[Federal Register Volume 89, Number 70 (Wednesday, April 10, 2024)]
[Notices]
[Pages 25293-25308]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07539]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99907; File No. SR-PEARL-2024-15]


Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change To Amend the MIAX 
Pearl Equities Exchange Fee Schedule To Establish Market Data Fees

April 4, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on March 26, 2024, MIAX PEARL, LLC (``MIAX Pearl'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the 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 Pearl Equities 
Exchange Fee Schedule (the ``Fee Schedule'') to adopt fees for the 
Exchange's proprietary market data feeds.\3\
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    \3\ All references to the ``Exchange'' in this filing refer to 
MIAX Pearl Equities. Any references to the options trading facility 
of MIAX PEARL, LLC will specifically be referred to as ``MIAX Pearl 
Options.''
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    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxoptions.com/rule-filings, at MIAX Pearl'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
    MIAX Pearl Equities provided its proprietary market data for free 
to subscribers for over three and half years since it commenced 
operations in September 2020.\4\ Since that time, the Exchange has 
solely and entirely absorbed all costs associated with compiling and 
disseminating its proprietary market data. The Exchange offers two 
standard proprietary market data products, the Top of Market (``ToM'') 
feed and the Depth of Market (``DoM'') feed (collectively, the ``market 
data feeds''). Each of these proprietary market data products are 
described in Exchange Rule 2625.
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    \4\ See Securities Exchange Act Release No. 90651 (December 11, 
2020), 85 FR 81971 (December 17, 2020) (SR-PEARL-2020-33).
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    Exchange Rule 2625(a) provides that the DoM feed is a data feed 
that contains the displayed price and size of each order in an equity 
security entered in the System,\5\ as well as order execution 
information, order cancellations, order modifications, order 
identification numbers, and administrative messages. Exchange Rule 
2625(b) provides that the ToM feed is a data feed that contains the 
price and aggregate size of displayed top of book quotations, order 
execution information, and administrative messages for equity 
securities entered into the System. Section 3 of the Fee Schedule 
entitled, Market Data Fees, specifically provides that fees for both 
the ToM and DoM feeds are waived for the Waiver Period.\6\ As described 
in more detail below, the Exchange proposes to remove this waiver 
language and adopt fees for the ToM and DoM feeds to recoup its ongoing 
costs going forward.
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    \5\ The term ``System'' means the automated trading system used 
by the Exchange for the trading of securities. See Exchange Rule 
100.
    \6\ The term ``Waiver Period'' means, for each applicable fee, 
the period of time from the initial effective date of the MIAX Pearl 
Equities Fee Schedule until such time that MIAX Pearl has an 
effective fee filing establishing the applicable fee. MIAX Pearl 
Equities will issue a Regulatory Circular announcing the 
establishment of an applicable fee that was subject to a Waiver 
Period at least fifteen (15) days prior to the termination of the 
Waiver Period and effective date of any such applicable fee. See the 
Definitions section of the Fee Schedule.
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    The Exchange notes that there is no requirement that any Equity 
Member \7\ or market participant subscribe to the ToM or DoM feeds 
offered by the Exchange. Instead, an Equity Member may choose to 
maintain subscriptions to the ToM or DoM feeds based on their own 
business needs and trading models. The proposed fees will not apply 
differently based upon the size or type of firm, but rather based upon 
the subscriptions that each firm elects to purchase.
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    \7\ The term ``Equity Member'' is a Member authorized by the 
Exchange to transact business on MIAX Pearl Equities. See Exchange 
Rule 1901.
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    The Exchange commenced operations in September 2020 and expressly 
waived fees for both the ToM and DoM data feeds since that time to 
incentivize market participants to subscribe and make the Exchange's 
market data more widely available.\8\ In the three and a half years 
since the Exchange launched operations, its market share has grown from 
0% to approximately 2.0% for the month of March 2024.\9\ One of the 
primary objectives of the Exchange is to provide competition and to 
provide low

[[Page 25294]]

cost options to the industry. Consistent with this objective, the 
Exchange believes that this proposal reflects a simple, competitive, 
reasonable, and equitable pricing structure.
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    \8\ See supra note 4.
    \9\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/.
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    The Exchange believes that exchanges, in setting fees of all types, 
should meet very high standards of transparency to demonstrate why each 
new fee or fee increase meets the requirements of the Act that fees be 
reasonable, equitably allocated, not unfairly discriminatory, and not 
create an undue burden on competition among Equity Members and markets. 
The Exchange believes this high standard is especially important when 
an exchange imposes various fees for market participants to access an 
exchange's market data. The Exchange believes that it is important to 
demonstrate that these fees are based on its costs and reasonable 
business needs. Accordingly, the Exchange included a cost analysis 
below in connection with the proposed market data fees and the costs 
associated with compiling and providing the ToM and DoM feeds (``Cost 
Analysis'').
    The Exchange believes the proposed fees will allow the Exchange to 
offset the expenses \10\ the Exchange has and will continue to incur 
associated with compiling and disseminating the ToM and DoM feeds. 
Further, the Exchange believes it provided sufficient transparency in 
the Cost Analysis provided below, which provides a basis for how the 
Exchange determined to charge such fees. The Exchange's proposal is 
described below.
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    \10\ For the avoidance of doubt, all references to expense or 
costs in this filing, including the cost categories discussed below, 
refer to costs incurred by MIAX Pearl Equities only and not MIAX 
Pearl Options, the options trading facility.
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Definitions
    The Exchange proposes to include a Definitions section at the 
beginning of Section 3 of the Fee Schedule. The purpose of the 
Definitions section is to provide market participants greater clarity 
and transparency regarding the applicability of fees by defining 
certain terms used in connection with market data feeds within the Fee 
Schedule in a single location related to the Exchange's market data 
products. The Exchange notes that other equities exchanges include 
similar Definitions in their respective fee schedules,\11\ and that 
each of the Exchange's proposed definitions are based on those 
exchanges. The Exchange believes that including a Definitions section 
for market data products makes the Fee Schedule more user-friendly and 
comprehensive.
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    \11\ See the market data sections of the fee schedules for the 
Cboe BZX Exchange, Inc. (``Cboe BZX''); Cboe BYX Exchange, Inc. 
(``Cboe BYX''); Cboe EDGA Exchange, Inc. (``Cboe EDGA''); and Cboe 
EDGX Exchange, Inc. (``Cboe EDGX''). See also the market data 
definition section of the MEMX LLC's (``MEMX'') fee schedule; and 
Securities Exchange Act Release No. 97130 (March 13, 2023), 88 FR 
16491 (March 17, 2023) (SR-MEMX-2023-04) (``MEMX Market Data Fee 
Proposal'').
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    The Exchange proposes to define the following terms in Section 3 of 
the Fee Schedule:
     Distributor. Any entity that receives the Exchange data 
product directly from the Exchange or indirectly through another entity 
and then distributes it internally or externally to a third party.
     External Distributor. A Distributor that receives the 
Exchange data product and then distributes that data to a third party 
or one or more Users outside the Distributor's own entity.
     Internal Distributor. A Distributor that receives the 
Exchange data product and then distributes that data to one or more 
Users within the Distributor's own entity.
    [cir] The Exchange notes that it proposes to use the phrase ``own 
organization'' in the definition of Internal Distributor and External 
Distributor because a subscriber would be permitted to share data 
received from an exchange data product to other legal entities 
affiliated with the subscriber's entity that have been disclosed to the 
Exchange without such distribution being considered external to a third 
party. For instance, if a company has multiple affiliated broker-
dealers under the same holding company, that company could have one of 
the broker-dealers or a non-broker-dealer affiliate subscribe to an 
exchange data product and then share the data with other affiliates 
that have a need for the data. This sharing with affiliates would not 
be considered external distribution to a third party but instead would 
be considered internal distribution to data recipients within the 
Distributor's own organization.
     Non-Display Usage. Any method of accessing an Exchange 
data product that involves access or use by a machine or automated 
device without access or use of a display by a natural person or 
persons.
     Non-Professional User. A natural person or qualifying 
trust that uses Exchange data only for personal purposes and not for 
any commercial purpose and, for a natural person who works in the 
United States, is not: (i) registered or qualified in any capacity with 
the Securities and Exchange Commission, the Commodities Futures Trading 
Commission, any state securities agency, any securities exchange or 
association, or any commodities or futures contract market or 
association; (ii) engaged as an ``investment adviser'' as that term is 
defined in Section 202(a)(11) of the Investment Advisors Act of 1940 
(whether or not registered or qualified under that Act); or (iii) 
employed by a bank or other organization exempt from registration under 
federal or state securities laws to perform functions that would 
require registration or qualification if such functions were performed 
for an organization not so exempt; or, for a natural person who works 
outside of the United States, does not perform the same functions as 
would disqualify such person as a Non-Professional User if he or she 
worked in the United States.
     Professional User. Any User other than a Non-Professional 
User.
     Trading Platform. Any execution platform operated as or by 
a registered National Securities Exchange (as defined in Section 
3(a)(1) of the Exchange Act), an Alternative Trading System (as defined 
in Rule 300(a) of Regulation ATS), or an Electronic Communications 
Network (as defined in Rule 600(b)(23) of Regulation NMS).
     User. A Professional User or Non-Professional User.
Proposed Market Data Pricing
    As described above, the ToM feed is a data feed that contains the 
price and aggregate size of displayed top of book quotations, order 
execution information, and administrative messages for equity 
securities entered into the System. The DoM feed is a data feed that 
contains the displayed price and size of each order in an equity 
security entered in the System, as well as order execution information, 
order cancellations, order modifications, order identification numbers, 
and administrative messages. The Exchange proposes to charge the below 
fees for the ToM and DoM data feeds, which, the Exchange believes are 
equal to or lower than market data fees charged by other similarly 
situated equities exchanges. Each of the below capitalized terms are 
defined above and would be included under the proposed Definitions 
section under Section 3, Market Data Fees, of the Fee Schedule.
    1. Internal Distributor Fee. The Exchange proposes to charge 
Internal Distributors a monthly fee of $1,000.00 for the ToM feed and 
$2,000.00 for the DoM feed. The proposed Internal Distributor fees 
would only be charged once per month per subscriber.
    2. External Distributor Fee. The Exchange proposes to charge 
Internal Distributors a monthly fee of $2,000.00 for the ToM feed and 
$2,500.00 for the DoM feed. The proposed External

[[Page 25295]]

Distributor fees would only be charged once per month per subscriber.
    3. User Fees. For the ToM feed, the Exchange proposes to charge a 
monthly fee of $2.00 for each Professional User and $0.10 for each Non-
Professional User. For the DoM feed, the Exchange proposes to charge a 
monthly fee of $30.00 for each Professional User and $3.00 for each 
Non-Professional User. The proposed User fees would apply to each 
person that has access to the ToM or DoM feed that is provided by a 
Distributor (either Internal or External) for displayed usage. Each 
Distributor's User count would include every individual that accesses 
the data regardless of the purpose for which the individual uses the 
data. Distributors of the ToM or DoM feed would be required to report 
all Professional and Non-Professional Users in accordance with the 
following:
     In connection with a Distributor's distribution of the ToM 
or DoM feed, the Distributor must count as one User each unique User 
that the Distributor has entitled to have access to the ToM or DoM 
feed.
     Distributors must report each unique individual person who 
receives access through multiple devices or multiple methods (e.g., a 
single User has multiple passwords and user identifications) as one 
User.
     If a Distributor entitles one or more individuals to use 
the same device, the Distributor must include only the individuals, and 
not the device, in the count. Thus, Distributors would not be required 
to report User device counts associated with a User's display use of 
the data feed.
    4. Enterprise Fee. As an alternative to User fees, Distributors may 
purchase a monthly Enterprise license to receive ToM or DoM feeds for 
distribution to an unlimited number of Professional and Non-
Professional Users. This provision would be codified under footnote 
``a'' under the description of each the ToM and DoM feed in the Fee 
Schedule. The Exchange proposes to establish a monthly Enterprise fee 
of $15,000.00 for ToM and $25,000.00 for the DoM feed.
    5. Non-Display Usage Fees. For both the ToM and DoM feeds, the 
Exchange proposes to establish separate Non-Display Usage fees for 
usage by Trading Platforms and other Users (i.e., not by Trading 
Platforms).
     Non-Display Usage. For Non-Display Usage, the Exchange 
proposes to establish a monthly fee of $1,000.00 for the ToM feed and 
$2,500.00 for the DoM feed.\12\
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    \12\ Non-Display Usage would include trading uses such as high 
frequency or algorithmic trading as well as any trading in any asset 
class, automated order or quote generation and/or order pegging, 
price referencing for smart order routing, operations control 
programs, investment analysis, order verification, surveillance 
programs, risk management, compliance, and portfolio management.
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     Subscribers of Non-Display Usage for both the ToM and DoM 
feed will only be subject to the Non-Display Usage fee for the DoM 
feed. In other words, such subscribers would receive both the ToM and 
DoM feeds but only be charged the Non-Display Usage fee of $2,500.00 
for the DoM feed. This provision would be codified under footnote ``b'' 
under the description of each the ToM and DoM feed in the Fee Schedule.
     Non-Display Usage by Trading Platforms. For Non-Display 
Usage by Trading Platforms, the Exchange proposes to establish a 
monthly fee of $2,500 for the ToM and DoM feeds. The Non-Displayed 
Usage by Trading Platform fee would only be charged per subscriber that 
uses the data within a Trading Platform.
     Subscribers of Non-Display Usage by Trading Platforms for 
both the ToM and DoM feed will only be subject to the Non-Display Usage 
by Trading Platforms fee for the DoM feed. In other words, such 
subscribers would receive both the ToM and DoM feeds but only be 
charged the Non-Display Usage by Trading Platforms fee of $2,500.00 for 
the DoM feed. This provision would be codified under footnote ``c'' 
under the description of each the ToM and DoM feed in the Fee Schedule.
     The fee would also represent the maximum charge per 
subscriber regardless of the number of Trading Platforms operated by 
the subscriber that receives the data for Non-Display Usage. This 
provision would be codified under footnote ``d'' under the description 
of each the ToM and DoM feed in the Fee Schedule.
     Miscellaneous. The proposed fees for Non-Display Usage 
would only be charged once per category per subscriber. In other words, 
with respect to Non-Display Usage Fees, a subscriber that uses the ToM 
feed for: (i) non-display purposes but not to operate a Trading 
Platform would pay $1,000 per month; (ii) a subscriber that uses the 
ToM feed in connection with the operation of one or more Trading 
Platforms (but not for other purposes) would pay $2,500 per month; and 
(iii) a subscriber that uses the ToM feed for non-display purposes 
other than operating a Trading Platform and for the operation of one or 
more Trading Platforms would pay $3,500 per month.
Implementation
    The Exchange issued an alert publicly announcing the proposed fees 
on January 31, 2024.\13\ The Exchange issued a Regulatory Circular on 
March 15, 2024 announcing the establishment of the proposed market data 
fees to satisfy the required fifteen (15) day notice period, as 
described in the Definitions Section of the Fee Schedule for 
termination of the Waiver Period.\14\ The proposed fee changes will be 
effective beginning April 1, 2024.
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    \13\ See Fee Change Alert, MIAX Pearl Equities Exchange--April 
1, 2024 Market Data Fee Changes, available at https://www.miaxglobal.com/alert/2024/01/31/miax-pearl-equities-exchange-april-1-2024-market-data-fee-changes.
    \14\ See MIAX Pearl Equities Regulatory Circular 2024-06, 
Termination of Waiver Period for Market Data Fees and Establishment 
of Fee Amounts, dated March 15, 2024, available at 
Pearl_Equities_RC_2024_06.pdf (miaxglobal.com).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b) \15\ of the Act in general, and 
furthers the objectives of Section 6(b)(4) \16\ of the Act, in 
particular, in that it is designed to provide for the equitable 
allocation of reasonable dues, fees and other charges among its Equity 
Members and other persons using its facilities. Additionally, the 
Exchange believes that the proposed fees are consistent with the 
objectives of Section 6(b)(5) \17\ of the Act in that they are designed 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to a 
free and open market and national market system, and, in general, to 
protect investors and the public interest, and, particularly, are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
    \17\ 15 U.S.C. 78f(b)(5).
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    In 2019, Commission staff published guidance suggesting the types 
of information that self-regulatory organizations (``SROs'') may use to 
demonstrate that their fee filings comply with the standards of the 
Exchange Act (the ``Staff Guidance'').\18\ While the Exchange 
understands that the Staff Guidance does not create new legal 
obligations on SROs, the Staff Guidance is consistent with the 
Exchange's view about the type and level of transparency that exchanges 
should meet to

[[Page 25296]]

demonstrate compliance with their existing obligations when they seek 
to charge new fees. The Staff Guidance provides that in assessing the 
reasonableness of a fee, the Staff would consider whether the fee is 
constrained by significant competitive forces. To determine whether a 
proposed fee is constrained by significant competitive forces, the 
Staff Guidance further provides that the Staff would consider whether 
the evidence provided by an SRO in a Fee Filing proposal demonstrates 
(i) that there are reasonable substitutes for the product or service 
that is the subject of a proposed fee; (ii) that ``platform'' 
competition constrains the fee; and/or (iii) that the revenue and cost 
analysis provided by the SRO otherwise demonstrates that the proposed 
fee would not result in the SRO taking supra-competitive profits.\19\ 
The Exchange provides sufficient evidence below to support the findings 
that the proposed fees are constrained by competitive forces; the 
market data feeds each have a reasonable substitute; and that the 
proposed fees would not result in a supra-competitive profit.
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    \18\ See Staff Guidance on SRO Rule Filings Relating to Fees 
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
    \19\ Id.
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    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. It was believed that this authority would 
expand the amount of data available to consumers, and also spur 
innovation and competition for the provision of market data. 
Particularly, the market data feeds further broaden the availability of 
U.S. option market data to investors consistent with the principles of 
Regulation NMS. The data products also promotes increased transparency 
through the dissemination of information regarding quotes and last sale 
information during the trading day, which may allow market participants 
to make better informed trading decisions throughout the day.
    There are currently 16 registered exchanges that trade equities. 
For the month of March 2024, based on publicly available information, 
no single equities exchange had more than approximately 16% of the 
equities market share and the Exchange represented only approximately 
2.0% of the equities market share.\20\ The Commission has repeatedly 
expressed its preference for competition over regulatory intervention 
in determining prices, products, and services in the securities 
markets. Particularly, in Regulation NMS, the Commission highlighted 
the importance of market forces in determining prices and SRO revenues 
and, also, recognized that current regulation of the market system 
``has been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \21\ Making similar data products available to market 
participants fosters competition in the marketplace, and constrains the 
ability of exchanges to charge supra-competitive fees. In the event 
that a market participant views one exchange's data product as more or 
less attractive than the competition they can and do switch between 
similar products.
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    \20\ See the ``Market Share'' section of the Exchange's website, 
available at https://www.miaxglobal.com/.
    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The fact that the market for order flow is competitive has long 
been recognized by the courts. In NetCoalition v. Securities and 
Exchange Commission, the D.C. Circuit stated, ``[n]o one disputes that 
competition for order flow is `fierce.' . . . As the SEC explained, 
`[i]n the U.S. national market system, buyers and sellers of 
securities, and the broker-dealers that act as their order-routing 
agents, have a wide range of choices of where to route orders for 
execution'; [and] `no exchange can afford to take its market share 
percentages for granted' because `no exchange possesses a monopoly, 
regulatory or otherwise, in the execution of order flow from broker 
dealers'. . . .'' \22\
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    \22\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting 
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR 
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)).
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    The Commission and the courts have repeatedly expressed their 
preference for competition over regulatory intervention to determine 
prices, products, and services in the securities markets. In Regulation 
NMS, while adopting a series of steps to improve the current market 
model, the Commission highlighted the importance of market forces in 
determining prices and SRO revenues, and also recognized that current 
regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' \23\
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    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    Congress directed the Commission to ``rely on `competition, 
whenever possible, in meeting its regulatory responsibilities for 
overseeing the SROs and the national market system.' '' \24\ As a 
result, the Commission has historically relied on competitive forces to 
determine whether a fee proposal is equitable, fair, reasonable, and 
not unreasonably or unfairly discriminatory. ``If competitive forces 
are operative, the self-interest of the exchanges themselves will work 
powerfully to constrain unreasonable or unfair behavior.'' \25\ 
Accordingly, ``the existence of significant competition provides a 
substantial basis for finding that the terms of an exchange's fee 
proposal are equitable, fair, reasonable, and not unreasonably or 
unfairly discriminatory.'' \26\ In the Staff Guidance, Commission Staff 
indicated that they would look at factors beyond the competitive 
environment, such as cost, only if a ``proposal lacks persuasive 
evidence that the proposed fee is constrained by significant 
competitive forces.'' \27\ In this case, the Exchange provided the 
below Cost Analysis.
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    \24\ See NetCoalition, 615 F.3d at 534-35; see also H.R. Rep. 
No. 94-229 at 92 (1975) (``[I]t is the intent of the conferees that 
the national market system evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed.'').
    \25\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74,770 (December 9, 2008) (SR-NYSEArca-2006-21).
    \26\ Id.
    \27\ See supra note 18.
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Cost Analysis
    In general, the Exchange believes that exchanges, in setting fees 
of all types, should meet high standards of transparency to demonstrate 
why each new fee or fee increase meets the Exchange Act requirements 
that fees be reasonable, equitably allocated, not unfairly 
discriminatory, and not create an undue burden on competition among 
members and markets. In particular, the Exchange believes that each 
exchange should take extra care to be able to demonstrate that these 
fees are based on its costs and reasonable business needs.
    Accordingly, in proposing to charge fees for market data, the 
Exchange is especially diligent in assessing those fees in a 
transparent way against its own aggregate costs of providing the 
related service, and in carefully and transparently assessing the 
impact on Equity Members--both generally and in relation to other 
Equity Members--to ensure the fees will not create a financial burden 
on any participant and will not have an undue impact in particular on 
smaller Equity Members and competition among Equity Members in general. 
The Exchange does not believe it needs to otherwise address questions 
about market competition in

[[Page 25297]]

the context of this filing because the proposed fees are consistent 
with the Act based on its Cost Analysis. The Exchange also believes 
that this level of diligence and transparency is called for by the 
requirements of Section 19(b)(1) under the Act,\28\ and Rule 19b-4 
thereunder,\29\ with respect to the types of information SROs should 
provide when filing fee changes, and Section 6(b) of the Act,\30\ which 
requires, among other things, that exchange fees be reasonable and 
equitably allocated,\31\ not designed to permit unfair 
discrimination,\32\ and that they not impose a burden on competition 
not necessary or appropriate in furtherance of the purposes of the 
Act.\33\ This proposal addresses those requirements, and the analysis 
and data in this section are designed to clearly and comprehensively 
show how they are met.
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    \28\ 15 U.S.C. 78s(b)(1).
    \29\ 17 CFR 240.19b-4.
    \30\ 15 U.S.C. 78f(b).
    \31\ 15 U.S.C. 78f(b)(4).
    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78f(b)(8).
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    In 2020, the Exchange completed a study of its aggregate costs to 
produce market data and connectivity, defined above as its Cost 
Analysis.\34\ The Cost Analysis required a detailed analysis of the 
Exchange's aggregate baseline costs, including a determination and 
allocation of costs for core services provided by the Exchange--
transaction execution, market data, membership services, physical 
connectivity, and port access (which provide order entry, cancellation 
and modification functionality, risk functionality, the ability to 
receive drop copies, and other functionality). The Exchange separately 
divided its costs between those costs necessary to deliver each of 
these core services, including infrastructure, software, human 
resources (i.e., personnel), and certain general and administrative 
expenses (``cost drivers'').
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    \34\ The Exchange frequently updates it Cost Analysis as 
strategic initiatives change, costs increase or decrease, and market 
participant needs and trading activity changes. The Exchange's most 
recent Cost Analysis was conducted ahead of this filing.
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    As an initial step, the Exchange determined the total cost for the 
Exchange and its affiliated markets \35\ for each cost driver as part 
of its 2024 budget review process. The 2024 budget review is a company-
wide process that occurs over the course of many months, includes 
meetings among senior management, department heads, and the Finance 
Team. Each department head is required to send a ``bottom up'' budget 
to the Finance Team allocating costs at the profit and loss account and 
vendor levels for the Exchange and its affiliated markets based on a 
number of factors, including server counts, additional hardware and 
software utilization, current or anticipated functional or non-
functional development projects, capacity needs, end-of-life or end-of-
service intervals, number of members, market model (e.g., price time or 
pro-rata, simple only or simple and complex markets, auction 
functionality, etc.), which may impact message traffic, individual 
system architectures that impact platform size,\36\ storage needs, 
dedicated infrastructure versus shared infrastructure allocated per 
platform based on the resources required to support each platform, 
number of available connections, and employees allocated time. All of 
these factors result in different allocation percentages among the 
Exchange and its affiliated markets, i.e., the different percentages of 
the overall cost driver allocated to the Exchange and its affiliated 
markets will cause the dollar amount of the overall cost allocated 
among the Exchange and its affiliated markets to also differ. Because 
the Exchange's parent company currently owns and operates four separate 
and distinct marketplaces, the Exchange must determine the costs 
associated with each actual market--as opposed to the Exchange's parent 
company simply concluding that all costs drivers are the same at each 
individual marketplace and dividing total cost by four (4) (evenly for 
each marketplace). Rather, the Exchange's parent company determines an 
accurate cost for each marketplace, which results in different 
allocations and amounts across exchanges for the same cost drivers, due 
to the unique factors of each marketplace as described above. This 
allocation methodology also ensures that no cost would be allocated 
twice or double-counted between the Exchange and its affiliated 
markets. MIAX PEARL, LLC further confirms that there is no double 
counting of expenses between the options and equities platform of MIAX 
PEARL, LLC. The Finance Team then consolidates the budget and sends it 
to senior management, including the Chief Financial Officer and Chief 
Executive Officer, for review and approval. Next, the budget is 
presented to the Board of Directors and the Finance and Audit 
Committees for each exchange for their approval. The above steps 
encompass the first step of the cost allocation process.
---------------------------------------------------------------------------

    \35\ The affiliated markets include Miami International 
Securities Exchange, LLC (``MIAX''); separately, the options and 
equities markets of MIAX Pearl; and MIAX Emerald, LLC (``MIAX 
Emerald'').
    \36\ For example, MIAX maintains 24 matching engines, MIAX Pearl 
Options maintains 12 matching engines, MIAX Pearl Equities maintains 
24 matching engines, and MIAX Emerald maintains 12 matching engines.
---------------------------------------------------------------------------

    The next step involves determining what portion of the cost 
allocated to the Exchange pursuant to the above methodology is to be 
allocated to each core service, e.g., connectivity and ports, market 
data, and transaction services. The Exchange and its affiliated markets 
adopted an allocation methodology with thoughtful and consistently 
applied principles to guide how much of a particular cost amount 
allocated to the Exchange should be allocated within the Exchange to 
each core service. This is the final step in the cost allocation 
process and is applied to each of the cost drivers set forth below. For 
instance, fixed costs that are not driven by client activity (e.g., 
message rates), such as data center costs, were allocated more heavily 
to the provision of physical connectivity (for example, 60.1% of the 
data center total expense amount is allocated to 10Gb ULL 
connectivity), with smaller allocations to ToM and DoM (2.0% combined), 
and the remainder to the provision of other connectivity, ports, 
transaction execution, and membership services (37.9%). This next level 
of the allocation methodology at the individual exchange level also 
took into account factors similar to those set forth under the first 
step of the allocation methodology process described above, to 
determine the appropriate allocation to connectivity or market data 
versus allocations for other services. This allocation methodology was 
developed through an assessment of costs with senior management 
intimately familiar with each area of the Exchange's operations. After 
adopting this allocation methodology, the Exchange then applied an 
allocation of each cost driver to each core service, resulting in the 
cost allocations described below. Each of the below cost allocations is 
unique to the Exchange and represents a percentage of overall cost that 
was allocated to the Exchange pursuant to the initial allocation 
described above.
    By allocating segmented costs to each core service, the Exchange 
was able to estimate by core service the potential margin it might earn 
based on different fee models. The Exchange notes that as a non-listing 
venue it has five primary sources of revenue that it can potentially 
use to fund its operations: transaction fees, fees for connectivity and 
port services, membership fees, regulatory fees, and market data fees.

[[Page 25298]]

Accordingly, the Exchange must cover its expenses from these five 
primary sources of revenue. The Exchange also notes that as a general 
matter each of these sources of revenue is based on services that are 
interdependent. For instance, the Exchange's system for executing 
transactions is dependent on physical hardware and connectivity; only 
Equity Members and parties that they sponsor to participate directly on 
the Exchange may submit orders to the Exchange; many Equity Members 
(but not all) consume market data from the Exchange in order to trade 
on the Exchange; and, the Exchange consumes market data from external 
sources in order to comply with regulatory obligations. Accordingly, 
given this interdependence, the allocation of costs to each service or 
revenue source required judgment of the Exchange and was weighted based 
on estimates of the Exchange that the Exchange believes are reasonable, 
as set forth below. While there is no standardized and generally 
accepted methodology for the allocation of an exchange's costs, the 
Exchange's methodology is the result of an extensive review and 
analysis and will be consistently applied going forward for any other 
cost-justified potential fee proposals. In the absence of the 
Commission attempting to specify a methodology for the allocation of 
exchanges' interdependent costs, the Exchange will continue to be left 
with its best efforts to attempt to conduct such an allocation in a 
thoughtful and reasonable manner.
    Through the Exchange's extensive Cost Analysis, which was again 
recently further refined, the Exchange analyzed nearly every expense 
item in the Exchange's general expense ledger to determine whether each 
such expense relates to the provision of market data feeds, and, if 
such expense did so relate, what portion (or percentage) of such 
expense actually supports the provision of market data feeds, and thus 
bears a relationship that is, ``in nature and closeness,'' directly 
related to market data feeds. In turn, the Exchange allocated certain 
costs more to physical connectivity and others to ports, while certain 
costs were only allocated to such services at a very low percentage or 
not at all, using consistent allocation methodologies as described 
above. Based on this analysis, the Exchange estimates that the 
aggregate monthly cost to provide the market data feeds is $150,031 
(the Exchange divided the annual cost for each of market data feed by 
12 months, then added both numbers together), as further detailed 
below.
Costs Related to Offering the Market Data Feeds
    The following chart details the individual line-item (annual) costs 
considered by the Exchange to be related to offering the market data 
feeds to its Equity Members and other customers, as well as the 
percentage of the Exchange's overall costs that such costs represent 
for such area (e.g., as set forth below, the Exchange allocated 
approximately 8.9% of its overall Human Resources cost to offering the 
market data feeds).

----------------------------------------------------------------------------------------------------------------
                                                          Allocated annual  Allocated monthly
                      Cost drivers                            cost \a\           cost \b\           % of all
----------------------------------------------------------------------------------------------------------------
Human Resources........................................         $1,577,592           $131,466                8.9
Connectivity (external fees, cabling, switches, etc.)..                933                 78                2.0
Internet Services and External Market Data.............               0.00               0.00                0.0
Data Center............................................             42,717              3,560                2.0
Hardware and Software Maintenance & Licenses...........             25,921              2,160                2.0
Depreciation...........................................             25,542              2,129                0.5
Allocated Shared Expenses..............................            127,655             10,638                2.0
                                                        --------------------------------------------------------
    Total..............................................          1,800,360           $150,031                5.1
----------------------------------------------------------------------------------------------------------------
\a\ The Annual Cost includes figures rounded to the nearest dollar.
\b\ The Monthly Cost was determined by dividing the Annual Cost for each line item by twelve (12) months and
  rounding up or down to the nearest dollar.

    Below are additional details regarding each of the line-item costs 
considered by the Exchange to be related to offering the market data 
feeds. While some costs were attempted to be allocated as equally as 
possible among the Exchange and its affiliated markets, the Exchange 
notes that some of its cost allocation percentages for certain cost 
drivers differ when compared to the same cost drivers for the 
Exchange's affiliated markets, MIAX and MIAX Emerald, in their recent 
proposed fee changes for options market data.\37\ This is because the 
Exchange's cost allocation methodology utilizes the actual projected 
costs of the Exchange (which are specific to the Exchange and are 
independent of the costs projected and utilized by the Exchange's 
affiliated markets) to determine its actual costs, which may vary 
across the Exchange and its affiliated markets based on factors that 
are unique to each marketplace, including that the Exchange, MIAX Pearl 
Options, and its affiliates trade different asset classes.
---------------------------------------------------------------------------

    \37\ See Securities Exchange Act Release Nos. 99736 (March 14, 
2024), 89 FR 19929 (March 20, 2024) (SR-MIAX-2024-13) and 99737 
(March 14, 2024), 89 FR 19915 (March 20, 2024) (SR-EMERALD-2024-09).
---------------------------------------------------------------------------

Human Resources
    The Exchange notes that it and its affiliated markets anticipate 
that by year-end 2024, there will be 289 employees (excluding employees 
at non-options/equities exchange subsidiaries of Miami International 
Holdings, Inc. (``MIH''), the holding company of the Exchange and its 
affiliated markets), and each department leader has direct knowledge of 
the time spent by each employee with respect to the various tasks 
necessary to operate the Exchange. Specifically, twice a year, and as 
needed with additional new hires and new project initiatives, in 
consultation with employees as needed, managers and department heads 
assign a percentage of time to every employee and then allocate that 
time amongst the Exchange and its affiliated markets to determine each 
market's individual Human Resources expense. Then, managers and 
department heads assign a percentage of each employee's time allocated 
to the Exchange into buckets including network connectivity, ports, 
market data, and other exchange services. This process ensures that 
every employee is 100% allocated, ensuring there is no double counting 
between the Exchange and its affiliated markets.
    For personnel costs (Human Resources), the Exchange calculated an 
allocation of employee time for employees whose functions include 
providing and maintaining market data feeds and performance thereof 
(primarily the Exchange's network

[[Page 25299]]

infrastructure team, which spends a portion of their time performing 
functions necessary to provide market data). As described more fully 
above, the Exchange's parent company allocates costs to the Exchange 
and its affiliated markets and then a portion of the Human Resources 
costs allocated to the Exchange is then allocated to market data. From 
that portion allocated to the Exchange that applied to market data, the 
Exchange then allocated a weighted average of 9.1% of each employee's 
time from the above group to market data feeds (which excludes an 
allocation for the recently hired Head of Data Services for the 
Exchange and its affiliates).
    The Exchange also allocated Human Resources costs to provide the 
market data feeds to a limited subset of personnel with ancillary 
functions related to establishing and maintaining such market data 
feeds (such as information security, sales, membership, and finance 
personnel). The Exchange allocated cost on an employee-by-employee 
basis (i.e., only including those personnel who support functions 
related to providing market data feeds) and then applied a smaller 
allocation to such employees' time to market data (8.8%, which includes 
an allocation for the Head of Data Services). This other group of 
personnel with a smaller allocation of Human Resources costs also have 
a direct nexus to providing the market data feeds, whether it is a 
sales person selling a market data feed, finance personnel billing for 
market data feeds or providing budget analysis, or information security 
ensuring that such market data feeds are secure and adequately defended 
from an outside intrusion.
    The estimates of Human Resources cost were therefore determined by 
consulting with such department leaders, determining which employees 
are involved in tasks related to providing market data feeds, and 
confirming that the proposed allocations were reasonable based on an 
understanding of the percentage of time such employees devote to those 
tasks. This includes personnel from the Exchange departments that are 
predominately involved in providing the market data feeds: Business 
Systems Development, Trading Systems Development, Systems Operations 
and Network Monitoring, Network and Data Center Operations, Listings, 
Trading Operations, and Project Management. Again, the Exchange 
allocated 9.1% of each of their employee's time assigned to the 
Exchange for the market data feeds, as stated above. Employees from 
these departments perform numerous functions to support the market data 
feeds, such as the configuration and maintenance of the hardware 
necessary to support the market data feeds. This hardware includes 
servers, routers, switches, firewalls, and monitoring devices. These 
employees also perform software upgrades, vulnerability assessments, 
remediation and patch installs, equipment configuration and hardening, 
as well as performance and capacity management. These employees also 
engage in research and development analysis for equipment and software 
supporting market data feeds and design, and support the development 
and on-going maintenance of internally-developed applications as well 
as data capture and analysis, and Equity Member and internal Exchange 
reports related to network and system performance. The above list of 
employee functions is not exhaustive of all the functions performed by 
Exchange employees to support market, but illustrates the breath of 
functions those employees perform in support of the above cost and time 
allocations.
    Lastly, the Exchange notes that senior level executives' time was 
only allocated to the market data feeds related Human Resources costs 
to the extent that they are involved in overseeing tasks related to 
providing market data. The Human Resources cost was calculated using a 
blended rate of compensation reflecting salary, equity and bonus 
compensation, benefits, payroll taxes, and 401(k) matching 
contributions.
Connectivity (External Fees, Cabling, Switches, etc.)
    The Connectivity cost driver includes cabling and switches required 
to generate and disseminate the market data feeds and operate the 
Exchange. The Connectivity cost driver is more narrowly focused on 
technology used to complete Equity Member subscriptions to the market 
data feeds and the servers used at the Exchange's primary and back-up 
data centers specifically for the market data feeds. Further, as 
certain servers are only partially utilized to generate and disseminate 
the market data feeds, only the percentage of such servers devoted to 
generating and disseminating the market data feeds was included (i.e., 
the capacity of such servers allocated to the market data feeds).\38\
---------------------------------------------------------------------------

    \38\ The Exchange understands that the Investors Exchange, Inc. 
(``IEX'') and MEMX LLC (``MEMX'') both allocated a percentage of 
their servers to the production and dissemination of market data to 
support proposed market data fees. See Securities Exchange Act 
Release Nos. 94630 (April 7, 2022), 87 FR 21945, at page 21949 
(April 13, 2022) (SR-IEX-2022-02) and 97130 (March 13, 2023), 88 FR 
16491 (March 17, 2023) (SR-MEMX-2023-04). The Exchange does not have 
insight into either MEMX's or IEX's technology infrastructure or 
what their determinations were based on. However, the Exchange 
reviewed its own technology infrastructure and believes based on its 
design, it is more appropriate for the Exchange to allocate a 
portion of its Connectivity cost driver to market data based on a 
percentage of overall cost, not on a per server basis.
---------------------------------------------------------------------------

Internet Services and External Market Data
    The next cost driver consists of internet services and external 
market data. Internet services includes third-party service providers 
that provide the internet, fiber and bandwidth connections between the 
Exchange's networks, primary and secondary data centers, and office 
locations in Princeton and Miami. External market data includes fees 
paid to third parties, including other exchanges, to receive market 
data. The Exchange did not allocate any costs associated with internet 
services or external market data to the market data feeds.
Data Center
    Data Center costs includes an allocation of the costs the Exchange 
incurs to provide the market data feeds in the third-party data centers 
where it maintains its equipment (such as dedicated space, security 
services, cooling and power). The Exchange does not own the primary 
data center or the secondary data center, but instead leases space in 
data centers operated by third parties. As the Data Center costs are 
primarily for space, power, and cooling of servers, the Exchange 
allocated 2.0% to the applicable Data Center costs for the market data 
feeds. The Exchange believes it is reasonable to apply the same 
proportionate percentage of Data Center costs to that of the 
Connectivity cost driver.
Hardware and Software Maintenance and Licenses
    Hardware and Software Maintenance and Licenses includes hardware 
and software licenses used to operate and monitor physical assets 
necessary to offer the market data feeds.\39\ Because the hardware and 
software license fees are correlated to the servers used by the 
Exchange, the Exchange again applied an allocation of 2.0% of its costs 
for Hardware and Software Maintenance

[[Page 25300]]

and Licenses to the market data feeds. The Exchange notes that this 
allocation may differ from its affiliates because MIAX Pearl Equities 
maintains software licenses that are unique to its trading platform and 
used only for the trading of equity securities. The cost for these 
licenses cannot be shared with MIAX Pearl Equities' affiliated options 
markets because each of those platforms trade only options, not 
equities. MIAX Pearl Equities' affiliates are able to share the cost of 
many of their software licenses among the multiple options platforms 
(thus lowering the cost to each individual options platform), whereas 
MIAX Pearl Equities cannot share such cost and, therefore, bears the 
entire cost.
---------------------------------------------------------------------------

    \39\ This expense may differ from the Exchange's affiliated 
markets. This is because each market may maintain and utilize a 
different amount of hardware and software based on its market model 
and infrastructure needs. The Exchange allocated a percentage of the 
overall cost based on actual amounts of hardware and software 
utilized by that market, which resulted in different cost 
allocations and dollar amounts.
---------------------------------------------------------------------------

Depreciation
    All physical assets, software, and hardware used to provide the 
market data feeds, which also includes assets used for testing and 
monitoring of Exchange infrastructure to provide market data, were 
valued at cost, and depreciated or leased over periods ranging from 
three to five years. Thus, the depreciation cost primarily relates to 
servers necessary to operate the Exchange, some of which are owned by 
the Exchange and some of which are leased by the Exchange in order to 
allow efficient periodic technology refreshes. The Exchange also 
included in the Depreciation cost driver certain budgeted improvements 
that the Exchange intends to capitalize and depreciate with respect to 
the market data feeds in the near-term. As with the other allocated 
costs in the Exchange's updated Cost Analysis, the Depreciation cost 
was therefore narrowly tailored to depreciation related to the market 
data feeds. As noted above, the Exchange allocated 0.5% of its 
allocated depreciation costs to providing the market data feeds.
    The vast majority of the software the Exchange uses for its 
operations to generate and disseminate the market data feeds has been 
developed in-house over an extended period. This software development 
also requires quality assurance and thorough testing to ensure the 
software works as intended. Hardware used to generate and disseminate 
the market data feeds, which includes servers and other physical 
equipment the Exchange purchased. Accordingly, the Exchange included 
depreciation costs related to depreciated hardware and software used to 
generate and disseminate the market data feeds. The Exchange also 
included in the Depreciation costs certain budgeted improvements that 
the Exchange intends to capitalize and depreciate with respect to the 
market data feeds in the near-term. As with the other allocated costs 
in the Exchange's updated Cost Analysis, the Depreciation cost was 
therefore narrowly tailored to depreciation related to the market data 
feeds.
    This allocation is also based on MIAX Pearl Equities being a newer 
market and having newer physical assets and software subject to 
depreciation than its affiliate options exchanges. The Exchange's 
affiliate options exchanges are older markets that have more software 
and equipment that have been fully depreciated when compared to the 
newer software and hardware currently being depreciated by MIAX Pearl 
Equities at higher rates.
Allocated Shared Expenses
    Finally, as with other exchange products and services, a portion of 
general shared expenses was allocated to the provision of the market 
data feeds. These general shared costs are integral to exchange 
operations, including its ability to provide the market data feeds. 
Costs included in general shared expenses include office space and 
office expenses (e.g., occupancy and overhead expenses), utilities, 
recruiting and training, marketing and advertising costs, professional 
fees for legal, tax and accounting services (including external and 
internal audit expenses), and telecommunications. Similarly, the cost 
of paying directors to serve on the Exchange's Board of Directors is 
also included in the Exchange's general shared expense cost driver.\40\ 
These general shared expenses are incurred by the Exchange's parent 
company, MIH, as a direct result of operating the Exchange and its 
affiliated markets.
---------------------------------------------------------------------------

    \40\ The Exchange notes that MEMX allocated a precise amount of 
10% of the overall cost for directors in a similar non-transaction 
fee filing. See Securities Exchange Act Release No. 97130 (March 13, 
2023), 88 FR 16491 (March 17, 2023) (SR-MEMX-2023-04). The Exchange 
does not calculate is expenses at that granular a level. Instead, 
director costs are included as part of the overall general 
allocation.
---------------------------------------------------------------------------

    The Exchange employed a process to determine a reasonable 
percentage to allocate general shared expenses to the market data feeds 
pursuant to its multi-layered allocation process. First, general 
expenses were allocated among the Exchange and affiliated markets as 
described above. Then, the general shared expense assigned to the 
Exchange was allocated across core services of the Exchange, including 
market data. Then, these costs were further allocated to sub-categories 
within the final categories, i.e., the market data feeds as sub-
categories of market data. In determining the percentage of general 
shared expenses allocated to market data that ultimately apply to the 
market data feeds, the Exchange looked at the percentage allocations of 
each of the cost drivers and determined a reasonable allocation 
percentage. The Exchange also held meetings with senior management, 
department heads, and the Finance Team to determine the proper amount 
of the shared general expense to allocate to the market data feeds. The 
Exchange, therefore, believes it is reasonable to assign an allocation, 
in the range of allocations for other cost drivers, while continuing to 
ensure that this expense is only allocated once. Again, the general 
shared expenses are incurred by the Exchange's parent company as a 
result of operating the Exchange and its affiliated markets and it is 
therefore reasonable to allocate a percentage of those expenses to the 
Exchange and ultimately to specific product offerings such as the 
market data feeds.
    Again, a portion of all shared expenses were allocated to the 
Exchange (and its affiliated markets) which, in turn, allocated a 
portion of that overall allocation to all market data products offered 
by the Exchange. The Exchange then allocated 2.0% of the portion 
allocated to market data. The Exchange believes this allocation 
percentage is reasonable because, while the overall dollar amount may 
be higher than other cost drivers, the 2.0% is based on and in line 
with the percentage allocations of each of the Exchange's other cost 
drivers. The percentage allocated to the market data feeds also 
reflects its importance to the Exchange's strategy and necessity 
towards the nature of the Exchange's overall operations, which is to 
provide a resilient, highly deterministic trading system that relies on 
faster market data feeds than the Exchange's competitors to maintain 
premium performance. This allocation reflects the Exchange's focus on 
providing and maintaining high performance market data services, of 
which the market data feeds are main contributors.
* * * * *
Cost Analysis--Additional Discussion
    In conducting its Cost Analysis, the Exchange did not allocate any 
of its expenses in full to any core service (including market data) and 
did not double-count any expenses. Instead, as described above, the 
Exchange allocated applicable cost drivers across its core services and 
used the same Cost Analysis to form the basis of this proposal and the 
filings the Exchange

[[Page 25301]]

recently submitted proposing fees for certain connectivity and ports 
offered by the Exchange. For instance, in calculating the Human 
Resources expenses to be allocated to market data based upon the above 
described methodology, the Exchange has a team of employees dedicated 
to network infrastructure and with respect to such employees the 
Exchange allocated network infrastructure personnel with a high 
percentage of the cost of such personnel (9.1%) given their focus on 
functions necessary to provide market data and the remaining 90.9% was 
allocated to connectivity services, port services, transaction 
services, and membership services. The Exchange did not allocate any 
other Human Resources expense for providing market data to any other 
employee group, outside of a smaller allocation of 8.8% for the market 
data feeds of the cost associated with certain specified personnel who 
work closely with and support network infrastructure personnel.
    In total, the Exchange allocated 8.9% of its personnel costs (Human 
Resources) to providing the market data feeds. In turn, the Exchange 
allocated the remaining 91.1% of its Human Resources expense to 
membership services, transaction services, connectivity services, and 
port services. Thus, again, the Exchange's allocations of cost across 
core services were based on real costs of operating the Exchange and 
were not double-counted across the core services or their associated 
revenue streams.
    As another example, the Exchange allocated depreciation expense to 
all core services, including market data, but in different amounts. The 
Exchange believes it is reasonable to allocate the identified portion 
of such expense because such expense includes the actual cost of the 
computer equipment, such as dedicated servers, computers, laptops, 
monitors, information security appliances and storage, and network 
switching infrastructure equipment, including switches and taps that 
were purchased to operate and support the network. Without this 
equipment, the Exchange would not be able to operate the network and 
provide the market data feeds to its Equity Members and their 
customers. However, the Exchange did not allocate all of the 
depreciation and amortization expense toward the cost of providing the 
market data feeds, but instead allocated approximately 0.5% of the 
Exchange's overall depreciation and amortization expense to the market 
data feeds combined. The Exchange allocated the remaining depreciation 
and amortization expense (99.5%) toward the cost of providing 
transaction services, membership services, connectivity services, and 
port services.
    The Exchange notes that its revenue estimates are based on 
projections across all potential revenue streams and will only be 
realized to the extent such revenue streams actually produce the 
revenue estimated. The Exchange does not yet know whether such 
expectations will be realized. For instance, in order to generate the 
revenue expected from the market data feeds, the Exchange will have to 
be successful in retaining existing clients that wish to maintain 
subscriptions to those market data feeds or in obtaining new clients 
that will purchase such services. Similarly, the Exchange will have to 
be successful in retaining a positive net capture on transaction fees 
in order to realize the anticipated revenue from transaction pricing.
    The Exchange notes that the Cost Analysis is based on the 
Exchange's 2024 fiscal year of operations and projections. It is 
possible, however, that actual costs may be higher or lower. To the 
extent the Exchange sees growth in use of market data services it will 
receive additional revenue to offset future cost increases. However, if 
use of market data services is static or decreases, the Exchange might 
not realize the revenue that it anticipates or needs in order to cover 
applicable costs. Accordingly, the Exchange is committing to conduct a 
one-year review after implementation of these fees. The Exchange 
expects that it may propose to adjust fees at that time, to increase 
fees in the event that revenues fail to cover costs and a reasonable 
mark-up of such costs. Similarly, the Exchange may propose to decrease 
fees in the event that revenue materially exceeds our current 
projections. In addition, the Exchange will periodically conduct a 
review to inform its decision making on whether a fee change is 
appropriate (e.g., to monitor for costs increasing/decreasing or 
subscribers increasing/decreasing, etc. in ways that suggest the then-
current fees are becoming dislocated from the prior cost-based 
analysis) and would propose to increase fees in the event that revenues 
fail to cover its costs and a reasonable mark-up, or decrease fees in 
the event that revenue or the mark-up materially exceeds our current 
projections. In the event that the Exchange determines to propose a fee 
change, the results of a timely review, including an updated cost 
estimate, will be included in the rule filing proposing the fee change. 
More generally, the Exchange believes that it is appropriate for an 
exchange to refresh and update information about its relevant costs and 
revenues in seeking any future changes to fees, and the Exchange 
commits to do so.
Projected Revenue \41\
---------------------------------------------------------------------------

    \41\ To estimate the potential number of subscribers and their 
anticipated use after the proposed fees are implemented, the 
Exchange surveyed and reviewed its current subscriber base, 
considered the number of current potential subscribers who may 
unsubscribe due to the proposed fees being implemented, and sought 
informal feedback from Equity Members and other subscribers.
---------------------------------------------------------------------------

    The proposed fees will allow the Exchange to cover certain costs 
incurred by the Exchange associated with creating, generating, and 
disseminating the market data feeds and the fact that the Exchange will 
need to fund future expenditures (increased costs, improvements, etc.). 
The Exchange routinely works to improve the performance of the 
network's hardware and software. The costs associated with maintaining 
and enhancing a state-of-the-art exchange network is a significant 
expense for the Exchange, and thus the Exchange believes that it is 
reasonable and appropriate to help offset those costs by amending fees 
for market data subscribers. Subscribers, particularly those of the 
market data feeds, expect the Exchange to provide this level of support 
so they continue to receive the performance they expect. This 
differentiates the Exchange from its competitors. As detailed above, 
the Exchange has five primary sources of revenue that it can 
potentially use to fund its operations: transaction fees, fees for 
connectivity services, membership and regulatory fees, and market data 
fees. Accordingly, the Exchange must cover its expenses from these five 
primary sources of revenue.
    The Exchange's Cost Analysis estimates the annual cost to provide 
the market data feeds will equal $1,800,360. Based on projected 
subscribers and Users, the Exchange would generate annual revenue of 
approximately $1,980,000 for the market data feeds. The Exchange 
believes this represents a modest profit of 9.1% when compared to the 
cost of providing the market data feeds, which the Exchange believes is 
fair and reasonable after taking into account the costs related to 
creating, generating, and disseminating the market data feeds and the 
fact that the Exchange will need to fund future expenditures (increased 
costs, improvements, etc.).
    Based on the above discussion, the Exchange believes that even if 
the Exchange earns the above revenue or incrementally more or less, the 
proposed fees are fair and reasonable because they will not result in 
pricing

[[Page 25302]]

that deviates from that of other exchanges or a supra-competitive 
profit, when comparing the total expense of the Exchange associated 
with providing the market data feeds versus the total projected revenue 
also associated with those market data feeds.
    The Exchange did not charge any fees for the market data feeds 
since its inception in September 2020 and its allocation of costs to 
the market data feeds was part of a holistic allocation that also 
allocated costs to other core services without double-counting any 
expenses. The Exchange is owned by a holding company that is the parent 
company of four exchange markets and, therefore, the Exchange and its 
affiliated markets must allocate shared costs across all of those 
markets accordingly, pursuant to the above-described allocation 
methodology. In contrast, IEX and MEMX, which are currently each 
operating only one SRO, in their recent non-transaction fee filings 
allocate the entire amount of that same cost to a single SRO. This can 
result in lower profit margins for the non-transaction fees proposed by 
IEX and MEMX because the single allocated cost does not experience the 
efficiencies and synergies that result from sharing costs across 
multiple platforms.\42\ The Exchange and its affiliated markets often 
share a single cost, which results in cost efficiencies that can cause 
a broader gap between the allocated cost amount and projected revenue, 
even though the fee levels being proposed are lower or competitive with 
competing markets (as described above). To the extent that the 
application of a cost-based standard results in Commission Staff making 
determinations as to the appropriateness of certain profit margins, the 
Commission Staff should consider whether the proposed fee level is 
comparable to, or competitive with, the same fee charged by competing 
exchanges and how different cost allocation methodologies (such as 
across multiple markets) may result in different profit margins for 
comparable fee levels. If Commission Staff is making determinations as 
to appropriate profit margins, the Exchange believes that the 
Commission should be clear to all market participants as to what they 
have determined is an appropriate profit margin and should apply such 
determinations consistently and, in the case of certain legacy 
exchanges, retroactively, if such standards are to avoid having a 
discriminatory effect. Further, the proposal reflects the Exchange's 
efforts to control its costs, which the Exchange does on an ongoing 
basis as a matter of good business practice. A potential profit margin 
should not be judged alone based on its size, but is also indicative of 
costs management and whether the ultimate fee reflects the value of the 
services provided. For example, a profit margin on one exchange should 
not be deemed excessive where that exchange has been successful in 
controlling its costs, but not excessive where on another exchange 
where that exchange is charging comparable fees but has a lower profit 
margin due to higher costs. Doing so could have the perverse effect of 
not incentivizing cost control where higher costs alone are used to 
justify fees increases.
---------------------------------------------------------------------------

    \42\ The Exchange acknowledges that IEX included in its proposal 
to adopt market data fees after offering market data for free an 
analysis of what its projected revenue would be if all of its 
existing customers continued to subscribe versus what its projected 
revenue would be if a limited number of customers subscribed due to 
the new fees. See Securities Exchange Act Release No. 94630 (April 
7, 2022), 87 FR 21945 (April 13, 2022) (SR-IEX-2022-02). MEMX did 
not include a similar analysis in its recent filing to adopt market 
data fees. See Securities Exchange Act Release No. 97130 (March 13, 
2023), 88 FR 16491 (March 17, 2023) (SR-MEMX-2023-04).
---------------------------------------------------------------------------

    Accordingly, while the Exchange is supportive of transparency 
around costs and potential margins (applied across all exchanges), as 
well as periodic review of revenues and applicable costs (as discussed 
below), the Exchange does not believe that these estimates should form 
the sole basis of whether or not a proposed fee is reasonable or can be 
adopted. Instead, the Exchange believes that the information should be 
used solely to confirm that an Exchange is not earning--or seeking to 
earn--supra-competitive profits, the standard set forth in the Staff 
Guidance. The Exchange believes the Cost Analysis and related 
projections in this filing demonstrate this fact.
    The Exchange notes that the Cost Analysis is based on the 
Exchange's 2024 fiscal year of operations and projections. It is 
possible, however, that such costs will either decrease or increase. To 
the extent the Exchange sees growth in use of market data feeds it will 
receive additional revenue to offset future cost increases. However, if 
use of market data feeds is static or decreases, the Exchange might not 
realize the revenue that it anticipates or needs in order to cover 
applicable costs. Accordingly, the Exchange is committing to conduct a 
one-year review after implementation of these fees. The Exchange 
expects that it may propose to adjust fees at that time, to increase 
fees in the event that revenues fail to cover costs and a reasonable 
mark-up of such costs.
    Similarly, the Exchange expects that it would propose to decrease 
fees in the event that revenue materially exceeds current projections. 
In addition, the Exchange will periodically conduct a review to inform 
its decision making on whether a fee change is appropriate (e.g., to 
monitor for costs increasing/decreasing or subscribers increasing/
decreasing, etc. in ways that suggest the then-current fees are 
becoming dislocated from the prior cost-based analysis) and expects 
that it would propose to increase fees in the event that revenues fail 
to cover its costs and a reasonable mark-up, or decrease fees in the 
event that revenue or the mark-up materially exceeds current 
projections. In the event that the Exchange determines to propose a fee 
change, the results of a timely review, including an updated cost 
estimate, will be included in the rule filing proposing the fee change. 
More generally, the Exchange believes that it is appropriate for an 
exchange to refresh and update information about its relevant costs and 
revenues in seeking any future changes to fees, and the Exchange 
commits to do so.
The Proposed Fees Are Reasonable and Comparable to the Fees Charged by 
Other Exchanges for Similar Data Products
    Overall. Among other things, the Exchange relying upon a cost-plus 
model to determine a reasonable fee structure that is informed by the 
Exchange's understanding of different uses of the products by different 
types of participants. In this context, the Exchange believes the 
proposed fees overall are fair and reasonable as a form of cost 
recovery plus the possibility of a reasonable return for the Exchange's 
aggregate costs of offering the market data feeds. The Exchange 
believes the proposed fees are reasonable because they are designed to 
generate annual revenue to recoup some or all of Exchange's annual 
costs of providing the market data feeds with a reasonable mark-up. As 
discussed above, the Exchange estimates this fee filing will result in 
annual revenue of approximately $1,980,000, representing a potential 
mark-up of just 9.1% over the cost of providing market data feeds. 
Accordingly, the Exchange believes that this fee methodology is 
reasonable because it allows the Exchange to recoup all of its expenses 
for providing the market data feeds (with any additional revenue 
representing no more than what the Exchange believes to be a reasonable 
rate of return). The Exchange also believes that the proposed fees are 
reasonable because

[[Page 25303]]

they are generally less than the fees charged by competing equities 
exchanges for comparable market data products, notwithstanding that the 
competing exchanges may have different system architectures that may 
result in different cost structures for the provision of market data.
    The Exchange also believes the proposed fees are reasonable when 
compared to fees charged for comparable products by other exchanges, 
including comparable data feeds priced significantly higher than the 
Exchange's proposed fees. Overall, the Exchange's proposed fees are 
generally lower or similar to fees charged by other exchanges.\43\ For 
this reason, the Exchange believes that the proposed fees are 
consistent with the Act generally, and Section 6(b)(5) \44\ of the Act 
in particular. The Exchange believes that denying it the ability to 
adopt the proposed fees that would allow the Exchange to recoup its 
costs with a reasonable margin in a manner that is closer to parity 
with other exchanges, in effect, impedes its ability to compete, 
including in its pricing of transaction fees and ability to invest in 
competitive infrastructure and other offerings.
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    \43\ See MEMX Fee Schedule, available at, https://info.memxtrading.com/membership-fees/ (``MEMX Fee Schedule''); Cboe 
BYX Fee Schedule, available at, https://www.cboe.com/us/equities/membership/fee_schedule/byx/; Cboe BZX Fee Schedule, available at, 
https://www.cboe.com/us/equities/membership/fee_schedule/bzx/; Cboe 
EDGA Fee Schedule, available at, https://www.cboe.com/us/equities/membership/fee_schedule/edga/; and Cboe EDGX Fee Schedule, available 
at, https://www.cboe.com/us/equities/membership/fee_schedule/edgx/.
    \44\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Internal Distribution Fees. The Exchange believes that it is 
reasonable to charge fees to access the market data feeds for Internal 
Distribution because of the value of such data to subscribers in their 
profit-generating activities. The Exchange also believes that the 
proposed monthly Internal Distribution fees are reasonable because they 
are similar to the amount charged by other exchanges for comparable 
data products. Specifically, the Exchange proposes to charge a monthly 
fee of $1,000.00 to Internal Distributors for the ToM feed and 
$2,000.00 for the DoM feed, both of which include last sale 
information. MEMX, Cboe BZX, and Cboe EDGX each charge Internal 
Distributors a monthly fee of $750.00 per month for their top-of-book 
products and $1,500.00 for their depth-of-book products, and charges 
separately for last sale information.\45\ The Exchange notes that while 
its proposed fee for Internal Distributors may be slightly higher than 
these other exchanges, its other proposed fees are either equal to or 
significantly lower than other exchanges, as discussed below.
---------------------------------------------------------------------------

    \45\ See MEMX Fee Schedule, supra note 43.
---------------------------------------------------------------------------

    External Distribution Fees. The Exchange believes that it is 
reasonable to charge External Distribution fees for the market data 
feeds because vendors receive value from redistributing the data in 
their business products provided to their customers. The Exchange 
believes that charging External Distribution fees is reasonable because 
the vendors that would be charged such fees profit by re-transmitting 
the Exchange's market data to their customers. These fees would be 
charged only once per month to each vendor account that redistributes 
any of the market data feeds, regardless of the number of customers to 
which that vendor redistributes the data.
    The Exchange also believes that the proposed monthly External 
Distribution fees are reasonable because they are equal to or lower 
than the amount charged by other exchanges for comparable data 
products. Specifically, the Exchange proposes to charge a monthly fee 
of $2,000.00 to External Distributor for the ToM feed and $2,500.00 for 
the DoM feed. The Exchange's proposed External Distribution fee for ToM 
is equal to or lower than the fees charged by MEMX, Cboe BZX, and Cboe 
EDGX to External Distributors of their depth-of-book products, who each 
charge $2,000.00, $2,500.00, and $2,250.00, respectively.\46\ 
Meanwhile, the Exchange's proposed External Distribution fee for DoM is 
equal to the fees charged by MEMX, Cboe BYX, Cboe EDGA, and Cboe EDGX 
to External Distributors of their depth-of-book products.\47\ 
Meanwhile, the Exchange's proposed External Distribution fee for DoM is 
lower than the $5,000.00 fee charged by Cboe BZX to External 
Distributors of its depth-of-book product.\48\
---------------------------------------------------------------------------

    \46\ See MEMX Fee Schedule, Cboe BZX Fee Schedule, and Cboe EDGX 
Fee Schedule, supra note 43.
    \47\ See MEMX Fee Schedule, Cboe BYX Fee Schedule, Cboe EDGA Fee 
Schedule, and Cboe EDGX Fee Schedule, id.
    \48\ See Cboe BZX Fee Schedule, id.
---------------------------------------------------------------------------

    User Fees. The Exchange believes that having separate Professional 
and Non-Professional User fees for the market data feeds is reasonable 
because it will make the product more affordable and result in greater 
availability to Professional and Non-Professional Users. Setting a 
modest Non-Professional User fee is reasonable because it provides an 
additional method for Non-Professional Users to access the market data 
feeds by providing the same data that is available to Professional 
Users. The proposed monthly Professional User and Non-Professional User 
fees are reasonable because they equal to or are lower than the fees 
charged by other exchanges for comparable data products. For example, 
the Exchange's proposed Professional User fees of $2.00 for ToM and 
$30.00 for DoM is lower than the same fee charged by Cboe BZX and Cboe 
EDGX, who each charge $4.00 for their top-of-book products and $40.00 
for their depth-of-book products.\49\ The Exchange's proposed Non-
Professional User fees of $0.10 for ToM is equal to the same fee 
charged by Cboe BZX and Cboe EDGX.\50\
---------------------------------------------------------------------------

    \49\ See Cboe BZX Fee Schedule and Cboe EDGX Fee Schedule, id.
    \50\ Id.
---------------------------------------------------------------------------

    Meanwhile, the Exchange's proposed Non-Professional User fees of 
$3.00 for DoM is equal to the same fee charged by MEMX and lower than 
the same fee charged by Cboe BZX and Cboe EDGX, who each charge $5.00 
for their depth-of-book products.\51\
---------------------------------------------------------------------------

    \51\ See MEMX Fee Schedule, Cboe BZX Fee Schedule, and Cboe EDGX 
Fee Schedule, supra note 43.
---------------------------------------------------------------------------

    The Exchange also believes that the proposal to require reporting 
of individual Users, but not devices, is reasonable as this too will 
eliminate unnecessary audit risk that can arise when recipients are 
required to apply complex counting rules such as whether or not to 
count devices or whether an individual accessing the same data through 
multiple devices should be counted once or multiple times.
    The Exchange also believes it is reasonable to adopt an Enterprise 
Fee because this would allow a market participant to disseminate such 
data feeds to an unlimited number of Users without the necessity of 
counting such Users. As this is an optional subscription, a data 
recipient is able to determine whether it prefers to count Users and 
report such Users to the Exchange or not, and also whether it is more 
economically advantageous to count and pay for specific Users or to 
subscribe to the Enterprise Fee. The Exchange also notes that only a 
market participant with a substantial number of Users would likely 
choose to subscribe for and pay the Enterprise Fee.
    The proposed monthly Enterprise fees are reasonable because they 
equal to or are lower than the fees charged by other exchanges for 
comparable data products. For example, the Exchange's proposed 
Enterprise fee of $15,000.00 per month for ToM equals the same fee

[[Page 25304]]

charged by Cboe BZX and Cboe EDGX.\52\ However, the Exchange's proposed 
Enterprise fee of $25,000.00 per month for DoM is much lower than the 
same fee charged by Cboe BZX and Cboe EDGX, who each charge $100,000.00 
per month.\53\
---------------------------------------------------------------------------

    \52\ See Cboe BZX Fee Schedule and Cboe EDGX Fee Schedule, id.
    \53\ Id.
---------------------------------------------------------------------------

    Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees are reasonable because they reflect the value of the 
data to the data recipients in their profit-generating activities and 
do not impose the burden of counting non-display devices.
    The Exchange believes that the proposed Non-Display Usage fees 
reflect the significant value of the non-display data use to data 
recipients, whom purchase such data on a voluntary basis. Non-display 
data can be used by data recipients for a wide variety of profit-
generating purposes, including proprietary and agency trading and smart 
order routing, as well as by data recipients that operate Trading 
Platforms that compete directly with the Exchange for order flow. The 
data also can be used for a variety of non-trading purposes that 
indirectly support trading, such as risk management and compliance. 
Although some of these non-trading uses do not directly generate 
revenues, they can nonetheless substantially reduce a recipient's costs 
by automating such functions so that they can be carried out in a more 
efficient and accurate manner and reduce errors and labor costs, 
thereby benefiting recipients. The Exchange believes that charging for 
non-trading uses is reasonable because data recipients can derive 
substantial value from such uses, for example, by automating tasks so 
that can be performed more quickly and accurately and less expensively 
than if they were performed manually.
    Previously, the non-display use data pricing policies of many 
exchanges required customers to count, and the exchanges to audit the 
count of, the number of non-display devices used by a customer. As non-
display use grew more prevalent and varied, however, exchanges received 
an increasing number of complaints about the impracticality and 
administrative burden associated with that approach. In response, 
several exchanges developed a non-display use pricing structure that 
does not require non-display devices to be counted or those counts to 
be audited, and instead categorizes different types of use. The 
Exchange proposes to distinguish between non-display use for the 
operation of a Trading Platform and other non-display use, which is 
similar to exchanges such as MEMX, BZX, and EDGX,\54\ while other 
exchanges maintain additional categories and in many cases charge 
multiple times for different types of non-display use or the operation 
of multiple Trading Platforms.\55\
---------------------------------------------------------------------------

    \54\ See Cboe BZX Fee Schedule and Cboe EDGX Fee Schedule, id.
    \55\ See NYSE Proprietary Market Data Pricing Guide, dated May 
4, 2022, available at https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Pricing.pdf, and the Nasdaq Global Data Products 
pricing list, available at https://nasdaqtrader.com/Trader.aspx?id=DPUSdata.
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to segment the fee for 
non-display use into these two categories. As noted above, the uses to 
which customers can put the market data feeds are numerous and varied, 
and the Exchange believes that charging separate fees for these 
separate categories of use is reasonable because it reflects the actual 
value the customer derives from the data, based upon how the customer 
makes use of the data.
    The Exchange believes that the proposed fees for Non-Display Usage 
for ToM are reasonable because the Exchange's proposed fee of $1,000.00 
per month is less than the amounts charged by several other exchanges 
for comparable data products.\56\ The Exchange also believes that the 
proposed fees for Non-Display Usage for DoM are reasonable because the 
Exchange's proposed fee of $2,500.00 per month for DoM equals the same 
fee charged by MEMX for its depth-of-book product.\57\ The proposed 
fees are also significantly less than the amounts charged by several 
other exchanges for comparable data products.\58\ In fact, the 
Exchange's proposed fees for Non-Display Usage fee may be even lower 
because the Exchange would allow subscribers to the DoM feed to also 
receive the ToM feed for no additional charge. The Exchange believes 
that the proposed fees directly and appropriately reflect the 
significant value of using data on a non-display basis in a wide range 
of computer-automated functions relating to both trading and non-
trading activities and that the number and range of these functions 
continue to grow through innovation and technology developments. 
Further, the Exchange benefits from other non-display use by market 
participants (including the fact that the Exchange receives orders 
resulting from algorithms and routers) and both the Exchange and other 
participants benefit from other non-display use by market participants 
when such use is to support more broadly beneficial functions such as 
risk management and compliance.
---------------------------------------------------------------------------

    \56\ Id.
    \57\ See MEMX Fee Schedule, supra note 43.
    \58\ See supra note 55.
---------------------------------------------------------------------------

    The Exchange believes that the proposed fees for Non-Display Usage 
for ToM are reasonable because the Exchange's proposed fee of $2,500.00 
per month is less than the amounts charged by several other exchanges 
for comparable data products,\59\ which also charge per Trading 
Platform operated by a data subscriber subject to a cap in most cases, 
rather than charging per subscriber, as proposed by the Exchange.\60\ 
The Exchange also believes that it is reasonable to charge the proposed 
fees for non-display use for operation of a Trading Platform of the DoM 
feed because its proposed fee of $2,500.00 per month equals the same 
fee charged by MEMX for its depth-of-book product.\61\ The proposed 
fees are also significantly less than the amounts charged by Cboe BZX 
and Cboe EDGA, who each charge $5,000.00 per month, for comparable data 
products.\62\ In fact, the Exchange's proposed fees for Non-Display 
Usage fee for Trading Platform may be even lower because the Exchange 
would allow subscribers to the DoM feed to also receive the ToM feed 
for no additional charge. The proposed fee is also significantly less 
than the amounts charged by several other exchanges for comparable data 
products, which also charge per Trading Platform operated by a data 
subscriber subject to a cap in most cases, rather than charging per 
subscriber, as proposed by the Exchange.\63\ With respect to 
alternative trading systems, or ATSs, such platforms can utilize the 
Exchange Data Feeds to form prices for trading on such platforms but 
are not required to do so and can instead utilize SIP data. Currently, 
no ATS approved to trade NMS stocks subscribes to the Exchange's market 
data feeds.\64\ With respect to other exchanges, which may choose to 
use the market data feeds for

[[Page 25305]]

Regulation NMS compliance and order routing, the Exchange notes that 
several exchange competitors of the Exchange have not subscribed to any 
of the market data feeds and instead utilize SIP data for such 
purposes.\65\ Accordingly, both ATSs and other exchanges clearly have a 
choice whether to subscribe to the Exchange's market data feeds.
---------------------------------------------------------------------------

    \59\ Id.
    \60\ See supra note 55. The Exchange notes that MEMX also 
charges per subscriber, as proposed herein. See MEMX Fee Schedule 
supra note 43.
    \61\ Id.
    \62\ See Cboe BZX Fee Schedule and Cboe EDGX Fee Schedule, supra 
note 43. See also supra note 55.
    \63\ See supra note 55. The Exchange notes that MEMX also 
charges per subscriber, as proposed herein. See MEMX Fee Schedule 
supra note 43.
    \64\ MIAX Pearl Equities internal data regarding non-display use 
by Trading Platforms. As of March 15, 2024, there were currently 32 
ATSs that had filed an effective Form ATS-N with the Commission to 
trade NMS stocks. See https://www.sec.gov/divisions/marketreg/form-ats-n-filings.htm#ats-n.
    \65\ See, e.g., BZX Rule 11.26, EDGA Rule 13.4, EDGX Rule 13.4, 
and Long Term Stock Exchange, Inc. Rule 11.4010(a), each of which 
discloses the data feeds used by each respective exchange and state 
that SIP products are used with respect to MIAX Pearl Equities.
---------------------------------------------------------------------------

    The proposed Non-Display Usage fees are also reasonable because 
they take into account the extra value of receiving the data for Non-
Display Usage that includes a rich set of information including top of 
book quotations, depth-of-book quotations, executions and other 
information. The Exchange believes that the proposed fees directly and 
appropriately reflect the significant value of using the market data 
feeds on a non-display basis in a wide range of computer-automated 
functions relating to both trading and non-trading activities and that 
the number and range of these functions continue to grow through 
innovation and technology developments.\66\
---------------------------------------------------------------------------

    \66\ See also Exchange Act Release No. 69157 (March 18, 2013), 
78 FR 17946, 17949 (March 25, 2013) (SR-CTA/CQ-2013-01) (``[D]ata 
feeds have become more valuable, as recipients now use them to 
perform a far larger array of non-display functions. Some firms even 
base their business models on the incorporation of data feeds into 
black boxes and application programming interfaces that apply 
trading algorithms to the data, but that do not require widespread 
data access by the firm's employees. As a result, these firms pay 
little for data usage beyond access fees, yet their data access and 
usage is critical to their businesses.'').
---------------------------------------------------------------------------

* * * * *
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the market data feeds are reasonable.
There Are Reasonable Substitutes for the Market Data Feeds
    Each equities exchange offers top-of-book quotation and last sale 
information based on their own quotation and trading activity that is 
substantially similar to the information provided by the Exchange 
through the ToM data feed. Further, the quote and last sale data 
contained in the ToM data feed is identical to the data sent to the 
securities information processors (``SIPs'') distributing consolidated 
data pursuant to the CTA/CQ Plan and the UTP Plan.\67\ Accordingly, 
market participants can substitute ToM data with feeds from other 
exchanges and/or through the SIPs. Exchange top-of-book data is 
therefore widely available today from a number of different sources.
---------------------------------------------------------------------------

    \67\ The Exchange notes that it makes available to subscribers 
that is included in the ToM data feed no earlier than the time at 
which the Exchange sends that data to the SIPs.
---------------------------------------------------------------------------

    The Exchange notes DoM is entirely optional. The Exchange is not 
required to make the proprietary data products that are the subject of 
this proposed rule change available or to offer any specific pricing 
alternatives to any customers, nor is any firm or investor required to 
purchase the Exchange's data products. Unlike some other data products 
(e.g., the consolidated quotation and last-sale information feeds) that 
firms are required to purchase in order to fulfil regulatory 
obligations,\68\ a customer's decision whether to purchase any of the 
Exchange's proprietary market data feeds is entirely discretionary. 
Most firms that choose to subscribe to proprietary market data feeds 
from the Exchange and its affiliates do so for the primary goals of 
using them to increase their revenues, reduce their expenses, and in 
some instances compete directly with the Exchange's trading services. 
Such firms are able to determine for themselves whether or not the 
products in question or any other similar products are attractively 
priced. If market data feeds from the Exchange and its affiliates do 
not provide sufficient value to firms based on the uses those firms may 
have for it, such firms may simply choose to conduct their business 
operations in ways that do not use the products.
---------------------------------------------------------------------------

    \68\ The Exchange notes that broker-dealers are not required to 
purchase proprietary market data to comply with their best execution 
obligations. See In the Matter of the Application of Securities 
Industry and Financial Markets Association for Review of Actions 
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May 16, 2014). Similarly, there is no requirement 
in Regulation NMS or any other rule that proprietary data be 
utilized for order routing decisions, and some broker-dealers and 
ATSs have chosen not to do so.
---------------------------------------------------------------------------

Equitable Allocation
    Overall. The Exchange believes that its proposed fees are 
reasonable, fair, and equitable, and not unfairly discriminatory 
because they are designed to align fees with services provided. The 
Exchange believes the proposed fees for the market data feeds are 
allocated fairly and equitably among the various categories of users of 
the feeds, and any differences among categories of users are justified 
and appropriate.
    The Exchange believes that the proposed fees are equitably 
allocated because they will apply uniformly to all data recipients that 
choose to subscribe to the market data feeds. Any subscriber or vendor 
that chooses to subscribe to the market data feeds is subject to the 
same Fee Schedule, regardless of what type of business they operate, 
and the decision to subscribe to one or more market data feeds is based 
on objective differences in usage of market data feeds among different 
Equity Members, which are still ultimately in the control of any 
particular Equity Member. The Exchange believes the proposed pricing of 
the market data feeds is equitably allocated because it is based, in 
part, upon the amount of information contained in each data feed and 
the value of that information to market participants.
    Internal Distributor Fees. The Exchange believes the proposed 
monthly fees for Internal Distributors of the market data feeds are 
equitably allocated because they would be charged on an equal basis to 
all data recipients that receive the market data feeds for internal 
distribution, regardless of what type of business they operate.
    External Distributor Fees. The Exchange believes the proposed 
monthly fees for External Distributors of the market data feeds are 
equitably allocated and not unfairly discriminatory because they would 
be charged on an equal basis to all data recipients that receive the 
market data feeds that choose to redistribute the feeds externally, 
regardless of what business they operate. The Exchange also believes 
that the proposed monthly fees for External Distributors are equitably 
allocated when compared to lower proposed fees for Internal 
Distributors because data recipients that are externally distributing 
market data feeds are able to monetize such distribution and spread 
such costs amongst multiple third party data recipients, whereas the 
Internal Distributor fee is applicable to use by a single data 
recipient (and its affiliates).
    The Exchange believes that it is reasonable and equitable 
discriminatory to assess Internal Distributors fees that are less than 
the fees assessed for External Distributors for subscriptions to the 
market data feeds because Internal Distributors have limited, 
restricted usage rights to the market data, as compared to External 
Distributors, which have more expansive usage rights. All Equity 
Members and non-Equity Members that decide to receive any market data 
feed of the Exchange must first execute, among other things, the MIAX 
Exchange Group Exchange Data Agreement (the

[[Page 25306]]

``Exchange Data Agreement'').\69\ Pursuant to the Exchange Data 
Agreement, Internal Distributors are restricted to the ``internal use'' 
of any market data they receive. This means that Internal Distributors 
may only distribute the Exchange's market data to the recipient's 
officers and employees and its affiliates.\70\ External Distributors 
may distribute the Exchange's market data to persons who are not 
officers, employees or affiliates of the External Distributor,\71\ and 
may charge their own fees for the redistribution of such market data. 
External Distributors may monetize their receipt of the market data 
feeds by charging their customers fees for receipt of the Exchange's 
market data feeds. Internal Distributors do not have the same ability 
to monetize the Exchange's market data feeds. Accordingly, the Exchange 
believes it is fair, reasonable and not unfairly discriminatory to 
assess External Distributors a higher fee for the Exchange's market 
data feeds as External Distributors have greater usage rights to 
commercialize such market data and can adjust their own fee structures 
if necessary.
---------------------------------------------------------------------------

    \69\ See Exchange Data Agreement, available at https://www.miaxglobal.com/markets/us-equities/pearl-equities/market-data-vendor-agreements.
    \70\ See id.
    \71\ See id.
---------------------------------------------------------------------------

    The Exchange also utilizes more resources to support External 
Distributors versus Internal Distributors, as External Distributors 
have reporting and monitoring obligations that Internal Distributors do 
not have, thus requiring additional time and effort of Exchange staff. 
For example, External Distributors have monthly reporting requirements 
under the Exchange's Market Data Policies.\72\ Exchange staff must 
then, in turn, process and review information reported by External 
Distributors to ensure the External Distributors are redistributing the 
market data feeds in compliance with the Exchange's Market Data 
Agreement and Policies.
---------------------------------------------------------------------------

    \72\ See Section 6 of the Exchange's Market Data Agreement, 
supra note 69.
---------------------------------------------------------------------------

    The Exchange believes the proposed fees are equitable because the 
fee level results in a reasonable and equitable allocation of fees 
amongst subscribers for similar services, depending on whether the 
subscriber is an Internal or External Distributor. Moreover, the 
decision as to whether or not to purchase market data is entirely 
optional to all market participants. Potential purchasers are not 
required to purchase the market data, and the Exchange is not required 
to make the market data available. Purchasers may request the data at 
any time or may decline to purchase such data. The allocation of fees 
among users is fair and reasonable because, if market participants 
decide not to subscribe to the data feed, firms can discontinue their 
use of the market data feeds.
    User Fees. The Exchange believes that the fee structure 
differentiating Professional User fees from Non-Professional User fees 
for display use is equitable. This structure has long been used by 
other exchanges and the SIPs to reduce the price of data to Non-
Professional Users and make it more broadly available.\73\ Offering the 
market data feeds to Non-Professional Users at a lower cost than 
Professional Users results in greater equity among data recipients, as 
Professional Users are categorized as such based on their employment 
and participation in financial markets, and thus, are compensated to 
participate in the markets. While Non-Professional Users too can 
receive significant financial benefits through their participation in 
the markets, the Exchange believes it is reasonable to charge more to 
those Users who are more directly engaged in the markets.
---------------------------------------------------------------------------

    \73\ See, e.g., Securities Exchange Act Release No. 59544 (March 
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131) 
(establishing the $15 Non-Professional User Fee (Per User) for NYSE 
OpenBook); Securities Exchange Act Release No. 20002, File No. S7-
433 (July 22, 1983), 48 FR 34552 (July 29, 1983) (establishing Non-
Professional fees for CTA data); NASDAQ BX Equity 7 Pricing 
Schedule, Section 123.
---------------------------------------------------------------------------

    The Exchange believes it is equitable to adopt User fees for the 
DoM feed that are higher than the User fees for the ToM feed because, 
as described above, DoM contains significantly more data than the ToM 
feed. The Exchange believes it is equitable to have pricing based, in 
part, upon the amount of information contained in each data feed and 
the value of that information to market participants.
    The Exchange also believes it is equitable to adopt an Enterprise 
Fee because this would allow a market participant to disseminate such 
data feeds to an unlimited number of Users without the necessity of 
counting such Users. As this is an optional subscription, a data 
recipient is able to determine whether it prefers to count Users and 
report such Users to the Exchange or not, and also whether it is more 
economically advantageous to count and pay for specific Users or to 
subscribe to the Enterprise Fee.
    Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees are equitably allocated because they would require 
subscribers to pay fees only for the uses they actually make of the 
data. As noted above, non-display data can be used by data recipients 
for a wide variety of profit-generating purposes (including trading and 
order routing) as well as purposes that do not directly generate 
revenues (such as risk management and compliance) but nonetheless 
substantially reduce the recipient's costs by automating certain 
functions. The Exchange believes that it is equitable to charge non-
display data subscribers that use the market data feeds for purposes 
other than operation of a Trading Platform as proposed because all such 
subscribers would have the ability to use such data for as many non-
display uses as they wish for one low fee. As noted above, this 
structure is comparable to that in place for the BZX Depth feed but 
several other exchanges charge multiple non-display fees to the same 
client to the extent they use a data feed in several different trading 
platforms or for several types of non-display use.\74\
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    \74\ See supra note 55.
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    The Exchange further believes that the fees for non-display use for 
operation of a Trading Platform and for non-display use other than 
operation of a Trading Platform are equitable because the Exchange is 
imposing the same flat fee for each category of non-display use.
    The Exchange believes that it is equitable to charge a single fee 
per subscriber rather than multiple fees for a subscriber that operates 
more than one Trading Platform because operators of Trading Platforms 
are many times viewed as a single competing venue or group, even if 
there are multiple liquidity pools operated by the same competitor.
* * * * *
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the market data feeds are equitably allocated.
The Proposed Fees Are Not Unfairly Discriminatory
    The Exchange believes the proposed fees are not unfairly 
discriminatory because any differences in the application of the fees 
are based on meaningful distinctions between customers, and those 
meaningful distinctions are not unfairly discriminatory between 
customers.
    Overall. The Exchange believes that the proposed fees are not 
unfairly discriminatory because they would apply to all data recipients 
that choose to subscribe to the same market data feed(s). Any vendor or 
subscriber that chooses to subscribe to the market data feeds is 
subject to the same Fee

[[Page 25307]]

Schedule, regardless of what type of business they operate. Because the 
proposed fees for DoM are higher, vendors and subscribers seeking lower 
cost options may instead choose to receive data from the SIPs or 
through the ToM feed for a lower cost. Alternatively, vendors and 
subscribers can choose to pay for the DoM feed to receive data in a 
single feed with depth-of-book information if such information is 
valuable to such vendors or subscribers. The Exchange notes that 
vendors or subscribers can also choose to subscribe to a combination of 
data feeds for redundancy purposes or to use different feeds for 
different purposes. In sum, each vendor or subscriber has the ability 
to choose the best business solution for itself. The Exchange does not 
believe it is unfairly discriminatory to base pricing upon the amount 
of information contained in each data feed and the value of that 
information to market participants. As described above, the ToM feed 
can be utilized to trade on the Exchange but contain less information 
than that is available on the DoM feed (i.e., even for a subscriber who 
takes both feeds, such feeds do not contain depth-of-book information). 
Thus, the Exchange believes it is not unfairly discriminatory for the 
products to be priced as proposed, with ToM having the lowest price and 
DoM a higher price.
    Internal Distributor Fees. The Exchange believes the proposed 
monthly fees for Internal Distributors are not unfairly discriminatory 
because they would be charged on an equal basis to all data recipients 
that receive the same market data feed(s) for internal distribution, 
regardless of what type of business they operate.
    External Distributor Fees. The Exchange believes the proposed 
monthly fees for redistributing the market data feeds are not unfairly 
discriminatory because they would be charged on an equal basis to all 
data recipients that receive the same market data feed(s) that choose 
to redistribute the feed(s) externally. The Exchange also believes that 
having higher monthly fees for External Distributors than Internal 
Distributors is not unfairly discriminatory because data recipients 
that are externally distributing the market data feeds are able to 
monetize such distribution and spread such costs amongst multiple third 
party data recipients, whereas the Internal Distributor fee is 
applicable to use by a single data recipient (and its affiliates).
    User Fees. The Exchange believes that the fee structure 
differentiating Professional User fees from Non-Professional User fees 
for display use is not unfairly discriminatory. This structure has long 
been used by other exchanges and the SIPs to reduce the price of data 
to Non-Professional Users and make it more broadly available.\75\ 
Offering the market data feeds to Non-Professional Users with the same 
data as is available to Professional Users, albeit at a lower cost, 
results in greater equity among data recipients. These User fees would 
be charged uniformly to all individuals that have access to the market 
data feeds based on the category of User.
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    \75\ See supra note 73.
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    The Exchange also believes the proposed User fees for DoM are not 
unfairly discriminatory, with higher fees for Professional Users than 
Non-Professional Users, because Non-Professional Users may have less 
ability to pay for such data than Professional Users as well as less 
opportunity to profit from their usage of such data. The Exchange also 
believes the proposed User fees for DoM are not unfairly 
discriminatory, even though substantially higher than the proposed User 
fees for ToM because, as described above, DoM has significantly more 
information than ToM and is thus potentially more valuable to such 
Users.
    The Exchange further believes that its proposal to adopt an 
Enterprise Fee is not unfairly discriminatory because this optional 
alternatives to counting and paying for specific Users will provide 
market participants the ability to provide information from the market 
data feeds to large numbers of Users without counting and paying for 
each individual User.
    Non-Display Use Fees. The Exchange believes the proposed Non-
Display Usage fees are not unfairly discriminatory because they would 
require subscribers for non-display use to pay fees depending on their 
use of the data, either for operation of a Trading Platform or not, but 
would not impose multiple fees to the extent a subscriber operates 
multiple Trading Platforms or has multiple different types of non-
display use. As noted above, non-display data can be used by data 
recipients for a wide variety of profit-generating purposes as well as 
purposes that do not directly generate revenues but nonetheless 
substantially reduce the recipient's costs by automating certain 
functions. This segmented fee structure is not unfairly discriminatory 
because no subscriber of non-display data would be charged a fee for a 
category of use in which it did not actually engage.
    The Exchange believes that it is not unreasonably discriminatory to 
charge a single fee for an operator of Trading Platforms that operates 
more than one Trading Platform because operators of Trading Platforms 
are many times viewed as a single competing venue or group, even if 
there a multiple liquidity pools operated by the same competitor. The 
Exchange again notes that certain competitors to the Exchange charge 
for non-display usage per Trading Platform,\76\ in contrast to the 
Exchange's proposal. In turn, to the extent they subscribe to the 
market data feeds, these same competitors will benefit from the 
Exchange's pricing model to the extent they operate multiple Trading 
Platforms (as most do) by paying a single fee rather than paying for 
each Trading Platform that they operate that consumes the market data 
feeds.
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    \76\ See supra note 55.
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* * * * *
    For all of the foregoing reasons, the Exchange believes that the 
proposed fees for the Exchange's market data feeds are not unfairly 
discriminatory.

B. Self-Regulatory Organization's Statement on Burden on Competition

    In accordance with Section 6(b)(8) of the Act,\77\ the Exchange 
does not believe that the proposed rule change would impose any burden 
on competition that is not necessary or appropriate in furtherance of 
the purposes of the Act.
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    \77\ 15 U.S.C. 78f(b)(8).
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Intra-Market Competition
    The Exchange does not believe that the proposed fees place certain 
market participants at a relative disadvantage to other market 
participants because, as noted above, the proposed fees are associated 
with usage of the data feed by each market participant based on whether 
the market participant internally or externally distributes the 
Exchange data, which are still ultimately in the control of any 
particular Equity Member, and such fees do not impose a barrier to 
entry to smaller participants. Accordingly, the proposed fees do not 
favor certain categories of market participants in a manner that would 
impose a burden on competition; rather, the allocation of the proposed 
fees reflects the types of data consumed by various market participants 
and their usage thereof.
Inter-Market Competition
    The Exchange does not believe the proposed fees place an undue 
burden on competition on other SROs that is not necessary or 
appropriate. In particular, market participants are not forced to 
subscribe to either data feed, as described above. Additionally, other 
exchanges have similar market data fees

[[Page 25308]]

with comparable rates in place for their participants.\78\ The proposed 
fees are based on actual costs and are designed to enable the Exchange 
to recoup its applicable costs with the possibility of a reasonable 
profit on its investment as described in the Purpose and Statutory 
Basis sections. Competing exchanges are free to adopt comparable fee 
structures subject to the Commission's rule filing process. Allowing 
the Exchange, or any new market entrant, to waive fees for a period of 
time to allow it to become established encourages market entry and 
thereby ultimately promotes competition.
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    \78\ See supra note 43.
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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,\79\ and Rule 19b-4(f)(2) \80\ 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 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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    \79\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \80\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-PEARL-2024-15 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-PEARL-2024-15. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-PEARL-2024-15 and should be 
submitted on or before May 1, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\81\
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    \81\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07539 Filed 4-9-24; 8:45 am]
BILLING CODE 8011-01-P