FR 2024-29926

General Summary

The document details a new proposal from MIAX Pearl, LLC, a self-regulatory organization in the financial sector. The proposal introduces a new fee for market participants who opt to access MIAX Pearl's testing systems environment through a dedicated cross connection. This environment allows users to test software and trading strategies before deploying them in the live trading setting. While the fee for this dedicated connection is $1,000 monthly, an alternative method using a virtual private network (VPN) remains free. The VPN offers a similar testing experience without the associated cost of a dedicated connection.

Significant Issues or Concerns

The proposal raises several issues. Firstly, it is unclear why a fee-based connection is necessary when free VPN access provides similar testing capabilities. This raises questions about whether the fee might lead to unnecessary expenditure for some users. Additionally, the complexity of fee comparisons with other exchanges might confuse stakeholders trying to evaluate the necessity and value of the proposed fees.

Furthermore, the document lacks detailed explanations regarding any competitive advantages a dedicated connection may offer over VPN access. This creates ambiguity around the fee's justification. Another point of concern is potential market competition implications. If only those who can afford the fee opt for the dedicated connection, it might inadvertently create disparity among market participants.

Lastly, the document is dense with regulatory language and legal references, which could hinder accessibility for those not versed in financial or legal terminology, potentially reducing transparency.

Impact on the Public

For the general public, the document's impact might be indirect, primarily affecting those involved in financial markets. However, these changes could influence trading efficiencies and costs that might eventually get passed on to consumers, albeit indirectly. Understanding the nuances of such regulatory changes can be challenging, given the technical and legal complexities involved.

Impact on Specific Stakeholders

For market participants, including brokers and dealers, the proposed rule offers both choices and challenges. The VPN option provides an accessible, cost-free method to test systems, ensuring all players can participate without financial barriers. However, those seeking potentially faster or more reliable connections may view the $1,000 fee for dedicated cross connection as necessary if it provides tangible benefits.

On the regulatory side, such changes emphasize the ongoing evolution within market operations to stay aligned with technological advancements and competitive practices. The commission's preference for competition over regulatory intervention shapes the landscape, underscoring the balance between innovation, cost, and market equity.

In conclusion, while the proposed fee may streamline the service offering and enhance revenue for MIAX Pearl, the necessity and value of the dedicated cross connection should be carefully weighed against the accessible and free VPN option, keeping in mind the broader market equity and financial integrity.

The document discusses a proposal by MIAX PEARL, LLC, an exchange, to establish a new fee structure related to accessing its testing systems environment. The proposal specifically introduces a monthly fee of $1,000 for market participants who choose to use a dedicated cross connection to access this environment.

The exchange already offers free alternatives for accessing these systems, primarily through Virtual Private Network (VPN) access, which raises questions about the necessity of the new fee. Unlike the dedicated connection, the VPN method allows the same range of testing capabilities but without any cost to the users. This situation leads to potential issues for those considering whether to opt for the paid service. It could imply unnecessary spending for those who could achieve similar outcomes via the free alternative, thereby complicating the decision-making process for stakeholders.

The financial aspect of the proposal is also placed into context by comparing fees charged by other exchanges like The Nasdaq Stock Market, which levies a $1,000 monthly fee per hand-off plus a one-time installation fee of another $1,000. This comparison aims to position MIAX PEARL's proposed fees as competitive, as their structure lacks an installation charge. However, this comparison introduces complexity, making it challenging for stakeholders to discern the value and necessity of the fee structure due to disparate fee components across various exchanges.

Moreover, Cboe BZX Exchange charges a lower fee of $250 per month, but this only provides access to their own testing environment and does not extend to affiliated exchanges. The cumulative cost for accessing affiliated exchanges can reach as high as $1,000 per month, aligning eventually with MIAX PEARL's fee, although through a different financial pathway. This highlights the inconsistencies and complexities in the exchange fee landscape, complicating the financial decision-making for potential subscribers.

Finally, the potential issue of market competition arises when considering that only those who can afford the $1,000 monthly fee might opt for the dedicated cross connection. This could inadvertently favor wealthier organizations, exacerbating competitive disparities in the access to testing environments. This financial structuring may skew the level playing field that is generally sought after in financial markets, inadvertently placing less affluent participants at a disadvantage.