82_FR_9790 82 FR 9765 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

82 FR 9765 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 25 (February 8, 2017)

Page Range9765-9778
FR Document2017-02554

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9765-9778]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02554]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79949; File No. SR-BatsEDGX-2017-08]


Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice 
of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To 
Implement the Compliance Rule Regarding the National Market System Plan 
Governing the Consolidated Audit Trail

February 2, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 30, 2017, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on 
January 17, 2017 under File No. SR-BatsEDGX-2017-06, and the 
Exchange subsequently withdrew that filing on January 30, 2017 and 
filed this proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to adopt Rules 4.5 through 4.16 to 
implement the compliance rule (``Compliance Rule'') regarding the 
National Market System Plan Governing the Consolidated Audit Trail (the 
``CAT NMS Plan'' or ``Plan'').\4\
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    \4\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.com, the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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

    In its filing with the Commission, the Exchange 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. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of

[[Page 9766]]

the most significant parts of such statements.

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., 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 \5\ and Rule 
608 of Regulation NMS thereunder,\6\ the CAT NMS Plan.\7\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\8\ and approved by the Commission, as 
modified, on November 15, 2016.\9\
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    \5\ 15 U.S.C. 78k-1.
    \6\ 17 CFR 242.608.
    \7\ 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.
    \8\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 
FR 30614 (May 17, 2016).
    \9\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 
FR 84696 (Nov. 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\10\ As is described more fully below, the Proposed Rules 4.5 
through 4.16 set forth the Compliance Rule to require Industry Members 
to comply with the provisions of the CAT NMS Plan. The Proposed Rules 
4.5 through 4.16 include twelve Proposed Rules covering the following 
areas: (1) Definitions; (2) clock synchronization; (3) Industry Member 
Data reporting; (4) Customer information reporting; (5) Industry Member 
information reporting; (6) time stamps; (7) clock synchronization rule 
violations; (8) connectivity and data transmission; (9) development and 
testing; (10) recordkeeping; (11) timely, accurate and complete data; 
and (12) compliance dates. Each of these Proposed Rules are discussed 
in detail below.
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    \10\ See SEC Rule 613(g)(1).
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(i) Definitions
    Proposed Rule 4.5 (Consolidated Audit Trail--Definitions) sets 
forth the definitions for the terms used in the Proposed Rules 4.5 
through 4.16. Each of the defined terms in Proposed Rule 4.5 is 
discussed in detail in this section.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customer's associated with orders. For example, SEC Rule 
613(c)(7)(i)(A) requires an Industry Member to report the ``Customer-
ID'' for each Customer for the original receipt or origination of an 
order. ``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with 
respect to a customer, a code that uniquely and consistently identifies 
such customer for purposes of providing data to the Central 
Repository.'' SEC Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer. The SEC granted the Participants 
exemptive relief to permit the use of an alternative approach to the 
requirement that an Industry Member report a Customer-ID for every 
Customer upon original receipt or origination.\11\ The alternative 
approach is called the Customer Information Approach.
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    \11\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would be 
permitted to use an account number or any other identifier defined by 
the firm, provided each identifier is unique across the firm for each 
business date (i.e., a single firm may not have multiple separate 
customers with the same identifier on any given date). Prior to their 
commencement of reporting to the CAT, Industry Members would submit an 
initial set of Customer information to the Central Repository, 
including the Firm Designated ID, Customer Identifying Information and 
Customer Account Information (which may include, as applicable, the 
Customer's name, address, date of birth, individual tax payer 
identifier number (``ITIN'')/social security number (``SSN''), 
individual's role in the account (e.g., primary holder, joint holder, 
guardian, trustee, person with power of attorney) and LEI and/or Larger 
Trader ID (``LTID'')). This process is referred to as the customer 
definition process.
    In accordance with the Customer Information Approach, Industry 
Members would be required to report only the Firm Designated ID for 
each new order submitted to the Central Repository, rather than the 
``Customer-ID'' with individual order events. Within the Central 
Repository, each Customer would be uniquely identified by identifiers 
or a combination of identifiers such as ITIN/SSN, date of birth, and as 
applicable, LEI and LTID. The Plan Processor would be required to use 
these unique identifiers to map orders to specific Customers across all 
Industry Members and Participants. To ensure information identifying a 
Customer is up to date, Industry Members would be required to submit to 
the Central Repository daily and periodic updates for reactivated 
accounts, newly established accounts, and revised Firm Designated IDs 
or associated reportable Customer information.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The

[[Page 9767]]

Participants requested and received an exemption to allow an ``Account 
Effective Date'' to be reported in lieu of an account open date in 
certain limited circumstances. The definition of ``Account Effective 
Date'' as set forth in Paragraph (a) of Proposed Rule 4.5 describes 
those limited circumstances in which an Industry Member may report an 
``Account Effective Date'' rather than the account open date. The 
proposed definition is the same as the definition of ``Account 
Effective Date'' set forth in Section 1.1 of the CAT NMS Plan, 
provided, however, that specific dates have replaced the descriptions 
of those dates set forth in Section 1.1 of the Plan.
    Specifically, Paragraph (a)(1) defines ``Account Effective Date to 
mean, with regard to those circumstances in which an Industry Member 
has established a trading relationship with an institution but has not 
established an account with that institution: (1) When the trading 
relationship was established prior to November 15, 2018 for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019 for Small Industry Members, either (a) the date the relationship 
identifier was established within the Industry Member; (b) the date 
when trading began (i.e., the date the first order was received) using 
the relevant relationship identifier; or (c) if both dates are 
available, the earlier date will be used to the extent that the dates 
differ; or (2) when the trading relationship was established on or 
after November 15, 2018 for Industry Members other than Small Industry 
Members, or on or after November 15, 2019 for Small Industry Members, 
the date the Industry Member established the relationship identifier, 
which would be no later than the date the first order was received.
    Paragraph (a)(2) of Proposed Rule 4.5 states that an ``Account 
Effective Date'' means, where an Industry Member changes back office 
providers or clearing firms prior to November 15, 2018 for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019 for Small Industry Members, the date an account was established at 
the relevant Industry Member, either directly or via transfer.
    Paragraph (a)(3) states that an ``Account Effective Date'' means, 
where an Industry Member acquires another Industry Member prior to 
November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer.
    Paragraph (a)(4) states that ``Account Effective Date'' means, 
where there are multiple dates associated with an account established 
prior to November 15, 2018 for Industry Members other than Small 
Industry Members, or prior to November 15, 2019 for Small Industry 
Members, the earliest available date.
    Paragraph (a)(5) states that an ``Account Effective Date'' means, 
with regard to Industry Member proprietary accounts established prior 
to November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members: (1) 
The date established for the account in the Industry Member or in a 
system of the Industry Member or (2) the date when proprietary trading 
began in the account (i.e., the date on which the first orders were 
submitted from the account). With regard to paragraphs (a)(2)-(5), the 
Account Effective Date will be no later than the date trading occurs at 
the Industry Member or in the Industry Member's system.
(B) Active Account
    Under the Customer Information Approach, Industry Members are 
required to report Customer Identifying Information and Customer 
Account Information for only those accounts that are active. This will 
alleviate the need for Industry Members to update such information for 
non-active accounts, but still ensure that the Central Repository will 
collect audit trail data for Customer accounts that have any Reportable 
Events. Accordingly, paragraph (b) of Proposed Rule 4.5 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
Industry Members to record and report to the Central Repository an 
Allocation Report that includes, among other things, the Firm 
Designated ID for any account(s) to which executed shares are allocated 
when an execution is allocated in whole or part in lieu of requiring 
the reporting of the account number for any subaccount to which an 
execution is allocated, as is required by SEC Rule 613.\12\ Under SEC 
Rule 613, regulators would be able to link the subaccount to which an 
allocation was made to a specific order. In contrast, under the 
Allocation Report Approach, regulators would only be able to link an 
allocation to the account to which it was made, and not to a specific 
order.
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    \12\ See Exemptive Request Letter at 26-27; and Exemption Order.
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(II) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, paragraph 
(c) of Proposed Rule 4.5 defines an ``Allocation Report.'' 
Specifically, an ``Allocation Report'' means a report made to the 
Central Repository by an Industry Member that identifies the Firm 
Designated ID for any account(s), including subaccount(s), to which 
executed shares are allocated and provides the security that has been 
allocated, the identifier of the firm reporting the allocation, the 
price per share of shares allocated, the side of shares allocated, the 
number of shares allocated to each account, and the time of the 
allocation; provided, for the avoidance of doubt, any such Allocation 
Report shall not be required to be linked to particular orders or 
executions. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(D) Business Clock
    To create the required audit trail, Industry Members are required 
to record the date and time of various Reportable Events to the Central 
Repository. Industry Members will use ``Business Clocks'' to record 
such dates and times. Accordingly, paragraph (d) of Proposed Rule 4.5 
defines the term ``Business Clock'' as a clock used to record the date 
and time of any Reportable Event required to be reported under Rules 
4.5 through 4.16. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan, except the Exchange proposes to replace the 
phrase ``under SEC Rule 613'' at the end of the definition in Section 
1.1 of the Plan with the phrase ``under Rules 4.5 through 4.16.'' This 
change is intended to recognize that the Industry Members' obligations 
with regard to the CAT are set forth in Rules 4.5 through 4.16.
(E) CAT
    Paragraph (e) of Proposed Rule 4.5 defines the term ``CAT'' to mean 
the consolidated audit trail contemplated by SEC Rule 613. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan.

[[Page 9768]]

(F) CAT NMS Plan
    Paragraph (f) of Proposed Rule 4.5 defines the term ``CAT NMS 
Plan'' to mean the National Market System Plan Governing the 
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to link the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of Proposed 
Rule 4.5 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-ID'' 
is defined to mean a unique order identifier or series of unique order 
identifiers that allows the Central Repository to efficiently and 
accurately link all Reportable Events for an order, and all orders that 
result from the aggregation or disaggregation of such order. This is 
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule 
613(j)(1).
(H) CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf of the Industry Member.\13\ Such a third party, referred to 
in the Proposed Rules 4.5 through 4.16 as a ``CAT Reporting Agent,'' 
would be one type of a Data Submitter, that is, a party that submits 
data to the Central Repository. Paragraph (h) of Proposed Rule 4.5 
defines the term ``CAT Reporting Agent'' to mean a Data Submitter that 
is a third party that enters into an agreement with an Industry Member 
pursuant to which the CAT Reporting Agent agrees to fulfill such 
Industry Member's reporting obligations under Rules 4.5 through 4.16.
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    \13\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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    This definition is based on FINRA's definition of a ``Reporting 
Agent'' as set forth in FINRA's rule related to its Order Audit Trail 
System (``OATS''). Specifically, FINRA Rule 7410(n) defines a 
``Reporting Agent'' as a third party that enters into any agreement 
with a member pursuant to which the Reporting Agent agrees to fulfill 
such member's obligations under Rule 7450. The Reporting Agent for OATS 
fulfills a similar role to the CAT Reporting Agent.
(I) Central Repository
    Paragraph (i) of Proposed Rule 4.5 defines the term ``Central 
Repository'' to mean the repository responsible for the receipt, 
consolidation, and retention of all information reported to the CAT 
pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan, except the 
Exchange uses the phrase ``CAT NMS Plan'' in place of the phrase ``this 
Agreement.''
(J) Compliance Threshold
    Paragraph (j) of Proposed Rule 4.5 defines the term ``Compliance 
Threshold'' as having the meaning set forth in Proposed Rule 4.15(d). 
This definition has the same substantive meaning as the definition set 
forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below 
with regard to Proposed Rule 4.15(d), each Industry Member is required 
to meet a separate compliance threshold which will be an Industry 
Member-specific rate that may be used as the basis for further review 
or investigation into the Industry Member's performance with regard to 
the CAT. This Industry Member-specific rate is the ``Compliance 
Threshold.''
(K) Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account Information, as well as 
data related to their Customer's Reportable Events. Accordingly, 
Paragraph (k) of Proposed Rule 4.5 proposes to define the term 
``Customer.'' Specifically, the term ``Customer'' would be defined to 
mean: (1) The account holder(s) of the account at an Industry Member 
originating the order; and (2) any person from whom the Industry Member 
is authorized to accept trading instructions for such account, if 
different from the account holder(s). This is the same definition as 
set forth in SEC Rule 613(j)(3), except the Exchange proposes to 
replace the references to a registered broker-dealer or broker-dealer 
with a reference to an Industry Member for consistency of terms used in 
the Proposed Rules 4.5 through 4.16. The Exchange also notes that 
Section 1.1 of the CAT NMS Plan defines ``Customer'' by reference to 
SEC Rule 613(j)(3).
(L) Customer Account Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Account Information to 
the Central Repository as part of the customer definition process. 
Accordingly, the Exchange proposes to define the term ``Customer 
Account Information'' to clarify what customer information would need 
to be reported to the Central Repository.
    Paragraph (l) of Proposed Rule 4.5 defines the term ``Customer 
Account Information'' to include, in part, account number, account 
type, customer type, date account opened, and large trader identifier 
(if applicable). Proposed Rule 4.5(l), however, provides an alternative 
definition of ``Customer Account Information'' in two limited 
circumstances. First, in those circumstances in which an Industry 
Member has established a trading relationship with an institution but 
has not established an account with that institution, the Industry 
Member will: (1) Provide the Account Effective Date in lieu of the 
``date account opened''; (2) provide the relationship identifier in 
lieu of the ``account number''; and (3) identify the ``account type'' 
as a ``relationship.'' Second, in those circumstances in which the 
relevant account was established prior to November 15, 2018 for 
Industry Members other than Small Industry Members, or prior to 
November 15, 2019 for Small Industry Members, and no ``date account 
opened'' is available for the account, the Industry Member will provide 
the Account Effective Date in the following circumstances: (1) Where an 
Industry Member changes back office providers or clearing firms and the 
date account opened is changed to the date the account was opened on 
the new back office/clearing firm system; (2) where an Industry Member 
acquires another Industry Member and the date account opened is changed 
to the date the account was opened on the post-merger back office/
clearing firm system; (3) where there are multiple dates associated 
with an account in an Industry Member's system, and the parameters of 
each date are determined by the individual Industry Member; and (4) 
where the relevant account is an Industry Member proprietary account. 
The proposed definition is the same as the definition of ``Customer 
Account Information'' set forth in Section 1.1 of the CAT NMS Plan, 
provided, however, that specific dates have replaced the

[[Page 9769]]

descriptions of those dates set forth in Section 1.1 of the Plan.
(M) Customer Identifying Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Identifying 
Information to the Central Repository as part of the customer 
definition process. Accordingly, the Exchange proposes to define the 
term ``Customer Account Information'' to clarify what Customer 
information would need to be reported to the Central Repository.
    Paragraph (m) of Proposed Rule 4.5 defines the term ``Customer 
Identifying Information'' to mean information of sufficient detail to 
identify a Customer. With respect to individuals, ``Customer 
Identifying Information'' includes, but is not limited to: name, 
address, date of birth, individual tax payer identification number 
(``ITIN'')/social security number (``SSN''), individual's role in the 
account (e.g., primary holder, joint holder, guardian, trustee, person 
with the power of attorney). With respect to legal entities, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``LEI'') or other comparable common entity identifier, if 
applicable. The definition further notes that an Industry Member that 
has an LEI for a Customer must submit the Customer's LEI in addition to 
other information of sufficient detail to identify the Customer. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\14\ Such Data 
Submitters may include those entities that are required to submit data 
to the Central Repository (e.g., national securities exchanges, 
national securities associations and Industry Members), third-parties 
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT 
Reporting Agents), and outside parties that are not required to submit 
data to the CAT but from which the CAT may receive data (e.g., 
securities information processors (``SIPs'')). To include this term in 
the Proposed Rules 4.5 through 4.16, the Exchange proposes to define 
``Data Submitter'' in paragraph (n) of Proposed Rule 4.5. Specifically, 
paragraph (n) of Proposed Rule 4.5 defines a ``Data Submitter'' to mean 
any person that reports data to the Central Repository, including 
national securities exchanges, national securities associations, 
broker-dealers, the SIPs for the CQS, CTA, UTP and Plan for Reporting 
of Consolidated Options Last Sale Reports and Quotation Information 
(``OPRA'') Plans, and certain other vendors or third parties that may 
submit data to the Central Repository on behalf of Industry Members.
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    \14\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of the Proposed Rules 4.5 through 4.16 
only apply to Reportable Events in Eligible Securities. Currently, an 
Eligible Security includes NMS Securities and OTC Equity Securities. 
Accordingly, paragraph (p) [sic] of Proposed Rule 4.5 defines the term 
``Eligible Security'' to include: (1) All NMS Securities; and (2) all 
OTC Equity Securities. The terms ``NMS Securities'' and ``OTC Equity 
Securities'' are defined, in turn, below. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\15\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\16\ If an Industry Member reports CAT data to the Central 
Repository with errors such that their error percentage exceeds the 
maximum Error Rate, then such Industry Member would not be in 
compliance with the CAT NMS Plan or Rule 613.\17\ As such, the Exchange 
or the SEC ``may [sic] take appropriate action against an Industry 
Member for failing to comply with its CAT reporting obligations.\18\ 
The CAT NMS Plan sets the initial Error Rate at 5%.\19\ It is 
anticipated that the maximum Error Rate will be reviewed and lowered by 
the Operating Committee once Industry Members begin to report to the 
Central Repository.\20\
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    \15\ Section 6.5(d)(i) of the CAT NMS Plan.
    \16\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \19\ Section 6.5(d)(i) of the CAT NMS Plan.
    \20\ Appendix C, Section A.3(b) of the CAT NMS Plan.
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    The CAT NMS Plan requires the Plan Processor to: (1) Measure and 
report errors every business day; (2) provide Industry Members daily 
statistics and error reports as they become available, including a 
description of such errors; (3) provide monthly reports to Industry 
Members that detail an Industry Member's performance and comparison 
statistics; (4) define educational and support programs for Industry 
Members to minimize Error Rates; and (5) identify, daily, all Industry 
Members exceeding the maximum allowable Error Rate. To timely correct 
data-submitted errors to the Central Repository, the CAT NMS Plan 
requires that the Central Repository receive and process error 
corrections at all times. Further, the CAT NMS Plan requires that 
Industry Members be able to submit error corrections to the Central 
Repository through a web-interface or via bulk uploads or file 
submissions, and that the Plan Processor, subject to the Operating 
Committee's approval, support the bulk replacement of records and the 
reprocessing of such records. The Participants, furthermore, require 
that the Plan Processor identify Industry Member data submission errors 
based on the Plan Processor's validation processes.\21\
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    \21\ Approval Order at 84718.
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(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchange proposes to define the term ``Error Rate'' in 
Proposed Rule 4.5. Paragraph (p) of Proposed Rule 4.5 defines the term 
``Error Rate'' to mean the percentage of Reportable Events collected by 
the Central Repository in which the data reported does not fully and 
accurately reflect the order event that occurred in the market. This is 
the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 
of the CAT NMS Plan defines ``Error Rate'' by reference to SEC Rule 
613(j)(6).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan would require each Industry Member to assign a unique Firm 
Designated ID to each Customer. Industry Members would be permitted to 
use as the Firm Designated ID an account number or any other identifier 
defined by the firm, provided each identifier is unique across the firm 
for each business date (i.e., a single firm may not have multiple 
separate customers with the same identifier on any given date). 
Industry Members would be required to report only the Firm Designated 
ID for each new order submitted to the Central Repository, rather than 
the ``Customer-ID'' with individual order events. Accordingly,

[[Page 9770]]

the Exchange proposes to define the term ``Firm Designated ID'' in 
Proposed Rule 4.5. Specifically, paragraph (q) of Proposed Rule 4.5 
defines the term ``Firm Designated ID'' to mean a unique identifier for 
each trading account designated by Industry Members for purposes of 
providing data to the Central Repository, where each such identifier is 
unique among all identifiers from any given Industry Member for each 
business date. This is the same definition as set forth in Section 1.1 
of the CAT NMS Plan. Industry Members would be permitted to use an 
account number or any other identifier defined by the firm, provided 
each identifier is unique across the firm for each business date (i.e., 
a single firm may not have multiple separate customers with the same 
identifier on any given date).
(R) Industry Member
    Paragraph (r) of Proposed Rule 4.5 defines the term ``Industry 
Member'' to mean a member of a national securities exchange or a member 
of a national securities association.'' This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(S) Industry Member Data
    Paragraph (s) of Proposed Rule 4.5 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 4.7(a)(2). This 
definition has the same substantive meaning as the definition set forth 
in Section 1.1 of the CAT NMS Plan. The definition of ``Industry Member 
Data'' is discussed more fully in the discussion below regarding 
Proposed Rule 4.7(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of Proposed Rule 4.5 defines the term ``Initial Plan 
Processor'' to mean the first Plan Processor selected by the Operating 
Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS 
Plan and the National Market System Plan Governing the Process for 
Selecting a Plan Processor and Developing a Plan for the Consolidated 
Audit Trail. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan, although the proposed definition uses the full name 
of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and the Proposed Rules 4.5 through 4.16 apply to 
Eligible Securities, which includes NMS Securities, which, in turn, 
includes Listed Options. Certain requirements of the Proposed Rules 4.5 
through 4.16 apply specifically to Listed Options. Accordingly, 
Paragraph (u) of Proposed Rule 4.5 defines the term ``Listed Option'' 
or ``Option.'' Specifically, paragraph (u) of Proposed Rule 4.5 states 
that the term ``Listed Option'' or ``Option'' has the meaning set forth 
in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, 
defines a listed option as ``any option traded on a registered national 
securities exchange or automated facility of a national securities 
association.'' The Exchange notes that the proposed definition of 
``Listed Option'' is the same definition as the definition set forth in 
Section 1.1 of the CAT NMS Plan.
(V) Manual Order Event
(I) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\22\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution systems use timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize their respective Business 
Clocks (other than such Business Clocks used solely for Manual Order 
Events) at a minimum to within 50 milliseconds of the time maintained 
by the National Institute of Standards and Technology (``NIST''), and 
maintain such a synchronization. Each Industry Member is required to 
synchronize their Business Clocks used solely for Manual Order Events, 
however, at a minimum to within one second of the time maintained by 
the NIST.
---------------------------------------------------------------------------

    \22\ Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, the Exchange proposes to 
define the term ``Manual Order Event'' in Proposed Rule 4.5. 
Specifically, paragraph (v) of Proposed Rule 4.5 defines the term 
``Manual Order Event'' to mean a non-electronic communication of order-
related information for which Industry Members must record and report 
the time of the event. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(W) Material Terms of the Order
    Proposed Rule 4.7 requires Industry Members to record and report to 
the Central Repository Material Terms of the Order with certain 
Reportable Events (e.g., for the original receipt or origination of an 
order, for the routing of an order). Accordingly, the Exchange proposes 
to define the term ``Material Terms of the Order'' in Proposed Rule 
4.5. Specifically, paragraph (w) of Proposed Rule 4.5 defines the term 
``Material Terms of the Order'' to include: The NMS Security or OTC 
Equity Security symbol; security type; price (if applicable); size 
(displayed and non-displayed); side (buy/sell); order type; if a sell 
order, whether the order is long, short, short exempt; open/close 
indicator (except on transactions in equities); time in force (if 
applicable); if the order is for a Listed Option, option type (put/
call), option symbol or root symbol, underlying symbol, strike price, 
expiration date, and open/close (except on market maker quotations); 
and any special handling instructions. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, the Exchange proposes to define the term ``NMS 
Security'' in Proposed Rule 4.5. Specifically, paragraph (x) of 
Proposed Rule 4.5 defines the term ``NMS Security'' to mean any 
security or class of securities for which transaction reports are 
collected, processed, and made available pursuant to an effective 
transaction reporting plan, or an effective national market system plan 
for reporting transactions in Listed Options. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks (as defined in SEC Rule 
600(b)(47)), Listed Options, OTC Equity Securities, and any other 
securities that are included as Eligible Securities from time to time. 
Accordingly, the Exchange proposes to define the term ``NMS Stock'' in 
Paragraph (y) of Proposed Rule 4.5 to mean any NMS Security other than 
an option. This is the same

[[Page 9771]]

definition as set forth in SEC Rule 600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of Proposed Rule 4.5 defines the term ``Operating 
Committee'' to mean the governing body of the CAT NMS, LLC designated 
as such and described in Article IV of the CAT NMS Plan. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan, except 
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the 
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC Rule 613, the details for each Options Market Maker quotation 
must be reported to the Central Repository by both the Options Market 
Maker and the options exchange to which it routes its quote.
    The SROs, however, requested and received exemptive relief from SEC 
Rule 613 so that the CAT NMS Plan may permit Options Market Maker 
quotes to be reported to the Central Repository by the relevant options 
exchange in lieu of requiring that such reporting be done by both the 
options exchange and the Options Market Maker, as is required by SEC 
Rule 613.\23\ In accordance with the exemptive relief, Options Market 
Makers would be required to report to the options exchange the time at 
which a quote in a Listed Option is sent to the options exchange. Such 
time information also will be reported to the Central Repository by the 
options exchange in lieu of reporting by the Options Market Maker
---------------------------------------------------------------------------

    \23\ See Exemptive Request Letter at 2, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in Proposed Rule 4.5. Specifically, paragraph (aa) of Proposed 
Rule 4.5 defines the term ``Options Market Makers'' to mean a broker-
dealer registered with an exchange for the purpose of making markets in 
options contracts traded on the exchange. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    The Proposed Rules 4.5 through 4.16 require each Industry Member to 
record and electronically report to the Central Repository certain 
details for each order. Accordingly, the Exchange proposes to define 
the term ``Order'' in Proposed Rule 4.5. Specifically, paragraph (bb) 
of Proposed Rule 4.5 defines the term ``Order'', with respect to 
Eligible Securities, to include: (1) Any order received by an Industry 
Member from any person; (2) any order originated by an Industry Member; 
or (3) any bid or offer. This is the same definition as set forth in 
SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase 
``member of a national securities exchange or national securities 
association'' with the term ``Industry Member.'' The Exchange notes 
that Section 1.1 of the CAT NMS Plan defines ``Order'' by reference to 
SEC Rule 613(j)(8).
(CC) OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities 
for the CAT. Therefore, the Exchange proposes to define the term ``OTC 
Equity Security'' in Proposed Rule 4.5. Specifically, paragraph (cc) of 
Proposed Rule 4.5 defines the term ``OTC Equity Security'' to mean any 
equity security, other than an NMS Security, subject to prompt last 
sale reporting rules of a registered national securities association 
and reported to one of such association's equity trade reporting 
facilities. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of Proposed Rule 4.5 defines the term 
``Participant'' to mean each Person identified as such in Exhibit A of 
the CAT NMS Plan, as amended, in such Person's capacity as a 
Participant in CAT NMS, LLC. This is the same definition in substance 
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of Proposed Rule 4.5 defines the term ``Person'' to 
mean any individual, partnership, limited liability company, 
corporation, joint venture, trust, business trust, cooperative or 
association and any heirs, executors, administrators, legal 
representatives, successors and assigns of such Person where the 
context so permits. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of Proposed Rule 4.5 defines the term ``Plan 
Processor'' to mean the Initial Plan Processor or any other Person 
selected by the Operating Committee pursuant to SEC Rule 613 and 
Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the 
Initial Plan Processor, the National Market System Plan Governing the 
Process for Selecting a Plan Processor and Developing a Plan for the 
Consolidated Audit Trail, to perform the CAT processing functions 
required by SEC Rule 613 and set forth in the CAT NMS Plan.
(GG) Received Industry Member Data
    Paragraph (gg) of Proposed Rule 4.5 states that the term ``Received 
Industry Member Data'' has the meaning set forth in Rule 4.7(a)(2). 
This definition has the same substantive meaning as the definition set 
forth in Section 1.1 of the CAT NMS Plan. The definition of ``Received 
Industry Member Data'' is discussed more fully in the discussion below 
regarding Proposed Rule 4.7(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of Proposed Rule 4.5 states that the term ``Recorded 
Industry Member Data'' has the meaning set forth in Rule 4.7(a)(1). 
This definition has the same substantive meaning as the definition set 
forth in in Section 1.1 of the CAT NMS Plan. The definition of 
``Recorded Industry Member Data'' is discussed more fully in the 
discussion below regarding Proposed Rule 4.7(a)(1).
(II) Reportable Event
    The Proposed Rules 4.5 through 4.16 require each Industry Member to 
record and electronically report to the Central Repository certain 
details for each Reportable Event. To clarify these requirements, the 
Exchange proposes to define the term ``Reportable Event'' in Proposed 
Rule 4.5. Specifically, paragraph (ii) of Proposed Rule 4.5 states that 
the term ``Reportable Event'' includes, but is not limited to, the 
original receipt or origination, modification, cancellation, routing, 
execution (in whole or in part) and allocation of an order, and receipt 
of a routed order. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(JJ) SRO
    Paragraph (jj) of Proposed Rule 4.5 defines the term ``SRO'' to 
mean any self-regulatory organization within the meaning of Section 
3(a)(26) of the Exchange Act. This is the same definition as set forth 
in Section 1.1 of the CAT NMS Plan.

[[Page 9772]]

(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The SROs requested and received exemptive relief from SEC Rule 613 
so that the CAT NMS Plan may permit the Existing Identifier Approach, 
which would allow an Industry Member to report an existing SRO-Assigned 
Market Participant Identifier in lieu of requiring the reporting of a 
universal CAT-Reporter-ID (that is, a code that uniquely and 
consistently identifies an Industry Member for purposes of providing 
data to the Central Repository).\24\ The CAT NMS Plan reflects the 
``Existing Identifier Approach'' for purposes of identifying each 
Industry Member associated with an order or Reportable Event. Under the 
Existing Identifier Approach, Industry Members are required to record 
and report to the Central Repository an SRO-Assigned Market Participant 
Identifier for orders and certain Reportable Events to be used by the 
Central Repository to assign a unique CAT-Reporter-ID to identify 
Industry Members.
---------------------------------------------------------------------------

    \24\ See Exemptive Request Letter at 19, and Exemption Order.
---------------------------------------------------------------------------

    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to 
the Central Repository, on a daily basis, all SRO-Assigned Market 
Participant Identifiers used by its Industry Members or itself; and 
information to identify each such Industry Member, including the CRD 
number and LEI if such LEI has been obtained, and itself, including 
LEI, if such LEI has been obtained. Additionally, each Industry Member 
is required to submit to the Central Repository information sufficient 
to identify such Industry Member, including CRD number and LEI, if such 
LEI has been obtained. The Plan Processor will use this information to 
assign a CAT-Reporter-ID to each Industry Member for internal use 
within the Central Repository.
(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange 
proposes to define the term ``SRO-Assigned Market Participant 
Identifier'' in Proposed Rule 4.5. Specifically, paragraph (kk) of 
Proposed Rule 4.5 defines the term ``SRO-Assigned Market Participant 
Identifier'' to mean an identifier assigned to an Industry Member by an 
SRO or an identifier used by a Participant. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan. For example, an 
Industry Member would be permitted to use any existing SRO-Assigned 
Market Participant Identifier (e.g., FINRA MPID, NASDAQ MPID, NYSE 
Mnemonic, CBOE User Acronym and CHX Acronym) when reporting order 
information to the Central Repository.
(LL) Small Industry Member
    The requirements of the Proposed Rules 4.5 through 4.16 differ to 
some extent for Small Industry Members versus Industry Members other 
than Small Industry Members. For example, the compliance dates for 
reporting data to the CAT are different for Small Industry Members 
versus other Industry Members. Accordingly, to clarify the requirements 
that apply to which Industry Members, the Exchange proposes to define 
the term ``Small Industry Member'' in Proposed Rule 4.5. Specifically, 
paragraph (ll) of Proposed Rule 4.5 defines the term ``Small Industry 
Member'' to mean an Industry Member that qualifies as a small broker-
dealer as defined in Rule 0-10(c) under the Securities Exchange Act of 
1934, as amended. This is the same in substance as the definition of 
``Small Industry Member'' as set forth in Section 1.1 of the CAT NMS 
Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a ``Small 
Industry Member'' as ``an Industry Member that qualifies as a small 
broker-dealer as defined in SEC Rule 613.'' The definition of a small 
broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as 
defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 4.7(b) establishes the deadlines for reporting 
certain data to the Central Repository using the term ``Trading Day.'' 
Accordingly, the Exchange proposes to define the term ``Trading Day'' 
in Proposed Rule 4.5. Specifically, Paragraph (mm) of Proposed Rule 4.5 
states that the term ``Trading Day'' shall have the meaning as is 
determined by the Operating Committee. For the avoidance of doubt, the 
Operating Committee may establish different Trading Days for NMS Stocks 
(as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity 
Securities, and any other securities that are included as Eligible 
Securities from time to time.
(ii) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards. To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\25\ To implement these provisions 
with regard to its Industry Members, the Exchange proposes Rule 4.6 
(Consolidated Audit Trail--Clock Synchronization) to require its 
Industry Members to comply with the clock synchronization requirements 
of the Plan.
---------------------------------------------------------------------------

    \25\ In addition, Section 6.7(a)(ii) of the Plan sets forth the 
timeline for CAT Reporters to comply with the clock synchronization 
requirements.
---------------------------------------------------------------------------

    Paragraph (a) of Proposed Rule 4.6 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(1) of Proposed Rule 4.6 requires each Industry Member to 
synchronize its Business Clocks, other than such Business Clocks used 
solely for Manual Order Events or used solely for the time of 
allocation on Allocation Reports, at a minimum to within a fifty (50) 
millisecond tolerance of the time maintained by the NIST atomic clock, 
and maintain such synchronization. This is the same requirement as set 
forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
    Paragraph (a)(2) of Proposed Rule 4.6 requires each Industry Member 
to synchronize (1) its Business Clocks used solely for Manual Order 
Events and (2) its Business Clocks used solely for the time of 
allocation on Allocation Reports at a minimum to within a one second 
tolerance of the time maintained by the NIST atomic clock, and maintain 
such synchronization. This is the same requirement as set forth in 
Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
    Paragraph (a)(3) of Proposed Rule 4.6 clarifies that the tolerance 
described in paragraphs (a)(1) and (2) of the Proposed Rule 4.6 
includes all of the following: (1) The time difference between the NIST 
atomic clock and the Industry Member's Business Clock; (2) the 
transmission delay from the source; and (3) the amount of drift of the 
Industry Member's Business Clock. This description of the clock 
synchronization tolerance is the same as set forth in paragraph (b) of 
FINRA Rule 4590 (Synchronization of Member Business Clocks).
    Paragraph (a)(4) of Proposed Rule 4.6 requires Industry Members to 
synchronize their Business Clocks every business day before market open 
to ensure that timestamps for Reportable Events are accurate. In 
addition, to maintain clock synchronization, Business Clocks must be 
checked against the NIST atomic clock and re-synchronized, as 
necessary, throughout the day. This description of the required

[[Page 9773]]

frequency of clock synchronization is the same as set forth in 
paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business 
Clocks).
    Paragraph (b) of Proposed Rule 4.6 sets forth documentation 
requirements with regard to clock synchronization. Specifically, 
paragraph (b) requires Industry Members to document and maintain their 
synchronization procedures for their Business Clocks. The Proposed Rule 
requires Industry Members to keep a log of the times when they 
synchronize their Business Clocks and the results of the 
synchronization process. This log is required to include notice of any 
time a Business Clock drifts more than the applicable tolerance 
specified in paragraph (a) of the Proposed Rule. Such logs must include 
results for a period of not less than five years ending on the then 
current date, or for the entire period for which the Industry Member 
has been required to comply with this Rule if less than five years. 
These documentation requirements are the same as those set forth in the 
``Sequencing Orders and Clock Synchronization'' section of Appendix C 
of the CAT NMS Plan. Moreover, these documentation requirements 
regarding clock synchronization are comparable to those set forth in 
Supplementary Material .01 of FINRA Rule 4590 (Synchronization of 
Member Business Clocks).
    Paragraph (c) of Proposed Rule 4.6 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of Proposed Rule 4.6 requires each Industry Member to 
certify to the Exchange that its Business Clocks satisfy the 
synchronization requirements set forth in paragraph (a) of Proposed 
Rule 4.6 periodically in accordance with the certification schedule 
established by the Operating Committee pursuant to the CAT NMS Plan. 
This requirement is the same requirement as set forth in Section 
6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the certification schedule 
established by the Operating Committee via Regulatory Circular.
    Paragraph (d) of Proposed Rule 4.6 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
Proposed Rule 4.6 requires Industry Members to report to the Plan 
Processor and the Exchange, violations of paragraph (a) of this Rule 
pursuant to the thresholds set by the Operating Committee pursuant to 
the CAT NMS Plan. This requirement is the same requirement as set forth 
in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The 
Exchange intends to announce to its Industry Members the relevant 
thresholds established by the Operating Committee via Regulatory 
Circular.
(iii) Industry Member Data Reporting
    SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to 
set forth certain provisions requiring Industry Members to record and 
report data to the CAT. To comply with this provision, Section 6.4 of 
the CAT NMS Plan sets forth the data reporting requirements for 
Industry Members. To implement these provisions with regard to its 
Industry Members, the Exchange proposes Rule 4.7 (Consolidated Audit 
Trail--Industry Member Data Reporting) to require its Industry Members 
to comply with the Industry Member Data reporting requirements of the 
Plan. Proposed Rule 4.7 has six sections [sic] covering: (1) Recording 
and reporting Industry Member Data, (2) timing of the recording and 
reporting, (3) the applicable securities covered by the recording and 
reporting requirements, (4) the security symbology to be used in the 
recording and reporting, and (5) error correction requirements, each of 
which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of Proposed Rule 4.7 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry 
Member Data, Received Industry Member Data and Options Market Maker 
data, respectively. Paragraphs (a)(1)-(a)(3) of Proposed Rule 4.7 set 
forth the recording and reporting requirements required in Section 
6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding 
Options Market Makers, each Industry Member to record and 
electronically report to the Central Repository the following details 
for each order and each Reportable Event, as applicable (``Recorded 
Industry Member Data'') in the manner prescribed by the Operating 
Committee pursuant to the CAT NMS Plan:
     For original receipt or origination of an order: (1) Firm 
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned 
Market Participant Identifier of the Industry Member receiving or 
originating the order; (4) date of order receipt or origination; (5) 
time of order receipt or origination (using timestamps pursuant to 
Proposed Rule 4.10); and (6) Material Terms of the Order;
     for the routing of an order: (1) CAT-Order-ID; (2) date on 
which the order is routed; (3) time at which the order is routed (using 
timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member routing the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Participant to which the order is being routed; (6) if routed 
internally at the Industry Member, the identity and nature of the 
department or desk to which the order is routed; and (7) Material Terms 
of the Order;
     for the receipt of an order that has been routed, the 
following information: (1) CAT-Order-ID; (2) date on which the order is 
received; (3) time at which the order is received (using timestamps 
pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant 
Identifier of the Industry Member receiving the order; (5) SRO-Assigned 
Market Participant Identifier of the Industry Member or Participant 
routing the order; and (6) Material Terms of the Order;
     if the order is modified or cancelled: (1) CAT-Order-ID; 
(2) date the modification or cancellation is received or originated; 
(3) time at which the modification or cancellation is received or 
originated (using timestamps pursuant to Proposed Rule 4.10); (4) price 
and remaining size of the order, if modified; (5) other changes in the 
Material Terms of the Order, if modified; and (6) whether the 
modification or cancellation instruction was given by the Customer or 
was initiated by the Industry Member;
     if the order is executed, in whole or in part: (1) CAT-
Order-ID; (2) date of execution; (3) time of execution (using 
timestamps pursuant to Proposed Rule 4.10; (4) execution capacity 
(principal, agency or riskless principal); (5) execution price and 
size; (6) SRO-Assigned Market Participant Identifier of the Industry 
Member executing the order; (7) whether the execution was reported 
pursuant to an effective transaction reporting plan or the Plan for 
Reporting of Consolidated Options Last Sale Reports and Quotation 
Information; and
     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of Proposed Rule 4.7 requires, subject to 
paragraph (a)(3) regarding Options Market Makers, each Industry Member 
to record and report to the Central Repository the following, as 
applicable (``Received Industry Member Data'' and collectively with the 
information referred to in Rule 4.7(a)(1) ``Industry Member Data'')) in 
the

[[Page 9774]]

manner prescribed by the Operating Committee pursuant to the CAT NMS 
Plan:
     If the order is executed, in whole or in part: (1) An 
Allocation Report; (2) SRO-Assigned Market Participant Identifier of 
the clearing broker or prime broker, if applicable; and (3) CAT-Order-
ID of any contra-side order(s);
     if the trade is cancelled, a cancelled trade indicator; 
and
     for original receipt or origination of an order, the Firm 
Designated ID for the relevant Customer, and in accordance with 
Proposed Rule 4.8, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of Proposed Rule 4.7 states that each Industry 
Member that is an Options Market Maker is not required to report to the 
Central Repository the Industry Member Data regarding the routing, 
modification or cancellation of its quotes in Listed Options. Each 
Industry Member that is an Options Market Maker, however, is required 
to report to the Exchange the time at which its quote in a Listed 
Option is sent to the Exchange (and, if applicable, any subsequent 
quote modification time and/or cancellation time when such modification 
or cancellation is originated by the Options Market Maker). This 
paragraph implements the Options Market Maker Quote Exemption, as 
discussed above.
(B) Timing of Recording and Reporting
    Paragraph (b) of Proposed Rule 4.7 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 4.7 set forth the 
requirements related to the timing of the recording and reporting 
requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
    Paragraph (b)(1) of Proposed Rule 4.7 requires each Industry Member 
to record Recorded Industry Member Data contemporaneously with the 
applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 4.7 
requires each Industry Member to report: (1) Recorded Industry Member 
Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading 
Day following the day the Industry Member records such Recorded 
Industry Member Data; and (2) Received Industry Member Data to the 
Central Repository by 8:00 a.m. Eastern Time on the Trading Day 
following the day the Industry Member receives such Received Industry 
Member Data. Paragraph (b)(3) states that Industry Members may, but are 
not required to, voluntarily report Industry Member Data prior to the 
applicable 8:00 a.m. Eastern Time deadline.
(C) Applicable Securities
    Paragraph (c) of Proposed Rule 4.7 describes the securities to 
which the recording and reporting requirements of Proposed Rule 4.7 
apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 4.7 set forth the 
description of applicable securities as set forth in Section 6.4(c)(i) 
and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of 
Proposed Rule 4.7 requires each Industry Member to record and report to 
the Central Repository the Industry Member Data as set forth in 
paragraph (a) of Proposed Rule 4.7 for each NMS Security registered or 
listed for trading on such exchange or admitted to unlisted trading 
privileges on such exchange. Paragraph (c)(2) of Proposed Rule 4.7 
requires each Industry Member to record and report to the Central 
Repository the Industry Member Data as set forth in paragraph (a) of 
this Proposed Rule 4.7 for each Eligible Security for which transaction 
reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of Proposed Rule 4.7 describes the security symbology 
that Industry Members are required to use when reporting Industry 
Member Data to the Central Repository. Paragraph (d)(1) of Proposed 
Rule 4.7 requires, for each exchange-listed Eligible Security, each 
Industry Member to report Industry Member Data to the Central 
Repository using the symbology format of the exchange listing the 
security. This requirement implements the requirement set forth in 
Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange 
symbology when reporting data to the Central Repository for exchange-
listed Eligible Securities.
    For each Eligible Security that is not exchange-listed, however, 
there is no listing exchange to provide the symbology format. Moreover, 
to date, the requisite symbology format has not been determined. 
Therefore, Paragraph (d)(2) of Proposed Rule 4.7 requires, for each 
Eligible Security that is not exchange-listed, each Industry Member to 
report Industry Member Data to the Central Repository using such 
symbology format as approved by the Operating Committee pursuant to the 
CAT NMS Plan. The Exchange intends to announce to its Industry Members 
the relevant symbology formats established by the Operating Committee 
via Regulatory Circular.
(E) Error Correction
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, the Exchange proposes to adopt paragraph 
(e) of Proposed Rule 4.7, which addresses the correction of erroneous 
data reported to the Central Repository. Paragraph (e) of Proposed Rule 
4.7 requires, for each Industry Member for which errors in Industry 
Member Data submitted to the Central Repository have been identified by 
the Plan Processor or otherwise, that such Industry Member submit 
corrected Industry Member Data to the Central Repository by 8:00 a.m. 
Eastern Time on T+3. This requirement implements the error correction 
requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
(iv) Customer Information Reporting
    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository certain information related to their 
Customers in accordance with the Customer Information Approach 
discussed above. The Exchange proposes Rule 4.8 (Consolidated Audit 
Trail--Customer Information Reporting) to implement this provision of 
the CAT NMS Plan with regard to its Industry Members. Specifically, 
paragraph (a) of Proposed Rule 4.8 requires each Industry Member to 
submit to the Central Repository the Firm Designated ID, Customer 
Account Information and Customer Identifying Information for each of 
its Customers with an Active Account prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in Rule 4.13. Paragraph (b) of Proposed 
Rule 4.8 requires each Industry Member to submit to the Central 
Repository any updates, additions or other changes to the Firm 
Designated ID, Customer Account Information and Customer Identifying 
Information for each of its Customers with an Active Account on a daily 
basis. Paragraph (c) of Proposed Rule 4.8 requires each Industry 
Member, on a periodic basis as designated by the Plan Processor and 
approved by the Operating Committee, to submit to the Central 
Repository a complete set of Firm Designated IDs, Customer Account 
Information and Customer Identifying Information for each of its 
Customers with an Active Account. This periodic refresh is intended to 
ensure that the Central Repository has the most current information 
identifying a Customer. The Exchange intends to announce to its

[[Page 9775]]

Industry Members when such a periodic refresh is required by the Plan 
Processor and the Operating Committee via Regulatory Circular.
    Finally, paragraph (d) of Proposed Rule 4.8 addresses the 
correction of erroneous Customer data reported to the Central 
Repository to ensure an accurate audit trail. Paragraph (d) requires, 
for each Industry Member for which errors in Firm Designated ID, 
Customer Account Information and Customer Identifying Information for 
each of its Customers with an Active Account submitted to the Central 
Repository have been identified by the Plan Processor or otherwise, 
such Member to submit corrected data to the Central Repository by 5:00 
p.m. Eastern Time on T+3. This requirement implements the error 
correction requirement set forth in Appendix C of the CAT NMS Plan.
(v) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository information sufficient to identify 
such Industry Member, including CRD number and LEI, if such LEI has 
been obtained, in accordance with the Existing Identifier Approach 
discussed above. The Exchange proposes Rule 4.9 (Consolidated Audit 
Trail--Industry Member Information Reporting) to implement this 
provision of the CAT NMS Plan with regard to its Industry Members. 
Specifically, Proposed Rule 4.9 requires each Industry Member to submit 
to the Central Repository information sufficient to identify such 
Industry Member, including CRD number and LEI, if such LEI has been 
obtained, prior to such Industry Member's commencement of reporting to 
the Central Repository and in accordance with the deadlines set forth 
in Rule 4.13, and keep such information up to date as necessary.
(vi) Time Stamps
    SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for 
time stamps used by CAT Reporters in recording and reporting data to 
the CAT.\26\ To comply with this provision, Section 6.8(b) of the Plan 
sets forth time stamp requirements for Industry Members. To implement 
this provision with regard to its Industry Members, the Exchange 
proposes new Rule 4.10 (Consolidated Audit Trail--Time Stamps) to 
require its Industry Members to comply with the time stamp requirements 
of the Plan.
---------------------------------------------------------------------------

    \26\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    Paragraph (a) of Proposed Rule 4.10 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of Proposed Rule 4.10 requires each Industry Member to 
record and report Industry Member Data to the Central Repository with 
time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of 
Proposed Rule 4.10. To the extent that any Industry Member's order 
handling or execution systems utilize time stamps in increments finer 
than milliseconds, paragraph (a)(2) of Proposed Rule 4.10 requires such 
Industry Member to record and report Industry Member Data to the 
Central Repository with time stamps in such finer increment, subject to 
paragraph (b) of Proposed Rule 4.10 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of Proposed Rule 4.10 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of Proposed Rule 4.10 permits each 
Industry Member to record and report Manual Order Events to the Central 
Repository in increments up to and including one second, provided that 
each Industry Member is required to record and report the time when a 
Manual Order Event has been captured electronically in an order 
handling and execution system of such Member (``Electronic Capture 
Time'') in milliseconds. In addition, paragraph (b)(2) of Proposed Rule 
4.10 permits each Industry Member to record and report the time of 
Allocation Reports in increments up to and including one second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 4.11 (Consolidated Audit Trail--Clock Synchronization 
Rule Violations) describes potential violations of the clock 
synchronization time period requirements set forth in the Proposed 
Rules 4.5 through 4.16. Proposed Rule 4.11 states that an Industry 
Member that engages in a pattern or practice of reporting Reportable 
Events outside of the required clock synchronization time period as set 
forth in the Proposed Rules 4.5 through 4.16 without reasonable 
justification or exceptional circumstances may be considered in 
violation of this Rule. This provision implements the requirements of 
Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to 
provide that a pattern or practice of reporting events outside of the 
required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of SEC Rule 613 or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 4.12 (Consolidated Audit Trail--Connectivity and Data 
Transmission) addresses connectivity and data transmission requirements 
related to the CAT. Paragraph (a) of Proposed Rule 4.12 describes the 
format(s) for reporting Industry Member Data to the Central Repository, 
thereby implementing the formatting requirements as set forth in 
Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of 
Proposed Rule 4.12 requires each Industry Member to transmit data as 
required under the CAT NMS Plan to the Central Repository utilizing 
such format(s) as may be provided by the Plan Processor and approved by 
the Operating Committee.
    Paragraph (b) of Proposed Rule 4.12 addresses connectivity 
requirements related to the CAT. Paragraph (b) of Proposed Rule 4.12 
requires each Industry Member to connect to the Central Repository 
using a secure method(s), including, but not limited to, private 
line(s) and virtual private network connection(s). This provision 
implements the connectivity requirements set forth in Section 4 of 
Appendix D to the CAT NMS Plan.
    Paragraph (c) permits Industry Members to use CAT Reporting Agents 
to fulfill their data reporting obligations related to the CAT. 
Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS 
Reporting Members to enter into agreements with Reporting Agents to 
fulfill the OATS obligations of the OATS Reporting Member. 
Specifically, Paragraph (c)(1) of Proposed Rule 4.12 states that any 
Industry Member may enter into an agreement with a CAT Reporting Agent 
pursuant to which the CAT Reporting Agent agrees to fulfill the 
obligations of such Industry Member under the Proposed Rules 4.5 
through 4.16. Any such agreement must be evidenced in writing, which 
specifies the respective functions and responsibilities of each party 
to the agreement that are required to effect full compliance with the 
requirements of the Proposed Rules 4.5 through 4.16. The Exchange notes 
that, currently, no standardized form agreement for CAT Reporting Agent 
arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 4.12 
requires that all written documents evidencing an agreement with a CAT 
Reporting Agent be maintained by each party to the agreement. Paragraph 
(c)(3) states that each Industry Member

[[Page 9776]]

remains primarily responsible for compliance with the requirements of 
the Proposed Rules 4.5 through 4.16, notwithstanding the existence of 
an agreement described in paragraph (c) of Proposed Rule 4.12.
(ix) Development and Testing
    The Exchange proposes Rule 4.13 (Consolidated Audit Trail--
Development and Testing) to address requirements for Industry Members 
related to CAT development and testing. Paragraph (a) of Proposed Rule 
4.13 sets forth the testing requirements and deadlines for Industry 
Members to develop and commence reporting to the Central Repository. 
These requirements are set forth in Appendix C to the CAT NMS Plan.
    Paragraph (a)(1) sets forth the deadlines related to connectivity 
and acceptance testing. Industry Members (other than Small Industry 
Members) are required to begin connectivity and acceptance testing with 
the Central Repository no later than August 15, 2018, and Small 
Industry Members are required to begin connectivity and acceptance 
testing with the Central Repository no later than August 15, 2019.
    Paragraph (a)(2) sets forth the deadlines related to reporting 
Customer and Industry Member information. Paragraph (a)(2)(i) requires 
Industry Members (other than Small Industry Members) to begin reporting 
Customer and Industry Member information, as required by Rules 4.8(a) 
and 4.9, respectively, to the Central Repository for processing no 
later than October 15, 2018. Paragraph (a)(2)(ii) requires Small 
Industry Members to begin reporting Customer and Industry Member 
information, as required by Rules 4.8(a) and 4.9, respectively, to the 
Central Repository for processing no later than October 15, 2019.
    Paragraph (a)(3) sets forth the deadlines related to the submission 
of order data. Under paragraph (a)(3)(i), Industry Members (other than 
Small Industry Members) are permitted, but not required, to submit 
order data for testing purposes beginning no later than May 15, 2018. 
In addition, Industry Members (other than Small Industry Members) are 
required to participate in the coordinated and structured testing of 
order submission, which will begin no later than August 15, 2018. Under 
paragraph (a)(3)(ii), Small Industry Members are permitted, but not 
required, to submit order data for testing purposes beginning no later 
than May 15, 2019. In addition, Small Industry Members are required to 
participate in the coordinated and structured testing of order 
submission, which will begin no later than August 15, 2019.
    Paragraph (a)(4) states that Industry Members are permitted, but 
not required to, submit Quote Sent Times on Options Market Maker 
quotes, beginning no later than October 15, 2018.
    Paragraph (b) of Proposed Rule 4.13 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\27\ Specifically, 
Proposed Rule 4.13 requires that each Industry Member participate in 
testing related to the Central Repository, including any industry-wide 
disaster recovery testing, pursuant to the schedule established 
pursuant to the CAT NMS Plan. The Exchange intends to announce to its 
Industry Members the schedule established pursuant to the CAT NMS Plan 
via Regulatory Circular.
---------------------------------------------------------------------------

    \27\ Approval Order at 84725.
---------------------------------------------------------------------------

(x) Recordkeeping
    Proposed Rule 4.14 (Consolidated Audit Trail--Recordkeeping) sets 
forth the recordkeeping obligations related to the CAT for Industry 
Members. Proposed Rule 4.14 requires each Industry Member to maintain 
and preserve records of the information required to be recorded in 
accordance with the Proposed Rules 4.5 through 4.16, for the period of 
time and accessibility specified in SEC Rule 17a-4(b). The records 
required to be maintained and preserved in accordance with Proposed 
Rules 4.5 through 4.16, may be immediately produced or reproduced on 
``micrographic media'' as defined in SEC Rule 17a-4(f)(1)(i) or by 
means of ``electronic storage media'' as defined in SEC Rule 17a-
4(f)(1)(ii) that meet the conditions set forth in SEC Rule 17a-4(f) and 
be maintained and preserved for the required time in that form. 
Proposed Rule 4.14 is based on FINRA Rule 7440(a)(5), which sets forth 
the recordkeeping requirements related to OATS.
(xi) Timely, Accurate and Complete Data
    SEC Rule 613 and the CAT NMS Plan emphasize the importance of the 
timeliness, accuracy, completeness and integrity of the data submitted 
to the CAT.\28\ Accordingly, Proposed Rule 4.15 (Consolidated Audit 
Trail--Timely, Accurate and Complete Data) implements this requirement 
with regard to Industry Members. Paragraph (a) of Proposed Rule 4.15 
requires that Industry Members record and report data to the Central 
Repository as required by the Proposed Rules 4.5 through 4.16 in a 
manner that ensures the timeliness, accuracy, integrity and 
completeness of such data.
---------------------------------------------------------------------------

    \28\ See SEC Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the 
CAT NMS Plan.
---------------------------------------------------------------------------

    In addition, without limiting the general requirement as set forth 
in paragraph (a), paragraph (b) of Proposed Rule 4.15 requires Industry 
Members to accurately provide the LEIs in their records as required by 
the Proposed Rules 4.5 through 4.16 and states that Industry Members 
may not knowingly submit inaccurate LEIs to the Central Repository. 
Paragraph (b) notes, however, that this requirement does not impose any 
additional due diligence obligations on Industry Members with regard to 
LEIs for CAT purposes. Accordingly, this provision does not impose any 
due diligence obligations beyond those that may exist today with 
respect to information associated with an LEI. Although Industry 
Members will not be required to perform additional due diligence with 
regard to the LEIs for CAT purposes, Industry Members will be required 
to accurately provide the LEIs in their records and may not knowingly 
submit inaccurate LEIs to the CAT. Paragraph (b) is consistent with the 
SEC's statements in the Approval Order for the CAT NMS Plan regarding 
an Industry Member's obligations regarding LEIs.\29\
---------------------------------------------------------------------------

    \29\ Approval Order at 84745.
---------------------------------------------------------------------------

    Paragraph (c) states that, if an Industry Member reports data to 
the Central Repository with errors such that its error percentage 
exceeds the maximum Error Rate established by the Operating Committee 
pursuant to the CAT NMS Plan, then such Industry Member would not be in 
compliance with the Rules 4.5 through 4.16. As discussed above, the 
initial maximum Error Rate is 5%, although the Error Rate is expected 
to be reduced over time. The Exchange intends to announce to its 
Industry Members changes to the Error Rate established pursuant to the 
CAT NMS Plan via Regulatory Circular.
    Furthermore, paragraph (d) of Proposed Rule 4.15 addresses 
Compliance Thresholds related to reporting data to the CAT. Proposed 
Rule 4.15 states that each Industry Member is required to meet a 
separate compliance threshold which will be an Industry Member-specific 
rate that may be used as the basis for further review or investigation 
into the Industry Member's performance with regard to the CAT (the 
``Compliance Thresholds''). Compliance Thresholds will compare an 
Industry Member's error rate to the aggregate Error Rate

[[Page 9777]]

over a period of time to be defined by the Operating Committee. 
Compliance Thresholds will be set by the Operating Committee, and will 
be calculated at intervals to be set by the Operating Committee.\30\ 
Compliance Thresholds will include compliance with the data reporting 
and clock synchronization requirements. Proposed Rule 4.15 states that 
an Industry Member's performance with respect to its Compliance 
Threshold will not signify, as a matter of law, that such Industry 
Member has violated the Proposed Rules 4.5 through 4.16.
---------------------------------------------------------------------------

    \30\ Appendix C of the CAT NMS Plan.
---------------------------------------------------------------------------

(xii) Compliance Dates
    Proposed Rule 4.16 (Consolidated Audit Trail--Compliance Dates) 
sets forth the compliance dates for the various provisions of the 
Proposed Rules 4.5 through 4.16. Paragraphs (b) and (c) of this Rule 
set forth the additional details with respect to the compliance date of 
the Proposed Rules 4.5 through 4.16. Unless otherwise noted, the 
Proposed Rules 4.5 through 4.16 will be fully effective upon approval 
by the Commission and Members must comply with their terms.
    Paragraph (b) of Proposed Rule 4.16 establishes the compliance 
dates for the clock synchronization requirements as set forth in 
Proposed Rule 4.6. Paragraph (b)(1) states that each Industry Member 
shall comply with Rule 4.6 with regard to Business Clocks that capture 
time in milliseconds commencing on or before March 15, 2017. Paragraph 
(b)(2) states that each Industry Member shall comply with Rule 4.6 with 
regard to Business Clocks that do not capture time in milliseconds 
commencing on or before February 19, 2018. The compliance date set 
forth in paragraph (b)(1) reflects the exemptive relief requested by 
the Participants with regard to the clock synchronization requirements 
related to Business Clocks that do not capture time in 
milliseconds.\31\
---------------------------------------------------------------------------

    \31\ See Letter from Participants to Brent J. Fields, Secretary, 
U.S. Securities and Exchange Commission, dated January 17, 2017, 
requesting exemptive relief from SEC Rule 613(a)(3)(iii) and Section 
6.7(a)(ii) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Paragraph (c) of Proposed Rule 4.16 establishes the compliance 
dates for the data recording and reporting requirements for Industry 
Members. Paragraph (c)(1) requires each Industry Member (other than 
Small Industry Members) to record and report the Industry Member Data 
to the Central Repository by November 15, 2018. Paragraph (c)(2) 
requires that each Industry Member that is a Small Industry Member to 
record and report the Industry Member Data to the Central Repository by 
November 15, 2019. Such compliance dates are consistent with the 
compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and 
Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act,\32\ which require, 
among other things, that the Exchange's 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, and Section 6(b)(8) of the Act,\33\ 
which requires that the Exchange's rules not impose any burden on 
competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies the provisions of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of the purposes of the Act.'' \34\ To the extent that this 
proposal implements, interprets or clarifies the Plan and applies 
specific requirements to Industry Members, the Exchange believes that 
this proposal furthers the objectives of the Plan, as identified by the 
SEC, and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \34\ Approval Order at 84697.
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that the proposed rule change implements provisions of the CAT 
NMS Plan, and is designed to assist the Exchange in meeting its 
regulatory obligations pursuant to the Plan. The Exchange also notes 
that the Proposed Rules 4.5 through 4.16 implement provisions of the 
CAT NMS Plan will apply equally to all firms that trade NMS Securities 
and OTC Equity Securities. In addition, all national securities 
exchanges and FINRA are proposing similar rules to apply the 
requirements of the CAT NMS Plan to their members. Therefore, this is 
not a competitive rule filing, and, therefore, it does not impose a 
burden on competition.

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

    Written comments were neither solicited nor received.

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 Exchange 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-BatsEDGX-2017-08 on the subject line.

2. 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-BatsEDGX-2017-08. 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

[[Page 9778]]

communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549 on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
the filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-BatsEDGX-2017-08 and should be submitted on or before 
March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02554 Filed 2-7-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                     9765

                                                    IV. Solicitation of Comments                            matters that would otherwise be                       SECURITIES AND EXCHANGE
                                                      Interested persons are invited to                     performed by multiple SROs. The plan                  COMMISSION
                                                    submit written data, views, and                         promotes efficiency by reducing costs to
                                                                                                                                                                  [Release No. 34–79949; File No. SR–
                                                    arguments concerning the foregoing.                     firms that are members of more than one
                                                                                                                                                                  BatsEDGX–2017–08]
                                                    Comments may be submitted by any of                     of the SRO participants. In addition,
                                                    the following methods:                                  because the SRO participants coordinate               Self-Regulatory Organizations; Bats
                                                                                                            their regulatory functions in accordance              EDGX Exchange, Inc.; Notice of Filing
                                                    Electronic Comments                                     with the plan, the plan promotes, and                 of a Proposed Rule Change To Adopt
                                                      • Use the Commission’s Internet                       will continue to promote, investor                    Rules 4.5 Through 4.16 To Implement
                                                    comment form (http://www.sec.gov/                       protection.                                           the Compliance Rule Regarding the
                                                    rules/sro.shtml); or                                       Under paragraph (c) of Rule 17d–2,                 National Market System Plan
                                                      • Send an email to rule-comments@                     the Commission may, after appropriate                 Governing the Consolidated Audit Trail
                                                    sec.gov. Please include File Number S7–                 notice and comment, declare a plan, or
                                                    966 on the subject line.                                                                                      February 2, 2017.
                                                                                                            any part of a plan, effective. In this
                                                                                                            instance, the Commission believes that                   Pursuant to Section 19(b)(1) of the
                                                    Paper Comments                                                                                                Securities Exchange Act of 1934 (the
                                                                                                            appropriate notice and comment can
                                                       • Send paper comments in triplicate                  take place after the proposed                         ‘‘Act’’),1 and Rule 19b–4 thereunder,2
                                                    to Secretary, Securities and Exchange                   amendment is effective. The primary                   notice is hereby given that on January
                                                    Commission, 100 F Street NE.,                           purpose of the amendment is to add                    30, 2017, Bats EDGX Exchange, Inc. (the
                                                    Washington, DC 20549–1090.                              MIAX PEARL as a participant to the                    ‘‘Exchange’’ or ‘‘EDGX’’) filed with the
                                                    All submissions should refer to File                    Plan. By declaring it effective today, the            Securities and Exchange Commission
                                                    Number S7–966. This file number                         amended Plan can become effective and                 (‘‘Commission’’) the proposed rule
                                                    should be included on the subject line                  be implemented without undue delay.24                 change as described in Items I, II and III
                                                    if email is used. To help the                           The Commission notes that the prior                   below, which Items have been prepared
                                                    Commission process and review your                      version of this plan immediately prior to             by the Exchange.3 The Commission is
                                                    comments more efficiently, please use                   this proposed amendment was                           publishing this notice to solicit
                                                    only one method. The Commission will                    published for comment and the                         comments on the proposed rule change
                                                    post all comments on the Commission’s                   Commission did not receive any                        from interested persons.
                                                    Internet Web site (http://www.sec.gov/                  comments thereon.25 Furthermore, the                  I. Self-Regulatory Organization’s
                                                    rules/sro.shtml). Copies of the                         Commission does not believe that the                  Statement of the Terms of Substance of
                                                    submission, all subsequent                              amendment to the plan raises any new                  the Proposed Rule Change
                                                    amendments, all written statements                      regulatory issues that the Commission
                                                                                                            has not previously considered.                           The Exchange filed a proposal to
                                                    with respect to the proposed plan that
                                                                                                                                                                  adopt Rules 4.5 through 4.16 to
                                                    are filed with the Commission, and all
                                                                                                            VI. Conclusion                                        implement the compliance rule
                                                    written communications relating to the
                                                                                                                                                                  (‘‘Compliance Rule’’) regarding the
                                                    proposed plan between the Commission                       This order gives effect to the amended             National Market System Plan Governing
                                                    and any person, other than those that                   Plan submitted to the Commission that                 the Consolidated Audit Trail (the ‘‘CAT
                                                    may be withheld from the public in                      is contained in File No. S7–966.                      NMS Plan’’ or ‘‘Plan’’).4
                                                    accordance with the provisions of 5                        It is therefore ordered, pursuant to                  The text of the proposed rule change
                                                    U.S.C. 552, will be available for Web                   Section 17(d) of the Act, that the Plan,              is available at the Exchange’s Web site
                                                    site viewing and printing in the                        as amended, filed with the Commission                 at www.bats.com, the principal office of
                                                    Commission’s Public Reference Room,                     pursuant to Rule 17d–2 on January 13,                 the Exchange, and at the Commission’s
                                                    100 F Street NE., Washington, DC                        2017, is hereby approved and declared                 Public Reference Room.
                                                    20549, on official business days                        effective.
                                                    between the hours of 10:00 a.m. and                                                                           II. Self-Regulatory Organization’s
                                                    3:00 p.m. Copies of the plan also will be                  It is further ordered that those SRO               Statement of the Purpose of, and
                                                    available for inspection and copying at                 participants that are not the DOEA as to              Statutory Basis for, the Proposed Rule
                                                    the principal offices of FINRA and                      a particular common member are                        Change
                                                    MIAX PEARL. All comments received                       relieved of those regulatory
                                                                                                            responsibilities allocated to the common                In its filing with the Commission, the
                                                    will be posted without change; the                                                                            Exchange included statements
                                                    Commission does not edit personal                       member’s DOEA under the amended
                                                                                                            Plan to the extent of such allocation.                concerning the purpose of and basis for
                                                    identifying information from                                                                                  the proposed rule change and discussed
                                                    submissions. You should submit only                       For the Commission, by the Division of
                                                                                                                                                                  any comments it received on the
                                                    information that you wish to make                       Trading and Markets, pursuant to delegated
                                                                                                            authority.26                                          proposed rule change. The text of these
                                                    available publicly. All submissions                                                                           statements may be examined at the
                                                    should refer to File Number S7–966 and                  Robert W. Errett,
                                                                                                                                                                  places specified in Item IV below. The
                                                    should be submitted on or before March                  Deputy Secretary.
                                                                                                                                                                  Exchange has prepared summaries, set
                                                    1, 2017.                                                [FR Doc. 2017–02547 Filed 2–7–17; 8:45 am]            forth in Sections A, B, and C below, of
                                                                                                            BILLING CODE 8011–01–P
                                                    V. Discussion
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                                                                                                                                                                    1 15U.S.C. 78s(b)(1).
                                                      The Commission continues to believe                     24 On  December 13, 2016, the Commission              2 17CFR 240.19b–4.
                                                    that the proposed plan is an                            approved MIAX PEARL’s application for                   3 The Exchange originally filed this proposed rule
                                                    achievement in cooperation among the                    registration as a national securities exchange. See   change on January 17, 2017 under File No. SR–
                                                    SRO participants. The Plan, as                          Securities Exchange Act Release No. 79543, 81 FR      BatsEDGX–2017–06, and the Exchange
                                                                                                            92901 (December 20, 2016).                            subsequently withdrew that filing on January 30,
                                                    amended, will reduce unnecessary                          25 See Securities Exchange Act Release No. 77148    2017 and filed this proposed rule change.
                                                    regulatory duplication by allocating to                 (February 16, 2016), 81 FR 8775 (February 22,           4 Unless otherwise specified, capitalized terms
                                                    the designated SRO the responsibility                   2016).                                                used in this rule filing are defined as set forth
                                                    for certain options-related sales practice                26 17 CFR 200.30–3(a)(34).                          herein or in the CAT NMS Plan.



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                                                    9766                        Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    the most significant parts of such                       4.5 through 4.16 set forth the                        require each Industry Member to assign
                                                    statements.                                              Compliance Rule to require Industry                   a unique Firm Designated ID to each
                                                                                                             Members to comply with the provisions                 Customer. As the Firm Designated ID,
                                                    (A) Self-Regulatory Organization’s
                                                                                                             of the CAT NMS Plan. The Proposed                     Industry Members would be permitted
                                                    Statement of the Purpose of, and
                                                                                                             Rules 4.5 through 4.16 include twelve                 to use an account number or any other
                                                    Statutory Basis for, the Proposed Rule
                                                                                                             Proposed Rules covering the following                 identifier defined by the firm, provided
                                                    Change
                                                                                                             areas: (1) Definitions; (2) clock                     each identifier is unique across the firm
                                                    1. Purpose                                               synchronization; (3) Industry Member                  for each business date (i.e., a single firm
                                                       Bats BYX Exchange, Inc., Bats BZX                     Data reporting; (4) Customer                          may not have multiple separate
                                                    Exchange, Inc., Bats EDGA Exchange,                      information reporting; (5) Industry                   customers with the same identifier on
                                                    Inc., Bats EDGX Exchange, Inc., BOX                      Member information reporting; (6) time                any given date). Prior to their
                                                    Options Exchange LLC, C2 Options                         stamps; (7) clock synchronization rule                commencement of reporting to the CAT,
                                                    Exchange, Incorporated, Chicago Board                    violations; (8) connectivity and data                 Industry Members would submit an
                                                    Options Exchange, Incorporated,                          transmission; (9) development and                     initial set of Customer information to
                                                    Chicago Stock Exchange, Inc., Financial                  testing; (10) recordkeeping; (11) timely,             the Central Repository, including the
                                                    Industry Regulatory Authority, Inc.,                     accurate and complete data; and (12)                  Firm Designated ID, Customer
                                                    International Securities Exchange, LLC,                  compliance dates. Each of these                       Identifying Information and Customer
                                                    Investors’ Exchange LLC, ISE Gemini,                     Proposed Rules are discussed in detail                Account Information (which may
                                                    LLC, ISE Mercury, LLC, Miami                             below.                                                include, as applicable, the Customer’s
                                                    International Securities Exchange LLC,                                                                         name, address, date of birth, individual
                                                                                                             (i) Definitions
                                                    MIAX PEARL, LLC, NASDAQ BX, Inc.,                                                                              tax payer identifier number (‘‘ITIN’’)/
                                                                                                                Proposed Rule 4.5 (Consolidated                    social security number (‘‘SSN’’),
                                                    NASDAQ PHLX LLC, The NASDAQ
                                                                                                             Audit Trail—Definitions) sets forth the               individual’s role in the account (e.g.,
                                                    Stock Market LLC, National Stock
                                                                                                             definitions for the terms used in the                 primary holder, joint holder, guardian,
                                                    Exchange, Inc., New York Stock
                                                                                                             Proposed Rules 4.5 through 4.16. Each                 trustee, person with power of attorney)
                                                    Exchange LLC, NYSE MKT LLC, and
                                                                                                             of the defined terms in Proposed Rule                 and LEI and/or Larger Trader ID
                                                    NYSE Arca, Inc. (collectively, the
                                                                                                             4.5 is discussed in detail in this section.           (‘‘LTID’’)). This process is referred to as
                                                    ‘‘Participants’’) filed with the
                                                    Commission, pursuant to Section 11A of                   (A) Account Effective Date                            the customer definition process.
                                                    the Exchange Act 5 and Rule 608 of                                                                                In accordance with the Customer
                                                                                                             (I) Customer Information Approach                     Information Approach, Industry
                                                    Regulation NMS thereunder,6 the CAT
                                                    NMS Plan.7 The Participants filed the                       SEC Rule 613 requires that numerous                Members would be required to report
                                                    Plan to comply with Rule 613 of                          data elements be reported to the CAT to               only the Firm Designated ID for each
                                                    Regulation NMS under the Exchange                        ensure there is sufficient information to             new order submitted to the Central
                                                    Act. The Plan was published for                          create the lifecycle of an order, and                 Repository, rather than the ‘‘Customer-
                                                    comment in the Federal Register on                       provide regulators with sufficient detail             ID’’ with individual order events.
                                                    May 17, 2016,8 and approved by the                       about an order to perform their                       Within the Central Repository, each
                                                    Commission, as modified, on November                     regulatory duties. Certain required                   Customer would be uniquely identified
                                                    15, 2016.9                                               elements are intended to ensure that the              by identifiers or a combination of
                                                       The Plan is designed to create,                       regulators can identify the Customer’s                identifiers such as ITIN/SSN, date of
                                                    implement and maintain a consolidated                    associated with orders. For example,                  birth, and as applicable, LEI and LTID.
                                                    audit trail (‘‘CAT’’) that would capture                 SEC Rule 613(c)(7)(i)(A) requires an                  The Plan Processor would be required to
                                                    customer and order event information                     Industry Member to report the                         use these unique identifiers to map
                                                    for orders in NMS Securities and OTC                     ‘‘Customer-ID’’ for each Customer for                 orders to specific Customers across all
                                                    Equity Securities, across all markets,                   the original receipt or origination of an             Industry Members and Participants. To
                                                    from the time of order inception through                 order. ‘‘Customer-ID’’ is defined in SEC              ensure information identifying a
                                                    routing, cancellation, modification, or                  Rule 613(j)(5) to mean ‘‘with respect to              Customer is up to date, Industry
                                                    execution in a single consolidated data                  a customer, a code that uniquely and                  Members would be required to submit
                                                    source. Each Participant is required to                  consistently identifies such customer for             to the Central Repository daily and
                                                    enforce compliance by its Industry                       purposes of providing data to the                     periodic updates for reactivated
                                                    Members, as applicable, with the                         Central Repository.’’ SEC Rule 613(c)(8)              accounts, newly established accounts,
                                                    provisions of the Plan, by adopting a                    requires Industry Members to use the                  and revised Firm Designated IDs or
                                                    Compliance Rule applicable to their                      same Customer-ID for each Customer.                   associated reportable Customer
                                                    Industry Members.10 As is described                      The SEC granted the Participants                      information.
                                                    more fully below, the Proposed Rules                     exemptive relief to permit the use of an              (II) Definition of Account Effective Date
                                                                                                             alternative approach to the requirement
                                                      5 15                                                   that an Industry Member report a                         In connection with the Customer
                                                            U.S.C. 78k–1.
                                                      6 17  CFR 242.608.                                     Customer-ID for every Customer upon                   Information Approach, Industry
                                                       7 See Letter from the Participants to Brent J.        original receipt or origination.11 The                Members would be required to report
                                                    Fields, Secretary, Commission, dated September 30,       alternative approach is called the                    Customer Account Information to the
                                                    2014; and Letter from Participants to Brent J. Fields,
                                                                                                             Customer Information Approach.                        Central Repository. ‘‘Customer Account
                                                    Secretary, Commission, dated February 27, 2015.                                                                Information’’ is defined in SEC Rule
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                                                    On December 24, 2015, the Participants submitted            Under the Customer Information
                                                    an amendment to the CAT NMS Plan. See Letter             Approach, the CAT NMS Plan would                      613(j)(4) to ‘‘include, but not be limited
                                                    from Participants to Brent J. Fields, Secretary,                                                               to, account number, account type,
                                                    Commission, dated December 23, 2015.                        11 See Securities Exchange Act Release No. 77265   customer type, date account opened,
                                                       8 Securities Exchange Act Rel. No. 77724 (Apr.
                                                                                                             (March 1, 2016), 81 FR 11856 (March 7, 2016)          and large trader identifier (if
                                                    27, 2016), 81 FR 30614 (May 17, 2016).                   (‘‘Exemption Order’’). See also Letter from
                                                       9 Securities Exchange Act Rel. No. 79318 (Nov.
                                                                                                                                                                   applicable).’’ Therefore, when reporting
                                                                                                             Participants to Brent J. Fields, Secretary,
                                                    15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval       Commission, dated January 30, 2015 at 12
                                                                                                                                                                   Customer Account Information, an
                                                    Order’’).                                                (‘‘Exemptive Request Letter’’); and CAT NMS Plan      Industry Member is required to report
                                                       10 See SEC Rule 613(g)(1).                            at Appendix C, Section A.1(a)(iii).                   the date an account was opened. The


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                    9767

                                                    Participants requested and received an                  multiple dates associated with an                     subaccount to which an execution is
                                                    exemption to allow an ‘‘Account                         account established prior to November                 allocated, as is required by SEC Rule
                                                    Effective Date’’ to be reported in lieu of              15, 2018 for Industry Members other                   613.12 Under SEC Rule 613, regulators
                                                    an account open date in certain limited                 than Small Industry Members, or prior                 would be able to link the subaccount to
                                                    circumstances. The definition of                        to November 15, 2019 for Small                        which an allocation was made to a
                                                    ‘‘Account Effective Date’’ as set forth in              Industry Members, the earliest available              specific order. In contrast, under the
                                                    Paragraph (a) of Proposed Rule 4.5                      date.                                                 Allocation Report Approach, regulators
                                                    describes those limited circumstances in                   Paragraph (a)(5) states that an                    would only be able to link an allocation
                                                    which an Industry Member may report                     ‘‘Account Effective Date’’ means, with                to the account to which it was made,
                                                    an ‘‘Account Effective Date’’ rather than               regard to Industry Member proprietary                 and not to a specific order.
                                                    the account open date. The proposed                     accounts established prior to November
                                                    definition is the same as the definition                                                                      (II) Definition of Allocation Report
                                                                                                            15, 2018 for Industry Members other
                                                    of ‘‘Account Effective Date’’ set forth in              than Small Industry Members, or prior                    To assist in implementing the
                                                    Section 1.1 of the CAT NMS Plan,                        to November 15, 2019 for Small                        Allocation Report Approach, paragraph
                                                    provided, however, that specific dates                  Industry Members: (1) The date                        (c) of Proposed Rule 4.5 defines an
                                                    have replaced the descriptions of those                 established for the account in the                    ‘‘Allocation Report.’’ Specifically, an
                                                    dates set forth in Section 1.1 of the Plan.             Industry Member or in a system of the                 ‘‘Allocation Report’’ means a report
                                                       Specifically, Paragraph (a)(1) defines               Industry Member or (2) the date when                  made to the Central Repository by an
                                                    ‘‘Account Effective Date to mean, with                  proprietary trading began in the account              Industry Member that identifies the
                                                    regard to those circumstances in which                  (i.e., the date on which the first orders             Firm Designated ID for any account(s),
                                                    an Industry Member has established a                    were submitted from the account). With                including subaccount(s), to which
                                                    trading relationship with an institution                regard to paragraphs (a)(2)–(5), the                  executed shares are allocated and
                                                    but has not established an account with                 Account Effective Date will be no later               provides the security that has been
                                                    that institution: (1) When the trading                  than the date trading occurs at the                   allocated, the identifier of the firm
                                                    relationship was established prior to                   Industry Member or in the Industry                    reporting the allocation, the price per
                                                    November 15, 2018 for Industry                          Member’s system.                                      share of shares allocated, the side of
                                                    Members other than Small Industry                                                                             shares allocated, the number of shares
                                                    Members, or prior to November 15, 2019                  (B) Active Account                                    allocated to each account, and the time
                                                    for Small Industry Members, either (a)                     Under the Customer Information                     of the allocation; provided, for the
                                                    the date the relationship identifier was                Approach, Industry Members are                        avoidance of doubt, any such Allocation
                                                    established within the Industry                         required to report Customer Identifying               Report shall not be required to be linked
                                                    Member; (b) the date when trading                       Information and Customer Account                      to particular orders or executions. This
                                                    began (i.e., the date the first order was               Information for only those accounts that              is the same definition as set forth in
                                                    received) using the relevant relationship               are active. This will alleviate the need              Section 1.1 of the CAT NMS Plan.
                                                    identifier; or (c) if both dates are                    for Industry Members to update such
                                                    available, the earlier date will be used                                                                      (D) Business Clock
                                                                                                            information for non-active accounts, but
                                                    to the extent that the dates differ; or (2)             still ensure that the Central Repository                To create the required audit trail,
                                                    when the trading relationship was                       will collect audit trail data for Customer            Industry Members are required to record
                                                    established on or after November 15,                    accounts that have any Reportable                     the date and time of various Reportable
                                                    2018 for Industry Members other than                    Events. Accordingly, paragraph (b) of                 Events to the Central Repository.
                                                    Small Industry Members, or on or after                  Proposed Rule 4.5 defines an ‘‘Active                 Industry Members will use ‘‘Business
                                                    November 15, 2019 for Small Industry                    Account’’ as an account that has had                  Clocks’’ to record such dates and times.
                                                    Members, the date the Industry Member                   activity in Eligible Securities within the            Accordingly, paragraph (d) of Proposed
                                                    established the relationship identifier,                last six months. This is the same                     Rule 4.5 defines the term ‘‘Business
                                                    which would be no later than the date                   definition as set forth in Section 1.1 of             Clock’’ as a clock used to record the date
                                                    the first order was received.                           the CAT NMS Plan.                                     and time of any Reportable Event
                                                       Paragraph (a)(2) of Proposed Rule 4.5                                                                      required to be reported under Rules 4.5
                                                    states that an ‘‘Account Effective Date’’               (C) Allocation Report                                 through 4.16. This is the same definition
                                                    means, where an Industry Member                         (I) Allocation Report Approach                        as set forth in Section 1.1 of the CAT
                                                    changes back office providers or                                                                              NMS Plan, except the Exchange
                                                    clearing firms prior to November 15,                       SEC Rule 613(c)(7)(vi)(A) requires                 proposes to replace the phrase ‘‘under
                                                    2018 for Industry Members other than                    each Industry Member to record and                    SEC Rule 613’’ at the end of the
                                                    Small Industry Members, or prior to                     report to the Central Repository ‘‘the                definition in Section 1.1 of the Plan
                                                    November 15, 2019 for Small Industry                    account number for any subaccounts to                 with the phrase ‘‘under Rules 4.5
                                                    Members, the date an account was                        which the execution is allocated (in                  through 4.16.’’ This change is intended
                                                    established at the relevant Industry                    whole or in part).’’ The SROs requested               to recognize that the Industry Members’
                                                    Member, either directly or via transfer.                and received from the SEC exemptive                   obligations with regard to the CAT are
                                                       Paragraph (a)(3) states that an                      relief from SEC Rule 613 for an                       set forth in Rules 4.5 through 4.16.
                                                    ‘‘Account Effective Date’’ means, where                 alternative to this approach (‘‘Allocation
                                                    an Industry Member acquires another                     Report Approach’’). The Allocation                    (E) CAT
                                                    Industry Member prior to November 15,                   Report Approach would permit Industry
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                                                                                                                                    Paragraph (e) of Proposed Rule 4.5
                                                    2018 for Industry Members other than                    Members to record and report to the                   defines the term ‘‘CAT’’ to mean the
                                                    Small Industry Members, or prior to                     Central Repository an Allocation Report               consolidated audit trail contemplated by
                                                    November 15, 2019 for Small Industry                    that includes, among other things, the                SEC Rule 613. This is the same
                                                    Members, the date an account was                        Firm Designated ID for any account(s) to              definition as set forth in Section 1.1 of
                                                    established at the relevant Industry                    which executed shares are allocated                   the CAT NMS Plan.
                                                    Member, either directly or via transfer.                when an execution is allocated in whole
                                                       Paragraph (a)(4) states that ‘‘Account               or part in lieu of requiring the reporting              12 See Exemptive Request Letter at 26–27; and

                                                    Effective Date’’ means, where there are                 of the account number for any                         Exemption Order.



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                                                    9768                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    (F) CAT NMS Plan                                        forth in FINRA’s rule related to its Order            that Section 1.1 of the CAT NMS Plan
                                                      Paragraph (f) of Proposed Rule 4.5                    Audit Trail System (‘‘OATS’’).                        defines ‘‘Customer’’ by reference to SEC
                                                    defines the term ‘‘CAT NMS Plan’’ to                    Specifically, FINRA Rule 7410(n)                      Rule 613(j)(3).
                                                    mean the National Market System Plan                    defines a ‘‘Reporting Agent’’ as a third
                                                                                                                                                                  (L) Customer Account Information
                                                    Governing the Consolidated Audit Trail,                 party that enters into any agreement
                                                                                                            with a member pursuant to which the                      As discussed above, under the
                                                    as amended from time to time.                                                                                 Customer Information Approach,
                                                                                                            Reporting Agent agrees to fulfill such
                                                    (G) CAT-Order-ID                                        member’s obligations under Rule 7450.                 Industry Members are required to report
                                                                                                            The Reporting Agent for OATS fulfills a               Customer Account Information to the
                                                    (I) Daisy Chain Approach                                                                                      Central Repository as part of the
                                                                                                            similar role to the CAT Reporting Agent.
                                                      Under the CAT NMS Plan, the Daisy                                                                           customer definition process.
                                                    Chain Approach is used to link and                      (I) Central Repository                                Accordingly, the Exchange proposes to
                                                    reconstruct the complete lifecycle of                      Paragraph (i) of Proposed Rule 4.5                 define the term ‘‘Customer Account
                                                    each Reportable Event in CAT.                           defines the term ‘‘Central Repository’’ to            Information’’ to clarify what customer
                                                    According to this Approach, Industry                    mean the repository responsible for the               information would need to be reported
                                                    Members assign their own identifiers to                 receipt, consolidation, and retention of              to the Central Repository.
                                                    each order event. Within the Central                    all information reported to the CAT                      Paragraph (l) of Proposed Rule 4.5
                                                    Repository, the Plan Processor later                    pursuant to SEC Rule 613 and the CAT                  defines the term ‘‘Customer Account
                                                    replaces the identifier provided by the                 NMS Plan. This is the same definition                 Information’’ to include, in part,
                                                    Industry Member for each Reportable                     as set forth in Section 1.1 of the CAT                account number, account type, customer
                                                    Event with a single identifier, called the              NMS Plan, except the Exchange uses the                type, date account opened, and large
                                                    CAT Order-ID, for all order events                      phrase ‘‘CAT NMS Plan’’ in place of the               trader identifier (if applicable).
                                                    pertaining to the same order. This CAT                  phrase ‘‘this Agreement.’’                            Proposed Rule 4.5(l), however, provides
                                                    Order-ID is used to link the Reportable                                                                       an alternative definition of ‘‘Customer
                                                                                                            (J) Compliance Threshold                              Account Information’’ in two limited
                                                    Events related to the same order.
                                                                                                               Paragraph (j) of Proposed Rule 4.5                 circumstances. First, in those
                                                    (II) Definition of CAT-Order-ID                         defines the term ‘‘Compliance                         circumstances in which an Industry
                                                       To implement the Daisy Chain                         Threshold’’ as having the meaning set                 Member has established a trading
                                                    Approach, Paragraph (g) of Proposed                     forth in Proposed Rule 4.15(d). This                  relationship with an institution but has
                                                    Rule 4.5 defines the term ‘‘CAT-Order-                  definition has the same substantive                   not established an account with that
                                                    ID.’’ The term ‘‘CAT-Order-ID’’ is                      meaning as the definition set forth in                institution, the Industry Member will:
                                                    defined to mean a unique order                          Section 1.1 of the CAT NMS Plan. As                   (1) Provide the Account Effective Date
                                                    identifier or series of unique order                    discussed in detail below with regard to              in lieu of the ‘‘date account opened’’; (2)
                                                    identifiers that allows the Central                     Proposed Rule 4.15(d), each Industry                  provide the relationship identifier in
                                                    Repository to efficiently and accurately                Member is required to meet a separate                 lieu of the ‘‘account number’’; and (3)
                                                    link all Reportable Events for an order,                compliance threshold which will be an                 identify the ‘‘account type’’ as a
                                                    and all orders that result from the                     Industry Member-specific rate that may                ‘‘relationship.’’ Second, in those
                                                    aggregation or disaggregation of such                   be used as the basis for further review               circumstances in which the relevant
                                                    order. This is the same definition as set               or investigation into the Industry                    account was established prior to
                                                    forth in SEC Rule 613(j)(1), and Section                Member’s performance with regard to                   November 15, 2018 for Industry
                                                    1.1 of the CAT NMS Plan defines ‘‘CAT-                  the CAT. This Industry Member-specific                Members other than Small Industry
                                                    Order-ID’’ by reference to SEC Rule                     rate is the ‘‘Compliance Threshold.’’                 Members, or prior to November 15, 2019
                                                    613(j)(1).                                                                                                    for Small Industry Members, and no
                                                                                                            (K) Customer                                          ‘‘date account opened’’ is available for
                                                    (H) CAT Reporting Agent                                    Industry Members are required to                   the account, the Industry Member will
                                                       The CAT NMS Plan permits an                          submit to the Central Repository certain              provide the Account Effective Date in
                                                    Industry Member to use a third party,                   information related to their Customers,               the following circumstances: (1) Where
                                                    such as a vendor, to report the required                including Customer Identifying                        an Industry Member changes back office
                                                    data to the Central Repository on behalf                Information and Customer Account                      providers or clearing firms and the date
                                                    of the Industry Member.13 Such a third                  Information, as well as data related to               account opened is changed to the date
                                                    party, referred to in the Proposed Rules                their Customer’s Reportable Events.                   the account was opened on the new
                                                    4.5 through 4.16 as a ‘‘CAT Reporting                   Accordingly, Paragraph (k) of Proposed                back office/clearing firm system; (2)
                                                    Agent,’’ would be one type of a Data                    Rule 4.5 proposes to define the term                  where an Industry Member acquires
                                                    Submitter, that is, a party that submits                ‘‘Customer.’’ Specifically, the term                  another Industry Member and the date
                                                    data to the Central Repository.                         ‘‘Customer’’ would be defined to mean:                account opened is changed to the date
                                                    Paragraph (h) of Proposed Rule 4.5                      (1) The account holder(s) of the account              the account was opened on the post-
                                                    defines the term ‘‘CAT Reporting                        at an Industry Member originating the                 merger back office/clearing firm system;
                                                    Agent’’ to mean a Data Submitter that is                order; and (2) any person from whom                   (3) where there are multiple dates
                                                    a third party that enters into an                       the Industry Member is authorized to                  associated with an account in an
                                                    agreement with an Industry Member                       accept trading instructions for such                  Industry Member’s system, and the
                                                                                                            account, if different from the account                parameters of each date are determined
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                                                    pursuant to which the CAT Reporting
                                                    Agent agrees to fulfill such Industry                   holder(s). This is the same definition as             by the individual Industry Member; and
                                                    Member’s reporting obligations under                    set forth in SEC Rule 613(j)(3), except               (4) where the relevant account is an
                                                    Rules 4.5 through 4.16.                                 the Exchange proposes to replace the                  Industry Member proprietary account.
                                                       This definition is based on FINRA’s                  references to a registered broker-dealer              The proposed definition is the same as
                                                    definition of a ‘‘Reporting Agent’’ as set              or broker-dealer with a reference to an               the definition of ‘‘Customer Account
                                                                                                            Industry Member for consistency of                    Information’’ set forth in Section 1.1 of
                                                      13 Appendix C, Section A.1(a) of the CAT NMS          terms used in the Proposed Rules 4.5                  the CAT NMS Plan, provided, however,
                                                    Plan.                                                   through 4.16. The Exchange also notes                 that specific dates have replaced the


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9769

                                                    descriptions of those dates set forth in                reports data to the Central Repository,                error reports as they become available,
                                                    Section 1.1 of the Plan.                                including national securities exchanges,               including a description of such errors;
                                                                                                            national securities associations, broker-              (3) provide monthly reports to Industry
                                                    (M) Customer Identifying Information
                                                                                                            dealers, the SIPs for the CQS, CTA, UTP                Members that detail an Industry
                                                       As discussed above, under the                        and Plan for Reporting of Consolidated                 Member’s performance and comparison
                                                    Customer Information Approach,                          Options Last Sale Reports and                          statistics; (4) define educational and
                                                    Industry Members are required to report                 Quotation Information (‘‘OPRA’’) Plans,                support programs for Industry Members
                                                    Customer Identifying Information to the                 and certain other vendors or third                     to minimize Error Rates; and (5)
                                                    Central Repository as part of the                       parties that may submit data to the                    identify, daily, all Industry Members
                                                    customer definition process.                            Central Repository on behalf of Industry               exceeding the maximum allowable Error
                                                    Accordingly, the Exchange proposes to                   Members.                                               Rate. To timely correct data-submitted
                                                    define the term ‘‘Customer Account                                                                             errors to the Central Repository, the
                                                    Information’’ to clarify what Customer                  (O) Eligible Security
                                                                                                                                                                   CAT NMS Plan requires that the Central
                                                    information would need to be reported                      The reporting requirements of the                   Repository receive and process error
                                                    to the Central Repository.                              Proposed Rules 4.5 through 4.16 only                   corrections at all times. Further, the
                                                       Paragraph (m) of Proposed Rule 4.5                   apply to Reportable Events in Eligible                 CAT NMS Plan requires that Industry
                                                    defines the term ‘‘Customer Identifying                 Securities. Currently, an Eligible                     Members be able to submit error
                                                    Information’’ to mean information of                    Security includes NMS Securities and                   corrections to the Central Repository
                                                    sufficient detail to identify a Customer.               OTC Equity Securities. Accordingly,                    through a web-interface or via bulk
                                                    With respect to individuals, ‘‘Customer                 paragraph (p) [sic] of Proposed Rule 4.5               uploads or file submissions, and that the
                                                    Identifying Information’’ includes, but is              defines the term ‘‘Eligible Security’’ to              Plan Processor, subject to the Operating
                                                    not limited to: name, address, date of                  include: (1) All NMS Securities; and (2)               Committee’s approval, support the bulk
                                                    birth, individual tax payer identification              all OTC Equity Securities. The terms                   replacement of records and the
                                                    number (‘‘ITIN’’)/social security number                ‘‘NMS Securities’’ and ‘‘OTC Equity                    reprocessing of such records. The
                                                    (‘‘SSN’’), individual’s role in the                     Securities’’ are defined, in turn, below.              Participants, furthermore, require that
                                                    account (e.g., primary holder, joint                    This is the same definition as set forth               the Plan Processor identify Industry
                                                    holder, guardian, trustee, person with                  in Section 1.1 of the CAT NMS Plan.                    Member data submission errors based
                                                    the power of attorney). With respect to                 (P) Error Rate                                         on the Plan Processor’s validation
                                                    legal entities, ‘‘Customer Identifying                                                                         processes.21
                                                    Information’’ includes, but is not                      (I) Maximum Error Rate
                                                    limited to, name, address, Employer                                                                            (II) Definition of Error Rate
                                                                                                               Under the CAT NMS Plan, the
                                                    Identification Number (‘‘EIN’’)/Legal                   Operating Committee sets the maximum                      To implement the requirements of the
                                                    Entity Identifier (‘‘LEI’’) or other                    Error Rate that the Central Repository                 CAT NMS Plan related to the Error Rate,
                                                    comparable common entity identifier, if                 would tolerate from an Industry                        the Exchange proposes to define the
                                                    applicable. The definition further notes                Member reporting data to the Central                   term ‘‘Error Rate’’ in Proposed Rule 4.5.
                                                    that an Industry Member that has an LEI                 Repository.15 The Operating Committee                  Paragraph (p) of Proposed Rule 4.5
                                                    for a Customer must submit the                          reviews and resets the maximum Error                   defines the term ‘‘Error Rate’’ to mean
                                                    Customer’s LEI in addition to other                     Rate, at least annually.16 If an Industry              the percentage of Reportable Events
                                                    information of sufficient detail to                     Member reports CAT data to the Central                 collected by the Central Repository in
                                                    identify the Customer. This is the same                 Repository with errors such that their                 which the data reported does not fully
                                                    definition as set forth in Section 1.1 of               error percentage exceeds the maximum                   and accurately reflect the order event
                                                    the CAT NMS Plan.                                       Error Rate, then such Industry Member                  that occurred in the market. This is the
                                                                                                            would not be in compliance with the                    same definition as set forth in SEC Rule
                                                    (N) Data Submitter                                                                                             613(j)(6), and Section 1.1 of the CAT
                                                                                                            CAT NMS Plan or Rule 613.17 As such,
                                                       The CAT NMS Plan uses the term                       the Exchange or the SEC ‘‘may [sic] take               NMS Plan defines ‘‘Error Rate’’ by
                                                    ‘‘Data Submitter’’ to refer to any person               appropriate action against an Industry                 reference to SEC Rule 613(j)(6).
                                                    that reports data to the Central                        Member for failing to comply with its                  (Q) Firm Designated ID
                                                    Repository.14 Such Data Submitters may                  CAT reporting obligations.18 The CAT
                                                    include those entities that are required                NMS Plan sets the initial Error Rate at                  As discussed above, under the
                                                    to submit data to the Central Repository                5%.19 It is anticipated that the                       Customer Information Approach, the
                                                    (e.g., national securities exchanges,                   maximum Error Rate will be reviewed                    CAT NMS Plan would require each
                                                    national securities associations and                    and lowered by the Operating                           Industry Member to assign a unique
                                                    Industry Members), third-parties that                   Committee once Industry Members                        Firm Designated ID to each Customer.
                                                    may submit data to the CAT on behalf                    begin to report to the Central                         Industry Members would be permitted
                                                    of CAT Reporters (i.e., CAT Reporting                   Repository.20                                          to use as the Firm Designated ID an
                                                    Agents), and outside parties that are not                  The CAT NMS Plan requires the Plan                  account number or any other identifier
                                                    required to submit data to the CAT but                  Processor to: (1) Measure and report                   defined by the firm, provided each
                                                    from which the CAT may receive data                     errors every business day; (2) provide                 identifier is unique across the firm for
                                                    (e.g., securities information processors                Industry Members daily statistics and                  each business date (i.e., a single firm
                                                    (‘‘SIPs’’)). To include this term in the                                                                       may not have multiple separate
                                                                                                                                                                   customers with the same identifier on
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                                                    Proposed Rules 4.5 through 4.16, the                      15 Section   6.5(d)(i) of the CAT NMS Plan.
                                                    Exchange proposes to define ‘‘Data                        16 Appendix     C, Section A.3(b) of the CAT NMS     any given date). Industry Members
                                                    Submitter’’ in paragraph (n) of Proposed                Plan.                                                  would be required to report only the
                                                                                                              17 Appendix C, Section A.3(b) of the CAT NMS
                                                    Rule 4.5. Specifically, paragraph (n) of                                                                       Firm Designated ID for each new order
                                                                                                            Plan; Rule 613(g)–(h).
                                                    Proposed Rule 4.5 defines a ‘‘Data                        18 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                                                                                   submitted to the Central Repository,
                                                    Submitter’’ to mean any person that                     Plan.                                                  rather than the ‘‘Customer-ID’’ with
                                                                                                              19 Section 6.5(d)(i) of the CAT NMS Plan.            individual order events. Accordingly,
                                                      14 Appendix C, Section A.1(a) of the CAT NMS            20 Appendix C, Section A.3(b) of the CAT NMS

                                                    Plan.                                                   Plan.                                                    21 Approval   Order at 84718.



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                                                    9770                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    the Exchange proposes to define the                     Option’’ or ‘‘Option.’’ Specifically,                  communication of order-related
                                                    term ‘‘Firm Designated ID’’ in Proposed                 paragraph (u) of Proposed Rule 4.5                     information for which Industry
                                                    Rule 4.5. Specifically, paragraph (q) of                states that the term ‘‘Listed Option’’ or              Members must record and report the
                                                    Proposed Rule 4.5 defines the term                      ‘‘Option’’ has the meaning set forth in                time of the event. This is the same
                                                    ‘‘Firm Designated ID’’ to mean a unique                 SEC Rule 600(b)(35) of Regulation NMS.                 definition as set forth in Section 1.1 of
                                                    identifier for each trading account                     SEC Rule 600(b)(35), in turn, defines a                the CAT NMS Plan.
                                                    designated by Industry Members for                      listed option as ‘‘any option traded on                (W) Material Terms of the Order
                                                    purposes of providing data to the                       a registered national securities exchange
                                                    Central Repository, where each such                     or automated facility of a national                       Proposed Rule 4.7 requires Industry
                                                    identifier is unique among all identifiers              securities association.’’ The Exchange                 Members to record and report to the
                                                    from any given Industry Member for                      notes that the proposed definition of                  Central Repository Material Terms of
                                                    each business date. This is the same                    ‘‘Listed Option’’ is the same definition               the Order with certain Reportable
                                                    definition as set forth in Section 1.1 of               as the definition set forth in Section 1.1             Events (e.g., for the original receipt or
                                                    the CAT NMS Plan. Industry Members                      of the CAT NMS Plan.                                   origination of an order, for the routing
                                                    would be permitted to use an account                                                                           of an order). Accordingly, the Exchange
                                                                                                            (V) Manual Order Event                                 proposes to define the term ‘‘Material
                                                    number or any other identifier defined
                                                    by the firm, provided each identifier is                (I) Manual Order Event Approach                        Terms of the Order’’ in Proposed Rule
                                                    unique across the firm for each business                                                                       4.5. Specifically, paragraph (w) of
                                                                                                              The CAT NMS Plan sets forth clock                    Proposed Rule 4.5 defines the term
                                                    date (i.e., a single firm may not have                  synchronization and timestamp
                                                    multiple separate customers with the                                                                           ‘‘Material Terms of the Order’’ to
                                                                                                            requirements for Industry Members                      include: The NMS Security or OTC
                                                    same identifier on any given date).                     which reflect exemptions for Manual                    Equity Security symbol; security type;
                                                    (R) Industry Member                                     Order Events granted by the                            price (if applicable); size (displayed and
                                                                                                            Commission.22 Specifically, the Plan                   non-displayed); side (buy/sell); order
                                                      Paragraph (r) of Proposed Rule 4.5
                                                                                                            requires Industry Members to record                    type; if a sell order, whether the order
                                                    defines the term ‘‘Industry Member’’ to
                                                                                                            and report the time of each Reportable                 is long, short, short exempt; open/close
                                                    mean a member of a national securities
                                                                                                            Event using timestamps reflecting                      indicator (except on transactions in
                                                    exchange or a member of a national
                                                                                                            current industry standards (which must                 equities); time in force (if applicable); if
                                                    securities association.’’ This is the same
                                                                                                            be at least to the millisecond) or, if an              the order is for a Listed Option, option
                                                    definition as set forth in Section 1.1 of
                                                                                                            Industry Member’s order handling or                    type (put/call), option symbol or root
                                                    the CAT NMS Plan.
                                                                                                            execution systems use timestamps in                    symbol, underlying symbol, strike price,
                                                    (S) Industry Member Data                                increments finer than milliseconds,                    expiration date, and open/close (except
                                                      Paragraph (s) of Proposed Rule 4.5                    such finer increments, when reporting                  on market maker quotations); and any
                                                    states that the term ‘‘Industry Member                  to the Central Repository. For Manual                  special handling instructions. This is
                                                    Data’’ has the meaning set forth in Rule                Order Events, however, the Plan                        the same definition as set forth in
                                                    4.7(a)(2). This definition has the same                 provides that such events must be                      Section 1.1 of the CAT NMS Plan.
                                                    substantive meaning as the definition                   recorded in increments up to and
                                                                                                            including one second, provided that                    (X) NMS Security
                                                    set forth in Section 1.1 of the CAT NMS
                                                    Plan. The definition of ‘‘Industry                      Industry Members record and report the                    NMS Securities are one of the types
                                                    Member Data’’ is discussed more fully                   time the event is captured electronically              of Eligible Securities for the CAT.
                                                    in the discussion below regarding                       in an order handling and execution                     Therefore, the Exchange proposes to
                                                    Proposed Rule 4.7(a)(2).                                system (‘‘Electronic Capture Time’’) in                define the term ‘‘NMS Security’’ in
                                                                                                            milliseconds. In addition, Industry                    Proposed Rule 4.5. Specifically,
                                                    (T) Initial Plan Processor                              Members are required to synchronize                    paragraph (x) of Proposed Rule 4.5
                                                      Paragraph (t) of Proposed Rule 4.5                    their respective Business Clocks (other                defines the term ‘‘NMS Security’’ to
                                                    defines the term ‘‘Initial Plan Processor’’             than such Business Clocks used solely                  mean any security or class of securities
                                                    to mean the first Plan Processor selected               for Manual Order Events) at a minimum                  for which transaction reports are
                                                    by the Operating Committee in                           to within 50 milliseconds of the time                  collected, processed, and made
                                                    accordance with SEC Rule 613, Section                   maintained by the National Institute of                available pursuant to an effective
                                                    6.1 of the CAT NMS Plan and the                         Standards and Technology (‘‘NIST’’),                   transaction reporting plan, or an
                                                    National Market System Plan Governing                   and maintain such a synchronization.                   effective national market system plan
                                                    the Process for Selecting a Plan                        Each Industry Member is required to                    for reporting transactions in Listed
                                                    Processor and Developing a Plan for the                 synchronize their Business Clocks used                 Options. This is the same definition as
                                                    Consolidated Audit Trail. This is the                   solely for Manual Order Events,                        set forth in Section 1.1 of the CAT NMS
                                                    same definition as set forth in Section                 however, at a minimum to within one                    Plan.
                                                    1.1 of the CAT NMS Plan, although the                   second of the time maintained by the
                                                                                                            NIST.                                                  (Y) NMS Stock
                                                    proposed definition uses the full name
                                                    of the ‘‘Selection Plan.’’                                                                                       Under the CAT NMS Plan, the
                                                                                                            (II) Definition of Manual Order Event                  Operating Committee may establish
                                                    (U) Listed Option or Option                               In order to clarify what a Manual                    different Trading Days for NMS Stocks
                                                      The CAT NMS Plan and the Proposed                     Order Event is for clock synchronization               (as defined in SEC Rule 600(b)(47)),
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                                                    Rules 4.5 through 4.16 apply to Eligible                and time stamp purposes, the Exchange                  Listed Options, OTC Equity Securities,
                                                    Securities, which includes NMS                          proposes to define the term ‘‘Manual                   and any other securities that are
                                                    Securities, which, in turn, includes                    Order Event’’ in Proposed Rule 4.5.                    included as Eligible Securities from
                                                    Listed Options. Certain requirements of                 Specifically, paragraph (v) of Proposed                time to time. Accordingly, the Exchange
                                                    the Proposed Rules 4.5 through 4.16                     Rule 4.5 defines the term ‘‘Manual                     proposes to define the term ‘‘NMS
                                                    apply specifically to Listed Options.                   Order Event’’ to mean a non-electronic                 Stock’’ in Paragraph (y) of Proposed
                                                    Accordingly, Paragraph (u) of Proposed                                                                         Rule 4.5 to mean any NMS Security
                                                    Rule 4.5 defines the term ‘‘Listed                        22 Exemption    Order.                               other than an option. This is the same


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                              9771

                                                    definition as set forth in SEC Rule                     is the same definition as set forth in                (FF) Plan Processor
                                                    600(b)(47) of Regulation NMS.                           Section 1.1 of the CAT NMS Plan.                        Paragraph (ff) of Proposed Rule 4.5
                                                    (Z) Operating Committee                                 (BB) Order                                            defines the term ‘‘Plan Processor’’ to
                                                                                                                                                                  mean the Initial Plan Processor or any
                                                      Paragraph (z) of Proposed Rule 4.5                       The Proposed Rules 4.5 through 4.16                other Person selected by the Operating
                                                    defines the term ‘‘Operating Committee’’                require each Industry Member to record                Committee pursuant to SEC Rule 613
                                                    to mean the governing body of the CAT                   and electronically report to the Central              and Sections 4.3(b)(i) and 6.1 of the
                                                    NMS, LLC designated as such and                         Repository certain details for each order.            CAT NMS Plan, and with regard to the
                                                    described in Article IV of the CAT NMS                  Accordingly, the Exchange proposes to                 Initial Plan Processor, the National
                                                    Plan. This is the same definition as set                define the term ‘‘Order’’ in Proposed                 Market System Plan Governing the
                                                    forth in Section 1.1 of the CAT NMS                     Rule 4.5. Specifically, paragraph (bb) of             Process for Selecting a Plan Processor
                                                    Plan, except the Exchange proposes to                   Proposed Rule 4.5 defines the term                    and Developing a Plan for the
                                                    use the phrase ‘‘CAT NMS LLC’’ in                       ‘‘Order’’, with respect to Eligible                   Consolidated Audit Trail, to perform the
                                                    place of the phrase ‘‘the Company’’ for                 Securities, to include: (1) Any order                 CAT processing functions required by
                                                    clarity.                                                received by an Industry Member from                   SEC Rule 613 and set forth in the CAT
                                                    (AA) Options Market Maker                               any person; (2) any order originated by               NMS Plan.
                                                                                                            an Industry Member; or (3) any bid or
                                                    (I) Options Market Maker Quote                                                                                (GG) Received Industry Member Data
                                                                                                            offer. This is the same definition as set
                                                    Exemption                                                                                                        Paragraph (gg) of Proposed Rule 4.5
                                                                                                            forth in SEC Rule 613(j)(8), except the
                                                       SEC Rule 613(c)(7) provides that the                 Exchange proposes to replace the phrase               states that the term ‘‘Received Industry
                                                    CAT NMS Plan must require each                          ‘‘member of a national securities                     Member Data’’ has the meaning set forth
                                                    Industry Member to record and                           exchange or national securities                       in Rule 4.7(a)(2). This definition has the
                                                    electronically report to the Central                    association’’ with the term ‘‘Industry                same substantive meaning as the
                                                    Repository details for each order and                   Member.’’ The Exchange notes that                     definition set forth in Section 1.1 of the
                                                    each reportable event, including the                    Section 1.1 of the CAT NMS Plan                       CAT NMS Plan. The definition of
                                                    routing and modification or cancellation                defines ‘‘Order’’ by reference to SEC                 ‘‘Received Industry Member Data’’ is
                                                    of an order. SEC Rule 613(j)(8) defines                 Rule 613(j)(8).                                       discussed more fully in the discussion
                                                    ‘‘order’’ to include ‘‘any bid or offer.’’                                                                    below regarding Proposed Rule 4.7(a)(2).
                                                    Therefore, under SEC Rule 613, the                      (CC) OTC Equity Security
                                                    details for each Options Market Maker                                                                         (HH) Recorded Industry Member Data
                                                                                                              OTC Equity Securities are one of the
                                                    quotation must be reported to the                       types of Eligible Securities for the CAT.                Paragraph (hh) of Proposed Rule 4.5
                                                    Central Repository by both the Options                  Therefore, the Exchange proposes to                   states that the term ‘‘Recorded Industry
                                                    Market Maker and the options exchange                   define the term ‘‘OTC Equity Security’’               Member Data’’ has the meaning set forth
                                                    to which it routes its quote.                           in Proposed Rule 4.5. Specifically,                   in Rule 4.7(a)(1). This definition has the
                                                       The SROs, however, requested and                                                                           same substantive meaning as the
                                                                                                            paragraph (cc) of Proposed Rule 4.5
                                                    received exemptive relief from SEC Rule                                                                       definition set forth in in Section 1.1 of
                                                                                                            defines the term ‘‘OTC Equity Security’’
                                                    613 so that the CAT NMS Plan may                                                                              the CAT NMS Plan. The definition of
                                                                                                            to mean any equity security, other than
                                                    permit Options Market Maker quotes to                                                                         ‘‘Recorded Industry Member Data’’ is
                                                                                                            an NMS Security, subject to prompt last
                                                    be reported to the Central Repository by                                                                      discussed more fully in the discussion
                                                                                                            sale reporting rules of a registered
                                                    the relevant options exchange in lieu of                                                                      below regarding Proposed Rule 4.7(a)(1).
                                                                                                            national securities association and
                                                    requiring that such reporting be done by                reported to one of such association’s                 (II) Reportable Event
                                                    both the options exchange and the                       equity trade reporting facilities. This is
                                                    Options Market Maker, as is required by                                                                          The Proposed Rules 4.5 through 4.16
                                                                                                            the same definition as set forth in                   require each Industry Member to record
                                                    SEC Rule 613.23 In accordance with the                  Section 1.1 of the CAT NMS Plan.
                                                    exemptive relief, Options Market                                                                              and electronically report to the Central
                                                    Makers would be required to report to                   (DD) Participant                                      Repository certain details for each
                                                    the options exchange the time at which                                                                        Reportable Event. To clarify these
                                                                                                              Paragraph (dd) of Proposed Rule 4.5                 requirements, the Exchange proposes to
                                                    a quote in a Listed Option is sent to the
                                                                                                            defines the term ‘‘Participant’’ to mean              define the term ‘‘Reportable Event’’ in
                                                    options exchange. Such time
                                                                                                            each Person identified as such in                     Proposed Rule 4.5. Specifically,
                                                    information also will be reported to the
                                                                                                            Exhibit A of the CAT NMS Plan, as                     paragraph (ii) of Proposed Rule 4.5
                                                    Central Repository by the options
                                                                                                            amended, in such Person’s capacity as                 states that the term ‘‘Reportable Event’’
                                                    exchange in lieu of reporting by the
                                                                                                            a Participant in CAT NMS, LLC. This is                includes, but is not limited to, the
                                                    Options Market Maker
                                                                                                            the same definition in substance as set               original receipt or origination,
                                                    (II) Definition of Options Market Maker                 forth in Section 1.1 of the CAT NMS                   modification, cancellation, routing,
                                                       To implement the requirements                        Plan.                                                 execution (in whole or in part) and
                                                    related to Option Market Maker quotes,                  (EE) Person                                           allocation of an order, and receipt of a
                                                    the Exchange proposes to define the                                                                           routed order. This is the same definition
                                                    term ‘‘Options Market Maker’’ in                          Paragraph (ee) of Proposed Rule 4.5                 as set forth in Section 1.1 of the CAT
                                                    Proposed Rule 4.5. Specifically,                        defines the term ‘‘Person’’ to mean any               NMS Plan.
                                                                                                            individual, partnership, limited liability
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                                                    paragraph (aa) of Proposed Rule 4.5                                                                           (JJ) SRO
                                                    defines the term ‘‘Options Market                       company, corporation, joint venture,
                                                    Makers’’ to mean a broker-dealer                        trust, business trust, cooperative or                    Paragraph (jj) of Proposed Rule 4.5
                                                    registered with an exchange for the                     association and any heirs, executors,                 defines the term ‘‘SRO’’ to mean any
                                                    purpose of making markets in options                    administrators, legal representatives,                self-regulatory organization within the
                                                    contracts traded on the exchange. This                  successors and assigns of such Person                 meaning of Section 3(a)(26) of the
                                                                                                            where the context so permits. This is the             Exchange Act. This is the same
                                                      23 See Exemptive Request Letter at 2, and             same definition as set forth in Section               definition as set forth in Section 1.1 of
                                                    Exemption Order.                                        1.1 of the CAT NMS Plan.                              the CAT NMS Plan.


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                                                    9772                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    (KK) SRO-Assigned Market Participant                    NMS Plan. For example, an Industry                    Plan sets forth the clock
                                                    Identifier                                              Member would be permitted to use any                  synchronization requirements for
                                                    (I) Existing Identifier Approach                        existing SRO-Assigned Market                          Industry Members.25 To implement
                                                                                                            Participant Identifier (e.g., FINRA MPID,             these provisions with regard to its
                                                       The SROs requested and received                      NASDAQ MPID, NYSE Mnemonic,                           Industry Members, the Exchange
                                                    exemptive relief from SEC Rule 613 so                   CBOE User Acronym and CHX                             proposes Rule 4.6 (Consolidated Audit
                                                    that the CAT NMS Plan may permit the                    Acronym) when reporting order                         Trail—Clock Synchronization) to
                                                    Existing Identifier Approach, which                     information to the Central Repository.                require its Industry Members to comply
                                                    would allow an Industry Member to                                                                             with the clock synchronization
                                                    report an existing SRO-Assigned Market                  (LL) Small Industry Member
                                                                                                                                                                  requirements of the Plan.
                                                    Participant Identifier in lieu of requiring                The requirements of the Proposed                      Paragraph (a) of Proposed Rule 4.6
                                                    the reporting of a universal CAT-                       Rules 4.5 through 4.16 differ to some                 sets forth the manner in which Industry
                                                    Reporter-ID (that is, a code that                       extent for Small Industry Members                     Members must synchronize their
                                                    uniquely and consistently identifies an                 versus Industry Members other than                    Business Clocks. Paragraph (a)(1) of
                                                    Industry Member for purposes of                         Small Industry Members. For example,                  Proposed Rule 4.6 requires each
                                                    providing data to the Central                           the compliance dates for reporting data               Industry Member to synchronize its
                                                    Repository).24 The CAT NMS Plan                         to the CAT are different for Small                    Business Clocks, other than such
                                                    reflects the ‘‘Existing Identifier                      Industry Members versus other Industry                Business Clocks used solely for Manual
                                                    Approach’’ for purposes of identifying                  Members. Accordingly, to clarify the                  Order Events or used solely for the time
                                                    each Industry Member associated with                    requirements that apply to which                      of allocation on Allocation Reports, at a
                                                    an order or Reportable Event. Under the                 Industry Members, the Exchange                        minimum to within a fifty (50)
                                                    Existing Identifier Approach, Industry                  proposes to define the term ‘‘Small                   millisecond tolerance of the time
                                                    Members are required to record and                      Industry Member’’ in Proposed Rule 4.5.               maintained by the NIST atomic clock,
                                                    report to the Central Repository an SRO-                Specifically, paragraph (ll) of Proposed              and maintain such synchronization.
                                                    Assigned Market Participant Identifier                  Rule 4.5 defines the term ‘‘Small                     This is the same requirement as set forth
                                                    for orders and certain Reportable Events                Industry Member’’ to mean an Industry                 in Section 6.8(a)(ii)(A) of the CAT NMS
                                                    to be used by the Central Repository to                 Member that qualifies as a small broker-              Plan.
                                                    assign a unique CAT-Reporter-ID to                      dealer as defined in Rule 0–10(c) under                  Paragraph (a)(2) of Proposed Rule 4.6
                                                    identify Industry Members.                              the Securities Exchange Act of 1934, as               requires each Industry Member to
                                                       For the Central Repository to link the               amended. This is the same in substance                synchronize (1) its Business Clocks used
                                                    SRO-Assigned Market Participant                         as the definition of ‘‘Small Industry                 solely for Manual Order Events and (2)
                                                    Identifier to the CAT-Reporter-ID, each                 Member’’ as set forth in Section 1.1 of               its Business Clocks used solely for the
                                                    SRO will submit to the Central                          the CAT NMS Plan. Specifically,                       time of allocation on Allocation Reports
                                                    Repository, on a daily basis, all SRO-                  Section 1.1 of the CAT NMS Plan                       at a minimum to within a one second
                                                    Assigned Market Participant Identifiers                 defines a ‘‘Small Industry Member’’ as                tolerance of the time maintained by the
                                                    used by its Industry Members or itself;                 ‘‘an Industry Member that qualifies as a              NIST atomic clock, and maintain such
                                                    and information to identify each such                   small broker-dealer as defined in SEC                 synchronization. This is the same
                                                    Industry Member, including the CRD                      Rule 613.’’ The definition of a small                 requirement as set forth in Section
                                                    number and LEI if such LEI has been                     broker-dealer under SEC Rule 613, in                  6.8(a)(iii) and (iv) of the CAT NMS Plan.
                                                    obtained, and itself, including LEI, if                 turn, is a small broker-dealer as defined                Paragraph (a)(3) of Proposed Rule 4.6
                                                    such LEI has been obtained.                             in SEC Rule 0–10(c).                                  clarifies that the tolerance described in
                                                    Additionally, each Industry Member is                   (MM) Trading Day                                      paragraphs (a)(1) and (2) of the Proposed
                                                    required to submit to the Central                                                                             Rule 4.6 includes all of the following:
                                                    Repository information sufficient to                       Proposed Rule 4.7(b) establishes the               (1) The time difference between the
                                                    identify such Industry Member,                          deadlines for reporting certain data to               NIST atomic clock and the Industry
                                                    including CRD number and LEI, if such                   the Central Repository using the term                 Member’s Business Clock; (2) the
                                                    LEI has been obtained. The Plan                         ‘‘Trading Day.’’ Accordingly, the                     transmission delay from the source; and
                                                    Processor will use this information to                  Exchange proposes to define the term                  (3) the amount of drift of the Industry
                                                    assign a CAT-Reporter-ID to each                        ‘‘Trading Day’’ in Proposed Rule 4.5.                 Member’s Business Clock. This
                                                    Industry Member for internal use within                 Specifically, Paragraph (mm) of                       description of the clock synchronization
                                                    the Central Repository.                                 Proposed Rule 4.5 states that the term                tolerance is the same as set forth in
                                                                                                            ‘‘Trading Day’’ shall have the meaning                paragraph (b) of FINRA Rule 4590
                                                    (II) Definition of SRO-Assigned Market                  as is determined by the Operating
                                                    Participant Identifier                                                                                        (Synchronization of Member Business
                                                                                                            Committee. For the avoidance of doubt,                Clocks).
                                                       To implement the Existing Identifier                 the Operating Committee may establish                    Paragraph (a)(4) of Proposed Rule 4.6
                                                    Approach, the Exchange proposes to                      different Trading Days for NMS Stocks                 requires Industry Members to
                                                    define the term ‘‘SRO-Assigned Market                   (as defined in SEC Rule 600(b)(47),                   synchronize their Business Clocks every
                                                    Participant Identifier’’ in Proposed Rule               Listed Options, OTC Equity Securities,                business day before market open to
                                                    4.5. Specifically, paragraph (kk) of                    and any other securities that are                     ensure that timestamps for Reportable
                                                    Proposed Rule 4.5 defines the term                      included as Eligible Securities from                  Events are accurate. In addition, to
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                                                    ‘‘SRO-Assigned Market Participant                       time to time.                                         maintain clock synchronization,
                                                    Identifier’’ to mean an identifier                      (ii) Clock Synchronization                            Business Clocks must be checked
                                                    assigned to an Industry Member by an                                                                          against the NIST atomic clock and re-
                                                    SRO or an identifier used by a                             SEC Rule 613(d)(1) under Regulation
                                                                                                                                                                  synchronized, as necessary, throughout
                                                    Participant. This is the same definition                NMS requires Industry Members to
                                                                                                                                                                  the day. This description of the required
                                                    as set forth in Section 1.1 of the CAT                  synchronize their Business Clocks to the
                                                                                                            time maintained by NIST, consistent                     25 In addition, Section 6.7(a)(ii) of the Plan sets
                                                      24 See
                                                           Exemptive Request Letter at 19, and              with industry standards. To comply                    forth the timeline for CAT Reporters to comply with
                                                    Exemption Order.                                        with this provision, Section 6.8 of the               the clock synchronization requirements.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9773

                                                    frequency of clock synchronization is                   NMS Plan. The Exchange intends to                        • for the routing of an order: (1) CAT-
                                                    the same as set forth in paragraph (c) of               announce to its Industry Members the                  Order-ID; (2) date on which the order is
                                                    FINRA Rule 4590 (Synchronization of                     relevant thresholds established by the                routed; (3) time at which the order is
                                                    Member Business Clocks).                                Operating Committee via Regulatory                    routed (using timestamps pursuant to
                                                       Paragraph (b) of Proposed Rule 4.6                   Circular.                                             Proposed Rule 4.10); (4) SRO-Assigned
                                                    sets forth documentation requirements                                                                         Market Participant Identifier of the
                                                    with regard to clock synchronization.                   (iii) Industry Member Data Reporting
                                                                                                                                                                  Industry Member routing the order; (5)
                                                    Specifically, paragraph (b) requires                       SEC Rule 613(c) under Regulation                   SRO-Assigned Market Participant
                                                    Industry Members to document and                        NMS requires the CAT NMS Plan to set                  Identifier of the Industry Member or
                                                    maintain their synchronization                          forth certain provisions requiring                    Participant to which the order is being
                                                    procedures for their Business Clocks.                   Industry Members to record and report                 routed; (6) if routed internally at the
                                                    The Proposed Rule requires Industry                     data to the CAT. To comply with this                  Industry Member, the identity and
                                                    Members to keep a log of the times                      provision, Section 6.4 of the CAT NMS                 nature of the department or desk to
                                                    when they synchronize their Business                    Plan sets forth the data reporting                    which the order is routed; and (7)
                                                    Clocks and the results of the                           requirements for Industry Members. To                 Material Terms of the Order;
                                                    synchronization process. This log is                    implement these provisions with regard                   • for the receipt of an order that has
                                                    required to include notice of any time                  to its Industry Members, the Exchange                 been routed, the following information:
                                                    a Business Clock drifts more than the                   proposes Rule 4.7 (Consolidated Audit                 (1) CAT-Order-ID; (2) date on which the
                                                    applicable tolerance specified in                       Trail—Industry Member Data Reporting)                 order is received; (3) time at which the
                                                    paragraph (a) of the Proposed Rule.                     to require its Industry Members to                    order is received (using timestamps
                                                    Such logs must include results for a                    comply with the Industry Member Data                  pursuant to Proposed Rule 4.10); (4)
                                                    period of not less than five years ending               reporting requirements of the Plan.                   SRO-Assigned Market Participant
                                                    on the then current date, or for the                    Proposed Rule 4.7 has six sections [sic]              Identifier of the Industry Member
                                                    entire period for which the Industry                    covering: (1) Recording and reporting                 receiving the order; (5) SRO-Assigned
                                                    Member has been required to comply                      Industry Member Data, (2) timing of the               Market Participant Identifier of the
                                                    with this Rule if less than five years.                 recording and reporting, (3) the                      Industry Member or Participant routing
                                                    These documentation requirements are                    applicable securities covered by the                  the order; and (6) Material Terms of the
                                                    the same as those set forth in the                      recording and reporting requirements,                 Order;
                                                    ‘‘Sequencing Orders and Clock                           (4) the security symbology to be used in                 • if the order is modified or
                                                    Synchronization’’ section of Appendix                   the recording and reporting, and (5)                  cancelled: (1) CAT-Order-ID; (2) date the
                                                    C of the CAT NMS Plan. Moreover,                        error correction requirements, each of                modification or cancellation is received
                                                    these documentation requirements                        which is described below.                             or originated; (3) time at which the
                                                    regarding clock synchronization are                                                                           modification or cancellation is received
                                                                                                            (A) Recording and Reporting Industry
                                                    comparable to those set forth in                                                                              or originated (using timestamps
                                                                                                            Member Data
                                                    Supplementary Material .01 of FINRA                                                                           pursuant to Proposed Rule 4.10); (4)
                                                    Rule 4590 (Synchronization of Member                      Paragraph (a) of Proposed Rule 4.7                  price and remaining size of the order, if
                                                    Business Clocks).                                       describes the recording and reporting of              modified; (5) other changes in the
                                                       Paragraph (c) of Proposed Rule 4.6                   Industry Member Data to the Central                   Material Terms of the Order, if
                                                    sets forth certification requirements                   Repository. Paragraph (a) consists of                 modified; and (6) whether the
                                                    with regard to clock synchronization.                   paragraphs (a)(1)–(a)(3), which cover                 modification or cancellation instruction
                                                    Specifically, paragraph (c) of Proposed                 Recorded Industry Member Data,                        was given by the Customer or was
                                                    Rule 4.6 requires each Industry Member                  Received Industry Member Data and                     initiated by the Industry Member;
                                                    to certify to the Exchange that its                     Options Market Maker data,                               • if the order is executed, in whole or
                                                    Business Clocks satisfy the                             respectively. Paragraphs (a)(1)–(a)(3) of             in part: (1) CAT-Order-ID; (2) date of
                                                    synchronization requirements set forth                  Proposed Rule 4.7 set forth the                       execution; (3) time of execution (using
                                                    in paragraph (a) of Proposed Rule 4.6                   recording and reporting requirements                  timestamps pursuant to Proposed Rule
                                                    periodically in accordance with the                     required in Section 6.4(d)(i)–(iii) of the            4.10; (4) execution capacity (principal,
                                                    certification schedule established by the               CAT NMS Plan, respectively.                           agency or riskless principal); (5)
                                                    Operating Committee pursuant to the                       Paragraph (a)(1) requires, subject to               execution price and size; (6) SRO-
                                                    CAT NMS Plan. This requirement is the                   paragraph (a)(3) regarding Options                    Assigned Market Participant Identifier
                                                    same requirement as set forth in Section                Market Makers, each Industry Member                   of the Industry Member executing the
                                                    6.8(a)(ii)(B), (iii) and (iv) of the CAT                to record and electronically report to the            order; (7) whether the execution was
                                                    NMS Plan. The Exchange intends to                       Central Repository the following details              reported pursuant to an effective
                                                    announce to its Industry Members the                    for each order and each Reportable                    transaction reporting plan or the Plan
                                                    certification schedule established by the               Event, as applicable (‘‘Recorded                      for Reporting of Consolidated Options
                                                    Operating Committee via Regulatory                      Industry Member Data’’) in the manner                 Last Sale Reports and Quotation
                                                    Circular.                                               prescribed by the Operating Committee                 Information; and
                                                       Paragraph (d) of Proposed Rule 4.6                   pursuant to the CAT NMS Plan:                            • other information or additional
                                                    establishes reporting requirements with                   • For original receipt or origination of            events as may be prescribed pursuant to
                                                    regard to clock synchronization.                        an order: (1) Firm Designated ID(s) for               the CAT NMS Plan.
                                                    Paragraph (d) of Proposed Rule 4.6                      each Customer; (2) CAT-Order-ID; (3)                     Paragraph (a)(2) of Proposed Rule 4.7
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                                                    requires Industry Members to report to                  SRO-Assigned Market Participant                       requires, subject to paragraph (a)(3)
                                                    the Plan Processor and the Exchange,                    Identifier of the Industry Member                     regarding Options Market Makers, each
                                                    violations of paragraph (a) of this Rule                receiving or originating the order; (4)               Industry Member to record and report to
                                                    pursuant to the thresholds set by the                   date of order receipt or origination; (5)             the Central Repository the following, as
                                                    Operating Committee pursuant to the                     time of order receipt or origination                  applicable (‘‘Received Industry Member
                                                    CAT NMS Plan. This requirement is the                   (using timestamps pursuant to Proposed                Data’’ and collectively with the
                                                    same requirement as set forth in Section                Rule 4.10); and (6) Material Terms of the             information referred to in Rule 4.7(a)(1)
                                                    6.8(a)(ii)(C), (iii) and (iv) of the CAT                Order;                                                ‘‘Industry Member Data’’)) in the


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                                                    9774                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    manner prescribed by the Operating                      Data prior to the applicable 8:00 a.m.                (E) Error Correction
                                                    Committee pursuant to the CAT NMS                       Eastern Time deadline.                                  To ensure that the CAT contains
                                                    Plan:                                                                                                         accurate data, the CAT NMS Plan
                                                                                                            (C) Applicable Securities
                                                       • If the order is executed, in whole or                                                                    requires Industry Members to correct
                                                    in part: (1) An Allocation Report; (2)                     Paragraph (c) of Proposed Rule 4.7                 erroneous data submitted to the Central
                                                    SRO-Assigned Market Participant                         describes the securities to which the                 Repository. Therefore, the Exchange
                                                    Identifier of the clearing broker or prime              recording and reporting requirements of               proposes to adopt paragraph (e) of
                                                    broker, if applicable; and (3) CAT-                     Proposed Rule 4.7 apply. Paragraphs                   Proposed Rule 4.7, which addresses the
                                                    Order-ID of any contra-side order(s);                   (c)(1) and (c)(2) of Proposed Rule 4.7 set            correction of erroneous data reported to
                                                       • if the trade is cancelled, a cancelled             forth the description of applicable                   the Central Repository. Paragraph (e) of
                                                    trade indicator; and                                    securities as set forth in Section 6.4(c)(i)          Proposed Rule 4.7 requires, for each
                                                       • for original receipt or origination of             and (ii) of the CAT NMS Plan,                         Industry Member for which errors in
                                                    an order, the Firm Designated ID for the                respectively. Paragraph (c)(1) of                     Industry Member Data submitted to the
                                                    relevant Customer, and in accordance                    Proposed Rule 4.7 requires each                       Central Repository have been identified
                                                    with Proposed Rule 4.8, Customer                        Industry Member to record and report to               by the Plan Processor or otherwise, that
                                                    Account Information and Customer                        the Central Repository the Industry                   such Industry Member submit corrected
                                                    Identifying Information for the relevant                Member Data as set forth in paragraph                 Industry Member Data to the Central
                                                    Customer.                                               (a) of Proposed Rule 4.7 for each NMS                 Repository by 8:00 a.m. Eastern Time on
                                                       Paragraph (a)(3) of Proposed Rule 4.7                Security registered or listed for trading             T+3. This requirement implements the
                                                    states that each Industry Member that is                on such exchange or admitted to                       error correction requirement set forth in
                                                    an Options Market Maker is not                          unlisted trading privileges on such                   Section 6 of Appendix D of the CAT
                                                    required to report to the Central                       exchange. Paragraph (c)(2) of Proposed                NMS Plan.
                                                    Repository the Industry Member Data                     Rule 4.7 requires each Industry Member
                                                    regarding the routing, modification or                                                                        (iv) Customer Information Reporting
                                                                                                            to record and report to the Central
                                                    cancellation of its quotes in Listed                    Repository the Industry Member Data as                   Section 6.4(d)(iv) of the CAT NMS
                                                    Options. Each Industry Member that is                   set forth in paragraph (a) of this                    Plan requires Industry Members to
                                                    an Options Market Maker, however, is                    Proposed Rule 4.7 for each Eligible                   submit to the Central Repository certain
                                                    required to report to the Exchange the                  Security for which transaction reports                information related to their Customers
                                                    time at which its quote in a Listed                     are required to be submitted to FINRA.                in accordance with the Customer
                                                    Option is sent to the Exchange (and, if                                                                       Information Approach discussed above.
                                                    applicable, any subsequent quote                        (D) Security Symbology                                The Exchange proposes Rule 4.8
                                                    modification time and/or cancellation                                                                         (Consolidated Audit Trail—Customer
                                                    time when such modification or                             Paragraph (d) of Proposed Rule 4.7                 Information Reporting) to implement
                                                    cancellation is originated by the Options               describes the security symbology that                 this provision of the CAT NMS Plan
                                                    Market Maker). This paragraph                           Industry Members are required to use                  with regard to its Industry Members.
                                                    implements the Options Market Maker                     when reporting Industry Member Data                   Specifically, paragraph (a) of Proposed
                                                    Quote Exemption, as discussed above.                    to the Central Repository. Paragraph                  Rule 4.8 requires each Industry Member
                                                                                                            (d)(1) of Proposed Rule 4.7 requires, for             to submit to the Central Repository the
                                                    (B) Timing of Recording and Reporting                   each exchange-listed Eligible Security,               Firm Designated ID, Customer Account
                                                      Paragraph (b) of Proposed Rule 4.7                    each Industry Member to report                        Information and Customer Identifying
                                                    describes the requirements related to the               Industry Member Data to the Central                   Information for each of its Customers
                                                    timing of recording and reporting of                    Repository using the symbology format                 with an Active Account prior to such
                                                    Industry Member Data. Paragraphs                        of the exchange listing the security. This            Industry Member’s commencement of
                                                    (b)(1)–(b)(3) of Proposed Rule 4.7 set                  requirement implements the                            reporting to the Central Repository and
                                                    forth the requirements related to the                   requirement set forth in Section 2 of                 in accordance with the deadlines set
                                                    timing of the recording and reporting                   Appendix D of the CAT NMS Plan to                     forth in Rule 4.13. Paragraph (b) of
                                                    requirements required in Section                        use the listing exchange symbology                    Proposed Rule 4.8 requires each
                                                    6.4(b)(i)–(ii) of the CAT NMS Plan.                     when reporting data to the Central                    Industry Member to submit to the
                                                      Paragraph (b)(1) of Proposed Rule 4.7                 Repository for exchange-listed Eligible               Central Repository any updates,
                                                    requires each Industry Member to                        Securities.                                           additions or other changes to the Firm
                                                    record Recorded Industry Member Data                       For each Eligible Security that is not             Designated ID, Customer Account
                                                    contemporaneously with the applicable                   exchange-listed, however, there is no                 Information and Customer Identifying
                                                    Reportable Event. Paragraph (b)(2) of                   listing exchange to provide the                       Information for each of its Customers
                                                    Proposed Rule 4.7 requires each                         symbology format. Moreover, to date,                  with an Active Account on a daily basis.
                                                    Industry Member to report: (1) Recorded                 the requisite symbology format has not                Paragraph (c) of Proposed Rule 4.8
                                                    Industry Member Data to the Central                     been determined. Therefore, Paragraph                 requires each Industry Member, on a
                                                    Repository by 8:00 a.m. Eastern Time on                 (d)(2) of Proposed Rule 4.7 requires, for             periodic basis as designated by the Plan
                                                    the Trading Day following the day the                   each Eligible Security that is not                    Processor and approved by the
                                                    Industry Member records such Recorded                   exchange-listed, each Industry Member                 Operating Committee, to submit to the
                                                    Industry Member Data; and (2) Received                  to report Industry Member Data to the                 Central Repository a complete set of
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                                                    Industry Member Data to the Central                     Central Repository using such                         Firm Designated IDs, Customer Account
                                                    Repository by 8:00 a.m. Eastern Time on                 symbology format as approved by the                   Information and Customer Identifying
                                                    the Trading Day following the day the                   Operating Committee pursuant to the                   Information for each of its Customers
                                                    Industry Member receives such                           CAT NMS Plan. The Exchange intends                    with an Active Account. This periodic
                                                    Received Industry Member Data.                          to announce to its Industry Members the               refresh is intended to ensure that the
                                                    Paragraph (b)(3) states that Industry                   relevant symbology formats established                Central Repository has the most current
                                                    Members may, but are not required to,                   by the Operating Committee via                        information identifying a Customer. The
                                                    voluntarily report Industry Member                      Regulatory Circular.                                  Exchange intends to announce to its


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                                                                                   Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9775

                                                    Industry Members when such a periodic                        Paragraph (a) of Proposed Rule 4.10                violation of SEC Rule 613 or the CAT
                                                    refresh is required by the Plan Processor                 sets forth the time stamp increments to               NMS Plan.
                                                    and the Operating Committee via                           be used by Industry Members in their
                                                                                                                                                                    (viii) Connectivity and Data
                                                    Regulatory Circular.                                      CAT reporting. Paragraph (a)(1) of
                                                                                                                                                                    Transmission
                                                      Finally, paragraph (d) of Proposed                      Proposed Rule 4.10 requires each
                                                    Rule 4.8 addresses the correction of                      Industry Member to record and report                    Proposed Rule 4.12 (Consolidated
                                                    erroneous Customer data reported to the                   Industry Member Data to the Central                   Audit Trail—Connectivity and Data
                                                    Central Repository to ensure an accurate                  Repository with time stamps in                        Transmission) addresses connectivity
                                                    audit trail. Paragraph (d) requires, for                  milliseconds, subject to paragraphs                   and data transmission requirements
                                                    each Industry Member for which errors                     (a)(2) and (b) of Proposed Rule 4.10. To              related to the CAT. Paragraph (a) of
                                                    in Firm Designated ID, Customer                           the extent that any Industry Member’s                 Proposed Rule 4.12 describes the
                                                    Account Information and Customer                          order handling or execution systems                   format(s) for reporting Industry Member
                                                    Identifying Information for each of its                   utilize time stamps in increments finer               Data to the Central Repository, thereby
                                                    Customers with an Active Account                          than milliseconds, paragraph (a)(2) of                implementing the formatting
                                                    submitted to the Central Repository                       Proposed Rule 4.10 requires such                      requirements as set forth in Section
                                                    have been identified by the Plan                          Industry Member to record and report                  6.4(a) of the CAT NMS Plan.
                                                    Processor or otherwise, such Member to                    Industry Member Data to the Central                   Specifically, paragraph (a) of Proposed
                                                    submit corrected data to the Central                      Repository with time stamps in such                   Rule 4.12 requires each Industry
                                                                                                              finer increment, subject to paragraph (b)             Member to transmit data as required
                                                    Repository by 5:00 p.m. Eastern Time on
                                                                                                              of Proposed Rule 4.10 regarding Manual                under the CAT NMS Plan to the Central
                                                    T+3. This requirement implements the
                                                                                                              Order Events and Allocation Reports.                  Repository utilizing such format(s) as
                                                    error correction requirement set forth in
                                                                                                                 Paragraph (b) of Proposed Rule 4.10                may be provided by the Plan Processor
                                                    Appendix C of the CAT NMS Plan.
                                                                                                              sets forth the permissible time stamp                 and approved by the Operating
                                                    (v) Industry Member Information                           increments for Manual Order Events                    Committee.
                                                    Reporting                                                 and Allocation Reports. Specifically,                   Paragraph (b) of Proposed Rule 4.12
                                                                                                              paragraph (b)(1) of Proposed Rule 4.10                addresses connectivity requirements
                                                      Section 6.4(d)(vi) of the CAT NMS                                                                             related to the CAT. Paragraph (b) of
                                                    Plan requires Industry Members to                         permits each Industry Member to record
                                                                                                              and report Manual Order Events to the                 Proposed Rule 4.12 requires each
                                                    submit to the Central Repository                                                                                Industry Member to connect to the
                                                    information sufficient to identify such                   Central Repository in increments up to
                                                                                                              and including one second, provided that               Central Repository using a secure
                                                    Industry Member, including CRD                                                                                  method(s), including, but not limited to,
                                                                                                              each Industry Member is required to
                                                    number and LEI, if such LEI has been                                                                            private line(s) and virtual private
                                                                                                              record and report the time when a
                                                    obtained, in accordance with the                                                                                network connection(s). This provision
                                                                                                              Manual Order Event has been captured
                                                    Existing Identifier Approach discussed                                                                          implements the connectivity
                                                                                                              electronically in an order handling and
                                                    above. The Exchange proposes Rule 4.9                                                                           requirements set forth in Section 4 of
                                                                                                              execution system of such Member
                                                    (Consolidated Audit Trail—Industry                                                                              Appendix D to the CAT NMS Plan.
                                                                                                              (‘‘Electronic Capture Time’’) in
                                                    Member Information Reporting) to                                                                                  Paragraph (c) permits Industry
                                                                                                              milliseconds. In addition, paragraph
                                                    implement this provision of the CAT                                                                             Members to use CAT Reporting Agents
                                                                                                              (b)(2) of Proposed Rule 4.10 permits
                                                    NMS Plan with regard to its Industry                                                                            to fulfill their data reporting obligations
                                                                                                              each Industry Member to record and
                                                    Members. Specifically, Proposed Rule                      report the time of Allocation Reports in              related to the CAT. Paragraph (c) is
                                                    4.9 requires each Industry Member to                      increments up to and including one                    based on FINRA Rule 7450(c), which
                                                    submit to the Central Repository                          second.                                               permits OATS Reporting Members to
                                                    information sufficient to identify such                                                                         enter into agreements with Reporting
                                                    Industry Member, including CRD                            (vii) Clock Synchronization Rule                      Agents to fulfill the OATS obligations of
                                                    number and LEI, if such LEI has been                      Violations                                            the OATS Reporting Member.
                                                    obtained, prior to such Industry                            Proposed Rule 4.11 (Consolidated                    Specifically, Paragraph (c)(1) of
                                                    Member’s commencement of reporting                        Audit Trail—Clock Synchronization                     Proposed Rule 4.12 states that any
                                                    to the Central Repository and in                          Rule Violations) describes potential                  Industry Member may enter into an
                                                    accordance with the deadlines set forth                   violations of the clock synchronization               agreement with a CAT Reporting Agent
                                                    in Rule 4.13, and keep such information                   time period requirements set forth in the             pursuant to which the CAT Reporting
                                                    up to date as necessary.                                  Proposed Rules 4.5 through 4.16.                      Agent agrees to fulfill the obligations of
                                                    (vi) Time Stamps                                          Proposed Rule 4.11 states that an                     such Industry Member under the
                                                                                                              Industry Member that engages in a                     Proposed Rules 4.5 through 4.16. Any
                                                      SEC Rule 613(d)(3) under Regulation                     pattern or practice of reporting                      such agreement must be evidenced in
                                                    NMS sets forth requirements for time                      Reportable Events outside of the                      writing, which specifies the respective
                                                    stamps used by CAT Reporters in                           required clock synchronization time                   functions and responsibilities of each
                                                    recording and reporting data to the                       period as set forth in the Proposed Rules             party to the agreement that are required
                                                    CAT.26 To comply with this provision,                     4.5 through 4.16 without reasonable                   to effect full compliance with the
                                                    Section 6.8(b) of the Plan sets forth time                justification or exceptional                          requirements of the Proposed Rules 4.5
                                                    stamp requirements for Industry                           circumstances may be considered in                    through 4.16. The Exchange notes that,
                                                    Members. To implement this provision                      violation of this Rule. This provision                currently, no standardized form
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                                                    with regard to its Industry Members, the                  implements the requirements of Section                agreement for CAT Reporting Agent
                                                    Exchange proposes new Rule 4.10                           6.8 of the CAT NMS Plan which                         arrangements has been adopted.
                                                    (Consolidated Audit Trail—Time                            requires the Compliance Rule to provide               Paragraph (c)(2) of Proposed Rule 4.12
                                                    Stamps) to require its Industry Members                   that a pattern or practice of reporting               requires that all written documents
                                                    to comply with the time stamp                             events outside of the required clock                  evidencing an agreement with a CAT
                                                    requirements of the Plan.                                 synchronization time period without                   Reporting Agent be maintained by each
                                                                                                              reasonable justification or exceptional               party to the agreement. Paragraph (c)(3)
                                                      26 17   CFR 242.613(d)(3).                              circumstances may be considered a                     states that each Industry Member


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                                                    9776                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    remains primarily responsible for                       of order submission, which will begin                 data to the Central Repository as
                                                    compliance with the requirements of the                 no later than August 15, 2019.                        required by the Proposed Rules 4.5
                                                    Proposed Rules 4.5 through 4.16,                          Paragraph (a)(4) states that Industry               through 4.16 in a manner that ensures
                                                    notwithstanding the existence of an                     Members are permitted, but not required               the timeliness, accuracy, integrity and
                                                    agreement described in paragraph (c) of                 to, submit Quote Sent Times on Options                completeness of such data.
                                                    Proposed Rule 4.12.                                     Market Maker quotes, beginning no later                  In addition, without limiting the
                                                                                                            than October 15, 2018.                                general requirement as set forth in
                                                    (ix) Development and Testing                              Paragraph (b) of Proposed Rule 4.13                 paragraph (a), paragraph (b) of Proposed
                                                       The Exchange proposes Rule 4.13                      implements the requirement under the                  Rule 4.15 requires Industry Members to
                                                    (Consolidated Audit Trail—                              CAT NMS Plan that Industry Members                    accurately provide the LEIs in their
                                                    Development and Testing) to address                     participate in required industry testing              records as required by the Proposed
                                                    requirements for Industry Members                       with the Central Repository.27                        Rules 4.5 through 4.16 and states that
                                                    related to CAT development and testing.                 Specifically, Proposed Rule 4.13                      Industry Members may not knowingly
                                                    Paragraph (a) of Proposed Rule 4.13 sets                requires that each Industry Member                    submit inaccurate LEIs to the Central
                                                    forth the testing requirements and                      participate in testing related to the                 Repository. Paragraph (b) notes,
                                                    deadlines for Industry Members to                       Central Repository, including any                     however, that this requirement does not
                                                    develop and commence reporting to the                   industry-wide disaster recovery testing,              impose any additional due diligence
                                                    Central Repository. These requirements                  pursuant to the schedule established                  obligations on Industry Members with
                                                    are set forth in Appendix C to the CAT                  pursuant to the CAT NMS Plan. The                     regard to LEIs for CAT purposes.
                                                    NMS Plan.                                               Exchange intends to announce to its                   Accordingly, this provision does not
                                                       Paragraph (a)(1) sets forth the                      Industry Members the schedule                         impose any due diligence obligations
                                                    deadlines related to connectivity and                   established pursuant to the CAT NMS                   beyond those that may exist today with
                                                    acceptance testing. Industry Members                    Plan via Regulatory Circular.                         respect to information associated with
                                                    (other than Small Industry Members) are                                                                       an LEI. Although Industry Members will
                                                    required to begin connectivity and                      (x) Recordkeeping                                     not be required to perform additional
                                                    acceptance testing with the Central                       Proposed Rule 4.14 (Consolidated                    due diligence with regard to the LEIs for
                                                    Repository no later than August 15,                     Audit Trail—Recordkeeping) sets forth                 CAT purposes, Industry Members will
                                                    2018, and Small Industry Members are                    the recordkeeping obligations related to              be required to accurately provide the
                                                    required to begin connectivity and                      the CAT for Industry Members.                         LEIs in their records and may not
                                                    acceptance testing with the Central                     Proposed Rule 4.14 requires each                      knowingly submit inaccurate LEIs to the
                                                    Repository no later than August 15,                     Industry Member to maintain and                       CAT. Paragraph (b) is consistent with
                                                    2019.                                                   preserve records of the information                   the SEC’s statements in the Approval
                                                       Paragraph (a)(2) sets forth the                      required to be recorded in accordance                 Order for the CAT NMS Plan regarding
                                                    deadlines related to reporting Customer                 with the Proposed Rules 4.5 through                   an Industry Member’s obligations
                                                    and Industry Member information.                        4.16, for the period of time and                      regarding LEIs.29
                                                    Paragraph (a)(2)(i) requires Industry                   accessibility specified in SEC Rule 17a–                 Paragraph (c) states that, if an
                                                    Members (other than Small Industry                      4(b). The records required to be                      Industry Member reports data to the
                                                    Members) to begin reporting Customer                    maintained and preserved in accordance                Central Repository with errors such that
                                                    and Industry Member information, as                     with Proposed Rules 4.5 through 4.16,                 its error percentage exceeds the
                                                    required by Rules 4.8(a) and 4.9,                       may be immediately produced or                        maximum Error Rate established by the
                                                    respectively, to the Central Repository                 reproduced on ‘‘micrographic media’’ as               Operating Committee pursuant to the
                                                    for processing no later than October 15,                defined in SEC Rule 17a–4(f)(1)(i) or by              CAT NMS Plan, then such Industry
                                                    2018. Paragraph (a)(2)(ii) requires Small               means of ‘‘electronic storage media’’ as              Member would not be in compliance
                                                    Industry Members to begin reporting                     defined in SEC Rule 17a–4(f)(1)(ii) that              with the Rules 4.5 through 4.16. As
                                                    Customer and Industry Member                            meet the conditions set forth in SEC                  discussed above, the initial maximum
                                                    information, as required by Rules 4.8(a)                Rule 17a–4(f) and be maintained and                   Error Rate is 5%, although the Error
                                                    and 4.9, respectively, to the Central                   preserved for the required time in that               Rate is expected to be reduced over
                                                    Repository for processing no later than                 form. Proposed Rule 4.14 is based on                  time. The Exchange intends to
                                                    October 15, 2019.                                       FINRA Rule 7440(a)(5), which sets forth               announce to its Industry Members
                                                       Paragraph (a)(3) sets forth the                                                                            changes to the Error Rate established
                                                                                                            the recordkeeping requirements related
                                                    deadlines related to the submission of                                                                        pursuant to the CAT NMS Plan via
                                                                                                            to OATS.
                                                    order data. Under paragraph (a)(3)(i),                                                                        Regulatory Circular.
                                                    Industry Members (other than Small                      (xi) Timely, Accurate and Complete                       Furthermore, paragraph (d) of
                                                    Industry Members) are permitted, but                    Data                                                  Proposed Rule 4.15 addresses
                                                    not required, to submit order data for                     SEC Rule 613 and the CAT NMS Plan                  Compliance Thresholds related to
                                                    testing purposes beginning no later than                emphasize the importance of the                       reporting data to the CAT. Proposed
                                                    May 15, 2018. In addition, Industry                     timeliness, accuracy, completeness and                Rule 4.15 states that each Industry
                                                    Members (other than Small Industry                      integrity of the data submitted to the                Member is required to meet a separate
                                                    Members) are required to participate in                 CAT.28 Accordingly, Proposed Rule 4.15                compliance threshold which will be an
                                                    the coordinated and structured testing                  (Consolidated Audit Trail—Timely,                     Industry Member-specific rate that may
                                                    of order submission, which will begin                                                                         be used as the basis for further review
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                                                                                                            Accurate and Complete Data)
                                                    no later than August 15, 2018. Under                    implements this requirement with                      or investigation into the Industry
                                                    paragraph (a)(3)(ii), Small Industry                    regard to Industry Members. Paragraph                 Member’s performance with regard to
                                                    Members are permitted, but not                          (a) of Proposed Rule 4.15 requires that               the CAT (the ‘‘Compliance
                                                    required, to submit order data for testing              Industry Members record and report                    Thresholds’’). Compliance Thresholds
                                                    purposes beginning no later than May                                                                          will compare an Industry Member’s
                                                    15, 2019. In addition, Small Industry                     27 Approval  Order at 84725.                        error rate to the aggregate Error Rate
                                                    Members are required to participate in                    28 See SEC Rule 613(e)(4)(i)(D)(ii); and Section
                                                    the coordinated and structured testing                  6.5(d) of the CAT NMS Plan.                             29 Approval   Order at 84745.



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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9777

                                                    over a period of time to be defined by                  the Industry Member Data to the Central               securities exchanges and FINRA are
                                                    the Operating Committee. Compliance                     Repository by November 15, 2019. Such                 proposing similar rules to apply the
                                                    Thresholds will be set by the Operating                 compliance dates are consistent with                  requirements of the CAT NMS Plan to
                                                    Committee, and will be calculated at                    the compliance dates set forth in SEC                 their members. Therefore, this is not a
                                                    intervals to be set by the Operating                    Rule 613(a)(3)(v) and (vi), and Section               competitive rule filing, and, therefore, it
                                                    Committee.30 Compliance Thresholds                      6.7(a)(v) and (vi) of the CAT NMS Plan.               does not impose a burden on
                                                    will include compliance with the data                                                                         competition.
                                                                                                            2. Statutory Basis
                                                    reporting and clock synchronization
                                                    requirements. Proposed Rule 4.15 states                    The Exchange believes that the                     (C) Self-Regulatory Organization’s
                                                    that an Industry Member’s performance                   proposed rule change is consistent with               Statement on Comments on the
                                                    with respect to its Compliance                          the provisions of Section 6(b)(5) of the              Proposed Rule Change Received From
                                                    Threshold will not signify, as a matter                 Act,32 which require, among other                     Members, Participants or Others
                                                    of law, that such Industry Member has                   things, that the Exchange’s rules must                  Written comments were neither
                                                    violated the Proposed Rules 4.5 through                 be designed to prevent fraudulent and                 solicited nor received.
                                                    4.16.                                                   manipulative acts and practices, to
                                                                                                            promote just and equitable principles of              III. Date of Effectiveness of the
                                                    (xii) Compliance Dates                                  trade, and, in general, to protect                    Proposed Rule Change and Timing for
                                                      Proposed Rule 4.16 (Consolidated                      investors and the public interest, and                Commission Action
                                                    Audit Trail—Compliance Dates) sets                      Section 6(b)(8) of the Act,33 which                      Within 45 days of the date of
                                                    forth the compliance dates for the                      requires that the Exchange’s rules not                publication of this notice in the Federal
                                                    various provisions of the Proposed                      impose any burden on competition that                 Register or within such longer period (i)
                                                    Rules 4.5 through 4.16. Paragraphs (b)                  is not necessary or appropriate.                      as the Commission may designate up to
                                                    and (c) of this Rule set forth the                         The Exchange believes that this                    90 days of such date if it finds such
                                                    additional details with respect to the                  proposal is consistent with the Act                   longer period to be appropriate and
                                                    compliance date of the Proposed Rules                   because it implements, interprets or                  publishes its reasons for so finding or
                                                    4.5 through 4.16. Unless otherwise                      clarifies the provisions of the Plan, and             (ii) as to which the Exchange consents,
                                                    noted, the Proposed Rules 4.5 through                   is designed to assist the Exchange and                the Commission will: (a) By order
                                                    4.16 will be fully effective upon                       its Industry Members in meeting                       approve or disapprove such proposed
                                                    approval by the Commission and                          regulatory obligations pursuant to the                rule change, or (b) institute proceedings
                                                    Members must comply with their terms.                   Plan. In approving the Plan, the SEC                  to determine whether the proposed rule
                                                      Paragraph (b) of Proposed Rule 4.16                   noted that the Plan ‘‘is necessary and                change should be disapproved.
                                                    establishes the compliance dates for the                appropriate in the public interest, for
                                                    clock synchronization requirements as                                                                         IV. Solicitation of Comments
                                                                                                            the protection of investors and the
                                                    set forth in Proposed Rule 4.6.                         maintenance of fair and orderly markets,                Interested persons are invited to
                                                    Paragraph (b)(1) states that each                       to remove impediments to, and perfect                 submit written data, views, and
                                                    Industry Member shall comply with                       the mechanism of a national market                    arguments concerning the foregoing,
                                                    Rule 4.6 with regard to Business Clocks                 system, or is otherwise in furtherance of             including whether the proposed rule
                                                    that capture time in milliseconds                       the purposes of the Act.’’ 34 To the                  change is consistent with the Act.
                                                    commencing on or before March 15,                       extent that this proposal implements,                 Comments may be submitted by any of
                                                    2017. Paragraph (b)(2) states that each                 interprets or clarifies the Plan and                  the following methods:
                                                    Industry Member shall comply with                       applies specific requirements to
                                                    Rule 4.6 with regard to Business Clocks                                                                       Electronic Comments
                                                                                                            Industry Members, the Exchange
                                                    that do not capture time in milliseconds                believes that this proposal furthers the                • Use the Commission’s Internet
                                                    commencing on or before February 19,                    objectives of the Plan, as identified by              comment form (http://www.sec.gov/
                                                    2018. The compliance date set forth in                  the SEC, and is therefore consistent with             rules/sro.shtml); or
                                                    paragraph (b)(1) reflects the exemptive                 the Act.                                                • Send an email to rule-comments@
                                                    relief requested by the Participants with                                                                     sec.gov. Please include File Number SR–
                                                    regard to the clock synchronization                     (B) Self-Regulatory Organization’s                    BatsEDGX–2017–08 on the subject line.
                                                    requirements related to Business Clocks                 Statement on Burden on Competition
                                                                                                                                                                  2. Paper Comments
                                                    that do not capture time in                                The Exchange does not believe that
                                                    milliseconds.31                                         the proposed rule change will result in                  • Send paper comments in triplicate
                                                      Paragraph (c) of Proposed Rule 4.16                   any burden on competition that is not                 to Secretary, Securities and Exchange
                                                    establishes the compliance dates for the                necessary or appropriate in furtherance               Commission, 100 F Street NE.,
                                                    data recording and reporting                            of the purposes of the Act. The                       Washington, DC 20549–1090.
                                                    requirements for Industry Members.                      Exchange notes that the proposed rule                 All submissions should refer to File
                                                    Paragraph (c)(1) requires each Industry                 change implements provisions of the                   Number SR–BatsEDGX–2017–08. This
                                                    Member (other than Small Industry                       CAT NMS Plan, and is designed to                      file number should be included on the
                                                    Members) to record and report the                       assist the Exchange in meeting its                    subject line if email is used. To help the
                                                    Industry Member Data to the Central                     regulatory obligations pursuant to the                Commission process and review your
                                                    Repository by November 15, 2018.                        Plan. The Exchange also notes that the                comments more efficiently, please use
                                                    Paragraph (c)(2) requires that each                                                                           only one method. The Commission will
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                                                                                                            Proposed Rules 4.5 through 4.16
                                                    Industry Member that is a Small                         implement provisions of the CAT NMS                   post all comments on the Commission’s
                                                    Industry Member to record and report                    Plan will apply equally to all firms that             Internet Web site (http://www.sec.gov/
                                                                                                            trade NMS Securities and OTC Equity                   rules/sro.shtml). Copies of the
                                                      30 Appendix   C of the CAT NMS Plan.
                                                                                                            Securities. In addition, all national                 submission, all subsequent
                                                      31 SeeLetter from Participants to Brent J. Fields,                                                          amendments, all written statements
                                                    Secretary, U.S. Securities and Exchange
                                                    Commission, dated January 17, 2017, requesting
                                                                                                              32 15U.S.C. 78f(b)(5).                              with respect to the proposed rule
                                                    exemptive relief from SEC Rule 613(a)(3)(iii) and         33 15U.S.C. 78f(b)(8).                              change that are filed with the
                                                    Section 6.7(a)(ii) of the CAT NMS Plan.                   34 Approval Order at 84697.                         Commission, and all written


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                                                    9778                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    communications relating to the                          I. Self-Regulatory Organization’s                     Plan to comply with Rule 613 of
                                                    proposed rule change between the                        Statement of the Terms of Substance of                Regulation NMS under the Exchange
                                                    Commission and any person, other than                   the Proposed Rule Change                              Act. The Plan was published for
                                                    those that may be withheld from the                        The Exchange proposes to adopt the                 comment in the Federal Register on
                                                    public in accordance with the                           Rule 900A Series to implement the                     May 17, 2016,8 and approved by the
                                                    provisions of 5 U.S.C. 552, will be                     compliance rule (‘‘Compliance Rule’’)                 Commission, as modified, on November
                                                    available for Web site viewing and                      regarding the National Market System                  15, 2016.9
                                                    printing in the Commission’s Public                     Plan Governing the Consolidated Audit                    The Plan is designed to create,
                                                    Reference Room, 100 F Street NE.,                       Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).4            implement, and maintain a consolidated
                                                    Washington, DC 20549 on official                           The text of the proposed rule change               audit trail (‘‘CAT’’) that would capture
                                                    business days between the hours of                      is available on the Exchange’s Web site               customer and order event information
                                                    10:00 a.m. and 3:00 p.m. Copies of the                  at http://nasdaqphlx.cchwallstreet.com/               for orders in NMS Securities and OTC
                                                    filing also will be available for                       at the principal office of the Exchange,              Equity Securities, across all markets,
                                                    inspection and copying at the principal                 and at the Commission’s Public                        from the time of order inception through
                                                    office of the Exchange. All comments                    Reference Room.                                       routing, cancellation, modification, or
                                                    received will be posted without change;                                                                       execution in a single consolidated data
                                                                                                            II. Self-Regulatory Organization’s                    source. Each Participant is required to
                                                    the Commission does not edit personal
                                                                                                            Statement of the Purpose of, and                      enforce compliance by its Industry
                                                    identifying information from
                                                                                                            Statutory Basis for, the Proposed Rule                Members, as applicable, with the
                                                    submissions. You should submit only
                                                                                                            Change                                                provisions of the Plan, by adopting a
                                                    information that you wish to make
                                                    available publicly. All submissions                        In its filing with the Commission, the             Compliance Rule applicable to their
                                                    should refer to File Number SR–                         Exchange included statements                          Industry Members.10 As is described
                                                    BatsEDGX–2017–08 and should be                          concerning the purpose of and basis for               more fully below, the Proposed Rule
                                                    submitted on or before March 1, 2017.                   the proposed rule change and discussed                900A Series sets forth the Compliance
                                                                                                            any comments it received on the                       Rule to require Industry Members to
                                                      For the Commission, by the Division of
                                                                                                            proposed rule change. The text of these               comply with the provisions of the CAT
                                                    Trading and Markets, pursuant to delegated
                                                                                                            statements may be examined at the                     NMS Plan. The Proposed Rule 900A
                                                    authority.35
                                                                                                            places specified in Item IV below. The                Series includes twelve Proposed Rules
                                                    Robert W. Errett,                                       Exchange has prepared summaries, set                  covering the following areas: (1)
                                                    Deputy Secretary.                                       forth in sections A, B, and C below, of               Definitions; (2) clock synchronization;
                                                    [FR Doc. 2017–02554 Filed 2–7–17; 8:45 am]              the most significant aspects of such                  (3) Industry Member Data reporting; (4)
                                                    BILLING CODE 8011–01–P                                  statements.                                           Customer information reporting; (5)
                                                                                                            A. Self-Regulatory Organization’s                     Industry Member information reporting;
                                                                                                            Statement of the Purpose of, and                      (6) time stamps; (7) clock
                                                    SECURITIES AND EXCHANGE                                 Statutory Basis for, the Proposed Rule                synchronization rule violations; (8)
                                                    COMMISSION                                              Change                                                connectivity and data transmission; (9)
                                                                                                                                                                  development and testing; (10)
                                                    [Release No. 34–79945; File No. SR–Phlx–                1. Purpose                                            recordkeeping; (11) timely, accurate and
                                                    2017–07]                                                   Bats BYX Exchange, Inc., Bats BZX                  complete data; and (12) compliance
                                                                                                            Exchange, Inc., Bats EDGA Exchange,                   dates. Each of these Proposed Rules are
                                                    Self-Regulatory Organizations;                          Inc., Bats EDGX Exchange, Inc., BOX                   discussed in detail below.
                                                    NASDAQ PHLX LLC; Notice of Filing of                    Options Exchange LLC, C2 Options                      (i) Definitions
                                                    Proposed Rule Change To Adopt the                       Exchange, Incorporated, Chicago Board
                                                    Rule 900A Series                                        Options Exchange, Incorporated,                         Proposed Rule 910A (Consolidated
                                                                                                            Chicago Stock Exchange, Inc., Financial               Audit Trail—Definitions) sets forth the
                                                    February 2, 2017.                                                                                             definitions for the terms used in the
                                                                                                            Industry Regulatory Authority, Inc.,
                                                       Pursuant to Section 19(b)(1) of the                  International Securities Exchange, LLC,               Proposed Rule 900A Series. Each of the
                                                    Securities Exchange Act of 1934                         Investors’ Exchange LLC, ISE Gemini,                  defined terms in Proposed Rule 910A is
                                                    (‘‘Act’’),1 and Rule 19b–4 thereunder,2                 LLC, ISE Mercury, LLC, Miami                          discussed in detail in this section.
                                                    notice is hereby given that on January                  International Securities Exchange LLC,                (A) Account Effective Date
                                                    30, 2017, NASDAQ PHLX LLC (‘‘Phlx’’                     MIAX PEARL, LLC, NASDAQ BX, Inc.,
                                                    or ‘‘Exchange’’) filed with the Securities              NASDAQ PHLX LLC, The NASDAQ                           (I) Customer Information Approach
                                                    and Exchange Commission (‘‘SEC’’ or                     Stock Market LLC, National Stock                        SEC Rule 613 requires that numerous
                                                    ‘‘Commission’’) the proposed rule                       Exchange, Inc., New York Stock                        data elements be reported to the CAT to
                                                    change as described in Items I, II, and                 Exchange LLC, NYSE MKT LLC, and                       ensure there is sufficient information to
                                                    III, below, which Items have been                       NYSE Arca, Inc. (collectively, the                    create the lifecycle of an order, and
                                                    prepared by the Exchange.3 The                          ‘‘Participants’’) filed with the                      provide regulators with sufficient detail
                                                    Commission is publishing this notice to                 Commission, pursuant to Section 11A of
                                                    solicit comments on the proposed rule                   the Exchange Act 5 and Rule 608 of                    2014; and Letter from Participants to Brent J. Fields,
                                                    change from interested persons.                         Regulation NMS thereunder,6 the CAT                   Secretary, Commission, dated February 27, 2015.
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                                                                                                                                                                  On December 24, 2015, the Participants submitted
                                                                                                            NMS Plan.7 The Participants filed the                 an amendment to the CAT NMS Plan. See Letter
                                                      35 17 CFR 200.30–3(a)(12).                                                                                  from Participants to Brent J. Fields, Secretary,
                                                      1 15                                                    4 Unless otherwise specified, capitalized terms     Commission, dated December 23, 2015.
                                                           U.S.C. 78s(b)(1).
                                                      2 17 CFR 240.19b–4.                                   used in this rule filing are defined as set forth        8 Securities Exchange Act Release No. 77724

                                                      3 The Exchange originally filed this proposed rule    herein or in the CAT NMS Plan.                        (Apr. 27, 2016), 81 FR 30614 (May 17, 2016).
                                                                                                              5 15 U.S.C. 78k–1.                                     9 Securities Exchange Act Release. No. 79318
                                                    change on January 17, 2017 under File No. SR–
                                                                                                              6 17 CFR 242.608.                                   (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016)
                                                    Phlx–2017–03, and the Exchange subsequently
                                                    withdrew that filing on January 30, 2017 and filed        7 See Letter from the Participants to Brent J.      (‘‘Approval Order’’).
                                                    this proposed rule change.                              Fields, Secretary, Commission, dated September 30,       10 See SEC Rule 613(g)(1).




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Document Created: 2017-02-08 02:59:35
Document Modified: 2017-02-08 02:59:35
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 9765 

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