[Federal Register Volume 89, Number 163 (Thursday, August 22, 2024)]
[Notices]
[Pages 67986-67999]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-18790]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100752; File No. SR-SAPPHIRE-2024-20]


Self-Regulatory Organizations; MIAX Sapphire, LLC; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule

August 16, 2024.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 8, 2024, MIAX Sapphire, LLC (``MIAX Sapphire'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') a proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to amend the MIAX Sapphire Options Exchange 
Fee Schedule \3\ (the ``Fee Schedule'') to establish: (1) one-time 
membership application fees for new MIAX Sapphire Members \4\; (2) 
monthly Trading Permit \5\

[[Page 67987]]

fees for Members; (3) per-instance Application Programming Interface 
(``API'') testing and certification fees for Members and non-Members; 
and (4) per-instance network connectivity testing and certification 
fees for Members and non-Members.
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    \3\ The Exchange previously submitted a rule filing pursuant to 
Section 19(b)(3)(A) of the Exchange Act (15 U.S.C. 78s(b)(3)(A)) and 
Rule 19b-4(f)(2) (17 CFR 240.19b-4(f)(2)) thereunder to establish, 
among other things, the initial structure of the Fee Schedule, 
including a section for Definitions of terms used throughout the Fee 
Schedule, which the Exchange cites to in this filing for certain 
capitalized terms. See SR-SAPPHIRE-2024-13 (not yet noticed by the 
Commission at the time of this filing).
    \4\ The term ``Member'' means an individual or organization that 
is registered with the Exchange pursuant to Chapter II of Exchange 
Rules for purposes of trading on the Exchange as an ``Electronic 
Exchange Member'' or ``Market Maker.'' Members are deemed 
``members'' under the Exchange Act. See the Definitions Section of 
the Fee Schedule and Exchange Rule 100.
    \5\ The term ``Trading Permit'' means a permit issued by the 
Exchange that confers the ability to transact on the Exchange. See 
Exchange Rule 100.
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    While changes to the Fee Schedule pursuant to this proposal are 
effective upon filing, the Exchange has designated these changes to be 
operative on August 12, 2024.
    The text of the proposed rule change is available on the Exchange's 
website at https://www.miaxglobal.com/markets/us-options/miax-options/rule-filings, at MIAX Sapphire's principal office, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend the Fee Schedule to establish: (1) 
one-time membership application fees for new Members; (2) monthly 
Trading Permit fees for Members; (3) per-instance API testing and 
certification fees for Members and non-Members; and (4) per-instance 
network connectivity testing and certification fees for Members and 
non-Members. The Exchange proposes to waive all of the above-mentioned 
fees during the Initial Waiver Period,\6\ which will be stated in the 
respective sections for each proposed fee in the Fee Schedule.
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    \6\ The term ``Initial Waiver Period'' means, for each 
applicable fee, the period of time from the initial effective date 
of the MIAX Sapphire Fee Schedule plus an additional six (6) full 
calendar months after the completion of the partial month of the 
Exchange launch. See the Definitions Section of the Fee Schedule.
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    On July 15, 2024, the Commission approved the Exchange's Form 1 
application and corresponding rules for registration as a national 
securities exchange under Section 6 of the Act.\7\ MIAX Sapphire then 
issued an alert that it intended to commence electronic trading in 
equity options on August 12, 2024.\8\ The Exchange issued an alert 
publicly announcing the proposed fees on July 23, 2024.\9\
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    \7\ See Securities Exchange Act Release No. 100539 (July 15, 
2024) (File No. 10-240) (In the Matter of the Application of MIAX 
Sapphire, LLC for Registration as a National Securities Exchange; 
Findings, Opinion, and Order of the Commission).
    \8\ See Press Release, Miami International Holdings Announces 
SEC Approval of MIAX Sapphire Exchange (July 17, 2024), available at 
https://www.miaxglobal.com/sites/default/files/press_release-files/MIAX_Press_Release_07172024.pdf.
    \9\ See Fee Change Alert, MIAX Sapphire Options Exchange--
Summary of Proposed Non-Transaction Fees (July 23, 2024), available 
at https://www.miaxglobal.com/alert/2024/07/23/miax-sapphire-options-exchange-summary-proposed-non-transaction-fees?nav=all.
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Membership Fees
One-Time Membership Application Fee
    The Exchange proposes to establish Section 3) of the Fee Schedule, 
Membership Fees, pursuant to which the Exchange will have separate 
subheadings for different types of membership fees. First, the 
Exchanges proposes to establish Section 3)a), Application for MIAX 
Sapphire Membership (One-Time Fee), in order to assess a one-time 
membership application fee based upon the applicant's status as either 
an Electronic Exchange Member (``EEM'') \10\ or Market Maker.\11\ The 
Exchange proposes that applicants for MIAX Sapphire membership as an 
EEM will be assessed a one-time application fee of $500 and applicants 
for MIAX Sapphire membership as a Market Maker will be assessed a one-
time application fee of $1,000.
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    \10\ The term ``Electronic Exchange Member'' or ``EEM'' means 
the holder of a Trading Permit who is a Member representing as agent 
Public Customer Orders or Non-Customer Orders on the Exchange and 
those non-Market Maker Members conducting proprietary trading. 
Electronic Exchange Members are deemed ``members'' under the 
Exchange Act. See Exchange Rule 100.
    \11\ The term ``Market Maker'' or ``MM'' means a Member 
registered with the Exchange for the purpose of making markets in 
options contracts traded on the Exchange and that is vested with the 
rights and responsibilities specified in Chapter VI of the 
Exchange's Rules. See Exchange Rule 100. The Exchange offers one 
type of Market Maker membership. See, generally, Chapter VI of the 
Exchange's Rules.
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    The Exchange proposes to state in the Fee Schedule that MIAX 
Sapphire will assess the one-time membership application fee to 
prospective Members on the earlier of (i) the date the applicant is 
certified in the membership system, or (ii) once an application for 
MIAX Sapphire membership is finally denied. The difference in the 
proposed one-time membership application fee to be charged to EEMs and 
Market Makers is because of the anticipated additional review and 
resources involved in processing a Market Maker's application, as 
Market Makers will have greater and more complex obligations with 
respect to doing business on the Exchange.\12\
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    \12\ See generally, Chapter VI of the Exchange's Rules.
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    The Exchange proposes to waive the one-time membership application 
fee for EEMs and Market Makers during the Initial Waiver Period.\13\ 
The Exchange believes that this will provide an incentive for market 
participants interested in becoming Members of the Exchange to submit 
early applications, which should result in increased potential order 
flow and liquidity as MIAX Sapphire begins electronic trading. Waiving 
certain fees is how exchanges have historically attracted membership 
and competed for order flow soon after launching operations.\14\ Even 
though the Exchange proposes to waive these particular fees during the 
Initial Waiver Period, the Exchange believes that it is appropriate to 
provide market participants with the overall structure of the fees by 
outlining the structure and amounts in the Fee Schedule so that there 
is general awareness that the Exchange intends to assess such fees upon 
expiration of the defined term of the Initial Waiver Period. MIAX 
Sapphire's proposed one-time membership application fees for EEMs and 
Market Makers are lower than, or similar to, the one-time application 
fees in place at the

[[Page 67988]]

Exchange's affiliates \15\ and other competing equity options 
exchanges.\16\
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    \13\ See supra note 6. Upon the expiration of the defined term 
of the Initial Waiver Period, which depends upon the month in which 
the Exchange commences operations, the Exchange will submit separate 
rule filings to remove the waiver language from the Fee Schedule for 
each applicable fee that was waived during the Initial Waiver 
Period.
    \14\ See, e.g., Securities Exchange Act Release Nos. 85393 
(March 21, 2019), 84 FR 11599 (March 27, 2019) (SR-EMERALD-2019-15) 
(waiving one-time membership application fees, trading permit fees, 
and testing and certification fees, among others, for an initial 
waiver period in order to attract membership and order flow upon 
launching operations) and 97893 (July 13, 2023), 88 FR 46285 (July 
19, 2023) (SR-MEMX-2023-13) (waiving membership fees for an initial 
waiver period of approximately six months upon launch of MEMX's 
options exchange).
    \15\ See Miami International Securities Exchange, LLC (``MIAX'') 
Fee Schedule, Section 3)a) (assessing a one-time membership 
application fee of $2,500 for an EEM and $3,000 for a MIAX Market 
Maker); MIAX Emerald, LLC (``MIAX Emerald'') Fee Schedule, Section 
3)a) (assessing a one-time membership application fee of $2,500 for 
an EEM and $3,000 for a MIAX Emerald Market Maker); and MIAX PEARL, 
LLC (``MIAX Pearl'') Fee Schedule, Section 3)a) (assessing a one-
time membership application fee of $500 for an EEM and $1,500 for a 
MIAX Pearl Options Market Maker). All references to ``MIAX Pearl'' 
in this filing are to the options trading facility of MIAX Pearl.
    \16\ See Cboe Exchange, Inc. (``Cboe'') Options Fee Schedule, 
Trading Permit Holder Application Fees section, page 12 (assessing 
an application fee of $3,000 for an individual trading permit holder 
and $5,000 for an organization); BOX Exchange LLC (``BOX'') Fee 
Schedule, Section I. Participant Fees, A. Initiation Fee (assessing 
new members a one-time fee of $2,500); and Nasdaq ISE, LLC (``Nasdaq 
ISE''), Options Rules, Options 7, Pricing Schedule, Section 9. Legal 
and Regulatory A. Application (assessing an application fee of 
$7,500 per firm for a primary market maker, $5,500 per firm for a 
competitive market maker, and $3,500 per firm for an electronic 
access member).
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Trading Permit Fees
    Next, the Exchange proposes to establish Section 3)b), Monthly 
Trading Permit Fees, which confer the ability to transact on MIAX 
Sapphire. Trading Permits will be issued to EEMs and Market Makers. The 
Exchange proposes that Members receiving Trading Permits during a 
particular calendar month will be assessed monthly Trading Permit fees 
as set forth in the Fee Schedule.
    The Exchange proposes to assess a monthly Trading Permit fee to 
EEMs (other than clearing firms) in any month the EEM is certified in 
the membership system and the EEM is credentialed to use one or more 
FIX Ports \17\ in the production environment. Further, the Exchange 
proposes that monthly Trading Permit fees will be assessed with respect 
to EEM Clearing Firms \18\ in any month the clearing firm is certified 
in the membership system to clear transactions on the Exchange. The 
Exchange proposes to assess EEMs a monthly Trading Permit fee of $500. 
The Exchange notes that its affiliates, MIAX, MIAX Pearl, and MIAX 
Emerald, charge Trading Permit fees to their Members. The Exchange's 
proposed Trading Permit fee structure for EEMs is based on the flat 
rate structure currently in place for MIAX and MIAX Emerald, and MIAX 
Sapphire's proposed Trading Permit fee for EEMs is lower than that of 
MIAX and MIAX Emerald.\19\
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    \17\ The term ``FIX Port'' means a FIX port that allows Members 
to send orders and other messages using the FIX protocol. See the 
Definitions section of the Fee Schedule. The term ``FIX Interface'' 
means the Financial Information Exchange interface used for 
submitting certain order types (as set forth in Rule 516) to the 
MIAX Sapphire System. See Exchange Rule 100.
    \18\ The term ``EEM Clearing Firm'' means an EEM that solely 
clears transactions on the Exchange and does not connect to the 
Exchange via either the FIX Interface or MEO Interface. See the 
Definitions section of the Fee Schedule.
    \19\ See MIAX Fee Schedule, Section 3)b) and MIAX Emerald Fee 
Schedule, Section 3)b).
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    The Exchange proposes that monthly Trading Permit fees will be 
assessed with respect to Market Makers in any month the Market Maker is 
certified in the membership system, is credentialed to use one or more 
MEO \20\ Ports in the production environment and is registered to quote 
in one or more classes. Notwithstanding the foregoing, the Exchange 
proposes that the calculation of the monthly Trading Permit fees for 
EEMs and Market Makers will be pro-rated based on the number of trading 
days during which the Trading Permit was in effect divided by the total 
number of trading days in that particular month multiplied by the 
monthly rate.
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    \20\ The term ``MEO Interface'' means a binary order interface 
used for submitting certain order types (as set forth in Rule 516 
and Rule 518) to the MIAX Sapphire System. See the Definitions 
Section of the Fee Schedule and Exchange Rule 100. Market Makers may 
connect to the System via the MEO Interface using a proprietary 
binary protocol (i.e., MEO Port) for the transmission of orders and 
other messages to and from the Exchange. See MIAX Sapphire Options 
Exchange User Manual, Section 5.01, Architecture, available at 
https://www.miaxglobal.com/sites/default/files/job-files/MIAX_Sapphire_User_Manual_v1.0.0_2024_06_18.pdf.
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    For the calculation of the monthly Market Maker Trading Permits 
fees, the Exchange proposes that the applicable fee rate will be the 
lesser of either the per class basis or percentage of total national 
average daily volume (``ADV'') measurement. The amount of the monthly 
Market Maker Trading Permit fee will be based upon the number of 
classes in which the Market Maker was registered to quote on any given 
day within the calendar month, or upon the class volume percentages set 
forth in the table in proposed Section 3)b) of the Fee Schedule. A 
Market Maker will be determined to be registered in a class if that 
Market Maker has been registered in one or more series in that 
class.\21\ The Exchange proposes to assess Market Makers the monthly 
Market Maker Trading Permit fee based on the greatest number of classes 
listed on MIAX Sapphire that the Market Maker registered to quote in on 
any given day within a calendar month. The class volume percentage is 
based on the total national ADV in classes listed on MIAX Sapphire in 
the prior calendar quarter. Newly listed option classes will be 
excluded from the calculation of the monthly Market Maker Trading 
Permit fee until the calendar quarter following their listing, at which 
time the newly listed option classes will be included in both the per 
class count and the percentage of total national average daily volume.
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    \21\ Market Makers self-select the series of options classes to 
make markets in each trading day. The Exchange does not appoint 
Market Makers to specific series of options classes. See Exchange 
Rule 602(a)-(b).
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    The Exchange proposes to adopt the following monthly Trading Permit 
fees for Market Makers: (i) $2,000 for Market Maker registrations in up 
to 10 option classes or up to 20% of option classes by national ADV; 
(ii) $4,000 for Market Maker registrations in up to 40 option classes 
or up to 35% of option classes by ADV; (iii) $6,000 for Market Maker 
registrations in up to 100 option classes or up to 50% of option 
classes by ADV; and (iv) $8,000 for Market Maker registrations in over 
100 option classes or over 50% of option classes by ADV up to all 
option classes listed on MIAX Sapphire.\22\ The Exchange notes that the 
proposed monthly Market Maker Trading Permit fee structure is the same 
as the Trading Permit fee structures in place at MIAX, MIAX Pearl and 
MIAX Emerald, and MIAX Sapphire's proposed Trading Permit fees are 
lower than the comparable Trading Permit fees by class or national ADV 
in place at the Exchange's affiliates.\23\ The Exchange also notes that 
other options exchanges assess certain of their membership fees at 
different rates, based upon a member's participation in classes on that 
exchange (as described in the table below), and, as such, this concept 
is not new or novel.
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    \22\ For example, if ``Market Maker 1'' elects to quote the top 
40 option classes which consist of 58% of the total national ADV in 
the prior calendar quarter, the Exchange would assess $4,000 to 
``Market Maker 1'' for the month which is the lesser of `up to 40 
classes' and `over 50% of classes by volume up to all classes listed 
on MIAX Sapphire.
    \23\ See MIAX Fee Schedule, Section 3)b) (assessing monthly 
market maker trading permit fees of $7,000 up to $22,000); MIAX 
Pearl Fee Schedule, Section 3)b) (assessing monthly market maker 
trading permit fees of $3,000 up to $9,000); and MIAX Emerald Fee 
Schedule, Section 3)b) (assessing monthly market maker trading 
permit fees of $7,000 up to $22,000).
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    The Exchange also proposes to adopt an alternative lower monthly 
Trading Permit fee for Market Makers who fall within the 3rd and 4th 
levels of the Market Maker Trading Permit fee table, which would apply 
to: (i) Market Maker registrations in up to 100 option classes or up to 
50% of option classes by volume; and (ii) Market Maker registrations in 
over 100 option classes or over 50% of option classes by volume up to 
all option classes listed on MIAX Sapphire. In particular, the Exchange 
proposes to adopt footnote ``a'' following the Market Maker Trading

[[Page 67989]]

Permit fee table for these monthly Trading Permit levels. Proposed 
footnote ``a'' will provide that if the Market Maker's total monthly 
executed volume during the relevant month is less than 0.015% of the 
total monthly executed volume reported by the Options Clearing 
Corporation (``OCC'') in the Market Maker account type for MIAX 
Sapphire-listed option classes for that month, then the monthly Trading 
Permit fee will be $5,000 instead of the fee otherwise applicable to 
such level (i.e., $6,000 or $8,000).
    The purpose of the alternative lower fee designated in proposed 
footnote ``a'' is to provide a lower fixed cost to those Market Makers 
who are quoting the entire Exchange market (or substantial amount of 
the Exchange market), as objectively measured by either number of 
classes registered or national ADV, but who do not otherwise execute a 
significant amount of volume on the Exchange. The Exchange believes 
that, by offering lower fixed costs to Market Makers that execute less 
volume, the Exchange will retain and attract smaller-scale Market 
Makers, which are an integral component of the option marketplace, but 
have been decreasing in number in recent years, due to industry 
consolidation and lower market maker profitability. Since these 
smaller-scale Market Makers utilize less Exchange capacity due to lower 
overall volume executed, the Exchange believes it is reasonable and 
equitable to offer such Market Makers a lower fixed cost. The 
Exchange's affiliates, MIAX, MIAX Pearl, and MIAX Emerald, also provide 
lower Trading Permit fees for Market Makers who quote the entire 
markets of those exchanges (or substantial amount of those markets), as 
objectively measured by either number of classes assigned/registered or 
national ADV, but who do not otherwise execute a significant amount of 
volume on MIAX, MIAX Pearl, or MIAX Emerald.\24\
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    \24\ See MIAX Fee Schedule, Section 3)b), note ``*''; MIAX Pearl 
Options Fee Schedule, Section 3)b), note ``**''; and MIAX Emerald 
Fee Schedule, Section 3)b), note `` [ssquf]''.
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    As illustrated by the table below, the Exchange's proposed Trading 
Permit fees are comparable to, or less than, the similar trading permit 
and monthly membership fees charged by competing options exchanges to 
their members. The Exchange believes other exchanges' membership and 
trading permit fees are useful examples of alternative approaches to 
providing and charging for membership and provides the table for 
comparison purposes only to show how the Exchange's proposed fees 
compare to fees currently charged by other options exchanges for 
similar membership and trading permits.

------------------------------------------------------------------------
                                      Monthly membership/trading permit
             Exchange                                fee
------------------------------------------------------------------------
MIAX Sapphire (as proposed).......  Market Maker Trading Permit fees:
                                    --Tier1: $2,000 for Market Maker
                                     Assignments in up to 10 option
                                     classes or up to 20% of option
                                     classes by national ADV.
                                    --Tier 2: $4,000 for Market Maker
                                     Assignments in up to 40 option
                                     classes or up to 35% of option
                                     classes by ADV.
                                    --Tier 3: $6,000 for Market Maker
                                     Assignments in up to 100 option
                                     classes or up to 50% of option
                                     classes by ADV.
                                    --Tier 4: $8,000 for Market Maker
                                     Assignments in over 100 option
                                     classes or over 50% of option
                                     classes by ADV up to all option
                                     classes listed on MIAX Sapphire.
                                    --Alternative lower rate of $5,000
                                     for Tiers 3 and 4 if the Market
                                     Maker's total monthly executed
                                     volume during the relevant month is
                                     less than 0.015% of the total
                                     monthly executed volume reported by
                                     OCC in the Market Maker account
                                     type for MIAX Sapphire-listed
                                     option classes.
BOX Options Exchange LLC (``BOX'')  Electronic Market Maker Trading
 \a\.                                Permit Fees:
                                    --Up to and including 10 classes:
                                     $4,000.
                                    --Up to and including 40 classes:
                                     $6,000.
                                    --Up to and including 100 classes:
                                     $8,000.
                                    --Over 100 classes: $10,000.
NYSE Arca, Inc. (``NYSE Arca'')     Options Trading Permits (``OTP'')
 \b\.                                for Market Makers:
                                    --1st OTP: $8,000 for up to 60
                                     option issues plus the bottom 45%
                                     of option issues.
                                    --2nd OTP: additional $6,000 for up
                                     to 150 option issues plus the
                                     bottom 45% of option issues.
                                    --3rd OTP: additional $5,000 for up
                                     to 500 option issues plus the
                                     bottom 45% of option issues.
                                    --4th OTP: additional $4,000 for up
                                     to 1,100 option issues plus the
                                     bottom 45% of option issues.
                                    --5th OTP: additional $3,000 for all
                                     option issues.
                                    --6th--9th OTP: additional $2,000
                                     for all option issues.
                                    --10th or more OTPs: $500 for all
                                     options issues.
NYSE American, LLC (``NYSE          ATP Trading Permits for Market
 American'') \c\.                    Makers:
                                    --1st ATP: $8,000 for up to 60
                                     option issues plus the bottom 45%
                                     of option issues.
                                    --2nd ATP: additional $6,000 for up
                                     to 150 option issues plus the
                                     bottom 45% of option issues.
                                    --3rd ATP: additional $5,000 for up
                                     to 500 option issues plus the
                                     bottom 45% of option issues.
                                    --4th ATP: additional $4,000 for up
                                     to 1,100 option issues plus the
                                     bottom 45% of option issues.
                                    --5th ATP: additional $3,000 for all
                                     option issues.
                                    --6th--9th ATP: additional $2,000
                                     for all option issues.
                                    --10th or more ATPs: additional $500
                                     for all option issues.
                                    Order Flow Provider ATP fee: $1,000.
                                    Clearing Member ATP fee: $1,000.
Nasdaq PHLX LLC (``Nasdaq PHLX'')   Streaming Quote Trader Permit Fees:
 \d\.                               --Tier 1 (up to 200 option classes):
                                     $0.00.
                                    --Tier 2 (up to 400 option classes):
                                     $2,200.
                                    --Tier 3 (up to 600 option classes):
                                     $3,200.
                                    --Tier 4 (up to 800 option classes):
                                     $4,200.
                                    --Tier 5 (up to 1,000 option
                                     classes): $5,200.
                                    --Tier 6 (up to 1,200 option
                                     classes): $6,200.
                                    --Tier 7 (all option classes):
                                     $7,200.
                                    Remote Market Maker Organization
                                     Permit Fees:
                                    --Tier 1 (less than 100 option
                                     classes): $5,000.
                                    --Tier 2 (more than 100 and less
                                     than 999 option classes): $8,000.

[[Page 67990]]

 
                                    --Tier 3 (1,000 or more option
                                     classes): $11,000.
------------------------------------------------------------------------
\a\ See BOX Fee Schedule, Section 1.C., Electronic Market Maker Trading
  Permit Fees.
\b\ See NYSE Arca Options Fees and Charges, OTP Trading Participant
  Rights, p.1. Under this fee structure, it effectively costs a Market
  Maker $26,000 per month to trade all options issues on NYSE Arca
  Options.
\c\ See NYSE American Options Fee Schedule, Section III.A., Monthly
  Trading Permit, Rights, Floor Access and Premium Product Fees, p. 23.
  Under this fee structure, it effectively costs a Market Maker $26,000
  per month to trade all options issues on NYSE American Options.
\d\ See Nasdaq PHLX Options 7 Pricing Schedule, Section 8. Membership
  Fees, B-C, Streaming Quote Trader (``SQT'') and Remote Market Maker
  Organization Fees.

    The Exchange proposes to waive all monthly Trading Permit fees for 
EEMs and Market Makers during the Initial Waiver Period. The Exchange 
believes that this will provide an incentive for market participants to 
become Members of the Exchange sooner, which should result in increased 
potential order flow and liquidity as MIAX Sapphire begins electronic 
trading. Even though the Exchange proposes to waive these particular 
fees during the Initial Waiver Period, the Exchange believes that is 
appropriate to provide market participants with the overall structure 
of the fees by outlining the structure and amounts in the Fee Schedule 
so that there is general awareness that the Exchange intends to assess 
such fees upon expiration of the defined term of the Initial Waiver 
Period.
Testing and Certification Fees
    Next, the Exchange proposes to establish Section (4), Testing and 
Certification Fees, applicable to Members and non-Members.
API Testing and Certification Fees--Members
    The Exchange proposes to establish Section 4)a), Member Application 
Programming Interface (``API'') Testing and Certification Fee, pursuant 
to which the Exchange proposes to assess an API testing and 
certification fee to all Members. An API makes it possible for a 
Member's software to communicate with MIAX Sapphire software 
applications, and is subject to Member testing with, and certification 
by, MIAX Sapphire. The Exchange proposes to offer four types of ports: 
(i) the FIX Port; \25\ (ii) the MEO Port; \26\ (iii) the FIX Drop Copy 
(``FXD'') Port; \27\ and (iv) the Clearing Trade Drop (``CTD'') 
Port.\28\
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    \25\ See supra note 17.
    \26\ See supra note 20.
    \27\ The term ``FXD'' or ``FIX Drop Copy Port'' means a 
messaging interface that provides a copy of real-time trade 
execution, trade correction and trade cancellation information to 
FIX Drop Copy Port users who subscribe to the service. FXD Port 
users are those users who are designated by an EEM to receive the 
information and the information is restricted for use by the EEM 
only. See the Definitions Section of the Fee Schedule.
    \28\ A ``CTD Port'' or ``Clearing Trade Drop Port'' provides an 
Exchange Member with a real-time clearing trade updates. The updates 
include the Member's clearing trade messages on a low latency, real-
time basis. The trade messages are routed to a Member's connection 
containing certain information. The information includes, among 
other things, the following: (i) trade date and time; (ii) symbol 
information; (iii) trade price/size information; (iv) Member type 
(for example, and without limitation, Market Maker, Electronic 
Exchange Member, Broker-Dealer); and (v) Exchange MPID for each side 
of the transaction, including Clearing Member MPID. See the 
Definitions Section of the Fee Schedule.
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    The Exchange proposes to assess API testing and certification fees 
for EEMs (other than clearing firms) (i) initially per API for FIX, FXD 
and CTD in the month the EEM has been credentialed to use one or more 
ports in the production environment for the tested API, and (ii) each 
time an EEM initiates a change to its system that requires testing and 
certification. The Exchange proposes to assess API testing and 
certification fees for EEM Clearing Firms (i) initially per API in the 
month the EEM Clearing Firm has been credentialed to use one or more 
CTD ports in the production environment, and (ii) each time an EEM 
Clearing Firm initiates a change to its system that requires testing 
and certification. The Exchange proposes to assess API testing and 
certification fees for Market Makers (i) initially per API for CTD and 
MEO in the month the Market Maker has been credentialed to use one or 
more ports in the production environment for the tested API and the 
Market Maker has been registered to quote in one or more classes, and 
(ii) each time a Market Maker initiates a change to its system that 
requires testing and certification.
    In particular, the Exchange proposes to assess EEMs a per-instance 
API testing and certification fee of $1,000 and Market Makers a per-
instance API testing and certification fee of $2,500. The proposed fees 
represent anticipated costs to be incurred by the Exchange as it works 
with each Member for testing and certifying that the Member's software 
systems communicate properly with MIAX Sapphire's interfaces.
    The proposed API testing and certification fees for Members are the 
same as the API testing and certification fees for Members of the 
Exchange's affiliates, MIAX and MIAX Emerald, including the Exchange's 
proposed amounts for EEMs and Market Makers and the structure of the 
proposed fees.\29\ In order to provide an incentive to prospective 
Members to apply early for membership and to engage in API testing and 
certification such that they will be able to trade options on MIAX 
Sapphire as soon as possible, the Exchange proposes to waive the API 
testing and certification fees assessable to Members for all ports 
during the Initial Waiver Period. Even though the Exchange proposes to 
waive this particular fee during the Initial Waiver Period, the 
Exchange believes that is appropriate to provide market participants 
with the overall structure of the fees by outlining the structure and 
amounts in the Fee Schedule so that there is general awareness that the 
Exchange intends to assess such fees upon expiration of the defined 
term of the Initial Waiver Period.
---------------------------------------------------------------------------

    \29\ See MIAX Fee Schedule, Section 4)a) and MIAX Emerald Fee 
Schedule, Section 4)a).
---------------------------------------------------------------------------

API Testing and Certification Fees--Non-Members
    The Exchange proposes to establish Section 4)b), Non-Member API 
Testing and Certification Fee, pursuant to which the Exchange proposes 
to assess an API testing and certification fee to all non-Members, 
including Third Party Vendors,\30\ Service Bureaus,\31\ and Extranet 
Providers,\32\ whose software interfaces with MIAX Sapphire software. 
As with Members, an API makes it possible for the software of Third 
Party Vendors, Service Bureaus, Extranet Providers and other non-
Members to communicate with MIAX Sapphire software applications, and is

[[Page 67991]]

subject to testing with, and certification by, MIAX Sapphire.
---------------------------------------------------------------------------

    \30\ The term ``Third Party Vendor'' means a subscriber of MIAX 
Sapphire's market and other data feeds, which they in turn use for 
redistribution purposes. See the Definitions Section of the Fee 
Schedule.
    \31\ The term ``Service Bureau'' means a technology provider 
that offers and supplies technology and technology services to a 
trading firm that does not have its own proprietary system. See the 
Definitions Section of the Fee Schedule.
    \32\ The term ``Extranet Provider'' means a technology provider 
that connects with MIAX Sapphire systems and in turn provides such 
connectivity to MIAX Sapphire participants that do not connect 
directly with MIAX Sapphire. See the Definitions Section of the Fee 
Schedule.
---------------------------------------------------------------------------

    The Exchange proposes to assess API testing and certification fees 
for all non-Members: (i) initially per API for FIX, MEO, FXD, and CTD 
in the month the non-Member has been credentialed to use one or more 
ports in the production environment for the tested API, and (ii) each 
time a non-Member initiates a change to its system that requires 
testing and certification. The Exchange proposes that API testing and 
certification fees will not be assessed in situations where the 
Exchange initiates a mandatory change to the Exchange's system that 
requires testing and certification. In particular, the Exchange 
proposes to assess all non-Members a per-instance API testing and 
certification fee of $1,200. The proposed fee represents anticipated 
costs to be incurred by the Exchange as it works with each non-Member 
for testing and certifying that the non-Member's software systems 
communicate properly with MIAX Sapphire's interfaces.
    The proposed API testing and certification fee for non-Members is 
the same as the API testing and certification fee for non-Members of 
the Exchange's affiliates, MIAX and MIAX Emerald, including the 
proposed amount and the structure of the proposed fee.\33\ In order to 
provide an incentive to prospective non-Members to engage in API 
testing and certification such that they will be able to trade options 
on MIAX Sapphire as soon as possible, the Exchange proposes to waive 
the API testing and certification fee assessable to non-Members for all 
ports during the Initial Waiver Period. Even though the Exchange 
proposes to waive this particular fee during the Initial Waiver Period, 
the Exchange believes that it is appropriate to provide market 
participants with the overall structure of the fee by outlining the 
structure and amount in the Fee Schedule so that there is general 
awareness that the Exchange intends to assess such fee upon expiration 
of the defined term of the Initial Waiver Period.
---------------------------------------------------------------------------

    \33\ See MIAX Fee Schedule, Section 4)b) and MIAX Emerald Fee 
Schedule, Section 4)b).
---------------------------------------------------------------------------

    The Exchange believes it is necessary to charge an API testing and 
certification fee to Members and non-Members because of the anticipated 
time and resources spent to ensure that Member and non-Member APIs 
function correctly to prevent any system malfunction. The price 
differential in API testing and certification fees for EEMs and non-
Members is because, in the experience of the Exchange's affiliates, EEM 
testing takes less time than non-Member testing as EEMs have more 
experience testing these systems with exchanges, resulting generally in 
fewer questions and issues arising during the testing and certification 
process. Likewise, the price differential in API testing and 
certification fees for Market Makers compared to EEMs and non-Members 
is because, in the experience of the Exchange's affiliates, testing and 
certification of APIs for Market Makers requires more Exchange 
resources as Market Makers have greater and more complex obligations 
with respect to doing business on the Exchange.\34\
---------------------------------------------------------------------------

    \34\ See supra note 12.
---------------------------------------------------------------------------

Network Connectivity Testing and Certification Fee--Members
    The Exchange proposes to establish Section 4)c), Member Network 
Connectivity Testing and Certification Fee, pursuant to which MIAX 
Sapphire will assess a fee for Members to establish electronic 
connections with the Exchange. The Exchange proposes to assess Members 
a network connectivity testing and certification fee: (i) initially per 
connection in the month the Member has been credentialed to use any API 
or market data feeds in the production environment utilizing the tested 
network connection; and (ii) each time a Member initiates a change to 
its system that requires network connectivity testing and 
certification. The Exchange proposes that network connectivity testing 
and certification fees will not be assessed in situations where the 
Exchange initiates a mandatory change to the Exchange's system that 
requires testing and certification. The Exchange also proposes that 
Member network connectivity testing and certification fees will not be 
assessed for testing and certification of connectivity to the 
Exchange's disaster recovery facility. The Exchange notes that Members 
utilizing a single, shared 1 Gigabit (``Gb'') cross-connect to connect 
to the trading platforms, market data systems, test systems, and 
disaster recovery facilities of the Exchange, MIAX, MIAX Pearl, and 
MIAX Emerald will only be assessed one network connectivity testing and 
certification fee per connection tested, regardless of the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities accessed via such connection. The Exchange proposes to 
assess Members a network connectivity testing and certification fee of 
$1,000 per Member per 1Gb connection tested and $4,000 per Member per 
10Gb ultra-low latency (``ULL'') connection tested.
    The proposed fee amounts are the same as the fees currently 
assessed for the same services at the Exchanges' affiliates, MIAX, MIAX 
Pearl, and MIAX Emerald.\35\ In order to provide an incentive to 
prospective Members to engage in network connectivity testing and 
certification such that they will be able to trade options on MIAX 
Sapphire as soon as possible, the Exchange proposes to waive the 
network connectivity testing and certification fees assessable to 
Members for all connections during the Initial Waiver Period. Even 
though the Exchange proposes to waive this particular fee during the 
Initial Waiver Period, the Exchange believes that it is appropriate to 
provide market participants with the overall structure of the fees by 
outlining the structure and amounts in the Fee Schedule so that there 
is general awareness that the Exchange intends to assess such fees upon 
expiration of the defined term of the Initial Waiver Period.
---------------------------------------------------------------------------

    \35\ See MIAX Fee Schedule, Section 4)c); MIAX Pearl Options Fee 
Schedule, Section 4)c); and MIAX Emerald Fee Schedule, Section 4)c).
---------------------------------------------------------------------------

Network Connectivity Testing and Certification Fee--Non-Members
    The Exchange proposes to establish Section 4)d), Non-Member Network 
Connectivity Testing and Certification Fee, pursuant to which MIAX will 
assess a fee for non-Members to establish electronic connections with 
the Exchange. The Exchange proposes to assess non-Member network 
connectivity testing and certification fees: (i) initially per 
connection in the month the non-Member has been credentialed to use any 
API or market data feeds in the production environment utilizing the 
tested network connection; and (ii) each time a non-Member initiates a 
change to its system that requires network connectivity testing and 
certification. The Exchange proposes that network connectivity testing 
and certification fees will not be assessed in situations where the 
Exchange initiates a mandatory change to the Exchange's system that 
requires testing and certification. The Exchange also proposes that 
non-Member network connectivity testing and certification fees will not 
be assessed for testing and certification of connectivity to the 
Exchange's disaster recovery facility. The Exchange notes that non-
Members utilizing a single, shared 1Gb cross-connect to connect to the 
trading platforms, market data systems, test systems, and disaster 
recovery facilities of the Exchange, MIAX, MIAX Pearl,

[[Page 67992]]

and MIAX Emerald will only be assessed one network connectivity testing 
and certification fee per connection tested, regardless of the trading 
platforms, market data systems, test systems, and disaster recovery 
facilities accessed via such connection. The Exchange proposes to 
assess non-Members a network connectivity testing and certification fee 
of $1,200 per non-Member per 1Gb connection tested and $4,200 per non-
Member per 10Gb ULL connection tested.
    The proposed fee amounts are the same as the fees currently 
assessed for the same services at the Exchanges' affiliates, MIAX, MIAX 
Pearl, and MIAX Emerald.\36\ In order to provide an incentive to 
prospective non-Members to engage in network connectivity testing and 
certification such that they will be able to trade options on MIAX 
Sapphire as soon as possible, the Exchange proposes to waive the 
network connectivity testing and certification fees assessable to non-
Members for all connections during the Initial Waiver Period. Even 
though the Exchange proposes to waive this particular fee during the 
Initial Waiver Period, the Exchange believes that it is appropriate to 
provide market participants with the overall structure of the fee by 
outlining the structure and amounts in the Fee Schedule so that there 
is general awareness that the Exchange intends to assess such fees upon 
expiration of the defined term of the Initial Waiver Period.
---------------------------------------------------------------------------

    \36\ See MIAX Fee Schedule, Section 4)d); MIAX Pearl Fee 
Schedule, Section 4)d); and MIAX Emerald Fee Schedule, Section 4)d).
---------------------------------------------------------------------------

    The Member and non-Member network connectivity testing and 
certification fees represent expected installation and support costs to 
be incurred by the Exchange as it works with each Member and non-Member 
to make sure there are appropriate electronic communication connections 
with MIAX Sapphire. The Exchange's affiliates, MIAX, MIAX Pearl, and 
MIAX Emerald, charge the same fees for the same services for their 
Members and non-Members.\37\ The Exchange proposes to assess a higher 
network connectivity testing and certification fee to non-Members than 
to Members, similar to how MIAX, MIAX Pearl, and MIAX Emerald assess 
such fees to their Members and non-Members. The proposed higher fees 
charged to non-Members reflects the anticipated greater amount of time 
to be spent by MIAX Sapphire employees testing and certifying non-
Members. In the experience of the Exchange's affiliates, Member network 
connectivity testing and certification takes less time than non-Member 
network connectivity testing and certification because Members have 
more experience testing these systems with exchanges and generally have 
fewer questions and issues arise during the testing and certification 
process.
---------------------------------------------------------------------------

    \37\ See supra notes 35 and 36.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that its proposal to amend the Fee Schedule 
is consistent with Section 6(b) of the Act \38\ in general, and 
furthers the objectives of Section 6(b)(4) of the Act \39\ in 
particular, in that it is an equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes the proposal furthers 
the objectives of Section 6(b)(5) of the Act in that it is designed to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general protects investors and the public 
interest and is not designed to permit unfair discrimination between 
customers, issuers, brokers and dealers.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78f(b).
    \39\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

Membership Application Fees (One-Time Fee)
    The Exchange believes that the proposed one-time membership 
application fees for EEMs and Market Makers are consistent with the 
provisions of Section 6 of the Act,\40\ in general, and with Sections 
6(b)(4) and 6(b)(5) of the Act,\41\ in particular, in that they provide 
for the equitable allocation of reasonable dues, fees and other charges 
among Members and other persons using its facilities and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers, as further discussed below.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f.
    \41\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes the proposed one-time membership application 
fees are reasonable, equitable and not unfairly discriminatory because 
they are one-time fees that are reasonably related to (and designed to 
recover) the Exchange's anticipated cost associated with reviewing and 
approving membership applications, which consists primarily of the time 
and resources of Exchange personnel to process the membership 
application and conduct the new Member on-boarding process. The 
Exchange's process for reviewing and approving potential new Members 
will involve several steps and participation from personnel in multiple 
Exchange departments, as follows: (i) reviewing prospective Member 
information provided in various membership forms, including, when 
necessary, consulting with the Financial Industry Regulatory Authority 
(``FINRA'') pursuant to the Exchange's regulatory services agreement; 
\42\ (ii) the on-boarding process, where Exchange personnel contacts 
the firm for an introductory meeting with the Exchange's Business Team 
to discuss goals, answer questions and schedule the technical on-
boarding meeting; (iii) the technical on-boarding meeting, where the 
Exchange's on-boarding team and Trading Operations Team guides the firm 
through the on-boarding process with Exchange personnel available to 
discuss network connectivity, APIs, Exchange functionality and 
operational issues; and (iv) follow-ups with the Trading Operations 
Team to coordinate testing, as necessary, until the firm is active in 
the Exchange's live trading environment.\43\
---------------------------------------------------------------------------

    \42\ See Securities Exchange Act Release No. 98746 (October 13, 
2023), 88 FR 72116 (October 19, 2012) (File No. 10-240), Exhibit L 
(describing the Exchange's proposed regulatory program, including 
regulatory services agreement with FINRA).
    \43\ See, generally, the Exchange's Membership and Technical 
Onboarding process and forms, available at https://www.miaxglobal.com/markets/us-options/sapphire-options/membership.
---------------------------------------------------------------------------

    As a self-regulatory organization, MIAX Sapphire's Membership Team 
will review applicants to ensure that each applicant for membership 
meets the Exchange's qualification criteria prior to approval. The 
Membership Team, in conjunction with the regulatory department, reviews 
the registration and qualification of an applicant's associated 
persons, the applicant's financial health, the validity of its clearing 
relationship, and its disciplinary history. The Membership Team also 
provides ongoing support to Members with respect to membership changes, 
registration, and other questions that commonly arise from Members 
regarding such matters. The Exchange believes that it is consistent 
with the Act to charge the one-time membership application fees to EEMs 
and Market Makers as it is reasonable to cover anticipated costs of 
administering its membership program.
    The Exchange believes that competitive forces constrain what the 
Exchange can charge as one-time membership application fees because if 
the Exchange proposes to charge a membership application fee that 
market

[[Page 67993]]

participants deem to be excessive, market participants would simply not 
become Members of the Exchange. The Exchange believes that the proposed 
one-time membership application fees for EEMs and Market Makers are 
reasonable because the proposed fees are lower than, or similar to, the 
one-time application fees in place at the Exchange's affiliates \44\ 
and other competing equity options exchanges.\45\
---------------------------------------------------------------------------

    \44\ See supra note 15.
    \45\ See supra note 16.
---------------------------------------------------------------------------

    The Exchange believes the difference in the proposed one-time 
membership application fee to be charged to EEMs and Market Makers is 
an equitable allocation of reasonable dues and fees pursuant to Section 
6(b)(4) of the Act \46\ because of the anticipated additional review 
and resources involved in processing a Market Maker's application as 
opposed to an EEM's application, as Market Makers will have greater and 
more complex obligations with respect to doing business on the 
Exchange.\47\
---------------------------------------------------------------------------

    \46\ 15 U.S.C. 78f(b)(4).
    \47\ See supra note 12.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to waive the one-time 
membership application fees for EEMs and Market Makers for the Initial 
Waiver Period to provide an incentive for market participants to apply 
for Exchange membership in connection with the launch of MIAX Sapphire. 
The Exchange believes waiving the one-time membership application fee 
is reasonable, equitable and not unfairly discriminatory because the 
waiver will apply uniformly to all new Members of the Exchange.
    The Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to waive all one-time membership application fees during 
the Initial Waiver Period in order to provide an incentive for market 
participants interested in becoming Members of the Exchange to submit 
early applications, which should result in increased potential order 
flow and liquidity as MIAX Sapphire begins electronic trading.
    At launch and for a limited time, the Exchange anticipates having a 
smaller number of market participants than the Exchange's affiliated 
markets, which are more established having launched years ago, as well 
as several competing options exchanges.\48\ The Exchange also notes 
that it will not seek to recoup any of the actual costs associated with 
reviewing membership applications that will take place from the launch 
of operations through the expiration of the Initial Waiver Period, 
which will be in excess of six months. By the completion of the Initial 
Waiver Period, the Exchange anticipates the majority of market 
participants will have already completed their membership applications 
and on-boarding as new Members of the Exchange, all of whom will not 
pay the one-time membership application fee.\49\ This means that the 
Exchange will likely not collect the majority of membership application 
fees for its Members. The Exchange believes it will assume 
approximately 100% of the anticipated costs associated with processing 
membership applications for the majority of Member firms approved by 
the Exchange (similar to MIAX, MIAX Pearl, and MIAX Emerald).\50\ 
Accordingly, the Exchange believes that it is reasonable, equitable, 
and not unfairly discriminatory to waive the one-time membership 
application fees during the Initial Waiver Period to attract market 
participants to the Exchange. The proposed one-time membership 
application fees are not designed to be a profit center for the 
Exchange; rather, the proposed fees are simply to recover some of the 
anticipated costs and employee time with reviewing new member 
applications for EEMs and Market Makers once the Exchange has already 
on-boarded the majority of its anticipated Members.
---------------------------------------------------------------------------

    \48\ See, e.g., MIAX Membership Directory (last visited July 15, 
2024), available at https://www.miaxglobal.com/miax_options_exchange_members.pdf (providing a list of 47 MIAX 
members); MIAX Emerald Membership Director (last visited July 15, 
2024), available at https://www.miaxglobal.com/miax_emerald_options_exchange_members.pdf (providing a list of 37 
MIAX Emerald members); MIAX Pearl Membership Directory (last visited 
July 15, 2024), available at https://www.miaxglobal.com/miax_pearl_options_exchange_members.pdf (providing a list of 41 MIAX 
Pearl members); NYSE American Options Membership Directory (last 
visited July 15, 2024), available at https://www.nyse.com/markets/american-options/membership#directory (providing a list of 74 NYSE 
American members); and Nasdaq ISE Membership (last visited July 15, 
2024), available at https://www.nasdaqtrader.com/Trader.aspx?id=Membership (providing a list of 76 Nasdaq ISE 
members).
    \49\ As noted by the Exchange's affiliate when it filed to 
introduce a one-time membership application fee, MIAX Emerald had 35 
members that became members during the period of time that the one-
time membership application fee was waived, which are fees MIAX 
Emerald will not be able to recoup. See Securities Exchange Act 
Release No. 91030 (February 1, 2021), 86 FR 8465 (February 5, 2021) 
(SR-EMERALD-2021-01) (``[MIAX Emerald] currently has 35 Members, all 
of whom did not pay the one-time membership application fee, as it 
was waived for the Waiver Period when these firms all became Members 
of the Exchange. Further, the majority of firms that are Members of 
the Exchange's affiliate options exchanges, MIAX and MIAX PEARL, 
also became Members of those exchanges during similar Waiver Periods 
for the MIAX and MIAX PEARL one-time membership application fees. 
Accordingly, the Exchange (and MIAX and MIAX PEARL) have assumed 
approximately 100% of the costs associated with processing 
membership applications for the majority of Member firms approved by 
the Exchange, MIAX, and MIAX PEARL.'') (footnote omitted).
    \50\ See id.
---------------------------------------------------------------------------

    Although the Exchange proposes to waive the one-time membership 
application fees for the Initial Waiver Period, the Exchange proposes 
to include the proposed fee structure and amounts in the Fee Schedule 
in order to communicate its intent to charge the one-time membership 
application fee to EEMs and Market Makers upon the expiration of the 
defined term of the Initial Waiver Period. As a new exchange entrant, 
the Exchange chooses not to charge for new Members to join the Exchange 
until the expiration of the Initial Waiver Period to encourage market 
participants to trade on the Exchange and experience the quality of the 
Exchange's technology and trading functionality. This practice is not 
uncommon. New exchanges often do not charge fees or charge lower fees 
for certain services such as memberships/trading permits to attract 
order flow to an exchange, and later, once there is sufficient depth 
and breadth of liquidity, amend their fees to reflect the true value of 
those services, absorbing all costs to provide those services in the 
meantime. Allowing new exchange entrants time to build and sustain 
market share through various pricing incentives, before establishing 
membership fees, encourages market entry and promotes competition. It 
also enables new exchanges to mature their markets and allow market 
participants to trade on the new exchanges without membership fees 
serving as a potential barrier to attracting memberships and order 
flow. The waiver is also a protection to new Members. If new Members 
join the Exchange in order to participate on MIAX Sapphire and 
subsequently decide that they do not want to continue trading on MIAX 
Sapphire prior to expiration of the Initial Waiver Period, they can 
cancel their membership without incurring the one-time membership 
application fee.
Trading Permit Fees
    The Exchange plans to commence operations on August 12, 2024 \51\ 
and waive monthly Trading Permit fees for Market Makers and EEMs to 
trade on the Exchange during the Initial Waiver Period.\52\ Although 
the Exchange proposes to waive the Trading Permit fees during the 
Initial Waiver Period, the Exchange proposes to establish an initial 
fee structure to communicate the Exchange's intent to charge Trading

[[Page 67994]]

Permit fees upon the expiration of the Initial Waiver Period. As a new 
exchange entrant, the Exchange chooses to offer Trading Permits for 
free to encourage market participants to trade on the Exchange and 
experience, among other things, the quality of the Exchange's 
technology and trading functionality. This practice is not uncommon. 
New exchanges often do not charge fees or charge lower fees for certain 
services such as memberships and trading permits to attract order flow 
to an exchange, and later amend their fees to reflect the true value of 
those services, absorbing all costs to provide those services in the 
meantime. Allowing new exchange entrants time to build and sustain 
market share through various pricing incentives before increasing 
certain fees encourages market entry and promotes competition. It also 
enables new exchanges to mature their markets and allow market 
participants to trade on the new exchanges without fees serving as a 
potential barrier to attracting memberships and order flow.\53\
---------------------------------------------------------------------------

    \51\ See supra note 8.
    \52\ See supra note 6.
    \53\ See e.g., Securities Exchange Act Release Nos. 94894 (May 
11, 2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (stating, 
``[t]he Exchange established this lower (when compared to other 
options exchanges in the industry) Participant Fee in order to 
encourage market participants to become Participants of BOX . . .'') 
and 90076 (October 2, 2020), 85 FR 63620 (October 8, 2020) (SR-MEMX-
2020-10) (``MEMX Membership Fee Proposal'') (proposing to adopt the 
initial fee schedule and stating that ``[u]nder the initial proposed 
Fee Schedule, the Exchange proposes to make clear that it does not 
charge any fees for membership, market data products, physical 
connectivity or application sessions.''). MEMX has seen its market 
share increase and subsequently proposed to adopt a membership fee 
and fees for connectivity. See Securities Exchange Act Release Nos. 
93927 (January 7, 2022), 87 FR 2191 (January 13, 2022) (SR-MEMX-
2021-19) (proposing to adopt membership fees); and 95299 (July 15, 
2022), 87 FR 43563 (July 21, 2022) (SR-MEMX-2022-17) (proposing to 
adopt fees for connectivity). See also, e.g., Securities Exchange 
Act Release No. 88211 (February 14, 2020), 85 FR 9847 (February 20, 
2020) (SR-NYSENAT-2020-05).
---------------------------------------------------------------------------

    The Exchange believes its proposed Trading Permit fees are 
reasonable and not unfairly discriminatory because the proposed Trading 
Permit fees are lower than comparable membership/trading permit fees 
assessed by competing options exchanges.\54\ Further, the Exchange 
believes that the proposal is reasonably designed to compete with other 
options exchanges by incentivizing market participants to register as 
Market Makers and EEMs on the Exchange in a manner than enables the 
Exchange to improve its overall competitiveness and strengthen market 
quality for all market participants upon launch. As stated above, the 
Exchange believes the proposed Market Maker Trading Permit fees are an 
appropriate balance between offsetting the anticipated costs to which 
Market Makers cost the Exchange and continuing to incentivize Market 
Makers to access and make a market on the Exchange.
---------------------------------------------------------------------------

    \54\ See supra ``Monthly Membership/Trading Permit Fee'' table.
---------------------------------------------------------------------------

    The proposed fees are equitable and not unfairly discriminatory as 
the fees apply equally to all Market Makers. As such, all similarly 
situated Market Makers, with the same number of class registrations 
will be subject to the same Market Maker Trading Permit fee. As 
proposed, a Market Maker would be determined to be registered in a 
class if that Market Maker has been registered in one or more series in 
that class. Exchange Rule 602(a) provides that a Member that has 
qualified as a Market Maker may register to make markets in individual 
series of options. The proposed tiered structure is based on the number 
of options classes the Market Maker is registered in, not the number of 
series within the options class. The Exchange believes its proposal is 
fair and reasonable because the proposed tiered structure would 
encourage Market Makers to register in more series within each options 
class as each additional series in that class would not count towards 
the particular Market Maker's overall number of classes assigned, and 
cause them to qualify for a higher tier and higher fee.
    The Exchange also believes that assessing lower fees to Market 
Makers that quote in fewer classes is reasonable and appropriate as it 
will allow the Exchange to retain and attract smaller-scale Market 
Makers, which are an integral component of the options industry 
marketplace. Since these smaller Market Makers typically utilize less 
bandwidth and capacity on the Exchange network due to the lower number 
of quoted classes, the Exchange believes it is reasonable and 
appropriate to offer such Market Makers a lower fee, designated in 
proposed footnote ``a.'' following the proposed Market Maker Trading 
Permit fee table. The Exchange also notes that the Exchange's 
affiliates, MIAX, MIAX Pearl, and MIAX Emerald, provide lower Trading 
Permit fees for Market Makers who quote the entire markets of those 
exchanges (or substantial amount of those markets), as objectively 
measured by either number of classes assigned or national ADV, but who 
do not otherwise execute a significant amount of volume on MIAX, MIAX 
Pearl, or MIAX Emerald,\55\ and, as such, this concept is not new or 
novel.
---------------------------------------------------------------------------

    \55\ See supra note 24.
---------------------------------------------------------------------------

    The Exchange believes the proposed tiered structure of the Market 
Maker Trading Permit fees is reasonable because Market Makers will be 
charged monthly fees based on the greatest number of classes quoted on 
any given trading day in a calendar month or upon certain class volume 
percentages of national ADV. Under the proposed fee structure, the fees 
increase as the number of classes quoted by a Market Maker increases. 
The Exchange believes this structure is reasonable and not unfairly 
discriminatory because the Exchange's system requires increased 
performance and capacity in order to provide the opportunity for Market 
Makers to quote in a higher number of options classes on the Exchange. 
Specifically, more classes that are actively quoted on the Exchange by 
a Market Maker will require increased memory for record retention, 
increased bandwidth for optimized performance, increased 
functionalities on each application layer, and increased optimization 
with regard to surveillance and monitoring of such classes quoted. As 
such, basing the Market Maker Trading Permit fee on the greatest number 
of classes quoted in on any given day in a calendar month is reasonable 
and not unfairly discriminatory when taking into account how the 
increased number of quoted classes directly impacts the costs and 
resources required for the Exchange to operate.
    There is no requirement, regulatory or otherwise, that any broker-
dealer connect to and access any (or all of) the available options 
exchanges. As noted above, the Exchange anticipates a smaller number of 
market participants will become Members of the Exchange from launch 
through the end of the Initial Waiver Period, which will constitute the 
majority of the Exchange's membership. A competing options exchange 
noted in a similar proposal to amend their own trading permit fees 
that, at the time of that filing in 2022, of the 62 market making firms 
that were registered as Market Makers across Cboe, MIAX, and BOX, 42 
firms accessed only one of the three exchanges.\56\ In addition, the 
Exchange's affiliates, MIAX, MIAX Pearl, and MIAX

[[Page 67995]]

Emerald, have a total of 48 Members (as of July 15, 2024). Of those 48 
total members, 36 are members of all three exchanges, four are members 
of only two exchanges, and eight are members of only one exchange. Of 
the members that are currently Market Makers at the Exchange's 
affiliates, five are not registered as Market Makers on MIAX Emerald, 
five are not registered as Market Makers on MIAX Pearl, and one is not 
registered as a Market Maker on MIAX.\57\ The above data evidences that 
a Market Maker need not be a Member of all options exchanges, let alone 
the Exchange and its affiliates, and market makers elect to do so based 
on their own business decisions and need to directly access each 
exchange's liquidity pool. Not only is there no regulatory requirement 
to connect to every options exchange, the Exchange believes there is 
also no ``de facto'' or practical requirement as well, as further 
evidenced by the market maker membership analysis of the options 
exchanges discussed above. Indeed, Market Makers choose if and how to 
access a particular exchange and because it is a choice, the Exchange 
must set reasonable pricing, otherwise prospective market makers would 
not connect and existing Market Makers would disconnect from the 
Exchange.
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    \56\ See Securities Exchange Act Release No. 94894 (May 11, 
2022), 87 FR 29987 (May 17, 2022) (SR-BOX-2022-17) (Notice of Filing 
and Immediate Effectiveness of a Proposed Rule Change to Amend the 
Fee Schedule on the BOX Options Market LLC Facility To Adopt 
Electronic Market Maker Trading Permit Fees). The Exchange believes 
that BOX's observation demonstrates that market making firms can, 
and do, select which exchanges they wish to access, and, 
accordingly, options exchanges must take competitive considerations 
into account when setting fees for such access.
    \57\ See supra note 48.
---------------------------------------------------------------------------

    The Exchange believes that elasticity of demand for Exchange 
membership exists when it comes to purchasing a Trading Permit and, as 
evidenced by the data provided below, prior fee proposals have resulted 
in Members terminating their memberships. As an example, one Market 
Maker terminated their MIAX Pearl membership effective January 1, 2023, 
as a direct result of the proposed connectivity and port fee changes 
proposed by MIAX Pearl. As another example, two Market Makers 
terminated their MIAX Emerald memberships effective February 1, 2024, 
as a direct result of the proposed non-transaction fee changes proposed 
by MIAX Emerald. Other exchanges have also experienced termination of 
memberships if their members deem fees to be unreasonable or excessive. 
The Exchange notes that a BOX participant modified its access to BOX in 
connection with the implementation of a proposed change to BOX's permit 
fees.\58\ The absence of new memberships coupled with the termination 
of memberships on the Exchange's affiliates, as well as similar 
membership changes on another options exchange in relation to a trading 
permit fee increase, shows that elasticity of demand exists.
---------------------------------------------------------------------------

    \58\ According to BOX, a Market Maker on BOX terminated its 
status as a Market Maker in response to BOX's proposed modification 
of Market Maker trading permit fees. See Securities Exchange Act 
Release No. 94894 (May 11, 2022), 87 FR 29987 (May 17, 2022) (SR-
BOX-2022-17). BOX noted, and the Exchange agrees, that this Market 
Maker's decision demonstrates that Market Makers can, and do, alter 
their membership status if they deem permit fees at an exchange to 
be unsuitable for their business needs, thus demonstrating the 
competitive environment for Market Maker permit fees and the 
constraints on options exchanges when setting Market Maker permit 
fees.
---------------------------------------------------------------------------

    The Exchange notes that there are material anticipated costs 
associated with providing the infrastructure and headcount to fully-
support access to the Exchange. The Exchange expects to incur 
technology expenses related to establishing and maintaining Information 
Security services, enhanced network monitoring and customer reporting 
associated with its network technology. While some of the anticipated 
expense is fixed, much of the expense is not fixed, and thus increases 
as the expenses associated with access services for Market Makers 
increases. For example, new Market Makers to the Exchange may require 
the purchase of additional hardware to support those Members as well as 
enhanced monitoring and reporting of customer performance that the 
Exchange provides. Further, as the total number of Market Makers 
increase, the Exchange may need to increase its data center footprint 
and consume more power, resulting in increased costs charged by their 
third-party data center provider. Accordingly, the anticipated cost to 
the Exchange to provide access to its Market Makers is not fixed. The 
Exchange believes the proposed Market Maker Trading Permit fees are 
reasonable in order to offset a portion of the anticipated costs to the 
Exchange associated with providing access to Market Makers to its quote 
and order infrastructure.
    The Exchange notes that while Market Makers will account for a vast 
majority of the system usage placed on the Exchange, Market Makers are 
valuable market participants on the exchanges as the options market is 
a quote driven industry. The Exchange recognizes the value that Market 
Makers bring to the Exchange. The Exchange proposes higher, separate 
Trading Permit fees for Market Makers that are more aligned with the 
anticipated costs and resources that Market Makers may place on the 
Exchange and its systems.
    The Exchange believes that the proposed Market Maker Trading Permit 
fees are reasonable, equitable, and not unfairly discriminatory. The 
Exchange believes that the reasonableness of its proposed fees is 
demonstrated by the fact that such fees are comparable to, and lower 
than, the costs of similar membership and trading permit fees at other 
exchanges.\59\ The Exchange notes these fees were similarly filed with 
the Commission and neither suspended nor disapproved.\60\ The proposed 
fees are fair and equitable and not unfairly discriminatory because 
they apply equally to all Market Makers and access to the Exchange is 
offered on terms that are not unfairly discriminatory. The Exchange 
designed the fee rates in order to provide objective criteria for 
Market Makers of different sizes and business models that best matches 
their activity on the Exchange. The Exchange believes that the proposed 
fee rates and criteria provide an objective and flexible framework that 
will encourage Market Makers to register in options classes while also 
equitably allocating the fees in a reasonable manner amongst Market 
Maker registrations to account for trading activity.
---------------------------------------------------------------------------

    \59\ See supra note 54.
    \60\ The Exchange presumes that the fees of other exchanges are 
reasonable, as required by the Exchange Act in the absence of any 
suspension or disapproval order by the Commission providing 
otherwise.
---------------------------------------------------------------------------

    The Exchange again notes that it operates in a highly competitive 
market in which market makers can readily favor competing venues if 
they deem fee levels at a particular venue to be excessive. In such an 
environment, the Exchange must continually adjust its fees for services 
and products, in addition to order flow, to remain competitive with 
other exchanges. The Exchange believes that the proposed changes 
reflect this competitive environment.
    The Exchange is not aware of any reason why Market Makers could not 
simply drop their access to an exchange (or not initially access an 
exchange) if an exchange were to establish prices for its non-
transaction fees that, in the determination of such Market Maker, did 
not make business or economic sense for such Market Maker to access 
such exchange.
    In sum, the Exchange believes the proposed Trading Permit fees are 
reasonable and reflect a competitive environment, as the Exchange seeks 
to establish Trading Permit fees for Market Makers, while still 
attracting Market Makers to continue to, or seek to, access the 
Exchange. The Exchange further believes the proposed Trading Permit 
fees discussed herein are an appropriate balance between offsetting the 
anticipated costs to which Market Makers cost the Exchange and 
continuing to incentivize Market Makers

[[Page 67996]]

to access and make a market on the Exchange.
API Testing and Certification Fees
    The Exchange believes it is reasonable to assess the proposed API 
testing and certification fees to Members and non-Members because of 
the anticipated time and resources to be spent to ensure that Member 
and non-Member APIs function correctly to prevent any system 
malfunction before firms use APIs in the production environment. The 
Exchange will not assess the proposed API testing and certification 
fees in situations where the Exchange initiates a mandatory change to 
the Exchange's system that requires testing and certification; rather, 
the Exchange proposes to only assess such fee when a Member or non-
Member has been credentialed to use one or more of the respective ports 
in the production environment and each time a Member initiatives a 
change to its system that requires testing and certification.
    The Exchange believes its proposed API testing and certification 
fees for Members and non-Members are reasonable, equitable, and not 
unfairly discriminatory because they are reasonably related to (and 
designed to recover) the Exchange's expected cost associated with 
conducting API testing and certification services, which consists 
primarily of the time and resources spent to ensure that Member and 
non-Member APIs function correctly to prevent any system malfunction.
    Further, the Exchange believes the price differential in API 
testing and certification fees for Members and non-Members is not 
unfairly discriminatory because, in the experience of the Exchange's 
affiliates, Member testing utilizes less resources and employee time 
than non-Member testing as Members have more experience testing these 
systems with exchanges, resulting generally in fewer questions and 
issues arising during the testing and certification process. Also, with 
respect to API testing and certification, because Third Party Vendors 
and Service Bureaus are redistributing data and reselling services to 
other Members and market participants the number and types of scenarios 
that need to be tested are likely to be more numerous and complex than 
those tested and certified for Members. The Exchange believes its 
proposed API testing and certification fees are reasonable because they 
are priced at the same rates as those charged by Exchange's affiliates, 
MIAX and MIAX Emerald, for the same services for Members and non-
Members.\61\
---------------------------------------------------------------------------

    \61\ See supra note 29.
---------------------------------------------------------------------------

    The Exchange believes its proposal to waive API testing and 
certification fees for Members and non-Members during the Initial 
Waiver Period is reasonable, equitable and not unfairly discriminatory 
because it will provide an incentive to market participants to apply 
early for membership and to engage in API testing and certification 
such that they will be able to trade options on MIAX Sapphire as soon 
as possible. The proposed fee waiver will apply equally to all firms 
during the Initial Waiver Period. Even though the Exchange proposes to 
waive these particular fees during the Initial Waiver Period, the 
Exchange believes that is reasonable to provide market participants 
with the overall structure of the proposed fees by outlining the 
structure and amounts in the Fee Schedule so that there is general 
awareness that the Exchange intends to assess such fees upon expiration 
of the defined term of the Initial Waiver Period.
Network Connectivity Testing and Certification Fees
    The Exchange believes it is reasonable to assess the proposed 
network connectivity testing and certification fees to Members and non-
Members because of the anticipated time and resources to be spent to 
ensure that Members and non-Members are able to successfully establish 
electronic connections to the Exchange. The Exchange will not assess 
the proposed network connectivity testing and certification fees in 
situations where the Exchange initiates a mandatory change to the 
Exchange's system that requires testing and certification; rather, the 
Exchange proposes to only assess such fee initially per connection in 
the month the Member or non-Member has been credentialed to use any API 
or market data feeds in the production environment utilizing the tested 
network connection and each time a Member or non-Member initiates a 
change to its system that requires network connectivity testing and 
certification.
    The Exchange further believes the proposed fees are reasonable 
because a Member or non-Member that utilizes a single, shared 1Gb 
cross-connect to connect to the trading platforms, market data systems, 
test systems, and disaster recovery facilities of the Exchange, MIAX, 
MIAX Pearl, and MIAX Emerald will only be assessed one network 
connectivity testing and certification fee per connection tested, 
regardless of the trading platforms, market data systems, test systems, 
and disaster recovery facilities accessed via such connection.
    The Exchange believes the proposed network connectivity testing and 
certification fees are reasonable because they represent expected 
installation and support costs to be incurred by the Exchange as it 
works with each Member and non-Member to make sure there are 
appropriate electronic communication connections with MIAX Sapphire. 
The Exchange's affiliates, MIAX, MIAX Pearl, and MIAX Emerald, charge 
the same fees for the same services for their Members and non-
Members.\62\ Additionally, the Exchange believes its proposed network 
connectivity testing and certification fees are reasonable, equitable, 
and not unfairly discriminatory because they are reasonably related to 
(and designed to recover) the Exchange's anticipated cost associated 
with conducting network connectivity testing and certification 
services, which consists primarily of the time and resources spent to 
ensure that Member and non-Member connectivity function correctly to 
prevent any system malfunction.
---------------------------------------------------------------------------

    \62\ See supra notes 35 and 36.
---------------------------------------------------------------------------

    Further, the Exchange believes the price differential in network 
connectivity testing and certification fees for Members and non-Members 
is not unfairly discriminatory because, in the experience of the 
Exchange's affiliates, Member testing utilizes less resources and 
employee time than non-Member testing as Members have more experience 
testing these systems with exchanges, resulting generally in fewer 
questions and issues arising during the testing and certification 
process.
    The Exchange believes the difference in the proposed 1Gb and 10Gb 
ULL network connectivity testing and certification fees is an equitable 
allocation of reasonable dues and fees pursuant to Section 6(b)(4) of 
the Act \63\ because of the anticipated additional review and resources 
involved in testing and certifying a 10Gb ULL connection as opposed to 
a 1Gb connection, as 10Gb ULL connections offer vastly greater products 
and services which require significantly more time to test, including 
Market Maker quoting systems. The Exchange believes its proposed 
network connectivity testing and certification fees are reasonable 
because the Exchange's affiliates, MIAX, MIAX Pearl, and MIAX Emerald, 
charge the same fees for the same services for their Members and non-
Members.\64\
---------------------------------------------------------------------------

    \63\ 15 U.S.C. 78f(b)(4).
    \64\ See supra notes 35 and 36.

---------------------------------------------------------------------------

[[Page 67997]]

    The Exchange believes its proposal to waive network connectivity 
testing and certification fees for Members and non-Members during the 
Initial Waiver Period is reasonable, equitable and not unfairly 
discriminatory because it will provide an incentive to market 
participants to apply early for membership and to engage in network 
connectivity testing and certification such that they will be able to 
trade options on MIAX Sapphire as soon as possible. The proposed fee 
waiver will apply equally to all firms during the Initial Waiver 
Period. Even though the Exchange proposes to waive these particular 
fees during the Initial Waiver Period, the Exchange believes that is 
reasonable to provide market participants with the overall structure of 
the proposed fees by outlining the structure and amounts in the Fee 
Schedule so that there is general awareness that the Exchange intends 
to assess such fees upon expiration of the defined term of the Initial 
Waiver Period.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act.
Intra-Market Competition
One-Time Membership Application Fees
    The Exchange believes that the proposed one-time membership 
application fees for EEMs and Market Makers do not impose any burden on 
intra-market competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange's proposed one-
time membership application fees for EEMs and Market Makers are lower 
than, or similar to, the one-time application fees in place at the 
Exchange's affiliates \65\ and other competing equity options 
exchanges.\66\ Further, the Exchange proposes to waive the one-time 
membership application fee for EEMs and Market Makers for the Initial 
Waiver Period, which the Exchange believes will provide an incentive 
for market participants interested in becoming Members of the Exchange 
to submit early applications, resulting in increased potential order 
flow and liquidity as MIAX Sapphire begins electronic trading. In turn, 
the Exchange believes its lower one-time membership application fees 
may stimulate intra-market competition by attracting additional firms 
to become Members on the Exchange or at least should not deter 
interested participants from joining the Exchange. As discussed above, 
membership fees are subject to competition from other exchanges. 
Accordingly, if the changes proposed herein are unattractive to market 
participants, it is likely the Exchange will see fewer than anticipated 
firms become Members of the Exchange as a result.
---------------------------------------------------------------------------

    \65\ See supra note 15.
    \66\ See supra note 16.
---------------------------------------------------------------------------

Trading Permit Fees
    The Exchange believes that the proposed Trading Permit fees do not 
place certain market participants at a relative disadvantage to other 
market participants because the proposed fees do not favor certain 
categories of market participants in a manner that would impose a 
burden on competition; rather, the fee rates are designed in order to 
provide objective criteria for Market Makers of different sizes and 
business models that best matches their quoting activity on the 
Exchange. Further, the Exchange believes that the proposed Market Maker 
Trading Permit fees will not impose a burden on intra-market 
competition because, when these fees are viewed in the context of the 
overall expected activity on the Exchange, Market Makers will: (1) 
consume the most bandwidth and resources of the network; (2) transact 
the vast majority of the volume on the Exchange; and (3) require the 
high touch network support services provided by the Exchange and its 
staff, including more costly network monitoring, reporting and support 
services, resulting in a much higher cost to the Exchange. The Exchange 
notes that the majority of customer demand will likely come from Market 
Makers, whose transactions make up a majority of the volume on the 
Exchange. Further, other Member types, i.e., EEMs, take up 
significantly less Exchange resources and costs. As such, the Exchange 
does not believe charging Market Makers higher Trading Permit fees than 
other Member types will impose a burden on intra-market competition.
    The Exchange believes that the tiered structure of the proposed 
Market Maker Trading Permit fees will not impose a burden on intra-
market competition because the tiered structure takes into account the 
number of classes quoted by each individual Market Maker. As discussed 
herein, the Exchange's system requires increased performance and 
capacity in order to provide the opportunity for each Market Maker to 
quote in a higher number of options classes on the Exchange. 
Specifically, the more classes that are actively quoted on the Exchange 
by a Market Maker requires increased memory for record retention, 
increased bandwidth for optimized performance, increased 
functionalities on each application layer, and increased optimization 
with regard to surveillance and monitoring of such classes quoted. As 
such, basing the Market Maker Trading Permit fee on the greatest number 
of classes quoted in on any given day in a calendar month is reasonable 
and appropriate when taking into account how the increased number of 
quoted classes directly impact the costs and resources for the 
Exchange.
API and Network Connectivity Testing and Certification Fees
    The Exchange believes that the proposed API and network 
connectivity testing and certification fees do not put any market 
participants at a relative disadvantage compared to other market 
participants. The proposed fees would apply to all new Exchange Members 
and those firms looking to establish APIs and network connectivity in 
the same manner. Market participants may not only choose whether to 
become Exchange Members at all, but may choose to become members at 
competing options exchanges instead.
    The Exchange further believes the proposed fees do not place any 
market participant at a disadvantage compared to other market 
participants because the proposed API testing and certification and 
network connectivity testing and certification fees are intended to 
cover the situations where a Member or non-Member firm makes changes to 
its own system for its own business purpose (i.e., instances where a 
firm is trying to improve its quoting engine), which requires the 
Exchange to test those re-architected systems. This testing requires 
the time of Exchange personnel in several departments (Trading 
Operations, Business, On-Boarding, Membership), and occurs primarily 
outside of normal business hours, often over the course of the weekend. 
The proposed fees are a way for the Exchange to recoup its anticipated 
costs associated with this testing. When the Exchange determines to 
make upgrades to its own system which requires mandatory testing and 
certification by Members, the Exchange does not charge any fees.
    The Exchange believes that the proposed fees do not dampen 
innovation because the majority of Exchange's anticipated Members are 
members of most, if not all, of the other 17 options exchanges. Those 
exchanges also require testing and certification any time their members 
make changes to their systems at those exchanges, and

[[Page 67998]]

also charge a fee to recoup the anticipated costs associated with 
testing and certifying members. Without some sort of testing and 
certification fee, the Exchange believes that Members and non-Members 
might be less efficient in testing their systems, potentially resulting 
in excessive time being consumed by the Exchange re-testing and re-
certifying Members and non-Members, to the detriment of all market 
participants as Exchange resources are diverted away from other trading 
operations.
    The Exchange also believes that the proposed fees neither favor nor 
penalize one or more categories of market participants in a manner that 
would impose an undue burden on competition. To the extent that various 
market participants are charged different fees for per-instance API and 
network connectivity testing, those distinctions are not unfairly 
discriminatory and do not unfairly burden one set of market 
participants over another. The proposed higher fee charged to Third 
Party Vendors, Service Bureaus and non-Members reflects the greater 
amount of time spent that will likely be spent by the Exchange's 
employees testing and certifying non-Members. It has been the 
experience of the Exchange's affiliates that Member testing takes less 
time than non-Member testing because Members have more experience 
testing these systems with exchanges, resulting in generally fewer 
questions and issues arising during the testing and certification 
process. Also, because Third Party Vendors and Service Bureaus will be 
redistributing data and reselling services to other Members and market 
participants, the number and types of scenarios that need to be tested 
are more numerous and complex than those tested and certified for a 
single Member.
    The proposed higher fee for network connectivity testing and 
certification to be charged to non-Members reflects the likely greater 
amount of time to be spent by MIAX Sapphire employees testing and 
certifying non-Members. It has been the experience of the Exchange's 
affiliates that that Member network connectivity testing takes less 
time than non-Member network connectivity testing because Members have 
more experience testing these systems with exchanges as generally fewer 
questions and issues arise during the testing and certification 
process. The proposed higher fee for testing and certifying 10Gb ULL 
connections versus 1Gb ULL connections reflects the likely greater 
amount of time to be spent by MIAX Sapphire employees testing and 
certifying 10Gb ULL connections. MIAX Sapphire's proposed per-instance 
API and network connectivity testing and certification fees are set at 
the same levels for the same services provided by the Exchanges 
affiliates.\67\
---------------------------------------------------------------------------

    \67\ See supra notes 29 and 33.
---------------------------------------------------------------------------

    The Exchange believes that the proposed API and network 
connectivity testing and certification fees do not place certain market 
participants at a relative disadvantage to other market participants 
because the fees do not apply unequally to different size market 
participants, but instead would allow the Exchange to charge for the 
time and resource necessary for API testing and certification and 
network connectivity testing and certification for Members and non-
Members to ensure proper functioning of all available order types, new 
order entry, order management, order throughput and mass order 
cancellation (as well as, for Market Makers, all available quote types, 
quote throughput, quote management and cancellation, Aggregate Risk 
Manager settings and triggers, and confirmation of quotes within the 
trading engines). Accordingly, the proposed API and network 
connectivity testing and certification fees do not favor certain 
categories of market participants in a manner that would impose a 
burden on competition.
Inter-Market Competition
    The Exchange believes the proposed fees do not place an undue 
burden on competition on other SROs that is not necessary or 
appropriate because of the availability of numerous substitute options 
exchanges. There are 17 other options exchanges where market 
participants can become members.
One-Time Membership Application Fee
    The Exchange believes that the proposed one-time membership 
application fees for EEMs and Market Makers do not impose any burden on 
inter-market competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed fees will 
apply to all EEMs and Market Makers equally. The Exchange operates in a 
highly competitive market in which market participants can determine 
whether or not to join the Exchange based on the value received 
compared to the cost of joining and maintaining membership on the 
Exchange.
Trading Permit Fees
    The Exchange believes the proposed Market Maker Trading Permit fees 
do not place an undue burden on competition on other self-regulatory 
organizations that is not necessary or appropriate. The proposed tiered 
structure is based on the number of options classes the Market Maker is 
registered in, not the number of series within the options class. The 
Exchange believes its proposal would promote inter-market competition 
because the proposed tiered structure would encourage Market Makers to 
register in more series within each options class as each additional 
series in that class would not count towards the particular Market 
Maker's overall number of classes assigned, and cause them to qualify 
for a higher tier and higher fee. This could improve the Exchange's 
market quality by encouraging Market Makers to quote more series within 
an options class without it impacting its Trading Permit fee.
    Market making firms are not forced to become market makers on all 
options exchanges. The Exchange notes that it anticipates having far 
less Market Makers as compared to the much greater number of market 
makers at other options exchanges. There are a number of large market 
makers that are participants of other options exchange but may not 
become Members of the Exchange. The Exchange is also unaware of any 
assertion that its proposed fee levels or the proposed Market Maker 
Trading Permit fees would somehow unduly impair its competition with 
other options exchanges. To the contrary, if the fees charged are 
deemed too high by a market making firm, they can simply discontinue 
their membership with the Exchange or not become a Member at all.
    The Exchange operates in a highly competitive market in which 
market participants can readily favor one of the 17 competing options 
venues if they deem fee levels at a particular venue to be excessive. 
Based on publicly-available information, and excluding index-based 
options, no single exchange had more than approximately 14-15% of the 
equity options market share for the month of June 2024.\68\ Therefore, 
no exchange possesses significant pricing power in the execution of 
multiply-listed equity and exchange-traded fund (``ETF'') options order 
flow. The Exchange believes that the ever-shifting market share among 
exchanges from month to month demonstrates that market participants can 
discontinue or reduce use of certain categories of products, or shift 
order flow, in response to fee changes. In such an

[[Page 67999]]

environment, the Exchange must continually adjust its fees and fee 
waivers to remain competitive with other exchanges and to attract order 
flow to the facility.
---------------------------------------------------------------------------

    \68\ See the ``Market Share'' section of the Exchange's website, 
available at www.miaxoptions.com (last visited July 24, 2024).
---------------------------------------------------------------------------

API and Network Connectivity Testing and Certification Fees
    The Exchange believes the proposed API Testing and Certification 
fees and Network Connectivity Testing and Certification fees do not 
place an undue burden on competition on other SROs that is not 
necessary or appropriate. The Exchange believes that the proposed fees 
do not impose a burden on competition or on other exchanges that is not 
necessary or appropriate because of the availability of numerous 
substitute options exchanges. There are 17 other options exchanges 
where market participants can become members.
    Finally, the Exchange notes that it operates in a highly 
competitive market in which market participants can readily favor 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and credits to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed rule change reflects this 
competitive environment.

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

    No written comments were either solicited or 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,\69\ and Rule 19b-4(f)(2) \70\ 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.
---------------------------------------------------------------------------

    \69\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \70\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-SAPPHIRE-2024-20 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-SAPPHIRE-2024-20. 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-SAPPHIRE-2024-20 and should 
be submitted on or before September 12, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\71\
---------------------------------------------------------------------------

    \71\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-18790 Filed 8-21-24; 8:45 am]
BILLING CODE 8011-01-P