82_FR_9954 82 FR 9929 - Self-Regulatory Organizations; MIAX PEARL, LLC ; Notice of Filing of a Proposed Rule Change by To Adopt Rules 1701-1712 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

82 FR 9929 - Self-Regulatory Organizations; MIAX PEARL, LLC ; Notice of Filing of a Proposed Rule Change by To Adopt Rules 1701-1712 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail

SECURITIES AND EXCHANGE COMMISSION

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

Page Range9929-9941
FR Document2017-02543

Federal Register, Volume 82 Issue 25 (Wednesday, February 8, 2017)
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9929-9941]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2017-02543]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79938; File No. SR-PEARL-2017-04]


Self-Regulatory Organizations; MIAX PEARL, LLC ; Notice of Filing 
of a Proposed Rule Change by To Adopt Rules 1701-1712 To Implement the 
Compliance Rule Regarding the National Market System Plan Governing the 
Consolidated Audit Trail

February 2, 2017.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on February 1, 2017, MIAX PEARL, LLC (``MIAX 
PEARL'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``Commission'') a proposed rule change as described in 
Items I and II below, which Items have been prepared by the 
Exchange.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on 
January 19, 2017 under File No. SR-PEARL-2017-02, and the Exchange 
subsequently withdrew that filing on January 30, 2017 and filed this 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Rules 1701-1712 to implement the 
compliance rule (``Compliance Rule'') regarding the National Market 
System Plan Governing the Consolidated Audit Trail (the ``CAT NMS 
Plan'' or ``Plan'').\4\
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    \4\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings/pearl, at MIAX 
PEARL's principal office, 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, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., International Securities Exchange, LLC, 
Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami 
International Securities Exchange LLC, MIAX PEARL, LLC,\5\ NASDAQ BX, 
Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc. (collectively, the ``Participants'' or ``SROs'') filed with 
the Commission, pursuant to Section 11A of the Exchange Act \6\ and 
Rule 608 of Regulation NMS thereunder,\7\ the CAT NMS Plan.\8\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\9\ and approved by the Commission, as 
modified, on November 15, 2016.\10\
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    \5\ MIAX PEARL became a party to the CAT NMS Plan via an 
Amendment to the Plan on January 12, 2017.
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608.
    \8\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \9\ See Securities Exchange Act Release No. 77724 (Apr. 27, 
2016), 81 FR 30614 (May 17, 2016).
    \10\ See Securities Exchange Act Release No. 79318 (Nov. 15, 
2016), 81 FR 84696 (Nov. 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\11\ As is described more fully below, the rules contained in 
the proposed Chapter XVII set forth the Compliance Rule to require 
Industry Members to comply with the provisions of the CAT NMS Plan. The 
proposed Rules include twelve proposed Rules covering the following 
areas: (1) Definitions; (2) clock synchronization; (3) Industry Member 
Data reporting; (4) Customer information reporting; (5) Industry Member 
information reporting; (6) time stamps; (7) clock synchronization rule 
violations; (8) connectivity and data transmission; (9) development and 
testing; (10) recordkeeping; (11) timely, accurate and complete data; 
and (12) compliance dates. Each of these proposed Rules are discussed 
in detail below.
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    \11\ See SEC Rule 613(g)(1).
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    The Exchange notes that its affiliate, Miami International 
Securities Exchange, LLC (``MIAX Options''), has submitted a nearly 
identical proposed rule change (the ``MIAX Options Rule Filing''). The 
Exchange intends that the proposed rule text set forth in Exhibit 5 of 
the MIAX Options Rule Filing, which will become the new MIAX Options 
Chapter XVII if and when the Commission approves the MIAX Options Rule 
Filing, will be incorporated by reference into the Exchange's proposed 
Chapter XVII, and will thus become the Exchange's rules and thereby 
applicable to the Exchange's members. Therefore, each of the proposed 
rules to be incorporated by reference are discussed in detail below, 
but the text of the proposed rule change as set forth in Exhibit 5 of 
this rule filing will specify that the rules contained in proposed MIAX 
Options Chapter XVII are hereby incorporated by reference into this 
MIAX PEARL Chapter XVII, and are thus MIAX PEARL Rules and

[[Page 9930]]

thereby applicable to MIAX PEARL Members.\12\
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    \12\ The Exchange proposes to request an exemption from the rule 
filing requirements of Section 19(b) of the Act for changes to MIAX 
PEARL Chapter XVII to the extent such rules are effected solely by 
virtue of a change to MIAX Options Chapter XVII.
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(i) Definitions
    Proposed Rule 1701 (Consolidated Audit Trail Compliance Rule--
Definitions) sets forth the definitions for the terms used in the 
proposed Rules 1701-1712. Each of the defined terms in proposed Rule 
1701 is discussed in detail in this section.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customers associated with orders. For example, SEC Rule 613(c)(7)(i)(A) 
requires an Industry Member to report the ``Customer-IDs'' for each 
Customer for the original receipt or origination of an order. 
``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with respect 
to a customer, a code that uniquely and consistently identifies such 
customer for purposes of providing data to the Central Repository.'' 
SEC Rule 613(c)(8) requires Industry Members to use the same Customer-
ID for each Customer. The SEC granted the Participants exemptive relief 
to permit the use of an alternative approach to the requirement that an 
Industry Member report a Customer-ID for every Customer upon original 
receipt or origination.\13\ The alternative approach is called the 
Customer Information Approach.
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    \13\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would be 
permitted to use an account number or any other identifier defined by 
the firm, provided each identifier is unique across the firm for each 
business date (i.e., a single firm may not have multiple separate 
customers with the same identifier on any given date). Prior to their 
commencement of reporting to the CAT, Industry Members would submit an 
initial set of Customer information to the Central Repository, 
including the Firm Designated ID, Customer Identifying Information and 
Customer Account Information (which may include, as applicable, the 
Customer's name, address, date of birth, individual tax payer 
identifier number (``ITIN'')/social security number (``SSN''), 
individual's role in the account (e.g., primary holder, joint holder, 
guardian, trustee, person with power of attorney) and LEI and/or Larger 
[sic] Trader ID (``LTID''). This process is referred to as the customer 
definition process.
    In accordance with the Customer Information Approach, Industry 
Members would be required to report only the Firm Designated ID for 
each new order submitted to the Central Repository, rather than the 
``Customer-ID'' with individual order events. Within the Central 
Repository, each Customer would be uniquely identified by identifiers 
or a combination of identifiers such as ITIN/SSN, date of birth, and as 
applicable, LEI and LTID. The Plan Processor would be required to use 
these unique identifiers to map orders to specific Customers across all 
Industry Members and Participants. To ensure information identifying a 
Customer is up to date, Industry Members would be required to submit to 
the Central Repository daily and periodic updates for reactivated 
accounts, newly established accounts, and revised Firm Designated IDs 
or associated reportable Customer information.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The Participants requested and received an 
exemption to allow an ``Account Effective Date'' to be reported in lieu 
of an account open date in certain limited circumstances. The 
definition of ``Account Effective Date'' as set forth in Paragraph (a) 
of proposed Rule 1701 describes those limited circumstances in which an 
Industry Member may report an ``Account Effective Date'' rather than 
the account open date. The proposed definition is the same as the 
definition of ``Account Effective Date'' set forth in Section 1.1 of 
the CAT NMS Plan, provided, however, that specific dates have replaced 
the descriptions of those dates set forth in Section 1.1 of the Plan.
    Specifically, Paragraph (a)(1) defines ``Account Effective Date to 
mean, with regard to those circumstances in which an Industry Member 
has established a trading relationship with an institution but has not 
established an account with that institution: (1) When the trading 
relationship was established prior to November 15, 2018, for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019, for Small Industry Members, either (a) the date the relationship 
identifier was established within the Industry Member; (b) the date 
when trading began (i.e., the date the first order was received) using 
the relevant relationship identifier; or (c) if both dates are 
available, the earlier date will be used to the extent that the dates 
differ; or (2) when the trading relationship was established on or 
after November 15, 2018 for Industry Members other than Small Industry 
Members, or on or after November 15, 2019 for Small Industry Members, 
the date the Industry Member established the relationship identifier, 
which would be no later than the date the first order was received.
    Paragraph (a)(2) of proposed Rule 1701 states that an ``Account 
Effective Date'' means, where an Industry Member changes back office 
providers or clearing firms prior to November 15, 2018, for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019, for Small Industry Members, the date an account was established 
at the relevant Industry Member, either directly or via transfer.
    Paragraph (a)(3) states that an ``Account Effective Date'' means, 
where an Industry Member acquires another Industry Member prior to 
November 15, 2018, for Industry Members other than Small Industry 
Members, or prior to November 15, 2019, for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer.
    Paragraph (a)(4) states that ``Account Effective Date'' means, 
where there are multiple dates associated with an account established 
prior to November 15, 2018, for Industry Members other than Small 
Industry Members, or prior to November 15, 2019, for Small Industry 
Members, the earliest available date.
    Paragraph (a)(5) states that an ``Account Effective Date'' means, 
with regard to Industry Member proprietary

[[Page 9931]]

accounts established prior to November 15, 2018, for Industry Members 
other than Small Industry Members, or prior to November 15, 2019, for 
Small Industry Members: (1) The date established for the account in the 
Industry Member or in a system of the Industry Member or (2) the date 
when proprietary trading began in the account (i.e., the date on which 
the first orders were submitted from the account). With regard to 
paragraphs (a)(2)-(5), the Account Effective Date will be no later than 
the date trading occurs at the Industry Member or in the Industry 
Member's system.
(B) Active Account
    Under the Customer Information Approach, Industry Members are 
required to report Customer Identifying Information and Customer 
Account Information for only those accounts that are active. This will 
alleviate the need for Industry Members to update such information for 
non-active accounts, but still ensure that the Central Repository will 
collect audit trail data for Customer accounts that have any Reportable 
Events. Accordingly, paragraph (b) of proposed Rule 1701 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
Industry Members to record and report to the Central Repository an 
Allocation Report that includes, among other things, the Firm 
Designated ID for any account(s) to which executed shares are allocated 
when an execution is allocated in whole or part in lieu of requiring 
the reporting of the account number for any subaccount to which an 
execution is allocated, as is required by SEC Rule 613.\14\ 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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    \14\ Exemptive Request Letter at 26-27; and Exemption Order.
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(II) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, paragraph 
(c) of proposed Rule 1701 defines an ``Allocation Report.'' 
Specifically, an ``Allocation Report'' means a report made to the 
Central Repository by an Industry Member that identifies the Firm 
Designated ID for any account(s), including subaccount(s), to which 
executed shares are allocated and provides the security that has been 
allocated, the identifier of the firm reporting the allocation, the 
price per share of shares allocated, the side of shares allocated, the 
number of shares allocated to each account, and the time of the 
allocation; provided, for the avoidance of doubt, any such Allocation 
Report shall not be required to be linked to particular orders or 
executions. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(D) Business Clock
    To create the required audit trail, Industry Members are required 
to record the date and time of various Reportable Events to the Central 
Repository. Industry Members will use ``Business Clocks'' to record 
such dates and times. Accordingly, paragraph (d) of proposed Rule 1701 
defines the term ``Business Clock'' as a clock used to record the date 
and time of any Reportable Event required to be reported under the 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712). This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan. This 
change is intended to recognize that the Industry Members' obligations 
with regard to the CAT are set forth in the Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712).
(E) CAT
    Paragraph (e) of proposed Rule 1701 defines the term ``CAT'' to 
mean the consolidated audit trail contemplated by SEC Rule 613. This is 
the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(F) CAT NMS Plan
    Paragraph (f) of proposed Rule 1701 defines the term ``CAT NMS 
Plan'' to mean the National Market System Plan Governing the 
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to links the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of proposed 
Rule 1701 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-ID'' 
is defined to mean a unique order identifier or series of unique order 
identifiers that allows the Central Repository to efficiently and 
accurately link all Reportable Events for an order, and all orders that 
result from the aggregation or disaggregation of such order. This is 
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule 
613(j)(1).
(H) CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf of the Industry Member.\15\ Such a third party, referred to 
in proposed Rule 1701 as a ``CAT Reporting Agent,'' would be one type 
of a Data Submitter, that is, a party that submits data to the Central 
Repository. Paragraph (h) of proposed Rule 1701 defines the term ``CAT 
Reporting Agent'' to mean a Data Submitter that is a third party that 
enters into an agreement with-an Industry Member pursuant to which the 
CAT Reporting Agent agrees to fulfill such Industry Member's reporting 
obligations under the Consolidated Audit Trail Compliance Rule 
(proposed Rules 1701-1712).
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    \15\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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    This definition is based on FINRA's definition of a ``Reporting 
Agent'' as set forth in FINRA's rule related to its Order Audit Trail 
System (``OATS''). Specifically, FINRA Rule 7410(n) defines a 
``Reporting Agent'' as a third party that enters into any agreement 
with a member pursuant to which the Reporting Agent agrees to fulfill 
such member's obligations under Rule 7450. The Reporting Agent for OATS 
fulfills a similar role to the CAT Reporting Agent.

[[Page 9932]]

(I) Central Repository
    Paragraph (i) of proposed Rule 1701 defines the term ``Central 
Repository'' to mean the repository responsible for the receipt, 
consolidation, and retention of all information reported to the CAT 
pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan, except the 
Exchange uses the phrase ``CAT NMS Plan'' in place of the phrase ``this 
Agreement.''
(J) Compliance Threshold
    Paragraph (j) of proposed Rule 1701 defines the term ``Compliance 
Threshold'' as having the meaning set forth in proposed Rule 1711(d). 
This definition has the same substantive meaning as the definition set 
forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below 
with regard to proposed Rule 1711(d), each Industry Member is required 
to meet a separate compliance threshold which will be an Industry 
Member-specific rate that may be used as the basis for further review 
or investigation into the Industry Member's performance with regard to 
the CAT. This Industry Member-specific rate is the ``Compliance 
Threshold.''
(K) Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account Information, as well as 
data related to their Customer's Reportable Events. Accordingly, 
Paragraph (k) of proposed Rule 1701 proposes to define the term 
``Customer.'' Specifically, the term ``Customer'' would be defined to 
mean: (1) The account holder(s) of the account at an Industry Member 
originating the order; and (2) any person from whom the Industry Member 
is authorized to accept trading instructions for such account, if 
different from the account holder(s). This is the same definition as 
set forth in SEC Rule 613(j)(3), except the Exchange proposes to 
replace the references to a registered broker-dealer or broker-dealer 
with a reference to an Industry Member for consistency of terms used in 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712). The Exchange also notes that Section 1.1 of the CAT NMS Plan 
defines ``Customer'' by reference to SEC Rule 613(j)(3).
(L) Customer Account Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Account Information to 
the Central Repository as part of the customer definition process. 
Accordingly, the Exchange proposes to define the term ``Customer 
Account Information'' to clarify what customer information would need 
to be reported to the Central Repository.
    Paragraph (l) of proposed Rule 1701 defines the term ``Customer 
Account Information'' to include, in part, account number, account 
type, customer type, date account opened, and large trader identifier 
(if applicable). Proposed Rule 1701(l), however, provides an 
alternative definition of ``Customer Account Information'' in two 
limited circumstances. First, in those circumstances in which an 
Industry Member has established a trading relationship with an 
institution but has not established an account with that institution, 
the Industry Member will: (1) Provide the Account Effective Date in 
lieu of the ``date account opened''; (2) provide the relationship 
identifier in lieu of the ``account number''; and (3) identify the 
``account type'' as a ``relationship.'' Second, in those circumstances 
in which the relevant account was established prior to November 15, 
2018, for Industry Members other than Small Industry Members, or prior 
to November 15, 2019, for Small Industry Members, and no ``date account 
opened'' is available for the account, the Industry Member will provide 
the Account Effective Date in the following circumstances: (1) Where an 
Industry Member changes back office providers or clearing firms and the 
date account opened is changed to the date the account was opened on 
the new back office/clearing firm system; (2) where an Industry Member 
acquires another Industry Member and the date account opened is changed 
to the date the account was opened on the post-merger back office/
clearing firm system; (3) where there are multiple dates associated 
with an account in an Industry Member's system, and the parameters of 
each date are determined by the individual Industry Member; and (4) 
where the relevant account is an Industry Member proprietary account. 
The proposed definition is the same as the definition of ``Customer 
Account Information'' set forth in Section 1.1 of the CAT NMS Plan, 
provided, however, that specific dates have replaced the descriptions 
of those dates set forth in Section 1.1 of the Plan.
(M) Customer Identifying Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Identifying 
Information to the Central Repository as part of the customer 
definition process. Accordingly, the Exchange proposes to define the 
term ``Customer Account Information'' to clarify what Customer 
information would need to be reported to the Central Repository.
    Paragraph (m) of proposed Rule 1701 defines the term ``Customer 
Identifying Information'' to mean information of sufficient detail to 
identify a Customer. With respect to individuals, ``Customer 
Identifying Information'' includes, but is not limited to: Name, 
address, date of birth, individual tax payer identification number 
(``ITIN'')/social security number (``SSN''), individual's role in the 
account (e.g., primary holder, joint holder, guardian, trustee, person 
with the power of attorney). With respect to legal entities, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``LEI'') or other comparable common entity identifier, if 
applicable. The definition further notes that an Industry Member that 
has an LEI for a Customer must submit the Customer's LEI in addition to 
other information of sufficient detail to identify the Customer. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\16\ Such Data 
Submitters may include those entities that are required to submit data 
to the Central Repository (e.g., national securities exchanges, 
national securities associations and Industry Members), third-parties 
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT 
Reporting Agents), and outside parties that are not required to submit 
data to the CAT but from which the CAT may receive data (e.g., 
securities information processors (``SIPs''). To include this term in 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712), the Exchange proposes to define ``Data Submitter'' in paragraph 
(n) of proposed Rule 1701. Specifically, paragraph (n) of proposed Rule 
1701 defines a ``Data Submitter'' to mean any person that reports data 
to the Central Repository, including national securities exchanges, 
national securities associations, broker-dealers, the SIPs for the CQS, 
CTA, UTP and Plan for Reporting of Consolidated Options Last Sale 
Reports and Quotation Information (``OPRA'') Plans, and certain other 
vendors or third parties that may submit data to the

[[Page 9933]]

Central Repository on behalf of Industry Members.
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    \16\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) only apply to Reportable Events in 
Eligible Securities. Currently, an Eligible Security includes NMS 
Securities and OTC Equity Securities. Accordingly, paragraph (o) of 
proposed Rule 1701 defines the term ``Eligible Security'' to include: 
(1) All NMS Securities; and (2) all OTC Equity Securities. The terms 
``NMS Securities'' and ``OTC Equity Securities'' are defined, in turn, 
below. This is the same definition as set forth in Section 1.1 of the 
CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\17\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\18\ 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.\19\ As such, the Exchange 
or the SEC ``[sic] may take appropriate action against an Industry 
Member for failing to comply with its CAT reporting obligations.\20\ 
The CAT NMS Plan sets the initial Error Rate at 5%.\21\ 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.\22\
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    \17\ Section 6.5(d)(i) of the CAT NMS Plan.
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \20\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \21\ Section 6.5(d)(i) of the CAT NMS Plan.
    \22\ 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.\23\
---------------------------------------------------------------------------

    \23\ Approval Order at 84718.
---------------------------------------------------------------------------

(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchange proposes to define the term ``Error Rate'' in 
proposed Rule 1701. Paragraph (p) of proposed Rule 1701 defines the 
term ``Error Rate'' to mean the percentage of Reportable Events 
collected by the Central Repository in which the data reported does not 
fully and accurately reflect the order event that occurred in the 
market. This is the same definition as set forth in SEC Rule 613(j)(6), 
and Section 1.1 of the CAT NMS Plan defines ``Error Rate'' by reference 
to SEC Rule 613(j)(6).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan would require each Industry Member to assign a unique Firm 
Designated ID to each Customer. Industry Members would be permitted to 
use as the Firm Designated ID an account number or any other identifier 
defined by the firm, provided each identifier is unique across the firm 
for each business date (i.e., a single firm may not have multiple 
separate customers with the same identifier on any given date). 
Industry Members would be required to report only the Firm Designated 
ID for each new order submitted to the Central Repository, rather than 
the ``Customer-ID'' with individual order events. Accordingly, the 
Exchange proposes to define the term ``Firm Designated ID'' in proposed 
Rule 1701. Specifically, paragraph (q) of proposed Rule 1701 defines 
the term ``Firm Designated ID'' to mean a unique identifier for each 
trading account designated by Industry Members for purposes of 
providing data to the Central Repository, where each such identifier is 
unique among all identifiers from any given Industry Member for each 
business date. This is the same definition as set forth in Section 1.1 
of the CAT NMS Plan. Industry Members would be permitted to use an 
account number or any other identifier defined by the firm, provided 
each identifier is unique across the firm for each business date (i.e., 
a single firm may not have multiple separate customers with the same 
identifier on any given date).
(R) Industry Member
    Paragraph (r) of proposed Rule 1701 defines the term ``Industry 
Member'' to mean a member of a national securities exchange or a member 
of a national securities association.'' This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(S) Industry Member Data
    Paragraph (s) of proposed Rule 1701 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 1703(a)(2). This 
definition has the same substantive meaning as the definition set forth 
in Section 1.1 of the CAT NMS Plan. The definition of ``Industry Member 
Data'' is discussed more fully in the discussion below regarding 
proposed Rule 1703(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of proposed Rule 1701 defines the term ``Initial Plan 
Processor'' to mean the first Plan Processor selected by the Operating 
Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS 
Plan and the National Market System Plan Governing the Process for 
Selecting a Plan Processor and Developing a Plan for the Consolidated 
Audit Trail. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan, although the proposed definition uses the full name 
of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and this proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) applies to Eligible Securities, which 
includes NMS Securities, which, in turn, includes Listed Options. 
Certain requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) apply specifically to Listed Options. 
Accordingly, Paragraph (u) of proposed Rule 1701 defines the term 
``Listed Option'' or ``Option.'' Specifically, paragraph (u) of 
proposed Rule 1701 states that the term ``Listed Option'' or ``Option'' 
has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS.

[[Page 9934]]

SEC Rule 600(b)(35), in turn, defines a listed option as ``any option 
traded on a registered national securities exchange or automated 
facility of a national securities association.'' The Exchange notes 
that the proposed definition of ``Listed Option'' is the same 
definition as the definition set forth in Section 1.1 of the CAT NMS 
Plan.
(V) Manual Order Event
(I) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\24\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution system uses timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize their respective Business 
Clocks (other than such Business Clocks used solely for Manual Order 
Events) at a minimum to within 50 milliseconds of the time maintained 
by the National Institute of Standards and Technology (``NIST''), and 
maintain such a synchronization. Each Industry Member is required to 
synchronize their Business Clocks used solely for Manual Order Events, 
however, at a minimum to within one second of the time maintained by 
the NIST.
---------------------------------------------------------------------------

    \24\ Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, the Exchange proposes to 
define the term ``Manual Order Event'' in proposed Rule 1701. 
Specifically, paragraph (v) of proposed Rule 1701 defines the term 
``Manual Order Event'' to mean a non-electronic communication of order-
related information for which Industry Members must record and report 
the time of the event. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(W) Material Terms of the Order
    Proposed Rule 1703 requires Industry Members to record and report 
to the Central Repository Material Terms of the Order with certain 
Reportable Events (e.g., for the original receipt or origination of an 
order, for the routing of an order). Accordingly, the Exchange proposes 
to define the term ``Material Terms of the Order'' in proposed Rule 
1701. Specifically, paragraph (w) of proposed Rule 1701 defines the 
term ``Material Terms of the Order'' to include: The NMS Security or 
OTC Equity Security symbol; security type; price (if applicable); size 
(displayed and non-displayed); side (buy/sell); order type; if a sell 
order, whether the order is long, short, short exempt; open/close 
indicator (except on transactions in equities); time in force (if 
applicable); if the order is for a Listed Option, option type (put/
call), option symbol or root symbol, underlying symbol, strike price, 
expiration date, and open/close (except on market maker quotations); 
and any special handling instructions. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, the Exchange proposes to define the term ``NMS 
Security'' in proposed Rule 1701. Specifically, paragraph (x) of 
proposed Rule 1701 defines the term ``NMS Security'' to mean any 
security or class of securities for which transaction reports are 
collected, processed, and made available pursuant to an effective 
transaction reporting plan, or an effective national market system plan 
for reporting transactions in Listed Options. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks (as defined in SEC Rule 
600(b)(47)), Listed Options, OTC Equity Securities, and any other 
securities that are included as Eligible Securities from time to time. 
Accordingly, the Exchange proposes to define the term ``NMS Stock'' in 
Paragraph (y) of proposed Rule 1701 to mean any NMS Security other than 
an option. This is the same definition as set forth in SEC Rule 
600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of proposed Rule 1701 defines the term ``Operating 
Committee'' to mean the governing body of the CAT NMS, LLC designated 
as such and described in Article IV of the CAT NMS Plan. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan, except 
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the 
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC Rule 613, the details for each Options Market Maker quotation 
must be reported to the Central Repository by both the Options Market 
Maker and the options exchange to which it routes its quote.
    The SROs, however, requested and received exemptive relief from SEC 
Rule 613 so that the CAT NMS Plan may permit Options Market Maker 
quotes to be reported to the Central Repository by the relevant options 
exchange in lieu of requiring that such reporting be done by both the 
options exchange and the Options Market Maker, as is required by SEC 
Rule 613.\25\ 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.
---------------------------------------------------------------------------

    \25\ See Exemptive Request Letter at 2, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in proposed Rule 1701. Specifically, paragraph (aa) of proposed 
Rule 1701 defines the term ``Options Market Maker'' to mean a broker-
dealer registered with an exchange for the purpose of making markets in 
options contracts traded on the exchange. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.

[[Page 9935]]

(BB) Order
    The proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) requires each Industry Member to record and electronically report 
to the Central Repository certain details for each order. Accordingly, 
the Exchange proposes to define the term ``Order'' in proposed Rule 
1701. Specifically, paragraph (bb) of proposed Rule 1701 defines the 
term ``Order'', with respect to Eligible Securities, to include: (1) 
Any order received by an Industry Member from any person; (2) any order 
originated by an Industry Member; or (3) any bid or offer. This is the 
same definition as set forth in SEC Rule 613(j)(8), except the Exchange 
proposes to replace the phrase ``member of a national securities 
exchange or national securities association'' with the term ``Industry 
Member.'' The Exchange notes that Section 1.1 of the CAT NMS Plan 
defines ``Order'' by reference to SEC Rule 613(j)(8).
(CC) OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities 
for the CAT. Therefore, the Exchange proposes to define the term ``OTC 
Equity Security'' in proposed Rule 1701. Specifically, paragraph (cc) 
of proposed Rule 1701 defines the term ``OTC Equity Security'' to mean 
any equity security, other than an NMS Security, subject to prompt last 
sale reporting rules of a registered national securities association 
and reported to one of such association's equity trade reporting 
facilities. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of proposed Rule 1701 defines the term 
``Participant'' to mean each Person identified as such in Exhibit A of 
the CAT NMS Plan, as amended, in such Person's capacity as a 
Participant in CAT NMS, LLC. This is the same definition in substance 
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of proposed Rule 1701 defines the term ``Person'' to 
mean any individual, partnership, limited liability company, 
corporation, joint venture, trust, business trust, cooperative or 
association and any heirs, executors, administrators, legal 
representatives, successors and assigns of such Person where the 
context so permits. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of proposed Rule 1701 defines the term ``Plan 
Processor'' to mean the Initial Plan Processor or any other Person 
selected by the Operating Committee pursuant to SEC Rule 613 and 
Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the 
Initial Plan Processor, the National Market System Plan Governing the 
Process for Selecting a Plan Processor and Developing a Plan for the 
Consolidated Audit Trail, to perform the CAT processing functions 
required by SEC Rule 613 and set forth in the CAT NMS Plan.
(GG) Received Industry Member Data
    Paragraph (gg) of proposed Rule 1701 states that the term 
``Received Industry Member Data'' has the meaning set forth in Rule 
1703(a)(2). This definition has the same substantive meaning as the 
definition set forth in Section 1.1 of the CAT NMS Plan. The definition 
of ``Received Industry Member Data'' is discussed more fully in the 
discussion below regarding proposed Rule 1703(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 1701 states that the term 
``Recorded Industry Member Data'' has the meaning set forth in Rule 
1703(a)(1). This definition has the same substantive meaning as the 
definition set forth in in Section 1.1 of the CAT NMS Plan. The 
definition of ``Recorded Industry Member Data'' is discussed more fully 
in the discussion below regarding proposed Rule 1703(a)(1).
(II) Reportable Event
    The proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) requires each Industry Member to record and electronically report 
to the Central Repository certain details for each Reportable Event. To 
clarify these requirements, the Exchange proposes to define the term 
``Reportable Event'' in proposed Rule 1701. Specifically, paragraph 
(ii) of proposed Rule 1701 states that the term ``Reportable Event'' 
includes, but is not limited to, the original receipt or origination, 
modification, cancellation, routing, execution (in whole or in part) 
and allocation of an order, and receipt of a routed order. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan.
(JJ) SRO
    Paragraph (jj) of proposed Rule 1701 defines the term ``SRO'' to 
mean any self-regulatory organization within the meaning of Section 
3(a)(26) of the Exchange Act. This is the same definition as set forth 
in Section 1.1 of the CAT NMS Plan.
(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The SROs requested and received exemptive relief from SEC Rule 613 
so that the CAT NMS Plan may permit the Existing Identifier Approach, 
which would allow an Industry Member to report an existing SRO-Assigned 
Market Participant Identifier in lieu of requiring the reporting of a 
universal CAT-Reporter-ID (that is, a code that uniquely and 
consistently identifies an Industry Member for purposes of providing 
data to the Central Repository).\26\ The CAT NMS Plan reflects the 
``Existing Identifier Approach'' for purposes of identifying each 
Industry Member associated with an order or Reportable Event. Under the 
Existing Identifier Approach, Industry Members are required to record 
and report to the Central Repository an SRO-Assigned Market Participant 
Identifier for orders and certain Reportable Events to be used by the 
Central Repository to assign a unique CAT-Reporter-ID to identify 
Industry Members. 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.
---------------------------------------------------------------------------

    \26\ See Exemptive Request Letter at 19, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange 
proposes to define the term ``SRO-Assigned Market Participant'' in 
proposed Rule 1701. Specifically, paragraph (kk) of proposed Rule 1701 
defines the term ``SRO-Assigned Market Participant Identifier'' to mean 
an identifier assigned to an Industry Member by an SRO or identifier 
used by a Participant. This is

[[Page 9936]]

the same definition as set forth in Section 1.1 of the CAT NMS Plan. 
For example, an Industry Member would be permitted to use any existing 
SRO-Assigned Market Participant Identifier (e.g., FINRA MPID, NASDAQ 
MPID, NYSE Mnemonic, CBOE User Acronym and CHX Acronym) when reporting 
order information to the Central Repository.
(LL) Small Industry Member
    The requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) differ to some extent for Small 
Industry Members versus Industry Members other than Small Industry 
Members. For example, the compliance dates for reporting data to the 
CAT are different for Small Industry Members versus other Industry 
Members. Accordingly, to clarify the requirements that apply to which 
Industry Members, the Exchange proposes to define the term ``Small 
Industry Member'' in proposed Rule 1701. Specifically, paragraph (ll) 
of proposed Rule 1701 defines the term ``Small Industry Member'' to 
mean an Industry Member that qualifies as a small broker-dealer as 
defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as 
amended. This is the same in substance as the definition of ``Small 
Industry Member'' as set forth in Section 1.1 of the CAT NMS Plan. 
Specifically, Section 1.1 of the CAT NMS Plan defines a ``Small 
Industry Member'' as ``an Industry Member that qualifies as a small 
broker-dealer as defined in SEC Rule 613.'' The definition of a small 
broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as 
defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 1703(b) establishes the deadlines for reporting 
certain data to the Central Repository using the term ``Trading Day.'' 
Accordingly, the Exchange proposes to define the term ``Trading Day'' 
in proposed Rule 1701. Specifically, Paragraph (mm) of proposed Rule 
1701 states that the term ``Trading Day'' shall have the meaning as is 
determined by the Operating Committee. For the avoidance of doubt, the 
Operating Committee may establish different Trading Days for NMS Stocks 
(as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity 
Securities, and any other securities that are included as Eligible 
Securities from time to time.
(ii) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards. To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\27\ To implement these provisions 
with regard to its Industry Members, the Exchange proposes Rule 1702 
(Consolidated Audit Trail Compliance Rule- Clock Synchronization) to 
require its Industry Members to comply with the clock synchronization 
requirements of the Plan.
---------------------------------------------------------------------------

    \27\ In addition, Section 6.7(a)(ii) of the Plan sets forth the 
timeline for CAT Reporters to comply with the clock synchronization 
requirements.
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 1702 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(1) of proposed Rule 1702 requires each Industry Member to 
synchronize its Business Clocks, other than such Business Clocks used 
solely for Manual Order Events or used solely for the time of 
allocation on Allocation Reports, at a minimum to within a fifty (50) 
millisecond tolerance of the time maintained by the NIST atomic clock, 
and maintain such synchronization. This is the same requirement as set 
forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 1702 requires each Industry 
Member to synchronize (1) its Business Clocks used solely for Manual 
Order Events and (2) its Business Clocks used solely for the time of 
allocation on Allocation Reports at a minimum to within a one second 
tolerance of the time maintained by the NIST atomic clock, and maintain 
such synchronization. This is the same requirement as set forth in 
Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
    Paragraph (a)(3) of proposed Rule 1702 clarifies that the tolerance 
described in paragraphs (a)(1) and (2) of the proposed Rule 1702 
includes all of the following: (1) The time difference between the NIST 
atomic clock and the Industry Member's Business Clock; (2) the 
transmission delay from the source; and (3) the amount of drift of the 
Industry Member's Business Clock. This description of the clock 
synchronization tolerance is the same as set forth in paragraph (b) of 
FINRA Rule 4590 (Synchronization of Member Business Clocks).
    Paragraph (a)(4) of proposed Rule 1702 requires Industry Members to 
synchronize their Business Clocks every business day before market open 
to ensure that timestamps for Reportable Events are accurate. In 
addition, to maintain clock synchronization, Business Clocks must be 
checked against the NIST atomic clock and re-synchronized, as 
necessary, throughout the day. This description of the required 
frequency of clock synchronization is the same as set forth in 
paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business 
Clocks).
    Paragraph (b) of proposed Rule 1702 sets forth documentation 
requirements with regard to clock synchronization. Specifically, 
paragraph (b) requires Industry Members to document and maintain their 
synchronization procedures for their Business Clocks. The proposed Rule 
requires Industry Members to keep a log of the times when they 
synchronize their Business Clocks and the results of the 
synchronization process. This log is required to include notice of any 
time a Business Clock drifts more than the applicable tolerance 
specified in paragraph (a) of the proposed Rule. Such logs must include 
results for a period of not less than five years ending on the then 
current date, or for the entire period for which the Industry Member 
has been required to comply with this Rule if less than five years. 
These documentation requirements are the same as those set forth in the 
``Sequencing Orders and Clock Synchronization'' section of Appendix C 
of the CAT NMS Plan. Moreover, these documentation requirements 
regarding clock synchronization are comparable to those set forth in 
Supplementary Material .01 of FINRA Rule 4590 (Synchronization of 
Member Business Clocks).
    Paragraph (c) of proposed Rule 1702 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of proposed Rule 1702 requires each Industry Member to 
certify to the Exchange that its Business Clocks satisfy the 
synchronization requirements set forth in paragraph (a) of proposed 
Rule 1702 periodically in accordance with the certification schedule 
established by the Operating Committee pursuant to the CAT NMS Plan. 
This requirement is the same requirement as set forth in Section 
6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the certification schedule 
established by the Operating Committee via Regulatory Circular.
    Paragraph (d) of proposed Rule 1702 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
proposed Rule 1702 requires Industry Members to report to the Plan 
Processor and SRO violations of paragraph (a) of this Rule pursuant to 
the thresholds set by the Operating

[[Page 9937]]

Committee pursuant to the CAT NMS Plan. This requirement is the same 
requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of 
the CAT NMS Plan. The Exchange intends to announce to its Industry 
Members the relevant thresholds established by the Operating Committee 
via Regulatory Circular.
(iii) Industry Member Data Reporting
    SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to 
set forth certain provisions requiring Industry Members to record and 
report data to the CAT. To comply with this provision, Section 6.4 of 
the CAT NMS Plan sets forth the data reporting requirements for 
Industry Members. To implement these provisions with regard to its 
Industry Members, the Exchange proposes Rule 1703 (Consolidated Audit 
Trail Compliance Rule--Industry Member Data Reporting) to require its 
Industry Members to comply with the Industry Member Data reporting 
requirements of the Plan. Proposed Rule 1703 has five sections 
covering: (1) Recording and reporting Industry Member Data, (2) timing 
of the recording and reporting, (3) the applicable securities covered 
by the recording and reporting requirements, (4) the security symbology 
to be used in the recording and reporting, and (5) error correction 
requirements, each of which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 1703 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry 
Member Data, Received Industry Member Data and Options Market Maker 
data, respectively. Paragraphs (a)(1)-(a)(3) of proposed Rule 1703 set 
forth the recording and reporting requirements required in Section 
6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding 
Options Market Makers, each Industry Member to record and 
electronically report to the Central Repository the following details 
for each order and each Reportable Event, as applicable (``Recorded 
Industry Member Data'') in the manner prescribed by the Operating 
Committee pursuant to the CAT NMS Plan:
     For original receipt or origination of an order: (1) Firm 
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned 
Market Participant Identifier of the Industry Member receiving or 
originating the order; (4) date of order receipt or origination; (5) 
time of order receipt or origination (using timestamps pursuant to 
proposed Rule 1706); and (6) Material Terms of the Order;
     for the routing of an order: (1) CAT-Order-ID; (2) date on 
which the order is routed; (3) time at which the order is routed (using 
timestamps pursuant to proposed Rule 1706); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member routing the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Participant to which the order is being routed; (6) if routed 
internally at the Industry Member, the identity and nature of the 
department or desk to which the order is routed; and (7) Material Terms 
of the Order;
     for the receipt of an order that has been routed, the 
following information: (1) CAT-Order-ID; (2) date on which the order is 
received; (3) time at which the order is received (using timestamps 
pursuant to proposed Rule 1706); (4) SRO-Assigned Market Participant 
Identifier of the Industry Member receiving the order; (5) SRO-Assigned 
Market Participant Identifier of the Industry Member or Participant 
routing the order; and (6) Material Terms of the Order;
     if the order is modified or cancelled: (1) CAT-Order-ID; 
(2) date the modification or cancellation is received or originated; 
(3) time at which the modification or cancellation is received or 
originated (using timestamps pursuant to proposed Rule 1706); (4) price 
and remaining size of the order, if modified; (5) other changes in the 
Material Terms of the Order, if modified; and (6) whether the 
modification or cancellation instruction was given by the Customer or 
was initiated by the Industry Member;
     if the order is executed, in whole or in part: (1) CAT-
Order-ID; (2) date of execution; (3) time of execution (using 
timestamps pursuant to proposed Rule 1706; (4) execution capacity 
(principal, agency or riskless principal); (5) execution price and 
size; (6) SRO-Assigned Market Participant Identifier of the Industry 
Member executing the order; (7) whether the execution was reported 
pursuant to an effective transaction reporting plan or the Plan for 
Reporting of Consolidated Options Last Sale Reports and Quotation 
Information; and
     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 1703 requires, subject to 
paragraph (a)(3) regarding Options Market Makers, each Industry Member 
to record and report to the Central Repository the following, as 
applicable (``Received Industry Member Data'' and collectively with the 
information referred to in Rule 1703(a)(1) ``Industry Member Data'') in 
the manner prescribed by the Operating Committee pursuant to the CAT 
NMS Plan:
     If the order is executed, in whole or in part: (1) An 
Allocation Report; (2) SRO-Assigned Market Participant Identifier of 
the clearing broker or prime broker, if applicable; and (3) CAT-Order-
ID of any contra-side order(s);
     if the trade is cancelled, a cancelled trade indicator; 
and
     for original receipt or origination of an order, the Firm 
Designated ID for the relevant Customer, and in accordance with 
proposed Rule 1704, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 1703 states that each Industry 
Member that is an Options Market Maker is not required to report to the 
Central Repository the Industry Member Data regarding the routing, 
modification or cancellation of its quotes in Listed Options. Each 
Industry Member that is an Options Market Maker, however, is required 
to report to the Exchange the time at which its quote in a Listed 
Option is sent to the Exchange (and, if applicable, any subsequent 
quote modification time and/or cancellation time when such modification 
or cancellation is originated by the Options Market Maker). This 
paragraph implements the Options Market Maker Quote Exemption, as 
discussed above.
(B) Timing of Recording and Reporting
    Paragraph (b) of proposed Rule 1703 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 1703 set forth the 
requirements related to the timing of the recording and reporting 
requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
    Paragraph (b)(1) of proposed Rule 1703 requires each Industry 
Member to record Recorded Industry Member Data contemporaneously with 
the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 1703 
requires each Industry Member to report: (1) Recorded Industry Member 
Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading 
Day following the day the Industry Member records such Recorded 
Industry Member Data; and (2) Received Industry Member Data to the 
Central Repository by 8:00 a.m. Eastern Time on the Trading Day 
following the day the-Industry Member receives such

[[Page 9938]]

Received Industry Member Data. Paragraph (b)(3) states that Industry 
Members may, but are not required to, voluntarily report Industry 
Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
(C) Applicable Securities
    Paragraph (c) of proposed Rule 1703 describes the securities to 
which the recording and reporting requirements of proposed Rule 1703 
apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 1703 set forth the 
description of applicable securities as set forth in Section 6.4(c)(i) 
and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of 
proposed Rule 1703 requires each Industry Member to record and report 
to the Central Repository the Industry Member Data as set forth in 
paragraph (a) of proposed Rule 1703 for each NMS Security registered or 
listed for trading on such exchange or admitted to unlisted trading 
privileges on such exchange. Paragraph (c)(2) of proposed Rule 1703 
requires each Industry Member to record and report to the Central 
Repository the Industry Member Data as set forth in paragraph (a) of 
this proposed Rule 1703 for each Eligible Security for which 
transaction reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of proposed Rule 1703 describes the security 
symbology that Industry Members are required to use when reporting 
Industry Member Data to the Central Repository. Paragraph (d)(1) of 
proposed Rule 1703 requires, for each exchange-listed Eligible 
Security, each Industry Member to report Industry Member Data to the 
Central Repository using the symbology format of the exchange listing 
the security. This requirement implements the requirement set forth in 
Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange 
symbology when reporting data to the Central Repository for exchange-
listed Eligible Securities.
    For each Eligible Security that is not exchange-listed, however, 
there is no listing exchange to provide the symbology format. Moreover, 
to date, the requisite symbology format has not been determined. 
Therefore, Paragraph (d)(2) of proposed Rule 1703 requires, for each 
Eligible Security that is not exchange-listed, each Industry Member to 
report Industry Member Data to the Central Repository using such 
symbology format as approved by the Operating Committee pursuant to the 
CAT NMS Plan. The Exchange intends to announce to its Industry Members 
the relevant symbology formats established by the Operating Committee 
via Regulatory Circular.
(E) Error Correction
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, the Exchange proposes to adopt paragraph 
(e) of proposed Rule 1703, which addresses the correction of erroneous 
data reported to the Central Repository. Paragraph (e) of proposed Rule 
1703 requires, for each Industry Member for which errors in Industry 
Member Data submitted to the Central Repository have been identified by 
the Plan Processor or otherwise, that such Industry Member submit 
corrected Industry Member Data to the Central Repository by 8:00 a.m. 
Eastern Time on T+3. This requirement implements the error correction 
requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
(iv) Customer Information Reporting
    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository certain information related to their 
Customers in accordance with the Customer Information Approach 
discussed above. The Exchange proposes Rule 1704 (Consolidated Audit 
Trail Compliance Rule--Customer Information Reporting) to implement 
this provision of the CAT NMS Plan with regard to its Industry Members. 
Specifically, paragraph (a) of proposed Rule 1704 requires each 
Industry Member to submit to the Central Repository the Firm Designated 
ID, Customer Account Information and Customer Identifying Information 
for each of its Customers with an Active Account prior to such Industry 
Member's commencement of reporting to the Central Repository and in 
accordance with the deadlines set forth in Rule 1709. Paragraph (b) of 
proposed Rule 1704 requires each Industry Member to submit to the 
Central Repository any updates, additions or other changes to the Firm 
Designated ID, Customer Account Information and Customer Identifying 
Information for each of its Customers with an Active Account on a daily 
basis. Paragraph (c) of proposed Rule 1704 requires each Industry 
Member, on a periodic basis as designated by the Plan Processor and 
approved by the Operating Committee, to submit to the Central 
Repository a complete set of Firm Designated IDs, Customer Account 
Information and Customer Identifying Information for each of its 
Customers with an Active Account. This periodic refresh is intended to 
ensure that the Central Repository has the most current information 
identifying a Customer. The Exchange intends to announce to its 
Industry Members when such a periodic refresh is required by the Plan 
Processor and the Operating Committee via Regulatory Circular.
    Finally, paragraph (d) of proposed Rule 1704 addresses the 
correction of erroneous Customer data reported to the Central 
Repository to ensure an accurate audit trail. Paragraph (d) requires, 
for each Industry Member for which errors in Firm Designated ID, 
Customer Account Information and Customer Identifying Information for 
each of its Customers with an Active Account submitted to the Central 
Repository have been identified by the Plan Processor or otherwise, 
such Member to submit corrected data to the Central Repository by 5:00 
p.m. Eastern Time on T+3. This requirement implements the error 
correction requirement set forth in Appendix C of the CAT NMS Plan.
(v) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository information sufficient to identify 
such Industry Member, including CRD number and LEI, if such LEI has 
been obtained, in accordance with the Existing Identifier Approach 
discussed above. The Exchange proposes Rule 1705 (Consolidated Audit 
Trail Compliance Rule--Industry Member Information Reporting) to 
implement this provision of the CAT NMS Plan with regard to its 
Industry Members. Specifically, proposed Rule 1705 requires each 
Industry Member to submit to the Central Repository information 
sufficient to identify such Industry Member, including CRD number and 
LEI, if such LEI has been obtained, prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in Rule 1709, and keep such information up 
to date as necessary.
(vi) Time Stamps
    SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for 
time stamps used by CAT Reporters in recording and reporting data to 
the CAT.\28\ To comply with this provision, Section 6.8(b) of the Plan 
sets forth time stamp requirements for Industry Members. To implement 
this provision with regard to its Industry Members, the Exchange 
proposes new Rule 1706

[[Page 9939]]

(Consolidated Audit Trail Compliance Rule--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 1706 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of proposed Rule 1706 requires each Industry Member to 
record and report Industry Member Data to the Central Repository with 
time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of 
proposed Rule 1706. To the extent that any Industry Member's order 
handling or execution systems utilize time stamps in increments finer 
than milliseconds, paragraph (a)(2) of proposed Rule 1706 requires such 
Industry Member to record and report Industry Member Data to the 
Central Repository with time stamps in such finer increment, subject to 
paragraph (b) of proposed Rule 1706 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of proposed Rule 1706 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of proposed Rule 1706 permits each 
Industry Member to record and report Manual Order Events to the Central 
Repository in increments up to and including one second, provided that 
each Industry Member is required to record and report the time when a 
Manual Order Event has been captured electronically in an order 
handling and execution system of such Member (``Electronic Capture 
Time'') in milliseconds. In addition, paragraph (b)(2) of proposed Rule 
1706 permits each Industry Member to record and report the time of 
Allocation Reports in increments up to and including one second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 1707 (Consolidated Audit Trail Compliance Rule--Clock 
Synchronization Rule Violation) describes potential violations of the 
clock synchronization time period requirements set forth in the 
proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712). 
Proposed Rule 1707 states that an Industry Member that engages in a 
pattern or practice of reporting Reportable Events outside of the 
required clock synchronization time period as set forth in the 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712) without 
reasonable justification or exceptional circumstances may be considered 
in violation of this Rule. This provision implements the requirements 
of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule 
to provide that a pattern or practice of reporting events outside of 
the required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of SEC Rule 613 or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 1708 (Consolidated Audit Trail Compliance Rule--
Connectivity and Data Transmission) addresses connectivity and data 
transmission requirements related to the CAT. Paragraph (a) of proposed 
Rule 1708 describes the format(s) for reporting Industry Member Data to 
the Central Repository, thereby implementing the formatting 
requirements as set forth in Section 6.4(a) of the CAT NMS Plan. 
Specifically, paragraph (a) of proposed Rule 1708 requires each 
Industry Member to transmit data as required under the CAT NMS Plan to 
the Central Repository utilizing such format(s) as may be provided by 
the Plan Processor and approved by the Operating Committee.
    Paragraph (b) of proposed Rule 1708 addresses connectivity 
requirements related to the CAT. Paragraph (b) of proposed Rule 1708 
requires each Industry Member to connect to the Central Repository 
using a secure method(s), including, but not limited to, private 
line(s) and virtual private network connection(s). This provision 
implements the connectivity requirements set forth in Section 4 of 
Appendix D to the CAT NMS Plan.
    Paragraph (c) permits Industry Members to use CAT Reporting Agents 
to fulfill their data reporting obligations related to the CAT. 
Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS 
Reporting Members to enter into agreements with Reporting Agents to 
fulfill the OATS obligations of the OATS Reporting Member. 
Specifically, Paragraph (c)(1) of proposed Rule 1708 states that any 
Industry Member may enter into an agreement with a CAT Reporting Agent 
pursuant to which the CAT Reporting Agent agrees to fulfill the 
obligations of such Industry Member under the proposed Consolidated 
Audit Trail Compliance Rule (Rules 1701-1712). Any such agreement must 
be evidenced in writing, which specifies the respective functions and 
responsibilities of each party to the agreement that are required to 
effect full compliance with the requirements of the proposed 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712). The 
Exchange notes that, currently, no standardized form agreement for CAT 
Reporting Agent arrangements has been adopted. Paragraph (c)(2) of 
proposed Rule 1708 requires that all written documents evidencing an 
agreement with a CAT Reporting Agent be maintained by each party to the 
agreement. Paragraph (c)(3) states that each Industry Member remains 
primarily responsible for compliance with the requirements of the 
proposed Consolidate Audit Trail Compliance Rule (Rules 1701-1712), 
notwithstanding the existence of an agreement described in paragraph 
(c) of proposed Rule 1708.
(ix) Development and Testing
    The Exchange proposes Rule 1709 (Consolidated Audit Trail 
Compliance Rule--Development and Testing) to address requirements for 
Industry Members related to CAT development and testing. Paragraph (a) 
of proposed Rule 1709 sets forth the testing requirements and deadlines 
for Industry Members to develop and commence reporting to the Central 
Repository. These requirements are set forth in Appendix C to the CAT 
NMS Plan.
    Paragraph (a)(1) sets forth the deadlines related to connectivity 
and acceptance testing. Industry Members (other than Small Industry 
Members) are required to begin connectivity and acceptance testing with 
the Central Repository no later than August 15, 2018, and Small 
Industry Members are required to begin connectivity and acceptance 
testing with the Central Repository no later than August 15, 2019.
    Paragraph (a)(2) sets forth the deadlines related to reporting 
Customer and Industry Member information. Paragraph (a)(2)(i) requires 
Industry Members (other than Small Industry Members) to begin reporting 
Customer and Industry Member information, as required by Rules 1704(a) 
and 1705, respectively, to the Central Repository for processing no 
later than October 15, 2018. Paragraph (a)(2)(ii) requires Small 
Industry Members to begin reporting Customer and Industry Member 
information, as required by Rules 1704(a) and 1705, respectively, to 
the Central Repository for processing no later than October 15, 2019.
    Paragraph (a)(3) sets forth the deadlines related to the submission 
of order data. Under paragraph (a)(3)(i), Industry Members (other than 
Small Industry Members) are permitted, but not required, to submit 
order data for testing purposes beginning no later than May 15, 2018. 
In addition, Industry Members (other than Small Industry

[[Page 9940]]

Members) are required to participate in the coordinated and structured 
testing of order submission, which will begin no later than August 15, 
2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, 
but not required, to submit order data for testing purposes beginning 
no later than May 15, 2019. In addition, Small Industry Members are 
required to participate in the coordinated and structured testing of 
order submission, which will begin no later than August 15, 2019.
    Paragraph (a)(4) states that Industry Members are permitted, but 
not required to, submit Quote Sent Times on Options Market Maker 
quotes, beginning no later than October 15, 2018
    Paragraph (b) of proposed Rule 1709 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\29\ Specifically, 
proposed Rule 1709 requires that each Industry Member participate in 
testing related to the Central Repository, including any industry-wide 
disaster recovery testing, pursuant to the schedule established 
pursuant to the CAT NMS Plan. The Exchange intends to announce to its 
Industry Members the schedule established pursuant to the CAT NMS Plan 
via Regulatory Circular.
---------------------------------------------------------------------------

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

(x) Recordkeeping
    Proposed Rule 1710 (Consolidated Audit Trail Compliance Rule--
Recordkeeping) sets forth the recordkeeping obligations related to the 
CAT for Industry Members. Proposed Rule 1710 requires each Industry 
Member to maintain and preserve records of the information required to 
be recorded under the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712) for the period of time and accessibility specified in 
SEC Rule 17a-4(b). The records required to be maintained and preserved 
under the proposed Consolidated Audit Trail Compliance Rule (Rules 
1701-1712) may be immediately produced or reproduced on ``micrographic 
media'' as defined in SEC Rule 17a-4(f)(1)(i) or by means of 
``electronic storage media'' as defined in SEC Rule 17a-4(f)(1)(ii) 
that meet the conditions set forth in SEC Rule 17a-4(f) and be 
maintained and preserved for the required time in that form. Proposed 
Rule 1710 is based on FINRA Rule 7440(a)(5), which sets forth the 
recordkeeping requirements related to OATS.
(xi) Timely, Accurate and Complete Data
    SEC Rule 613 and the CAT NMS Plan emphasize the importance of the 
timeliness, accuracy, completeness and integrity of the data submitted 
to the CAT.\30\ Accordingly, proposed Rule 1711 (Consolidated Audit 
Trail Compliance Rule--Timely, Accurate and Complete Data) implements 
this requirement with regard to Industry Members. Paragraph (a) of 
proposed Rule 1711 requires that Industry Members record and report 
data to the Central Repository as required by the proposed Consolidated 
Audit Trail Compliance Rule (Rules 1701-1712) in a manner that ensures 
the timeliness, accuracy, integrity and completeness of such data.
---------------------------------------------------------------------------

    \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 1711 requires Industry 
Members to accurately provide the LEIs in their records as required by 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712) 
and states that Industry Members may not knowingly submit inaccurate 
LEIs to the Central Repository. Paragraph (b) notes, however, that this 
requirement does not impose any additional due diligence obligations on 
Industry Members with regard to LEIs for CAT purposes. Accordingly, 
this provision does not impose any due diligence obligations beyond 
those that may exist today with respect to information associated with 
an LEI. Although Industry Members will not be required to perform 
additional due diligence with regard to the LEIs for CAT purposes, 
Industry Members will be required to accurately provide the LEIs in 
their records and may not knowingly submit inaccurate LEIs to the CAT. 
Paragraph (b) is consistent with the SEC's statements in the Approval 
Order for the CAT NMS Plan regarding an Industry Member's obligations 
regarding LEIs.\31\
---------------------------------------------------------------------------

    \31\ Approval Order at 84745.
---------------------------------------------------------------------------

    Paragraph (c) states that, if an Industry Member reports data to 
the Central Repository with errors such that its error percentage 
exceeds the maximum Error Rate established by the Operating Committee 
pursuant to the CAT NMS Plan, then such Industry Member would not be in 
compliance with the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712). As discussed above, the initial maximum Error Rate 
is 5%, although the Error Rate is expected to be reduced over time. The 
Exchange intends to announce to its Industry Members changes to the 
Error Rate established pursuant to the CAT NMS Plan via Regulatory 
Circular.
    Furthermore, paragraph (d) of proposed Rule 1711 addresses 
Compliance Thresholds related to reporting data to the CAT. Proposed 
Rule 1711 states that each Industry Member is required to meet a 
separate compliance threshold which will be an Industry Member-specific 
rate that may be used as the basis for further review or investigation 
into the Industry Member's performance with regard to the CAT (the 
``Compliance Thresholds''). Compliance Thresholds will compare an 
Industry Member's error rate to the aggregate Error Rate over a period 
of time to be defined by the Operating Committee. Compliance Thresholds 
will be set by the Operating Committee, and will be calculated at 
intervals to be set by the Operating Committee.\32\ Compliance 
Thresholds will include compliance with the data reporting and clock 
synchronization requirements. Proposed Rule 1711 states that an 
Industry Member's performance with respect to its Compliance Threshold 
will not signify, as a matter of law, that such Industry Member has 
violated the proposed Consolidated Audit Trail Compliance Rule (Rules 
1701-1712).
---------------------------------------------------------------------------

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

(xii) Compliance Dates
    Proposed Rule 1712 (Consolidated Audi [sic] Trail Compliance Rule--
Compliance Dates) sets forth the compliance dates for the various 
provisions of the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712). Paragraph (a) of proposed Rule 1712 states that 
paragraphs (b) and (c) of this Rule set forth the additional details 
with respect to the compliance date for the Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712). It further states that, unless 
otherwise noted, Rules 1701-1712 are fully effective and Members must 
comply with their terms.
    Paragraph (b) of proposed Rule 1712 establishes the compliance 
dates for the clock synchronization requirements as set forth in 
proposed Rule 1702. Paragraph (b)(1) states that each Industry Member 
shall comply with Rule 1702 with regard to Business Clocks that capture 
time in milliseconds commencing on or before March 15, 2017. Paragraph 
(b)(2) states that each Industry Member shall comply with Rule 1702 
with regard to Business Clocks that do not capture time in milliseconds 
commencing on or before

[[Page 9941]]

February 19, 2018. The compliance date set forth in paragraph (b)(1) 
reflects the exemptive relief requested by the Participants with regard 
to the clock synchronization requirements related to Business Clocks 
that do not capture time in milliseconds.
    Paragraph (c) of proposed Rule 1712 establishes the compliance 
dates for the data recording and reporting requirements for Industry 
Members. Paragraph (c)(1) requires each Industry Member (other than 
Small Industry Members) to record and report the Industry Member Data 
to the Central Repository by November 15, 2018. Paragraph (c)(2) 
requires that each Industry Member that is a Small Industry Member to 
record and report the Industry Member Data to the Central Repository by 
November 15, 2019. Such compliance dates are consistent with the 
compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and 
Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act \33\ which requires, 
among other things, that the Exchange's rules must be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest, and Section 6(b)(8) of the Act \34\ 
which requires that the Exchange's rules not impose any burden on 
competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(6) [sic].
    \34\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies the provisions of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of the purposes of the Act.'' \35\ To the extent that this 
proposal implements, interprets or clarifies the Plan and applies 
specific requirements to Industry Members, the Exchange believes that 
this proposal furthers the objectives of the Plan, as identified by the 
SEC, and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \35\ Approval Order at 84697.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
notes that the proposed rule change implements provisions of the CAT 
NMS Plan, and is designed to assist the Exchange in meeting its 
regulatory obligations pursuant to the Plan. The Exchange also notes 
that the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) implementing provisions of the CAT NMS Plan will apply equally to 
all firms that trade NMS Securities and OTC Equity Securities. In 
addition, all national securities exchanges and FINRA are proposing 
this Consolidated Audit Trail Compliance Rule (Rules 1701-1712). 
Therefore, this is not a competitive rule filing, and, therefore, it 
does not impose a burden on competition.

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

    Written comments were neither solicited nor received.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-PEARL-2017-04 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-PEARL-2017-04. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-PEARL-2017-04 and should be 
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02543 Filed 2-7-17; 8:45 am]
BILLING CODE 8011-01-P



                                                                               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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                                                    9930                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    thereby applicable to MIAX PEARL                        commencement of reporting to the CAT,                 definition is the same as the definition
                                                    Members.12                                              Industry Members would submit an                      of ‘‘Account Effective Date’’ set forth in
                                                                                                            initial set of Customer information to                Section 1.1 of the CAT NMS Plan,
                                                    (i) Definitions
                                                                                                            the Central Repository, including the                 provided, however, that specific dates
                                                       Proposed Rule 1701 (Consolidated                     Firm Designated ID, Customer                          have replaced the descriptions of those
                                                    Audit Trail Compliance Rule—                            Identifying Information and Customer                  dates set forth in Section 1.1 of the Plan.
                                                    Definitions) sets forth the definitions for             Account Information (which may                           Specifically, Paragraph (a)(1) defines
                                                    the terms used in the proposed Rules                    include, as applicable, the Customer’s                ‘‘Account Effective Date to mean, with
                                                    1701–1712. Each of the defined terms in                 name, address, date of birth, individual              regard to those circumstances in which
                                                    proposed Rule 1701 is discussed in                      tax payer identifier number (‘‘ITIN’’)/               an Industry Member has established a
                                                    detail in this section.                                 social security number (‘‘SSN’’),                     trading relationship with an institution
                                                    (A) Account Effective Date                              individual’s role in the account (e.g.,               but has not established an account with
                                                                                                            primary holder, joint holder, guardian,               that institution: (1) When the trading
                                                    (I) Customer Information Approach                       trustee, person with power of attorney)               relationship was established prior to
                                                       SEC Rule 613 requires that numerous                  and LEI and/or Larger [sic] Trader ID                 November 15, 2018, for Industry
                                                    data elements be reported to the CAT to                 (‘‘LTID’’). This process is referred to as            Members other than Small Industry
                                                    ensure there is sufficient information to               the customer definition process.                      Members, or prior to November 15,
                                                    create the lifecycle of an order, and                      In accordance with the Customer                    2019, for Small Industry Members,
                                                    provide regulators with sufficient detail               Information Approach, Industry                        either (a) the date the relationship
                                                    about an order to perform their                         Members would be required to report                   identifier was established within the
                                                    regulatory duties. Certain required                     only the Firm Designated ID for each                  Industry Member; (b) the date when
                                                    elements are intended to ensure that the                new order submitted to the Central                    trading began (i.e., the date the first
                                                    regulators can identify the Customers                   Repository, rather than the ‘‘Customer-               order was received) using the relevant
                                                    associated with orders. For example,                    ID’’ with individual order events.                    relationship identifier; or (c) if both
                                                    SEC Rule 613(c)(7)(i)(A) requires an                    Within the Central Repository, each                   dates are available, the earlier date will
                                                    Industry Member to report the                           Customer would be uniquely identified                 be used to the extent that the dates
                                                    ‘‘Customer-IDs’’ for each Customer for                  by identifiers or a combination of                    differ; or (2) when the trading
                                                    the original receipt or origination of an               identifiers such as ITIN/SSN, date of                 relationship was established on or after
                                                    order. ‘‘Customer-ID’’ is defined in SEC                birth, and as applicable, LEI and LTID.               November 15, 2018 for Industry
                                                    Rule 613(j)(5) to mean ‘‘with respect to                The Plan Processor would be required to               Members other than Small Industry
                                                    a customer, a code that uniquely and                    use these unique identifiers to map                   Members, or on or after November 15,
                                                    consistently identifies such customer for               orders to specific Customers across all               2019 for Small Industry Members, the
                                                    purposes of providing data to the                       Industry Members and Participants. To                 date the Industry Member established
                                                    Central Repository.’’ SEC Rule 613(c)(8)                ensure information identifying a                      the relationship identifier, which would
                                                    requires Industry Members to use the                    Customer is up to date, Industry                      be no later than the date the first order
                                                    same Customer-ID for each Customer.                     Members would be required to submit                   was received.
                                                    The SEC granted the Participants                        to the Central Repository daily and                      Paragraph (a)(2) of proposed Rule
                                                    exemptive relief to permit the use of an                periodic updates for reactivated                      1701 states that an ‘‘Account Effective
                                                    alternative approach to the requirement                 accounts, newly established accounts,                 Date’’ means, where an Industry
                                                    that an Industry Member report a                        and revised Firm Designated IDs or                    Member changes back office providers
                                                    Customer-ID for every Customer upon                     associated reportable Customer                        or clearing firms prior to November 15,
                                                    original receipt or origination.13 The                  information.                                          2018, for Industry Members other than
                                                    alternative approach is called the                                                                            Small Industry Members, or prior to
                                                                                                            (II) Definition of Account Effective Date             November 15, 2019, for Small Industry
                                                    Customer Information Approach.
                                                       Under the Customer Information                          In connection with the Customer                    Members, the date an account was
                                                    Approach, the CAT NMS Plan would                        Information Approach, Industry                        established at the relevant Industry
                                                    require each Industry Member to assign                  Members would be required to report                   Member, either directly or via transfer.
                                                    a unique Firm Designated ID to each                     Customer Account Information to the                      Paragraph (a)(3) states that an
                                                    Customer. As the Firm Designated ID,                    Central Repository. ‘‘Customer Account                ‘‘Account Effective Date’’ means, where
                                                    Industry Members would be permitted                     Information’’ is defined in SEC Rule                  an Industry Member acquires another
                                                    to use an account number or any other                   613(j)(4) to ‘‘include, but not be limited            Industry Member prior to November 15,
                                                    identifier defined by the firm, provided                to, account number, account type,                     2018, for Industry Members other than
                                                    each identifier is unique across the firm               customer type, date account opened,                   Small Industry Members, or prior to
                                                    for each business date (i.e., a single firm             and large trader identifier (if                       November 15, 2019, for Small Industry
                                                    may not have multiple separate                          applicable).’’ Therefore, when reporting              Members, the date an account was
                                                    customers with the same identifier on                   Customer Account Information, an                      established at the relevant Industry
                                                    any given date). Prior to their                         Industry Member is required to report                 Member, either directly or via transfer.
                                                                                                            the date an account was opened. The                      Paragraph (a)(4) states that ‘‘Account
                                                       12 The Exchange proposes to request an               Participants requested and received an                Effective Date’’ means, where there are
                                                    exemption from the rule filing requirements of          exemption to allow an ‘‘Account                       multiple dates associated with an
                                                    Section 19(b) of the Act for changes to MIAX            Effective Date’’ to be reported in lieu of            account established prior to November
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                                                    PEARL Chapter XVII to the extent such rules are         an account open date in certain limited
                                                    effected solely by virtue of a change to MIAX
                                                                                                                                                                  15, 2018, for Industry Members other
                                                    Options Chapter XVII.                                   circumstances. The definition of                      than Small Industry Members, or prior
                                                       13 See Securities Exchange Act Release No. 77265     ‘‘Account Effective Date’’ as set forth in            to November 15, 2019, for Small
                                                    (March 1, 2016), 81 FR 11856 (March 7, 2016)            Paragraph (a) of proposed Rule 1701                   Industry Members, the earliest available
                                                    (‘‘Exemption Order’’). See also Letter from             describes those limited circumstances in              date.
                                                    Participants to Brent J. Fields, Secretary,
                                                    Commission, dated January 30, 2015 at 12
                                                                                                            which an Industry Member may report                      Paragraph (a)(5) states that an
                                                    (‘‘Exemptive Request Letter’’); and CAT NMS Plan        an ‘‘Account Effective Date’’ rather than             ‘‘Account Effective Date’’ means, with
                                                    at Appendix C, Section A.1(a)(iii).                     the account open date. The proposed                   regard to Industry Member proprietary


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                  9931

                                                    accounts established prior to November                  to the account to which it was made,                  each Reportable Event in CAT.
                                                    15, 2018, for Industry Members other                    and not to a specific order.                          According to this Approach, Industry
                                                    than Small Industry Members, or prior                                                                         Members assign their own identifiers to
                                                                                                            (II) Definition of Allocation Report
                                                    to November 15, 2019, for Small                                                                               each order event. Within the Central
                                                    Industry Members: (1) The date                             To assist in implementing the                      Repository, the Plan Processor later
                                                    established for the account in the                      Allocation Report Approach, paragraph                 replaces the identifier provided by the
                                                    Industry Member or in a system of the                   (c) of proposed Rule 1701 defines an                  Industry Member for each Reportable
                                                    Industry Member or (2) the date when                    ‘‘Allocation Report.’’ Specifically, an               Event with a single identifier, called the
                                                    proprietary trading began in the account                ‘‘Allocation Report’’ means a report                  CAT Order-ID, for all order events
                                                    (i.e., the date on which the first orders               made to the Central Repository by an                  pertaining to the same order. This CAT
                                                    were submitted from the account). With                  Industry Member that identifies the                   Order-ID is used to links the Reportable
                                                    regard to paragraphs (a)(2)–(5), the                    Firm Designated ID for any account(s),                Events related to the same order.
                                                    Account Effective Date will be no later                 including subaccount(s), to which
                                                    than the date trading occurs at the                     executed shares are allocated and                     (II) Definition of CAT-Order-ID
                                                    Industry Member or in the Industry                      provides the security that has been
                                                    Member’s system.                                        allocated, the identifier of the firm                    To implement the Daisy Chain
                                                                                                            reporting the allocation, the price per               Approach, Paragraph (g) of proposed
                                                    (B) Active Account                                      share of shares allocated, the side of                Rule 1701 defines the term ‘‘CAT-Order-
                                                       Under the Customer Information                       shares allocated, the number of shares                ID.’’ The term ‘‘CAT-Order-ID’’ is
                                                    Approach, Industry Members are                          allocated to each account, and the time               defined to mean a unique order
                                                    required to report Customer Identifying                 of the allocation; provided, for the                  identifier or series of unique order
                                                    Information and Customer Account                        avoidance of doubt, any such Allocation               identifiers that allows the Central
                                                    Information for only those accounts that                Report shall not be required to be linked             Repository to efficiently and accurately
                                                    are active. This will alleviate the need                to particular orders or executions. This              link all Reportable Events for an order,
                                                    for Industry Members to update such                     is the same definition as set forth in                and all orders that result from the
                                                    information for non-active accounts, but                Section 1.1 of the CAT NMS Plan.                      aggregation or disaggregation of such
                                                    still ensure that the Central Repository                                                                      order. This is the same definition as set
                                                                                                            (D) Business Clock                                    forth in SEC Rule 613(j)(1), and Section
                                                    will collect audit trail data for Customer
                                                    accounts that have any Reportable                          To create the required audit trail,                1.1 of the CAT NMS Plan defines ‘‘CAT-
                                                    Events. Accordingly, paragraph (b) of                   Industry Members are required to record               Order-ID’’ by reference to SEC Rule
                                                    proposed Rule 1701 defines an ‘‘Active                  the date and time of various Reportable               613(j)(1).
                                                    Account’’ as an account that has had                    Events to the Central Repository.
                                                    activity in Eligible Securities within the              Industry Members will use ‘‘Business                  (H) CAT Reporting Agent
                                                    last six months. This is the same                       Clocks’’ to record such dates and times.                The CAT NMS Plan permits an
                                                    definition as set forth in Section 1.1 of               Accordingly, paragraph (d) of proposed                Industry Member to use a third party,
                                                    the CAT NMS Plan.                                       Rule 1701 defines the term ‘‘Business
                                                                                                                                                                  such as a vendor, to report the required
                                                                                                            Clock’’ as a clock used to record the date
                                                    (C) Allocation Report                                                                                         data to the Central Repository on behalf
                                                                                                            and time of any Reportable Event
                                                    (I) Allocation Report Approach                                                                                of the Industry Member.15 Such a third
                                                                                                            required to be reported under the
                                                                                                                                                                  party, referred to in proposed Rule 1701
                                                       SEC Rule 613(c)(7)(vi)(A) requires                   Consolidated Audit Trail Compliance
                                                                                                                                                                  as a ‘‘CAT Reporting Agent,’’ would be
                                                    each Industry Member to record and                      Rule (Rules 1701–1712). This is the
                                                                                                                                                                  one type of a Data Submitter, that is, a
                                                    report to the Central Repository ‘‘the                  same definition as set forth in Section
                                                                                                                                                                  party that submits data to the Central
                                                    account number for any subaccounts to                   1.1 of the CAT NMS Plan. This change
                                                                                                                                                                  Repository. Paragraph (h) of proposed
                                                    which the execution is allocated (in                    is intended to recognize that the
                                                                                                                                                                  Rule 1701 defines the term ‘‘CAT
                                                    whole or in part).’’ The SROs requested                 Industry Members’ obligations with
                                                                                                            regard to the CAT are set forth in the                Reporting Agent’’ to mean a Data
                                                    and received from the SEC exemptive                                                                           Submitter that is a third party that
                                                    relief from SEC Rule 613 for an                         Consolidated Audit Trail Compliance
                                                                                                            Rule (Rules 1701–1712).                               enters into an agreement with-an
                                                    alternative to this approach (‘‘Allocation                                                                    Industry Member pursuant to which the
                                                    Report Approach’’). The Allocation                      (E) CAT                                               CAT Reporting Agent agrees to fulfill
                                                    Report Approach would permit Industry                                                                         such Industry Member’s reporting
                                                    Members to record and report to the                       Paragraph (e) of proposed Rule 1701
                                                                                                            defines the term ‘‘CAT’’ to mean the                  obligations under the Consolidated
                                                    Central Repository an Allocation Report                                                                       Audit Trail Compliance Rule (proposed
                                                    that includes, among other things, the                  consolidated audit trail contemplated by
                                                                                                            SEC Rule 613. This is the same                        Rules 1701–1712).
                                                    Firm Designated ID for any account(s) to
                                                    which executed shares are allocated                     definition as set forth in Section 1.1 of               This definition is based on FINRA’s
                                                    when an execution is allocated in whole                 the CAT NMS Plan.                                     definition of a ‘‘Reporting Agent’’ as set
                                                    or part in lieu of requiring the reporting              (F) CAT NMS Plan                                      forth in FINRA’s rule related to its Order
                                                    of the account number for any                                                                                 Audit Trail System (‘‘OATS’’).
                                                                                                              Paragraph (f) of proposed Rule 1701                 Specifically, FINRA Rule 7410(n)
                                                    subaccount to which an execution is
                                                    allocated, as is required by SEC Rule                   defines the term ‘‘CAT NMS Plan’’ to                  defines a ‘‘Reporting Agent’’ as a third
                                                                                                            mean the National Market System Plan
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                                                    613.14 Under SEC Rule 613, regulators                                                                         party that enters into any agreement
                                                    would be able to link the subaccount to                 Governing the Consolidated Audit Trail,               with a member pursuant to which the
                                                    which an allocation was made to a                       as amended from time to time.                         Reporting Agent agrees to fulfill such
                                                    specific order. In contrast, under the                  (G) CAT-Order-ID                                      member’s obligations under Rule 7450.
                                                    Allocation Report Approach, regulators                                                                        The Reporting Agent for OATS fulfills a
                                                                                                            (I) Daisy Chain Approach                              similar role to the CAT Reporting Agent.
                                                    would only be able to link an allocation
                                                                                                               Under the CAT NMS Plan, the Daisy
                                                      14 Exemptive Request Letter at 26–27; and             Chain Approach is used to link and                      15 Appendix C, Section A.1(a) of the CAT NMS

                                                    Exemption Order.                                        reconstruct the complete lifecycle of                 Plan.



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                                                    9932                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    (I) Central Repository                                  customer definition process.                          Accordingly, the Exchange proposes to
                                                       Paragraph (i) of proposed Rule 1701                  Accordingly, the Exchange proposes to                 define the term ‘‘Customer Account
                                                    defines the term ‘‘Central Repository’’ to              define the term ‘‘Customer Account                    Information’’ to clarify what Customer
                                                    mean the repository responsible for the                 Information’’ to clarify what customer                information would need to be reported
                                                    receipt, consolidation, and retention of                information would need to be reported                 to the Central Repository.
                                                    all information reported to the CAT                     to the Central Repository.                               Paragraph (m) of proposed Rule 1701
                                                    pursuant to SEC Rule 613 and the CAT                       Paragraph (l) of proposed Rule 1701                defines the term ‘‘Customer Identifying
                                                    NMS Plan. This is the same definition                   defines the term ‘‘Customer Account                   Information’’ to mean information of
                                                    as set forth in Section 1.1 of the CAT                  Information’’ to include, in part,                    sufficient detail to identify a Customer.
                                                    NMS Plan, except the Exchange uses the                  account number, account type, customer                With respect to individuals, ‘‘Customer
                                                    phrase ‘‘CAT NMS Plan’’ in place of the                 type, date account opened, and large                  Identifying Information’’ includes, but is
                                                    phrase ‘‘this Agreement.’’                              trader identifier (if applicable).                    not limited to: Name, address, date of
                                                                                                            Proposed Rule 1701(l), however,                       birth, individual tax payer identification
                                                    (J) Compliance Threshold                                provides an alternative definition of                 number (‘‘ITIN’’)/social security number
                                                       Paragraph (j) of proposed Rule 1701                  ‘‘Customer Account Information’’ in two               (‘‘SSN’’), individual’s role in the
                                                    defines the term ‘‘Compliance                           limited circumstances. First, in those                account (e.g., primary holder, joint
                                                    Threshold’’ as having the meaning set                   circumstances in which an Industry                    holder, guardian, trustee, person with
                                                    forth in proposed Rule 1711(d). This                    Member has established a trading                      the power of attorney). With respect to
                                                    definition has the same substantive                     relationship with an institution but has              legal entities, ‘‘Customer Identifying
                                                    meaning as the definition set forth in                  not established an account with that                  Information’’ includes, but is not
                                                    Section 1.1 of the CAT NMS Plan. As                     institution, the Industry Member will:                limited to, name, address, Employer
                                                    discussed in detail below with regard to                (1) Provide the Account Effective Date                Identification Number (‘‘EIN’’)/Legal
                                                    proposed Rule 1711(d), each Industry                    in lieu of the ‘‘date account opened’’; (2)           Entity Identifier (‘‘LEI’’) or other
                                                    Member is required to meet a separate                   provide the relationship identifier in                comparable common entity identifier, if
                                                    compliance threshold which will be an                   lieu of the ‘‘account number’’; and (3)               applicable. The definition further notes
                                                    Industry Member-specific rate that may                  identify the ‘‘account type’’ as a                    that an Industry Member that has an LEI
                                                    be used as the basis for further review                 ‘‘relationship.’’ Second, in those                    for a Customer must submit the
                                                    or investigation into the Industry                      circumstances in which the relevant                   Customer’s LEI in addition to other
                                                    Member’s performance with regard to                     account was established prior to                      information of sufficient detail to
                                                    the CAT. This Industry Member-specific                  November 15, 2018, for Industry                       identify the Customer. This is the same
                                                    rate is the ‘‘Compliance Threshold.’’                   Members other than Small Industry                     definition as set forth in Section 1.1 of
                                                                                                            Members, or prior to November 15,                     the CAT NMS Plan.
                                                    (K) Customer                                            2019, for Small Industry Members, and
                                                                                                                                                                  (N) Data Submitter
                                                       Industry Members are required to                     no ‘‘date account opened’’ is available
                                                    submit to the Central Repository certain                for the account, the Industry Member                     The CAT NMS Plan uses the term
                                                    information related to their Customers,                 will provide the Account Effective Date               ‘‘Data Submitter’’ to refer to any person
                                                    including Customer Identifying                          in the following circumstances: (1)                   that reports data to the Central
                                                    Information and Customer Account                        Where an Industry Member changes                      Repository.16 Such Data Submitters may
                                                    Information, as well as data related to                 back office providers or clearing firms               include those entities that are required
                                                    their Customer’s Reportable Events.                     and the date account opened is changed                to submit data to the Central Repository
                                                    Accordingly, Paragraph (k) of proposed                  to the date the account was opened on                 (e.g., national securities exchanges,
                                                    Rule 1701 proposes to define the term                   the new back office/clearing firm                     national securities associations and
                                                    ‘‘Customer.’’ Specifically, the term                    system; (2) where an Industry Member                  Industry Members), third-parties that
                                                    ‘‘Customer’’ would be defined to mean:                  acquires another Industry Member and                  may submit data to the CAT on behalf
                                                    (1) The account holder(s) of the account                the date account opened is changed to                 of CAT Reporters (i.e., CAT Reporting
                                                    at an Industry Member originating the                   the date the account was opened on the                Agents), and outside parties that are not
                                                    order; and (2) any person from whom                     post-merger back office/clearing firm                 required to submit data to the CAT but
                                                    the Industry Member is authorized to                    system; (3) where there are multiple                  from which the CAT may receive data
                                                    accept trading instructions for such                    dates associated with an account in an                (e.g., securities information processors
                                                    account, if different from the account                  Industry Member’s system, and the                     (‘‘SIPs’’). To include this term in the
                                                    holder(s). This is the same definition as               parameters of each date are determined                proposed Consolidated Audit Trail
                                                    set forth in SEC Rule 613(j)(3), except                 by the individual Industry Member; and                Compliance Rule (Rules 1701–1712), the
                                                    the Exchange proposes to replace the                    (4) where the relevant account is an                  Exchange proposes to define ‘‘Data
                                                    references to a registered broker-dealer                Industry Member proprietary account.                  Submitter’’ in paragraph (n) of proposed
                                                    or broker-dealer with a reference to an                 The proposed definition is the same as                Rule 1701. Specifically, paragraph (n) of
                                                    Industry Member for consistency of                      the definition of ‘‘Customer Account                  proposed Rule 1701 defines a ‘‘Data
                                                    terms used in the proposed                              Information’’ set forth in Section 1.1 of             Submitter’’ to mean any person that
                                                    Consolidated Audit Trail Compliance                     the CAT NMS Plan, provided, however,                  reports data to the Central Repository,
                                                    Rule (Rules 1701–1712). The Exchange                    that specific dates have replaced the                 including national securities exchanges,
                                                    also notes that Section 1.1 of the CAT                  descriptions of those dates set forth in              national securities associations, broker-
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    NMS Plan defines ‘‘Customer’’ by                        Section 1.1 of the Plan.                              dealers, the SIPs for the CQS, CTA, UTP
                                                    reference to SEC Rule 613(j)(3).                                                                              and Plan for Reporting of Consolidated
                                                                                                            (M) Customer Identifying Information
                                                    (L) Customer Account Information                                                                              Options Last Sale Reports and
                                                                                                              As discussed above, under the                       Quotation Information (‘‘OPRA’’) Plans,
                                                      As discussed above, under the                         Customer Information Approach,                        and certain other vendors or third
                                                    Customer Information Approach,                          Industry Members are required to report               parties that may submit data to the
                                                    Industry Members are required to report                 Customer Identifying Information to the
                                                    Customer Account Information to the                     Central Repository as part of the                       16 Appendix C, Section A.1(a) of the CAT NMS

                                                    Central Repository as part of the                       customer definition process.                          Plan.



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                                                                                 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9933

                                                    Central Repository on behalf of Industry                  to minimize Error Rates; and (5)                      purposes of providing data to the
                                                    Members.                                                  identify, daily, all Industry Members                 Central Repository, where each such
                                                                                                              exceeding the maximum allowable Error                 identifier is unique among all identifiers
                                                    (O) Eligible Security
                                                                                                              Rate. To timely correct data-submitted                from any given Industry Member for
                                                      The reporting requirements of the                       errors to the Central Repository, the                 each business date. This is the same
                                                    proposed Consolidated Audit Trail                         CAT NMS Plan requires that the Central                definition as set forth in Section 1.1 of
                                                    Compliance Rule (Rules 1701–1712)                         Repository receive and process error                  the CAT NMS Plan. Industry Members
                                                    only apply to Reportable Events in                        corrections at all times. Further, the                would be permitted to use an account
                                                    Eligible Securities. Currently, an                        CAT NMS Plan requires that Industry                   number or any other identifier defined
                                                    Eligible Security includes NMS                            Members be able to submit error                       by the firm, provided each identifier is
                                                    Securities and OTC Equity Securities.                     corrections to the Central Repository                 unique across the firm for each business
                                                    Accordingly, paragraph (o) of proposed                    through a web-interface or via bulk                   date (i.e., a single firm may not have
                                                    Rule 1701 defines the term ‘‘Eligible                     uploads or file submissions, and that the             multiple separate customers with the
                                                    Security’’ to include: (1) All NMS                        Plan Processor, subject to the Operating              same identifier on any given date).
                                                    Securities; and (2) all OTC Equity                        Committee’s approval, support the bulk
                                                    Securities. The terms ‘‘NMS Securities’’                  replacement of records and the                        (R) Industry Member
                                                    and ‘‘OTC Equity Securities’’ are                         reprocessing of such records. The                       Paragraph (r) of proposed Rule 1701
                                                    defined, in turn, below. This is the same                 Participants, furthermore, require that               defines the term ‘‘Industry Member’’ to
                                                    definition as set forth in Section 1.1 of                 the Plan Processor identify Industry                  mean a member of a national securities
                                                    the CAT NMS Plan.                                         Member data submission errors based                   exchange or a member of a national
                                                    (P) Error Rate                                            on the Plan Processor’s validation                    securities association.’’ This is the same
                                                                                                              processes.23                                          definition as set forth in Section 1.1 of
                                                    (I) Maximum Error Rate                                                                                          the CAT NMS Plan.
                                                                                                              (II) Definition of Error Rate
                                                       Under the CAT NMS Plan, the
                                                                                                                 To implement the requirements of the               (S) Industry Member Data
                                                    Operating Committee sets the maximum
                                                    Error Rate that the Central Repository                    CAT NMS Plan related to the Error Rate,                 Paragraph (s) of proposed Rule 1701
                                                    would tolerate from an Industry                           the Exchange proposes to define the                   states that the term ‘‘Industry Member
                                                    Member reporting data to the Central                      term ‘‘Error Rate’’ in proposed Rule                  Data’’ has the meaning set forth in Rule
                                                    Repository.17 The Operating Committee                     1701. Paragraph (p) of proposed Rule                  1703(a)(2). This definition has the same
                                                    reviews and resets the maximum Error                      1701 defines the term ‘‘Error Rate’’ to               substantive meaning as the definition
                                                    Rate, at least annually.18 If an Industry                 mean the percentage of Reportable                     set forth in Section 1.1 of the CAT NMS
                                                    Member reports CAT data to the Central                    Events collected by the Central                       Plan. The definition of ‘‘Industry
                                                    Repository with errors such that their                    Repository in which the data reported                 Member Data’’ is discussed more fully
                                                    error percentage exceeds the maximum                      does not fully and accurately reflect the             in the discussion below regarding
                                                    Error Rate, then such Industry Member                     order event that occurred in the market.              proposed Rule 1703(a)(2).
                                                    would not be in compliance with the                       This is the same definition as set forth
                                                                                                              in SEC Rule 613(j)(6), and Section 1.1 of             (T) Initial Plan Processor
                                                    CAT NMS Plan or Rule 613.19 As such,
                                                    the Exchange or the SEC ‘‘[sic] may take                  the CAT NMS Plan defines ‘‘Error Rate’’                 Paragraph (t) of proposed Rule 1701
                                                    appropriate action against an Industry                    by reference to SEC Rule 613(j)(6).                   defines the term ‘‘Initial Plan Processor’’
                                                    Member for failing to comply with its                                                                           to mean the first Plan Processor selected
                                                                                                              (Q) Firm Designated ID
                                                    CAT reporting obligations.20 The CAT                                                                            by the Operating Committee in
                                                    NMS Plan sets the initial Error Rate at                      As discussed above, under the                      accordance with SEC Rule 613, Section
                                                    5%.21 It is anticipated that the                          Customer Information Approach, the                    6.1 of the CAT NMS Plan and the
                                                    maximum Error Rate will be reviewed                       CAT NMS Plan would require each                       National Market System Plan Governing
                                                    and lowered by the Operating                              Industry Member to assign a unique                    the Process for Selecting a Plan
                                                    Committee once Industry Members                           Firm Designated ID to each Customer.                  Processor and Developing a Plan for the
                                                    begin to report to the Central                            Industry Members would be permitted                   Consolidated Audit Trail. This is the
                                                    Repository.22                                             to use as the Firm Designated ID an                   same definition as set forth in Section
                                                       The CAT NMS Plan requires the Plan                     account number or any other identifier                1.1 of the CAT NMS Plan, although the
                                                    Processor to: (1) Measure and report                      defined by the firm, provided each                    proposed definition uses the full name
                                                    errors every business day; (2) provide                    identifier is unique across the firm for              of the ‘‘Selection Plan.’’
                                                    Industry Members daily statistics and                     each business date (i.e., a single firm
                                                                                                              may not have multiple separate                        (U) Listed Option or Option
                                                    error reports as they become available,
                                                    including a description of such errors;                   customers with the same identifier on                    The CAT NMS Plan and this proposed
                                                    (3) provide monthly reports to Industry                   any given date). Industry Members                     Consolidated Audit Trail Compliance
                                                    Members that detail an Industry                           would be required to report only the                  Rule (Rules 1701–1712) applies to
                                                    Member’s performance and comparison                       Firm Designated ID for each new order                 Eligible Securities, which includes NMS
                                                    statistics; (4) define educational and                    submitted to the Central Repository,                  Securities, which, in turn, includes
                                                    support programs for Industry Members                     rather than the ‘‘Customer-ID’’ with                  Listed Options. Certain requirements of
                                                                                                              individual order events. Accordingly,                 the proposed Consolidated Audit Trail
                                                                                                              the Exchange proposes to define the                   Compliance Rule (Rules 1701–1712)
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                                                      17 Section   6.5(d)(i) of the CAT NMS Plan.
                                                      18 Appendix     C, Section A.3(b) of the CAT NMS        term ‘‘Firm Designated ID’’ in proposed               apply specifically to Listed Options.
                                                    Plan.                                                     Rule 1701. Specifically, paragraph (q) of             Accordingly, Paragraph (u) of proposed
                                                      19 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                              proposed Rule 1701 defines the term                   Rule 1701 defines the term ‘‘Listed
                                                    Plan; Rule 613(g)–(h).                                                                                          Option’’ or ‘‘Option.’’ Specifically,
                                                      20 Appendix C, Section A.3(b) of the CAT NMS
                                                                                                              ‘‘Firm Designated ID’’ to mean a unique
                                                    Plan.                                                     identifier for each trading account                   paragraph (u) of proposed Rule 1701
                                                      21 Section 6.5(d)(i) of the CAT NMS Plan.               designated by Industry Members for                    states that the term ‘‘Listed Option’’ or
                                                      22 Appendix C, Section A.3(b) of the CAT NMS                                                                  ‘‘Option’’ has the meaning set forth in
                                                    Plan.                                                       23 Approval   Order at 84718.                       SEC Rule 600(b)(35) of Regulation NMS.


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                                                    9934                        Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    SEC Rule 600(b)(35), in turn, defines a                  definition as set forth in Section 1.1 of             (Z) Operating Committee
                                                    listed option as ‘‘any option traded on                  the CAT NMS Plan.                                       Paragraph (z) of proposed Rule 1701
                                                    a registered national securities exchange                                                                      defines the term ‘‘Operating Committee’’
                                                    or automated facility of a national                      (W) Material Terms of the Order
                                                                                                                                                                   to mean the governing body of the CAT
                                                    securities association.’’ The Exchange                      Proposed Rule 1703 requires Industry               NMS, LLC designated as such and
                                                    notes that the proposed definition of                    Members to record and report to the                   described in Article IV of the CAT NMS
                                                    ‘‘Listed Option’’ is the same definition                 Central Repository Material Terms of                  Plan. This is the same definition as set
                                                    as the definition set forth in Section 1.1               the Order with certain Reportable                     forth in Section 1.1 of the CAT NMS
                                                    of the CAT NMS Plan.                                     Events (e.g., for the original receipt or             Plan, except the Exchange proposes to
                                                    (V) Manual Order Event                                   origination of an order, for the routing              use the phrase ‘‘CAT NMS LLC’’ in
                                                                                                             of an order). Accordingly, the Exchange               place of the phrase ‘‘the Company’’ for
                                                    (I) Manual Order Event Approach                          proposes to define the term ‘‘Material                clarity.
                                                      The CAT NMS Plan sets forth clock                      Terms of the Order’’ in proposed Rule
                                                                                                                                                                   (AA) Options Market Maker
                                                    synchronization and timestamp                            1701. Specifically, paragraph (w) of
                                                                                                             proposed Rule 1701 defines the term                   (I) Options Market Maker Quote
                                                    requirements for Industry Members                                                                              Exemption
                                                    which reflect exemptions for Manual                      ‘‘Material Terms of the Order’’ to
                                                    Order Events granted by the                              include: The NMS Security or OTC                         SEC Rule 613(c)(7) provides that the
                                                    Commission.24 Specifically, the Plan                     Equity Security symbol; security type;                CAT NMS Plan must require each
                                                    requires Industry Members to record                      price (if applicable); size (displayed and            Industry Member to record and
                                                    and report the time of each Reportable                   non-displayed); side (buy/sell); order                electronically report to the Central
                                                    Event using timestamps reflecting                        type; if a sell order, whether the order              Repository details for each order and
                                                    current industry standards (which must                   is long, short, short exempt; open/close              each reportable event, including the
                                                    be at least to the millisecond) or, if an                indicator (except on transactions in                  routing and modification or cancellation
                                                    Industry Member’s order handling or                      equities); time in force (if applicable); if          of an order. SEC Rule 613(j)(8) defines
                                                    execution system uses timestamps in                      the order is for a Listed Option, option              ‘‘order’’ to include ‘‘any bid or offer.’’
                                                    increments finer than milliseconds,                      type (put/call), option symbol or root                Therefore, under SEC Rule 613, the
                                                    such finer increments, when reporting                    symbol, underlying symbol, strike price,              details for each Options Market Maker
                                                    to the Central Repository. For Manual                    expiration date, and open/close (except               quotation must be reported to the
                                                    Order Events, however, the Plan                          on market maker quotations); and any                  Central Repository by both the Options
                                                    provides that such events must be                        special handling instructions. This is                Market Maker and the options exchange
                                                    recorded in increments up to and                         the same definition as set forth in                   to which it routes its quote.
                                                    including one second, provided that                      Section 1.1 of the CAT NMS Plan.                         The SROs, however, requested and
                                                    Industry Members record and report the                                                                         received exemptive relief from SEC Rule
                                                                                                             (X) NMS Security                                      613 so that the CAT NMS Plan may
                                                    time the event is captured electronically
                                                    in an order handling and execution                          NMS Securities are one of the types                permit Options Market Maker quotes to
                                                    system (‘‘Electronic Capture Time’’) in                  of Eligible Securities for the CAT.                   be reported to the Central Repository by
                                                    milliseconds. In addition, Industry                      Therefore, the Exchange proposes to                   the relevant options exchange in lieu of
                                                    Members are required to synchronize                      define the term ‘‘NMS Security’’ in                   requiring that such reporting be done by
                                                    their respective Business Clocks (other                  proposed Rule 1701. Specifically,                     both the options exchange and the
                                                    than such Business Clocks used solely                    paragraph (x) of proposed Rule 1701                   Options Market Maker, as is required by
                                                    for Manual Order Events) at a minimum                    defines the term ‘‘NMS Security’’ to                  SEC Rule 613.25 In accordance with the
                                                    to within 50 milliseconds of the time                    mean any security or class of securities              exemptive relief, Options Market
                                                    maintained by the National Institute of                  for which transaction reports are                     Makers would be required to report to
                                                    Standards and Technology (‘‘NIST’’),                     collected, processed, and made                        the options exchange the time at which
                                                    and maintain such a synchronization.                     available pursuant to an effective                    a quote in a Listed Option is sent to the
                                                    Each Industry Member is required to                      transaction reporting plan, or an                     options exchange. Such time
                                                    synchronize their Business Clocks used                   effective national market system plan                 information also will be reported to the
                                                    solely for Manual Order Events,                          for reporting transactions in Listed                  Central Repository by the options
                                                    however, at a minimum to within one                      Options. This is the same definition as               exchange in lieu of reporting by the
                                                    second of the time maintained by the                     set forth in Section 1.1 of the CAT NMS               Options Market Maker.
                                                    NIST.                                                    Plan.                                                 (II) Definition of Options Market Maker
                                                    (II) Definition of Manual Order Event                    (Y) NMS Stock                                            To implement the requirements
                                                                                                                                                                   related to Option Market Maker quotes,
                                                      In order to clarify what a Manual                        Under the CAT NMS Plan, the                         the Exchange proposes to define the
                                                    Order Event is for clock synchronization                 Operating Committee may establish                     term ‘‘Options Market Maker’’ in
                                                    and time stamp purposes, the Exchange                    different Trading Days for NMS Stocks                 proposed Rule 1701. Specifically,
                                                    proposes to define the term ‘‘Manual                     (as defined in SEC Rule 600(b)(47)),                  paragraph (aa) of proposed Rule 1701
                                                    Order Event’’ in proposed Rule 1701.                     Listed Options, OTC Equity Securities,                defines the term ‘‘Options Market
                                                    Specifically, paragraph (v) of proposed                  and any other securities that are
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                                                                                                                                                                   Maker’’ to mean a broker-dealer
                                                    Rule 1701 defines the term ‘‘Manual                      included as Eligible Securities from                  registered with an exchange for the
                                                    Order Event’’ to mean a non-electronic                   time to time. Accordingly, the Exchange               purpose of making markets in options
                                                    communication of order-related                           proposes to define the term ‘‘NMS                     contracts traded on the exchange. This
                                                    information for which Industry                           Stock’’ in Paragraph (y) of proposed                  is the same definition as set forth in
                                                    Members must record and report the                       Rule 1701 to mean any NMS Security                    Section 1.1 of the CAT NMS Plan.
                                                    time of the event. This is the same                      other than an option. This is the same
                                                                                                             definition as set forth in SEC Rule                     25 See Exemptive Request Letter at 2, and
                                                      24 Exemption   Order.                                  600(b)(47) of Regulation NMS.                         Exemption Order.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                        9935

                                                    (BB) Order                                              (FF) Plan Processor                                   Exchange Act. This is the same
                                                                                                              Paragraph (ff) of proposed Rule 1701                definition as set forth in Section 1.1 of
                                                       The proposed Consolidated Audit                                                                            the CAT NMS Plan.
                                                    Trail Compliance Rule (Rules 1701–                      defines the term ‘‘Plan Processor’’ to
                                                                                                            mean the Initial Plan Processor or any                (KK) SRO-Assigned Market Participant
                                                    1712) requires each Industry Member to
                                                                                                            other Person selected by the Operating                Identifier
                                                    record and electronically report to the
                                                                                                            Committee pursuant to SEC Rule 613
                                                    Central Repository certain details for                                                                        (I) Existing Identifier Approach
                                                                                                            and Sections 4.3(b)(i) and 6.1 of the
                                                    each order. Accordingly, the Exchange                                                                            The SROs requested and received
                                                                                                            CAT NMS Plan, and with regard to the
                                                    proposes to define the term ‘‘Order’’ in                Initial Plan Processor, the National                  exemptive relief from SEC Rule 613 so
                                                    proposed Rule 1701. Specifically,                       Market System Plan Governing the                      that the CAT NMS Plan may permit the
                                                    paragraph (bb) of proposed Rule 1701                    Process for Selecting a Plan Processor                Existing Identifier Approach, which
                                                    defines the term ‘‘Order’’, with respect                and Developing a Plan for the                         would allow an Industry Member to
                                                    to Eligible Securities, to include: (1)                 Consolidated Audit Trail, to perform the              report an existing SRO-Assigned Market
                                                    Any order received by an Industry                       CAT processing functions required by                  Participant Identifier in lieu of requiring
                                                    Member from any person; (2) any order                   SEC Rule 613 and set forth in the CAT                 the reporting of a universal CAT-
                                                    originated by an Industry Member; or (3)                NMS Plan.                                             Reporter-ID (that is, a code that
                                                    any bid or offer. This is the same                                                                            uniquely and consistently identifies an
                                                    definition as set forth in SEC Rule                     (GG) Received Industry Member Data                    Industry Member for purposes of
                                                    613(j)(8), except the Exchange proposes                    Paragraph (gg) of proposed Rule 1701               providing data to the Central
                                                    to replace the phrase ‘‘member of a                     states that the term ‘‘Received Industry              Repository).26 The CAT NMS Plan
                                                    national securities exchange or national                Member Data’’ has the meaning set forth               reflects the ‘‘Existing Identifier
                                                    securities association’’ with the term                  in Rule 1703(a)(2). This definition has               Approach’’ for purposes of identifying
                                                    ‘‘Industry Member.’’ The Exchange                       the same substantive meaning as the                   each Industry Member associated with
                                                    notes that Section 1.1 of the CAT NMS                   definition set forth in Section 1.1 of the            an order or Reportable Event. Under the
                                                    Plan defines ‘‘Order’’ by reference to                  CAT NMS Plan. The definition of                       Existing Identifier Approach, Industry
                                                    SEC Rule 613(j)(8).                                     ‘‘Received Industry Member Data’’ is                  Members are required to record and
                                                                                                            discussed more fully in the discussion                report to the Central Repository an SRO-
                                                    (CC) OTC Equity Security                                below regarding proposed Rule                         Assigned Market Participant Identifier
                                                      OTC Equity Securities are one of the                  1703(a)(2).                                           for orders and certain Reportable Events
                                                    types of Eligible Securities for the CAT.               (HH) Recorded Industry Member Data                    to be used by the Central Repository to
                                                    Therefore, the Exchange proposes to                                                                           assign a unique CAT-Reporter-ID to
                                                                                                               Paragraph (hh) of proposed Rule 1701               identify Industry Members. For the
                                                    define the term ‘‘OTC Equity Security’’                 states that the term ‘‘Recorded Industry
                                                    in proposed Rule 1701. Specifically,                                                                          Central Repository to link the SRO-
                                                                                                            Member Data’’ has the meaning set forth               Assigned Market Participant Identifier
                                                    paragraph (cc) of proposed Rule 1701                    in Rule 1703(a)(1). This definition has               to the CAT-Reporter-ID, each SRO will
                                                    defines the term ‘‘OTC Equity Security’’                the same substantive meaning as the                   submit to the Central Repository, on a
                                                    to mean any equity security, other than                 definition set forth in in Section 1.1 of             daily basis, all SRO-Assigned Market
                                                    an NMS Security, subject to prompt last                 the CAT NMS Plan. The definition of                   Participant Identifiers used by its
                                                    sale reporting rules of a registered                    ‘‘Recorded Industry Member Data’’ is                  Industry Members, as well as
                                                    national securities association and                     discussed more fully in the discussion                information to identify each such
                                                    reported to one of such association’s                   below regarding proposed Rule                         Industry Member, including CRD
                                                    equity trade reporting facilities. This is              1703(a)(1).                                           number and LEI, if the SRO has
                                                    the same definition as set forth in                                                                           collected such LEI of the Industry
                                                    Section 1.1 of the CAT NMS Plan.                        (II) Reportable Event
                                                                                                                                                                  Member. Additionally, each Industry
                                                                                                               The proposed Consolidated Audit                    Member is required to submit to the
                                                    (DD) Participant                                        Trail Compliance Rule (Rules 1701–                    Central Repository the CRD number of
                                                      Paragraph (dd) of proposed Rule 1701                  1712) requires each Industry Member to                the Industry Member as well as the LEI
                                                    defines the term ‘‘Participant’’ to mean                record and electronically report to the               of the Industry Member (if the Industry
                                                    each Person identified as such in                       Central Repository certain details for                Member has an LEI). The Plan Processor
                                                    Exhibit A of the CAT NMS Plan, as                       each Reportable Event. To clarify these               will use this information to assign a
                                                    amended, in such Person’s capacity as                   requirements, the Exchange proposes to                CAT-Reporter-ID to each Industry
                                                    a Participant in CAT NMS, LLC. This is                  define the term ‘‘Reportable Event’’ in               Member for internal use within the
                                                    the same definition in substance as set                 proposed Rule 1701. Specifically,                     Central Repository.
                                                    forth in Section 1.1 of the CAT NMS                     paragraph (ii) of proposed Rule 1701
                                                                                                            states that the term ‘‘Reportable Event’’             (II) Definition of SRO-Assigned Market
                                                    Plan.                                                                                                         Participant Identifier
                                                                                                            includes, but is not limited to, the
                                                    (EE) Person                                             original receipt or origination,                         To implement the Existing Identifier
                                                                                                            modification, cancellation, routing,                  Approach, the Exchange proposes to
                                                      Paragraph (ee) of proposed Rule 1701                  execution (in whole or in part) and                   define the term ‘‘SRO-Assigned Market
                                                    defines the term ‘‘Person’’ to mean any                 allocation of an order, and receipt of a              Participant’’ in proposed Rule 1701.
                                                    individual, partnership, limited liability
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                                                                                                            routed order. This is the same definition             Specifically, paragraph (kk) of proposed
                                                    company, corporation, joint venture,                    as set forth in Section 1.1 of the CAT                Rule 1701 defines the term ‘‘SRO-
                                                    trust, business trust, cooperative or                   NMS Plan.                                             Assigned Market Participant Identifier’’
                                                    association and any heirs, executors,                                                                         to mean an identifier assigned to an
                                                    administrators, legal representatives,                  (JJ) SRO
                                                                                                                                                                  Industry Member by an SRO or
                                                    successors and assigns of such Person                      Paragraph (jj) of proposed Rule 1701               identifier used by a Participant. This is
                                                    where the context so permits. This is the               defines the term ‘‘SRO’’ to mean any
                                                    same definition as set forth in Section                 self-regulatory organization within the                 26 See Exemptive Request Letter at 19, and

                                                    1.1 of the CAT NMS Plan.                                meaning of Section 3(a)(26) of the                    Exemption Order.



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                                                    9936                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    the same definition as set forth in                     time maintained by NIST, consistent                     Business Clocks must be checked
                                                    Section 1.1 of the CAT NMS Plan. For                    with industry standards. To comply                      against the NIST atomic clock and re-
                                                    example, an Industry Member would be                    with this provision, Section 6.8 of the                 synchronized, as necessary, throughout
                                                    permitted to use any existing SRO-                      Plan sets forth the clock                               the day. This description of the required
                                                    Assigned Market Participant Identifier                  synchronization requirements for                        frequency of clock synchronization is
                                                    (e.g., FINRA MPID, NASDAQ MPID,                         Industry Members.27 To implement                        the same as set forth in paragraph (c) of
                                                    NYSE Mnemonic, CBOE User Acronym                        these provisions with regard to its                     FINRA Rule 4590 (Synchronization of
                                                    and CHX Acronym) when reporting                         Industry Members, the Exchange                          Member Business Clocks).
                                                    order information to the Central                        proposes Rule 1702 (Consolidated Audit                     Paragraph (b) of proposed Rule 1702
                                                    Repository.                                             Trail Compliance Rule- Clock                            sets forth documentation requirements
                                                                                                            Synchronization) to require its Industry                with regard to clock synchronization.
                                                    (LL) Small Industry Member                                                                                      Specifically, paragraph (b) requires
                                                                                                            Members to comply with the clock
                                                       The requirements of the proposed                     synchronization requirements of the                     Industry Members to document and
                                                    Consolidated Audit Trail Compliance                     Plan.                                                   maintain their synchronization
                                                    Rule (Rules 1701–1712) differ to some                      Paragraph (a) of proposed Rule 1702                  procedures for their Business Clocks.
                                                    extent for Small Industry Members                       sets forth the manner in which Industry                 The proposed Rule requires Industry
                                                    versus Industry Members other than                      Members must synchronize their                          Members to keep a log of the times
                                                    Small Industry Members. For example,                    Business Clocks. Paragraph (a)(1) of                    when they synchronize their Business
                                                    the compliance dates for reporting data                 proposed Rule 1702 requires each                        Clocks and the results of the
                                                    to the CAT are different for Small                      Industry Member to synchronize its                      synchronization process. This log is
                                                    Industry Members versus other Industry                  Business Clocks, other than such                        required to include notice of any time
                                                    Members. Accordingly, to clarify the                    Business Clocks used solely for Manual                  a Business Clock drifts more than the
                                                    requirements that apply to which                        Order Events or used solely for the time                applicable tolerance specified in
                                                    Industry Members, the Exchange                          of allocation on Allocation Reports, at a               paragraph (a) of the proposed Rule.
                                                    proposes to define the term ‘‘Small                     minimum to within a fifty (50)                          Such logs must include results for a
                                                    Industry Member’’ in proposed Rule                      millisecond tolerance of the time                       period of not less than five years ending
                                                    1701. Specifically, paragraph (ll) of                   maintained by the NIST atomic clock,                    on the then current date, or for the
                                                    proposed Rule 1701 defines the term                     and maintain such synchronization.                      entire period for which the Industry
                                                    ‘‘Small Industry Member’’ to mean an                    This is the same requirement as set forth               Member has been required to comply
                                                    Industry Member that qualifies as a                     in Section 6.8(a)(ii)(A) of the CAT NMS                 with this Rule if less than five years.
                                                    small broker-dealer as defined in Rule                  Plan.                                                   These documentation requirements are
                                                    0–10(c) under the Securities Exchange                      Paragraph (a)(2) of proposed Rule                    the same as those set forth in the
                                                    Act of 1934, as amended. This is the                    1702 requires each Industry Member to                   ‘‘Sequencing Orders and Clock
                                                    same in substance as the definition of                  synchronize (1) its Business Clocks used                Synchronization’’ section of Appendix
                                                    ‘‘Small Industry Member’’ as set forth in               solely for Manual Order Events and (2)                  C of the CAT NMS Plan. Moreover,
                                                    Section 1.1 of the CAT NMS Plan.                        its Business Clocks used solely for the                 these documentation requirements
                                                    Specifically, Section 1.1 of the CAT                    time of allocation on Allocation Reports                regarding clock synchronization are
                                                    NMS Plan defines a ‘‘Small Industry                     at a minimum to within a one second                     comparable to those set forth in
                                                    Member’’ as ‘‘an Industry Member that                   tolerance of the time maintained by the                 Supplementary Material .01 of FINRA
                                                    qualifies as a small broker-dealer as                   NIST atomic clock, and maintain such                    Rule 4590 (Synchronization of Member
                                                    defined in SEC Rule 613.’’ The                          synchronization. This is the same                       Business Clocks).
                                                    definition of a small broker-dealer under               requirement as set forth in Section                        Paragraph (c) of proposed Rule 1702
                                                    SEC Rule 613, in turn, is a small broker-               6.8(a)(iii) and (iv) of the CAT NMS Plan.               sets forth certification requirements
                                                    dealer as defined in SEC Rule 0–10(c).                     Paragraph (a)(3) of proposed Rule                    with regard to clock synchronization.
                                                                                                            1702 clarifies that the tolerance                       Specifically, paragraph (c) of proposed
                                                    (MM) Trading Day                                                                                                Rule 1702 requires each Industry
                                                                                                            described in paragraphs (a)(1) and (2) of
                                                       Proposed Rule 1703(b) establishes the                the proposed Rule 1702 includes all of                  Member to certify to the Exchange that
                                                    deadlines for reporting certain data to                 the following: (1) The time difference                  its Business Clocks satisfy the
                                                    the Central Repository using the term                   between the NIST atomic clock and the                   synchronization requirements set forth
                                                    ‘‘Trading Day.’’ Accordingly, the                       Industry Member’s Business Clock; (2)                   in paragraph (a) of proposed Rule 1702
                                                    Exchange proposes to define the term                    the transmission delay from the source;                 periodically in accordance with the
                                                    ‘‘Trading Day’’ in proposed Rule 1701.                  and (3) the amount of drift of the                      certification schedule established by the
                                                    Specifically, Paragraph (mm) of                         Industry Member’s Business Clock. This                  Operating Committee pursuant to the
                                                    proposed Rule 1701 states that the term                 description of the clock synchronization                CAT NMS Plan. This requirement is the
                                                    ‘‘Trading Day’’ shall have the meaning                  tolerance is the same as set forth in                   same requirement as set forth in Section
                                                    as is determined by the Operating                       paragraph (b) of FINRA Rule 4590                        6.8(a)(ii)(B), (iii) and (iv) of the CAT
                                                    Committee. For the avoidance of doubt,                  (Synchronization of Member Business                     NMS Plan. The Exchange intends to
                                                    the Operating Committee may establish                   Clocks).                                                announce to its Industry Members the
                                                    different Trading Days for NMS Stocks                      Paragraph (a)(4) of proposed Rule                    certification schedule established by the
                                                    (as defined in SEC Rule 600(b)(47),                     1702 requires Industry Members to                       Operating Committee via Regulatory
                                                                                                                                                                    Circular.
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                                                    Listed Options, OTC Equity Securities,                  synchronize their Business Clocks every
                                                    and any other securities that are                                                                                  Paragraph (d) of proposed Rule 1702
                                                                                                            business day before market open to
                                                    included as Eligible Securities from                                                                            establishes reporting requirements with
                                                                                                            ensure that timestamps for Reportable
                                                    time to time.                                                                                                   regard to clock synchronization.
                                                                                                            Events are accurate. In addition, to
                                                                                                                                                                    Paragraph (d) of proposed Rule 1702
                                                    (ii) Clock Synchronization                              maintain clock synchronization,
                                                                                                                                                                    requires Industry Members to report to
                                                       SEC Rule 613(d)(1) under Regulation                    27 In addition, Section 6.7(a)(ii) of the Plan sets   the Plan Processor and SRO violations
                                                    NMS requires Industry Members to                        forth the timeline for CAT Reporters to comply with     of paragraph (a) of this Rule pursuant to
                                                    synchronize their Business Clocks to the                the clock synchronization requirements.                 the thresholds set by the Operating


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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                             9937

                                                    Committee pursuant to the CAT NMS                       date of order receipt or origination; (5)             report to the Central Repository the
                                                    Plan. This requirement is the same                      time of order receipt or origination                  following, as applicable (‘‘Received
                                                    requirement as set forth in Section                     (using timestamps pursuant to proposed                Industry Member Data’’ and collectively
                                                    6.8(a)(ii)(C), (iii) and (iv) of the CAT                Rule 1706); and (6) Material Terms of                 with the information referred to in Rule
                                                    NMS Plan. The Exchange intends to                       the Order;                                            1703(a)(1) ‘‘Industry Member Data’’) in
                                                    announce to its Industry Members the                       • for the routing of an order: (1) CAT-            the manner prescribed by the Operating
                                                    relevant thresholds established by the                  Order-ID; (2) date on which the order is              Committee pursuant to the CAT NMS
                                                    Operating Committee via Regulatory                      routed; (3) time at which the order is                Plan:
                                                    Circular.                                               routed (using timestamps pursuant to                     • If the order is executed, in whole or
                                                                                                            proposed Rule 1706); (4) SRO-Assigned                 in part: (1) An Allocation Report; (2)
                                                    (iii) Industry Member Data Reporting                    Market Participant Identifier of the                  SRO-Assigned Market Participant
                                                       SEC Rule 613(c) under Regulation                     Industry Member routing the order; (5)                Identifier of the clearing broker or prime
                                                    NMS requires the CAT NMS Plan to set                    SRO-Assigned Market Participant                       broker, if applicable; and (3) CAT-
                                                    forth certain provisions requiring                      Identifier of the Industry Member or                  Order-ID of any contra-side order(s);
                                                    Industry Members to record and report                   Participant to which the order is being                  • if the trade is cancelled, a cancelled
                                                    data to the CAT. To comply with this                    routed; (6) if routed internally at the               trade indicator; and
                                                    provision, Section 6.4 of the CAT NMS                   Industry Member, the identity and                        • for original receipt or origination of
                                                    Plan sets forth the data reporting                      nature of the department or desk to                   an order, the Firm Designated ID for the
                                                    requirements for Industry Members. To                   which the order is routed; and (7)                    relevant Customer, and in accordance
                                                    implement these provisions with regard                  Material Terms of the Order;                          with proposed Rule 1704, Customer
                                                    to its Industry Members, the Exchange                      • for the receipt of an order that has             Account Information and Customer
                                                    proposes Rule 1703 (Consolidated Audit                  been routed, the following information:               Identifying Information for the relevant
                                                    Trail Compliance Rule—Industry                          (1) CAT-Order-ID; (2) date on which the               Customer.
                                                    Member Data Reporting) to require its                   order is received; (3) time at which the                 Paragraph (a)(3) of proposed Rule
                                                    Industry Members to comply with the                     order is received (using timestamps                   1703 states that each Industry Member
                                                    Industry Member Data reporting                          pursuant to proposed Rule 1706); (4)                  that is an Options Market Maker is not
                                                    requirements of the Plan. Proposed Rule                 SRO-Assigned Market Participant                       required to report to the Central
                                                    1703 has five sections covering: (1)                    Identifier of the Industry Member                     Repository the Industry Member Data
                                                    Recording and reporting Industry                        receiving the order; (5) SRO-Assigned                 regarding the routing, modification or
                                                    Member Data, (2) timing of the                          Market Participant Identifier of the                  cancellation of its quotes in Listed
                                                    recording and reporting, (3) the                        Industry Member or Participant routing                Options. Each Industry Member that is
                                                    applicable securities covered by the                    the order; and (6) Material Terms of the              an Options Market Maker, however, is
                                                    recording and reporting requirements,                   Order;                                                required to report to the Exchange the
                                                    (4) the security symbology to be used in                   • if the order is modified or                      time at which its quote in a Listed
                                                    the recording and reporting, and (5)                    cancelled: (1) CAT-Order-ID; (2) date the             Option is sent to the Exchange (and, if
                                                    error correction requirements, each of                  modification or cancellation is received              applicable, any subsequent quote
                                                    which is described below.                               or originated; (3) time at which the                  modification time and/or cancellation
                                                                                                            modification or cancellation is received              time when such modification or
                                                    (A) Recording and Reporting Industry                    or originated (using timestamps                       cancellation is originated by the Options
                                                    Member Data                                             pursuant to proposed Rule 1706); (4)                  Market Maker). This paragraph
                                                      Paragraph (a) of proposed Rule 1703                   price and remaining size of the order, if             implements the Options Market Maker
                                                    describes the recording and reporting of                modified; (5) other changes in the                    Quote Exemption, as discussed above.
                                                    Industry Member Data to the Central                     Material Terms of the Order, if
                                                    Repository. Paragraph (a) consists of                                                                         (B) Timing of Recording and Reporting
                                                                                                            modified; and (6) whether the
                                                    paragraphs (a)(1)–(a)(3), which cover                   modification or cancellation instruction                Paragraph (b) of proposed Rule 1703
                                                    Recorded Industry Member Data,                          was given by the Customer or was                      describes the requirements related to the
                                                    Received Industry Member Data and                       initiated by the Industry Member;                     timing of recording and reporting of
                                                    Options Market Maker data,                                 • if the order is executed, in whole or            Industry Member Data. Paragraphs
                                                    respectively. Paragraphs (a)(1)–(a)(3) of               in part: (1) CAT-Order-ID; (2) date of                (b)(1)–(b)(3) of proposed Rule 1703 set
                                                    proposed Rule 1703 set forth the                        execution; (3) time of execution (using               forth the requirements related to the
                                                    recording and reporting requirements                    timestamps pursuant to proposed Rule                  timing of the recording and reporting
                                                    required in Section 6.4(d)(i)–(iii) of the              1706; (4) execution capacity (principal,              requirements required in Section
                                                    CAT NMS Plan, respectively.                             agency or riskless principal); (5)                    6.4(b)(i)–(ii) of the CAT NMS Plan.
                                                      Paragraph (a)(1) requires, subject to                 execution price and size; (6) SRO-                      Paragraph (b)(1) of proposed Rule
                                                    paragraph (a)(3) regarding Options                      Assigned Market Participant Identifier                1703 requires each Industry Member to
                                                    Market Makers, each Industry Member                     of the Industry Member executing the                  record Recorded Industry Member Data
                                                    to record and electronically report to the              order; (7) whether the execution was                  contemporaneously with the applicable
                                                    Central Repository the following details                reported pursuant to an effective                     Reportable Event. Paragraph (b)(2) of
                                                    for each order and each Reportable                      transaction reporting plan or the Plan                proposed Rule 1703 requires each
                                                    Event, as applicable (‘‘Recorded                        for Reporting of Consolidated Options                 Industry Member to report: (1) Recorded
                                                    Industry Member Data’’) in the manner                                                                         Industry Member Data to the Central
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                                                                                                            Last Sale Reports and Quotation
                                                    prescribed by the Operating Committee                   Information; and                                      Repository by 8:00 a.m. Eastern Time on
                                                    pursuant to the CAT NMS Plan:                              • other information or additional                  the Trading Day following the day the
                                                      • For original receipt or origination of              events as may be prescribed pursuant to               Industry Member records such Recorded
                                                    an order: (1) Firm Designated ID(s) for                 the CAT NMS Plan.                                     Industry Member Data; and (2) Received
                                                    each Customer; (2) CAT-Order-ID; (3)                       Paragraph (a)(2) of proposed Rule                  Industry Member Data to the Central
                                                    SRO-Assigned Market Participant                         1703 requires, subject to paragraph                   Repository by 8:00 a.m. Eastern Time on
                                                    Identifier of the Industry Member                       (a)(3) regarding Options Market Makers,               the Trading Day following the day the-
                                                    receiving or originating the order; (4)                 each Industry Member to record and                    Industry Member receives such


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                                                    9938                       Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    Received Industry Member Data.                          by the Operating Committee via                        intended to ensure that the Central
                                                    Paragraph (b)(3) states that Industry                   Regulatory Circular.                                  Repository has the most current
                                                    Members may, but are not required to,                                                                         information identifying a Customer. The
                                                                                                            (E) Error Correction
                                                    voluntarily report Industry Member                                                                            Exchange intends to announce to its
                                                    Data prior to the applicable 8:00 a.m.                    To ensure that the CAT contains                     Industry Members when such a periodic
                                                    Eastern Time deadline.                                  accurate data, the CAT NMS Plan                       refresh is required by the Plan Processor
                                                                                                            requires Industry Members to correct                  and the Operating Committee via
                                                    (C) Applicable Securities                               erroneous data submitted to the Central               Regulatory Circular.
                                                       Paragraph (c) of proposed Rule 1703                  Repository. Therefore, the Exchange                     Finally, paragraph (d) of proposed
                                                    describes the securities to which the                   proposes to adopt paragraph (e) of                    Rule 1704 addresses the correction of
                                                    recording and reporting requirements of                 proposed Rule 1703, which addresses                   erroneous Customer data reported to the
                                                    proposed Rule 1703 apply. Paragraphs                    the correction of erroneous data                      Central Repository to ensure an accurate
                                                    (c)(1) and (c)(2) of proposed Rule 1703                 reported to the Central Repository.                   audit trail. Paragraph (d) requires, for
                                                    set forth the description of applicable                 Paragraph (e) of proposed Rule 1703                   each Industry Member for which errors
                                                    securities as set forth in Section 6.4(c)(i)            requires, for each Industry Member for                in Firm Designated ID, Customer
                                                    and (ii) of the CAT NMS Plan,                           which errors in Industry Member Data                  Account Information and Customer
                                                    respectively. Paragraph (c)(1) of                       submitted to the Central Repository                   Identifying Information for each of its
                                                    proposed Rule 1703 requires each                        have been identified by the Plan                      Customers with an Active Account
                                                    Industry Member to record and report to                 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 1703 for each NMS                  Repository by 8:00 a.m. Eastern Time on               submit corrected data to the Central
                                                    Security registered or listed for trading               T+3. This requirement implements the                  Repository by 5:00 p.m. Eastern Time on
                                                    on such exchange or admitted to                         error correction requirement set forth in             T+3. This requirement implements the
                                                    unlisted trading privileges on such                     Section 6 of Appendix D of the CAT                    error correction requirement set forth in
                                                    exchange. Paragraph (c)(2) of proposed                  NMS Plan.                                             Appendix C of the CAT NMS Plan.
                                                    Rule 1703 requires each Industry
                                                                                                            (iv) Customer Information Reporting                   (v) Industry Member Information
                                                    Member to record and report to the
                                                    Central Repository the Industry Member                     Section 6.4(d)(iv) of the CAT NMS                  Reporting
                                                    Data as set forth in paragraph (a) of this              Plan requires Industry Members to                       Section 6.4(d)(vi) of the CAT NMS
                                                    proposed Rule 1703 for each Eligible                    submit to the Central Repository certain              Plan requires Industry Members to
                                                    Security for which transaction reports                  information related to their Customers                submit to the Central Repository
                                                    are required to be submitted to FINRA.                  in accordance with the Customer                       information sufficient to identify such
                                                                                                            Information Approach discussed above.                 Industry Member, including CRD
                                                    (D) Security Symbology                                  The Exchange proposes Rule 1704                       number and LEI, if such LEI has been
                                                       Paragraph (d) of proposed Rule 1703                  (Consolidated Audit Trail Compliance                  obtained, in accordance with the
                                                    describes the security symbology that                   Rule—Customer Information Reporting)                  Existing Identifier Approach discussed
                                                    Industry Members are required to use                    to implement this provision of the CAT                above. The Exchange proposes Rule
                                                    when reporting Industry Member Data                     NMS Plan with regard to its Industry                  1705 (Consolidated Audit Trail
                                                    to the Central Repository. Paragraph                    Members. Specifically, paragraph (a) of               Compliance Rule—Industry Member
                                                    (d)(1) of proposed Rule 1703 requires,                  proposed Rule 1704 requires each                      Information Reporting) to implement
                                                    for each exchange-listed Eligible                       Industry Member to submit to the                      this provision of the CAT NMS Plan
                                                    Security, each Industry Member to                       Central Repository the Firm Designated                with regard to its Industry Members.
                                                    report Industry Member Data to the                      ID, Customer Account Information and                  Specifically, proposed Rule 1705
                                                    Central Repository using the symbology                  Customer Identifying Information for                  requires each Industry Member to
                                                    format of the exchange listing the                      each of its Customers with an Active                  submit to the Central Repository
                                                    security. This requirement implements                   Account prior to such Industry                        information sufficient to identify such
                                                    the requirement set forth in Section 2 of               Member’s commencement of reporting                    Industry Member, including CRD
                                                    Appendix D of the CAT NMS Plan to                       to the Central Repository and in                      number and LEI, if such LEI has been
                                                    use the listing exchange symbology                      accordance with the deadlines set forth               obtained, prior to such Industry
                                                    when reporting data to the Central                      in Rule 1709. Paragraph (b) of proposed               Member’s commencement of reporting
                                                    Repository for exchange-listed Eligible                 Rule 1704 requires each Industry                      to the Central Repository and in
                                                    Securities.                                             Member to submit to the Central                       accordance with the deadlines set forth
                                                       For each Eligible Security that is not               Repository any updates, additions or                  in Rule 1709, and keep such
                                                    exchange-listed, however, there is no                   other changes to the Firm Designated ID,              information up to date as necessary.
                                                    listing exchange to provide the                         Customer Account Information and
                                                    symbology format. Moreover, to date,                    Customer Identifying Information for                  (vi) Time Stamps
                                                    the requisite symbology format has not                  each of its Customers with an Active                    SEC Rule 613(d)(3) under Regulation
                                                    been determined. Therefore, Paragraph                   Account on a daily basis. Paragraph (c)               NMS sets forth requirements for time
                                                    (d)(2) of proposed Rule 1703 requires,                  of proposed Rule 1704 requires each                   stamps used by CAT Reporters in
                                                    for each Eligible Security that is not                  Industry Member, on a periodic basis as               recording and reporting data to the
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                                                    exchange-listed, each Industry Member                   designated by the Plan Processor and                  CAT.28 To comply with this provision,
                                                    to report Industry Member Data to the                   approved by the Operating Committee,                  Section 6.8(b) of the Plan sets forth time
                                                    Central Repository using such                           to submit to the Central Repository a                 stamp requirements for Industry
                                                    symbology format as approved by the                     complete set of Firm Designated IDs,                  Members. To implement this provision
                                                    Operating Committee pursuant to the                     Customer Account Information and                      with regard to its Industry Members, the
                                                    CAT NMS Plan. The Exchange intends                      Customer Identifying Information for                  Exchange proposes new Rule 1706
                                                    to announce to its Industry Members the                 each of its Customers with an Active
                                                    relevant symbology formats established                  Account. This periodic refresh is                       28 17   CFR 242.613(d)(3).



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                            9939

                                                    (Consolidated Audit Trail Compliance                    6.8 of the CAT NMS Plan which                         Rule (Rules 1701–1712). The Exchange
                                                    Rule—Time Stamps) to require its                        requires the Compliance Rule to provide               notes that, currently, no standardized
                                                    Industry Members to comply with the                     that a pattern or practice of reporting               form agreement for CAT Reporting
                                                    time stamp requirements of the Plan.                    events outside of the required clock                  Agent arrangements has been adopted.
                                                       Paragraph (a) of proposed Rule 1706                  synchronization time period without                   Paragraph (c)(2) of proposed Rule 1708
                                                    sets forth the time stamp increments to                 reasonable justification or exceptional               requires that all written documents
                                                    be used by Industry Members in their                    circumstances may be considered a                     evidencing an agreement with a CAT
                                                    CAT reporting. Paragraph (a)(1) of                      violation of SEC Rule 613 or the CAT                  Reporting Agent be maintained by each
                                                    proposed Rule 1706 requires each                        NMS Plan.                                             party to the agreement. Paragraph (c)(3)
                                                    Industry Member to record and report                                                                          states that each Industry Member
                                                    Industry Member Data to the Central                     (viii) Connectivity and Data
                                                                                                                                                                  remains primarily responsible for
                                                    Repository with time stamps in                          Transmission
                                                                                                                                                                  compliance with the requirements of the
                                                    milliseconds, subject to paragraphs                        Proposed Rule 1708 (Consolidated                   proposed Consolidate Audit Trail
                                                    (a)(2) and (b) of proposed Rule 1706. To                Audit Trail Compliance Rule—                          Compliance Rule (Rules 1701–1712),
                                                    the extent that any Industry Member’s                   Connectivity and Data Transmission)                   notwithstanding the existence of an
                                                    order handling or execution systems                     addresses connectivity and data                       agreement described in paragraph (c) of
                                                    utilize time stamps in increments finer                 transmission requirements related to the              proposed Rule 1708.
                                                    than milliseconds, paragraph (a)(2) of                  CAT. Paragraph (a) of proposed Rule
                                                    proposed Rule 1706 requires such                        1708 describes the format(s) for                      (ix) Development and Testing
                                                    Industry Member to record and report                    reporting Industry Member Data to the                    The Exchange proposes Rule 1709
                                                    Industry Member Data to the Central                     Central Repository, thereby                           (Consolidated Audit Trail Compliance
                                                    Repository with time stamps in such                     implementing the formatting                           Rule—Development and Testing) to
                                                    finer increment, subject to paragraph (b)               requirements as set forth in Section                  address requirements for Industry
                                                    of proposed Rule 1706 regarding                         6.4(a) of the CAT NMS Plan.                           Members related to CAT development
                                                    Manual Order Events and Allocation                      Specifically, paragraph (a) of proposed               and testing. Paragraph (a) of proposed
                                                    Reports.                                                Rule 1708 requires each Industry                      Rule 1709 sets forth the testing
                                                       Paragraph (b) of proposed Rule 1706                  Member to transmit data as required                   requirements and deadlines for Industry
                                                    sets forth the permissible time stamp                   under the CAT NMS Plan to the Central                 Members to develop and commence
                                                    increments for Manual Order Events                      Repository utilizing such format(s) as                reporting to the Central Repository.
                                                    and Allocation Reports. Specifically,                   may be provided by the Plan Processor                 These requirements are set forth in
                                                    paragraph (b)(1) of proposed Rule 1706                  and approved by the Operating                         Appendix C to the CAT NMS Plan.
                                                    permits each Industry Member to record                  Committee.                                               Paragraph (a)(1) sets forth the
                                                    and report Manual Order Events to the                      Paragraph (b) of proposed Rule 1708                deadlines related to connectivity and
                                                    Central Repository in increments up to                  addresses connectivity requirements                   acceptance testing. Industry Members
                                                    and including one second, provided that                 related to the CAT. Paragraph (b) of                  (other than Small Industry Members) are
                                                    each Industry Member is required to                     proposed Rule 1708 requires each                      required to begin connectivity and
                                                    record and report the time when a                       Industry Member to connect to the                     acceptance testing with the Central
                                                    Manual Order Event has been captured                    Central Repository using a secure                     Repository no later than August 15,
                                                    electronically in an order handling and                 method(s), including, but not limited to,             2018, and Small Industry Members are
                                                    execution system of such Member                         private line(s) and virtual private                   required to begin connectivity and
                                                    (‘‘Electronic Capture Time’’) in                        network connection(s). This provision                 acceptance testing with the Central
                                                    milliseconds. In addition, paragraph                    implements the connectivity                           Repository no later than August 15,
                                                    (b)(2) of proposed Rule 1706 permits                    requirements set forth in Section 4 of                2019.
                                                    each Industry Member to record and                      Appendix D to the CAT NMS Plan.                          Paragraph (a)(2) sets forth the
                                                    report the time of Allocation Reports in                   Paragraph (c) permits Industry                     deadlines related to reporting Customer
                                                    increments up to and including one                      Members to use CAT Reporting Agents                   and Industry Member information.
                                                    second.                                                 to fulfill their data reporting obligations           Paragraph (a)(2)(i) requires Industry
                                                                                                            related to the CAT. Paragraph (c) is                  Members (other than Small Industry
                                                    (vii) Clock Synchronization Rule                        based on FINRA Rule 7450(c), which                    Members) to begin reporting Customer
                                                    Violations                                              permits OATS Reporting Members to                     and Industry Member information, as
                                                      Proposed Rule 1707 (Consolidated                      enter into agreements with Reporting                  required by Rules 1704(a) and 1705,
                                                    Audit Trail Compliance Rule—Clock                       Agents to fulfill the OATS obligations of             respectively, to the Central Repository
                                                    Synchronization Rule Violation)                         the OATS Reporting Member.                            for processing no later than October 15,
                                                    describes potential violations of the                   Specifically, Paragraph (c)(1) of                     2018. Paragraph (a)(2)(ii) requires Small
                                                    clock synchronization time period                       proposed Rule 1708 states that any                    Industry Members to begin reporting
                                                    requirements set forth in the proposed                  Industry Member may enter into an                     Customer and Industry Member
                                                    Consolidated Audit Trail Compliance                     agreement with a CAT Reporting Agent                  information, as required by Rules
                                                    Rule (Rules 1701–1712). Proposed Rule                   pursuant to which the CAT Reporting                   1704(a) and 1705, respectively, to the
                                                    1707 states that an Industry Member                     Agent agrees to fulfill the obligations of            Central Repository for processing no
                                                    that engages in a pattern or practice of                such Industry Member under the                        later than October 15, 2019.
                                                    reporting Reportable Events outside of                  proposed Consolidated Audit Trail                        Paragraph (a)(3) sets forth the
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                                                    the required clock synchronization time                 Compliance Rule (Rules 1701–1712).                    deadlines related to the submission of
                                                    period as set forth in the Consolidated                 Any such agreement must be evidenced                  order data. Under paragraph (a)(3)(i),
                                                    Audit Trail Compliance Rule (Rules                      in writing, which specifies the                       Industry Members (other than Small
                                                    1701–1712) without reasonable                           respective functions and responsibilities             Industry Members) are permitted, but
                                                    justification or exceptional                            of each party to the agreement that are               not required, to submit order data for
                                                    circumstances may be considered in                      required to effect full compliance with               testing purposes beginning no later than
                                                    violation of this Rule. This provision                  the requirements of the proposed                      May 15, 2018. In addition, Industry
                                                    implements the requirements of Section                  Consolidated Audit Trail Compliance                   Members (other than Small Industry


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                                                    9940                         Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices

                                                    Members) are required to participate in                     (xi) Timely, Accurate and Complete                    announce to its Industry Members
                                                    the coordinated and structured testing                      Data                                                  changes to the Error Rate established
                                                    of order submission, which will begin                          SEC Rule 613 and the CAT NMS Plan                  pursuant to the CAT NMS Plan via
                                                    no later than August 15, 2018. Under                        emphasize the importance of the                       Regulatory Circular.
                                                    paragraph (a)(3)(ii), Small Industry                        timeliness, accuracy, completeness and                  Furthermore, paragraph (d) of
                                                    Members are permitted, but not                              integrity of the data submitted to the                proposed Rule 1711 addresses
                                                    required, to submit order data for testing                  CAT.30 Accordingly, proposed Rule                     Compliance Thresholds related to
                                                    purposes beginning no later than May                        1711 (Consolidated Audit Trail                        reporting data to the CAT. Proposed
                                                    15, 2019. In addition, Small Industry                       Compliance Rule—Timely, Accurate                      Rule 1711 states that each Industry
                                                    Members are required to participate in                      and Complete Data) implements this                    Member is required to meet a separate
                                                    the coordinated and structured testing                      requirement with regard to Industry                   compliance threshold which will be an
                                                    of order submission, which will begin                       Members. Paragraph (a) of proposed                    Industry Member-specific rate that may
                                                    no later than August 15, 2019.                              Rule 1711 requires that Industry                      be used as the basis for further review
                                                                                                                Members record and report data to the                 or investigation into the Industry
                                                      Paragraph (a)(4) states that Industry                                                                           Member’s performance with regard to
                                                    Members are permitted, but not required                     Central Repository as required by the
                                                                                                                proposed Consolidated Audit Trail                     the CAT (the ‘‘Compliance
                                                    to, submit Quote Sent Times on Options                                                                            Thresholds’’). Compliance Thresholds
                                                    Market Maker quotes, beginning no later                     Compliance Rule (Rules 1701–1712) in
                                                                                                                a manner that ensures the timeliness,                 will compare an Industry Member’s
                                                    than October 15, 2018                                                                                             error rate to the aggregate Error Rate
                                                                                                                accuracy, integrity and completeness of
                                                      Paragraph (b) of proposed Rule 1709                       such data.                                            over a period of time to be defined by
                                                    implements the requirement under the                           In addition, without limiting the                  the Operating Committee. Compliance
                                                    CAT NMS Plan that Industry Members                          general requirement as set forth in                   Thresholds will be set by the Operating
                                                    participate in required industry testing                    paragraph (a), paragraph (b) of proposed              Committee, and will be calculated at
                                                    with the Central Repository.29                              Rule 1711 requires Industry Members to                intervals to be set by the Operating
                                                    Specifically, proposed Rule 1709                            accurately provide the LEIs in their                  Committee.32 Compliance Thresholds
                                                    requires that each Industry Member                          records as required by the proposed                   will include compliance with the data
                                                    participate in testing related to the                       Consolidated Audit Trail Compliance                   reporting and clock synchronization
                                                                                                                Rule (Rules 1701–1712) and states that                requirements. Proposed Rule 1711 states
                                                    Central Repository, including any
                                                                                                                Industry Members may not knowingly                    that an Industry Member’s performance
                                                    industry-wide disaster recovery testing,
                                                                                                                submit inaccurate LEIs to the Central                 with respect to its Compliance
                                                    pursuant to the schedule established
                                                                                                                Repository. Paragraph (b) notes,                      Threshold will not signify, as a matter
                                                    pursuant to the CAT NMS Plan. The                                                                                 of law, that such Industry Member has
                                                    Exchange intends to announce to its                         however, that this requirement does not
                                                                                                                impose any additional due diligence                   violated the proposed Consolidated
                                                    Industry Members the schedule                                                                                     Audit Trail Compliance Rule (Rules
                                                    established pursuant to the CAT NMS                         obligations on Industry Members with
                                                                                                                regard to LEIs for CAT purposes.                      1701–1712).
                                                    Plan via Regulatory Circular.
                                                                                                                Accordingly, this provision does not                  (xii) Compliance Dates
                                                    (x) Recordkeeping                                           impose any due diligence obligations
                                                                                                                                                                         Proposed Rule 1712 (Consolidated
                                                                                                                beyond those that may exist today with
                                                      Proposed Rule 1710 (Consolidated                                                                                Audi [sic] Trail Compliance Rule—
                                                                                                                respect to information associated with
                                                    Audit Trail Compliance Rule—                                                                                      Compliance Dates) sets forth the
                                                                                                                an LEI. Although Industry Members will
                                                    Recordkeeping) sets forth the                                                                                     compliance dates for the various
                                                                                                                not be required to perform additional
                                                    recordkeeping obligations related to the                                                                          provisions of the proposed Consolidated
                                                                                                                due diligence with regard to the LEIs for
                                                    CAT for Industry Members. Proposed                                                                                Audit Trail Compliance Rule (Rules
                                                                                                                CAT purposes, Industry Members will
                                                    Rule 1710 requires each Industry                                                                                  1701–1712). Paragraph (a) of proposed
                                                                                                                be required to accurately provide the
                                                    Member to maintain and preserve                                                                                   Rule 1712 states that paragraphs (b) and
                                                                                                                LEIs in their records and may not
                                                    records of the information required to be                                                                         (c) of this Rule set forth the additional
                                                                                                                knowingly submit inaccurate LEIs to the
                                                    recorded under the proposed                                                                                       details with respect to the compliance
                                                                                                                CAT. Paragraph (b) is consistent with
                                                    Consolidated Audit Trail Compliance                                                                               date for the Consolidated Audit Trail
                                                                                                                the SEC’s statements in the Approval
                                                    Rule (Rules 1701–1712) for the period of                                                                          Compliance Rule (Rules 1701–1712). It
                                                                                                                Order for the CAT NMS Plan regarding
                                                    time and accessibility specified in SEC                     an Industry Member’s obligations                      further states that, unless otherwise
                                                                                                                regarding LEIs.31                                     noted, Rules 1701–1712 are fully
                                                    Rule 17a–4(b). The records required to
                                                                                                                   Paragraph (c) states that, if an                   effective and Members must comply
                                                    be maintained and preserved under the
                                                                                                                Industry Member reports data to the                   with their terms.
                                                    proposed Consolidated Audit Trail                                                                                    Paragraph (b) of proposed Rule 1712
                                                    Compliance Rule (Rules 1701–1712)                           Central Repository with errors such that
                                                                                                                its error percentage exceeds the                      establishes the compliance dates for the
                                                    may be immediately produced or                                                                                    clock synchronization requirements as
                                                    reproduced on ‘‘micrographic media’’ as                     maximum Error Rate established by the
                                                                                                                Operating Committee pursuant to the                   set forth in proposed Rule 1702.
                                                    defined in SEC Rule 17a–4(f)(1)(i) or by                                                                          Paragraph (b)(1) states that each
                                                    means of ‘‘electronic storage media’’ as                    CAT NMS Plan, then such Industry
                                                                                                                Member would not be in compliance                     Industry Member shall comply with
                                                    defined in SEC Rule 17a–4(f)(1)(ii) that                                                                          Rule 1702 with regard to Business
                                                    meet the conditions set forth in SEC                        with the proposed Consolidated Audit
                                                                                                                                                                      Clocks that capture time in milliseconds
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                                                    Rule 17a–4(f) and be maintained and                         Trail Compliance Rule (Rules 1701–
                                                                                                                1712). As discussed above, the initial                commencing on or before March 15,
                                                    preserved for the required time in that                                                                           2017. Paragraph (b)(2) states that each
                                                                                                                maximum Error Rate is 5%, although
                                                    form. Proposed Rule 1710 is based on                                                                              Industry Member shall comply with
                                                                                                                the Error Rate is expected to be reduced
                                                    FINRA Rule 7440(a)(5), which sets forth                                                                           Rule 1702 with regard to Business
                                                                                                                over time. The Exchange intends to
                                                    the recordkeeping requirements related                                                                            Clocks that do not capture time in
                                                    to OATS.                                                      30 See SEC Rule 613(e)(4)(i)(D)(ii); and Section    milliseconds commencing on or before
                                                                                                                6.5(d) of the CAT NMS Plan.
                                                      29 Adopting   Release [sic] at 84725.                       31 Approval Order at 84745.                           32 Appendix   C of the CAT NMS Plan.



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                                                                               Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices                                                  9941

                                                    February 19, 2018. The compliance date                  believes that this proposal furthers the              Electronic Comments
                                                    set forth in paragraph (b)(1) reflects the              objectives of the Plan, as identified by
                                                    exemptive relief requested by the                       the SEC, and is therefore consistent with               • Use the Commission’s Internet
                                                    Participants with regard to the clock                   the Act.                                              comment form (http://www.sec.gov/
                                                    synchronization requirements related to                                                                       rules/sro.shtml); or
                                                                                                            B. Self-Regulatory Organization’s
                                                    Business Clocks that do not capture
                                                                                                            Statement on Burden on Competition                      • Send an email to rule-comments@
                                                    time in milliseconds.                                                                                         sec.gov. Please include File Number SR–
                                                      Paragraph (c) of proposed Rule 1712                     The Exchange does not believe that                  PEARL–2017–04 on the subject line.
                                                    establishes the compliance dates for the                the proposed rule change will result in
                                                    data recording and reporting                            any burden on competition that is not                 Paper Comments
                                                    requirements for Industry Members.                      necessary or appropriate in furtherance
                                                    Paragraph (c)(1) requires each Industry                 of the purposes of the Act. The                         • Send paper comments in triplicate
                                                    Member (other than Small Industry                       Exchange notes that the proposed rule                 to Secretary, Securities and Exchange
                                                    Members) to record and report the                       change implements provisions of the                   Commission, 100 F Street NE.,
                                                    Industry Member Data to the Central                     CAT NMS Plan, and is designed to                      Washington, DC 20549–1090.
                                                    Repository by November 15, 2018.                        assist the Exchange in meeting its                    All submissions should refer to File
                                                    Paragraph (c)(2) requires that each                     regulatory obligations pursuant to the                Number SR–PEARL–2017–04. This file
                                                    Industry Member that is a Small                         Plan. The Exchange also notes that the                number should be included on the
                                                    Industry Member to record and report                    proposed Consolidated Audit Trail                     subject line if email is used. To help the
                                                    the Industry Member Data to the Central                 Compliance Rule (Rules 1701–1712)                     Commission process and review your
                                                    Repository by November 15, 2019. Such                   implementing provisions of the CAT                    comments more efficiently, please use
                                                    compliance dates are consistent with                    NMS Plan will apply equally to all firms              only one method. The Commission will
                                                    the compliance dates set forth in SEC                   that trade NMS Securities and OTC                     post all comments on the Commission’s
                                                    Rule 613(a)(3)(v) and (vi), and Section                 Equity Securities. In addition, all                   Internet Web site (http://www.sec.gov/
                                                    6.7(a)(v) and (vi) of the CAT NMS Plan.                 national securities exchanges and                     rules/sro.shtml). Copies of the
                                                                                                            FINRA are proposing this Consolidated                 submission, all subsequent
                                                    2. Statutory Basis                                      Audit Trail Compliance Rule (Rules                    amendments, all written statements
                                                       The Exchange believes that the                       1701–1712). Therefore, this is not a                  with respect to the proposed rule
                                                    proposed rule change is consistent with                 competitive rule filing, and, therefore, it           change that are filed with the
                                                    the provisions of Section 6(b)(5) of the                does not impose a burden on                           Commission, and all written
                                                    Act 33 which requires, among other                      competition.
                                                                                                                                                                  communications relating to the
                                                    things, that the Exchange’s rules must
                                                                                                            C. Self-Regulatory Organization’s                     proposed rule change between the
                                                    be designed to prevent fraudulent and
                                                                                                            Statement on Comments on the                          Commission and any person, other than
                                                    manipulative acts and practices, to
                                                                                                            Proposed Rule Change Received From                    those that may be withheld from the
                                                    promote just and equitable principles of
                                                                                                            Members, Participants, or Others                      public in accordance with the
                                                    trade, and, in general, to protect
                                                                                                              Written comments were neither                       provisions of 5 U.S.C. 552, will be
                                                    investors and the public interest, and
                                                                                                            solicited nor received.                               available for Web site viewing and
                                                    Section 6(b)(8) of the Act 34 which
                                                                                                                                                                  printing in the Commission’s Public
                                                    requires that the Exchange’s rules not                  III. Date of Effectiveness of the                     Reference Room, 100 F Street NE.,
                                                    impose any burden on competition that                   Proposed Rule Change and Timing for                   Washington, DC 20549, on official
                                                    is not necessary or appropriate.                        Commission Action
                                                       The Exchange believes that this                                                                            business days between the hours of
                                                    proposal is consistent with the Act                       Within 45 days of the date of                       10:00 a.m. and 3:00 p.m. Copies of such
                                                    because it implements, interprets or                    publication of this notice in the Federal             filing will also be available for
                                                    clarifies the provisions of the Plan, and               Register or within such longer period                 inspection and copying at the principal
                                                    is designed to assist the Exchange and                  up to 90 days (i) as the Commission may               office of the Exchange. All comments
                                                    its Industry Members in meeting                         designate if it finds such longer period              received will be posted without change;
                                                    regulatory obligations pursuant to the                  to be appropriate and publishes its                   the Commission does not edit personal
                                                    Plan. In approving the Plan, the SEC                    reasons for so finding or (ii) as to which            identifying information from
                                                    noted that the Plan ‘‘is necessary and                  the self-regulatory organization                      submissions. You should submit only
                                                    appropriate in the public interest, for                 consents, the Commission will:                        information that you wish to make
                                                    the protection of investors and the                       (A) By order approve or disapprove                  available publicly. All submissions
                                                    maintenance of fair and orderly markets,                the proposed rule change, or                          should refer to File Number SR–
                                                    to remove impediments to, and perfect                     (B) institute proceedings to determine              PEARL–2017–04 and should be
                                                    the mechanism of a national market                      whether the proposed rule change                      submitted on or before March 1, 2017.
                                                    system, or is otherwise in furtherance of               should be disapproved.                                  For the Commission, by the Division of
                                                    the purposes of the Act.’’ 35 To the                    IV. Solicitation of Comments                          Trading and Markets, pursuant to delegated
                                                    extent that this proposal implements,                                                                         authority.36
                                                    interprets or clarifies the Plan and                      Interested persons are invited to
                                                                                                                                                                  Robert W. Errett,
                                                                                                            submit written data, views, and
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                                                    applies specific requirements to                                                                              Deputy Secretary.
                                                    Industry Members, the Exchange                          arguments concerning the foregoing,
                                                                                                            including whether the proposed rule                   [FR Doc. 2017–02543 Filed 2–7–17; 8:45 am]
                                                      33 15U.S.C. 78f(b)(6) [sic].                          change is consistent with the Act.                    BILLING CODE 8011–01–P
                                                      34 15U.S.C. 78f(b)(8).                                Comments may be submitted by any of
                                                      35 Approval Order at 84697.                           the following methods:                                  36 17   CFR 200.30–3(a)(12).




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Document Created: 2017-02-08 02:59:05
Document Modified: 2017-02-08 02:59:05
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 9929 

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