82_FR_9815 82 FR 9790 - Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt Consolidated Audit Trail Compliance Rule (Rules 1701-1712) To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

82 FR 9790 - Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt Consolidated Audit Trail Compliance Rule (Rules 1701-1712) 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 Range9790-9803
FR Document2017-02542

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9790-9803]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02542]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79937; File No. SR-MIAX-2017-03]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712) To Implement 
the Compliance Rule Regarding the National Market System Plan Governing 
the Consolidated Audit Trail

February 2, 2017.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 30, 2017, Miami International 
Securities Exchange, LLC (``MIAX Options'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I and II 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-MIAX-2017-01, 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 proposes to adopt the Rules 1701-1712 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 on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings, at MIAX's 
principal office, and at the Commission's Public Reference Room.

[[Page 9791]]

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 the most significant aspects of such 
statements.

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

1. Purpose
    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,\5\ 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'' or ``SROs'') filed with 
the Commission, pursuant to Section 11A of the Exchange Act \6\ and 
Rule 608 of Regulation NMS thereunder,\7\ the CAT NMS Plan.\8\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\9\ and approved by the Commission, as 
modified, on November 15, 2016.\10\
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    \5\ MIAX PEARL, LLC, became a party to the CAT NMS Plan via an 
Amendment to the Plan on January 12, 2017.
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608.
    \8\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \9\ See Securities Exchange Act Release No. 77724 (Apr. 27, 
2016), 81 FR 30614 (May 17, 2016).
    \10\ See Securities Exchange Act Release 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.\11\ As is described more fully below, the rules contained in 
the proposed Chapter XVII set forth the Compliance Rule to require 
Industry Members to comply with the provisions of the CAT NMS Plan. The 
proposed Rules 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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    \11\ See SEC Rule 613(g)(1).
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(i) Definitions
    Proposed Rule 1701 (Consolidated Audit Trail Compliance Rule--
Definitions) sets forth the definitions for the terms used in the 
proposed Rules 1701-1712. Each of the defined terms in proposed Rule 
1701 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 
Customers associated with orders. For example, SEC Rule 613(c)(7)(i)(A) 
requires an Industry Member to report the ``Customer-IDs'' 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.\12\ The alternative approach is called the 
Customer Information Approach.
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    \12\ 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 
[sic] 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,

[[Page 9792]]

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 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 1701 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 
[sic] 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 1701 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 1701 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.\13\ 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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    \13\ 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 1701 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 1701 
defines the term ``Business

[[Page 9793]]

Clock'' as a clock used to record the date and time of any Reportable 
Event required to be reported under the Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712). This is the same definition as set 
forth in Section 1.1 of the CAT NMS Plan. This change is intended to 
recognize that the Industry Members' obligations with regard to the CAT 
are set forth in the Consolidated Audit Trail Compliance Rule (Rules 
1701-1712).
(E) CAT
    Paragraph (e) of proposed Rule 1701 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.
(F) CAT NMS Plan
    Paragraph (f) of proposed Rule 1701 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 links 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 1701 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.\14\ Such a third party, referred to 
in proposed Rule 1701 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 1701 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 the Consolidated Audit Trail Compliance Rule 
(proposed Rules 1701-1712).
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    \14\ 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 1701 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 1701 defines the term ``Compliance 
Threshold'' as having the meaning set forth in proposed Rule 1711(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 1711(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 1701 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 Consolidated Audit Trail Compliance Rule (Rules 1701-
1712). 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 1701 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 1701(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)

[[Page 9794]]

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 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 1701 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.\15\ 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 Consolidated Audit Trail Compliance Rule (Rules 1701-
1712), the Exchange proposes to define ``Data Submitter'' in paragraph 
(n) of proposed Rule 1701. Specifically, paragraph (n) of proposed Rule 
1701 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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    \15\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) only apply to Reportable Events in 
Eligible Securities. Currently, an Eligible Security includes NMS 
Securities and OTC Equity Securities. Accordingly, paragraph (o) of 
proposed Rule 1701 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.\16\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\17\ 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.\18\ As such, the Exchange 
or the SEC ``[sic]'' may take appropriate action against an Industry 
Member for failing to comply with its CAT reporting obligations.\19\ 
The CAT NMS Plan sets the initial Error Rate at 5%.\20\ 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.\21\
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    \16\ Section 6.5(d)(i) of the CAT NMS Plan.
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \20\ Section 6.5(d)(i) of the CAT NMS Plan.
    \21\ 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.\22\
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    \22\ 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 1701. Paragraph (p) of proposed Rule 1701 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

[[Page 9795]]

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, the 
Exchange proposes to define the term ``Firm Designated ID'' in proposed 
Rule 1701. Specifically, paragraph (q) of proposed Rule 1701 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 1701 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 1701 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 1703(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 1703(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of proposed Rule 1701 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 this proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) applies to Eligible Securities, which 
includes NMS Securities, which, in turn, includes Listed Options. 
Certain requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) apply specifically to Listed Options. 
Accordingly, Paragraph (u) of proposed Rule 1701 defines the term 
``Listed Option'' or ``Option.'' Specifically, paragraph (u) of 
proposed Rule 1701 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.\23\ 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 system uses 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.
---------------------------------------------------------------------------

    \23\ 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 1701. 
Specifically, paragraph (v) of proposed Rule 1701 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 1703 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 
1701. Specifically, paragraph (w) of proposed Rule 1701 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

[[Page 9796]]

define the term ``NMS Security'' in proposed Rule 1701. Specifically, 
paragraph (x) of proposed Rule 1701 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 1701 to mean any NMS Security other than 
an option. This is the same definition as set forth in SEC Rule 
600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of proposed Rule 1701 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.\24\ 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.
---------------------------------------------------------------------------

    \24\ 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 1701. Specifically, paragraph (aa) of proposed 
Rule 1701 defines the term ``Options Market Maker'' 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 Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) requires 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 
1701. Specifically, paragraph (bb) of proposed Rule 1701 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 1701. Specifically, paragraph (cc) 
of proposed Rule 1701 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 1701 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 1701 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 1701 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 1701 states that the term 
``Received Industry Member Data'' has the meaning set forth in Rule 
1703(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 1703(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 1701 states that the term 
``Recorded Industry Member Data'' has the meaning set forth in Rule 
1703(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

[[Page 9797]]

below regarding proposed Rule 1703(a)(1).
(II) Reportable Event
    The proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) requires 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 1701. Specifically, paragraph 
(ii) of proposed Rule 1701 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 1701 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.
(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).\25\ 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.
    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, as well as 
information to identify each such Industry Member, including CRD number 
and LEI, if the SRO has collected such LEI of the Industry Member. 
Additionally, each Industry Member is required to submit to the Central 
Repository the CRD number of the Industry Member as well as the LEI of 
the Industry Member (if the Industry Member has an LEI). The Plan 
Processor will use this information to assign a CAT-Reporter-ID to each 
Industry Member for internal use within the Central Repository.
---------------------------------------------------------------------------

    \25\ See Exemptive Request Letter at 19, and Exemption Order.
---------------------------------------------------------------------------

(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'' in 
proposed Rule 1701. Specifically, paragraph (kk) of proposed Rule 1701 
defines the term ``SRO-Assigned Market Participant Identifier'' to mean 
an identifier assigned to an Industry Member by an SRO or 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 Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) 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 1701. Specifically, paragraph (ll) 
of proposed Rule 1701 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 1703(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 1701. Specifically, Paragraph (mm) of proposed Rule 
1701 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.\26\ To implement these provisions 
with regard to its Industry Members, the Exchange proposes Rule 1702 
(Consolidated Audit Trail Compliance Rule-Clock Synchronization) to 
require its Industry Members to comply with the clock synchronization 
requirements of the Plan.
---------------------------------------------------------------------------

    \26\ 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 1702 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(1) of proposed Rule 1702 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 1702 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

[[Page 9798]]

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 1702 clarifies that the tolerance 
described in paragraphs (a)(1) and (2) of the proposed Rule 1702 
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 1702 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 
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 1702 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 1702 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of proposed Rule 1702 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 1702 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 1702 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
proposed Rule 1702 requires Industry Members to report to the Plan 
Processor and SRO 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 1703 (Consolidated Audit 
Trail Compliance Rule--Industry Member Data Reporting) to require its 
Industry Members to comply with the Industry Member Data reporting 
requirements of the Plan. Proposed Rule 1703 has five sections 
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 1703 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 1703 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 1706); 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 1706); (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 1706); (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

[[Page 9799]]

modification or cancellation is received or originated (using 
timestamps pursuant to proposed Rule 1706); (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 1706; (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 1703 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 1703(a)(1) ``Industry Member Data'') in 
the 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 1704, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 1703 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 1703 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 1703 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 1703 requires each Industry 
Member to record Recorded Industry Member Data contemporaneously with 
the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 1703 
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 1703 describes the securities to 
which the recording and reporting requirements of proposed Rule 1703 
apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 1703 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 1703 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 1703 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 1703 
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 1703 for each Eligible Security for which 
transaction reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of proposed Rule 1703 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 1703 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 1703 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 1703, which addresses the correction of erroneous 
data reported to the Central Repository. Paragraph (e) of proposed Rule 
1703 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 1704 (Consolidated Audit 
Trail Compliance Rule--Customer Information Reporting)

[[Page 9800]]

to implement this provision of the CAT NMS Plan with regard to its 
Industry Members. Specifically, paragraph (a) of proposed Rule 1704 
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 1709. Paragraph (b) of proposed Rule 1704 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 1704 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 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 1704 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 1705 (Consolidated Audit 
Trail Compliance Rule--Industry Member Information Reporting) to 
implement this provision of the CAT NMS Plan with regard to its 
Industry Members. Specifically, proposed Rule 1705 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 1709, 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.\27\ 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 1706 (Consolidated Audit Trail Compliance Rule--Time 
Stamps) to require its Industry Members to comply with the time stamp 
requirements of the Plan.
---------------------------------------------------------------------------

    \27\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 1706 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of proposed Rule 1706 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 1706. 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 1706 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 1706 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of proposed Rule 1706 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of proposed Rule 1706 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 
1706 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 1707 (Consolidated Audit Trail Compliance Rule--Clock 
Synchronization Rule Violation) describes potential violations of the 
clock synchronization time period requirements set forth in the 
proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712). 
Proposed Rule 1707 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 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712) 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 1708 (Consolidated Audit Trail Compliance Rule--
Connectivity and Data Transmission) addresses connectivity and data 
transmission requirements related to the CAT. Paragraph (a) of proposed 
Rule 1708 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 1708 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 1708 addresses connectivity 
requirements related to the CAT. Paragraph (b) of proposed Rule 1708 
requires each Industry Member to connect to the

[[Page 9801]]

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 1708 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 Consolidated 
Audit Trail Compliance Rule (Rules 1701-1712). 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 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712). The 
Exchange notes that, currently, no standardized form agreement for CAT 
Reporting Agent arrangements has been adopted. Paragraph (c)(2) of 
proposed Rule 1708 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 remains 
primarily responsible for compliance with the requirements of the 
proposed Consolidate Audit Trail Compliance Rule (Rules 1701-1712), 
notwithstanding the existence of an agreement described in paragraph 
(c) of proposed Rule 1708.
(ix) Development and Testing
    The Exchange proposes Rule 1709 (Consolidated Audit Trail 
Compliance Rule--Development and Testing) to address requirements for 
Industry Members related to CAT development and testing. Paragraph (a) 
of proposed Rule 1709 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 1704(a) 
and 1705, 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 1704(a) and 1705, 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 1709 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\28\ Specifically, 
proposed Rule 1709 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.
---------------------------------------------------------------------------

    \28\ Adopting Release [sic] at 84725.
---------------------------------------------------------------------------

(x) Recordkeeping
    Proposed Rule 1710 (Consolidated Audit Trail Compliance Rule--
Recordkeeping) sets forth the recordkeeping obligations related to the 
CAT for Industry Members. Proposed Rule 1710 requires each Industry 
Member to maintain and preserve records of the information required to 
be recorded under the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712) for the period of time and accessibility specified in 
SEC Rule 17a-4(b). The records required to be maintained and preserved 
under the proposed Consolidated Audit Trail Compliance Rule (Rules 
1701-1712) 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 1710 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.\29\ Accordingly, proposed Rule 1711 (Consolidated Audit 
Trail Compliance Rule--Timely, Accurate and Complete Data) implements 
this requirement with regard to Industry Members. Paragraph (a) of 
proposed Rule 1711 requires that Industry Members record and report 
data to the Central Repository as required by the proposed Consolidated 
Audit Trail Compliance Rule (Rules 1701-1712) in a manner that ensures 
the timeliness, accuracy, integrity and completeness of such data.
---------------------------------------------------------------------------

    \29\ 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 1711 requires Industry 
Members to accurately provide the LEIs in their records as required by 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712) 
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

[[Page 9802]]

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.\30\
---------------------------------------------------------------------------

    \30\ 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 proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712). 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 1711 addresses 
Compliance Thresholds related to reporting data to the CAT. Proposed 
Rule 1711 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 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.\31\ Compliance 
Thresholds will include compliance with the data reporting and clock 
synchronization requirements. Proposed Rule 1711 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 Consolidated Audit Trail Compliance Rule (Rules 
1701-1712).
---------------------------------------------------------------------------

    \31\ Appendix C of the CAT NMS Plan.
---------------------------------------------------------------------------

(xii) Compliance Dates
    Proposed Rule 1712 (Consolidated Audi [sic] Trail Compliance Rule--
Compliance Dates) sets forth the compliance dates for the various 
provisions of the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712). Paragraph (a) of proposed Rule 1712 states that 
paragraphs (b) and (c) of this Rule set forth the additional details 
with respect to the compliance date for the Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712). It further states that, unless 
otherwise noted, Rules 1701-1712 are fully effective and Members must 
comply with their terms.
    Paragraph (b) of proposed Rule 1712 establishes the compliance 
dates for the clock synchronization requirements as set forth in 
proposed Rule 1702. Paragraph (b)(1) states that each Industry Member 
shall comply with Rule 1702 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 1702 
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.
    Paragraph (c) of proposed Rule 1712 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 requires, 
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)(6) [sic].
    \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 Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) implementing 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 
this Consolidated Audit Trail Compliance Rule (Rules 1701-1712). 
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.

[[Page 9803]]

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 up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the 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-MIAX-2017-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

    All submissions should refer to File Number SR-MIAX-2017-03. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also 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-MIAX-2017-03 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. 2017-02542 Filed 2-7-17; 8:45 am]
BILLING CODE 8011-01-P



                                                    9790                        Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    appropriate in the public interest, for                  IV. Solicitation of Comments                            For the Commission, by the Division of
                                                    the protection of investors and the                                                                            Trading and Markets, pursuant to delegated
                                                    maintenance of fair and orderly markets,                   Interested persons are invited to                   authority.35
                                                    to remove impediments to, and perfect                    submit written data, views, and                       Robert W. Errett,
                                                    the mechanism of a national market                       arguments concerning the foregoing,                   Deputy Secretary.
                                                    system, or is otherwise in furtherance of                including whether the proposed rule                   [FR Doc. 2017–02550 Filed 2–7–17; 8:45 am]
                                                    the purposes of the Act.’’ 34 To the                     change is consistent with the Act.                    BILLING CODE 8011–01–P
                                                    extent that this proposal implements,                    Comments may be submitted by any of
                                                    interprets or clarifies the Plan and                     the following methods:
                                                    applies specific requirements to                         Electronic Comments                                   SECURITIES AND EXCHANGE
                                                    Industry Members, the Exchange                                                                                 COMMISSION
                                                    believes that this proposal furthers the                   • Use the Commission’s Internet
                                                    objectives of the Plan, as identified by                 comment form (http://www.sec.gov/                     [Release No. 34–79937; File No. SR–MIAX–
                                                    the SEC, and is therefore consistent with                rules/sro.shtml); or                                  2017–03]
                                                    the Act.                                                   • Send an email to rule-comments@
                                                                                                                                                                   Self-Regulatory Organizations; Miami
                                                    B. Self-Regulatory Organization’s                        sec.gov. Please include File Number SR–               International Securities Exchange,
                                                    Statement on Burden on Competition                       Phlx–2017–07 on the subject line.                     LLC; Notice of Filing of a Proposed
                                                                                                             Paper Comments                                        Rule Change To Adopt Consolidated
                                                      The Exchange does not believe that                                                                           Audit Trail Compliance Rule (Rules
                                                    the proposed rule change will result in                    • Send paper comments in triplicate                 1701–1712) To Implement the
                                                    any burden on competition that is not                    to Brent J. Fields, Secretary, Securities             Compliance Rule Regarding the
                                                    necessary or appropriate in furtherance                  and Exchange Commission, 100 F Street                 National Market System Plan
                                                    of the purposes of the Act. The                          NE., Washington, DC 20549–1090.                       Governing the Consolidated Audit Trail
                                                    Exchange notes that the proposed rule
                                                    change implements provisions of the                      All submissions should refer to File                  February 2, 2017.
                                                    CAT NMS Plan, and is designed to                         Number SR–Phlx–2017–07. This file                        Pursuant to the provisions of Section
                                                    assist the Exchange in meeting its                       number should be included on the                      19(b)(1) of the Securities Exchange Act
                                                    regulatory obligations pursuant to the                   subject line if email is used. To help the            of 1934 (‘‘Act’’) 1 and Rule 19b–4
                                                    Plan. The Exchange also notes that the                   Commission process and review your                    thereunder,2 notice is hereby given that
                                                    Proposed Rule Series implementing                        comments more efficiently, please use                 on January 30, 2017, Miami
                                                    provisions of the CAT NMS Plan will                      only one method. The Commission will                  International Securities Exchange, LLC
                                                    apply equally to all firms that trade                    post all comments on the Commission’s                 (‘‘MIAX Options’’ or ‘‘Exchange’’) filed
                                                    NMS Securities and OTC Equity                            Internet Web site (http://www.sec.gov/                with the Securities and Exchange
                                                    Securities. In addition, all national                    rules/sro.shtml).                                     Commission (‘‘Commission’’) a
                                                    securities exchanges and FINRA are                          Copies of the submission, all                      proposed rule change as described in
                                                    proposing this Proposed Rule 900A                        subsequent amendments, all written                    Items I and II below, which Items have
                                                    Series. Therefore, this is not a                         statements with respect to the proposed               been prepared by the Exchange.3 The
                                                    competitive rule filing, and, therefore, it              rule change that are filed with the                   Commission is publishing this notice to
                                                    does not impose a burden on                              Commission, and all written                           solicit comments on the proposed rule
                                                    competition.                                             communications relating to the                        change from interested persons.
                                                    C. Self-Regulatory Organization’s                        proposed rule change between the                      I. Self-Regulatory Organization’s
                                                    Statement on Comments on the                             Commission and any person, other than                 Statement of the Terms of Substance of
                                                    Proposed Rule Change Received From                       those that may be withheld from the                   the Proposed Rule Change
                                                    Members, Participants, or Others                         public in accordance with the
                                                                                                             provisions of 5 U.S.C. 552, will be                      The Exchange proposes to adopt the
                                                      No written comments were either                        available for Web site viewing and                    Rules 1701–1712 to implement the
                                                    solicited or received.                                                                                         compliance rule (‘‘Compliance Rule’’)
                                                                                                             printing in the Commission’s Public
                                                                                                                                                                   regarding the National Market System
                                                    III. Date of Effectiveness of the                        Reference Room, 100 F Street NE.,
                                                                                                                                                                   Plan Governing the Consolidated Audit
                                                    Proposed Rule Change and Timing for                      Washington, DC 20549, on official
                                                                                                                                                                   Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).4
                                                    Commission Action                                        business days between the hours of
                                                                                                             10:00 a.m. and 3:00 p.m. Copies of the                   The text of the proposed rule change
                                                       Within 45 days of the date of                         filing also will be available for                     is available on the Exchange’s Web site
                                                    publication of this notice in the Federal                inspection and copying at the principal               at http://www.miaxoptions.com/rule-
                                                    Register or within such longer period (i)                office of the Exchange. All comments                  filings, at MIAX’s principal office, and
                                                    as the Commission may designate up to                                                                          at the Commission’s Public Reference
                                                                                                             received will be posted without change;
                                                    90 days of such date if it finds such                                                                          Room.
                                                                                                             the Commission does not edit personal
                                                    longer period to be appropriate and                      identifying information from                            35 17 CFR 200.30–3(a)(12).
                                                    publishes its reasons for so finding or
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                                                                                                             submissions. You should submit only                     1 15 U.S.C. 78s(b)(1).
                                                    (ii) as to which the Exchange consents,                  information that you wish to make                       2 17 CFR 240.19b–4.
                                                    the Commission shall: (a) By order                       available publicly.                                     3 The Exchange originally filed this proposed rule
                                                    approve or disapprove such proposed                                                                            change on January 17, 2017 under File No. SR–
                                                    rule change, or (b) institute proceedings                   All submissions should refer to File               MIAX–2017–01, and the Exchange subsequently
                                                    to determine whether the proposed rule                   Number SR–Phlx–2017–07 and should                     withdrew that filing on January 30, 2017 and filed
                                                    change should be disapproved.                            be submitted on or before March 1,                    this proposed rule change.
                                                                                                                                                                     4 Unless otherwise specified, capitalized terms
                                                                                                             2017.
                                                                                                                                                                   used in this rule filing are defined as set forth
                                                      34 Approval   Order at 84697.                                                                                herein or in the CAT NMS Plan.



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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                        9791

                                                    II. Self-Regulatory Organization’s                         The Plan is designed to create,                        requires Industry Members to use the
                                                    Statement of the Purpose of, and                         implement and maintain a consolidated                    same Customer-ID for each Customer.
                                                    Statutory Basis for, the Proposed Rule                   audit trail (‘‘CAT’’) that would capture                 The SEC granted the Participants
                                                    Change                                                   customer and order event information                     exemptive relief to permit the use of an
                                                       In its filing with the Commission, the                for orders in NMS Securities and OTC                     alternative approach to the requirement
                                                    Exchange included statements                             Equity Securities, across all markets,                   that an Industry Member report a
                                                    concerning the purpose of and basis for                  from the time of order inception through                 Customer-ID for every Customer upon
                                                    the proposed rule change and discussed                   routing, cancellation, modification, or                  original receipt or origination.12 The
                                                    any comments it received on the                          execution in a single consolidated data                  alternative approach is called the
                                                    proposed rule change. The text of these                  source. Each Participant is required to                  Customer Information Approach.
                                                    statements may be examined at the                        enforce compliance by its Industry                          Under the Customer Information
                                                    places specified in Item IV below. The                   Members, as applicable, with the                         Approach, the CAT NMS Plan would
                                                    Exchange has prepared summaries, set                     provisions of the Plan, by adopting a                    require each Industry Member to assign
                                                    forth in sections A, B, and C below, of                  Compliance Rule applicable to their                      a unique Firm Designated ID to each
                                                    the most significant aspects of such                     Industry Members.11 As is described                      Customer. As the Firm Designated ID,
                                                    statements.                                              more fully below, the rules contained in                 Industry Members would be permitted
                                                                                                             the proposed Chapter XVII set forth the                  to use an account number or any other
                                                    A. Self-Regulatory Organization’s                        Compliance Rule to require Industry                      identifier defined by the firm, provided
                                                    Statement of the Purpose of, and                         Members to comply with the provisions                    each identifier is unique across the firm
                                                    Statutory Basis for, the Proposed Rule                   of the CAT NMS Plan. The proposed                        for each business date (i.e., a single firm
                                                    Change                                                   Rules include twelve proposed Rules                      may not have multiple separate
                                                    1. Purpose                                               covering the following areas: (1)                        customers with the same identifier on
                                                                                                             Definitions; (2) clock synchronization;                  any given date). Prior to their
                                                       Bats BYX Exchange, Inc., Bats BZX                                                                              commencement of reporting to the CAT,
                                                    Exchange, Inc., Bats EDGA Exchange,                      (3) Industry Member Data reporting; (4)
                                                                                                             Customer information reporting; (5)                      Industry Members would submit an
                                                    Inc., Bats EDGX Exchange, Inc., BOX                                                                               initial set of Customer information to
                                                    Options Exchange LLC, C2 Options                         Industry Member information reporting;
                                                                                                             (6) time stamps; (7) clock                               the Central Repository, including the
                                                    Exchange, Incorporated, Chicago Board                                                                             Firm Designated ID, Customer
                                                    Options Exchange, Incorporated,                          synchronization rule violations; (8)
                                                                                                             connectivity and data transmission; (9)                  Identifying Information and Customer
                                                    Chicago Stock Exchange, Inc., Financial                                                                           Account Information (which may
                                                    Industry Regulatory Authority, Inc.,                     development and testing; (10)
                                                                                                             recordkeeping; (11) timely, accurate and                 include, as applicable, the Customer’s
                                                    International Securities Exchange, LLC,                                                                           name, address, date of birth, individual
                                                    Investors’ Exchange LLC, ISE Gemini,                     complete data; and (12) compliance
                                                                                                             dates. Each of these proposed Rules are                  tax payer identifier number (‘‘ITIN’’)/
                                                    LLC, ISE Mercury, LLC, Miami                                                                                      social security number (‘‘SSN’’),
                                                    International Securities Exchange LLC,                   discussed in detail below.
                                                                                                                                                                      individual’s role in the account (e.g.,
                                                    MIAX PEARL, LLC,5 NASDAQ BX, Inc.,                       (i) Definitions                                          primary holder, joint holder, guardian,
                                                    NASDAQ PHLX LLC, The NASDAQ                                                                                       trustee, person with power of attorney)
                                                    Stock Market LLC, National Stock                           Proposed Rule 1701 (Consolidated
                                                                                                             Audit Trail Compliance Rule—                             and LEI and/or Larger [sic] Trader ID
                                                    Exchange, Inc., New York Stock                                                                                    (‘‘LTID’’). This process is referred to as
                                                    Exchange LLC, NYSE MKT LLC, and                          Definitions) sets forth the definitions for
                                                                                                             the terms used in the proposed Rules                     the customer definition process.
                                                    NYSE Arca, Inc. (collectively, the                                                                                   In accordance with the Customer
                                                    ‘‘Participants’’ or ‘‘SROs’’) filed with the             1701–1712. Each of the defined terms in
                                                                                                             proposed Rule 1701 is discussed in                       Information Approach, Industry
                                                    Commission, pursuant to Section 11A of                                                                            Members would be required to report
                                                    the Exchange Act 6 and Rule 608 of                       detail in this section.
                                                                                                                                                                      only the Firm Designated ID for each
                                                    Regulation NMS thereunder,7 the CAT                      (A) Account Effective Date                               new order submitted to the Central
                                                    NMS Plan.8 The Participants filed the                                                                             Repository, rather than the ‘‘Customer-
                                                    Plan to comply with Rule 613 of                          (I) Customer Information Approach
                                                                                                                                                                      ID’’ with individual order events.
                                                    Regulation NMS under the Exchange                           SEC Rule 613 requires that numerous                   Within the Central Repository, each
                                                    Act. The Plan was published for                          data elements be reported to the CAT to                  Customer would be uniquely identified
                                                    comment in the Federal Register on                       ensure there is sufficient information to                by identifiers or a combination of
                                                    May 17, 2016,9 and approved by the                       create the lifecycle of an order, and                    identifiers such as ITIN/SSN, date of
                                                    Commission, as modified, on November                     provide regulators with sufficient detail                birth, and as applicable, LEI and LTID.
                                                    15, 2016.10                                              about an order to perform their                          The Plan Processor would be required to
                                                                                                             regulatory duties. Certain required                      use these unique identifiers to map
                                                       5 MIAX PEARL, LLC, became a party to the CAT
                                                                                                             elements are intended to ensure that the                 orders to specific Customers across all
                                                    NMS Plan via an Amendment to the Plan on                 regulators can identify the Customers
                                                    January 12, 2017.                                                                                                 Industry Members and Participants. To
                                                       6 15 U.S.C. 78k–1.                                    associated with orders. For example,                     ensure information identifying a
                                                       7 17 CFR 242.608.                                     SEC Rule 613(c)(7)(i)(A) requires an                     Customer is up to date, Industry
                                                       8 See Letter from the Participants to Brent J.        Industry Member to report the                            Members would be required to submit
                                                    Fields, Secretary, Commission, dated September 30,       ‘‘Customer-IDs’’ for each Customer for                   to the Central Repository daily and
                                                    2014; and Letter from Participants to Brent J. Fields,   the original receipt or origination of an
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                                                    Secretary, Commission, dated February 27, 2015.                                                                   periodic updates for reactivated
                                                    On December 24, 2015, the Participants submitted
                                                                                                             order. ‘‘Customer-ID’’ is defined in SEC                 accounts, newly established accounts,
                                                    an amendment to the CAT NMS Plan. See Letter             Rule 613(j)(5) to mean ‘‘with respect to
                                                    from Participants to Brent J. Fields, Secretary,         a customer, a code that uniquely and                        12 See Securities Exchange Act Release No. 77265
                                                    Commission, dated December 23, 2015.                     consistently identifies such customer for                (March 1, 2016), 81 FR 11856 (March 7, 2016)
                                                       9 See Securities Exchange Act Release No. 77724
                                                                                                             purposes of providing data to the                        (‘‘Exemption Order’’). See also Letter from
                                                    (Apr. 27, 2016), 81 FR 30614 (May 17, 2016).                                                                      Participants to Brent J. Fields, Secretary,
                                                       10 See Securities Exchange Act Release No. 79318      Central Repository.’’ SEC Rule 613(c)(8)                 Commission, dated January 30, 2015 at 12
                                                    (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016)                                                                      (‘‘Exemptive Request Letter’’); and CAT NMS Plan
                                                    (‘‘Approval Order’’).                                     11 See   SEC Rule 613(g)(1).                            at Appendix C, Section A.1(a)(iii).



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                                                    9792                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    and revised Firm Designated IDs or                      Member changes back office providers                  (C) Allocation Report
                                                    associated reportable Customer                          or clearing firms prior to November 15,               (I) Allocation Report Approach
                                                    information.                                            2018, for Industry Members other than
                                                                                                            Small Industry Members, or prior to                      SEC Rule 613(c)(7)(vi)(A) requires
                                                    (II) Definition of Account Effective Date                                                                     each Industry Member to record and
                                                                                                            November 15, 2019, for Small Industry
                                                       In connection with the Customer                      Members, the date an account was                      report to the Central Repository ‘‘the
                                                    Information Approach, Industry                          established at the relevant Industry                  account number for any subaccounts to
                                                    Members would be required to report                     Member, either directly or via transfer.              which the execution is allocated (in
                                                    Customer Account Information to the                                                                           whole or in part).’’ The SROs requested
                                                    Central Repository. ‘‘Customer Account                     Paragraph (a)(3) states that an                    and received from the SEC exemptive
                                                    Information’’ is defined in SEC Rule                    ‘‘Account Effective Date’’ means, where               relief from SEC Rule 613 for an
                                                    613(j)(4) to ‘‘include, but not be limited              an Industry Member acquires another                   alternative to this approach (‘‘Allocation
                                                    to, account number, account type,                       Industry Member prior to November 15,                 Report Approach’’). The Allocation
                                                    customer type, date account opened,                     2018, for Industry Members other than                 Report Approach would permit Industry
                                                    and large trader identifier (if                         Small Industry Members, or prior to                   Members to record and report to the
                                                    applicable).’’ Therefore, when reporting                November 15, 2019, for Small Industry                 Central Repository an Allocation Report
                                                    Customer Account Information, an                        Members, the date an account was                      that includes, among other things, the
                                                    Industry Member is required to report                   established at the relevant Industry                  Firm Designated ID for any account(s) to
                                                    the date an account was opened. The                     Member, either directly or via transfer.              which executed shares are allocated
                                                    Participants requested and received an                     Paragraph (a)(4) states that ‘‘Account             when an execution is allocated in whole
                                                    exemption to allow an ‘‘Account                         Effective Date’’ means, where there are               or part in lieu of requiring the reporting
                                                    Effective Date’’ to be reported in lieu of              multiple dates associated with an                     of the account number for any
                                                    an account open date in certain limited                 account established prior to November                 subaccount to which an execution is
                                                    circumstances. The definition of                        15, 2018, for Industry Members other                  allocated, as is required by SEC Rule
                                                    ‘‘Account Effective Date’’ as set forth in                                                                    613.13 Under SEC Rule 613, regulators
                                                                                                            than Small Industry Members, or prior
                                                    Paragraph (a) of proposed Rule 1701                                                                           would be able to link the subaccount to
                                                                                                            to November 15, 2019, for Small
                                                    describes those limited circumstances in                                                                      which an allocation was made to a
                                                                                                            Industry Members, the earliest available
                                                    which an Industry Member may report                                                                           specific order. In contrast, under the
                                                    an ‘‘Account Effective Date’’ rather than               date.
                                                                                                                                                                  Allocation Report Approach, regulators
                                                    the account open date. The proposed                        Paragraph (a)(5) states that an                    would only be able to link an allocation
                                                    definition is the same as the definition                ‘‘Account Effective Date’’ means, with                to the account to which it was made,
                                                    of ‘‘Account Effective Date’’ set forth in              regard to Industry Member proprietary                 and not to a specific order.
                                                    Section 1.1 of the CAT NMS Plan,                        accounts established prior to November
                                                    provided, however, that specific dates                  15, 2018, for Industry Members other                  (II) Definition of Allocation Report
                                                    have replaced the descriptions of those                 than Small Industry Members, or prior                    To assist in implementing the
                                                    dates set forth in Section 1.1 of the Plan.             to November 15, 2019, for Small                       Allocation Report Approach, paragraph
                                                       Specifically, Paragraph (a)(1) defines               Industry Members: (1) The date                        (c) of proposed Rule 1701 defines an
                                                    ‘‘Account Effective Date [sic] to mean,                 established for the account in the                    ‘‘Allocation Report.’’ Specifically, an
                                                    with regard to those circumstances in                   Industry Member or in a system of the                 ‘‘Allocation Report’’ means a report
                                                    which an Industry Member has                            Industry Member or (2) the date when                  made to the Central Repository by an
                                                    established a trading relationship with                 proprietary trading began in the account              Industry Member that identifies the
                                                    an institution but has not established an               (i.e., the date on which the first orders             Firm Designated ID for any account(s),
                                                    account with that institution: (1) When                 were submitted from the account). With                including subaccount(s), to which
                                                    the trading relationship was established                regard to paragraphs (a)(2)–(5), the                  executed shares are allocated and
                                                    prior to November 15, 2018, for Industry                Account Effective Date will be no later               provides the security that has been
                                                    Members other than Small Industry                       than the date trading occurs at the                   allocated, the identifier of the firm
                                                    Members, or prior to November 15,                       Industry Member or in the Industry                    reporting the allocation, the price per
                                                    2019, for Small Industry Members,                       Member’s system.                                      share of shares allocated, the side of
                                                    either (a) the date the relationship                                                                          shares allocated, the number of shares
                                                    identifier was established within the                   (B) Active Account                                    allocated to each account, and the time
                                                    Industry Member; (b) the date when                                                                            of the allocation; provided, for the
                                                    trading began (i.e., the date the first                    Under the Customer Information
                                                                                                            Approach, Industry Members are                        avoidance of doubt, any such Allocation
                                                    order was received) using the relevant                                                                        Report shall not be required to be linked
                                                    relationship identifier; or (c) if both                 required to report Customer Identifying
                                                                                                            Information and Customer Account                      to particular orders or executions. This
                                                    dates are available, the earlier date will                                                                    is the same definition as set forth in
                                                    be used to the extent that the dates                    Information for only those accounts that
                                                                                                                                                                  Section 1.1 of the CAT NMS Plan.
                                                    differ; or (2) when the trading                         are active. This will alleviate the need
                                                    relationship was established on or after                for Industry Members to update such                   (D) Business Clock
                                                    November 15, 2018 for Industry                          information for non-active accounts, but                To create the required audit trail,
                                                    Members other than Small Industry                       still ensure that the Central Repository              Industry Members are required to record
                                                    Members, or on or after November 15,                    will collect audit trail data for Customer
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                                                                                                                                                                  the date and time of various Reportable
                                                    2019 for Small Industry Members, the                    accounts that have any Reportable                     Events to the Central Repository.
                                                    date the Industry Member established                    Events. Accordingly, paragraph (b) of                 Industry Members will use ‘‘Business
                                                    the relationship identifier, which would                proposed Rule 1701 defines an ‘‘Active                Clocks’’ to record such dates and times.
                                                    be no later than the date the first order               Account’’ as an account that has had                  Accordingly, paragraph (d) of proposed
                                                    was received.                                           activity in Eligible Securities within the            Rule 1701 defines the term ‘‘Business
                                                       Paragraph (a)(2) of proposed Rule                    last six months. This is the same
                                                    1701 states that an ‘‘Account Effective                 definition as set forth in Section 1.1 of               13 Exemptive Request Letter at 26–27; and

                                                    Date’’ means, where an Industry                         the CAT NMS Plan.                                     Exemption Order.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9793

                                                    Clock’’ as a clock used to record the date              of the Industry Member.14 Such a third                Information and Customer Account
                                                    and time of any Reportable Event                        party, referred to in proposed Rule 1701              Information, as well as data related to
                                                    required to be reported under the                       as a ‘‘CAT Reporting Agent,’’ would be                their Customer’s Reportable Events.
                                                    Consolidated Audit Trail Compliance                     one type of a Data Submitter, that is, a              Accordingly, Paragraph (k) of proposed
                                                    Rule (Rules 1701–1712). This is the                     party that submits data to the Central                Rule 1701 proposes to define the term
                                                    same definition as set forth in Section                 Repository. Paragraph (h) of proposed                 ‘‘Customer.’’ Specifically, the term
                                                    1.1 of the CAT NMS Plan. This change                    Rule 1701 defines the term ‘‘CAT                      ‘‘Customer’’ would be defined to mean:
                                                    is intended to recognize that the                       Reporting Agent’’ to mean a Data                      (1) The account holder(s) of the account
                                                    Industry Members’ obligations with                      Submitter that is a third party that                  at an Industry Member originating the
                                                    regard to the CAT are set forth in the                  enters into an agreement with-an                      order; and (2) any person from whom
                                                    Consolidated Audit Trail Compliance                     Industry Member pursuant to which the                 the Industry Member is authorized to
                                                    Rule (Rules 1701–1712).                                 CAT Reporting Agent agrees to fulfill                 accept trading instructions for such
                                                                                                            such Industry Member’s reporting                      account, if different from the account
                                                    (E) CAT
                                                                                                            obligations under the Consolidated                    holder(s). This is the same definition as
                                                      Paragraph (e) of proposed Rule 1701                   Audit Trail Compliance Rule (proposed                 set forth in SEC Rule 613(j)(3), except
                                                    defines the term ‘‘CAT’’ to mean the                    Rules 1701–1712).                                     the Exchange proposes to replace the
                                                    consolidated audit trail contemplated by                  This definition is based on FINRA’s                 references to a registered broker-dealer
                                                    SEC Rule 613. This is the same                          definition of a ‘‘Reporting Agent’’ as set            or broker-dealer with a reference to an
                                                    definition as set forth in Section 1.1 of               forth in FINRA’s rule related to its Order            Industry Member for consistency of
                                                    the CAT NMS Plan.                                       Audit Trail System (‘‘OATS’’).                        terms used in the proposed
                                                    (F) CAT NMS Plan                                        Specifically, FINRA Rule 7410(n)                      Consolidated Audit Trail Compliance
                                                                                                            defines a ‘‘Reporting Agent’’ as a third              Rule (Rules 1701–1712). The Exchange
                                                      Paragraph (f) of proposed Rule 1701                                                                         also notes that Section 1.1 of the CAT
                                                                                                            party that enters into any agreement
                                                    defines the term ‘‘CAT NMS Plan’’ to                                                                          NMS Plan defines ‘‘Customer’’ by
                                                                                                            with a member pursuant to which the
                                                    mean the National Market System Plan                                                                          reference to SEC Rule 613(j)(3).
                                                                                                            Reporting Agent agrees to fulfill such
                                                    Governing the Consolidated Audit Trail,
                                                                                                            member’s obligations under Rule 7450.                 (L) Customer Account Information
                                                    as amended from time to time.
                                                                                                            The Reporting Agent for OATS fulfills a
                                                    (G) CAT-Order-ID                                        similar role to the CAT Reporting Agent.                 As discussed above, under the
                                                                                                                                                                  Customer Information Approach,
                                                    (I) Daisy Chain Approach                                (I) Central Repository                                Industry Members are required to report
                                                       Under the CAT NMS Plan, the Daisy                       Paragraph (i) of proposed Rule 1701                Customer Account Information to the
                                                    Chain Approach is used to link and                      defines the term ‘‘Central Repository’’ to            Central Repository as part of the
                                                    reconstruct the complete lifecycle of                   mean the repository responsible for the               customer definition process.
                                                    each Reportable Event in CAT.                           receipt, consolidation, and retention of              Accordingly, the Exchange proposes to
                                                    According to this Approach, Industry                    all information reported to the CAT                   define the term ‘‘Customer Account
                                                    Members assign their own identifiers to                 pursuant to SEC Rule 613 and the CAT                  Information’’ to clarify what customer
                                                    each order event. Within the Central                    NMS Plan. This is the same definition                 information would need to be reported
                                                    Repository, the Plan Processor later                    as set forth in Section 1.1 of the CAT                to the Central Repository.
                                                    replaces the identifier provided by the                 NMS Plan, except the Exchange uses the                   Paragraph (l) of proposed Rule 1701
                                                    Industry Member for each Reportable                     phrase ‘‘CAT NMS Plan’’ in place of the               defines the term ‘‘Customer Account
                                                    Event with a single identifier, called the              phrase ‘‘this Agreement.’’                            Information’’ to include, in part,
                                                    CAT Order-ID, for all order events                                                                            account number, account type, customer
                                                    pertaining to the same order. This CAT                  (J) Compliance Threshold                              type, date account opened, and large
                                                    Order-ID is used to links the Reportable                   Paragraph (j) of proposed Rule 1701                trader identifier (if applicable).
                                                    Events related to the same order.                       defines the term ‘‘Compliance                         Proposed Rule 1701(l), however,
                                                                                                            Threshold’’ as having the meaning set                 provides an alternative definition of
                                                    (II) Definition of CAT-Order-ID                                                                               ‘‘Customer Account Information’’ in two
                                                                                                            forth in proposed Rule 1711(d). This
                                                       To implement the Daisy Chain                         definition has the same substantive                   limited circumstances. First, in those
                                                    Approach, Paragraph (g) of proposed                     meaning as the definition set forth in                circumstances in which an Industry
                                                    Rule 1701 defines the term ‘‘CAT-Order-                 Section 1.1 of the CAT NMS Plan. As                   Member has established a trading
                                                    ID.’’ The term ‘‘CAT-Order-ID’’ is                      discussed in detail below with regard to              relationship with an institution but has
                                                    defined to mean a unique order                          proposed Rule 1711(d), each Industry                  not established an account with that
                                                    identifier or series of unique order                    Member is required to meet a separate                 institution, the Industry Member will:
                                                    identifiers that allows the Central                     compliance threshold which will be an                 (1) Provide the Account Effective Date
                                                    Repository to efficiently and accurately                Industry Member-specific rate that may                in lieu of the ‘‘date account opened’’; (2)
                                                    link all Reportable Events for an order,                be used as the basis for further review               provide the relationship identifier in
                                                    and all orders that result from the                     or investigation into the Industry                    lieu of the ‘‘account number’’; and (3)
                                                    aggregation or disaggregation of such                   Member’s performance with regard to                   identify the ‘‘account type’’ as a
                                                    order. This is the same definition as set               the CAT. This Industry Member-specific                ‘‘relationship.’’ Second, in those
                                                    forth in SEC Rule 613(j)(1), and Section                rate is the ‘‘Compliance Threshold.’’                 circumstances in which the relevant
                                                                                                                                                                  account was established prior to
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                                                    1.1 of the CAT NMS Plan defines ‘‘CAT-
                                                    Order-ID’’ by reference to SEC Rule                     (K) Customer                                          November 15, 2018, for Industry
                                                    613(j)(1).                                                Industry Members are required to                    Members other than Small Industry
                                                                                                            submit to the Central Repository certain              Members, or prior to November 15,
                                                    (H) CAT Reporting Agent                                                                                       2019, for Small Industry Members, and
                                                                                                            information related to their Customers,
                                                      The CAT NMS Plan permits an                           including Customer Identifying                        no ‘‘date account opened’’ is available
                                                    Industry Member to use a third party,                                                                         for the account, the Industry Member
                                                    such as a vendor, to report the required                  14 Appendix C, Section A.1(a) of the CAT NMS        will provide the Account Effective Date
                                                    data to the Central Repository on behalf                Plan.                                                 in the following circumstances: (1)


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                                                    9794                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    Where an Industry Member changes                        Repository.15 Such Data Submitters may                Error Rate, then such Industry Member
                                                    back office providers or clearing firms                 include those entities that are required              would not be in compliance with the
                                                    and the date account opened is changed                  to submit data to the Central Repository              CAT NMS Plan or Rule 613.18 As such,
                                                    to the date the account was opened on                   (e.g., national securities exchanges,                 the Exchange or the SEC ‘‘[sic]’’ may
                                                    the new back office/clearing firm                       national securities associations and                  take appropriate action against an
                                                    system; (2) where an Industry Member                    Industry Members), third-parties that                 Industry Member for failing to comply
                                                    acquires another Industry Member and                    may submit data to the CAT on behalf                  with its CAT reporting obligations.19
                                                    the date account opened is changed to                   of CAT Reporters (i.e., CAT Reporting                 The CAT NMS Plan sets the initial Error
                                                    the date the account was opened on the                  Agents), and outside parties that are not             Rate at 5%.20 It is anticipated that the
                                                    post-merger back office/clearing firm                   required to submit data to the CAT but                maximum Error Rate will be reviewed
                                                    system; (3) where there are multiple                    from which the CAT may receive data                   and lowered by the Operating
                                                    dates associated with an account in an                  (e.g., securities information processors              Committee once Industry Members
                                                    Industry Member’s system, and the                       (‘‘SIPs’’). To include this term in the               begin to report to the Central
                                                    parameters of each date are determined                  proposed Consolidated Audit Trail                     Repository.21
                                                    by the individual Industry Member; and                  Compliance Rule (Rules 1701–1712), the                  The CAT NMS Plan requires the Plan
                                                    (4) where the relevant account is an                    Exchange proposes to define ‘‘Data                    Processor to: (1) Measure and report
                                                    Industry Member proprietary account.                    Submitter’’ in paragraph (n) of proposed              errors every business day; (2) provide
                                                    The proposed definition is the same as                  Rule 1701. Specifically, paragraph (n) of             Industry Members daily statistics and
                                                    the definition of ‘‘Customer Account                    proposed Rule 1701 defines a ‘‘Data                   error reports as they become available,
                                                    Information’’ set forth in Section 1.1 of               Submitter’’ to mean any person that                   including a description of such errors;
                                                    the CAT NMS Plan, provided, however,                    reports data to the Central Repository,               (3) provide monthly reports to Industry
                                                    that specific dates have replaced the                   including national securities exchanges,              Members that detail an Industry
                                                    descriptions of those dates set forth in                national securities associations, broker-             Member’s performance and comparison
                                                    Section 1.1 of the Plan.                                dealers, the SIPs for the CQS, CTA, UTP               statistics; (4) define educational and
                                                                                                            and Plan for Reporting of Consolidated                support programs for Industry Members
                                                    (M) Customer Identifying Information                                                                          to minimize Error Rates; and (5)
                                                                                                            Options Last Sale Reports and
                                                       As discussed above, under the                        Quotation Information (‘‘OPRA’’) Plans,               identify, daily, all Industry Members
                                                    Customer Information Approach,                          and certain other vendors or third                    exceeding the maximum allowable Error
                                                    Industry Members are required to report                 parties that may submit data to the                   Rate. To timely correct data-submitted
                                                    Customer Identifying Information to the                 Central Repository on behalf of Industry              errors to the Central Repository, the
                                                    Central Repository as part of the                       Members.                                              CAT NMS Plan requires that the Central
                                                    customer definition process.                                                                                  Repository receive and process error
                                                    Accordingly, the Exchange proposes to                   (O) Eligible Security                                 corrections at all times. Further, the
                                                    define the term ‘‘Customer Account                        The reporting requirements of the                   CAT NMS Plan requires that Industry
                                                    Information’’ to clarify what Customer                  proposed Consolidated Audit Trail                     Members be able to submit error
                                                    information would need to be reported                   Compliance Rule (Rules 1701–1712)                     corrections to the Central Repository
                                                    to the Central Repository.                              only apply to Reportable Events in                    through a web-interface or via bulk
                                                       Paragraph (m) of proposed Rule 1701                  Eligible Securities. Currently, an                    uploads or file submissions, and that the
                                                    defines the term ‘‘Customer Identifying                 Eligible Security includes NMS                        Plan Processor, subject to the Operating
                                                    Information’’ to mean information of                    Securities and OTC Equity Securities.                 Committee’s approval, support the bulk
                                                    sufficient detail to identify a Customer.               Accordingly, paragraph (o) of proposed                replacement of records and the
                                                    With respect to individuals, ‘‘Customer                 Rule 1701 defines the term ‘‘Eligible                 reprocessing of such records. The
                                                    Identifying Information’’ includes, but is              Security’’ to include: (1) All NMS                    Participants, furthermore, require that
                                                    not limited to: Name, address, date of                  Securities; and (2) all OTC Equity                    the Plan Processor identify Industry
                                                    birth, individual tax payer identification              Securities. The terms ‘‘NMS Securities’’              Member data submission errors based
                                                    number (‘‘ITIN’’)/social security number                and ‘‘OTC Equity Securities’’ are                     on the Plan Processor’s validation
                                                    (‘‘SSN’’), individual’s role in the                     defined, in turn, below. This is the same             processes.22
                                                    account (e.g., primary holder, joint                    definition as set forth in Section 1.1 of
                                                    holder, guardian, trustee, person with                                                                        (II) Definition of Error Rate
                                                                                                            the CAT NMS Plan.
                                                    the power of attorney). With respect to                                                                          To implement the requirements of the
                                                    legal entities, ‘‘Customer Identifying                  (P) Error Rate                                        CAT NMS Plan related to the Error Rate,
                                                    Information’’ includes, but is not                      (I) Maximum Error Rate                                the Exchange proposes to define the
                                                    limited to, name, address, Employer                                                                           term ‘‘Error Rate’’ in proposed Rule
                                                                                                               Under the CAT NMS Plan, the                        1701. Paragraph (p) of proposed Rule
                                                    Identification Number (‘‘EIN’’)/Legal                   Operating Committee sets the maximum
                                                    Entity Identifier (‘‘LEI’’) or other                                                                          1701 defines the term ‘‘Error Rate’’ to
                                                                                                            Error Rate that the Central Repository                mean the percentage of Reportable
                                                    comparable common entity identifier, if                 would tolerate from an Industry
                                                    applicable. The definition further notes                                                                      Events collected by the Central
                                                                                                            Member reporting data to the Central                  Repository in which the data reported
                                                    that an Industry Member that has an LEI                 Repository.16 The Operating Committee
                                                    for a Customer must submit the                                                                                does not fully and accurately reflect the
                                                                                                            reviews and resets the maximum Error                  order event that occurred in the market.
                                                    Customer’s LEI in addition to other
                                                                                                            Rate, at least annually.17 If an Industry             This is the same definition as set forth
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                                                    information of sufficient detail to
                                                                                                            Member reports CAT data to the Central
                                                    identify the Customer. This is the same
                                                                                                            Repository with errors such that their                  18 Appendix C, Section A.3(b) of the CAT NMS
                                                    definition as set forth in Section 1.1 of
                                                                                                            error percentage exceeds the maximum                  Plan; Rule 613(g)–(h).
                                                    the CAT NMS Plan.                                                                                               19 Appendix C, Section A.3(b) of the CAT NMS

                                                    (N) Data Submitter                                        15 Appendix C, Section A.1(a) of the CAT NMS        Plan.
                                                                                                            Plan.                                                   20 Section 6.5(d)(i) of the CAT NMS Plan.
                                                       The CAT NMS Plan uses the term                         16 Section 6.5(d)(i) of the CAT NMS Plan.             21 Appendix C, Section A.3(b) of the CAT NMS
                                                    ‘‘Data Submitter’’ to refer to any person                 17 Appendix C, Section A.3(b) of the CAT NMS        Plan.
                                                    that reports data to the Central                        Plan.                                                   22 Approval Order at 84718.




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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                               9795

                                                    in SEC Rule 613(j)(6), and Section 1.1 of               (T) Initial Plan Processor                             time the event is captured electronically
                                                    the CAT NMS Plan defines ‘‘Error Rate’’                   Paragraph (t) of proposed Rule 1701                  in an order handling and execution
                                                    by reference to SEC Rule 613(j)(6).                     defines the term ‘‘Initial Plan Processor’’            system (‘‘Electronic Capture Time’’) in
                                                                                                            to mean the first Plan Processor selected              milliseconds. In addition, Industry
                                                    (Q) Firm Designated ID                                                                                         Members are required to synchronize
                                                                                                            by the Operating Committee in
                                                       As discussed above, under the                        accordance with SEC Rule 613, Section                  their respective Business Clocks (other
                                                                                                            6.1 of the CAT NMS Plan and the                        than such Business Clocks used solely
                                                    Customer Information Approach, the
                                                                                                            National Market System Plan Governing                  for Manual Order Events) at a minimum
                                                    CAT NMS Plan would require each
                                                                                                            the Process for Selecting a Plan                       to within 50 milliseconds of the time
                                                    Industry Member to assign a unique
                                                                                                            Processor and Developing a Plan for the                maintained by the National Institute of
                                                    Firm Designated ID to each Customer.                                                                           Standards and Technology (‘‘NIST’’),
                                                    Industry Members would be permitted                     Consolidated Audit Trail. This is the
                                                                                                            same definition as set forth in Section                and maintain such a synchronization.
                                                    to use as the Firm Designated ID an                                                                            Each Industry Member is required to
                                                    account number or any other identifier                  1.1 of the CAT NMS Plan, although the
                                                                                                            proposed definition uses the full name                 synchronize their Business Clocks used
                                                    defined by the firm, provided each                                                                             solely for Manual Order Events,
                                                    identifier is unique across the firm for                of the ‘‘Selection Plan.’’
                                                                                                                                                                   however, at a minimum to within one
                                                    each business date (i.e., a single firm                 (U) Listed Option or Option                            second of the time maintained by the
                                                    may not have multiple separate                             The CAT NMS Plan and this proposed                  NIST.
                                                    customers with the same identifier on                   Consolidated Audit Trail Compliance
                                                    any given date). Industry Members                                                                              (II) Definition of Manual Order Event
                                                                                                            Rule (Rules 1701–1712) applies to
                                                    would be required to report only the                    Eligible Securities, which includes NMS                   In order to clarify what a Manual
                                                    Firm Designated ID for each new order                   Securities, which, in turn, includes                   Order Event is for clock synchronization
                                                    submitted to the Central Repository,                    Listed Options. Certain requirements of                and time stamp purposes, the Exchange
                                                    rather than the ‘‘Customer-ID’’ with                                                                           proposes to define the term ‘‘Manual
                                                                                                            the proposed Consolidated Audit Trail
                                                    individual order events. Accordingly,                                                                          Order Event’’ in proposed Rule 1701.
                                                                                                            Compliance Rule (Rules 1701–1712)
                                                    the Exchange proposes to define the                                                                            Specifically, paragraph (v) of proposed
                                                                                                            apply specifically to Listed Options.
                                                    term ‘‘Firm Designated ID’’ in proposed                                                                        Rule 1701 defines the term ‘‘Manual
                                                                                                            Accordingly, Paragraph (u) of proposed
                                                    Rule 1701. Specifically, paragraph (q) of                                                                      Order Event’’ to mean a non-electronic
                                                                                                            Rule 1701 defines the term ‘‘Listed
                                                    proposed Rule 1701 defines the term                                                                            communication of order-related
                                                                                                            Option’’ or ‘‘Option.’’ Specifically,
                                                    ‘‘Firm Designated ID’’ to mean a unique                                                                        information for which Industry
                                                                                                            paragraph (u) of proposed Rule 1701
                                                    identifier for each trading account                                                                            Members must record and report the
                                                                                                            states that the term ‘‘Listed Option’’ or
                                                    designated by Industry Members for                                                                             time of the event. This is the same
                                                                                                            ‘‘Option’’ has the meaning set forth in
                                                    purposes of providing data to the                                                                              definition as set forth in Section 1.1 of
                                                                                                            SEC Rule 600(b)(35) of Regulation NMS.
                                                                                                                                                                   the CAT NMS Plan.
                                                    Central Repository, where each such                     SEC Rule 600(b)(35), in turn, defines a
                                                    identifier is unique among all identifiers              listed option as ‘‘any option traded on                (W) Material Terms of the Order
                                                    from any given Industry Member for                      a registered national securities exchange                 Proposed Rule 1703 requires Industry
                                                    each business date. This is the same                    or automated facility of a national                    Members to record and report to the
                                                    definition as set forth in Section 1.1 of               securities association.’’ The Exchange                 Central Repository Material Terms of
                                                    the CAT NMS Plan. Industry Members                      notes that the proposed definition of                  the Order with certain Reportable
                                                    would be permitted to use an account                    ‘‘Listed Option’’ is the same definition               Events (e.g., for the original receipt or
                                                    number or any other identifier defined                  as the definition set forth in Section 1.1             origination of an order, for the routing
                                                    by the firm, provided each identifier is                of the CAT NMS Plan.                                   of an order). Accordingly, the Exchange
                                                    unique across the firm for each business                (V) Manual Order Event                                 proposes to define the term ‘‘Material
                                                    date (i.e., a single firm may not have                                                                         Terms of the Order’’ in proposed Rule
                                                    multiple separate customers with the                    (I) Manual Order Event Approach
                                                                                                                                                                   1701. Specifically, paragraph (w) of
                                                    same identifier on any given date).                        The CAT NMS Plan sets forth clock                   proposed Rule 1701 defines the term
                                                                                                            synchronization and timestamp                          ‘‘Material Terms of the Order’’ to
                                                    (R) Industry Member                                     requirements for Industry Members                      include: The NMS Security or OTC
                                                      Paragraph (r) of proposed Rule 1701                   which reflect exemptions for Manual                    Equity Security symbol; security type;
                                                    defines the term ‘‘Industry Member’’ to                 Order Events granted by the                            price (if applicable); size (displayed and
                                                    mean a member of a national securities                  Commission.23 Specifically, the Plan                   non-displayed); side (buy/sell); order
                                                    exchange or a member of a national                      requires Industry Members to record                    type; if a sell order, whether the order
                                                    securities association.’’ This is the same              and report the time of each Reportable                 is long, short, short exempt; open/close
                                                    definition as set forth in Section 1.1 of               Event using timestamps reflecting                      indicator (except on transactions in
                                                                                                            current industry standards (which must                 equities); time in force (if applicable); if
                                                    the CAT NMS Plan.
                                                                                                            be at least to the millisecond) or, if an              the order is for a Listed Option, option
                                                    (S) Industry Member Data                                Industry Member’s order handling or                    type (put/call), option symbol or root
                                                                                                            execution system uses timestamps in                    symbol, underlying symbol, strike price,
                                                      Paragraph (s) of proposed Rule 1701                   increments finer than milliseconds,                    expiration date, and open/close (except
                                                    states that the term ‘‘Industry Member                  such finer increments, when reporting
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                                                                                                                                                                   on market maker quotations); and any
                                                    Data’’ has the meaning set forth in Rule                to the Central Repository. For Manual                  special handling instructions. This is
                                                    1703(a)(2). This definition has the same                Order Events, however, the Plan                        the same definition as set forth in
                                                    substantive meaning as the definition                   provides that such events must be                      Section 1.1 of the CAT NMS Plan.
                                                    set forth in Section 1.1 of the CAT NMS                 recorded in increments up to and
                                                    Plan. The definition of ‘‘Industry                      including one second, provided that                    (X) NMS Security
                                                    Member Data’’ is discussed more fully                   Industry Members record and report the                   NMS Securities are one of the types
                                                    in the discussion below regarding                                                                              of Eligible Securities for the CAT.
                                                    proposed Rule 1703(a)(2).                                 23 Exemption    Order.                               Therefore, the Exchange proposes to


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                                                    9796                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    define the term ‘‘NMS Security’’ in                     both the options exchange and the                     reported to one of such association’s
                                                    proposed Rule 1701. Specifically,                       Options Market Maker, as is required by               equity trade reporting facilities. This is
                                                    paragraph (x) of proposed Rule 1701                     SEC Rule 613.24 In accordance with the                the same definition as set forth in
                                                    defines the term ‘‘NMS Security’’ to                    exemptive relief, Options Market                      Section 1.1 of the CAT NMS Plan.
                                                    mean any security or class of securities                Makers would be required to report to
                                                                                                                                                                  (DD) Participant
                                                    for which transaction reports are                       the options exchange the time at which
                                                    collected, processed, and made                          a quote in a Listed Option is sent to the               Paragraph (dd) of proposed Rule 1701
                                                    available pursuant to an effective                      options exchange. Such time                           defines the term ‘‘Participant’’ to mean
                                                    transaction reporting plan, or an                       information also will be reported to the              each Person identified as such in
                                                    effective national market system plan                   Central Repository by the options                     Exhibit A of the CAT NMS Plan, as
                                                    for reporting transactions in Listed                    exchange in lieu of reporting by the                  amended, in such Person’s capacity as
                                                    Options. This is the same definition as                 Options Market Maker.                                 a Participant in CAT NMS, LLC. This is
                                                    set forth in Section 1.1 of the CAT NMS                                                                       the same definition in substance as set
                                                    Plan.                                                   (II) Definition of Options Market Maker               forth in Section 1.1 of the CAT NMS
                                                                                                               To implement the requirements                      Plan.
                                                    (Y) NMS Stock
                                                                                                            related to Option Market Maker quotes,
                                                      Under the CAT NMS Plan, the                                                                                 (EE) Person
                                                                                                            the Exchange proposes to define the
                                                    Operating Committee may establish                       term ‘‘Options Market Maker’’ in                        Paragraph (ee) of proposed Rule 1701
                                                    different Trading Days for NMS Stocks                   proposed Rule 1701. Specifically,                     defines the term ‘‘Person’’ to mean any
                                                    (as defined in SEC Rule 600(b)(47)),                    paragraph (aa) of proposed Rule 1701                  individual, partnership, limited liability
                                                    Listed Options, OTC Equity Securities,                  defines the term ‘‘Options Market                     company, corporation, joint venture,
                                                    and any other securities that are                       Maker’’ to mean a broker-dealer                       trust, business trust, cooperative or
                                                    included as Eligible Securities from                    registered with an exchange for the                   association and any heirs, executors,
                                                    time to time. Accordingly, the Exchange                 purpose of making markets in options                  administrators, legal representatives,
                                                    proposes to define the term ‘‘NMS                       contracts traded on the exchange. This                successors and assigns of such Person
                                                    Stock’’ in Paragraph (y) of proposed                    is the same definition as set forth in                where the context so permits. This is the
                                                    Rule 1701 to mean any NMS Security                      Section 1.1 of the CAT NMS Plan.                      same definition as set forth in Section
                                                    other than an option. This is the same                                                                        1.1 of the CAT NMS Plan.
                                                    definition as set forth in SEC Rule                     (BB) Order
                                                    600(b)(47) of Regulation NMS.                                                                                 (FF) Plan Processor
                                                                                                               The proposed Consolidated Audit
                                                                                                            Trail Compliance Rule (Rules 1701–                      Paragraph (ff) of proposed Rule 1701
                                                    (Z) Operating Committee
                                                                                                            1712) requires each Industry Member to                defines the term ‘‘Plan Processor’’ to
                                                      Paragraph (z) of proposed Rule 1701                   record and electronically report to the               mean the Initial Plan Processor or any
                                                    defines the term ‘‘Operating Committee’’                Central Repository certain details for                other Person selected by the Operating
                                                    to mean the governing body of the CAT                   each order. Accordingly, the Exchange                 Committee pursuant to SEC Rule 613
                                                    NMS, LLC designated as such and                         proposes to define the term ‘‘Order’’ in              and Sections 4.3(b)(i) and 6.1 of the
                                                    described in Article IV of the CAT NMS                  proposed Rule 1701. Specifically,                     CAT NMS Plan, and with regard to the
                                                    Plan. This is the same definition as set                paragraph (bb) of proposed Rule 1701                  Initial Plan Processor, the National
                                                    forth in Section 1.1 of the CAT NMS                     defines the term ‘‘Order’’, with respect              Market System Plan Governing the
                                                    Plan, except the Exchange proposes to                   to Eligible Securities, to include: (1)               Process for Selecting a Plan Processor
                                                    use the phrase ‘‘CAT NMS LLC’’ in                       Any order received by an Industry                     and Developing a Plan for the
                                                    place of the phrase ‘‘the Company’’ for                 Member from any person; (2) any order                 Consolidated Audit Trail, to perform the
                                                    clarity.                                                originated by an Industry Member; or (3)              CAT processing functions required by
                                                    (AA) Options Market Maker                               any bid or offer. This is the same                    SEC Rule 613 and set forth in the CAT
                                                                                                            definition as set forth in SEC Rule                   NMS Plan.
                                                    (I) Options Market Maker Quote
                                                                                                            613(j)(8), except the Exchange proposes               (GG) Received Industry Member Data
                                                    Exemption
                                                                                                            to replace the phrase ‘‘member of a
                                                       SEC Rule 613(c)(7) provides that the                 national securities exchange or national                 Paragraph (gg) of proposed Rule 1701
                                                    CAT NMS Plan must require each                          securities association’’ with the term                states that the term ‘‘Received Industry
                                                    Industry Member to record and                           ‘‘Industry Member.’’ The Exchange                     Member Data’’ has the meaning set forth
                                                    electronically report to the Central                    notes that Section 1.1 of the CAT NMS                 in Rule 1703(a)(2). This definition has
                                                    Repository details for each order and                   Plan defines ‘‘Order’’ by reference to                the same substantive meaning as the
                                                    each reportable event, including the                    SEC Rule 613(j)(8).                                   definition set forth in Section 1.1 of the
                                                    routing and modification or cancellation                                                                      CAT NMS Plan. The definition of
                                                    of an order. SEC Rule 613(j)(8) defines                 (CC) OTC Equity Security                              ‘‘Received Industry Member Data’’ is
                                                    ‘‘order’’ to include ‘‘any bid or offer.’’                OTC Equity Securities are one of the                discussed more fully in the discussion
                                                    Therefore, under SEC Rule 613, the                      types of Eligible Securities for the CAT.             below regarding proposed Rule
                                                    details for each Options Market Maker                   Therefore, the Exchange proposes to                   1703(a)(2).
                                                    quotation must be reported to the                       define the term ‘‘OTC Equity Security’’
                                                    Central Repository by both the Options                                                                        (HH) Recorded Industry Member Data
                                                                                                            in proposed Rule 1701. Specifically,
                                                    Market Maker and the options exchange                                                                            Paragraph (hh) of proposed Rule 1701
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                                                                                                            paragraph (cc) of proposed Rule 1701
                                                    to which it routes its quote.                           defines the term ‘‘OTC Equity Security’’              states that the term ‘‘Recorded Industry
                                                       The SROs, however, requested and                     to mean any equity security, other than               Member Data’’ has the meaning set forth
                                                    received exemptive relief from SEC Rule                 an NMS Security, subject to prompt last               in Rule 1703(a)(1). This definition has
                                                    613 so that the CAT NMS Plan may                        sale reporting rules of a registered                  the same substantive meaning as the
                                                    permit Options Market Maker quotes to                   national securities association and                   definition set forth in in Section 1.1 of
                                                    be reported to the Central Repository by                                                                      the CAT NMS Plan. The definition of
                                                    the relevant options exchange in lieu of                  24 See Exemptive Request Letter at 2, and           ‘‘Recorded Industry Member Data’’ is
                                                    requiring that such reporting be done by                Exemption Order.                                      discussed more fully in the discussion


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                      9797

                                                    below regarding proposed Rule                           Assigned Market Participant Identifiers               defined in SEC Rule 613.’’ The
                                                    1703(a)(1).                                             used by its Industry Members, as well                 definition of a small broker-dealer under
                                                                                                            as information to identify each such                  SEC Rule 613, in turn, is a small broker-
                                                    (II) Reportable Event
                                                                                                            Industry Member, including CRD                        dealer as defined in SEC Rule 0–10(c).
                                                       The proposed Consolidated Audit                      number and LEI, if the SRO has
                                                    Trail Compliance Rule (Rules 1701–                                                                            (MM) Trading Day
                                                                                                            collected such LEI of the Industry
                                                    1712) requires each Industry Member to                  Member. Additionally, each Industry                      Proposed Rule 1703(b) establishes the
                                                    record and electronically report to the                 Member is required to submit to the                   deadlines for reporting certain data to
                                                    Central Repository certain details for                  Central Repository the CRD number of                  the Central Repository using the term
                                                    each Reportable Event. To clarify these                 the Industry Member as well as the LEI                ‘‘Trading Day.’’ Accordingly, the
                                                    requirements, the Exchange proposes to                  of the Industry Member (if the Industry               Exchange proposes to define the term
                                                    define the term ‘‘Reportable Event’’ in                 Member has an LEI). The Plan Processor                ‘‘Trading Day’’ in proposed Rule 1701.
                                                    proposed Rule 1701. Specifically,                       will use this information to assign a                 Specifically, Paragraph (mm) of
                                                    paragraph (ii) of proposed Rule 1701                    CAT-Reporter-ID to each Industry                      proposed Rule 1701 states that the term
                                                    states that the term ‘‘Reportable Event’’               Member for internal use within the                    ‘‘Trading Day’’ shall have the meaning
                                                    includes, but is not limited to, the                    Central Repository.                                   as is determined by the Operating
                                                    original receipt or origination,                                                                              Committee. For the avoidance of doubt,
                                                    modification, cancellation, routing,                    (II) Definition of SRO-Assigned Market
                                                                                                                                                                  the Operating Committee may establish
                                                    execution (in whole or in part) and                     Participant Identifier
                                                                                                                                                                  different Trading Days for NMS Stocks
                                                    allocation of an order, and receipt of a                   To implement the Existing Identifier               (as defined in SEC Rule 600(b)(47),
                                                    routed order. This is the same definition               Approach, the Exchange proposes to                    Listed Options, OTC Equity Securities,
                                                    as set forth in Section 1.1 of the CAT                  define the term ‘‘SRO-Assigned Market                 and any other securities that are
                                                    NMS Plan.                                               Participant’’ in proposed Rule 1701.                  included as Eligible Securities from
                                                                                                            Specifically, paragraph (kk) of proposed              time to time.
                                                    (JJ) SRO
                                                                                                            Rule 1701 defines the term ‘‘SRO-
                                                       Paragraph (jj) of proposed Rule 1701                 Assigned Market Participant Identifier’’              (ii) Clock Synchronization
                                                    defines the term ‘‘SRO’’ to mean any                    to mean an identifier assigned to an                     SEC Rule 613(d)(1) under Regulation
                                                    self-regulatory organization within the                 Industry Member by an SRO or                          NMS requires Industry Members to
                                                    meaning of Section 3(a)(26) of the                      identifier used by a Participant. This is             synchronize their Business Clocks to the
                                                    Exchange Act. This is the same                          the same definition as set forth in                   time maintained by NIST, consistent
                                                    definition as set forth in Section 1.1 of               Section 1.1 of the CAT NMS Plan. For                  with industry standards. To comply
                                                    the CAT NMS Plan.                                       example, an Industry Member would be                  with this provision, Section 6.8 of the
                                                    (KK) SRO-Assigned Market Participant                    permitted to use any existing SRO-                    Plan sets forth the clock
                                                    Identifier                                              Assigned Market Participant Identifier                synchronization requirements for
                                                                                                            (e.g., FINRA MPID, NASDAQ MPID,                       Industry Members.26 To implement
                                                    (I) Existing Identifier Approach                        NYSE Mnemonic, CBOE User Acronym                      these provisions with regard to its
                                                       The SROs requested and received                      and CHX Acronym) when reporting                       Industry Members, the Exchange
                                                    exemptive relief from SEC Rule 613 so                   order information to the Central                      proposes Rule 1702 (Consolidated Audit
                                                    that the CAT NMS Plan may permit the                    Repository.                                           Trail Compliance Rule-Clock
                                                    Existing Identifier Approach, which                     (LL) Small Industry Member                            Synchronization) to require its Industry
                                                    would allow an Industry Member to                                                                             Members to comply with the clock
                                                    report an existing SRO-Assigned Market                     The requirements of the proposed
                                                                                                                                                                  synchronization requirements of the
                                                    Participant Identifier in lieu of requiring             Consolidated Audit Trail Compliance
                                                                                                                                                                  Plan.
                                                    the reporting of a universal CAT-                       Rule (Rules 1701–1712) differ to some
                                                                                                                                                                     Paragraph (a) of proposed Rule 1702
                                                    Reporter-ID (that is, a code that                       extent for Small Industry Members
                                                                                                                                                                  sets forth the manner in which Industry
                                                    uniquely and consistently identifies an                 versus Industry Members other than
                                                                                                                                                                  Members must synchronize their
                                                    Industry Member for purposes of                         Small Industry Members. For example,
                                                                                                                                                                  Business Clocks. Paragraph (a)(1) of
                                                    providing data to the Central                           the compliance dates for reporting data
                                                                                                                                                                  proposed Rule 1702 requires each
                                                    Repository).25 The CAT NMS Plan                         to the CAT are different for Small
                                                                                                                                                                  Industry Member to synchronize its
                                                    reflects the ‘‘Existing Identifier                      Industry Members versus other Industry
                                                                                                                                                                  Business Clocks, other than such
                                                    Approach’’ for purposes of identifying                  Members. Accordingly, to clarify the
                                                                                                                                                                  Business Clocks used solely for Manual
                                                    each Industry Member associated with                    requirements that apply to which
                                                                                                                                                                  Order Events or used solely for the time
                                                    an order or Reportable Event. Under the                 Industry Members, the Exchange
                                                                                                                                                                  of allocation on Allocation Reports, at a
                                                    Existing Identifier Approach, Industry                  proposes to define the term ‘‘Small
                                                                                                                                                                  minimum to within a fifty (50)
                                                    Members are required to record and                      Industry Member’’ in proposed Rule
                                                                                                                                                                  millisecond tolerance of the time
                                                    report to the Central Repository an SRO-                1701. Specifically, paragraph (ll) of
                                                                                                                                                                  maintained by the NIST atomic clock,
                                                    Assigned Market Participant Identifier                  proposed Rule 1701 defines the term
                                                                                                                                                                  and maintain such synchronization.
                                                    for orders and certain Reportable Events                ‘‘Small Industry Member’’ to mean an
                                                                                                                                                                  This is the same requirement as set forth
                                                    to be used by the Central Repository to                 Industry Member that qualifies as a
                                                                                                                                                                  in Section 6.8(a)(ii)(A) of the CAT NMS
                                                    assign a unique CAT-Reporter-ID to                      small broker-dealer as defined in Rule
                                                                                                                                                                  Plan.
                                                                                                            0–10(c) under the Securities Exchange
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                                                    identify Industry Members.                                                                                       Paragraph (a)(2) of proposed Rule
                                                       For the Central Repository to link the               Act of 1934, as amended. This is the
                                                                                                                                                                  1702 requires each Industry Member to
                                                    SRO-Assigned Market Participant                         same in substance as the definition of
                                                                                                                                                                  synchronize (1) its Business Clocks used
                                                    Identifier to the CAT-Reporter-ID, each                 ‘‘Small Industry Member’’ as set forth in
                                                                                                                                                                  solely for Manual Order Events and (2)
                                                    SRO will submit to the Central                          Section 1.1 of the CAT NMS Plan.
                                                                                                                                                                  its Business Clocks used solely for the
                                                    Repository, on a daily basis, all SRO-                  Specifically, Section 1.1 of the CAT
                                                                                                            NMS Plan defines a ‘‘Small Industry                     26 In addition, Section 6.7(a)(ii) of the Plan sets
                                                      25 See
                                                           Exemptive Request Letter at 19, and              Member’’ as ‘‘an Industry Member that                 forth the timeline for CAT Reporters to comply with
                                                    Exemption Order.                                        qualifies as a small broker-dealer as                 the clock synchronization requirements.



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                                                    9798                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    time of allocation on Allocation Reports                Rule 4590 (Synchronization of Member                  (A) Recording and Reporting Industry
                                                    at a minimum to within a one second                     Business Clocks).                                     Member Data
                                                    tolerance of the time maintained by the                    Paragraph (c) of proposed Rule 1702                  Paragraph (a) of proposed Rule 1703
                                                    NIST atomic clock, and maintain such                    sets forth certification requirements                 describes the recording and reporting of
                                                    synchronization. This is the same                       with regard to clock synchronization.                 Industry Member Data to the Central
                                                    requirement as set forth in Section                     Specifically, paragraph (c) of proposed               Repository. Paragraph (a) consists of
                                                    6.8(a)(iii) and (iv) of the CAT NMS Plan.               Rule 1702 requires each Industry                      paragraphs (a)(1)–(a)(3), which cover
                                                       Paragraph (a)(3) of proposed Rule                    Member to certify to the Exchange that                Recorded Industry Member Data,
                                                    1702 clarifies that the tolerance                       its Business Clocks satisfy the                       Received Industry Member Data and
                                                    described in paragraphs (a)(1) and (2) of               synchronization requirements set forth                Options Market Maker data,
                                                    the proposed Rule 1702 includes all of                  in paragraph (a) of proposed Rule 1702                respectively. Paragraphs (a)(1)–(a)(3) of
                                                    the following: (1) The time difference                  periodically in accordance with the                   proposed Rule 1703 set forth the
                                                    between the NIST atomic clock and the                   certification schedule established by the             recording and reporting requirements
                                                    Industry Member’s Business Clock; (2)                   Operating Committee pursuant to the                   required in Section 6.4(d)(i)–(iii) of the
                                                    the transmission delay from the source;                 CAT NMS Plan. This requirement is the                 CAT NMS Plan, respectively.
                                                    and (3) the amount of drift of the                      same requirement as set forth in Section                Paragraph (a)(1) requires, subject to
                                                    Industry Member’s Business Clock. This                  6.8(a)(ii)(B), (iii) and (iv) of the CAT              paragraph (a)(3) regarding Options
                                                    description of the clock synchronization                NMS Plan. The Exchange intends to                     Market Makers, each Industry Member
                                                    tolerance is the same as set forth in                   announce to its Industry Members the                  to record and electronically report to the
                                                    paragraph (b) of FINRA Rule 4590                        certification schedule established by the             Central Repository the following details
                                                    (Synchronization of Member Business                     Operating Committee via Regulatory                    for each order and each Reportable
                                                    Clocks).                                                Circular.                                             Event, as applicable (‘‘Recorded
                                                       Paragraph (a)(4) of proposed Rule                                                                          Industry Member Data’’) in the manner
                                                    1702 requires Industry Members to                          Paragraph (d) of proposed Rule 1702
                                                                                                                                                                  prescribed by the Operating Committee
                                                    synchronize their Business Clocks every                 establishes reporting requirements with
                                                                                                                                                                  pursuant to the CAT NMS Plan:
                                                    business day before market open to                      regard to clock synchronization.                        • For original receipt or origination of
                                                    ensure that timestamps for Reportable                   Paragraph (d) of proposed Rule 1702                   an order: (1) Firm Designated ID(s) for
                                                    Events are accurate. In addition, to                    requires Industry Members to report to                each Customer; (2) CAT-Order-ID; (3)
                                                    maintain clock synchronization,                         the Plan Processor and SRO violations                 SRO-Assigned Market Participant
                                                    Business Clocks must be checked                         of paragraph (a) of this Rule pursuant to             Identifier of the Industry Member
                                                    against the NIST atomic clock and re-                   the thresholds set by the Operating                   receiving or originating the order; (4)
                                                    synchronized, as necessary, throughout                  Committee pursuant to the CAT NMS                     date of order receipt or origination; (5)
                                                    the day. This description of the required               Plan. This requirement is the same                    time of order receipt or origination
                                                    frequency of clock synchronization is                   requirement as set forth in Section                   (using timestamps pursuant to proposed
                                                    the same as set forth in paragraph (c) of               6.8(a)(ii)(C), (iii) and (iv) of the CAT              Rule 1706); and (6) Material Terms of
                                                    FINRA Rule 4590 (Synchronization of                     NMS Plan. The Exchange intends to                     the Order;
                                                    Member Business Clocks).                                announce to its Industry Members the                    • for the routing of an order: (1) CAT-
                                                       Paragraph (b) of proposed Rule 1702                  relevant thresholds established by the                Order-ID; (2) date on which the order is
                                                    sets forth documentation requirements                   Operating Committee via Regulatory                    routed; (3) time at which the order is
                                                    with regard to clock synchronization.                   Circular.                                             routed (using timestamps pursuant to
                                                    Specifically, paragraph (b) requires                    (iii) Industry Member Data Reporting                  proposed Rule 1706); (4) SRO-Assigned
                                                    Industry Members to document and                                                                              Market Participant Identifier of the
                                                    maintain their synchronization                            SEC Rule 613(c) under Regulation                    Industry Member routing the order; (5)
                                                    procedures for their Business Clocks.                   NMS requires the CAT NMS Plan to set                  SRO-Assigned Market Participant
                                                    The proposed Rule requires Industry                     forth certain provisions requiring                    Identifier of the Industry Member or
                                                    Members to keep a log of the times                      Industry Members to record and report                 Participant to which the order is being
                                                    when they synchronize their Business                    data to the CAT. To comply with this                  routed; (6) if routed internally at the
                                                    Clocks and the results of the                           provision, Section 6.4 of the CAT NMS                 Industry Member, the identity and
                                                    synchronization process. This log is                    Plan sets forth the data reporting                    nature of the department or desk to
                                                    required to include notice of any time                  requirements for Industry Members. To                 which the order is routed; and (7)
                                                    a Business Clock drifts more than the                   implement these provisions with regard                Material Terms of the Order;
                                                    applicable tolerance specified in                       to its Industry Members, the Exchange                   • for the receipt of an order that has
                                                    paragraph (a) of the proposed Rule.                     proposes Rule 1703 (Consolidated Audit                been routed, the following information:
                                                    Such logs must include results for a                    Trail Compliance Rule—Industry                        (1) CAT-Order-ID; (2) date on which the
                                                    period of not less than five years ending               Member Data Reporting) to require its                 order is received; (3) time at which the
                                                    on the then current date, or for the                    Industry Members to comply with the                   order is received (using timestamps
                                                    entire period for which the Industry                    Industry Member Data reporting                        pursuant to proposed Rule 1706); (4)
                                                    Member has been required to comply                      requirements of the Plan. Proposed Rule               SRO-Assigned Market Participant
                                                    with this Rule if less than five years.                 1703 has five sections covering: (1)                  Identifier of the Industry Member
                                                    These documentation requirements are                    Recording and reporting Industry                      receiving the order; (5) SRO-Assigned
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                                                    the same as those set forth in the                      Member Data, (2) timing of the                        Market Participant Identifier of the
                                                    ‘‘Sequencing Orders and Clock                           recording and reporting, (3) the                      Industry Member or Participant routing
                                                    Synchronization’’ section of Appendix                   applicable securities covered by the                  the order; and (6) Material Terms of the
                                                    C of the CAT NMS Plan. Moreover,                        recording and reporting requirements,                 Order;
                                                    these documentation requirements                        (4) the security symbology to be used in                • if the order is modified or
                                                    regarding clock synchronization are                     the recording and reporting, and (5)                  cancelled: (1) CAT-Order-ID; (2) date the
                                                    comparable to those set forth in                        error correction requirements, each of                modification or cancellation is received
                                                    Supplementary Material .01 of FINRA                     which is described below.                             or originated; (3) time at which the


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9799

                                                    modification or cancellation is received                time when such modification or                        Industry Members are required to use
                                                    or originated (using timestamps                         cancellation is originated by the Options             when reporting Industry Member Data
                                                    pursuant to proposed Rule 1706); (4)                    Market Maker). This paragraph                         to the Central Repository. Paragraph
                                                    price and remaining size of the order, if               implements the Options Market Maker                   (d)(1) of proposed Rule 1703 requires,
                                                    modified; (5) other changes in the                      Quote Exemption, as discussed above.                  for each exchange-listed Eligible
                                                    Material Terms of the Order, if                                                                               Security, each Industry Member to
                                                                                                            (B) Timing of Recording and Reporting
                                                    modified; and (6) whether the                                                                                 report Industry Member Data to the
                                                    modification or cancellation instruction                  Paragraph (b) of proposed Rule 1703                 Central Repository using the symbology
                                                    was given by the Customer or was                        describes the requirements related to the             format of the exchange listing the
                                                    initiated by the Industry Member;                       timing of recording and reporting of                  security. This requirement implements
                                                       • if the order is executed, in whole or              Industry Member Data. Paragraphs                      the requirement set forth in Section 2 of
                                                    in part: (1) CAT-Order-ID; (2) date of                  (b)(1)–(b)(3) of proposed Rule 1703 set               Appendix D of the CAT NMS Plan to
                                                    execution; (3) time of execution (using                 forth the requirements related to the                 use the listing exchange symbology
                                                    timestamps pursuant to proposed Rule                    timing of the recording and reporting                 when reporting data to the Central
                                                    1706; (4) execution capacity (principal,                requirements required in Section                      Repository for exchange-listed Eligible
                                                    agency or riskless principal); (5)                      6.4(b)(i)–(ii) of the CAT NMS Plan.                   Securities.
                                                    execution price and size; (6) SRO-                        Paragraph (b)(1) of proposed Rule                      For each Eligible Security that is not
                                                    Assigned Market Participant Identifier                  1703 requires each Industry Member to                 exchange-listed, however, there is no
                                                    of the Industry Member executing the                    record Recorded Industry Member Data                  listing exchange to provide the
                                                    order; (7) whether the execution was                    contemporaneously with the applicable                 symbology format. Moreover, to date,
                                                    reported pursuant to an effective                       Reportable Event. Paragraph (b)(2) of                 the requisite symbology format has not
                                                    transaction reporting plan or the Plan                  proposed Rule 1703 requires each                      been determined. Therefore, Paragraph
                                                    for Reporting of Consolidated Options                   Industry Member to report: (1) Recorded               (d)(2) of proposed Rule 1703 requires,
                                                    Last Sale Reports and Quotation                         Industry Member Data to the Central                   for each Eligible Security that is not
                                                    Information; and                                        Repository by 8:00 a.m. Eastern Time on               exchange-listed, each Industry Member
                                                       • other information or additional                    the Trading Day following the day the                 to report Industry Member Data to the
                                                    events as may be prescribed pursuant to                 Industry Member records such Recorded                 Central Repository using such
                                                    the CAT NMS Plan.                                       Industry Member Data; and (2) Received                symbology format as approved by the
                                                       Paragraph (a)(2) of proposed Rule                    Industry Member Data to the Central                   Operating Committee pursuant to the
                                                    1703 requires, subject to paragraph                     Repository by 8:00 a.m. Eastern Time on               CAT NMS Plan. The Exchange intends
                                                    (a)(3) regarding Options Market Makers,                 the Trading Day following the day the-                to announce to its Industry Members the
                                                    each Industry Member to record and                      Industry Member receives such                         relevant symbology formats established
                                                    report to the Central Repository the                    Received Industry Member Data.                        by the Operating Committee via
                                                    following, as applicable (‘‘Received                    Paragraph (b)(3) states that Industry                 Regulatory Circular.
                                                    Industry Member Data’’ and collectively                 Members may, but are not required to,
                                                                                                                                                                  (E) Error Correction
                                                    with the information referred to in Rule                voluntarily report Industry Member
                                                    1703(a)(1) ‘‘Industry Member Data’’) in                 Data prior to the applicable 8:00 a.m.                  To ensure that the CAT contains
                                                    the manner prescribed by the Operating                  Eastern Time deadline.                                accurate data, the CAT NMS Plan
                                                    Committee pursuant to the CAT NMS                                                                             requires Industry Members to correct
                                                    Plan:                                                   (C) Applicable Securities                             erroneous data submitted to the Central
                                                       • If the order is executed, in whole or                 Paragraph (c) of proposed Rule 1703                Repository. Therefore, the Exchange
                                                    in part: (1) An Allocation Report; (2)                  describes the securities to which the                 proposes to adopt paragraph (e) of
                                                    SRO-Assigned Market Participant                         recording and reporting requirements of               proposed Rule 1703, which addresses
                                                    Identifier of the clearing broker or prime              proposed Rule 1703 apply. Paragraphs                  the correction of erroneous data
                                                    broker, if applicable; and (3) CAT-                     (c)(1) and (c)(2) of proposed Rule 1703               reported to the Central Repository.
                                                    Order-ID of any contra-side order(s);                   set forth the description of applicable               Paragraph (e) of proposed Rule 1703
                                                       • if the trade is cancelled, a cancelled             securities as set forth in Section 6.4(c)(i)          requires, for each Industry Member for
                                                    trade indicator; and                                    and (ii) of the CAT NMS Plan,                         which errors in Industry Member Data
                                                       • for original receipt or origination of             respectively. Paragraph (c)(1) of                     submitted to the Central Repository
                                                    an order, the Firm Designated ID for the                proposed Rule 1703 requires each                      have been identified by the Plan
                                                    relevant Customer, and in accordance                    Industry Member to record and report to               Processor or otherwise, that such
                                                    with proposed Rule 1704, Customer                       the Central Repository the Industry                   Industry Member submit corrected
                                                    Account Information and Customer                        Member Data as set forth in paragraph                 Industry Member Data to the Central
                                                    Identifying Information for the relevant                (a) of proposed Rule 1703 for each NMS                Repository by 8:00 a.m. Eastern Time on
                                                    Customer.                                               Security registered or listed for trading             T+3. This requirement implements the
                                                       Paragraph (a)(3) of proposed Rule                    on such exchange or admitted to                       error correction requirement set forth in
                                                    1703 states that each Industry Member                   unlisted trading privileges on such                   Section 6 of Appendix D of the CAT
                                                    that is an Options Market Maker is not                  exchange. Paragraph (c)(2) of proposed                NMS Plan.
                                                    required to report to the Central                       Rule 1703 requires each Industry
                                                    Repository the Industry Member Data                                                                           (iv) Customer Information Reporting
                                                                                                            Member to record and report to the
                                                    regarding the routing, modification or                                                                           Section 6.4(d)(iv) of the CAT NMS
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                                                                                                            Central Repository the Industry Member
                                                    cancellation of its quotes in Listed                    Data as set forth in paragraph (a) of this            Plan requires Industry Members to
                                                    Options. Each Industry Member that is                   proposed Rule 1703 for each Eligible                  submit to the Central Repository certain
                                                    an Options Market Maker, however, is                    Security for which transaction reports                information related to their Customers
                                                    required to report to the Exchange the                  are required to be submitted to FINRA.                in accordance with the Customer
                                                    time at which its quote in a Listed                                                                           Information Approach discussed above.
                                                    Option is sent to the Exchange (and, if                 (D) Security Symbology                                The Exchange proposes Rule 1704
                                                    applicable, any subsequent quote                          Paragraph (d) of proposed Rule 1703                 (Consolidated Audit Trail Compliance
                                                    modification time and/or cancellation                   describes the security symbology that                 Rule—Customer Information Reporting)


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                                                    9800                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    to implement this provision of the CAT                  above. The Exchange proposes Rule                       Manual Order Event has been captured
                                                    NMS Plan with regard to its Industry                    1705 (Consolidated Audit Trail                          electronically in an order handling and
                                                    Members. Specifically, paragraph (a) of                 Compliance Rule—Industry Member                         execution system of such Member
                                                    proposed Rule 1704 requires each                        Information Reporting) to implement                     (‘‘Electronic Capture Time’’) in
                                                    Industry Member to submit to the                        this provision of the CAT NMS Plan                      milliseconds. In addition, paragraph
                                                    Central Repository the Firm Designated                  with regard to its Industry Members.                    (b)(2) of proposed Rule 1706 permits
                                                    ID, Customer Account Information and                    Specifically, proposed Rule 1705                        each Industry Member to record and
                                                    Customer Identifying Information for                    requires each Industry Member to                        report the time of Allocation Reports in
                                                    each of its Customers with an Active                    submit to the Central Repository                        increments up to and including one
                                                    Account prior to such Industry                          information sufficient to identify such                 second.
                                                    Member’s commencement of reporting                      Industry Member, including CRD
                                                                                                                                                                    (vii) Clock Synchronization Rule
                                                    to the Central Repository and in                        number and LEI, if such LEI has been
                                                                                                                                                                    Violations
                                                    accordance with the deadlines set forth                 obtained, prior to such Industry
                                                    in Rule 1709. Paragraph (b) of proposed                 Member’s commencement of reporting                        Proposed Rule 1707 (Consolidated
                                                    Rule 1704 requires each Industry                        to the Central Repository and in                        Audit Trail Compliance Rule—Clock
                                                    Member to submit to the Central                         accordance with the deadlines set forth                 Synchronization Rule Violation)
                                                    Repository any updates, additions or                    in Rule 1709, and keep such                             describes potential violations of the
                                                    other changes to the Firm Designated ID,                information up to date as necessary.                    clock synchronization time period
                                                    Customer Account Information and                                                                                requirements set forth in the proposed
                                                                                                            (vi) Time Stamps                                        Consolidated Audit Trail Compliance
                                                    Customer Identifying Information for
                                                    each of its Customers with an Active                       SEC Rule 613(d)(3) under Regulation                  Rule (Rules 1701–1712). Proposed Rule
                                                    Account on a daily basis. Paragraph (c)                 NMS sets forth requirements for time                    1707 states that an Industry Member
                                                    of proposed Rule 1704 requires each                     stamps used by CAT Reporters in                         that engages in a pattern or practice of
                                                    Industry Member, on a periodic basis as                 recording and reporting data to the                     reporting Reportable Events outside of
                                                    designated by the Plan Processor and                    CAT.27 To comply with this provision,                   the required clock synchronization time
                                                    approved by the Operating Committee,                    Section 6.8(b) of the Plan sets forth time              period as set forth in the Consolidated
                                                    to submit to the Central Repository a                   stamp requirements for Industry                         Audit Trail Compliance Rule (Rules
                                                    complete set of Firm Designated IDs,                    Members. To implement this provision                    1701–1712) without reasonable
                                                    Customer Account Information and                        with regard to its Industry Members, the                justification or exceptional
                                                    Customer Identifying Information for                    Exchange proposes new Rule 1706                         circumstances may be considered in
                                                    each of its Customers with an Active                    (Consolidated Audit Trail Compliance                    violation of this Rule. This provision
                                                    Account. This periodic refresh is                       Rule—Time Stamps) to require its                        implements the requirements of Section
                                                    intended to ensure that the Central                     Industry Members to comply with the                     6.8 of the CAT NMS Plan which
                                                    Repository has the most current                         time stamp requirements of the Plan.                    requires the Compliance Rule to provide
                                                    information identifying a Customer. The                    Paragraph (a) of proposed Rule 1706                  that a pattern or practice of reporting
                                                    Exchange intends to announce to its                     sets forth the time stamp increments to                 events outside of the required clock
                                                    Industry Members when such a periodic                   be used by Industry Members in their                    synchronization time period without
                                                    refresh is required by the Plan Processor               CAT reporting. Paragraph (a)(1) of                      reasonable justification or exceptional
                                                    and the Operating Committee via                         proposed Rule 1706 requires each                        circumstances may be considered a
                                                    Regulatory Circular.                                    Industry Member to record and report                    violation of SEC Rule 613 or the CAT
                                                      Finally, paragraph (d) of proposed                    Industry Member Data to the Central                     NMS Plan.
                                                    Rule 1704 addresses the correction of                   Repository with time stamps in
                                                                                                            milliseconds, subject to paragraphs                     (viii) Connectivity and Data
                                                    erroneous Customer data reported to the                                                                         Transmission
                                                    Central Repository to ensure an accurate                (a)(2) and (b) of proposed Rule 1706. To
                                                    audit trail. Paragraph (d) requires, for                the extent that any Industry Member’s                      Proposed Rule 1708 (Consolidated
                                                    each Industry Member for which errors                   order handling or execution systems                     Audit Trail Compliance Rule—
                                                    in Firm Designated ID, Customer                         utilize time stamps in increments finer                 Connectivity and Data Transmission)
                                                    Account Information and Customer                        than milliseconds, paragraph (a)(2) of                  addresses connectivity and data
                                                    Identifying Information for each of its                 proposed Rule 1706 requires such                        transmission requirements related to the
                                                    Customers with an Active Account                        Industry Member to record and report                    CAT. Paragraph (a) of proposed Rule
                                                    submitted to the Central Repository                     Industry Member Data to the Central                     1708 describes the format(s) for
                                                    have been identified by the Plan                        Repository with time stamps in such                     reporting Industry Member Data to the
                                                    Processor or otherwise, such Member to                  finer increment, subject to paragraph (b)               Central Repository, thereby
                                                    submit corrected data to the Central                    of proposed Rule 1706 regarding                         implementing the formatting
                                                    Repository by 5:00 p.m. Eastern Time on                 Manual Order Events and Allocation                      requirements as set forth in Section
                                                    T+3. This requirement implements the                    Reports.                                                6.4(a) of the CAT NMS Plan.
                                                    error correction requirement set forth in                  Paragraph (b) of proposed Rule 1706                  Specifically, paragraph (a) of proposed
                                                    Appendix C of the CAT NMS Plan.                         sets forth the permissible time stamp                   Rule 1708 requires each Industry
                                                                                                            increments for Manual Order Events                      Member to transmit data as required
                                                    (v) Industry Member Information                         and Allocation Reports. Specifically,                   under the CAT NMS Plan to the Central
                                                    Reporting                                               paragraph (b)(1) of proposed Rule 1706                  Repository utilizing such format(s) as
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                                                      Section 6.4(d)(vi) of the CAT NMS                     permits each Industry Member to record                  may be provided by the Plan Processor
                                                    Plan requires Industry Members to                       and report Manual Order Events to the                   and approved by the Operating
                                                    submit to the Central Repository                        Central Repository in increments up to                  Committee.
                                                    information sufficient to identify such                 and including one second, provided that                    Paragraph (b) of proposed Rule 1708
                                                    Industry Member, including CRD                          each Industry Member is required to                     addresses connectivity requirements
                                                    number and LEI, if such LEI has been                    record and report the time when a                       related to the CAT. Paragraph (b) of
                                                    obtained, in accordance with the                                                                                proposed Rule 1708 requires each
                                                    Existing Identifier Approach discussed                    27 17   CFR 242.613(d)(3).                            Industry Member to connect to the


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                        9801

                                                    Central Repository using a secure                       Repository no later than August 15,                    (x) Recordkeeping
                                                    method(s), including, but not limited to,               2018, and Small Industry Members are                     Proposed Rule 1710 (Consolidated
                                                    private line(s) and virtual private                     required to begin connectivity and                     Audit Trail Compliance Rule—
                                                    network connection(s). This provision                   acceptance testing with the Central                    Recordkeeping) sets forth the
                                                    implements the connectivity                             Repository no later than August 15,                    recordkeeping obligations related to the
                                                    requirements set forth in Section 4 of                  2019.                                                  CAT for Industry Members. Proposed
                                                    Appendix D to the CAT NMS Plan.                            Paragraph (a)(2) sets forth the                     Rule 1710 requires each Industry
                                                      Paragraph (c) permits Industry                        deadlines related to reporting Customer                Member to maintain and preserve
                                                    Members to use CAT Reporting Agents                     and Industry Member information.                       records of the information required to be
                                                    to fulfill their data reporting obligations             Paragraph (a)(2)(i) requires Industry                  recorded under the proposed
                                                    related to the CAT. Paragraph (c) is                    Members (other than Small Industry                     Consolidated Audit Trail Compliance
                                                    based on FINRA Rule 7450(c), which                      Members) to begin reporting Customer                   Rule (Rules 1701–1712) for the period of
                                                    permits OATS Reporting Members to                       and Industry Member information, as                    time and accessibility specified in SEC
                                                    enter into agreements with Reporting                    required by Rules 1704(a) and 1705,                    Rule 17a–4(b). The records required to
                                                    Agents to fulfill the OATS obligations of               respectively, to the Central Repository                be maintained and preserved under the
                                                    the OATS Reporting Member.                              for processing no later than October 15,               proposed Consolidated Audit Trail
                                                    Specifically, Paragraph (c)(1) of                       2018. Paragraph (a)(2)(ii) requires Small              Compliance Rule (Rules 1701–1712)
                                                    proposed Rule 1708 states that any                      Industry Members to begin reporting                    may be immediately produced or
                                                    Industry Member may enter into an                       Customer and Industry Member                           reproduced on ‘‘micrographic media’’ as
                                                    agreement with a CAT Reporting Agent                    information, as required by Rules                      defined in SEC Rule 17a–4(f)(1)(i) or by
                                                    pursuant to which the CAT Reporting                     1704(a) and 1705, respectively, to the                 means of ‘‘electronic storage media’’ as
                                                    Agent agrees to fulfill the obligations of              Central Repository for processing no                   defined in SEC Rule 17a–4(f)(1)(ii) that
                                                    such Industry Member under the                          later than October 15, 2019.                           meet the conditions set forth in SEC
                                                    proposed Consolidated Audit Trail                          Paragraph (a)(3) sets forth the                     Rule 17a–4(f) and be maintained and
                                                    Compliance Rule (Rules 1701–1712).                      deadlines related to the submission of                 preserved for the required time in that
                                                    Any such agreement must be evidenced                    order data. Under paragraph (a)(3)(i),                 form. Proposed Rule 1710 is based on
                                                    in writing, which specifies the                         Industry Members (other than Small                     FINRA Rule 7440(a)(5), which sets forth
                                                    respective functions and responsibilities               Industry Members) are permitted, but                   the recordkeeping requirements related
                                                    of each party to the agreement that are                 not required, to submit order data for                 to OATS.
                                                    required to effect full compliance with                 testing purposes beginning no later than
                                                    the requirements of the proposed                                                                               (xi) Timely, Accurate and Complete
                                                                                                            May 15, 2018. In addition, Industry
                                                    Consolidated Audit Trail Compliance                                                                            Data
                                                                                                            Members (other than Small Industry
                                                    Rule (Rules 1701–1712). The Exchange                    Members) are required to participate in                  SEC Rule 613 and the CAT NMS Plan
                                                    notes that, currently, no standardized                                                                         emphasize the importance of the
                                                                                                            the coordinated and structured testing
                                                    form agreement for CAT Reporting                                                                               timeliness, accuracy, completeness and
                                                                                                            of order submission, which will begin
                                                    Agent arrangements has been adopted.                                                                           integrity of the data submitted to the
                                                                                                            no later than August 15, 2018. Under
                                                    Paragraph (c)(2) of proposed Rule 1708                                                                         CAT.29 Accordingly, proposed Rule
                                                                                                            paragraph (a)(3)(ii), Small Industry
                                                    requires that all written documents                                                                            1711 (Consolidated Audit Trail
                                                                                                            Members are permitted, but not
                                                    evidencing an agreement with a CAT                                                                             Compliance Rule—Timely, Accurate
                                                                                                            required, to submit order data for testing
                                                    Reporting Agent be maintained by each                                                                          and Complete Data) implements this
                                                                                                            purposes beginning no later than May
                                                    party to the agreement. Paragraph (c)(3)                                                                       requirement with regard to Industry
                                                                                                            15, 2019. In addition, Small Industry
                                                    states that each Industry Member                                                                               Members. Paragraph (a) of proposed
                                                                                                            Members are required to participate in
                                                    remains primarily responsible for                                                                              Rule 1711 requires that Industry
                                                    compliance with the requirements of the                 the coordinated and structured testing
                                                                                                            of order submission, which will begin                  Members record and report data to the
                                                    proposed Consolidate Audit Trail                                                                               Central Repository as required by the
                                                    Compliance Rule (Rules 1701–1712),                      no later than August 15, 2019.
                                                                                                               Paragraph (a)(4) states that Industry               proposed Consolidated Audit Trail
                                                    notwithstanding the existence of an                                                                            Compliance Rule (Rules 1701–1712) in
                                                    agreement described in paragraph (c) of                 Members are permitted, but not required
                                                                                                            to, submit Quote Sent Times on Options                 a manner that ensures the timeliness,
                                                    proposed Rule 1708.                                                                                            accuracy, integrity and completeness of
                                                                                                            Market Maker quotes, beginning no later
                                                    (ix) Development and Testing                            than October 15, 2018.                                 such data.
                                                                                                                                                                     In addition, without limiting the
                                                       The Exchange proposes Rule 1709                         Paragraph (b) of proposed Rule 1709
                                                                                                                                                                   general requirement as set forth in
                                                    (Consolidated Audit Trail Compliance                    implements the requirement under the
                                                                                                                                                                   paragraph (a), paragraph (b) of proposed
                                                    Rule—Development and Testing) to                        CAT NMS Plan that Industry Members
                                                                                                                                                                   Rule 1711 requires Industry Members to
                                                    address requirements for Industry                       participate in required industry testing
                                                                                                                                                                   accurately provide the LEIs in their
                                                    Members related to CAT development                      with the Central Repository.28                         records as required by the proposed
                                                    and testing. Paragraph (a) of proposed                  Specifically, proposed Rule 1709                       Consolidated Audit Trail Compliance
                                                    Rule 1709 sets forth the testing                        requires that each Industry Member                     Rule (Rules 1701–1712) and states that
                                                    requirements and deadlines for Industry                 participate in testing related to the                  Industry Members may not knowingly
                                                    Members to develop and commence                         Central Repository, including any                      submit inaccurate LEIs to the Central
                                                    reporting to the Central Repository.                    industry-wide disaster recovery testing,
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                                                                                                                                                                   Repository. Paragraph (b) notes,
                                                    These requirements are set forth in                     pursuant to the schedule established                   however, that this requirement does not
                                                    Appendix C to the CAT NMS Plan.                         pursuant to the CAT NMS Plan. The                      impose any additional due diligence
                                                       Paragraph (a)(1) sets forth the                      Exchange intends to announce to its                    obligations on Industry Members with
                                                    deadlines related to connectivity and                   Industry Members the schedule                          regard to LEIs for CAT purposes.
                                                    acceptance testing. Industry Members                    established pursuant to the CAT NMS                    Accordingly, this provision does not
                                                    (other than Small Industry Members) are                 Plan via Regulatory Circular.
                                                    required to begin connectivity and                                                                               29 See SEC Rule 613(e)(4)(i)(D)(ii); and Section

                                                    acceptance testing with the Central                       28 Adopting   Release [sic] at 84725.                6.5(d) of the CAT NMS Plan.



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                                                    9802                        Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    impose any due diligence obligations                     (xii) Compliance Dates                                   trade, and, in general, to protect
                                                    beyond those that may exist today with                      Proposed Rule 1712 (Consolidated                      investors and the public interest, and
                                                    respect to information associated with                   Audi [sic] Trail Compliance Rule—                        Section 6(b)(8) of the Act 33 which
                                                    an LEI. Although Industry Members will                   Compliance Dates) sets forth the                         requires that the Exchange’s rules not
                                                    not be required to perform additional                    compliance dates for the various                         impose any burden on competition that
                                                    due diligence with regard to the LEIs for                provisions of the proposed Consolidated                  is not necessary or appropriate.
                                                    CAT purposes, Industry Members will                      Audit Trail Compliance Rule (Rules                          The Exchange believes that this
                                                    be required to accurately provide the                    1701–1712). Paragraph (a) of proposed                    proposal is consistent with the Act
                                                    LEIs in their records and may not                        Rule 1712 states that paragraphs (b) and                 because it implements, interprets or
                                                    knowingly submit inaccurate LEIs to the                  (c) of this Rule set forth the additional                clarifies the provisions of the Plan, and
                                                    CAT. Paragraph (b) is consistent with                    details with respect to the compliance                   is designed to assist the Exchange and
                                                    the SEC’s statements in the Approval                     date for the Consolidated Audit Trail                    its Industry Members in meeting
                                                    Order for the CAT NMS Plan regarding                     Compliance Rule (Rules 1701–1712). It                    regulatory obligations pursuant to the
                                                    an Industry Member’s obligations                         further states that, unless otherwise                    Plan. In approving the Plan, the SEC
                                                    regarding LEIs.30                                        noted, Rules 1701–1712 are fully                         noted that the Plan ‘‘is necessary and
                                                       Paragraph (c) states that, if an                      effective and Members must comply                        appropriate in the public interest, for
                                                    Industry Member reports data to the                      with their terms.                                        the protection of investors and the
                                                    Central Repository with errors such that                    Paragraph (b) of proposed Rule 1712                   maintenance of fair and orderly markets,
                                                    its error percentage exceeds the                         establishes the compliance dates for the                 to remove impediments to, and perfect
                                                    maximum Error Rate established by the                    clock synchronization requirements as                    the mechanism of a national market
                                                    Operating Committee pursuant to the                      set forth in proposed Rule 1702.                         system, or is otherwise in furtherance of
                                                    CAT NMS Plan, then such Industry                         Paragraph (b)(1) states that each                        the purposes of the Act.’’ 34 To the
                                                    Member would not be in compliance                        Industry Member shall comply with                        extent that this proposal implements,
                                                    with the proposed Consolidated Audit                     Rule 1702 with regard to Business                        interprets or clarifies the Plan and
                                                    Trail Compliance Rule (Rules 1701–                       Clocks that capture time in milliseconds                 applies specific requirements to
                                                    1712). As discussed above, the initial                   commencing on or before March 15,                        Industry Members, the Exchange
                                                    maximum Error Rate is 5%, although                       2017. Paragraph (b)(2) states that each                  believes that this proposal furthers the
                                                    the Error Rate is expected to be reduced                 Industry Member shall comply with                        objectives of the Plan, as identified by
                                                    over time. The Exchange intends to                       Rule 1702 with regard to Business                        the SEC, and is therefore consistent with
                                                    announce to its Industry Members                         Clocks that do not capture time in                       the Act.
                                                    changes to the Error Rate established                    milliseconds commencing on or before
                                                    pursuant to the CAT NMS Plan via                         February 19, 2018. The compliance date                   B. Self-Regulatory Organization’s
                                                    Regulatory Circular.                                     set forth in paragraph (b)(1) reflects the               Statement on Burden on Competition
                                                                                                             exemptive relief requested by the
                                                       Furthermore, paragraph (d) of                                                                                    The Exchange does not believe that
                                                                                                             Participants with regard to the clock
                                                    proposed Rule 1711 addresses                                                                                      the proposed rule change will result in
                                                                                                             synchronization requirements related to
                                                    Compliance Thresholds related to                                                                                  any burden on competition that is not
                                                                                                             Business Clocks that do not capture
                                                    reporting data to the CAT. Proposed                                                                               necessary or appropriate in furtherance
                                                                                                             time in milliseconds.
                                                    Rule 1711 states that each Industry                                                                               of the purposes of the Act. The
                                                                                                                Paragraph (c) of proposed Rule 1712
                                                    Member is required to meet a separate                                                                             Exchange notes that the proposed rule
                                                                                                             establishes the compliance dates for the
                                                    compliance threshold which will be an                                                                             change implements provisions of the
                                                                                                             data recording and reporting
                                                    Industry Member-specific rate that may                                                                            CAT NMS Plan, and is designed to
                                                                                                             requirements for Industry Members.
                                                    be used as the basis for further review                                                                           assist the Exchange in meeting its
                                                                                                             Paragraph (c)(1) requires each Industry
                                                    or investigation into the Industry                                                                                regulatory obligations pursuant to the
                                                                                                             Member (other than Small Industry
                                                    Member’s performance with regard to                                                                               Plan. The Exchange also notes that the
                                                                                                             Members) to record and report the
                                                    the CAT (the ‘‘Compliance                                                                                         proposed Consolidated Audit Trail
                                                                                                             Industry Member Data to the Central
                                                    Thresholds’’). Compliance Thresholds                                                                              Compliance Rule (Rules 1701–1712)
                                                                                                             Repository by November 15, 2018.
                                                    will compare an Industry Member’s                                                                                 implementing provisions of the CAT
                                                                                                             Paragraph (c)(2) requires that each
                                                    error rate to the aggregate Error Rate                                                                            NMS Plan will apply equally to all firms
                                                                                                             Industry Member that is a Small
                                                    over a period of time to be defined by                                                                            that trade NMS Securities and OTC
                                                                                                             Industry Member to record and report
                                                    the Operating Committee. Compliance                                                                               Equity Securities. In addition, all
                                                                                                             the Industry Member Data to the Central
                                                    Thresholds will be set by the Operating                                                                           national securities exchanges and
                                                                                                             Repository by November 15, 2019. Such
                                                    Committee, and will be calculated at                                                                              FINRA are proposing this Consolidated
                                                                                                             compliance dates are consistent with
                                                    intervals to be set by the Operating                                                                              Audit Trail Compliance Rule (Rules
                                                                                                             the compliance dates set forth in SEC
                                                    Committee.31 Compliance Thresholds                                                                                1701–1712). Therefore, this is not a
                                                                                                             Rule 613(a)(3)(v) and (vi), and Section
                                                    will include compliance with the data                                                                             competitive rule filing, and, therefore, it
                                                                                                             6.7(a)(v) and (vi) of the CAT NMS Plan.
                                                    reporting and clock synchronization                                                                               does not impose a burden on
                                                    requirements. Proposed Rule 1711 states                  2. Statutory Basis                                       competition.
                                                    that an Industry Member’s performance                      The Exchange believes that the                         C. Self-Regulatory Organization’s
                                                    with respect to its Compliance
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                                                                                                             proposed rule change is consistent with                  Statement on Comments on the
                                                    Threshold will not signify, as a matter                  the provisions of Section 6(b)(5) of the                 Proposed Rule Change Received From
                                                    of law, that such Industry Member has                    Act 32 which requires, among other                       Members, Participants, or Others
                                                    violated the proposed Consolidated                       things, that the Exchange’s rules must
                                                    Audit Trail Compliance Rule (Rules                       be designed to prevent fraudulent and                      Written comments were neither
                                                    1701–1712).                                              manipulative acts and practices, to                      solicited nor received.
                                                                                                             promote just and equitable principles of
                                                      30 Approval   Order at 84745.                                                                                     33 15   U.S.C. 78f(b)(8)
                                                      31 Appendix   C of the CAT NMS Plan.                     32 15   U.S.C. 78f(b)(6) [sic].                          34 Approval    Order at 84697.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                     9803

                                                    III. Date of Effectiveness of the                       inspection and copying at the principal               as Exhibit 4 to the filing but is not
                                                    Proposed Rule Change and Timing for                     office of the Exchange. All comments                  attached to the publication of this
                                                    Commission Action                                       received will be posted without change;               notice.
                                                      Within 45 days of the date of                         the Commission does not edit personal
                                                                                                            identifying information from                          II. Self-Regulatory Organization’s
                                                    publication of this notice in the Federal                                                                     Statement of the Purpose of, and
                                                    Register or within such longer period                   submissions. You should submit only
                                                                                                            information that you wish to make                     Statutory Basis for, the Proposed Rule
                                                    up to 90 days (i) as the Commission may                                                                       Change
                                                                                                            available publicly. All submissions
                                                    designate if it finds such longer period
                                                                                                            should refer to File Number SR–MIAX–                    In its filing with the Commission, CFE
                                                    to be appropriate and publishes its
                                                                                                            2017–03 and should be submitted on or
                                                    reasons for so finding or (ii) as to which                                                                    included statements concerning the
                                                                                                            before March 1, 2017.
                                                    the self-regulatory organization                                                                              purpose of and basis for the proposed
                                                    consents, the Commission will:                            For the Commission, by the Division of              rule change and discussed any
                                                      (A) By order approve or disapprove                    Trading and Markets, pursuant to delegated            comments it received on the proposed
                                                                                                            authority.35
                                                    the proposed rule change, or                                                                                  rule change. The text of these statements
                                                      (B) institute proceedings to determine                Robert W. Errett,                                     may be examined at the places specified
                                                    whether the proposed rule change                        Deputy Secretary.                                     in Item IV below. CFE has prepared
                                                    should be disapproved.                                  [FR Doc. 2017–02542 Filed 2–7–17; 8:45 am]            summaries, set forth in Sections A, B,
                                                    IV. Solicitation of Comments
                                                                                                            BILLING CODE 8011–01–P                                and C below, of the most significant
                                                                                                                                                                  aspects of such statements.
                                                      Interested persons are invited to
                                                    submit written data, views, and                         SECURITIES AND EXCHANGE                               A. Self-Regulatory Organization’s
                                                    arguments concerning the foregoing,                     COMMISSION                                            Statement of the Purpose of, and
                                                    including whether the proposed rule                                                                           Statutory Basis for, the Proposed Rule
                                                                                                            [Release No. 34–79931; File No. SR–CFE–
                                                    change is consistent with the Act.                      2017–001]                                             Change
                                                    Comments may be submitted by any of                                                                           1. Purpose
                                                    the following methods:                                  Self-Regulatory Organizations; CBOE
                                                                                                            Futures Exchange, LLC; Notice of                         CFE Rule 415 sets forth requirements
                                                    Electronic Comments                                     Filing of a Proposed Rule Change                      relating to Block Trades. The proposed
                                                      • Use the Commission’s Internet                       Regarding Block Trades                                rule change adds paragraph (l) to Rule
                                                    comment form (http://www.sec.gov/                                                                             415 which relates to the front running
                                                    rules/sro.shtml); or                                    February 2, 2017.
                                                                                                               Pursuant to Section 19(b)(7) of the                of Block Trades. Proposed Rule 415(l)
                                                      • Send an email to rule-comments@                                                                           makes clear that no person may engage
                                                    sec.gov. Please include File Number SR–                 Securities Exchange Act of 1934
                                                                                                            (‘‘Act’’),1 notice is hereby given that on            in the front running of a Block Trade
                                                    MIAX–2017–03 on the subject line.                                                                             when acting on material non-public
                                                                                                            January 19, 2017 CBOE Futures
                                                    Paper Comments                                          Exchange, LLC (‘‘CFE’’ or ‘‘Exchange’’)               information regarding an impending
                                                                                                            filed with the Securities and Exchange                transaction by another person, acting on
                                                       • Send paper comments in triplicate                                                                        non-public information obtained
                                                    to Secretary, Securities and Exchange                   Commission (‘‘SEC’’ or ‘‘Commission’’)
                                                                                                            the proposed rule change described in                 through a confidential employee/
                                                    Commission, 100 F Street NE.,                                                                                 employer relationship, broker/customer
                                                    Washington, DC 20549–1090.                              Items I, II, and III below, which Items
                                                                                                            have been prepared by CFE. The                        relationship, or in breach of a pre-
                                                       All submissions should refer to File                                                                       existing duty. Proposed Rule 415(l)
                                                                                                            Commission is publishing this notice to
                                                    Number SR–MIAX–2017–03. This file                                                                             would apply to all products traded on
                                                                                                            solicit comments on the proposed rule
                                                    number should be included on the                                                                              CFE, including both non-security
                                                                                                            change from interested persons. CFE
                                                    subject line if email is used. To help the                                                                    futures and security futures.
                                                                                                            also has filed this proposed rule change
                                                    Commission process and review your
                                                                                                            with the Commodity Futures Trading                       The proposed rule change is being
                                                    comments more efficiently, please use
                                                                                                            Commission (‘‘CFTC’’). CFE filed a                    made in connection with other
                                                    only one method. The Commission will
                                                                                                            written certification with the CFTC                   proposed amendments to Rule 415
                                                    post all comments on the Commission’s
                                                                                                            under Section 5c(c) of the Commodity                  which are not included as part of this
                                                    Internet Web site (http://www.sec.gov/
                                                                                                            Exchange Act (‘‘CEA’’) 2 on January 19,               proposed rule change. Those proposed
                                                    rules/sro.shtml). Copies of the
                                                                                                            2017.                                                 amendments are to be included in new
                                                    submission, all subsequent
                                                                                                            I. Self-Regulatory Organization’s                     paragraph (k) of Rule 415.3 The
                                                    amendments, all written statements
                                                                                                            Description of the Proposed Rule                      provisions of proposed Rule 415(k) are
                                                    with respect to the proposed rule
                                                                                                            Change                                                intended to clarify certain restrictions
                                                    change that are filed with the
                                                                                                                                                                  relating to disclosure and use of non-
                                                    Commission, and all written                                The Exchange proposes to amend CFE                 public information regarding Block
                                                    communications relating to the                          Rule 415 related to Block Trades. The                 Trades and the extent to which
                                                    proposed rule change between the                        scope of this filing is limited solely to             counterparties to a Block Trade may
                                                    Commission and any person, other than                   the application of the proposed rule                  enter into pre-hedging or anticipatory
                                                    those that may be withheld from the                     amendments to security futures that                   hedging transactions in connection with
                                                    public in accordance with the
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                                                                                                            may be traded on CFE. Although no                     Block Trades. Proposed Rule 415(k)
                                                    provisions of 5 U.S.C. 552, will be                     security futures are currently listed for             would only apply to non-security
                                                    available for Web site viewing and                      trading on CFE, CFE may list security                 futures, and the Exchange is including
                                                    printing in the Commission’s Public                     futures for trading in the future. The text           a sentence in proposed Rule 415(k) to
                                                    Reference Room, 100 F Street NE.,                       of the proposed rule change is attached
                                                    Washington, DC 20549, on official                                                                               3 Paragraph (k) will be filed simultaneously with
                                                    business days between the hours of                        35 17 CFR 200.30–3(a)(12).                          paragraph (l) with CFTC which is why the
                                                    10:00 a.m. and 3:00 p.m. Copies of such                   1 15 U.S.C. 78s(b)(7).
                                                                                                                                                                  provisions of paragraph (l) are marked as existing
                                                    filing will also be available for                         2 7 U.S.C. 7a–2(c).                                 rule text in Exhibit 4.



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Document Created: 2017-02-08 02:58:56
Document Modified: 2017-02-08 02:58:56
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 9790 

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