82_FR_25527 82 FR 25423 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Eliminate Requirements That Will Be Duplicative of CAT

82 FR 25423 - Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change To Eliminate Requirements That Will Be Duplicative of CAT

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 104 (June 1, 2017)

Page Range25423-25429
FR Document2017-11359

Federal Register, Volume 82 Issue 104 (Thursday, June 1, 2017)
[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25423-25429]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-11359]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80783; File No. SR-FINRA-2017-013]


Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of Proposed Rule Change To Eliminate 
Requirements That Will Be Duplicative of CAT

May 26, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on May 15, 2017, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') (f/k/a National Association of Securities Dealers, Inc. 
(``NASD'')) filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. 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\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to eliminate the Order Audit Trail System 
(``OATS'') rules in the FINRA Rule 7400 Series and to amend FINRA's 
electronic blue sheet (``EBS'') rules, Rules 8211 and 8213, to reflect 
changes to these rules once members are effectively reporting to the 
consolidated audit trail (``CAT'') and the CAT's accuracy and 
reliability meet certain standards as described below.
    The text of the proposed rule change is available on FINRA's Web 
site at http://www.finra.org, at the principal office of FINRA 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, FINRA 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 these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
(1) Background
    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.; FINRA; International 
Securities Exchange, LLC; Investors' Exchange LLC; ISE Gemini, LLC; ISE 
Mercury, LLC; Miami International Securities Exchange LLC; MIAX PEARL, 
LLC; NASDAQ BX, Inc.; NASDAQ PHLX LLC; The NASDAQ Stock Market LLC; 
National Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE MKT 
LLC; and NYSE Arca, Inc. (collectively, the ``Participants'') filed 
with the Commission, pursuant to Section 11A of the Exchange Act \3\ 
and Rule 608 of Regulation NMS thereunder,\4\ the National Market 
System Plan Governing the Consolidated Audit Trail (the ``CAT NMS 
Plan'' or ``Plan'').\5\ The Participants filed the Plan to comply with 
Rule 613 of Regulation NMS under the Exchange Act.\6\ The Plan was 
published for comment in the Federal Register on May 17, 2016,\7\ and 
approved by the Commission, as modified, on November 15, 2016.\8\ On 
March 15, 2017, the Commission approved the new FINRA Rule 6800 Series 
to implement provisions of the CAT NMS Plan that are applicable to 
FINRA members.\9\
---------------------------------------------------------------------------

    \3\ 15 U.S.C. 78k-1.
    \4\ 17 CFR 242.608.
    \5\ 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. 
Unless otherwise specified, capitalized terms used in this rule 
filing are defined as set forth herein, or in the CAT Compliance 
Rule Series or in the CAT NMS Plan.
    \6\ 17 CFR 242.613.
    \7\ Securities Exchange Act Rel. No. 77724 (April 27, 2016), 81 
FR 30614 (May 17, 2016).
    \8\ Securities Exchange Act Rel. No. 79318 (November 15, 2016), 
81 FR 84696 (November 23, 2016) (``Approval Order'').
    \9\ Securities Exchange Act Rel. No. 80255 (March 15, 2017), 82 
FR 14563 (March 21, 2017).
---------------------------------------------------------------------------

    The CAT NMS Plan is designed to create, implement, and maintain a 
consolidated audit trail that will capture in a single consolidated 
data source 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. Among other things, Section C.9. of Appendix C to the Plan, 
as modified by the Commission, requires each Participant to ``file with 
the SEC the relevant rule change filing to eliminate or modify its 
duplicative rules within six (6) months of the SEC's approval of the 
CAT NMS Plan.'' \10\ The Plan notes that ``the elimination of such 
rules and the retirement of such systems [will] be effective at such 
time as CAT Data meets minimum standards of accuracy and reliability.'' 
\11\ Finally, the Plan requires the rule filing to discuss the 
following:
---------------------------------------------------------------------------

    \10\ CAT NMS Plan, Appendix C, Section C.9.
    \11\ See id.
---------------------------------------------------------------------------

    (i) Specific accuracy and reliability standards that will determine 
when duplicative systems will be retired, including, but not limited 
to, whether the attainment of a certain Error Rate should determine 
when a system duplicative of the CAT can be retired;
    (ii) whether the availability of certain data from Small Industry 
Members two years after the Effective Date would facilitate a more 
expeditious retirement of duplicative systems; and
    (iii) whether individual Industry Members can be exempted from 
reporting to duplicative systems once their CAT reporting meets 
specified accuracy and reliability standards, including, but not 
limited to, ways in which establishing cross-system regulatory 
functionality or integrating data from existing systems and the CAT 
would facilitate such Individual Industry Member exemptions.\12\
---------------------------------------------------------------------------

    \12\ See id.
---------------------------------------------------------------------------

    In response to these requirements, the proposed rule change deletes 
the Rule 7400 Series (the ``OATS Rules'') \13\ and Rule 4554 from the 
FINRA rulebook and adds new Supplementary Material to FINRA's EBS 
rules, Rules 8211 and 8213, once the CAT achieves the

[[Page 25424]]

specific accuracy and reliability standards described below and FINRA 
has determined that its usage of the CAT Data has not revealed material 
issues that have not been corrected, confirmed that the CAT includes 
all data necessary to allow FINRA to continue to meet its surveillance 
obligations,\14\ and confirmed that the Plan Processor is sufficiently 
meeting all of its obligations under the CAT NMS Plan.\15\
---------------------------------------------------------------------------

    \13\ FINRA notes that there are multiple rules throughout the 
FINRA Rulebook that cross-reference or otherwise incorporate some or 
all of the OATS Rules. If the Commission approves the proposed rule 
change, FINRA will file a subsequent proposed rule change to 
eliminate or amend, as applicable, the references to the OATS Rules 
before the amendments in the current proposed rule change are 
implemented.
    \14\ As noted in the Participants' September 23, 2016 response 
to comment letters on the Plan, the Participants ``worked to keep 
[the CAT] gap analyses up-to-date by including newly-added data 
fields in these duplicative systems, such as the new OATS data 
fields related to the tick size pilot and ATS order book changes, in 
the gap analyses.'' Letter from Participants to Brent J. Fields, 
Secretary, Commission, dated September 23, 2016, at 21. The 
Participants noted that they ``will work with the Plan Processor and 
the industry to develop detailed Technical Specifications to ensure 
that by the time Industry Members are required to report to the CAT, 
the CAT will include all data elements necessary to facilitate the 
rapid retirement of duplicative systems.'' Id.
    \15\ FINRA notes that the OATS Rules were originally proposed to 
fulfill one of the undertakings contained in an order issued by the 
Commission relating to the settlement of an enforcement action 
against the NASD for failure to adequately enforce its rules. See 
Securities Exchange Act Release No. 39729 (March 6, 1998), 63 FR 
12559 (March 13, 1998) (``OATS Approval Order''); see also 
Securities Exchange Act Release No. 37538 (August 8, 1996); 
Administrative Proceeding File No. 3-9056 (``SEC Order''). In 
approving the OATS Rules, the Commission concluded that OATS 
satisfied the conditions of the SEC Order and was consistent with 
the Exchange Act. See OATS Approval Order, supra, at 12566-67. As 
noted, the Plan is designed to create, implement, and maintain a 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. 
FINRA has already adopted rules to enforce compliance by its 
Industry Members, as applicable, with the provisions of the Plan. 
See Rule 6800 Series. Once the CAT can replace the OATS Rules, FINRA 
believes it will be appropriate to delete the OATS Rules that were 
implemented to comply with the SEC Order. Accordingly, FINRA 
believes that it would continue to be in compliance with the 
requirements of the SEC Order once the OATS Rules are deleted.
---------------------------------------------------------------------------

(2) Specific Accuracy and Reliability Standards
    The first issue the Plan requires the proposed rule change to 
discuss is ``specific accuracy and reliability standards that will 
determine when duplicative systems will be retired, including, but not 
limited to, whether the attainment of a certain Error Rate should 
determine when a system duplicative of the CAT can be retired.'' \16\ 
FINRA believes that relevant error rates are the primary, but not the 
sole, metric by which to determine the CAT's accuracy and reliability 
and will serve as the baseline requirement needed before OATS can be 
retired and requests for trading information pursuant to Rule 8211 or 
8213 can be amended to account for information being available in the 
CAT.
---------------------------------------------------------------------------

    \16\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

    As discussed in Section A.3.(b) of Appendix C to the CAT NMS Plan, 
the Participants established an initial Error Rate, as defined in the 
Plan, of 5% on initially submitted data (i.e., data as submitted by a 
CAT Reporter before any required corrections are performed). The 
Participants noted in the Plan that their expectation was that ``error 
rates after reprocessing of error corrections will be de minimis.'' 
\17\ The Participants based this Error Rate on their consideration of 
``current and historical OATS Error Rates, the magnitude of new 
reporting requirements on the CAT Reporters and the fact that many CAT 
Reporters may have never been obligated to report data to an audit 
trail.'' \18\
---------------------------------------------------------------------------

    \17\ See CAT NMS Plan, Appendix C, Section A.3(b), at n.102.
    \18\ See CAT NMS Plan, Appendix C, Section A.3(b).
---------------------------------------------------------------------------

    FINRA agrees with the Participants' conclusion that a 5% pre-
correction threshold ``strikes the balance of adapting to a new 
reporting regime, while ensuring that the data provided to regulators 
will be capable of being used to conduct surveillance and market 
reconstruction, as well as having a sufficient level of accuracy to 
facilitate the retirement of existing regulatory reports and systems 
where possible.'' \19\ However, FINRA believes that, when assessing the 
accuracy and reliability of the data for the purposes of retiring OATS, 
the error thresholds should be measured in more granular ways and 
should also include minimum error rates of post-correction data, which 
represents the data most likely to be used by FINRA to conduct 
surveillance. Although FINRA is proposing to measure the appropriate 
error rates in the aggregate, rather than firm-by-firm, FINRA believes 
that the error rates for equity securities should be measured 
separately from options since options orders are not currently reported 
regularly or included in OATS.
---------------------------------------------------------------------------

    \19\ Id.
---------------------------------------------------------------------------

    To ensure the CAT's accuracy and reliability, FINRA is proposing 
that, before OATS could be retired, the CAT would generally need to 
achieve a sustained error rate for Industry Member reporting in each of 
the categories below for a period of at least 180 days of 5% or lower, 
measured on a pre-correction or as-submitted basis and 2% or lower on a 
post-correction basis (measured at T+5).\20\ FINRA is proposing to 
measure the 5% pre-correction and 2% post-correction thresholds by 
averaging the error rate across the period, not require a 5% pre-
correction and 2% post-correction maximum each day for 180 consecutive 
days. FINRA believes that measuring each of the thresholds over the 
course of 180 days will ensure that the CAT consistently meets minimum 
accuracy and reliability thresholds for Industry Member reporting while 
also ensuring that single-day measurements do not unduly affect the 
overall measurements.
---------------------------------------------------------------------------

    \20\ The Plan requires that the Plan Processor must ensure that 
regulators have access to corrected and linked order and Customer 
data by 8:00 a.m. Eastern Time on T+5. See CAT NMS Plan, Appendix C, 
Section A.2(a).
---------------------------------------------------------------------------

    FINRA is proposing to use error rates in each the following 
categories, measured separately for options and for equities, to assess 
whether the threshold pre- and post-correction error rates are being 
met:
     Rejection Rates and Data Validations. Data validations for 
the CAT, while not expected to be designed the same as OATS, must be 
functionally equivalent to OATS in accordance with the CAT NMS Plan 
(i.e., the same types of basic data validations must be performed by 
the Plan Processor to comply with the CAT NMS Plan requirements). 
Appendix D of the Plan, for example, requires that certain file 
validations \21\ and syntax and context checks be performed on all 
submitted records.\22\ If a record does not pass these basic data 
validations, it must be rejected and returned to the CAT Reporter to be 
corrected and resubmitted.\23\ The specific validations can be 
determined only after the Plan Processor has finalized the Industry 
Member Technical Specifications; however, the Plan also requires the 
Plan Processor to provide daily statistics on rejection rates after the 
data has been processed, including the number of files rejected and 
accepted, the number of

[[Page 25425]]

order events accepted and rejected, and the number of each type of 
report rejected.\24\ FINRA is proposing that, over the 180-day period, 
aggregate rejection rates (measured separately for equities and 
options) must be no more than 5% pre-correction or 2% post-correction 
across all CAT Reporters.
---------------------------------------------------------------------------

    \21\ See CAT NMS Plan, Appendix D, Section 7.2. The Plan 
requires the Plan Processor to confirm that file transmission and 
receipt are in the correct formats, including validation of header 
and trailers on the submitted report, confirmation of a valid SRO-
Assigned Market Participant Identifier, and verification of the 
number of records in the file. Id.
    \22\ See id. The Plan notes that syntax and context checks would 
include format checks (i.e., that data is entered in the specified 
format); data type checks (i.e., that the data type of each 
attribute conforms to the specifications); consistency checks (i.e., 
that all attributes for a record of a specified type are 
consistent); range/logic checks (i.e., that each attribute for every 
record has a value within specified limits and the values provided 
are associated with the event type they represent); data validity 
checks (i.e., that each attribute for every record has an acceptable 
value); completeness checks (i.e., that each mandatory attribute for 
every record is not null); and timeliness checks (i.e., that the 
records were submitted within the submission timelines). Id.
    \23\ See id.
    \24\ See id.
---------------------------------------------------------------------------

     Intra-Firm Linkages. The Plan requires that ``the Plan 
Processor must be able to link all related order events from all CAT 
Reporters involved in the lifecycle of an order.'' \25\ At a minimum, 
this requirement includes the creation of an order lifecycle between 
``[a]ll order events handled within an individual CAT Reporter, 
including orders routed to internal desks or departments with different 
functions (e.g., an internal ATS).'' \26\ FINRA is proposing that 
aggregate intra-firm linkage rates across all Industry Member Reporters 
must be at least 95% pre-correction and 98% post-correction.
---------------------------------------------------------------------------

    \25\ CAT NMS Plan, Appendix D, Section 3.
    \26\ Id.
---------------------------------------------------------------------------

     Inter-Firm Linkages. The order linkage requirements in the 
Plan also require that the Plan Processor be able to create the 
lifecycle between orders routed between broker-dealers.\27\ FINRA is 
proposing that at least a 95% pre-correction and 98% post-correction 
aggregate match rate be achieved for orders routed between two Industry 
Member Reporters.\28\
---------------------------------------------------------------------------

    \27\ Id.
    \28\ This assumes linkage statistics will include both unlinked 
route reports and new orders where no related route report could be 
found.
---------------------------------------------------------------------------

     Order Linkage Rates. In addition to creating linkages 
within and between broker-dealers, the Plan also includes requirements 
that the Plan Processor be able to create lifecycles to link various 
pieces of related orders.\29\ For example, the Plan requires linkages 
between customer orders and ``representative'' orders created in firm 
accounts for the purpose of facilitating a customer order, various legs 
of option/equity complex orders, riskless principal orders, and orders 
worked through average price accounts.\30\ FINRA is proposing that 
there be at least a 95% pre-correction and 98% post-correction linkage 
rate for multi-legged orders (e.g., related equity/options orders, VWAP 
orders, riskless principal transactions).
---------------------------------------------------------------------------

    \29\ See CAT NMS Plan, Appendix D, Section 3.
    \30\ See id.
---------------------------------------------------------------------------

     Exchange and TRF/ORF Match Rates. The Plan requires that 
an order lifecycle be created to link ``[o]rders routed from broker-
dealers to exchanges'' and ``[e]xecuted orders and trade reports.'' 
\31\ FINRA is proposing at least a 95% pre-correction and 98% post-
correction aggregate match rate to each equity exchange for orders 
routed from Industry Members to an exchange and, for over-the-counter 
executions, the same match rate for orders linked to trade reports.
---------------------------------------------------------------------------

    \31\ Id.
---------------------------------------------------------------------------

    In addition to these minimum error rates and matching thresholds 
that generally must be met before OATS can be retired, FINRA believes 
that during the minimum 180-day period during which the thresholds are 
calculated, FINRA's use of the data in the CAT must confirm that (i) 
usage over that time period has not revealed material issues that have 
not been corrected, (ii) the CAT includes all data necessary to allow 
FINRA to continue to meet its surveillance obligations, and (iii) the 
Plan Processor is sufficiently meeting all of its obligations under the 
CAT NMS Plan. FINRA believes this time period to use the CAT Data is 
necessary to reveal any errors that may manifest themselves only after 
surveillance patterns and other queries have been run and to confirm 
that the Plan Processor is meeting its obligations and performing its 
functions adequately.
(3) Small Industry Member Data Availability
    The second issue the Plan requires the proposed rule change to 
address is ``whether the availability of certain data from Small 
Industry Members two years after the Effective Date would facilitate a 
more expeditious retirement of duplicative systems.''
    FINRA believes that there is no effective way to retire OATS until 
all current OATS reporters are reporting to the CAT. Although Technical 
Specifications for Industry Members are not yet available, FINRA 
believes it would be inefficient, less reliable, and more costly to 
attempt to marry the OATS and CAT databases for a temporary period to 
allow some FINRA members to report to CAT while others continue to 
report to OATS. Consequently, FINRA has concluded at this time that 
having data from those Small Industry Members currently reporting to 
OATS available two years after the Effective Date would substantially 
facilitate a more expeditious retirement of OATS. For this reason, 
FINRA supports an amendment to the Plan that would require current OATS 
Reporters that are ``Small Industry Members'' to report two years after 
the Effective Date (instead of three). FINRA intends to work with the 
other Participants to submit a proposed amendment to the Plan to 
require Small Industry Members that are OATS Reporters to report two 
years after the Effective Date.\32\
---------------------------------------------------------------------------

    \32\ The 180-day timeframes discussed above with respect to 
usage of the data and calculation of error rates would apply to data 
reported to the CAT by Small Industry Members that are reporting to 
OATS. If an amendment to the Plan to accelerate the reporting 
requirement for those firms is not approved, the retirement of OATS 
could not be accomplished until at least 180 days after Small 
Industry Members begin reporting, which is scheduled to begin in 
November 2019.
---------------------------------------------------------------------------

    FINRA has identified approximately 300 member firms that currently 
report to OATS and meet the definition of ``Small Industry Member;'' 
however, only ten of these firms submit information to OATS on their 
own behalf, and eight of the ten firms report very few orders to 
OATS.\33\ The vast majority of these 300 firms use third parties to 
fulfill their reporting obligations, and many of these third parties 
will begin reporting to CAT in November 2018. Consequently, FINRA 
believes that the burden on current OATS Reporters that are ``Small 
Industry Members'' would not be significant if those firms are required 
to report to CAT beginning in November 2018 rather than November 2019. 
The burdens, however, are significantly greater for those firms that 
are not reporting to OATS currently; therefore, FINRA does not believe 
it would be necessary or appropriate to accelerate CAT reporting for 
``Small Industry Members'' that are not currently reporting to OATS, 
and FINRA would not support an amendment to the Plan to accelerate CAT 
reporting for ``Small Industry Members'' that are not currently OATS 
Reporters.
---------------------------------------------------------------------------

    \33\ For example, in one recent month, eight of the ten firms 
submitted fewer than 100 reports during the month, with four firms 
submitting fewer than 50.
---------------------------------------------------------------------------

(4) Individual Industry Member Exemptions
    The final issue the Plan requires the proposed rule change to 
address is ``whether individual Industry Members can be exempted from 
reporting to duplicative systems once their CAT reporting meets 
specified accuracy and reliability standards, including, but not 
limited to, ways in which establishing cross-system regulatory 
functionality or integrating data from existing systems and the CAT 
would facilitate such Individual Industry Member exemptions.''
    As described above, FINRA believes that a single cut-over from OATS 
to CAT is highly preferable to a firm-by-firm approach and is not 
proposing to exempt members from the OATS requirements on a firm-by-
firm basis. The primary benefit to a firm-by-firm

[[Page 25426]]

exemptive approach would be to reduce the amount of time an individual 
firm is required to report to a legacy system (e.g., OATS) if it is 
also accurately and reliably reporting to the CAT. FINRA believes that 
the overall accuracy and reliability thresholds for the CAT described 
above would need to be met under any conditions before firms could stop 
reporting to OATS. Moreover, as discussed above, FINRA supports 
amending the Plan to accelerate the reporting requirements for Small 
Industry Members that are OATS Reporters to report on the same 
timeframe as all other OATS Reporters. If such an amendment were 
approved by the Commission, there would be no need to exempt members 
from OATS requirements on a firm-by-firm basis.
(5) Automated Submission of Trading Data
    In addition to the OATS rules, Rules 8211 and 8213 (the ``EBS 
Rules'') will also be affected by the implementation of the CAT. The 
EBS Rules are FINRA's rules regarding the automated submission of 
specific trading data to FINRA upon request using the EBS system.
    Once broker-dealer reporting to the CAT has begun, the CAT will 
contain much of the data the Participants would otherwise have 
requested via the EBS system for purposes of NMS Securities and OTC 
Equity Securities. Consequently, FINRA will not need to use the EBS 
system or request information pursuant to the EBS Rules for NMS 
Securities and OTC Equity Securities for time periods after CAT 
reporting has begun if the appropriate accuracy and reliability 
thresholds are achieved, including an acceptable accuracy rate for 
customer and account information. However, the EBS Rules cannot be 
completely removed from the FINRA Rulebook immediately upon the CAT 
achieving the appropriate thresholds because FINRA may still need to 
request information pursuant to these rules for trading activity 
occurring before a member was reporting to the CAT.\34\ In addition, 
the EBS Rules apply to information regarding transactions involving 
securities that will not be reportable to the CAT initially, such as 
fixed-income securities; thus, the rules must remain in effect with 
respect to those transactions indefinitely or until those transactions 
are captured in the CAT.
---------------------------------------------------------------------------

    \34\ Firms are required to maintain the trade information for 
pre-CAT transactions in equities and options pursuant to applicable 
rules, such as books and records retention requirements, for the 
relevant time period, which is generally three or six years, 
depending upon the record. See 17 CFR 240.17a-3(a), 240.17a-4.
---------------------------------------------------------------------------

    The proposed rule change adds new Supplementary Material to the EBS 
Rules to clarify how FINRA will request data under these rules after 
members are reporting to the CAT. Specifically, the proposed 
Supplementary Material to each rule will note that FINRA will request 
information under the rules only if the information is not available in 
the CAT because, for example, the transactions in question occurred 
before the firm was reporting information to the CAT or involved 
securities that are not reportable to the CAT. In essence, under the 
new Supplementary Material, FINRA will make requests under these rules 
if and only if the information is not otherwise available through the 
CAT.
    However, as noted above, FINRA believes that the CAT must meet 
certain minimum accuracy and reliability standards before FINRA could 
rely on the CAT Data to replace existing regulatory tools, including 
EBS. Consequently, the proposed Supplementary Material will be 
implemented only after the CAT achieves the thresholds set forth above 
with respect to OATS and an accuracy rate for customer and account 
information of 95% for pre-corrected data and 98% for post-correction 
data. In addition, as discussed above, FINRA can rely on CAT Data to 
replace EBS requests only after FINRA has determined that its usage of 
the CAT Data over a 180-day period has not revealed material issues 
that have not been corrected, confirmed that the CAT includes all data 
necessary to allow FINRA to continue to meet its surveillance 
obligations, and confirmed that the CAT Plan Processor is fulfilling 
its obligations under the CAT NMS Plan.
    If the Commission approves the proposed rule change, the rule text 
will be effective; however, the amendments will not be implemented 
until FINRA has determined the accuracy and reliability standards set 
forth in the proposed rule change have been met. FINRA will announce 
the implementation date of the proposed rule change in a Regulatory 
Notice that will be published once FINRA concludes the thresholds for 
accuracy and reliability described herein have been met and that the 
CAT Plan Processor is sufficiently meeting all of its obligations.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\35\ which requires, among 
other things, that FINRA rules must 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. FINRA believes that the proposed rule change fulfills 
the obligation in the CAT NMS Plan for FINRA to submit a proposed rule 
change to eliminate or modify duplicative rules. FINRA believes that 
the approach set forth in the proposed rule change strikes the 
appropriate balance between ensuring that FINRA is able to continue to 
fulfill its statutory obligation to protect investors and the public 
interest by ensuring its surveillance of market activity remains 
accurate and effective while also establishing a reasonable timeframe 
for elimination or modification of its rules that will be rendered 
duplicative after implementation of the CAT.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78o-3(b)(6).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    FINRA 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.
(a) Economic Impact Assessment--Retirement of OATS and Amendments to 
the EBS Rules Following the Implementation of CAT
    Currently all FINRA members that do business in equity securities 
are required to report equity audit trail information to OATS and make 
transaction information available through the EBS system. As stated in 
the CAT NMS Plan, all large broker-dealers that are also FINRA members 
will be required to report order information in NMS Securities and OTC 
Equity Securities to both OATS and CAT beginning in November 2018 and 
Small Industry Members beginning in November 2019 as part of the 
broader CAT NMS Plan to implement the CAT and retire other systems. 
Further, clearing firms will be required to continue to make equity and 
option transaction data available through EBS requests until the 
proposed Supplementary Material is implemented. The proposed rule 
change lays out a plan by which FINRA will retire OATS and amend its 
rules for EBS to eventually eliminate the need for duplicative 
reporting and records maintenance.
    Costs and benefits associated with establishing the CAT, including 
the

[[Page 25427]]

economic impacts associated with retiring existing systems, have been 
established as a part of the Plan approved by the SEC. Significant 
economic impacts of OATS retirement as described in this proposed rule 
change include amending the Plan to require that Small Industry Members 
who currently report to OATS would be required to begin reporting to 
the CAT in 2018 rather than 2019 and a single cut-over from OATS to CAT 
for all firms provided that (1) average error rate thresholds over a 
180-day period are met, (2) no material issues related to market 
surveillance needs have been identified but are uncorrected, (3) the 
CAT not [sic] contain material issues that would negatively impact 
market surveillance, and (4) the plan processor is sufficiently meeting 
all of its obligations under the CAT NMS Plan. The key aspect to the 
proposed amendments to FINRA's rules for EBS include a provision that 
FINRA would no longer request data that is available in CAT through 
EBS, once the accuracy and reliability thresholds are achieved. The EBS 
Rules would continue to apply for securities that are not included 
within the CAT and for transactions that occurred before the CAT's 
accuracy and reliability are confirmed.
(b) Economic Impact
    In creating the proposal to retire OATS and amend the EBS Rules, 
FINRA is seeking to carefully balance the additional costs incurred by 
member firms associated with continuing to maintain duplicate systems 
and records created by the CAT NMS Plan and existing rules with the 
risks to effective and efficient surveillance that could arise from 
eliminating access to existing data systems before a high-quality 
alternative has been tested and verified. The costs of maintaining 
duplicate systems and records include, among other things, system 
maintenance, quality control oversight, and staff to maintain the 
systems and records. Because the CAT NMS Plan created the need to have 
duplicate systems and required a plan for the retirement of duplicate 
systems and processes, the Economic Impact Assessment will focus on the 
proposed choices made by FINRA in implementing the retirement plan.
(1) OATS Retirement
    The proposed rule change will impact all OATS-reporting firms. 
Currently all but 299 medium and large broker-dealers and 300 of 630 
small broker-dealers report to OATS. Of the 300 Small Industry Members 
that report to OATS, all but 10 of them currently report through other 
firms or service providers.\36\ Of the 10 that self-report, eight of 
them report very few orders to OATS as described above in Footnote 33. 
The approximately 629 broker dealers that are currently exempt or 
excluded from OATS reporting are not impacted by this proposed rule 
change. The EIA focuses on the impact of the proposed plan for retiring 
OATS on all OATS-reporting firms.
---------------------------------------------------------------------------

    \36\ All of the clearing firms that report to OATS on behalf of 
Small Industry Members are required to begin reporting to CAT in 
2018. In addition, the service providers that report to OATS on 
behalf of Small Industry Members have a mix of small and large 
clients for whom they provide this service and, therefore, would be 
prepared to begin CAT reporting on behalf of their clients in 2018.
---------------------------------------------------------------------------

    First, FINRA's proposed plan recommends a requirement that there be 
a single cut-over from OATS to CAT rather than a firm-by-firm cut-over. 
The primary beneficiary of this proposal will be the investing public. 
This approach eliminates the need to merge OATS and CAT data in order 
to execute surveillance in accordance with SEC rules and SRO 
obligations. The integration process would be technologically costly 
and difficult and could introduce errors into the data being surveilled 
that did not exist prior to integration. Conducting market surveillance 
from a single audit trail system increases the efficiency and 
effectiveness of the process and improves the integrity of the markets. 
In addition, there are direct benefits of this approach to firms. 
Specifically, other than during the time period during which the 
accuracy and reliability of CAT data is validated, a single cut-over 
approach would eliminate the need for firms that report on other firms' 
behalf to create a technological solution for receiving and reporting 
on data structured for both OATS and CAT simultaneously. Such a 
practice would increase costs to ensure compliance with the proper 
reporting mechanism. These costs would likely be incorporated into the 
fees for the service charged to introducing firms and could eventually 
be borne by customers through higher fees based on the price elasticity 
for brokerage services.
    The potential costs associated with the single cut-over approach 
will be borne by firms that could meet the maximum error thresholds for 
reporting to CAT earlier than the single cut-over approach would allow. 
These firms would bear the technology and compliance costs associated 
with dual reporting for a longer period than they might otherwise.
    Another potential cost of the single cut-over method is that there 
will likely be firms reporting to CAT that do not meet the maximum 
error rate thresholds, leading to lower quality data available for 
surveillance. If firms were individually permitted to end OATS 
reporting only when meeting a maximum error rate, every firm's 
reporting would meet the minimum criterion. Requiring an aggregate 
error rate may permit individual firms to end OATS reporting even while 
their CAT reporting does not meet the specified error rate as long as 
the error rate is low enough for the industry. Thus, surveillance of 
market activity for those firms may not be as efficient or effective 
due to the higher error rates. Taken further, it is possible that a 
single cut-over may reduce the incentives for any one firm to put 
significant effort and costs into meeting or beating the threshold 
error rates because the benefits are shared among all firms while 
greater cost is borne by the firms whose compliance rates satisfy the 
minimum error rate thresholds. This disincentive is likely to be small 
for firms with significant reporting obligations, who would seek to end 
duplicative reporting as quickly as possible and who represent the vast 
majority of OATS reports, but may, at the margin, extend the time 
necessary to meet the error reporting threshold. However, significant 
error rates could constitute a rule violation and subject firms to 
possible disciplinary action.\37\ Thus, firms that delay reducing error 
rates to threshold levels would over time incur higher costs through 
enforcement actions and be incentivized to improve their compliance 
rates.
---------------------------------------------------------------------------

    \37\ See CAT NMS Plan, Appendix C, Section 3(b) (discussing 
firm-specific compliance thresholds).
---------------------------------------------------------------------------

    FINRA supports an amendment to the Plan to require that all firms 
that report to OATS begin CAT reporting in November 2018. This 
requirement would accelerate by one year the CAT reporting obligations 
for 300 Small Industry Members. The primary benefit of this approach is 
that it allows the OATS system to be retired up to a year earlier, 
saving firms the costs of maintaining duplicate reporting systems. Of 
the estimated 300 firms who would be impacted by this proposal, 290 
report to OATS through clearing firms or other third party providers, 
all of whom will begin CAT reporting in 2018 either by the requirement 
in the Plan or on behalf of clients who are required to in the Plan. 
Thus, there should be limited additional technical requirements or 
costs to facilitate accelerated reporting for these firms. In fact, the 
accelerated reporting will likely allow the introducing and clearing 
firms

[[Page 25428]]

to avoid the costs associated with maintaining two systems for 
reporting during the additional transition year. The other 10 small 
firms will be required to incur costs associated with the changeover to 
CAT a year earlier. The magnitude of these costs is dependent on 
several factors, including the volume of trades expected to be reported 
to CAT as well as the technological differences between the OATS system 
specifications and the as yet unknown CAT system specifications.
    Third, FINRA proposes that the official retirement of OATS occurs 
only once CAT has met minimum accuracy and reliability standards 
defined as (1) a maximum of a 5% pre-correction error rate and 2% post-
correction error for all CAT submissions averaged over a 180-day period 
in applicable categories, (2) no material data issues not captured in 
the error rates that would negatively impact FINRA's ability to conduct 
effective market surveillance, (3) the CAT including all data necessary 
to allow FINRA to continue to meet its surveillance obligations, and 
(4) the plan processor is sufficiently meeting all of its obligations 
under the CAT NMS Plan. FINRA believes that a minimum of 180 days is 
required to provide sufficient time to ensure that future error rates 
below the maximum thresholds are able to be maintained and that the CAT 
data can otherwise be relied upon for conducting effective market 
surveillance. The trade-offs of lengthening or shortening the phase-in 
period and raising or lowering error rate thresholds are increased 
costs to member firms for maintaining duplicate reporting systems and 
records versus increased assurance for FINRA that the data will 
continue to meet maximum error thresholds and not contain material 
issues that would negatively impact market surveillance. Note that the 
current OATS error rates are significantly lower than 2%; however, OATS 
reporting errors have decreased over time with additional experience by 
firms, and CAT reporting is anticipated to be more complex and new to 
some firms and therefore more likely to contain errors when initially 
reported.
(2) Electronic Blue Sheet System Rule Amendments
    Once broker-dealer reporting to the CAT has begun, the CAT will 
contain much of the data that otherwise would have been requested via 
the EBS system for purposes of equities and options. Consequently, 
FINRA will no longer need to rely on the EBS system or request new 
information pursuant to the EBS Rules for equities or options for time 
periods after CAT has met the minimum accuracy and reliability 
standards defined above. Supplementary Material to the EBS Rules 
detailing the changes in how FINRA requests equity and options data 
will be implemented once the appropriate accuracy and reliability 
thresholds are achieved. The EBS Rules will remain applicable for 
historical equity and options data prior to CAT implementation and for 
record keeping purposes, three to seven years depending on the record. 
The EBS Rules will also remain in effect for reporting data for 
securities not reported in CAT.
    The proposed changes to the EBS Rules will impact clearing firms 
differently depending on the amount of automation already built into 
each firm's EBS system. As described in the Economic Impact Assessment 
for OATS retirement, there are economic trade-offs for loosening or 
tightening the requirements under which the new Supplementary Material 
outlined in the EBS Rule amendments would become effective. Loosening 
the requirements would hasten the effective date but could increase the 
risk that the quality of the data received would hamper FINRA's efforts 
to conduct market surveillance and investigate trading violations, 
potentially increasing risks to investors. Alternatively, tightening 
the requirements could decrease the risk that the data will be low 
quality but will increase the costs to member firms for maintaining 
duplicate reporting and data delivery systems. These costs to continue 
using the EBS system will have a differential impact on clearing firms, 
depending on the level of automation in each firm's EBS response 
process. Firms that have a fully automated EBS response system incur 
lower variable costs to responding to any individual request, but have 
higher fixed costs stemming from maintenance of a more complex system. 
Alternatively firms where more of the response process is manual incur 
higher variable costs to EBS requests due to data collection and 
validation but do not have the more sophisticated systems to maintain 
and therefore incur low fixed costs. So, when the Supplementary 
Material is implemented and clearing firms begin receiving fewer Blue 
Sheet requests, firms with highly manual processes will incur lower 
variable and therefore lower overall costs while firms with highly 
automated systems will likely see more modest cost decline. Firms with 
semi- or fully-automated EBS response systems may decide to phase out 
their automated systems and gradually replace them with more manual 
processes as the number of requests declines. Because clearing firms 
use different processes and systems to collect and submit EBS requests, 
there is ambiguity as to whether any individual firm's costs will be 
affected by the transition to CAT for transaction data requests and at 
what point firms may choose to move toward manual processes.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Although written comments on the proposed rule change were not 
solicited, two commenters, the Financial Information Forum (``FIF'') 
and the Securities Industry and Financial Markets Association 
(``SIFMA''), submitted letters to the Participants regarding the 
retirement of systems related to the CAT.\38\ In its comment letter, 
with regard to the retirement of duplicative systems more generally, 
FIF recommends that the Participants continue the effort to incorporate 
current reporting obligations into the CAT in order to replace existing 
reportable systems with the CAT. In addition, FIF further recommends 
that, once a CAT Reporter achieves satisfactory reporting data quality, 
the CAT Reporter should be exempt from reporting to any duplicative 
reporting systems. FIF believes that these recommendations ``would 
serve both an underlying regulatory objective of more immediate and 
accurate access to data as well as an industry objective of reduced 
costs and burdens of regulatory oversight.'' \39\ In its comments about 
EBS specifically, FIF states that the retirement of the EBS 
requirements should be a high priority, and that the CAT should be 
designed to include the requisite data elements to permit the rapid 
retirement of the EBS system.\40\ Similarly, SIFMA states that ``the 
establishment of the CAT must be accompanied by the prompt elimination 
of duplicative systems,'' and ``recommend[ed] that the initial 
technical specifications be designed to facilitate the immediate 
retirement of . . . duplicative reporting systems.'' \41\
---------------------------------------------------------------------------

    \38\ Letter from William H. Hebert, FIF, to Participants re: 
Milestone for Participants' rule change filings to eliminate/modify 
duplicative rules, dated April 12, 2017 (``FIF Letter''); Letter 
from Kenneth E. Bentsen, Jr., SIFMA, to Participants re: Selection 
of Thesys as CAT Processor, dated April 4, 2017, at 2 (``SIFMA 
Letter'').
    \39\ FIF Letter at 2.
    \40\ Id.
    \41\ SIFMA Letter at 2.
---------------------------------------------------------------------------

    As discussed above, FINRA agrees with the commenters that the OATS

[[Page 25429]]

reporting requirements should be replaced by the CAT reporting 
requirements as soon as accurate and reliable CAT Data is available. To 
this end, FINRA anticipates that the CAT will be designed to collect 
the data necessary to permit the retirement of OATS. As discussed 
above, FINRA disagrees with the recommendation to provide individual 
exemptions to those CAT Reporters who obtain satisfactory data 
reporting quality; however, FINRA supports amendments to the CAT NMS 
Plan that would accelerate reporting for Small Industry Members that 
are currently reporting to OATS to facilitate the retirement of OATS.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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-FINRA-2017-013 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-FINRA-2017-013. 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 such filing also will be available 
for inspection and copying at the principal office of FINRA. 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-FINRA-2017-013 and should be 
submitted on or before June 22, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11359 Filed 5-31-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                       25423

                                                    For the Commission, by the Division of                proposed rule change and discussed any                   CAT NMS Plan that are applicable to
                                                  Trading and Markets, pursuant to delegated              comments it received on the proposed                     FINRA members.9
                                                  authority.58                                            rule change. The text of these statements                   The CAT NMS Plan is designed to
                                                  Eduardo A. Aleman,                                      may be examined at the places specified                  create, implement, and maintain a
                                                  Assistant Secretary.                                    in Item IV below. FINRA has prepared                     consolidated audit trail that will capture
                                                  [FR Doc. 2017–11361 Filed 5–31–17; 8:45 am]             summaries, set forth in sections A, B,                   in a single consolidated data source
                                                  BILLING CODE 8011–01–P                                  and C below, of the most significant                     customer and order event information
                                                                                                          aspects of such statements.                              for orders in NMS Securities and OTC
                                                                                                                                                                   Equity Securities, across all markets,
                                                  SECURITIES AND EXCHANGE                                 A. Self-Regulatory Organization’s                        from the time of order inception through
                                                  COMMISSION                                              Statement of the Purpose of, and                         routing, cancellation, modification, or
                                                                                                          Statutory Basis for, the Proposed Rule                   execution. Among other things, Section
                                                  [Release No. 34–80783; File No. SR–FINRA–               Change                                                   C.9. of Appendix C to the Plan, as
                                                  2017–013]
                                                                                                          1. Purpose                                               modified by the Commission, requires
                                                  Self-Regulatory Organizations;                                                                                   each Participant to ‘‘file with the SEC
                                                  Financial Industry Regulatory                           (1) Background                                           the relevant rule change filing to
                                                  Authority, Inc.; Notice of Filing of                                                                             eliminate or modify its duplicative rules
                                                                                                             Bats BYX Exchange, Inc.; Bats BZX                     within six (6) months of the SEC’s
                                                  Proposed Rule Change To Eliminate                       Exchange, Inc.; Bats EDGA Exchange,
                                                  Requirements That Will Be Duplicative                                                                            approval of the CAT NMS Plan.’’ 10 The
                                                                                                          Inc.; Bats EDGX Exchange, Inc.; BOX                      Plan notes that ‘‘the elimination of such
                                                  of CAT                                                  Options Exchange LLC; C2 Options                         rules and the retirement of such systems
                                                  May 26, 2017.                                           Exchange, Incorporated; Chicago Board                    [will] be effective at such time as CAT
                                                     Pursuant to Section 19(b)(1) of the                  Options Exchange, Incorporated;                          Data meets minimum standards of
                                                  Securities Exchange Act of 1934                         Chicago Stock Exchange, Inc.; FINRA;                     accuracy and reliability.’’ 11 Finally, the
                                                  (‘‘Act’’) 1 and Rule 19b–4 thereunder,2                 International Securities Exchange, LLC;                  Plan requires the rule filing to discuss
                                                  notice is hereby given that on May 15,                  Investors’ Exchange LLC; ISE Gemini,                     the following:
                                                  2017, Financial Industry Regulatory                     LLC; ISE Mercury, LLC; Miami                                (i) Specific accuracy and reliability
                                                  Authority, Inc. (‘‘FINRA’’) (f/k/a                      International Securities Exchange LLC;                   standards that will determine when
                                                  National Association of Securities                      MIAX PEARL, LLC; NASDAQ BX, Inc.;                        duplicative systems will be retired,
                                                  Dealers, Inc. (‘‘NASD’’)) filed with the                NASDAQ PHLX LLC; The NASDAQ                              including, but not limited to, whether
                                                  Securities and Exchange Commission                      Stock Market LLC; National Stock                         the attainment of a certain Error Rate
                                                  (‘‘SEC’’ or ‘‘Commission’’) the proposed                Exchange, Inc.; New York Stock                           should determine when a system
                                                  rule change as described in Items I, II,                Exchange LLC; NYSE MKT LLC; and                          duplicative of the CAT can be retired;
                                                  and III below, which Items have been                    NYSE Arca, Inc. (collectively, the                          (ii) whether the availability of certain
                                                  prepared by FINRA. The Commission is                    ‘‘Participants’’) filed with the                         data from Small Industry Members two
                                                  publishing this notice to solicit                       Commission, pursuant to Section 11A of                   years after the Effective Date would
                                                  comments on the proposed rule change                    the Exchange Act 3 and Rule 608 of                       facilitate a more expeditious retirement
                                                  from interested persons.                                Regulation NMS thereunder,4 the                          of duplicative systems; and
                                                                                                          National Market System Plan Governing                       (iii) whether individual Industry
                                                  I. Self-Regulatory Organization’s                       the Consolidated Audit Trail (the ‘‘CAT                  Members can be exempted from
                                                  Statement of the Terms of Substance of                  NMS Plan’’ or ‘‘Plan’’).5 The                            reporting to duplicative systems once
                                                  the Proposed Rule Change                                Participants filed the Plan to comply                    their CAT reporting meets specified
                                                     FINRA is proposing to eliminate the                  with Rule 613 of Regulation NMS under                    accuracy and reliability standards,
                                                  Order Audit Trail System (‘‘OATS’’)                     the Exchange Act.6 The Plan was                          including, but not limited to, ways in
                                                  rules in the FINRA Rule 7400 Series and                 published for comment in the Federal                     which establishing cross-system
                                                  to amend FINRA’s electronic blue sheet                  Register on May 17, 2016,7 and                           regulatory functionality or integrating
                                                  (‘‘EBS’’) rules, Rules 8211 and 8213, to                approved by the Commission, as                           data from existing systems and the CAT
                                                  reflect changes to these rules once                     modified, on November 15, 2016.8 On                      would facilitate such Individual
                                                  members are effectively reporting to the                March 15, 2017, the Commission                           Industry Member exemptions.12
                                                  consolidated audit trail (‘‘CAT’’) and the              approved the new FINRA Rule 6800                            In response to these requirements, the
                                                  CAT’s accuracy and reliability meet                     Series to implement provisions of the                    proposed rule change deletes the Rule
                                                  certain standards as described below.                                                                            7400 Series (the ‘‘OATS Rules’’) 13 and
                                                     The text of the proposed rule change                   3 15  U.S.C. 78k–1.                                    Rule 4554 from the FINRA rulebook and
                                                  is available on FINRA’s Web site at                       4 17  CFR 242.608.                                     adds new Supplementary Material to
                                                                                                             5 See Letter from the Participants to Brent J.
                                                  http://www.finra.org, at the principal                                                                           FINRA’s EBS rules, Rules 8211 and
                                                                                                          Fields, Secretary, Commission, dated September 30,
                                                  office of FINRA and at the                              2014; and Letter from Participants to Brent J. Fields,
                                                                                                                                                                   8213, once the CAT achieves the
                                                  Commission’s Public Reference Room.                     Secretary, Commission, dated February 27, 2015.
                                                                                                                                                                     9 Securities Exchange Act Rel. No. 80255 (March
                                                                                                          On December 24, 2015, the Participants submitted
                                                  II. Self-Regulatory Organization’s                      an amendment to the CAT NMS Plan. See Letter             15, 2017), 82 FR 14563 (March 21, 2017).
                                                  Statement of the Purpose of, and                        from Participants to Brent J. Fields, Secretary,           10 CAT NMS Plan, Appendix C, Section C.9.

                                                  Statutory Basis for, the Proposed Rule                  Commission, dated December 23, 2015. Unless                11 See id.
                                                                                                          otherwise specified, capitalized terms used in this        12 See id.
                                                  Change
mstockstill on DSK30JT082PROD with NOTICES




                                                                                                          rule filing are defined as set forth herein, or in the     13 FINRA notes that there are multiple rules
                                                    In its filing with the Commission,                    CAT Compliance Rule Series or in the CAT NMS             throughout the FINRA Rulebook that cross-
                                                                                                          Plan.
                                                  FINRA included statements concerning                       6 17 CFR 242.613.
                                                                                                                                                                   reference or otherwise incorporate some or all of the
                                                  the purpose of and basis for the                                                                                 OATS Rules. If the Commission approves the
                                                                                                             7 Securities Exchange Act Rel. No. 77724 (April
                                                                                                                                                                   proposed rule change, FINRA will file a subsequent
                                                                                                          27, 2016), 81 FR 30614 (May 17, 2016).                   proposed rule change to eliminate or amend, as
                                                    58 17 CFR 200.30–3(a)(12).                               8 Securities Exchange Act Rel. No. 79318              applicable, the references to the OATS Rules before
                                                    1 15 U.S.C. 78s(b)(1).                                (November 15, 2016), 81 FR 84696 (November 23,           the amendments in the current proposed rule
                                                    2 17 CFR 240.19b–4.                                   2016) (‘‘Approval Order’’).                              change are implemented.



                                             VerDate Sep<11>2014   18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00200   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM     01JNN1


                                                  25424                           Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  specific accuracy and reliability                         needed before OATS can be retired and                 the 5% pre-correction and 2% post-
                                                  standards described below and FINRA                       requests for trading information                      correction thresholds by averaging the
                                                  has determined that its usage of the CAT                  pursuant to Rule 8211 or 8213 can be                  error rate across the period, not require
                                                  Data has not revealed material issues                     amended to account for information                    a 5% pre-correction and 2% post-
                                                  that have not been corrected, confirmed                   being available in the CAT.                           correction maximum each day for 180
                                                  that the CAT includes all data necessary                     As discussed in Section A.3.(b) of                 consecutive days. FINRA believes that
                                                  to allow FINRA to continue to meet its                    Appendix C to the CAT NMS Plan, the                   measuring each of the thresholds over
                                                  surveillance obligations,14 and                           Participants established an initial Error             the course of 180 days will ensure that
                                                  confirmed that the Plan Processor is                      Rate, as defined in the Plan, of 5% on                the CAT consistently meets minimum
                                                  sufficiently meeting all of its obligations               initially submitted data (i.e., data as               accuracy and reliability thresholds for
                                                  under the CAT NMS Plan.15                                 submitted by a CAT Reporter before any                Industry Member reporting while also
                                                                                                            required corrections are performed). The              ensuring that single-day measurements
                                                  (2) Specific Accuracy and Reliability                     Participants noted in the Plan that their             do not unduly affect the overall
                                                  Standards                                                 expectation was that ‘‘error rates after              measurements.
                                                     The first issue the Plan requires the                  reprocessing of error corrections will be               FINRA is proposing to use error rates
                                                  proposed rule change to discuss is                        de minimis.’’ 17 The Participants based               in each the following categories,
                                                  ‘‘specific accuracy and reliability                       this Error Rate on their consideration of             measured separately for options and for
                                                  standards that will determine when                        ‘‘current and historical OATS Error                   equities, to assess whether the threshold
                                                  duplicative systems will be retired,                      Rates, the magnitude of new reporting                 pre- and post-correction error rates are
                                                  including, but not limited to, whether                    requirements on the CAT Reporters and                 being met:
                                                  the attainment of a certain Error Rate                    the fact that many CAT Reporters may                    • Rejection Rates and Data
                                                  should determine when a system                            have never been obligated to report data              Validations. Data validations for the
                                                  duplicative of the CAT can be                             to an audit trail.’’ 18                               CAT, while not expected to be designed
                                                  retired.’’ 16 FINRA believes that relevant                   FINRA agrees with the Participants’                the same as OATS, must be functionally
                                                  error rates are the primary, but not the                  conclusion that a 5% pre-correction                   equivalent to OATS in accordance with
                                                  sole, metric by which to determine the                    threshold ‘‘strikes the balance of                    the CAT NMS Plan (i.e., the same types
                                                  CAT’s accuracy and reliability and will                   adapting to a new reporting regime,                   of basic data validations must be
                                                  serve as the baseline requirement                         while ensuring that the data provided to              performed by the Plan Processor to
                                                                                                            regulators will be capable of being used              comply with the CAT NMS Plan
                                                     14 As noted in the Participants’ September 23,         to conduct surveillance and market                    requirements). Appendix D of the Plan,
                                                  2016 response to comment letters on the Plan, the         reconstruction, as well as having a                   for example, requires that certain file
                                                  Participants ‘‘worked to keep [the CAT] gap
                                                  analyses up-to-date by including newly-added data
                                                                                                            sufficient level of accuracy to facilitate            validations 21 and syntax and context
                                                  fields in these duplicative systems, such as the new      the retirement of existing regulatory                 checks be performed on all submitted
                                                  OATS data fields related to the tick size pilot and       reports and systems where possible.’’ 19              records.22 If a record does not pass these
                                                  ATS order book changes, in the gap analyses.’’            However, FINRA believes that, when                    basic data validations, it must be
                                                  Letter from Participants to Brent J. Fields, Secretary,   assessing the accuracy and reliability of             rejected and returned to the CAT
                                                  Commission, dated September 23, 2016, at 21. The
                                                  Participants noted that they ‘‘will work with the         the data for the purposes of retiring                 Reporter to be corrected and
                                                  Plan Processor and the industry to develop detailed       OATS, the error thresholds should be                  resubmitted.23 The specific validations
                                                  Technical Specifications to ensure that by the time       measured in more granular ways and                    can be determined only after the Plan
                                                  Industry Members are required to report to the CAT,       should also include minimum error                     Processor has finalized the Industry
                                                  the CAT will include all data elements necessary
                                                  to facilitate the rapid retirement of duplicative         rates of post-correction data, which                  Member Technical Specifications;
                                                  systems.’’ Id.                                            represents the data most likely to be                 however, the Plan also requires the Plan
                                                     15 FINRA notes that the OATS Rules were                used by FINRA to conduct surveillance.                Processor to provide daily statistics on
                                                  originally proposed to fulfill one of the                 Although FINRA is proposing to                        rejection rates after the data has been
                                                  undertakings contained in an order issued by the          measure the appropriate error rates in                processed, including the number of files
                                                  Commission relating to the settlement of an
                                                  enforcement action against the NASD for failure to        the aggregate, rather than firm-by-firm,              rejected and accepted, the number of
                                                  adequately enforce its rules. See Securities              FINRA believes that the error rates for
                                                  Exchange Act Release No. 39729 (March 6, 1998),           equity securities should be measured                  linked order and Customer data by 8:00 a.m.
                                                  63 FR 12559 (March 13, 1998) (‘‘OATS Approval             separately from options since options                 Eastern Time on T+5. See CAT NMS Plan,
                                                  Order’’); see also Securities Exchange Act Release                                                              Appendix C, Section A.2(a).
                                                  No. 37538 (August 8, 1996); Administrative                orders are not currently reported                        21 See CAT NMS Plan, Appendix D, Section 7.2.
                                                  Proceeding File No. 3–9056 (‘‘SEC Order’’). In            regularly or included in OATS.                        The Plan requires the Plan Processor to confirm that
                                                  approving the OATS Rules, the Commission                     To ensure the CAT’s accuracy and                   file transmission and receipt are in the correct
                                                  concluded that OATS satisfied the conditions of the       reliability, FINRA is proposing that,                 formats, including validation of header and trailers
                                                  SEC Order and was consistent with the Exchange                                                                  on the submitted report, confirmation of a valid
                                                  Act. See OATS Approval Order, supra, at 12566–
                                                                                                            before OATS could be retired, the CAT
                                                                                                                                                                  SRO-Assigned Market Participant Identifier, and
                                                  67. As noted, the Plan is designed to create,             would generally need to achieve a                     verification of the number of records in the file. Id.
                                                  implement, and maintain a CAT that would capture          sustained error rate for Industry Member                 22 See id. The Plan notes that syntax and context
                                                  customer and order event information for orders in        reporting in each of the categories below             checks would include format checks (i.e., that data
                                                  NMS Securities and OTC Equity Securities, across          for a period of at least 180 days of 5%               is entered in the specified format); data type checks
                                                  all markets, from the time of order inception                                                                   (i.e., that the data type of each attribute conforms
                                                  through routing, cancellation, modification, or           or lower, measured on a pre-correction                to the specifications); consistency checks (i.e., that
                                                  execution in a single consolidated data source.           or as-submitted basis and 2% or lower                 all attributes for a record of a specified type are
                                                  FINRA has already adopted rules to enforce                on a post-correction basis (measured at               consistent); range/logic checks (i.e., that each
                                                  compliance by its Industry Members, as applicable,        T+5).20 FINRA is proposing to measure                 attribute for every record has a value within
mstockstill on DSK30JT082PROD with NOTICES




                                                  with the provisions of the Plan. See Rule 6800                                                                  specified limits and the values provided are
                                                  Series. Once the CAT can replace the OATS Rules,                                                                associated with the event type they represent); data
                                                                                                              17 See CAT NMS Plan, Appendix C, Section
                                                  FINRA believes it will be appropriate to delete the                                                             validity checks (i.e., that each attribute for every
                                                  OATS Rules that were implemented to comply with           A.3(b), at n.102.                                     record has an acceptable value); completeness
                                                                                                              18 See CAT NMS Plan, Appendix C, Section
                                                  the SEC Order. Accordingly, FINRA believes that it                                                              checks (i.e., that each mandatory attribute for every
                                                  would continue to be in compliance with the               A.3(b).                                               record is not null); and timeliness checks (i.e., that
                                                  requirements of the SEC Order once the OATS                 19 Id.                                              the records were submitted within the submission
                                                  Rules are deleted.                                          20 The Plan requires that the Plan Processor must   timelines). Id.
                                                     16 See CAT NMS Plan, Appendix C, Section C.9.          ensure that regulators have access to corrected and      23 See id.




                                             VerDate Sep<11>2014    18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00201   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM   01JNN1


                                                                                   Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                     25425

                                                  order events accepted and rejected, and                   least a 95% pre-correction and 98%                    Reporters to report two years after the
                                                  the number of each type of report                         post-correction aggregate match rate to               Effective Date.32
                                                  rejected.24 FINRA is proposing that,                      each equity exchange for orders routed                   FINRA has identified approximately
                                                  over the 180-day period, aggregate                        from Industry Members to an exchange                  300 member firms that currently report
                                                  rejection rates (measured separately for                  and, for over-the-counter executions, the             to OATS and meet the definition of
                                                  equities and options) must be no more                     same match rate for orders linked to                  ‘‘Small Industry Member;’’ however,
                                                  than 5% pre-correction or 2% post-                        trade reports.                                        only ten of these firms submit
                                                  correction across all CAT Reporters.                         In addition to these minimum error                 information to OATS on their own
                                                     • Intra-Firm Linkages. The Plan                        rates and matching thresholds that                    behalf, and eight of the ten firms report
                                                  requires that ‘‘the Plan Processor must                   generally must be met before OATS can                 very few orders to OATS.33 The vast
                                                  be able to link all related order events                  be retired, FINRA believes that during                majority of these 300 firms use third
                                                  from all CAT Reporters involved in the                    the minimum 180-day period during                     parties to fulfill their reporting
                                                  lifecycle of an order.’’ 25 At a minimum,                 which the thresholds are calculated,                  obligations, and many of these third
                                                  this requirement includes the creation                    FINRA’s use of the data in the CAT                    parties will begin reporting to CAT in
                                                  of an order lifecycle between ‘‘[a]ll order               must confirm that (i) usage over that                 November 2018. Consequently, FINRA
                                                  events handled within an individual                       time period has not revealed material                 believes that the burden on current
                                                  CAT Reporter, including orders routed                     issues that have not been corrected, (ii)             OATS Reporters that are ‘‘Small
                                                  to internal desks or departments with                     the CAT includes all data necessary to                Industry Members’’ would not be
                                                  different functions (e.g., an internal                    allow FINRA to continue to meet its                   significant if those firms are required to
                                                  ATS).’’ 26 FINRA is proposing that                        surveillance obligations, and (iii) the               report to CAT beginning in November
                                                  aggregate intra-firm linkage rates across                 Plan Processor is sufficiently meeting all            2018 rather than November 2019. The
                                                  all Industry Member Reporters must be                     of its obligations under the CAT NMS                  burdens, however, are significantly
                                                  at least 95% pre-correction and 98%                       Plan. FINRA believes this time period to              greater for those firms that are not
                                                  post-correction.                                          use the CAT Data is necessary to reveal               reporting to OATS currently; therefore,
                                                     • Inter-Firm Linkages. The order                       any errors that may manifest themselves               FINRA does not believe it would be
                                                  linkage requirements in the Plan also                     only after surveillance patterns and                  necessary or appropriate to accelerate
                                                  require that the Plan Processor be able                   other queries have been run and to                    CAT reporting for ‘‘Small Industry
                                                  to create the lifecycle between orders                    confirm that the Plan Processor is                    Members’’ that are not currently
                                                  routed between broker-dealers.27 FINRA                                                                          reporting to OATS, and FINRA would
                                                                                                            meeting its obligations and performing
                                                  is proposing that at least a 95% pre-                                                                           not support an amendment to the Plan
                                                                                                            its functions adequately.
                                                  correction and 98% post-correction                                                                              to accelerate CAT reporting for ‘‘Small
                                                  aggregate match rate be achieved for                      (3) Small Industry Member Data                        Industry Members’’ that are not
                                                  orders routed between two Industry                        Availability                                          currently OATS Reporters.
                                                  Member Reporters.28                                          The second issue the Plan requires the
                                                     • Order Linkage Rates. In addition to                                                                        (4) Individual Industry Member
                                                                                                            proposed rule change to address is
                                                  creating linkages within and between                                                                            Exemptions
                                                                                                            ‘‘whether the availability of certain data
                                                  broker-dealers, the Plan also includes                                                                             The final issue the Plan requires the
                                                                                                            from Small Industry Members two years
                                                  requirements that the Plan Processor be                                                                         proposed rule change to address is
                                                                                                            after the Effective Date would facilitate
                                                  able to create lifecycles to link various                                                                       ‘‘whether individual Industry Members
                                                                                                            a more expeditious retirement of
                                                  pieces of related orders.29 For example,                                                                        can be exempted from reporting to
                                                                                                            duplicative systems.’’
                                                  the Plan requires linkages between                                                                              duplicative systems once their CAT
                                                  customer orders and ‘‘representative’’                       FINRA believes that there is no
                                                                                                            effective way to retire OATS until all                reporting meets specified accuracy and
                                                  orders created in firm accounts for the                                                                         reliability standards, including, but not
                                                  purpose of facilitating a customer order,                 current OATS reporters are reporting to
                                                                                                            the CAT. Although Technical                           limited to, ways in which establishing
                                                  various legs of option/equity complex                                                                           cross-system regulatory functionality or
                                                  orders, riskless principal orders, and                    Specifications for Industry Members are
                                                                                                            not yet available, FINRA believes it                  integrating data from existing systems
                                                  orders worked through average price                                                                             and the CAT would facilitate such
                                                  accounts.30 FINRA is proposing that                       would be inefficient, less reliable, and
                                                                                                            more costly to attempt to marry the                   Individual Industry Member
                                                  there be at least a 95% pre-correction                                                                          exemptions.’’
                                                  and 98% post-correction linkage rate for                  OATS and CAT databases for a
                                                                                                            temporary period to allow some FINRA                     As described above, FINRA believes
                                                  multi-legged orders (e.g., related equity/                                                                      that a single cut-over from OATS to
                                                  options orders, VWAP orders, riskless                     members to report to CAT while others
                                                                                                            continue to report to OATS.                           CAT is highly preferable to a firm-by-
                                                  principal transactions).                                                                                        firm approach and is not proposing to
                                                     • Exchange and TRF/ORF Match                           Consequently, FINRA has concluded at
                                                                                                            this time that having data from those                 exempt members from the OATS
                                                  Rates. The Plan requires that an order                                                                          requirements on a firm-by-firm basis.
                                                  lifecycle be created to link ‘‘[o]rders                   Small Industry Members currently
                                                                                                            reporting to OATS available two years                 The primary benefit to a firm-by-firm
                                                  routed from broker-dealers to
                                                  exchanges’’ and ‘‘[e]xecuted orders and                   after the Effective Date would
                                                                                                                                                                    32 The 180-day timeframes discussed above with
                                                  trade reports.’’ 31 FINRA is proposing at                 substantially facilitate a more
                                                                                                                                                                  respect to usage of the data and calculation of error
                                                                                                            expeditious retirement of OATS. For                   rates would apply to data reported to the CAT by
                                                    24 See   id.                                            this reason, FINRA supports an                        Small Industry Members that are reporting to
                                                    25 CAT    NMS Plan, Appendix D, Section 3.              amendment to the Plan that would                      OATS. If an amendment to the Plan to accelerate
mstockstill on DSK30JT082PROD with NOTICES




                                                    26 Id.                                                  require current OATS Reporters that are               the reporting requirement for those firms is not
                                                                                                                                                                  approved, the retirement of OATS could not be
                                                    27 Id.                                                  ‘‘Small Industry Members’’ to report two              accomplished until at least 180 days after Small
                                                    28 This assumes linkage statistics will include
                                                                                                            years after the Effective Date (instead of            Industry Members begin reporting, which is
                                                  both unlinked route reports and new orders where          three). FINRA intends to work with the                scheduled to begin in November 2019.
                                                  no related route report could be found.                                                                           33 For example, in one recent month, eight of the
                                                    29 See CAT NMS Plan, Appendix D, Section 3.             other Participants to submit a proposed
                                                                                                                                                                  ten firms submitted fewer than 100 reports during
                                                    30 See id.                                              amendment to the Plan to require Small                the month, with four firms submitting fewer than
                                                    31 Id.                                                  Industry Members that are OATS                        50.



                                             VerDate Sep<11>2014     18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00202   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM   01JNN1


                                                  25426                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  exemptive approach would be to reduce                   those transactions are captured in the                of Section 15A(b)(6) of the Act,35 which
                                                  the amount of time an individual firm                   CAT.                                                  requires, among other things, that
                                                  is required to report to a legacy system                   The proposed rule change adds new                  FINRA rules must be designed to
                                                  (e.g., OATS) if it is also accurately and               Supplementary Material to the EBS                     prevent fraudulent and manipulative
                                                  reliably reporting to the CAT. FINRA                    Rules to clarify how FINRA will request               acts and practices, to promote just and
                                                  believes that the overall accuracy and                  data under these rules after members are              equitable principles of trade, and, in
                                                  reliability thresholds for the CAT                      reporting to the CAT. Specifically, the               general, to protect investors and the
                                                  described above would need to be met                    proposed Supplementary Material to                    public interest. FINRA believes that the
                                                  under any conditions before firms could                 each rule will note that FINRA will                   proposed rule change fulfills the
                                                  stop reporting to OATS. Moreover, as                    request information under the rules only              obligation in the CAT NMS Plan for
                                                  discussed above, FINRA supports                         if the information is not available in the            FINRA to submit a proposed rule
                                                  amending the Plan to accelerate the                     CAT because, for example, the                         change to eliminate or modify
                                                  reporting requirements for Small                        transactions in question occurred before              duplicative rules. FINRA believes that
                                                  Industry Members that are OATS                          the firm was reporting information to                 the approach set forth in the proposed
                                                  Reporters to report on the same                         the CAT or involved securities that are               rule change strikes the appropriate
                                                  timeframe as all other OATS Reporters.                  not reportable to the CAT. In essence,                balance between ensuring that FINRA is
                                                  If such an amendment were approved                      under the new Supplementary Material,                 able to continue to fulfill its statutory
                                                  by the Commission, there would be no                    FINRA will make requests under these                  obligation to protect investors and the
                                                  need to exempt members from OATS                        rules if and only if the information is               public interest by ensuring its
                                                  requirements on a firm-by-firm basis.                   not otherwise available through the                   surveillance of market activity remains
                                                                                                          CAT.                                                  accurate and effective while also
                                                  (5) Automated Submission of Trading                                                                           establishing a reasonable timeframe for
                                                  Data                                                       However, as noted above, FINRA
                                                                                                          believes that the CAT must meet certain               elimination or modification of its rules
                                                     In addition to the OATS rules, Rules                 minimum accuracy and reliability                      that will be rendered duplicative after
                                                  8211 and 8213 (the ‘‘EBS Rules’’) will                  standards before FINRA could rely on                  implementation of the CAT.
                                                  also be affected by the implementation                  the CAT Data to replace existing                      B. Self-Regulatory Organization’s
                                                  of the CAT. The EBS Rules are FINRA’s                   regulatory tools, including EBS.                      Statement on Burden on Competition
                                                  rules regarding the automated                           Consequently, the proposed
                                                                                                                                                                  FINRA does not believe that the
                                                  submission of specific trading data to                  Supplementary Material will be
                                                                                                                                                                proposed rule change will result in any
                                                  FINRA upon request using the EBS                        implemented only after the CAT
                                                                                                                                                                burden on competition that is not
                                                  system.                                                 achieves the thresholds set forth above
                                                                                                                                                                necessary or appropriate in furtherance
                                                     Once broker-dealer reporting to the                  with respect to OATS and an accuracy
                                                                                                                                                                of the purposes of the Act.
                                                  CAT has begun, the CAT will contain                     rate for customer and account
                                                  much of the data the Participants would                 information of 95% for pre-corrected                  (a) Economic Impact Assessment—
                                                  otherwise have requested via the EBS                    data and 98% for post-correction data.                Retirement of OATS and Amendments
                                                  system for purposes of NMS Securities                   In addition, as discussed above, FINRA                to the EBS Rules Following the
                                                  and OTC Equity Securities.                              can rely on CAT Data to replace EBS                   Implementation of CAT
                                                  Consequently, FINRA will not need to                    requests only after FINRA has                            Currently all FINRA members that do
                                                  use the EBS system or request                           determined that its usage of the CAT                  business in equity securities are
                                                  information pursuant to the EBS Rules                   Data over a 180-day period has not                    required to report equity audit trail
                                                  for NMS Securities and OTC Equity                       revealed material issues that have not                information to OATS and make
                                                  Securities for time periods after CAT                   been corrected, confirmed that the CAT                transaction information available
                                                  reporting has begun if the appropriate                  includes all data necessary to allow                  through the EBS system. As stated in the
                                                  accuracy and reliability thresholds are                 FINRA to continue to meet its                         CAT NMS Plan, all large broker-dealers
                                                  achieved, including an acceptable                       surveillance obligations, and confirmed               that are also FINRA members will be
                                                  accuracy rate for customer and account                  that the CAT Plan Processor is fulfilling             required to report order information in
                                                  information. However, the EBS Rules                     its obligations under the CAT NMS                     NMS Securities and OTC Equity
                                                  cannot be completely removed from the                   Plan.                                                 Securities to both OATS and CAT
                                                  FINRA Rulebook immediately upon the                        If the Commission approves the                     beginning in November 2018 and Small
                                                  CAT achieving the appropriate                           proposed rule change, the rule text will              Industry Members beginning in
                                                  thresholds because FINRA may still                      be effective; however, the amendments                 November 2019 as part of the broader
                                                  need to request information pursuant to                 will not be implemented until FINRA                   CAT NMS Plan to implement the CAT
                                                  these rules for trading activity occurring              has determined the accuracy and                       and retire other systems. Further,
                                                  before a member was reporting to the                    reliability standards set forth in the                clearing firms will be required to
                                                  CAT.34 In addition, the EBS Rules apply                 proposed rule change have been met.                   continue to make equity and option
                                                  to information regarding transactions                   FINRA will announce the                               transaction data available through EBS
                                                  involving securities that will not be                   implementation date of the proposed                   requests until the proposed
                                                  reportable to the CAT initially, such as                rule change in a Regulatory Notice that               Supplementary Material is
                                                  fixed-income securities; thus, the rules                will be published once FINRA                          implemented. The proposed rule change
                                                  must remain in effect with respect to                   concludes the thresholds for accuracy                 lays out a plan by which FINRA will
                                                  those transactions indefinitely or until                and reliability described herein have                 retire OATS and amend its rules for EBS
mstockstill on DSK30JT082PROD with NOTICES




                                                                                                          been met and that the CAT Plan                        to eventually eliminate the need for
                                                    34 Firms are required to maintain the trade           Processor is sufficiently meeting all of              duplicative reporting and records
                                                  information for pre-CAT transactions in equities        its obligations.                                      maintenance.
                                                  and options pursuant to applicable rules, such as                                                                Costs and benefits associated with
                                                  books and records retention requirements, for the       2. Statutory Basis
                                                  relevant time period, which is generally three or six                                                         establishing the CAT, including the
                                                  years, depending upon the record. See 17 CFR
                                                                                                            FINRA believes that the proposed rule
                                                  240.17a–3(a), 240.17a–4.                                change is consistent with the provisions                35 15   U.S.C. 78o–3(b)(6).



                                             VerDate Sep<11>2014   18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00203   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM    01JNN1


                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                  25427

                                                  economic impacts associated with                        report through other firms or service                 be firms reporting to CAT that do not
                                                  retiring existing systems, have been                    providers.36 Of the 10 that self-report,              meet the maximum error rate
                                                  established as a part of the Plan                       eight of them report very few orders to               thresholds, leading to lower quality data
                                                  approved by the SEC. Significant                        OATS as described above in Footnote                   available for surveillance. If firms were
                                                  economic impacts of OATS retirement                     33. The approximately 629 broker                      individually permitted to end OATS
                                                  as described in this proposed rule                      dealers that are currently exempt or                  reporting only when meeting a
                                                  change include amending the Plan to                     excluded from OATS reporting are not                  maximum error rate, every firm’s
                                                  require that Small Industry Members                     impacted by this proposed rule change.                reporting would meet the minimum
                                                  who currently report to OATS would be                   The EIA focuses on the impact of the                  criterion. Requiring an aggregate error
                                                  required to begin reporting to the CAT                  proposed plan for retiring OATS on all                rate may permit individual firms to end
                                                  in 2018 rather than 2019 and a single                   OATS-reporting firms.                                 OATS reporting even while their CAT
                                                  cut-over from OATS to CAT for all firms                    First, FINRA’s proposed plan                       reporting does not meet the specified
                                                  provided that (1) average error rate                    recommends a requirement that there be                error rate as long as the error rate is low
                                                  thresholds over a 180-day period are                    a single cut-over from OATS to CAT                    enough for the industry. Thus,
                                                  met, (2) no material issues related to                  rather than a firm-by-firm cut-over. The              surveillance of market activity for those
                                                  market surveillance needs have been                     primary beneficiary of this proposal will             firms may not be as efficient or effective
                                                  identified but are uncorrected, (3) the                 be the investing public. This approach                due to the higher error rates. Taken
                                                  CAT not [sic] contain material issues                   eliminates the need to merge OATS and                 further, it is possible that a single cut-
                                                  that would negatively impact market                     CAT data in order to execute                          over may reduce the incentives for any
                                                  surveillance, and (4) the plan processor                surveillance in accordance with SEC                   one firm to put significant effort and
                                                  is sufficiently meeting all of its                      rules and SRO obligations. The                        costs into meeting or beating the
                                                  obligations under the CAT NMS Plan.                     integration process would be                          threshold error rates because the
                                                  The key aspect to the proposed                          technologically costly and difficult and              benefits are shared among all firms
                                                  amendments to FINRA’s rules for EBS                     could introduce errors into the data                  while greater cost is borne by the firms
                                                  include a provision that FINRA would                    being surveilled that did not exist prior             whose compliance rates satisfy the
                                                  no longer request data that is available                to integration. Conducting market                     minimum error rate thresholds. This
                                                  in CAT through EBS, once the accuracy                   surveillance from a single audit trail                disincentive is likely to be small for
                                                  and reliability thresholds are achieved.                system increases the efficiency and                   firms with significant reporting
                                                  The EBS Rules would continue to apply                   effectiveness of the process and                      obligations, who would seek to end
                                                  for securities that are not included                    improves the integrity of the markets. In             duplicative reporting as quickly as
                                                  within the CAT and for transactions that                addition, there are direct benefits of this           possible and who represent the vast
                                                  occurred before the CAT’s accuracy and                  approach to firms. Specifically, other                majority of OATS reports, but may, at
                                                  reliability are confirmed.                              than during the time period during                    the margin, extend the time necessary to
                                                                                                          which the accuracy and reliability of                 meet the error reporting threshold.
                                                  (b) Economic Impact
                                                                                                          CAT data is validated, a single cut-over              However, significant error rates could
                                                     In creating the proposal to retire                   approach would eliminate the need for                 constitute a rule violation and subject
                                                  OATS and amend the EBS Rules, FINRA                     firms that report on other firms’ behalf              firms to possible disciplinary action.37
                                                  is seeking to carefully balance the                     to create a technological solution for                Thus, firms that delay reducing error
                                                  additional costs incurred by member                     receiving and reporting on data                       rates to threshold levels would over
                                                  firms associated with continuing to                     structured for both OATS and CAT                      time incur higher costs through
                                                  maintain duplicate systems and records                  simultaneously. Such a practice would                 enforcement actions and be incentivized
                                                  created by the CAT NMS Plan and                         increase costs to ensure compliance                   to improve their compliance rates.
                                                  existing rules with the risks to effective              with the proper reporting mechanism.                     FINRA supports an amendment to the
                                                  and efficient surveillance that could                   These costs would likely be                           Plan to require that all firms that report
                                                  arise from eliminating access to existing               incorporated into the fees for the service            to OATS begin CAT reporting in
                                                  data systems before a high-quality                      charged to introducing firms and could                November 2018. This requirement
                                                  alternative has been tested and verified.               eventually be borne by customers                      would accelerate by one year the CAT
                                                  The costs of maintaining duplicate                      through higher fees based on the price                reporting obligations for 300 Small
                                                  systems and records include, among                      elasticity for brokerage services.                    Industry Members. The primary benefit
                                                  other things, system maintenance,                          The potential costs associated with                of this approach is that it allows the
                                                  quality control oversight, and staff to                 the single cut-over approach will be                  OATS system to be retired up to a year
                                                  maintain the systems and records.                       borne by firms that could meet the                    earlier, saving firms the costs of
                                                  Because the CAT NMS Plan created the                    maximum error thresholds for reporting                maintaining duplicate reporting
                                                  need to have duplicate systems and                      to CAT earlier than the single cut-over               systems. Of the estimated 300 firms who
                                                  required a plan for the retirement of                   approach would allow. These firms                     would be impacted by this proposal,
                                                  duplicate systems and processes, the                    would bear the technology and                         290 report to OATS through clearing
                                                  Economic Impact Assessment will focus                   compliance costs associated with dual                 firms or other third party providers, all
                                                  on the proposed choices made by                         reporting for a longer period than they               of whom will begin CAT reporting in
                                                  FINRA in implementing the retirement                    might otherwise.                                      2018 either by the requirement in the
                                                  plan.                                                      Another potential cost of the single               Plan or on behalf of clients who are
                                                  (1) OATS Retirement                                     cut-over method is that there will likely             required to in the Plan. Thus, there
mstockstill on DSK30JT082PROD with NOTICES




                                                                                                                                                                should be limited additional technical
                                                     The proposed rule change will impact                   36 All of the clearing firms that report to OATS    requirements or costs to facilitate
                                                  all OATS-reporting firms. Currently all                 on behalf of Small Industry Members are required      accelerated reporting for these firms. In
                                                  but 299 medium and large broker-                        to begin reporting to CAT in 2018. In addition, the   fact, the accelerated reporting will likely
                                                  dealers and 300 of 630 small broker-                    service providers that report to OATS on behalf of
                                                                                                          Small Industry Members have a mix of small and        allow the introducing and clearing firms
                                                  dealers report to OATS. Of the 300                      large clients for whom they provide this service
                                                  Small Industry Members that report to                   and, therefore, would be prepared to begin CAT          37 See CAT NMS Plan, Appendix C, Section 3(b)

                                                  OATS, all but 10 of them currently                      reporting on behalf of their clients in 2018.         (discussing firm-specific compliance thresholds).



                                             VerDate Sep<11>2014   18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00204   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM   01JNN1


                                                  25428                          Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices

                                                  to avoid the costs associated with                      time periods after CAT has met the                    manual processes as the number of
                                                  maintaining two systems for reporting                   minimum accuracy and reliability                      requests declines. Because clearing
                                                  during the additional transition year.                  standards defined above.                              firms use different processes and
                                                  The other 10 small firms will be                        Supplementary Material to the EBS                     systems to collect and submit EBS
                                                  required to incur costs associated with                 Rules detailing the changes in how                    requests, there is ambiguity as to
                                                  the changeover to CAT a year earlier.                   FINRA requests equity and options data                whether any individual firm’s costs will
                                                  The magnitude of these costs is                         will be implemented once the                          be affected by the transition to CAT for
                                                  dependent on several factors, including                 appropriate accuracy and reliability                  transaction data requests and at what
                                                  the volume of trades expected to be                     thresholds are achieved. The EBS Rules                point firms may choose to move toward
                                                  reported to CAT as well as the                          will remain applicable for historical                 manual processes.
                                                  technological differences between the                   equity and options data prior to CAT                  C. Self-Regulatory Organization’s
                                                  OATS system specifications and the as                   implementation and for record keeping                 Statement on Comments on the
                                                  yet unknown CAT system                                  purposes, three to seven years                        Proposed Rule Change Received From
                                                  specifications.                                         depending on the record. The EBS Rules
                                                     Third, FINRA proposes that the                                                                             Members, Participants, or Others
                                                                                                          will also remain in effect for reporting
                                                  official retirement of OATS occurs only                 data for securities not reported in CAT.                 Although written comments on the
                                                  once CAT has met minimum accuracy                                                                             proposed rule change were not solicited,
                                                                                                             The proposed changes to the EBS
                                                  and reliability standards defined as (1)                                                                      two commenters, the Financial
                                                                                                          Rules will impact clearing firms                      Information Forum (‘‘FIF’’) and the
                                                  a maximum of a 5% pre-correction error                  differently depending on the amount of
                                                  rate and 2% post-correction error for all                                                                     Securities Industry and Financial
                                                                                                          automation already built into each                    Markets Association (‘‘SIFMA’’),
                                                  CAT submissions averaged over a 180-
                                                                                                          firm’s EBS system. As described in the                submitted letters to the Participants
                                                  day period in applicable categories, (2)
                                                                                                          Economic Impact Assessment for OATS                   regarding the retirement of systems
                                                  no material data issues not captured in
                                                                                                          retirement, there are economic trade-offs             related to the CAT.38 In its comment
                                                  the error rates that would negatively
                                                                                                          for loosening or tightening the                       letter, with regard to the retirement of
                                                  impact FINRA’s ability to conduct
                                                                                                          requirements under which the new                      duplicative systems more generally, FIF
                                                  effective market surveillance, (3) the
                                                                                                          Supplementary Material outlined in the                recommends that the Participants
                                                  CAT including all data necessary to
                                                                                                          EBS Rule amendments would become                      continue the effort to incorporate
                                                  allow FINRA to continue to meet its
                                                                                                          effective. Loosening the requirements                 current reporting obligations into the
                                                  surveillance obligations, and (4) the
                                                  plan processor is sufficiently meeting all              would hasten the effective date but                   CAT in order to replace existing
                                                  of its obligations under the CAT NMS                    could increase the risk that the quality              reportable systems with the CAT. In
                                                  Plan. FINRA believes that a minimum of                  of the data received would hamper                     addition, FIF further recommends that,
                                                  180 days is required to provide                         FINRA’s efforts to conduct market                     once a CAT Reporter achieves
                                                  sufficient time to ensure that future                   surveillance and investigate trading                  satisfactory reporting data quality, the
                                                  error rates below the maximum                           violations, potentially increasing risks              CAT Reporter should be exempt from
                                                  thresholds are able to be maintained and                to investors. Alternatively, tightening               reporting to any duplicative reporting
                                                  that the CAT data can otherwise be                      the requirements could decrease the risk              systems. FIF believes that these
                                                  relied upon for conducting effective                    that the data will be low quality but will            recommendations ‘‘would serve both an
                                                  market surveillance. The trade-offs of                  increase the costs to member firms for                underlying regulatory objective of more
                                                  lengthening or shortening the phase-in                  maintaining duplicate reporting and                   immediate and accurate access to data
                                                  period and raising or lowering error rate               data delivery systems. These costs to                 as well as an industry objective of
                                                  thresholds are increased costs to                       continue using the EBS system will                    reduced costs and burdens of regulatory
                                                  member firms for maintaining duplicate                  have a differential impact on clearing                oversight.’’ 39 In its comments about
                                                  reporting systems and records versus                    firms, depending on the level of                      EBS specifically, FIF states that the
                                                  increased assurance for FINRA that the                  automation in each firm’s EBS response                retirement of the EBS requirements
                                                  data will continue to meet maximum                      process. Firms that have a fully                      should be a high priority, and that the
                                                  error thresholds and not contain                        automated EBS response system incur                   CAT should be designed to include the
                                                  material issues that would negatively                   lower variable costs to responding to                 requisite data elements to permit the
                                                  impact market surveillance. Note that                   any individual request, but have higher               rapid retirement of the EBS system.40
                                                  the current OATS error rates are                        fixed costs stemming from maintenance                 Similarly, SIFMA states that ‘‘the
                                                  significantly lower than 2%; however,                   of a more complex system. Alternatively               establishment of the CAT must be
                                                  OATS reporting errors have decreased                    firms where more of the response                      accompanied by the prompt elimination
                                                  over time with additional experience by                 process is manual incur higher variable               of duplicative systems,’’ and
                                                  firms, and CAT reporting is anticipated                 costs to EBS requests due to data                     ‘‘recommend[ed] that the initial
                                                  to be more complex and new to some                      collection and validation but do not                  technical specifications be designed to
                                                  firms and therefore more likely to                      have the more sophisticated systems to                facilitate the immediate retirement of
                                                  contain errors when initially reported.                 maintain and therefore incur low fixed                . . . duplicative reporting systems.’’ 41
                                                                                                          costs. So, when the Supplementary                        As discussed above, FINRA agrees
                                                  (2) Electronic Blue Sheet System Rule                   Material is implemented and clearing                  with the commenters that the OATS
                                                  Amendments                                              firms begin receiving fewer Blue Sheet
                                                    Once broker-dealer reporting to the                   requests, firms with highly manual                       38 Letter from William H. Hebert, FIF, to

                                                  CAT has begun, the CAT will contain                     processes will incur lower variable and               Participants re: Milestone for Participants’ rule
mstockstill on DSK30JT082PROD with NOTICES




                                                                                                                                                                change filings to eliminate/modify duplicative
                                                  much of the data that otherwise would                   therefore lower overall costs while firms             rules, dated April 12, 2017 (‘‘FIF Letter’’); Letter
                                                  have been requested via the EBS system                  with highly automated systems will                    from Kenneth E. Bentsen, Jr., SIFMA, to
                                                  for purposes of equities and options.                   likely see more modest cost decline.                  Participants re: Selection of Thesys as CAT
                                                                                                                                                                Processor, dated April 4, 2017, at 2 (‘‘SIFMA
                                                  Consequently, FINRA will no longer                      Firms with semi- or fully-automated                   Letter’’).
                                                  need to rely on the EBS system or                       EBS response systems may decide to                       39 FIF Letter at 2.

                                                  request new information pursuant to the                 phase out their automated systems and                    40 Id.

                                                  EBS Rules for equities or options for                   gradually replace them with more                         41 SIFMA Letter at 2.




                                             VerDate Sep<11>2014   18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00205   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM   01JNN1


                                                                                 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices                                                  25429

                                                  reporting requirements should be                        submission, all subsequent                            solicit comments on the proposed rule
                                                  replaced by the CAT reporting                           amendments, all written statements                    change from interested persons.
                                                  requirements as soon as accurate and                    with respect to the proposed rule
                                                                                                                                                                I. Self-Regulatory Organization’s
                                                  reliable CAT Data is available. To this                 change that are filed with the
                                                                                                                                                                Statement of the Terms of Substance of
                                                  end, FINRA anticipates that the CAT                     Commission, and all written
                                                                                                                                                                the Proposed Rule Change
                                                  will be designed to collect the data                    communications relating to the
                                                  necessary to permit the retirement of                   proposed rule change between the                         The Exchange proposes to modify
                                                  OATS. As discussed above, FINRA                         Commission and any person, other than                 requirements for the collection of
                                                  disagrees with the recommendation to                    those that may be withheld from the                   information that is duplicative of
                                                  provide individual exemptions to those                  public in accordance with the                         information intended to be collected for
                                                  CAT Reporters who obtain satisfactory                   provisions of 5 U.S.C. 552, will be                   the consolidated audit trail (‘‘CAT’’)
                                                  data reporting quality; however, FINRA                  available for Web site viewing and                    adopted pursuant to the National
                                                  supports amendments to the CAT NMS                      printing in the Commission’s Public                   Market System Plan Governing the
                                                  Plan that would accelerate reporting for                Reference Room, 100 F Street NE.,                     Consolidated Audit Trail (the ‘‘CAT
                                                  Small Industry Members that are                         Washington, DC 20549, on official                     NMS Plan’’ or ‘‘Plan’’).3 The Exchange
                                                  currently reporting to OATS to facilitate               business days between the hours of                    will announce the implementation date
                                                  the retirement of OATS.                                 10:00 a.m. and 3:00 p.m. Copies of such               of the proposed rule change and
                                                                                                          filing also will be available for                     effective date of the retirement of any
                                                  III. Date of Effectiveness of the                                                                             related systems by Regulatory Circular
                                                                                                          inspection and copying at the principal
                                                  Proposed Rule Change and Timing for                                                                           that will be published once the options
                                                                                                          office of FINRA. All comments received
                                                  Commission Action                                                                                             exchanges determine the thresholds for
                                                                                                          will be posted without change; the
                                                     Within 45 days of the date of                        Commission does not edit personal                     accuracy and reliability described below
                                                  publication of this notice in the Federal               identifying information from                          have been met and that the Plan
                                                  Register or within such longer period (i)               submissions. You should submit only                   Processor for CAT is sufficiently
                                                  as the Commission may designate up to                   information that you wish to make                     meeting all of its obligations under the
                                                  90 days of such date if it finds such                   available publicly. All submissions                   CAT NMS Plan.
                                                  longer period to be appropriate and                     should refer to File Number SR–FINRA–                    The text of the proposed rule change
                                                  publishes its reasons for so finding or                 2017–013 and should be submitted on                   is available on the Exchange’s Web site
                                                  (ii) as to which the self-regulatory                    or before June 22, 2017.                              (http://www.cboe.com/AboutCBOE/
                                                  organization consents, the Commission                                                                         CBOELegalRegulatoryHome.aspx), at
                                                                                                            For the Commission, by the Division of
                                                  will:                                                                                                         the Exchange’s Office of the Secretary,
                                                                                                          Trading and Markets, pursuant to delegated
                                                     (A) By order approve or disapprove                   authority.42                                          and at the Commission’s Public
                                                  such proposed rule change, or                                                                                 Reference Room.
                                                                                                          Eduardo A. Aleman,
                                                     (B) institute proceedings to determine
                                                  whether the proposed rule change                        Assistant Secretary.                                  II. Self-Regulatory Organization’s
                                                  should be disapproved.                                  [FR Doc. 2017–11359 Filed 5–31–17; 8:45 am]           Statement of the Purpose of, and
                                                                                                          BILLING CODE 8011–01–P                                Statutory Basis for, the Proposed Rule
                                                  IV. Solicitation of Comments                                                                                  Change
                                                    Interested persons are invited to                                                                              In its filing with the Commission, the
                                                  submit written data, views, and                         SECURITIES AND EXCHANGE                               Exchange included statements
                                                  arguments concerning the foregoing,                     COMMISSION                                            concerning the purpose of and basis for
                                                  including whether the proposed rule                                                                           the proposed rule change and discussed
                                                                                                          [Release No. 34–80797; File No. SR–CBOE–
                                                  change is consistent with the Act.                      2017–041]                                             any comments it received on the
                                                  Comments may be submitted by any of                                                                           proposed rule change. The text of these
                                                  the following methods:                                  Self-Regulatory Organizations;                        statements may be examined at the
                                                  Electronic Comments                                     Chicago Board Options Exchange,                       places specified in Item IV below. The
                                                                                                          Incorporated; Notice of Filing of                     Exchange has prepared summaries, set
                                                    • Use the Commission’s Internet                       Proposed Rule Change To Eliminate                     forth in sections A, B, and C below, of
                                                  comment form (http://www.sec.gov/                       Requirements That Will Be Duplicative                 the most significant aspects of such
                                                  rules/sro.shtml); or                                    of CAT                                                statements.
                                                    • Send an email to rule-comments@
                                                  sec.gov. Please include File Number SR–                 May 26, 2017.                                         A. Self-Regulatory Organization’s
                                                  FINRA–2017–013 on the subject line.                        Pursuant to Section 19(b)(1) of the                Statement of the Purpose of, and
                                                                                                          Securities Exchange Act of 1934 (the                  Statutory Basis for, the Proposed Rule
                                                  Paper Comments                                                                                                Change
                                                                                                          ‘‘Act’’) 1 and Rule 19b–4 thereunder,2
                                                    • Send paper comments in triplicate                   notice is hereby given that on May 15,                1. Purpose
                                                  to Secretary, Securities and Exchange                   2017, Chicago Board Options Exchange,
                                                  Commission, 100 F Street NE.,                                                                                    Bats BYX Exchange, Inc., Bats BZX
                                                                                                          Incorporated (the ‘‘Exchange’’ or
                                                  Washington, DC 20549–1090.                                                                                    Exchange, Inc., Bats EDGA Exchange,
                                                                                                          ‘‘CBOE’’) filed with the Securities and
                                                  All submissions should refer to File                                                                          Inc., Bats EDGX Exchange, Inc., BOX
                                                                                                          Exchange Commission (the
                                                  Number SR–FINRA–2017–013. This file                                                                           Options Exchange LLC, C2 Options
                                                                                                          ‘‘Commission’’) the proposed rule
                                                  number should be included on the                                                                              Exchange, Incorporated, Chicago Board
                                                                                                          change as described in Items I, II, and
mstockstill on DSK30JT082PROD with NOTICES




                                                  subject line if email is used. To help the                                                                    Options Exchange, Incorporated,
                                                                                                          III below, which Items have been
                                                  Commission process and review your                                                                            Chicago Stock Exchange, Inc., Financial
                                                                                                          prepared by the Exchange. The
                                                  comments more efficiently, please use                                                                         Industry Regulatory Authority, Inc.
                                                                                                          Commission is publishing this notice to
                                                  only one method. The Commission will                                                                            3 Unless otherwise specified, capitalized terms
                                                  post all comments on the Commission’s                     42 17 CFR 200.30–3(a)(12).                          used in this rule filing are defined as set forth
                                                  Internet Web site (http://www.sec.gov/                    1 15 U.S.C. 78s(b)(1).
                                                                                                                                                                herein, or in the CAT Compliance Rule Series or in
                                                  rules/sro.shtml). Copies of the                           2 17 CFR 240.19b–4.                                 the CAT NMS Plan.



                                             VerDate Sep<11>2014   18:32 May 31, 2017   Jkt 241001   PO 00000   Frm 00206   Fmt 4703   Sfmt 4703   E:\FR\FM\01JNN1.SGM   01JNN1



Document Created: 2017-06-01 03:05:37
Document Modified: 2017-06-01 03:05:37
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 25423 

2025 Federal Register | Disclaimer | Privacy Policy
USC | CFR | eCFR