FR 2024-29923

The document in question is a notice published in the Federal Register by the Miami International Securities Exchange, LLC (MIAX) regarding their intent to implement a fee for accessing their testing systems environment via a dedicated cross connection. Beginning on December 1, 2024, MIAX proposes to charge a monthly fee of $1,000 for users, whether they choose a 1Gb or a 10Gb connection. VPN access will continue to be offered for free, but the dedicated connection serves as a premium alternative for those who require it.

Significant Issues or Concerns

Several issues arise from this proposed rule change:

1. Justification for the Fee: The notice explains the new fee but does not provide detailed information on how the $1,000 monthly charge was determined. Without this context, stakeholders may express concerns regarding potential wasteful spending or overcharging if the fee does not align with actual costs or service benefits.

2. Optional Service Nature: Accessing the testing systems environment through a dedicated cross connection is portrayed as entirely optional, suggesting that stakeholders might question whether such expenditure is necessary, particularly if demand for this premium connection option remains low.

3. Complexity and Accessibility: The document is dense with legal references and technical jargon, which might make it challenging for the general public to fully grasp the implications of the proposed changes. This complexity could result in a lack of transparency and understanding among stakeholders who are not well-versed in financial legislation or market infrastructure.

4. Market Comparisons: Although the proposal states that the fee is in line with or lower than similar services offered by other exchanges, the document does not delve into specific comparisons. This may leave stakeholders questioning the accuracy and legitimacy of these comparative claims.

5. Lack of Evidence: There is an absence of concrete evidence or data supporting the necessity of the new fee structure. Stakeholders might be concerned about whether the pricing is appropriate and justified, as the document does not outline specific financial analyses or projected impacts.

6. Revenue Intentions: There is some ambiguity regarding whether the fee is purposed to simply cover operational costs or is intended also to generate revenue. This potential lack of clarity could agitate parties interested in fee transparency.

Impact on the Public

The implementation of this fee may have varied impacts. For the general public, the fee itself might not appear directly consequential, as it targets a specific subset of professional market participants needing advanced access to MIAX's systems. However, what might be more significant is understanding how changes like these affect overall market stability and efficiency, potentially influencing broader financial market health indirectly.

Impact on Specific Stakeholders

• Market Participants: For brokers, dealers, and other market participants, particularly those smaller in scale or new entrants, the additional cost may deter them from opting for the dedicated connection. They might choose to continue using the free VPN access, fearing increased operational costs.

• Exchange Competitors: Competing exchanges might view this fee decision as an opportunity to attract clients by possibly offering more cost-effective solutions or similar services without added fees.

• Regulatory Bodies and Policy Makers: These entities might scrutinize the fee's justification and its compliance with fair trading practices and regulations aimed at sustaining competitive and equitable market conditions.

In conclusion, while the proposed fee structure by MIAX seems to be a reasonable attempt to monetize premium access to its testing environment, the notice leaves several questions unanswered, particularly concerning the rationale behind the pricing, its necessity, and implications. This proposal's impacts extend beyond MIAX itself, touching competitive market dynamics and possibly influencing decisions by other exchanges and market entities. Such developments necessitate transparent communication to ensure understanding and buy-in from all affected stakeholders.

The document from the Federal Register discusses a proposed rule change by the Miami International Securities Exchange, LLC (MIAX) regarding the implementation of fees associated with accessing its testing systems environment through a dedicated cross connection.

Summary of Financial References

The key financial aspect discussed is the introduction of a proposed monthly fee of $1,000 for market participants who choose to utilize a dedicated cross connection to the Exchange's testing systems environment. This fee applies equally to both Members and non-Members and does not vary with the bandwidth of the connection, whether 1Gb or 10Gb. The document clarifies that this proposed fee is intended to be competitive with similar fees charged by other exchanges, such as Nasdaq, which imposes a $1,000 monthly fee plus a one-time installation fee of the same amount. In contrast, the Cboe BZX Exchange charges a lower fee of $250 per month per certification logical port, although this fee applies strictly to the individual testing environment of Cboe BZX and does not extend across affiliates without incurring additional costs.

Relation to Identified Issues

The proposed fee has potential issues when it comes to justification and transparency. Firstly, there is a lack of detailed explanation or data on how the $1,000 fee was determined. This could lead to concerns regarding whether the fee is justified or if it could result in unnecessary expenditure for market participants. The absence of specific cost breakdowns to support this pricing decision raises questions about potential wasteful spending or profit generation ambitions that extend beyond simply covering service costs.

Furthermore, while the document states that accessing the testing systems environment through a dedicated connection is optional, this could imply that the related expenditure might not be essential, particularly for those entities that can perform similar testing functions via the free VPN access. Therefore, if the demand for such access is low, the associated costs could be viewed as wasteful.

The document also refers to the fee's competitiveness against other exchanges without providing in-depth comparison metrics or further evidence, which might lead to ambiguities about whether the fee truly reflects fair market pricing. Without explicit data or cost analysis, stakeholders might remain unsure if the pricing is genuinely aligned with other market options or if it offers any substantial advantage worth the cost. This lack of clarity surrounding the relationship between the proposed fee and its justification might contribute to hesitations or criticisms among market participants and regulatory entities.

Overall, while the proposed fee appears to align with certain industry standards, the financial references involve several areas of concern primarily related to transparency, necessity, and competitive justification.