82_FR_9871 82 FR 9846 - Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

82 FR 9846 - Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

SECURITIES AND EXCHANGE COMMISSION

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

Page Range9846-9858
FR Document2017-02549

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9846-9858]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02549]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79944; File No. SR-BatsBYX-2017-02]


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

February 2, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 30, 2017, Bats BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange.\3\ The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on 
January 17, 2017 under File No. SR-BatsBYX-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 filed a proposal to adopt Rules 4.5 through 4.16 to 
implement the compliance rule (``Compliance Rule'') regarding the 
National Market System Plan Governing the Consolidated Audit Trail (the 
``CAT NMS Plan'' or ``Plan'').\4\
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    \4\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.bats.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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

    In its filing with the Commission, the 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 parts of such 
statements.

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., International Securities Exchange, LLC, 
Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami 
International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, 
Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc. (collectively, the ``Participants'') filed with the 
Commission, pursuant to Section 11A of the Exchange Act \5\ and Rule 
608 of Regulation NMS thereunder,\6\ the CAT NMS Plan.\7\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\8\ and approved by the Commission, as 
modified, on November 15, 2016.\9\
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    \5\ 15 U.S.C. 78k-1.
    \6\ 17 CFR 242.608.
    \7\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \8\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 
FR 30614 (May 17, 2016).
    \9\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 
FR 84696 (Nov. 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\10\ As is described more fully below, the Proposed Rules 4.5 
through 4.16 set forth the Compliance Rule to require Industry Members 
to comply with the provisions of the CAT NMS Plan. The Proposed Rules 
4.5 through 4.16 include twelve Proposed Rules covering the following 
areas: (1) Definitions; (2) clock synchronization; (3) Industry Member 
Data reporting; (4) Customer information reporting; (5) Industry Member 
information reporting; (6) time stamps; (7) clock synchronization rule 
violations; (8) connectivity and data transmission; (9) development and 
testing; (10) recordkeeping; (11) timely, accurate and complete data; 
and (12) compliance dates. Each of these Proposed Rules are discussed 
in detail below.
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    \10\ See SEC Rule 613(g)(1).
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(i) Definitions
    Proposed Rule 4.5 (Consolidated Audit Trail--Definitions) sets 
forth the definitions for the terms used in the Proposed Rules 4.5 
through 4.16. Each of the defined terms in Proposed Rule 4.5 is 
discussed in detail in this section.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customer's associated with orders. For example, SEC Rule 
613(c)(7)(i)(A) requires an Industry Member to report the ``Customer-
ID'' for each Customer for the original receipt or origination of an 
order. ``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with 
respect to a customer, a code that uniquely and consistently identifies 
such customer for purposes of providing data to the Central 
Repository.'' SEC Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer.

[[Page 9847]]

The SEC granted the Participants exemptive relief to permit the use of 
an alternative approach to the requirement that an Industry Member 
report a Customer-ID for every Customer upon original receipt or 
origination.\11\ The alternative approach is called the Customer 
Information Approach.
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    \11\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would be 
permitted to use an account number or any other identifier defined by 
the firm, provided each identifier is unique across the firm for each 
business date (i.e., a single firm may not have multiple separate 
customers with the same identifier on any given date). Prior to their 
commencement of reporting to the CAT, Industry Members would submit an 
initial set of Customer information to the Central Repository, 
including the Firm Designated ID, Customer Identifying Information and 
Customer Account Information (which may include, as applicable, the 
Customer's name, address, date of birth, individual tax payer 
identifier number (``ITIN'')/social security number (``SSN''), 
individual's role in the account (e.g., primary holder, joint holder, 
guardian, trustee, person with power of attorney) and LEI and/or Larger 
Trader ID (``LTID'')). This process is referred to as the customer 
definition process.
    In accordance with the Customer Information Approach, Industry 
Members would be required to report only the Firm Designated ID for 
each new order submitted to the Central Repository, rather than the 
``Customer-ID'' with individual order events. Within the Central 
Repository, each Customer would be uniquely identified by identifiers 
or a combination of identifiers such as ITIN/SSN, date of birth, and as 
applicable, LEI and LTID. The Plan Processor would be required to use 
these unique identifiers to map orders to specific Customers across all 
Industry Members and Participants. To ensure information identifying a 
Customer is up to date, Industry Members would be required to submit to 
the Central Repository daily and periodic updates for reactivated 
accounts, newly established accounts, and revised Firm Designated IDs 
or associated reportable Customer information.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The Participants requested and received an 
exemption to allow an ``Account Effective Date'' to be reported in lieu 
of an account open date in certain limited circumstances. The 
definition of ``Account Effective Date'' as set forth in Paragraph (a) 
of Proposed Rule 4.5 describes those limited circumstances in which an 
Industry Member may report an ``Account Effective Date'' rather than 
the account open date. The proposed definition is the same as the 
definition of ``Account Effective Date'' set forth in Section 1.1 of 
the CAT NMS Plan, provided, however, that specific dates have replaced 
the descriptions of those dates set forth in Section 1.1 of the Plan.
    Specifically, Paragraph (a)(1) defines ``Account Effective Date to 
mean, with regard to those circumstances in which an Industry Member 
has established a trading relationship with an institution but has not 
established an account with that institution: (1) When the trading 
relationship was established prior to November 15, 2018 for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019 for Small Industry Members, either (a) the date the relationship 
identifier was established within the Industry Member; (b) the date 
when trading began (i.e., the date the first order was received) using 
the relevant relationship identifier; or (c) if both dates are 
available, the earlier date will be used to the extent that the dates 
differ; or (2) when the trading relationship was established on or 
after November 15, 2018 for Industry Members other than Small Industry 
Members, or on or after November 15, 2019 for Small Industry Members, 
the date the Industry Member established the relationship identifier, 
which would be no later than the date the first order was received.
    Paragraph (a)(2) of Proposed Rule 4.5 states that an ``Account 
Effective Date'' means, where an Industry Member changes back office 
providers or clearing firms prior to November 15, 2018 for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019 for Small Industry Members, the date an account was established at 
the relevant Industry Member, either directly or via transfer.
    Paragraph (a)(3) states that an ``Account Effective Date'' means, 
where an Industry Member acquires another Industry Member prior to 
November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer.
    Paragraph (a)(4) states that ``Account Effective Date'' means, 
where there are multiple dates associated with an account established 
prior to November 15, 2018 for Industry Members other than Small 
Industry Members, or prior to November 15, 2019 for Small Industry 
Members, the earliest available date.
    Paragraph (a)(5) states that an ``Account Effective Date'' means, 
with regard to Industry Member proprietary accounts established prior 
to November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members: (1) 
The date established for the account in the Industry Member or in a 
system of the Industry Member or (2) the date when proprietary trading 
began in the account (i.e., the date on which the first orders were 
submitted from the account). With regard to paragraphs (a)(2)-(5), the 
Account Effective Date will be no later than the date trading occurs at 
the Industry Member or in the Industry Member's system.
(B) Active Account
    Under the Customer Information Approach, Industry Members are 
required to report Customer Identifying Information and Customer 
Account Information for only those accounts that are active. This will 
alleviate the need for Industry Members to update such information for 
non-active accounts, but still ensure that the Central Repository will 
collect audit trail data for Customer accounts that have any Reportable 
Events. Accordingly, paragraph (b) of Proposed Rule 4.5 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and

[[Page 9848]]

report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
Industry Members to record and report to the Central Repository an 
Allocation Report that includes, among other things, the Firm 
Designated ID for any account(s) to which executed shares are allocated 
when an execution is allocated in whole or part in lieu of requiring 
the reporting of the account number for any subaccount to which an 
execution is allocated, as is required by SEC Rule 613.\12\ Under SEC 
Rule 613, regulators would be able to link the subaccount to which an 
allocation was made to a specific order. In contrast, under the 
Allocation Report Approach, regulators would only be able to link an 
allocation to the account to which it was made, and not to a specific 
order.
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    \12\ See Exemptive Request Letter at 26-27; and Exemption Order.
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(II) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, paragraph 
(c) of Proposed Rule 4.5 defines an ``Allocation Report.'' 
Specifically, an ``Allocation Report'' means a report made to the 
Central Repository by an Industry Member that identifies the Firm 
Designated ID for any account(s), including subaccount(s), to which 
executed shares are allocated and provides the security that has been 
allocated, the identifier of the firm reporting the allocation, the 
price per share of shares allocated, the side of shares allocated, the 
number of shares allocated to each account, and the time of the 
allocation; provided, for the avoidance of doubt, any such Allocation 
Report shall not be required to be linked to particular orders or 
executions. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(D) Business Clock
    To create the required audit trail, Industry Members are required 
to record the date and time of various Reportable Events to the Central 
Repository. Industry Members will use ``Business Clocks'' to record 
such dates and times. Accordingly, paragraph (d) of Proposed Rule 4.5 
defines the term ``Business Clock'' as a clock used to record the date 
and time of any Reportable Event required to be reported under Rules 
4.5 through 4.16. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan, except the Exchange proposes to replace the 
phrase ``under SEC Rule 613'' at the end of the definition in Section 
1.1 of the Plan with the phrase ``under Rules 4.5 through 4.16.'' This 
change is intended to recognize that the Industry Members' obligations 
with regard to the CAT are set forth in Rules 4.5 through 4.16.
(E) CAT
    Paragraph (e) of Proposed Rule 4.5 defines the term ``CAT'' to mean 
the consolidated audit trail contemplated by SEC Rule 613. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan.
(F) CAT NMS Plan
    Paragraph (f) of Proposed Rule 4.5 defines the term ``CAT NMS 
Plan'' to mean the National Market System Plan Governing the 
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to link the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of Proposed 
Rule 4.5 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-ID'' 
is defined to mean a unique order identifier or series of unique order 
identifiers that allows the Central Repository to efficiently and 
accurately link all Reportable Events for an order, and all orders that 
result from the aggregation or disaggregation of such order. This is 
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule 
613(j)(1).
(H) CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf of the Industry Member.\13\ Such a third party, referred to 
in the Proposed Rules 4.5 through 4.16 as a ``CAT Reporting Agent,'' 
would be one type of a Data Submitter, that is, a party that submits 
data to the Central Repository. Paragraph (h) of Proposed Rule 4.5 
defines the term ``CAT Reporting Agent'' to mean a Data Submitter that 
is a third party that enters into an agreement with an Industry Member 
pursuant to which the CAT Reporting Agent agrees to fulfill such 
Industry Member's reporting obligations under Rules 4.5 through 4.16.
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    \13\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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    This definition is based on FINRA's definition of a ``Reporting 
Agent'' as set forth in FINRA's rule related to its Order Audit Trail 
System (``OATS''). Specifically, FINRA Rule 7410(n) defines a 
``Reporting Agent'' as a third party that enters into any agreement 
with a member pursuant to which the Reporting Agent agrees to fulfill 
such member's obligations under Rule 7450. The Reporting Agent for OATS 
fulfills a similar role to the CAT Reporting Agent.
(I) Central Repository
    Paragraph (i) of Proposed Rule 4.5 defines the term ``Central 
Repository'' to mean the repository responsible for the receipt, 
consolidation, and retention of all information reported to the CAT 
pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan, except the 
Exchange uses the phrase ``CAT NMS Plan'' in place of the phrase ``this 
Agreement.''
(J) Compliance Threshold
    Paragraph (j) of Proposed Rule 4.5 defines the term ``Compliance 
Threshold'' as having the meaning set forth in Proposed Rule 4.15(d). 
This definition has the same substantive meaning as the definition set 
forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below 
with regard to Proposed Rule 4.15(d), each Industry Member is required 
to meet a separate compliance threshold which will be an Industry 
Member-specific rate that may be used as the basis for further review 
or investigation into the Industry Member's performance with regard to 
the CAT. This Industry Member-specific rate is the ``Compliance 
Threshold.''
(K) Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account

[[Page 9849]]

Information, as well as data related to their Customer's Reportable 
Events. Accordingly, Paragraph (k) of Proposed Rule 4.5 proposes to 
define the term ``Customer.'' Specifically, the term ``Customer'' would 
be defined to mean: (1) The account holder(s) of the account at an 
Industry Member originating the order; and (2) any person from whom the 
Industry Member is authorized to accept trading instructions for such 
account, if different from the account holder(s). This is the same 
definition as set forth in SEC Rule 613(j)(3), except the Exchange 
proposes to replace the references to a registered broker-dealer or 
broker-dealer with a reference to an Industry Member for consistency of 
terms used in the Proposed Rules 4.5 through 4.16. The Exchange also 
notes that Section 1.1 of the CAT NMS Plan defines ``Customer'' by 
reference to SEC Rule 613(j)(3).
(L) Customer Account Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Account Information to 
the Central Repository as part of the customer definition process. 
Accordingly, the Exchange proposes to define the term ``Customer 
Account Information'' to clarify what customer information would need 
to be reported to the Central Repository.
    Paragraph (l) of Proposed Rule 4.5 defines the term ``Customer 
Account Information'' to include, in part, account number, account 
type, customer type, date account opened, and large trader identifier 
(if applicable). Proposed Rule 4.5(l), however, provides an alternative 
definition of ``Customer Account Information'' in two limited 
circumstances. First, in those circumstances in which an Industry 
Member has established a trading relationship with an institution but 
has not established an account with that institution, the Industry 
Member will: (1) Provide the Account Effective Date in lieu of the 
``date account opened''; (2) provide the relationship identifier in 
lieu of the ``account number''; and (3) identify the ``account type'' 
as a ``relationship.'' Second, in those circumstances in which the 
relevant account was established prior to November 15, 2018 for 
Industry Members other than Small Industry Members, or prior to 
November 15, 2019 for Small Industry Members, and no ``date account 
opened'' is available for the account, the Industry Member will provide 
the Account Effective Date in the following circumstances: (1) Where an 
Industry Member changes back office providers or clearing firms and the 
date account opened is changed to the date the account was opened on 
the new back office/clearing firm system; (2) where an Industry Member 
acquires another Industry Member and the date account opened is changed 
to the date the account was opened on the post-merger back office/
clearing firm system; (3) where there are multiple dates associated 
with an account in an Industry Member's system, and the parameters of 
each date are determined by the individual Industry Member; and (4) 
where the relevant account is an Industry Member proprietary account. 
The proposed definition is the same as the definition of ``Customer 
Account Information'' set forth in Section 1.1 of the CAT NMS Plan, 
provided, however, that specific dates have replaced the descriptions 
of those dates set forth in Section 1.1 of the Plan.
(M) Customer Identifying Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Identifying 
Information to the Central Repository as part of the customer 
definition process. Accordingly, the Exchange proposes to define the 
term ``Customer Account Information'' to clarify what Customer 
information would need to be reported to the Central Repository.
    Paragraph (m) of Proposed Rule 4.5 defines the term ``Customer 
Identifying Information'' to mean information of sufficient detail to 
identify a Customer. With respect to individuals, ``Customer 
Identifying Information'' includes, but is not limited to: Name, 
address, date of birth, individual tax payer identification number 
(``ITIN'')/social security number (``SSN''), individual's role in the 
account (e.g., primary holder, joint holder, guardian, trustee, person 
with the power of attorney). With respect to legal entities, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``LEI'') or other comparable common entity identifier, if 
applicable. The definition further notes that an Industry Member that 
has an LEI for a Customer must submit the Customer's LEI in addition to 
other information of sufficient detail to identify the Customer. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\14\ Such Data 
Submitters may include those entities that are required to submit data 
to the Central Repository (e.g., national securities exchanges, 
national securities associations and Industry Members), third-parties 
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT 
Reporting Agents), and outside parties that are not required to submit 
data to the CAT but from which the CAT may receive data (e.g., 
securities information processors (``SIPs'')). To include this term in 
the Proposed Rules 4.5 through 4.16, the Exchange proposes to define 
``Data Submitter'' in paragraph (n) of Proposed Rule 4.5. Specifically, 
paragraph (n) of Proposed Rule 4.5 defines a ``Data Submitter'' to mean 
any person that reports data to the Central Repository, including 
national securities exchanges, national securities associations, 
broker-dealers, the SIPs for the CQS, CTA, UTP and Plan for Reporting 
of Consolidated Options Last Sale Reports and Quotation Information 
(``OPRA'') Plans, and certain other vendors or third parties that may 
submit data to the Central Repository on behalf of Industry Members.
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    \14\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of the Proposed Rules 4.5 through 4.16 
only apply to Reportable Events in Eligible Securities. Currently, an 
Eligible Security includes NMS Securities and OTC Equity Securities. 
Accordingly, paragraph (p) [sic] of Proposed Rule 4.5 defines the term 
``Eligible Security'' to include: (1) All NMS Securities; and (2) all 
OTC Equity Securities. The terms ``NMS Securities'' and ``OTC Equity 
Securities'' are defined, in turn, below. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\15\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\16\ If an Industry Member reports CAT data to the Central 
Repository with errors such that their error percentage exceeds the 
maximum Error Rate, then such Industry Member would not be in 
compliance with the

[[Page 9850]]

CAT NMS Plan or Rule 613.\17\ As such, the Exchange or the SEC ``may 
[sic] take appropriate action against an Industry Member for failing to 
comply with its CAT reporting obligations.\18\ The CAT NMS Plan sets 
the initial Error Rate at 5%.\19\ It is anticipated that the maximum 
Error Rate will be reviewed and lowered by the Operating Committee once 
Industry Members begin to report to the Central Repository.\20\
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    \15\ Section 6.5(d)(i) of the CAT NMS Plan.
    \16\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \19\ Section 6.5(d)(i) of the CAT NMS Plan.
    \20\ Appendix C, Section A.3(b) of the CAT NMS Plan.
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    The CAT NMS Plan requires the Plan Processor to: (1) Measure and 
report errors every business day; (2) provide Industry Members daily 
statistics and error reports as they become available, including a 
description of such errors; (3) provide monthly reports to Industry 
Members that detail an Industry Member's performance and comparison 
statistics; (4) define educational and support programs for Industry 
Members to minimize Error Rates; and (5) identify, daily, all Industry 
Members exceeding the maximum allowable Error Rate. To timely correct 
data-submitted errors to the Central Repository, the CAT NMS Plan 
requires that the Central Repository receive and process error 
corrections at all times. Further, the CAT NMS Plan requires that 
Industry Members be able to submit error corrections to the Central 
Repository through a web-interface or via bulk uploads or file 
submissions, and that the Plan Processor, subject to the Operating 
Committee's approval, support the bulk replacement of records and the 
reprocessing of such records. The Participants, furthermore, require 
that the Plan Processor identify Industry Member data submission errors 
based on the Plan Processor's validation processes.\21\
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    \21\ Approval Order at 84718.
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(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchange proposes to define the term ``Error Rate'' in 
Proposed Rule 4.5. Paragraph (p) of Proposed Rule 4.5 defines the term 
``Error Rate'' to mean the percentage of Reportable Events collected by 
the Central Repository in which the data reported does not fully and 
accurately reflect the order event that occurred in the market. This is 
the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 
of the CAT NMS Plan defines ``Error Rate'' by reference to SEC Rule 
613(j)(6).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan would require each Industry Member to assign a unique Firm 
Designated ID to each Customer. Industry Members would be permitted to 
use as the Firm Designated ID an account number or any other identifier 
defined by the firm, provided each identifier is unique across the firm 
for each business date (i.e., a single firm may not have multiple 
separate customers with the same identifier on any given date). 
Industry Members would be required to report only the Firm Designated 
ID for each new order submitted to the Central Repository, rather than 
the ``Customer-ID'' with individual order events. Accordingly, the 
Exchange proposes to define the term ``Firm Designated ID'' in Proposed 
Rule 4.5. Specifically, paragraph (q) of Proposed Rule 4.5 defines the 
term ``Firm Designated ID'' to mean a unique identifier for each 
trading account designated by Industry Members for purposes of 
providing data to the Central Repository, where each such identifier is 
unique among all identifiers from any given Industry Member for each 
business date. This is the same definition as set forth in Section 1.1 
of the CAT NMS Plan. Industry Members would be permitted to use an 
account number or any other identifier defined by the firm, provided 
each identifier is unique across the firm for each business date (i.e., 
a single firm may not have multiple separate customers with the same 
identifier on any given date).
(R) Industry Member
    Paragraph (r) of Proposed Rule 4.5 defines the term ``Industry 
Member'' to mean a member of a national securities exchange or a member 
of a national securities association.'' This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(S) Industry Member Data
    Paragraph (s) of Proposed Rule 4.5 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 4.7(a)(2). This 
definition has the same substantive meaning as the definition set forth 
in Section 1.1 of the CAT NMS Plan. The definition of ``Industry Member 
Data'' is discussed more fully in the discussion below regarding 
Proposed Rule 4.7(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of Proposed Rule 4.5 defines the term ``Initial Plan 
Processor'' to mean the first Plan Processor selected by the Operating 
Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS 
Plan and the National Market System Plan Governing the Process for 
Selecting a Plan Processor and Developing a Plan for the Consolidated 
Audit Trail. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan, although the proposed definition uses the full name 
of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and the Proposed Rules 4.5 through 4.16 apply to 
Eligible Securities, which includes NMS Securities, which, in turn, 
includes Listed Options. Certain requirements of the Proposed Rules 4.5 
through 4.16 apply specifically to Listed Options. Accordingly, 
Paragraph (u) of Proposed Rule 4.5 defines the term ``Listed Option'' 
or ``Option.'' Specifically, paragraph (u) of Proposed Rule 4.5 states 
that the term ``Listed Option'' or ``Option'' has the meaning set forth 
in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, 
defines a listed option as ``any option traded on a registered national 
securities exchange or automated facility of a national securities 
association.'' The Exchange notes that the proposed definition of 
``Listed Option'' is the same definition as the definition set forth in 
Section 1.1 of the CAT NMS Plan.
(V) Manual Order Event
(I) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\22\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution systems use timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize

[[Page 9851]]

their respective Business Clocks (other than such Business Clocks used 
solely for Manual Order Events) at a minimum to within 50 milliseconds 
of the time maintained by the National Institute of Standards and 
Technology (``NIST''), and maintain such a synchronization. Each 
Industry Member is required to synchronize their Business Clocks used 
solely for Manual Order Events, however, at a minimum to within one 
second of the time maintained by the NIST.
---------------------------------------------------------------------------

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

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, the Exchange proposes to 
define the term ``Manual Order Event'' in Proposed Rule 4.5. 
Specifically, paragraph (v) of Proposed Rule 4.5 defines the term 
``Manual Order Event'' to mean a non-electronic communication of order-
related information for which Industry Members must record and report 
the time of the event. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(W) Material Terms of the Order
    Proposed Rule 4.7 requires Industry Members to record and report to 
the Central Repository Material Terms of the Order with certain 
Reportable Events (e.g., for the original receipt or origination of an 
order, for the routing of an order). Accordingly, the Exchange proposes 
to define the term ``Material Terms of the Order'' in Proposed Rule 
4.5. Specifically, paragraph (w) of Proposed Rule 4.5 defines the term 
``Material Terms of the Order'' to include: The NMS Security or OTC 
Equity Security symbol; security type; price (if applicable); size 
(displayed and non-displayed); side (buy/sell); order type; if a sell 
order, whether the order is long, short, short exempt; open/close 
indicator (except on transactions in equities); time in force (if 
applicable); if the order is for a Listed Option, option type (put/
call), option symbol or root symbol, underlying symbol, strike price, 
expiration date, and open/close (except on market maker quotations); 
and any special handling instructions. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, the Exchange proposes to define the term ``NMS 
Security'' in Proposed Rule 4.5. Specifically, paragraph (x) of 
Proposed Rule 4.5 defines the term ``NMS Security'' to mean any 
security or class of securities for which transaction reports are 
collected, processed, and made available pursuant to an effective 
transaction reporting plan, or an effective national market system plan 
for reporting transactions in Listed Options. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks (as defined in SEC Rule 
600(b)(47)), Listed Options, OTC Equity Securities, and any other 
securities that are included as Eligible Securities from time to time. 
Accordingly, the Exchange proposes to define the term ``NMS Stock'' in 
Paragraph (y) of Proposed Rule 4.5 to mean any NMS Security other than 
an option. This is the same definition as set forth in SEC Rule 
600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of Proposed Rule 4.5 defines the term ``Operating 
Committee'' to mean the governing body of the CAT NMS, LLC designated 
as such and described in Article IV of the CAT NMS Plan. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan, except 
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the 
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC Rule 613, the details for each Options Market Maker quotation 
must be reported to the Central Repository by both the Options Market 
Maker and the options exchange to which it routes its quote.
    The SROs, however, requested and received exemptive relief from SEC 
Rule 613 so that the CAT NMS Plan may permit Options Market Maker 
quotes to be reported to the Central Repository by the relevant options 
exchange in lieu of requiring that such reporting be done by both the 
options exchange and the Options Market Maker, as is required by SEC 
Rule 613.\23\ In accordance with the exemptive relief, Options Market 
Makers would be required to report to the options exchange the time at 
which a quote in a Listed Option is sent to the options exchange. Such 
time information also will be reported to the Central Repository by the 
options exchange in lieu of reporting by the Options Market Maker
---------------------------------------------------------------------------

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

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in Proposed Rule 4.5. Specifically, paragraph (aa) of Proposed 
Rule 4.5 defines the term ``Options Market Makers'' to mean a broker-
dealer registered with an exchange for the purpose of making markets in 
options contracts traded on the exchange. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    The Proposed Rules 4.5 through 4.16 require each Industry Member to 
record and electronically report to the Central Repository certain 
details for each order. Accordingly, the Exchange proposes to define 
the term ``Order'' in Proposed Rule 4.5. Specifically, paragraph (bb) 
of Proposed Rule 4.5 defines the term ``Order'', with respect to 
Eligible Securities, to include: (1) Any order received by an Industry 
Member from any person; (2) any order originated by an Industry Member; 
or (3) any bid or offer. This is the same definition as set forth in 
SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase 
``member of a national securities exchange or national securities 
association'' with the term ``Industry Member.'' The Exchange notes 
that Section 1.1 of the CAT NMS Plan defines ``Order'' by reference to 
SEC Rule 613(j)(8).
(CC) OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities 
for the CAT. Therefore, the Exchange proposes to define the term ``OTC 
Equity Security'' in Proposed Rule 4.5. Specifically, paragraph (cc) of 
Proposed Rule 4.5 defines the term ``OTC Equity Security'' to mean any 
equity security, other than an NMS Security, subject to prompt last 
sale reporting rules of a registered national securities association 
and reported to one of such association's equity trade reporting 
facilities. This is

[[Page 9852]]

the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of Proposed Rule 4.5 defines the term 
``Participant'' to mean each Person identified as such in Exhibit A of 
the CAT NMS Plan, as amended, in such Person's capacity as a 
Participant in CAT NMS, LLC. This is the same definition in substance 
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of Proposed Rule 4.5 defines the term ``Person'' to 
mean any individual, partnership, limited liability company, 
corporation, joint venture, trust, business trust, cooperative or 
association and any heirs, executors, administrators, legal 
representatives, successors and assigns of such Person where the 
context so permits. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of Proposed Rule 4.5 defines the term ``Plan 
Processor'' to mean the Initial Plan Processor or any other Person 
selected by the Operating Committee pursuant to SEC Rule 613 and 
Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the 
Initial Plan Processor, the National Market System Plan Governing the 
Process for Selecting a Plan Processor and Developing a Plan for the 
Consolidated Audit Trail, to perform the CAT processing functions 
required by SEC Rule 613 and set forth in the CAT NMS Plan.
(GG) Received Industry Member Data
    Paragraph (gg) of Proposed Rule 4.5 states that the term ``Received 
Industry Member Data'' has the meaning set forth in Rule 4.7(a)(2). 
This definition has the same substantive meaning as the definition set 
forth in Section 1.1 of the CAT NMS Plan. The definition of ``Received 
Industry Member Data'' is discussed more fully in the discussion below 
regarding Proposed Rule 4.7(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of Proposed Rule 4.5 states that the term ``Recorded 
Industry Member Data'' has the meaning set forth in Rule 4.7(a)(1). 
This definition has the same substantive meaning as the definition set 
forth in in Section 1.1 of the CAT NMS Plan. The definition of 
``Recorded Industry Member Data'' is discussed more fully in the 
discussion below regarding Proposed Rule 4.7(a)(1).
(II) Reportable Event
    The Proposed Rules 4.5 through 4.16 require each Industry Member to 
record and electronically report to the Central Repository certain 
details for each Reportable Event. To clarify these requirements, the 
Exchange proposes to define the term ``Reportable Event'' in Proposed 
Rule 4.5. Specifically, paragraph (ii) of Proposed Rule 4.5 states that 
the term ``Reportable Event'' includes, but is not limited to, the 
original receipt or origination, modification, cancellation, routing, 
execution (in whole or in part) and allocation of an order, and receipt 
of a routed order. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(JJ) SRO
    Paragraph (jj) of Proposed Rule 4.5 defines the term ``SRO'' to 
mean any self-regulatory organization within the meaning of Section 
3(a)(26) of the Exchange Act. This is the same definition as set forth 
in Section 1.1 of the CAT NMS Plan.
(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The SROs requested and received exemptive relief from SEC Rule 613 
so that the CAT NMS Plan may permit the Existing Identifier Approach, 
which would allow an Industry Member to report an existing SRO-Assigned 
Market Participant Identifier in lieu of requiring the reporting of a 
universal CAT-Reporter-ID (that is, a code that uniquely and 
consistently identifies an Industry Member for purposes of providing 
data to the Central Repository).\24\ The CAT NMS Plan reflects the 
``Existing Identifier Approach'' for purposes of identifying each 
Industry Member associated with an order or Reportable Event. Under the 
Existing Identifier Approach, Industry Members are required to record 
and report to the Central Repository an SRO-Assigned Market Participant 
Identifier for orders and certain Reportable Events to be used by the 
Central Repository to assign a unique CAT-Reporter-ID to identify 
Industry Members.
---------------------------------------------------------------------------

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

    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to 
the Central Repository, on a daily basis, all SRO-Assigned Market 
Participant Identifiers used by its Industry Members or itself; and 
information to identify each such Industry Member, including the CRD 
number and LEI if such LEI has been obtained, and itself, including 
LEI, if such LEI has been obtained. Additionally, each Industry Member 
is required to submit to the Central Repository information sufficient 
to identify such Industry Member, including CRD number and LEI, if such 
LEI has been obtained. The Plan Processor will use this information to 
assign a CAT-Reporter-ID to each Industry Member for internal use 
within the Central Repository.
(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange 
proposes to define the term ``SRO-Assigned Market Participant 
Identifier'' in Proposed Rule 4.5. Specifically, paragraph (kk) of 
Proposed Rule 4.5 defines the term ``SRO-Assigned Market Participant 
Identifier'' to mean an identifier assigned to an Industry Member by an 
SRO or an identifier used by a Participant. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan. For example, an 
Industry Member would be permitted to use any existing SRO-Assigned 
Market Participant Identifier (e.g., FINRA MPID, NASDAQ MPID, NYSE 
Mnemonic, CBOE User Acronym and CHX Acronym) when reporting order 
information to the Central Repository.
(LL) Small Industry Member
    The requirements of the Proposed Rules 4.5 through 4.16 differ to 
some extent for Small Industry Members versus Industry Members other 
than Small Industry Members. For example, the compliance dates for 
reporting data to the CAT are different for Small Industry Members 
versus other Industry Members. Accordingly, to clarify the requirements 
that apply to which Industry Members, the Exchange proposes to define 
the term ``Small Industry Member'' in Proposed Rule 4.5. Specifically, 
paragraph (ll) of Proposed Rule 4.5 defines the term ``Small Industry 
Member'' to mean an Industry Member that qualifies as a small broker-
dealer as defined in Rule 0-10(c) under the Securities Exchange Act of 
1934, as amended. This is the same in substance as the definition of 
``Small Industry Member'' as set forth in Section 1.1 of the CAT NMS 
Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a ``Small 
Industry Member'' as ``an Industry Member that qualifies as a small 
broker-dealer as defined in SEC Rule 613.'' The definition of a small 
broker-dealer under SEC Rule 613, in

[[Page 9853]]

turn, is a small broker-dealer as defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 4.7(b) establishes the deadlines for reporting 
certain data to the Central Repository using the term ``Trading Day.'' 
Accordingly, the Exchange proposes to define the term ``Trading Day'' 
in Proposed Rule 4.5. Specifically, Paragraph (mm) of Proposed Rule 4.5 
states that the term ``Trading Day'' shall have the meaning as is 
determined by the Operating Committee. For the avoidance of doubt, the 
Operating Committee may establish different Trading Days for NMS Stocks 
(as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity 
Securities, and any other securities that are included as Eligible 
Securities from time to time.
(ii) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards. To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\25\ To implement these provisions 
with regard to its Industry Members, the Exchange proposes Rule 4.6 
(Consolidated Audit Trail--Clock Synchronization) to require its 
Industry Members to comply with the clock synchronization requirements 
of the Plan.
---------------------------------------------------------------------------

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

    Paragraph (a) of Proposed Rule 4.6 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(1) of Proposed Rule 4.6 requires each Industry Member to 
synchronize its Business Clocks, other than such Business Clocks used 
solely for Manual Order Events or used solely for the time of 
allocation on Allocation Reports, at a minimum to within a fifty (50) 
millisecond tolerance of the time maintained by the NIST atomic clock, 
and maintain such synchronization. This is the same requirement as set 
forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
    Paragraph (a)(2) of Proposed Rule 4.6 requires each Industry Member 
to synchronize (1) its Business Clocks used solely for Manual Order 
Events and (2) its Business Clocks used solely for the time of 
allocation on Allocation Reports at a minimum to within a one second 
tolerance of the time maintained by the NIST atomic clock, and maintain 
such synchronization. This is the same requirement as set forth in 
Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
    Paragraph (a)(3) of Proposed Rule 4.6 clarifies that the tolerance 
described in paragraphs (a)(1) and (2) of the Proposed Rule 4.6 
includes all of the following: (1) The time difference between the NIST 
atomic clock and the Industry Member's Business Clock; (2) the 
transmission delay from the source; and (3) the amount of drift of the 
Industry Member's Business Clock. This description of the clock 
synchronization tolerance is the same as set forth in paragraph (b) of 
FINRA Rule 4590 (Synchronization of Member Business Clocks).
    Paragraph (a)(4) of Proposed Rule 4.6 requires Industry Members to 
synchronize their Business Clocks every business day before market open 
to ensure that timestamps for Reportable Events are accurate. In 
addition, to maintain clock synchronization, Business Clocks must be 
checked against the NIST atomic clock and re-synchronized, as 
necessary, throughout the day. This description of the required 
frequency of clock synchronization is the same as set forth in 
paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business 
Clocks).
    Paragraph (b) of Proposed Rule 4.6 sets forth documentation 
requirements with regard to clock synchronization. Specifically, 
paragraph (b) requires Industry Members to document and maintain their 
synchronization procedures for their Business Clocks. The Proposed Rule 
requires Industry Members to keep a log of the times when they 
synchronize their Business Clocks and the results of the 
synchronization process. This log is required to include notice of any 
time a Business Clock drifts more than the applicable tolerance 
specified in paragraph (a) of the Proposed Rule. Such logs must include 
results for a period of not less than five years ending on the then 
current date, or for the entire period for which the Industry Member 
has been required to comply with this Rule if less than five years. 
These documentation requirements are the same as those set forth in the 
``Sequencing Orders and Clock Synchronization'' section of Appendix C 
of the CAT NMS Plan. Moreover, these documentation requirements 
regarding clock synchronization are comparable to those set forth in 
Supplementary Material .01 of FINRA Rule 4590 (Synchronization of 
Member Business Clocks).
    Paragraph (c) of Proposed Rule 4.6 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of Proposed Rule 4.6 requires each Industry Member to 
certify to the Exchange that its Business Clocks satisfy the 
synchronization requirements set forth in paragraph (a) of Proposed 
Rule 4.6 periodically in accordance with the certification schedule 
established by the Operating Committee pursuant to the CAT NMS Plan. 
This requirement is the same requirement as set forth in Section 
6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the certification schedule 
established by the Operating Committee via Regulatory Circular.
    Paragraph (d) of Proposed Rule 4.6 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
Proposed Rule 4.6 requires Industry Members to report to the Plan 
Processor and the Exchange, violations of paragraph (a) of this Rule 
pursuant to the thresholds set by the Operating Committee pursuant to 
the CAT NMS Plan. This requirement is the same requirement as set forth 
in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The 
Exchange intends to announce to its Industry Members the relevant 
thresholds established by the Operating Committee via Regulatory 
Circular.
(iii) Industry Member Data Reporting
    SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to 
set forth certain provisions requiring Industry Members to record and 
report data to the CAT. To comply with this provision, Section 6.4 of 
the CAT NMS Plan sets forth the data reporting requirements for 
Industry Members. To implement these provisions with regard to its 
Industry Members, the Exchange proposes Rule 4.7 (Consolidated Audit 
Trail--Industry Member Data Reporting) to require its Industry Members 
to comply with the Industry Member Data reporting requirements of the 
Plan. Proposed Rule 4.7 has six sections [sic] covering: (1) Recording 
and reporting Industry Member Data, (2) timing of the recording and 
reporting, (3) the applicable securities covered by the recording and 
reporting requirements, (4) the security symbology to be used in the 
recording and reporting, and (5) error correction requirements, each of 
which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of Proposed Rule 4.7 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of

[[Page 9854]]

paragraphs (a)(1)-(a)(3), which cover Recorded Industry Member Data, 
Received Industry Member Data and Options Market Maker data, 
respectively. Paragraphs (a)(1)-(a)(3) of Proposed Rule 4.7 set forth 
the recording and reporting requirements required in Section 6.4(d)(i)-
(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding 
Options Market Makers, each Industry Member to record and 
electronically report to the Central Repository the following details 
for each order and each Reportable Event, as applicable (``Recorded 
Industry Member Data'') in the manner prescribed by the Operating 
Committee pursuant to the CAT NMS Plan:
     For original receipt or origination of an order: (1) Firm 
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned 
Market Participant Identifier of the Industry Member receiving or 
originating the order; (4) date of order receipt or origination; (5) 
time of order receipt or origination (using timestamps pursuant to 
Proposed Rule 4.10); and (6) Material Terms of the Order;
     for the routing of an order: (1) CAT-Order-ID; (2) date on 
which the order is routed; (3) time at which the order is routed (using 
timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member routing the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Participant to which the order is being routed; (6) if routed 
internally at the Industry Member, the identity and nature of the 
department or desk to which the order is routed; and (7) Material Terms 
of the Order;
     for the receipt of an order that has been routed, the 
following information: (1) CAT-Order-ID; (2) date on which the order is 
received; (3) time at which the order is received (using timestamps 
pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant 
Identifier of the Industry Member receiving the order; (5) SRO-Assigned 
Market Participant Identifier of the Industry Member or Participant 
routing the order; and (6) Material Terms of the Order;
     if the order is modified or cancelled: (1) CAT-Order-ID; 
(2) date the modification or cancellation is received or originated; 
(3) time at which the modification or cancellation is received or 
originated (using timestamps pursuant to Proposed Rule 4.10); (4) price 
and remaining size of the order, if modified; (5) other changes in the 
Material Terms of the Order, if modified; and (6) whether the 
modification or cancellation instruction was given by the Customer or 
was initiated by the Industry Member;
     if the order is executed, in whole or in part: (1) CAT-
Order-ID; (2) date of execution; (3) time of execution (using 
timestamps pursuant to Proposed Rule 4.10; (4) execution capacity 
(principal, agency or riskless principal); (5) execution price and 
size; (6) SRO-Assigned Market Participant Identifier of the Industry 
Member executing the order; (7) whether the execution was reported 
pursuant to an effective transaction reporting plan or the Plan for 
Reporting of Consolidated Options Last Sale Reports and Quotation 
Information; and
     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of Proposed Rule 4.7 requires, subject to 
paragraph (a)(3) regarding Options Market Makers, each Industry Member 
to record and report to the Central Repository the following, as 
applicable (``Received Industry Member Data'' and collectively with the 
information referred to in Rule 4.7(a)(1) ``Industry Member Data'')) in 
the manner prescribed by the Operating Committee pursuant to the CAT 
NMS Plan:
     If the order is executed, in whole or in part: (1) An 
Allocation Report; (2) SRO-Assigned Market Participant Identifier of 
the clearing broker or prime broker, if applicable; and (3) CAT-Order-
ID of any contra-side order(s);
     if the trade is cancelled, a cancelled trade indicator; 
and
     for original receipt or origination of an order, the Firm 
Designated ID for the relevant Customer, and in accordance with 
Proposed Rule 4.8, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of Proposed Rule 4.7 states that each Industry 
Member that is an Options Market Maker is not required to report to the 
Central Repository the Industry Member Data regarding the routing, 
modification or cancellation of its quotes in Listed Options. Each 
Industry Member that is an Options Market Maker, however, is required 
to report to the Exchange the time at which its quote in a Listed 
Option is sent to the Exchange (and, if applicable, any subsequent 
quote modification time and/or cancellation time when such modification 
or cancellation is originated by the Options Market Maker). This 
paragraph implements the Options Market Maker Quote Exemption, as 
discussed above.
(B) Timing of Recording and Reporting
    Paragraph (b) of Proposed Rule 4.7 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 4.7 set forth the 
requirements related to the timing of the recording and reporting 
requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
    Paragraph (b)(1) of Proposed Rule 4.7 requires each Industry Member 
to record Recorded Industry Member Data contemporaneously with the 
applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 4.7 
requires each Industry Member to report: (1) Recorded Industry Member 
Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading 
Day following the day the Industry Member records such Recorded 
Industry Member Data; and (2) Received Industry Member Data to the 
Central Repository by 8:00 a.m. Eastern Time on the Trading Day 
following the day the Industry Member receives such Received Industry 
Member Data. Paragraph (b)(3) states that Industry Members may, but are 
not required to, voluntarily report Industry Member Data prior to the 
applicable 8:00 a.m. Eastern Time deadline.
(C) Applicable Securities
    Paragraph (c) of Proposed Rule 4.7 describes the securities to 
which the recording and reporting requirements of Proposed Rule 4.7 
apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 4.7 set forth the 
description of applicable securities as set forth in Section 6.4(c)(i) 
and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of 
Proposed Rule 4.7 requires each Industry Member to record and report to 
the Central Repository the Industry Member Data as set forth in 
paragraph (a) of Proposed Rule 4.7 for each NMS Security registered or 
listed for trading on such exchange or admitted to unlisted trading 
privileges on such exchange. Paragraph (c)(2) of Proposed Rule 4.7 
requires each Industry Member to record and report to the Central 
Repository the Industry Member Data as set forth in paragraph (a) of 
this Proposed Rule 4.7 for each Eligible Security for which transaction 
reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of Proposed Rule 4.7 describes the security symbology 
that Industry Members are required to use when reporting Industry 
Member Data to the Central Repository. Paragraph (d)(1) of Proposed 
Rule 4.7 requires, for each exchange-listed Eligible Security,

[[Page 9855]]

each Industry Member to report Industry Member Data to the Central 
Repository using the symbology format of the exchange listing the 
security. This requirement implements the requirement set forth in 
Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange 
symbology when reporting data to the Central Repository for exchange-
listed Eligible Securities.
    For each Eligible Security that is not exchange-listed, however, 
there is no listing exchange to provide the symbology format. Moreover, 
to date, the requisite symbology format has not been determined. 
Therefore, Paragraph (d)(2) of Proposed Rule 4.7 requires, for each 
Eligible Security that is not exchange-listed, each Industry Member to 
report Industry Member Data to the Central Repository using such 
symbology format as approved by the Operating Committee pursuant to the 
CAT NMS Plan. The Exchange intends to announce to its Industry Members 
the relevant symbology formats established by the Operating Committee 
via Regulatory Circular.
(E) Error Correction
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, the Exchange proposes to adopt paragraph 
(e) of Proposed Rule 4.7, which addresses the correction of erroneous 
data reported to the Central Repository. Paragraph (e) of Proposed Rule 
4.7 requires, for each Industry Member for which errors in Industry 
Member Data submitted to the Central Repository have been identified by 
the Plan Processor or otherwise, that such Industry Member submit 
corrected Industry Member Data to the Central Repository by 8:00 a.m. 
Eastern Time on T+3. This requirement implements the error correction 
requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
(iv) Customer Information Reporting
    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository certain information related to their 
Customers in accordance with the Customer Information Approach 
discussed above. The Exchange proposes Rule 4.8 (Consolidated Audit 
Trail--Customer Information Reporting) to implement this provision of 
the CAT NMS Plan with regard to its Industry Members. Specifically, 
paragraph (a) of Proposed Rule 4.8 requires each Industry Member to 
submit to the Central Repository the Firm Designated ID, Customer 
Account Information and Customer Identifying Information for each of 
its Customers with an Active Account prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in Rule 4.13. Paragraph (b) of Proposed 
Rule 4.8 requires each Industry Member to submit to the Central 
Repository any updates, additions or other changes to the Firm 
Designated ID, Customer Account Information and Customer Identifying 
Information for each of its Customers with an Active Account on a daily 
basis. Paragraph (c) of Proposed Rule 4.8 requires each Industry 
Member, on a periodic basis as designated by the Plan Processor and 
approved by the Operating Committee, to submit to the Central 
Repository a complete set of Firm Designated IDs, Customer Account 
Information and Customer Identifying Information for each of its 
Customers with an Active Account. This periodic refresh is intended to 
ensure that the Central Repository has the most current information 
identifying a Customer. The Exchange intends to announce to its 
Industry Members when such a periodic refresh is required by the Plan 
Processor and the Operating Committee via Regulatory Circular.
    Finally, paragraph (d) of Proposed Rule 4.8 addresses the 
correction of erroneous Customer data reported to the Central 
Repository to ensure an accurate audit trail. Paragraph (d) requires, 
for each Industry Member for which errors in Firm Designated ID, 
Customer Account Information and Customer Identifying Information for 
each of its Customers with an Active Account submitted to the Central 
Repository have been identified by the Plan Processor or otherwise, 
such Member to submit corrected data to the Central Repository by 5:00 
p.m. Eastern Time on T+3. This requirement implements the error 
correction requirement set forth in Appendix C of the CAT NMS Plan.
(v) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository information sufficient to identify 
such Industry Member, including CRD number and LEI, if such LEI has 
been obtained, in accordance with the Existing Identifier Approach 
discussed above. The Exchange proposes Rule 4.9 (Consolidated Audit 
Trail--Industry Member Information Reporting) to implement this 
provision of the CAT NMS Plan with regard to its Industry Members. 
Specifically, Proposed Rule 4.9 requires each Industry Member to submit 
to the Central Repository information sufficient to identify such 
Industry Member, including CRD number and LEI, if such LEI has been 
obtained, prior to such Industry Member's commencement of reporting to 
the Central Repository and in accordance with the deadlines set forth 
in Rule 4.13, and keep such information up to date as necessary.
(vi) Time Stamps
    SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for 
time stamps used by CAT Reporters in recording and reporting data to 
the CAT.\26\ To comply with this provision, Section 6.8(b) of the Plan 
sets forth time stamp requirements for Industry Members. To implement 
this provision with regard to its Industry Members, the Exchange 
proposes new Rule 4.10 (Consolidated Audit Trail--Time Stamps) to 
require its Industry Members to comply with the time stamp requirements 
of the Plan.
---------------------------------------------------------------------------

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

    Paragraph (a) of Proposed Rule 4.10 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of Proposed Rule 4.10 requires each Industry Member to 
record and report Industry Member Data to the Central Repository with 
time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of 
Proposed Rule 4.10. To the extent that any Industry Member's order 
handling or execution systems utilize time stamps in increments finer 
than milliseconds, paragraph (a)(2) of Proposed Rule 4.10 requires such 
Industry Member to record and report Industry Member Data to the 
Central Repository with time stamps in such finer increment, subject to 
paragraph (b) of Proposed Rule 4.10 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of Proposed Rule 4.10 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of Proposed Rule 4.10 permits each 
Industry Member to record and report Manual Order Events to the Central 
Repository in increments up to and including one second, provided that 
each Industry Member is required to record and report the time when a 
Manual Order Event has been captured electronically in an order 
handling and execution system of such Member (``Electronic Capture 
Time'') in milliseconds. In addition, paragraph (b)(2) of Proposed Rule 
4.10 permits each Industry Member to record and report the time of 
Allocation Reports in

[[Page 9856]]

increments up to and including one second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 4.11 (Consolidated Audit Trail--Clock Synchronization 
Rule Violations) describes potential violations of the clock 
synchronization time period requirements set forth in the Proposed 
Rules 4.5 through 4.16. Proposed Rule 4.11 states that an Industry 
Member that engages in a pattern or practice of reporting Reportable 
Events outside of the required clock synchronization time period as set 
forth in the Proposed Rules 4.5 through 4.16 without reasonable 
justification or exceptional circumstances may be considered in 
violation of this Rule. This provision implements the requirements of 
Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to 
provide that a pattern or practice of reporting events outside of the 
required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of SEC Rule 613 or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 4.12 (Consolidated Audit Trail--Connectivity and Data 
Transmission) addresses connectivity and data transmission requirements 
related to the CAT. Paragraph (a) of Proposed Rule 4.12 describes the 
format(s) for reporting Industry Member Data to the Central Repository, 
thereby implementing the formatting requirements as set forth in 
Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of 
Proposed Rule 4.12 requires each Industry Member to transmit data as 
required under the CAT NMS Plan to the Central Repository utilizing 
such format(s) as may be provided by the Plan Processor and approved by 
the Operating Committee.
    Paragraph (b) of Proposed Rule 4.12 addresses connectivity 
requirements related to the CAT. Paragraph (b) of Proposed Rule 4.12 
requires each Industry Member to connect to the Central Repository 
using a secure method(s), including, but not limited to, private 
line(s) and virtual private network connection(s). This provision 
implements the connectivity requirements set forth in Section 4 of 
Appendix D to the CAT NMS Plan.
    Paragraph (c) permits Industry Members to use CAT Reporting Agents 
to fulfill their data reporting obligations related to the CAT. 
Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS 
Reporting Members to enter into agreements with Reporting Agents to 
fulfill the OATS obligations of the OATS Reporting Member. 
Specifically, Paragraph (c)(1) of Proposed Rule 4.12 states that any 
Industry Member may enter into an agreement with a CAT Reporting Agent 
pursuant to which the CAT Reporting Agent agrees to fulfill the 
obligations of such Industry Member under the Proposed Rules 4.5 
through 4.16. Any such agreement must be evidenced in writing, which 
specifies the respective functions and responsibilities of each party 
to the agreement that are required to effect full compliance with the 
requirements of the Proposed Rules 4.5 through 4.16. The Exchange notes 
that, currently, no standardized form agreement for CAT Reporting Agent 
arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 4.12 
requires that all written documents evidencing an agreement with a CAT 
Reporting Agent be maintained by each party to the agreement. Paragraph 
(c)(3) states that each Industry Member remains primarily responsible 
for compliance with the requirements of the Proposed Rules 4.5 through 
4.16, notwithstanding the existence of an agreement described in 
paragraph (c) of Proposed Rule 4.12.
(ix) Development and Testing
    The Exchange proposes Rule 4.13 (Consolidated Audit Trail--
Development and Testing) to address requirements for Industry Members 
related to CAT development and testing. Paragraph (a) of Proposed Rule 
4.13 sets forth the testing requirements and deadlines for Industry 
Members to develop and commence reporting to the Central Repository. 
These requirements are set forth in Appendix C to the CAT NMS Plan.
    Paragraph (a)(1) sets forth the deadlines related to connectivity 
and acceptance testing. Industry Members (other than Small Industry 
Members) are required to begin connectivity and acceptance testing with 
the Central Repository no later than August 15, 2018, and Small 
Industry Members are required to begin connectivity and acceptance 
testing with the Central Repository no later than August 15, 2019.
    Paragraph (a)(2) sets forth the deadlines related to reporting 
Customer and Industry Member information. Paragraph (a)(2)(i) requires 
Industry Members (other than Small Industry Members) to begin reporting 
Customer and Industry Member information, as required by Rules 4.8(a) 
and 4.9, respectively, to the Central Repository for processing no 
later than October 15, 2018. Paragraph (a)(2)(ii) requires Small 
Industry Members to begin reporting Customer and Industry Member 
information, as required by Rules 4.8(a) and 4.9, respectively, to the 
Central Repository for processing no later than October 15, 2019.
    Paragraph (a)(3) sets forth the deadlines related to the submission 
of order data. Under paragraph (a)(3)(i), Industry Members (other than 
Small Industry Members) are permitted, but not required, to submit 
order data for testing purposes beginning no later than May 15, 2018. 
In addition, Industry Members (other than Small Industry Members) are 
required to participate in the coordinated and structured testing of 
order submission, which will begin no later than August 15, 2018. Under 
paragraph (a)(3)(ii), Small Industry Members are permitted, but not 
required, to submit order data for testing purposes beginning no later 
than May 15, 2019. In addition, Small Industry Members are required to 
participate in the coordinated and structured testing of order 
submission, which will begin no later than August 15, 2019.
    Paragraph (a)(4) states that Industry Members are permitted, but 
not required to, submit Quote Sent Times on Options Market Maker 
quotes, beginning no later than October 15, 2018.
    Paragraph (b) of Proposed Rule 4.13 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\27\ Specifically, 
Proposed Rule 4.13 requires that each Industry Member participate in 
testing related to the Central Repository, including any industry-wide 
disaster recovery testing, pursuant to the schedule established 
pursuant to the CAT NMS Plan. The Exchange intends to announce to its 
Industry Members the schedule established pursuant to the CAT NMS Plan 
via Regulatory Circular.
---------------------------------------------------------------------------

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

(x) Recordkeeping
    Proposed Rule 4.14 (Consolidated Audit Trail--Recordkeeping) sets 
forth the recordkeeping obligations related to the CAT for Industry 
Members. Proposed Rule 4.14 requires each Industry Member to maintain 
and preserve records of the information required to be recorded in 
accordance with the Proposed Rules 4.5 through 4.16, for the period of 
time and accessibility specified in SEC Rule 17a-4(b). The records 
required to be maintained and preserved in accordance

[[Page 9857]]

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

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

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

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

    Paragraph (c) states that, if an Industry Member reports data to 
the Central Repository with errors such that its error percentage 
exceeds the maximum Error Rate established by the Operating Committee 
pursuant to the CAT NMS Plan, then such Industry Member would not be in 
compliance with the Rules 4.5 through 4.16. As discussed above, the 
initial maximum Error Rate is 5%, although the Error Rate is expected 
to be reduced over time. The Exchange intends to announce to its 
Industry Members changes to the Error Rate established pursuant to the 
CAT NMS Plan via Regulatory Circular.
    Furthermore, paragraph (d) of Proposed Rule 4.15 addresses 
Compliance Thresholds related to reporting data to the CAT. Proposed 
Rule 4.15 states that each Industry Member is required to meet a 
separate compliance threshold which will be an Industry Member-specific 
rate that may be used as the basis for further review or investigation 
into the Industry Member's performance with regard to the CAT (the 
``Compliance Thresholds''). Compliance Thresholds will compare an 
Industry Member's error rate to the aggregate Error Rate over a period 
of time to be defined by the Operating Committee. Compliance Thresholds 
will be set by the Operating Committee, and will be calculated at 
intervals to be set by the Operating Committee.\30\ Compliance 
Thresholds will include compliance with the data reporting and clock 
synchronization requirements. Proposed Rule 4.15 states that an 
Industry Member's performance with respect to its Compliance Threshold 
will not signify, as a matter of law, that such Industry Member has 
violated the Proposed Rules 4.5 through 4.16.
---------------------------------------------------------------------------

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

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

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

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

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

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies the provisions of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of

[[Page 9858]]

the purposes of the Act.'' \34\ To the extent that this proposal 
implements, interprets or clarifies the Plan and applies specific 
requirements to Industry Members, the Exchange believes that this 
proposal furthers the objectives of the Plan, as identified by the SEC, 
and is therefore consistent with the Act.
---------------------------------------------------------------------------

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

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

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

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

    Written comments were neither solicited nor received.

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

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-BatsBYX-2017-02 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-BatsBYX-2017-02. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsBYX-2017-02 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\
Robert W. Errett,
Deputy Secretary.
---------------------------------------------------------------------------

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

[FR Doc. 2017-02549 Filed 2-7-17; 8:45 am]
BILLING CODE 8011-01-P



                                                    9846                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                      For the Commission, by the Division of                II. Self-Regulatory Organization’s                       audit trail (‘‘CAT’’) that would capture
                                                    Trading and Markets, pursuant to delegated              Statement of the Purpose of, and                         customer and order event information
                                                    authority.35                                            Statutory Basis for, the Proposed Rule                   for orders in NMS Securities and OTC
                                                    Robert W. Errett,                                       Change                                                   Equity Securities, across all markets,
                                                    Deputy Secretary.                                          In its filing with the Commission, the                from the time of order inception through
                                                    [FR Doc. 2017–02540 Filed 2–7–17; 8:45 am]              Exchange included statements                             routing, cancellation, modification, or
                                                                                                            concerning the purpose of and basis for                  execution in a single consolidated data
                                                    BILLING CODE 8011–01–P
                                                                                                            the proposed rule change and discussed                   source. Each Participant is required to
                                                                                                            any comments it received on the                          enforce compliance by its Industry
                                                    SECURITIES AND EXCHANGE                                 proposed rule change. The text of these                  Members, as applicable, with the
                                                                                                            statements may be examined at the                        provisions of the Plan, by adopting a
                                                    COMMISSION
                                                                                                            places specified in Item IV below. The                   Compliance Rule applicable to their
                                                                                                            Exchange has prepared summaries, set                     Industry Members.10 As is described
                                                    [Release No. 34–79944; File No. SR–                                                                              more fully below, the Proposed Rules
                                                    BatsBYX–2017–02]                                        forth in Sections A, B, and C below, of
                                                                                                            the most significant parts of such                       4.5 through 4.16 set forth the
                                                                                                            statements.                                              Compliance Rule to require Industry
                                                    Self-Regulatory Organizations; Bats                                                                              Members to comply with the provisions
                                                    BYX Exchange, Inc.; Notice of Filing of                 (A) Self-Regulatory Organization’s                       of the CAT NMS Plan. The Proposed
                                                    a Proposed Rule Change To Adopt                         Statement of the Purpose of, and                         Rules 4.5 through 4.16 include twelve
                                                    Rules 4.5 Through 4.16 To Implement                     Statutory Basis for, the Proposed Rule                   Proposed Rules covering the following
                                                    the Compliance Rule Regarding the                       Change                                                   areas: (1) Definitions; (2) clock
                                                    National Market System Plan                                                                                      synchronization; (3) Industry Member
                                                    Governing the Consolidated Audit Trail                  1. Purpose
                                                                                                                                                                     Data reporting; (4) Customer
                                                                                                               Bats BYX Exchange, Inc., Bats BZX                     information reporting; (5) Industry
                                                    February 2, 2017.                                       Exchange, Inc., Bats EDGA Exchange,                      Member information reporting; (6) time
                                                       Pursuant to Section 19(b)(1) of the                  Inc., Bats EDGX Exchange, Inc., BOX                      stamps; (7) clock synchronization rule
                                                    Securities Exchange Act of 1934 (the                    Options Exchange LLC, C2 Options                         violations; (8) connectivity and data
                                                    ‘‘Act’’),1 and Rule 19b–4 thereunder,2                  Exchange, Incorporated, Chicago Board                    transmission; (9) development and
                                                    notice is hereby given that on January                  Options Exchange, Incorporated,                          testing; (10) recordkeeping; (11) timely,
                                                    30, 2017, Bats BYX Exchange, Inc. (the                  Chicago Stock Exchange, Inc., Financial                  accurate and complete data; and (12)
                                                    ‘‘Exchange’’ or ‘‘BYX’’) filed with the                 Industry Regulatory Authority, Inc.,                     compliance dates. Each of these
                                                    Securities and Exchange Commission                      International Securities Exchange, LLC,                  Proposed Rules are discussed in detail
                                                                                                            Investors’ Exchange LLC, ISE Gemini,                     below.
                                                    (‘‘Commission’’) the proposed rule
                                                                                                            LLC, ISE Mercury, LLC, Miami
                                                    change as described in Items I, II and III                                                                       (i) Definitions
                                                                                                            International Securities Exchange LLC,
                                                    below, which Items have been prepared                   MIAX PEARL, LLC, NASDAQ BX, Inc.,
                                                    by the Exchange.3 The Commission is                                                                                Proposed Rule 4.5 (Consolidated
                                                                                                            NASDAQ PHLX LLC, The NASDAQ                              Audit Trail—Definitions) sets forth the
                                                    publishing this notice to solicit                       Stock Market LLC, National Stock                         definitions for the terms used in the
                                                    comments on the proposed rule change                    Exchange, Inc., New York Stock                           Proposed Rules 4.5 through 4.16. Each
                                                    from interested persons.                                Exchange LLC, NYSE MKT LLC, and                          of the defined terms in Proposed Rule
                                                    I. Self-Regulatory Organization’s                       NYSE Arca, Inc. (collectively, the                       4.5 is discussed in detail in this section.
                                                    Statement of the Terms of Substance of                  ‘‘Participants’’) filed with the
                                                                                                            Commission, pursuant to Section 11A of                   (A) Account Effective Date
                                                    the Proposed Rule Change
                                                                                                            the Exchange Act 5 and Rule 608 of                       (I) Customer Information Approach
                                                       The Exchange filed a proposal to                     Regulation NMS thereunder,6 the CAT
                                                                                                                                                                        SEC Rule 613 requires that numerous
                                                    adopt Rules 4.5 through 4.16 to                         NMS Plan.7 The Participants filed the
                                                                                                                                                                     data elements be reported to the CAT to
                                                    implement the compliance rule                           Plan to comply with Rule 613 of
                                                                                                                                                                     ensure there is sufficient information to
                                                    (‘‘Compliance Rule’’) regarding the                     Regulation NMS under the Exchange
                                                                                                                                                                     create the lifecycle of an order, and
                                                    National Market System Plan Governing                   Act. The Plan was published for
                                                                                                                                                                     provide regulators with sufficient detail
                                                    the Consolidated Audit Trail (the ‘‘CAT                 comment in the Federal Register on
                                                                                                                                                                     about an order to perform their
                                                    NMS Plan’’ or ‘‘Plan’’).4                               May 17, 2016,8 and approved by the
                                                                                                                                                                     regulatory duties. Certain required
                                                                                                            Commission, as modified, on November
                                                       The text of the proposed rule change                                                                          elements are intended to ensure that the
                                                                                                            15, 2016.9
                                                    is available at the Exchange’s Web site                                                                          regulators can identify the Customer’s
                                                                                                               The Plan is designed to create,
                                                    at www.bats.com, at the principal office                                                                         associated with orders. For example,
                                                                                                            implement and maintain a consolidated
                                                    of the Exchange, and at the                                                                                      SEC Rule 613(c)(7)(i)(A) requires an
                                                    Commission’s Public Reference Room.                       5 15  U.S.C. 78k–1.
                                                                                                                                                                     Industry Member to report the
                                                                                                              6 17  CFR 242.608.                                     ‘‘Customer-ID’’ for each Customer for
                                                                                                               7 See Letter from the Participants to Brent J.        the original receipt or origination of an
                                                      35 17 CFR 200.30–3(a)(12).                            Fields, Secretary, Commission, dated September 30,       order. ‘‘Customer-ID’’ is defined in SEC
                                                      1 15 U.S.C. 78s(b)(1).                                2014; and Letter from Participants to Brent J. Fields,   Rule 613(j)(5) to mean ‘‘with respect to
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                                                      2 17 CFR 240.19b–4.                                   Secretary, Commission, dated February 27, 2015.
                                                                                                            On December 24, 2015, the Participants submitted
                                                                                                                                                                     a customer, a code that uniquely and
                                                      3 The Exchange originally filed this proposed rule
                                                                                                            an amendment to the CAT NMS Plan. See Letter             consistently identifies such customer for
                                                    change on January 17, 2017 under File No. SR–
                                                                                                            from Participants to Brent J. Fields, Secretary,         purposes of providing data to the
                                                    BatsBYX–2017–01, and the Exchange subsequently          Commission, dated December 23, 2015.
                                                    withdrew that filing on January 30, 2017 and filed
                                                                                                                                                                     Central Repository.’’ SEC Rule 613(c)(8)
                                                                                                               8 Securities Exchange Act Rel. No. 77724 (Apr.
                                                    this proposed rule change.                                                                                       requires Industry Members to use the
                                                                                                            27, 2016), 81 FR 30614 (May 17, 2016).
                                                      4 Unless otherwise specified, capitalized terms          9 Securities Exchange Act Rel. No. 79318 (Nov.        same Customer-ID for each Customer.
                                                    used in this rule filing are defined as set forth       15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval
                                                    herein or in the CAT NMS Plan.                          Order’’).                                                 10 See   SEC Rule 613(g)(1).



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9847

                                                    The SEC granted the Participants                        associated reportable Customer                        2018 for Industry Members other than
                                                    exemptive relief to permit the use of an                information.                                          Small Industry Members, or prior to
                                                    alternative approach to the requirement                                                                       November 15, 2019 for Small Industry
                                                                                                            (II) Definition of Account Effective Date
                                                    that an Industry Member report a                                                                              Members, the date an account was
                                                    Customer-ID for every Customer upon                        In connection with the Customer                    established at the relevant Industry
                                                    original receipt or origination.11 The                  Information Approach, Industry                        Member, either directly or via transfer.
                                                    alternative approach is called the                      Members would be required to report                      Paragraph (a)(3) states that an
                                                    Customer Information Approach.                          Customer Account Information to the                   ‘‘Account Effective Date’’ means, where
                                                       Under the Customer Information                       Central Repository. ‘‘Customer Account                an Industry Member acquires another
                                                    Approach, the CAT NMS Plan would                        Information’’ is defined in SEC Rule                  Industry Member prior to November 15,
                                                    require each Industry Member to assign                  613(j)(4) to ‘‘include, but not be limited            2018 for Industry Members other than
                                                    a unique Firm Designated ID to each                     to, account number, account type,                     Small Industry Members, or prior to
                                                    Customer. As the Firm Designated ID,                    customer type, date account opened,                   November 15, 2019 for Small Industry
                                                                                                            and large trader identifier (if                       Members, the date an account was
                                                    Industry Members would be permitted
                                                                                                            applicable).’’ Therefore, when reporting              established at the relevant Industry
                                                    to use an account number or any other
                                                                                                            Customer Account Information, an                      Member, either directly or via transfer.
                                                    identifier defined by the firm, provided
                                                                                                            Industry Member is required to report                    Paragraph (a)(4) states that ‘‘Account
                                                    each identifier is unique across the firm
                                                                                                            the date an account was opened. The                   Effective Date’’ means, where there are
                                                    for each business date (i.e., a single firm
                                                                                                            Participants requested and received an                multiple dates associated with an
                                                    may not have multiple separate
                                                                                                            exemption to allow an ‘‘Account                       account established prior to November
                                                    customers with the same identifier on
                                                                                                            Effective Date’’ to be reported in lieu of            15, 2018 for Industry Members other
                                                    any given date). Prior to their
                                                                                                            an account open date in certain limited               than Small Industry Members, or prior
                                                    commencement of reporting to the CAT,
                                                                                                            circumstances. The definition of                      to November 15, 2019 for Small
                                                    Industry Members would submit an                        ‘‘Account Effective Date’’ as set forth in            Industry Members, the earliest available
                                                    initial set of Customer information to                  Paragraph (a) of Proposed Rule 4.5                    date.
                                                    the Central Repository, including the                   describes those limited circumstances in                 Paragraph (a)(5) states that an
                                                    Firm Designated ID, Customer                            which an Industry Member may report                   ‘‘Account Effective Date’’ means, with
                                                    Identifying Information and Customer                    an ‘‘Account Effective Date’’ rather than             regard to Industry Member proprietary
                                                    Account Information (which may                          the account open date. The proposed                   accounts established prior to November
                                                    include, as applicable, the Customer’s                  definition is the same as the definition              15, 2018 for Industry Members other
                                                    name, address, date of birth, individual                of ‘‘Account Effective Date’’ set forth in            than Small Industry Members, or prior
                                                    tax payer identifier number (‘‘ITIN’’)/                 Section 1.1 of the CAT NMS Plan,                      to November 15, 2019 for Small
                                                    social security number (‘‘SSN’’),                       provided, however, that specific dates                Industry Members: (1) The date
                                                    individual’s role in the account (e.g.,                 have replaced the descriptions of those               established for the account in the
                                                    primary holder, joint holder, guardian,                 dates set forth in Section 1.1 of the Plan.           Industry Member or in a system of the
                                                    trustee, person with power of attorney)                    Specifically, Paragraph (a)(1) defines             Industry Member or (2) the date when
                                                    and LEI and/or Larger Trader ID                         ‘‘Account Effective Date to mean, with                proprietary trading began in the account
                                                    (‘‘LTID’’)). This process is referred to as             regard to those circumstances in which                (i.e., the date on which the first orders
                                                    the customer definition process.                        an Industry Member has established a                  were submitted from the account). With
                                                       In accordance with the Customer                      trading relationship with an institution              regard to paragraphs (a)(2)–(5), the
                                                    Information Approach, Industry                          but has not established an account with               Account Effective Date will be no later
                                                    Members would be required to report                     that institution: (1) When the trading                than the date trading occurs at the
                                                    only the Firm Designated ID for each                    relationship was established prior to                 Industry Member or in the Industry
                                                    new order submitted to the Central                      November 15, 2018 for Industry                        Member’s system.
                                                    Repository, rather than the ‘‘Customer-                 Members other than Small Industry
                                                                                                                                                                  (B) Active Account
                                                    ID’’ with individual order events.                      Members, or prior to November 15, 2019
                                                    Within the Central Repository, each                     for Small Industry Members, either (a)                   Under the Customer Information
                                                    Customer would be uniquely identified                   the date the relationship identifier was              Approach, Industry Members are
                                                    by identifiers or a combination of                      established within the Industry                       required to report Customer Identifying
                                                    identifiers such as ITIN/SSN, date of                   Member; (b) the date when trading                     Information and Customer Account
                                                    birth, and as applicable, LEI and LTID.                 began (i.e., the date the first order was             Information for only those accounts that
                                                    The Plan Processor would be required to                 received) using the relevant relationship             are active. This will alleviate the need
                                                    use these unique identifiers to map                     identifier; or (c) if both dates are                  for Industry Members to update such
                                                    orders to specific Customers across all                 available, the earlier date will be used              information for non-active accounts, but
                                                    Industry Members and Participants. To                   to the extent that the dates differ; or (2)           still ensure that the Central Repository
                                                    ensure information identifying a                        when the trading relationship was                     will collect audit trail data for Customer
                                                    Customer is up to date, Industry                        established on or after November 15,                  accounts that have any Reportable
                                                    Members would be required to submit                     2018 for Industry Members other than                  Events. Accordingly, paragraph (b) of
                                                    to the Central Repository daily and                     Small Industry Members, or on or after                Proposed Rule 4.5 defines an ‘‘Active
                                                    periodic updates for reactivated                        November 15, 2019 for Small Industry                  Account’’ as an account that has had
                                                                                                            Members, the date the Industry Member                 activity in Eligible Securities within the
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                                                    accounts, newly established accounts,
                                                    and revised Firm Designated IDs or                      established the relationship identifier,              last six months. This is the same
                                                                                                            which would be no later than the date                 definition as set forth in Section 1.1 of
                                                       11 See Securities Exchange Act Release No. 77265     the first order was received.                         the CAT NMS Plan.
                                                    (March 1, 2016), 81 FR 11856 (March 7, 2016)               Paragraph (a)(2) of Proposed Rule 4.5              (C) Allocation Report
                                                    (‘‘Exemption Order’’). See also Letter from             states that an ‘‘Account Effective Date’’
                                                    Participants to Brent J. Fields, Secretary,
                                                                                                            means, where an Industry Member                       (I) Allocation Report Approach
                                                    Commission, dated January 30, 2015 at 12
                                                    (‘‘Exemptive Request Letter’’); and CAT NMS Plan        changes back office providers or                         SEC Rule 613(c)(7)(vi)(A) requires
                                                    at Appendix C, Section A.1(a)(iii).                     clearing firms prior to November 15,                  each Industry Member to record and


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                                                    9848                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    report to the Central Repository ‘‘the                  NMS Plan, except the Exchange                         of the Industry Member.13 Such a third
                                                    account number for any subaccounts to                   proposes to replace the phrase ‘‘under                party, referred to in the Proposed Rules
                                                    which the execution is allocated (in                    SEC Rule 613’’ at the end of the                      4.5 through 4.16 as a ‘‘CAT Reporting
                                                    whole or in part).’’ The SROs requested                 definition in Section 1.1 of the Plan                 Agent,’’ would be one type of a Data
                                                    and received from the SEC exemptive                     with the phrase ‘‘under Rules 4.5                     Submitter, that is, a party that submits
                                                    relief from SEC Rule 613 for an                         through 4.16.’’ This change is intended               data to the Central Repository.
                                                    alternative to this approach (‘‘Allocation              to recognize that the Industry Members’               Paragraph (h) of Proposed Rule 4.5
                                                    Report Approach’’). The Allocation                      obligations with regard to the CAT are                defines the term ‘‘CAT Reporting
                                                    Report Approach would permit Industry                   set forth in Rules 4.5 through 4.16.                  Agent’’ to mean a Data Submitter that is
                                                    Members to record and report to the                                                                           a third party that enters into an
                                                    Central Repository an Allocation Report                 (E) CAT                                               agreement with an Industry Member
                                                    that includes, among other things, the                    Paragraph (e) of Proposed Rule 4.5                  pursuant to which the CAT Reporting
                                                    Firm Designated ID for any account(s) to                defines the term ‘‘CAT’’ to mean the                  Agent agrees to fulfill such Industry
                                                    which executed shares are allocated                     consolidated audit trail contemplated by              Member’s reporting obligations under
                                                    when an execution is allocated in whole                                                                       Rules 4.5 through 4.16.
                                                                                                            SEC Rule 613. This is the same
                                                    or part in lieu of requiring the reporting                                                                       This definition is based on FINRA’s
                                                                                                            definition as set forth in Section 1.1 of
                                                    of the account number for any                                                                                 definition of a ‘‘Reporting Agent’’ as set
                                                                                                            the CAT NMS Plan.
                                                    subaccount to which an execution is                                                                           forth in FINRA’s rule related to its Order
                                                    allocated, as is required by SEC Rule                   (F) CAT NMS Plan                                      Audit Trail System (‘‘OATS’’).
                                                    613.12 Under SEC Rule 613, regulators                                                                         Specifically, FINRA Rule 7410(n)
                                                    would be able to link the subaccount to                   Paragraph (f) of Proposed Rule 4.5                  defines a ‘‘Reporting Agent’’ as a third
                                                    which an allocation was made to a                       defines the term ‘‘CAT NMS Plan’’ to                  party that enters into any agreement
                                                    specific order. In contrast, under the                  mean the National Market System Plan                  with a member pursuant to which the
                                                    Allocation Report Approach, regulators                  Governing the Consolidated Audit Trail,               Reporting Agent agrees to fulfill such
                                                    would only be able to link an allocation                as amended from time to time.                         member’s obligations under Rule 7450.
                                                    to the account to which it was made,                    (G) CAT-Order-ID                                      The Reporting Agent for OATS fulfills a
                                                    and not to a specific order.                                                                                  similar role to the CAT Reporting Agent.
                                                                                                            (I) Daisy Chain Approach
                                                    (II) Definition of Allocation Report                                                                          (I) Central Repository
                                                       To assist in implementing the                          Under the CAT NMS Plan, the Daisy                      Paragraph (i) of Proposed Rule 4.5
                                                    Allocation Report Approach, paragraph                   Chain Approach is used to link and                    defines the term ‘‘Central Repository’’ to
                                                    (c) of Proposed Rule 4.5 defines an                     reconstruct the complete lifecycle of                 mean the repository responsible for the
                                                    ‘‘Allocation Report.’’ Specifically, an                 each Reportable Event in CAT.                         receipt, consolidation, and retention of
                                                    ‘‘Allocation Report’’ means a report                    According to this Approach, Industry                  all information reported to the CAT
                                                    made to the Central Repository by an                    Members assign their own identifiers to               pursuant to SEC Rule 613 and the CAT
                                                    Industry Member that identifies the                     each order event. Within the Central                  NMS Plan. This is the same definition
                                                    Firm Designated ID for any account(s),                  Repository, the Plan Processor later                  as set forth in Section 1.1 of the CAT
                                                    including subaccount(s), to which                       replaces the identifier provided by the               NMS Plan, except the Exchange uses the
                                                    executed shares are allocated and                       Industry Member for each Reportable                   phrase ‘‘CAT NMS Plan’’ in place of the
                                                    provides the security that has been                     Event with a single identifier, called the            phrase ‘‘this Agreement.’’
                                                    allocated, the identifier of the firm                   CAT Order-ID, for all order events
                                                    reporting the allocation, the price per                 pertaining to the same order. This CAT                (J) Compliance Threshold
                                                    share of shares allocated, the side of                  Order-ID is used to link the Reportable                  Paragraph (j) of Proposed Rule 4.5
                                                    shares allocated, the number of shares                  Events related to the same order.                     defines the term ‘‘Compliance
                                                    allocated to each account, and the time                 (II) Definition of CAT-Order-ID                       Threshold’’ as having the meaning set
                                                    of the allocation; provided, for the                                                                          forth in Proposed Rule 4.15(d). This
                                                    avoidance of doubt, any such Allocation                    To implement the Daisy Chain                       definition has the same substantive
                                                    Report shall not be required to be linked               Approach, Paragraph (g) of Proposed                   meaning as the definition set forth in
                                                    to particular orders or executions. This                Rule 4.5 defines the term ‘‘CAT-Order-                Section 1.1 of the CAT NMS Plan. As
                                                    is the same definition as set forth in                  ID.’’ The term ‘‘CAT-Order-ID’’ is                    discussed in detail below with regard to
                                                    Section 1.1 of the CAT NMS Plan.                        defined to mean a unique order                        Proposed Rule 4.15(d), each Industry
                                                                                                            identifier or series of unique order                  Member is required to meet a separate
                                                    (D) Business Clock
                                                                                                            identifiers that allows the Central                   compliance threshold which will be an
                                                      To create the required audit trail,                   Repository to efficiently and accurately              Industry Member-specific rate that may
                                                    Industry Members are required to record                 link all Reportable Events for an order,              be used as the basis for further review
                                                    the date and time of various Reportable                 and all orders that result from the                   or investigation into the Industry
                                                    Events to the Central Repository.                       aggregation or disaggregation of such                 Member’s performance with regard to
                                                    Industry Members will use ‘‘Business                    order. This is the same definition as set             the CAT. This Industry Member-specific
                                                    Clocks’’ to record such dates and times.                forth in SEC Rule 613(j)(1), and Section              rate is the ‘‘Compliance Threshold.’’
                                                    Accordingly, paragraph (d) of Proposed                  1.1 of the CAT NMS Plan defines ‘‘CAT-                (K) Customer
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                                                    Rule 4.5 defines the term ‘‘Business                    Order-ID’’ by reference to SEC Rule
                                                    Clock’’ as a clock used to record the date              613(j)(1).                                              Industry Members are required to
                                                    and time of any Reportable Event                                                                              submit to the Central Repository certain
                                                    required to be reported under Rules 4.5                 (H) CAT Reporting Agent                               information related to their Customers,
                                                    through 4.16. This is the same definition                                                                     including Customer Identifying
                                                                                                              The CAT NMS Plan permits an
                                                    as set forth in Section 1.1 of the CAT                                                                        Information and Customer Account
                                                                                                            Industry Member to use a third party,
                                                      12 See Exemptive Request Letter at 26–27; and         such as a vendor, to report the required                13 Appendix C, Section A.1(a) of the CAT NMS

                                                    Exemption Order.                                        data to the Central Repository on behalf              Plan.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                  9849

                                                    Information, as well as data related to                 account opened is changed to the date                 Repository.14 Such Data Submitters may
                                                    their Customer’s Reportable Events.                     the account was opened on the new                     include those entities that are required
                                                    Accordingly, Paragraph (k) of Proposed                  back office/clearing firm system; (2)                 to submit data to the Central Repository
                                                    Rule 4.5 proposes to define the term                    where an Industry Member acquires                     (e.g., national securities exchanges,
                                                    ‘‘Customer.’’ Specifically, the term                    another Industry Member and the date                  national securities associations and
                                                    ‘‘Customer’’ would be defined to mean:                  account opened is changed to the date                 Industry Members), third-parties that
                                                    (1) The account holder(s) of the account                the account was opened on the post-                   may submit data to the CAT on behalf
                                                    at an Industry Member originating the                   merger back office/clearing firm system;              of CAT Reporters (i.e., CAT Reporting
                                                    order; and (2) any person from whom                     (3) where there are multiple dates                    Agents), and outside parties that are not
                                                    the Industry Member is authorized to                    associated with an account in an                      required to submit data to the CAT but
                                                    accept trading instructions for such                    Industry Member’s system, and the                     from which the CAT may receive data
                                                    account, if different from the account                  parameters of each date are determined                (e.g., securities information processors
                                                    holder(s). This is the same definition as               by the individual Industry Member; and                (‘‘SIPs’’)). To include this term in the
                                                    set forth in SEC Rule 613(j)(3), except                 (4) where the relevant account is an                  Proposed Rules 4.5 through 4.16, the
                                                    the Exchange proposes to replace the                    Industry Member proprietary account.                  Exchange proposes to define ‘‘Data
                                                    references to a registered broker-dealer                The proposed definition is the same as                Submitter’’ in paragraph (n) of Proposed
                                                    or broker-dealer with a reference to an                 the definition of ‘‘Customer Account                  Rule 4.5. Specifically, paragraph (n) of
                                                    Industry Member for consistency of                      Information’’ set forth in Section 1.1 of             Proposed Rule 4.5 defines a ‘‘Data
                                                    terms used in the Proposed Rules 4.5                    the CAT NMS Plan, provided, however,                  Submitter’’ to mean any person that
                                                    through 4.16. The Exchange also notes                   that specific dates have replaced the                 reports data to the Central Repository,
                                                    that Section 1.1 of the CAT NMS Plan                    descriptions of those dates set forth in              including national securities exchanges,
                                                    defines ‘‘Customer’’ by reference to SEC                Section 1.1 of the Plan.                              national securities associations, broker-
                                                    Rule 613(j)(3).                                                                                               dealers, the SIPs for the CQS, CTA, UTP
                                                                                                            (M) Customer Identifying Information                  and Plan for Reporting of Consolidated
                                                    (L) Customer Account Information
                                                                                                               As discussed above, under the                      Options Last Sale Reports and
                                                       As discussed above, under the                                                                              Quotation Information (‘‘OPRA’’) Plans,
                                                    Customer Information Approach,                          Customer Information Approach,
                                                                                                            Industry Members are required to report               and certain other vendors or third
                                                    Industry Members are required to report                                                                       parties that may submit data to the
                                                    Customer Account Information to the                     Customer Identifying Information to the
                                                                                                            Central Repository as part of the                     Central Repository on behalf of Industry
                                                    Central Repository as part of the
                                                                                                            customer definition process.                          Members.
                                                    customer definition process.
                                                    Accordingly, the Exchange proposes to                   Accordingly, the Exchange proposes to                 (O) Eligible Security
                                                    define the term ‘‘Customer Account                      define the term ‘‘Customer Account
                                                    Information’’ to clarify what customer                  Information’’ to clarify what Customer                   The reporting requirements of the
                                                    information would need to be reported                   information would need to be reported                 Proposed Rules 4.5 through 4.16 only
                                                    to the Central Repository.                              to the Central Repository.                            apply to Reportable Events in Eligible
                                                       Paragraph (l) of Proposed Rule 4.5                                                                         Securities. Currently, an Eligible
                                                                                                               Paragraph (m) of Proposed Rule 4.5
                                                    defines the term ‘‘Customer Account                                                                           Security includes NMS Securities and
                                                                                                            defines the term ‘‘Customer Identifying
                                                    Information’’ to include, in part,                                                                            OTC Equity Securities. Accordingly,
                                                                                                            Information’’ to mean information of
                                                    account number, account type, customer                                                                        paragraph (p) [sic] of Proposed Rule 4.5
                                                                                                            sufficient detail to identify a Customer.
                                                    type, date account opened, and large                                                                          defines the term ‘‘Eligible Security’’ to
                                                                                                            With respect to individuals, ‘‘Customer
                                                    trader identifier (if applicable).                                                                            include: (1) All NMS Securities; and (2)
                                                                                                            Identifying Information’’ includes, but is
                                                    Proposed Rule 4.5(l), however, provides                                                                       all OTC Equity Securities. The terms
                                                                                                            not limited to: Name, address, date of
                                                    an alternative definition of ‘‘Customer                                                                       ‘‘NMS Securities’’ and ‘‘OTC Equity
                                                                                                            birth, individual tax payer identification
                                                    Account Information’’ in two limited                                                                          Securities’’ are defined, in turn, below.
                                                                                                            number (‘‘ITIN’’)/social security number
                                                    circumstances. First, in those                                                                                This is the same definition as set forth
                                                                                                            (‘‘SSN’’), individual’s role in the
                                                    circumstances in which an Industry                                                                            in Section 1.1 of the CAT NMS Plan.
                                                                                                            account (e.g., primary holder, joint
                                                    Member has established a trading                        holder, guardian, trustee, person with                (P) Error Rate
                                                    relationship with an institution but has                the power of attorney). With respect to
                                                    not established an account with that                                                                          (I) Maximum Error Rate
                                                                                                            legal entities, ‘‘Customer Identifying
                                                    institution, the Industry Member will:                  Information’’ includes, but is not                      Under the CAT NMS Plan, the
                                                    (1) Provide the Account Effective Date                  limited to, name, address, Employer                   Operating Committee sets the maximum
                                                    in lieu of the ‘‘date account opened’’; (2)
                                                                                                            Identification Number (‘‘EIN’’)/Legal                 Error Rate that the Central Repository
                                                    provide the relationship identifier in
                                                                                                            Entity Identifier (‘‘LEI’’) or other                  would tolerate from an Industry
                                                    lieu of the ‘‘account number’’; and (3)
                                                                                                            comparable common entity identifier, if               Member reporting data to the Central
                                                    identify the ‘‘account type’’ as a
                                                                                                            applicable. The definition further notes              Repository.15 The Operating Committee
                                                    ‘‘relationship.’’ Second, in those
                                                                                                            that an Industry Member that has an LEI               reviews and resets the maximum Error
                                                    circumstances in which the relevant
                                                                                                            for a Customer must submit the                        Rate, at least annually.16 If an Industry
                                                    account was established prior to
                                                                                                            Customer’s LEI in addition to other                   Member reports CAT data to the Central
                                                    November 15, 2018 for Industry
                                                                                                            information of sufficient detail to                   Repository with errors such that their
                                                    Members other than Small Industry
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                                                                                                            identify the Customer. This is the same               error percentage exceeds the maximum
                                                    Members, or prior to November 15, 2019
                                                                                                            definition as set forth in Section 1.1 of             Error Rate, then such Industry Member
                                                    for Small Industry Members, and no
                                                                                                            the CAT NMS Plan.                                     would not be in compliance with the
                                                    ‘‘date account opened’’ is available for
                                                    the account, the Industry Member will                   (N) Data Submitter                                      14 Appendix C, Section A.1(a) of the CAT NMS
                                                    provide the Account Effective Date in                                                                         Plan.
                                                    the following circumstances: (1) Where                     The CAT NMS Plan uses the term                       15 Section 6.5(d)(i) of the CAT NMS Plan.
                                                    an Industry Member changes back office                  ‘‘Data Submitter’’ to refer to any person               16 Appendix C, Section A.3(b) of the CAT NMS

                                                    providers or clearing firms and the date                that reports data to the Central                      Plan.



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                                                    9850                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    CAT NMS Plan or Rule 613.17 As such,                    NMS Plan defines ‘‘Error Rate’’ by                    to mean the first Plan Processor selected
                                                    the Exchange or the SEC ‘‘may [sic] take                reference to SEC Rule 613(j)(6).                      by the Operating Committee in
                                                    appropriate action against an Industry                                                                        accordance with SEC Rule 613, Section
                                                                                                            (Q) Firm Designated ID
                                                    Member for failing to comply with its                                                                         6.1 of the CAT NMS Plan and the
                                                    CAT reporting obligations.18 The CAT                       As discussed above, under the                      National Market System Plan Governing
                                                    NMS Plan sets the initial Error Rate at                 Customer Information Approach, the                    the Process for Selecting a Plan
                                                    5%.19 It is anticipated that the                        CAT NMS Plan would require each                       Processor and Developing a Plan for the
                                                    maximum Error Rate will be reviewed                     Industry Member to assign a unique                    Consolidated Audit Trail. This is the
                                                    and lowered by the Operating                            Firm Designated ID to each Customer.                  same definition as set forth in Section
                                                    Committee once Industry Members                         Industry Members would be permitted                   1.1 of the CAT NMS Plan, although the
                                                    begin to report to the Central                          to use as the Firm Designated ID an                   proposed definition uses the full name
                                                    Repository.20                                           account number or any other identifier                of the ‘‘Selection Plan.’’
                                                      The CAT NMS Plan requires the Plan                    defined by the firm, provided each
                                                                                                            identifier is unique across the firm for              (U) Listed Option or Option
                                                    Processor to: (1) Measure and report
                                                    errors every business day; (2) provide                  each business date (i.e., a single firm                  The CAT NMS Plan and the Proposed
                                                    Industry Members daily statistics and                   may not have multiple separate                        Rules 4.5 through 4.16 apply to Eligible
                                                    error reports as they become available,                 customers with the same identifier on                 Securities, which includes NMS
                                                    including a description of such errors;                 any given date). Industry Members                     Securities, which, in turn, includes
                                                    (3) provide monthly reports to Industry                 would be required to report only the                  Listed Options. Certain requirements of
                                                    Members that detail an Industry                         Firm Designated ID for each new order                 the Proposed Rules 4.5 through 4.16
                                                    Member’s performance and comparison                     submitted to the Central Repository,                  apply specifically to Listed Options.
                                                    statistics; (4) define educational and                  rather than the ‘‘Customer-ID’’ with                  Accordingly, Paragraph (u) of Proposed
                                                    support programs for Industry Members                   individual order events. Accordingly,                 Rule 4.5 defines the term ‘‘Listed
                                                    to minimize Error Rates; and (5)                        the Exchange proposes to define the                   Option’’ or ‘‘Option.’’ Specifically,
                                                    identify, daily, all Industry Members                   term ‘‘Firm Designated ID’’ in Proposed               paragraph (u) of Proposed Rule 4.5
                                                    exceeding the maximum allowable Error                   Rule 4.5. Specifically, paragraph (q) of              states that the term ‘‘Listed Option’’ or
                                                    Rate. To timely correct data-submitted                  Proposed Rule 4.5 defines the term                    ‘‘Option’’ has the meaning set forth in
                                                    errors to the Central Repository, the                   ‘‘Firm Designated ID’’ to mean a unique               SEC Rule 600(b)(35) of Regulation NMS.
                                                    CAT NMS Plan requires that the Central                  identifier for each trading account                   SEC Rule 600(b)(35), in turn, defines a
                                                    Repository receive and process error                    designated by Industry Members for                    listed option as ‘‘any option traded on
                                                    corrections at all times. Further, the                  purposes of providing data to the                     a registered national securities exchange
                                                    CAT NMS Plan requires that Industry                     Central Repository, where each such                   or automated facility of a national
                                                    Members be able to submit error                         identifier is unique among all identifiers            securities association.’’ The Exchange
                                                    corrections to the Central Repository                   from any given Industry Member for                    notes that the proposed definition of
                                                    through a web-interface or via bulk                     each business date. This is the same                  ‘‘Listed Option’’ is the same definition
                                                    uploads or file submissions, and that the               definition as set forth in Section 1.1 of             as the definition set forth in Section 1.1
                                                    Plan Processor, subject to the Operating                the CAT NMS Plan. Industry Members                    of the CAT NMS Plan.
                                                    Committee’s approval, support the bulk                  would be permitted to use an account
                                                                                                            number or any other identifier defined                (V) Manual Order Event
                                                    replacement of records and the
                                                    reprocessing of such records. The                       by the firm, provided each identifier is              (I) Manual Order Event Approach
                                                    Participants, furthermore, require that                 unique across the firm for each business                The CAT NMS Plan sets forth clock
                                                    the Plan Processor identify Industry                    date (i.e., a single firm may not have                synchronization and timestamp
                                                    Member data submission errors based                     multiple separate customers with the                  requirements for Industry Members
                                                    on the Plan Processor’s validation                      same identifier on any given date).                   which reflect exemptions for Manual
                                                    processes.21                                            (R) Industry Member                                   Order Events granted by the
                                                    (II) Definition of Error Rate                             Paragraph (r) of Proposed Rule 4.5                  Commission.22 Specifically, the Plan
                                                                                                            defines the term ‘‘Industry Member’’ to               requires Industry Members to record
                                                      To implement the requirements of the                                                                        and report the time of each Reportable
                                                                                                            mean a member of a national securities
                                                    CAT NMS Plan related to the Error Rate,                                                                       Event using timestamps reflecting
                                                                                                            exchange or a member of a national
                                                    the Exchange proposes to define the                                                                           current industry standards (which must
                                                                                                            securities association.’’ This is the same
                                                    term ‘‘Error Rate’’ in Proposed Rule 4.5.                                                                     be at least to the millisecond) or, if an
                                                                                                            definition as set forth in Section 1.1 of
                                                    Paragraph (p) of Proposed Rule 4.5                                                                            Industry Member’s order handling or
                                                                                                            the CAT NMS Plan.
                                                    defines the term ‘‘Error Rate’’ to mean                                                                       execution systems use timestamps in
                                                    the percentage of Reportable Events                     (S) Industry Member Data                              increments finer than milliseconds,
                                                    collected by the Central Repository in                    Paragraph (s) of Proposed Rule 4.5                  such finer increments, when reporting
                                                    which the data reported does not fully                  states that the term ‘‘Industry Member                to the Central Repository. For Manual
                                                    and accurately reflect the order event                  Data’’ has the meaning set forth in Rule              Order Events, however, the Plan
                                                    that occurred in the market. This is the                4.7(a)(2). This definition has the same               provides that such events must be
                                                    same definition as set forth in SEC Rule                substantive meaning as the definition                 recorded in increments up to and
                                                    613(j)(6), and Section 1.1 of the CAT                                                                         including one second, provided that
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                                                                                                            set forth in Section 1.1 of the CAT NMS
                                                                                                            Plan. The definition of ‘‘Industry                    Industry Members record and report the
                                                      17 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                            Member Data’’ is discussed more fully                 time the event is captured electronically
                                                    Plan; Rule 613(g)–(h).                                                                                        in an order handling and execution
                                                      18 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                            in the discussion below regarding
                                                                                                            Proposed Rule 4.7(a)(2).                              system (‘‘Electronic Capture Time’’) in
                                                    Plan.
                                                      19 Section 6.5(d)(i) of the CAT NMS Plan.                                                                   milliseconds. In addition, Industry
                                                      20 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                            (T) Initial Plan Processor                            Members are required to synchronize
                                                    Plan.                                                     Paragraph (t) of Proposed Rule 4.5
                                                      21 Approval Order at 84718.                           defines the term ‘‘Initial Plan Processor’’             22 Exemption    Order.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                       9851

                                                    their respective Business Clocks (other                 for which transaction reports are                     SEC Rule 613.23 In accordance with the
                                                    than such Business Clocks used solely                   collected, processed, and made                        exemptive relief, Options Market
                                                    for Manual Order Events) at a minimum                   available pursuant to an effective                    Makers would be required to report to
                                                    to within 50 milliseconds of the time                   transaction reporting plan, or an                     the options exchange the time at which
                                                    maintained by the National Institute of                 effective national market system plan                 a quote in a Listed Option is sent to the
                                                    Standards and Technology (‘‘NIST’’),                    for reporting transactions in Listed                  options exchange. Such time
                                                    and maintain such a synchronization.                    Options. This is the same definition as               information also will be reported to the
                                                    Each Industry Member is required to                     set forth in Section 1.1 of the CAT NMS               Central Repository by the options
                                                    synchronize their Business Clocks used                  Plan.                                                 exchange in lieu of reporting by the
                                                    solely for Manual Order Events,                                                                               Options Market Maker
                                                    however, at a minimum to within one                     (Y) NMS Stock
                                                    second of the time maintained by the                                                                          (II) Definition of Options Market Maker
                                                                                                              Under the CAT NMS Plan, the
                                                    NIST.                                                                                                            To implement the requirements
                                                                                                            Operating Committee may establish
                                                    (II) Definition of Manual Order Event                   different Trading Days for NMS Stocks                 related to Option Market Maker quotes,
                                                                                                            (as defined in SEC Rule 600(b)(47)),                  the Exchange proposes to define the
                                                       In order to clarify what a Manual                                                                          term ‘‘Options Market Maker’’ in
                                                    Order Event is for clock synchronization                Listed Options, OTC Equity Securities,
                                                                                                            and any other securities that are                     Proposed Rule 4.5. Specifically,
                                                    and time stamp purposes, the Exchange                                                                         paragraph (aa) of Proposed Rule 4.5
                                                    proposes to define the term ‘‘Manual                    included as Eligible Securities from
                                                                                                            time to time. Accordingly, the Exchange               defines the term ‘‘Options Market
                                                    Order Event’’ in Proposed Rule 4.5.
                                                                                                            proposes to define the term ‘‘NMS                     Makers’’ to mean a broker-dealer
                                                    Specifically, paragraph (v) of Proposed
                                                                                                            Stock’’ in Paragraph (y) of Proposed                  registered with an exchange for the
                                                    Rule 4.5 defines the term ‘‘Manual
                                                                                                            Rule 4.5 to mean any NMS Security                     purpose of making markets in options
                                                    Order Event’’ to mean a non-electronic
                                                                                                            other than an option. This is the same                contracts traded on the exchange. This
                                                    communication of order-related
                                                                                                            definition as set forth in SEC Rule                   is the same definition as set forth in
                                                    information for which Industry
                                                                                                            600(b)(47) of Regulation NMS.                         Section 1.1 of the CAT NMS Plan.
                                                    Members must record and report the
                                                    time of the event. This is the same                                                                           (BB) Order
                                                                                                            (Z) Operating Committee
                                                    definition as set forth in Section 1.1 of
                                                    the CAT NMS Plan.                                                                                                The Proposed Rules 4.5 through 4.16
                                                                                                              Paragraph (z) of Proposed Rule 4.5                  require each Industry Member to record
                                                    (W) Material Terms of the Order                         defines the term ‘‘Operating Committee’’              and electronically report to the Central
                                                                                                            to mean the governing body of the CAT                 Repository certain details for each order.
                                                       Proposed Rule 4.7 requires Industry                  NMS, LLC designated as such and
                                                    Members to record and report to the                                                                           Accordingly, the Exchange proposes to
                                                                                                            described in Article IV of the CAT NMS                define the term ‘‘Order’’ in Proposed
                                                    Central Repository Material Terms of
                                                                                                            Plan. This is the same definition as set              Rule 4.5. Specifically, paragraph (bb) of
                                                    the Order with certain Reportable
                                                                                                            forth in Section 1.1 of the CAT NMS                   Proposed Rule 4.5 defines the term
                                                    Events (e.g., for the original receipt or
                                                                                                            Plan, except the Exchange proposes to                 ‘‘Order’’, with respect to Eligible
                                                    origination of an order, for the routing
                                                                                                            use the phrase ‘‘CAT NMS LLC’’ in                     Securities, to include: (1) Any order
                                                    of an order). Accordingly, the Exchange
                                                                                                            place of the phrase ‘‘the Company’’ for               received by an Industry Member from
                                                    proposes to define the term ‘‘Material
                                                                                                            clarity.                                              any person; (2) any order originated by
                                                    Terms of the Order’’ in Proposed Rule
                                                    4.5. Specifically, paragraph (w) of                     (AA) Options Market Maker                             an Industry Member; or (3) any bid or
                                                    Proposed Rule 4.5 defines the term                                                                            offer. This is the same definition as set
                                                    ‘‘Material Terms of the Order’’ to                      (I) Options Market Maker Quote                        forth in SEC Rule 613(j)(8), except the
                                                    include: The NMS Security or OTC                        Exemption                                             Exchange proposes to replace the phrase
                                                    Equity Security symbol; security type;                                                                        ‘‘member of a national securities
                                                                                                               SEC Rule 613(c)(7) provides that the
                                                    price (if applicable); size (displayed and                                                                    exchange or national securities
                                                                                                            CAT NMS Plan must require each
                                                    non-displayed); side (buy/sell); order                                                                        association’’ with the term ‘‘Industry
                                                                                                            Industry Member to record and
                                                    type; if a sell order, whether the order                                                                      Member.’’ The Exchange notes that
                                                                                                            electronically report to the Central
                                                    is long, short, short exempt; open/close                                                                      Section 1.1 of the CAT NMS Plan
                                                                                                            Repository details for each order and
                                                    indicator (except on transactions in                                                                          defines ‘‘Order’’ by reference to SEC
                                                                                                            each reportable event, including the
                                                    equities); time in force (if applicable); if                                                                  Rule 613(j)(8).
                                                                                                            routing and modification or cancellation
                                                    the order is for a Listed Option, option                of an order. SEC Rule 613(j)(8) defines               (CC) OTC Equity Security
                                                    type (put/call), option symbol or root                  ‘‘order’’ to include ‘‘any bid or offer.’’
                                                    symbol, underlying symbol, strike price,                Therefore, under SEC Rule 613, the                      OTC Equity Securities are one of the
                                                    expiration date, and open/close (except                 details for each Options Market Maker                 types of Eligible Securities for the CAT.
                                                    on market maker quotations); and any                    quotation must be reported to the                     Therefore, the Exchange proposes to
                                                    special handling instructions. This is                  Central Repository by both the Options                define the term ‘‘OTC Equity Security’’
                                                    the same definition as set forth in                     Market Maker and the options exchange                 in Proposed Rule 4.5. Specifically,
                                                    Section 1.1 of the CAT NMS Plan.                        to which it routes its quote.                         paragraph (cc) of Proposed Rule 4.5
                                                                                                                                                                  defines the term ‘‘OTC Equity Security’’
                                                    (X) NMS Security                                           The SROs, however, requested and
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                                                                                                                                                                  to mean any equity security, other than
                                                      NMS Securities are one of the types                   received exemptive relief from SEC Rule               an NMS Security, subject to prompt last
                                                    of Eligible Securities for the CAT.                     613 so that the CAT NMS Plan may                      sale reporting rules of a registered
                                                    Therefore, the Exchange proposes to                     permit Options Market Maker quotes to                 national securities association and
                                                    define the term ‘‘NMS Security’’ in                     be reported to the Central Repository by              reported to one of such association’s
                                                    Proposed Rule 4.5. Specifically,                        the relevant options exchange in lieu of              equity trade reporting facilities. This is
                                                    paragraph (x) of Proposed Rule 4.5                      requiring that such reporting be done by
                                                    defines the term ‘‘NMS Security’’ to                    both the options exchange and the                       23 See Exemptive Request Letter at 2, and

                                                    mean any security or class of securities                Options Market Maker, as is required by               Exemption Order.



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                                                    9852                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    the same definition as set forth in                     (II) Reportable Event                                 Industry Member, including the CRD
                                                    Section 1.1 of the CAT NMS Plan.                           The Proposed Rules 4.5 through 4.16                number and LEI if such LEI has been
                                                                                                            require each Industry Member to record                obtained, and itself, including LEI, if
                                                    (DD) Participant
                                                                                                            and electronically report to the Central              such LEI has been obtained.
                                                      Paragraph (dd) of Proposed Rule 4.5                   Repository certain details for each                   Additionally, each Industry Member is
                                                    defines the term ‘‘Participant’’ to mean                Reportable Event. To clarify these                    required to submit to the Central
                                                    each Person identified as such in                       requirements, the Exchange proposes to                Repository information sufficient to
                                                    Exhibit A of the CAT NMS Plan, as                       define the term ‘‘Reportable Event’’ in               identify such Industry Member,
                                                    amended, in such Person’s capacity as                   Proposed Rule 4.5. Specifically,                      including CRD number and LEI, if such
                                                    a Participant in CAT NMS, LLC. This is                  paragraph (ii) of Proposed Rule 4.5                   LEI has been obtained. The Plan
                                                    the same definition in substance as set                 states that the term ‘‘Reportable Event’’             Processor will use this information to
                                                    forth in Section 1.1 of the CAT NMS                     includes, but is not limited to, the                  assign a CAT-Reporter-ID to each
                                                    Plan.                                                   original receipt or origination,                      Industry Member for internal use within
                                                                                                            modification, cancellation, routing,                  the Central Repository.
                                                    (EE) Person
                                                                                                            execution (in whole or in part) and                   (II) Definition of SRO-Assigned Market
                                                      Paragraph (ee) of Proposed Rule 4.5                   allocation of an order, and receipt of a              Participant Identifier
                                                    defines the term ‘‘Person’’ to mean any                 routed order. This is the same definition
                                                    individual, partnership, limited liability              as set forth in Section 1.1 of the CAT                   To implement the Existing Identifier
                                                    company, corporation, joint venture,                    NMS Plan.                                             Approach, the Exchange proposes to
                                                    trust, business trust, cooperative or                                                                         define the term ‘‘SRO-Assigned Market
                                                                                                            (JJ) SRO                                              Participant Identifier’’ in Proposed Rule
                                                    association and any heirs, executors,
                                                    administrators, legal representatives,                    Paragraph (jj) of Proposed Rule 4.5                 4.5. Specifically, paragraph (kk) of
                                                    successors and assigns of such Person                   defines the term ‘‘SRO’’ to mean any                  Proposed Rule 4.5 defines the term
                                                    where the context so permits. This is the               self-regulatory organization within the               ‘‘SRO-Assigned Market Participant
                                                    same definition as set forth in Section                 meaning of Section 3(a)(26) of the                    Identifier’’ to mean an identifier
                                                    1.1 of the CAT NMS Plan.                                Exchange Act. This is the same                        assigned to an Industry Member by an
                                                                                                            definition as set forth in Section 1.1 of             SRO or an identifier used by a
                                                    (FF) Plan Processor                                     the CAT NMS Plan.                                     Participant. This is the same definition
                                                                                                                                                                  as set forth in Section 1.1 of the CAT
                                                      Paragraph (ff) of Proposed Rule 4.5                   (KK) SRO-Assigned Market Participant                  NMS Plan. For example, an Industry
                                                    defines the term ‘‘Plan Processor’’ to                  Identifier                                            Member would be permitted to use any
                                                    mean the Initial Plan Processor or any                  (I) Existing Identifier Approach                      existing SRO-Assigned Market
                                                    other Person selected by the Operating                                                                        Participant Identifier (e.g., FINRA MPID,
                                                    Committee pursuant to SEC Rule 613                        The SROs requested and received
                                                                                                            exemptive relief from SEC Rule 613 so                 NASDAQ MPID, NYSE Mnemonic,
                                                    and Sections 4.3(b)(i) and 6.1 of the                                                                         CBOE User Acronym and CHX
                                                    CAT NMS Plan, and with regard to the                    that the CAT NMS Plan may permit the
                                                                                                            Existing Identifier Approach, which                   Acronym) when reporting order
                                                    Initial Plan Processor, the National                                                                          information to the Central Repository.
                                                    Market System Plan Governing the                        would allow an Industry Member to
                                                    Process for Selecting a Plan Processor                  report an existing SRO-Assigned Market                (LL) Small Industry Member
                                                    and Developing a Plan for the                           Participant Identifier in lieu of requiring
                                                                                                            the reporting of a universal CAT-                        The requirements of the Proposed
                                                    Consolidated Audit Trail, to perform the
                                                                                                            Reporter-ID (that is, a code that                     Rules 4.5 through 4.16 differ to some
                                                    CAT processing functions required by
                                                                                                            uniquely and consistently identifies an               extent for Small Industry Members
                                                    SEC Rule 613 and set forth in the CAT
                                                                                                            Industry Member for purposes of                       versus Industry Members other than
                                                    NMS Plan.
                                                                                                            providing data to the Central                         Small Industry Members. For example,
                                                    (GG) Received Industry Member Data                      Repository).24 The CAT NMS Plan                       the compliance dates for reporting data
                                                                                                            reflects the ‘‘Existing Identifier                    to the CAT are different for Small
                                                       Paragraph (gg) of Proposed Rule 4.5                                                                        Industry Members versus other Industry
                                                                                                            Approach’’ for purposes of identifying
                                                    states that the term ‘‘Received Industry                                                                      Members. Accordingly, to clarify the
                                                                                                            each Industry Member associated with
                                                    Member Data’’ has the meaning set forth                                                                       requirements that apply to which
                                                                                                            an order or Reportable Event. Under the
                                                    in Rule 4.7(a)(2). This definition has the                                                                    Industry Members, the Exchange
                                                                                                            Existing Identifier Approach, Industry
                                                    same substantive meaning as the                                                                               proposes to define the term ‘‘Small
                                                                                                            Members are required to record and
                                                    definition set forth in Section 1.1 of the                                                                    Industry Member’’ in Proposed Rule 4.5.
                                                                                                            report to the Central Repository an SRO-
                                                    CAT NMS Plan. The definition of                                                                               Specifically, paragraph (ll) of Proposed
                                                                                                            Assigned Market Participant Identifier
                                                    ‘‘Received Industry Member Data’’ is                                                                          Rule 4.5 defines the term ‘‘Small
                                                                                                            for orders and certain Reportable Events
                                                    discussed more fully in the discussion                                                                        Industry Member’’ to mean an Industry
                                                                                                            to be used by the Central Repository to
                                                    below regarding Proposed Rule 4.7(a)(2).                                                                      Member that qualifies as a small broker-
                                                                                                            assign a unique CAT-Reporter-ID to
                                                    (HH) Recorded Industry Member Data                      identify Industry Members.                            dealer as defined in Rule 0–10(c) under
                                                                                                              For the Central Repository to link the              the Securities Exchange Act of 1934, as
                                                       Paragraph (hh) of Proposed Rule 4.5                  SRO-Assigned Market Participant                       amended. This is the same in substance
                                                    states that the term ‘‘Recorded Industry                                                                      as the definition of ‘‘Small Industry
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                                                                                                            Identifier to the CAT-Reporter-ID, each
                                                    Member Data’’ has the meaning set forth                 SRO will submit to the Central                        Member’’ as set forth in Section 1.1 of
                                                    in Rule 4.7(a)(1). This definition has the              Repository, on a daily basis, all SRO-                the CAT NMS Plan. Specifically,
                                                    same substantive meaning as the                         Assigned Market Participant Identifiers               Section 1.1 of the CAT NMS Plan
                                                    definition set forth in in Section 1.1 of               used by its Industry Members or itself;               defines a ‘‘Small Industry Member’’ as
                                                    the CAT NMS Plan. The definition of                     and information to identify each such                 ‘‘an Industry Member that qualifies as a
                                                    ‘‘Recorded Industry Member Data’’ is                                                                          small broker-dealer as defined in SEC
                                                    discussed more fully in the discussion                    24 See Exemptive Request Letter at 19, and          Rule 613.’’ The definition of a small
                                                    below regarding Proposed Rule 4.7(a)(1).                Exemption Order.                                      broker-dealer under SEC Rule 613, in


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9853

                                                    turn, is a small broker-dealer as defined               NIST atomic clock, and maintain such                  with regard to clock synchronization.
                                                    in SEC Rule 0–10(c).                                    synchronization. This is the same                     Specifically, paragraph (c) of Proposed
                                                                                                            requirement as set forth in Section                   Rule 4.6 requires each Industry Member
                                                    (MM) Trading Day
                                                                                                            6.8(a)(iii) and (iv) of the CAT NMS Plan.             to certify to the Exchange that its
                                                       Proposed Rule 4.7(b) establishes the                    Paragraph (a)(3) of Proposed Rule 4.6              Business Clocks satisfy the
                                                    deadlines for reporting certain data to                 clarifies that the tolerance described in             synchronization requirements set forth
                                                    the Central Repository using the term                   paragraphs (a)(1) and (2) of the Proposed             in paragraph (a) of Proposed Rule 4.6
                                                    ‘‘Trading Day.’’ Accordingly, the                       Rule 4.6 includes all of the following:               periodically in accordance with the
                                                    Exchange proposes to define the term                    (1) The time difference between the                   certification schedule established by the
                                                    ‘‘Trading Day’’ in Proposed Rule 4.5.                   NIST atomic clock and the Industry                    Operating Committee pursuant to the
                                                    Specifically, Paragraph (mm) of                         Member’s Business Clock; (2) the                      CAT NMS Plan. This requirement is the
                                                    Proposed Rule 4.5 states that the term                  transmission delay from the source; and               same requirement as set forth in Section
                                                    ‘‘Trading Day’’ shall have the meaning                  (3) the amount of drift of the Industry               6.8(a)(ii)(B), (iii) and (iv) of the CAT
                                                    as is determined by the Operating                       Member’s Business Clock. This                         NMS Plan. The Exchange intends to
                                                    Committee. For the avoidance of doubt,                  description of the clock synchronization              announce to its Industry Members the
                                                    the Operating Committee may establish                   tolerance is the same as set forth in                 certification schedule established by the
                                                    different Trading Days for NMS Stocks                   paragraph (b) of FINRA Rule 4590                      Operating Committee via Regulatory
                                                    (as defined in SEC Rule 600(b)(47),                     (Synchronization of Member Business                   Circular.
                                                    Listed Options, OTC Equity Securities,                  Clocks).                                                Paragraph (d) of Proposed Rule 4.6
                                                    and any other securities that are                          Paragraph (a)(4) of Proposed Rule 4.6              establishes reporting requirements with
                                                    included as Eligible Securities from                    requires Industry Members to                          regard to clock synchronization.
                                                    time to time.                                           synchronize their Business Clocks every               Paragraph (d) of Proposed Rule 4.6
                                                                                                            business day before market open to                    requires Industry Members to report to
                                                    (ii) Clock Synchronization                              ensure that timestamps for Reportable                 the Plan Processor and the Exchange,
                                                       SEC Rule 613(d)(1) under Regulation                  Events are accurate. In addition, to                  violations of paragraph (a) of this Rule
                                                    NMS requires Industry Members to                        maintain clock synchronization,                       pursuant to the thresholds set by the
                                                    synchronize their Business Clocks to the                Business Clocks must be checked                       Operating Committee pursuant to the
                                                    time maintained by NIST, consistent                     against the NIST atomic clock and re-                 CAT NMS Plan. This requirement is the
                                                    with industry standards. To comply                      synchronized, as necessary, throughout                same requirement as set forth in Section
                                                    with this provision, Section 6.8 of the                 the day. This description of the required             6.8(a)(ii)(C), (iii) and (iv) of the CAT
                                                    Plan sets forth the clock                               frequency of clock synchronization is                 NMS Plan. The Exchange intends to
                                                    synchronization requirements for                        the same as set forth in paragraph (c) of             announce to its Industry Members the
                                                    Industry Members.25 To implement                        FINRA Rule 4590 (Synchronization of                   relevant thresholds established by the
                                                    these provisions with regard to its                     Member Business Clocks).                              Operating Committee via Regulatory
                                                    Industry Members, the Exchange                             Paragraph (b) of Proposed Rule 4.6                 Circular.
                                                    proposes Rule 4.6 (Consolidated Audit                   sets forth documentation requirements
                                                                                                            with regard to clock synchronization.                 (iii) Industry Member Data Reporting
                                                    Trail—Clock Synchronization) to
                                                    require its Industry Members to comply                  Specifically, paragraph (b) requires                     SEC Rule 613(c) under Regulation
                                                    with the clock synchronization                          Industry Members to document and                      NMS requires the CAT NMS Plan to set
                                                    requirements of the Plan.                               maintain their synchronization                        forth certain provisions requiring
                                                       Paragraph (a) of Proposed Rule 4.6                   procedures for their Business Clocks.                 Industry Members to record and report
                                                    sets forth the manner in which Industry                 The Proposed Rule requires Industry                   data to the CAT. To comply with this
                                                    Members must synchronize their                          Members to keep a log of the times                    provision, Section 6.4 of the CAT NMS
                                                    Business Clocks. Paragraph (a)(1) of                    when they synchronize their Business                  Plan sets forth the data reporting
                                                    Proposed Rule 4.6 requires each                         Clocks and the results of the                         requirements for Industry Members. To
                                                    Industry Member to synchronize its                      synchronization process. This log is                  implement these provisions with regard
                                                    Business Clocks, other than such                        required to include notice of any time                to its Industry Members, the Exchange
                                                    Business Clocks used solely for Manual                  a Business Clock drifts more than the                 proposes Rule 4.7 (Consolidated Audit
                                                    Order Events or used solely for the time                applicable tolerance specified in                     Trail—Industry Member Data Reporting)
                                                    of allocation on Allocation Reports, at a               paragraph (a) of the Proposed Rule.                   to require its Industry Members to
                                                    minimum to within a fifty (50)                          Such logs must include results for a                  comply with the Industry Member Data
                                                    millisecond tolerance of the time                       period of not less than five years ending             reporting requirements of the Plan.
                                                    maintained by the NIST atomic clock,                    on the then current date, or for the                  Proposed Rule 4.7 has six sections [sic]
                                                    and maintain such synchronization.                      entire period for which the Industry                  covering: (1) Recording and reporting
                                                    This is the same requirement as set forth               Member has been required to comply                    Industry Member Data, (2) timing of the
                                                    in Section 6.8(a)(ii)(A) of the CAT NMS                 with this Rule if less than five years.               recording and reporting, (3) the
                                                    Plan.                                                   These documentation requirements are                  applicable securities covered by the
                                                       Paragraph (a)(2) of Proposed Rule 4.6                the same as those set forth in the                    recording and reporting requirements,
                                                    requires each Industry Member to                        ‘‘Sequencing Orders and Clock                         (4) the security symbology to be used in
                                                    synchronize (1) its Business Clocks used                Synchronization’’ section of Appendix                 the recording and reporting, and (5)
                                                                                                            C of the CAT NMS Plan. Moreover,
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                                                    solely for Manual Order Events and (2)                                                                        error correction requirements, each of
                                                    its Business Clocks used solely for the                 these documentation requirements                      which is described below.
                                                    time of allocation on Allocation Reports                regarding clock synchronization are
                                                                                                            comparable to those set forth in                      (A) Recording and Reporting Industry
                                                    at a minimum to within a one second                                                                           Member Data
                                                    tolerance of the time maintained by the                 Supplementary Material .01 of FINRA
                                                                                                            Rule 4590 (Synchronization of Member                    Paragraph (a) of Proposed Rule 4.7
                                                      25 In addition, Section 6.7(a)(ii) of the Plan sets   Business Clocks).                                     describes the recording and reporting of
                                                    forth the timeline for CAT Reporters to comply with        Paragraph (c) of Proposed Rule 4.6                 Industry Member Data to the Central
                                                    the clock synchronization requirements.                 sets forth certification requirements                 Repository. Paragraph (a) consists of


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                                                    9854                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    paragraphs (a)(1)–(a)(3), which cover                   modification or cancellation instruction              (B) Timing of Recording and Reporting
                                                    Recorded Industry Member Data,                          was given by the Customer or was                        Paragraph (b) of Proposed Rule 4.7
                                                    Received Industry Member Data and                       initiated by the Industry Member;                     describes the requirements related to the
                                                    Options Market Maker data,                                 • if the order is executed, in whole or            timing of recording and reporting of
                                                    respectively. Paragraphs (a)(1)–(a)(3) of               in part: (1) CAT-Order-ID; (2) date of                Industry Member Data. Paragraphs
                                                    Proposed Rule 4.7 set forth the                         execution; (3) time of execution (using               (b)(1)–(b)(3) of Proposed Rule 4.7 set
                                                    recording and reporting requirements                    timestamps pursuant to Proposed Rule                  forth the requirements related to the
                                                    required in Section 6.4(d)(i)–(iii) of the              4.10; (4) execution capacity (principal,              timing of the recording and reporting
                                                    CAT NMS Plan, respectively.                             agency or riskless principal); (5)                    requirements required in Section
                                                      Paragraph (a)(1) requires, subject to                 execution price and size; (6) SRO-
                                                    paragraph (a)(3) regarding Options                                                                            6.4(b)(i)–(ii) of the CAT NMS Plan.
                                                                                                            Assigned Market Participant Identifier                  Paragraph (b)(1) of Proposed Rule 4.7
                                                    Market Makers, each Industry Member                     of the Industry Member executing the
                                                    to record and electronically report to the                                                                    requires each Industry Member to
                                                                                                            order; (7) whether the execution was                  record Recorded Industry Member Data
                                                    Central Repository the following details                reported pursuant to an effective
                                                    for each order and each Reportable                                                                            contemporaneously with the applicable
                                                                                                            transaction reporting plan or the Plan                Reportable Event. Paragraph (b)(2) of
                                                    Event, as applicable (‘‘Recorded                        for Reporting of Consolidated Options
                                                    Industry Member Data’’) in the manner                                                                         Proposed Rule 4.7 requires each
                                                                                                            Last Sale Reports and Quotation                       Industry Member to report: (1) Recorded
                                                    prescribed by the Operating Committee                   Information; and
                                                    pursuant to the CAT NMS Plan:                                                                                 Industry Member Data to the Central
                                                      • For original receipt or origination of                 • other information or additional                  Repository by 8:00 a.m. Eastern Time on
                                                    an order: (1) Firm Designated ID(s) for                 events as may be prescribed pursuant to               the Trading Day following the day the
                                                    each Customer; (2) CAT-Order-ID; (3)                    the CAT NMS Plan.                                     Industry Member records such Recorded
                                                    SRO-Assigned Market Participant                            Paragraph (a)(2) of Proposed Rule 4.7              Industry Member Data; and (2) Received
                                                    Identifier of the Industry Member                       requires, subject to paragraph (a)(3)                 Industry Member Data to the Central
                                                    receiving or originating the order; (4)                 regarding Options Market Makers, each                 Repository by 8:00 a.m. Eastern Time on
                                                    date of order receipt or origination; (5)               Industry Member to record and report to               the Trading Day following the day the
                                                    time of order receipt or origination                    the Central Repository the following, as              Industry Member receives such
                                                    (using timestamps pursuant to Proposed                  applicable (‘‘Received Industry Member                Received Industry Member Data.
                                                    Rule 4.10); and (6) Material Terms of the               Data’’ and collectively with the                      Paragraph (b)(3) states that Industry
                                                    Order;                                                  information referred to in Rule 4.7(a)(1)             Members may, but are not required to,
                                                      • for the routing of an order: (1) CAT-               ‘‘Industry Member Data’’)) in the                     voluntarily report Industry Member
                                                    Order-ID; (2) date on which the order is                manner prescribed by the Operating                    Data prior to the applicable 8:00 a.m.
                                                    routed; (3) time at which the order is                  Committee pursuant to the CAT NMS                     Eastern Time deadline.
                                                    routed (using timestamps pursuant to                    Plan:                                                 (C) Applicable Securities
                                                    Proposed Rule 4.10); (4) SRO-Assigned                      • If the order is executed, in whole or
                                                    Market Participant Identifier of the                    in part: (1) An Allocation Report; (2)                   Paragraph (c) of Proposed Rule 4.7
                                                    Industry Member routing the order; (5)                  SRO-Assigned Market Participant                       describes the securities to which the
                                                    SRO-Assigned Market Participant                         Identifier of the clearing broker or prime            recording and reporting requirements of
                                                    Identifier of the Industry Member or                    broker, if applicable; and (3) CAT-                   Proposed Rule 4.7 apply. Paragraphs
                                                    Participant to which the order is being                 Order-ID of any contra-side order(s);                 (c)(1) and (c)(2) of Proposed Rule 4.7 set
                                                    routed; (6) if routed internally at the                                                                       forth the description of applicable
                                                                                                               • if the trade is cancelled, a cancelled           securities as set forth in Section 6.4(c)(i)
                                                    Industry Member, the identity and
                                                                                                            trade indicator; and                                  and (ii) of the CAT NMS Plan,
                                                    nature of the department or desk to
                                                    which the order is routed; and (7)                         • for original receipt or origination of           respectively. Paragraph (c)(1) of
                                                    Material Terms of the Order;                            an order, the Firm Designated ID for the              Proposed Rule 4.7 requires each
                                                      • for the receipt of an order that has                relevant Customer, and in accordance                  Industry Member to record and report to
                                                    been routed, the following information:                 with Proposed Rule 4.8, Customer                      the Central Repository the Industry
                                                    (1) CAT-Order-ID; (2) date on which the                 Account Information and Customer                      Member Data as set forth in paragraph
                                                    order is received; (3) time at which the                Identifying Information for the relevant              (a) of Proposed Rule 4.7 for each NMS
                                                    order is received (using timestamps                     Customer.                                             Security registered or listed for trading
                                                    pursuant to Proposed Rule 4.10); (4)                       Paragraph (a)(3) of Proposed Rule 4.7              on such exchange or admitted to
                                                    SRO-Assigned Market Participant                         states that each Industry Member that is              unlisted trading privileges on such
                                                    Identifier of the Industry Member                       an Options Market Maker is not                        exchange. Paragraph (c)(2) of Proposed
                                                    receiving the order; (5) SRO-Assigned                   required to report to the Central                     Rule 4.7 requires each Industry Member
                                                    Market Participant Identifier of the                    Repository the Industry Member Data                   to record and report to the Central
                                                    Industry Member or Participant routing                  regarding the routing, modification or                Repository the Industry Member Data as
                                                    the order; and (6) Material Terms of the                cancellation of its quotes in Listed                  set forth in paragraph (a) of this
                                                    Order;                                                  Options. Each Industry Member that is                 Proposed Rule 4.7 for each Eligible
                                                      • if the order is modified or                         an Options Market Maker, however, is                  Security for which transaction reports
                                                    cancelled: (1) CAT-Order-ID; (2) date the               required to report to the Exchange the                are required to be submitted to FINRA.
                                                    modification or cancellation is received                time at which its quote in a Listed
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                                                    or originated; (3) time at which the                    Option is sent to the Exchange (and, if               (D) Security Symbology
                                                    modification or cancellation is received                applicable, any subsequent quote                        Paragraph (d) of Proposed Rule 4.7
                                                    or originated (using timestamps                         modification time and/or cancellation                 describes the security symbology that
                                                    pursuant to Proposed Rule 4.10); (4)                    time when such modification or                        Industry Members are required to use
                                                    price and remaining size of the order, if               cancellation is originated by the Options             when reporting Industry Member Data
                                                    modified; (5) other changes in the                      Market Maker). This paragraph                         to the Central Repository. Paragraph
                                                    Material Terms of the Order, if                         implements the Options Market Maker                   (d)(1) of Proposed Rule 4.7 requires, for
                                                    modified; and (6) whether the                           Quote Exemption, as discussed above.                  each exchange-listed Eligible Security,


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9855

                                                    each Industry Member to report                          Information and Customer Identifying                  submit to the Central Repository
                                                    Industry Member Data to the Central                     Information for each of its Customers                 information sufficient to identify such
                                                    Repository using the symbology format                   with an Active Account prior to such                  Industry Member, including CRD
                                                    of the exchange listing the security. This              Industry Member’s commencement of                     number and LEI, if such LEI has been
                                                    requirement implements the                              reporting to the Central Repository and               obtained, prior to such Industry
                                                    requirement set forth in Section 2 of                   in accordance with the deadlines set                  Member’s commencement of reporting
                                                    Appendix D of the CAT NMS Plan to                       forth in Rule 4.13. Paragraph (b) of                  to the Central Repository and in
                                                    use the listing exchange symbology                      Proposed Rule 4.8 requires each                       accordance with the deadlines set forth
                                                    when reporting data to the Central                      Industry Member to submit to the                      in Rule 4.13, and keep such information
                                                    Repository for exchange-listed Eligible                 Central Repository any updates,                       up to date as necessary.
                                                    Securities.                                             additions or other changes to the Firm
                                                       For each Eligible Security that is not               Designated ID, Customer Account                       (vi) Time Stamps
                                                    exchange-listed, however, there is no                   Information and Customer Identifying                     SEC Rule 613(d)(3) under Regulation
                                                    listing exchange to provide the                         Information for each of its Customers                 NMS sets forth requirements for time
                                                    symbology format. Moreover, to date,                    with an Active Account on a daily basis.              stamps used by CAT Reporters in
                                                    the requisite symbology format has not                  Paragraph (c) of Proposed Rule 4.8                    recording and reporting data to the
                                                    been determined. Therefore, Paragraph                   requires each Industry Member, on a                   CAT.26 To comply with this provision,
                                                    (d)(2) of Proposed Rule 4.7 requires, for               periodic basis as designated by the Plan              Section 6.8(b) of the Plan sets forth time
                                                    each Eligible Security that is not                      Processor and approved by the                         stamp requirements for Industry
                                                    exchange-listed, each Industry Member                   Operating Committee, to submit to the                 Members. To implement this provision
                                                    to report Industry Member Data to the                   Central Repository a complete set of                  with regard to its Industry Members, the
                                                    Central Repository using such                           Firm Designated IDs, Customer Account                 Exchange proposes new Rule 4.10
                                                    symbology format as approved by the                     Information and Customer Identifying                  (Consolidated Audit Trail—Time
                                                    Operating Committee pursuant to the                     Information for each of its Customers                 Stamps) to require its Industry Members
                                                    CAT NMS Plan. The Exchange intends                      with an Active Account. This periodic                 to comply with the time stamp
                                                    to announce to its Industry Members the                 refresh is intended to ensure that the                requirements of the Plan.
                                                    relevant symbology formats established                  Central Repository has the most current                  Paragraph (a) of Proposed Rule 4.10
                                                    by the Operating Committee via                          information identifying a Customer. The               sets forth the time stamp increments to
                                                    Regulatory Circular.                                    Exchange intends to announce to its                   be used by Industry Members in their
                                                    (E) Error Correction                                    Industry Members when such a periodic                 CAT reporting. Paragraph (a)(1) of
                                                                                                            refresh is required by the Plan Processor             Proposed Rule 4.10 requires each
                                                      To ensure that the CAT contains                       and the Operating Committee via
                                                    accurate data, the CAT NMS Plan                                                                               Industry Member to record and report
                                                                                                            Regulatory Circular.                                  Industry Member Data to the Central
                                                    requires Industry Members to correct                      Finally, paragraph (d) of Proposed
                                                    erroneous data submitted to the Central                                                                       Repository with time stamps in
                                                                                                            Rule 4.8 addresses the correction of
                                                    Repository. Therefore, the Exchange                                                                           milliseconds, subject to paragraphs
                                                                                                            erroneous Customer data reported to the
                                                    proposes to adopt paragraph (e) of                                                                            (a)(2) and (b) of Proposed Rule 4.10. To
                                                                                                            Central Repository to ensure an accurate
                                                    Proposed Rule 4.7, which addresses the                                                                        the extent that any Industry Member’s
                                                                                                            audit trail. Paragraph (d) requires, for
                                                    correction of erroneous data reported to                                                                      order handling or execution systems
                                                                                                            each Industry Member for which errors
                                                    the Central Repository. Paragraph (e) of                                                                      utilize time stamps in increments finer
                                                                                                            in Firm Designated ID, Customer
                                                    Proposed Rule 4.7 requires, for each                                                                          than milliseconds, paragraph (a)(2) of
                                                                                                            Account Information and Customer
                                                    Industry Member for which errors in                                                                           Proposed Rule 4.10 requires such
                                                                                                            Identifying Information for each of its
                                                    Industry Member Data submitted to the                                                                         Industry Member to record and report
                                                                                                            Customers with an Active Account
                                                    Central Repository have been identified                                                                       Industry Member Data to the Central
                                                                                                            submitted to the Central Repository
                                                    by the Plan Processor or otherwise, that                have been identified by the Plan                      Repository with time stamps in such
                                                    such Industry Member submit corrected                   Processor or otherwise, such Member to                finer increment, subject to paragraph (b)
                                                    Industry Member Data to the Central                     submit corrected data to the Central                  of Proposed Rule 4.10 regarding Manual
                                                    Repository by 8:00 a.m. Eastern Time on                 Repository by 5:00 p.m. Eastern Time on               Order Events and Allocation Reports.
                                                    T+3. This requirement implements the                    T+3. This requirement implements the                     Paragraph (b) of Proposed Rule 4.10
                                                    error correction requirement set forth in               error correction requirement set forth in             sets forth the permissible time stamp
                                                    Section 6 of Appendix D of the CAT                      Appendix C of the CAT NMS Plan.                       increments for Manual Order Events
                                                    NMS Plan.                                                                                                     and Allocation Reports. Specifically,
                                                                                                            (v) Industry Member Information                       paragraph (b)(1) of Proposed Rule 4.10
                                                    (iv) Customer Information Reporting                     Reporting                                             permits each Industry Member to record
                                                       Section 6.4(d)(iv) of the CAT NMS                      Section 6.4(d)(vi) of the CAT NMS                   and report Manual Order Events to the
                                                    Plan requires Industry Members to                       Plan requires Industry Members to                     Central Repository in increments up to
                                                    submit to the Central Repository certain                submit to the Central Repository                      and including one second, provided that
                                                    information related to their Customers                  information sufficient to identify such               each Industry Member is required to
                                                    in accordance with the Customer                         Industry Member, including CRD                        record and report the time when a
                                                    Information Approach discussed above.                   number and LEI, if such LEI has been                  Manual Order Event has been captured
                                                    The Exchange proposes Rule 4.8                          obtained, in accordance with the                      electronically in an order handling and
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                                                    (Consolidated Audit Trail—Customer                      Existing Identifier Approach discussed                execution system of such Member
                                                    Information Reporting) to implement                     above. The Exchange proposes Rule 4.9                 (‘‘Electronic Capture Time’’) in
                                                    this provision of the CAT NMS Plan                      (Consolidated Audit Trail—Industry                    milliseconds. In addition, paragraph
                                                    with regard to its Industry Members.                    Member Information Reporting) to                      (b)(2) of Proposed Rule 4.10 permits
                                                    Specifically, paragraph (a) of Proposed                 implement this provision of the CAT                   each Industry Member to record and
                                                    Rule 4.8 requires each Industry Member                  NMS Plan with regard to its Industry                  report the time of Allocation Reports in
                                                    to submit to the Central Repository the                 Members. Specifically, Proposed Rule
                                                    Firm Designated ID, Customer Account                    4.9 requires each Industry Member to                    26 17   CFR 242.613(d)(3).



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                                                    9856                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    increments up to and including one                      based on FINRA Rule 7450(c), which                    respectively, to the Central Repository
                                                    second.                                                 permits OATS Reporting Members to                     for processing no later than October 15,
                                                                                                            enter into agreements with Reporting                  2018. Paragraph (a)(2)(ii) requires Small
                                                    (vii) Clock Synchronization Rule
                                                                                                            Agents to fulfill the OATS obligations of             Industry Members to begin reporting
                                                    Violations
                                                                                                            the OATS Reporting Member.                            Customer and Industry Member
                                                      Proposed Rule 4.11 (Consolidated                      Specifically, Paragraph (c)(1) of                     information, as required by Rules 4.8(a)
                                                    Audit Trail—Clock Synchronization                       Proposed Rule 4.12 states that any                    and 4.9, respectively, to the Central
                                                    Rule Violations) describes potential                    Industry Member may enter into an                     Repository for processing no later than
                                                    violations of the clock synchronization                 agreement with a CAT Reporting Agent                  October 15, 2019.
                                                    time period requirements set forth in the               pursuant to which the CAT Reporting                     Paragraph (a)(3) sets forth the
                                                    Proposed Rules 4.5 through 4.16.                        Agent agrees to fulfill the obligations of            deadlines related to the submission of
                                                    Proposed Rule 4.11 states that an                       such Industry Member under the                        order data. Under paragraph (a)(3)(i),
                                                    Industry Member that engages in a                       Proposed Rules 4.5 through 4.16. Any                  Industry Members (other than Small
                                                    pattern or practice of reporting                        such agreement must be evidenced in                   Industry Members) are permitted, but
                                                    Reportable Events outside of the                        writing, which specifies the respective               not required, to submit order data for
                                                    required clock synchronization time                     functions and responsibilities of each                testing purposes beginning no later than
                                                    period as set forth in the Proposed Rules               party to the agreement that are required              May 15, 2018. In addition, Industry
                                                    4.5 through 4.16 without reasonable                     to effect full compliance with the                    Members (other than Small Industry
                                                    justification or exceptional                            requirements of the Proposed Rules 4.5                Members) are required to participate in
                                                    circumstances may be considered in                      through 4.16. The Exchange notes that,                the coordinated and structured testing
                                                    violation of this Rule. This provision                  currently, no standardized form                       of order submission, which will begin
                                                    implements the requirements of Section                  agreement for CAT Reporting Agent                     no later than August 15, 2018. Under
                                                    6.8 of the CAT NMS Plan which                           arrangements has been adopted.                        paragraph (a)(3)(ii), Small Industry
                                                    requires the Compliance Rule to provide                 Paragraph (c)(2) of Proposed Rule 4.12                Members are permitted, but not
                                                    that a pattern or practice of reporting                 requires that all written documents                   required, to submit order data for testing
                                                    events outside of the required clock                    evidencing an agreement with a CAT                    purposes beginning no later than May
                                                    synchronization time period without                     Reporting Agent be maintained by each                 15, 2019. In addition, Small Industry
                                                    reasonable justification or exceptional                 party to the agreement. Paragraph (c)(3)              Members are required to participate in
                                                    circumstances may be considered a                       states that each Industry Member                      the coordinated and structured testing
                                                    violation of SEC Rule 613 or the CAT                    remains primarily responsible for                     of order submission, which will begin
                                                    NMS Plan.                                               compliance with the requirements of the               no later than August 15, 2019.
                                                                                                            Proposed Rules 4.5 through 4.16,                        Paragraph (a)(4) states that Industry
                                                    (viii) Connectivity and Data
                                                                                                            notwithstanding the existence of an                   Members are permitted, but not required
                                                    Transmission
                                                                                                            agreement described in paragraph (c) of               to, submit Quote Sent Times on Options
                                                      Proposed Rule 4.12 (Consolidated                      Proposed Rule 4.12.                                   Market Maker quotes, beginning no later
                                                    Audit Trail—Connectivity and Data                                                                             than October 15, 2018.
                                                    Transmission) addresses connectivity                    (ix) Development and Testing                            Paragraph (b) of Proposed Rule 4.13
                                                    and data transmission requirements                         The Exchange proposes Rule 4.13                    implements the requirement under the
                                                    related to the CAT. Paragraph (a) of                    (Consolidated Audit Trail—                            CAT NMS Plan that Industry Members
                                                    Proposed Rule 4.12 describes the                        Development and Testing) to address                   participate in required industry testing
                                                    format(s) for reporting Industry Member                 requirements for Industry Members                     with the Central Repository.27
                                                    Data to the Central Repository, thereby                 related to CAT development and testing.               Specifically, Proposed Rule 4.13
                                                    implementing the formatting                             Paragraph (a) of Proposed Rule 4.13 sets              requires that each Industry Member
                                                    requirements as set forth in Section                    forth the testing requirements and                    participate in testing related to the
                                                    6.4(a) of the CAT NMS Plan.                             deadlines for Industry Members to                     Central Repository, including any
                                                    Specifically, paragraph (a) of Proposed                 develop and commence reporting to the                 industry-wide disaster recovery testing,
                                                    Rule 4.12 requires each Industry                        Central Repository. These requirements                pursuant to the schedule established
                                                    Member to transmit data as required                     are set forth in Appendix C to the CAT                pursuant to the CAT NMS Plan. The
                                                    under the CAT NMS Plan to the Central                   NMS Plan.                                             Exchange intends to announce to its
                                                    Repository utilizing such format(s) as                     Paragraph (a)(1) sets forth the                    Industry Members the schedule
                                                    may be provided by the Plan Processor                   deadlines related to connectivity and                 established pursuant to the CAT NMS
                                                    and approved by the Operating                           acceptance testing. Industry Members                  Plan via Regulatory Circular.
                                                    Committee.                                              (other than Small Industry Members) are
                                                      Paragraph (b) of Proposed Rule 4.12                   required to begin connectivity and                    (x) Recordkeeping
                                                    addresses connectivity requirements                     acceptance testing with the Central                     Proposed Rule 4.14 (Consolidated
                                                    related to the CAT. Paragraph (b) of                    Repository no later than August 15,                   Audit Trail—Recordkeeping) sets forth
                                                    Proposed Rule 4.12 requires each                        2018, and Small Industry Members are                  the recordkeeping obligations related to
                                                    Industry Member to connect to the                       required to begin connectivity and                    the CAT for Industry Members.
                                                    Central Repository using a secure                       acceptance testing with the Central                   Proposed Rule 4.14 requires each
                                                    method(s), including, but not limited to,               Repository no later than August 15,                   Industry Member to maintain and
                                                    private line(s) and virtual private                     2019.                                                 preserve records of the information
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                                                    network connection(s). This provision                      Paragraph (a)(2) sets forth the                    required to be recorded in accordance
                                                    implements the connectivity                             deadlines related to reporting Customer               with the Proposed Rules 4.5 through
                                                    requirements set forth in Section 4 of                  and Industry Member information.                      4.16, for the period of time and
                                                    Appendix D to the CAT NMS Plan.                         Paragraph (a)(2)(i) requires Industry                 accessibility specified in SEC Rule 17a–
                                                      Paragraph (c) permits Industry                        Members (other than Small Industry                    4(b). The records required to be
                                                    Members to use CAT Reporting Agents                     Members) to begin reporting Customer                  maintained and preserved in accordance
                                                    to fulfill their data reporting obligations             and Industry Member information, as
                                                    related to the CAT. Paragraph (c) is                    required by Rules 4.8(a) and 4.9,                       27 Approval   Order at 84725.



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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                          9857

                                                    with Proposed Rules 4.5 through 4.16,                     its error percentage exceeds the                       commencing on or before March 15,
                                                    may be immediately produced or                            maximum Error Rate established by the                  2017. Paragraph (b)(2) states that each
                                                    reproduced on ‘‘micrographic media’’ as                   Operating Committee pursuant to the                    Industry Member shall comply with
                                                    defined in SEC Rule 17a–4(f)(1)(i) or by                  CAT NMS Plan, then such Industry                       Rule 4.6 with regard to Business Clocks
                                                    means of ‘‘electronic storage media’’ as                  Member would not be in compliance                      that do not capture time in milliseconds
                                                    defined in SEC Rule 17a–4(f)(1)(ii) that                  with the Rules 4.5 through 4.16. As                    commencing on or before February 19,
                                                    meet the conditions set forth in SEC                      discussed above, the initial maximum                   2018. The compliance date set forth in
                                                    Rule 17a–4(f) and be maintained and                       Error Rate is 5%, although the Error                   paragraph (b)(1) reflects the exemptive
                                                    preserved for the required time in that                   Rate is expected to be reduced over                    relief requested by the Participants with
                                                    form. Proposed Rule 4.14 is based on                      time. The Exchange intends to                          regard to the clock synchronization
                                                    FINRA Rule 7440(a)(5), which sets forth                   announce to its Industry Members                       requirements related to Business Clocks
                                                    the recordkeeping requirements related                    changes to the Error Rate established                  that do not capture time in
                                                    to OATS.                                                  pursuant to the CAT NMS Plan via                       milliseconds.31
                                                                                                              Regulatory Circular.                                     Paragraph (c) of Proposed Rule 4.16
                                                    (xi) Timely, Accurate and Complete                           Furthermore, paragraph (d) of                       establishes the compliance dates for the
                                                    Data                                                      Proposed Rule 4.15 addresses                           data recording and reporting
                                                       SEC Rule 613 and the CAT NMS Plan                      Compliance Thresholds related to                       requirements for Industry Members.
                                                    emphasize the importance of the                           reporting data to the CAT. Proposed                    Paragraph (c)(1) requires each Industry
                                                    timeliness, accuracy, completeness and                    Rule 4.15 states that each Industry                    Member (other than Small Industry
                                                    integrity of the data submitted to the                    Member is required to meet a separate                  Members) to record and report the
                                                    CAT.28 Accordingly, Proposed Rule 4.15                    compliance threshold which will be an                  Industry Member Data to the Central
                                                    (Consolidated Audit Trail—Timely,                         Industry Member-specific rate that may                 Repository by November 15, 2018.
                                                    Accurate and Complete Data)                               be used as the basis for further review                Paragraph (c)(2) requires that each
                                                    implements this requirement with                          or investigation into the Industry                     Industry Member that is a Small
                                                    regard to Industry Members. Paragraph                     Member’s performance with regard to                    Industry Member to record and report
                                                    (a) of Proposed Rule 4.15 requires that                   the CAT (the ‘‘Compliance                              the Industry Member Data to the Central
                                                    Industry Members record and report                        Thresholds’’). Compliance Thresholds                   Repository by November 15, 2019. Such
                                                    data to the Central Repository as                         will compare an Industry Member’s                      compliance dates are consistent with
                                                    required by the Proposed Rules 4.5                        error rate to the aggregate Error Rate                 the compliance dates set forth in SEC
                                                    through 4.16 in a manner that ensures                     over a period of time to be defined by                 Rule 613(a)(3)(v) and (vi), and Section
                                                    the timeliness, accuracy, integrity and                   the Operating Committee. Compliance                    6.7(a)(v) and (vi) of the CAT NMS Plan.
                                                    completeness of such data.                                Thresholds will be set by the Operating
                                                                                                                                                                     2. Statutory Basis
                                                       In addition, without limiting the                      Committee, and will be calculated at
                                                    general requirement as set forth in                       intervals to be set by the Operating                      The Exchange believes that the
                                                    paragraph (a), paragraph (b) of Proposed                  Committee.30 Compliance Thresholds                     proposed rule change is consistent with
                                                    Rule 4.15 requires Industry Members to                    will include compliance with the data                  the provisions of Section 6(b)(5) of the
                                                    accurately provide the LEIs in their                      reporting and clock synchronization                    Act,32 which require, among other
                                                    records as required by the Proposed                       requirements. Proposed Rule 4.15 states                things, that the Exchange’s rules must
                                                    Rules 4.5 through 4.16 and states that                    that an Industry Member’s performance                  be designed to prevent fraudulent and
                                                    Industry Members may not knowingly                        with respect to its Compliance                         manipulative acts and practices, to
                                                    submit inaccurate LEIs to the Central                     Threshold will not signify, as a matter                promote just and equitable principles of
                                                    Repository. Paragraph (b) notes,                          of law, that such Industry Member has                  trade, and, in general, to protect
                                                    however, that this requirement does not                   violated the Proposed Rules 4.5 through                investors and the public interest, and
                                                    impose any additional due diligence                       4.16.                                                  Section 6(b)(8) of the Act,33 which
                                                    obligations on Industry Members with                                                                             requires that the Exchange’s rules not
                                                                                                              (xii) Compliance Dates                                 impose any burden on competition that
                                                    regard to LEIs for CAT purposes.
                                                    Accordingly, this provision does not                        Proposed Rule 4.16 (Consolidated                     is not necessary or appropriate.
                                                    impose any due diligence obligations                      Audit Trail—Compliance Dates) sets                        The Exchange believes that this
                                                    beyond those that may exist today with                    forth the compliance dates for the                     proposal is consistent with the Act
                                                    respect to information associated with                    various provisions of the Proposed                     because it implements, interprets or
                                                    an LEI. Although Industry Members will                    Rules 4.5 through 4.16. Paragraphs (b)                 clarifies the provisions of the Plan, and
                                                    not be required to perform additional                     and (c) of this Rule set forth the                     is designed to assist the Exchange and
                                                    due diligence with regard to the LEIs for                 additional details with respect to the                 its Industry Members in meeting
                                                    CAT purposes, Industry Members will                       compliance date of the Proposed Rules                  regulatory obligations pursuant to the
                                                    be required to accurately provide the                     4.5 through 4.16. Unless otherwise                     Plan. In approving the Plan, the SEC
                                                    LEIs in their records and may not                         noted, the Proposed Rules 4.5 through                  noted that the Plan ‘‘is necessary and
                                                    knowingly submit inaccurate LEIs to the                   4.16 will be fully effective upon                      appropriate in the public interest, for
                                                    CAT. Paragraph (b) is consistent with                     approval by the Commission and                         the protection of investors and the
                                                    the SEC’s statements in the Approval                      Members must comply with their terms.                  maintenance of fair and orderly markets,
                                                    Order for the CAT NMS Plan regarding                        Paragraph (b) of Proposed Rule 4.16                  to remove impediments to, and perfect
                                                                                                              establishes the compliance dates for the               the mechanism of a national market
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                                                    an Industry Member’s obligations
                                                    regarding LEIs.29                                         clock synchronization requirements as                  system, or is otherwise in furtherance of
                                                       Paragraph (c) states that, if an                       set forth in Proposed Rule 4.6.
                                                    Industry Member reports data to the                       Paragraph (b)(1) states that each                        31 See Letter from Participants to Brent J. Fields,

                                                                                                              Industry Member shall comply with                      Secretary, U.S. Securities and Exchange
                                                    Central Repository with errors such that                                                                         Commission, dated January 17, 2017, requesting
                                                                                                              Rule 4.6 with regard to Business Clocks                exemptive relief from SEC Rule 613(a)(3)(iii) and
                                                      28 See SEC Rule 613(e)(4)(i)(D)(ii); and Section        that capture time in milliseconds                      Section 6.7(a)(ii) of the CAT NMS Plan.
                                                    6.5(d) of the CAT NMS Plan.                                                                                        32 15 U.S.C. 78f(b)(5).
                                                      29 Approval Order at 84745.                               30 Appendix     C of the CAT NMS Plan.                 33 15 U.S.C. 78f(b)(8).




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                                                    9858                        Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    the purposes of the Act.’’ 34 To the                     Comments may be submitted by any of                    SECURITIES AND EXCHANGE
                                                    extent that this proposal implements,                    the following methods:                                 COMMISSION
                                                    interprets or clarifies the Plan and
                                                    applies specific requirements to                         Electronic Comments
                                                                                                                                                                    [Release No. 34–79940; File No. SR–IEX–
                                                    Industry Members, the Exchange                             • Use the Commission’s Internet                      2017–03]
                                                    believes that this proposal furthers the                 comment form (http://www.sec.gov/
                                                    objectives of the Plan, as identified by                 rules/sro.shtml); or                                   Self-Regulatory Organizations:
                                                    the SEC, and is therefore consistent with                                                                       Investors Exchange LLC; Notice of
                                                    the Act.                                                   • Send an email to rule-comments@                    Filing of Proposed Rule Change To
                                                                                                             sec.gov. Please include File Number SR–                Amend IEX Rule 16.135 To Adopt
                                                    (B) Self-Regulatory Organization’s                       BatsBYX–2017–02 on the subject line.                   Generic Listing Standards for Managed
                                                    Statement on Burden on Competition
                                                                                                             Paper Comments                                         Fund Shares
                                                       The Exchange does not believe that
                                                                                                                                                                    February 2, 2017.
                                                    the proposed rule change will result in                    • Send paper comments in triplicate
                                                    any burden on competition that is not                                                                              Pursuant to Section 19(b)(1) 1 of the
                                                                                                             to Secretary, Securities and Exchange
                                                    necessary or appropriate in furtherance                                                                         Securities Exchange Act of 1934 (the
                                                                                                             Commission, 100 F Street NE.,
                                                    of the purposes of the Act. The                                                                                 ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
                                                                                                             Washington, DC 20549–1090.
                                                    Exchange notes that the proposed rule                                                                           notice is hereby given that, on January
                                                    change implements provisions of the                      All submissions should refer to File                   19, 2017, the Investors Exchange LLC
                                                    CAT NMS Plan, and is designed to                         Number SR–BatsBYX–2017–02. This                        (‘‘IEX’’ or the ‘‘Exchange’’) filed with the
                                                    assist the Exchange in meeting its                       file number should be included on the                  Securities and Exchange Commission
                                                    regulatory obligations pursuant to the                   subject line if email is used. To help the             (the ‘‘Commission’’) the proposed rule
                                                    Plan. The Exchange also notes that the                   Commission process and review your                     change as described in Items I and II
                                                    Proposed Rules 4.5 through 4.16                          comments more efficiently, please use                  below, which Items have been prepared
                                                    implement provisions of the CAT NMS                      only one method. The Commission will                   by the self-regulatory organization. The
                                                    Plan will apply equally to all firms that                post all comments on the Commission’s                  Commission is publishing this notice to
                                                    trade NMS Securities and OTC Equity                      Internet Web site (http://www.sec.gov/                 solicit comments on the proposed rule
                                                    Securities. In addition, all national                    rules/sro.shtml). Copies of the                        change from interested persons.
                                                    securities exchanges and FINRA are                       submission, all subsequent                             I. Self-Regulatory Organization’s
                                                    proposing similar rules to apply the                     amendments, all written statements                     Statement of the Terms of Substance of
                                                    requirements of the CAT NMS Plan to                      with respect to the proposed rule                      the Proposed Rule Change
                                                    their members. Therefore, this is not a                  change that are filed with the
                                                    competitive rule filing, and, therefore, it                                                                        Pursuant to the provisions of Section
                                                                                                             Commission, and all written                            19(b)(1) under the Securities Exchange
                                                    does not impose a burden on                              communications relating to the
                                                    competition.                                                                                                    Act of 1934 (‘‘Act’’),4 and Rule 19b–4
                                                                                                             proposed rule change between the                       thereunder,5 Investors Exchange LLC
                                                    (C) Self-Regulatory Organization’s                       Commission and any person, other than                  (‘‘IEX’’ or ‘‘Exchange’’) is filing with the
                                                    Statement on Comments on the                             those that may be withheld from the                    Commission a proposed rule change to
                                                    Proposed Rule Change Received From                       public in accordance with the                          amend IEX Rule 16.135 to adopt generic
                                                    Members, Participants or Others                          provisions of 5 U.S.C. 552, will be                    listing standards for Managed Fund
                                                                                                             available for Web site viewing and                     Shares.
                                                      Written comments were neither
                                                                                                             printing in the Commission’s Public                       The text of the proposed rule change
                                                    solicited nor received.
                                                                                                             Reference Room, 100 F Street NE.,                      is available at the Exchange’s Web site
                                                    III. Date of Effectiveness of the                        Washington, DC 20549 on official                       at www.iextrading.com, at the principal
                                                    Proposed Rule Change and Timing for                      business days between the hours of                     office of the Exchange, and at the
                                                    Commission Action                                        10:00 a.m. and 3:00 p.m. Copies of the                 Commission’s Public Reference Room.
                                                       Within 45 days of the date of                         filing also will be available for                      II. Self-Regulatory Organization’s
                                                    publication of this notice in the Federal                inspection and copying at the principal                Statement of the Purpose of, and the
                                                    Register or within such longer period (i)                office of the Exchange. All comments                   Statutory Basis for, the Proposed Rule
                                                    as the Commission may designate up to                    received will be posted without change;                Change
                                                    90 days of such date if it finds such                    the Commission does not edit personal
                                                                                                             identifying information from                             In its filing with the Commission, the
                                                    longer period to be appropriate and                                                                             self-regulatory organization included
                                                    publishes its reasons for so finding or                  submissions. You should submit only
                                                                                                                                                                    statements concerning the purpose of
                                                    (ii) as to which the Exchange consents,                  information that you wish to make
                                                                                                                                                                    and basis for the proposed rule change
                                                    the Commission will: (a) By order                        available publicly. All submissions
                                                                                                                                                                    and discussed any comments it received
                                                    approve or disapprove such proposed                      should refer to File Number SR–                        on the proposed rule change. The text
                                                    rule change, or (b) institute proceedings                BatsBYX–2017–02 and should be                          of these statements may be examined at
                                                    to determine whether the proposed rule                   submitted on or before March 1, 2017.                  the places specified in Item IV below.
                                                    change should be disapproved.                              For the Commission, by the Division of               The self-regulatory organization has
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                                                    IV. Solicitation of Comments                             Trading and Markets, pursuant to delegated             prepared summaries, set forth in
                                                                                                             authority.35                                           Sections A, B, and C below, of the most
                                                      Interested persons are invited to                                                                             significant aspects of such statements.
                                                                                                             Robert W. Errett,
                                                    submit written data, views, and
                                                    arguments concerning the foregoing,                      Deputy Secretary.
                                                                                                                                                                      1 15 U.S.C. 78s(b)(1).
                                                    including whether the proposed rule                      [FR Doc. 2017–02549 Filed 2–7–17; 8:45 am]
                                                                                                                                                                      2 15 U.S.C. 78a.
                                                    change is consistent with the Act.                       BILLING CODE 8011–01–P                                   3 17 CFR 240.19b–4.
                                                                                                                                                                      4 15 U.S.C. 78s(b)(1).
                                                      34 Approval   Order at 84697.                            35 17   CFR 200.30–3(a)(12).                           5 17 CFR 240.19b–4.




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Document Created: 2017-02-08 02:59:10
Document Modified: 2017-02-08 02:59:10
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 9846 

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