[Federal Register Volume 86, Number 226 (Monday, November 29, 2021)]
[Notices]
[Pages 67745-67750]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25879]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93640; File Nos. SR-MIAX-2021-43, SR-EMERALD-2021-31]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC, MIAX Emerald, LLC; Suspension of and Order Instituting 
Proceedings To Determine Whether To Approve or Disapprove Proposed Rule 
Changes To Amend Fee Schedules To Adopt Tiered-Pricing Structures for 
Additional Limited Service MIAX and MIAX Emerald Express Interface 
Ports

November 22, 2021.

I. Introduction

    On September 28, 2021, Miami International Securities Exchange, LLC 
(``MIAX'') and MIAX Emerald, LLC (``MIAX Emerald'') (each an 
``Exchange''; collectively, the ``Exchanges'') each filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act''),\1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to adopt a tiered-
pricing structure for additional limited service express interface 
ports. Each proposed rule change was immediately effective upon filing 
with the Commission pursuant to Section 19(b)(3)(A) of the Act.\3\ The 
proposed rule changes were published for comment in the Federal 
Register on October 5, 2021.\4\ Pursuant to Section 19(b)(3)(C) of the 
Act,\5\ the Commission is hereby: (1) Temporarily suspending File Nos. 
SR-MIAX-2021-43 and SR-EMERALD-2021-31; and (2) instituting proceedings 
to determine whether to approve or disapprove File Nos. SR-MIAX-2021-43 
and SR-EMERALD-2021-31.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ See Securities Exchange Act Release Nos. 93185 (September 
29, 2021), 86 FR 55093 (October 5, 2021) (SR-MIAX-2021-43) (``MIAX 
Notice''); 93188 (September 29, 2021), 86 FR 55052 (October 5, 2021) 
(SR-EMERALD-2021-31) (``MIAX Emerald Notice''). For ease of 
reference, citations to statements generally applicable to both 
notices are to the MIAX Notice. Comments received on the proposed 
rule changes are available on the Commission's website at: https://www.sec.gov/comments/sr-miax-2021-43/srmiax202143.htm (SR-MIAX-2021-
43); https://www.sec.gov/comments/sr-emerald-2021-31/sremerald202131.htm (SR-EMERALD-2021-31).
    \5\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Changes

    Limited Service MIAX Express Interface Ports and Limited Service 
MIAX Emerald Express Interface Ports (collectively, ``Limited Service 
MEI Ports'') provide Market Makers \6\ with the ability to send eQuotes 
and quote purge messages, and are also capable of receiving 
administrative information.\7\ Currently, each Exchange allocates two 
Limited Service MEI Ports, free of charge, per matching engine to which 
a Market Maker connects. Market Makers may request additional Limited 
Service MEI Ports for each matching engine to which they connect for an 
additional monthly fee for each such additional port. Prior to the 
proposed rule changes, each Exchange charged a flat $100 monthly fee 
for each such additional port. Each Exchange has proposed to adopt a 
tiered-pricing structure.\8\ For both MIAX and MIAX Emerald, the first 
and second Limited Service MEI Ports for each matching engine would 
remain free of charge. For MIAX, the additional Limited Service MEI 
Port fees for each matching engine would increase from $100 to: (i) 
$150 for the third and fourth Limited Service MEI Ports; (ii) $200 for 
the fifth and sixth Limited Service MEI Ports; and (iii) $250 for the 
seventh or more Limited Service MEI Ports.\9\ For MIAX Emerald, the 
additional Limited Service MEI Port fees for each matching engine would 
increase from $100 to: (i) $200 for the third and fourth Limited 
Service MEI Ports; (ii) $300 for the fifth and sixth Limited Service 
MEI Ports; and (iii) $400 for the seventh to fourteenth Limited Service 
MEI Ports.\10\
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    \6\ Defined at MIAX Rule 100 and MIAX Emerald Rule 100.
    \7\ See, e.g., MIAX Notice, supra note 4, at 55093 n.10.
    \8\ The Exchanges initially filed the proposed fee changes on 
August 2, 2021. See Securities Exchange Act Release Nos. 92661 
(August 13, 2021), 86 FR 46737 (August 19, 2021) (SR-MIAX-2021-37), 
92662 (August 13, 2021), 86 FR 46726 (August 19, 2021) (SR-EMERALD-
2021-25). These filings were withdrawn and replaced with the instant 
filings, with additional information. See also Securities Exchange 
Act Release No. 91857 (May 12, 2021), 86 FR 26973 (May 18, 2021) 
(MIAX-2021-19) (allowing purchase of any number of additional 
Limited Service MEI Ports and stating that, at a continued monthly 
fee of $100 for each additional port, the Exchange anticipates 
generating an annual loss from the provision).
    \9\ See MIAX Notice, supra note 4, at 55094.
    \10\ See MIAX Emerald Notice, supra note 4, at 55053. The MIAX 
Emerald Fee Schedule states that Market Makers are limited to twelve 
additional Limited Service MEI Ports per matching engine, for a 
total of fourteen per matching engine. See MIAX Emerald Fee Schedule 
5.d.ii.

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[[Page 67746]]

III. Suspension of the Proposed Rule Changes

    Pursuant to Section 19(b)(3)(C) of the Act,\11\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to Section 19(b)(1) of the Act,\12\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') if it appears to the 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. As described below, the Commission believes a temporary 
suspension of the proposed rule changes is necessary and appropriate to 
allow for additional analysis of the proposed rule changes' consistency 
with the Act and the rules thereunder.
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    \11\ 15 U.S.C. 78s(b)(3)(C).
    \12\ 15 U.S.C. 78s(b)(1).
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    In support of the proposed tiered-pricing structure and associated 
fee increases, the Exchanges argue that they operate in a highly 
competitive market \13\ and their ability to price access and ports is 
constrained by competition among exchanges and third parties.\14\ MIAX 
states that it has a market share of only 5.8%, and MIAX Emerald states 
that it has a market share of only 4.99%, of the U.S. equity options 
industry as of September 2021.\15\ The Exchanges also state that there 
are 15 other U.S options exchanges which they must consider in their 
pricing discipline in order to compete for market participants.\16\ As 
evidence for their arguments, the Exchanges provide port fees for 
competing exchanges which, according to the Exchanges, demonstrate that 
the proposed tiered-pricing structure and proposed fees for additional 
Limited Service MEI Ports are less than or similar to fees charged by 
competing options exchanges for similar access on those exchanges.\17\
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    \13\ See, e.g., MIAX Notice, supra note 4, at 55094.
    \14\ See, e.g., id. at 55101.
    \15\ See MIAX Notice, supra note 4, at 55095; MIAX Emerald 
Notice, supra note 4, at 55054-55.
    \16\ See, e.g., MIAX Notice, supra note 4, at 55101.
    \17\ See, e.g., id. at 55095.
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    In further support of their arguments that competitive forces 
constrain the proposed tiered-pricing structure and the associated fee 
increases, the Exchanges state that the use of such additional Limited 
Service MEI Ports is entirely voluntary; \18\ and that there is no 
regulatory requirement that any market participant access any one 
options exchange, use more than the two free Limited Service MEI Ports 
that the Exchanges provide per matching engine, access the Exchanges in 
a particular capacity, or trade any particular product offered on the 
Exchanges.\19\ Each Exchange further states that no options market 
participant is required by rule, regulation, or competitive forces to 
be a Member of its Exchange; \20\ and that it 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 non-
transaction fees that did not make business or economic sense for such 
market participants.\21\ The Exchanges believe this is illustrated by 
the fact that market participants can and do drop their access to 
exchanges based on non-transaction fee pricing \22\ and that they are 
unaware of any one options exchange whose membership includes every 
registered broker-dealer.\23\
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    \18\ See, e.g., id. at 55101.
    \19\ See, e.g., id. at 55100.
    \20\ See, e.g., id. at 55096.
    \21\ See, e.g., id.
    \22\ See, e.g., id.
    \23\ See, e.g., id. at 55100-101.
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    The Exchanges also state that the proposed fee increases for 
additional Limited Service MEI Ports (which they reference as 
``Proposed Access Fees'') are intended to recover the Exchanges' costs 
of providing access to their systems \24\ and are a reasonable attempt 
to offset a portion of the costs associated with providing access to 
their network infrastructure.\25\ The Exchanges provide an analysis of 
their revenues, costs, and profitability associated with the Proposed 
Access Fees. The Exchanges state that this analysis reflects an 
extensive cost review in which the Exchanges analyzed nearly every 
expense item in the Exchanges' general expense ledgers to determine 
whether each such expense relates to the Proposed Access Fees, and, if 
such expense did so relate, what portion (or percentage) of such 
expense actually supports the access services associated with the 
Proposed Access Fees.\26\
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    \24\ See, e.g., id. at 55099.
    \25\ See, e.g., id. at 55096.
    \26\ See, e.g., id. Each Exchange also states that no expense 
amount is allocated twice; and the expenses in each Exchange's 
analysis only cover its own options market, not those of any 
affiliate. See, e.g., id. at 55097.
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    For 2021, the total annual expense for providing the access 
services associated with the Proposed Access Fees is projected by the 
Exchanges to be approximately $1.32 million for MIAX and $0.88 million 
for MIAX Emerald.\27\ As described in more detail in the MIAX Notice 
and MIAX Emerald Notice, the total annual expense for each Exchange is 
comprised of the following, all of which the Exchanges state are 
directly related to the access services associated with the Proposed 
Access Fees: \28\
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    \27\ See MIAX Notice, supra note 4, at 55096; MIAX Emerald 
Notice, supra note 4, at 55056.
    \28\ See, e.g., MIAX Notice, supra note 4, at 55096-99. The 
Exchanges clarify that the projected total annual expense includes 
costs related to all Limited Service MEI Ports, including the two 
Limited Service MEI Ports that Market Makers receive for free. See, 
e.g., id. at 55099.
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     Third-party expense, relating to fees paid by the 
Exchanges to third-parties for certain products and services. This 
included allocating a portion of fees paid to: (1) Equinix for data 
center services; (2) Zayo Group Holdings, Inc. for network services; 
(3) Secure Financial Transaction Infrastructure, which supports 
connectivity and feeds; (4) various other service providers for 
content, connectivity, and infrastructure services; and (5) various 
other hardware and software providers; and
     internal expense, relating to the internal costs of the 
Exchanges to provide the access services associated with the Proposed 
Access Fees. This included allocating a portion of the Exchanges': (1) 
Employee compensation and benefits expenses for full-time employees 
that support the access services associated with the Proposed Access 
Fees; (2) depreciation and amortization of hardware and software used 
to provide the access services associated with the Proposed Access 
Fees; and (3) occupancy expenses for leased office space for staff that 
provide the access services associated with the Proposed Access Fees.
    The Exchanges state that their cost and revenue analyses show that 
the Proposed Access Fees will not result in excessive pricing or supra-
competitive profits.\29\ According to the Exchanges, on a fully-
annualized basis, the revenue the Exchanges project to collect from the 
Proposed Access Fees \30\ would be approximately $3.21 million per year 
for MIAX and $2.07 million per year for MIAX Emerald.\31\ This results 
in a projected profit margin of approximately 59% for MIAX ($3.21 
million in projected revenue minus $1.32 million in projected expense = 
$1.89 million profit per year) and

[[Page 67747]]

approximately 58% for MIAX Emerald ($2.07 million in projected revenue 
minus $0.88 million in projected expense = $1.19 million profit per 
year).\32\ The Exchanges state that, based on the 2020 financial 
statements filed by competing options exchanges in Form 1 amendments, 
the Exchanges' revenues that are derived from access fees are in line 
with the revenue that is derived from access fees of competing 
exchanges, and the Exchanges' overall operating margins are in line 
with or less than the operating margins of competing exchanges.\33\ 
MIAX further states that its anticipated operating margin, inclusive of 
its proposed fee change, would remain lower than or comparable to that 
of competing exchanges.\34\
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    \29\ See, e.g., id. at 55099.
    \30\ The revenue numbers include the revenues the Exchanges 
project to collect only from the fees the Exchanges will charge for 
additional Limited Service MEI Ports after the first two Limited 
Service MEI Ports that Market Makers receive for free. See, e.g., 
id.
    \31\ See MIAX Notice, supra note 4, at 55099; MIAX Emerald 
Notice, supra note 4, at 55058.
    \32\ See MIAX Notice, supra note 4, at 55099; MIAX Emerald 
Notice, supra note 4, at 55058.
    \33\ See, e.g., MIAX Notice, supra note 4, at 55100.
    \34\ See MIAX Notice, supra note 4, at 55100.
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    The Exchanges further state that the Proposed Access Fees are 
reasonable, equitably allocated, and not unfairly discriminatory 
because it benefits overall competition in the marketplace to allow 
relatively new entrants like the Exchanges and their affiliate, MIAX 
Pearl, LLC (``MIAX Pearl''), to propose fees that may help them recoup 
their substantial investment in building out costly infrastructure. The 
Exchanges state that they and MIAX Pearl have historically set their 
fees purposefully low in order to attract business and market share. 
The Exchanges also state that the concept of a tiered-pricing structure 
for ports is not new or novel.\35\
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    \35\ See, e.g., MIAX Notice, supra note 4, at 55100.
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    In addition, the Exchanges state that the move from a flat fee per 
month to a tiered-pricing structure is reasonable, equitably allocated, 
and not unfairly discriminatory because the proposed structure would 
encourage firms to be more efficient and economical in the number of 
Limited Service MEI Ports they purchase, which the Exchanges believe 
will enable them to better monitor and provide access to the Exchanges' 
networks to ensure that the Exchanges meet their obligations under the 
Act to offer access to the Exchanges on terms that are not unfairly 
discriminatory, as well as to ensure sufficient capacity and headroom 
in their systems.\36\
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    \36\ See, e.g., id.
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    The Exchanges further state that firms that are primarily order 
routers seeking best-execution do not utilize Limited Service MEI 
Ports; and that, therefore, the fees described in the proposed tiered-
pricing structure will only be allocated to market-making firms that 
engage in advanced trading strategies and typically request multiple 
additional Limited Service MEI Ports.\37\ The Exchanges further state 
that such market-making firms generate higher costs by utilizing more 
of the Exchanges' resources.\38\ The Exchanges state that they must 
build out and continue to maintain networks that have the capacity the 
handle the message rate requirements of not only firms that consume 
minimal port resources, but also those firms that most heavily consume 
port resources, network consumers, and purchasers of numerous Limited 
Service MEI Ports, which handle billions of messages per day across the 
Exchanges' networks.\39\ The Exchanges believe that, given that 
purchasers of the greatest amount of Limited Service MEI Ports utilize 
the most resources across their networks, it is reasonable to operate 
at profit margins of approximately 59% (for MIAX) and 58% (for MIAX 
Emerald) for these ports.\40\ The Exchanges state that such profit 
margins should enable the Exchanges to continue to invest in their 
networks and systems, maintain their current infrastructure, support 
future enhancements to ports and network connectivity, and continue to 
offer enhanced customer reporting and monitoring services.\41\
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    \37\ See, e.g., id. at 55094.
    \38\ See, e.g., id.
    \39\ See, e.g., id. at 55099.
    \40\ See MIAX Notice, supra note 4, at 55099; MIAX Emerald 
Notice, supra note 4, at 55059.
    \41\ See MIAX Notice, supra note 4, at 55099; MIAX Emerald 
Notice, supra note 4, at 55059.
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    The Commission received two comment letters from one commenter that 
opposes the proposed rule changes.\42\ This commenter states that the 
Exchanges have not sufficiently demonstrated their proposed fees' 
consistency with the Act or addressed previous concerns with the 
proposed fees raised by the same commenter.\43\ Specifically, this 
commenter argues that the Exchanges' filings make the same general 
claims in support of their assertion that the port fee changes are fair 
and reasonable, equitably allocated, and not unfairly discriminatory as 
other filings relating to ``10Gb ULL'' connections,\44\ and that the 
Exchanges' justifications for the Limited Service MEI Ports fail for 
the same reasons as those offered in the 10Gb ULL filings.\45\ The 
commenter asserts that there are no reasonable substitutes for the 
Exchanges' 10Gb ULL connectivity lines, particularly for market makers 
whose business models require them to subscribe to direct connectivity 
to the Exchanges in the highest proposed pricing tier.\46\ The 
commenter further argues that the fact that no member or non-member has 
altered its use of 10Gb ULL connectivity since the fee changes went 
into effect serves as further support of its claim that there are no 
reasonable alternatives to the service.\47\ This commenter also argues 
that the ability for a member to withdraw from an exchange should not 
support the reasonableness of any individual proposed fee, as a member 
would incur significant costs in withdrawing from an exchange in the 
form of lost infrastructure investments, the cost of withdrawal itself, 
and other opportunity costs.\48\ This commenter further objects that 
the Exchanges have not provided sufficient quantitative support for 
their revenues, costs, and profitability under the current and proposed 
fees to support an analysis that the proposed fees and the Exchanges' 
profitability are reasonable.\49\ Moreover, the commenter argues that 
the Exchanges' comparison of their projected access fee profit margins 
to the overall profit margins of competing exchanges is insufficient as 
it does not appropriately compare the individual components of these 
other exchange fees to those of the Exchanges.\50\ The commenter also 
suggests that any comparisons made by the Exchanges to the revenues and 
margins of other exchanges are inapt

[[Page 67748]]

because they do not account for the circumstances under which other 
exchanges established their fees, including, for example, whether the 
services are equivalent or the costs to provide them are similar.\51\ 
Finally, this commenter claims that the proposed tiers in the new fee 
structure are unfairly discriminatory because the Exchanges have not 
provided any cost breakdown to support the claim that the use of 
multiple connections creates higher costs for the Exchanges.\52\ 
Instead, the commenter argues that market participants who purchase 
more units of 10Gb ULL connections use more exchange bandwidth simply 
due to the fact that they have purchased more units, and that this does 
not justify the proposal to charge a higher rate per unit, which the 
commenter claims is unfairly discriminatory towards market maker 
subscribers.\53\
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    \42\ See letters from Richard J. McDonald, Susquehanna 
International Group, LLP, to Vanessa Countryman, Secretary, 
Commission, dated October 1, 2021 (``First SIG Letter'') and October 
26, 2021 (``Second SIG Letter'').
    \43\ See Second SIG Letter, supra note 42, at 2. In the First 
SIG Letter the commenter requested that the Commission suspend the 
proposals and institute proceedings to determine whether to approve 
or disapprove the proposals on the basis that the proposals 
represent the same fee changes previously proposed by the Exchanges 
for which the commenter expressed concerns. See also letter from 
Richard J. McDonald, Susquehanna International Group, LLP, to 
Vanessa Countryman, Secretary, Commission, dated September 7, 2021, 
available at https://www.sec.gov/comments/sr-miax-2021-35/srmiax202135-9208444-249989.pdf (comment letter submitted to File 
Nos. SR-MIAX-2021-35, SR-MIAX-2021-37, SR-PEARL-2021-33, SR-PEARL-
2021-36, SR-EMERALD-2021-23, and SR-EMERALD-2021-25, and expressing 
similar concerns to those described herein).
    \44\ See Securities Exchange Act Release Nos. 93165 (September 
28, 2021), 86 FR 54750 (October 4, 2021) (SR-MIAX-2021-41); 93162 
(September 28, 2021), 86 FR 54739 (October 4, 2021) (SR-PEARL-45); 
and 93166 (September 28, 2021), 86 FR 54760 (October 4, 2021) (SR-
EMERALD-29).
    \45\ See Second SIG Letter, supra note 42, at 7.
    \46\ See id. at 2-3.
    \47\ See id. at 3.
    \48\ See id.
    \49\ See id. at 4. The commenter further argues that the 
Exchanges have not sufficiently justified the profit margins they 
would be accruing with the proposed fees by, for example, explaining 
specific technological undertakings the Exchanges expect to fund 
with the revenue from the new fees. See id.
    \50\ See id. at 4-5.
    \51\ See id.
    \52\ See id. at 5.
    \53\ See id. at 6.
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    Another commenter asks the Commission to disapprove the proposed 
fee changes because the Exchanges have not met their burden of 
demonstrating that they are consistent with the standards under the 
Exchange Act.\54\ This commenter states that the Exchanges' argument 
that competition for order flow constrains pricing for products and 
services exclusively offered by the Exchange does not demonstrate that 
the fees are reasonable.\55\ This commenter also disagrees with the 
Exchanges' statement that they must continually adjust the fees for 
these services as a result of competition from other markets because it 
does not reflect marketplace reality.\56\ This commenter also states 
that the Exchanges have failed to demonstrate that the proposed fees 
are equitably allocated and not unfairly discriminatory, with the 
proposed fee changes ``clearly and directly'' impacting market makers 
and burden of the fee increases falling predominantly on market makers 
operating on the Exchanges.\57\ The commenter states that the Exchanges 
offer no concrete support for their arguments that the tiered-pricing 
structure would encourage firms to be more economical and efficient in 
the number of connections they purchase, allowing the Exchanges to 
better monitor and provide access to their networks to ensure that they 
have sufficient capacity and headroom in their systems.\58\ The 
commenter also states that the Exchanges have provided no public 
information on how they derived the cost amounts they determined to 
allocate to the products and services subject to the proposed fee 
changes nor any meaningful baseline information regarding the 
Exchanges' overall costs.\59\ This commenter believes that the 
Exchanges have withdrawn and refiled essentially identical 
proposals,\60\ subverting proper consideration of the proposed fee 
changes under the process set forth in the Exchange Act.\61\
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    \54\ See letter from Ellen Green, Managing Director, Equity and 
Options Market Structure, Securities Industry and Financial Markets 
Association, to Vanessa Countryman, Secretary, Commission, dated 
November 16, 2021 (``SIFMA Letter'').
    \55\ See id. at 3. This commenter asserts that the proposals are 
similar to proprietary market data products offered by the 
Exchanges, which are unique to the Exchanges and market participants 
cannot obtain anywhere else. Id. The commenter also states that for 
market makers, additional MEI ports are critical for market makers 
to provide liquidity on the Exchanges and the argument that the 
additional MEI ports are options ``does not reflect marketplace 
reality, nor does it demonstrate that the proposed fees are 
reasonable.'' Id. at 4.
    \56\ See id. at 4.
    \57\ See id. at 4-5.
    \58\ See id. at 4. The commenter also states that the Exchanges 
fail to provide any discussion of why their current capacity needs 
are constrained under the current pricing structure.
    \59\ See id. at 5. The commenter believes that such information 
is needed to allow commenters to judge whether the allocations are 
supportable. Id. This commenter also believes that the Exchanges' 
discussion of profit margins are ``high-level and conclusory,'' and 
fail to provide sufficient detail to understand whether or not the 
fees are reasonable. Id.
    \60\ See supra note 8.
    \61\ See SIFMA Letter, supra note 54, at 5-6.
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    When an exchange files a proposed rule change with the Commission, 
including fee filings, it is required to provide a statement supporting 
the proposal's basis under the Act and the rules and regulations 
thereunder applicable to the exchange.\62\ The instructions to Form 
19b-4, on which exchanges file their proposed rule changes, specify 
that such statement ``should be sufficiently detailed and specific to 
support a finding that the proposed rule change is consistent with 
[those] requirements.'' \63\
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    \62\ See 17 CFR 240.19b-4 (General Instructions for Form 19b-4--
Information to be Included in the Complete Form--Item 3 entitled 
``Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change'').
    \63\ See id.
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    Section 6 of the Act, including Sections 6(b)(4), (5), and (8), 
requires, among other things, that the rules of an exchange: (1) 
Provide for the equitable allocation of reasonable fees among members, 
issuers, and other persons using the exchange's facilities; \64\ (2) be 
designed to perfect the mechanism of a free and open market and a 
national market system and to protect investors and the public 
interest, and not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers; \65\ and (3) not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\66\
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    \64\ 15 U.S.C. 78f(b)(4).
    \65\ 15 U.S.C. 78f(b)(5).
    \66\ 15 U.S.C. 78f(b)(8).
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    In temporarily suspending the Exchanges' proposed rule changes, the 
Commission intends to further consider whether the proposed additional 
Limited Service MEI Port fees are consistent with the statutory 
requirements applicable to a national securities exchange under the 
Act. In particular, the Commission will consider whether the proposed 
rule changes satisfy the standards under the Act and the rules 
thereunder requiring, among other things, that an exchange's rules 
provide for the equitable allocation of reasonable fees among members, 
issuers, and other persons using its facilities; are designed to 
perfect the mechanism of a free and open market and a national market 
system and to protect investors and the public interest, and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers; and do not impose any burden on competition not 
necessary or appropriate in furtherance of the purposes of the Act.\67\
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    \67\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule changes.\68\
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    \68\ For purposes of temporarily suspending the proposed rule 
changes, the Commission has considered the proposed rules' impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Changes

    In addition to temporarily suspending the proposal, the Commission 
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C) 
\69\ and 19(b)(2)(B) of the Act \70\ to determine whether the 
Exchanges' proposed rule changes should be approved or disapproved. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, the

[[Page 67749]]

Commission seeks and encourages interested persons to provide 
additional comment on the proposed rule changes to inform the 
Commission's analysis of whether to approve or disapprove the proposed 
rule changes.
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    \69\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, Section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under Section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \70\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\71\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
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    \71\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
See id. The time for conclusion of the proceedings may be extended 
for up to 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding, or if the 
exchange consents to the longer period. See id.
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     Whether the Exchanges have demonstrated how the proposed 
fees are consistent with Section 6(b)(4) of the Act, which requires 
that the rules of a national securities exchange ``provide for the 
equitable allocation of reasonable dues, fees, and other charges among 
its members and issuers and other persons using its facilities''; \72\
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    \72\ 15 U.S.C. 78f(b)(4).
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     Whether the Exchanges have demonstrated how the proposed 
fees are consistent with Section 6(b)(5) of the Act, which requires, 
among other things, that the rules of a national securities exchange be 
designed to ``perfect the mechanism of a free and open market and a 
national market system'' and ``protect investors and the public 
interest,'' and not be ``designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers''; \73\ and
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    \73\ 15 U.S.C. 78f(b)(5).
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     Whether the Exchanges have demonstrated how the proposed 
fees are consistent with Section 6(b)(8) of the Act, which requires 
that the rules of a national securities exchange ``not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of [the Act].'' \74\
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    \74\ 15 U.S.C. 78f(b)(8).
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    As discussed in Section III above, the Exchanges made various 
arguments in support of the proposals, and the Commission received 
comment letters disputing the Exchanges' arguments and expressing 
concerns regarding the proposals.\75\ In particular, the commenters 
argue that the Exchanges did not provide sufficient information to 
establish that the proposed fees are consistent with the Act and the 
rules thereunder.\76\ The Commission believes that there are questions 
as to whether the Exchanges have provided sufficient information to 
demonstrate that the proposals are consistent with the Act and the 
rules thereunder.
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    \75\ See First SIG Letter and Second SIG Letter, supra note 42; 
SIFMA Letter, supra note 54.
    \76\ See id.
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    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \77\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\78\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\79\
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    \77\ 17 CFR 201.700(b)(3).
    \78\ See id.
    \79\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposals are consistent with the Act, and specifically, 
with its requirements that the rules of a national securities exchange 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among its members, issuers, and other persons using its 
facilities; are designed to perfect the mechanism of a free and open 
market and a national market system, and to protect investors and the 
public interest; are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; and do not impose a 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act; \80\ as well as any other provision of the 
Act, or the rules and regulations thereunder.
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    \80\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by December 20, 2021. 
Rebuttal comments should be submitted by January 3, 2022. Although 
there do not appear to be any issues relevant to approval or 
disapproval that would be facilitated by an oral presentation of views, 
data, and arguments, the Commission will consider, pursuant to Rule 
19b-4, any request for an opportunity to make an oral presentation.\81\
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    \81\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchanges' statements in support of the proposals, in 
addition to any other comments they may wish to submit about the 
proposed rule changes.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule changes, including whether the 
proposed rule changes are 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 Nos. SR-MIAX-2021-43 and SR-EMERALD-2021-31 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 Nos. SR-MIAX-2021-43 and SR-
EMERALD-2021-31. These file numbers 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 
changes that are filed with the Commission, and all written 
communications relating to the proposed rule changes 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

[[Page 67750]]

inspection and copying at the principal office of the Exchanges. 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 Nos. SR-MIAX-2021-43 and SR-EMERALD-
2021-31 and should be submitted on or before December 20, 2021. 
Rebuttal comments should be submitted by January 3, 2022.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the 
Act,\82\ that File Nos. SR-MIAX-2021-43 and SR-EMERALD-2021-31 be, and 
hereby are, temporarily suspended. In addition, the Commission is 
instituting proceedings to determine whether the proposed rule changes 
should be approved or disapproved.
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    \82\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\83\
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    \83\ 17 CFR 200.30-3(a)(57) and (58).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-25879 Filed 11-26-21; 8:45 am]
BILLING CODE 8011-01-P