82_FR_9941 82 FR 9916 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to the Consolidated Audit Trail

82 FR 9916 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to the Consolidated Audit Trail

SECURITIES AND EXCHANGE COMMISSION

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

Page Range9916-9929
FR Document2017-02555

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9916-9929]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02555]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79950; File No. SR-CBOE-2017-012]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing of a Proposed Rule Change Relating to 
the Consolidated Audit Trail

February 2, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 30, 2017, Chicago Board Options Exchange, Incorporated 
(the ``Exchange'' or ``CBOE'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I, II, and III below, which Items have been prepared by the 
Exchange.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on 
January 17, 2017 under File No. SR-CBOE-2017-006, and the Exchange 
subsequently withdrew that filing on January 30, 2017 and filed this 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Chapter VI, Section F to implement 
the compliance rule (``Compliance Rule'') regarding the National Market 
System Plan Governing the Consolidated Audit Trail (the ``CAT NMS 
Plan'' or the ``Plan''). The text of the proposed rule change is 
available on the Exchange's Web site (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, CBOE, Chicago Stock Exchange, Inc., 
Financial Industry Regulatory Authority, Inc. (``FINRA''), 
International Securities Exchange, LLC, Investors' Exchange LLC, ISE 
Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange 
LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ 
Stock Market LLC, National Stock Exchange, Inc., New York Stock 
Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the 
``Participants'') filed with the Commission, pursuant to Section 11A of 
the Act \4\ and Rule 608 of Regulation

[[Page 9917]]

NMS thereunder,\5\ the CAT NMS Plan.\6\ The Participants filed the Plan 
to comply with Rule 613 of Regulation NMS under the Act. The Plan was 
published for comment in the Federal Register on May 17, 2016,\7\ and 
approved by the Commission, as modified, on November 15, 2016.\8\
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    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
    \6\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \7\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 
FR 30614 (May 17, 2016).
    \8\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 
FR 84696 (Nov. 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\9\ As is described more fully below, proposed Chapter VI, 
Section F sets forth the Compliance Rule to require Industry Members to 
comply with the provisions of the CAT NMS Plan. Proposed Section F 
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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    \9\ See SEC Rule 613(g)(1).
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(1) Definitions
    Proposed Rule 6.85 (Definitions) sets forth the definitions for the 
terms used in proposed Section F. Each of the defined terms in proposed 
Rule 6.85 is discussed in detail in this section.
(A) Account Effective Date
(i) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customer's associated with orders. For example, SEC Rule 
613(c)(7)(i)(A) requires an Industry Member to report the ``Customer-
ID'' for each Customer for the original receipt or origination of an 
order. ``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with 
respect to a customer, a code that uniquely and consistently identifies 
such customer for purposes of providing data to the Central 
Repository.'' SEC Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer. The SEC granted the Participants 
exemptive relief to permit the use of an alternative approach to the 
requirement that an Industry Member report a Customer-ID for every 
Customer upon original receipt or origination.\10\ The alternative 
approach is called the Customer Information Approach.
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    \10\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''); see also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would be 
permitted to use an account number or any other identifier defined by 
the firm, provided each identifier is unique across the firm for each 
business date (i.e., a single firm may not have multiple separate 
customers with the same identifier on any given date). Prior to their 
commencement of reporting to the CAT, Industry Members would submit an 
initial set of Customer information to the Central Repository, 
including the Firm Designated ID, Customer Identifying Information and 
Customer Account Information (which may include, as applicable, the 
Customer's name, address, date of birth, individual tax payer 
identifier number (``ITIN'')/social security number (``SSN''), 
individual's role in the account (e.g., primary holder, joint holder, 
guardian, trustee, person with power of attorney) and LEI and/or Larger 
Trader ID (``LTID'')). This process is referred to as the customer 
definition process.
    In accordance with the Customer Information Approach, Industry 
Members would be required to report only the Firm Designated ID for 
each new order submitted to the Central Repository, rather than the 
``Customer-ID'' with individual order events. Within the Central 
Repository, each Customer would be uniquely identified by identifiers 
or a combination of identifiers such as ITIN/SSN, date of birth, and as 
applicable, LEI and LTID. The Plan Processor would be required to use 
these unique identifiers to map orders to specific Customers across all 
Industry Members and Participants. To ensure information identifying a 
Customer is up to date, Industry Members would be required to submit to 
the Central Repository daily and periodic updates for reactivated 
accounts, newly established accounts, and revised Firm Designated IDs 
or associated reportable Customer information.
(ii) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The Participants requested and received an 
exemption to allow an ``Account Effective Date'' to be reported in lieu 
of an account open date in certain limited circumstances. The 
definition of ``Account Effective Date'' as set forth in paragraph (a) 
of proposed Rule 6.85 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)(i) defines ``Account Effective Date to 
mean, with regard to those circumstances in which an Industry Member 
has established a trading relationship with an institution but has not 
established an account with that institution: (A) 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 (1) the date the relationship 
identifier was established within the Industry Member; (2) the date 
when trading began (i.e., the date the first order was received) using 
the relevant relationship identifier; or (3) if both dates are 
available, the earlier date will be used to the extent that the dates 
differ; or (B) when the trading relationship was established on or 
after November 15,

[[Page 9918]]

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)(ii) 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)(iii) 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)(iv) 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)(v) 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: (A) 
The date established for the account in the Industry Member or in a 
system of the Industry Member or (B) 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)(ii) through 
(v), 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 6.85 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(i) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
Industry Members to record and report to the Central Repository an 
Allocation Report that includes, among other things, the Firm 
Designated ID for any account(s) to which executed shares are allocated 
when an execution is allocated in whole or part in lieu of requiring 
the reporting of the account number for any subaccount to which an 
execution is allocated, as is required by SEC Rule 613.\11\ 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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    \11\ 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 6.85 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 6.85 
defines the term ``Business Clock'' as a clock used to record the date 
and time of any Reportable Event required to be reported under proposed 
Section F. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan, except CBOE 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 Rule Series.'' This change is intended to 
recognize that the Industry Members' obligations with regard to the CAT 
are set forth in proposed Section F.
(E) CAT
    Paragraph (e) of proposed Rule 6.85 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 6.85 defines the term ``CAT NMS 
Plan'' to mean the National Market System Plan Governing the 
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(i) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to link the Reportable Events related to the same 
order.
(ii) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, paragraph (g) of proposed 
Rule 6.85 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

[[Page 9919]]

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.\12\ Such a third party, referred to 
in this proposed Section F 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 6.85 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 
obligations under proposed Section F.
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    \12\ 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 reporting 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 6.85 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 CBOE 
uses the phrase ``CAT NMS Plan'' in place of the phrase ``this 
Agreement.''
(J) Compliance Threshold
    Paragraph (j) of proposed Rule 6.85 defines the term ``Compliance 
Threshold'' as having the meaning set forth in proposed Rule 6.95(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 6.95(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 6.85 proposes to define the term 
``Customer.'' Specifically, the term ``Customer'' would be defined to 
mean: (i) The account holder(s) of the account at an Industry Member 
originating the order; and (ii) any person from whom the Industry 
Member is authorized to accept trading instructions for such account, 
if different from the account holder(s). This is the same definition as 
set forth in SEC Rule 613(j)(3), except CBOE 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 Section F. CBOE 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, CBOE 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 6.85 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 6.85(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: (i) Provide the Account Effective Date in 
lieu of the ``date account opened''; (ii) provide the relationship 
identifier in lieu of the ``account number''; and (iii) 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: (i) 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; (ii) 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; (iii) 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 (iv) 
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, CBOE 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 6.85 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

[[Page 9920]]

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.\13\ 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 Section F, CBOE proposes to define ``Data Submitter'' in 
paragraph (n) of proposed Rule 6.85. Specifically, paragraph (n) of 
proposed Rule 6.85 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 and the UTP Plans and the Plan for Reporting of 
Consolidated Options Last Sale Reports and Quotation Information 
(``OPRA''), and certain other vendors or third parties that may submit 
data to the Central Repository on behalf of Industry Members.
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    \13\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of proposed Section F 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 6.85 defines the term 
``Eligible Security'' to include: (i) All NMS Securities; and (ii) 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.\14\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\15\ 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.\16\ As such, CBOE or the 
SEC ``may [sic] take appropriate action against an Industry Member for 
failing to comply with its CAT reporting obligations.\17\ The CAT NMS 
Plan sets the initial Error Rate at 5%.\18\ It is anticipated that the 
maximum Error Rate will be reviewed and lowered by the Operating 
Committee once Industry Members begin to report to the Central 
Repository.\19\
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    \14\ Section 6.5(d)(i) of the CAT NMS Plan.
    \15\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \16\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \18\ Section 6.5(d)(i) of the CAT NMS Plan.
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan.
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    The CAT NMS Plan requires the Plan Processor to: (1) Measure and 
report errors every business day; (2) provide Industry Members daily 
statistics and error reports as they become available, including a 
description of such errors; (3) provide monthly reports to Industry 
Members that detail an Industry Member's performance and comparison 
statistics; (4) define educational and support programs for Industry 
Members to minimize Error Rates; and (5) identify, daily, all Industry 
Members exceeding the maximum allowable Error Rate. To timely correct 
data-submitted errors to the Central Repository, the CAT NMS Plan 
requires that the Central Repository receive and process error 
corrections at all times. Further, the CAT NMS Plan requires that 
Industry Members be able to submit error corrections to the Central 
Repository through a web-interface or via bulk uploads or file 
submissions, and that the Plan Processor, subject to the Operating 
Committee's approval, support the bulk replacement of records and the 
reprocessing of such records. The Participants, furthermore, require 
that the Plan Processor identify Industry Member data submission errors 
based on the Plan Processor's validation processes.\20\
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    \20\ 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, CBOE proposes to define the term ``Error Rate'' in proposed 
Rule 6.85. Paragraph (p) of proposed Rule 6.85 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, CBOE 
proposes to define the term ``Firm Designated ID'' in proposed Rule 
6.85. Specifically, paragraph (q) of proposed Rule 6.85 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 6.85 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 6.85 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 6.87(a)(ii). 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

[[Page 9921]]

Member Data'' is discussed more fully in the discussion below regarding 
proposed Rule 6.87(a)(ii).
(T) Initial Plan Processor
    Paragraph (t) of proposed Rule 6.85 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 proposed Section F applies to Eligible 
Securities, which includes NMS Securities, which, in turn, includes 
Listed Options. Certain requirements of proposed Section F apply 
specifically to Listed Options. Accordingly, paragraph (u) of proposed 
Rule 6.85 defines the term ``Listed Option'' or ``Option.'' 
Specifically, paragraph (u) of proposed Rule 6.85 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.'' CBOE 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.\21\ 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 and execution system uses timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (i.e., 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 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.
---------------------------------------------------------------------------

    \21\ Exemption Order.
---------------------------------------------------------------------------

(ii) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, CBOE proposes to define the 
term ``Manual Order Event'' in proposed Rule 6.85. Specifically, 
paragraph (v) of proposed Rule 6.85 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 6.87 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, CBOE proposes to 
define the term ``Material Terms of the Order'' in proposed Rule 6.85. 
Specifically, paragraph (w) of proposed Rule 6.85 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; \22\ 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; 
\23\) and any special handling instructions. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \22\ The Exchange notes identification of a sell order as long, 
short, or short exempt does not apply to Option transactions. The 
Exchange may work with the Operating Committee to seek an amendment 
to the Plan to reflect this.
    \23\ The Exchange notes its rules do not require market-makers 
to identify certain orders, in addition to quotations, as open/
close. See Rule 6.51(d). The Exchange may work with the Operating 
Committee to seek an amendment to the Plan to reflect this.
---------------------------------------------------------------------------

(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, CBOE proposes to define the term ``NMS Security'' in 
proposed Rule 6.85. Specifically, paragraph (x) of proposed Rule 6.85 
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, CBOE proposes to define the term ``NMS Stock'' in 
paragraph (y) of proposed Rule 6.85(y) 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 6.85 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 
CBOE 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

[[Page 9922]]

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, CBOE proposes to define the term ``Options Market Maker'' in 
proposed Rule 6.85. Specifically, paragraph (aa) of proposed Rule 6.85 
defines the term ``Options Market Makers'' to mean a broker-dealer 
registered with an exchange for the purpose of making markets in 
options contracts traded on the exchange. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    Section F requires each Industry Member to record and 
electronically report to the Central Repository certain details for 
each order. Accordingly, CBOE proposes to define the term ``Order'' in 
proposed Rule 6.85. Specifically, paragraph (bb) of proposed Rule 6.85 
defines the term ``Order,'' with respect to Eligible Securities, to 
include: (i) Any order received by an Industry Member from any person; 
(ii) any order originated by an Industry Member; or (iii) any bid or 
offer. This is the same definition as set forth in SEC Rule 613(j)(8), 
except CBOE proposes to replace the phrase ``member of a national 
securities exchange or national securities association'' with the term 
``Industry Member.'' CBOE 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, CBOE proposes to define the term ``OTC Equity 
Security'' in proposed Rule 6.85. Specifically, paragraph (cc) of 
proposed Rule 6.85 defines the term ``OTC Equity Security'' to mean any 
equity security, other than an NMS Security, subject to prompt last 
sale reporting rules of a registered national securities association 
and reported to one of such association's equity trade reporting 
facilities. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of proposed Rule 6.85 defines the term 
``Participant'' to mean each Person identified as such in Exhibit A of 
the CAT NMS Plan, as amended, in such Person's capacity as a 
Participant in CAT NMS, LLC. This is the same definition in substance 
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of proposed Rule 6.85 defines the term ``Person'' to 
mean any individual, partnership, limited liability company, 
corporation, joint venture, trust, business trust, cooperative or 
association and any heirs, executors, administrators, legal 
representatives, successors and assigns of such Person where the 
context so permits. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of proposed Rule 6.85 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 6.85 states that the term 
``Received Industry Member Data'' has the meaning set forth in proposed 
Rule 6.87(a)(ii). 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 6.87(a)(ii).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 6.85 states that the term 
``Recorded Industry Member Data'' has the meaning set forth in proposed 
Rule 6.87(a)(i). This definition has the same substantive meaning as 
the definition set forth 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 6.87(a)(i).
(II) Reportable Event
    Proposed Section F requires each Industry Member to record and 
electronically report to the Central Repository certain details for 
each Reportable Event. To clarify these requirements, CBOE proposes to 
define the term ``Reportable Event'' in proposed Rule 6.85. 
Specifically, paragraph (ii) of proposed Rule 6.85 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 6.85 defines the term ``SRO'' to 
mean any self-regulatory organization within the meaning of Section 
3(a)(26) of the Exchange Act. This is the same definition as set forth 
in Section 1.1 of the CAT NMS Plan.
(KK) SRO-Assigned Market Participant Identifier
(i) Existing Identifier Approach
    The SROs requested and received exemptive relief from SEC Rule 613 
so that the CAT NMS Plan may permit the Existing Identifier Approach, 
which would allow an Industry Member to report an existing SRO-Assigned 
Market Participant Identifier in lieu of requiring the reporting of a 
universal CAT-Reporter-ID (that is, a code that uniquely and 
consistently identifies an Industry Member for purposes of providing 
data to the Central Repository).\25\ The CAT NMS Plan reflects the 
``Existing Identifier Approach'' for purposes of identifying each 
Industry Member associated with an order or Reportable Event. Under the 
Existing Identifier Approach, Industry Members are required to record 
and report to the Central Repository an SRO-

[[Page 9923]]

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.
---------------------------------------------------------------------------

    \25\ 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 number of the Industry Member as well as the LEI of 
the Industry Member (if the Industry Member has an LEI). The Plan 
Processor will use this information to assign a CAT-Reporter-ID to each 
Industry Member for internal use within the Central Repository.
(ii) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, CBOE proposes to 
define the term ``SRO-Assigned Market Participant Identifier'' in 
proposed Rule 6.85. Specifically, paragraph (kk) of proposed Rule 6.85 
defines the term ``SRO-Assigned Market Participant Identifier'' to mean 
an identifier assigned to an Industry Member by an SRO or an identifier 
used by a Participant. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan. For example, an Industry Member would 
be permitted to use any existing SRO-Assigned Market Participant 
Identifier (e.g., FINRA MPID, NASDAQ MPID, NYSE Mnemonic, CBOE User 
Acronym and CHX Acronym) when reporting order information to the 
Central Repository.
(LL) Small Industry Member
    The requirements of proposed Section F 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, CBOE proposes to define the term ``Small 
Industry Member'' in proposed Rule 6.85. Specifically, paragraph (ll) 
of proposed Rule 6.85 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 Act. 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 6.87(b) establishes the deadlines for reporting 
certain data to the Central Repository using the term ``Trading Day.'' 
Accordingly, CBOE proposes to define the term ``Trading Day'' in 
proposed Rule 6.85. Specifically, paragraph (mm) of proposed Rule 6.85 
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.
(2) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by the 
National Institute of Standards and Technology (``NIST''), consistent 
with industry standards. To comply with this provision, Section 6.8 of 
the Plan sets forth the clock synchronization requirements for Industry 
Members.\26\ To implement these provisions with regard to its Industry 
Members, CBOE proposes Rule 6.86 (Clock Synchronization) to require its 
Industry Members to comply with the clock synchronization requirements 
of the Plan.
---------------------------------------------------------------------------

    \26\ In addition, Section 6.7(a)(ii) of the Plan sets forth the 
timeline for CAT Reporters to comply with the clock synchronization 
requirements.
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 6.86 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(i) of proposed Rule 6.86 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)(ii) of proposed Rule 6.86 requires each Industry 
Member to synchronize (A) its Business Clocks used solely for Manual 
Order Events and (B) 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)(iii) of proposed Rule 6.86 clarifies that the 
tolerance described in paragraphs (a)(i) and (ii) of the proposed Rule 
6.86 includes all of the following: (A) The time difference between the 
NIST atomic clock and the Industry Member's Business Clock; (B) the 
transmission delay from the source; and (C) 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)(iv) of proposed Rule 6.86 requires Industry Members 
to synchronize their Business Clocks every business day before market 
open \27\ 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).
---------------------------------------------------------------------------

    \27\ CBOE has two separate trading sessions: Regular Trading 
Hours and Extended Trading Hours. The proposed rule change states 
this requirement applies before the open of each trading session.
---------------------------------------------------------------------------

    Paragraph (b) of proposed Rule 6.86 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

[[Page 9924]]

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 6.86 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of proposed Rule 6.86 requires each Industry Member to 
certify to CBOE that its Business Clocks satisfy the synchronization 
requirements set forth in paragraph (a) of proposed Rule 6.86 
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. CBOE intends to 
announce to its Industry Members the certification schedule established 
by the Operating Committee via Regulatory Circular.
    Paragraph (d) of proposed Rule 6.86 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
proposed Rule 6.86 requires Industry Members to report to the Plan 
Processor and CBOE violations of paragraph (a) of this proposed 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. CBOE 
intends to announce to its Industry Members the relevant thresholds 
established by the Operating Committee via Regulatory Circular.
(3) 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, CBOE proposes Rule 6.87 (Industry Member Data 
Reporting) to require its Industry Members to comply with the Industry 
Member Data reporting requirements of the Plan. Proposed Rule 6.87 has 
five sections covering: (a) Recording and reporting Industry Member 
Data, (b) timing of the recording and reporting, (c) the applicable 
securities covered by the recording and reporting requirements, (d) the 
security symbology to be used in the recording and reporting, and (e) 
error correction requirements, each of which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 6.87 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of paragraphs (a)(i) through (a)(iii), which cover 
Recorded Industry Member Data, Received Industry Member Data and 
Options Market Maker data, respectively. Paragraphs (a)(i) through 
(a)(iii) of proposed Rule 6.87 set forth the recording and reporting 
requirements required in Section 6.4(d)(i) through (iii) of the CAT NMS 
Plan, respectively.
    Paragraph (a)(i) requires, subject to paragraph (a)(iii) 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:
    (A) For original receipt or origination of an order: (1) Firm 
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned 
Market Participant Identifier of the Industry Member receiving or 
originating the order; (4) date of order receipt or origination; (5) 
time of order receipt or origination (using time stamps pursuant to 
proposed Rule 6.90); and (6) Material Terms of the Order;
    (B) 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 
time stamps pursuant to proposed Rule 6.90); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member routing the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Participant to which the order is being routed; (6) if routed 
internally at the Industry Member, the identity and nature of the 
department or desk to which the order is routed; and (7) Material Terms 
of the Order;
    (C) 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 time stamps pursuant to 
proposed Rule 6.90); (4) SRO-Assigned Market Participant Identifier of 
the Industry Member receiving the order; (5) SRO-Assigned Market 
Participant Identifier of the Industry Member or Participant routing 
the order; and (6) Material Terms of the Order;
    (D) 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 time stamps pursuant to proposed Rule 6.90); (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;
    (E) if the order is executed, in whole or in part: (1) CAT-Order-
ID; (2) date of execution; (3) time of execution (using time stamps 
pursuant to proposed Rule 6.90; (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; and (7) whether the execution was reported pursuant to an 
effective transaction reporting plan or OPRA; and
    (F) other information or additional events as may be prescribed 
pursuant to the CAT NMS Plan.
    Paragraph (a)(ii) of proposed Rule 6.87 requires, subject to 
paragraph (a)(iii) 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 proposed Rule 6.87(a)(i) ``Industry Member 
Data'') in the manner prescribed by the Operating Committee pursuant to 
the CAT NMS Plan:
    (A) If the order is executed, in whole or in part: (1) 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);
    (B) if the trade is cancelled, a cancelled trade indicator; and
    (C) for original receipt or origination of an order, the Firm 
Designated ID for the relevant Customer, and in accordance with 
Proposed Rule 6.88, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(iii) of proposed Rule 6.87 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

[[Page 9925]]

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 6.87 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(i) through (b)(iii) of proposed Rule 6.87 set 
forth the requirements related to the timing of the recording and 
reporting requirements required in Section 6.4(b)(i) through (ii) of 
the CAT NMS Plan.
    Paragraph (b)(i) of proposed Rule 6.87 requires each Industry 
Member to record Recorded Industry Member Data contemporaneously with 
the applicable Reportable Event. Paragraph (b)(ii) of proposed Rule 
6.87 requires each Industry Member to report: (A) 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 (B) 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)(iii) 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 6.87 describes the securities to 
which the recording and reporting requirements of proposed Rule 6.87 
apply. Paragraphs (c)(i) and (c)(ii) of proposed Rule 6.87 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)(i) 
of proposed Rule 6.87 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 6.87 for each NMS Security registered 
or listed for trading on an exchange or admitted to unlisted trading 
privileges on an exchange. Paragraph (c)(ii) of proposed Rule 6.87 
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 6.87 for each Eligible Security for which transaction 
reports are required to be submitted to a national securities 
association.
(D) Security Symbology
    Paragraph (d) of proposed Rule 6.87 describes the security 
symbology that Industry Members are required to use when reporting 
Industry Member Data to the Central Repository. Paragraph (d)(i) of 
proposed Rule 6.87 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)(ii) of proposed Rule 6.87 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. CBOE intends to announce to its Industry Members the 
relevant symbology formats established by the Operating Committee via 
Regulatory Circular.
(E) Error Correction
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, CBOE proposes to adopt paragraph (e) of 
proposed Rule 6.87, which addresses the correction of erroneous data 
reported to the Central Repository. Paragraph (e) of proposed Rule 6.87 
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.
(4) 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. CBOE proposes Rule 6.88 (Customer Information 
Reporting) to implement this provision of the CAT NMS Plan with regard 
to its Industry Members. Specifically, paragraph (a) of proposed Rule 
6.88 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 6.93.
    Paragraph (b) of proposed Rule 6.88 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 6.88 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. 
CBOE intends to announce to its Industry Members when such a periodic 
refresh is required by the Plan Processor and the Operating Committee 
via Regulatory Circular.
    Finally, paragraph (d) of proposed Rule 6.88 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.
(5) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to

[[Page 9926]]

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. CBOE proposes Rule 6.89 (Industry Member Information 
Reporting) to implement this provision of the CAT NMS Plan with regard 
to its Industry Members. Specifically, proposed Rule 6.89 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 6.93, and keep such information up 
to date as necessary.
(6) 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, CBOE proposes Rule 
6.90 (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 6.90 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of proposed Rule 6.90 requires each Industry Member to 
record and report Industry Member Data to the Central Repository with 
time stamps in milliseconds, subject to paragraphs (a)(ii) and (b) of 
proposed Rule 6.90. To the extent that any Industry Member's order 
handling or execution systems utilize time stamps in increments finer 
than milliseconds, paragraph (a)(ii) of proposed Rule 6.90 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 6.90 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of proposed Rule 6.90 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(i) of proposed Rule 6.90 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 (i.e., electronic capture 
time) in milliseconds. In addition, paragraph (b)(ii) of proposed Rule 
6.90 permits each Industry Member to record and report the time of 
Allocation Reports in increments up to and including one second.
(7) Clock Synchronization Rule Violations
    Proposed Rule 6.91 (Clock Synchronization Rule Violations) 
describes potential violations of the clock synchronization time period 
requirements set forth in proposed Section F. Proposed Rule 6.91 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 Rule Series without 
reasonable justification or exceptional circumstances may be considered 
in violation of this Rule. This provision implements the requirements 
of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule 
to provide that a pattern or practice of reporting events outside of 
the required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of SEC Rule 613 or the CAT NMS Plan.
(8) Connectivity and Data Transmission
    Proposed Rule 6.92 (Connectivity and Data Transmission) addresses 
connectivity and data transmission requirements related to the CAT. 
Paragraph (a) of proposed Rule 6.92 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 6.92 
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 6.92 addresses connectivity 
requirements related to the CAT. Paragraph (b) of proposed Rule 6.92 
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 6.92 states that any 
Industry Member may enter into an agreement with a CAT Reporting Agent 
pursuant to which the CAT Reporting Agent agrees to fulfill the 
obligations of such Industry Member under proposed Section F. 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 
Section F. CBOE notes that, currently, no standardized form agreement 
for CAT Reporting Agent arrangements has been adopted. Paragraph 
(c)(ii) of proposed Rule 6.92 requires that all written documents 
evidencing an agreement with a CAT Reporting Agent be maintained by 
each party to the agreement. Paragraph (c)(iii) of proposed Rule 6.92 
states that each Industry Member remains primarily responsible for 
compliance with the requirements of proposed Section F, notwithstanding 
the existence of an agreement described in paragraph (c) of proposed 
Rule 6.92.
(9) Development and Testing
    CBOE proposes Rule 6.93 (Development and Testing) to address 
requirements for Industry Members related to CAT development and 
testing. Paragraph (a) of proposed Rule 6.93 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)(i) 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)(ii) sets forth the deadlines related to reporting 
Customer

[[Page 9927]]

and Industry Member information. Paragraph (a)(ii)(A) requires Industry 
Members (other than Small Industry Members) to begin reporting Customer 
and Industry Member information, as required by proposed Rules 6.88(a) 
and 6.89, respectively, to the Central Repository for processing no 
later than October 15, 2018. Paragraph (a)(ii)(B) requires Small 
Industry Members to begin reporting Customer and Industry Member 
information, as required by proposed Rules 6.88(a) and 6.89, 
respectively, to the Central Repository for processing no later than 
October 15, 2019.
    Paragraph (a)(iii) sets forth the deadlines related to the 
submission of order data. Under paragraph (a)(iii)(A), 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)(iii)(B), 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)(iv) 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 6.93 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\29\ Specifically, 
proposed Rule 6.93 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. CBOE intends to announce to its Industry 
Members the schedule established pursuant to the CAT NMS Plan via 
Regulatory Circular.
---------------------------------------------------------------------------

    \29\ Adopting Release at 84725.
---------------------------------------------------------------------------

(10) Recordkeeping
    Proposed Rule 6.94 (Recordkeeping) sets forth the recordkeeping 
obligations related to the CAT for Industry Members. Proposed Rule 6.94 
requires each Industry Member to maintain and preserve records of the 
information required to be recorded under proposed Section F for the 
period of time and accessibility specified in SEC Rule 17a-4(b). The 
records required to be maintained and preserved under proposed Section 
F 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 6.94 is 
based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping 
requirements related to OATS.
(11) 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 6.95 (Timely, Accurate and 
Complete Data) implements this requirement with regard to Industry 
Members. Paragraph (a) of proposed Rule 6.95 requires that Industry 
Members record and report data to the Central Repository as required by 
proposed Section F in a 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 6.95 requires Industry 
Members to accurately provide the LEIs in their records as required by 
proposed Section F 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 proposed Section F. As discussed above, the initial 
maximum Error Rate is 5%, although the Error Rate is expected to be 
reduced over time. CBOE intends to announce to its Industry Members 
changes to the Error Rate established pursuant to the CAT NMS Plan via 
Regulatory Circular.
    Furthermore, paragraph (d) of proposed Rule 6.95 addresses 
Compliance Thresholds related to reporting data to the CAT. Proposed 
Rule 6.95 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 6.95 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 proposed Section F.
---------------------------------------------------------------------------

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

(12) Compliance Dates
    Proposed Rule 6.96 (Compliance Dates) sets forth the compliance 
dates for the various provisions of proposed Section F. Paragraph (a) 
of proposed Rule 6.96 states that, except as set forth in paragraphs 
(b) and (c) of proposed Rule 6.96 or otherwise set forth in proposed 
Section F, the compliance date for proposed Section F is the approval 
date of the filing.\33\
---------------------------------------------------------------------------

    \33\ Proposed Section F, except for provisions otherwise stated 
in the proposed rule change, will become effective upon approval of 
this rule filing. As proposed Section F will not be inserted into 
CBOE's Rules until that time, the proposed rule text states: 
``Except as set forth in paragraphs (b) and (c) of this Rule or 
otherwise set forth in this Section F, the Rules in this Section F 
are effective.''

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

[[Page 9928]]

    Paragraph (b) of proposed Rule 6.96 establishes the compliance 
dates for the clock synchronization requirements as set forth in 
proposed Rule 6.96. Paragraph (b)(i) states that each Industry Member 
shall comply with 6.86 with regard to Business Clocks that capture time 
in milliseconds commencing on or before March 15, 2017. Paragraph 
(b)(ii) states that each Industry Member shall comply with Rule 6.86 
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)(i) reflects the exemptive relief the 
Participants intend to request with regard to the clock synchronization 
requirements related to Business Clocks that do not capture time in 
milliseconds.
    Paragraph (c) of proposed Rule 6.96 establishes the compliance 
dates for the data recording and reporting requirements for Industry 
Members. Paragraph (c)(i) 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)(ii) 
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 the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\34\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \35\ requirements that the rules 
of an exchange be designed to prevent fraudulent and manipulative acts 
and practices, to promote just and equitable principles of trade, to 
foster cooperation and coordination with persons engaged in regulating, 
clearing, settling, processing information with respect to, and 
facilitating transactions in securities, to remove impediments to and 
perfect the mechanism of a free and open market and a national market 
system, and, in general, to protect investors and the public interest. 
Additionally, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \36\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers and the Section 6(b)(8) \37\ 
requirement that the rules of an exchange not impose any burden on 
competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b).
    \35\ 15 U.S.C. 78f(b)(5).
    \36\ Id.
    \37\ 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 Commission noted 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.'' \38\ 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 
Commission, and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \38\ Approval Order at 84697.
---------------------------------------------------------------------------

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

    CBOE 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. CBOE notes that the proposed 
rule change implements provisions of the CAT NMS Plan, and is designed 
to assist CBOE in meeting its regulatory obligations pursuant to the 
Plan. CBOE also notes that proposed Section F 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 rules virtually identical 
to proposed Section F. Therefore, this is not a competitive rule 
filing, and, therefore, it does not impose a burden on competition.

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

    The Exchange neither solicited nor received comments on 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 Exchange consents, the Commission will:
    A. By order approve or disapprove such proposed rule change, or
    B. institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CBOE-2017-012 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-CBOE-2017-012. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for

[[Page 9929]]

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-CBOE-2017-012 and should be 
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02555 Filed 2-7-17; 8:45 am]
 BILLING CODE 8011-01-P



                                                    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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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9917

                                                    NMS thereunder,5 the CAT NMS Plan.6                      regulatory duties. Certain required                   birth, and as applicable, LEI and LTID.
                                                    The Participants filed the Plan to                       elements are intended to ensure that the              The Plan Processor would be required to
                                                    comply with Rule 613 of Regulation                       regulators can identify the Customer’s                use these unique identifiers to map
                                                    NMS under the Act. The Plan was                          associated with orders. For example,                  orders to specific Customers across all
                                                    published for comment in the Federal                     SEC Rule 613(c)(7)(i)(A) requires an                  Industry Members and Participants. To
                                                    Register on May 17, 2016,7 and                           Industry Member to report the                         ensure information identifying a
                                                    approved by the Commission, as                           ‘‘Customer-ID’’ for each Customer for                 Customer is up to date, Industry
                                                    modified, on November 15, 2016.8                         the original receipt or origination of an             Members would be required to submit
                                                       The Plan is designed to create,                       order. ‘‘Customer-ID’’ is defined in SEC              to the Central Repository daily and
                                                    implement and maintain a consolidated                    Rule 613(j)(5) to mean ‘‘with respect to              periodic updates for reactivated
                                                    audit trail (‘‘CAT’’) that would capture                 a customer, a code that uniquely and                  accounts, newly established accounts,
                                                    customer and order event information                     consistently identifies such customer for             and revised Firm Designated IDs or
                                                    for orders in NMS Securities and OTC                     purposes of providing data to the                     associated reportable Customer
                                                    Equity Securities, across all markets,                   Central Repository.’’ SEC Rule 613(c)(8)
                                                    from the time of order inception through                                                                       information.
                                                                                                             requires Industry Members to use the
                                                    routing, cancellation, modification, or                  same Customer-ID for each Customer.                   (ii) Definition of Account Effective Date
                                                    execution in a single consolidated data                  The SEC granted the Participants
                                                    source. Each Participant is required to                  exemptive relief to permit the use of an                 In connection with the Customer
                                                    enforce compliance by its Industry                       alternative approach to the requirement               Information Approach, Industry
                                                    Members, as applicable, with the                         that an Industry Member report a                      Members would be required to report
                                                    provisions of the Plan, by adopting a                    Customer-ID for every Customer upon                   Customer Account Information to the
                                                    Compliance Rule applicable to their                      original receipt or origination.10 The                Central Repository. ‘‘Customer Account
                                                    Industry Members.9 As is described                       alternative approach is called the                    Information’’ is defined in SEC Rule
                                                    more fully below, proposed Chapter VI,                   Customer Information Approach.                        613(j)(4) to ‘‘include, but not be limited
                                                    Section F sets forth the Compliance                         Under the Customer Information                     to, account number, account type,
                                                    Rule to require Industry Members to                      Approach, the CAT NMS Plan would                      customer type, date account opened,
                                                    comply with the provisions of the CAT                    require each Industry Member to assign                and large trader identifier (if
                                                    NMS Plan. Proposed Section F includes                    a unique Firm Designated ID to each                   applicable).’’ Therefore, when reporting
                                                    twelve proposed Rules covering the                       Customer. As the Firm Designated ID,                  Customer Account Information, an
                                                    following areas: (1) Definitions; (2) clock              Industry Members would be permitted                   Industry Member is required to report
                                                    synchronization; (3) Industry Member                     to use an account number or any other                 the date an account was opened. The
                                                    Data reporting; (4) Customer                             identifier defined by the firm, provided              Participants requested and received an
                                                    information reporting; (5) Industry                      each identifier is unique across the firm             exemption to allow an ‘‘Account
                                                    Member information reporting; (6) time                   for each business date (i.e., a single firm           Effective Date’’ to be reported in lieu of
                                                    stamps; (7) clock synchronization rule                   may not have multiple separate                        an account open date in certain limited
                                                    violations; (8) connectivity and data                    customers with the same identifier on                 circumstances. The definition of
                                                    transmission; (9) development and                        any given date). Prior to their                       ‘‘Account Effective Date’’ as set forth in
                                                    testing; (10) recordkeeping; (11) timely,                commencement of reporting to the CAT,                 paragraph (a) of proposed Rule 6.85
                                                    accurate and complete data; and (12)                     Industry Members would submit an
                                                                                                                                                                   describes those limited circumstances in
                                                    compliance dates. Each of these                          initial set of Customer information to
                                                                                                                                                                   which an Industry Member may report
                                                    proposed Rules are discussed in detail                   the Central Repository, including the
                                                                                                                                                                   an ‘‘Account Effective Date’’ rather than
                                                    below.                                                   Firm Designated ID, Customer
                                                                                                             Identifying Information and Customer                  the account open date. The proposed
                                                    (1) Definitions                                                                                                definition is the same as the definition
                                                                                                             Account Information (which may
                                                      Proposed Rule 6.85 (Definitions) sets                  include, as applicable, the Customer’s                of ‘‘Account Effective Date’’ set forth in
                                                    forth the definitions for the terms used                 name, address, date of birth, individual              Section 1.1 of the CAT NMS Plan,
                                                    in proposed Section F. Each of the                       tax payer identifier number (‘‘ITIN’’)/               provided, however, that specific dates
                                                    defined terms in proposed Rule 6.85 is                   social security number (‘‘SSN’’),                     have replaced the descriptions of those
                                                    discussed in detail in this section.                     individual’s role in the account (e.g.,               dates set forth in Section 1.1 of the Plan.
                                                    (A) Account Effective Date                               primary holder, joint holder, guardian,                  Specifically, paragraph (a)(i) defines
                                                                                                             trustee, person with power of attorney)               ‘‘Account Effective Date to mean, with
                                                    (i) Customer Information Approach                        and LEI and/or Larger Trader ID                       regard to those circumstances in which
                                                       SEC Rule 613 requires that numerous                   (‘‘LTID’’)). This process is referred to as           an Industry Member has established a
                                                    data elements be reported to the CAT to                  the customer definition process.                      trading relationship with an institution
                                                    ensure there is sufficient information to                   In accordance with the Customer                    but has not established an account with
                                                    create the lifecycle of an order, and                    Information Approach, Industry                        that institution: (A) When the trading
                                                    provide regulators with sufficient detail                Members would be required to report                   relationship was established prior to
                                                    about an order to perform their                          only the Firm Designated ID for each                  November 15, 2018 for Industry
                                                                                                             new order submitted to the Central                    Members other than Small Industry
                                                      5 17  CFR 242.608.                                     Repository, rather than the ‘‘Customer-               Members, or prior to November 15, 2019
                                                      6 See  Letter from the Participants to Brent J.        ID’’ with individual order events.                    for Small Industry Members, either (1)
                                                    Fields, Secretary, Commission, dated September 30,       Within the Central Repository, each
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                                                    2014; and Letter from Participants to Brent J. Fields,                                                         the date the relationship identifier was
                                                    Secretary, Commission, dated February 27, 2015.
                                                                                                             Customer would be uniquely identified                 established within the Industry
                                                    On December 24, 2015, the Participants submitted         by identifiers or a combination of                    Member; (2) the date when trading
                                                    an amendment to the CAT NMS Plan. See Letter             identifiers such as ITIN/SSN, date of                 began (i.e., the date the first order was
                                                    from Participants to Brent J. Fields, Secretary,
                                                    Commission, dated December 23, 2015.                        10 See Securities Exchange Act Release No. 77265
                                                                                                                                                                   received) using the relevant relationship
                                                       7 Securities Exchange Act Rel. No. 77724 (Apr.
                                                                                                             (March 1, 2016), 81 FR 11856 (March 7, 2016)          identifier; or (3) if both dates are
                                                    27, 2016), 81 FR 30614 (May 17, 2016).                   (‘‘Exemption Order’’); see also Letter from           available, the earlier date will be used
                                                       8 Securities Exchange Act Rel. No. 79318 (Nov.
                                                                                                             Participants to Brent J. Fields, Secretary,           to the extent that the dates differ; or (B)
                                                    15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval       Commission, dated January 30, 2015 at 12
                                                    Order’’).                                                (‘‘Exemptive Request Letter’’); and CAT NMS Plan      when the trading relationship was
                                                       9 See SEC Rule 613(g)(1).                             at Appendix C, Section A.1(a)(iii).                   established on or after November 15,

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                                                    9918                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    2018 for Industry Members other than                    Events. Accordingly, paragraph (b) of                 (D) Business Clock
                                                    Small Industry Members, or on or after                  proposed Rule 6.85 defines an ‘‘Active                  To create the required audit trail,
                                                    November 15, 2019 for Small Industry                    Account’’ as an account that has had                  Industry Members are required to record
                                                    Members, the date the Industry Member                   activity in Eligible Securities within the            the date and time of various Reportable
                                                    established the relationship identifier,                last six months. This is the same                     Events to the Central Repository.
                                                    which would be no later than the date                   definition as set forth in Section 1.1 of             Industry Members will use ‘‘Business
                                                    the first order was received.                           the CAT NMS Plan.                                     Clocks’’ to record such dates and times.
                                                       Paragraph (a)(ii) states that an
                                                                                                            (C) Allocation Report                                 Accordingly, paragraph (d) of proposed
                                                    ‘‘Account Effective Date’’ means, where
                                                                                                                                                                  Rule 6.85 defines the term ‘‘Business
                                                    an Industry Member changes back office                  (i) Allocation Report Approach                        Clock’’ as a clock used to record the date
                                                    providers or clearing firms prior to
                                                                                                                                                                  and time of any Reportable Event
                                                    November 15, 2018 for Industry                             SEC Rule 613(c)(7)(vi)(A) requires                 required to be reported under proposed
                                                    Members other than Small Industry                       each Industry Member to record and
                                                    Members, or prior to November 15, 2019                                                                        Section F. This is the same definition as
                                                                                                            report to the Central Repository ‘‘the                set forth in Section 1.1 of the CAT NMS
                                                    for Small Industry Members, the date an                 account number for any subaccounts to
                                                    account was established at the relevant                                                                       Plan, except CBOE proposes to replace
                                                                                                            which the execution is allocated (in                  the phrase ‘‘under SEC Rule 613’’ at the
                                                    Industry Member, either directly or via                 whole or in part).’’ The SROs requested
                                                    transfer.                                                                                                     end of the definition in Section 1.1 of
                                                                                                            and received from the SEC exemptive                   the Plan with the phrase ‘‘under this
                                                       Paragraph (a)(iii) states that an
                                                                                                            relief from SEC Rule 613 for an                       Rule Series.’’ This change is intended to
                                                    ‘‘Account Effective Date’’ means, where
                                                                                                            alternative to this approach (‘‘Allocation            recognize that the Industry Members’
                                                    an Industry Member acquires another
                                                                                                            Report Approach’’). The Allocation                    obligations with regard to the CAT are
                                                    Industry Member prior to November 15,
                                                    2018 for Industry Members other than                    Report Approach would permit Industry                 set forth in proposed Section F.
                                                    Small Industry Members, or prior to                     Members to record and report to the
                                                                                                            Central Repository an Allocation Report               (E) CAT
                                                    November 15, 2019 for Small Industry
                                                    Members, the date an account was                        that includes, among other things, the                  Paragraph (e) of proposed Rule 6.85
                                                    established at the relevant Industry                    Firm Designated ID for any account(s) to              defines the term ‘‘CAT’’ to mean the
                                                    Member, either directly or via transfer.                which executed shares are allocated                   consolidated audit trail contemplated by
                                                       Paragraph (a)(iv) states that ‘‘Account              when an execution is allocated in whole               SEC Rule 613. This is the same
                                                    Effective Date’’ means, where there are                 or part in lieu of requiring the reporting            definition as set forth in Section 1.1 of
                                                    multiple dates associated with an                       of the account number for any                         the CAT NMS Plan.
                                                    account established prior to November                   subaccount to which an execution is                   (F) CAT NMS Plan
                                                    15, 2018 for Industry Members other                     allocated, as is required by SEC Rule
                                                    than Small Industry Members, or prior                   613.11 Under SEC Rule 613, regulators                   Paragraph (f) of proposed Rule 6.85
                                                    to November 15, 2019 for Small                          would be able to link the subaccount to               defines the term ‘‘CAT NMS Plan’’ to
                                                    Industry Members, the earliest available                which an allocation was made to a                     mean the National Market System Plan
                                                    date.                                                   specific order. In contrast, under the                Governing the Consolidated Audit Trail,
                                                       Paragraph (a)(v) states that an                      Allocation Report Approach, regulators                as amended from time to time.
                                                    ‘‘Account Effective Date’’ means, with                  would only be able to link an allocation              (G) CAT-Order-ID
                                                    regard to Industry Member proprietary                   to the account to which it was made,
                                                    accounts established prior to November                                                                        (i) Daisy Chain Approach
                                                                                                            and not to a specific order.
                                                    15, 2018 for Industry Members other                                                                             Under the CAT NMS Plan, the Daisy
                                                    than Small Industry Members, or prior                   (ii) Definition of Allocation Report                  Chain Approach is used to link and
                                                    to November 15, 2019 for Small                                                                                reconstruct the complete lifecycle of
                                                                                                               To assist in implementing the
                                                    Industry Members: (A) The date                                                                                each Reportable Event in CAT.
                                                                                                            Allocation Report Approach, paragraph                 According to this Approach, Industry
                                                    established for the account in the
                                                                                                            (c) of proposed Rule 6.85 defines an                  Members assign their own identifiers to
                                                    Industry Member or in a system of the
                                                                                                            ‘‘Allocation Report.’’ Specifically, an               each order event. Within the Central
                                                    Industry Member or (B) the date when
                                                    proprietary trading began in the account                ‘‘Allocation Report’’ means a report                  Repository, the Plan Processor later
                                                    (i.e., the date on which the first orders               made to the Central Repository by an                  replaces the identifier provided by the
                                                    were submitted from the account). With                  Industry Member that identifies the                   Industry Member for each Reportable
                                                    regard to paragraphs (a)(ii) through (v),               Firm Designated ID for any account(s),                Event with a single identifier, called the
                                                    the Account Effective Date will be no                   including subaccount(s), to which                     CAT Order-ID, for all order events
                                                    later than the date trading occurs at the               executed shares are allocated and                     pertaining to the same order. This CAT
                                                    Industry Member or in the Industry                      provides the security that has been                   Order-ID is used to link the Reportable
                                                    Member’s system.                                        allocated, the identifier of the firm                 Events related to the same order.
                                                                                                            reporting the allocation, the price per
                                                    (B) Active Account                                      share of shares allocated, the side of                (ii) Definition of CAT-Order-ID
                                                       Under the Customer Information                       shares allocated, the number of shares                   To implement the Daisy Chain
                                                    Approach, Industry Members are                          allocated to each account, and the time               Approach, paragraph (g) of proposed
                                                    required to report Customer Identifying                 of the allocation; provided, for the                  Rule 6.85 defines the term ‘‘CAT-Order-
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                                                    Information and Customer Account                        avoidance of doubt, any such Allocation               ID.’’ The term ‘‘CAT-Order-ID’’ is
                                                    Information for only those accounts that                Report shall not be required to be linked             defined to mean a unique order
                                                    are active. This will alleviate the need                to particular orders or executions. This              identifier or series of unique order
                                                    for Industry Members to update such                     is the same definition as set forth in                identifiers that allows the Central
                                                    information for non-active accounts, but                Section 1.1 of the CAT NMS Plan.                      Repository to efficiently and accurately
                                                    still ensure that the Central Repository                                                                      link all Reportable Events for an order,
                                                    will collect audit trail data for Customer                11 See Exemptive Request Letter at 26–27; and       and all orders that result from the
                                                    accounts that have any Reportable                       Exemption Order.                                      aggregation or disaggregation of such


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9919

                                                    order. This is the same definition as set               or investigation into the Industry                    November 15, 2018 for Industry
                                                    forth in SEC Rule 613(j)(1), and Section                Member’s performance with regard to                   Members other than Small Industry
                                                    1.1 of the CAT NMS Plan defines ‘‘CAT-                  the CAT. This Industry Member-specific                Members, or prior to November 15, 2019
                                                    Order-ID’’ by reference to SEC Rule                     rate is the ‘‘Compliance Threshold.’’                 for Small Industry Members, and no
                                                    613(j)(1).                                                                                                    ‘‘date account opened’’ is available for
                                                                                                            (K) Customer
                                                                                                                                                                  the account, the Industry Member will
                                                    (H) CAT Reporting Agent                                    Industry Members are required to                   provide the Account Effective Date in
                                                       The CAT NMS Plan permits an                          submit to the Central Repository certain              the following circumstances: (i) Where
                                                    Industry Member to use a third party,                   information related to their Customers,               an Industry Member changes back office
                                                    such as a vendor, to report the required                including Customer Identifying                        providers or clearing firms and the date
                                                    data to the Central Repository on behalf                Information and Customer Account                      account opened is changed to the date
                                                    of the Industry Member.12 Such a third                  Information, as well as data related to               the account was opened on the new
                                                    party, referred to in this proposed                     their Customer’s Reportable Events.                   back office/clearing firm system; (ii)
                                                    Section F as a ‘‘CAT Reporting Agent,’’                 Accordingly, paragraph (k) of proposed                where an Industry Member acquires
                                                    would be one type of a Data Submitter,                  Rule 6.85 proposes to define the term                 another Industry Member and the date
                                                    that is, a party that submits data to the               ‘‘Customer.’’ Specifically, the term                  account opened is changed to the date
                                                    Central Repository. Paragraph (h) of                    ‘‘Customer’’ would be defined to mean:                the account was opened on the post-
                                                    proposed Rule 6.85 defines the term                     (i) The account holder(s) of the account              merger back office/clearing firm system;
                                                    ‘‘CAT Reporting Agent’’ to mean a Data                  at an Industry Member originating the                 (iii) where there are multiple dates
                                                    Submitter that is a third party that                    order; and (ii) any person from whom                  associated with an account in an
                                                    enters into an agreement with an                        the Industry Member is authorized to                  Industry Member’s system, and the
                                                    Industry Member pursuant to which the                   accept trading instructions for such                  parameters of each date are determined
                                                    CAT Reporting Agent agrees to fulfill                   account, if different from the account                by the individual Industry Member; and
                                                    such Industry Member’s obligations                      holder(s). This is the same definition as             (iv) where the relevant account is an
                                                    under proposed Section F.                               set forth in SEC Rule 613(j)(3), except               Industry Member proprietary account.
                                                       This definition is based on FINRA’s                  CBOE proposes to replace the references               The proposed definition is the same as
                                                    definition of a ‘‘Reporting Agent’’ as set              to a registered broker-dealer or broker-              the definition of ‘‘Customer Account
                                                    forth in FINRA’s rule related to its Order              dealer with a reference to an Industry                Information’’ set forth in Section 1.1 of
                                                    Audit Trail System (‘‘OATS’’).                          Member for consistency of terms used in               the CAT NMS Plan, provided, however,
                                                    Specifically, FINRA Rule 7410(n)                        proposed Section F. CBOE also notes                   that specific dates have replaced the
                                                    defines a ‘‘Reporting Agent’’ as a third                that Section 1.1 of the CAT NMS Plan                  descriptions of those dates set forth in
                                                    party that enters into any agreement                    defines ‘‘Customer’’ by reference to SEC              Section 1.1 of the Plan.
                                                    with a member pursuant to which the                     Rule 613(j)(3).
                                                                                                                                                                  (M) Customer Identifying Information
                                                    Reporting Agent agrees to fulfill such                  (L) Customer Account Information
                                                    member’s reporting obligations under                                                                             As discussed above, under the
                                                                                                               As discussed above, under the                      Customer Information Approach,
                                                    Rule 7450. The Reporting Agent for
                                                                                                            Customer Information Approach,                        Industry Members are required to report
                                                    OATS fulfills a similar role to the CAT
                                                                                                            Industry Members are required to report               Customer Identifying Information to the
                                                    Reporting Agent.
                                                                                                            Customer Account Information to the                   Central Repository as part of the
                                                    (I) Central Repository                                  Central Repository as part of the                     customer definition process.
                                                       Paragraph (i) of proposed Rule 6.85                  customer definition process.                          Accordingly, CBOE proposes to define
                                                    defines the term ‘‘Central Repository’’ to              Accordingly, CBOE proposes to define                  the term ‘‘Customer Account
                                                    mean the repository responsible for the                 the term ‘‘Customer Account                           Information’’ to clarify what Customer
                                                    receipt, consolidation, and retention of                Information’’ to clarify what customer                information would need to be reported
                                                    all information reported to the CAT                     information would need to be reported                 to the Central Repository.
                                                    pursuant to SEC Rule 613 and the CAT                    to the Central Repository.                               Paragraph (m) of proposed Rule 6.85
                                                    NMS Plan. This is the same definition                      Paragraph (l) of proposed Rule 6.85                defines the term ‘‘Customer Identifying
                                                    as set forth in Section 1.1 of the CAT                  defines the term ‘‘Customer Account                   Information’’ to mean information of
                                                    NMS Plan, except CBOE uses the phrase                   Information’’ to include, in part,                    sufficient detail to identify a Customer.
                                                    ‘‘CAT NMS Plan’’ in place of the phrase                 account number, account type, customer                With respect to individuals, ‘‘Customer
                                                    ‘‘this Agreement.’’                                     type, date account opened, and large                  Identifying Information’’ includes, but is
                                                                                                            trader identifier (if applicable).                    not limited to: Name, address, date of
                                                    (J) Compliance Threshold                                Proposed Rule 6.85(l), however,                       birth, individual tax payer identification
                                                       Paragraph (j) of proposed Rule 6.85                  provides an alternative definition of                 number (‘‘ITIN’’)/social security number
                                                    defines the term ‘‘Compliance                           ‘‘Customer Account Information’’ in two               (‘‘SSN’’), individual’s role in the
                                                    Threshold’’ as having the meaning set                   limited circumstances. First, in those                account (e.g., primary holder, joint
                                                    forth in proposed Rule 6.95(d). This                    circumstances in which an Industry                    holder, guardian, trustee, person with
                                                    definition has the same substantive                     Member has established a trading                      the power of attorney). With respect to
                                                    meaning as the definition set forth in                  relationship with an institution but has              legal entities, ‘‘Customer Identifying
                                                    Section 1.1 of the CAT NMS Plan. As                     not established an account with that                  Information’’ includes, but is not
                                                                                                            institution, the Industry Member will:                limited to, name, address, Employer
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                                                    discussed in detail below with regard to
                                                    proposed Rule 6.95(d), each Industry                    (i) Provide the Account Effective Date in             Identification Number (‘‘EIN’’)/Legal
                                                    Member is required to meet a separate                   lieu of the ‘‘date account opened’’; (ii)             Entity Identifier (‘‘LEI’’) or other
                                                    compliance threshold which will be an                   provide the relationship identifier in                comparable common entity identifier, if
                                                    Industry Member-specific rate that may                  lieu of the ‘‘account number’’; and (iii)             applicable. The definition further notes
                                                    be used as the basis for further review                 identify the ‘‘account type’’ as a                    that an Industry Member that has an LEI
                                                                                                            ‘‘relationship.’’ Second, in those                    for a Customer must submit the
                                                      12 Appendix C, Section A.1(a) of the CAT NMS          circumstances in which the relevant                   Customer’s LEI in addition to other
                                                    Plan.                                                   account was established prior to                      information of sufficient detail to


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                                                    9920                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    identify the Customer. This is the same                 Rate, at least annually.15 If an Industry             the percentage of Reportable Events
                                                    definition as set forth in Section 1.1 of               Member reports CAT data to the Central                collected by the Central Repository in
                                                    the CAT NMS Plan.                                       Repository with errors such that their                which the data reported does not fully
                                                                                                            error percentage exceeds the maximum                  and accurately reflect the order event
                                                    (N) Data Submitter
                                                                                                            Error Rate, then such Industry Member                 that occurred in the market. This is the
                                                       The CAT NMS Plan uses the term                       would not be in compliance with the                   same definition as set forth in SEC Rule
                                                    ‘‘Data Submitter’’ to refer to any person               CAT NMS Plan or Rule 613.16 As such,                  613(j)(6), and Section 1.1 of the CAT
                                                    that reports data to the Central                        CBOE or the SEC ‘‘may [sic] take                      NMS Plan defines ‘‘Error Rate’’ by
                                                    Repository.13 Such Data Submitters may                  appropriate action against an Industry                reference to SEC Rule 613(j)(6).
                                                    include those entities that are required                Member for failing to comply with its
                                                                                                                                                                  (Q) Firm Designated ID
                                                    to submit data to the Central Repository                CAT reporting obligations.17 The CAT
                                                    (e.g., national securities exchanges,                   NMS Plan sets the initial Error Rate at                  As discussed above, under the
                                                    national securities associations and                    5%.18 It is anticipated that the                      Customer Information Approach, the
                                                    Industry Members), third-parties that                   maximum Error Rate will be reviewed                   CAT NMS Plan would require each
                                                    may submit data to the CAT on behalf                    and lowered by the Operating                          Industry Member to assign a unique
                                                    of CAT Reporters (i.e., CAT Reporting                   Committee once Industry Members                       Firm Designated ID to each Customer.
                                                    Agents), and outside parties that are not               begin to report to the Central                        Industry Members would be permitted
                                                    required to submit data to the CAT but                  Repository.19                                         to use as the Firm Designated ID an
                                                    from which the CAT may receive data                       The CAT NMS Plan requires the Plan                  account number or any other identifier
                                                    (e.g., securities information processors                Processor to: (1) Measure and report                  defined by the firm, provided each
                                                    (‘‘SIPs’’)). To include this term in                    errors every business day; (2) provide                identifier is unique across the firm for
                                                    proposed Section F, CBOE proposes to                    Industry Members daily statistics and                 each business date (i.e., a single firm
                                                    define ‘‘Data Submitter’’ in paragraph                  error reports as they become available,               may not have multiple separate
                                                    (n) of proposed Rule 6.85. Specifically,                including a description of such errors;               customers with the same identifier on
                                                    paragraph (n) of proposed Rule 6.85                     (3) provide monthly reports to Industry               any given date). Industry Members
                                                    defines a ‘‘Data Submitter’’ to mean any                Members that detail an Industry                       would be required to report only the
                                                    person that reports data to the Central                 Member’s performance and comparison                   Firm Designated ID for each new order
                                                    Repository, including national securities               statistics; (4) define educational and                submitted to the Central Repository,
                                                    exchanges, national securities                          support programs for Industry Members                 rather than the ‘‘Customer-ID’’ with
                                                    associations, broker-dealers, the SIPs for              to minimize Error Rates; and (5)                      individual order events. Accordingly,
                                                    the CQS, CTA and the UTP Plans and                      identify, daily, all Industry Members                 CBOE proposes to define the term ‘‘Firm
                                                    the Plan for Reporting of Consolidated                  exceeding the maximum allowable Error                 Designated ID’’ in proposed Rule 6.85.
                                                    Options Last Sale Reports and                           Rate. To timely correct data-submitted                Specifically, paragraph (q) of proposed
                                                    Quotation Information (‘‘OPRA’’), and                   errors to the Central Repository, the                 Rule 6.85 defines the term ‘‘Firm
                                                    certain other vendors or third parties                  CAT NMS Plan requires that the Central                Designated ID’’ to mean a unique
                                                    that may submit data to the Central                     Repository receive and process error                  identifier for each trading account
                                                    Repository on behalf of Industry                        corrections at all times. Further, the                designated by Industry Members for
                                                    Members.                                                CAT NMS Plan requires that Industry                   purposes of providing data to the
                                                                                                            Members be able to submit error                       Central Repository, where each such
                                                    (O) Eligible Security                                   corrections to the Central Repository                 identifier is unique among all identifiers
                                                       The reporting requirements of                        through a web-interface or via bulk                   from any given Industry Member for
                                                    proposed Section F only apply to                        uploads or file submissions, and that the             each business date. This is the same
                                                    Reportable Events in Eligible Securities.               Plan Processor, subject to the Operating              definition as set forth in Section 1.1 of
                                                    Currently, an Eligible Security includes                Committee’s approval, support the bulk                the CAT NMS Plan. Industry Members
                                                    NMS Securities and OTC Equity                           replacement of records and the                        would be permitted to use an account
                                                    Securities. Accordingly, paragraph (o) of               reprocessing of such records. The                     number or any other identifier defined
                                                    proposed Rule 6.85 defines the term                     Participants, furthermore, require that               by the firm, provided each identifier is
                                                    ‘‘Eligible Security’’ to include: (i) All               the Plan Processor identify Industry                  unique across the firm for each business
                                                    NMS Securities; and (ii) all OTC Equity                 Member data submission errors based                   date (i.e., a single firm may not have
                                                    Securities. The terms ‘‘NMS Securities’’                on the Plan Processor’s validation                    multiple separate customers with the
                                                    and ‘‘OTC Equity Securities’’ are                       processes.20                                          same identifier on any given date).
                                                    defined, in turn, below. This is the same               (ii) Definition of Error Rate                         (R) Industry Member
                                                    definition as set forth in Section 1.1 of                                                                       Paragraph (r) of proposed Rule 6.85
                                                    the CAT NMS Plan.                                          To implement the requirements of the
                                                                                                            CAT NMS Plan related to the Error Rate,               defines the term ‘‘Industry Member’’ to
                                                    (P) Error Rate                                          CBOE proposes to define the term                      mean a member of a national securities
                                                                                                            ‘‘Error Rate’’ in proposed Rule 6.85.                 exchange or a member of a national
                                                    (i) Maximum Error Rate
                                                                                                            Paragraph (p) of proposed Rule 6.85                   securities association.’’ This is the same
                                                      Under the CAT NMS Plan, the                           defines the term ‘‘Error Rate’’ to mean               definition as set forth in Section 1.1 of
                                                    Operating Committee sets the maximum                                                                          the CAT NMS Plan.
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                                                    Error Rate that the Central Repository                    15 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                                                                                  (S) Industry Member Data
                                                    would tolerate from an Industry                         Plan.
                                                    Member reporting data to the Central                      16 Appendix C, Section A.3(b) of the CAT NMS          Paragraph (s) of proposed Rule 6.85
                                                                                                            Plan; Rule 613(g)–(h).                                states that the term ‘‘Industry Member
                                                    Repository.14 The Operating Committee                     17 Appendix C, Section A.3(b) of the CAT NMS
                                                    reviews and resets the maximum Error                                                                          Data’’ has the meaning set forth in Rule
                                                                                                            Plan.
                                                                                                              18 Section 6.5(d)(i) of the CAT NMS Plan.           6.87(a)(ii). This definition has the same
                                                      13 Appendix C, Section A.1(a) of the CAT NMS            19 Appendix C, Section A.3(b) of the CAT NMS        substantive meaning as the definition
                                                    Plan.                                                   Plan.                                                 set forth in Section 1.1 of the CAT NMS
                                                      14 Section 6.5(d)(i) of the CAT NMS Plan.               20 Approval Order at 84718.                         Plan. The definition of ‘‘Industry


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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                   9921

                                                    Member Data’’ is discussed more fully                    time the event is captured electronically              special handling instructions. This is
                                                    in the discussion below regarding                        in an order handling and execution                     the same definition as set forth in
                                                    proposed Rule 6.87(a)(ii).                               system (i.e., electronic capture time) in              Section 1.1 of the CAT NMS Plan.
                                                                                                             milliseconds. In addition, Industry
                                                    (T) Initial Plan Processor                                                                                      (X) NMS Security
                                                                                                             Members are required to synchronize
                                                      Paragraph (t) of proposed Rule 6.85                    their respective Business Clocks (other                   NMS Securities are one of the types
                                                    defines the term ‘‘Initial Plan Processor’’              than such Business Clocks used solely                  of Eligible Securities for the CAT.
                                                    to mean the first Plan Processor selected                for Manual Order Events) at a minimum                  Therefore, CBOE proposes to define the
                                                    by the Operating Committee in                            to within 50 milliseconds of the time                  term ‘‘NMS Security’’ in proposed Rule
                                                    accordance with SEC Rule 613, Section                    maintained by the National Institute of                6.85. Specifically, paragraph (x) of
                                                    6.1 of the CAT NMS Plan and the                          Standards and Technology (‘‘NIST’’),                   proposed Rule 6.85 defines the term
                                                    National Market System Plan Governing                    and maintain such a synchronization.                   ‘‘NMS Security’’ to mean any security or
                                                    the Process for Selecting a Plan                         Each Industry Members is required to                   class of securities for which transaction
                                                    Processor and Developing a Plan for the                  synchronize their Business Clocks used                 reports are collected, processed, and
                                                    Consolidated Audit Trail. This is the                    solely for Manual Order Events,                        made available pursuant to an effective
                                                    same definition as set forth in Section                  however, at a minimum to within one                    transaction reporting plan, or an
                                                    1.1 of the CAT NMS Plan, although the                    second of the time maintained by the                   effective national market system plan
                                                    proposed definition uses the full name                   NIST.                                                  for reporting transactions in Listed
                                                    of the ‘‘Selection Plan.’’                                                                                      Options. This is the same definition as
                                                                                                             (ii) Definition of Manual Order Event                  set forth in Section 1.1 of the CAT NMS
                                                    (U) Listed Option or Option
                                                                                                                In order to clarify what a Manual                   Plan.
                                                       The CAT NMS Plan and proposed                         Order Event is for clock synchronization
                                                    Section F applies to Eligible Securities,                                                                       (Y) NMS Stock
                                                                                                             and time stamp purposes, CBOE
                                                    which includes NMS Securities, which,                    proposes to define the term ‘‘Manual                     Under the CAT NMS Plan, the
                                                    in turn, includes Listed Options. Certain                Order Event’’ in proposed Rule 6.85.                   Operating Committee may establish
                                                    requirements of proposed Section F                       Specifically, paragraph (v) of proposed                different Trading Days for NMS Stocks
                                                    apply specifically to Listed Options.                    Rule 6.85 defines the term ‘‘Manual                    (as defined in SEC Rule 600(b)(47)),
                                                    Accordingly, paragraph (u) of proposed                   Order Event’’ to mean a non-electronic                 Listed Options, OTC Equity Securities,
                                                    Rule 6.85 defines the term ‘‘Listed                      communication of order-related                         and any other securities that are
                                                    Option’’ or ‘‘Option.’’ Specifically,                    information for which Industry                         included as Eligible Securities from
                                                    paragraph (u) of proposed Rule 6.85                      Members must record and report the                     time to time. Accordingly, CBOE
                                                    states that the term ‘‘Listed Option’’ or                time of the event. This is the same                    proposes to define the term ‘‘NMS
                                                    ‘‘Option’’ has the meaning set forth in                                                                         Stock’’ in paragraph (y) of proposed
                                                                                                             definition as set forth in Section 1.1 of
                                                    SEC Rule 600(b)(35) of Regulation NMS.                                                                          Rule 6.85(y) to mean any NMS Security
                                                                                                             the CAT NMS Plan.
                                                    SEC Rule 600(b)(35), in turn, defines a                                                                         other than an option. This is the same
                                                    listed option as ‘‘any option traded on                  (W) Material Terms of the Order                        definition as set forth in SEC Rule
                                                    a registered national securities exchange                   Proposed Rule 6.87 requires Industry                600(b)(47) of Regulation NMS.
                                                    or automated facility of a national                      Members to record and report to the
                                                    securities association.’’ CBOE notes that                                                                       (Z) Operating Committee
                                                                                                             Central Repository Material Terms of
                                                    the proposed definition of ‘‘Listed                      the Order with certain Reportable                        Paragraph (z) of proposed Rule 6.85
                                                    Option’’ is the same definition as the                   Events (e.g., for the original receipt or              defines the term ‘‘Operating Committee’’
                                                    definition set forth in Section 1.1 of the               origination of an order, for the routing               to mean the governing body of the CAT
                                                    CAT NMS Plan.                                            of an order). Accordingly, CBOE                        NMS, LLC designated as such and
                                                    (V) Manual Order Event                                   proposes to define the term ‘‘Material                 described in Article IV of the CAT NMS
                                                                                                             Terms of the Order’’ in proposed Rule                  Plan. This is the same definition as set
                                                    (i) Manual Order Event Approach                                                                                 forth in Section 1.1 of the CAT NMS
                                                                                                             6.85. Specifically, paragraph (w) of
                                                       The CAT NMS Plan sets forth clock                     proposed Rule 6.85 defines the term                    Plan, except CBOE proposes to use the
                                                    synchronization and timestamp                            ‘‘Material Terms of the Order’’ to                     phrase ‘‘CAT NMS LLC’’ in place of the
                                                    requirements for Industry Members,                       include: The NMS Security or OTC                       phrase ‘‘the Company’’ for clarity.
                                                    which reflect exemptions for Manual                      Equity Security symbol; security type;                 (AA) Options Market Maker
                                                    Order Events granted by the                              price (if applicable); size (displayed and
                                                    Commission.21 Specifically, the Plan                     non-displayed); side (buy/sell); order                 (i) Options Market Maker Quote
                                                    requires Industry Members to record                      type; if a sell order, whether the order               Exemption
                                                    and report the time of each Reportable                   is long, short, short exempt; 22 open/                    SEC Rule 613(c)(7) provides that the
                                                    Event using timestamps reflecting                        close indicator (except on transactions                CAT NMS Plan must require each
                                                    current industry standards (which must                   in equities); time in force (if applicable);           Industry Member to record and
                                                    be at least to the millisecond) or, if an                if the order is for a Listed Option, option            electronically report to the Central
                                                    Industry Member’s order handling and                     type (put/call), option symbol or root                 Repository details for each order and
                                                    execution system uses timestamps in                      symbol, underlying symbol, strike price,               each reportable event, including the
                                                    increments finer than milliseconds,                      expiration date, and open/close (except                routing and modification or cancellation
                                                    such finer increments, when reporting
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                                                                                                             on market maker quotations; 23) and any                of an order. SEC Rule 613(j)(8) defines
                                                    to the Central Repository. For Manual                                                                           ‘‘order’’ to include ‘‘any bid or offer.’’
                                                    Order Events, however, the Plan                            22 The Exchange notes identification of a sell
                                                                                                                                                                    Therefore, under SEC Rule 613, the
                                                    provides that such events must be                        order as long, short, or short exempt does not apply
                                                                                                                                                                    details for each Options Market Maker
                                                    recorded in increments up to and                         to Option transactions. The Exchange may work
                                                                                                             with the Operating Committee to seek an                quotation must be reported to the
                                                    including one second, provided that                      amendment to the Plan to reflect this.
                                                    Industry Members record and report the                     23 The Exchange notes its rules do not require       6.51(d). The Exchange may work with the Operating
                                                                                                             market-makers to identify certain orders, in           Committee to seek an amendment to the Plan to
                                                      21 Exemption   Order.                                  addition to quotations, as open/close. See Rule        reflect this.



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                                                    9922                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    Central Repository by both the Options                  term ‘‘OTC Equity Security’’ in                       (HH) Recorded Industry Member Data
                                                    Market Maker and the options exchange                   proposed Rule 6.85. Specifically,                       Paragraph (hh) of proposed Rule 6.85
                                                    to which it routes its quote.                           paragraph (cc) of proposed Rule 6.85                  states that the term ‘‘Recorded Industry
                                                      The SROs, however, requested and                      defines the term ‘‘OTC Equity Security’’              Member Data’’ has the meaning set forth
                                                    received exemptive relief from SEC Rule                 to mean any equity security, other than               in proposed Rule 6.87(a)(i). This
                                                    613 so that the CAT NMS Plan may                        an NMS Security, subject to prompt last               definition has the same substantive
                                                    permit Options Market Maker quotes to                   sale reporting rules of a registered                  meaning as the definition set forth in
                                                    be reported to the Central Repository by                national securities association and                   Section 1.1 of the CAT NMS Plan. The
                                                    the relevant options exchange in lieu of                reported to one of such association’s                 definition of ‘‘Recorded Industry
                                                    requiring that such reporting be done by                equity trade reporting facilities. This is            Member Data’’ is discussed more fully
                                                    both the options exchange and the                       the same definition as set forth in                   in the discussion below regarding
                                                    Options Market Maker, as is required by                 Section 1.1 of the CAT NMS Plan.                      proposed Rule 6.87(a)(i).
                                                    SEC Rule 613.24 In accordance with the
                                                    exemptive relief, Options Market                        (DD) Participant                                      (II) Reportable Event
                                                    Makers would be required to report to                                                                            Proposed Section F requires each
                                                    the options exchange the time at which                    Paragraph (dd) of proposed Rule 6.85
                                                                                                            defines the term ‘‘Participant’’ to mean              Industry Member to record and
                                                    a quote in a Listed Option is sent to the                                                                     electronically report to the Central
                                                    options exchange. Such time                             each Person identified as such in
                                                                                                            Exhibit A of the CAT NMS Plan, as                     Repository certain details for each
                                                    information also will be reported to the                                                                      Reportable Event. To clarify these
                                                    Central Repository by the options                       amended, in such Person’s capacity as
                                                                                                            a Participant in CAT NMS, LLC. This is                requirements, CBOE proposes to define
                                                    exchange in lieu of reporting by the                                                                          the term ‘‘Reportable Event’’ in
                                                    Options Market Maker                                    the same definition in substance as set
                                                                                                            forth in Section 1.1 of the CAT NMS                   proposed Rule 6.85. Specifically,
                                                    (ii) Definition of Options Market Maker                 Plan.                                                 paragraph (ii) of proposed Rule 6.85
                                                                                                                                                                  states that the term ‘‘Reportable Event’’
                                                       To implement the requirements
                                                                                                            (EE) Person                                           includes, but is not limited to, the
                                                    related to Option Market Maker quotes,
                                                                                                                                                                  original receipt or origination,
                                                    CBOE proposes to define the term                          Paragraph (ee) of proposed Rule 6.85                modification, cancellation, routing,
                                                    ‘‘Options Market Maker’’ in proposed                    defines the term ‘‘Person’’ to mean any               execution (in whole or in part) and
                                                    Rule 6.85. Specifically, paragraph (aa) of              individual, partnership, limited liability            allocation of an order, and receipt of a
                                                    proposed Rule 6.85 defines the term                     company, corporation, joint venture,                  routed order. This is the same definition
                                                    ‘‘Options Market Makers’’ to mean a                     trust, business trust, cooperative or                 as set forth in Section 1.1 of the CAT
                                                    broker-dealer registered with an                        association and any heirs, executors,                 NMS Plan.
                                                    exchange for the purpose of making                      administrators, legal representatives,
                                                    markets in options contracts traded on                  successors and assigns of such Person                 (JJ) SRO
                                                    the exchange. This is the same                          where the context so permits. This is the               Paragraph (jj) of proposed Rule 6.85
                                                    definition as set forth in Section 1.1 of               same definition as set forth in Section               defines the term ‘‘SRO’’ to mean any
                                                    the CAT NMS Plan.                                       1.1 of the CAT NMS Plan.                              self-regulatory organization within the
                                                    (BB) Order                                                                                                    meaning of Section 3(a)(26) of the
                                                                                                            (FF) Plan Processor                                   Exchange Act. This is the same
                                                       Section F requires each Industry
                                                    Member to record and electronically                       Paragraph (ff) of proposed Rule 6.85                definition as set forth in Section 1.1 of
                                                    report to the Central Repository certain                defines the term ‘‘Plan Processor’’ to                the CAT NMS Plan.
                                                    details for each order. Accordingly,                    mean the Initial Plan Processor or any                (KK) SRO-Assigned Market Participant
                                                    CBOE proposes to define the term                        other Person selected by the Operating                Identifier
                                                    ‘‘Order’’ in proposed Rule 6.85.                        Committee pursuant to SEC Rule 613
                                                                                                                                                                  (i) Existing Identifier Approach
                                                    Specifically, paragraph (bb) of proposed                and Sections 4.3(b)(i) and 6.1 of the
                                                    Rule 6.85 defines the term ‘‘Order,’’                   CAT NMS Plan, and with regard to the                    The SROs requested and received
                                                    with respect to Eligible Securities, to                 Initial Plan Processor, the National                  exemptive relief from SEC Rule 613 so
                                                    include: (i) Any order received by an                   Market System Plan Governing the                      that the CAT NMS Plan may permit the
                                                    Industry Member from any person; (ii)                   Process for Selecting a Plan Processor                Existing Identifier Approach, which
                                                    any order originated by an Industry                     and Developing a Plan for the                         would allow an Industry Member to
                                                    Member; or (iii) any bid or offer. This                 Consolidated Audit Trail, to perform the              report an existing SRO-Assigned Market
                                                    is the same definition as set forth in SEC              CAT processing functions required by                  Participant Identifier in lieu of requiring
                                                    Rule 613(j)(8), except CBOE proposes to                 SEC Rule 613 and set forth in the CAT                 the reporting of a universal CAT-
                                                    replace the phrase ‘‘member of a                        NMS Plan.                                             Reporter-ID (that is, a code that
                                                    national securities exchange or national                                                                      uniquely and consistently identifies an
                                                    securities association’’ with the term                  (GG) Received Industry Member Data                    Industry Member for purposes of
                                                    ‘‘Industry Member.’’ CBOE notes that                                                                          providing data to the Central
                                                                                                              Paragraph (gg) of proposed Rule 6.85                Repository).25 The CAT NMS Plan
                                                    Section 1.1 of the CAT NMS Plan
                                                                                                            states that the term ‘‘Received Industry              reflects the ‘‘Existing Identifier
                                                    defines ‘‘Order’’ by reference to SEC
                                                                                                            Member Data’’ has the meaning set forth
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                                                    Rule 613(j)(8).                                                                                               Approach’’ for purposes of identifying
                                                                                                            in proposed Rule 6.87(a)(ii). This                    each Industry Member associated with
                                                    (CC) OTC Equity Security                                definition has the same substantive                   an order or Reportable Event. Under the
                                                      OTC Equity Securities are one of the                  meaning as the definition set forth in                Existing Identifier Approach, Industry
                                                    types of Eligible Securities for the CAT.               Section 1.1 of the CAT NMS Plan. The                  Members are required to record and
                                                    Therefore, CBOE proposes to define the                  definition of ‘‘Received Industry                     report to the Central Repository an SRO-
                                                                                                            Member Data’’ is discussed more fully
                                                      24 See Exemptive Request Letter at 2, and             in the discussion below regarding                       25 See Exemptive Request Letter at 19, and

                                                    Exemption Order.                                        proposed Rule 6.87(a)(ii).                            Exemption Order.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                       9923

                                                    Assigned Market Participant Identifier                  in substance as the definition of ‘‘Small               in Section 6.8(a)(ii)(A) of the CAT NMS
                                                    for orders and certain Reportable Events                Industry Member’’ as set forth in                       Plan.
                                                    to be used by the Central Repository to                 Section 1.1 of the CAT NMS Plan.                           Paragraph (a)(ii) of proposed Rule
                                                    assign a unique CAT-Reporter-ID to                      Specifically, Section 1.1 of the CAT                    6.86 requires each Industry Member to
                                                    identify Industry Members.                              NMS Plan defines a ‘‘Small Industry                     synchronize (A) its Business Clocks
                                                      For the Central Repository to link the                Member’’ as ‘‘an Industry Member that                   used solely for Manual Order Events
                                                    SRO-Assigned Market Participant                         qualifies as a small broker-dealer as                   and (B) its Business Clocks used solely
                                                    Identifier to the CAT-Reporter-ID, each                 defined in SEC Rule 613.’’ The                          for the time of allocation on Allocation
                                                    SRO will submit to the Central                          definition of a small broker-dealer under               Reports at a minimum to within a one
                                                    Repository, on a daily basis, all SRO-                  SEC Rule 613, in turn, is a small broker-               second tolerance of the time maintained
                                                    Assigned Market Participant Identifiers                 dealer as defined in SEC Rule 0–10(c).                  by the NIST atomic clock, and maintain
                                                    used by its Industry Members, as well                                                                           such synchronization. This is the same
                                                    as information to identify each such                    (MM) Trading Day                                        requirement as set forth in Section
                                                    Industry Member, including CRD                             Proposed Rule 6.87(b) establishes the                6.8(a)(iii) and (iv) of the CAT NMS Plan.
                                                    number and LEI, if the SRO has                          deadlines for reporting certain data to                    Paragraph (a)(iii) of proposed Rule
                                                    collected such LEI of the Industry                      the Central Repository using the term                   6.86 clarifies that the tolerance
                                                    Member. Additionally, each Industry                     ‘‘Trading Day.’’ Accordingly, CBOE                      described in paragraphs (a)(i) and (ii) of
                                                    Member is required to submit to the                     proposes to define the term ‘‘Trading                   the proposed Rule 6.86 includes all of
                                                    Central Repository the CRD number of                    Day’’ in proposed Rule 6.85.                            the following: (A) The time difference
                                                    the Industry Member as well as the LEI                  Specifically, paragraph (mm) of                         between the NIST atomic clock and the
                                                    of the Industry Member (if the Industry                 proposed Rule 6.85 states that the term                 Industry Member’s Business Clock; (B)
                                                    Member has an LEI). The Plan Processor                  ‘‘Trading Day’’ shall have the meaning                  the transmission delay from the source;
                                                    will use this information to assign a                   as is determined by the Operating                       and (C) the amount of drift of the
                                                    CAT-Reporter-ID to each Industry                        Committee. For the avoidance of doubt,                  Industry Member’s Business Clock. This
                                                    Member for internal use within the                      the Operating Committee may establish                   description of the clock synchronization
                                                    Central Repository.                                     different Trading Days for NMS Stocks                   tolerance is the same as set forth in
                                                                                                            (as defined in SEC Rule 600(b)(47),                     paragraph (b) of FINRA Rule 4590
                                                    (ii) Definition of SRO-Assigned Market                                                                          (Synchronization of Member Business
                                                    Participant Identifier                                  Listed Options, OTC Equity Securities,
                                                                                                            and any other securities that are                       Clocks).
                                                       To implement the Existing Identifier                 included as Eligible Securities from                       Paragraph (a)(iv) of proposed Rule
                                                    Approach, CBOE proposes to define the                   time to time.                                           6.86 requires Industry Members to
                                                    term ‘‘SRO-Assigned Market Participant                                                                          synchronize their Business Clocks every
                                                    Identifier’’ in proposed Rule 6.85.                     (2) Clock Synchronization                               business day before market open 27 to
                                                    Specifically, paragraph (kk) of proposed                   SEC Rule 613(d)(1) under Regulation                  ensure that timestamps for Reportable
                                                    Rule 6.85 defines the term ‘‘SRO-                       NMS requires Industry Members to                        Events are accurate. In addition, to
                                                    Assigned Market Participant Identifier’’                synchronize their Business Clocks to the                maintain clock synchronization,
                                                    to mean an identifier assigned to an                    time maintained by the National                         Business Clocks must be checked
                                                    Industry Member by an SRO or an                         Institute of Standards and Technology                   against the NIST atomic clock and re-
                                                    identifier used by a Participant. This is               (‘‘NIST’’), consistent with industry                    synchronized, as necessary, throughout
                                                    the same definition as set forth in                     standards. To comply with this                          the day. This description of the required
                                                    Section 1.1 of the CAT NMS Plan. For                    provision, Section 6.8 of the Plan sets                 frequency of clock synchronization is
                                                    example, an Industry Member would be                    forth the clock synchronization                         the same as set forth in paragraph (c) of
                                                    permitted to use any existing SRO-                      requirements for Industry Members.26                    FINRA Rule 4590 (Synchronization of
                                                    Assigned Market Participant Identifier                  To implement these provisions with                      Member Business Clocks).
                                                    (e.g., FINRA MPID, NASDAQ MPID,                         regard to its Industry Members, CBOE                       Paragraph (b) of proposed Rule 6.86
                                                    NYSE Mnemonic, CBOE User Acronym                        proposes Rule 6.86 (Clock                               sets forth documentation requirements
                                                    and CHX Acronym) when reporting                         Synchronization) to require its Industry                with regard to clock synchronization.
                                                    order information to the Central                        Members to comply with the clock                        Specifically, paragraph (b) requires
                                                    Repository.                                                                                                     Industry Members to document and
                                                                                                            synchronization requirements of the
                                                                                                                                                                    maintain their synchronization
                                                    (LL) Small Industry Member                              Plan.
                                                                                                               Paragraph (a) of proposed Rule 6.86                  procedures for their Business Clocks.
                                                       The requirements of proposed Section                                                                         The proposed Rule requires Industry
                                                                                                            sets forth the manner in which Industry
                                                    F differ to some extent for Small                                                                               Members to keep a log of the times
                                                                                                            Members must synchronize their
                                                    Industry Members versus Industry                                                                                when they synchronize their Business
                                                                                                            Business Clocks. Paragraph (a)(i) of
                                                    Members other than Small Industry                                                                               Clocks and the results of the
                                                                                                            proposed Rule 6.86 requires each
                                                    Members. For example, the compliance                                                                            synchronization process. This log is
                                                                                                            Industry Member to synchronize its
                                                    dates for reporting data to the CAT are                                                                         required to include notice of any time
                                                                                                            Business Clocks, other than such
                                                    different for Small Industry Members                                                                            a Business Clock drifts more than the
                                                                                                            Business Clocks used solely for Manual
                                                    versus other Industry Members.                                                                                  applicable tolerance specified in
                                                                                                            Order Events or used solely for the time
                                                    Accordingly, to clarify the requirements                                                                        paragraph (a) of the proposed Rule.
                                                                                                            of allocation on Allocation Reports, at a
                                                    that apply to which Industry Members,                                                                           Such logs must include results for a
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                                                                                                            minimum to within a fifty (50)
                                                    CBOE proposes to define the term                                                                                period of not less than five years ending
                                                                                                            millisecond tolerance of the time
                                                    ‘‘Small Industry Member’’ in proposed                                                                           on the then current date, or for the
                                                                                                            maintained by the NIST atomic clock,                    entire period for which the Industry
                                                    Rule 6.85. Specifically, paragraph (ll) of
                                                                                                            and maintain such synchronization.
                                                    proposed Rule 6.85 defines the term
                                                                                                            This is the same requirement as set forth                 27 CBOE has two separate trading sessions:
                                                    ‘‘Small Industry Member’’ to mean an
                                                                                                                                                                    Regular Trading Hours and Extended Trading
                                                    Industry Member that qualifies as a                       26 In addition, Section 6.7(a)(ii) of the Plan sets   Hours. The proposed rule change states this
                                                    small broker-dealer as defined in Rule                  forth the timeline for CAT Reporters to comply with     requirement applies before the open of each trading
                                                    0–10(c) under the Act. This is the same                 the clock synchronization requirements.                 session.



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                                                    9924                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    Member has been required to comply                      the recording and reporting                           Market Participant Identifier of the
                                                    with this Rule if less than five years.                 requirements, (d) the security                        Industry Member or Participant routing
                                                    These documentation requirements are                    symbology to be used in the recording                 the order; and (6) Material Terms of the
                                                    the same as those set forth in the                      and reporting, and (e) error correction               Order;
                                                    ‘‘Sequencing Orders and Clock                           requirements, each of which is                           (D) if the order is modified or
                                                    Synchronization’’ section of Appendix                   described below.                                      cancelled: (1) CAT-Order-ID; (2) date the
                                                    C of the CAT NMS Plan. Moreover,                                                                              modification or cancellation is received
                                                                                                            (A) Recording and Reporting Industry                  or originated; (3) time at which the
                                                    these documentation requirements
                                                                                                            Member Data                                           modification or cancellation is received
                                                    regarding clock synchronization are
                                                    comparable to those set forth in                           Paragraph (a) of proposed Rule 6.87                or originated (using time stamps
                                                    Supplementary Material .01 of FINRA                     describes the recording and reporting of              pursuant to proposed Rule 6.90); (4)
                                                    Rule 4590 (Synchronization of Member                    Industry Member Data to the Central                   price and remaining size of the order, if
                                                    Business Clocks).                                       Repository. Paragraph (a) consists of                 modified; (5) other changes in the
                                                       Paragraph (c) of proposed Rule 6.86                  paragraphs (a)(i) through (a)(iii), which             Material Terms of the Order, if
                                                    sets forth certification requirements                   cover Recorded Industry Member Data,                  modified; and (6) whether the
                                                    with regard to clock synchronization.                   Received Industry Member Data and                     modification or cancellation instruction
                                                    Specifically, paragraph (c) of proposed                 Options Market Maker data,                            was given by the Customer or was
                                                    Rule 6.86 requires each Industry                        respectively. Paragraphs (a)(i) through               initiated by the Industry Member;
                                                    Member to certify to CBOE that its                      (a)(iii) of proposed Rule 6.87 set forth                 (E) if the order is executed, in whole
                                                    Business Clocks satisfy the                             the recording and reporting                           or in part: (1) CAT-Order-ID; (2) date of
                                                    synchronization requirements set forth                  requirements required in Section                      execution; (3) time of execution (using
                                                    in paragraph (a) of proposed Rule 6.86                  6.4(d)(i) through (iii) of the CAT NMS                time stamps pursuant to proposed Rule
                                                    periodically in accordance with the                     Plan, respectively.                                   6.90; (4) execution capacity (principal,
                                                    certification schedule established by the                  Paragraph (a)(i) requires, subject to              agency or riskless principal); (5)
                                                    Operating Committee pursuant to the                     paragraph (a)(iii) regarding Options                  execution price and size; (6) SRO-
                                                    CAT NMS Plan. This requirement is the                   Market Makers, each Industry Member                   Assigned Market Participant Identifier
                                                    same requirement as set forth in Section                to record and electronically report to the            of the Industry Member executing the
                                                    6.8(a)(ii)(B), (iii) and (iv) of the CAT                Central Repository the following details              order; and (7) whether the execution
                                                    NMS Plan. CBOE intends to announce                      for each order and each Reportable                    was reported pursuant to an effective
                                                    to its Industry Members the certification               Event, as applicable (‘‘Recorded                      transaction reporting plan or OPRA; and
                                                    schedule established by the Operating                   Industry Member Data’’) in the manner                    (F) other information or additional
                                                    Committee via Regulatory Circular.                      prescribed by the Operating Committee                 events as may be prescribed pursuant to
                                                       Paragraph (d) of proposed Rule 6.86                  pursuant to the CAT NMS Plan:                         the CAT NMS Plan.
                                                    establishes reporting requirements with                    (A) For original receipt or origination               Paragraph (a)(ii) of proposed Rule
                                                    regard to clock synchronization.                        of an order: (1) Firm Designated ID(s) for            6.87 requires, subject to paragraph
                                                    Paragraph (d) of proposed Rule 6.86                     each Customer; (2) CAT-Order-ID; (3)                  (a)(iii) regarding Options Market
                                                    requires Industry Members to report to                  SRO-Assigned Market Participant                       Makers, each Industry Member to record
                                                    the Plan Processor and CBOE violations                  Identifier of the Industry Member                     and report to the Central Repository the
                                                    of paragraph (a) of this proposed Rule                  receiving or originating the order; (4)               following, as applicable (‘‘Received
                                                    pursuant to the thresholds set by the                   date of order receipt or origination; (5)             Industry Member Data’’ and collectively
                                                    Operating Committee pursuant to the                     time of order receipt or origination                  with the information referred to in
                                                    CAT NMS Plan. This requirement is the                   (using time stamps pursuant to                        proposed Rule 6.87(a)(i) ‘‘Industry
                                                    same requirement as set forth in Section                proposed Rule 6.90); and (6) Material                 Member Data’’) in the manner
                                                    6.8(a)(ii)(C), (iii) and (iv) of the CAT                Terms of the Order;                                   prescribed by the Operating Committee
                                                    NMS Plan. CBOE intends to announce                         (B) for the routing of an order: (1)               pursuant to the CAT NMS Plan:
                                                    to its Industry Members the relevant                    CAT-Order-ID; (2) date on which the                      (A) If the order is executed, in whole
                                                    thresholds established by the Operating                 order is routed; (3) time at which the                or in part: (1) Allocation Report; (2)
                                                    Committee via Regulatory Circular.                      order is routed (using time stamps                    SRO-Assigned Market Participant
                                                                                                            pursuant to proposed Rule 6.90); (4)                  Identifier of the clearing broker or prime
                                                    (3) Industry Member Data Reporting                      SRO-Assigned Market Participant                       broker, if applicable; and (3) CAT-
                                                       SEC Rule 613(c) under Regulation                     Identifier of the Industry Member                     Order-ID of any contra-side order(s);
                                                    NMS requires the CAT NMS Plan to set                    routing the order; (5) SRO-Assigned                      (B) if the trade is cancelled, a
                                                    forth certain provisions requiring                      Market Participant Identifier of the                  cancelled trade indicator; and
                                                    Industry Members to record and report                   Industry Member or Participant to                        (C) for original receipt or origination
                                                    data to the CAT. To comply with this                    which the order is being routed; (6) if               of an order, the Firm Designated ID for
                                                    provision, Section 6.4 of the CAT NMS                   routed internally at the Industry                     the relevant Customer, and in
                                                    Plan sets forth the data reporting                      Member, the identity and nature of the                accordance with Proposed Rule 6.88,
                                                    requirements for Industry Members. To                   department or desk to which the order                 Customer Account Information and
                                                    implement these provisions with regard                  is routed; and (7) Material Terms of the              Customer Identifying Information for
                                                    to its Industry Members, CBOE proposes                  Order;                                                the relevant Customer.
                                                    Rule 6.87 (Industry Member Data                            (C) for the receipt of an order that has              Paragraph (a)(iii) of proposed Rule
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                                                    Reporting) to require its Industry                      been routed, the following information:               6.87 states that each Industry Member
                                                    Members to comply with the Industry                     (1) CAT-Order-ID; (2) date on which the               that is an Options Market Maker is not
                                                    Member Data reporting requirements of                   order is received; (3) time at which the              required to report to the Central
                                                    the Plan. Proposed Rule 6.87 has five                   order is received (using time stamps                  Repository the Industry Member Data
                                                    sections covering: (a) Recording and                    pursuant to proposed Rule 6.90); (4)                  regarding the routing, modification or
                                                    reporting Industry Member Data, (b)                     SRO-Assigned Market Participant                       cancellation of its quotes in Listed
                                                    timing of the recording and reporting,                  Identifier of the Industry Member                     Options. Each Industry Member that is
                                                    (c) the applicable securities covered by                receiving the order; (5) SRO-Assigned                 an Options Market Maker, however, is


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9925

                                                    required to report to the Exchange the                  which transaction reports are required                information related to their Customers
                                                    time at which its quote in a Listed                     to be submitted to a national securities              in accordance with the Customer
                                                    Option is sent to the Exchange (and, if                 association.                                          Information Approach discussed above.
                                                    applicable, any subsequent quote                                                                              CBOE proposes Rule 6.88 (Customer
                                                                                                            (D) Security Symbology
                                                    modification time and/or cancellation                                                                         Information Reporting) to implement
                                                    time when such modification or                             Paragraph (d) of proposed Rule 6.87                this provision of the CAT NMS Plan
                                                    cancellation is originated by the Options               describes the security symbology that                 with regard to its Industry Members.
                                                    Market Maker). This paragraph                           Industry Members are required to use                  Specifically, paragraph (a) of proposed
                                                    implements the Options Market Maker                     when reporting Industry Member Data                   Rule 6.88 requires each Industry
                                                    Quote Exemption, as discussed above.                    to the Central Repository. Paragraph                  Member to submit to the Central
                                                                                                            (d)(i) of proposed Rule 6.87 requires, for            Repository the Firm Designated ID,
                                                    (B) Timing of Recording and Reporting                   each exchange-listed Eligible Security,               Customer Account Information and
                                                      Paragraph (b) of proposed Rule 6.87                   each Industry Member to report                        Customer Identifying Information for
                                                    describes the requirements related to the               Industry Member Data to the Central                   each of its Customers with an Active
                                                    timing of recording and reporting of                    Repository using the symbology format                 Account prior to such Industry
                                                    Industry Member Data. Paragraphs (b)(i)                 of the exchange listing the security. This            Member’s commencement of reporting
                                                    through (b)(iii) of proposed Rule 6.87 set              requirement implements the                            to the Central Repository and in
                                                    forth the requirements related to the                   requirement set forth in Section 2 of                 accordance with the deadlines set forth
                                                    timing of the recording and reporting                   Appendix D of the CAT NMS Plan to                     in Rule 6.93.
                                                    requirements required in Section                        use the listing exchange symbology                      Paragraph (b) of proposed Rule 6.88
                                                    6.4(b)(i) through (ii) of the CAT NMS                   when reporting data to the Central                    requires each Industry Member to
                                                    Plan.                                                   Repository for exchange-listed Eligible               submit to the Central Repository any
                                                      Paragraph (b)(i) of proposed Rule 6.87                Securities.                                           updates, additions or other changes to
                                                    requires each Industry Member to                           For each Eligible Security that is not             the Firm Designated ID, Customer
                                                    record Recorded Industry Member Data                    exchange-listed, however, there is no                 Account Information and Customer
                                                    contemporaneously with the applicable                   listing exchange to provide the                       Identifying Information for each of its
                                                    Reportable Event. Paragraph (b)(ii) of                  symbology format. Moreover, to date,                  Customers with an Active Account on a
                                                    proposed Rule 6.87 requires each                        the requisite symbology format has not                daily basis.
                                                    Industry Member to report: (A)                          been determined. Therefore, paragraph                   Paragraph (c) of proposed Rule 6.88
                                                    Recorded Industry Member Data to the                    (d)(ii) of proposed Rule 6.87 requires,               requires each Industry Member, on a
                                                    Central Repository by 8:00 a.m. Eastern                 for each Eligible Security that is not                periodic basis as designated by the Plan
                                                    time on the Trading Day following the                   exchange-listed, each Industry Member                 Processor and approved by the
                                                    day the Industry Member records such                    to report Industry Member Data to the                 Operating Committee, to submit to the
                                                    Recorded Industry Member Data; and                      Central Repository using such                         Central Repository a complete set of
                                                    (B) Received Industry Member Data to                    symbology format as approved by the                   Firm Designated IDs, Customer Account
                                                    the Central Repository by 8:00 a.m.                     Operating Committee pursuant to the                   Information and Customer Identifying
                                                    Eastern time on the Trading Day                         CAT NMS Plan. CBOE intends to                         Information for each of its Customers
                                                    following the day the Industry Member                   announce to its Industry Members the                  with an Active Account. This periodic
                                                    receives such Received Industry                         relevant symbology formats established                refresh is intended to ensure that the
                                                    Member Data. Paragraph (b)(iii) states                  by the Operating Committee via                        Central Repository has the most current
                                                    that Industry Members may, but are not                  Regulatory Circular.                                  information identifying a Customer.
                                                    required to, voluntarily report Industry                                                                      CBOE intends to announce to its
                                                    Member Data prior to the applicable                     (E) Error Correction                                  Industry Members when such a periodic
                                                    8:00 a.m. Eastern time deadline.                          To ensure that the CAT contains                     refresh is required by the Plan Processor
                                                                                                            accurate data, the CAT NMS Plan                       and the Operating Committee via
                                                    (C) Applicable Securities
                                                                                                            requires Industry Members to correct                  Regulatory Circular.
                                                       Paragraph (c) of proposed Rule 6.87                  erroneous data submitted to the Central                 Finally, paragraph (d) of proposed
                                                    describes the securities to which the                   Repository. Therefore, CBOE proposes                  Rule 6.88 addresses the correction of
                                                    recording and reporting requirements of                 to adopt paragraph (e) of proposed Rule               erroneous Customer data reported to the
                                                    proposed Rule 6.87 apply. Paragraphs                    6.87, which addresses the correction of               Central Repository to ensure an accurate
                                                    (c)(i) and (c)(ii) of proposed Rule 6.87                erroneous data reported to the Central                audit trail. Paragraph (d) requires, for
                                                    set forth the description of applicable                 Repository. Paragraph (e) of proposed                 each Industry Member for which errors
                                                    securities as set forth in Section 6.4(c)(i)            Rule 6.87 requires, for each Industry                 in Firm Designated ID, Customer
                                                    and (ii) of the CAT NMS Plan,                           Member for which errors in Industry                   Account Information and Customer
                                                    respectively. Paragraph (c)(i) of                       Member Data submitted to the Central                  Identifying Information for each of its
                                                    proposed Rule 6.87 requires each                        Repository have been identified by the                Customers with an Active Account
                                                    Industry Member to record and report to                 Plan Processor or otherwise, that such                submitted to the Central Repository
                                                    the Central Repository the Industry                     Industry Member submit corrected                      have been identified by the Plan
                                                    Member Data as set forth in paragraph                   Industry Member Data to the Central                   Processor or otherwise, such Member to
                                                    (a) of proposed Rule 6.87 for each NMS                  Repository by 8:00 a.m. Eastern time on               submit corrected data to the Central
                                                    Security registered or listed for trading
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                                                                                                            T+3. This requirement implements the                  Repository by 5:00 p.m. Eastern time on
                                                    on an exchange or admitted to unlisted                  error correction requirement set forth in             T+3. This requirement implements the
                                                    trading privileges on an exchange.                      Section 6 of Appendix D of the CAT                    error correction requirement set forth in
                                                    Paragraph (c)(ii) of proposed Rule 6.87                 NMS Plan.                                             Appendix C of the CAT NMS Plan.
                                                    requires each Industry Member to
                                                    record and report to the Central                        (4) Customer Information Reporting                    (5) Industry Member Information
                                                    Repository the Industry Member Data as                    Section 6.4(d)(iv) of the CAT NMS                   Reporting
                                                    set forth in paragraph (a) of proposed                  Plan requires Industry Members to                       Section 6.4(d)(vi) of the CAT NMS
                                                    Rule 6.87 for each Eligible Security for                submit to the Central Repository certain              Plan requires Industry Members to


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                                                    9926                           Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    submit to the Central Repository                          and including one second, provided that               network connection(s). This provision
                                                    information sufficient to identify such                   each Industry Member is required to                   implements the connectivity
                                                    Industry Member, including CRD                            record and report the time when a                     requirements set forth in Section 4 of
                                                    number and LEI, if such LEI has been                      Manual Order Event has been captured                  Appendix D to the CAT NMS Plan.
                                                    obtained, in accordance with the                          electronically in an order handling and                 Paragraph (c) permits Industry
                                                    Existing Identifier Approach discussed                    execution system of such Member (i.e.,                Members to use CAT Reporting Agents
                                                    above. CBOE proposes Rule 6.89                            electronic capture time) in milliseconds.             to fulfill their data reporting obligations
                                                    (Industry Member Information                              In addition, paragraph (b)(ii) of                     related to the CAT. Paragraph (c) is
                                                    Reporting) to implement this provision                    proposed Rule 6.90 permits each                       based on FINRA Rule 7450(c), which
                                                    of the CAT NMS Plan with regard to its                    Industry Member to record and report                  permits OATS Reporting Members to
                                                    Industry Members. Specifically,                           the time of Allocation Reports in                     enter into agreements with Reporting
                                                    proposed Rule 6.89 requires each                          increments up to and including one                    Agents to fulfill the OATS obligations of
                                                    Industry Member to submit to the                          second.                                               the OATS Reporting Member.
                                                    Central Repository information                                                                                  Specifically, paragraph (c)(1) of
                                                                                                              (7) Clock Synchronization Rule                        proposed Rule 6.92 states that any
                                                    sufficient to identify such Industry
                                                                                                              Violations                                            Industry Member may enter into an
                                                    Member, including CRD number and
                                                    LEI, if such LEI has been obtained, prior                   Proposed Rule 6.91 (Clock                           agreement with a CAT Reporting Agent
                                                    to such Industry Member’s                                 Synchronization Rule Violations)                      pursuant to which the CAT Reporting
                                                    commencement of reporting to the                          describes potential violations of the                 Agent agrees to fulfill the obligations of
                                                    Central Repository and in accordance                      clock synchronization time period                     such Industry Member under proposed
                                                    with the deadlines set forth in Rule                      requirements set forth in proposed                    Section F. Any such agreement must be
                                                    6.93, and keep such information up to                     Section F. Proposed Rule 6.91 states that             evidenced in writing, which specifies
                                                    date as necessary.                                        an Industry Member that engages in a                  the respective functions and
                                                                                                              pattern or practice of reporting                      responsibilities of each party to the
                                                    (6) Time Stamps                                           Reportable Events outside of the                      agreement that are required to effect full
                                                       SEC Rule 613(d)(3) under Regulation                    required clock synchronization time                   compliance with the requirements of
                                                    NMS sets forth requirements for time                      period as set forth in this Rule Series               proposed Section F. CBOE notes that,
                                                    stamps used by CAT Reporters in                           without reasonable justification or                   currently, no standardized form
                                                    recording and reporting data to the                       exceptional circumstances may be                      agreement for CAT Reporting Agent
                                                    CAT.28 To comply with this provision,                     considered in violation of this Rule.                 arrangements has been adopted.
                                                    Section 6.8(b) of the Plan sets forth time                This provision implements the                         Paragraph (c)(ii) of proposed Rule 6.92
                                                    stamp requirements for Industry                           requirements of Section 6.8 of the CAT                requires that all written documents
                                                    Members. To implement this provision                      NMS Plan which requires the                           evidencing an agreement with a CAT
                                                    with regard to its Industry Members,                      Compliance Rule to provide that a                     Reporting Agent be maintained by each
                                                    CBOE proposes Rule 6.90 (Time                             pattern or practice of reporting events               party to the agreement. Paragraph (c)(iii)
                                                    Stamps) to require its Industry Members                   outside of the required clock                         of proposed Rule 6.92 states that each
                                                    to comply with the time stamp                             synchronization time period without                   Industry Member remains primarily
                                                    requirements of the Plan.                                 reasonable justification or exceptional               responsible for compliance with the
                                                       Paragraph (a) of proposed Rule 6.90                    circumstances may be considered a                     requirements of proposed Section F,
                                                    sets forth the time stamp increments to                   violation of SEC Rule 613 or the CAT                  notwithstanding the existence of an
                                                    be used by Industry Members in their                      NMS Plan.                                             agreement described in paragraph (c) of
                                                    CAT reporting. Paragraph (a)(1) of                                                                              proposed Rule 6.92.
                                                    proposed Rule 6.90 requires each                          (8) Connectivity and Data Transmission
                                                    Industry Member to record and report                        Proposed Rule 6.92 (Connectivity and                (9) Development and Testing
                                                    Industry Member Data to the Central                       Data Transmission) addresses                            CBOE proposes Rule 6.93
                                                    Repository with time stamps in                            connectivity and data transmission                    (Development and Testing) to address
                                                    milliseconds, subject to paragraphs                       requirements related to the CAT.                      requirements for Industry Members
                                                    (a)(ii) and (b) of proposed Rule 6.90. To                 Paragraph (a) of proposed Rule 6.92                   related to CAT development and testing.
                                                    the extent that any Industry Member’s                     describes the format(s) for reporting                 Paragraph (a) of proposed Rule 6.93 sets
                                                    order handling or execution systems                       Industry Member Data to the Central                   forth the testing requirements and
                                                    utilize time stamps in increments finer                   Repository, thereby implementing the                  deadlines for Industry Members to
                                                    than milliseconds, paragraph (a)(ii) of                   formatting requirements as set forth in               develop and commence reporting to the
                                                    proposed Rule 6.90 requires such                          Section 6.4(a) of the CAT NMS Plan.                   Central Repository. These requirements
                                                    Industry Member to record and report                      Specifically, paragraph (a) of proposed               are set forth in Appendix C to the CAT
                                                    Industry Member Data to the Central                       Rule 6.92 requires each Industry                      NMS Plan.
                                                    Repository with time stamps in such                       Member to transmit data as required                     Paragraph (a)(i) sets forth the
                                                    finer increment, subject to paragraph (b)                 under the CAT NMS Plan to the Central                 deadlines related to connectivity and
                                                    of proposed Rule 6.90 regarding Manual                    Repository utilizing such format(s) as                acceptance testing. Industry Members
                                                    Order Events and Allocation Reports.                      may be provided by the Plan Processor                 (other than Small Industry Members) are
                                                       Paragraph (b) of proposed Rule 6.90                    and approved by the Operating                         required to begin connectivity and
                                                    sets forth the permissible time stamp                     Committee.                                            acceptance testing with the Central
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                                                    increments for Manual Order Events                          Paragraph (b) of proposed Rule 6.92                 Repository no later than August 15,
                                                    and Allocation Reports. Specifically,                     addresses connectivity requirements                   2018, and Small Industry Members are
                                                    paragraph (b)(i) of proposed Rule 6.90                    related to the CAT. Paragraph (b) of                  required to begin connectivity and
                                                    permits each Industry Member to record                    proposed Rule 6.92 requires each                      acceptance testing with the Central
                                                    and report Manual Order Events to the                     Industry Member to connect to the                     Repository no later than August 15,
                                                    Central Repository in increments up to                    Central Repository using a secure                     2019.
                                                                                                              method(s), including, but not limited to,               Paragraph (a)(ii) sets forth the
                                                      28 17   CFR 242.613(d)(3).                              private line(s) and virtual private                   deadlines related to reporting Customer


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                                                                                Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                        9927

                                                    and Industry Member information.                         required to be recorded under proposed                Industry Member’s obligations regarding
                                                    Paragraph (a)(ii)(A) requires Industry                   Section F for the period of time and                  LEIs.31
                                                    Members (other than Small Industry                       accessibility specified in SEC Rule 17a–                 Paragraph (c) states that, if an
                                                    Members) to begin reporting Customer                     4(b). The records required to be                      Industry Member reports data to the
                                                    and Industry Member information, as                      maintained and preserved under                        Central Repository with errors such that
                                                    required by proposed Rules 6.88(a) and                   proposed Section F may be immediately                 its error percentage exceeds the
                                                    6.89, respectively, to the Central                       produced or reproduced on                             maximum Error Rate established by the
                                                    Repository for processing no later than                  ‘‘micrographic media’’ as defined in                  Operating Committee pursuant to the
                                                    October 15, 2018. Paragraph (a)(ii)(B)                   SEC Rule 17a–4(f)(1)(i) or by means of                CAT NMS Plan, then such Industry
                                                    requires Small Industry Members to                       ‘‘electronic storage media’’ as defined in            Member would not be in compliance
                                                    begin reporting Customer and Industry                    SEC Rule 17a–4(f)(1)(ii) that meet the                with proposed Section F. As discussed
                                                    Member information, as required by                       conditions set forth in SEC Rule 17a–                 above, the initial maximum Error Rate is
                                                    proposed Rules 6.88(a) and 6.89,                         4(f) and be maintained and preserved                  5%, although the Error Rate is expected
                                                    respectively, to the Central Repository                  for the required time in that form.                   to be reduced over time. CBOE intends
                                                    for processing no later than October 15,                 Proposed Rule 6.94 is based on FINRA                  to announce to its Industry Members
                                                    2019.                                                    Rule 7440(a)(5), which sets forth the                 changes to the Error Rate established
                                                      Paragraph (a)(iii) sets forth the                                                                            pursuant to the CAT NMS Plan via
                                                                                                             recordkeeping requirements related to
                                                    deadlines related to the submission of                                                                         Regulatory Circular.
                                                                                                             OATS.
                                                    order data. Under paragraph (a)(iii)(A),                                                                          Furthermore, paragraph (d) of
                                                    Industry Members (other than Small                       (11) Timely, Accurate and Complete                    proposed Rule 6.95 addresses
                                                    Industry Members) are permitted, but                     Data                                                  Compliance Thresholds related to
                                                    not required, to submit order data for                                                                         reporting data to the CAT. Proposed
                                                    testing purposes beginning no later than                    SEC Rule 613 and the CAT NMS Plan                  Rule 6.95 states that each Industry
                                                    May 15, 2018. In addition, Industry                      emphasize the importance of the                       Member is required to meet a separate
                                                    Members (other than Small Industry                       timeliness, accuracy, completeness and                compliance threshold which will be an
                                                    Members) are required to participate in                  integrity of the data submitted to the                Industry Member-specific rate that may
                                                    the coordinated and structured testing                   CAT.30 Accordingly, proposed Rule 6.95                be used as the basis for further review
                                                    of order submission, which will begin                    (Timely, Accurate and Complete Data)                  or investigation into the Industry
                                                    no later than August 15, 2018. Under                     implements this requirement with                      Member’s performance with regard to
                                                    paragraph (a)(iii)(B), Small Industry                    regard to Industry Members. Paragraph                 the CAT (the ‘‘Compliance
                                                    Members are permitted, but not                           (a) of proposed Rule 6.95 requires that               Thresholds’’). Compliance Thresholds
                                                    required, to submit order data for testing               Industry Members record and report                    will compare an Industry Member’s
                                                    purposes beginning no later than May                     data to the Central Repository as                     error rate to the aggregate Error Rate
                                                    15, 2019. In addition, Small Industry                    required by proposed Section F in a                   over a period of time to be defined by
                                                    Members are required to participate in                   manner that ensures the timeliness,                   the Operating Committee. Compliance
                                                    the coordinated and structured testing                   accuracy, integrity and completeness of               Thresholds will be set by the Operating
                                                    of order submission, which will begin                    such data.                                            Committee, and will be calculated at
                                                    no later than August 15, 2019.                              In addition, without limiting the                  intervals to be set by the Operating
                                                      Paragraph (a)(iv) states that Industry
                                                                                                             general requirement as set forth in                   Committee.32 Compliance Thresholds
                                                    Members are permitted, but not required
                                                                                                             paragraph (a), paragraph (b) of proposed              will include compliance with the data
                                                    to, submit Quote Sent Times on Options
                                                                                                             Rule 6.95 requires Industry Members to                reporting and clock synchronization
                                                    Market Maker quotes, beginning no later
                                                                                                             accurately provide the LEIs in their                  requirements. Proposed Rule 6.95 states
                                                    than October 15, 2018.
                                                      Paragraph (b) of proposed Rule 6.93                    records as required by proposed Section               that an Industry Member’s performance
                                                    implements the requirement under the                     F and states that Industry Members may                with respect to its Compliance
                                                    CAT NMS Plan that Industry Members                       not knowingly submit inaccurate LEIs to               Threshold will not signify, as a matter
                                                    participate in required industry testing                 the Central Repository. Paragraph (b)                 of law, that such Industry Member has
                                                    with the Central Repository.29                           notes, however, that this requirement                 violated proposed Section F.
                                                    Specifically, proposed Rule 6.93                         does not impose any additional due                    (12) Compliance Dates
                                                    requires that each Industry Member                       diligence obligations on Industry
                                                                                                             Members with regard to LEIs for CAT                     Proposed Rule 6.96 (Compliance
                                                    participate in testing related to the
                                                                                                             purposes. Accordingly, this provision                 Dates) sets forth the compliance dates
                                                    Central Repository, including any
                                                                                                             does not impose any due diligence                     for the various provisions of proposed
                                                    industry-wide disaster recovery testing,
                                                                                                             obligations beyond those that may exist               Section F. Paragraph (a) of proposed
                                                    pursuant to the schedule established
                                                                                                             today with respect to information                     Rule 6.96 states that, except as set forth
                                                    pursuant to the CAT NMS Plan. CBOE
                                                                                                             associated with an LEI. Although                      in paragraphs (b) and (c) of proposed
                                                    intends to announce to its Industry
                                                                                                             Industry Members will not be required                 Rule 6.96 or otherwise set forth in
                                                    Members the schedule established
                                                                                                             to perform additional due diligence                   proposed Section F, the compliance
                                                    pursuant to the CAT NMS Plan via
                                                                                                             with regard to the LEIs for CAT                       date for proposed Section F is the
                                                    Regulatory Circular.
                                                                                                             purposes, Industry Members will be                    approval date of the filing.33
                                                    (10) Recordkeeping                                       required to accurately provide the LEIs
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                                                                                                                                                                     31 Approval   Order at 84745.
                                                      Proposed Rule 6.94 (Recordkeeping)                     in their records and may not knowingly                  32 Appendix    C of the CAT NMS Plan.
                                                    sets forth the recordkeeping obligations                 submit inaccurate LEIs to the CAT.                      33 Proposed Section F, except for provisions
                                                    related to the CAT for Industry                          Paragraph (b) is consistent with the                  otherwise stated in the proposed rule change, will
                                                    Members. Proposed Rule 6.94 requires                     SEC’s statements in the Approval Order                become effective upon approval of this rule filing.
                                                    each Industry Member to maintain and                     for the CAT NMS Plan regarding an                     As proposed Section F will not be inserted into
                                                                                                                                                                   CBOE’s Rules until that time, the proposed rule text
                                                    preserve records of the information                                                                            states: ‘‘Except as set forth in paragraphs (b) and (c)
                                                                                                               30 See SEC Rule 613(e)(4)(i)(D)(ii); and Section    of this Rule or otherwise set forth in this Section
                                                      29 Adopting   Release at 84725.                        6.5(d) of the CAT NMS Plan.                           F, the Rules in this Section F are effective.’’



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                                                    9928                        Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                      Paragraph (b) of proposed Rule 6.96                    the Section 6(b)(5) 36 requirement that                 III. Date of Effectiveness of the
                                                    establishes the compliance dates for the                 the rules of an exchange not be designed                Proposed Rule Change and Timing for
                                                    clock synchronization requirements as                    to permit unfair discrimination between                 Commission Action
                                                    set forth in proposed Rule 6.96.                         customers, issuers, brokers, or dealers                   Within 45 days of the date of
                                                    Paragraph (b)(i) states that each Industry               and the Section 6(b)(8) 37 requirement                  publication of this notice in the Federal
                                                    Member shall comply with 6.86 with                       that the rules of an exchange not impose                Register or within such longer period
                                                    regard to Business Clocks that capture                   any burden on competition that is not                   up to 90 days (i) as the Commission may
                                                    time in milliseconds commencing on or                    necessary or appropriate.                               designate if it finds such longer period
                                                    before March 15, 2017. Paragraph (b)(ii)                    The Exchange believes that this                      to be appropriate and publishes its
                                                    states that each Industry Member shall                   proposal is consistent with the Act                     reasons for so finding or (ii) as to which
                                                    comply with Rule 6.86 with regard to                     because it implements, interprets or                    the Exchange consents, the Commission
                                                    Business Clocks that do not capture                      clarifies the provisions of the Plan, and               will:
                                                    time in milliseconds commencing on or                    is designed to assist the Exchange and                    A. By order approve or disapprove
                                                    before February 19, 2018. The                            its Industry Members in meeting                         such proposed rule change, or
                                                    compliance date set forth in paragraph                   regulatory obligations pursuant to the                    B. institute proceedings to determine
                                                    (b)(i) reflects the exemptive relief the                 Plan. In approving the Plan, the                        whether the proposed rule change
                                                    Participants intend to request with                      Commission noted the Plan ‘‘is                          should be disapproved.
                                                    regard to the clock synchronization                      necessary and appropriate in the public
                                                    requirements related to Business Clocks                  interest, for the protection of investors               IV. Solicitation of Comments
                                                    that do not capture time in                              and the maintenance of fair and orderly                   Interested persons are invited to
                                                    milliseconds.                                            markets, to remove impediments to, and                  submit written data, views, and
                                                      Paragraph (c) of proposed Rule 6.96                    perfect the mechanism of a national                     arguments concerning the foregoing,
                                                    establishes the compliance dates for the                 market system, or is otherwise in                       including whether the proposed rule
                                                    data recording and reporting                             furtherance of the purposes of the                      change is consistent with the Act.
                                                    requirements for Industry Members.                       Act.’’ 38 To the extent that this proposal              Comments may be submitted by any of
                                                    Paragraph (c)(i) requires each Industry                  implements, interprets or clarifies the                 the following methods:
                                                    Member (other than Small Industry                        Plan and applies specific requirements
                                                    Members) to record and report the                        to Industry Members, the Exchange                       Electronic comments
                                                    Industry Member Data to the Central                      believes that this proposal furthers the                  • Use the Commission’s Internet
                                                    Repository by November 15, 2018.                         objectives of the Plan, as identified by                comment form (http://www.sec.gov/
                                                    Paragraph (c)(ii) requires that each                     the Commission, and is therefore                        rules/sro.shtml); or
                                                    Industry Member that is a Small                          consistent with the Act.                                  • Send an email to rule-comments@
                                                    Industry Member to record and report                                                                             sec.gov. Please include File Number SR–
                                                                                                             B. Self-Regulatory Organization’s                       CBOE–2017–012 on the subject line.
                                                    the Industry Member Data to the Central
                                                                                                             Statement on Burden on Competition
                                                    Repository by November 15, 2019. Such
                                                                                                                                                                     Paper comments
                                                    compliance dates are consistent with                       CBOE does not believe that the
                                                    the compliance dates set forth in SEC                    proposed rule change will result in any                    • Send paper comments in triplicate
                                                    Rule 613(a)(3)(v) and (vi), and Section                  burden on competition that is not                       to Secretary, Securities and Exchange
                                                    6.7(a)(v) and (vi) of the CAT NMS Plan.                  necessary or appropriate in furtherance                 Commission, 100 F Street NE.,
                                                                                                             of the purposes of the Act. CBOE notes                  Washington, DC 20549–1090.
                                                    2. Statutory Basis
                                                                                                             that the proposed rule change                           All submissions should refer to File
                                                       The Exchange believes the proposed                    implements provisions of the CAT NMS                    Number SR–CBOE–2017–012. This file
                                                    rule change is consistent with the Act                   Plan, and is designed to assist CBOE in                 number should be included on the
                                                    and the rules and regulations                            meeting its regulatory obligations                      subject line if email is used. To help the
                                                    thereunder applicable to the Exchange                    pursuant to the Plan. CBOE also notes                   Commission process and review your
                                                    and, in particular, the requirements of                  that proposed Section F implementing                    comments more efficiently, please use
                                                    Section 6(b) of the Act.34 Specifically,                 provisions of the CAT NMS Plan will                     only one method. The Commission will
                                                    the Exchange believes the proposed rule                  apply equally to all firms that trade                   post all comments on the Commission’s
                                                    change is consistent with the Section                    NMS Securities and OTC Equity                           Internet Web site (http://www.sec.gov/
                                                    6(b)(5) 35 requirements that the rules of                Securities. In addition, all national                   rules/sro.shtml). Copies of the
                                                    an exchange be designed to prevent                       securities exchanges and FINRA are                      submission, all subsequent
                                                    fraudulent and manipulative acts and                     proposing rules virtually identical to                  amendments, all written statements
                                                    practices, to promote just and equitable                 proposed Section F. Therefore, this is                  with respect to the proposed rule
                                                    principles of trade, to foster cooperation               not a competitive rule filing, and,                     change that are filed with the
                                                    and coordination with persons engaged                    therefore, it does not impose a burden                  Commission, and all written
                                                    in regulating, clearing, settling,                       on competition.                                         communications relating to the
                                                    processing information with respect to,                                                                          proposed rule change between the
                                                                                                             C. Self-Regulatory Organization’s
                                                    and facilitating transactions in                                                                                 Commission and any person, other than
                                                                                                             Statement on Comments on the
                                                    securities, to remove impediments to                                                                             those that may be withheld from the
                                                                                                             Proposed Rule Change Received From
                                                    and perfect the mechanism of a free and                                                                          public in accordance with the
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                                                                                                             Members, Participants, or Others
                                                    open market and a national market                                                                                provisions of 5 U.S.C. 552, will be
                                                    system, and, in general, to protect                        The Exchange neither solicited nor                    available for Web site viewing and
                                                    investors and the public interest.                       received comments on the proposed                       printing in the Commission’s Public
                                                    Additionally, the Exchange believes the                  rule change.                                            Reference Room, 100 F Street NE.,
                                                    proposed rule change is consistent with                                                                          Washington, DC 20549 on official
                                                                                                               36 Id.                                                business days between the hours of
                                                      34 15 U.S.C. 78f(b).                                     37 15    U.S.C. 78f(b)(8).                            10:00 a.m. and 3:00 p.m. Copies of the
                                                      35 15 U.S.C. 78f(b)(5).                                  38 Approval     Order at 84697.                       filing also will be available for


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                        9929

                                                    inspection and copying at the principal                    The text of the proposed rule change                  May 17, 2016,9 and approved by the
                                                    office of the Exchange. All comments                    is available on the Exchange’s Web site                  Commission, as modified, on November
                                                    received will be posted without change;                 at http://www.miaxoptions.com/rule-                      15, 2016.10
                                                    the Commission does not edit personal                   filings/pearl, at MIAX PEARL’s                              The Plan is designed to create,
                                                    identifying information from                            principal office, and at the                             implement and maintain a consolidated
                                                    submissions. You should submit only                     Commission’s Public Reference Room.                      audit trail (‘‘CAT’’) that would capture
                                                    information that you wish to make                                                                                customer and order event information
                                                                                                            II. Self-Regulatory Organization’s                       for orders in NMS Securities and OTC
                                                    available publicly. All submissions
                                                                                                            Statement of the Purpose of, and                         Equity Securities, across all markets,
                                                    should refer to File Number SR–CBOE–
                                                                                                            Statutory Basis for, the Proposed Rule                   from the time of order inception through
                                                    2017–012 and should be submitted on
                                                                                                            Change                                                   routing, cancellation, modification, or
                                                    or before March 1, 2017.
                                                                                                              In its filing with the Commission, the                 execution in a single consolidated data
                                                      For the Commission, by the Division of
                                                    Trading and Markets, pursuant to delegated              Exchange included statements                             source. Each Participant is required to
                                                    authority.39                                            concerning the purpose of and basis for                  enforce compliance by its Industry
                                                    Robert W. Errett,                                       the proposed rule change and discussed                   Members, as applicable, with the
                                                                                                            any comments it received on the                          provisions of the Plan, by adopting a
                                                    Deputy Secretary.
                                                                                                            proposed rule change. The text of these                  Compliance Rule applicable to their
                                                    [FR Doc. 2017–02555 Filed 2–7–17; 8:45 am]
                                                                                                            statements may be examined at the                        Industry Members.11 As is described
                                                    BILLING CODE 8011–01–P
                                                                                                            places specified in Item IV below. The                   more fully below, the rules contained in
                                                                                                            Exchange has prepared summaries, set                     the proposed Chapter XVII set forth the
                                                                                                            forth in sections A, B, and C below, of                  Compliance Rule to require Industry
                                                    SECURITIES AND EXCHANGE
                                                                                                            the most significant aspects of such                     Members to comply with the provisions
                                                    COMMISSION                                                                                                       of the CAT NMS Plan. The proposed
                                                                                                            statements.
                                                    [Release No. 34–79938; File No. SR–                                                                              Rules include twelve proposed Rules
                                                    PEARL–2017–04]                                          A. Self-Regulatory Organization’s                        covering the following areas: (1)
                                                                                                            Statement of the Purpose of, and                         Definitions; (2) clock synchronization;
                                                    Self-Regulatory Organizations; MIAX                     Statutory Basis for, the Proposed Rule                   (3) Industry Member Data reporting; (4)
                                                    PEARL, LLC ; Notice of Filing of a                      Change                                                   Customer information reporting; (5)
                                                    Proposed Rule Change by To Adopt                                                                                 Industry Member information reporting;
                                                                                                            1. Purpose
                                                    Rules 1701–1712 To Implement the                                                                                 (6) time stamps; (7) clock
                                                    Compliance Rule Regarding the                              Bats BYX Exchange, Inc., Bats BZX                     synchronization rule violations; (8)
                                                    National Market System Plan                             Exchange, Inc., Bats EDGA Exchange,                      connectivity and data transmission; (9)
                                                    Governing the Consolidated Audit Trail                  Inc., Bats EDGX Exchange, Inc., BOX                      development and testing; (10)
                                                                                                            Options Exchange LLC, C2 Options                         recordkeeping; (11) timely, accurate and
                                                    February 2, 2017.                                       Exchange, Incorporated, Chicago Board
                                                       Pursuant to the provisions of Section                                                                         complete data; and (12) compliance
                                                                                                            Options Exchange, Incorporated,                          dates. Each of these proposed Rules are
                                                    19(b)(1) of the Securities Exchange Act                 Chicago Stock Exchange, Inc., Financial                  discussed in detail below.
                                                    of 1934 (‘‘Act’’) 1 and Rule 19b–4                      Industry Regulatory Authority, Inc.,                        The Exchange notes that its affiliate,
                                                    thereunder,2 notice is hereby given that                International Securities Exchange, LLC,                  Miami International Securities
                                                    on February 1, 2017, MIAX PEARL, LLC                    Investors’ Exchange LLC, ISE Gemini,                     Exchange, LLC (‘‘MIAX Options’’), has
                                                    (‘‘MIAX PEARL’’ or ‘‘Exchange’’) filed                  LLC, ISE Mercury, LLC, Miami                             submitted a nearly identical proposed
                                                    with the Securities and Exchange                        International Securities Exchange LLC,                   rule change (the ‘‘MIAX Options Rule
                                                    Commission (‘‘Commission’’) a                           MIAX PEARL, LLC,5 NASDAQ BX, Inc.,                       Filing’’). The Exchange intends that the
                                                    proposed rule change as described in                    NASDAQ PHLX LLC, The NASDAQ                              proposed rule text set forth in Exhibit 5
                                                    Items I and II below, which Items have                  Stock Market LLC, National Stock                         of the MIAX Options Rule Filing, which
                                                    been prepared by the Exchange.3 The                     Exchange, Inc., New York Stock                           will become the new MIAX Options
                                                    Commission is publishing this notice to                 Exchange LLC, NYSE MKT LLC, and                          Chapter XVII if and when the
                                                    solicit comments on the proposed rule                   NYSE Arca, Inc. (collectively, the                       Commission approves the MIAX
                                                    change from interested persons.                         ‘‘Participants’’ or ‘‘SROs’’) filed with the             Options Rule Filing, will be
                                                    I. Self-Regulatory Organization’s                       Commission, pursuant to Section 11A of                   incorporated by reference into the
                                                    Statement of the Terms of Substance of                  the Exchange Act 6 and Rule 608 of                       Exchange’s proposed Chapter XVII, and
                                                    the Proposed Rule Change                                Regulation NMS thereunder,7 the CAT                      will thus become the Exchange’s rules
                                                                                                            NMS Plan.8 The Participants filed the                    and thereby applicable to the
                                                       The Exchange proposes to adopt                       Plan to comply with Rule 613 of                          Exchange’s members. Therefore, each of
                                                    Rules 1701–1712 to implement the                        Regulation NMS under the Exchange                        the proposed rules to be incorporated by
                                                    compliance rule (‘‘Compliance Rule’’)                   Act. The Plan was published for                          reference are discussed in detail below,
                                                    regarding the National Market System                    comment in the Federal Register on                       but the text of the proposed rule change
                                                    Plan Governing the Consolidated Audit                                                                            as set forth in Exhibit 5 of this rule filing
                                                    Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).4                 5 MIAX PEARL became a party to the CAT NMS            will specify that the rules contained in
                                                                                                            Plan via an Amendment to the Plan on January 12,         proposed MIAX Options Chapter XVII
                                                      39 17 CFR 200.30–3(a)(12).                            2017.
                                                                                                                                                                     are hereby incorporated by reference
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                                                      1 15 U.S.C. 78s(b)(1).                                   6 15 U.S.C. 78k–1.
                                                      2 17 CFR 240.19b–4.                                      7 17 CFR 242.608.
                                                                                                                                                                     into this MIAX PEARL Chapter XVII,
                                                      3 The Exchange originally filed this proposed rule       8 See Letter from the Participants to Brent J.        and are thus MIAX PEARL Rules and
                                                    change on January 19, 2017 under File No. SR–           Fields, Secretary, Commission, dated September 30,
                                                    PEARL–2017–02, and the Exchange subsequently            2014; and Letter from Participants to Brent J. Fields,      9 See Securities Exchange Act Release No. 77724

                                                    withdrew that filing on January 30, 2017 and filed      Secretary, Commission, dated February 27, 2015.          (Apr. 27, 2016), 81 FR 30614 (May 17, 2016).
                                                    this proposed rule change.                              On December 24, 2015, the Participants submitted            10 See Securities Exchange Act Release No. 79318
                                                      4 Unless otherwise specified, capitalized terms       an amendment to the CAT NMS Plan. See Letter             (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016)
                                                    used in this rule filing are defined as set forth       from Participants to Brent J. Fields, Secretary,         (‘‘Approval Order’’).
                                                    herein or in the CAT NMS Plan.                          Commission, dated December 23, 2015.                        11 See SEC Rule 613(g)(1).




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Document Created: 2017-02-08 02:59:22
Document Modified: 2017-02-08 02:59:22
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 9916 

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