reg e dispute flowchart

See Nasdaq Price ListU.S. Securities Exchange Act Release No. 17 CFR 240.19b4(f)(2). and that they not impose a burden on competition not necessary or appropriate in furtherance of the purposes of the Act. 157. The Exchange and its affiliated markets often share a single cost, which results in cost efficiencies that can cause a broader gap between the allocated cost amount and projected revenue, even though the fee levels being proposed are lower or competitive with competing markets (as described above). The Exchange monitors the System's performance and makes adjustments to its System based on market conditions and Member demand. To do so, the Exchange chose to waive the fees for some non-transaction related services and Exchange products or provide them at a very lower fee, which was not profitable to the Exchange. All physical assets, software, and hardware used to provide 10Gb ULL connectivity, which also includes assets used for testing and monitoring of Exchange infrastructure, were valued at cost, and depreciated or leased over periods ranging from three to five years. The Commission further invited the parties to submit briefing stating whether the challenges asserted in the applications for review . Fee Schedule, Section 5)d)ii), note 29. Based on its experience and expertise, the Exchange found the most practical way to increase connectivity availability on its switches was to bifurcate the existing 10Gb ULL networks for the Exchange and MIAX Pearl Options by migrating the exchanges' connections from the shared network onto their own set of switches. Service bureaus offer technology-based services to other companies for a fee, including order entry services, and thus, may access Limited Service MEI Ports on behalf of one or more Members. For instance, in order to generate the revenue expected from connectivity, the Exchange will have to be successful in retaining existing clients that wish to maintain physical connectivity and/or Limited Service MEI Ports or in obtaining new clients that will purchase such services. The next cost driver consists of internet services and external market data. This was mostly driven by the connectivity demands of latency sensitive Members ( WebRegulation E Sample Error Resolution Procedures . In that proposal, BOX stated that, . Commission Chair Gary Gensler recently reiterated the Commission's mandate to ensure competition in the equities markets. path forward for non-legacy exchanges to establish commensurate non-transaction fees, or by failing to provide any alternative means for smaller markets to establish fee parity with legacy exchanges, the Commission is stifling competition: non-legacy exchanges are, in effect, being deprived of the revenue necessary to compete on a level playing field with legacy exchanges. The legacy exchanges all established a significantly higher baseline for access and market data fees prior to the Revised Review Process. projected revenue would be if a limited number of customers subscribed due to the new fees. Id. %PDF-1.4 % Assuming the U.S. inflation rate continues at its current rate, the Exchange believes that the projected profit margins in this proposal will decrease; however, the Exchange cannot predict with any certainty whether the U.S. inflation rate will continue at its current rate or its impact on the Exchange's future profits or losses. This PDF is . Web1. 142 85459 (March 29, 2019), 84 FR 13363 (April 4, 2019) (SRBOX201824, SRBOX201837, and SRBOX201904) (Order Disapproving Proposed Rule Changes to Amend the Fee Schedule on the BOX Market LLC Options Facility to Establish BOX Connectivity Fees for Participants and Non-Participants Who Connect to the BOX Network). 34. 90333 (November 4, 2020), 85 FR 71666 (November 10, 2020) (SRCBOE2020105). 58. In light of the arguments above regarding disparate standards of review for historical legacy non-transaction fees and current non-transaction fees for non-legacy exchanges, a fee parity alternative would be one possible way to avoid the current unfair and discriminatory effect of the Staff Guidance and Revised Review Process. the connectivity needs of Members and market participants has increased every year since the launch of MIAX Pearl Options and the operations of the Exchange and MIAX Pearl Options on a single shared 10Gb ULL network is no longer feasible. All hardware and software, were valued at cost, depreciated or leased over periods ranging from three to five years. [63], The Exchange now proposes to move from a flat monthly fee per Limited Service MEI Port for each matching engine to a tiered-pricing structure for Limited Service MEI Ports for each matching engine under which the monthly fee would vary depending on the number of Limited Service MEI Ports each Market Maker elects to purchase. and $30,687,000 for 2021. Indus. The allocation percentages set forth above differ because they correspond with the number of applicable ports utilized on each exchange. The proposed fees would assist the Exchange in recovering costs related to providing dedicated 10Gb connectivity to the Exchange while enabling it to continue to meet current and anticipated demands for connectivity by its Members and other market participants. 5. 118. Section V.B. The Exchange also proposes to amend the Fee Schedule to reflect the bifurcation of the 10Gb ULL network and specify that only the 1Gb network provides access to both the Exchange and MIAX Pearl Options. 134. ([T]he sole purpose of the challenged remand has disappeared.). [137] 78s(b)(3)(A)(ii). Disapproval could also have the adverse effect of discouraging an exchange from optimizing its operations and deploying innovative technology to the benefit of market participants if it believes the Commission would later prevent that exchange from covering its costs and monetizing operational enhancements, thus adversely impacting competition. WebMiscellaneous Deposit Tools. For example, a profit margin on one exchange should not be deemed excessive where that exchange has been successful in controlling its costs, but not excessive on another exchange where that exchange is charging comparable fees but has a lower profit margin due to higher costs. Full Service MEI Ports provide Market Makers with the ability to send Market Maker quotes, eQuotes, and quote purge messages to the MIAX System. The need to support billions of messages per day consume the Exchange's resources and significantly contribute to the overall network connectivity expense for storage and network transport capabilities. The only other fair and reasonable alternative would be to require the numerous fee filings unquestioningly approved before the Staff Guidance and Revised Review Process to develop a record, and to explain their conclusions, based on that record, in a written decision that is sufficient to enable us to perform our review, and to ensure a comparable review process with the Exchange's filing. First, legacy exchanges are able to use their additional non-transaction revenue for investments in infrastructure, vast marketing and advertising on major media outlets,[49] [117] The allocation percentages set forth above differ because they correspond with the number of applicable ports utilized on each exchange. The Exchange could have sought to charge higher fees at the outset, but that could have served to discourage participation on the Exchange. [44] Members are deemed members under the Exchange Act. 139. [111] 117. Susquehanna Decision, It is not an official legal edition of the Federal v. The market participants that utilize more connectivity services typically utilize the most bandwidth, and those are the participants that consume the most resources from the network. which is designed to recover a portion of the costs associated with directly accessing the Exchange. The salaries of those same personnel were allocated only 8.4% to Limited Service MEI Ports and the remaining 49.6% was allocated to 1Gb connectivity, other port services, transaction services, membership services and market data. Start Printed Page 42861 The firms that purchase numerous Limited Service MEI Ports do so for competitive reasons and based on their business needs, which include a desire to access the market more quickly using the lowest latency connections. We find that checklists for this process assist staff and help limit the number of findings. Start Printed Page 42855 96553 (December 20, 2022), 87 FR 79379 (December 27, 2022) (SRPEARL202260); 96545 (December 20, 2022) 87 FR 79393 (December 27, 2022) (SRMIAX202248). Reg E Dispute for Merchandise Not Recieved. The term System means the automated trading system used by the Exchange for the trading of securities. The Exchange must also purchase additional storage capacity on an ongoing basis to ensure it has sufficient capacity to store these messages as part of it surveillance program and to satisfy its record keeping requirements under the Exchange Act. These can be useful In conducting its Cost Analysis, the Exchange did not allocate any of its expenses in full to any core services (including physical connectivity or Limited Service MEI Ports) and did not double-count any expenses. i.e., The Exchange has filed, and subsequently withdrawn, various forms of this proposed fee change numerous times since August 2021 with Securities Exchange Act Release No. 32. The Exchange offers various types of ports with differing prices because each port accomplishes different tasks, are suited to different types of Members, and consume varying capacity amounts of the network. The proposed fee does not favor certain categories of market participants in a manner that would impose an undue burden on competition. The Exchange recently filed a proposal to no longer operate 10Gb connectivity to the Exchange on a single shared network with its affiliate, MIAX Pearl Options. In lieu of becoming a member at each options exchange, a market participant may join one exchange and elect to have their orders routed in the event that a better price is available on an away market. This timeframe also includes challenges to over 400 rule filings by SIFMA and Bloomberg discussed above. 15 U.S.C. To help the Commission process and review your comments more efficiently, please use only one method. See legal research should verify their results against an official edition of The Exchange believes that the proposed fees are reasonable, fair, equitable, and not unfairly discriminatory because they are designed to align fees with services provided and will apply equally to all subscribers. .,[50] See15 U.S.C. 15 U.S.C. The Exchange concurs with the following statement by CBOE, The rule structure for options exchanges are also fundamentally different from those of equities exchanges. While it would have resulted in a gain in overall port availability, the existing switches on the shared 10Gb ULL network in use would have continued to suffer from lack of port headroom given many latency sensitive Members' needs for a presence on each switch to reach both the Exchange and MIAX Pearl Options. The Exchange proposes to amend the explanatory paragraphs below the network connectivity fee tables in Sections 5)a)b) of the Fee Schedule to specify that, with the bifurcated 10Gb ULL network, Members (and non-Members) utilizing the MENI to connect to the trading platforms, market data systems, test systems, and disaster recovery facilities of the Exchange and MIAX Pearl Options via a single, can only do so via a shared 1Gb connection. This added gateway contributes to the difference in allocations between the Exchange and MIAX Pearl. or (c) accept that certain competition-based arguments are applicable given the linkage between non-transaction fees and transaction fees, especially where non-transaction fees among exchanges are based upon disparate standards of review, lack parity, and impede fair competition. and According to PHLX, Trade Management Services includes a wide variety of alternatives for connectivity to and accessing [the PHLX] markets for a fee. The Exchange would be uniquely disadvantaged by not being able to increase its access fees to comparable levels (or lower levels than current market rates) to those of other options exchanges for connectivity. The Exchange experienced a monthly average equity options trading volume of 1.87% for the month of November 2013. 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. Thus, as the number of connections a Market Maker has increases, the related demand on Exchange resources also increases. additional details regarding each of the line-item costs considered by the Exchange to be related to offering physical 10Gb ULL connectivity. e.g., 15 U.S.C. The Exchange did not allocate any other Human Resources expense for providing physical connections to any other employee group, outside of a smaller allocation of 17.8% for 10Gb ULL connectivity or 18.2% for the entire network, of the cost associated with certain specified personnel who work closely with and support network infrastructure personnel. Securities Exchange Act Release No. Nothing in the Order Protection Rule requires a firm to become a Member ator establish connectivity tothe Exchange. Start Printed Page 42867 e.g., Co-Location Services. See This fee was unchanged since 2016. i.e., Web(a) Attendance standards are usually necessary to maintain order, control, and productivity. The Human Resources cost was calculated using a blended rate of compensation reflecting salary, equity and bonus compensation, benefits, payroll taxes, and 401(k) matching contributions. 38. 11. The Human Resources cost was again calculated using a blended rate of compensation reflecting salary, equity and bonus compensation, benefits, payroll taxes, and 401(k) matching contributions. e.g., The net result is that the non-legacy exchanges are effectively now blocked by the Commission Staff from adopting or increasing fees to amounts comparable to the legacy exchanges (which were not subject to the Revised Review Process and Staff Guidance), despite providing enhanced disclosures and rationale to support their proposed fee changes that far exceed any such support provided by legacy exchanges. requirements. 17 CFR 240.19b4. 126. First, the Exchange has under gone a technology refresh since the time MIAX Emerald launched in February 2019, leading to it having more hardware that software that is subject to depreciation. & Fin. $1,250 per port, Connectivity (external fees, cabling, switches, etc.). new products and other innovations. The Finance Team then consolidates the budget and sends it to senior management, including the Chief Financial Officer and Chief Executive Officer, for review and approval. corresponding official PDF file on govinfo.gov. This is because the Exchange's cost allocation methodology utilizes the actual projected costs of the Exchange (which are specific to the Exchange and are independent of the The Exchange believes this would result in an estimated profit margin of 35% after calculating the cost of providing Limited Service MEI Port services, which profit margin could decrease over time. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. Specifically, the Exchange proposes to amend Sections 5)a)b) of the Fee Schedule to increase the 10Gb ULL connectivity fee for Members and non-Members from $10,000 per month to $13,500 per month (10Gb ULL Fee). 8. Securities Exchange Act Release No. The Exchange does not believe the proposed fees for connectivity services would negatively impact the ability of Members, non-Members (extranets or service bureaus), third-parties that purchase the Exchange's connectivity and resell it, and customers of those resellers to compete with other market participants or that they are placed at a disadvantage. Particularly, in the event that a market participant views the Exchange's direct connectivity and access fees as more or less attractive than competing markets, that market participant can choose to connect to the Exchange indirectly or may choose not to connect to the Exchange and connect instead to one or more of the other 15 options markets.
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