \7\ in that it is designed to promote just 
and equitable principles of trade, to remove impediments to and perfect 
the mechanism of a free and open market and a national market system, 
and, in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customer, issuers, 
brokers and dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 15 U.S.C. 78f(b)(5).
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    First, the Exchange believes that its proposal is consistent with 
Section 6(b)(4) of the Act, in that the Proposed Fees are fair, 
equitable and not unreasonably discriminatory, because the fees for the 
connectivity alternatives available on the Exchange, as proposed, are 
competitive and market-driven. The U.S. options markets are highly 
competitive (there are currently 16 options markets) and a reliance on 
competitive markets is an appropriate means to ensure equitable and 
reasonable prices.
    The Exchange acknowledges that there is no regulatory requirement 
that any market participant connect to the Exchange, or that any 
participant

[[Page 10352]]

connect at any specific connection speed. The rule structure for 
options exchanges are, in fact, fundamentally different from those of 
equities exchanges. The Exchange further recognizes that the decision 
of whether to connect to the Exchange is separate and distinct from the 
decision of whether and how to trade on the Exchange. The Exchange 
acknowledges that many firms may choose to connect to the Exchange, but 
ultimately not trade on it.
    The Exchange,\8\ MIAX Options,\9\ and MIAX PEARL \10\ are comprised 
of 41 distinct members amongst all three exchanges, excluding any 
additional affiliates of such members that are also members of the 
Exchange, MIAX Options, MIAX PEARL, or any combination thereof. Of 
those 41 distinct members, 28 of those distinct members are Members of 
MIAX Emerald. (Currently, there are no Members of MIAX Emerald that are 
not also members of MIAX Options or MIAX PEARL, or both.) Of those 28 
distinct Members of MIAX Emerald, there are 6 Members that have no 
connectivity to the Exchange. Members are not forced to purchase 
connectivity to the Exchange, and these Members have elected not to 
purchase such connectivity. Of note, these same 6 Members also do not 
have connectivity to either MIAX Options or MIAX PEARL. These Members 
either trade indirectly through other Members or non-Members that have 
connectivity to the Exchange, or do not trade and conduct another type 
of business on the Exchange. Of the remaining 22 distinct Members of 
MIAX Emerald, all 22 of those distinct Members already had connectivity 
to the Exchange via existing Shared Connections, thus providing all 
such 22 MIAX Emerald Members with instant connectivity to the Exchange 
without paying any new incremental connectivity fees.
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    \8\ The Exchange has 28 distinct Members, excluding affiliated 
entities. See MIAX Emerald Exchange Member Directory, available at 
https://www.miaxoptions.com.
    \9\ MIAX Options has 38 distinct Members, excluding affiliated 
entities. See MIAX Options Exchange Member Directory, available at 
https://www.miaxoptions.com.
    \10\ MIAX PEARL has 36 distinct Members, excluding affiliated 
entities. See MIAX PEARL Exchange Member Directory, available at 
https://www.miaxoptions.com.
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    Further, of those 22 Members, 14 of such Members elected to 
purchase additional connectivity to the Exchange, including additional 
Shared Connections and additional Dedicated Connections. The Exchange 
made available in advance to all of its prospective Members its 
proposed connectivity pricing (subject to regulatory clearance), in 
order for those prospective Members to make an informed decision about 
whether to become a Member of the Exchange and whether to purchase 
connectivity to the Exchange. Accordingly, each such Member made the 
decision to become a Member of the Exchange and to purchase 
connectivity to the Exchange, knowing in advance the connectivity 
pricing. And the vast majority of the additional connectivity purchased 
by those Members were for Dedicated Connections, the most expensive 
connectivity option.
    As a result, of those 22 Members, through existing Shared 
Connections, newly purchased Shared Connections, and newly purchased 
Dedicated Connections: 14 Members have 1Gb (primary/secondary) 
connections; 13 Members have 10Gb ULL (primary/secondary) connections; 
3 Members have 10Gb (disaster recovery) connections; and 10 Members 
have 1Gb (disaster recovery) connections, or some combination of 
multiple various connections. The Exchange expects that all such 
Members with those Shared Connections and Dedicated Connections will 
trade on MIAX Emerald.
    The 6 Members who have not purchased any connectivity to the 
Exchange are still able to trade on the Exchange indirectly through 
other Members or non-Member service bureaus that are connected. These 6 
Members who have not purchased connectivity are not forced or compelled 
to purchase connectivity, and they retain all of the other benefits of 
membership with the Exchange. Accordingly, Members have the choice to 
purchase connectivity and are not compelled to do so in any way.
    In addition, there are 5 non-Member service bureaus that already 
have connectivity to the Exchange via existing Shared Connections, thus 
providing all 5 of those non-Member service bureaus with instant 
connectivity to the Exchange without paying any new incremental 
connectivity fees. These non-Members freely purchased their 
connectivity from one of the Exchange's affiliates, either MIAX Options 
or MIAX PEARL, in order to offer trading services to other firms and 
customers, as well as access to the market data services that their 
connections to the Exchange provide them, but they are not required or 
compelled to purchase any of the Exchange's connectivity options.
    The Exchange is launching trading on March 1, 2019. Thus, at the 
time that the 14 Members who elected to purchase connectivity to the 
Exchange, the Exchange was untested and unproven, and had 0% market 
share of the U.S. options industry. For all of 2018, the Exchange's 
affiliate, MIAX Options, had only 4.39% market share of the U.S. 
options industry in 2018 in Equity/ETF classes according to the 
OCC.\11\ For all of 2018, the Exchange's affiliate, MIAX PEARL, had 
only 4.82% market share of the U.S. options industry in Equity/ETF 
classes according to the OCC.\12\ The Exchange is aware of no evidence 
that a combined market share less than 10% provides the Exchange with 
anti-competitive pricing power. Certainly, an untested and unproven 
exchange, with 0% market share, and no rule or requirement that a 
market participant must join or connect to it, does not have anti-
competitive pricing power, with respect to setting the pricing for the 
Dedicated Connections or the Shared Connections. If the Exchange were 
to attempt to establish unreasonable connectivity pricing, then no 
market participant would join or connect. Therefore, since 28 distinct 
Members joined MIAX Emerald and 14 of those distinct Members purchased 
additional connectivity to the Exchange, all knowing, in advance, the 
connectivity fees, the Exchange believes the Proposed Fees are 
reasonable, equitable, and not unfairly discriminatory.
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    \11\ See Exchange Market Share of Equity Products--2018, The 
Options Clearing Corporation, available at https://www.theocc.com/webapps/exchange-volume.
    \12\ Id.
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    Separately, the Exchange knows of no reason why market participants 
could not simply drop their connections and cease being Members of the 
Exchange if the Exchange were to establish unreasonable and 
uncompetitive price increases for its connectivity alternatives. No 
options market participant is required by rule, regulation, or 
competitive forces to be a Member of the Exchange. Several market 
participants choose not to be Members of the Exchange and choose not to 
access the Exchange, and several market participants are proposing to 
access the Exchange indirectly through another market participant. To 
illustrate, the Exchange has only 34 total Members (including all such 
Members' affiliate Members). However, Cboe Exchange, Inc. (``Cboe'') 
has over 200 members,\13\ Nasdaq ISE, LLC has

[[Page 10353]]

approximately 100 members,\14\ and NYSE American LLC has over 80 
members.\15\ If all market participants were required to be Members of 
the Exchange and connect directly to the Exchange, the Exchange would 
have over 200 Members, in line with Cboe's total membership. But it 
does not. The Exchange only has 34 Members.
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    \13\ See Form 1/A, filed August 30, 2018 (https://www.sec.gov/Archives/edgar/vprr/1800/18002831.pdf); Form 1/A, filed August 30, 
2018 (https://www.sec.gov/Archives/edgar/vprr/1800/18002833.pdf); 
Form 1/A, filed July 24, 2018 (https://www.sec.gov/Archives/edgar/vprr/1800/18002781.pdf); Form 1/A, filed August 30, 2018 (https://www.sec.gov/Archives/edgar/data/1473845/999999999718007832/9999999997-18-007832-index.htm).
    \14\ See Form 1/A, filed July 1, 2016 (https://www.sec.gov/Archives/edgar/vprr/1601/16019243.pdf).
    \15\ See https://www.nyse.com/markets/american-options/membership#directory.
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    Further, since there are 41 distinct members amongst all three 
exchanges, and only 28 of those distinct members decided to become 
Members of MIAX Emerald, there were 13 distinct members that decided 
not to become Members of MIAX Emerald. This further reinforces the fact 
that all market participants are not required to be Members of the 
Exchange and are not required to connect to the Exchange. It is a 
choice whether to join and it is a choice to connect. Therefore, the 
Exchange believes that the Proposed Fees are fair, equitable, and non-
discriminatory, as the fees are competitive.
    With respect to the now MIAX Emerald Members that had Shared 
Connections in place as of August 1, 2018 (via a previously purchased 
Shared Connection from MIAX Options or MIAX PEARL), the Exchange finds 
it compelling that all of those Members continued to purchase those 
Shared Connections after August 1, 2018, when MIAX Options and MIAX 
PEARL increased the connectivity fees for the Shared Connections to the 
current amounts proposed by the Exchange herein. In particular, the 
Exchange believes that the Proposed Fees for the Shared Connections are 
reasonable because MIAX Options and MIAX PEARL, which charge the same 
amount for the Shared Connections, did not lose any Members (or the 
number of Shared Connections each Member purchased) or non-Member 
Shared Connections when MIAX Options and MIAX PEARL proposed to 
increase the connectivity fees for the Shared Connections on August 1, 
2018. For example, with respect to the Shared Connections maintained by 
now Members of MIAX Emerald who had Shared Connections in place as of 
July 2018, 12 Members purchased 1Gb connections. The vast majority of 
those Members purchased multiple such connections, the number of 
connections depending on their throughput requirements based on the 
volume of their quote/order traffic associated with their business 
model. After the fee increase, beginning August 1, 2018, the same 12 
Members purchased 1Gb connections. Furthermore, the total number of 
connections did not decrease from July to August.
    Further, with respect to the Shared Connections maintained by now 
Members of MIAX Emerald who had Shared Connections in place as of July 
2018, of those Members and non-Members that bought multiple 
connections, no firm dropped any connections beginning August 1, 2018, 
when MIAX Options and MIAX PEARL increased its fees. Furthermore, the 
Exchange understands that MIAX Options and MIAX PEARL did not receive 
any official comment letters or complaints from any now Members of MIAX 
Emerald who had Shared Connections in place as of July 2018 regarding 
the increased fees regarding how the change was unreasonable, unduly 
burdensome, or would negatively impact their competitiveness amongst 
other market participants. Therefore, the Exchange believes that the 
Proposed Fees are fair, equitable, and non-discriminatory, as the fees 
are competitive.
    The Exchange believes that the Proposed Fees are equitably 
allocated among Members and non-Members, as evidenced by the fact that 
the fees are allocated across all connectivity alternatives, and there 
is not a disproportionate number of Members purchasing any 
alternative--14 Members have 1Gb (primary/secondary) connections; 13 
Members have 10Gb ULL (primary/secondary) connections; 3 Members have 
10Gb (disaster recovery) connections; and 10 Members have 1Gb (disaster 
recovery) connections, or some combination of multiple various 
connections.
    Second, the Exchange believes that its proposal is consistent with 
Section 6(b)(4) of the Act because the Proposed Fees allow the Exchange 
to recover a portion (less than all) of the costs incurred by the 
Exchange associated with providing and maintaining the necessary 
hardware and other infrastructure to support this technology. The 
Exchange believes that it is reasonable and appropriate to establish 
its fees charged for use of its connectivity at a level that will 
partially offset the costs to the Exchange associated with maintaining 
and enhancing a state-of-the-art exchange network infrastructure in the 
U.S. options industry.
    The costs associated with making the network accessible to Exchange 
Members and non-Members, through the expansion associated with new 
Shared Connections and Dedicated Connections, as well as the general 
expansion of a state-of-the-art infrastructure, are extensive, have 
increased year-over-year in the past two years, and are projected to 
increase year-over-year in the future. This is due to several factors, 
including costs associated with maintaining and expanding a team of 
highly-skilled network engineers, fees charged by the Exchange's third-
party data center operator, and costs associated with projects and 
initiatives designed to improve overall network performance and 
stability, through the Exchange's R&D efforts.
    In order to provide more detail and to quantify the Exchange's 
costs, the Exchange notes that costs are associated with the 
infrastructure and headcount to fully-support the advances in 
infrastructure and expansion of network level services, including 
customer monitoring, alerting and reporting. The Exchange incurs 
technology expenses related to establishing and maintaining Information 
Security services, monitoring and remediation, as well as Regulation 
SCI mandated processes, associated with its network technology. 
Additionally, the Exchange incurred costs in the expansion/buildout of 
the network leading up to the launch of operations, and the network 
maintenance costs continue to increase year-over-year. For example, 
since the initial phases of the buildout of the Exchange over two years 
ago, with respect to the network, there has been an approximate 70% 
increase in technology-related personnel costs in infrastructure, due 
to expansion of services/support; an approximate 10% increase in 
datacenter costs due to price increases and footprint expansion; an 
approximate 5% increase in vendor-supplied dark fiber due to price 
increases and expanded capabilities; and a 30% increase in market data 
connectivity fees. There was also significant capital expenditures over 
this same period to upgrade and enhance the underlying technology 
components. The Exchange believes that it is reasonable and appropriate 
to establish its fees charged for use of its connectivity at a level 
that will partially offset the costs to the Exchange associated with 
the buildout, maintenance, and enhancement of its network 
infrastructure.
    Further, because the costs of operating a data center are 
significant and not economically feasible for the Exchange, the 
Exchange does not operate its own data centers, and instead contracts 
with a third-party data center provider. The

[[Page 10354]]

Exchange notes that larger, dominant exchange operators own/operate 
their data centers, which offers them greater control over their data 
center costs. Because those exchanges own and operate their data 
centers as profit centers, the Exchange is subject to additional costs.
    Further, the Exchange invests significant resources in network R&D 
to improve the overall performance and stability of its network. For 
example, the Exchange has a number of network monitoring tools (some of 
which were developed in-house, and some of which are licensed from 
third-parties), that continually monitor, detect, and report network 
performance, many of which serve as significant value-adds to the 
Exchange's Members and enable the Exchange to provide a high level of 
customer service. These tools detect and report performance issues, and 
thus enable the Exchange to proactively notify a Member (and the SIPs) 
when the Exchange detects a problem with a Member's connectivity. The 
Exchange also incurs costs associated with the maintenance and 
improvement of existing tools and the development of new tools.
    Certain recently developed network aggregation and monitoring tools 
provide the Exchange with the ability to measure network traffic with a 
much more granular level of variability. This is important as Exchange 
Members demand a higher level of network determinism and the ability to 
measure variability in terms of single digit nanoseconds. Also, routine 
R&D projects to improve the performance of the network's hardware 
infrastructure result in additional cost. As an example, in the last 
year, R&D efforts resulted in a performance improvement, requiring the 
purchase of new equipment to support that improvement, and thus 
resulting in increased costs in the hundreds of thousands of dollars 
range. In sum, the costs associated with maintaining and enhancing a 
state-of-the-art exchange network infrastructure in the U.S. options 
industry is a significant expense for the Exchange that also increases 
year-over-year, and thus the Exchange believes that it is reasonable to 
offset a portion of those costs through establishing network 
connectivity fees, as proposed herein. Overall, the Proposed Fees are 
projected to offset only a portion of the Exchange's network 
connectivity costs.
    The Exchange also believes its proposal to offer 10Gb ULL 
connections as dedicated connections furthers the objectives of Section 
6(b)(5) of the Act \16\ in that it is designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general to protect investors and the public interest and is not 
designed to permit unfair discrimination between customer, issuers, 
brokers and dealers. In particular, for the Dedicated Connection, the 
Exchange's MENI is configured to provide Members and non-Members of the 
Exchange network connectivity to the trading platforms, market data 
systems, test systems, and disaster recovery facilities of the 
Exchange. Any Member or non-Member can purchase a Dedicated Connection. 
The Exchange determined to design its network architecture in a manner 
that offered 10Gb ULL connections as dedicated connections (as opposed 
to shared connections) in order to provide cost saving opportunities 
for itself and for its Members, by reducing the amount of equipment 
that the Exchange would have to purchase and to which the Members would 
have to connect. A dedicated 10Gb ULL connection does not offer any 
unfair advantage over a shared 10GB ULL connection, as is being offered 
solely as a cost-saving measure to the Exchange and its Members.
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    \16\ 15 U.S.C. 78f(b)(5).
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    The Exchange notes that other exchanges have similar connectivity 
alternatives for their participants, including similar low-latency 
connectivity. For example, Nasdaq PHLX LLC (``Phlx''), NYSE Arca, Inc. 
(``Arca''), NYSE American LLC (``NYSE American'') and Nasdaq ISE, LLC 
(``ISE'') all offer a 1Gb, 10Gb and 10Gb low latency ethernet 
connectivity alternatives to each of their participants.\17\ The 
Exchange further notes that Phlx, ISE, Arca and NYSE American each 
charge higher rates for such similar connectivity to primary and 
secondary facilities,\18\ however the Exchange also notes that the 
Exchange's 10Gb ULL connection is dedicated solely to one market (the 
Exchange) whereas the Exchange believes that other exchanges offer a 
shared 10Gb ULL connection to multiple markets. Additionally, the 
Exchange's proposed connectivity fees to its disaster recovery facility 
are within the range of the fees charged by other exchanges for similar 
connectivity alternatives.\19\
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    \17\ See Phlx and ISE Rules, General Equity and Options Rules, 
General 8, Section 1(b). Phlx and ISE each charge a monthly fee of 
$2,500 for each 1Gb connection, $10,000 for each 10Gb connection and 
$15,000 for each 10Gb Ultra connection, which the equivalent of the 
Exchange's 10Gb ULL connection. See also NYSE American Fee Schedule, 
Section V.B, and Arca Fees and Charges, Co-Location Fees. NYSE 
American and Arca each charge a monthly fee of $5,000 for each 1Gb 
circuit, $14,000 for each 10Gb circuit and $22,000 for each 10Gb LX 
circuit, which the equivalent of the Exchange's 10Gb ULL connection.
    \18\ Id.
    \19\ See Nasdaq ISE, Options Rules, Options 7, Pricing Schedule, 
Section 11.D. (charging $3,000 for disaster recovery testing & 
relocation services); see also Cboe Exchange, Inc. (``Cboe'') Fees 
Schedule, p. 14, Cboe Command Connectivity Charges (charging a 
monthly fee of $2,000 for a 1Gb disaster recovery network access 
port and a monthly fee of $6,000 for a 10Gb disaster recovery 
network access port).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    MIAX Emerald does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. In particular, the Exchange has 
received no official comment letters or complaints from Members or 
others who connect to it that its Proposed Fees are negatively 
impacting or would negatively impact their abilities to compete with 
other market participants. Further, the Exchange is unaware of any 
assertion that its Proposed Fees would somehow unduly impair its 
competition with other options exchanges. To the contrary, if the fees 
charged are deemed too high by market participants, they can simply 
disconnect.
    While the Exchange recognizes the distinction between connecting to 
an exchange and trading at the exchange, the Exchange notes that it 
operates in a highly competitive options market in which market 
participants can readily connect and trade with venues they desire. In 
such an environment, the Exchange must continually adjust its fees to 
remain competitive with other exchanges. The Exchange believes that the 
proposed changes reflect this competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments were neither solicited nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act,\20\ and Rule 19b-4(f)(2) \21\ thereunder. 
At any time within 60 days of the filing of the proposed rule change, 
the Commission summarily may temporarily suspend such rule change if it 
appears to the

[[Page 10355]]

Commission that such action is necessary or appropriate in the public 
interest, for the protection of investors, or otherwise in furtherance 
of the purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.
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    \20\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \21\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-EMERALD-2019-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-EMERALD-2019-11. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-EMERALD-2019-11 and should be submitted 
on or before April 10, 2019.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05215 Filed 3-19-19; 8:45 am]
 BILLING CODE 8011-01-P