82 FR 23457 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services, and the NYSE Arca Schedule of Options Fees and Charges To Adopt the Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 97 (May 22, 2017)
Federal Register Volume 82, Issue 97 (May 22, 2017)
| Page Range | 23457-23475 | |
| FR Document | 2017-10302 |
[Federal Register Volume 82, Number 97 (Monday, May 22, 2017)] [Notices] [Pages 23457-23475] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-10302] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-80698; File No. SR-NYSEARCA-2017-52] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services, and the NYSE Arca Schedule of Options Fees and Charges To Adopt the Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail May 16, 2017. Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on May 10, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. --------------------------------------------------------------------------- [[Page 23458]] I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the NYSE Arca Equities Schedule of Fees and Charges for Exchange Services (``Arca Fee Schedule''), and the NYSE Arca Schedule of Options Fees and Charges (``Arca Options Fee Schedule''), to adopt the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan''). The proposed rule change is available on the Exchange's Web site at www.nyse.com, at the principal office of the Exchange, 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 self-regulatory organization 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 those 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 parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc. (``FINRA''), Investors' Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,\4\ NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE MKT LLC, NYSE Arca, Inc. and NYSE National, Inc.\5\ (collectively, the ``Participants'') filed with the Commission, pursuant to Section 11A of the Exchange Act \6\ and Rule 608 of Regulation NMS thereunder,\7\ the CAT NMS Plan.\8\ The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. The Plan was published for comment in the Federal Register on May 17, 2016,\9\ and approved by the Commission, as modified, on November 15, 2016.\10\ The Plan is designed to create, implement and maintain a consolidated audit trail (``CAT'') that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. The Plan accomplishes this by creating CAT NMS, LLC (the ``Company''), of which each Participant is a member, to operate the CAT.\11\ Under the CAT NMS Plan, the Operating Committee of the Company (``Operating Committee'') has discretion to establish funding for the Company to operate the CAT, including establishing fees that the Participants will pay, and establishing fees for Industry Members that will be implemented by the Participants (``CAT Fees'').\12\ The Participants are required to file with the SEC under Section 19(b) of the Exchange Act any such CAT Fees applicable to Industry Members that the Operating Committee approves.\13\ Accordingly, the Exchange submits this fee filing to amend the Arca Fee Schedule and the Arca Options Fee Schedule which will require Industry Members that are NYSE Arca members to pay the CAT Fees determined by the Operating Committee. --------------------------------------------------------------------------- \4\ ISE Gemini, LLC, ISE Mercury, LLC and International Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange Act Release Nos. 80248 (March 15, 2017), 82 FR 14547 (March 21, 2017); 80326 (March 29, 2017), 82 FR 16460 (April 4, 2017); and 80325 (March 29, 2017), 82 FR 16445 (April 4, 2017). \5\ National Stock Exchange, Inc. has been renamed NYSE National, Inc. See Securities Exchange Act Release No. 79902 (January 30, 2017), 82 FR 9258 (February 3, 2017). \6\ 15 U.S.C. 78k-1. \7\ 17 CFR 242.608. \8\ See Letter from the Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Participants submitted an amendment to the CAT NMS Plan. See Letter from Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. \9\ See Securities Exchange Act Release No. 77724 (April 27, 2016), 81 FR 30614 (May 17, 2016). \10\ See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 2016) (``Approval Order''). \11\ The Plan also serves as the limited liability company agreement for the Company. \12\ Section 11.1(b) of the CAT NMS Plan. \13\ Section 12.1(b) [sic] of the CAT NMS Plan. --------------------------------------------------------------------------- (1) Executive Summary The following provides an executive summary of the CAT funding model approved by the Operating Committee, as well as Industry Members' rights and obligations related to the payment of CAT Fees calculated pursuant to the CAT funding model. A detailed description of the CAT funding model and the CAT Fees follows this executive summary. (A) CAT Funding ModelCAT Costs. The CAT funding model is designed to establish CAT-specific fees to collectively recover the costs of building and operating the CAT from all CAT Reporters, including Industry Members and Participants. The overall CAT costs for the calculation of the CAT Fees in this fee filing are comprised of Plan Processor CAT costs and non-Plan Processor CAT costs incurred, and estimated to be incurred, from November 21, 2016 through November 21, 2017. (See Section 3(a)(2)(E) [sic] below \14\) --------------------------------------------------------------------------- \14\ The Commission notes that references to Sections 3(a)(2) and 3(a)(3) in this Executive Summary should be instead to Sections II.A.1.(2) and II.A.1.(3), respectively. --------------------------------------------------------------------------- Bifurcated Funding Model. The CAT NMS Plan requires a bifurcated funding model, where costs associated with building and operating the CAT would be borne by (1) Participants and Industry Members that are Execution Venues for Eligible Securities through fixed tier fees based on market share, and (2) Industry Members (other than alternative trading systems (``ATSs'') that execute transactions in Eligible Securities (``Execution Venue ATSs'')) through fixed tier fees based on message traffic for Eligible Securities. (See Section 3(a)(2) [sic] below) Industry Member Fees. Each Industry Member (other than Execution Venue ATSs) will be placed into one of nine tiers of fixed fees, based on ``message traffic'' in Eligible Securities for a defined period (as discussed below). Prior to the start of CAT reporting, ``message traffic'' will be comprised of historical equity and equity options orders, cancels and quotes provided by each exchange and FINRA over the previous three months. After an Industry Member begins reporting to the CAT, ``message traffic'' will be calculated based on the Industry Member's Reportable Events reported to the CAT. Industry Members with lower levels of message traffic will pay a lower fee and Industry Members with higher levels of message traffic will pay a higher fee. (See Section 3(a)(2)(B) [sic] below) Execution Venue Fees. Each Equity Execution Venue will be placed in one of two tiers of fixed fees based on market share, and each Options [[Page 23459]] Execution Venue will be placed in one of two tiers of fixed fees based on market share. Equity Execution Venue market share will be determined by calculating each Equity Execution Venue's proportion of the total volume of NMS Stock and OTC Equity shares reported by all Equity Execution Venues during the relevant time period. Similarly, market share for Options Execution Venues will be determined by calculating each Options Execution Venue's proportion of the total volume of Listed Options contracts reported by all Options Execution Venues during the relevant time period. Equity Execution Venues with a larger market share will pay a larger CAT Fee than Equity Execution Venues with a smaller market share. Similarly, Options Execution Venues with a larger market share will pay a larger CAT Fee than Options Execution Venues with a smaller market share. (See Section 3(a)(2)(C) [sic] below) Cost Allocation. For the reasons discussed below, in designing the model, the Operating Committee determined that 75 percent of total costs recovered would be allocated to Industry Members (other than Execution Venue ATSs) and 25 percent would be allocated to Execution Venues. In addition, the Operating Committee determined to allocate 75 percent of Execution Venue costs recovered to Equity Execution Venues and 25 percent to Options Execution Venues. (See Section 3(a)(2)(D) [sic] below) Comparability of Fees. The CAT funding model requires that the CAT Fees charged to the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether Execution Venues and/or Industry Members). (See Section 3(a)(2)(F) [sic] below) (B) CAT Fees for Industry Members Fee Schedule. The quarterly CAT Fees for each tier for Industry Members are set forth in the two fee schedules in the Consolidated Audit Trail Funding Fees, one for Equity ATSs and one for Industry Members other than Equity ATSs. (See Section 3(a)(3)(B) [sic] below) Quarterly Invoices. Industry Members will be billed quarterly for CAT Fees, with the invoices payable within 30 days. The quarterly invoices will identify within which tier the Industry Member falls. (See Section 3(a)(3)(C) [sic] below) Centralized Payment. Each Industry Member will receive from the Company one invoice for its applicable CAT Fees, not separate invoices from each Participant of which it is a member. The Industry Members will pay its CAT Fees to the Company via the centralized system for the collection of CAT Fees established by the Operating Committee. (See Section 3(a)(3)(C) [sic] below) Billing Commencement. Industry Members will begin to receive invoices for CAT Fees as promptly as possible following the establishment of a billing mechanism. The Exchange will issue a Trader Update to its members when the billing mechanism is established, specifying the date when such invoicing of Industry Members will commence. (See Section 3(a)(2)(G) [sic] below) (2) Description of the CAT Funding Model Article XI of the CAT NMS Plan requires the Operating Committee to approve the operating budget, including projected costs of developing and operating the CAT for the upcoming year. As set forth in Article XI of the CAT NMS Plan, the CAT NMS Plan requires a bifurcated funding model, where costs associated with building and operating the Central Repository would be borne by (1) Participants and Industry Members that are Execution Venues through fixed tier fees based on market share, and (2) Industry Members (other than Execution Venue ATSs) through fixed tier fees based on message traffic. In its order approving the CAT NMS Plan, the Commission determined that the proposed funding model was ``reasonable'' \15\ and ``reflects a reasonable exercise of the Participants' funding authority to recover the Participants' costs related to the CAT.'' \16\ --------------------------------------------------------------------------- \15\ Approval Order at 84796. \16\ Id. at 84794. --------------------------------------------------------------------------- More specifically, the Commission stated in approving the CAT NMS Plan that ``[t]he Commission believes that the proposed funding model is reasonably designed to allocate the costs of the CAT between the Participants and Industry Members.'' \17\ The Commission further noted the following: --------------------------------------------------------------------------- \17\ Id. at 84795. The Commission believes that the proposed funding model reflects a reasonable exercise of the Participants' funding authority to recover the Participants' costs related to the CAT. The CAT is a regulatory facility jointly owned by the Participants and . . . the Exchange Act specifically permits the Participants to charge their members fees to fund their self-regulatory obligations. The Commission further believes that the proposed funding model is designed to impose fees reasonably related to the Participants' self-regulatory obligations because the fees would be directly associated with the costs of establishing and maintaining the CAT, and not unrelated SRO services.\18\ --------------------------------------------------------------------------- \18\ Id. at 84794. Accordingly, the funding model imposes fees on both Participants and Industry Members. In addition, as discussed in Appendix C of the CAT NMS Plan, the Operating Committee considered the advantages and disadvantages of a variety of alternative funding and cost allocation models before selecting the proposed model.\19\ After analyzing the various alternatives, the Operating Committee determined that the proposed tiered, fixed fee funding model provides a variety of advantages in comparison to the alternatives. First, the fixed fee model, as opposed to a variable fee model, provides transparency, ease of calculation, ease of billing and other administrative functions, and predictability of a fixed fee. Such factors are crucial to estimating a reliable revenue stream for the Company and for permitting CAT Reporters to reasonably predict their payment obligations for budgeting purposes.\20\ Additionally, a strictly variable or metered funding model based on message volume would be far more likely to affect market behavior and place an inappropriate burden on competition. Moreover, as the SEC noted in approving the CAT NMS Plan, ``[t]he Participants also have offered a reasonable basis for establishing a funding model based on broad tiers, in that it be may be easier to implement.'' \21\ --------------------------------------------------------------------------- \19\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85006. \20\ In choosing a tiered fee structure, the SROs concluded that the variety of benefits offered by a tiered fee structure, discussed above, outweighed the fact that Industry Members in any particular tier would pay different rates per message traffic order event (e.g., an Industry Member with the largest amount of message traffic in one tier would pay a smaller amount per order event than an Industry Member in the same tier with the least amount of message traffic). Such variation is the natural result of a tiered fee structure. \21\ Approval Order at 84796. --------------------------------------------------------------------------- In addition, multiple reviews of current broker-dealer order and trading data submitted under existing reporting requirements showed a wide range in activity among broker-dealers, with a number of broker- dealers submitting fewer than 1,000 orders per month and other broker- dealers submitting millions and even billions of orders in the same period. Accordingly, the CAT NMS Plan includes a tiered approach to fees. The tiered approach helps ensure that fees are equitably allocated among similarly [[Page 23460]] situated CAT Reporters and furthers the goal of lessening the impact on smaller firms.\22\ The self-regulatory organizations considered several approaches to developing a tiered model, including defining fee tiers based on such factors as size of firm, message traffic or trading dollar volume. After analyzing the alternatives, it was concluded that the tiering should be based on the relative impact of CAT Reporters on the CAT System. --------------------------------------------------------------------------- \22\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85006. --------------------------------------------------------------------------- Accordingly, the CAT NMS Plan contemplates that costs will be allocated across the CAT Reporters on a tiered basis to allocate costs to those CAT Reporters that contribute more to the costs of creating, implementing and maintaining the CAT.\23\ The fees to be assessed at each tier are calculated so as to recoup a proportion of costs appropriate to the message traffic or market share (as applicable) from CAT Reporters in each tier. Therefore, Industry Members generating the most message traffic will be in the higher tiers, and therefore be charged a higher fee. Industry Members with lower levels of message traffic will be in lower tiers and will be assessed a smaller fee for the CAT.\24\ Correspondingly, Execution Venues with the highest market share will be in the top tier, and therefore will be charged a higher fee. Execution Venues with a lower market share will be in the lower tier and will be assessed a smaller fee for the CAT.\25\ --------------------------------------------------------------------------- \23\ Approval Order at 85005. \24\ Id. \25\ Id. --------------------------------------------------------------------------- The Commission also noted in approving the CAT NMS Plan that ``[t]he Participants have offered a credible justification for using different criteria to charge Execution Venues (market share) and Industry Members (message traffic)'' \26\ in the CAT funding model. While there are multiple factors that contribute to the cost of building, maintaining and using the CAT, processing and storage of incoming message traffic is one of the most significant cost drivers for the CAT.\27\ Thus, the CAT NMS Plan provides that the fees payable by Industry Members (other than Execution Venue ATSs) will be based on the message traffic generated by such Industry Member.\28\ --------------------------------------------------------------------------- \26\ Id. at 84796. \27\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85005. \28\ Section 11.3(b) of the CAT NMS Plan. --------------------------------------------------------------------------- The CAT NMS Plan provides that the Operating Committee will use different criteria to establish fees for Execution Venues and non- Execution Venues due to the fundamental differences between the two types of entities. In particular, the CAT NMS Plan provides that fees charged to CAT Reporters that are Execution Venues will be based on the level of market share and that costs charged to Industry Members (other than Execution Venue ATSs) will be based upon message traffic.\29\ Because most Participant message traffic consists of quotations, and Participants usually disseminate quotations in all instruments they trade, regardless of execution volume, Execution Venues that are Participants generally disseminate similar amounts of message traffic. Accordingly, basing fees for Execution Venues on message traffic would not provide the same degree of differentiation among Execution Venues that it does among Industry Members (other than Execution Venue ATSs). In contrast, execution volume more accurately delineates the different levels of trading activity of Execution Venues.\30\ --------------------------------------------------------------------------- \29\ Section 11.2(c) of the CAT NMS Plan. \30\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85005. --------------------------------------------------------------------------- The CAT NMS Plan's funding model also is structured to avoid a ``reduction in market quality.'' \31\ The tiered, fixed fee funding model is designed to limit the disincentives to providing liquidity to the market. For example, the Participants expect that a firm that had a large volume of quotes would likely be categorized in one of the upper tiers, and would not be assessed a fee for this traffic directly as they would under a more directly metered model. In contrast, strictly variable or metered funding models based on message volume were far more likely to affect market behavior. In approving the CAT NMS Plan, the SEC stated that ``[t]he Participants also offered a reasonable basis for establishing a funding model based on broad tiers, in that it may be . . . less likely to have an incremental deterrent effect on liquidity provision.'' \32\ --------------------------------------------------------------------------- \31\ Section 11.2(e) of the CAT NMS Plan. \32\ Approval Order at 84796. --------------------------------------------------------------------------- The CAT NMS Plan is structured to avoid potential conflicts raised by the Operating Committee determining fees applicable to its own members--the Participants. First, the Company will be operated on a ``break-even'' basis, with fees imposed to cover costs and an appropriate reserve. Any surpluses will be treated as an operational reserve to offset future fees and will not be distributed to the Participants as profits.\33\ To ensure that the Participants' operation of the CAT will not contribute to the funding of their other operations, Section 11.1(c) of the CAT NMS Plan specifically states that ``[a]ny surplus of the Company's revenues over its expenses shall be treated as an operational reserve to offset future fees.'' In addition, as set forth in Article VIII of the CAT NMS Plan, the Company ``intends to operate in a manner such that it qualifies as a `business league' within the meaning of Section 501(c)(6) of the [Internal Revenue] Code.'' To qualify as a business league, an organization must ``not [be] organized for profit and no part of the net earnings of [the organization can] inure[ ] to the benefit of any private shareholder or individual.'' \34\ As the SEC stated when approving the CAT NMS Plan, ``the Commission believes that the Company's application for Section 501(c)(6) business league status addresses issues raised by commenters about the Plan's proposed allocation of profit and loss by mitigating concerns that the Company's earnings could be used to benefit individual Participants.'' \35\ --------------------------------------------------------------------------- \33\ Id. at 84792. \34\ 26 U.S.C. 501(c)(6). \35\ Approval Order at 84793. --------------------------------------------------------------------------- Finally, by adopting a CAT-specific fee, the Participants will be fully transparent regarding the costs of the CAT. Charging a general regulatory fee, which would be used to cover CAT costs as well as other regulatory costs, would be less transparent than the selected approach of charging a fee designated to cover CAT costs only. A full description of the funding model is set forth below. This description includes the framework for the funding model as set forth in the CAT NMS Plan, as well as the details as to how the funding model will be applied in practice, including the number of fee tiers and the applicable fees for each tier. The Exchange notes that the complete funding model is described below, including those fees that are to be paid by the Participants. The proposed Consolidated Audit Trail Funding Fees, however, do not apply to the Participants; the proposed Consolidated Audit Trail Funding Fees only apply to Industry Members. The CAT fees for Participants will be imposed separately by the Operating Committee pursuant to the CAT NMS Plan. (A) Funding Principles Section 11.2 of the CAT NMS Plan sets forth the principles that the Operating Committee applied in establishing the funding for the Company. The Operating Committee has considered these funding principles as [[Page 23461]] well as the other funding requirements set forth in the CAT NMS Plan and in Rule 613 in developing the proposed funding model. The following are the funding principles in Section 11.2 of the CAT NMS Plan: To create transparent, predictable revenue streams for the Company that are aligned with the anticipated costs to build, operate and administer the CAT and other costs of the Company; To establish an allocation of the Company's related costs among Participants and Industry Members that is consistent with the Exchange Act, taking into account the timeline for implementation of the CAT and distinctions in the securities trading operations of Participants and Industry Members and their relative impact upon the Company's resources and operations; To establish a tiered fee structure in which the fees charged to: (i) CAT Reporters that are Execution Venues, including ATSs, are based upon the level of market share; (ii) Industry Members' non-ATS activities are based upon message traffic; (iii) the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether Execution Venue and/or Industry Members); To provide for ease of billing and other administrative functions; To avoid any disincentives such as placing an inappropriate burden on competition and a reduction in market quality; and To build financial stability to support the Company as a going concern. (B) Industry Member Tiering Under Section 11.3(b) of the CAT NMS Plan, the Operating Committee is required to establish fixed fees to be payable by Industry Members, based on message traffic generated by such Industry Member, with the Operating Committee establishing at least five and no more than nine tiers. The CAT NMS Plan clarifies that the fixed fees payable by Industry Members pursuant to Section 11.3(b) shall, in addition to any other applicable message traffic, include message traffic generated by: (i) An ATS that does not execute orders that is sponsored by such Industry Member; and (ii) routing orders to and from any ATS sponsored by such Industry Member. In addition, the Industry Member fees will apply to Industry Members that act as routing broker-dealers for exchanges. The Industry Member fees will not be applicable, however, to an ATS that qualifies as an Execution Venue, as discussed in more detail in the section on Execution Venue tiering. In accordance with Section 11.3(b), the Operating Committee approved a tiered fee structure for Industry Members (other than Execution Venue ATSs) as described in this section. In determining the tiers, the Operating Committee considered the funding principles set forth in Section 11.2 of the CAT NMS Plan, seeking to create funding tiers that take into account the relative impact on CAT System resources of different Industry Members, and that establish comparable fees among the CAT Reporters with the most Reportable Events. The Operating Committee has determined that establishing nine tiers results in the fairest allocation of fees, best distinguishing between Industry Members with differing levels of message traffic. Thus, each such Industry Member will be placed into one of nine tiers of fixed fees, based on ``message traffic'' for a defined period (as discussed below). A nine tier structure was selected to provide the widest range of levels for tiering Industry Members such that Industry Members submitting significantly less message traffic to the CAT would be adequately differentiated from Industry Members submitting substantially more message traffic. The Operating Committee considered historical message traffic generated by Industry Members across all exchanges and as submitted to FINRA's Order Audit Trail System (``OATS''), and considered the distribution of firms with similar levels of message traffic, grouping together firms with similar levels of message traffic. Based on this, the Operating Committee determined that nine tiers would best group firms with similar levels of message traffic, charging those firms with higher impact on the CAT more, while lowering the burden of Industry Members that have less CAT-related activity. Each Industry Member (other than Execution Venue ATSs) will be ranked by message traffic and tiered by predefined Industry Member percentages (the ``Industry Member Percentages''). The Operating Committee determined to use predefined percentages rather than fixed volume thresholds to allow the funding model to ensure that the total CAT fees collected recover the intended CAT costs regardless of changes in the total level of message traffic. To determine the fixed percentage of Industry Members in each tier, the Operating Committee analyzed historical message traffic generated by Industry Members across all exchanges and as submitted to OATS, and considered the distribution of firms with similar levels of message traffic, grouping together firms with similar levels of message traffic. Based on this, the Operating Committee identified tiers that would group firms with similar levels of message traffic, charging those firms with higher impact on the CAT more, while lowering the burden on Industry Members that have less CAT-related activity. The percentage of costs recovered by each Industry Member tier will be determined by predefined percentage allocations (the ``Industry Member Recovery Allocation''). In determining the fixed percentage allocation of costs recovered for each tier, the Operating Committee considered the impact of CAT Reporter message traffic on the CAT System as well as the distribution of total message volume across Industry Members while seeking to maintain comparable fees among the largest CAT Reporters. Accordingly, following the determination of the percentage of Industry Members in each tier, the Operating Committee identified the percentage of total market volume for each tier based on the historical message traffic upon which Industry Members had been initially ranked. Taking this into account along with the resulting percentage of total recovery, the percentage allocation of costs recovered for each tier were assigned, allocating higher percentages of recovery to tiers with higher levels of message traffic while avoiding any inappropriate burden on competition. Furthermore, by using percentages of Industry Members and costs recovered per tier, the Operating Committee sought to include stability and elasticity within the funding model, allowing the funding model to respond to changes in either the total number of Industry Members or the total level of message traffic. The following chart illustrates the breakdown of nine Industry Member tiers across the monthly average of total equity and equity options orders, cancels and quotes in Q1 2016 and identifies relative gaps across varying levels of Industry Member message traffic as well as message traffic thresholds between the largest of Industry Member message traffic gaps. The Operating Committee referenced similar distribution illustrations to determine the appropriate division of Industry Member percentages in each tier by considering the grouping of firms with similar levels of message traffic and seeking to identify relative [[Page 23462]] breakpoints in the message traffic between such groupings. In reviewing the chart and its corresponding table, note that while these distribution illustrations were referenced to help differentiate between Industry Member tiers, the proposed funding model is directly driven, not by fixed message traffic thresholds, but rather by fixed percentages of Industry Members across tiers to account for fluctuating levels of message traffic across time and to provide for the financial stability of the CAT by ensuring that the funding model will recover the required amounts regardless of changes in the number of Industry Members or the amount of message traffic. Actual messages in any tier will vary based on the actual traffic in a given measurement period, as well as the number of firms included in the measurement period. The Industry Member Percentages and Industry Member Recovery Allocation for each tier will remain fixed with each Industry Member's tier to be reassigned periodically, as described below in Section 3(a)(1)(H) [sic]. [GRAPHIC] [TIFF OMITTED] TN22MY17.004 ------------------------------------------------------------------------ Monthly average message traffic per industry Industry member tier member (orders, quotes and cancels) ------------------------------------------------------------------------ Tier 1............................................... >10,000,000,000 Tier 2............................................... >1,000,000,000 Tier 3............................................... >100,000,000 Tier 4............................................... >2,500,000 Tier 5............................................... >200,000 Tier 6............................................... >50,000 Tier 7............................................... >5,000 Tier 8............................................... >1,000 Tier 9............................................... <=1,000 ------------------------------------------------------------------------ Based on the above analysis, the Operating Committee approved the following Industry Member Percentages and Recovery Allocations: ---------------------------------------------------------------------------------------------------------------- Percentage of Percentage of industry Percentage of Industry member tier industry member total recovery members recovery ---------------------------------------------------------------------------------------------------------------- Tier 1.......................................................... 0.500 8.50 6.38 Tier 2.......................................................... 2.500 35.00 26.25 Tier 3.......................................................... 2.125 21.25 15.94 Tier 4.......................................................... 4.625 15.75 11.81 Tier 5.......................................................... 3.625 7.75 5.81 Tier 6.......................................................... 4.000 5.25 3.94 Tier 7.......................................................... 17.500 4.50 3.38 [[Page 23463]] Tier 8.......................................................... 20.125 1.50 1.13 Tier 9.......................................................... 45.000 0.50 0.38 ----------------------------------------------- Total....................................................... 100 100 75 ---------------------------------------------------------------------------------------------------------------- For the purposes of creating these tiers based on message traffic, the Operating Committee determined to define the term ``message traffic'' separately for the period before the commencement of CAT reporting and for the period after the start of CAT reporting. The different definition for message traffic is necessary as there will be no Reportable Events as defined in the Plan, prior to the commencement of CAT reporting. Accordingly, prior to the start of CAT reporting, ``message traffic'' will be comprised of historical equity and equity options orders, cancels and quotes provided by each exchange and FINRA over the previous three months.\36\ Prior to the start of CAT reporting, orders would be comprised of the total number of equity and equity options orders received and originated by a member of an exchange or FINRA over the previous three-month period, including principal orders, cancel/replace orders, market maker orders originated by a member of an exchange, and reserve (iceberg) orders as well as order routes and executions originated by a member of FINRA, and excluding order rejects and implied orders.\37\ In addition, prior to the start of CAT reporting, cancels would be comprised of the total number of equity and equity option cancels received and originated by a member of an exchange or FINRA over a three-month period, excluding order modifications (e.g., order updates, order splits, partial cancels). Furthermore, prior to the start of CAT reporting, quotes would be comprised of information readily available to the exchanges and FINRA, such as the total number of historical equity and equity options quotes received and originated by a member of an exchange or FINRA over the prior three-month period. --------------------------------------------------------------------------- \36\ The SEC approved exemptive relief permitting Options Market Maker quotes to be reported to the Central Repository by the relevant Options Exchange in lieu of requiring that such reporting be done by both the Options Exchange and the Options Market Maker, as required by Rule 613 of Regulation NMS. See Securities Exchange Act Release No. 77265 (Mar. 1, 2017 [sic], 81 FR 11856 (Mar. 7, 2016). This exemption applies to Options Market Maker quotes for CAT reporting purposes only. Therefore, notwithstanding the reporting exemption provided for Options Market Maker quotes, Options Market Maker quotes will be included in the calculation of total message traffic for Options Market Makers for purposes of tiering under the CAT funding model both prior to CAT reporting and once CAT reporting commences. \37\ Consequently, firms that do not have ``message traffic'' reported to an exchange or OATS before they are reporting to the CAT would not be subject to a fee until they begin to report information to CAT. --------------------------------------------------------------------------- After an Industry Member begins reporting to the CAT, ``message traffic'' will be calculated based on the Industry Member's Reportable Events reported to the CAT as will be defined in the Technical Specifications.\38\ --------------------------------------------------------------------------- \38\ If an Industry Member (other than an Execution Venue ATS) has no orders, cancels or quotes prior to the commencement of CAT Reporting, or no Reportable Events after CAT reporting commences, then the Industry Member would not have a CAT fee obligation. --------------------------------------------------------------------------- The Operating Committee has determined to calculate fee tiers every three months, on a calendar quarter basis, based on message traffic from the prior three months. Based on its analysis of historical data, the Operating Committee believes that calculating tiers based on three months of data will provide the best balance between reflecting changes in activity by Industry Members while still providing predictability in the tiering for Industry Members. Because fee tiers will be calculated based on message traffic from the prior three months, the Operating Committee will begin calculating message traffic based on an Industry Member's Reportable Events reported to the CAT once the Industry Member has been reporting to the CAT for three months. Prior to that, fee tiers will be calculated as discussed above with regard to the period prior to CAT reporting. (C) Execution Venue Tiering Under Section 11.3(a) of the CAT NMS Plan, the Operating Committee is required to establish fixed fees payable by Execution Venues. Section 1.1 of the CAT NMS Plan defines an Execution Venue as ``a Participant or an alternative trading system (``ATS'') (as defined in Rule 300 of Regulation ATS) that operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS that does not execute orders).'' \39\ --------------------------------------------------------------------------- \39\ Although FINRA does not operate an execution venue, because it is a Participant, it is considered an ``Execution Venue'' under the Plan for purposes of determining fees. --------------------------------------------------------------------------- The Participants determined that ATSs should be included within the definition of Execution Venue. Given the similarity between the activity of exchanges and ATSs, both of which meet the definition of an ``exchange'' as set forth in the Exchange Act and the fact that the similar trading models would have similar anticipated burdens on the CAT, the Participants determined that ATSs should be treated in the same manner as the exchanges for the purposes of determining the level of fees associated with the CAT.\40\ --------------------------------------------------------------------------- \40\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85005. --------------------------------------------------------------------------- Given the differences between Execution Venues that trade NMS Stocks and/or OTC Equity Securities and Execution Venues that trade Listed Options, Section 11.3(a) addresses Execution Venues that trade NMS Stocks and/or OTC Equity Securities separately from Execution Venues that trade Listed Options. Equity and Options Execution Venues are treated separately for two reasons. First, the differing quoting behavior of Equity and Options Execution Venues makes comparison of activity between Execution Venues difficult. Second, Execution Venue tiers are calculated based on market share of share volume, and it is therefore difficult to compare market share between asset classes (i.e., equity shares versus options contracts). Discussed below is how the funding model treats the two types of Execution Venues. (I) NMS Stocks and OTC Equity Securities Section 11.3(a)(i) of the CAT NMS Plan states that each Execution Venue that (i) executes transactions or, (ii) in the case of a national securities association, has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange, in NMS Stocks or OTC Equity Securities will pay a fixed fee depending on the market share of that Execution Venue in NMS Stocks and OTC Equity Securities, with the Operating Committee establishing at least two and not more than five tiers of fixed fees, based on an Execution Venue's NMS Stocks and [[Page 23464]] OTC Equity Securities market share. For these purposes, market share for Execution Venues that execute transactions will be calculated by share volume, and market share for a national securities association that has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange in NMS Stocks or OTC Equity Securities will be calculated based on share volume of trades reported, provided, however, that the share volume reported to such national securities association by an Execution Venue shall not be included in the calculation of such national security association's market share. In accordance with Section 11.3(a)(i) of the CAT NMS Plan, the Operating Committee approved a tiered fee structure for Equity Execution Venues and Option Execution Venues. In determining the Equity Execution Venue Tiers, the Operating Committee considered the funding principles set forth in Section 11.2 of the CAT NMS Plan, seeking to create funding tiers that take into account the relative impact on system resources of different Equity Execution Venues, and that establish comparable fees among the CAT Reporters with the most Reportable Events. Each Equity Execution Venue will be placed into one of two tiers of fixed fees, based on the Execution Venue's NMS Stocks and OTC Equity Securities market share. In choosing two tiers, the Operating Committee performed an analysis similar to that discussed above with regard to the non-Execution Venue Industry Members to determine the number of tiers for Equity Execution Venues. The Operating Committee determined to establish two tiers for Equity Execution Venues, rather than a larger number of tiers as established for non-Execution Venue Industry Members, because the two tiers were sufficient to distinguish between the smaller number of Equity Execution Venues based on market share. Furthermore, the incorporation of additional Equity Execution Venue tiers would result in significantly higher fees for Tier 1 Equity Execution Venues and diminish comparability between Execution Venues and Industry Members. Each Equity Execution Venue will be ranked by market share and tiered by predefined Execution Venue percentages, (the ``Equity Execution Venue Percentages''). In determining the fixed percentage of Equity Execution Venues in each tier, the Operating Committee looked at historical market share of share volume for execution venues. Equities Execution Venue market share of share volume were sourced from market statistics made publicly-available by Bats Global Markets, Inc. (``Bats''). ATS market share of share volume was sourced from market statistics made publicly-available by FINRA. FINRA trading [sic] reporting facility (``TRF'') market share of share volume was sourced from market statistics made publicly available by Bats. As indicated by FINRA, ATSs accounted for 37.80% of the share volume across the TRFs during the recent tiering period. A 37.80/62.20 split was applied to the ATS and non-ATS breakdown of FINRA market share, with FINRA tiered based only on the non-ATS portion of its TRF market share of share volume. Based on this, the Operating Committee considered the distribution of Execution Venues, and grouped together Execution Venues with similar levels of market share of share volume. In doing so, the Participants considered that, as previously noted, Execution Venues in many cases have similar levels of message traffic due to quoting activity, and determined that it was simpler and more appropriate to have fewer, rather than more, Execution Venue tiers to distinguish between Execution Venues. The percentage of costs recovered by each Equity Execution Venue tier will be determined by predefined percentage allocations (the ``Equity Execution Venue Recovery Allocation''). In determining the fixed percentage allocation of costs recovered for each tier, the Operating Committee considered the impact of CAT Reporter market share activity on the CAT System as well as the distribution of total market volume across Equity Execution Venues while seeking to maintain comparable fees among the largest CAT Reporters. Accordingly, following the determination of the percentage of Execution Venues in each tier, the Operating Committee identified the percentage of total market volume for each tier based on the historical market share upon which Execution Venues had been initially ranked. Taking this into account along with the resulting percentage of total recovery, the percentage allocation of costs recovered for each tier were assigned, allocating higher percentages of recovery to the tier with a higher level of market share while avoiding any inappropriate burden on competition. Furthermore, due to the similar levels of impact on the CAT System across Execution Venues, there is less variation in CAT Fees between the highest and lowest of tiers for Execution Venues. Furthermore, by using percentages of Equity Execution Venues and costs recovered per tier, the Operating Committee sought to include stability and elasticity within the funding model, allowing the funding model to respond to changes in either the total number of Equity Execution Venues or changes in market share. Based on this analysis, the Operating Committee approved the following Equity Execution Venue Percentages and Recovery Allocations: ---------------------------------------------------------------------------------------------------------------- Percentage of Percentage of equity execution Percentage of Equity execution venue tier execution venue total recovery venues recovery ---------------------------------------------------------------------------------------------------------------- Tier 1.......................................................... 25.00 26.00 6.50 Tier 2.......................................................... 75.00 49.00 12.25 ----------------------------------------------- Total....................................................... 100 75 18.75 ---------------------------------------------------------------------------------------------------------------- The following table exhibits the relative separation of market share of share volume between Tier 1 and Tier 2 Equity Execution Venues. In reviewing the table, note that while this division was referenced as a data point to help differentiate between Equity Execution Venue tiers, the proposed funding model is directly driven not by market share thresholds, but rather by fixed percentages of Equity Execution Venues across tiers to account for fluctuating levels of market share across time. Actual market share in any tier will vary based on the actual market activity in a given measurement period, as well as the number of Equity Execution Venues included in the measurement period. The Equity Execution Venue Percentages and Equity Execution Venue Recovery [[Page 23465]] Allocation for each tier will remain fixed with each Equity Execution Venue tier to be reassigned periodically, as described below in Section 3(a)(1)(I) [sic]. ------------------------------------------------------------------------ Equity market Equity execution venue tier share of share volume (%) ------------------------------------------------------------------------ Tier 1.................................................. >=1 Tier 2.................................................. <1 ------------------------------------------------------------------------ (II) Listed Options Section 11.3(a)(ii) of the CAT NMS Plan states that each Execution Venue that executes transactions in Listed Options will pay a fixed fee depending on the Listed Options market share of that Execution Venue, with the Operating Committee establishing at least two and no more than five tiers of fixed fees, based on an Execution Venue's Listed Options market share. For these purposes, market share will be calculated by contract volume. In accordance with Section 11.3(a)(ii) of the CAT NMS Plan, the Operating Committee approved a tiered fee structure for Options Execution Venues. In determining the tiers, the Operating Committee considered the funding principles set forth in Section 11.2 of the CAT NMS Plan, seeking to create funding tiers that take into account the relative impact on system resources of different Options Execution Venues, and that establish comparable fees among the CAT Reporters with the most Reportable Events. Each Options Execution Venue will be placed into one of two tiers of fixed fees, based on the Execution Venue's Listed Options market share. In choosing two tiers, the Operating Committee performed an analysis similar to that discussed above with regard to Industry Members (other than Execution Venue ATSs) to determine the number of tiers for Options Execution Venues. The Operating Committee determined to establish two tiers for Options Execution Venues, rather than a larger number of tiers as established for Industry Members (other than Execution Venue ATSs), because the two tiers were sufficient to distinguish between the smaller number of Options Execution Venues based on market share. Furthermore, due to the smaller number of Options Execution Venues, the incorporation of additional Options Execution Venue tiers would result in significantly higher fees for Tier 1 Options Execution Venues and reduce comparability between Execution Venues and Industry Members. Each Options Execution Venue will be ranked by market share and tiered by predefined Execution Venue percentages, (the ``Options Execution Venue Percentages''). To determine the fixed percentage of Options Execution Venues in each tier, the Operating Committee analyzed the historical and publicly available market share of Options Execution Venues to group Options Execution Venues with similar market shares across the tiers. Options Execution Venue market share of share volume were sourced from market statistics made publicly-available by Bats. The process for developing the Options Execution Venue Percentages was the same as discussed above with regard to Equity Execution Venues. The percentage of costs recovered by each Options Execution Venue tier will be determined by predefined percentage allocations (the ``Options Execution Venue Recovery Allocation''). In determining the fixed percentage allocation of costs recovered for each tier, the Operating Committee considered the impact of CAT Reporter market share activity on the CAT System as well as the distribution of total market volume across Options Execution Venues while seeking to maintain comparable fees among the largest CAT Reporters. Furthermore, by using percentages of Options Execution Venues and costs recovered per tier, the Operating Committee sought to include stability and elasticity within the funding model, allowing the funding model to respond to changes in either the total number of Options Execution Venues or changes in market share. The process for developing the Options Execution Venue Recovery Allocation was the same as discussed above with regard to Equity Execution Venues. Based on this analysis, the Operating Committee approved the following Options Execution Venue Percentages and Recovery Allocations: ---------------------------------------------------------------------------------------------------------------- Percentage of Percentage of options execution Percentage of Options execution venue tier execution venue total recovery venues recovery ---------------------------------------------------------------------------------------------------------------- Tier 1.......................................................... 75.00 20.00 5.00 Tier 2.......................................................... 25.00 5.00 1.25 ----------------------------------------------- Total....................................................... 100 25 6.25 ---------------------------------------------------------------------------------------------------------------- The following table exhibits the relative separation of market share of share volume between Tier 1 and Tier 2 Options Execution Venues. In reviewing the table, note that while this division was referenced as a data point to help differentiate between Options Execution Venue tiers, the proposed funding model is directly driven, not by market share thresholds, but rather by fixed percentages of Options Execution Venues across tiers to account for fluctuating levels of market share across time. Actual market share in any tier will vary based on the actual market activity in a given measurement period, as well as the number of Options Execution Venues included in the measurement period. The Options Execution Venue Percentages and Equity Execution Venue Recovery Allocation for each tier will remain fixed with each Options Execution Venue tier to be reassigned periodically, as described below in Section 3(a)(1)(I) [sic]. ------------------------------------------------------------------------ Options market share Options execution venue tier of share volume (%) ------------------------------------------------------------------------ Tier 1.................................................. >=1 Tier 2.................................................. <1 ------------------------------------------------------------------------ (III) Market Share/Tier Assignments The Operating Committee determined that, prior to the start of CAT reporting, market share for Execution Venues would be sourced from publicly-available market data. Options and equity volumes for Participants will be sourced from market data made publicly available by Bats while Execution Venue ATS volumes will be sourced from market data made publicly available by FINRA. Set forth in the Appendix are two charts, one listing the current Equity Execution Venues, each with its rank and tier, and one listing the current Options Execution Venues, each with its rank and tier. [[Page 23466]] After the commencement of CAT reporting, market share for Execution Venues will be sourced from data reported to the CAT. Equity Execution Venue market share will be determined by calculating each Equity Execution Venue's proportion of the total volume of NMS Stock and OTC Equity shares reported by all Equity Execution Venues during the relevant time period. Similarly, market share for Options Execution Venues will be determined by calculating each Options Execution Venue's proportion of the total volume of Listed Options contracts reported by all Options Execution Venues during the relevant time period. The Operating Committee has determined to calculate fee tiers for Execution Venues every three months based on market share from the prior three months. Based on its analysis of historical data, the Operating Committee believes calculating tiers based on three months of data will provide the best balance between reflecting changes in activity by Execution Venues while still providing predictability in the tiering for Execution Venues. (D) Allocation of Costs In addition to the funding principles discussed above, including comparability of fees, Section 11.1(c) of the CAT NMS Plan also requires expenses to be fairly and reasonably shared among the Participants and Industry Members. Accordingly, in developing the proposed fee schedules pursuant to the funding model, the Operating Committee calculated how the CAT costs would be allocated between Industry Members and Execution Venues, and how the portion of CAT costs allocated to Execution Venues would be allocated between Equity Execution Venues and Options Execution Venues. These determinations are described below. (I) Allocation Between Industry Members and Execution Venues In determining the cost allocation between Industry Members (other than Execution Venue ATSs) and Execution Venues, the Operating Committee analyzed a range of possible splits for revenue recovered from such Industry Members and Execution Venues. Based on this analysis, the Operating Committee determined that 75 percent of total costs recovered would be allocated to Industry Members (other than Execution Venue ATSs) and 25 percent would be allocated to Execution Venues. The Operating Committee determined that this 75/25 division maintained the greatest level of comparability across the funding model, keeping in view that comparability should consider affiliations among or between CAT Reporters (e.g., firms with multiple Industry Members and/or exchange licenses). For example, the cost allocation establishes fees for the largest Industry Members (i.e., those Industry Members in Tiers 1, 2 and 3) that are comparable to the largest Equity Execution Venues and Options Execution Venues (i.e., those Execution Venues in Tier 1). In addition, the cost allocation establishes fees for Execution Venue complexes that are comparable to those of Industry Member complexes. For example, when analyzing alternative allocations, other possible allocations led to much higher fees for larger Industry Members than for larger Execution Venues or vice versa, and/or led to much higher fees for Industry Member complexes than Execution Venue complexes or vice versa. Furthermore, the allocation of total CAT costs recovered recognizes the difference in the number of CAT Reporters that are Industry Members versus CAT Reporters that are Execution Venues. Specifically, the cost allocation takes into consideration that there are approximately 25 times more Industry Members expected to report to the CAT than Execution Venues (e.g., an estimated 1,630 Industry Members versus 70 Execution Venues as of January 2017). (II) Allocation Between Equity Execution Venues and Options Execution Venues The Operating Committee also analyzed how the portion of CAT costs allocated to Execution Venues would be allocated between Equity Execution Venues and Options Execution Venues. In considering this allocation of costs, the Operating Committee analyzed a range of alternative splits for revenue recovered between Equity and Options Execution Venues, including a 70/30, 67/33, 65/35, 50/50 and 25/75 split. Based on this analysis, the Operating Committee determined to allocate 75 percent of Execution Venue costs recovered to Equity Execution Venues and 25 percent to Options Execution Venues. The Operating Committee determined that a 75/25 division between Equity and Options Execution Venues maintained elasticity across the funding model as well the greatest level of fee equitability and comparability based on the current number of Equity and Options Execution Venues. For example, the allocation establishes fees for the larger Equity Execution Venues that are comparable to the larger Options Execution Venues, and fees for the smaller Equity Execution Venues that are comparable to the smaller Options Execution Venues. In addition to fee comparability between Equity Execution Venues and Options Execution Venues, the allocation also establishes equitability between larger (Tier 1) and smaller (Tier 2) Execution Venues based upon the level of market share. Furthermore, the allocation is intended to reflect the relative levels of current equity and options order events. (E) Fee Levels The Operating Committee determined to establish a CAT-specific fee to collectively recover the costs of building and operating the CAT. Accordingly, under the funding model, the sum of the CAT Fees is designed to recover the total cost of the CAT. The Operating Committee has determined overall CAT costs to be comprised of Plan Processor costs and non-Plan Processor costs, which are estimated to be $50,700,000 in total for the year beginning November 21, 2016.\41\ --------------------------------------------------------------------------- \41\ It is anticipated that CAT-related costs incurred prior to November 21, 2016 will be addressed via a separate fee filing. --------------------------------------------------------------------------- The Plan Processor costs relate to costs incurred by the Plan Processor and consist of the Plan Processor's current estimates of average yearly ongoing costs, including development cost, which total $37,500,000. This amount is based upon the fees due to the Plan Processor pursuant to the agreement with the Plan Processor. The non-Plan Processor estimated costs incurred and to be incurred by the Company through November 21, 2017 consists of three categories of costs. The first category of such costs are third party support costs, which include historic legal fees, consulting fees and audit fees from November 21, 2016 until the date of filing as well as estimated third party support costs for the rest of the year. These amount to an estimated $5,200,000. The second category of non-Plan Processor costs are estimated insurance costs for the year. Based on discussions with potential insurance providers, assuming $2-5 million insurance premium on $100 million in coverage, the Company has received an estimate of $3,000,000 for the annual cost. The final cost figures will be determined following receipt of final underwriter quotes. The third category of non-Plan Processor costs is the operational reserve, which is comprised of three months of ongoing Plan Processor costs ($9,375,000), third party support costs ($1,300,000) and insurance costs ($750,000). The Operating Committee aims to accumulate the necessary funds for the [[Page 23467]] establishment of the three-month operating reserve for the Company through the CAT Fees charged to CAT Reporters for the year. On an ongoing basis, the Operating Committee will account for any potential need for the replenishment of the operating reserve or other changes to total cost during its annual budgeting process. The following table summarizes the Plan Processor and non-Plan Processor cost components which comprise the total CAT costs of $50,700,000. --------------------------------------------------------------------------- \42\ This $5,000,000 represents the gradual accumulation of the funds for a target operating reserve of $11,425,000. --------------------------------------------------------------------------- Based on the estimated costs and the calculations for the funding model described above, the Operating Committee determined to impose the following fees: \43\ --------------------------------------------------------------------------- \43\ Note that all monthly, quarterly and annual CAT Fees have been rounded to the nearest dollar. ------------------------------------------------------------------------ Cost category Cost component Amount ------------------------------------------------------------------------ Plan Processor.................... Operational Costs... $37,500,000 Non-Plan Processor................ Third Party Support 5,200,000 Costs. Operational Reserve. \42\ 5,000,000 Insurance Costs..... 3,000,000 --------------- Estimated Total............... .................... 50,700,000 ------------------------------------------------------------------------ For Industry Members (other than Execution Venue ATSs): ---------------------------------------------------------------------------------------------------------------- Monthly CAT Quarterly CAT CAT fees paid Tier fee fee annually \44\ ---------------------------------------------------------------------------------------------------------------- 1............................................................... $33,668 $101,004 $404,016 2............................................................... 27,051 81,153 324,612 3............................................................... 19,239 57,717 230,868 4............................................................... 6,655 19,965 79,860 5............................................................... 4,163 12,489 49,956 6............................................................... 2,560 7,680 30,720 7............................................................... 501 1,503 6,012 8............................................................... 145 435 1,740 9............................................................... 22 66 264 ---------------------------------------------------------------------------------------------------------------- For Execution Venues for NMS Stocks and OTC Equity Securities: --------------------------------------------------------------------------- \44\ This column represents the approximate total CAT Fees paid each year by each Industry Member (other than Execution Venue ATSs) (i.e., ``CAT Fees Paid Annually'' = ``Monthly CAT Fee'' x 12 months). ---------------------------------------------------------------------------------------------------------------- Monthly CAT Quarterly CAT CAT fees paid Tier fee fee annually \45\ ---------------------------------------------------------------------------------------------------------------- 1............................................................... $21,125 $63,375 $253,500 2............................................................... 12,940 38,820 155,280 ---------------------------------------------------------------------------------------------------------------- For Execution Venues for Listed Options: --------------------------------------------------------------------------- \45\ This column represents the approximate total CAT Fees paid each year by each Execution Venue for NMS Stocks and OTC Equity Securities (i.e., ``CAT Fees Paid Annually'' = ``Monthly CAT Fee'' x 12 months). ---------------------------------------------------------------------------------------------------------------- Monthly CAT Quarterly CAT CAT fees paid Tier fee fee annually \46\ ---------------------------------------------------------------------------------------------------------------- 1............................................................... $19,205 $57,615 $230,460 2............................................................... 13,204 39,612 158,448 ---------------------------------------------------------------------------------------------------------------- As noted above, the fees set forth in the tables reflect the Operating Committee's decision to ensure comparable fees between Execution Venues and Industry Members. The fees of the top tiers for Industry Members (other than Execution Venue ATSs) are not identical to the top tier for Execution Venues, however, because the Operating Committee also determined that the fees for Execution Venue complexes should be comparable to those of Industry Member complexes. The difference in the fees reflects this decision to recognize affiliations. --------------------------------------------------------------------------- \46\ This column represents the approximate total CAT Fees paid each year by each Execution Venue for Listed Options (i.e., ``CAT Fees Paid Annually'' = ``Monthly CAT Fee'' x 12 months). --------------------------------------------------------------------------- The Operating Committee has calculated the schedule of effective fees for Industry Members (other than Execution Venue ATSs) and Execution Venues in the following manner. Note that the calculation of CAT Reporter fees assumes 53 Equity Execution Venues, 15 Options Execution Venues and 1,631 Industry Members (other than Execution Venue ATSs) as of January 2017. [[Page 23468]] Calculation of Annual Tier Fees for Industry Members [``IM''] ---------------------------------------------------------------------------------------------------------------- Percentage of Percentage of industry Percentage of Industry member tier industry member total recovery members recovery ---------------------------------------------------------------------------------------------------------------- Tier 1.......................................................... 0.500 8.50 6.38 Tier 2.......................................................... 2.500 35.00 26.25 Tier 3.......................................................... 2.125 21.25 15.94 Tier 4.......................................................... 4.625 15.75 11.81 Tier 5.......................................................... 3.625 7.75 5.81 Tier 6.......................................................... 4.000 5.25 3.94 Tier 7.......................................................... 17.500 4.50 3.38 Tier 8.......................................................... 20.125 1.50 1.13 Tier 9.......................................................... 45.000 0.50 0.38 ----------------------------------------------- Total....................................................... 100 100 75 ---------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ Estimated number Industry member tier of industry members ------------------------------------------------------------------------ Tier 1............................................... 8 Tier 2............................................... 41 Tier 3............................................... 35 Tier 4............................................... 75 Tier 5............................................... 59 Tier 6............................................... 65 Tier 7............................................... 285 Tier 8............................................... 328 Tier 9............................................... 735 ------------------ Total............................................ 1,631 ------------------------------------------------------------------------ [[Page 23469]] [GRAPHIC] [TIFF OMITTED] TN22MY17.005 Calculation of Annual Tier Fees for Equity Execution Venues [``EV''] ---------------------------------------------------------------------------------------------------------------- Percentage of Percentage of equity execution Percentage of Equity execution venue tier execution venue total recovery venues recovery ---------------------------------------------------------------------------------------------------------------- Tier 1.......................................................... 25.00 26.00 6.50 Tier 2.......................................................... 75.00 49.00 12.25 Total....................................................... 100 75 18.75 ---------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ Estimated number Equity execution venue tier of equity execution venues ------------------------------------------------------------------------ Tier 1............................................. 13 [[Page 23470]] Tier 2............................................. 40 -------------------- Total.......................................... 53 ------------------------------------------------------------------------ [GRAPHIC] [TIFF OMITTED] TN22MY17.006 Calculation of Annual Tier Fees for Options Execution Venues [``EV''] ---------------------------------------------------------------------------------------------------------------- Percentage of Percentage of options execution Percentage of Options execution venue tier execution venue total recovery venues recovery ---------------------------------------------------------------------------------------------------------------- Tier 1.......................................................... 75.00 20.00 5.00 Tier 2.......................................................... 25.00 5.00 1.25 ----------------------------------------------- Total....................................................... 100 25 6.25 ---------------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ Estimated number Options execution venue tier of options execution venues ------------------------------------------------------------------------ Tier 1............................................... 11 Tier 2............................................... 4 ------------------ Total............................................ 15 ------------------------------------------------------------------------ [GRAPHIC] [TIFF OMITTED] TN22MY17.007 Traceability of Total CAT Fees ---------------------------------------------------------------------------------------------------------------- Estimated Type Industry member tier number of CAT fees paid Total recovery members annually ---------------------------------------------------------------------------------------------------------------- Industry Members.................... Tier 1.................... 8 $404,016 $3,232,128 Tier 2.................... 41 324,612 13,309,092 Tier 3.................... 35 230,868 8,080,380 Tier 4.................... 75 79,860 5,989,500 Tier 5.................... 59 49,956 2,947,404 Tier 6.................... 65 30,720 1,996,800 Tier 7.................... 285 6,012 1,713,420 Tier 8.................... 328 1,740 570,720 Tier 9.................... 735 264 194,040 ----------------------------------------------- [[Page 23471]] Total........................... .......................... 1,631 .............. 38,033,484 Equity Execution Venues............. Tier 1.................... 13 253,500 3,295,500 Tier 2.................... 40 155,280 6,211,200 ----------------------------------------------- Total........................... .......................... 53 .............. 9,506,700 Options Execution Venues............ Tier 1.................... 11 230,460 2,535,060 Tier 2.................... 4 158,448 633,792 ----------------------------------------------- Total........................... .......................... 15 .............. 3,168,852 ----------------------------------------------- Total....................... .......................... .............. .............. 50,709,036 ----------------------------------------------- Excess \47\................. .......................... .............. .............. 9,036 ---------------------------------------------------------------------------------------------------------------- (F) Comparability of Fees --------------------------------------------------------------------------- \47\ The amount in excess of the total CAT costs will contribute to the gradual accumulation of the target operating reserve of $11.425 million. --------------------------------------------------------------------------- The funding principles require a funding model in which the fees charged to the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether Execution Venue and/or Industry Members). Accordingly, in creating the model, the Operating Committee sought to take account of the affiliations between or among CAT Reporters--that is, where affiliated entities may have multiple Industry Member and/or Execution Venue licenses, by maintaining relative comparability of fees among such affiliations with the most expected CAT-related activity. To do this, the Participants identified representative affiliations in the largest tier of both Execution Venues and Industry Members and compared the aggregate fees that would be paid by such firms. While the proposed fees for Tier 1 and Tier 2 Industry Members are relatively higher than those of Tier 1 and Tier 2 Execution Venues, Execution Venue complex fees are relatively higher than those of Industry Member complexes largely due to affiliations between Execution Venues. The tables set forth below describe the largest Execution Venue and Industry Member complexes and their associated fees: \48\ --------------------------------------------------------------------------- \48\ Note that the analysis of the complexes was performed on a best efforts basis, as all affiliations between the 1631 Industry Members may not be included. Execution Venue Complexes ---------------------------------------------------------------------------------------------------------------- Listing of equity Listing of options Total fees by Execution venue complex execution venue tiers execution venue tier EV complex ---------------------------------------------------------------------------------------------------------------- Execution Venue Complex 1............... Tier 1 (x2)...... Tier 1 (x4)...... $1,900,962 Tier 2 (x1)...... Tier 2 (x2)...... Execution Venue Complex 2............... Tier 1 (x2)...... Tier 1 (x2)...... 1,863,801 Tier 2 (x1)...... Execution Venue Complex 3............... Tier 1 (x2)...... Tier 1 (x2)...... 1,278,447 Tier 2 (x2)...... ---------------------------------------------------------------------------------------------------------------- Industry Member Complexes ---------------------------------------------------------------------------------------------------------------- Listing of industry Total fees by Industry member complex member tiers Listing of ATS tiers IM complex ---------------------------------------------------------------------------------------------------------------- Industry Member Complex 1............... Tier 1 (x2)...... Tier 2 (x1)...... $963,300 Industry Member Complex 2............... Tier 1 (x1)...... Tier 2 (x3)...... 949,674 Tier 4 (x1)...... Industry Member Complex 3............... Tier 1 (x1)...... Tier 2 (x1)...... 883,888 Tier 2 (x1)...... Industry Member Complex 4............... Tier 1 (x1)...... N/A....................... 808,472 Tier 2 (x1)...... Tier 4 (x1)...... Industry Member Complex 5............... Tier 2 (x1)...... Tier 2 (x1)...... 796,595 Tier 3 (x1)...... Tier 4 (x1)...... Tier 7 (x1)...... ---------------------------------------------------------------------------------------------------------------- [[Page 23472]] (G) Billing Onset Under Section 11.1(c) of the CAT NMS Plan, to fund the development and implementation of the CAT, the Company shall time the imposition and collection of all fees on Participants and Industry Members in a manner reasonably related to the timing when the Company expects to incur such development and implementation costs. The Company is currently incurring such development and implementation costs and will continue to do so prior to the commencement of CAT reporting and thereafter. For example, the Plan Processor has required up-front payments to begin building the CAT. In addition, the Company continues to incur consultant and legal expenses on an on-going basis to implement the CAT. Accordingly, the Operating Committee determined that all CAT Reporters, including both Industry Members and Execution Venues (including Participants), would begin to be invoiced as promptly as possible following the establishment of a billing mechanism. The Exchange will issue a Trader Update to its members when the billing mechanism is established, specifying the date when such invoicing of Industry Members will commence. (H) Changes to Fee Levels and Tiers Section 11.3(d) of the CAT NMS Plan states that ``[t]he Operating Committee shall review such fee schedule on at least an annual basis and shall make any changes to such fee schedule that it deems appropriate. The Operating Committee is authorized to review such fee schedule on a more regular basis, but shall not make any changes on more than a semi-annual basis unless, pursuant to a Supermajority Vote, the Operating Committee concludes that such change is necessary for the adequate funding of the Company.'' With such reviews, the Operating Committee will review the distribution of Industry Members and Execution Venues across tiers, and make any updates to the percentage of CAT Reporters allocated to each tier as may be necessary. In addition, the reviews will evaluate the estimated ongoing CAT costs and the level of the operating reserve. To the extent that the total CAT costs decrease, the fees would be adjusted downward, and, to the extent that the total CAT costs increase, the fees would be adjusted upward.\49\ Furthermore, any surplus of the Company's revenues over its expenses is to be included within the operational reserve to offset future fees. The limitations on more frequent changes to the fee, however, are intended to provide budgeting certainty for the CAT Reporters and the Company.\50\ To the extent that the Operating Committee approves changes to the number of tiers in the funding model or the fees assigned to each tier, then the Exchange will file such changes with the SEC pursuant to Section 19(b) of the Exchange Act, and any such changes will become effective in accordance with the requirements of Section 19(b). --------------------------------------------------------------------------- \49\ The CAT Fees are designed to recover the costs associated with the CAT. Accordingly, CAT Fees would not be affected by increases or decreases in other non-CAT expenses incurred by the SROs, such as any changes in costs related to the retirement of existing regulatory systems, such as OATS. \50\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85006. --------------------------------------------------------------------------- (I) Initial and Periodic Tier Reassignments The Operating Committee has determined to calculate fee tiers every three months based on market share or message traffic, as applicable, from the prior three months. For the initial tier assignments, the Company will calculate the relevant tier for each CAT Reporter using the three months of data prior to the commencement date. As with the initial tier assignment, for the tri-monthly reassignments, the Company will calculate the relevant tier using the three months of data prior to the relevant tri-monthly date. The Exchange notes that any movement of CAT Reporters between tiers will not change the criteria for each tier or the fee amount corresponding to each tier. In performing the tri-monthly reassignments, the Exchange notes that the percentage of CAT Reporters in each assigned tier is relative. Therefore, a CAT Reporter's assigned tier will depend, not only on its own message traffic or market share, but it also will depend on the message traffic/market share across all CAT Reporters. For example, the percentage of Industry Members (other than Execution Venue ATSs) in each tier is relative such that such Industry Member's assigned tier will depend on message traffic generated across all CAT Reporters as well as the total number of CAT Reporters. The Operating Committee will inform CAT Reporters of their assigned tier every three months following the periodic tiering process, as the funding model will compare an individual CAT Reporter's activity to that of other CAT Reporters in the marketplace. The following demonstrates a tier reassignment. In accordance with the funding model, the top 75% of Options Execution Venues in market share are categorized as Tier 1 while the bottom 25% of Options Execution Venues in market share are categorized as Tier 2. In the sample scenario below, Options Execution Venue L is initially categorized as a Tier 2 Options Execution Venue in Period A due to its market share. When market share is recalculated for Period B, the market share of Execution Venue L increases, and it is therefore subsequently reranked and reassigned to Tier 1 in Period B. Correspondingly, Options Execution Venue K, initially a Tier 1 Options Execution Venue in Period A, is reassigned to Tier 2 in Period B due to decreases in its market share of share volume. ---------------------------------------------------------------------------------------------------------------- Period A Period B ---------------------------------------------------------------------------------------------------------------- Market share Options Market share Options execution venue rank Tier execution venue rank Tier ---------------------------------------------------------------------------------------------------------------- Options Execution Venue A.... 1 1 Options 1 1 Execution Venue A. Options Execution Venue B.... 2 1 Options 2 1 Execution Venue B. Options Execution Venue C.... 3 1 Options 3 1 Execution Venue C. Options Execution Venue D.... 4 1 Options 4 1 Execution Venue D. Options Execution Venue E.... 5 1 Options 5 1 Execution Venue E. Options Execution Venue F.... 6 1 Options 6 1 Execution Venue F. Options Execution Venue G.... 7 1 Options 7 1 Execution Venue I. Options Execution Venue H.... 8 1 Options 8 1 Execution Venue H. Options Execution Venue I.... 9 1 Options 9 1 Execution Venue G. Options Execution Venue J.... 10 1 Options 10 1 Execution Venue J. Options Execution Venue K.... 11 1 Options 11 1 Execution Venue L. [[Page 23473]] Options Execution Venue L.... 12 2 Options 12 2 Execution Venue K. Options Execution Venue M.... 13 2 Options 13 2 Execution Venue N. Options Execution Venue N.... 14 2 Options 14 2 Execution Venue M. Options Execution Venue O.... 15 2 Options 15 2 Execution Venue O. ---------------------------------------------------------------------------------------------------------------- (3) Proposed CAT Fees The Exchange proposes the Consolidated Audit Trail Funding Fees to implement the CAT Fees determined by the Operating Committee on the Exchange's Industry Members. The proposed fee change has three sections, covering definitions, the fee schedule for CAT Fees, and the timing and manner of payments. Each of these sections is discussed in detail below. (A) Definitions Paragraph (a) sets forth the definitions applicable to the proposed Consolidated Audit Trail Funding Fees. Proposed paragraph (a)(1) states that, the terms ``CAT NMS Plan,'' ``Industry Member,'' ``NMS Stock,'' ``OTC Equity Security,'' and ``Participant'' are defined as set forth in Rule 6.6810 (Consolidated Audit Trail--Definitions) of the CAT Compliance Rule, as adopted by the Exchange for its equities trading platform,\51\ and Rule 11.6810 (Consolidated Audit Trail--Definitions) of the CAT Compliance Rule, as adopted by the Exchange for its options trading platform.\52\ --------------------------------------------------------------------------- \51\ See Securities Exchange Act Release No. 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (SR-NYSEArca-2017-04). \52\ See Securities Exchange Act Release No. 80256 (March 15, 2017), 82 FR 14526 (March 21, 2017) (SR-NYSEArca-2017-03). --------------------------------------------------------------------------- The Exchange proposes to impose different fees on Equity ATSs and Industry Members that are not Equity ATSs. Accordingly, the Exchange proposes to define the term ``Equity ATS.'' First, paragraph (a)(2) defines an ``ATS'' to mean an alternative trading system as defined in Rule 300(a) of Regulation ATS under the Exchange Act that operates pursuant to Rule 301 of Regulation ATS. This is the same definition of an ATS as set forth in Section 1.1 of the CAT NMS Plan in the definition of an ``Execution Venue.'' Then, paragraph (a)(4) defines an ``Equity ATS'' as an ATS that executes transactions in NMS Stocks and/ or OTC Equity Securities. Paragraph (a)(3) defines the term ``CAT Fee'' to mean the Consolidated Audit Trail Funding Fee(s) to be paid by Industry Members pursuant to this proposed rule change. Finally, Paragraph (a)(6) defines an ``Execution Venue'' as a Participant or an ATS (excluding any such ATS that does not execute orders). This definition is the same substantive definition as set forth in Section 1.1 of the CAT NMS Plan. Paragraph (a)(5) defines an ``Equity Execution Venue'' as an Execution Venue that trades NMS Stocks and/or OTC Equity Securities. (B) Fee Schedule The Exchange proposes to impose the CAT Fees applicable to its Industry Members through paragraph (b) of the proposed rule change. Paragraph (b)(1) of the proposed rule change sets forth the CAT Fees applicable to Industry Members other than Equity ATSs. Specifically, paragraph (b)(1) states that the Company will assign each Industry Member (other than an Equity ATS) to a fee tier once every quarter, where such tier assignment is calculated by ranking each Industry Member based on its total message traffic for the three months prior to the quarterly tier calculation day and assigning each Industry Member to a tier based on that ranking and predefined Industry Member percentages. The Industry Members with the highest total quarterly message traffic will be ranked in Tier 1, and the Industry Members with lowest quarterly message traffic will be ranked in Tier 9. Each quarter, each Industry Member (other than an Equity ATS) shall pay the following CAT Fee corresponding to the tier assigned by the Company for such Industry Member for that quarter: ------------------------------------------------------------------------ Percentage of Tier industry Quarterly CAT members fee ------------------------------------------------------------------------ 1....................................... 0.500 $101,004 2....................................... 2.500 81,153 3....................................... 2.125 57,717 4....................................... 4.625 19,965 5....................................... 3.625 12,489 6....................................... 4.000 7,680 7....................................... 17.500 1,503 8....................................... 20.125 435 9....................................... 45.000 66 ------------------------------------------------------------------------ Paragraph (b)(2) of the proposed fee schedule sets forth the CAT Fees applicable to Equity ATSs.\53\ These are the same fees that Participants that trade NMS Stocks and/or OTC Equity Securities will pay. Specifically, paragraph (b)(2) states that the Company will assign each Equity ATS to a fee tier once every quarter, where such tier assignment is calculated by ranking each Equity Execution Venue based on its total market share of NMS Stocks and OTC Equity Securities for the three months prior to the quarterly tier calculation day and assigning each Equity Execution Venue to a tier based on that ranking and predefined Equity Execution Venue percentages. The Equity Execution Venues with the higher total quarterly market share will be ranked in Tier 1, and the Equity Execution Venues with the lower quarterly market share will be ranked in Tier 2. Specifically, paragraph (b)(2) states that, each quarter, each Equity ATS shall pay the following CAT Fee corresponding to the tier assigned by the Company for such Equity ATS for that quarter: --------------------------------------------------------------------------- \53\ Note that no fee schedule is provided for Execution Venue ATSs that execute transactions in Listed Options, as no such Execution Venue ATSs currently exist due trading restrictions related to Listed Options. ------------------------------------------------------------------------ Percentage of equity Quarterly CAT Tier execution fee venues ------------------------------------------------------------------------ 1....................................... 25.00 $63,375 2....................................... 75.00 38,820 ------------------------------------------------------------------------ (C) Timing and Manner of Payment Section 11.4 of the CAT NMS Plan states that the Operating Committee shall establish a system for the collection of fees authorized under the CAT NMS Plan. The Operating Committee may include such collection responsibility as a function of the Plan Processor or another administrator. To implement the payment process to be adopted by the Operating Committee, paragraph (c)(1) of the proposed rule change states that the Company will provide each Industry Member with one invoice each quarter for its CAT Fees as determined pursuant to paragraph (b) of the proposed fee change, regardless of whether the Industry Member is a [[Page 23474]] member of multiple self-regulatory organizations. Paragraph (c)(1) further states that each Industry Member will pay its CAT Fees to the Company via the centralized system for the collection of CAT Fees established by the Company in the manner prescribed by the Company. The Exchange will provide Industry Members with details regarding the manner of payment of CAT Fees by Trader Update. Although the exact fee collection system and processes for CAT fees has not yet been established, all CAT fees will be billed and collected centrally through the Company, via the Plan Processor or otherwise. Although each Participant will adopt its own fee schedule regarding CAT Fees, no CAT Fees or portion thereof will be collected by the individual Participants. Each Industry Member will receive from the Company one invoice for its applicable CAT fees, not separate invoices from each Participant of which it is a member. The Industry Members will pay the CAT Fees to the Company via the centralized system for the collection of CAT fees established by the Company.\54\ --------------------------------------------------------------------------- \54\ Section 11.4 of the CAT NMS Plan. --------------------------------------------------------------------------- Section 11.4 of the CAT NMS Plan also states that Participants shall require each Industry Member to pay all applicable authorized CAT Fees within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). Section 11.4 further states that, if an Industry Member fails to pay any such fee when due, such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (i) The Prime Rate plus 300 basis points; or (ii) the maximum rate permitted by applicable law. Therefore, in accordance with Section 11.4 of the CAT NMS Plan, proposed paragraph (c)(2) states that each Industry Member shall pay CAT Fees within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due, such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of: (i) The Prime Rate plus 300 basis points; or (ii) the maximum rate permitted by applicable law. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(4) of the Act,\55\ because it provides for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using its facilities. The Exchange believes the proposed rule change is also consistent with Section 6(b)(5) of the Act,\56\ which requires, among other things, that the Exchange's rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest, and not designed to permit unfair discrimination between customers, issuers, brokers and dealers. As discussed above, the SEC approved the bifurcated, tiered, fixed fee funding model in the CAT NMS Plan, finding it was reasonable and that it equitably allocated fees among Participants and Industry Members. The Exchange believes that the proposed tiered fees adopted pursuant to the funding model approved by the SEC in the CAT NMS Plan are reasonable, equitably allocated and not unfairly discriminatory. --------------------------------------------------------------------------- \55\ 15 U.S.C. 78f(b)(4). \56\ 15 U.S.C. 78f(b)(6) [sic]. --------------------------------------------------------------------------- The Exchange believes that this proposal is consistent with the Act because it implements, interprets or clarifies the provisions of the Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan ``is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.'' \57\ To the extent that this proposal implements, interprets or clarifies the Plan and applies specific requirements to Industry Members, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act. --------------------------------------------------------------------------- \57\ Approval Order at 84697. --------------------------------------------------------------------------- The Exchange believes that the proposed tiered fees are reasonable. First, the total CAT Fees to be collected would be directly associated with the costs of establishing and maintaining the CAT, where such costs include Plan Processor costs and costs related to insurance, third party services and the operational reserve. The CAT Fees would not cover Participant services unrelated to the CAT. In addition, any surplus CAT Fees cannot be distributed to the individual Participants; such surpluses must be used as a reserve to offset future fees. Given the direct relationship between the fees and the CAT costs, the Exchange believes that the total level of the CAT Fees is reasonable. In addition, the Exchange believes that the proposed CAT Fees are reasonably designed to allocate the total costs of the CAT equitably between and among the Participants and Industry Members, and are therefore not unfairly discriminatory. As discussed in detail above, the proposed tiered fees impose comparable fees on similarly situated CAT Reporters. For example, those with a larger impact on the CAT (measured via message traffic or market share) pay higher fees, whereas CAT Reporters with a smaller impact pay lower fees. Correspondingly, the tiered structure lessens the impact on smaller CAT Reporters by imposing smaller fees on those CAT Reporters with less market share or message traffic. In addition, the funding model takes into consideration affiliations between CAT Reporters, imposing comparable fees on such affiliated entities. Moreover, the Exchange believes that the division of the total CAT costs between Industry Members and Execution Venues, and the division of the Execution Venue portion of total costs between Equity and Options Execution Venues, is reasonably designed to allocate CAT costs among CAT Reporters. The 75/25 division between Industry Members and Execution Venues maintains the greatest level of comparability across the funding model, keeping in view that comparability should consider affiliations among or between CAT Reporters (e.g., firms with multiple Industry Members or exchange licenses). Similarly, the 75/25 division between Equity and Options Execution Venues maintains elasticity across the funding model as well as the greatest level of fee equitability and comparability based on the current number of Equity and Options Execution Venues. Finally, the Exchange believes that the proposed fees are reasonable because they would provide ease of calculation, ease of billing and other administrative functions, and predictability of a fixed fee. Such factors are crucial to estimating a reliable revenue stream for the Company and for permitting CAT Reporters to reasonably predict their payment obligations for budgeting purposes. For the foregoing reasons, the Exchange believes that the proposal is consistent with the Act. [[Page 23475]] B. Self-Regulatory Organization's Statement on Burden on Competition Section 6(b)(8) of the Act \58\ require [sic] that the Exchange's rules not impose any burden on competition that is not necessary or appropriate. The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan approved by the Commission, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. Similarly, all national securities exchanges and FINRA are proposing a similar proposed fee change to implement the requirements of the CAT NMS Plan. Therefore, this is not a competitive fee filing and, therefore, it does not raise competition issues between and among the exchanges and FINRA. --------------------------------------------------------------------------- \58\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- Moreover, as previously described, the Exchange believes that the proposed rule change fairly and equitably allocates costs among CAT Reporters. In particular, the proposed fee schedule is structured to impose comparable fees on similarly situated CAT Reporters, and lessen the impact on smaller CAT Reporters. CAT Reporters with similar levels of CAT activity will pay similar fees. For example, Industry Members (other than Execution Venue ATSs) with higher levels of message traffic will pay higher fees, and those with lower levels of message traffic will pay lower fees. Similarly, Execution Venue ATSs and other Execution Venues with larger market share will pay higher fees, and those with lower levels of market share will pay lower fees. Therefore, given that there is generally a relationship between message traffic and market share to the CAT Reporter's size, smaller CAT Reporters generally pay less than larger CAT Reporters. Accordingly, the Exchange does not believe that the CAT Fees would have a disproportionate effect on smaller or larger CAT Reporters. In addition, ATSs and exchanges will pay the same fees based on market share. Therefore, the Exchange does not believe that the fees will impose any burden on the competition between ATSs and exchanges. Accordingly, the Exchange believes that the proposed fees will minimize the potential for adverse effects on competition between CAT Reporters in the market. Furthermore, the tiered, fixed fee funding model limits the disincentives to providing liquidity to the market. Therefore, the proposed fees are structured to limit burdens on competitive quoting and other liquidity provision in the market. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change is effective upon filing pursuant to Section 19(b)(3)(A) \59\ of the Act and subparagraph (f)(2) of Rule 19b-4 \60\ thereunder, because it establishes a due, fee, or other charge imposed by the Exchange. --------------------------------------------------------------------------- \59\ 15 U.S.C. 78s(b)(3)(A). \60\ 17 CFR 240.19b-4(f)(2). --------------------------------------------------------------------------- At any time within 60 days of the filing of such 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 under Section 19(b)(2)(B) \61\ of the Act to determine whether the proposed rule change should be approved or disapproved. --------------------------------------------------------------------------- \61\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- 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 (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEARCA-2017-52 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-NYSEARCA-2017-52. 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 Web site (http://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 Web site 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEARCA-2017-52 and should be submitted on or before June 12, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\62\ --------------------------------------------------------------------------- \62\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-10302 Filed 5-19-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices 23457
appropriate. Nasdaq does not believe C. Self-Regulatory Organization’s those that may be withheld from the
that the proposed rule change will result Statement on Comments on the public in accordance with the
in any burden on competition that is not Proposed Rule Change Received From provisions of 5 U.S.C. 552, will be
necessary or appropriate in furtherance Members, Participants, or Others available for Web site viewing and
of the purposes of the Act. Nasdaq notes No written comments were either printing in the Commission’s Public
that the proposed rule change solicited or received. Reference Room, 100 F Street NE.,
implements provisions of the CAT NMS Washington, DC 20549, on official
III. Date of Effectiveness of the business days between the hours of
Plan approved by the Commission, and
Proposed Rule Change and Timing for 10:00 a.m. and 3:00 p.m. Copies of the
is designed to assist Nasdaq in meeting Commission Action
its regulatory obligations pursuant to the filing also will be available for
Plan. Similarly, all national securities The foregoing rule change has become inspection and copying at the principal
exchanges and FINRA are proposing effective pursuant to Section office of the Exchange. All comments
19(b)(3)(A)(ii) of the Act.56 At any time received will be posted without change;
this proposed fee schedule to
within 60 days of the filing of the the Commission does not edit personal
implement the requirements of the CAT
proposed rule change, the Commission identifying information from
NMS Plan. Therefore, this is not a summarily may temporarily suspend submissions. You should submit only
competitive fee filing and, therefore, it such rule change if it appears to the information that you wish to make
does not raise competition issues Commission that such action is (i) available publicly. All submissions
between and among the exchanges and necessary or appropriate in the public should refer to File Number SR–
FINRA. interest; (ii) for the protection of NASDAQ–2017–046, and should be
Moreover, as previously described, investors; or (iii) otherwise in submitted on or before June 12, 2017.
Nasdaq believes that the proposed rule furtherance of the purposes of the Act. For the Commission, by the Division of
change fairly and equitably allocates If the Commission takes such action, the Trading and Markets, pursuant to delegated
costs among CAT Reporters. In Commission shall institute proceedings authority.57
particular, the proposed fee schedule is to determine whether the proposed rule Eduardo A. Aleman,
structured to impose comparable fees on should be approved or disapproved. Assistant Secretary.
similarly situated CAT Reporters, and IV. Solicitation of Comments [FR Doc. 2017–10300 Filed 5–19–17; 8:45 am]
lessen the impact on smaller CAT Interested persons are invited to BILLING CODE 8011–01–P
Reporters. CAT Reporters with similar submit written data, views, and
levels of CAT activity will pay similar arguments concerning the foregoing,
fees. For example, Industry Members including whether the proposed rule SECURITIES AND EXCHANGE
(other than Execution Venue ATSs) with change is consistent with the Act. COMMISSION
higher levels of message traffic will pay Comments may be submitted by any of [Release No. 34–80698; File No. SR–
higher fees, and those with lower levels the following methods: NYSEARCA–2017–52]
of message traffic will pay lower fees.
Electronic Comments
Similarly, Execution Venue ATSs and Self-Regulatory Organizations; NYSE
other Execution Venues with larger • Use the Commission’s Internet Arca, Inc.; Notice of Filing and
market share will pay higher fees, and comment form (http://www.sec.gov/ Immediate Effectiveness of Proposed
those with lower levels of market share rules/sro.shtml); or Rule Change Amending the NYSE Arca
• Send an email to rule-comments@ Equities Schedule of Fees and
will pay lower fees. Therefore, given
sec.gov. Please include File Number SR– Charges for Exchange Services, and
that there is generally a relationship
NASDAQ–2017–046 on the subject line. the NYSE Arca Schedule of Options
between message traffic and market
share to the CAT Reporter’s size, smaller Paper Comments Fees and Charges To Adopt the Fees
CAT Reporters generally pay less than • Send paper comments in triplicate for Industry Members Related to the
larger CAT Reporters. Accordingly, the to Secretary, Securities and Exchange National Market System Plan
Exchange does not believe that the CAT Commission, 100 F Street NE., Governing the Consolidated Audit Trail
Fees would have a disproportionate Washington, DC 20549–1090. May 16, 2017.
effect on smaller or larger CAT All submissions should refer to File Pursuant to Section 19(b)(1) 1 of the
Reporters. In addition, ATSs and Number SR–NASDAQ–2017–046. This Securities Exchange Act of 1934 (the
exchanges will pay the same fees based file number should be included on the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
on market share. Therefore, Nasdaq does subject line if email is used. To help the notice is hereby given that, on May 10,
not believe that the fees will impose any Commission process and review your 2017, NYSE Arca, Inc. (the ‘‘Exchange’’
burden on the competition between comments more efficiently, please use or ‘‘NYSE Arca’’) filed with the
ATSs and exchanges. Accordingly, only one method. The Commission will Securities and Exchange Commission
Nasdaq believes that the proposed fees post all comments on the Commission’s (the ‘‘Commission’’) the proposed rule
will minimize the potential for adverse Internet Web site (http://www.sec.gov/ change as described in Items I, II, and
effects on competition between CAT rules/sro.shtml). Copies of the III below, which Items have been
Reporters in the market. submission, all subsequent prepared by the self-regulatory
amendments, all written statements organization. The Commission is
Furthermore, the tiered, fixed fee with respect to the proposed rule publishing this notice to solicit
mstockstill on DSK30JT082PROD with NOTICES
funding model limits the disincentives change that are filed with the comments on the proposed rule change
to providing liquidity to the market. Commission, and all written from interested persons.
Therefore, the proposed fees are communications relating to the
structured to limit burdens on proposed rule change between the 57 17 CFR 200.30–3(a)(12).
competitive quoting and other liquidity Commission and any person, other than 1 15 U.S.C. 78s(b)(1).
provision in the market. 2 15 U.S.C. 78a.
56 15 U.S.C. 78s(b)(3)(A)(ii). 3 17 CFR 240.19b–4.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00288 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/1.svg)
![23458 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
I. Self-Regulatory Organization’s (collectively, the ‘‘Participants’’) filed as well as Industry Members’ rights and
Statement of the Terms of Substance of with the Commission, pursuant to obligations related to the payment of
the Proposed Rule Change Section 11A of the Exchange Act 6 and CAT Fees calculated pursuant to the
Rule 608 of Regulation NMS CAT funding model. A detailed
The Exchange proposes to amend the
thereunder,7 the CAT NMS Plan.8 The description of the CAT funding model
NYSE Arca Equities Schedule of Fees Participants filed the Plan to comply and the CAT Fees follows this executive
and Charges for Exchange Services with Rule 613 of Regulation NMS under summary.
(‘‘Arca Fee Schedule’’), and the NYSE the Exchange Act. The Plan was
Arca Schedule of Options Fees and published for comment in the Federal (A) CAT Funding Model
Charges (‘‘Arca Options Fee Schedule’’), Register on May 17, 2016,9 and • CAT Costs. The CAT funding model
to adopt the fees for Industry Members approved by the Commission, as is designed to establish CAT-specific
related to the National Market System modified, on November 15, 2016.10 The fees to collectively recover the costs of
Plan Governing the Consolidated Audit Plan is designed to create, implement building and operating the CAT from all
Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’). and maintain a consolidated audit trail CAT Reporters, including Industry
The proposed rule change is available (‘‘CAT’’) that would capture customer Members and Participants. The overall
on the Exchange’s Web site at and order event information for orders CAT costs for the calculation of the CAT
www.nyse.com, at the principal office of in NMS Securities and OTC Equity Fees in this fee filing are comprised of
the Exchange, and at the Commission’s Securities, across all markets, from the Plan Processor CAT costs and non-Plan
Public Reference Room. time of order inception through routing, Processor CAT costs incurred, and
II. Self-Regulatory Organization’s cancellation, modification, or execution estimated to be incurred, from
Statement of the Purpose of, and in a single consolidated data source. November 21, 2016 through November
Statutory Basis for, the Proposed Rule The Plan accomplishes this by creating 21, 2017. (See Section 3(a)(2)(E) [sic]
Change CAT NMS, LLC (the ‘‘Company’’), of below 14)
which each Participant is a member, to • Bifurcated Funding Model. The
In its filing with the Commission, the operate the CAT.11 Under the CAT NMS CAT NMS Plan requires a bifurcated
self-regulatory organization included Plan, the Operating Committee of the funding model, where costs associated
statements concerning the purpose of, Company (‘‘Operating Committee’’) has with building and operating the CAT
and basis for, the proposed rule change discretion to establish funding for the would be borne by (1) Participants and
and discussed any comments it received Company to operate the CAT, including Industry Members that are Execution
on the proposed rule change. The text establishing fees that the Participants Venues for Eligible Securities through
of those statements may be examined at will pay, and establishing fees for fixed tier fees based on market share,
the places specified in Item IV below. Industry Members that will be and (2) Industry Members (other than
The Exchange has prepared summaries, implemented by the Participants (‘‘CAT alternative trading systems (‘‘ATSs’’)
set forth in sections A, B, and C below, Fees’’).12 The Participants are required that execute transactions in Eligible
of the most significant parts of such to file with the SEC under Section 19(b) Securities (‘‘Execution Venue ATSs’’))
statements. of the Exchange Act any such CAT Fees through fixed tier fees based on message
A. Self-Regulatory Organization’s applicable to Industry Members that the traffic for Eligible Securities. (See
Statement of the Purpose of, and the Operating Committee approves.13 Section 3(a)(2) [sic] below)
Statutory Basis for, the Proposed Rule Accordingly, the Exchange submits this • Industry Member Fees. Each
Change fee filing to amend the Arca Fee Industry Member (other than Execution
Schedule and the Arca Options Fee Venue ATSs) will be placed into one of
1. Purpose Schedule which will require Industry nine tiers of fixed fees, based on
Bats BYX Exchange, Inc., Bats BZX Members that are NYSE Arca members ‘‘message traffic’’ in Eligible Securities
Exchange, Inc., Bats EDGA Exchange, to pay the CAT Fees determined by the for a defined period (as discussed
Inc., Bats EDGX Exchange, Inc., BOX Operating Committee. below). Prior to the start of CAT
Options Exchange LLC, C2 Options (1) Executive Summary reporting, ‘‘message traffic’’ will be
Exchange, Incorporated, Chicago Board comprised of historical equity and
The following provides an executive equity options orders, cancels and
Options Exchange, Incorporated,
summary of the CAT funding model quotes provided by each exchange and
Chicago Stock Exchange, Inc., Financial
approved by the Operating Committee, FINRA over the previous three months.
Industry Regulatory Authority, Inc.
(‘‘FINRA’’), Investors’ Exchange LLC, After an Industry Member begins
Release No. 79902 (January 30, 2017), 82 FR 9258
Miami International Securities (February 3, 2017). reporting to the CAT, ‘‘message traffic’’
Exchange, LLC, MIAX PEARL, LLC, 6 15 U.S.C. 78k–1. will be calculated based on the Industry
NASDAQ BX, Inc., Nasdaq GEMX, LLC, 7 17 CFR 242.608. Member’s Reportable Events reported to
Nasdaq ISE, LLC, Nasdaq MRX, LLC,4 8 See Letter from the Participants to Brent J. the CAT. Industry Members with lower
NASDAQ PHLX LLC, The NASDAQ Fields, Secretary, Commission, dated September 30, levels of message traffic will pay a lower
2014; and Letter from Participants to Brent J. Fields,
Stock Market LLC, New York Stock Secretary, Commission, dated February 27, 2015.
fee and Industry Members with higher
Exchange LLC, NYSE MKT LLC, NYSE On December 24, 2015, the Participants submitted levels of message traffic will pay a
Arca, Inc. and NYSE National, Inc.5 an amendment to the CAT NMS Plan. See Letter higher fee. (See Section 3(a)(2)(B) [sic]
from Participants to Brent J. Fields, Secretary, below)
Commission, dated December 23, 2015.
4 ISE Gemini, LLC, ISE Mercury, LLC and • Execution Venue Fees. Each Equity
mstockstill on DSK30JT082PROD with NOTICES
9 See Securities Exchange Act Release No. 77724
International Securities Exchange, LLC have been Execution Venue will be placed in one
renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, (April 27, 2016), 81 FR 30614 (May 17, 2016).
and Nasdaq ISE, LLC, respectively. See Securities
10 See Securities Exchange Act Release No. 79318 of two tiers of fixed fees based on
Exchange Act Release Nos. 80248 (March 15, 2017), (November 15, 2016), 81 FR 84696 (November 23, market share, and each Options
82 FR 14547 (March 21, 2017); 80326 (March 29, 2016) (‘‘Approval Order’’).
11 The Plan also serves as the limited liability
2017), 82 FR 16460 (April 4, 2017); and 80325 14 The Commission notes that references to
(March 29, 2017), 82 FR 16445 (April 4, 2017). company agreement for the Company. Sections 3(a)(2) and 3(a)(3) in this Executive
5 National Stock Exchange, Inc. has been renamed 12 Section 11.1(b) of the CAT NMS Plan.
Summary should be instead to Sections II.A.1.(2)
NYSE National, Inc. See Securities Exchange Act 13 Section 12.1(b) [sic] of the CAT NMS Plan. and II.A.1.(3), respectively.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00289 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/2.svg)
![Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices 23459
Execution Venue will be placed in one • Centralized Payment. Each Industry impose fees reasonably related to the
of two tiers of fixed fees based on Member will receive from the Company Participants’ self-regulatory obligations
market share. Equity Execution Venue one invoice for its applicable CAT Fees, because the fees would be directly associated
market share will be determined by not separate invoices from each with the costs of establishing and
maintaining the CAT, and not unrelated SRO
calculating each Equity Execution Participant of which it is a member. The services.18
Venue’s proportion of the total volume Industry Members will pay its CAT Fees
of NMS Stock and OTC Equity shares to the Company via the centralized Accordingly, the funding model
reported by all Equity Execution Venues system for the collection of CAT Fees imposes fees on both Participants and
during the relevant time period. established by the Operating Committee. Industry Members.
Similarly, market share for Options (See Section 3(a)(3)(C) [sic] below) In addition, as discussed in Appendix
Execution Venues will be determined by • Billing Commencement. Industry C of the CAT NMS Plan, the Operating
calculating each Options Execution Members will begin to receive invoices Committee considered the advantages
Venue’s proportion of the total volume for CAT Fees as promptly as possible and disadvantages of a variety of
of Listed Options contracts reported by following the establishment of a billing alternative funding and cost allocation
all Options Execution Venues during mechanism. The Exchange will issue a models before selecting the proposed
the relevant time period. Equity Trader Update to its members when the model.19 After analyzing the various
Execution Venues with a larger market billing mechanism is established, alternatives, the Operating Committee
share will pay a larger CAT Fee than specifying the date when such invoicing determined that the proposed tiered,
Equity Execution Venues with a smaller of Industry Members will commence. fixed fee funding model provides a
market share. Similarly, Options (See Section 3(a)(2)(G) [sic] below) variety of advantages in comparison to
Execution Venues with a larger market (2) Description of the CAT Funding the alternatives. First, the fixed fee
share will pay a larger CAT Fee than Model model, as opposed to a variable fee
Options Execution Venues with a model, provides transparency, ease of
smaller market share. (See Section Article XI of the CAT NMS Plan calculation, ease of billing and other
3(a)(2)(C) [sic] below) requires the Operating Committee to administrative functions, and
• Cost Allocation. For the reasons approve the operating budget, including predictability of a fixed fee. Such factors
discussed below, in designing the projected costs of developing and are crucial to estimating a reliable
model, the Operating Committee operating the CAT for the upcoming revenue stream for the Company and for
determined that 75 percent of total costs year. As set forth in Article XI of the permitting CAT Reporters to reasonably
recovered would be allocated to CAT NMS Plan, the CAT NMS Plan predict their payment obligations for
Industry Members (other than Execution requires a bifurcated funding model, budgeting purposes.20 Additionally, a
Venue ATSs) and 25 percent would be where costs associated with building strictly variable or metered funding
allocated to Execution Venues. In and operating the Central Repository model based on message volume would
addition, the Operating Committee would be borne by (1) Participants and be far more likely to affect market
determined to allocate 75 percent of Industry Members that are Execution behavior and place an inappropriate
Execution Venue costs recovered to Venues through fixed tier fees based on burden on competition. Moreover, as
Equity Execution Venues and 25 percent market share, and (2) Industry Members the SEC noted in approving the CAT
to Options Execution Venues. (See (other than Execution Venue ATSs) NMS Plan, ‘‘[t]he Participants also have
Section 3(a)(2)(D) [sic] below) through fixed tier fees based on message offered a reasonable basis for
• Comparability of Fees. The CAT traffic. In its order approving the CAT establishing a funding model based on
funding model requires that the CAT NMS Plan, the Commission determined broad tiers, in that it be may be easier
Fees charged to the CAT Reporters with that the proposed funding model was to implement.’’ 21
the most CAT-related activity (measured ‘‘reasonable’’ 15 and ‘‘reflects a In addition, multiple reviews of
by market share and/or message traffic, reasonable exercise of the Participants’ current broker-dealer order and trading
as applicable) are generally comparable funding authority to recover the data submitted under existing reporting
(where, for these comparability Participants’ costs related to the requirements showed a wide range in
purposes, the tiered fee structure takes CAT.’’ 16 activity among broker-dealers, with a
into consideration affiliations between More specifically, the Commission number of broker-dealers submitting
or among CAT Reporters, whether stated in approving the CAT NMS Plan fewer than 1,000 orders per month and
Execution Venues and/or Industry that ‘‘[t]he Commission believes that the other broker-dealers submitting millions
Members). (See Section 3(a)(2)(F) [sic] proposed funding model is reasonably and even billions of orders in the same
below) designed to allocate the costs of the CAT period. Accordingly, the CAT NMS Plan
between the Participants and Industry includes a tiered approach to fees. The
(B) CAT Fees for Industry Members Members.’’ 17 The Commission further tiered approach helps ensure that fees
• Fee Schedule. The quarterly CAT noted the following: are equitably allocated among similarly
Fees for each tier for Industry Members The Commission believes that the
are set forth in the two fee schedules in proposed funding model reflects a reasonable 18 Id. at 84794.
the Consolidated Audit Trail Funding exercise of the Participants’ funding 19 Section B.7, Appendix C of the CAT NMS Plan,
Fees, one for Equity ATSs and one for authority to recover the Participants’ costs Approval Order at 85006.
Industry Members other than Equity related to the CAT. The CAT is a regulatory 20 In choosing a tiered fee structure, the SROs
ATSs. (See Section 3(a)(3)(B) [sic] facility jointly owned by the Participants and concluded that the variety of benefits offered by a
below) . . . the Exchange Act specifically permits tiered fee structure, discussed above, outweighed
mstockstill on DSK30JT082PROD with NOTICES
the Participants to charge their members fees the fact that Industry Members in any particular tier
• Quarterly Invoices. Industry would pay different rates per message traffic order
to fund their self-regulatory obligations. The
Members will be billed quarterly for Commission further believes that the event (e.g., an Industry Member with the largest
CAT Fees, with the invoices payable proposed funding model is designed to amount of message traffic in one tier would pay a
within 30 days. The quarterly invoices smaller amount per order event than an Industry
Member in the same tier with the least amount of
will identify within which tier the 15 Approval Order at 84796. message traffic). Such variation is the natural result
Industry Member falls. (See Section 16 Id. at 84794. of a tiered fee structure.
3(a)(3)(C) [sic] below) 17 Id. at 84795. 21 Approval Order at 84796.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00290 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/3.svg)
![23460 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
situated CAT Reporters and furthers the the two types of entities. In particular, other operations, Section 11.1(c) of the
goal of lessening the impact on smaller the CAT NMS Plan provides that fees CAT NMS Plan specifically states that
firms.22 The self-regulatory charged to CAT Reporters that are ‘‘[a]ny surplus of the Company’s
organizations considered several Execution Venues will be based on the revenues over its expenses shall be
approaches to developing a tiered level of market share and that costs treated as an operational reserve to
model, including defining fee tiers charged to Industry Members (other offset future fees.’’ In addition, as set
based on such factors as size of firm, than Execution Venue ATSs) will be forth in Article VIII of the CAT NMS
message traffic or trading dollar volume. based upon message traffic.29 Because Plan, the Company ‘‘intends to operate
After analyzing the alternatives, it was most Participant message traffic consists in a manner such that it qualifies as a
concluded that the tiering should be of quotations, and Participants usually ‘business league’ within the meaning of
based on the relative impact of CAT disseminate quotations in all Section 501(c)(6) of the [Internal
Reporters on the CAT System. instruments they trade, regardless of Revenue] Code.’’ To qualify as a
Accordingly, the CAT NMS Plan execution volume, Execution Venues business league, an organization must
contemplates that costs will be allocated that are Participants generally ‘‘not [be] organized for profit and no
across the CAT Reporters on a tiered disseminate similar amounts of message part of the net earnings of [the
basis to allocate costs to those CAT traffic. Accordingly, basing fees for organization can] inure[ ] to the benefit
Reporters that contribute more to the Execution Venues on message traffic of any private shareholder or
costs of creating, implementing and would not provide the same degree of individual.’’ 34 As the SEC stated when
maintaining the CAT.23 The fees to be differentiation among Execution Venues approving the CAT NMS Plan, ‘‘the
assessed at each tier are calculated so as that it does among Industry Members Commission believes that the
to recoup a proportion of costs (other than Execution Venue ATSs). In Company’s application for Section
appropriate to the message traffic or contrast, execution volume more 501(c)(6) business league status
market share (as applicable) from CAT accurately delineates the different levels addresses issues raised by commenters
Reporters in each tier. Therefore, of trading activity of Execution about the Plan’s proposed allocation of
Industry Members generating the most Venues.30 profit and loss by mitigating concerns
message traffic will be in the higher The CAT NMS Plan’s funding model that the Company’s earnings could be
tiers, and therefore be charged a higher also is structured to avoid a ‘‘reduction used to benefit individual
fee. Industry Members with lower levels in market quality.’’ 31 The tiered, fixed Participants.’’ 35
of message traffic will be in lower tiers fee funding model is designed to limit Finally, by adopting a CAT-specific
and will be assessed a smaller fee for the the disincentives to providing liquidity fee, the Participants will be fully
CAT.24 Correspondingly, Execution to the market. For example, the transparent regarding the costs of the
Venues with the highest market share Participants expect that a firm that had CAT. Charging a general regulatory fee,
will be in the top tier, and therefore will a large volume of quotes would likely be which would be used to cover CAT
be charged a higher fee. Execution categorized in one of the upper tiers, costs as well as other regulatory costs,
Venues with a lower market share will and would not be assessed a fee for this would be less transparent than the
be in the lower tier and will be assessed traffic directly as they would under a selected approach of charging a fee
a smaller fee for the CAT.25 more directly metered model. In designated to cover CAT costs only.
The Commission also noted in contrast, strictly variable or metered A full description of the funding
approving the CAT NMS Plan that funding models based on message model is set forth below. This
‘‘[t]he Participants have offered a volume were far more likely to affect description includes the framework for
credible justification for using different the funding model as set forth in the
market behavior. In approving the CAT
criteria to charge Execution Venues CAT NMS Plan, as well as the details as
NMS Plan, the SEC stated that ‘‘[t]he
(market share) and Industry Members to how the funding model will be
Participants also offered a reasonable
(message traffic)’’ 26 in the CAT funding applied in practice, including the
basis for establishing a funding model
model. While there are multiple factors number of fee tiers and the applicable
based on broad tiers, in that it may be
that contribute to the cost of building, fees for each tier. The Exchange notes
. . . less likely to have an incremental
maintaining and using the CAT, that the complete funding model is
deterrent effect on liquidity
processing and storage of incoming described below, including those fees
provision.’’ 32
message traffic is one of the most that are to be paid by the Participants.
The CAT NMS Plan is structured to
significant cost drivers for the CAT.27 The proposed Consolidated Audit Trail
avoid potential conflicts raised by the
Thus, the CAT NMS Plan provides that Funding Fees, however, do not apply to
Operating Committee determining fees
the fees payable by Industry Members the Participants; the proposed
applicable to its own members—the
(other than Execution Venue ATSs) will Consolidated Audit Trail Funding Fees
Participants. First, the Company will be
be based on the message traffic only apply to Industry Members. The
operated on a ‘‘break-even’’ basis, with
generated by such Industry Member.28 CAT fees for Participants will be
The CAT NMS Plan provides that the fees imposed to cover costs and an
appropriate reserve. Any surpluses will imposed separately by the Operating
Operating Committee will use different Committee pursuant to the CAT NMS
criteria to establish fees for Execution be treated as an operational reserve to
offset future fees and will not be Plan.
Venues and non-Execution Venues due
to the fundamental differences between distributed to the Participants as (A) Funding Principles
profits.33 To ensure that the
Section 11.2 of the CAT NMS Plan
22 Section B.7, Appendix C of the CAT NMS Plan, Participants’ operation of the CAT will
sets forth the principles that the
mstockstill on DSK30JT082PROD with NOTICES
Approval Order at 85006. not contribute to the funding of their
23 Approval Order at 85005.
Operating Committee applied in
24 Id. 29 Section 11.2(c) of the CAT NMS Plan.
establishing the funding for the
25 Id. 30 Section B.7, Appendix C of the CAT NMS Plan, Company. The Operating Committee has
26 Id. at 84796. Approval Order at 85005. considered these funding principles as
27 Section B.7, Appendix C of the CAT NMS Plan, 31 Section 11.2(e) of the CAT NMS Plan.
Approval Order at 85005. 32 Approval Order at 84796. 34 26 U.S.C. 501(c)(6).
28 Section 11.3(b) of the CAT NMS Plan. 33 Id. at 84792. 35 Approval Order at 84793.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00291 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/4.svg)
![Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices 23463
Percentage of
Percentage of industry Percentage of
Industry member tier industry member total recovery
members recovery
Tier 8 ............................................................................................................................................ 20.125 1.50 1.13
Tier 9 ............................................................................................................................................ 45.000 0.50 0.38
Total ...................................................................................................................................... 100 100 75
For the purposes of creating these information readily available to the The Participants determined that
tiers based on message traffic, the exchanges and FINRA, such as the total ATSs should be included within the
Operating Committee determined to number of historical equity and equity definition of Execution Venue. Given
define the term ‘‘message traffic’’ options quotes received and originated the similarity between the activity of
separately for the period before the by a member of an exchange or FINRA exchanges and ATSs, both of which
commencement of CAT reporting and over the prior three-month period. meet the definition of an ‘‘exchange’’ as
for the period after the start of CAT After an Industry Member begins set forth in the Exchange Act and the
reporting. The different definition for reporting to the CAT, ‘‘message traffic’’ fact that the similar trading models
message traffic is necessary as there will will be calculated based on the Industry would have similar anticipated burdens
be no Reportable Events as defined in Member’s Reportable Events reported to on the CAT, the Participants determined
the Plan, prior to the commencement of the CAT as will be defined in the that ATSs should be treated in the same
CAT reporting. Accordingly, prior to the Technical Specifications.38 manner as the exchanges for the
start of CAT reporting, ‘‘message traffic’’ The Operating Committee has purposes of determining the level of fees
will be comprised of historical equity determined to calculate fee tiers every associated with the CAT.40
and equity options orders, cancels and three months, on a calendar quarter Given the differences between
quotes provided by each exchange and basis, based on message traffic from the Execution Venues that trade NMS
FINRA over the previous three prior three months. Based on its Stocks and/or OTC Equity Securities
months.36 Prior to the start of CAT analysis of historical data, the Operating and Execution Venues that trade Listed
reporting, orders would be comprised of Committee believes that calculating tiers Options, Section 11.3(a) addresses
the total number of equity and equity based on three months of data will Execution Venues that trade NMS
options orders received and originated provide the best balance between Stocks and/or OTC Equity Securities
by a member of an exchange or FINRA reflecting changes in activity by separately from Execution Venues that
over the previous three-month period, Industry Members while still providing trade Listed Options. Equity and
including principal orders, cancel/ predictability in the tiering for Industry Options Execution Venues are treated
replace orders, market maker orders Members. Because fee tiers will be separately for two reasons. First, the
originated by a member of an exchange, calculated based on message traffic from differing quoting behavior of Equity and
and reserve (iceberg) orders as well as the prior three months, the Operating Options Execution Venues makes
order routes and executions originated Committee will begin calculating comparison of activity between
by a member of FINRA, and excluding message traffic based on an Industry Execution Venues difficult. Second,
order rejects and implied orders.37 In Member’s Reportable Events reported to Execution Venue tiers are calculated
addition, prior to the start of CAT the CAT once the Industry Member has based on market share of share volume,
reporting, cancels would be comprised been reporting to the CAT for three and it is therefore difficult to compare
of the total number of equity and equity months. Prior to that, fee tiers will be market share between asset classes (i.e.,
option cancels received and originated calculated as discussed above with equity shares versus options contracts).
by a member of an exchange or FINRA regard to the period prior to CAT Discussed below is how the funding
over a three-month period, excluding reporting. model treats the two types of Execution
order modifications (e.g., order updates, Venues.
order splits, partial cancels). (C) Execution Venue Tiering
(I) NMS Stocks and OTC Equity
Furthermore, prior to the start of CAT Under Section 11.3(a) of the CAT Securities
reporting, quotes would be comprised of NMS Plan, the Operating Committee is
required to establish fixed fees payable Section 11.3(a)(i) of the CAT NMS
36 The SEC approved exemptive relief permitting
by Execution Venues. Section 1.1 of the Plan states that each Execution Venue
Options Market Maker quotes to be reported to the
CAT NMS Plan defines an Execution that (i) executes transactions or, (ii) in
Central Repository by the relevant Options the case of a national securities
Exchange in lieu of requiring that such reporting be Venue as ‘‘a Participant or an alternative
done by both the Options Exchange and the Options trading system (‘‘ATS’’) (as defined in association, has trades reported by its
Market Maker, as required by Rule 613 of Rule 300 of Regulation ATS) that members to its trade reporting facility or
Regulation NMS. See Securities Exchange Act facilities for reporting transactions
Release No. 77265 (Mar. 1, 2017 [sic], 81 FR 11856 operates pursuant to Rule 301 of
(Mar. 7, 2016). This exemption applies to Options Regulation ATS (excluding any such effected otherwise than on an exchange,
Market Maker quotes for CAT reporting purposes ATS that does not execute orders).’’ 39 in NMS Stocks or OTC Equity Securities
only. Therefore, notwithstanding the reporting will pay a fixed fee depending on the
exemption provided for Options Market Maker market share of that Execution Venue in
38 If an Industry Member (other than an Execution
quotes, Options Market Maker quotes will be
mstockstill on DSK30JT082PROD with NOTICES
included in the calculation of total message traffic Venue ATS) has no orders, cancels or quotes prior NMS Stocks and OTC Equity Securities,
for Options Market Makers for purposes of tiering to the commencement of CAT Reporting, or no with the Operating Committee
under the CAT funding model both prior to CAT Reportable Events after CAT reporting commences, establishing at least two and not more
reporting and once CAT reporting commences. then the Industry Member would not have a CAT
37 Consequently, firms that do not have ‘‘message fee obligation.
than five tiers of fixed fees, based on an
traffic’’ reported to an exchange or OATS before 39 Although FINRA does not operate an execution Execution Venue’s NMS Stocks and
they are reporting to the CAT would not be subject venue, because it is a Participant, it is considered
to a fee until they begin to report information to an ‘‘Execution Venue’’ under the Plan for purposes 40 Section B.7, Appendix C of the CAT NMS Plan,
CAT. of determining fees. Approval Order at 85005.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00294 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/7.svg)
![23464 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
OTC Equity Securities market share. For the smaller number of Equity Execution Venue tiers to distinguish between
these purposes, market share for Venues based on market share. Execution Venues.
Execution Venues that execute Furthermore, the incorporation of The percentage of costs recovered by
transactions will be calculated by share additional Equity Execution Venue tiers each Equity Execution Venue tier will
volume, and market share for a national would result in significantly higher fees be determined by predefined percentage
securities association that has trades for Tier 1 Equity Execution Venues and allocations (the ‘‘Equity Execution
reported by its members to its trade diminish comparability between Venue Recovery Allocation’’). In
reporting facility or facilities for Execution Venues and Industry determining the fixed percentage
reporting transactions effected Members. allocation of costs recovered for each
otherwise than on an exchange in NMS Each Equity Execution Venue will be tier, the Operating Committee
Stocks or OTC Equity Securities will be ranked by market share and tiered by considered the impact of CAT Reporter
calculated based on share volume of predefined Execution Venue market share activity on the CAT
trades reported, provided, however, that percentages, (the ‘‘Equity Execution System as well as the distribution of
the share volume reported to such Venue Percentages’’). In determining the total market volume across Equity
national securities association by an fixed percentage of Equity Execution Execution Venues while seeking to
Execution Venue shall not be included Venues in each tier, the Operating maintain comparable fees among the
in the calculation of such national Committee looked at historical market largest CAT Reporters. Accordingly,
security association’s market share. share of share volume for execution following the determination of the
In accordance with Section 11.3(a)(i) venues. Equities Execution Venue percentage of Execution Venues in each
of the CAT NMS Plan, the Operating market share of share volume were tier, the Operating Committee identified
Committee approved a tiered fee sourced from market statistics made the percentage of total market volume
structure for Equity Execution Venues publicly-available by Bats Global for each tier based on the historical
and Option Execution Venues. In Markets, Inc. (‘‘Bats’’). ATS market market share upon which Execution
determining the Equity Execution share of share volume was sourced from Venues had been initially ranked.
Venue Tiers, the Operating Committee market statistics made publicly- Taking this into account along with the
considered the funding principles set available by FINRA. FINRA trading [sic] resulting percentage of total recovery,
forth in Section 11.2 of the CAT NMS reporting facility (‘‘TRF’’) market share the percentage allocation of costs
Plan, seeking to create funding tiers that of share volume was sourced from recovered for each tier were assigned,
take into account the relative impact on market statistics made publicly allocating higher percentages of
system resources of different Equity available by Bats. As indicated by recovery to the tier with a higher level
Execution Venues, and that establish FINRA, ATSs accounted for 37.80% of of market share while avoiding any
comparable fees among the CAT the share volume across the TRFs inappropriate burden on competition.
Reporters with the most Reportable during the recent tiering period. A Furthermore, due to the similar levels of
Events. Each Equity Execution Venue 37.80/62.20 split was applied to the impact on the CAT System across
will be placed into one of two tiers of ATS and non-ATS breakdown of FINRA Execution Venues, there is less variation
fixed fees, based on the Execution market share, with FINRA tiered based in CAT Fees between the highest and
Venue’s NMS Stocks and OTC Equity only on the non-ATS portion of its TRF lowest of tiers for Execution Venues.
Securities market share. In choosing two market share of share volume. Furthermore, by using percentages of
tiers, the Operating Committee Based on this, the Operating Equity Execution Venues and costs
performed an analysis similar to that Committee considered the distribution recovered per tier, the Operating
discussed above with regard to the non- of Execution Venues, and grouped Committee sought to include stability
Execution Venue Industry Members to together Execution Venues with similar and elasticity within the funding model,
determine the number of tiers for Equity levels of market share of share volume. allowing the funding model to respond
Execution Venues. The Operating In doing so, the Participants considered to changes in either the total number of
Committee determined to establish two that, as previously noted, Execution Equity Execution Venues or changes in
tiers for Equity Execution Venues, rather Venues in many cases have similar market share.
than a larger number of tiers as levels of message traffic due to quoting Based on this analysis, the Operating
established for non-Execution Venue activity, and determined that it was Committee approved the following
Industry Members, because the two tiers simpler and more appropriate to have Equity Execution Venue Percentages
were sufficient to distinguish between fewer, rather than more, Execution and Recovery Allocations:
Percentage of Percentage of
equity execution Percentage of
Equity execution venue tier execution venue total recovery
venues recovery
Tier 1 ............................................................................................................................................ 25.00 26.00 6.50
Tier 2 ............................................................................................................................................ 75.00 49.00 12.25
Total ...................................................................................................................................... 100 75 18.75
mstockstill on DSK30JT082PROD with NOTICES
The following table exhibits the Execution Venue tiers, the proposed will vary based on the actual market
relative separation of market share of funding model is directly driven not by activity in a given measurement period,
share volume between Tier 1 and Tier market share thresholds, but rather by as well as the number of Equity
2 Equity Execution Venues. In fixed percentages of Equity Execution Execution Venues included in the
reviewing the table, note that while this Venues across tiers to account for measurement period. The Equity
division was referenced as a data point fluctuating levels of market share across Execution Venue Percentages and
to help differentiate between Equity time. Actual market share in any tier Equity Execution Venue Recovery
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00295 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/8.svg)
![Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices 23465
Allocation for each tier will remain Reportable Events. Each Options market shares across the tiers. Options
fixed with each Equity Execution Venue Execution Venue will be placed into one Execution Venue market share of share
tier to be reassigned periodically, as of two tiers of fixed fees, based on the volume were sourced from market
described below in Section 3(a)(1)(I) Execution Venue’s Listed Options statistics made publicly-available by
[sic]. market share. In choosing two tiers, the Bats. The process for developing the
Operating Committee performed an Options Execution Venue Percentages
Equity market analysis similar to that discussed above was the same as discussed above with
share of share with regard to Industry Members (other regard to Equity Execution Venues.
Equity execution venue tier volume
(%) than Execution Venue ATSs) to The percentage of costs recovered by
determine the number of tiers for each Options Execution Venue tier will
Tier 1 .................................... ≥1 Options Execution Venues. The be determined by predefined percentage
Tier 2 .................................... <1 Operating Committee determined to allocations (the ‘‘Options Execution
establish two tiers for Options Venue Recovery Allocation’’). In
(II) Listed Options Execution Venues, rather than a larger determining the fixed percentage
Section 11.3(a)(ii) of the CAT NMS number of tiers as established for allocation of costs recovered for each
Plan states that each Execution Venue Industry Members (other than Execution tier, the Operating Committee
that executes transactions in Listed Venue ATSs), because the two tiers considered the impact of CAT Reporter
Options will pay a fixed fee depending were sufficient to distinguish between market share activity on the CAT
on the Listed Options market share of the smaller number of Options System as well as the distribution of
that Execution Venue, with the Execution Venues based on market total market volume across Options
Operating Committee establishing at share. Furthermore, due to the smaller Execution Venues while seeking to
least two and no more than five tiers of number of Options Execution Venues, maintain comparable fees among the
fixed fees, based on an Execution the incorporation of additional Options largest CAT Reporters. Furthermore, by
Venue’s Listed Options market share. Execution Venue tiers would result in using percentages of Options Execution
For these purposes, market share will be significantly higher fees for Tier 1 Venues and costs recovered per tier, the
calculated by contract volume. Options Execution Venues and reduce Operating Committee sought to include
In accordance with Section 11.3(a)(ii) comparability between Execution stability and elasticity within the
of the CAT NMS Plan, the Operating Venues and Industry Members. funding model, allowing the funding
Committee approved a tiered fee Each Options Execution Venue will model to respond to changes in either
structure for Options Execution Venues. be ranked by market share and tiered by the total number of Options Execution
In determining the tiers, the Operating predefined Execution Venue Venues or changes in market share. The
Committee considered the funding percentages, (the ‘‘Options Execution process for developing the Options
principles set forth in Section 11.2 of Venue Percentages’’). To determine the Execution Venue Recovery Allocation
the CAT NMS Plan, seeking to create fixed percentage of Options Execution was the same as discussed above with
funding tiers that take into account the Venues in each tier, the Operating regard to Equity Execution Venues.
relative impact on system resources of Committee analyzed the historical and Based on this analysis, the Operating
different Options Execution Venues, publicly available market share of Committee approved the following
and that establish comparable fees Options Execution Venues to group Options Execution Venue Percentages
among the CAT Reporters with the most Options Execution Venues with similar and Recovery Allocations:
Percentage of Percentage of
options execution Percentage of
Options execution venue tier execution venue total recovery
venues recovery
Tier 1 ............................................................................................................................................ 75.00 20.00 5.00
Tier 2 ............................................................................................................................................ 25.00 5.00 1.25
Total ...................................................................................................................................... 100 25 6.25
The following table exhibits the measurement period. The Options (III) Market Share/Tier Assignments
relative separation of market share of Execution Venue Percentages and
share volume between Tier 1 and Tier Equity Execution Venue Recovery The Operating Committee determined
2 Options Execution Venues. In Allocation for each tier will remain that, prior to the start of CAT reporting,
reviewing the table, note that while this fixed with each Options Execution market share for Execution Venues
division was referenced as a data point Venue tier to be reassigned periodically, would be sourced from publicly-
to help differentiate between Options as described below in Section 3(a)(1)(I) available market data. Options and
Execution Venue tiers, the proposed [sic]. equity volumes for Participants will be
funding model is directly driven, not by sourced from market data made publicly
market share thresholds, but rather by Options available by Bats while Execution
fixed percentages of Options Execution market Venue ATS volumes will be sourced
mstockstill on DSK30JT082PROD with NOTICES
Venues across tiers to account for Options execution venue tier share of from market data made publicly
share volume available by FINRA. Set forth in the
fluctuating levels of market share across (%)
time. Actual market share in any tier Appendix are two charts, one listing the
will vary based on the actual market Tier 1 .................................... ≥1 current Equity Execution Venues, each
activity in a given measurement period, Tier 2 .................................... <1 with its rank and tier, and one listing
as well as the number of Options the current Options Execution Venues,
Execution Venues included in the each with its rank and tier.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00296 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/9.svg)
![23468 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
CALCULATION OF ANNUAL TIER FEES FOR INDUSTRY MEMBERS
[‘‘IM’’]
Percentage
Percentage of industry Percentage of
Industry member tier of industry member total recovery
members recovery
Tier 1 ............................................................................................................................................ 0.500 8.50 6.38
Tier 2 ............................................................................................................................................ 2.500 35.00 26.25
Tier 3 ............................................................................................................................................ 2.125 21.25 15.94
Tier 4 ............................................................................................................................................ 4.625 15.75 11.81
Tier 5 ............................................................................................................................................ 3.625 7.75 5.81
Tier 6 ............................................................................................................................................ 4.000 5.25 3.94
Tier 7 ............................................................................................................................................ 17.500 4.50 3.38
Tier 8 ............................................................................................................................................ 20.125 1.50 1.13
Tier 9 ............................................................................................................................................ 45.000 0.50 0.38
Total ...................................................................................................................................... 100 100 75
Estimated number
of
Industry member tier industry
members
Tier 1 .............................................................................................................................................................................................. 8
Tier 2 .............................................................................................................................................................................................. 41
Tier 3 .............................................................................................................................................................................................. 35
Tier 4 .............................................................................................................................................................................................. 75
Tier 5 .............................................................................................................................................................................................. 59
Tier 6 .............................................................................................................................................................................................. 65
Tier 7 .............................................................................................................................................................................................. 285
Tier 8 .............................................................................................................................................................................................. 328
Tier 9 .............................................................................................................................................................................................. 735
Total ........................................................................................................................................................................................ 1,631
mstockstill on DSK30JT082PROD with NOTICES
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00299 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/12.svg)
![23472 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
(G) Billing Onset Committee will review the distribution change the criteria for each tier or the
Under Section 11.1(c) of the CAT of Industry Members and Execution fee amount corresponding to each tier.
NMS Plan, to fund the development and Venues across tiers, and make any In performing the tri-monthly
implementation of the CAT, the updates to the percentage of CAT reassignments, the Exchange notes that
Company shall time the imposition and Reporters allocated to each tier as may the percentage of CAT Reporters in each
collection of all fees on Participants and be necessary. In addition, the reviews assigned tier is relative. Therefore, a
Industry Members in a manner will evaluate the estimated ongoing CAT Reporter’s assigned tier will
reasonably related to the timing when CAT costs and the level of the operating depend, not only on its own message
the Company expects to incur such reserve. To the extent that the total CAT
traffic or market share, but it also will
development and implementation costs. costs decrease, the fees would be
depend on the message traffic/market
The Company is currently incurring adjusted downward, and, to the extent
share across all CAT Reporters. For
such development and implementation that the total CAT costs increase, the
example, the percentage of Industry
costs and will continue to do so prior fees would be adjusted upward.49
Members (other than Execution Venue
to the commencement of CAT reporting Furthermore, any surplus of the
ATSs) in each tier is relative such that
and thereafter. For example, the Plan Company’s revenues over its expenses is
such Industry Member’s assigned tier
Processor has required up-front to be included within the operational
will depend on message traffic
payments to begin building the CAT. In reserve to offset future fees. The
generated across all CAT Reporters as
addition, the Company continues to limitations on more frequent changes to
well as the total number of CAT
incur consultant and legal expenses on the fee, however, are intended to
Reporters. The Operating Committee
an on-going basis to implement the provide budgeting certainty for the CAT
will inform CAT Reporters of their
CAT. Accordingly, the Operating Reporters and the Company.50 To the
assigned tier every three months
Committee determined that all CAT extent that the Operating Committee
following the periodic tiering process,
Reporters, including both Industry approves changes to the number of tiers
as the funding model will compare an
Members and Execution Venues in the funding model or the fees
individual CAT Reporter’s activity to
(including Participants), would begin to assigned to each tier, then the Exchange
that of other CAT Reporters in the
be invoiced as promptly as possible will file such changes with the SEC
marketplace.
following the establishment of a billing pursuant to Section 19(b) of the
mechanism. The Exchange will issue a Exchange Act, and any such changes The following demonstrates a tier
Trader Update to its members when the will become effective in accordance reassignment. In accordance with the
billing mechanism is established, with the requirements of Section 19(b). funding model, the top 75% of Options
specifying the date when such invoicing Execution Venues in market share are
(I) Initial and Periodic Tier categorized as Tier 1 while the bottom
of Industry Members will commence. Reassignments 25% of Options Execution Venues in
(H) Changes to Fee Levels and Tiers The Operating Committee has market share are categorized as Tier 2.
Section 11.3(d) of the CAT NMS Plan determined to calculate fee tiers every In the sample scenario below, Options
states that ‘‘[t]he Operating Committee three months based on market share or Execution Venue L is initially
shall review such fee schedule on at message traffic, as applicable, from the categorized as a Tier 2 Options
least an annual basis and shall make any prior three months. For the initial tier Execution Venue in Period A due to its
changes to such fee schedule that it assignments, the Company will market share. When market share is
deems appropriate. The Operating calculate the relevant tier for each CAT recalculated for Period B, the market
Committee is authorized to review such Reporter using the three months of data share of Execution Venue L increases,
fee schedule on a more regular basis, but prior to the commencement date. As and it is therefore subsequently
shall not make any changes on more with the initial tier assignment, for the reranked and reassigned to Tier 1 in
than a semi-annual basis unless, tri-monthly reassignments, the Period B. Correspondingly, Options
pursuant to a Supermajority Vote, the Company will calculate the relevant tier Execution Venue K, initially a Tier 1
Operating Committee concludes that using the three months of data prior to Options Execution Venue in Period A,
such change is necessary for the the relevant tri-monthly date. The is reassigned to Tier 2 in Period B due
adequate funding of the Company.’’ Exchange notes that any movement of to decreases in its market share of share
With such reviews, the Operating CAT Reporters between tiers will not volume.
Period A Period B
Market Market
Options execution venue Tier Options execution venue Tier
share rank share rank
Options Execution Venue A ............. 1 1 Options Execution Venue A ............. 1 1
Options Execution Venue B ............. 2 1 Options Execution Venue B ............. 2 1
Options Execution Venue C ............. 3 1 Options Execution Venue C ............. 3 1
Options Execution Venue D ............. 4 1 Options Execution Venue D ............. 4 1
Options Execution Venue E ............. 5 1 Options Execution Venue E ............. 5 1
Options Execution Venue F ............. 6 1 Options Execution Venue F ............. 6 1
Options Execution Venue G ............. 7 1 Options Execution Venue I .............. 7 1
Options Execution Venue H ............. 8 1 Options Execution Venue H ............. 8 1
mstockstill on DSK30JT082PROD with NOTICES
Options Execution Venue I .............. 9 1 Options Execution Venue G ............ 9 1
Options Execution Venue J .............. 10 1 Options Execution Venue J ............. 10 1
Options Execution Venue K ............. 11 1 Options Execution Venue L ............. 11 1
49 The CAT Fees are designed to recover the costs such as any changes in costs related to the 50 Section B.7, Appendix C of the CAT NMS Plan,
associated with the CAT. Accordingly, CAT Fees retirement of existing regulatory systems, such as Approval Order at 85006.
would not be affected by increases or decreases in OATS.
other non-CAT expenses incurred by the SROs,
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00303 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/16.svg)
![23474 Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices
member of multiple self-regulatory the provisions of Section 6(b)(4) of the surpluses must be used as a reserve to
organizations. Paragraph (c)(1) further Act,55 because it provides for the offset future fees. Given the direct
states that each Industry Member will equitable allocation of reasonable dues, relationship between the fees and the
pay its CAT Fees to the Company via fees, and other charges among members CAT costs, the Exchange believes that
the centralized system for the collection and issuers and other persons using its the total level of the CAT Fees is
of CAT Fees established by the facilities. The Exchange believes the reasonable.
Company in the manner prescribed by proposed rule change is also consistent In addition, the Exchange believes
the Company. The Exchange will with Section 6(b)(5) of the Act,56 which that the proposed CAT Fees are
provide Industry Members with details requires, among other things, that the reasonably designed to allocate the total
regarding the manner of payment of Exchange’s rules be designed to prevent costs of the CAT equitably between and
CAT Fees by Trader Update. fraudulent and manipulative acts and among the Participants and Industry
Although the exact fee collection practices, to promote just and equitable Members, and are therefore not unfairly
system and processes for CAT fees has principles of trade, and, in general, to discriminatory. As discussed in detail
not yet been established, all CAT fees protect investors and the public interest, above, the proposed tiered fees impose
will be billed and collected centrally and not designed to permit unfair comparable fees on similarly situated
through the Company, via the Plan discrimination between customers, CAT Reporters. For example, those with
Processor or otherwise. Although each issuers, brokers and dealers. As a larger impact on the CAT (measured
Participant will adopt its own fee discussed above, the SEC approved the via message traffic or market share) pay
schedule regarding CAT Fees, no CAT bifurcated, tiered, fixed fee funding higher fees, whereas CAT Reporters
Fees or portion thereof will be collected model in the CAT NMS Plan, finding it with a smaller impact pay lower fees.
by the individual Participants. Each was reasonable and that it equitably Correspondingly, the tiered structure
Industry Member will receive from the allocated fees among Participants and lessens the impact on smaller CAT
Company one invoice for its applicable Industry Members. The Exchange Reporters by imposing smaller fees on
CAT fees, not separate invoices from believes that the proposed tiered fees those CAT Reporters with less market
each Participant of which it is a adopted pursuant to the funding model share or message traffic. In addition, the
member. The Industry Members will approved by the SEC in the CAT NMS funding model takes into consideration
pay the CAT Fees to the Company via Plan are reasonable, equitably allocated affiliations between CAT Reporters,
the centralized system for the collection and not unfairly discriminatory. imposing comparable fees on such
of CAT fees established by the The Exchange believes that this affiliated entities.
Company.54 proposal is consistent with the Act Moreover, the Exchange believes that
Section 11.4 of the CAT NMS Plan because it implements, interprets or the division of the total CAT costs
also states that Participants shall require clarifies the provisions of the Plan, and between Industry Members and
each Industry Member to pay all is designed to assist the Exchange and Execution Venues, and the division of
applicable authorized CAT Fees within its Industry Members in meeting the Execution Venue portion of total
thirty days after receipt of an invoice or regulatory obligations pursuant to the costs between Equity and Options
other notice indicating payment is due Plan. In approving the Plan, the SEC Execution Venues, is reasonably
(unless a longer payment period is noted that the Plan ‘‘is necessary and designed to allocate CAT costs among
otherwise indicated). Section 11.4 appropriate in the public interest, for CAT Reporters. The 75/25 division
further states that, if an Industry the protection of investors and the between Industry Members and
Member fails to pay any such fee when maintenance of fair and orderly markets,
Execution Venues maintains the greatest
due, such Industry Member shall pay to remove impediments to, and perfect
level of comparability across the
interest on the outstanding balance from the mechanism of a national market
funding model, keeping in view that
such due date until such fee is paid at system, or is otherwise in furtherance of
comparability should consider
a per annum rate equal to the lesser of: the purposes of the Act.’’ 57 To the
affiliations among or between CAT
(i) The Prime Rate plus 300 basis points; extent that this proposal implements,
Reporters (e.g., firms with multiple
or (ii) the maximum rate permitted by interprets or clarifies the Plan and
Industry Members or exchange
applicable law. Therefore, in accordance applies specific requirements to
licenses). Similarly, the 75/25 division
with Section 11.4 of the CAT NMS Plan, Industry Members, the Exchange
between Equity and Options Execution
proposed paragraph (c)(2) states that believes that this proposal furthers the
Venues maintains elasticity across the
each Industry Member shall pay CAT objectives of the Plan, as identified by
funding model as well as the greatest
Fees within thirty days after receipt of the SEC, and is therefore consistent with
level of fee equitability and
an invoice or other notice indicating the Act.
comparability based on the current
payment is due (unless a longer The Exchange believes that the
number of Equity and Options
payment period is otherwise indicated). proposed tiered fees are reasonable.
Execution Venues.
If an Industry Member fails to pay any First, the total CAT Fees to be collected
Finally, the Exchange believes that
such fee when due, such Industry would be directly associated with the
the proposed fees are reasonable
Member shall pay interest on the costs of establishing and maintaining
because they would provide ease of
outstanding balance from such due date the CAT, where such costs include Plan
calculation, ease of billing and other
until such fee is paid at a per annum Processor costs and costs related to
administrative functions, and
rate equal to the lesser of: (i) The Prime insurance, third party services and the
predictability of a fixed fee. Such factors
Rate plus 300 basis points; or (ii) the operational reserve. The CAT Fees
are crucial to estimating a reliable
mstockstill on DSK30JT082PROD with NOTICES
maximum rate permitted by applicable would not cover Participant services
revenue stream for the Company and for
law. unrelated to the CAT. In addition, any
permitting CAT Reporters to reasonably
surplus CAT Fees cannot be distributed
2. Statutory Basis predict their payment obligations for
to the individual Participants; such
The Exchange believes that the budgeting purposes.
proposed rule change is consistent with 55 15U.S.C. 78f(b)(4).
For the foregoing reasons, the
56 15U.S.C. 78f(b)(6) [sic]. Exchange believes that the proposal is
54 Section 11.4 of the CAT NMS Plan. 57 Approval Order at 84697. consistent with the Act.
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00305 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/18.svg)
![Federal Register / Vol. 82, No. 97 / Monday, May 22, 2017 / Notices 23475
B. Self-Regulatory Organization’s Furthermore, the tiered, fixed fee All submissions should refer to File
Statement on Burden on Competition funding model limits the disincentives Number SR–NYSEARCA–2017–52. This
to providing liquidity to the market. file number should be included on the
Section 6(b)(8) of the Act 58 require Therefore, the proposed fees are subject line if email is used. To help the
[sic] that the Exchange’s rules not structured to limit burdens on Commission process and review your
impose any burden on competition that competitive quoting and other liquidity comments more efficiently, please use
is not necessary or appropriate. The provision in the market. only one method. The Commission will
Exchange does not believe that the post all comments on the Commission’s
proposed rule change will result in any C. Self-Regulatory Organization’s
Internet Web site (http://www.sec.gov/
burden on competition that is not Statement on Comments on the
rules/sro.shtml). Copies of the
necessary or appropriate in furtherance Proposed Rule Change Received From
submission, all subsequent
of the purposes of the Act. The Members, Participants, or Others
amendments, all written statements
Exchange notes that the proposed rule No written comments were solicited with respect to the proposed rule
change implements provisions of the or received with respect to the proposed change that are filed with the
CAT NMS Plan approved by the rule change. Commission, and all written
Commission, and is designed to assist communications relating to the
the Exchange in meeting its regulatory III. Date of Effectiveness of the
Proposed Rule Change and Timing for proposed rule change between the
obligations pursuant to the Plan. Commission and any person, other than
Similarly, all national securities Commission Action
those that may be withheld from the
exchanges and FINRA are proposing a The foregoing rule change is effective public in accordance with the
similar proposed fee change to upon filing pursuant to Section provisions of 5 U.S.C. 552, will be
implement the requirements of the CAT 19(b)(3)(A) 59 of the Act and available for Web site viewing and
NMS Plan. Therefore, this is not a subparagraph (f)(2) of Rule 19b–4 60 printing in the Commission’s Public
competitive fee filing and, therefore, it thereunder, because it establishes a due, Reference Room, 100 F Street NE.,
does not raise competition issues fee, or other charge imposed by the Washington, DC 20549 on official
between and among the exchanges and Exchange. business days between the hours of
FINRA. At any time within 60 days of the 10:00 a.m. and 3:00 p.m. Copies of the
Moreover, as previously described, filing of such proposed rule change, the filing also will be available for
the Exchange believes that the proposed Commission summarily may inspection and copying at the principal
rule change fairly and equitably temporarily suspend such rule change if office of the Exchange. All comments
allocates costs among CAT Reporters. In it appears to the Commission that such received will be posted without change;
particular, the proposed fee schedule is action is necessary or appropriate in the the Commission does not edit personal
structured to impose comparable fees on public interest, for the protection of identifying information from
similarly situated CAT Reporters, and investors, or otherwise in furtherance of submissions. You should submit only
lessen the impact on smaller CAT the purposes of the Act. If the information that you wish to make
Reporters. CAT Reporters with similar Commission takes such action, the available publicly. All submissions
levels of CAT activity will pay similar Commission shall institute proceedings should refer to File Number SR–
fees. For example, Industry Members under Section 19(b)(2)(B) 61 of the Act to NYSEARCA–2017–52 and should be
(other than Execution Venue ATSs) with determine whether the proposed rule submitted on or before June 12, 2017.
higher levels of message traffic will pay change should be approved or
For the Commission, by the Division of
higher fees, and those with lower levels disapproved. Trading and Markets, pursuant to delegated
of message traffic will pay lower fees. IV. Solicitation of Comments authority.62
Similarly, Execution Venue ATSs and Eduardo A. Aleman,
other Execution Venues with larger Interested persons are invited to
Assistant Secretary.
market share will pay higher fees, and submit written data, views, and
arguments concerning the foregoing, [FR Doc. 2017–10302 Filed 5–19–17; 8:45 am]
those with lower levels of market share
will pay lower fees. Therefore, given including whether the proposed rule BILLING CODE 8011–01–P
that there is generally a relationship change is consistent with the Act.
between message traffic and market Comments may be submitted by any of
the following methods: SECURITIES AND EXCHANGE
share to the CAT Reporter’s size, smaller COMMISSION
CAT Reporters generally pay less than Electronic Comments
larger CAT Reporters. Accordingly, the [Release No. 34–80687; File No. SR–
• Use the Commission’s Internet BatsBZX–2017–31]
Exchange does not believe that the CAT
comment form (http://www.sec.gov/
Fees would have a disproportionate
rules/sro.shtml); or Self-Regulatory Organizations; Bats
effect on smaller or larger CAT
• Send an email to rule-comments@ BZX Exchange, Inc.; Notice of Filing
Reporters. In addition, ATSs and
sec.gov. Please include File Number SR– and Immediate Effectiveness of a
exchanges will pay the same fees based
NYSEARCA–2017–52 on the subject Proposed Rule Change to Rule 11.27 of
on market share. Therefore, the
line. Bats BZX Exchange, Inc. To Modify the
Exchange does not believe that the fees
Date of Appendix B Web Site Data
will impose any burden on the Paper Comments Publication Pursuant to the Regulation
competition between ATSs and • Send paper comments in triplicate
mstockstill on DSK30JT082PROD with NOTICES
NMS Plan To Implement a Tick Size
exchanges. Accordingly, the Exchange to Secretary, Securities and Exchange Pilot Program
believes that the proposed fees will Commission, 100 F Street NE.,
minimize the potential for adverse Washington, DC 20549–1090. May 16, 2017.
effects on competition between CAT Pursuant to section 19(b)(1) of the
Reporters in the market. 59 15 U.S.C. 78s(b)(3)(A). Securities Exchange Act of 1934 (the
60 17 CFR 240.19b–4(f)(2).
58 15 U.S.C. 78f(b)(8). 61 15 U.S.C. 78s(b)(2)(B). 62 17 CFR 200.30–3(a)(12).
VerDate Sep<11>2014 23:17 May 19, 2017 Jkt 241001 PO 00000 Frm 00306 Fmt 4703 Sfmt 4703 E:\FR\FM\22MYN1.SGM 22MYN1](https://thefederalregister.org/doc/82_FR_23554/page/19.svg)
Document Created: 2018-11-08 08:50:00
Document Modified: 2018-11-08 08:50:00
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 82 FR 23457 |
2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR