82_FR_9929 82 FR 9904 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

82 FR 9904 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change 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 Range9904-9916
FR Document2017-02553

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9904-9916]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02553]



[[Page 9904]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79948; File No. SR-CHX-2017-03]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Proposed Rule Change 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 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that on February 1, 2017, the Chicago Stock Exchange, Inc. 
(``CHX'' or ``Exchange'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the self-
regulatory organization.\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 18, 2017 under File No. SR-CHX-2017-02, 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

    CHX proposes to amend the Rules of the Exchange (``CHX Rules'') to 
adopt Article 23 of the Rules of the Exchange (``CHX Rules'') 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\ The text of this proposed rule change 
is available on the Exchange's Web site at http://www.chx.com/regulatory-operations/rule-filings/, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.
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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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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B and C below, of the most 
significant parts of such statements.

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, the Exchange, 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 
``Plan Participants'' \5\) filed with the Commission, pursuant to 
Section 11A of the Exchange Act \6\ and Rule 608 of Regulation NMS 
thereunder,\7\ the CAT NMS Plan.\8\ The Plan Participants filed the 
Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. 
The Plan was published for comment in the Federal Register on May 17, 
2016,\9\ and approved by the Commission, as modified, on November 15, 
2016.\10\
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    \5\ A ``Participant'' is a ``member'' of the Exchange for 
purposes of the Act. See CHX Article 1, Rule 1(s). For the avoidance 
of confusion, the term ``Plan Participant'' will be used when 
referring to Participants of the Plan.
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608.
    \8\ See Letter from the Plan Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Plan Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Plan Participants 
submitted an amendment to the CAT NMS Plan. See Letter from Plan 
Participants to Brent J. Fields, Secretary, Commission, dated 
December 23, 2015.
    \9\ See Securities Exchange Act Release No. 77724 (Apr. 27, 
2016), 81 FR 30614 (May 17, 2016).
    \10\ 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 Plan Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\11\ As is described more fully below, the proposed Article 23 
sets forth the Compliance Rule to require Industry Members to comply 
with the provisions of the CAT NMS Plan. Proposed Article 23 includes 
twelve proposed Rules covering the following areas: (1) Definitions; 
(2) clock synchronization; (3) Industry Member Data reporting; (4) 
Customer information reporting; (5) Industry Member information 
reporting; (6) time stamps; (7) clock synchronization rule violations; 
(8) connectivity and data transmission; (9) development and testing; 
(10) recordkeeping; (11) timely, accurate and complete data; and (12) 
compliance dates. Each of these proposed Rules are discussed in detail 
below.
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    \11\ See SEC Rule 613(g)(1).
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(i) Definitions
    Proposed Rule 1 (Consolidated Audit Trail--Definitions) sets forth 
the definitions for the terms used in proposed Article 23. Each of the 
defined terms in proposed Rule 1 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 [sic] associated with orders. For example, SEC Rule 
613(c)(7)(i)(A) requires an Industry Member to report the ``Customer-
IDs'' for each Customer for the original receipt or origination of an 
order. ``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with 
respect to a customer, a code that uniquely and consistently identifies 
such customer for purposes of providing data to the Central 
Repository.'' SEC Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer. The SEC granted the Plan 
Participants exemptive relief to permit the use of an alternative 
approach to the requirement that an Industry Member report a Customer-
ID for every Customer upon original receipt or origination.\12\ The 
alternative

[[Page 9905]]

approach is called the Customer Information Approach.
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    \12\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would be 
permitted to use an account number or any other identifier defined by 
the firm, provided each identifier is unique across the firm for each 
business date (i.e., a single firm may not have multiple separate 
customers with the same identifier on any given date). Prior to their 
commencement of reporting to the CAT, Industry Members would submit an 
initial set of Customer information to the Central Repository, 
including the Firm Designated ID, Customer Identifying Information and 
Customer Account Information (which may include, as applicable, the 
Customer's name, address, date of birth, individual tax payer 
identifier number (``ITIN'')/social security number (``SSN''), 
individual's role in the account (e.g., primary holder, joint holder, 
guardian, trustee, person with power of attorney) and LEI and/or Larger 
[sic] Trader ID (``LTID'')). This process is referred to as the 
customer definition process.
    In accordance with the Customer Information Approach, Industry 
Members would be required to report only the Firm Designated ID for 
each new order submitted to the Central Repository, rather than the 
``Customer-ID'' with individual order events. Within the Central 
Repository, each Customer would be uniquely identified by identifiers 
or a combination of identifiers such as ITIN/SSN, date of birth, and as 
applicable, LEI and LTID. The Plan Processor would be required to use 
these unique identifiers to map orders to specific Customers across all 
Industry Members and Plan 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 Plan 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 1 describes those limited circumstances in which an 
Industry Member may report an ``Account Effective Date'' rather than 
the account open date. The proposed definition is the same as the 
definition of ``Account Effective Date'' set forth in Section 1.1 of 
the CAT NMS Plan, provided, however, that specific dates have replaced 
the descriptions of those dates set forth in Section 1.1 of the Plan.
    Specifically, paragraph (a)(1) defines ``Account Effective Date 
[sic] to mean, with regard to those circumstances in which an Industry 
Member has established a trading relationship with an institution but 
has not established an account with that institution: (1) When the 
trading relationship was established prior to November 15, 2018 for 
Industry Members other than Small Industry Members, or prior to 
November 15, 2019 for Small Industry Members, either (a) the date the 
relationship identifier was established within the Industry Member; (b) 
the date when trading began (i.e., the date the first order was 
received) using the relevant relationship identifier; or (c) if both 
dates are available, the earlier date will be used to the extent that 
the dates differ; or (2) when the trading relationship was established 
on or after November 15, 2018 for Industry Members other than Small 
Industry Members, or on or after November 15, 2019 for Small Industry 
Members, the date the Industry Member established the relationship 
identifier, which would be no later than the date the first order was 
received.
    Paragraph (a)(2) of proposed Rule 1 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 1 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation

[[Page 9906]]

Report Approach would permit Industry Members to record and report to 
the Central Repository an Allocation Report that includes, among other 
things, the Firm Designated ID for any account(s) to which executed 
shares are allocated when an execution is allocated in whole or part in 
lieu of requiring the reporting of the account number for any 
subaccount to which an execution is allocated, as is required by SEC 
Rule 613.\13\ Under SEC Rule 613, regulators would be able to link the 
subaccount to which an allocation was made to a specific order. In 
contrast, under the Allocation Report Approach, regulators would only 
be able to link an allocation to the account to which it was made, and 
not to a specific order.
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    \13\ 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 1 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 1 
defines the term ``Business Clock'' as a clock used to record the date 
and time of any Reportable Event required to be reported under this 
Article 23. 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 this Article 23.'' This change is 
intended to recognize that the Industry Members' obligations with 
regard to the CAT are set forth in this Article 23.
(E) CAT
    Paragraph (e) of proposed Rule 1 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 1 defines the term ``CAT NMS Plan'' 
to mean the National Market System Plan Governing the Consolidated 
Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to links the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of proposed 
Rule 1 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-ID'' is 
defined to mean a unique order identifier or series of unique order 
identifiers that allows the Central Repository to efficiently and 
accurately link all Reportable Events for an order, and all orders that 
result from the aggregation or disaggregation of such order. This is 
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule 
613(j)(1).
(H) CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf of the Industry Member.\14\ Such a third party, referred to 
in this proposed Article 23 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 1 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 this Article 23.
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    \14\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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    This definition is based on FINRA's definition of a ``Reporting 
Agent'' as set forth in FINRA's rule related to its Order Audit Trail 
System (``OATS''). Specifically, FINRA Rule 7410(n) defines a 
``Reporting Agent'' as a third party that enters into any agreement 
with a member pursuant to which the Reporting Agent agrees to fulfill 
such member's obligations under Rule 7450. The Reporting Agent for OATS 
fulfills a similar role to the CAT Reporting Agent.
(I) Central Repository
    Paragraph (i) of proposed Rule 1 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 1 defines the term ``Compliance 
Threshold'' as having the meaning set forth in proposed Rule 11(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 11(d), each Industry Member is required to 
meet a separate compliance threshold which will be an Industry Member-
specific rate that may be used as the basis for further review or 
investigation into the Industry Member's performance with regard to the 
CAT. This Industry Member-specific rate is the ``Compliance 
Threshold.''
(K) Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account Information, as well as 
data related to their Customer's Reportable Events. Accordingly, 
Paragraph (k) of proposed Rule 1 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

[[Page 9907]]

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 proposed Article 23. 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 1 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 1(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 1 defines the term ``Customer 
Identifying Information'' to mean information of sufficient detail to 
identify a Customer. With respect to individuals, ``Customer 
Identifying Information'' includes, but is not limited to: Name, 
address, date of birth, individual tax payer identification number 
(``ITIN'')/social security number (``SSN''), individual's role in the 
account (e.g., primary holder, joint holder, guardian, trustee, person 
with the power of attorney). With respect to legal entities, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``LEI'') or other comparable common entity identifier, if 
applicable. The definition further notes that an Industry Member that 
has an LEI for a Customer must submit the Customer's LEI in addition to 
other information of sufficient detail to identify the Customer. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\15\ Such Data 
Submitters may include those entities that are required to submit data 
to the Central Repository (e.g., national securities exchanges, 
national securities associations and Industry Members), third-parties 
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT 
Reporting Agents), and outside parties that are not required to submit 
data to the CAT but from which the CAT may receive data (e.g., 
securities information processors (``SIPs'')). To include this term in 
proposed Article 23, the Exchange proposes to define ``Data Submitter'' 
in paragraph (n) of proposed Rule 1. Specifically, paragraph (n) of 
proposed Rule 1 defines a ``Data Submitter'' to mean any person that 
reports data to the Central Repository, including national securities 
exchanges, national securities associations, broker-dealers, the SIPs 
for the CQS, CTA, UTP and Plan for Reporting of Consolidated Options 
Last Sale Reports and Quotation Information (``OPRA'') Plans, and 
certain other vendors or third parties that may submit data to the 
Central Repository on behalf of Industry Members.
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    \15\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of proposed Article 23 only apply to 
Reportable Events in Eligible Securities. Currently, an Eligible 
Security includes NMS Securities and OTC Equity Securities. 
Accordingly, paragraph (o) of proposed Rule 1 defines the term 
``Eligible Security'' to include: (1) All NMS Securities; and (2) all 
OTC Equity Securities. The terms ``NMS Securities'' and ``OTC Equity 
Securities'' are defined, in turn, below. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\16\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\17\ If an Industry Member reports CAT data to the Central 
Repository with errors such that their error percentage exceeds the 
maximum Error Rate, then such Industry Member would not be in 
compliance with the CAT NMS Plan or Rule 613.\18\ As such, the Exchange 
or the SEC ``[sic] may take appropriate action against an Industry 
Member for failing to comply with its CAT reporting obligations.\19\ 
The CAT NMS Plan sets the initial Error Rate at 5%.\20\ It is 
anticipated that the maximum Error Rate will be reviewed and lowered by 
the Operating Committee once Industry Members

[[Page 9908]]

begin to report to the Central Repository.\21\
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    \16\ Section 6.5(d)(i) of the CAT NMS Plan.
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \20\ Section 6.5(d)(i) of the CAT NMS Plan.
    \21\ Appendix C, Section A.3(b) of the CAT NMS Plan.
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    The CAT NMS Plan requires the Plan Processor to: (1) Measure and 
report errors every business day; (2) provide Industry Members daily 
statistics and error reports as they become available, including a 
description of such errors; (3) provide monthly reports to Industry 
Members that detail an Industry Member's performance and comparison 
statistics; (4) define educational and support programs for Industry 
Members to minimize Error Rates; and (5) identify, daily, all Industry 
Members exceeding the maximum allowable Error Rate. To timely correct 
data-submitted errors to the Central Repository, the CAT NMS Plan 
requires that the Central Repository receive and process error 
corrections at all times. Further, the CAT NMS Plan requires that 
Industry Members be able to submit error corrections to the Central 
Repository through a web-interface or via bulk uploads or file 
submissions, and that the Plan Processor, subject to the Operating 
Committee's approval, support the bulk replacement of records and the 
reprocessing of such records. The Plan Participants, furthermore, 
require that the Plan Processor identify Industry Member data 
submission errors based on the Plan Processor's validation 
processes.\22\
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    \22\ Approval Order at 84718.
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(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchange proposes to define the term ``Error Rate'' in 
proposed Rule 1. Paragraph (p) of proposed Rule 1 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 1. Specifically, paragraph (q) of proposed Rule 1 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 1 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 1 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 3(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 3(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of proposed Rule 1 defines the term ``Initial Plan 
Processor'' to mean the first Plan Processor selected by the Operating 
Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS 
Plan and the National Market System Plan Governing the Process for 
Selecting a Plan Processor and Developing a Plan for the Consolidated 
Audit Trail. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan, although the proposed definition uses the full name 
of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and this proposed Article 23 applies to Eligible 
Securities, which includes NMS Securities, which, in turn, includes 
Listed Options. Certain requirements of proposed Article 23 apply 
specifically to Listed Options. Accordingly, paragraph (u) of proposed 
Rule 1 defines the term ``Listed Option'' or ``Option.'' Specifically, 
paragraph (u) of proposed Rule 1 states that the term ``Listed Option'' 
or ``Option'' has the meaning set forth in SEC Rule 600(b)(35) of 
Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option 
as ``any option traded on a registered national securities exchange or 
automated facility of a national securities association.'' The Exchange 
notes that the proposed definition of ``Listed Option'' is the same 
definition as the definition set forth in Section 1.1 of the CAT NMS 
Plan.
(V) Manual Order Event
(I) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\23\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution systems uses timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize their respective Business 
Clocks (other than such Business Clocks used solely for Manual Order 
Events) at a minimum to within 50 milliseconds of the time maintained 
by the National Institute of Standards and Technology (``NIST''), and 
maintain such a synchronization. Each Industry Members [sic] is 
required to synchronize their Business Clocks used solely for Manual 
Order Events, however, at a minimum to within one second of the time 
maintained by the NIST.
---------------------------------------------------------------------------

    \23\ Exemption Order.

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[[Page 9909]]

(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 1. 
Specifically, paragraph (v) of proposed Rule 1 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 3 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 1. 
Specifically, paragraph (w) of proposed Rule 1 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 1. Specifically, paragraph (x) of proposed 
Rule 1 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 1 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 1 defines the term ``Operating 
Committee'' to mean the governing body of the CAT NMS, LLC designated 
as such and described in Article IV of the CAT NMS Plan. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan, except 
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the 
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC Rule 613, the details for each Options Market Maker quotation 
must be reported to the Central Repository by both the Options Market 
Maker and the options exchange to which it routes its quote.
    The SROs, however, requested and received exemptive relief from SEC 
Rule 613 so that the CAT NMS Plan may permit Options Market Maker 
quotes to be reported to the Central Repository by the relevant options 
exchange in lieu of requiring that such reporting be done by both the 
options exchange and the Options Market Maker, as is required by SEC 
Rule 613.\24\ In accordance with the exemptive relief, Options Market 
Makers would be required to report to the options exchange the time at 
which a quote in a Listed Option is sent to the options exchange. Such 
time information also will be reported to the Central Repository by the 
options exchange in lieu of reporting by the Options Market Maker.
---------------------------------------------------------------------------

    \24\ See Exemptive Request Letter at 2, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in proposed Rule 1. Specifically, paragraph (aa) of proposed 
Rule 1 defines the term ``Options Market Maker'' to mean a broker-
dealer registered with an exchange for the purpose of making markets in 
options contracts traded on the exchange. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    The proposed Article 23 requires each Industry Member to record and 
electronically report to the Central Repository certain details for 
each order. Accordingly, the Exchange proposes to define the term 
``Order'' in proposed Rule 1. Specifically, paragraph (bb) of proposed 
Rule 1 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 1. Specifically, paragraph (cc) of 
proposed Rule 1 defines the term ``OTC Equity Security'' to mean any 
equity security, other than an NMS Security, subject to prompt last 
sale reporting rules of a registered national securities association 
and reported to one of such association's equity trade reporting 
facilities. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(DD) Plan Participant \25\
---------------------------------------------------------------------------

    \25\ See supra note 5.
---------------------------------------------------------------------------

    Paragraph (dd) of proposed Rule 1 defines the term ``Plan 
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 1 defines the term ``Person'' to 
mean any

[[Page 9910]]

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 1 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 1 states that the term ``Received 
Industry Member Data'' has the meaning set forth in Rule 3(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 3(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 1 states that the term ``Recorded 
Industry Member Data'' has the meaning set forth in Rule 3(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 3(a)(1).
(II) Reportable Event
    The proposed Article 23 requires each Industry Member to record and 
electronically report to the Central Repository certain details for 
each Reportable Event. To clarify these requirements, the Exchange 
proposes to define the term ``Reportable Event'' in proposed Rule 1. 
Specifically, paragraph (ii) of proposed Rule 1 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 1 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).\26\ 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.
---------------------------------------------------------------------------

    \26\ 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, as well as 
information to identify each such Industry Member, including CRD number 
and LEI, if the SRO has collected such LEI of the Industry Member. 
Additionally, each Industry Member is required to submit to the Central 
Repository the CRD of the Industry Member, as well as the LEI of the 
Industry Member (if the Industry Member has an LEI). The Plan Processor 
will use this information to assign a CAT-Reporter-ID to each Industry 
Member for internal use within the Central Repository.
(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange 
proposes to define the term ``SRO-Assigned Market Participant'' in 
proposed Rule 1. Specifically, paragraph (kk) of proposed Rule 1 
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 Plan 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 proposed Article 23 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 1. Specifically, paragraph 
(ll) of proposed Rule 1 defines the term ``Small Industry Member'' to 
mean an Industry Member that qualifies as a small broker-dealer as 
defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as 
amended. This is the same in substance as the definition of ``Small 
Industry Member'' as set forth in Section 1.1 of the CAT NMS Plan. 
Specifically, Section 1.1 of the CAT NMS Plan defines a ``Small 
Industry Member'' as ``an Industry Member that qualifies as a small 
broker-dealer as defined in SEC Rule 613.'' The definition of a small 
broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as 
defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 3(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 1. Specifically, Paragraph (mm) of proposed Rule 1 
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.

[[Page 9911]]

(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.\27\ To implement these provisions 
with regard to its Industry Members, the Exchange proposes Rule 2 
(Consolidated Audit Trail--Clock Synchronization) to require its 
Industry Members to comply with the clock synchronization requirements 
of the Plan.
---------------------------------------------------------------------------

    \27\ 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 2 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(1) of proposed Rule 2 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 2 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 2 clarifies that the tolerance 
described in paragraphs (a)(1) and (2) of the proposed Rule 2 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 2 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 2 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 2 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of proposed Rule 2 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 2 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 Information Memorandum.
    Paragraph (d) of proposed Rule 2 establishes reporting requirements 
with regard to clock synchronization. Paragraph (d) of proposed Rule 2 
requires Industry Members to report to the Plan Processor and SRO 
violations of paragraph (a) of this Rule pursuant to the thresholds set 
by the Operating Committee pursuant to the CAT NMS Plan. This 
requirement is the same requirement as set forth in Section 
6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the relevant thresholds established 
by the Operating Committee via Information Memorandum.
(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 3 (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 3 has six [sic] sections covering: (1) Recording 
and reporting Industry Member Data, (2) timing of the recording and 
reporting, (3) the applicable securities cover by the recording and 
reporting requirements, (4) format, [sic] (5) the security symbology to 
be used in the recording and reporting, and (6) error correction 
requirements, each of which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 3 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry 
Member Data, Received Industry Member Data and Options Market Maker 
data, respectively. Paragraphs (a)(1)-(a)(3) of proposed Rule 3 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

[[Page 9912]]

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 6); 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 6); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member routing the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Plan 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 6); (4) SRO-Assigned Market Participant 
Identifier of the Industry Member receiving the order; (5) SRO-Assigned 
Market Participant Identifier of the Industry Member or Plan 
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 6); (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 6; (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 3 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 3(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, Customer Account Information and Customer Identifying 
Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 3 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 3 describes the requirements related 
to the timing of recording and reporting of Industry Member Data. 
Paragraphs (b)(1)-(b)(3) of proposed Rule 3 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 3 requires each Industry Member 
to record Recorded Industry Member Data contemporaneously with the 
applicable Reportable Event. Paragraph (b)(2) of proposed Rule 3 
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 3 describes the securities to which 
the recording and reporting requirements of proposed Rule 3 apply. 
Paragraphs (c)(1) and (c)(2) of proposed Rule 3 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 3 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 3 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 3 
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 3 for each Eligible Security for which transaction 
reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of proposed Rule 3 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 3 requires, for each exchange-listed Eligible Security, each 
Industry Member to report Industry Member Data to the Central 
Repository using the symbology format of the exchange listing the 
security. This requirement implements the requirement set forth in 
Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange 
symbology when reporting data to the Central Repository for exchange-
listed Eligible Securities.
    For each Eligible Security that is not exchange-listed, however, 
there is no listing exchange to provide the symbology format. Moreover, 
to date, the requisite symbology format has not been determined. 
Therefore, paragraph (d)(2) of proposed Rule 3 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

[[Page 9913]]

relevant symbology formats established by the Operating Committee via 
Information Memorandum.
(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 3, which addresses the correction of erroneous 
data reported to the Central Repository. Paragraph (e) of proposed Rule 
3 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 (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 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 9. Paragraph (b) of proposed Rule 
4 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 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 Information Memorandum.
    Finally, paragraph (d) of proposed Rule 4 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 5 (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 5 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 9, 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.\28\ 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 6 (Consolidated Audit Trail--Time Stamps) to require 
its Industry Members to comply with the time stamp requirements of the 
Plan.
---------------------------------------------------------------------------

    \28\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 6 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of proposed Rule 6 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 6. 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 6 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 6 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of proposed Rule 6 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of proposed Rule 6 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 
6 permits each Industry Member to record and report the time of 
Allocation Reports in increments up to and including one second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 7 (Consolidated Audit Trail--Clock Synchronization 
Rule Violations [sic]) describes potential violations of the clock 
synchronization time period requirements set forth in proposed Article 
23. Proposed Rule 7 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 this Article 
23 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

[[Page 9914]]

circumstances may be considered a violation of SEC Rule 613 or the CAT 
NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 8 (Consolidated Audit Trail--Connectivity and Data 
Transmission) addresses connectivity and data transmission requirements 
related to the CAT. Paragraph (a) of proposed Rule 8 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 8 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 8 addresses connectivity 
requirements related to the CAT. Paragraph (b) of proposed Rule 8 
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 8 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 
reporting obligations of such Industry Member under proposed Article 
23. 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 proposed Article 23. The Exchange notes that, 
currently, no standardized form agreement for CAT Reporting Agent 
arrangements has been adopted. Paragraph (c)(2) of proposed Rule 8 
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 proposed Article 23, 
notwithstanding the existence of an agreement described in paragraph 
(c) of proposed Rule 8.
(ix) Development and Testing
    The Exchange proposes Rule 9 (Consolidated Audit Trail--Development 
and Testing) to address requirements for Industry Members related to 
CAT development and testing. Paragraph (a) of proposed Rule 9 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 and 5, 
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 and 5, 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 9 implements the requirement under 
the CAT NMS Plan that Industry Members participate in required industry 
testing with the Central Repository.\29\ Specifically, proposed Rule 9 
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 Information 
Memorandum.
---------------------------------------------------------------------------

    \29\ Adopting Release [sic] at 84725.
---------------------------------------------------------------------------

(x) Recordkeeping
    Proposed Rule 10 (Consolidated Audit Trail--Recordkeeping) sets 
forth the recordkeeping obligations related to the CAT for Industry 
Members. Proposed Rule 10 requires each Industry Member to maintain and 
preserve records of the information required to be recorded under 
proposed Article 23 for the period of time and accessibility specified 
in SEC Rule 17a-4(b). The records required to be maintained and 
preserved under proposed Article 23 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 10 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.\30\ Accordingly, proposed Rule 11 (Consolidated Audit 
Trail--Timely, Accurate and Complete Data) implements this requirement 
with regard to Industry Members. Paragraph (a) of proposed Rule 11 
requires that Industry Members record and report data to the Central 
Repository as required by proposed Article 23 in a

[[Page 9915]]

manner that ensures the timeliness, accuracy, integrity and 
completeness of such data.
---------------------------------------------------------------------------

    \30\ 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 11 requires Industry 
Members to accurately provide the LEIs in their records as required by 
proposed Article 23 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.\31\
---------------------------------------------------------------------------

    \31\ 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 Article 23. 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 
Information Memorandum.
    Furthermore, paragraph (d) of proposed Rule 11 addresses Compliance 
Thresholds related to reporting data to the CAT. Proposed Rule 11 
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.\32\ Compliance 
Thresholds will include compliance with the data reporting and clock 
synchronization requirements. Proposed Rule 11 further 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 this proposed Article 23.
---------------------------------------------------------------------------

    \32\ Appendix C of the CAT NMS Plan.
---------------------------------------------------------------------------

(xii) Compliance Dates
    Proposed Rule 12 (Consolidated Audi [sic] Trail--Compliance Dates) 
sets forth the compliance dates for the various provisions of proposed 
Article 23. Paragraph (a) of proposed Rule 12 states that paragraphs 
(b) and (c) of this Rule set forth the additional details with respect 
to the compliance date of Article 23. Unless otherwise noted, Article 
23 is fully effective and Industry Members must comply with their 
terms.
    Paragraph (b) of proposed Rule 12 establishes the compliance dates 
for the clock synchronization requirements as set forth in proposed 
Rule 2. Paragraph (b)(1) states that each Industry Member shall comply 
with Rule 2 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 2 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 Plan 
Participants with regard to the clock synchronization requirements 
related to Business Clocks that do not capture time in 
milliseconds.\33\
---------------------------------------------------------------------------

    \33\ See Letter from the Plan Participants to Brent J. Fields, 
Secretary, Commission, dated January 17, 2017. Specifically, the 
Participants will ask the Commission to extend the clock 
synchronization compliance date from March 15, 2017 to February 19, 
2018 for Industry Members' Business Clocks that do not capture time 
in milliseconds.
---------------------------------------------------------------------------

    Paragraph (c) of proposed Rule 12 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,\34\ which require, 
among other things, that CHX 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,\35\ which 
requires that CHX Rules not impose any burden on competition that is 
not necessary or appropriate.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b)(6) [sic].
    \35\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies the provisions of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of the purposes of the Act.'' \36\ 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.
---------------------------------------------------------------------------

    \36\ 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 implementing provisions of the CAT NMS Plan 
will apply equally to all firms that trade NMS Securities and OTC 
Equity Securities. In addition, all national securities exchanges and 
FINRA are proposing this proposed Article 23. Therefore, this is not a 
competitive rule filing, and, therefore, it

[[Page 9916]]

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CHX-2017-03 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CHX-2017-03. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CHX-2017-03 and should be 
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
---------------------------------------------------------------------------

    \37\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02553 Filed 2-7-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                    9904                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    SECURITIES AND EXCHANGE                                 the places specified in Item IV below.                  Members, as applicable, with the
                                                    COMMISSION                                              The Exchange has prepared summaries,                    provisions of the Plan, by adopting a
                                                                                                            set forth in sections A, B and C below,                 Compliance Rule applicable to their
                                                    [Release No. 34–79948; File No. SR–CHX–
                                                                                                            of the most significant parts of such                   Industry Members.11 As is described
                                                    2017–03]
                                                                                                            statements.                                             more fully below, the proposed Article
                                                    Self-Regulatory Organizations;                          A. Self-Regulatory Organization’s                       23 sets forth the Compliance Rule to
                                                    Chicago Stock Exchange, Inc.; Notice                    Statement of the Purpose of, and the                    require Industry Members to comply
                                                    of Filing of Proposed Rule Change To                    Statutory Basis for, the Proposed Rule                  with the provisions of the CAT NMS
                                                    Implement the Compliance Rule                           Change                                                  Plan. Proposed Article 23 includes
                                                    Regarding the National Market System                                                                            twelve proposed Rules covering the
                                                    Plan Governing the Consolidated Audit                   1. Purpose                                              following areas: (1) Definitions; (2) clock
                                                    Trail                                                      Bats BYX Exchange, Inc., Bats BZX                    synchronization; (3) Industry Member
                                                                                                            Exchange, Inc., Bats EDGA Exchange,                     Data reporting; (4) Customer
                                                    February 2, 2017.                                       Inc., Bats EDGX Exchange, Inc., BOX                     information reporting; (5) Industry
                                                       Pursuant to Section 19(b)(1) of the                  Options Exchange LLC, C2 Options                        Member information reporting; (6) time
                                                    Securities Exchange Act of 1934                         Exchange, Incorporated, Chicago Board                   stamps; (7) clock synchronization rule
                                                    (‘‘Exchange Act’’) 1 and Rule 19b–4                     Options Exchange, Incorporated, the                     violations; (8) connectivity and data
                                                    thereunder,2 notice is hereby given that                Exchange, Financial Industry Regulatory                 transmission; (9) development and
                                                    on February 1, 2017, the Chicago Stock                  Authority, Inc., International Securities               testing; (10) recordkeeping; (11) timely,
                                                    Exchange, Inc. (‘‘CHX’’ or ‘‘Exchange’’)                Exchange, LLC, Investors’ Exchange                      accurate and complete data; and (12)
                                                    filed with the Securities and Exchange                  LLC, ISE Gemini, LLC, ISE Mercury,                      compliance dates. Each of these
                                                    Commission (the ‘‘Commission’’) the                     LLC, Miami International Securities                     proposed Rules are discussed in detail
                                                    proposed rule change as described in                    Exchange LLC, MIAX PEARL, LLC,                          below.
                                                    Items I and II below, which Items have                  NASDAQ BX, Inc., NASDAQ PHLX                            (i) Definitions
                                                    been prepared by the self-regulatory                    LLC, The NASDAQ Stock Market LLC,
                                                    organization.3 The Commission is                        National Stock Exchange, Inc., New                         Proposed Rule 1 (Consolidated Audit
                                                    publishing this notice to solicit                       York Stock Exchange LLC, NYSE MKT                       Trail—Definitions) sets forth the
                                                    comments on the proposed rule change                    LLC, and NYSE Arca, Inc. (collectively,                 definitions for the terms used in
                                                    from interested persons.                                the ‘‘Plan Participants’’ 5) filed with the             proposed Article 23. Each of the defined
                                                                                                            Commission, pursuant to Section 11A of                  terms in proposed Rule 1 is discussed
                                                    I. Self-Regulatory Organization’s                                                                               in detail in this section.
                                                    Statement of the Terms of Substance of                  the Exchange Act 6 and Rule 608 of
                                                    the Proposed Rule Change                                Regulation NMS thereunder,7 the CAT                     (A) Account Effective Date
                                                                                                            NMS Plan.8 The Plan Participants filed
                                                       CHX proposes to amend the Rules of                   the Plan to comply with Rule 613 of                     (I) Customer Information Approach
                                                    the Exchange (‘‘CHX Rules’’) to adopt                   Regulation NMS under the Exchange                          SEC Rule 613 requires that numerous
                                                    Article 23 of the Rules of the Exchange                 Act. The Plan was published for                         data elements be reported to the CAT to
                                                    (‘‘CHX Rules’’) to implement the                        comment in the Federal Register on                      ensure there is sufficient information to
                                                    compliance rule (‘‘Compliance Rule’’)                   May 17, 2016,9 and approved by the                      create the lifecycle of an order, and
                                                    regarding the National Market System                    Commission, as modified, on November                    provide regulators with sufficient detail
                                                    Plan Governing the Consolidated Audit                   15, 2016.10                                             about an order to perform their
                                                    Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).4                 The Plan is designed to create,                      regulatory duties. Certain required
                                                    The text of this proposed rule change is                implement and maintain a consolidated                   elements are intended to ensure that the
                                                    available on the Exchange’s Web site at                 audit trail (‘‘CAT’’) that would capture                regulators can identify the Customer’s
                                                    http://www.chx.com/regulatory-                          customer and order event information                    [sic] associated with orders. For
                                                    operations/rule-filings/, at the principal              for orders in NMS Securities and OTC                    example, SEC Rule 613(c)(7)(i)(A)
                                                    office of the Exchange, and at the                      Equity Securities, across all markets,                  requires an Industry Member to report
                                                    Commission’s Public Reference Room.                     from the time of order inception through                the ‘‘Customer-IDs’’ for each Customer
                                                                                                            routing, cancellation, modification, or                 for the original receipt or origination of
                                                    II. Self-Regulatory Organization’s                      execution in a single consolidated data
                                                    Statement of the Purpose of, and                                                                                an order. ‘‘Customer-ID’’ is defined in
                                                                                                            source. Each Plan Participant is required               SEC Rule 613(j)(5) to mean ‘‘with
                                                    Statutory Basis for, the Proposed Rule                  to enforce compliance by its Industry
                                                    Change                                                                                                          respect to a customer, a code that
                                                                                                                                                                    uniquely and consistently identifies
                                                      In its filing with the Commission, the                  5 A ‘‘Participant’’ is a ‘‘member’’ of the Exchange
                                                                                                                                                                    such customer for purposes of providing
                                                    self-regulatory organization included                   for purposes of the Act. See CHX Article 1, Rule
                                                                                                            1(s). For the avoidance of confusion, the term ‘‘Plan   data to the Central Repository.’’ SEC
                                                    statements concerning the purpose of,                   Participant’’ will be used when referring to            Rule 613(c)(8) requires Industry
                                                    and basis for, the proposed rule change                 Participants of the Plan.                               Members to use the same Customer-ID
                                                    and discussed any comments it received                    6 15 U.S.C. 78k–1.
                                                                                                                                                                    for each Customer. The SEC granted the
                                                    on the proposed rule change. The text                     7 17 CFR 242.608.
                                                                                                                                                                    Plan Participants exemptive relief to
                                                                                                              8 See Letter from the Plan Participants to Brent J.
                                                    of those statements may be examined at                                                                          permit the use of an alternative
                                                                                                            Fields, Secretary, Commission, dated September 30,
                                                                                                            2014; and Letter from Plan Participants to Brent J.     approach to the requirement that an
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                      1 15 U.S.C. 78s(b)(1).
                                                      2 17
                                                                                                            Fields, Secretary, Commission, dated February 27,       Industry Member report a Customer-ID
                                                           CFR 240.19b–4.                                   2015. On December 24, 2015, the Plan Participants       for every Customer upon original receipt
                                                      3 The Exchange originally filed this proposed rule    submitted an amendment to the CAT NMS Plan.
                                                    change on January 18, 2017 under File No. SR–           See Letter from Plan Participants to Brent J. Fields,   or origination.12 The alternative
                                                    CHX–2017–02, and the Exchange subsequently              Secretary, Commission, dated December 23, 2015.
                                                    withdrew that filing on January 30, 2017 and filed        9 See Securities Exchange Act Release No. 77724         11 See SEC Rule 613(g)(1).
                                                    this proposed rule change.                              (Apr. 27, 2016), 81 FR 30614 (May 17, 2016).              12 See Securities Exchange Act Release No. 77265
                                                      4 Unless otherwise specified, capitalized terms         10 Securities Exchange Act Rel. No. 79318 (Nov.       (March 1, 2016), 81 FR 11856 (March 7, 2016)
                                                    used in this rule filing are defined as set forth       15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval      (‘‘Exemption Order’’). See also Letter from
                                                    herein or in the CAT NMS Plan.                          Order’’).                                               Participants to Brent J. Fields, Secretary,



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9905

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


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                                                    9906                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    Report Approach would permit Industry                   with regard to the CAT are set forth in               Reporting Agent’’ to mean a Data
                                                    Members to record and report to the                     this Article 23.                                      Submitter that is a third party that
                                                    Central Repository an Allocation Report                                                                       enters into an agreement with an
                                                                                                            (E) CAT
                                                    that includes, among other things, the                                                                        Industry Member pursuant to which the
                                                    Firm Designated ID for any account(s) to                  Paragraph (e) of proposed Rule 1                    CAT Reporting Agent agrees to fulfill
                                                    which executed shares are allocated                     defines the term ‘‘CAT’’ to mean the                  such Industry Member’s reporting
                                                    when an execution is allocated in whole                 consolidated audit trail contemplated by              obligations under this Article 23.
                                                    or part in lieu of requiring the reporting              SEC Rule 613. This is the same                          This definition is based on FINRA’s
                                                    of the account number for any                           definition as set forth in Section 1.1 of             definition of a ‘‘Reporting Agent’’ as set
                                                    subaccount to which an execution is                     the CAT NMS Plan.                                     forth in FINRA’s rule related to its Order
                                                    allocated, as is required by SEC Rule                                                                         Audit Trail System (‘‘OATS’’).
                                                                                                            (F) CAT NMS Plan
                                                    613.13 Under SEC Rule 613, regulators                                                                         Specifically, FINRA Rule 7410(n)
                                                    would be able to link the subaccount to                   Paragraph (f) of proposed Rule 1                    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
                                                                                                               Under the CAT NMS Plan, the Daisy
                                                                                                            Chain Approach is used to link and                       Paragraph (i) of proposed Rule 1
                                                       To assist in implementing the                                                                              defines the term ‘‘Central Repository’’ to
                                                    Allocation Report Approach, paragraph                   reconstruct the complete lifecycle of
                                                                                                            each Reportable Event in CAT.                         mean the repository responsible for the
                                                    (c) of proposed Rule 1 defines an                                                                             receipt, consolidation, and retention of
                                                    ‘‘Allocation Report.’’ Specifically, an                 According to this Approach, Industry
                                                                                                            Members assign their own identifiers to               all information reported to the CAT
                                                    ‘‘Allocation Report’’ means a report                                                                          pursuant to SEC Rule 613 and the CAT
                                                    made to the Central Repository by an                    each order event. Within the Central
                                                                                                            Repository, the Plan Processor later                  NMS Plan. This is the same definition
                                                    Industry Member that identifies the                                                                           as set forth in Section 1.1 of the CAT
                                                    Firm Designated ID for any account(s),                  replaces the identifier provided by the
                                                                                                            Industry Member for each Reportable                   NMS Plan, except the Exchange uses the
                                                    including subaccount(s), to which                                                                             phrase ‘‘CAT NMS Plan’’ in place of the
                                                    executed shares are allocated and                       Event with a single identifier, called the
                                                                                                            CAT Order-ID, for all order events                    phrase ‘‘this Agreement.’’
                                                    provides the security that has been
                                                    allocated, the identifier of the firm                   pertaining to the same order. This CAT                (J) Compliance Threshold
                                                    reporting the allocation, the price per                 Order-ID is used to links the Reportable
                                                                                                            Events related to the same order.                        Paragraph (j) of proposed Rule 1
                                                    share of shares allocated, the side of                                                                        defines the term ‘‘Compliance
                                                    shares allocated, the number of shares                  (II) Definition of CAT-Order-ID                       Threshold’’ as having the meaning set
                                                    allocated to each account, and the time                                                                       forth in proposed Rule 11(d). This
                                                                                                               To implement the Daisy Chain
                                                    of the allocation; provided, for the                                                                          definition has the same substantive
                                                                                                            Approach, Paragraph (g) of proposed
                                                    avoidance of doubt, any such Allocation                                                                       meaning as the definition set forth in
                                                                                                            Rule 1 defines the term ‘‘CAT-Order-
                                                    Report shall not be required to be linked                                                                     Section 1.1 of the CAT NMS Plan. As
                                                                                                            ID.’’ The term ‘‘CAT-Order-ID’’ is
                                                    to particular orders or executions. This                                                                      discussed in detail below with regard to
                                                                                                            defined to mean a unique order
                                                    is the same definition as set forth in                                                                        proposed Rule 11(d), each Industry
                                                                                                            identifier or series of unique order
                                                    Section 1.1 of the CAT NMS Plan.                                                                              Member is required to meet a separate
                                                                                                            identifiers that allows the Central
                                                    (D) Business Clock                                      Repository to efficiently and accurately              compliance threshold which will be an
                                                                                                            link all Reportable Events for an order,              Industry Member-specific rate that may
                                                      To create the required audit trail,                   and all orders that result from the                   be used as the basis for further review
                                                    Industry Members are required to record                 aggregation or disaggregation of such                 or investigation into the Industry
                                                    the date and time of various Reportable                 order. This is the same definition as set             Member’s performance with regard to
                                                    Events to the Central Repository.                       forth in SEC Rule 613(j)(1), and Section              the CAT. This Industry Member-specific
                                                    Industry Members will use ‘‘Business                    1.1 of the CAT NMS Plan defines ‘‘CAT-                rate is the ‘‘Compliance Threshold.’’
                                                    Clocks’’ to record such dates and times.                Order-ID’’ by reference to SEC Rule
                                                    Accordingly, paragraph (d) of proposed                                                                        (K) Customer
                                                                                                            613(j)(1).
                                                    Rule 1 defines the term ‘‘Business                                                                               Industry Members are required to
                                                    Clock’’ as a clock used to record the date              (H) CAT Reporting Agent                               submit to the Central Repository certain
                                                    and time of any Reportable Event                          The CAT NMS Plan permits an                         information related to their Customers,
                                                    required to be reported under this                      Industry Member to use a third party,                 including Customer Identifying
                                                    Article 23. This is the same definition                 such as a vendor, to report the required              Information and Customer Account
                                                    as set forth in Section 1.1 of the CAT                  data to the Central Repository on behalf              Information, as well as data related to
                                                    NMS Plan, except the Exchange                           of the Industry Member.14 Such a third                their Customer’s Reportable Events.
                                                                                                                                                                  Accordingly, Paragraph (k) of proposed
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                                                    proposes to replace the phrase ‘‘under                  party, referred to in this proposed
                                                    SEC Rule 613’’ at the end of the                        Article 23 as a ‘‘CAT Reporting Agent,’’              Rule 1 proposes to define the term
                                                    definition in Section 1.1 of the Plan                   would be one type of a Data Submitter,                ‘‘Customer.’’ Specifically, the term
                                                    with the phrase ‘‘under this Article 23.’’              that is, a party that submits data to the             ‘‘Customer’’ would be defined to mean:
                                                    This change is intended to recognize                    Central Repository. Paragraph (h) of                  (1) The account holder(s) of the account
                                                    that the Industry Members’ obligations                  proposed Rule 1 defines the term ‘‘CAT                at an Industry Member originating the
                                                                                                                                                                  order; and (2) any person from whom
                                                      13 See Exemptive Request Letter at 26–27; and           14 Appendix C, Section A.1(a) of the CAT NMS        the Industry Member is authorized to
                                                    Exemption Order.                                        Plan.                                                 accept trading instructions for such


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                      9907

                                                    account, if different from the account                  by the individual Industry Member; and                (e.g., securities information processors
                                                    holder(s). This is the same definition as               (4) where the relevant account is an                  (‘‘SIPs’’)). To include this term in
                                                    set forth in SEC Rule 613(j)(3), except                 Industry Member proprietary account.                  proposed Article 23, the Exchange
                                                    the Exchange proposes to replace the                    The proposed definition is the same as                proposes to define ‘‘Data Submitter’’ in
                                                    references to a registered broker-dealer                the definition of ‘‘Customer Account                  paragraph (n) of proposed Rule 1.
                                                    or broker-dealer with a reference to an                 Information’’ set forth in Section 1.1 of             Specifically, paragraph (n) of proposed
                                                    Industry Member for consistency of                      the CAT NMS Plan, provided, however,                  Rule 1 defines a ‘‘Data Submitter’’ to
                                                    terms used in proposed Article 23. The                  that specific dates have replaced the                 mean any person that reports data to the
                                                    Exchange also notes that Section 1.1 of                 descriptions of those dates set forth in              Central Repository, including national
                                                    the CAT NMS Plan defines ‘‘Customer’’                   Section 1.1 of the Plan.                              securities exchanges, national securities
                                                    by reference to SEC Rule 613(j)(3).                                                                           associations, broker-dealers, the SIPs for
                                                                                                            (M) Customer Identifying Information
                                                    (L) Customer Account Information                                                                              the CQS, CTA, UTP and Plan for
                                                                                                               As discussed above, under the                      Reporting of Consolidated Options Last
                                                       As discussed above, under the                        Customer Information Approach,                        Sale Reports and Quotation Information
                                                    Customer Information Approach,                          Industry Members are required to report               (‘‘OPRA’’) Plans, and certain other
                                                    Industry Members are required to report                 Customer Identifying Information to the               vendors or third parties that may submit
                                                    Customer Account Information to the                     Central Repository as part of the                     data to the Central Repository on behalf
                                                    Central Repository as part of the                       customer definition process.                          of Industry Members.
                                                    customer definition process.                            Accordingly, the Exchange proposes to
                                                    Accordingly, the Exchange proposes to                   define the term ‘‘Customer Account                    (O) Eligible Security
                                                    define the term ‘‘Customer Account                      Information’’ to clarify what Customer                   The reporting requirements of
                                                    Information’’ to clarify what customer                  information would need to be reported                 proposed Article 23 only apply to
                                                    information would need to be reported                   to the Central Repository.                            Reportable Events in Eligible Securities.
                                                    to the Central Repository.                                 Paragraph (m) of proposed Rule 1                   Currently, an Eligible Security includes
                                                       Paragraph (l) of proposed Rule 1                     defines the term ‘‘Customer Identifying               NMS Securities and OTC Equity
                                                    defines the term ‘‘Customer Account                     Information’’ to mean information of                  Securities. Accordingly, paragraph (o) of
                                                    Information’’ to include, in part,                      sufficient detail to identify a Customer.             proposed Rule 1 defines the term
                                                    account number, account type, customer                  With respect to individuals, ‘‘Customer               ‘‘Eligible Security’’ to include: (1) All
                                                    type, date account opened, and large                    Identifying Information’’ includes, but is            NMS Securities; and (2) all OTC Equity
                                                    trader identifier (if applicable).                      not limited to: Name, address, date of                Securities. The terms ‘‘NMS Securities’’
                                                    Proposed Rule 1(l), however, provides                   birth, individual tax payer identification            and ‘‘OTC Equity Securities’’ are
                                                    an alternative definition of ‘‘Customer                 number (‘‘ITIN’’)/social security number              defined, in turn, below. This is the same
                                                    Account Information’’ in two limited                    (‘‘SSN’’), individual’s role in the                   definition as set forth in Section 1.1 of
                                                    circumstances. First, in those                          account (e.g., primary holder, joint                  the CAT NMS Plan.
                                                    circumstances in which an Industry                      holder, guardian, trustee, person with
                                                    Member has established a trading                        the power of attorney). With respect to               (P) Error Rate
                                                    relationship with an institution but has                legal entities, ‘‘Customer Identifying                (I) Maximum Error Rate
                                                    not established an account with that                    Information’’ includes, but is not
                                                    institution, the Industry Member will:                  limited to, name, address, Employer                     Under the CAT NMS Plan, the
                                                    (1) Provide the Account Effective Date                  Identification Number (‘‘EIN’’)/Legal                 Operating Committee sets the maximum
                                                    in lieu of the ‘‘date account opened’’; (2)             Entity Identifier (‘‘LEI’’) or other                  Error Rate that the Central Repository
                                                    provide the relationship identifier in                  comparable common entity identifier, if               would tolerate from an Industry
                                                    lieu of the ‘‘account number’’; and (3)                 applicable. The definition further notes              Member reporting data to the Central
                                                    identify the ‘‘account type’’ as a                      that an Industry Member that has an LEI               Repository.16 The Operating Committee
                                                    ‘‘relationship.’’ Second, in those                      for a Customer must submit the                        reviews and resets the maximum Error
                                                    circumstances in which the relevant                     Customer’s LEI in addition to other                   Rate, at least annually.17 If an Industry
                                                    account was established prior to                        information of sufficient detail to                   Member reports CAT data to the Central
                                                    November 15, 2018 for Industry                          identify the Customer. This is the same               Repository with errors such that their
                                                    Members other than Small Industry                       definition as set forth in Section 1.1 of             error percentage exceeds the maximum
                                                    Members, or prior to November 15, 2019                  the CAT NMS Plan.                                     Error Rate, then such Industry Member
                                                    for Small Industry Members, and no                                                                            would not be in compliance with the
                                                    ‘‘date account opened’’ is available for                (N) Data Submitter                                    CAT NMS Plan or Rule 613.18 As such,
                                                    the account, the Industry Member will                      The CAT NMS Plan uses the term                     the Exchange or the SEC ‘‘[sic] may take
                                                    provide the Account Effective Date in                   ‘‘Data Submitter’’ to refer to any person             appropriate action against an Industry
                                                    the following circumstances: (1) Where                  that reports data to the Central                      Member for failing to comply with its
                                                    an Industry Member changes back office                  Repository.15 Such Data Submitters may                CAT reporting obligations.19 The CAT
                                                    providers or clearing firms and the date                include those entities that are required              NMS Plan sets the initial Error Rate at
                                                    account opened is changed to the date                   to submit data to the Central Repository              5%.20 It is anticipated that the
                                                    the account was opened on the new                       (e.g., national securities exchanges,                 maximum Error Rate will be reviewed
                                                    back office/clearing firm system; (2)                   national securities associations and                  and lowered by the Operating
                                                    where an Industry Member acquires                                                                             Committee once Industry Members
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                                                                                                            Industry Members), third-parties that
                                                    another Industry Member and the date                    may submit data to the CAT on behalf
                                                    account opened is changed to the date                   of CAT Reporters (i.e., CAT Reporting                   16 Section   6.5(d)(i) of the CAT NMS Plan.
                                                    the account was opened on the post-                     Agents), and outside parties that are not
                                                                                                                                                                    17 Appendix     C, Section A.3(b) of the CAT NMS
                                                    merger back office/clearing firm system;                                                                      Plan.
                                                                                                            required to submit data to the CAT but                  18 Appendix C, Section A.3(b) of the CAT NMS
                                                    (3) where there are multiple dates                      from which the CAT may receive data                   Plan; Rule 613(g)–(h).
                                                    associated with an account in an                                                                                19 Appendix C, Section A.3(b) of the CAT NMS
                                                    Industry Member’s system, and the                         15 Appendix C, Section A.1(a) of the CAT NMS        Plan.
                                                    parameters of each date are determined                  Plan.                                                   20 Section 6.5(d)(i) of the CAT NMS Plan.




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                                                    9908                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    begin to report to the Central                          may not have multiple separate                        (U) Listed Option or Option
                                                    Repository.21                                           customers with the same identifier on
                                                      The CAT NMS Plan requires the Plan                                                                             The CAT NMS Plan and this proposed
                                                                                                            any given date). Industry Members
                                                    Processor to: (1) Measure and report                                                                          Article 23 applies to Eligible Securities,
                                                                                                            would be required to report only the
                                                    errors every business day; (2) provide                                                                        which includes NMS Securities, which,
                                                                                                            Firm Designated ID for each new order
                                                    Industry Members daily statistics and                                                                         in turn, includes Listed Options. Certain
                                                                                                            submitted to the Central Repository,                  requirements of proposed Article 23
                                                    error reports as they become available,                 rather than the ‘‘Customer-ID’’ with
                                                    including a description of such errors;                                                                       apply specifically to Listed Options.
                                                                                                            individual order events. Accordingly,                 Accordingly, paragraph (u) of proposed
                                                    (3) provide monthly reports to Industry                 the Exchange proposes to define the
                                                    Members that detail an Industry                                                                               Rule 1 defines the term ‘‘Listed Option’’
                                                                                                            term ‘‘Firm Designated ID’’ in proposed               or ‘‘Option.’’ Specifically, paragraph (u)
                                                    Member’s performance and comparison                     Rule 1. Specifically, paragraph (q) of
                                                    statistics; (4) define educational and                                                                        of proposed Rule 1 states that the term
                                                                                                            proposed Rule 1 defines the term ‘‘Firm               ‘‘Listed Option’’ or ‘‘Option’’ has the
                                                    support programs for Industry Members                   Designated ID’’ to mean a unique
                                                    to minimize Error Rates; and (5)                                                                              meaning set forth in SEC Rule
                                                                                                            identifier for each trading account                   600(b)(35) of Regulation NMS. SEC Rule
                                                    identify, daily, all Industry Members
                                                                                                            designated by Industry Members for                    600(b)(35), in turn, defines a listed
                                                    exceeding the maximum allowable Error
                                                                                                            purposes of providing data to the                     option as ‘‘any option traded on a
                                                    Rate. To timely correct data-submitted
                                                    errors to the Central Repository, the                   Central Repository, where each such                   registered national securities exchange
                                                    CAT NMS Plan requires that the Central                  identifier is unique among all identifiers            or automated facility of a national
                                                    Repository receive and process error                    from any given Industry Member for                    securities association.’’ The Exchange
                                                    corrections at all times. Further, the                  each business date. This is the same                  notes that the proposed definition of
                                                    CAT NMS Plan requires that Industry                     definition as set forth in Section 1.1 of             ‘‘Listed Option’’ is the same definition
                                                    Members be able to submit error                         the CAT NMS Plan. Industry Members                    as the definition set forth in Section 1.1
                                                    corrections to the Central Repository                   would be permitted to use an account                  of the CAT NMS Plan.
                                                    through a web-interface or via bulk                     number or any other identifier defined                (V) Manual Order Event
                                                    uploads or file submissions, and that the               by the firm, provided each identifier is
                                                    Plan Processor, subject to the Operating                unique across the firm for each business              (I) Manual Order Event Approach
                                                    Committee’s approval, support the bulk                  date (i.e., a single firm may not have                  The CAT NMS Plan sets forth clock
                                                    replacement of records and the                          multiple separate customers with the                  synchronization and timestamp
                                                    reprocessing of such records. The Plan                  same identifier on any given date).                   requirements for Industry Members
                                                    Participants, furthermore, require that                 (R) Industry Member                                   which reflect exemptions for Manual
                                                    the Plan Processor identify Industry                                                                          Order Events granted by the
                                                    Member data submission errors based                       Paragraph (r) of proposed Rule 1                    Commission.23 Specifically, the Plan
                                                    on the Plan Processor’s validation                      defines the term ‘‘Industry Member’’ to               requires Industry Members to record
                                                    processes.22                                            mean a member of a national securities                and report the time of each Reportable
                                                    (II) Definition of Error Rate                           exchange or a member of a national                    Event using timestamps reflecting
                                                                                                            securities association.’’ This is the same            current industry standards (which must
                                                       To implement the requirements of the                 definition as set forth in Section 1.1 of             be at least to the millisecond) or, if an
                                                    CAT NMS Plan related to the Error Rate,                 the CAT NMS Plan.                                     Industry Member’s order handling or
                                                    the Exchange proposes to define the                                                                           execution systems uses timestamps in
                                                    term ‘‘Error Rate’’ in proposed Rule 1.                 (S) Industry Member Data                              increments finer than milliseconds,
                                                    Paragraph (p) of proposed Rule 1                                                                              such finer increments, when reporting
                                                    defines the term ‘‘Error Rate’’ to mean                   Paragraph (s) of proposed Rule 1
                                                                                                            states that the term ‘‘Industry Member                to the Central Repository. For Manual
                                                    the percentage of Reportable Events                                                                           Order Events, however, the Plan
                                                    collected by the Central Repository in                  Data’’ has the meaning set forth in Rule
                                                                                                            3(a)(2). This definition has the same                 provides that such events must be
                                                    which the data reported does not fully                                                                        recorded in increments up to and
                                                    and accurately reflect the order event                  substantive meaning as the definition
                                                                                                            set forth in Section 1.1 of the CAT NMS               including one second, provided that
                                                    that occurred in the market. This is the                                                                      Industry Members record and report the
                                                    same definition as set forth in SEC Rule                Plan. The definition of ‘‘Industry
                                                                                                                                                                  time the event is captured electronically
                                                    613(j)(6), and Section 1.1 of the CAT                   Member Data’’ is discussed more fully
                                                                                                                                                                  in an order handling and execution
                                                    NMS Plan defines ‘‘Error Rate’’ by                      in the discussion below regarding
                                                                                                                                                                  system (‘‘Electronic Capture Time’’) in
                                                    reference to SEC Rule 613(j)(6).                        proposed Rule 3(a)(2).
                                                                                                                                                                  milliseconds. In addition, Industry
                                                    (Q) Firm Designated ID                                  (T) Initial Plan Processor                            Members are required to synchronize
                                                                                                                                                                  their respective Business Clocks (other
                                                      As discussed above, under the                           Paragraph (t) of proposed Rule 1                    than such Business Clocks used solely
                                                    Customer Information Approach, the                      defines the term ‘‘Initial Plan Processor’’           for Manual Order Events) at a minimum
                                                    CAT NMS Plan would require each                         to mean the first Plan Processor selected             to within 50 milliseconds of the time
                                                    Industry Member to assign a unique                      by the Operating Committee in                         maintained by the National Institute of
                                                    Firm Designated ID to each Customer.
                                                                                                            accordance with SEC Rule 613, Section                 Standards and Technology (‘‘NIST’’),
                                                    Industry Members would be permitted
                                                                                                            6.1 of the CAT NMS Plan and the                       and maintain such a synchronization.
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                                                    to use as the Firm Designated ID an
                                                                                                            National Market System Plan Governing                 Each Industry Members [sic] is required
                                                    account number or any other identifier
                                                                                                            the Process for Selecting a Plan                      to synchronize their Business Clocks
                                                    defined by the firm, provided each
                                                                                                            Processor and Developing a Plan for the               used solely for Manual Order Events,
                                                    identifier is unique across the firm for
                                                                                                            Consolidated Audit Trail. This is the                 however, at a minimum to within one
                                                    each business date (i.e., a single firm
                                                                                                            same definition as set forth in Section               second of the time maintained by the
                                                      21 Appendix C, Section A.3(b) of the CAT NMS          1.1 of the CAT NMS Plan, although the                 NIST.
                                                    Plan.                                                   proposed definition uses the full name
                                                      22 Approval Order at 84718.                           of the ‘‘Selection Plan.’’                              23 Exemption    Order.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9909

                                                    (II) Definition of Manual Order Event                   Listed Options, OTC Equity Securities,                term ‘‘Options Market Maker’’ in
                                                       In order to clarify what a Manual                    and any other securities that are                     proposed Rule 1. Specifically, paragraph
                                                    Order Event is for clock synchronization                included as Eligible Securities from                  (aa) of proposed Rule 1 defines the term
                                                    and time stamp purposes, the Exchange                   time to time. Accordingly, the Exchange               ‘‘Options Market Maker’’ to mean a
                                                    proposes to define the term ‘‘Manual                    proposes to define the term ‘‘NMS                     broker-dealer registered with an
                                                    Order Event’’ in proposed Rule 1.                       Stock’’ in Paragraph (y) of proposed                  exchange for the purpose of making
                                                    Specifically, paragraph (v) of proposed                 Rule 1 to mean any NMS Security other                 markets in options contracts traded on
                                                    Rule 1 defines the term ‘‘Manual Order                  than an option. This is the same                      the exchange. This is the same
                                                    Event’’ to mean a non-electronic                        definition as set forth in SEC Rule                   definition as set forth in Section 1.1 of
                                                    communication of order-related                          600(b)(47) of Regulation NMS.                         the CAT NMS Plan.
                                                    information for which Industry                          (Z) Operating Committee                               (BB) Order
                                                    Members must record and report the
                                                                                                              Paragraph (z) of proposed Rule 1                       The proposed Article 23 requires each
                                                    time of the event. This is the same
                                                                                                            defines the term ‘‘Operating Committee’’              Industry Member to record and
                                                    definition as set forth in Section 1.1 of
                                                                                                            to mean the governing body of the CAT                 electronically report to the Central
                                                    the CAT NMS Plan.
                                                                                                            NMS, LLC designated as such and                       Repository certain details for each order.
                                                    (W) Material Terms of the Order                         described in Article IV of the CAT NMS                Accordingly, the Exchange proposes to
                                                       Proposed Rule 3 requires Industry                    Plan. This is the same definition as set              define the term ‘‘Order’’ in proposed
                                                    Members to record and report to the                     forth in Section 1.1 of the CAT NMS                   Rule 1. Specifically, paragraph (bb) of
                                                    Central Repository Material Terms of                    Plan, except the Exchange proposes to                 proposed Rule 1 defines the term
                                                    the Order with certain Reportable                       use the phrase ‘‘CAT NMS LLC’’ in                     ‘‘Order’’, with respect to Eligible
                                                    Events (e.g., for the original receipt or               place of the phrase ‘‘the Company’’ for               Securities, to include: (1) Any order
                                                    origination of an order, for the routing                clarity.                                              received by an Industry Member from
                                                    of an order). Accordingly, the Exchange                 (AA) Options Market Maker                             any person; (2) any order originated by
                                                    proposes to define the term ‘‘Material                                                                        an Industry Member; or (3) any bid or
                                                    Terms of the Order’’ in proposed Rule                   (I) Options Market Maker Quote                        offer. This is the same definition as set
                                                    1. Specifically, paragraph (w) of                       Exemption                                             forth in SEC Rule 613(j)(8), except the
                                                    proposed Rule 1 defines the term                           SEC Rule 613(c)(7) provides that the               Exchange proposes to replace the phrase
                                                    ‘‘Material Terms of the Order’’ to                      CAT NMS Plan must require each                        ‘‘member of a national securities
                                                    include: The NMS Security or OTC                        Industry Member to record and                         exchange or national securities
                                                    Equity Security symbol; security type;                  electronically report to the Central                  association’’ with the term ‘‘Industry
                                                    price (if applicable); size (displayed and              Repository details for each order and                 Member.’’ The Exchange notes that
                                                    non-displayed); side (buy/sell); order                  each reportable event, including the                  Section 1.1 of the CAT NMS Plan
                                                    type; if a sell order, whether the order                routing and modification or cancellation              defines ‘‘Order’’ by reference to SEC
                                                    is long, short, short exempt; open/close                of an order. SEC Rule 613(j)(8) defines               Rule 613(j)(8).
                                                    indicator (except on transactions in                    ‘‘order’’ to include ‘‘any bid or offer.’’
                                                                                                            Therefore, under SEC Rule 613, the                    (CC) OTC Equity Security
                                                    equities); time in force (if applicable); if
                                                    the order is for a Listed Option, option                details for each Options Market Maker                   OTC Equity Securities are one of the
                                                    type (put/call), option symbol or root                  quotation must be reported to the                     types of Eligible Securities for the CAT.
                                                    symbol, underlying symbol, strike price,                Central Repository by both the Options                Therefore, the Exchange proposes to
                                                    expiration date, and open/close (except                 Market Maker and the options exchange                 define the term ‘‘OTC Equity Security’’
                                                    on market maker quotations); and any                    to which it routes its quote.                         in proposed Rule 1. Specifically,
                                                    special handling instructions. This is                     The SROs, however, requested and                   paragraph (cc) of proposed Rule 1
                                                    the same definition as set forth in                     received exemptive relief from SEC Rule               defines the term ‘‘OTC Equity Security’’
                                                    Section 1.1 of the CAT NMS Plan.                        613 so that the CAT NMS Plan may                      to mean any equity security, other than
                                                                                                            permit Options Market Maker quotes to                 an NMS Security, subject to prompt last
                                                    (X) NMS Security                                        be reported to the Central Repository by              sale reporting rules of a registered
                                                       NMS Securities are one of the types                  the relevant options exchange in lieu of              national securities association and
                                                    of Eligible Securities for the CAT.                     requiring that such reporting be done by              reported to one of such association’s
                                                    Therefore, the Exchange proposes to                     both the options exchange and the                     equity trade reporting facilities. This is
                                                    define the term ‘‘NMS Security’’ in                     Options Market Maker, as is required by               the same definition as set forth in
                                                    proposed Rule 1. Specifically, paragraph                SEC Rule 613.24 In accordance with the                Section 1.1 of the CAT NMS Plan.
                                                    (x) of proposed Rule 1 defines the term                 exemptive relief, Options Market
                                                    ‘‘NMS Security’’ to mean any security or                                                                      (DD) Plan Participant 25
                                                                                                            Makers would be required to report to
                                                    class of securities for which transaction               the options exchange the time at which                  Paragraph (dd) of proposed Rule 1
                                                    reports are collected, processed, and                   a quote in a Listed Option is sent to the             defines the term ‘‘Plan Participant’’ to
                                                    made available pursuant to an effective                 options exchange. Such time                           mean each Person identified as such in
                                                    transaction reporting plan, or an                       information also will be reported to the              Exhibit A of the CAT NMS Plan, as
                                                    effective national market system plan                   Central Repository by the options                     amended, in such Person’s capacity as
                                                    for reporting transactions in Listed                    exchange in lieu of reporting by the                  a Participant in CAT NMS, LLC. This is
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                                                    Options. This is the same definition as                 Options Market Maker.                                 the same definition in substance as set
                                                    set forth in Section 1.1 of the CAT NMS                                                                       forth in Section 1.1 of the CAT NMS
                                                    Plan.                                                   (II) Definition of Options Market Maker               Plan.
                                                    (Y) NMS Stock                                              To implement the requirements
                                                                                                                                                                  (EE) Person
                                                                                                            related to Option Market Maker quotes,
                                                      Under the CAT NMS Plan, the                           the Exchange proposes to define the                     Paragraph (ee) of proposed Rule 1
                                                    Operating Committee may establish                                                                             defines the term ‘‘Person’’ to mean any
                                                    different Trading Days for NMS Stocks                     24 See Exemptive Request Letter at 2, and

                                                    (as defined in SEC Rule 600(b)(47)),                    Exemption Order.                                        25 See   supra note 5.



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                                                    9910                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    individual, partnership, limited liability              (JJ) SRO                                              Specifically, paragraph (kk) of proposed
                                                    company, corporation, joint venture,                      Paragraph (jj) of proposed Rule 1                   Rule 1 defines the term ‘‘SRO-Assigned
                                                    trust, business trust, cooperative or                   defines the term ‘‘SRO’’ to mean any                  Market Participant Identifier’’ to mean
                                                    association and any heirs, executors,                   self-regulatory organization within the               an identifier assigned to an Industry
                                                    administrators, legal representatives,                  meaning of Section 3(a)(26) of the                    Member by an SRO or an identifier used
                                                    successors and assigns of such Person                   Exchange Act. This is the same                        by a Plan Participant. This is the same
                                                    where the context so permits. This is the               definition as set forth in Section 1.1 of             definition as set forth in Section 1.1 of
                                                    same definition as set forth in Section                 the CAT NMS Plan.                                     the CAT NMS Plan. For example, an
                                                    1.1 of the CAT NMS Plan.                                                                                      Industry Member would be permitted to
                                                                                                            (KK) SRO-Assigned Market Participant                  use any existing SRO-Assigned Market
                                                    (FF) Plan Processor                                     Identifier                                            Participant Identifier (e.g., FINRA MPID,
                                                      Paragraph (ff) of proposed Rule 1                                                                           NASDAQ MPID, NYSE Mnemonic,
                                                                                                            (I) Existing Identifier Approach
                                                    defines the term ‘‘Plan Processor’’ to                                                                        CBOE User Acronym and CHX
                                                    mean the Initial Plan Processor or any                    The SROs requested and received
                                                                                                                                                                  Acronym) when reporting order
                                                    other Person selected by the Operating                  exemptive relief from SEC Rule 613 so
                                                                                                                                                                  information to the Central Repository.
                                                    Committee pursuant to SEC Rule 613                      that the CAT NMS Plan may permit the
                                                    and Sections 4.3(b)(i) and 6.1 of the                   Existing Identifier Approach, which                   (LL) Small Industry Member
                                                    CAT NMS Plan, and with regard to the                    would allow an Industry Member to
                                                    Initial Plan Processor, the National                    report an existing SRO-Assigned Market                   The requirements of proposed Article
                                                    Market System Plan Governing the                        Participant Identifier in lieu of requiring           23 differ to some extent for Small
                                                    Process for Selecting a Plan Processor                  the reporting of a universal CAT-                     Industry Members versus Industry
                                                    and Developing a Plan for the                           Reporter-ID (that is, a code that                     Members other than Small Industry
                                                    Consolidated Audit Trail, to perform the                uniquely and consistently identifies an               Members. For example, the compliance
                                                    CAT processing functions required by                    Industry Member for purposes of                       dates for reporting data to the CAT are
                                                    SEC Rule 613 and set forth in the CAT                   providing data to the Central                         different for Small Industry Members
                                                    NMS Plan.                                               Repository).26 The CAT NMS Plan                       versus other Industry Members.
                                                                                                            reflects the ‘‘Existing Identifier                    Accordingly, to clarify the requirements
                                                    (GG) Received Industry Member Data                      Approach’’ for purposes of identifying                that apply to which Industry Members,
                                                       Paragraph (gg) of proposed Rule 1                    each Industry Member associated with                  the Exchange proposes to define the
                                                    states that the term ‘‘Received Industry                an order or Reportable Event. Under the               term ‘‘Small Industry Member’’ in
                                                    Member Data’’ has the meaning set forth                 Existing Identifier Approach, Industry                proposed Rule 1. Specifically, paragraph
                                                    in Rule 3(a)(2). This definition has the                Members are required to record and                    (ll) of proposed Rule 1 defines the term
                                                    same substantive meaning as the                         report to the Central Repository an SRO-              ‘‘Small Industry Member’’ to mean an
                                                    definition set forth in Section 1.1 of the              Assigned Market Participant Identifier                Industry Member that qualifies as a
                                                    CAT NMS Plan. The definition of                         for orders and certain Reportable Events              small broker-dealer as defined in Rule
                                                    ‘‘Received Industry Member Data’’ is                    to be used by the Central Repository to               0–10(c) under the Securities Exchange
                                                    discussed more fully in the discussion                  assign a unique CAT-Reporter-ID to                    Act of 1934, as amended. This is the
                                                    below regarding proposed Rule 3(a)(2).                  identify Industry Members.                            same in substance as the definition of
                                                                                                              For the Central Repository to link the              ‘‘Small Industry Member’’ as set forth in
                                                    (HH) Recorded Industry Member Data
                                                                                                            SRO-Assigned Market Participant                       Section 1.1 of the CAT NMS Plan.
                                                       Paragraph (hh) of proposed Rule 1                    Identifier to the CAT-Reporter-ID, each               Specifically, Section 1.1 of the CAT
                                                    states that the term ‘‘Recorded Industry                SRO will submit to the Central                        NMS Plan defines a ‘‘Small Industry
                                                    Member Data’’ has the meaning set forth                 Repository, on a daily basis, all SRO-                Member’’ as ‘‘an Industry Member that
                                                    in Rule 3(a)(1). This definition has the                Assigned Market Participant Identifiers               qualifies as a small broker-dealer as
                                                    same substantive meaning as the                         used by its Industry Members, as well                 defined in SEC Rule 613.’’ The
                                                    definition set forth in in Section 1.1 of               as information to identify each such                  definition of a small broker-dealer under
                                                    the CAT NMS Plan. The definition of                     Industry Member, including CRD                        SEC Rule 613, in turn, is a small broker-
                                                    ‘‘Recorded Industry Member Data’’ is                    number and LEI, if the SRO has                        dealer as defined in SEC Rule 0–10(c).
                                                    discussed more fully in the discussion                  collected such LEI of the Industry
                                                    below regarding proposed Rule 3(a)(1).                  Member. Additionally, each Industry                   (MM) Trading Day
                                                    (II) Reportable Event                                   Member is required to submit to the                      Proposed Rule 3(b) establishes the
                                                                                                            Central Repository the CRD of the
                                                       The proposed Article 23 requires each                                                                      deadlines for reporting certain data to
                                                                                                            Industry Member, as well as the LEI of
                                                    Industry Member to record and                                                                                 the Central Repository using the term
                                                                                                            the Industry Member (if the Industry
                                                    electronically report to the Central                                                                          ‘‘Trading Day.’’ Accordingly, the
                                                                                                            Member has an LEI). The Plan Processor
                                                    Repository certain details for each                                                                           Exchange proposes to define the term
                                                                                                            will use this information to assign a
                                                    Reportable Event. To clarify these                                                                            ‘‘Trading Day’’ in proposed Rule 1.
                                                                                                            CAT-Reporter-ID to each Industry
                                                    requirements, the Exchange proposes to                                                                        Specifically, Paragraph (mm) of
                                                                                                            Member for internal use within the
                                                    define the term ‘‘Reportable Event’’ in                                                                       proposed Rule 1 states that the term
                                                                                                            Central Repository.
                                                    proposed Rule 1. Specifically, paragraph                                                                      ‘‘Trading Day’’ shall have the meaning
                                                    (ii) of proposed Rule 1 states that the                 (II) Definition of SRO-Assigned Market                as is determined by the Operating
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                                                    term ‘‘Reportable Event’’ includes, but is              Participant Identifier                                Committee. For the avoidance of doubt,
                                                    not limited to, the original receipt or                   To implement the Existing Identifier                the Operating Committee may establish
                                                    origination, modification, cancellation,                Approach, the Exchange proposes to                    different Trading Days for NMS Stocks
                                                    routing, execution (in whole or in part)                define the term ‘‘SRO-Assigned Market                 (as defined in SEC Rule 600(b)(47),
                                                    and allocation of an order, and receipt                 Participant’’ in proposed Rule 1.                     Listed Options, OTC Equity Securities,
                                                    of a routed order. This is the same                                                                           and any other securities that are
                                                    definition as set forth in Section 1.1 of                 26 See Exemptive Request Letter at 19, and          included as Eligible Securities from
                                                    the CAT NMS Plan.                                       Exemption Order.                                      time to time.


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9911

                                                    (ii) Clock Synchronization                              Events are accurate. In addition, to                  of paragraph (a) of this Rule pursuant to
                                                       SEC Rule 613(d)(1) under Regulation                  maintain clock synchronization,                       the thresholds set by the Operating
                                                    NMS requires Industry Members to                        Business Clocks must be checked                       Committee pursuant to the CAT NMS
                                                    synchronize their Business Clocks to the                against the NIST atomic clock and re-                 Plan. This requirement is the same
                                                    time maintained by NIST, consistent                     synchronized, as necessary, throughout                requirement as set forth in Section
                                                    with industry standards. To comply                      the day. This description of the required             6.8(a)(ii)(C), (iii) and (iv) of the CAT
                                                    with this provision, Section 6.8 of the                 frequency of clock synchronization is                 NMS Plan. The Exchange intends to
                                                    Plan sets forth the clock                               the same as set forth in paragraph (c) of             announce to its Industry Members the
                                                    synchronization requirements for                        FINRA Rule 4590 (Synchronization of                   relevant thresholds established by the
                                                    Industry Members.27 To implement                        Member Business Clocks).                              Operating Committee via Information
                                                    these provisions with regard to its                        Paragraph (b) of proposed Rule 2 sets              Memorandum.
                                                    Industry Members, the Exchange                          forth documentation requirements with
                                                                                                            regard to clock synchronization.                      (iii) Industry Member Data Reporting
                                                    proposes Rule 2 (Consolidated Audit
                                                                                                            Specifically, paragraph (b) requires                     SEC Rule 613(c) under Regulation
                                                    Trail—Clock Synchronization) to
                                                                                                            Industry Members to document and                      NMS requires the CAT NMS Plan to set
                                                    require its Industry Members to comply
                                                                                                            maintain their synchronization                        forth certain provisions requiring
                                                    with the clock synchronization
                                                                                                            procedures for their Business Clocks.                 Industry Members to record and report
                                                    requirements of the Plan.
                                                       Paragraph (a) of proposed Rule 2 sets                The proposed Rule requires Industry                   data to the CAT. To comply with this
                                                    forth the manner in which Industry                      Members to keep a log of the times                    provision, Section 6.4 of the CAT NMS
                                                    Members must synchronize their                          when they synchronize their Business                  Plan sets forth the data reporting
                                                    Business Clocks. Paragraph (a)(1) of                    Clocks and the results of the                         requirements for Industry Members. To
                                                    proposed Rule 2 requires each Industry                  synchronization process. This log is                  implement these provisions with regard
                                                    Member to synchronize its Business                      required to include notice of any time                to its Industry Members, the Exchange
                                                    Clocks, other than such Business Clocks                 a Business Clock drifts more than the                 proposes Rule 3 (Consolidated Audit
                                                    used solely for Manual Order Events or                  applicable tolerance specified in                     Trail—Industry Member Data Reporting)
                                                    used solely for the time of allocation on               paragraph (a) of the proposed Rule.                   to require its Industry Members to
                                                    Allocation Reports, at a minimum to                     Such logs must include results for a                  comply with the Industry Member Data
                                                    within a fifty (50) millisecond tolerance               period of not less than five years ending             reporting requirements of the Plan.
                                                    of the time maintained by the NIST                      on the then current date, or for the                  Proposed Rule 3 has six [sic] sections
                                                    atomic clock, and maintain such                         entire period for which the Industry                  covering: (1) Recording and reporting
                                                    synchronization. This is the same                       Member has been required to comply                    Industry Member Data, (2) timing of the
                                                    requirement as set forth in Section                     with this Rule if less than five years.               recording and reporting, (3) the
                                                    6.8(a)(ii)(A) of the CAT NMS Plan.                      These documentation requirements are                  applicable securities cover by the
                                                       Paragraph (a)(2) of proposed Rule 2                  the same as those set forth in the                    recording and reporting requirements,
                                                    requires each Industry Member to                        ‘‘Sequencing Orders and Clock                         (4) format, [sic] (5) the security
                                                    synchronize (1) its Business Clocks used                Synchronization’’ section of Appendix                 symbology to be used in the recording
                                                    solely for Manual Order Events and (2)                  C of the CAT NMS Plan. Moreover,                      and reporting, and (6) error correction
                                                    its Business Clocks used solely for the                 these documentation requirements                      requirements, each of which is
                                                    time of allocation on Allocation Reports                regarding clock synchronization are                   described below.
                                                    at a minimum to within a one second                     comparable to those set forth in
                                                                                                                                                                  (A) Recording and Reporting Industry
                                                    tolerance of the time maintained by the                 Supplementary Material .01 of FINRA
                                                                                                                                                                  Member Data
                                                    NIST atomic clock, and maintain such                    Rule 4590 (Synchronization of Member
                                                                                                            Business Clocks).                                       Paragraph (a) of proposed Rule 3
                                                    synchronization. This is the same
                                                                                                               Paragraph (c) of proposed Rule 2 sets              describes the recording and reporting of
                                                    requirement as set forth in Section
                                                                                                            forth certification requirements with                 Industry Member Data to the Central
                                                    6.8(a)(iii) and (iv) of the CAT NMS Plan.
                                                       Paragraph (a)(3) of proposed Rule 2                  regard to clock synchronization.                      Repository. Paragraph (a) consists of
                                                    clarifies that the tolerance described in               Specifically, paragraph (c) of proposed               paragraphs (a)(1)–(a)(3), which cover
                                                    paragraphs (a)(1) and (2) of the proposed               Rule 2 requires each Industry Member                  Recorded Industry Member Data,
                                                    Rule 2 includes all of the following: (1)               to certify to the Exchange that its                   Received Industry Member Data and
                                                    The time difference between the NIST                    Business Clocks satisfy the                           Options Market Maker data,
                                                    atomic clock and the Industry Member’s                  synchronization requirements set forth                respectively. Paragraphs (a)(1)–(a)(3) of
                                                    Business Clock; (2) the transmission                    in paragraph (a) of proposed Rule 2                   proposed Rule 3 set forth the recording
                                                    delay from the source; and (3) the                      periodically in accordance with the                   and reporting requirements required in
                                                    amount of drift of the Industry                         certification schedule established by the             Section 6.4(d)(i)–(iii) of the CAT NMS
                                                    Member’s Business Clock. This                           Operating Committee pursuant to the                   Plan, respectively.
                                                                                                            CAT NMS Plan. This requirement is the                   Paragraph (a)(1) requires, subject to
                                                    description of the clock synchronization
                                                                                                            same requirement as set forth in Section              paragraph (a)(3) regarding Options
                                                    tolerance is the same as set forth in
                                                                                                            6.8(a)(ii)(B), (iii) and (iv) of the CAT              Market Makers, each Industry Member
                                                    paragraph (b) of FINRA Rule 4590
                                                                                                            NMS Plan. The Exchange intends to                     to record and electronically report to the
                                                    (Synchronization of Member Business
                                                                                                            announce to its Industry Members the                  Central Repository the following details
                                                    Clocks).
                                                                                                            certification schedule established by the             for each order and each Reportable
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                                                       Paragraph (a)(4) of proposed Rule 2
                                                    requires Industry Members to                            Operating Committee via Information                   Event, as applicable (‘‘Recorded
                                                    synchronize their Business Clocks every                 Memorandum.                                           Industry Member Data’’) in the manner
                                                                                                               Paragraph (d) of proposed Rule 2                   prescribed by the Operating Committee
                                                    business day before market open to
                                                                                                            establishes reporting requirements with               pursuant to the CAT NMS Plan:
                                                    ensure that timestamps for Reportable
                                                                                                            regard to clock synchronization.                        • For original receipt or origination of
                                                      27 In addition, Section 6.7(a)(ii) of the Plan sets   Paragraph (d) of proposed Rule 2                      an order: (1) Firm Designated ID(s) for
                                                    forth the timeline for CAT Reporters to comply with     requires Industry Members to report to                each Customer; (2) CAT-Order-ID; (3)
                                                    the clock synchronization requirements.                 the Plan Processor and SRO violations                 SRO-Assigned Market Participant


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                                                    9912                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

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


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9913

                                                    relevant symbology formats established                  Repository has the most current                         to comply with the time stamp
                                                    by the Operating Committee via                          information identifying a Customer. The                 requirements of the Plan.
                                                    Information Memorandum.                                 Exchange intends to announce to its                        Paragraph (a) of proposed Rule 6 sets
                                                                                                            Industry Members when such a periodic                   forth the time stamp increments to be
                                                    (E) Error Correction                                                                                            used by Industry Members in their CAT
                                                                                                            refresh is required by the Plan Processor
                                                      To ensure that the CAT contains                       and the Operating Committee via                         reporting. Paragraph (a)(1) of proposed
                                                    accurate data, the CAT NMS Plan                         Information Memorandum.                                 Rule 6 requires each Industry Member
                                                    requires Industry Members to correct                      Finally, paragraph (d) of proposed                    to record and report Industry Member
                                                    erroneous data submitted to the Central                 Rule 4 addresses the correction of                      Data to the Central Repository with time
                                                    Repository. Therefore, the Exchange                     erroneous Customer data reported to the                 stamps in milliseconds, subject to
                                                    proposes to adopt paragraph (e) of                      Central Repository to ensure an accurate                paragraphs (a)(2) and (b) of proposed
                                                    proposed Rule 3, which addresses the                    audit trail. Paragraph (d) requires, for                Rule 6. To the extent that any Industry
                                                    correction of erroneous data reported to                each Industry Member for which errors                   Member’s order handling or execution
                                                    the Central Repository. Paragraph (e) of                in Firm Designated ID, Customer                         systems utilize time stamps in
                                                    proposed Rule 3 requires, for each                      Account Information and Customer                        increments finer than milliseconds,
                                                    Industry Member for which errors in                     Identifying Information for each of its                 paragraph (a)(2) of proposed Rule 6
                                                    Industry Member Data submitted to the                   Customers with an Active Account                        requires such Industry Member to
                                                    Central Repository have been identified                 submitted to the Central Repository                     record and report Industry Member Data
                                                    by the Plan Processor or otherwise, that                have been identified by the Plan                        to the Central Repository with time
                                                    such Industry Member submit corrected                   Processor or otherwise, such Member to                  stamps in such finer increment, subject
                                                    Industry Member Data to the Central                     submit corrected data to the Central                    to paragraph (b) of proposed Rule 6
                                                    Repository by 8:00 a.m. Eastern Time on                 Repository by 5:00 p.m. Eastern Time on                 regarding Manual Order Events and
                                                    T+3. This requirement implements the                    T+3. This requirement implements the                    Allocation Reports.
                                                    error correction requirement set forth in               error correction requirement set forth in                  Paragraph (b) of proposed Rule 6 sets
                                                    Section 6 of Appendix D of the CAT                      Appendix C of the CAT NMS Plan.                         forth the permissible time stamp
                                                    NMS Plan.                                                                                                       increments for Manual Order Events
                                                                                                            (v) Industry Member Information                         and Allocation Reports. Specifically,
                                                    (iv) Customer Information Reporting                     Reporting                                               paragraph (b)(1) of proposed Rule 6
                                                       Section 6.4(d)(iv) of the CAT NMS                      Section 6.4(d)(vi) of the CAT NMS                     permits each Industry Member to record
                                                    Plan requires Industry Members to                       Plan requires Industry Members to                       and report Manual Order Events to the
                                                    submit to the Central Repository certain                submit to the Central Repository                        Central Repository in increments up to
                                                    information related to their Customers                  information sufficient to identify such                 and including one second, provided that
                                                    in accordance with the Customer                         Industry Member, including CRD                          each Industry Member is required to
                                                    Information Approach discussed above.                   number and LEI, if such LEI has been                    record and report the time when a
                                                    The Exchange proposes Rule 4                            obtained, in accordance with the                        Manual Order Event has been captured
                                                    (Consolidated Audit Trail—Customer                      Existing Identifier Approach discussed                  electronically in an order handling and
                                                    Information Reporting) to implement                     above. The Exchange proposes Rule 5                     execution system of such Member
                                                    this provision of the CAT NMS Plan                      (Consolidated Audit Trail—Industry                      (‘‘Electronic Capture Time’’) in
                                                    with regard to its Industry Members.                    Member Information Reporting) to                        milliseconds. In addition, paragraph
                                                    Specifically, paragraph (a) of proposed                 implement this provision of the CAT                     (b)(2) of proposed Rule 6 permits each
                                                    Rule 4 requires each Industry Member                    NMS Plan with regard to its Industry                    Industry Member to record and report
                                                    to submit to the Central Repository the                 Members. Specifically, proposed Rule 5                  the time of Allocation Reports in
                                                    Firm Designated ID, Customer Account                    requires each Industry Member to                        increments up to and including one
                                                    Information and Customer Identifying                    submit to the Central Repository                        second.
                                                    Information for each of its Customers                   information sufficient to identify such
                                                    with an Active Account prior to such                                                                            (vii) Clock Synchronization Rule
                                                                                                            Industry Member, including CRD
                                                    Industry Member’s commencement of                                                                               Violations
                                                                                                            number and LEI, if such LEI has been
                                                    reporting to the Central Repository and                 obtained, prior to such Industry                          Proposed Rule 7 (Consolidated Audit
                                                    in accordance with the deadlines set                    Member’s commencement of reporting                      Trail—Clock Synchronization Rule
                                                    forth in Rule 9. Paragraph (b) of                       to the Central Repository and in                        Violations [sic]) describes potential
                                                    proposed Rule 4 requires each Industry                  accordance with the deadlines set forth                 violations of the clock synchronization
                                                    Member to submit to the Central                         in Rule 9, and keep such information up                 time period requirements set forth in
                                                    Repository any updates, additions or                    to date as necessary.                                   proposed Article 23. Proposed Rule 7
                                                    other changes to the Firm Designated ID,                                                                        states that an Industry Member that
                                                    Customer Account Information and                        (vi) Time Stamps                                        engages in a pattern or practice of
                                                    Customer Identifying Information for                      SEC Rule 613(d)(3) under Regulation                   reporting Reportable Events outside of
                                                    each of its Customers with an Active                    NMS sets forth requirements for time                    the required clock synchronization time
                                                    Account on a daily basis. Paragraph (c)                 stamps used by CAT Reporters in                         period as set forth in this Article 23
                                                    of proposed Rule 4 requires each                        recording and reporting data to the                     without reasonable justification or
                                                    Industry Member, on a periodic basis as                 CAT.28 To comply with this provision,                   exceptional circumstances may be
                                                    designated by the Plan Processor and                    Section 6.8(b) of the Plan sets forth time              considered in violation of this Rule.
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                                                    approved by the Operating Committee,                    stamp requirements for Industry                         This provision implements the
                                                    to submit to the Central Repository a                   Members. To implement this provision                    requirements of Section 6.8 of the CAT
                                                    complete set of Firm Designated IDs,                    with regard to its Industry Members, the                NMS Plan which requires the
                                                    Customer Account Information and                        Exchange proposes new Rule 6                            Compliance Rule to provide that a
                                                    Customer Identifying Information for                    (Consolidated Audit Trail—Time                          pattern or practice of reporting events
                                                    each of its Customers with an Active                    Stamps) to require its Industry Members                 outside of the required clock
                                                    Account. This periodic refresh is                                                                               synchronization time period without
                                                    intended to ensure that the Central                       28 17   CFR 242.613(d)(3).                            reasonable justification or exceptional


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                                                    9914                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    circumstances may be considered a                       remains primarily responsible for                     of order submission, which will begin
                                                    violation of SEC Rule 613 or the CAT                    compliance with the requirements of                   no later than August 15, 2019.
                                                    NMS Plan.                                               proposed Article 23, notwithstanding                    Paragraph (a)(4) states that Industry
                                                                                                            the existence of an agreement described               Members are permitted, but not required
                                                    (viii) Connectivity and Data
                                                                                                            in paragraph (c) of proposed Rule 8.                  to, submit Quote Sent Times on Options
                                                    Transmission
                                                                                                                                                                  Market Maker quotes, beginning no later
                                                       Proposed Rule 8 (Consolidated Audit                  (ix) Development and Testing                          than October 15, 2018
                                                    Trail—Connectivity and Data                                The Exchange proposes Rule 9                         Paragraph (b) of proposed Rule 9
                                                    Transmission) addresses connectivity                    (Consolidated Audit Trail—                            implements the requirement under the
                                                    and data transmission requirements                      Development and Testing) to address                   CAT NMS Plan that Industry Members
                                                    related to the CAT. Paragraph (a) of                    requirements for Industry Members                     participate in required industry testing
                                                    proposed Rule 8 describes the format(s)                 related to CAT development and testing.               with the Central Repository.29
                                                    for reporting Industry Member Data to                   Paragraph (a) of proposed Rule 9 sets                 Specifically, proposed Rule 9 requires
                                                    the Central Repository, thereby                         forth the testing requirements and                    that each Industry Member participate
                                                    implementing the formatting                             deadlines for Industry Members to                     in testing related to the Central
                                                    requirements as set forth in Section                    develop and commence reporting to the                 Repository, including any industry-wide
                                                    6.4(a) of the CAT NMS Plan.                             Central Repository. These requirements                disaster recovery testing, pursuant to the
                                                    Specifically, paragraph (a) of proposed                 are set forth in Appendix C to the CAT                schedule established pursuant to the
                                                    Rule 8 requires each Industry Member                    NMS Plan.                                             CAT NMS Plan. The Exchange intends
                                                    to transmit data as required under the                     Paragraph (a)(1) sets forth the                    to announce to its Industry Members the
                                                    CAT NMS Plan to the Central                             deadlines related to connectivity and                 schedule established pursuant to the
                                                    Repository utilizing such format(s) as                  acceptance testing. Industry Members                  CAT NMS Plan via Information
                                                    may be provided by the Plan Processor                   (other than Small Industry Members) are               Memorandum.
                                                    and approved by the Operating
                                                                                                            required to begin connectivity and                    (x) Recordkeeping
                                                    Committee.
                                                                                                            acceptance testing with the Central
                                                       Paragraph (b) of proposed Rule 8                                                                              Proposed Rule 10 (Consolidated Audit
                                                    addresses connectivity requirements                     Repository no later than August 15,
                                                                                                            2018, and Small Industry Members are                  Trail—Recordkeeping) sets forth the
                                                    related to the CAT. Paragraph (b) of                                                                          recordkeeping obligations related to the
                                                    proposed Rule 8 requires each Industry                  required to begin connectivity and
                                                                                                            acceptance testing with the Central                   CAT for Industry Members. Proposed
                                                    Member to connect to the Central                                                                              Rule 10 requires each Industry Member
                                                    Repository using a secure method(s),                    Repository no later than August 15,
                                                                                                            2019.                                                 to maintain and preserve records of the
                                                    including, but not limited to, private                                                                        information required to be recorded
                                                    line(s) and virtual private network                        Paragraph (a)(2) sets forth the
                                                                                                            deadlines related to reporting Customer               under proposed Article 23 for the period
                                                    connection(s). This provision                                                                                 of time and accessibility specified in
                                                    implements the connectivity                             and Industry Member information.
                                                                                                            Paragraph (a)(2)(i) requires Industry                 SEC Rule 17a–4(b). The records required
                                                    requirements set forth in Section 4 of                                                                        to be maintained and preserved under
                                                    Appendix D to the CAT NMS Plan.                         Members (other than Small Industry
                                                                                                            Members) to begin reporting Customer                  proposed Article 23 may be
                                                       Paragraph (c) permits Industry                                                                             immediately produced or reproduced on
                                                    Members to use CAT Reporting Agents                     and Industry Member information, as
                                                                                                            required by Rules 4 and 5, respectively,              ‘‘micrographic media’’ as defined in
                                                    to fulfill their data reporting obligations                                                                   SEC Rule 17a–4(f)(1)(i) or by means of
                                                    related to the CAT. Paragraph (c) is                    to the Central Repository for processing
                                                                                                            no later than October 15, 2018.                       ‘‘electronic storage media’’ as defined in
                                                    based on FINRA Rule 7450(c), which                                                                            SEC Rule 17a–4(f)(1)(ii) that meet the
                                                    permits OATS Reporting Members to                       Paragraph (a)(2)(ii) requires Small
                                                                                                            Industry Members to begin reporting                   conditions set forth in SEC Rule 17a–
                                                    enter into agreements with Reporting                                                                          4(f) and be maintained and preserved
                                                    Agents to fulfill the OATS obligations of               Customer and Industry Member
                                                                                                            information, as required by Rules 4 and               for the required time in that form.
                                                    the OATS Reporting Member.
                                                                                                            5, respectively, to the Central Repository            Proposed Rule 10 is based on FINRA
                                                    Specifically, Paragraph (c)(1) of
                                                                                                            for processing no later than October 15,              Rule 7440(a)(5), which sets forth the
                                                    proposed Rule 8 states that any Industry
                                                                                                            2019.                                                 recordkeeping requirements related to
                                                    Member may enter into an agreement
                                                                                                                                                                  OATS.
                                                    with a CAT Reporting Agent pursuant to                     Paragraph (a)(3) sets forth the
                                                    which the CAT Reporting Agent agrees                    deadlines related to the submission of                (xi) Timely, Accurate and Complete
                                                    to fulfill the reporting obligations of                 order data. Under paragraph (a)(3)(i),                Data
                                                    such Industry Member under proposed                     Industry Members (other than Small                       SEC Rule 613 and the CAT NMS Plan
                                                    Article 23. Any such agreement must be                  Industry Members) are permitted, but                  emphasize the importance of the
                                                    evidenced in writing, which specifies                   not required, to submit order data for                timeliness, accuracy, completeness and
                                                    the respective functions and                            testing purposes beginning no later than              integrity of the data submitted to the
                                                    responsibilities of each party to the                   May 15, 2018. In addition, Industry                   CAT.30 Accordingly, proposed Rule 11
                                                    agreement that are required to effect full              Members (other than Small Industry                    (Consolidated Audit Trail—Timely,
                                                    compliance with the requirements of                     Members) are required to participate in               Accurate and Complete Data)
                                                    proposed Article 23. The Exchange                       the coordinated and structured testing                implements this requirement with
                                                    notes that, currently, no standardized                  of order submission, which will begin
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                                                                                                                                                                  regard to Industry Members. Paragraph
                                                    form agreement for CAT Reporting                        no later than August 15, 2018. Under                  (a) of proposed Rule 11 requires that
                                                    Agent arrangements has been adopted.                    paragraph (a)(3)(ii), Small Industry                  Industry Members record and report
                                                    Paragraph (c)(2) of proposed Rule 8                     Members are permitted, but not                        data to the Central Repository as
                                                    requires that all written documents                     required, to submit order data for testing            required by proposed Article 23 in a
                                                    evidencing an agreement with a CAT                      purposes beginning no later than May
                                                    Reporting Agent be maintained by each                   15, 2019. In addition, Small Industry                   29 Adopting  Release [sic] at 84725.
                                                    party to the agreement. Paragraph (c)(3)                Members are required to participate in                  30 See SEC Rule 613(e)(4)(i)(D)(ii); and Section
                                                    states that each Industry Member                        the coordinated and structured testing                6.5(d) of the CAT NMS Plan.



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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                              9915

                                                    manner that ensures the timeliness,                      calculated at intervals to be set by the               Rule 613(a)(3)(v) and (vi), and Section
                                                    accuracy, integrity and completeness of                  Operating Committee.32 Compliance                      6.7(a)(v) and (vi) of the CAT NMS Plan.
                                                    such data.                                               Thresholds will include compliance
                                                       In addition, without limiting the                                                                            2. Statutory Basis
                                                                                                             with the data reporting and clock
                                                    general requirement as set forth in                      synchronization requirements. Proposed                    The Exchange believes that the
                                                    paragraph (a), paragraph (b) of proposed                 Rule 11 further states that an Industry                proposed rule change is consistent with
                                                    Rule 11 requires Industry Members to                     Member’s performance with respect to                   the provisions of Section 6(b)(5) of the
                                                    accurately provide the LEIs in their                     its Compliance Threshold will not                      Act,34 which require, among other
                                                    records as required by proposed Article                  signify, as a matter of law, that such                 things, that CHX Rules must be
                                                    23 and states that Industry Members                      Industry Member has violated this                      designed to prevent fraudulent and
                                                    may not knowingly submit inaccurate                      proposed Article 23.                                   manipulative acts and practices, to
                                                    LEIs to the Central Repository.                                                                                 promote just and equitable principles of
                                                    Paragraph (b) notes, however, that this                  (xii) Compliance Dates
                                                                                                                                                                    trade, and, in general, to protect
                                                    requirement does not impose any                             Proposed Rule 12 (Consolidated Audi                 investors and the public interest, and
                                                    additional due diligence obligations on                  [sic] Trail—Compliance Dates) sets forth               Section 6(b)(8) of the Act,35 which
                                                    Industry Members with regard to LEIs                     the compliance dates for the various                   requires that CHX Rules not impose any
                                                    for CAT purposes. Accordingly, this                      provisions of proposed Article 23.                     burden on competition that is not
                                                    provision does not impose any due                        Paragraph (a) of proposed Rule 12 states               necessary or appropriate.
                                                    diligence obligations beyond those that                  that paragraphs (b) and (c) of this Rule                  The Exchange believes that this
                                                    may exist today with respect to                          set forth the additional details with                  proposal is consistent with the Act
                                                    information associated with an LEI.                      respect to the compliance date of Article              because it implements, interprets or
                                                    Although Industry Members will not be                    23. Unless otherwise noted, Article 23 is              clarifies the provisions of the Plan, and
                                                    required to perform additional due                       fully effective and Industry Members                   is designed to assist the Exchange and
                                                    diligence with regard to the LEIs for                    must comply with their terms.                          its Industry Members in meeting
                                                    CAT purposes, Industry Members will
                                                    be required to accurately provide the                       Paragraph (b) of proposed Rule 12                   regulatory obligations pursuant to the
                                                    LEIs in their records and may not                        establishes the compliance dates for the               Plan. In approving the Plan, the SEC
                                                    knowingly submit inaccurate LEIs to the                  clock synchronization requirements as                  noted that the Plan ‘‘is necessary and
                                                    CAT. Paragraph (b) is consistent with                    set forth in proposed Rule 2. Paragraph                appropriate in the public interest, for
                                                    the SEC’s statements in the Approval                     (b)(1) states that each Industry Member                the protection of investors and the
                                                    Order for the CAT NMS Plan regarding                     shall comply with Rule 2 with regard to                maintenance of fair and orderly markets,
                                                    an Industry Member’s obligations                         Business Clocks that capture time in                   to remove impediments to, and perfect
                                                    regarding LEIs.31                                        milliseconds commencing on or before                   the mechanism of a national market
                                                       Paragraph (c) states that, if an                      March 15, 2017. Paragraph (b)(2) states                system, or is otherwise in furtherance of
                                                    Industry Member reports data to the                      that each Industry Member shall comply                 the purposes of the Act.’’ 36 To the
                                                    Central Repository with errors such that                 with Rule 2 with regard to Business                    extent that this proposal implements,
                                                    its error percentage exceeds the                         Clocks that do not capture time in                     interprets or clarifies the Plan and
                                                    maximum Error Rate established by the                    milliseconds commencing on or before                   applies specific requirements to
                                                    Operating Committee pursuant to the                      February 19, 2018. The compliance date                 Industry Members, the Exchange
                                                    CAT NMS Plan, then such Industry                         set forth in paragraph (b)(1) reflects the             believes that this proposal furthers the
                                                    Member would not be in compliance                        exemptive relief requested by the Plan                 objectives of the Plan, as identified by
                                                    with the Article 23. As discussed above,                 Participants with regard to the clock                  the SEC, and is therefore consistent with
                                                    the initial maximum Error Rate is 5%,                    synchronization requirements related to                the Act.
                                                    although the Error Rate is expected to be                Business Clocks that do not capture
                                                                                                                                                                    B. Self-Regulatory Organization’s
                                                    reduced over time. The Exchange                          time in milliseconds.33
                                                                                                                                                                    Statement on Burden on Competition
                                                    intends to announce to its Industry                         Paragraph (c) of proposed Rule 12
                                                    Members changes to the Error Rate                        establishes the compliance dates for the                  The Exchange does not believe that
                                                    established pursuant to the CAT NMS                      data recording and reporting                           the proposed rule change will result in
                                                    Plan via Information Memorandum.                         requirements for Industry Members.                     any burden on competition that is not
                                                       Furthermore, paragraph (d) of                         Paragraph (c)(1) requires each Industry                necessary or appropriate in furtherance
                                                    proposed Rule 11 addresses Compliance                    Member (other than Small Industry                      of the purposes of the Act. The
                                                    Thresholds related to reporting data to                  Members) to record and report the                      Exchange notes that the proposed rule
                                                    the CAT. Proposed Rule 11 states that                    Industry Member Data to the Central                    change implements provisions of the
                                                    each Industry Member is required to                      Repository by November 15, 2018.                       CAT NMS Plan, and is designed to
                                                    meet a separate compliance threshold                     Paragraph (c)(2) requires that each                    assist the Exchange in meeting its
                                                    which will be an Industry Member-                        Industry Member that is a Small                        regulatory obligations pursuant to the
                                                    specific rate that may be used as the                    Industry Member to record and report                   Plan. The Exchange also notes that the
                                                    basis for further review or investigation                the Industry Member Data to the Central                proposed rules implementing provisions
                                                    into the Industry Member’s performance                   Repository by November 15, 2019. Such                  of the CAT NMS Plan will apply equally
                                                    with regard to the CAT (the                              compliance dates are consistent with                   to all firms that trade NMS Securities
                                                    ‘‘Compliance Thresholds’’). Compliance
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                                                                                                             the compliance dates set forth in SEC                  and OTC Equity Securities. In addition,
                                                    Thresholds will compare an Industry                                                                             all national securities exchanges and
                                                    Member’s error rate to the aggregate                       32 Appendix    C of the CAT NMS Plan.                FINRA are proposing this proposed
                                                    Error Rate over a period of time to be                     33 See  Letter from the Plan Participants to Brent   Article 23. Therefore, this is not a
                                                    defined by the Operating Committee.                      J. Fields, Secretary, Commission, dated January 17,    competitive rule filing, and, therefore, it
                                                    Compliance Thresholds will be set by                     2017. Specifically, the Participants will ask the
                                                                                                             Commission to extend the clock synchronization
                                                    the Operating Committee, and will be                     compliance date from March 15, 2017 to February
                                                                                                                                                                     34 15U.S.C. 78f(b)(6) [sic].
                                                                                                                                                                     35 15U.S.C. 78f(b)(8).
                                                                                                             19, 2018 for Industry Members’ Business Clocks
                                                      31 Approval   Order at 84745.                          that do not capture time in milliseconds.               36 Approval Order at 84697.




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                                                    9916                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    does not impose a burden on                             Commission and any person, other than                  I. Self-Regulatory Organization’s
                                                    competition.                                            those that may be withheld from the                    Statement of the Terms of Substance of
                                                                                                            public in accordance with the                          the Proposed Rule Change
                                                    C. Self-Regulatory Organization’s
                                                                                                            provisions of 5 U.S.C. 552, will be
                                                    Statement on Comments on the                                                                                      The Exchange proposes to adopt
                                                                                                            available for Web site viewing and
                                                    Proposed Rule Change Received From                                                                             Chapter VI, Section F to implement the
                                                                                                            printing in the Commission’s Public
                                                    Members, Participants or Others
                                                                                                            Reference Room, 100 F Street NE.,                      compliance rule (‘‘Compliance Rule’’)
                                                      No written comments were solicited                    Washington, DC 20549, on official                      regarding the National Market System
                                                    or received with respect to the proposed                business days between the hours of                     Plan Governing the Consolidated Audit
                                                    rule change.                                            10:00 a.m. and 3:00 p.m. Copies of such                Trail (the ‘‘CAT NMS Plan’’ or the
                                                    III. Date of Effectiveness of the                       filing will also be available for                      ‘‘Plan’’). The text of the proposed rule
                                                    Proposed Rule Change and Timing for                     inspection and copying at the principal                change is available on the Exchange’s
                                                    Commission Action                                       office of the Exchange. All comments                   Web site (http://www.cboe.com/
                                                                                                            received will be posted without change;                AboutCBOE/
                                                      Within 45 days of the date of                         the Commission does not edit personal                  CBOELegalRegulatoryHome.aspx), at
                                                    publication of this notice in the Federal               identifying information from
                                                    Register or within such longer period                                                                          the Exchange’s Office of the Secretary,
                                                                                                            submissions. You should submit only                    and at the Commission’s Public
                                                    up to 90 days (i) as the Commission may                 information that you wish to make
                                                    designate if it finds such longer period                                                                       Reference Room.
                                                                                                            available publicly. All submissions
                                                    to be appropriate and publishes its                     should refer to File Number SR–CHX–                    II. Self-Regulatory Organization’s
                                                    reasons for so finding or (ii) as to which              2017–03 and should be submitted on or                  Statement of the Purpose of, and
                                                    the self-regulatory organization                        before March 1, 2017.                                  Statutory Basis for, the Proposed Rule
                                                    consents, the Commission will:                                                                                 Change
                                                                                                              For the Commission, by the Division of
                                                      (A) By order approve or disapprove
                                                                                                            Trading and Markets, pursuant to delegated
                                                    the proposed rule change, or                            authority.37                                             In its filing with the Commission, the
                                                      (B) institute proceedings to determine                                                                       Exchange included statements
                                                                                                            Robert W. Errett,
                                                    whether the proposed rule change                                                                               concerning the purpose of and basis for
                                                    should be disapproved.                                  Deputy Secretary.
                                                                                                            [FR Doc. 2017–02553 Filed 2–7–17; 8:45 am]
                                                                                                                                                                   the proposed rule change and discussed
                                                    IV. Solicitation of Comments                                                                                   any comments it received on the
                                                                                                            BILLING CODE 8011–01–P
                                                                                                                                                                   proposed rule change. The text of these
                                                      Interested persons are invited to
                                                                                                                                                                   statements may be examined at the
                                                    submit written data, views, and
                                                                                                            SECURITIES AND EXCHANGE                                places specified in Item IV below. The
                                                    arguments concerning the foregoing,
                                                    including whether the proposed rule                     COMMISSION                                             Exchange has prepared summaries, set
                                                    change is consistent with the Act.                                                                             forth in sections A, B, and C below, of
                                                    Comments may be submitted by any of                                                                            the most significant aspects of such
                                                                                                            [Release No. 34–79950; File No. SR–CBOE–
                                                    the following methods:                                  2017–012]                                              statements.
                                                    Electronic Comments                                                                                            A. Self-Regulatory Organization’s
                                                                                                            Self-Regulatory Organizations;
                                                                                                                                                                   Statement of the Purpose of, and
                                                      • Use the Commission’s Internet                       Chicago Board Options Exchange,
                                                                                                                                                                   Statutory Basis for, the Proposed Rule
                                                    comment form (http://www.sec.gov/                       Incorporated; Notice of Filing of a
                                                                                                            Proposed Rule Change Relating to the                   Change
                                                    rules/sro.shtml); or
                                                      • Send an email to rule-comments@                     Consolidated Audit Trail                               1. Purpose
                                                    sec.gov. Please include File Number SR–
                                                                                                            February 2, 2017.                                         Bats BYX Exchange, Inc., Bats BZX
                                                    CHX–2017–03 on the subject line.
                                                                                                               Pursuant to Section 19(b)(1) of the                 Exchange, Inc., Bats EDGA Exchange,
                                                    Paper Comments
                                                                                                            Securities Exchange Act of 1934 (the                   Inc., Bats EDGX Exchange, Inc., BOX
                                                      • Send paper comments in triplicate                   ‘‘Act’’),1 and Rule 19b–4 thereunder,2                 Options Exchange LLC, C2 Options
                                                    to Secretary, Securities and Exchange                   notice is hereby given that on January                 Exchange, Incorporated, CBOE, Chicago
                                                    Commission, 100 F Street NE.,                           30, 2017, Chicago Board Options                        Stock Exchange, Inc., Financial Industry
                                                    Washington, DC 20549–1090.                              Exchange, Incorporated (the ‘‘Exchange’’               Regulatory Authority, Inc. (‘‘FINRA’’),
                                                    All submissions should refer to File                    or ‘‘CBOE’’) filed with the Securities                 International Securities Exchange, LLC,
                                                    Number SR–CHX–2017–03. This file                        and Exchange Commission (the                           Investors’ Exchange LLC, ISE Gemini,
                                                    number should be included on the                        ‘‘Commission’’) the proposed rule                      LLC, ISE Mercury, LLC, Miami
                                                    subject line if email is used. To help the              change as described in Items I, II, and                International Securities Exchange LLC,
                                                    Commission process and review your                      III below, which Items have been                       MIAX PEARL, LLC, NASDAQ BX, Inc.,
                                                    comments more efficiently, please use                   prepared by the Exchange.3 The                         NASDAQ PHLX LLC, The NASDAQ
                                                    only one method. The Commission will                    Commission is publishing this notice to                Stock Market LLC, National Stock
                                                    post all comments on the Commission’s                   solicit comments on the proposed rule
                                                                                                                                                                   Exchange, Inc., New York Stock
                                                    Internet Web site (http://www.sec.gov/                  change from interested persons.
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                                                                                                                                                                   Exchange LLC, NYSE MKT LLC, and
                                                    rules/sro.shtml). Copies of the
                                                                                                                                                                   NYSE Arca, Inc. (collectively, the
                                                    submission, all subsequent                                37 17 CFR 200.30–3(a)(12).
                                                                                                                                                                   ‘‘Participants’’) filed with the
                                                    amendments, all written statements                        1 15 U.S.C. 78s(b)(1).
                                                    with respect to the proposed rule                         2 17 CFR 240.19b–4.                                  Commission, pursuant to Section 11A of
                                                    change that are filed with the                            3 The Exchange originally filed this proposed rule   the Act 4 and Rule 608 of Regulation
                                                                                                            change on January 17, 2017 under File No. SR–
                                                    Commission, and all written                             CBOE–2017–006, and the Exchange subsequently
                                                    communications relating to the                          withdrew that filing on January 30, 2017 and filed      4 15   U.S.C. 78k–1.
                                                    proposed rule change between the                        this proposed rule change.



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Document Created: 2017-02-08 02:58:56
Document Modified: 2017-02-08 02:58:56
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
FR Citation82 FR 9904 

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