FR 2024-29925

Overview

The document discusses MIAX Sapphire, LLC's proposal to modify its fee schedule concerning access to their testing systems environment. This change involves introducing a monthly fee of $1,000 for accessing the testing environment through a dedicated cross connection for either 1Gb or 10Gb connections. This service is optional, as participants can also opt for free access via a virtual private network (VPN). The adjusted fee schedule is effective from December 1, 2024, intending to provide an environment for market participants to test systems reliably before live trading.

Key Issues and Concerns

One primary issue is the potential for the new fee structure to favor larger entities with greater financial resources, as they might more easily absorb the costs associated with the dedicated cross connection. While the service is described as optional, the fee might disadvantage smaller participants who cannot afford the additional cost despite potentially benefiting from the higher quality testing environment.

Complex language and frequent references to legal standards can also be a barrier, making it challenging for those not well-versed in legal jargon or financial regulations to grasp the implications fully. The explanation regarding the nondiscriminatory nature of the fee structure attempts to reassure fairness, but the rationale might not be sufficiently clear to all readers.

The document draws significant comparisons with fees charged by other exchanges as justification for the proposed fees. However, this approach might overlook other critical justifications specific to MIAX Sapphire, which could be more compelling to certain stakeholders.

Public Impact

Broadly, the proposed changes could affect market dynamics by influencing who can utilize advanced testing services. While the option for free VPN access remains, market participants with greater resources may have more incentive to invest in dedicated cross connections, potentially enhancing their competitive positioning.

Individuals and organizations less familiar with securities regulation may find the document overly dense and repetitive, particularly the sections emphasizing the optional nature of services. This could obscure the document's core objectives and affect comprehension of potential impacts on the trading environment.

Stakeholder Impact

The fee change can have varied effects on different stakeholders. Larger trading firms and entities with substantial resources stand to benefit, given their potential ability to afford the dedicated connection and its associated benefits. These firms might appreciate the opportunity to test systems in an environment that mimics live trading conditions more closely than a VPN solution might.

Conversely, smaller market participants might face challenges. The cost of the dedicated cross connection could be prohibitive, which could limit their access to the benefits of robust testing environments. This disparity could, in the long term, affect market equity, as the operational efficiencies gained through superior testing capabilities may not be uniformly available.

Additionally, without a detailed explanation of how pricing strategies prevent preferential treatment, concerns about potential conflicts of interest or market advantages for certain subscribers might persist.

In conclusion, while the proposed changes attempt to align with industry standards and competition, they introduce concerns about equity and access that merit consideration by stakeholders and the public alike.

The document from MIAX Sapphire, LLC outlines a proposed rule change to establish fees for accessing its testing systems environment via a dedicated cross connection. This document provides an extensive overview of proposed financial structures and compares them to similar structures from other exchanges.

Financial Summary and Pricing Comparisons

The core financial reference in the document is the proposal to establish a monthly fee of $1,000 for accessing the testing systems environment through a dedicated cross connection. This fee is applicable to both members and non-members of the Exchange, regardless of whether they choose a 1Gb or 10Gb connection.

In comparison, The Nasdaq Stock Market, LLC imposes a similar fee structure: $1,000 per hand-off, per month, with an additional one-time installation fee of $1,000 per hand-off. The notable difference is that MIAX Sapphire does not charge this separate installation fee, presenting their offering as more cost-effective.

On the other hand, Cboe BZX Exchange, Inc. charges $250 per month for access to their testing environment through a certification logical port. However, to access similar environments across all their affiliates, the total monthly fees can sum up to $1,000, comparable to MIAX Sapphire's proposed fee.

Financial Implications and Contextual Considerations

The document places significant emphasis on the optional nature of this fee. Accessing the testing environment via a dedicated cross connection is not mandatory. Instead, it remains an additional option alongside free access through a Virtual Private Network (VPN). This optional nature is meant to ensure that the pricing does not unfairly discriminate against smaller market participants who might not afford the dedicated connection.

However, the high cost of $1,000 per month might still place financial pressure on smaller entities, potentially favoring larger participants with more substantial resources. While the document stresses competitive pricing as a justification for these fees, the reliance on comparisons with other exchanges does not extensively explore unique justifications for MIAX Sapphire’s fees. The document also lacks a clear discussion on how this fee structure might impact smaller market participants operationally, especially those who might depend more heavily on free testing options.

Overall, the financial components of this rule change reflect a careful alignment with industry standards while maintaining flexibility for users through free alternatives. Nonetheless, the high monthly fee associated with the dedicated cross connection could still raise questions about accessibility and fairness, despite its voluntary nature.