Page Range | 9677-9966 | |
FR Document |
Page and Subject | |
---|---|
82 FR 9965 - Core Principles for Regulating the United States Financial System | |
82 FR 9742 - Sunshine Act Meeting Notice | |
82 FR 9756 - Sunshine Act Meeting; National Science Board | |
82 FR 9755 - Sunshine Act Meeting | |
82 FR 9869 - Sunshine Act Meeting; Additional Item | |
82 FR 9719 - Finished Carbon Steel Flanges From India: Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination | |
82 FR 9723 - Finished Carbon Steel Flanges From Spain: Preliminary Determination of Sales at Less Than Fair Value | |
82 FR 9711 - Finished Carbon Steel Flanges From Italy: Preliminary Determination of Sales at Less Than Fair Value and Postponement of Final Determination | |
82 FR 9755 - NASA Advisory Council; Science Committee; Ad Hoc Task Force on Big Data; Meeting | |
82 FR 9751 - Agency Information Collection Activities: Temporary Scientific or Educational Purposes | |
82 FR 9751 - Agency Information Collection Activities: Importation Bond Structure | |
82 FR 9731 - Submission of Data by State Educational Agencies; Submission Dates for State Revenue and Expenditure Reports for Fiscal Year (FY) 2016, Revisions to Those Reports, and Revisions to Prior Fiscal Year Reports | |
82 FR 9740 - Certain New Chemicals or Significant New Uses; Statements of Findings for November 2016 | |
82 FR 9738 - Proposed Information Collection Request; Comment Request; General Administrative Requirements for Assistance Programs | |
82 FR 9682 - Uniform National Discharge Standards for Vessels of the Armed Forces-Phase II Batch One: Delay of Effective Date | |
82 FR 9741 - Agency Information Collection Activities: Submission for OMB Review; National Survey of Unbanked and Underbanked Households (3064-0167); Comment Request | |
82 FR 9690 - Standardized Bycatch Reporting Methodology | |
82 FR 9726 - Proposed Information Collection; Comment Request; Special Subsistence Permits and Harvest Logs for Pacific Halibut in Waters Off Alaska | |
82 FR 9742 - Notice of Agreements Filed | |
82 FR 9709 - Approval of Subzone Status; AxisCare Health Logistics, Inc.; Toa Baja, Puerto Rico | |
82 FR 9955 - 60-Day Notice of Proposed Information Collection: Annual Report-J-NONIMMIGRANT Exchange Visitor Program | |
82 FR 9690 - List of Fisheries for 2017 | |
82 FR 9752 - Agency Information Collection Activities: Extension, Without Change, of an Existing Information Collection; Comment Request; OMB Control No. 1653-0051 | |
82 FR 9753 - Additional Clarifying Guidance, Waivers, and Alternative Requirements for Grantees in Receipt of Community Development Block Grant (CDBG) Disaster Recovery Grant Funds Under the Disaster Relief Appropriations Act, 2013 | |
82 FR 9754 - Notice of Receipt of Complaint; Solicitation of Comments; Relating to the Public Interest | |
82 FR 9958 - Agency Information Collection Activities: Information Collection Renewal; Comment Request; Capital Adequacy Standards | |
82 FR 9677 - Revisions to Operational Requirements for the Use of Enhanced Flight Vision Systems (EFVS) and to Pilot Compartment View Requirements for Vision Systems | |
82 FR 9744 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
82 FR 9743 - Change in Bank Control Notices; Acquisitions of Shares of a Bank or Bank Holding Company | |
82 FR 9743 - Formations of, Acquisitions by, and Mergers of Bank Holding Companies | |
82 FR 9714 - Countervailing Duty Investigation of Stainless Steel Sheet and Strip From the People's Republic of China: Final Affirmative Determination, and Final Affirmative Critical Circumstances Determination, in Part | |
82 FR 9716 - Antidumping Duty Investigation of Stainless Steel Sheet and Strip From the People's Republic of China: Final Determination of Sales at Less Than Fair Value and Final Affirmative Determination of Critical Circumstances | |
82 FR 9732 - Orders Granting Authority To Import and Export Natural Gas, and To Export Liquefied Natural Gas During December 2016 | |
82 FR 9756 - Program-Specific Guidance About Exempt Distribution Licenses | |
82 FR 9706 - Traders With Indians | |
82 FR 9728 - Inland Waterways Users Board Meeting Notice | |
82 FR 9727 - Army Education Advisory Subcommittee Meeting Notice | |
82 FR 9729 - Board on Coastal Engineering Research | |
82 FR 9961 - Sanctions Actions Pursuant to Executive Order 13224 | |
82 FR 9960 - Sanctions Actions Pursuant to Executive Orders 13382 | |
82 FR 9730 - Agency Information Collection Activities; Submission to the Office of Management and Budget for Review and Approval; Comment Request; Application for Grants Under the Veterans Upward Bound Program (1894-0006) | |
82 FR 9954 - Tennessee Disaster #TN-00101 | |
82 FR 9744 - Agency Forms Undergoing Paperwork Reduction Act Review | |
82 FR 9735 - Basic Energy Sciences Advisory Committee | |
82 FR 9733 - Environmental Management Site-Specific Advisory Board, Hanford | |
82 FR 9734 - Environmental Management Site-Specific Advisory Board, Idaho National Laboratory | |
82 FR 9733 - Environmental Management Site-Specific Advisory Board, Northern New Mexico | |
82 FR 9745 - Agency Forms Undergoing Paperwork Reduction Act Review | |
82 FR 9916 - Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing of a Proposed Rule Change Relating to the Consolidated Audit Trail | |
82 FR 9765 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9904 - Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9865 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX PEARL Rules 100, 404, 519C and Adopt MIAX PEARL 1018 | |
82 FR 9869 - Self-Regulatory Organizations; MIAX PEARL, LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Exchange Rule 515, Execution of Orders and Quotes | |
82 FR 9778 - Self-Regulatory Organizations; NASDAQ PHLX LLC; Notice of Filing of Proposed Rule Change To Adopt the Rule 900A Series | |
82 FR 9846 - Self-Regulatory Organizations; Bats BYX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9807 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, Bats BZX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, the Bats EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ BX, Inc., the NASDAQ PHLX, Inc., Miami International Securities Exchange, LLC, and MIAX PEARL Concerning Options-Related Market Surveillance | |
82 FR 9757 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Among NYSE MKT LLC, Bats BZX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, the Chicago Board Options Exchange, Incorporated, Bats EDGX Exchange, Inc., the International Securities Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Financial Industry Regulatory Authority, Inc., NYSE Arca, Inc., The NASDAQ Stock Market LLC, NASDAQ BX, Inc., the NASDAQ PHLX, Inc., Miami International Securities Exchange, LLC, and MIAX PEARL, LLC Concerning Options-Related Sales Practice Matters | |
82 FR 9814 - Program for Allocation of Regulatory Responsibilities Pursuant to Rule 17d-2; Notice of Filing and Order Approving and Declaring Effective an Amendment to the Plan for the Allocation of Regulatory Responsibilities Between Bats BZX Exchange, Inc., Bats BYX Exchange, Inc., BOX Options Exchange LLC, Chicago Board Options Exchange, Incorporated, C2 Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX 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, The NASDAQ Stock Market LLC, NASDAQ BX, Inc., NASDAQ PHLX, Inc., National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. | |
82 FR 9804 - Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Functionality Offered by the Exchange's Options Platform To Adopt Qualified Contingent Cross Orders | |
82 FR 9858 - Self-Regulatory Organizations: Investors Exchange LLC; Notice of Filing of Proposed Rule Change To Amend IEX Rule 16.135 To Adopt Generic Listing Standards for Managed Fund Shares | |
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 9790 - Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt Consolidated Audit Trail Compliance Rule (Rules 1701-1712) To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9886 - Self-Regulatory Organizations; BOX Options Exchange LLC; Order Granting Approval of a Proposed Rule Change To Amend Rule 5050 Series of Options Contracts Open for Trading To Provide for the Listing and Trading on the Exchange of RealDayTM | |
82 FR 9831 - Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Adopt Rules Regarding the CAT NMS Plan | |
82 FR 9891 - Self-Regulatory Organizations; Investors Exchange LLC; Notice of Filing of Proposed Rule Change To Adopt the Rule Series 11.600 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9942 - Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing of Proposed Rule Change To Implement Compliance Rules Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9819 - Self-Regulatory Organizations; BOX Options Exchange LLC; Notice of Filing of a Proposed Rule Change To Adopt the Rule 16000 Series To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9803 - Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice of Filing of a Proposed Rule Change Regarding Block Trades | |
82 FR 9874 - Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Adopt Rules 4.5 Through 4.16 To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail | |
82 FR 9737 - PacifiCorp; Notice of Institution of Section 206 Proceeding and Refund Effective Date | |
82 FR 9735 - Combined Notice of Filings #2 | |
82 FR 9738 - Combined Notice of Filings #1 | |
82 FR 9707 - Endangered and Threatened Wildlife and Plants: Notice of 12-Month Finding on a Petition To List the Gulf of Mexico Bryde's Whale as Endangered Under the Endangered Species Act (ESA); Reopening of Public Comment Period | |
82 FR 9722 - Citric Acid and Certain Citrate Salts From the People's Republic of China: Preliminary Results of Antidumping Duty Administrative Review, Preliminary Determination of No Shipments, and Preliminary Partial Rescission of Antidumping Duty Administrative Review; 2015-2016 | |
82 FR 9726 - Proposed Information Collection; Comment Request | |
82 FR 9709 - Antidumping or Countervailing Duty Order, Finding, or Suspended Investigation; Opportunity To Request Administrative Review | |
82 FR 9736 - Combined Notice of Filings | |
82 FR 9737 - Combined Notice of Filings #1 | |
82 FR 9749 - Center for Scientific Review; Notice of Closed Meetings | |
82 FR 9678 - IFR Altitudes; Miscellaneous Amendments | |
82 FR 9746 - Center for Scientific Review; Notice of Closed Meetings | |
82 FR 9748 - National Eye Institute; Notice of Closed Meeting | |
82 FR 9748 - National Institute of Allergy and Infectious Diseases; Notice of Closed Meeting | |
82 FR 9749 - National Human Genome Research Institute; Notice of Closed Meeting | |
82 FR 9747 - National Human Genome Research Institute; Notice of Closed Meetings | |
82 FR 9748 - National Institute on Deafness and Other Communication Disorders; Notice of Closed Meeting | |
82 FR 9749 - Center for Scientific Review; Amended Notice of Meeting | |
82 FR 9962 - Open Meeting of the Financial Research Advisory Committee | |
82 FR 9955 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel SOUTHERN SPORT; Invitation for Public Comments | |
82 FR 9956 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel ONE; Invitation for Public Comments | |
82 FR 9957 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel MASCALZONE; Invitation for Public Comments | |
82 FR 9957 - Requested Administrative Waiver of the Coastwise Trade Laws: Vessel MAKARA; Invitation for Public Comments | |
82 FR 9680 - Adoption of Updated EDGAR Filer Manual | |
82 FR 9702 - Remedial Action Schemes Reliability Standard | |
82 FR 9691 - Alternative Capital | |
82 FR 9682 - Revision of the Freedom of Information Act Regulations of the National Railroad Passenger Corporation |
Foreign-Trade Zones Board
International Trade Administration
National Oceanic and Atmospheric Administration
Engineers Corps
Federal Energy Regulatory Commission
Centers for Disease Control and Prevention
National Institutes of Health
U.S. Customs and Border Protection
U.S. Immigration and Customs Enforcement
Indian Affairs Bureau
Foreign Claims Settlement Commission
Federal Aviation Administration
Maritime Administration
Comptroller of the Currency
Foreign Assets Control Office
Consult the Reader Aids section at the end of this issue for phone numbers, online resources, finding aids, and notice of recently enacted public laws.
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Federal Aviation Administration (FAA), Department of Transportation (DOT).
Final rule; delay of effective date.
On December 13, 2016, the Federal Aviation Administration (FAA) published a final rule to permit operators to use an enhanced flight vision system in lieu of natural vision to continue descending from 100 feet above the touchdown zone elevation to the runway and to land on certain straight-in instrument approach procedures under instrument flight rules. The FAA is delaying the effective date of this final rule.
The effective date of the rule amending 14 CFR parts 1, 23, 25, 27, 29, 61, 91, 121, 125, and 135 published at 81 FR 90126, December 13, 2016, is delayed until March 21, 2017, except for the amendments to §§ 61.66 (amendatory instruction no. 15), 91.175 (amendatory instruction no. 18), 91.1039 (amendatory instruction no. 23), 121.651 (amendatory instruction no. 27), 125.325 (amendatory instruction no. 33), 125.381 (amendatory instruction no. 35), and 135.225 (amendatory instruction no. 38), which are effective March 13, 2018.
Terry King, Flight Technologies and Procedures Division, AFS-400, Flight Standards Service, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; telephone (202) 267-8790; email
On December 13, 2016, the FAA published the final rule Revisions to Operational Requirements for the Use of Enhanced Flight Vision Systems (EFVS) and to Pilot Compartment View Requirements for Vision Systems. That final rule permits operators to use an EFVS in lieu of natural vision to continue descending from 100 feet above the touchdown zone elevation to the runway and to land on certain straight-in instrument approach procedures under instrument flight rules. Additionally, the final rule addresses provisions that permit operators who conduct EFVS operations under 14 CFR part 121, 125, or 135 to use EFVS-equipped aircraft to dispatch, release, or takeoff under instrument flight rules, and revises the regulations for those operators to initiate and continue an approach, when the destination airport weather is below authorized visibility minimums for the runway of intended landing. The final rule establishes pilot training and recent flight experience requirements for operators who use EFVS in lieu of natural vision to descend below the decision altitude/decision height or minimum descent altitude. EFVS-equipped aircraft conducting operations to touchdown and rollout are required to meet additional airworthiness requirements. The final rule also revises pilot compartment view certification requirements for vision systems using a transparent display surface located in the pilot's outside field of view.
In accordance with the President's memorandum “Regulatory Freeze Pending Review” issued January 20, 2017, and the accompanying M-17-16, Implementation of Regulatory Freeze, issued January 24, 2017, the FAA is hereby delaying the effective date of the final rule from March 13, 2017 to March 21, 2017. This delay in effective date will allow for the review of this final rule in accordance with the President's memorandum.
The FAA emphasizes that the amendments to §§ 61.66 (amendatory instruction no. 15), 91.175 (amendatory instruction no. 18), 91.1039 (amendatory instruction no. 23), 121.651 (amendatory instruction no. 27), 125.325 (amendatory instruction no. 33), 125.381 (amendatory instruction no. 35), and 135.225 (amendatory instruction no. 38), discussed in the December 13, 2016, final rule are not affected by this change in effective date of the final rule. Those provisions will become effective March 13, 2018. This change in effective date of the final rule also does not affect the date by which persons conducting EFVS operations to 100 feet above the TDZE under §§ 91.175(l) and (m) must begin conducting them under § 91.176(b) and thus comply with the training, recent flight experience, and refresher training requirements of § 61.66. The compliance date for these provisions is March 13, 2018. The FAA also notes that the date specified in § 61.66(h)(4) remains unchanged. Section 61.66(h)(4) excepts persons from the ground and flight training requirements in § 61.66(a) and (b) if they are conducting EFVS operations under § 91.176(b) and can document that prior to March 13, 2018, they have satisfactorily completed ground and flight training on EFVS operations to 100 feet above the TDZE.
Section 553(b)(3)(B) of Title 5, United States Code, (the Administration Procedure Act) authorizes agencies to dispense with notice and comment procedures for rules when the agency for “good cause” finds that those procedures are “impracticable, unnecessary, or contrary to the public interest.” Under this section, an agency, upon finding good cause, may issue a final rule without seeking comment prior to the rulemaking. The FAA finds that prior notice and public comment to this final rule is unnecessary due to the brief length of the extension of the effective date and the fact that there is no change to the rule.
Federal Aviation Administration (FAA), DOT.
Final rule.
This amendment adopts miscellaneous amendments to the required IFR (instrument flight rules) altitudes and changeover points for certain Federal airways, jet routes, or direct routes for which a minimum or maximum en route authorized IFR altitude is prescribed. This regulatory action is needed because of changes occurring in the National Airspace System. These changes are designed to provide for the safe and efficient use of the navigable airspace under instrument conditions in the affected areas.
Richard A. Dunham, Flight Procedure Standards Branch (AMCAFS-420), Flight Technologies and Programs Division, Flight Standards Service, Federal Aviation Administration, Mike Monroney Aeronautical Center, 6500 South MacArthur Blvd. Oklahoma City, OK 73169 (Mail Address: P.O. Box 25082 Oklahoma City, OK 73125) telephone: (405) 954-4164.
This amendment to part 95 of the Federal Aviation Regulations (14 CFR part 95) amends, suspends, or revokes IFR altitudes governing the operation of all aircraft in flight over a specified route or any portion of that route, as well as the changeover points (COPs) for Federal airways, jet routes, or direct routes as prescribed in part 95.
The specified IFR altitudes, when used in conjunction with the prescribed changeover points for those routes, ensure navigation aid coverage that is adequate for safe flight operations and free of frequency interference. The reasons and circumstances that create the need for this amendment involve matters of flight safety and operational efficiency in the National Airspace System, are related to published aeronautical charts that are essential to the user, and provide for the safe and efficient use of the navigable airspace. In addition, those various reasons or circumstances require making this amendment effective before the next scheduled charting and publication date of the flight information to assure its timely availability to the user. The effective date of this amendment reflects those considerations. In view of the close and immediate relationship between these regulatory changes and safety in air commerce, I find that notice and public procedure before adopting this amendment are impracticable and contrary to the public interest and that good cause exists for making the amendment effective in less than 30 days.
The FAA has determined that this regulation only involves an established body of technical regulations for which frequent and routine amendments are necessary to keep them operationally current. It, therefore—(1) is not a “significant regulatory action” under Executive Order 12866; (2) is not a “significant rule” under DOT Regulatory Policies and Procedures (44 FR 11034; February 26, 1979); and (3) does not warrant preparation of a regulatory evaluation as the anticipated impact is so minimal. For the same reason, the FAA certifies that this amendment will not have a significant economic impact on a substantial number of small entities under the criteria of the Regulatory Flexibility Act.
Airspace, Navigation (air).
Accordingly, pursuant to the authority delegated to me by the Administrator, part 95 of the Federal Aviation Regulations (14 CFR part 95) is amended as follows effective at 0901 UTC, March 2, 2017.
49 U.S.C. 106(g), 40103, 40106, 40113, 40114, 40120, 44502, 44514, 44719, 44721.
Securities and Exchange Commission.
Final rule.
The Securities and Exchange Commission (the Commission) is adopting revisions to the Electronic Data Gathering, Analysis, and Retrieval System (EDGAR) Filer Manual and related rules to reflect updates to the EDGAR system. The updates are being made primarily to support an upgrade to the passphrase authentication process; and update the recommended Internet browser language for all EDGAR Web sites. The EDGAR system is scheduled to be upgraded to support the functionalities on January 30, 2017.
Effective February 8, 2017. The incorporation by reference of the EDGAR Filer Manual is approved by the Director of the Federal Register as of February 8, 2017.
In the Division of Corporation Finance, for questions concerning the passphrase update process, contact Heather Mackintosh (202) 551-8111; in the Division of Trading and Markets, for questions concerning Form X-17A-5, contact Kathy Bateman at (202) 551-4345; and in the Office of Information Technology, for questions concerning recommended Internet browsers, contact Tammy Borkowski at (202) 551-7802.
We are adopting an updated EDGAR Filer Manual, Volume I, Volume II and Volume III. The Filer Manual describes the technical formatting requirements for the preparation and submission of electronic filings through the EDGAR system.
The revisions to the Filer Manual reflect changes within Volume I entitled EDGAR Filer Manual, Volume I: “General Information,” Version 26 (January 2017), Volume II entitled EDGAR Filer Manual, Volume II: “EDGAR Filing,” Version 40 (January 2017), and Volume III: “N-SAR Supplement”, Version 6 (January 2017). The updated manual will be incorporated by reference into the Code of Federal Regulations.
The Filer Manual contains all the technical specifications for filers to submit filings using the EDGAR system. Filers must comply with the applicable provisions of the Filer Manual in order to assure the timely acceptance and processing of filings made in electronic format.
The EDGAR system will be upgraded to Release 17.0.2 on January 30, 2017 and will introduce the following changes:
EDGAR will be upgraded with an enhanced authentication process to increase the security surrounding a filer's request for a passphrase update. This includes the issuance of a one-time security token which will be emailed to the registrant at the email address on record. If the email on record is not valid, the filer will need to provide authorization to have their codes reset, and in the case of a company, the request must be on company letterhead. If a Power of Attorney (POA) is provided, it must be manually signed. For more information, please refer to Section 4.1.1 of “EDGAR Filer Manual Volume I: General Information”.
Filers will have the option to add one or more attachments of type “FULL” to submission form types X-17A-5 and X-17A-5/A, which can be designated as “Public” or “Confidential.” If a “FULL” attachment designated as “Public” is attached, then all other attachment types are optional.
The EDGAR Portal, EDGAR Company Database, and the landing pages for all EDGAR Web sites will be updated to remove any reference to Internet Explorer (IE) 8.0 and Firefox version 24.x, and to update the language so that vendor supported versions of IE and Google Chrome are the recommended browsers. The references to Internet Explorer 8.0 and Firefox 24.x will be deleted in “EDGAR Filer Manual, Volume I: General Information,” “EDGAR Filer Manual, Volume II: EDGAR Filing,” and “EDGAR Filer Manual: Volume III: N-SAR Supplement.”
Along with the adoption of the Filer Manual, we are amending Rule 301 of Regulation S-T to provide for the incorporation by reference into the Code of Federal Regulations of today's revisions. This incorporation by reference was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51.
The updated EDGAR Filer Manual will be available for Web site viewing and printing; the address for the Filer Manual is
Since the Filer Manual and the corresponding rule changes relate solely to agency procedures or practice, publication for notice and comment is not required under the Administrative Procedure Act (APA).
The effective date for the updated Filer Manual and the rule amendments is February 8, 2017. In accordance with the APA,
We are adopting the amendments to Regulation S-T under Sections 6, 7, 8, 10, and 19(a) of the Securities Act of 1933,
Incorporation by reference, Reporting and recordkeeping requirements, Securities.
In accordance with the foregoing, Title 17, Chapter II of the Code of Federal Regulations is amended as follows:
15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 77z-3, 77sss(a), 78c(b), 78
Filers must prepare electronic filings in the manner prescribed by the EDGAR Filer Manual, promulgated by the Commission, which sets out the technical formatting requirements for electronic submissions. The requirements for becoming an EDGAR Filer and updating company data are set forth in the updated EDGAR Filer Manual, Volume I: “General Information,” Version 26 (January 2017). The requirements for filing on EDGAR are set forth in the updated EDGAR Filer Manual, Volume II: “EDGAR Filing,” Version 40 (January 2017). Additional provisions applicable to Form N-SAR filers are set forth in the EDGAR Filer Manual, Volume III: “N-SAR Supplement,” Version 6 (January 2017). All of these provisions have been incorporated by reference into the Code of Federal Regulations, which action was approved by the Director of the Federal Register in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. You must comply with these requirements in order for documents to be timely received and accepted. The EDGAR Filer Manual is available for Web site viewing and printing; the address for the Filer Manual is
By the Commission.
Environmental Protection Agency (EPA) and Department of Defense (DOD).
Final rule; delay of effective date.
In accordance with the Presidential directive as expressed in the memorandum of January 20, 2017, from the Assistant to the President and Chief of Staff, entitled “Regulatory Freeze Pending Review,” this action temporarily delays until March 21, 2017, the effective date of the rule entitled Uniform National Discharge Standards for Vessels of the Armed Forces—Phase II Batch One, published in the
This final rule is effective February 8, 2017. The effective date of the regulation titled Uniform National Discharge Standards for Vessels of the Armed Forces—Phase II Batch One, published in the
Katherine B. Weiler, Marine Pollution Control Branch (4504T), U.S. EPA, 1200 Pennsylvania Avenue NW., Washington, DC 20460; (202) 566-1280;
Environmental Protection Agency (EPA) and Department of Defense (DOD) base this action on the Presidential directive as expressed in the memorandum of January 20, 2017, from the Assistant to the President and Chief of Staff, entitled “Regulatory Freeze Pending Review.” That memorandum directed the heads of Executive Departments and Agencies to temporarily postpone for sixty days from the date of the memorandum the effective dates of all regulations that had been published in the
The EPA's and DOD's implementation of this action without opportunity for public comment is based on the good cause exceptions in 5 U.S.C. 553(b)(B) and 553(d)(3), in that seeking public comment is impracticable, unnecessary and contrary to the public interest. The temporary delay in effective date until March 21, 2017, is necessary to give the EPA and DOD officials the opportunity for further review and consideration of new regulation, consistent with the memorandum of the Assistant to the President and Chief of Staff, dated January 20, 2017. Given the imminence of the effective date, seeking prior public comment on this temporary delay would have been impractical, as well as contrary to the public interest in the orderly promulgation and implementation of regulations.
By focusing the two agencies' attention on the substance of the regulation rather than soliciting comment on a decision to delay their effective date until March 21, 2017, the EPA and DOD can minimize or obviate the need for further temporary delays beyond March 21, 2017.
For the foregoing reasons, the good cause exceptions in 5 U.S.C. 553(b)(B) and 553(d)(3) also apply to the EPA's and DOD's decisions to make this action effectively immediately.
If deemed appropriate, the EPA and DOD may consider delaying the effective date of this regulation beyond March 21, 2017. If the EPA and DOD were to do so, consistent with the memorandum of the Assistant to the President and Chief of Staff, the two agencies would propose any later effective date for public comment.
National Railroad Passenger Corporation.
Final rule.
This final rule sets forth revisions of the Freedom of Information Act (FOIA) regulations of the National Railroad Passenger Corporation (“Amtrak”). Amtrak is revising its FOIA regulations to incorporate the changes brought about by the FOIA Improvement Act of 2016 and to update, clarify, and streamline the language of its regulations to make the FOIA process easier for the public to navigate.
This final rule is effective March 10, 2017.
Sharron H. Hawkins, Lead FOIA Specialist, 202-906-3741 or
Amtrak's FOIA regulations were last revised on February 13, 1998. Since that time, there have been several major changes to the FOIA, including the FOIA Improvement Act of 2016 (Pub. L. 114-185), which requires all agencies to review and update their FOIA regulations in accordance with its provisions. The Act contains several substantive and procedural amendments to the FOIA, which include requirements that agencies establish a minimum of 90 days for requesters to file an administrative appeal and that they provide dispute resolution services at various times throughout the FOIA process.
Based on the amendments to the FOIA, developments in the case law, and the practical experience of its FOIA staff, Amtrak issued a proposed rule on November 23, 2016 to amend its FOIA regulations.
Freedom of Information.
5 U.S.C. 552; 49 U.S.C. 24301(e).
This part contains the rules that the National Railroad Passenger Corporation (“Amtrak”) follows in processing requests for records under the Freedom of Information Act (FOIA), Title 5 of the United States Code, section 552. Information routinely provided to the public (
Unless the context requires otherwise in this part, masculine pronouns include the feminine gender and “includes” means “includes but is not limited to.”
(1) Library materials compiled for reference purposes or objects of substantial intrinsic value.
(2) Routing and transmittal sheets, notes, and filing notes which do not also include information, comments, or statements of substance.
(3) Anything that is not a tangible or documentary record such as an individual's memory or oral communication.
(4) Objects or articles, whatever their historical or value as evidence.
(a) Amtrak will make records of the Corporation available to the public to the greatest practicable extent in keeping with the spirit of the law. Therefore, records of the Corporation are available electronically, which can be accessed at the Amtrak FOIA Web site
(b) A record of the Corporation, or parts thereof, may be withheld from disclosure if the Corporation reasonably foresees that disclosure would harm an interest protected by a FOIA exemption or when disclosure is prohibited by law. Disclosure to a properly constituted advisory committee, to Congress, or to Federal agencies does not waive the exemption.
(c) In the event full disclosure of a requested record is not possible, any reasonably segregable portion of the record will be made available to the requesting person after deletion of the exempt portions. The entire record may be withheld if a determination is made that nonexempt material is so inextricably intertwined that disclosure would leave only essentially meaningless words or phrases, or when it can be reasonably assumed that a skillful and knowledgeable person could reconstruct the deleted information.
(d) The procedures in this part apply only to records in existence at the time of a request. The Corporation has no obligation to create a record solely for the purpose of making it available under the FOIA or to provide a record that will be created in the future.
(e) Each officer and employee of the Corporation dealing with FOIA requests is directed to cooperate in making records available for disclosure under the Act in a prompt manner consistent with this part.
(f) The FOIA time limits will not begin to run until a request has been identified as being made under the Act and deemed received by the FOIA Office.
(g) Generally, when a member of the public complies with the procedures established in this part for obtaining records under the FOIA, the request
(a)
(b)
(1) Amtrak shall decide on a case-by-case basis whether records fall into the first category of “frequently requested FOIA records” based on the following factors:
(i) Previous experience with similar records;
(ii) The nature and type of information contained in the records;
(iii) The identity and number of requesters and whether there is widespread media or commercial interest in the records.
(c)
(a)
(2) A request must be in writing, indicate that it is being made under the FOIA, and provide an adequate description of the records sought. The request should also include applicable information regarding fees as specified in paragraphs (d) and (e) of this section.
(b)
(2) The request must be addressed to the Freedom of Information Office; National Railroad Passenger Corporation; 60 Massachusetts Avenue NE., Washington, DC 20002. Requests will also be accepted by facsimile at (202) 906-2004 or via email at
(c)
(2)
(d)
(1)
(i) In order to protect requesters from large and/or unexpected fees, Amtrak will request a specific commitment when it estimates or determines that fees will exceed $100.00.
(ii) A request shall not be considered received and further processing shall not be carried out until the requesting party agrees to pay the anticipated total fee. Any such agreement must be memorialized in writing. A notice under this paragraph will offer the requesting party an opportunity to discuss the matter in order to reformulate the request to meet the requester's needs at a lower cost.
(iii) Amtrak will hold in abeyance for a reasonable amount of time requests requiring agreement to pay fees and will thereafter deem the request closed. This action will not prevent the requesting party from refiling the FOIA request with a fee commitment at a subsequent date.
(2)
(e)
(f)
(1) A notarized written authorization signed by that individual permitting disclosure of those records to the requesting party, together with a copy of a photo ID of that individual; or
(2) Proof that the individual is deceased (
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(2) A request for records shall be considered to have been received on the later of the following dates:
(i) The requester has agreed in writing to pay applicable fees in accordance with § 701.5(d); or
(ii) The fees have been waived in accordance with § 701.11(k); or
(iii) Payment in advance has been received from the requester when required in accordance with § 701.11(i).
(3) The time for responding to requests set forth in paragraph (b) of this section may be delayed if:
(i) The request does not sufficiently identify the fee category applicable to the request;
(ii) The request does not state a willingness to pay all fees;
(iii) A request seeking a fee waiver does not address the criteria for fee waivers set forth in § 701.11(k);
(iv) A fee waiver request is denied, and the request does not include an alternative statement indicating that the requesting party is willing to pay all fees.
(b)
(c)
(2) In general, when requests are received, Amtrak's FOIA Office will review and categorize them for tracking purposes. Requests within each track will be processed according to date of receipt.
(3) The FOIA Office may contact a requester when a request does not appear to qualify for fast track processing to provide an opportunity to limit the scope of the request and qualify for a faster track. Such notification shall be at the discretion of the FOIA Office and will depend largely on whether it is believed that a narrowing of the request could place the request on a faster track.
(d)
(2) If Amtrak believes that multiple requests submitted by a requester or by a group of requesters acting in concert constitute a single request that would otherwise involve unusual circumstances and the requests involve clearly related matters, the requests may be aggregated. Multiple requests concerning unrelated matters may not be aggregated.
(3) Unusual circumstances that may justify delay include:
(i) The need to search for and collect the requested records from other facilities that are separate from Amtrak's headquarters offices.
(ii) The need to search for, collect, and examine a voluminous amount of separate and distinct records sought in a single request.
(iii) The need for consultation, which shall be conducted with all practicable speed, with agencies having a substantial interest in the determination of the request, or among two or more Amtrak components having a substantial subject-matter interest in the request.
(e)
(f)
(i) Circumstances in which the lack of expedited treatment could reasonably be expected to pose an imminent threat to the life or physical safety of an individual; and
(ii) An urgency to inform the public about an actual or alleged Amtrak activity, if made by a person primarily engaged in disseminating information.
(2) A request for expedited processing may be made at the time of the initial request for records or at a later date.
(3) A requester seeking expedited processing must submit a statement, certified to be true and correct to the best of that person's knowledge and belief, explaining in detail the basis for requesting expedited processing. This statement must accompany the request in order to be considered and responded to within the ten calendar days required for decisions on expedited access.
(4) A requester who is not a full-time member of the news media must
(5) Within ten business days of receipt of a request for expedited processing, Amtrak shall determine whether to grant such a request and notify the requester of the decision. If a request for expedited treatment is granted, the request shall be given priority and shall be processed as soon as practicable.
(6) Amtrak shall provide prompt consideration of appeals of decisions denying expedited processing.
(a)
(b)
(i) A determination to withhold any requested record in whole or in part;
(ii) A determination that a requested record does not exist or cannot be located;
(iii) A denial of a request for expedited treatment; and
(iv) A determination on any disputed fee matter including a denial of a request for a fee waiver.
(2)
(3)
(i) A brief statement of the reason(s) for the adverse determination including any FOIA exemptions applied in denying the request;
(ii) An estimate of the volume of information withheld (number of pages or some other reasonable form of estimation). An estimate does not need to be provided if the volume is indicated through deletions on records disclosed in part, or if providing an estimate would harm an interest protected by an applicable exemption;
(iii) A statement that an appeal may be filed under § 701.10 and a description of the requirements of that section and of the right of the requesting party to seek dispute resolution services from either Amtrak's FOIA Public Liaison or the Office of Government Information Services (OGIS); and
(iv) The name and title or position of the person responsible for the denial.
(a)
(b)
(1)
(2)
(c)
(d)
(e)
(1) The information has been designated in good faith by the submitter as information considered protected from disclosure under Exemption 4; or
(2) Amtrak has reason to believe that the information may be protected from disclosure under Exemption 4.
(f)
(1) A detailed written statement must be submitted to Amtrak if the submitter has any objection to disclosure. The statement must specify all grounds for withholding any specified portion of the information sought under the FOIA. In the case of Exemption 4, it must show why the information is a trade secret or commercial or financial information that is privileged or confidential.
(2) Unless otherwise specified, in the event that a submitter fails to respond within the time specified in the notice, the submitter may, in Amtrak's discretion, be considered to have no objection to disclosure of the information sought under the FOIA.
(3) Information provided by a submitter in response to the notice may be subject to disclosure under the FOIA.
(g)
(1) A statement of the reason(s) why each of the submitter's objections to disclosure was not sustained;
(2) A description of the information to be disclosed; and
(3) A specified disclosure date, which shall be a reasonable time subsequent to the notice as determined by Amtrak in its sole discretion.
(h)
(1) Amtrak determines that the information should not be disclosed;
(2) The information has been published or has been officially made available to the public;
(3) Disclosure of the information is required by law (other than the FOIA);
(4) The designation made by the submitter under paragraph (c) of this section appears obviously frivolous. In such a case, Amtrak shall, prior to a specified disclosure date, give the submitter written notice of the final decision to disclose the information; or
(5) The information requested is not designated by the submitter as exempt from disclosure in accordance with this
(i)
(j)
(2) When Amtrak notifies a submitter of its intent to disclose requested information under paragraph (g) of this section, Amtrak shall also notify the requester(s).
(3) When a submitter files a lawsuit seeking to prevent the disclosure of business information, Amtrak shall notify the requester(s).
(a)
(i) A decision to withhold any requested record in whole or in part;
(ii) A determination that a requested record does not exist or cannot be located;
(iii) A denial of a request for expedited treatment; or
(iv) Any disputed fee matter or the denial of a request for a fee waiver.
(2) The appeal must be addressed to the President and Chief Executive Officer, in care of the Chief Legal Officer and General Counsel; National Railroad Passenger Corporation; 60 Massachusetts Avenue NE., Washington, DC 20002.
(3) The appeal must be in writing and specify the relevant facts and the basis for the appeal. The appeal letter and envelope should be marked prominently that it is a Freedom of Information Act or “FOIA” appeal to ensure that it is properly routed.
(4) The appeal must be received by the President's Office within ninety days of the date of denial.
(5) An appeal will not be acted upon if the request becomes a matter of FOIA litigation.
(b)
(1) A decision upholding an adverse determination in whole or in part shall contain a statement of the reason(s) for such action, including any FOIA exemption(s) applied. The requesting party shall also be advised of the provision for judicial review of the decision contained in 5 U.S.C. 552(a)(4)(B).
(2)
(3) If the adverse determination is reversed or modified on appeal in whole or in part, the requesting party shall be notified, and the request shall be reprocessed in accordance with the decision.
(c)
(a)
(b)
(1)
(2)
(3)
(4)
(c)
(1)
(2)
(3)
(4)
(5)
(d)
(1)
(2)
(3)
(e)
(2)
(3)
(4)
(5)
(6)
(f)
(g)
(2)
(3)
(4)
(h)
(i)
(2) Where a requester has previously failed to pay a properly charged FOIA fee within thirty (30) days of the date of billing, Amtrak may require the full amount due plus applicable interest and an advance payment of the full amount of anticipated fees before beginning to process a new request or continuing to process a pending request. The time limits of the FOIA will begin only after Amtrak has received such payment.
(3) Amtrak will hold in abeyance for thirty days requests where deposits are due.
(4) Monies owed for work already completed (
(5) Amtrak shall not deem a request as being received in cases in which an advance deposit or payment is due, and further work will not be done until the required payment is received.
(j)
(k)
(2)
(i) It is likely to contribute significantly to public understanding of the operations or activities of Amtrak, and
(ii) It is not primarily in the commercial interest of the requesting party.
(3) To determine whether the fee waiver requirement in paragraph (k)(2)(i) of this section is met, Amtrak will consider the following factors:
(i)
(ii)
(iii)
(iv)
(4) To determine whether the fee waiver requirement in paragraph (k)(2)(ii) of this section is met, Amtrak will consider the following factors:
(i)
(ii)
(5) Requests for a fee waiver will be considered on a case-by-case basis, based upon the merits of the information provided. Where it is difficult to determine whether the request is commercial in nature, Amtrak may draw inference from the requester's identity and the circumstances of the request.
(6) Requests for a waiver or reduction of fees must address the factors listed in paragraphs (k)(3) and (4) of this section. In all cases, the burden shall be on the requesting party to present evidence of information in support of a request for a waiver of fees.
(l)
Nothing in this part shall be construed as entitling any person, as of right, to any service or the disclosure of any record to which such person is not entitled under the FOIA.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule; delay of effective date.
In accordance with the memorandum of January 20, 2017, from the Assistant to the President and Chief of Staff, entitled “Regulatory Freeze Pending Review,” published in the
Effective February 8, 2017, the effective date of the final rule publishing the final List of Fisheries (LOF), which published on January 12, 2017, at 82 FR 3655, is delayed to March 21, 2017.
NMFS published its LOF for 2017, as required by the Marine Mammal Protection Act (MMPA), to reflect new information on interactions between commercial fisheries and marine mammals. NMFS must classify each commercial fishery on the LOF into one of three categories under the MMPA based upon the level of mortality and serious injury of marine mammals that occurs incidental to each fishery. The classification of a fishery on the LOF determines whether participants in that fishery are subject to certain provisions of the MMPA, such as registration, observer coverage, and take reduction plan requirements.
On January 20, 2017, the White House issued a memo instructing Federal agencies to temporarily postpone the effective date for 60 days after January 20, 2017, of any regulations or guidance documents that have published in the
16 U.S.C. 1361
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Final rule; delay of effective date.
In accordance with the memorandum of January 20, 2017, from the Assistant to the President and Chief of Staff, entitled “Regulatory Freeze Pending Review,” published in the
Effective February 8, 2017, the effective date of the final rule amending 50 CFR part 600, that published on January 19, 2017, at 82 FR 6317, is delayed to March 21, 2017.
Karen Abrams, 301-427-8508, or by email:
On January 19, 2017, NMFS published this final rule to interpret and provide guidance on the requirement of the Magnuson-Stevens Fishery Conservation and Management Act (MSA) that all fishery management plans (FMPs), with respect to any fishery, establish a standardized reporting methodology to assess the amount and type of bycatch occurring in a fishery. The final establishes requirements and provides guidance to regional fishery management councils and the Secretary of Commerce regarding the development, documentation, and review of such methodologies, commonly referred to as Standardized Bycatch Reporting Methodologies (SBRMs).
On January 20, 2017, the White House issued a memorandum instructing Federal agencies to temporarily postpone the effective date for 60 days after January 20, 2017, of any regulations or guidance documents that have been published in the
Administrative practice and procedure, Bycatch, Fisheries, Standardized Reporting Methodology.
National Credit Union Administration.
Advance notice of proposed rulemaking.
The NCUA Board (Board) is issuing this advanced notice of proposed rulemaking (ANPR) to solicit comments on alternative forms of capital federally insured credit unions could use in meeting capital standards required by statute and regulation. For purposes of this ANPR, alternative capital includes two different categories: Secondary capital and supplemental capital. Secondary capital is currently permissible under the Federal Credit Union Act (Act) only for low-income designated credit unions to issue and to be counted toward both the net worth ratio and the risk-based net worth requirement of NCUA's prompt corrective action standards. The Board is considering changes to the secondary capital regulation for low-income designated credit unions. There are no other forms of alternative capital currently authorized. However, the Board is also considering whether or not to authorize credit unions to issue supplemental capital instruments that would only count towards the risk-based net worth requirement.
Comments must be received on or before May 9, 2017.
You may submit comments by any one of the following methods (Please send comments by one method only):
•
•
•
•
•
Steve Farrar, Supervisory Financial Analyst, at (703) 518-6360; or Justin Anderson, Senior Staff Attorney, Office of General Counsel, at (703) 518-6540. You may also contact them at the National Credit Union Administration, 1775 Duke Street, Alexandria, Virginia 22314.
At its October 2016 meeting, the Board held a public briefing on the topic of alternative capital for credit unions. This ANPR provides relevant background information and seeks comment on a broad range of considerations with respect to alternative capital for federally insured credit unions. This ANPR addresses topics including: (1) NCUA's authority to include alternative capital for prompt corrective action purposes; (2) credit unions' authority to issue alternative forms of capital; (3) prudential standards regarding the extent to which various forms of instruments would qualify as capital for prompt corrective action purposes and credit union eligibility for the sale of alternative capital; (4) the utility and suitability of supplemental capital for credit unions; (5) standards for investor protection, including disclosure requirements and investor eligibility criteria for the purchase of alternative capital; (6) implications of securities law for supplemental and secondary capital; (7) potential implications for credit unions, including the credit union tax exemption; and (8) overall regulatory changes the Board would need to make to permit supplemental capital, improve secondary capital standards, and provide or modify related supporting authorities. The Board has posed a number of specific questions on these and other topics, but invites comments on any and all aspects of alternative capital.
In 1998, Congress passed the Credit Union Membership Access Act (CUMAA) which amended the Act to mandate a system of prompt corrective action for federally insured natural person credit unions (credit unions).
The Act defines a credit union's capital level based on a net worth ratio requirement for all credit unions and a risk-based net worth requirement for credit unions the Board defines as
• The retained earnings balance of the credit union, as determined under generally accepted accounting principles, together with any amounts that were previously retained earnings of any other credit union with which the credit union is combined;
• Secondary capital of a low-income designated credit union that is uninsured and subordinate to all other claims of the credit union, including the claims of creditors, shareholders, and the Share Insurance Fund; and
• Certain assistance provided under section 208 of the Act pursuant to NCUA regulations.
As noted above, per the Act, secondary capital is currently only permissible for low-income designated credit unions to issue and to be counted toward the net worth ratio. NCUA also counts secondary capital issued by low-income designated credit unions as net worth for the risk-based net worth ratio.
The Board notes that, NCUA cannot change the Act's definition of net worth—only Congress can. However, the Board has broad discretion in designing the risk-based net worth requirement. Thus, it is possible for the Board to authorize a credit union that is not low-income designated to issue alternative capital instruments that would count towards satisfying the risk-based net worth requirement—but not the net worth ratio. (See the discussion of legal authority in Section IV). For purposes of this ANPR, the term supplemental capital includes any form of capital instruments credit unions that are not designated as low-income might be authorized to issue and count only for inclusion in the risk-based net worth requirement.
The risk-based net worth requirement for federally insured credit unions is based on a risk-based net worth ratio calculation in Part 702 of NCUA's Rules and Regulations.
During the risk-based capital rulemaking process, the Board asked for stakeholder input on supplemental capital. Specifically, in the January 2015 risk-based capital (RBC) proposal the NCUA Board posed the following six questions:
1.
2.
3.
4.
5.
6.
In response to these questions, a majority of the commenters who addressed supplemental capital stated that it was imperative that the Board consider allowing credit unions access to additional forms of capital. The commenters suggested credit union authority to issue supplemental capital was particularly important as credit unions are at a disadvantage in the financial market because most lack access to additional capital outside of retained earnings. While none of the commenters offered specific suggestions on how to implement supplemental capital, a few did suggest that the Board should promulgate broad, non-prescriptive rules to allow credit unions maximum flexibility in issuing supplemental capital.
As the Board did not receive comments with sufficient detail in response to the RBC proposal, the Board is again posing the six questions listed above for commenters to consider and address. Throughout this ANPR, the Board will expand on these six questions and ask more specific questions about the structure, form, regulations, and requirements related to supplemental capital, as well as relevant changes and improvements to secondary capital. The Board encourages all stakeholders to address in detail as many of these questions as possible and provide the Board with specific comments and responses. The Board intends these questions to be a starting point for commenters to present their thoughts, but invites comments on all aspects of alternative capital
Throughout this ANPR the Board discusses several complex topics and uses terms to refer to specific forms of capital. In addition to supplemental, secondary, and alternative capital, the Board will use the term “regulatory capital” when referring to financial instruments issued by credit unions or banks, that include both equity and debt, and other financial statement account which meet the criteria contained in regulations for inclusion in the calculation of capital adequacy measures.
The Act's definition of net worth states that secondary capital must be “uninsured and subordinate to all other claims of the credit union, including the claims of creditors, shareholders, and the Share Insurance Fund.”
NCUA's rules and regulations also contain various provisions addressing the prudent and appropriate issuance and use of secondary capital by low-income designated credit unions. These provisions are as follows:
• Low-income designed credit unions:
○ May only accept secondary capital accounts from non-natural person members and non-natural person nonmembers.
○ Must submit and receive approval by NCUA of a Secondary Capital Plan.
○ Must execute a Disclosure and Acknowledgement statement.
• A secondary capital account:
○ Must be uninsured;
○ Have a minimum maturity of five years with a reduction in the recognition of the net worth value of accounts with less than five years of remaining maturity;
○ Must be subordinate to all other claims, including those of shareholders, creditors and the Share Insurance Fund;
○ Must be available to cover operating losses that exceed net available reserves and to extent losses are applied the accounts must not be restored;
○ Cannot be pledged by investors as security on a loan;
○ Are subject to restrictions of dividends as provided in prompt corrective action; and
○ May only in certain circumstances be redeemed early and only with prior NCUA approval.
The regulations allow NCUA to prohibit a low-income designated credit union classified as critically undercapitalized from paying principal, dividends, or interest on secondary capital. This provision is to ensure secondary capital is available to cover losses while the low-income designated credit union is operating as a going concern. These payment restrictions are consistent with limitations on principal and interest payments imposed by the federal banking regulators for subordinated debt issued by banks.
Further, due to the fact that secondary capital is not a permanent form of capital, NCUA's regulations reduce the portion of secondary capital that is included in the net worth ratio as it approaches maturity. Once the remaining maturity is less than five years, the regulations require low-income designated credit unions to discount how much a secondary capital account contributes to the credit union's net worth value based on the following schedule:
Since 2006, low-income credit unions may request NCUA approval to redeem the portion of secondary capital no longer included in net worth if:
• The credit union will have a post-redemption net worth classification of at least adequately capitalized;
• The discounted secondary capital has been on deposit at least two years; and
• The discounted secondary capital will not be needed to cover losses prior to the final maturity date.
With respect to secondary capital, the Board specifically seeks comments on the following:
• Whether or not to permit a low-income designated credit union to sell secondary capital to non-institutional investors (
• Allowing for broader call options for the low-income designated credit union, other than just the portion no longer counting as net worth and subject to NCUA approval, if provided for in the secondary capital contract.
• Relaxation of pre-approval of issuing secondary capital if a low-income designated credit union meets certain conditions such as being at least adequately capitalized and having prior experience issuing secondary capital.
• Inclusion of more flexibility to fund dividend payments as an operating loss if provided for in the contract.
• Any other prudential restrictions on secondary capital that should be considered.
• Reorganization of the regulation to improve clarity by moving to part 702 (Prompt Corrective Action) all matters related to how the instrument must be structured to qualify for capital treatment. This would move these conditions to the section of NCUA rules and regulations applicable to all insured natural person credit unions, and leave the provisions specific to federal credit union issuance authority in Part 701.
This section provides information on community bank use of subordinated debt and low-income designated credit unions' use of secondary capital. This section also provides information on the projected impact of risk-based capital standards on complex credit unions to estimate the potential need for supplemental capital for risk-based net worth requirement purposes. This information provides a basis for estimating the potential for use of supplemental capital, the purpose of its use, the potential purchasers, and the related costs. The Board is interested in receiving comments concerning projections on the volume of supplemental capital that credit unions would be likely to issue. The Board also seeks specific comments on the structures of supplemental capital instruments that would be beneficial, why credit unions will issue supplemental capital, and how it fits into the credit union's business model. The Board is also interested in any comments about who will purchase supplemental capital. Since the costs associated with supplemental capital are significant to the issuing credit union, the Board seeks comments on how any regulations should address the issue of the cost of the instrument and any items that may be helpful in reducing the cost while maintaining adequate protection for investors and the Share Insurance Fund.
Community bank use of subordinated debt increased in 2016. As of June, 30, 2016, the amount outstanding was $831 million compared to $479 million as of December 31, 2016.
• Facilitate mergers and acquisitions;
• Redemption of preferred stock held by the U.S. Treasury Department due to increasing costs; and
• Fund organic growth.
While the interest rate paid on community bank subordinated debt can vary significantly, generally the interest
As of June 30, 2016, there were 2,426 low-income designated credit unions. Only 73 low-income designated credit unions (about 3 percent) report total outstanding secondary capital of $181 million.
The $181 million in outstanding secondary capital equates to 13 percent of the total net worth of the low-income designated credit unions that issued it—with an average balance of about $2.5 million. However, outstanding secondary capital is concentrated in four low-income designated credit unions, which hold 74 percent of the total secondary capital outstanding. When excluding these four low-income designated credit unions, the average amount of secondary capital is under $700,000 per low-income designated credit union. The interest rate paid by the four largest holders of the outstanding secondary capital ranges from 0.14 percent to 3.5 percent.
Secondary capital does, however, significantly benefit a low-income designated credit union's net worth ratio. The secondary capital adds an average of nearly 300 basis points to the net worth ratio, which brings the average from just below 7 percent to near 10 percent. Out of the 73 low-income designated credit unions with secondary capital, 66 have a net worth ratio greater than the well capitalized 7 percent level. Without the secondary capital, 25 of the 66 would have a net worth ratio less than 7 percent.
The Board notes that low-income designated credit unions that have issued secondary capital have a higher failure rate than other low-income designated credit unions. The average annual failure rate for low-income designated credit unions with secondary capital was 2.9 percent from 2000-2013, compared to 0.8 percent for low-income designated credit unions without secondary capital during the same period.
• Poor due diligence, inaccurate cost benefit analysis and weak strategic planning in connection with establishing and expanding member service programs funded by secondary capital.
• Concentrations of secondary capital to support unproven or poorly performing programs.
• Failure to realistically assess and timely curtail programs not meeting expectations.
• Use of secondary capital solely to delay prompt corrective action.
• Insufficient liquidity to repay secondary capital at maturity.
The potential use of supplemental capital is difficult to predict due to the probable changes in market factors such as interest rates, demographics, and competition. Since supplemental capital would only increase a credit union's risk-based capital ratio, the most likely users would be those credit unions with net worth ratios above the well capitalized level but with a risk-based capital below or near the minimum needed to be well capitalized.
The following table contains an estimate of the number of credit unions likely to issue supplemental capital and the potential amount of supplemental capital that might be issued. Using Call Report data as of December 31, 2015, applied to FICUs with more than $100 million in assets,
The Board
In addition to the Act's requirements related to the net worth ratio, the Act requires the Board to design “a risk-based net worth requirement for credit unions defined as complex.”
While the Act defined the term “net worth,” it did not define the risk-based net worth requirement, nor how to calculate any corresponding risk-based ratio. In contrast to the narrow definition of net worth, the lack of a statutory prescription for the risk-based net worth requirement gives the Board the latitude to include within that requirement items that would not meet the statutory definition of “net worth” but otherwise serve as capital in protecting the Share Insurance Fund from losses when a credit union fails. Given the statutory objective of prompt corrective action “to resolve the problems of insured credit unions at the least possible long-term loss” to the Share Insurance Fund, the Board believes it should explore expanded options for credit unions to build capital beyond retained earnings.
For a credit union defined as complex to be classified well capitalized, the Act requires the credit union to have a net worth ratio of 7 percent or greater (6 percent for adequately capitalized) and to meet the applicable risk-based net worth requirement. Starting in January 2019, the risk-based net worth requirement will require the risk-based capital ratio to be 10 percent or greater to be well capitalized (8 percent for adequately capitalized). The Act classifies a credit union as undercapitalized if it is unable to achieve the applicable risk-based net worth requirement, even if it has a high net worth ratio, thus subjecting the credit union to the corresponding prompt corrective action supervisory consequences.
The authority for low-income designated credit unions to issue secondary capital is established in the Act. Conversely, there is no express authority for credit unions not designated as low-income to issue alternative forms of capital. However, the Act does provide federal credit unions with relatively broad authority to borrow from any source in accordance with such rules and regulations as may be prescribed by the Board.
Supplemental capital and secondary capital are similar in that, for federal credit unions, both are uninsured accounts issued as borrowings and subject to applicable statutory borrowing limits. Secondary capital, however, is included in the statutory definition of net worth and counts towards both the net worth ratio and the risk-based net worth requirement. Supplemental capital is not included the statutory definition of net worth and can only be considered for inclusion in the computation of the risk-based net worth requirement.
Supplemental capital would have to be subordinate to the Share Insurance Fund and uninsured shareholders in the payout priorities. However, since secondary capital, per the Act, must be subordinate to all other claims, supplemental capital would be senior to secondary capital in the payout priorities. Credit unions issuing supplemental capital could be provided flexibility to include payment priority structures within or between supplemental capital instruments to enhance investors' interests.
The Board is considering expanding the borrowing rule to clarify this authority for federal credit unions. As noted above, the Act states that federal credit unions may “borrow, in accordance with such rules and regulations as may be prescribed by the Board, from any source.” Currently, NCUA's regulations only contain a rule addressing when federal credit unions borrow from natural persons. Given that the wording of the Act could suggest a federal credit union's borrowing authority is contingent on rules and regulations prescribed by the Board, it may appear to investors that federal credit unions are restricted to only borrowing from natural persons. While the Board disagrees with this reading of the Act, the Board is concerned that some supplemental capital investors may question a federal credit union's authority to issue supplemental capital instruments to anyone other than natural persons. Clarity and certainty about a federal credit union's borrowing authority may be important to the sale of supplemental capital—by expanding the potential investor base and reducing unnecessary transaction complications. With respect to this topic, the Board is interested in commenter's views on whether the Board should promulgate a more comprehensive borrowing rule as part of any authorization of supplemental capital, and what the rule should address.
The authority under which a federally insured state chartered credit union could issue alternative capital instruments is distinct from whether and to what extent NCUA, as insurer, would recognize it as regulatory capital for prompt corrective action purposes. A federally insured state chartered credit union's authority to issue supplemental capital would be derived from applicable state law and regulation regarding its ability to issue liability and equity instruments. Such state laws may be narrower or broader than those for federal credit unions. Recognition as regulatory capital will depend on the characteristics of the instrument and its availability to protect the Share Insurance Fund—which would be based on uniform criteria that apply to all federally insured credit unions. (
For federal credit unions, the Act limits the aggregate amount of borrowed funds to 50 percent of paid-in and unimpaired capital and surplus.
The Board recognizes that supplemental capital could have an impact on the credit union tax exemption. The Act specifically exempts federal credit unions from taxation by the United States or by any State or local taxing authority, except real and personal property taxes.
Unlike federal credit unions, the Act does not exempt federally insured state chartered credit unions from taxation. Federally insured state chartered credit unions are exempt from federal income tax under § 501(c)(14)(A) of the Internal Revenue Code. Section 501(c)(14)(A) of the Internal Revenue Code provides for exemption from federal income taxes for state credit unions
The Board also invites comments on the potential effect supplemental capital may have on the mutual ownership structure and governance of credit unions. The Board invites comments on how it should structure any potential rule to avoid issues impacting the mutuality of credit unions, and the members' rights to govern the affairs of the institution. Specifically, the Board invites comments on restrictions it might impose on characteristics of supplemental capital to avoid these issues, such as: Non-voting and limits on covenants in the investment agreement that may give investors levels of control over the credit union.
The Board believes that both secondary and supplemental capital would be considered securities for purposes of state and federal securities laws. The Board invites comment on this topic and its relationship to credit unions issuing securities as supplemental capital.
Being subject to securities laws can impose requirements on the issuer to register with the Securities Exchange Commission (SEC), issue SEC mandated disclosures, and comply with the SEC's broad anti-fraud rules. The Board, however, is aware that there are two exemptions that would likely be available to credit unions:
• Section 3(a)(5) of the Securities Act, which is available to certain types of financial institutions, including credit unions, for the issuance of any type of security to any type of investor;
• Rule 506 under Regulation D under the Securities Act, which is available to any entity offering any type of security, provided that purchasers of the securities are “accredited investors” (although sales to a limited number of investors who are not accredited are also possible under certain circumstances).
While these exemptions are likely to relieve credit unions of the requirements to register with the SEC and issue SEC mandated disclosures, there are a number of other issues that credit unions must consider and comply with before issuing any instrument that would be considered a security. The Board briefly addresses each of these issues below.
Regardless of any exemption from registration and disclosure, credit unions issuing alternative capital must still comply with the SEC's broad anti-fraud regulations.
(a) Regulation D relates to transactions exempted from the registration requirements of section 5 of the Securities Act of 1933 (the Act) (15 U.S.C. 77a
It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security.
The primary intent of Rule 10b-5 and, more broadly, the anti-fraud provisions of the Securities Act of 1933 (Securities Act) and Exchange Act, is to prevent fraud, deceit, and incorrect or misleading statements or omissions in the offering, purchase and sale of securities. Given that intent, clear and complete disclosure is the critical factor in ensuring the anti-fraud provisions of the Securities Act and Exchange Act are not breached in any offering by credit unions, regardless of whether the offering is registered with the SEC under the Securities Act or exempt from registration.
In the absence of SEC-mandated disclosure delivery requirements, the practical concern for credit unions relying on either the Section 3(a)(5) or Regulation D, Rule 506 exemption is determining what type and amount of disclosure is appropriate to meet the anti-fraud standards. The Board is aware that the amount of disclosure varies depending on multiple factors, including:
• The nature of the potential investors (focusing on their level of sophistication);
• The nature of the security being offered (focusing on the complexity of the instrument);
• The nature of the business of the issuer and the industry in which the issuer operates (focusing on the complexity of the business or industry); and
• Market practices (focusing on the types of disclosure commonly provided by peer companies).
In addition, the Board is aware that for any disclosure to meet the standards of Rule 10b-5, the disclosure must not contain any untrue statement of a material fact and must not omit to state a material fact, the absence of which renders any disclosure being made misleading. Further, the disclosure must be clear, accurate and verifiable, and should cover topics that are typically important to investors in making an investment decision, including:
• Material risks relating to the issuer and the industry in which the issuer operates;
• Material risks relating to the security being offered;
• The issuer's planned uses for the proceeds of the offering;
• Regulatory matters impacting the issuer and its operations;
• Tax issues associated with the security being offered; and
• How the securities are being offered and sold, including any conditions to be met in order to complete the offering.
The Board is also aware that the Office of Comptroller of the Currency (OCC) promulgated regulations that require supervised banks issuing securities to register directly with the OCC and issue OCC mandated disclosures. The OCC mandated disclosures are very similar to those required by the SEC.
• Should the Board require credit unions issuing alternative capital to register with NCUA?
• How could NCUA protect the Share Insurance Fund against potential anti-fraud claims that could impair the alternative capital's ability to cover losses?
• Should the Board mandate disclosures all credit unions issuing alternative capital must provide to investors? If the Board should mandate disclosures, should it base them on the SEC's, the OCC's, or create a unique set of disclosures for credit unions? If the Board creates a unique set of disclosures, what should it include in those disclosures? Should the level of disclosures vary based on the level of the investor (institutional, accredited, natural person)?
• Should the Board require credit unions to develop policies and procedures to ensure ongoing compliance with anti-fraud requirements before it begins issuing alternative capital?
The Board is also aware that there may be potential broker-dealer registration issues related to secondary and supplemental capital. Specifically, marketing activities by a credit union and its employees could require the credit union to register as a broker-dealer. While there are exemptions available to credit unions and their employees, the Board notes that these exemptions are complex and require a thorough evaluation of a credit union's practices and the activities of its employees. If a credit union or its employees fail to qualify for an exemption, the credit union or employee could be required to register as a broker-dealer or face penalties for failure to comply with applicable rules. The Board has previously stated that federal credit unions are not permitted to register as broker-dealers.
In addition, it is unlikely that credit unions and their employees would be subject to investment adviser registration requirements. The Board notes that certain marketing activities and relationships with other credit unions could raise investment adviser requirements. The Board, therefore, invites comments on this issue and if NCUA should require credit unions to have policies and procedures to ensure their activities do not trigger investment adviser registration requirements.
First, certain provisions of the Securities Act and SEC rules have preempted state securities laws with respect to most covered securities. However, states may require issuers to register with the state and/or pay state registration fees. Further, states may also pursue fraud-based claims. The Board invites comment on how it should ensure that any credit union issuing alternative capital has considered and complied with all applicable state laws.
The Board also notes that issuing securities can affect a credit union's director and officer liability coverage. A lack of coverage could not only impair the credit union, but also threaten the Share Insurance Fund in the event there are losses that the credit union is ultimately responsible for. Before engaging in supplemental or secondary capital activities, therefore, credit unions will need to evaluate coverage to
A credit union will need to address contractual provisions between the credit union and its investors. Often these provisions will include requiring ongoing communications with investors, reporting of compliance with the contractual covenants, and sharing of information with current and prospective investors. Credit unions will have to develop policies and procedures to comply with these covenants and provisions and ensure that they are not providing non-public information to investors that is not generally available to all investors. Failure to comply with the investment contracts or to properly monitor communications and sharing of information could subject the credit union to liability, which could negatively impact the Share Insurance Fund. As such, the Board requests comment on if it should mandate comprehensive policies addressing compliance with investment contracts, communications, and information sharing. The Board invites commenters to provide suggestions on the specific details that should be in the policy and if sufficient policies should be a prerequisite to engaging in supplemental or secondary capital activities.
Section 701.34(b) of NCUA's regulations limits eligible investors in secondary capital to institutional investors, referenced as non-natural persons.
From an investor protection standpoint, the issue of limiting the sale of secondary capital and supplemental capital largely focuses on providing adequate protections to the purchasers through the issuance of initial disclosures, transparency standards with respect to reporting of information about the operations and performance of the credit union, and whether the purchaser has the necessary sophistication relative to the complexity and risk of the instrument. As discussed in more detail in the Section V, Securities Law Applicability, of this ANPR, the OCC requires banks issuing subordinated debt to comply with the securities offering disclosure rules in its regulations.
The issue of permissible investors is also related to anti-fraud considerations. As noted above, the level of disclosures necessary to comply with anti-fraud rules varies, in part, on the level of sophistication of the investors. In practice, selling to non-sophisticated investors would likely involve a much higher initial and ongoing disclosure and communications burden for credit unions.
Thus, the Board requests comment on whether the sale of secondary and supplemental capital should be limited to only institutional investors, include accredited investor, or allow for anyone to purchase. If the Board were to allow credit unions to sell alternative capital to non-accredited investors, should there be limits on the amount individual investors can purchase? Also, should there be conditions on how the sale to non-accredited investors must be handled to minimize potential confusion about its lack of federal insurance?
Whether credit unions that are not low-income designated should be able sell supplemental capital instruments to nonmembers with equity like characteristics is a matter relevant to considerations about the mutual model of credit unions. The Board requests comments on the extent to which credit unions should be allowed to sell alternative capital with equity like characteristics to nonmembers, and if so, what controls are necessary to preserve the mutual ownership structure and democratic governance of credit unions. The Board invites comments on how it should structure any potential rule to avoid issues impacting the mutuality of credit unions, and the members' rights to govern the affairs of the institution.
For a financial instrument to be considered regulatory capital for prompt corrective action purposes, NCUA must consider the instrument's degree of permanence, capacity to absorb losses as a going concern, the flexibility of principal and interest payments, and intended use of the proceeds. These characteristics are consistent with the Basel Tier 2 capital criteria.
The function of supplemental capital is to protect the credit union and the Share Insurance Fund in the event of loss. Supplemental capital, therefore, must be able to absorb losses ahead of the Share Insurance Fund while not conferring control of the credit union to the investor. The instruments must be uninsured and cannot be guaranteed or secured by the credit union or its assets. These features ensure supplemental capital fulfils its ultimate purpose and does not result in unintended encumbrances to the credit union or the Share Insurance Fund.
The degree of permanence is important because the instrument must create sufficient stability in the credit union's capital base to be available to cover losses over a long time period. This is the reason for the minimum five year maturity contained in the Basel accords, the U.S. banking capital regulations, and for secondary capital
The alternative capital must be able to absorb losses while the institution is still a going concern, and not just in the case of liquidation. The existing regulatory language regarding secondary capital requires that it is available to “cover operating losses.”
Further, the payment of interest on the instruments must be capable of being cancelled on a permanent, noncumulative basis without constituting a default. The interest provisions must also not contain any feature which would provide incentive for the credit union to exercise a call option, such as a large increase in the interest rate. The flexibility of payments ensures investors cannot obviate any risk exposure to their principal through problematic dividend and interest provisions. These criteria are consistent with the criteria for inclusion in Tier 2 capital used by the other banking regulators
Because of these characteristics, most alternative capital instruments can have relatively low liquidity for the purchaser and there is no guarantee of a secondary market. These characteristics also impact the interest rate the credit union must pay for alternative capital. The Board seeks comment on how to maintain protection of the Share Insurance Fund while minimizing the impact the criteria would have on the cost and marketability of the alternative capital instruments.
The Board is considering including an application and notice requirement in any supplemental capital regulations it may issue.
The Board notes that currently NCUA requires a low-income designated credit union to submit a “Secondary Capital Plan” prior to the acceptance of secondary capital that includes:
• The maximum aggregate amount of secondary capital the low-income designated credit union plans to accept;
• The purpose for which the secondary capital will be used and how it will be repaid;
• Demonstration that the uses of the secondary capital conform to the low-income designated credit union's strategic plan, business plan, and budget; and
• Supporting pro forma financial statements covering a minimum of two years.
The account agreement associated with any alternative capital needs to conform to the standards that ensure it protects the Share Insurance Fund and provide the credit union with flexibility in conducting its daily affairs. The secondary capital regulation currently requires that the low-income designated credit union retain the original account agreement and the “Disclosure and Acknowledgment” for the term of the agreement.
For all forms of alternative capital, the Board seeks comments on the utility of a prior approval process and a post-issuance notification process. The Board can also consider under what conditions prior approval would not be necessary, such as credit unions that are well capitalized with a successful history of issuing alternative capital. When prior approval would be necessary, however, the Board requests comments on what should be required in an application for authority to issue alternative capital, and how long the credit union would have to issue the alternative capital after approval. In addition, the Board request comment on the evaluation criteria NCUA should use to approve or deny the application, including whether or not certain credit unions that are already in danger of failing should be precluded from issuing alternative capital as a form of investor protection. Also, the Board seeks comment on the manner of and what should be included in any post-issuance notice credit unions would file with NCUA.
Secondary capital must be subordinate to all other claims per the Act.
Unlike secondary capital, supplemental capital is not subject to provisions in the Act that limit flexibility in structuring payment priorities within and between supplemental capital instruments. For example, a credit union could issue a supplemental capital instrument with
While supplemental capital can protect the Share Insurance Fund and uninsured shares from losses, reliance on alternative capital as the primary source of capital is generally unsafe and unsound. Even with a high level of permanent capital, such as retained earnings and common stock, heavy reliance on alternative capital can result in wide fluctuations in capital measures due to the timing of its maturity and negative impact on earnings due to the associated costs.
U.S. bank capital regulations require banks to hold minimum levels of common equity tier 1 capital, total tier 1 capital, and total tier 1 and tier 2 capital to total risk assets that ensures that permanent capital is generally the primary source of regulatory capital.
• A common equity tier 1 capital ratio of 4.5 percent;
• A tier 1 capital ratio of 6 percent;
• A total capital ratio of 8 percent; and
• A leverage ratio of 4 percent.
Additionally to be classified as well capitalized a bank must have:
• A total risk-based capital ratio of 10.0 percent or greater;
• A Tier 1 risk-based capital ratio of 8.0 percent or greater;
• A common equity tier 1 capital ratio of 6.5 percent or greater; and
• A leverage ratio of 5.0 percent or greater.
As a result, banks are inherently limited in how much Tier 2 forms of capital will be included in meeting their regulatory capital standards. Most forms of alternative capital likely available to credit unions will be in the form of subordinated debt—which does not meet the standards to qualify as Tier 1 capital.
Neither the Act nor NCUA regulations limit the amount of secondary capital that can make up a low income designated credit union's net worth. Given their unique needs and mission, low-income designated credit unions can primarily rely on secondary capital to meet prompt corrective action requirements, provided their use of the proceeds and overall ongoing management of their secondary capital is otherwise safe and sound. However, the Board believes any regulation for supplemental capital needs to contain some method of preventing supplemental capital, a lower quality of capital, from becoming the primary component of regulatory capital for credit unions. The Board seeks comments on how capital regulations could be designed to limit the amount of supplemental capital included in regulatory capital calculations.
Consistent with Basel, U.S. bank capital standards,
The Board also notes that changing conditions and circumstances may warrant early repayment of alternative capital, in part or in whole. The decision on early repayment must reside with the issuing credit union and not the holder of the instrument, to ensure the permanence of the instrument and prevent undue influence by investors. Currently the secondary capital regulations only allow for early redemption of the amount of secondary capital that is not recognized as net worth, with approval by NCUA.
Regulatory controls over early repayment are necessary to protect the Share Insurance Fund and uninsured shares. Regulatory controls over early repayment are also consistent with the Basel framework for subordinated debt and the other banking agencies' regulations, which provide control over the early repayment of subordinated debt by:
• Requiring all banks to obtain prior approval to prepay or call subordinated debt included in tier 2 capital.
• Prohibiting the holder of subordinated debt from having a contractual right to accelerate principal or interest payments in the instrument, except in the event of a receivership, insolvency, liquidation, or other similar proceeding.
• Prohibiting the exercise of a call option in the first five years following issuance, except in certain very limited circumstances.
Enabling regulations for supplemental capital will need to address the issue of prepayment and call provisions for supplemental capital. The options regarding the abilities of a credit union to prepay supplemental capital could include minimum capital measures after repayment, current and expected future performance measures and notice criteria of varying degrees. The Board invites comments on the topic of prepayment and call provisions for alternative capital and how it should structure any related requirements. Allowing credit unions greater flexibility to eliminate the cost of alternative capital or reprice the instrument under better terms could provide benefits to the credit union. Any alternative to the redemption process would be contingent on the credit union no longer relying on the alternative capital to achieve an appropriate level of capital.
Regulations for alternative capital need to address reciprocal holdings. Reciprocal holdings exist when two or more credit unions hold each other's alternative capital. Reciprocal holdings
The Board notes a national bank or federal savings association must deduct investments in the capital of other financial institutions it holds reciprocally, where such reciprocal cross holdings result from a formal or informal arrangement to swap, exchange, or otherwise intent to hold each other's capital instruments, by applying the corresponding deduction approach.
Per the current regulation, in the event of merger of a low-income designated credit union (other than merger into another low-income designated credit union) the secondary capital accounts will be closed and paid out to the investor to the extent they are not needed to cover losses at the time of merger or dissolution. The OCC prohibits a covenant or provision in subordinated debt instruments that requires the prior approval of a purchaser or holder of the subordinated debt note in the case of a voluntary merger where the resulting institution assumes the due and punctual performance of all conditions of the subordinated debt note and where the agreement is not in default of the various other covenants.
In order to avoid any perceptions of an alternative capital holder having ownership rights, any restrictions on merger or other change of control must not interfere with the credit union's ability to exercise its business judgement and management of the credit union in a manner that avoids unsafe and unsound practices. The Board seeks comment on the issue of merging credit unions and how alternative capital should be treated post-merger.
Supplemental capital must not contain contractual terms that would limit or impede the authority of NCUA or a State Supervisory Authority to undertake supervisory action, as necessary, to protect the issuing credit union's members or the Share Insurance Fund. Any such contractual terms would impose unsafe and unsound limits on the credit union's and regulators' ability to manage the institution and address problems. Affirmative covenants within the supplemental capital note or agreement must not restrict operations or potentially require a credit union to violate a law or regulation. Negative covenants should not unreasonably impair the credit union's flexibility in conducting its operations or interfere with management. Without these restrictions, contractual terms could undermine the purpose of supplemental capital and provide holders of these obligations with unintended rights and control over the credit union's operations. Any representation or warranties contained in the agreements that would require acceleration and repayment of the subordinated debt note because of a technical violation that does not reflect underlying credit issues could be contrary to safety and soundness. The Board seeks comments on the issue of contractual restrictions for alternative capital instruments.
Due to the potential use of alternative capital as a funding source similar to public units and nonmembers, the NCUA Board is seeking comment on § 701.32 of NCUA's regulations as it prescribes limits placed on these accounts.
Section 1757(6) of the FCU Act grants federal credit unions the power “to receive from its members, from other credit unions, from an officer, employee, or agent of those nonmember units of Federal, Indian tribal, State, or local governments and political subdivisions thereof enumerated in section 1787 of this title and in the manner so prescribed, from the Central Liquidity Facility, and from nonmembers in the case of credit unions serving predominately low-income members (as defined by the Board) payments, representing equity, on—(A) shares which may be issued at varying dividend rates; (B) share certificates which may be issued at varying dividend rates and maturities; and (C) share draft accounts authorized under section 1785(f) of this title; subject to such terms, rates, and conditions as may be established by the board of directors, within limitations prescribed by the Board.”
Currently the regulation limits total public unit and nonmember shares to 20 percent of the total shares of the federal credit union or $3 million, whichever is greater.
• Adopt a specific written plan concerning the intended use of these shares and provide it to the Regional Director before accepting the funds; and
• Submit a written request to the Regional Director for a new maximum level of public unit and nonmember shares.
Under § 741.204, federally insured state chartered credit unions must adhere to the requirements of § 701.32 regarding public unit and nonmember accounts.
Because the limitations the NCUA board may prescribe to these accounts is not statutory, the NCUA Board is interested in comments on revisions to this regulation which would reduce the regulatory burden of the waiver process but still provide for adequate protection of the Share Insurance Fund.
Section 701.34 of NCUA's Rules and Regulations sets out the requirements and process for a credit union to receive a low-income designation, the criteria for accepting secondary capital and the inclusion of secondary capital as regulatory capital. NCUA is seeking comment on whether the criteria and process for obtaining the low income designation, the criteria for issuing secondary capital, and the criteria for inclusion of secondary capital as regulatory capital should be in separate regulations.
Section 701.34 could be solely focused on the process to receive a low-income designation. A new section of 701 could be used to address:
• The authority and requirements of secondary capital;
• Grandfathering treatment of existing secondary capital in the event of regulatory changes;
• Requirement to comply with all applicable federal and state laws in the issuance of secondary capital;
• Requirements for written contract agreements covering the terms and conditions of the secondary capital;
• Requirements for disclosures and acknowledgement;
• Investor suitability; and
• Prohibitions.
The items specific to secondary capital's and supplemental capital's inclusion in regulatory capital and related capital adequacy issues could be consolidated into Section 702—Capital Adequacy, including:
• Standards for alternative capital instruments to be counted as regulatory capital;
• Any limits on the amount of alternative capital counted as regulatory capital;
• The role of supplemental capital in approval of a net worth restoration plan;
• Provisions for discounting regulatory capital treatments such as violations of applicable laws or regulation, including any deficiency cure alternatives; and
• Risk weight for an investment in supplemental capital.
To conform the regulatory payout priorities for supplemental capital, the payout priorities for an involuntary liquidation will need to be revised.
The Board seeks comments on any other related changes to existing regulations, such as:
• Modifying the definition of insured shares in 741.4(b) to exclude any equity shares allowed under state law, if they are in fact uninsured;
• Modifying 741.9 to provide for the existence of uninsured accounts issued under state law by FISCUs; and
• Any cohering changes to part 745 as necessary.
Federal Energy Regulatory Commission.
Notice of proposed rulemaking.
The Federal Energy Regulatory Commission proposes to approve Reliability Standard PRC-012-2 (Remedial Action Schemes) submitted by the North American Electric Reliability Corporation. The purpose of proposed Reliability Standard PRC-012-2 is to ensure that remedial action schemes do not introduce unintentional or unacceptable reliability risks to the bulk electric system.
Comments are due April 10, 2017
Comments, identified by docket number, may be filed in the following ways:
• Electronic Filing through
•
1. Pursuant to section 215 of the Federal Power Act (FPA), the Commission proposes to approve proposed Reliability Standard PRC-012-2 (Remedial Action Schemes). The North American Electric Reliability Corporation (NERC), the Commission-certified Electric Reliability Organization (ERO), submitted proposed Reliability Standard PRC-012-2 for approval. The purpose of proposed Reliability Standard PRC 012-2 is to ensure that remedial action schemes (RAS) do not introduce unintentional or unacceptable reliability risks to the bulk electric system. In addition, the Commission proposes to approve the associated violation risk factors and violation severity levels, implementation plan, and effective date proposed by NERC. NERC also submitted proposals to retire two currently-effective Reliability Standards and to withdraw three Reliability Standards that are pending review before the Commission. While proposing to approve Reliability Standard PRC-012-2, the Commission seeks clarifying comments addressing “limited impact” RAS. Based on comments and information received, the Commission may issue directives as appropriate.
2. Section 215 of the FPA requires a Commission-certified ERO to develop mandatory and enforceable Reliability Standards, subject to Commission review and approval.
3. On March 16, 2007, the Commission issued Order No. 693, approving 83 of the 107 Reliability Standards filed by NERC, including Reliability Standards PRC-015-1 (Remedial Action Scheme Data and Documentation) and PRC-016-1 (Remedial Action Scheme Misoperation).
4. In Order No. 693, the Commission determined that proposed Reliability Standard PRC-012-0 was a “fill-in-the-blank” Reliability Standard because, while it was proposed to require regional reliability organizations to ensure that all special protection systems are properly designed, meet performance requirements, and are coordinated with other protection systems, NERC had not submitted any regional review procedures with this standard.
5. On June 23, 2016, the Commission approved NERC's revision to NERC Glossary of Terms that redefines special protection system to have the same definition as RAS, effective April 1, 2017.
A scheme designed to detect predetermined System conditions and automatically take corrective actions that may include, but are not limited to, adjusting or tripping generation (MW and Mvar), tripping load, or reconfiguring a System(s). RAS accomplish objectives such as:
• Meet requirements identified in the NERC Reliability Standards;
• Maintain Bulk Electric System (BES) stability;
• Maintain acceptable BES voltages;
• Maintain acceptable BES power flows;
• Limit the impact of Cascading or extreme events.
6. On August 5, 2016, NERC submitted a petition seeking Commission approval of proposed Reliability Standard PRC-012-2.
7. NERC states that, in the United States, proposed Reliability Standard PRC-012-2 will apply to reliability coordinators, planning coordinators, and RAS-entities. Proposed Reliability Standard PRC-012-2 defines RAS-entities to include the transmission owner, generation owner, or distribution provider that owns all or part of a RAS.
8. NERC states that proposed Reliability Standard PRC-012-2 includes nine requirements that combine all existing (both effective and “pending”) Reliability Standards into a single, consolidated, continent-wide Reliability Standard to address all aspects of RAS.
9. NERC explains how the nine Requirements in proposed Reliability
10. Proposed Requirement R4 requires the planning coordinator to perform a periodic evaluation of each RAS within its planning area, at least once every five years.
Except for limited impact RAS, a single component failure in the RAS, when the RAS is intended to operate does not prevent the BES from meeting the same performance requirements (defined in Reliability Standard TPL-001-4 or its successor) as those required for the events and conditions for which the RAS is designed.
11. NERC states that prior to development of proposed Reliability Standard PRC-012-2, two NERC Regions, the Northeast Power Coordinating Council (NPCC) and the Western Electric Coordinating Council (WECC), used individual RAS classification regimes to identify RAS that would meet criteria similar to those for RAS described as “limited impact” in proposed Reliability Standard PRC-012-2.
12. Proposed Requirements R5, R6, and R7 pertain to the analysis of each RAS operation or misoperation.
13. NERC proposes an implementation plan that includes an effective date for proposed Reliability Standard PRC-012-2 that is the first day of the first calendar quarter that is thirty-six months after the date that the Commission approves the proposed Reliability Standard. Concurrent with the effective date, the implementation plan calls for the retirement of currently-effective Reliability Standards PRC-015-1 and PRC-016-1 and withdrawal of “pending” Reliability Standards PRC-012-1, PRC-013-1, and PRC-014-1.
14. Pursuant to section 215(d)(2) of the FPA, we propose to approve proposed Reliability Standard PRC-012-2 as just, reasonable, not unduly discriminatory or preferential, and in the public interest. We also propose to approve the associated violation risk factors and violation severity levels, implementation plan, and effective date proposed by NERC. Further, we propose to approve the withdrawal of “pending” Reliability Standards PRC-012-1, PRC-013-1, and PRC-014-1 and retirement of currently-effective Reliability Standards PRC-015-1 and PRC-016-1, as proposed by NERC.
15. Proposed Reliability Standard PRC-012-2 enhances reliability by addressing all aspects of RAS in a single, continent-wide Reliability Standard and by assigning specific RAS responsibilities to appropriate functional entities. Accordingly, proposed Reliability Standard PRC-012-2 satisfies the relevant directive in Order No. 693. In addition, we agree with NERC that Reliability Standards PRC-015-1 and PRC-016-1 can be retired as proposed in the implementation plan due to their consolidation with proposed Reliability Standard PRC-012-2.
16. NERC's petition states that proposed Reliability Standard PRC-012-2 does not exempt “limited impact” RAS from meeting all system performance requirements of Reliability Standard TPL-001-4. We propose to clarify that, consistent with NERC's explanation, proposed Reliability Standard PRC-012-2 will not modify or supersede any system performance obligations under Reliability Standard TPL-001-4.
17. We also seek comment on the processes used to ensure the LAPS or Type III RAS will be compliant with Reliability Standard TPL-001-4 prior to the effective date of Reliability Standard PRC-012-2, including a description of considerations on whether the load disconnected by each RAS installation is consequential or non-consequential, and if non-consequential load loss is greater than 75 MW.
18. The collection of information addressed in this Notice of Proposed Rulemaking is subject to review by the Office of Management and Budget (OMB) under section 3507(d) of the Paperwork Reduction Act of 1995.
19. The Commission will submit the information collection requirement to OMB for its final review and approval. The Commission solicits public comments on the need for this information, whether the information will have practical utility, the accuracy of the burden estimates, ways to enhance the quality, utility, and clarity of the information to be collected or retained, and any suggested methods for minimizing respondents' burden, including the use of automated information techniques.
20. The information collection requirements in this Notice of Proposed Rulemaking in Docket No. RM16-20-000 is associated with FERC-725A (OMB Control No. 1902-0244) and FERC-725G (OMB Control No. 1902-0252).
21.
22. Interested persons may obtain information on the reporting requirements by contacting the Federal Energy Regulatory Commission, Office of the Executive Director, 888 First Street NE., Washington, DC 20426 [Attention: Ellen Brown, email:
23. Comments concerning the information collection proposed in this Notice of Proposed Rulemaking and the associated burden estimates should be sent to the Commission in this docket and may also be sent to the Office of Management and Budget, Office of Information and Regulatory Affairs [Attention: Desk Officer for the Federal Energy Regulatory Commission]. For security reasons, comments should be sent by email to OMB at the following email address:
24. The Commission is required to prepare an Environmental Assessment or an Environmental Impact Statement for any action that may have a significant adverse effect on the human environment.
25. The Regulatory Flexibility Act of 1980 (RFA)
26. The proposed Reliability Standard PRC-012-2 will apply to approximately 1,681 entities in the United States. Comparison of the applicable entities with the Commission's small business data indicates that approximately 1,025 are small entities or 61 percent of the respondents affected by proposed Reliability Standard PRC-012-2.
27. The Commission invites interested persons to submit comments on the matters and issues proposed in this notice to be adopted, including any related matters or alternative proposals that commenters may wish to discuss. Comments are due April 10, 2017. Comments must refer to Docket No. RM16-20-000, and must include the commenter's name, the organization they represent, if applicable, and their address in their comments.
28. The Commission encourages comments to be filed electronically via the eFiling link on the Commission's Web site at
29. Commenters that are not able to file comments electronically must send an original of their comments to: Federal Energy Regulatory Commission, Secretary of the Commission, 888 First Street NE., Washington, DC 20426.
30. All comments will be placed in the Commission's public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commenters on this proposal are not required to serve copies of their comments on other commenters.
31. In addition to publishing the full text of this document in the
32. From the Commission's Home Page on the Internet, this information is available on eLibrary. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in eLibrary, type the docket number excluding the last three digits of this document in the docket number field.
33. User assistance is available for eLibrary and the Commission's Web site during normal business hours from the Commission's Online Support at 202-502-6652 (toll free at 1-866-208-3676) or email at
By direction of the Commission.
Bureau of Indian Affairs, Interior.
Advance notice of proposed rulemaking; Tribal consultation.
This document announces details for Tribal consultation sessions to discuss the advance notice of proposed rulemaking on Licensed Indian Traders, which the Department of the Interior (Department) published on December 9, 2016. The Department is interested in whether to address the Indian trader regulations and, if so, how.
Please see the
Please see the
Elizabeth Appel, Director, Office of Regulatory Affairs and Collaborative Action, Office of the Assistant Secretary—Indian Affairs; telephone (202) 273-4680,
The Department of the Interior will be hosting consultation sessions with Indian Tribes on the ANPRM regarding whether and how to address the Indian Trader regulations at 25 CFR part 140. We will accept both oral and written communications at these consultation sessions. The following table lists dates and locations for the consultations.
Please refer to the publication on December 9 (81 FR 89015) for background and information the Department is seeking through this consultation.
National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce.
Proposed rule; reopening of public comment period.
On December 8, 2016, NMFS published a proposed rule to list the Gulf of Mexico Bryde's whale as an endangered species under the Endangered Species Act of 1973 (ESA), with comments due by February 6, 2017. However, in response to a request to extend the public comment period, NMFS has decided to reopen the public comment period by an additional 15 calendar days.
The deadline for receipt of comments on the proposed rule published on December 8, 2016 (81 FR 88639) is reopened from February 8, 2017 to February 23, 2017. NMFS must receive written comments and information on or before February 23, 2017.
You may submit comments, information, or data on this document, identified by docket number NOAA-NMFS-2014-0157 by any of the following methods:
•
•
•
Laura Engleby or Calusa Horn, NMFS, Southeast Regional Office (727) 824-
On December 8, 2016, NMFS published a 12-month finding and proposed rule in the
On November 4, 2016, the Acting Executive Secretary of the Foreign-Trade Zones (FTZ) Board docketed an application submitted by CODEZOL, C.D., grantee of FTZ 163, requesting subzone status subject to the existing activation limit of FTZ 163, on behalf of AxisCare Health Logistics, Inc., in Toa Baja, Puerto Rico.
The application was processed in accordance with the FTZ Act and Regulations, including notice in the
Pursuant to the authority delegated to the FTZ Board's Executive Secretary (15 CFR Sec. 400.36(f)), the application to establish Subzone 163E is approved, subject to the FTZ Act and the Board's regulations, including Section 400.13, and further subject to FTZ 163's 923.36-acre activation limit.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Brenda E. Waters, Office of AD/CVD Operations, Customs Liaison Unit, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230, telephone: (202) 482-4735.
Each year during the anniversary month of the publication of an antidumping or countervailing duty order, finding, or suspended investigation, an interested party, as defined in section 771(9) of the Tariff Act of 1930, as amended (“the Act”), may request, in accordance with 19 CFR 351.213, that the Department of Commerce (“the Department”) conduct an administrative review of that antidumping or countervailing duty order, finding, or suspended investigation.
All deadlines for the submission of comments or actions by the Department discussed below refer to the number of calendar days from the applicable starting date.
In the event the Department limits the number of respondents for individual examination for administrative reviews initiated pursuant to requests made for the orders identified below, the Department intends to select respondents based on U.S. Customs and Border Protection (“CBP”) data for U.S. imports during the period of review. We intend to release the CBP data under Administrative Protective Order (“APO”) to all parties having an APO within five days of publication of the initiation notice and to make our decision regarding respondent selection within 21 days of publication of the initiation
In the event the Department decides it is necessary to limit individual examination of respondents and conduct respondent selection under section 777A(c)(2) of the Act:
In general, the Department finds that determinations concerning whether particular companies should be “collapsed” (
Pursuant to 19 CFR 351.213(d)(1), a party that requests a review may withdraw that request within 90 days of the date of publication of the notice of initiation of the requested review. The regulation provides that the Department may extend this time if it is reasonable to do so. In order to provide parties additional certainty with respect to when the Department will exercise its discretion to extend this 90-day deadline, interested parties are advised that, with regard to reviews requested on the basis of anniversary months on or after February 2017, the Department does not intend to extend the 90-day deadline unless the requestor demonstrates that an extraordinary circumstance prevented it from submitting a timely withdrawal request. Determinations by the Department to extend the 90-day deadline will be made on a case-by-case basis.
The Department is providing this notice on its Web site, as well as in its “Opportunity to Request Administrative Review” notices, so that interested parties will be aware of the manner in which the Department intends to exercise its discretion in the future.
None.
In accordance with 19 CFR 351.213(b), an interested party as defined by section 771(9) of the Act may request in writing that the Secretary conduct an administrative review. For both antidumping and countervailing duty reviews, the interested party must specify the individual producers or exporters covered by an antidumping finding or an antidumping or countervailing duty order or suspension agreement for which it is requesting a review. In addition, a domestic interested party or an interested party described in section 771(9)(B) of the Act must state why it desires the Secretary to review those particular producers or exporters. If the interested party intends for the Secretary to review sales of merchandise by an exporter (or a producer if that producer also exports merchandise from other suppliers) which was produced in more than one country of origin and each country of origin is subject to a separate order, then the interested party must state specifically, on an order-by-order basis, which exporter(s) the request is intended to cover.
Note that, for any party the Department was unable to locate in prior segments, the Department will not accept a request for an administrative review of that party absent new information as to the party's location. Moreover, if the interested party who files a request for review is unable to locate the producer or exporter for which it requested the review, the interested party must provide an explanation of the attempts it made to locate the producer or exporter at the same time it files its request for review, in order for the Secretary to determine if the interested party's attempts were reasonable, pursuant to 19 CFR 351.303(f)(3)(ii).
As explained in
The Department no longer considers the non-market economy (NME) entity as an exporter conditionally subject to an antidumping duty administrative reviews.
All requests must be filed electronically in Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (“ACCESS”) on Enforcement and Compliance's ACCESS Web site at
The Department will publish in the
For the first administrative review of any order, there will be no assessment of antidumping or countervailing duties on entries of subject merchandise entered, or withdrawn from warehouse, for consumption during the relevant provisional-measures “gap” period of the order, if such a gap period is applicable to the period of review.
This notice is not required by statute but is published as a service to the international trading community.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) preliminarily determines that finished carbon steel flanges from Italy are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2015, through March 31, 2016. The estimated weighted-average dumping margins of sales at LTFV are shown in the “Preliminary Determination” section of this notice. Interested parties are invited to comment on this preliminary determination.
Effective February 8, 2017.
Edythe Artman or Moses Song, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of
The Department initiated this investigation on July 20, 2016.
The Preliminary Decision Memorandum is a public document and is made available to the public
The product covered by this investigation is finished carbon steel flanges from Italy. For a complete description of the scope of the investigation,
We received no comments from interested parties regarding the scope of the investigation as it appeared in the
The Department is conducting this investigation in accordance with section 731 of the Tariff Act of 1930, as amended (the Act). Pursuant to section 776(a) of the Act, the Department is preliminarily relying upon facts otherwise available to assign an estimated weighted-average dumping margin to the mandatory respondents in this investigation because both respondents failed to timely provide necessary information requested by the Department, withheld requested information, and significantly impeded the investigation. Further, the Department is preliminarily determining that these mandatory respondents failed to cooperate by not acting to the best of their abilities to comply with requests for information and, thus, the Department is applying adverse facts available (AFA) to the respondents, in accordance with section 776(b) of Act. For a full description of the methodology underlying our preliminary determination,
Section 733(d)(1)(A)(ii) of the Act provides that, in the preliminary determination, the Department shall determine an estimated “all-others” rate for all exporters and producers not individually investigated, in accordance with section 735(c)(5) of the Act. Section 735(c)(5)(A) of the Act states that, generally, the estimated rate for all-others shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
In the petition, Weldbend Corporation and Boltex Manufacturing Co., L.P. (collectively, Petitioners) calculated three dumping margins for subject merchandise from Italy.
The Department preliminarily determines that finished carbon steel flanges from Italy are being, or are likely to be, sold in the United States at LTFV, pursuant to section 733 of the Act, and that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, we will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of all entries of finished
Pursuant to section 733(d) of the Act and 19 CFR 351.205(d), we will instruct CBP to require cash deposits
Normally, the Department discloses the calculations performed in connection with a preliminary determination to interested parties within five days of the date of publication of this notice in accordance with 19 CFR 351.224(b). Because the Department preliminarily applied total AFA to each of the mandatory respondents in this investigation, in accordance with section 776 of the Act, there are no calculations to disclose.
Because the mandatory respondents in this investigation did not provide information requested by the Department, the Department will not conduct verifications of company responses.
Interested parties are invited to comment on this preliminary determination no later than 30 days after the date of publication of the preliminary determination.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, and a list of the issues to be discussed. If a request for a hearing is made, the Department intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
All documents must be filed electronically using ACCESS. An electronically-filed request must be received successfully in its entirety by ACCESS by 5:00 p.m. Eastern Standard Time.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. 19 CFR 351.210(e)(2) requires that requests by respondents for postponement of a final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Respondent Melesi has requested that, in the event of an affirmative preliminary determination in this investigation, the Department postpone its final determination until no later than 135 days after the publication of the preliminary determination in the
In accordance with section 735(a)(2)(A) of the Act and 19 CFR 351.210(b)(2)(ii), because (1) our preliminary determination is affirmative; (2) the requesting exporter accounts for a significant proportion of exports of the subject merchandise; and (3) no compelling reasons for denial exist, we are postponing the final determination until no later than 135 days after the publication of this notice in the
In accordance with section 733(f) of the Act, we are notifying the International Trade Commission (ITC) of our affirmative preliminary determination of sales at LTFV. If our final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after our final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The scope of this investigation covers finished carbon steel flanges. Finished carbon steel flanges differ from unfinished carbon steel flanges (also known as carbon steel flange forgings) in that they have undergone further processing after forging, including, but not limited to, beveling, bore threading, center or step boring, face machining, taper boring, machining ends or surfaces, drilling bolt holes, and/or de-
While these finished carbon steel flanges are generally manufactured to specification ASME B16.5 or ASME B16.47 series A or series B, the scope is not limited to flanges produced under those specifications. All types of finished carbon steel flanges are included in the scope regardless of pipe size (which may or may not be expressed in inches of nominal pipe size), pressure class (usually, but not necessarily, expressed in pounds of pressure,
(a) iron predominates, by weight, over each of the other contained elements:
(b) the carbon content is 2 percent or less, by weight; and
(c) none of the elements listed below exceeds the quantity, by weight, as indicated:
(i) 0.87 percent of aluminum;
(ii) 0.0105 percent of boron;
(iii) 10.10 percent of chromium;
(iv) 1.55 percent of columbium;
(v) 3.10 percent of copper;
(vi) 0.38 percent of lead;
(vii) 3.04 percent of manganese;
(viii) 2.05 percent of molybdenum;
(ix) 20.15 percent of nickel;
(x) 1.55 percent of niobium;
(xi) 0.20 percent of nitrogen;
(xii) 0.21 percent of phosphorus;
(xiii) 3.10 percent of silicon;
(xiv) 0.21 percent of sulfur;
(xv) 1.05 percent of titanium;
(xvi) 4.06 percent of tungsten;
(xvii) 0.53 percent of vanadium; or
(xviii) 0.015 percent of zirconium.
Finished carbon steel flanges are currently classified under subheadings 7307.91.5010 and 7307.91.5050 of the Harmonized Tariff Schedule of the United States (HTSUS). They may also be entered under HTSUS subheadings 7307.91.5030 and 7307.91.5070. The HTSUS subheadings are provided for convenience and customs purposes; the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) determines that countervailable subsidies are being provided to producers and exporters of stainless steel sheet and strip (stainless sheet and strip) from the People's Republic of China (PRC) as provided in section 705 of the Tariff Act of 1930, as amended (the Act). For information on the estimated subsidy rates, see the “Final Determination” section of this notice. The period of investigation is January 1, 2015, through December 31, 2015.
Effective February 8, 2017.
Spencer Toubia or David Lindgren, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone (202) 482-0123 or (202) 482-3870, respectively.
The Department published the
The period of investigation (POI) for which we are measuring subsidies is January 1, 2015, through December 31, 2015.
In accordance with the Preliminary Scope Determination, the Department set aside a period of time for parties to address scope issues in case briefs or other written comments on scope issues.
The product covered by this investigation is stainless sheet and strip from the PRC. For a complete description of the scope of this investigation,
The subsidy programs under investigation and the issues raised in the case and rebuttal briefs by parties in this investigation are discussed in the Final Decision Memorandum. A list of the issues that parties raised, and to which we responded in the Final
The Department, in making these findings, relied, in part, on facts available, and because one or more respondents failed to cooperate by not acting to the best of their ability, we made adverse inferences.
Based on our review and analysis of the comments received from parties, and minor corrections accepted at verification, we made certain changes to the respondents' subsidy rate calculations since the
Prior to the
In accordance with section 705(c)(1)(B)(i)(I) of the Act, we established rates for Taigang (the only individually investigated exporter/producer of the subject merchandise that participated in this investigation), and for Ningbo Baoxin and Daming (which were assigned a rate based on adverse facts available (AFA)).
In accordance with sections 705(c)(1)(B)(i)(I) and 705(c)(5)(A)(i) of the Act, for companies not individually investigated, we apply an “all-others” rate, which is normally calculated by weight averaging the subsidy rates of the individual companies selected for individual examination with those companies' export sales of the subject merchandise to the United States, excluding any zero and
Because the only individually calculated rate that is not zero,
As a result of our
If the U.S. International Trade Commission (the ITC) issues a final affirmative injury determination, we will issue a CVD order and will reinstate the suspension of liquidation under section 706(a) of the Act and will require a cash deposit of estimated CVDs for such entries of subject merchandise in the amounts indicated above. If the ITC determines that material injury, or threat of material injury, does not exist, this proceeding will be terminated and all estimated duties deposited or securities posted as a result of the suspension of liquidation will be refunded or canceled. Further, because we find critical circumstances do not exist for Taigang and “all other” producers or exporters, we will terminate the retroactive suspension of liquidation ordered at the Preliminary Determination and release any cash deposits that were required during that period, consistent with section 705(c)(3) of the Act.
In accordance with section 705(d) of the Act, we will notify the ITC of our determination. In addition, we are making available to the ITC all non-privileged and non-proprietary information related to this investigation. We will allow the ITC access to all privileged and business proprietary information in our files, provided the ITC confirms that it will not disclose such information, either publicly or under an administrative protective order (APO), without the written consent of the Assistant Secretary for Enforcement and Compliance.
In the event the ITC issues a final negative injury determination, this notice serves as the only reminder to parties subject to an APO of their responsibility concerning the destruction of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and terms of an APO is a violation subject to sanction.
This determination is issued and published pursuant to sections 705(d) and 777(i) of the Act.
The merchandise covered by this investigation is stainless steel sheet and strip, whether in coils or straight lengths. Stainless steel is an alloy steel containing, by weight, 1.2 percent or less of carbon and 10.5 percent or more of chromium, with or without other elements. The subject sheet and strip is a flat-rolled product with a width that is greater than 9.5 mm and with a thickness of 0.3048 mm and greater but less than 4.75 mm, and that is annealed or otherwise heat treated, and pickled or otherwise descaled. The subject sheet and strip may also be further processed (
For purposes of the width and thickness requirements referenced above: (1) Where the nominal and actual measurements vary, a product is within the scope if application of either the nominal or actual measurement would place it within the scope based on the definitions set forth above; and (2) where the width and thickness vary for a specific product (
All products that meet the written physical description, and in which the chemistry quantities do not exceed any one of the noted element levels listed above, are within the scope of this investigation unless specifically excluded.
Subject merchandise includes stainless steel sheet and strip that has been further processed in a third country, including but not limited to cold-rolling, annealing, tempering, polishing, aluminizing, coating, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the stainless steel sheet and strip.
Excluded from the scope of this investigation are the following: (1) Sheet and strip that is not annealed or otherwise heat treated and not pickled or otherwise descaled; (2) plate (
The products under investigation are currently classifiable under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7219.13.0031, 7219.13.0051, 7219.13.0071, 7219.13.0081, 7219.14.0030, 7219.14.0065, 7219.14.0090, 7219.23.0030, 7219.23.0060, 7219.24.0030, 7219.24.0060, 7219.32.0005, 7219.32.0020, 7219.32.0025, 7219.32.0035, 7219.32.0036, 7219.32.0038, 7219.32.0042, 7219.32.0044, 7219.32.0045, 7219.32.0060, 7219.33.0005, 7219.33.0020, 7219.33.0025, 7219.33.0035, 7219.33.0036, 7219.33.0038, 7219.33.0042, 7219.33.0044, 7219.33.0045, 7219.33.0070, 7219.33.0080, 7219.34.0005, 7219.34.0020, 7219.34.0025, 7219.34.0030, 7219.34.0035, 7219.34.0050, 7219.35.0005, 7219.35.0015, 7219.35.0030, 7219.35.0035, 7219.35.0050, 7219.90.0010, 7219.90.0020, 7219.90.0025, 7219.90.0060, 7219.90.0080, 7220.12.1000, 7220.12.5000, 7220.20.1010, 7220.20.1015, 7220.20.1060, 7220.20.1080, 7220.20.6005, 7220.20.6010, 7220.20.6015, 7220.20.6060, 7220.20.6080, 7220.20.7005, 7220.20.7010, 7220.20.7015, 7220.20.7060, 7220.20.7080, 7220.90.0010, 7220.90.0015, 7220.90.0060, and 7220.90.0080. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this proceeding is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
Effective February 8, 2017.
The Department of Commerce (the Department) determines that imports of stainless steel sheet and strip (stainless sheet and strip) from the People's Republic of China (PRC) is being, or is likely to be, sold in the United States at less than fair value
Alexander Cipolla, or Kathryn Wallace, AD/CVD Operations, Office VII, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-4956 or (202) 482-6251 respectively.
On September 19, 2016, the Department published its affirmative preliminary determination that stainless sheet and strip from the PRC is being, or is likely to be, sold in the United States at less than fair value, as provided by section 733 of the Tariff Act of 1930, as amended (the Act).
The POI is July 1, 2015, through December 31, 2015. This period corresponds to the two most recent fiscal quarters prior to the month of the filing of the petition.
The product covered by this investigation is stainless sheet and strip. For a complete description of the scope of this investigation,
We continue to find that critical circumstances exist for the PRC-wide entity and non-selected respondents eligible for a separate rate, in accordance with section 735(a)(3) of the Act and 19 CFR 351.206. For a full description of the methodology and results of our analysis,
In the
With respect to Taigang, we determined in the
We have looked to sections 735(c)(5)(A)-(B) of the Act for guidance in determining the rate applicable to separate rate respondents not selected for individual examination. Under section 735(c)(5)(A) of the Act, the rate for all other companies that have not been individually examined is normally an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
All issues raised in the case and rebuttal briefs by parties to this investigation are addressed in the
Based on our review and analysis of the comments received from parties, we made certain changes to the separate rate and PRC-wide entity cash deposit rates since the
In our
In the
The Department determines that imports of stainless sheet and strip from the PRC is being, or is likely to be, sold in the United States at LTFV as provided in section 735 of the Act and determines that the estimated final weighted-average dumping margins are as follows:
We intend to disclose to parties the calculations performed in this proceeding within five days of any public announcement of this notice in accordance with 19 CFR 351.224(b).
As noted above, for this final determination, the Department found that critical circumstances exist with respect to imports of the subject merchandise from the PRC-wide entity and the non-selected separate rate respondents. Therefore, in accordance with section 735(c)(4)(A) of the Act, we will instruct U.S. Customs and Border Protection (CBP) to continue to suspend liquidation of all imports of the merchandise subject to the investigation, that were entered or withdrawn from warehouse, for consumption on or after June 21, 2016, 90 days prior to publication of the
Pursuant to 19 CFR 351.205(d) and section 735(c)(1)(B)(ii) of the Act, we will instruct CBP to require a cash deposit
The cash deposit rates were adjusted by the countervailing duty attributable to export subsidies. Pursuant to 777A(f) of the Act, we are also adjusting final cash deposit rates for estimated domestic subsidy pass-through, where appropriate.
In accordance with section 735(d) of the Act, we will notify the International Trade Commission (ITC) of the final affirmative determination of sales at less than fair value. Because the final determination in this proceeding is
In the event the ITC issues a final negative injury determination, this notice will serve as the only reminder to parties subject to an administrative protective order (APO) of their responsibility concerning the disposition of proprietary information disclosed under APO in accordance with 19 CFR 351.305(a)(3). Timely written notification of the return or destruction of APO materials, or conversion to judicial protective order, is hereby requested. Failure to comply with the regulations and terms of an APO is a violation subject to sanction. This determination and notice are issued and published pursuant to sections 735(d) and 777(i)(1) of the Act.
The merchandise covered by this investigation is stainless steel sheet and strip, whether in coils or straight lengths. Stainless steel is an alloy steel containing, by weight, 1.2 percent or less of carbon and 10.5 percent or more of chromium, with or without other elements. The subject sheet and strip is a flat-rolled product with a width that is greater than 9.5 mm and with a thickness of 0.3048 mm and greater but less than 4.75 mm, and that is annealed or otherwise heat treated, and pickled or otherwise descaled. The subject sheet and strip may also be further processed (
For purposes of the width and thickness requirements referenced above: (1) Where the nominal and actual measurements vary, a product is within the scope if application of either the nominal or actual measurement would place it within the scope based on the definitions set forth above; and (2) where the width and thickness vary for a specific product (
All products that meet the written physical description, and in which the chemistry quantities do not exceed any one of the noted element levels listed above, are within the scope of this investigation unless specifically excluded.
Subject merchandise includes stainless steel sheet and strip that has been further processed in a third country, including but not limited to cold-rolling, annealing, tempering, polishing, aluminizing, coating, painting, varnishing, trimming, cutting, punching, and/or slitting, or any other processing that would not otherwise remove the merchandise from the scope of the investigation if performed in the country of manufacture of the stainless steel sheet and strip.
Excluded from the scope of this investigation are the following: (1) Sheet and strip that is not annealed or otherwise heat treated and not pickled or otherwise descaled; (2) plate (
The products under investigation are currently classifiable under Harmonized Tariff Schedule of the United States (HTSUS) subheadings 7219.13.0031, 7219.13.0051, 7219.13.0071, 7219.13.0081, 7219.14.0030, 7219.14.0065, 7219.14.0090, 7219.23.0030, 7219.23.0060, 7219.24.0030, 7219.24.0060, 7219.32.0005, 7219.32.0020, 7219.32.0025, 7219.32.0035, 7219.32.0036, 7219.32.0038, 7219.32.0042, 7219.32.0044, 7219.32.0045, 7219.32.0060, 7219.33.0005, 7219.33.0020, 7219.33.0025, 7219.33.0035, 7219.33.0036, 7219.33.0038, 7219.33.0042, 7219.33.0044, 7219.33.0045, 7219.33.0070, 7219.33.0080, 7219.34.0005, 7219.34.0020, 7219.34.0025, 7219.34.0030, 7219.34.0035, 7219.34.0050, 7219.35.0005, 7219.35.0015, 7219.35.0030, 7219.35.0035, 7219.35.0050, 7219.90.0010, 7219.90.0020, 7219.90.0025, 7219.90.0060, 7219.90.0080, 7220.12.1000, 7220.12.5000, 7220.20.1010, 7220.20.1015, 7220.20.1060, 7220.20.1080, 7220.20.6005, 7220.20.6010, 7220.20.6015, 7220.20.6060, 7220.20.6080, 7220.20.7005, 7220.20.7010, 7220.20.7015, 7220.20.7060, 7220.20.7080, 7220.90.0010, 7220.90.0015, 7220.90.0060, and 7220.90.0080. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the scope of this proceeding is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) preliminarily determines that finished carbon steel flanges from India are being, or are likely to be, sold in the United States at less than fair value (LTFV). The period of investigation (POI) is April 1, 2015, through March 31, 2016. The estimated weighted-average dumping margins of sales at LTFV are shown in the “Preliminary Determination” section of this notice. Interested parties are invited
Effective February 8, 2017.
Fred Baker or Mark Flessner, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-2924 or (202) 482-6312, respectively.
The Department initiated this investigation on July 20, 2016.
The Preliminary Decision Memorandum is a public document and is made available to the public via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at
The product covered by this investigation is finished carbon steel flanges from India. For a full description of the scope of this investigation,
We received no comments from interested parties regarding the scope of the investigation as it appeared in the
The Department is conducting this investigation in accordance with section 731 of the Tariff Act of 1930, as amended (the Act). Export price was calculated in accordance with section 772 of the Act. Normal value (NV) was calculated in accordance with section 773 of the Act. For a full description of the methodology underlying our preliminary conclusions,
Section 733(d)(1)(A)(ii) of the Act provides that in the preliminary determination the Department shall determine an estimated “all-others” rate for all exporters and producers not individually investigated, in accordance with section 735(c)(5) of the Act. Section 735(c)(5)(A) of the Act states that generally the estimated rate for all-others shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
The Department preliminarily determines that finished carbon steel flanges from India are being, or are likely to be, sold in the United States at LTFV, pursuant to section 733 of the Act, and that the following estimated weighted-average dumping margins exist:
In accordance with section 733(d)(2) of the Act, we will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of all entries of finished carbon steel flanges from India, as described in the Scope of the Investigation in Appendix I, that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Pursuant to section 733(d) of the Act and 19 CFR 351.205(d), we will instruct CBP to require cash deposits
We intend to disclose the calculations performed to interested parties in this proceeding within five days of the public announcement of this preliminary determination in accordance with 19 CFR 351.224(b).
As provided in section 782(i) of the Act, we intend to verify information relied upon in making our final determination.
Interested parties are invited to comment on this preliminary determination no later than 30 days after the date of publication of this preliminary determination.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, and a list of the issues to be discussed. If a request for a hearing is made, the Department intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
All documents must be filed electronically using ACCESS. An electronically-filed request must be received successfully in its entirety by ACCESS by 5:00 p.m. Eastern Standard Time.
Section 735(a)(2) of the Act provides that a final determination may be postponed until not later than 135 days after the date of the publication of the preliminary determination if, in the event of an affirmative preliminary determination, a request for such postponement is made by exporters who account for a significant proportion of exports of the subject merchandise, or in the event of a negative preliminary determination, a request for such postponement is made by the petitioner. Section 351.210(e)(2) of the Department's regulations requires that requests by respondents for postponement of a final determination be accompanied by a request for extension of provisional measures from a four-month period to a period not more than six months in duration.
Respondents Norma and Gupta have requested that, in the event of an affirmative preliminary determination in this investigation, the Department postpone its final determination,
In accordance with section 735(a)(2)(A) of the Act and 19 CFR 351.210(b)(2)(ii), because: (1) Our preliminary determination is affirmative; (2) the requesting exporters account for a significant proportion of exports of the subject merchandise; and (3) no compelling reasons for denial exist, we are postponing the final determination until no later than 135 days after the publication of this notice in the
In accordance with section 733(f) of the Act, we are notifying the ITC of our affirmative preliminary determination of sales at LTFV. If our final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after our final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The scope of this investigation covers finished carbon steel flanges. Finished carbon steel flanges differ from unfinished carbon steel flanges (also known as carbon steel flange forgings) in that they have undergone further processing after forging, including, but not limited to, beveling, bore threading, center or step boring, face machining, taper boring, machining ends or surfaces, drilling bolt holes, and/or de-burring or shot blasting. Any one of these post-forging processes suffices to render the forging into a finished carbon steel flange for purposes of this investigation. However, mere heat treatment of a carbon steel flange forging (without any other further processing after forging) does not render the forging into a finished carbon steel flange for purposes of this investigation.
While these finished carbon steel flanges are generally manufactured to specification ASME B16.5 or ASME B16.47 series A or series B, the scope is not limited to flanges produced under those specifications. All types of finished carbon steel flanges are included in the scope regardless of pipe size (which may or may not be expressed in inches of nominal pipe size), pressure class (usually, but not necessarily, expressed in pounds of pressure,
(a) iron predominates, by weight, over each of the other contained elements:
(b) the carbon content is 2 percent or less, by weight; and
(c) none of the elements listed below exceeds the quantity, by weight, as indicated:
(i) 0.87 percent of aluminum;
(ii) 0.0105 percent of boron;
(iii) 10.10 percent of chromium;
(iv) 1.55 percent of columbium;
(v) 3.10 percent of copper;
(vi) 0.38 percent of lead;
(vii) 3.04 percent of manganese;
(viii) 2.05 percent of molybdenum;
(ix) 20.15 percent of nickel;
(x) 1.55 percent of niobium;
(xi) 0.20 percent of nitrogen;
(xii) 0.21 percent of phosphorus;
(xiii) 3.10 percent of silicon;
(xiv) 0.21 percent of sulfur;
(xv) 1.05 percent of titanium;
(xvi) 4.06 percent of tungsten;
(xvii) 0.53 percent of vanadium; or
(xviii) 0.015 percent of zirconium.
Finished carbon steel flanges are currently classified under subheadings 7307.91.5010 and 7307.91.5050 of the Harmonized Tariff Schedule of the United States (HTSUS). They may also be entered under HTSUS subheadings 7307.91.5030 and 7307.91.5070. The HTSUS subheadings are provided for convenience and customs purposes; the written description of the scope is dispositive.
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (“the Department”) is conducting the seventh administrative review (“AR”) of the antidumping duty order on citric acid and certain citrate salts (“citric acid”) from the People's Republic of China (“PRC”). The Department selected two companies, RZBC Co., Ltd., RZBC Import & Export Co., Ltd., and RZBC (Juxian) Co., Ltd. (collectively, “RZBC”) and Laiwu Taihe Biochemistry Co., Ltd. (“Taihe”), as mandatory respondents for individual examination. The period of review (“POR”) for the AR is May 1, 2015 through April 30, 2016. The Department is rescinding the review with respect to RZBC. Further, the Department preliminarily finds that Taihe is part of the PRC-wide entity.
Effective February 8, 2017.
Krisha Hill or Maliha Khan, Office IV, Enforcement & Compliance, International Trade Administration, Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-4037 or (202) 482-0895, respectively.
The products covered by the order include the hydrous and anhydrous forms of citric acid, the dihydrate and anhydrous forms of sodium citrate, otherwise known as citric acid sodium salt, and the monohydrate and monopotassium forms of potassium citrate. Sodium citrate also includes both trisodium citrate and monosodium citrate, which are also known as citric acid trisodium salt and citric acid monosodium salt, respectively. Citric acid and sodium citrate are classifiable under 2918.14.0000 and 2918.15.1000 of the Harmonized Tariff Schedule of the United States (“HTSUS”), respectively. Potassium citrate and crude calcium citrate are classifiable under 2918.15.5000 and 3824.90.9290 of the HTSUS, respectively. Blends that include citric acid, sodium citrate, and potassium citrate are classifiable under 3824.90.9290 of the HTSUS. Although the HTSUS subheadings are provided for convenience and customs purposes, the written description of the merchandise is dispositive.
On May 31, 2016, Archer Daniels Midland Company, Cargill, Incorporated, and Tate & Lyle Ingredients Americas LLC (collectively “Petitioners”) requested an AR of subject merchandise exported by RZBC, Taihe, and an additional 16 companies. Subsequently, on October 5, 2016, Petitioners timely withdrew their request for an AR of RZBC.
Two companies for which a review was requested, Niran (Thailand) Co., Ltd. (“Niran”) and Niran Biochemical Limited (“Niran Biochemical”), timely submitted certifications indicating that they had no exports, sales, shipments, or entries of subject merchandise during the POR. Consistent with our practice, the Department requested that U.S. Customs and Border Protection (“CBP”) conduct a query on potential shipments made by Niran and Niran Biochemical during the POR; CBP provided no evidence that contradicted the companies' claims of no shipments. Based on the no shipment certifications submitted by Niran and Niran Biochemical, and our analysis of the CBP information, we preliminarily determine that Niran and Niran Biochemical had no shipments during the POR. However, consistent with our practice in non-market economy (“NME”) cases, the Department intends to complete the review with respect to Niran and Niran Biochemical and issue appropriate instructions to CBP based on the final results of the review.
The Department is conducting this AR in accordance with section 751(a)(1)(B) of the Tariff Act of 1930, as amended (“the Act”). For a full description of the methodology underlying our conclusions,
The Department's change in policy regarding conditional review of the PRC-wide entity applies to this AR.
In addition to Taihe, 14 companies listed in the
The rate previously established for the PRC-wide entity in this proceeding is 156.87 percent.
Interested parties may submit case briefs and/or written comments, filed electronically using ACCESS, within 30 days of the date of publication of these preliminary results of review.
Further, interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the publication of this notice.
The Department intends to issue the final results of this AR, including the results of its analysis of the issues raised in any written briefs, not later than 120 days after the date of publication of this notice, unless extended, pursuant to section 751(a)(3)(A) of the Act.
Upon issuance of the final results, the Department will determine, and CBP shall assess, antidumping duties on all appropriate entries covered by this review.
The following cash deposit requirements will be effective upon publication of the final results of this AR for all shipments of the subject merchandise entered, or withdrawn from warehouse, for consumption on or after the publication date of the final results of review, as provided by section 751(a)(2)(C) of the Act: (1) For previously investigated or reviewed PRC and non-PRC exporters which are not under review in this segment of the proceeding but which have separate rates, the cash deposit rate will continue to be the exporter-specific rate published for the most recently completed segment of this proceeding; (2) for all PRC exporters of subject merchandise that have not been found to be entitled to a separate rate, the cash deposit rate will be the rate for the PRC-wide entity, 156.87 percent; and (3) for all non-PRC exporters of subject merchandise which have not received their own rate, the cash deposit rate will be the rate applicable to the PRC exporter(s) that supplied that non-PRC exporter. These deposit requirements, when imposed, shall remain in effect until further notice.
This notice also serves as a preliminary reminder to importers of their responsibility under 19 CFR 351.402(f)(2) to file a certificate regarding the reimbursement of antidumping duties prior to liquidation of the relevant entries during this review period. Failure to comply with this requirement could result in the Department's presumption that reimbursement of antidumping duties occurred and the subsequent assessment of double antidumping duties.
We are issuing and publishing these results in accordance with sections 751(a)(1) and 777(i)(1) of the Act and 19 CFR 351.213 and 351.221(b)(4).
Enforcement and Compliance, International Trade Administration, Department of Commerce.
The Department of Commerce (the Department) preliminarily determines that finished carbon steel flanges from Spain are being, or are
Effective February 8, 2017.
Mark Flessner or Erin Kearney, AD/CVD Operations, Office VI, Enforcement and Compliance, International Trade Administration, U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230; telephone: (202) 482-6312 or (202) 482-0167, respectively.
The Department initiated this investigation on July 20, 2016.
The Preliminary Decision Memorandum is a public document and is made available to the public via Enforcement and Compliance's Antidumping and Countervailing Duty Centralized Electronic Service System (ACCESS). ACCESS is available to registered users at
The product covered by this investigation is finished carbon steel flanges from Spain. For a full description of the scope of this investigation,
We received no comments from interested parties regarding the scope of the investigation as it appeared in the
The Department is conducting this investigation in accordance with section 731 of the Tariff Act of 1930, as amended (the Act). Pursuant to section 776(a) of the Act, the Department preliminarily relied upon facts otherwise available to assign an estimated weighted-average dumping margin to the mandatory respondent in this investigation, because ULMA did not submit a response to the Department's questionnaire.
Section 733(d)(1)(A)(ii) of the Act provides that in the preliminary determination the Department shall determine an estimated “all-others” rate for all exporters and producers not individually investigated, in accordance with section 735(c)(5) of the Act. Section 735(c)(5)(A) of the Act states that generally the estimated rate for all-others shall be an amount equal to the weighted average of the estimated weighted-average dumping margins established for exporters and producers individually investigated, excluding any zero and
With respect to Spain, the petitioners calculated two margins in the Petition.
The Department preliminarily determines that finished carbon steel flanges from Spain are being, or are likely to be, sold in the United States at LTFV, pursuant to section 733 of the Act, and that the following estimated
In accordance with section 733(d)(2) of the Act, we will direct U.S. Customs and Border Protection (CBP) to suspend liquidation of all entries of finished carbon steel flanges from Spain, as described in the Scope of the Investigation in Appendix I, that are entered, or withdrawn from warehouse, for consumption on or after the date of publication of this notice in the
Pursuant to section 733(d) of the Act and 19 CFR 351.205(d), we will instruct CBP to require cash deposits
Normally, the Department discloses to interested parties the calculations performed in connection with a preliminary determination within five days after public announcement of the preliminary determination in accordance with 19 CFR 351.224(b). Because the Department preliminarily applied a rate from the Petition as AFA to the mandatory respondent in this investigation, there are no calculations to disclose.
Because the mandatory respondent in this investigation did not provide the information requested, the Department will not conduct verifications.
Interested parties are invited to comment on this preliminary determination no later than 30 days after the date of publication of this preliminary determination.
Pursuant to 19 CFR 351.310(c), interested parties who wish to request a hearing must submit a written request to the Assistant Secretary for Enforcement and Compliance, U.S. Department of Commerce, within 30 days after the date of publication of this notice. Requests should contain the party's name, address, and telephone number, the number of participants, and a list of the issues to be discussed. If a request for a hearing is made, the Department intends to hold the hearing at the U.S. Department of Commerce, 1401 Constitution Avenue NW., Washington, DC 20230, at a time and date to be determined. Parties should confirm by telephone the date, time, and location of the hearing two days before the scheduled date.
All documents must be filed electronically using ACCESS. An electronically-filed request must be received successfully in its entirety by ACCESS by 5:00 p.m. Eastern Standard Time.
In accordance with section 733(f) of the Act, we are notifying the ITC of our affirmative preliminary determination of sales at LTFV. If our final determination is affirmative, the ITC will determine before the later of 120 days after the date of this preliminary determination or 45 days after our final determination whether these imports are materially injuring, or threaten material injury to, the U.S. industry.
This determination is issued and published in accordance with sections 733(f) and 777(i)(1) of the Act and 19 CFR 351.205(c).
The scope of this investigation covers finished carbon steel flanges. Finished carbon steel flanges differ from unfinished carbon steel flanges (also known as carbon steel flange forgings) in that they have undergone further processing after forging, including, but not limited to, beveling, bore threading, center or step boring, face machining, taper boring, machining ends or surfaces, drilling bolt holes, and/or de-burring or shot blasting. Any one of these post-forging processes suffices to render the forging into a finished carbon steel flange for purposes of this investigation. However, mere heat treatment of a carbon steel flange forging (without any other further processing after forging) does not render the forging into a finished carbon steel flange for purposes of this investigation.
While these finished carbon steel flanges are generally manufactured to specification ASME B16.5 or ASME B16.47 series A or series B, the scope is not limited to flanges produced under those specifications. All types of finished carbon steel flanges are included in the scope regardless of pipe size (which may or may not be expressed in inches of nominal pipe size), pressure class (usually, but not necessarily, expressed in pounds of pressure,
(a) Iron predominates, by weight, over each of the other contained elements;
(b) the carbon content is 2 percent or less, by weight; and
(c) none of the elements listed below exceeds the quantity, by weight, as indicated:
(i) 0.87 percent of aluminum;
(ii) 0.0105 percent of boron;
(iii) 10.10 percent of chromium;
(iv) 1.55 percent of columbium;
(v) 3.10 percent of copper;
(vi) 0.38 percent of lead;
(vii) 3.04 percent of manganese;
(viii) 2.05 percent of molybdenum;
(ix) 20.15 percent of nickel;
(x) 1.55 percent of niobium;
(xi) 0.20 percent of nitrogen;
(xii) 0.21 percent of phosphorus;
(xiii) 3.10 percent of silicon;
(xiv) 0.21 percent of sulfur;
(xv) 1.05 percent of titanium;
(xvi) 4.06 percent of tungsten;
(xvii) 0.53 percent of vanadium; or
(xviii) 0.015 percent of zirconium.
Finished carbon steel flanges are currently classified under subheadings 7307.91.5010 and 7307.91.5050 of the Harmonized Tariff Schedule of the United States (HTSUS). They may also be entered under HTSUS subheadings 7307.91.5030 and 7307.91.5070. The HTSUS subheadings are provided for convenience and customs purposes; the written description of the scope is dispositive.
National Oceanic and Atmospheric Administration (NOAA), Commerce.
Notice.
The Department of Commerce, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995.
Written comments must be submitted on or before April 10, 2017.
Direct all written comments to Jennifer Jessup, Departmental Paperwork Clearance Officer, Department of Commerce, Room 6616, 14th and Constitution Avenue NW., Washington, DC 20230 (or via the Internet at
Requests for additional information or copies of the information collection instruments and instructions should be directed to Rachel Baker, (907) 586-7425 or
This request is for extension of a currently approved information collection.
This information collection describes special permits issued to participants in the Pacific halibut subsistence fishery in waters off the coast of Alaska and any appeals resulting from denials. The National Marine Fisheries Service (NMFS) designed the permits to work in conjunction with other halibut harvest assessment measures. Subsistence fishing for halibut has occurred for many years among the Alaska Native people and non-Native people. Special permits are initiated in response to the concerns of Native and community groups regarding increased restrictions in International Pacific Halibut Commission Area 2C and include Community Harvest Permits, Ceremonial Permits, and Educational Permits.
A Community Harvest Permit allows the community or Alaska Native tribe to appoint one or more individuals from its respective community or tribe to harvest subsistence halibut from a single vessel under reduced gear and harvest restrictions.
Ceremonial and Educational Permits are available exclusively to Alaska Native tribes. Eligible Alaska Native tribes may appoint only one Ceremonial Permit Coordinator per tribe for Ceremonial Permits or one authorized Instructor per tribe for Educational Permits.
Except for enrolled students fishing under a valid Educational Permit, special permits require persons fishing under them to also possess a Subsistence Halibut Registration Certificate (SHARC) (see OMB No. 0648-0460) which identifies those persons who are currently eligible for subsistence halibut fishing. Each of the instruments is designed to minimize the reporting burden on subsistence halibut fishermen while retrieving essential information.
Respondents have a choice of either electronic or paper forms. Methods of submittal include online, email of electronic forms, mail, and facsimile transmission of paper forms. Educational Permits may not be applied for online.
Comments are invited on: (a) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimate of the burden (including hours and cost) of the proposed collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology.
Comments submitted in response to this notice will be summarized and/or included in the request for OMB approval of this information collection; they also will become a matter of public record.
Corporation for National and Community Service.
Notice.
The Corporation for National and Community Service (CNCS), as part of its continuing effort to reduce paperwork and respondent burden, conducts a pre-clearance consultation program to provide the general public and federal agencies with an opportunity to comment on proposed and/or continuing collections of information in accordance with the Paperwork Reduction Act of 1995 (PRA95) . This program helps to ensure
Currently, CNCS is soliciting comments concerning its proposed renewal of The Volunteering and Civic Life Assessment: September CPS Supplement. This is a national survey conducted by the US Census and CNCS. CNCS is directed by Congress to collect data and produce yearly reports on the Nation's civic health and volunteering activity (Section 179A of the National and Community Service Act.
Copies of the information collection request can be obtained by contacting the office listed in the Addresses section of this Notice.
Written comments must be submitted to the individual and office listed in the
You may submit comments, identified by the title of the information collection activity, by any of the following methods:
(1)
(2) By hand delivery or by courier to the CNCS mailroom at Rm. #4300 at the mail address given in paragraph (1) above, between 9:00 a.m. and 4:00 p.m. Eastern Time, Monday through Friday, except Federal holidays.
(3) Electronically through
Individuals who use a telecommunications device for the deaf (TTY-TDD) may call 1-800-833-3722 between 8:00 a.m. and 8:00 p.m. Eastern Time, Monday through Friday.
Anthony Nerino, 202-606-3913, or by email at
CNCS is particularly interested in comments that:
• Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of CNCS, including whether the information will have practical utility;
• Evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
• Enhance the quality, utility, and clarity of the information to be collected; and
• Minimize the burden of the collection of information on those who are expected to respond, including the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology (
The survey will be administered to a sample of U.S. citizens age 16 and older to assess the nature, extent and scope of their participation in civic activity. Approximately 60,000 households (90,000 individuals) will be enrolled in the Current Population Survey and be included in the September survey supplement. The CPS is administered monthly by the U.S. Census for the Bureau of Labor Statistics to measure employment rates and labor trends. The information will be collected in-person and via telephone survey.
This is a new information collection request. The previous data collection process occurred yearly across two separate months and included the Volunteer Supplement in September and the Civic Health Supplement in November. In consultation with the National Academy of Science and an ad hoc group of technical advisors and stakeholders, CNCS combined the supplements and shortened the instrument by eliminating redundant questions and items of low value, and by adding relevant queries.
The information collection will be used to generate civic health reports at the National, State, and Metropolitan Statistical Area (MSA) level and to disseminate these data to various stakeholders and end users for grant writing purposes and research.
Comments submitted in response to this notice will be summarized and/or included in the request for Office of Management and Budget approval of the information collection request; they will also become a matter of public record.
Department of the Army, DoD.
Notice of open Subcommittee meeting.
The Department of the Army is publishing this notice to announce the following Federal advisory committee meeting of the U.S. Army War College Board of Visitors, a subcommittee of the Army Education Advisory Committee. This meeting is open to the public.
The U.S. Army War College Board of Visitors Subcommittee will meet from 8:00 a.m. to 2:00 p.m. on March, 31, 2017.
U.S. Army War College, 122 Forbes Avenue, Carlisle, PA, Command Conference Room, Root Hall, Carlisle Barracks, PA 17013.
Dr. David Dworak, the Alternate Designated Federal Officer for the subcommittee, in writing at Office of the Provost, 122 Forbes Ave., Carlisle, PA 17013, by email at
The subcommittee meeting is being held under the provisions of the Federal Advisory Committee Act of 1972 (5 U.S.C., Appendix, as amended), the Government in the Sunshine Act of 1976 (5 U.S.C. 552b, as amended), and 41 CFR 102-3.150.
Because the meeting of the subcommittee will be held in a Federal Government facility on a military base, security screening is required. A photo ID is required to enter base. Please note that security and gate guards have the right to inspect vehicles and persons seeking to enter and exit the installation. Root Hall is fully handicap accessible. Wheelchair access is available in front at the main entrance of the building. For additional information about public access procedures, contact Dr. David Dworak, the subcommittee's Alternate Designated Federal Officer, at the email address or telephone number listed in the
Pursuant to 41 CFR 102-3.140d, the Committee is not obligated to allow a member of the public to speak or otherwise address the Committee during the meeting. Members of the public will be permitted to make verbal comments during the Committee meeting only at the time and in the manner described below. If a member of the public is interested in making a verbal comment at the open meeting, that individual must submit a request, with a brief statement of the subject matter to be addressed by the comment, at least seven business days in advance to the subcommittee's Alternate Designated Federal Official, via electronic mail, the preferred mode of submission, at the address listed in the
Department of the Army, U.S. Army Corps of Engineers, DoD.
Notice of open Federal advisory committee meeting.
The Department of the Army is publishing this notice to announce the following Federal advisory committee meeting of the U.S. Army Corps of Engineers, Inland Waterways Users Board (Board). This meeting is open to the public. For additional information about the Board, please visit the committee's Web site at
The Army Corps of Engineers, Inland Waterways Users Board will meet from 9:00 a.m. to 1:00 p.m. on February 24, 2017. Public registration will begin at 8:15 a.m.
The Board meeting will be conducted at the Port of Lake Charles in the Port Boardroom, 1611 W. Sallier Street, Lake Charles, Louisiana 70601, 337-439-3661, or
Mr. Mark R. Pointon, the Designated Federal Officer (DFO) for the committee, in writing at the Institute for Water Resources, U.S. Army Corps of Engineers, ATTN: CEIWR-GM, 7701 Telegraph Road, Casey Building, Alexandria, VA 22315-3868; by telephone at 703-428-6438; and by email at
The committee meeting is being held under the provisions of the Federal Advisory Committee Act of 1972 (5 U.S.C., Appendix, as amended), the Government in the Sunshine Act of 1976 (5 U.S.C. 552b, as amended), and 41 CFR 102-3.150.
Department of the Army, DoD.
Notice of Advisory Committee meeting.
The Department of the Army is publishing this notice to announce the following Federal advisory committee meeting of the Board on Coastal Engineering Research. This meeting is open to the public.
The Board on Coastal Engineering Research will meet from 8:00 a.m. to 5:00 p.m. on March 16, 2017 and reconvene from 8:00 a.m. to 12:00 p.m. on March 17, 2017.
All sessions will be held at the Ted's Scripps Conference Room, Robert Scripps Forum for Science, Society, and the Environment, Scripps Institution of Oceanography, 8610 Kennel Way, La Jolla, CA 92037. All sessions are open to the public. For more information about the Board, please visit
COL Bryan S. Green Designated Federal Officer (DFO), U.S. Army Engineer Research and Development Center, Waterways Experiment Station, 3909 Halls Ferry Road, Vicksburg, MS 39180-6199, phone 601-634-2513, or
The meeting is being held under the provisions of the Federal Advisory Committee Act (FACA) of 1972 (5 U.S.C., Appendix, as amended), the Government in the Sunshine Act of 1976 (5 U.S.C. 552b, as amended), and 41 CFR 102-3.150. The Board on Coastal Engineering Research provides broad policy guidance and reviews plans for the conduct of research and the development of research projects in consonance with the needs of the coastal engineering field and the objectives of the U.S. Army Chief of Engineers.
On Friday morning, March 17, 2017, the Board will reconvene to discuss comments from day one. Presentations on Heterogeneous Research Topics, State of Coastal CHL, Identify Strategic Coastal Research Priorities, and update and discussion on the June 2017 meeting in Honolulu, HI.
Oral participation by the public is scheduled for 10:45 a.m. on Friday, March 17, 2017. The Ted's Scripps Meeting Room is fully handicap accessible. For additional information about public access procedures, please contact COL Bryan S. Green, the Board's DFO, at the email address or telephone number listed in the
Office of Postsecondary Education (OPE), Department of Education (ED).
Notice.
In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 3501
Interested persons are invited to submit comments on or before March 10, 2017.
To access and review all the documents related to the information collection listed in this notice, please use
For specific questions related to collection activities, please contact Kenneth Foushee, 202-453-7417.
The Department of Education (ED), in accordance with the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3506(c)(2)(A)), provides the general public and Federal agencies with an opportunity to comment on proposed, revised, and continuing collections of information. This helps the Department assess the impact of its information collection requirements and minimize the public's reporting burden. It also helps the public understand the Department's information collection requirements and provide the requested data in the desired format. ED is soliciting comments on the proposed information collection request (ICR) that is described below. The Department of Education is especially interested in public comment addressing the following issues: (1) Is this collection necessary to the proper functions of the Department; (2) will this information be processed and used in a timely manner; (3) is the estimate of burden accurate; (4) how might the Department enhance the quality, utility, and clarity of the information to be collected; and (5) how might the Department minimize the
Authority for this program is contained in Title IV, Part A, Subpart 2, Chapter 1, Section 402C of the Higher Education Act of 1965, as amended by the Higher Education Opportunity Act of 2008. Eligible applicants include institutions of higher education, public or private agencies or organizations, including community-based organizations with experience in serving disadvantaged youth, secondary schools, and combinations of institutions, agencies, organizations, and secondary schools.
The Department is requesting a reinstatement with change because the previous VUB application was discontinued in June 2015 and the application will be needed for a Fiscal Year (FY) 2017 competition for new awards. The FY 2017 application removes previously-used competitive preference priorities and adds a selection criterion: Quality of Project Design. The change does not affect burden hours.
National Center for Education Statistics, Institute of Education Sciences, Department of Education.
Notice.
The Secretary announces dates for State educational agencies (SEAs) to submit expenditure and revenue data and average daily attendance statistics on ED Form 2447 (the National Public Education Financial Survey (NPEFS)) for FY 2016, revisions to those reports, and revisions to prior fiscal year reports. The Secretary sets these dates to ensure that data are available to serve as the basis for timely distribution of Federal funds. The U.S. Census Bureau is the data collection agent for this request of the Department of Education's National Center for Education Statistics (NCES). The data will be published by NCES and will be used by the Secretary in the calculation of allocations for FY 2018 appropriated funds.
SEAs can begin submitting data on Thursday, February 9, 2017. The deadline for the final submission of all data, including any revisions to previously submitted data for FY 2015 and FY 2016, is Tuesday, August 15, 2017. Any resubmissions of FY 2015 or FY 2016 data by SEAs in response to requests for clarification or reconciliation or other inquiries by NCES or the Census Bureau must be completed as soon as possible, but no later than Tuesday, September 5, 2017. All outstanding data issues must be reconciled or resolved by the SEAs, NCES, and the Census Bureau as soon as possible, but no later than September 5, 2017.
SEAs may mail ED Form 2447 to: U.S. Census Bureau, ATTENTION: Economic Reimbursable Surveys Division, 4600 Silver Hill Road, Suitland, MD 20746.
SEAs may submit data online using the interactive survey form on the NPEFS data collection Web site at:
Alternatively, SEAs may hand-deliver submissions by 4:00 p.m. Washington, DC time on August 15, 2017, to: U.S. Census Bureau, Economic Reimbursable Surveys Division, 4600 Silver Hill Road, Suitland, MD 20746.
Mr. Stephen Q. Cornman, NPEFS Project Director, National Center for Education Statistics, Institute of Education Sciences, U.S. Department of Education. Telephone: (202) 245-7753 or by email:
If you use a telecommunications device for the deaf (TDD) or a text telephone (TTY), call the Federal Relay Service, toll free, at 1-800-877-8339.
Under section 153(a)(1)(I) of the Education Sciences Reform Act of 2002, 20 U.S.C. 9543(a)(1)(I), which authorizes NCES to gather data on the financing and management of education, NCES collects data annually from SEAs through ED Form 2447. The report from SEAs includes attendance, revenue, and expenditure data from which NCES determines a State's “average per-pupil expenditure” (SPPE) for elementary and secondary education, as defined in section 8101(2) of the Elementary and Secondary Education Act of 1965, as amended (ESEA) (20 U.S.C. 7801(2)).
In addition to using the SPPE data as general information on the financing of elementary and secondary education, the Secretary uses these data directly in calculating allocations for certain formula grant programs, including, but not limited to, title I, part A of the ESEA, Impact Aid, and Indian Education programs. Other programs, such as the Education for Homeless Children and Youth program under title VII of the McKinney-Vento Homeless Assistance Act and the Teacher Quality State Grants program (title II, part A of the ESEA), make use of SPPE data indirectly because their formulas are based, in whole or in part, on State title I, part A allocations.
In January 2017, the Census Bureau, acting as the data collection agent for NCES, will email ED Form 2447 to SEAs, with instructions, and will request that SEAs commence submitting
Submissions by SEAs to the Census Bureau will be analyzed for accuracy and returned to each SEA for verification. SEAs must submit all data, including any revisions to FY 2015 and FY 2016 data, to the Census Bureau no later than Tuesday, August 15, 2017. Any resubmissions of FY 2015 or FY 2016 data by SEAs in response to requests for clarification or reconciliation or other inquiries by NCES or the Census Bureau must be completed by Tuesday, September 5, 2017. Between August 15, 2017, and September 5, 2017, SEAs may also, on their own initiative, resubmit data to resolve issues not addressed in their final submission of NPEFS data by August 15, 2017. All outstanding data issues must be reconciled or resolved by the SEAs, NCES, and the Census Bureau as soon as possible, but no later than September 5, 2017.
In order to facilitate timely submission of data, the Census Bureau will send reminder notices to SEAs in May, June, and July of 2017.
Having accurate, consistent, and timely information is critical to an efficient and fair Department of Education (Department) allocation process and to the NCES statistical process. To ensure timely distribution of Federal education funds based on the best, most accurate data available, the Department establishes, for program funding allocation purposes, Tuesday, August 15, 2017, as the final date by which the SEAs must submit data using either the interactive survey form on the NPEFS data collection Web site at:
Any resubmissions of FY 2015 or FY 2016 data by SEAs in response to requests for clarification or reconciliation or other inquiries by NCES or the Census Bureau must be completed through the interactive survey form on the NPEFS data collection Web site or ED Form 2447 by Tuesday, September 5, 2017. If an SEA submits revised data after the final deadline that result in a lower SPPE figure, the SEA's allocations may be adjusted downward, or the Department may direct the SEA to return funds. SEAs should be aware that all of these data are subject to audit and that, if any inaccuracies are discovered in the audit process, the Department may seek recovery of overpayments for the applicable programs.
The following are important dates in the data collection process for FY 2016:
February 9, 2017—SEAs can begin to submit accurate and complete data for FY 2016 and revisions to previously submitted data for FY 2015.
March 17, 2017—Date by which SEAs are urged to submit accurate and complete data for FY 2015 and FY 2016.
August 15, 2017—Mandatory final submission date for FY 2015 and FY 2016 data to be used for program funding allocation purposes.
September 5, 2017—Mandatory final deadline for responses by SEAs to requests for clarification or reconciliation or other inquiries by NCES or the Census Bureau. All data issues must be resolved.
If an SEA's submission is received by the Census Bureau after August 15, 2017, the SEA must show one of the following as proof that the submission was mailed on or before that date:
1. A legibly dated U.S. Postal Service postmark.
2. A legible mail receipt with the date of mailing stamped by the U.S. Postal Service.
3. A dated shipping label, invoice, or receipt from a commercial carrier.
4. Any other proof of mailing acceptable to the Secretary.
If the SEA mails ED Form 2447 through the U.S. Postal Service, the Secretary does not accept either of the following as proof of mailing:
1. A private metered postmark.
2. A mail receipt that is not dated by the U.S. Postal Service.
The U.S. Postal Service does not uniformly provide a dated postmark. Before relying on this method, an SEA should check with its local post office.
At this site you can view this document, as well as all other documents of this Department published in the
You may also access documents of the Department published in the
Specifically, through the advanced search feature at this site, you can limit your search to documents published by the Department.
20 U.S.C. 9543.
Office of Fossil Energy, Department of Energy.
Notice of orders.
The Office of Fossil Energy (FE) of the Department of Energy gives notice that during December 2016, it
They are also available for inspection and copying in the U.S. Department of Energy (FE-34), Division of Natural Gas Regulation, Office of Regulation and International Engagement, Office of Fossil Energy, Docket Room 3E-033, Forrestal Building, 1000 Independence Avenue SW., Washington, DC 20585, (202) 586-9478. The Docket Room is open between the hours of 8:00 a.m. and 4:30 p.m., Monday through Friday, except Federal holidays.
Department of Energy.
Notice of open meeting.
This notice announces a meeting of the Environmental Management Site-Specific Advisory Board (EM SSAB), Hanford. The Federal Advisory Committee Act requires that public notice of this meeting be announced in the
Red Lion Hanford House, 802 George Washington Way, Richland, WA 99352.
Kristen Holmes, Federal Coordinator, Department of Energy Richland Operations Office, 825 Jadwin Avenue, P.O. Box 550, A7-75, Richland, WA 99352; Phone: (509) 376-5803; or Email:
Department of Energy.
Notice of open meeting.
This notice announces a combined meeting of the Environmental Monitoring and Remediation Committee and Waste Management Committee of the Environmental Management Site-Specific Advisory Board (EM SSAB), Northern New Mexico (known locally as the Northern New Mexico Citizens' Advisory Board [NNMCAB]). The Federal Advisory Committee Act (Pub. L. 92-463, 86 Stat. 770) requires that public notice of this meeting be announced in the
Wednesday, February 22, 2017, 1:00 p.m.-4:00 p.m.
NNMCAB Office, 94 Cities of Gold Road, Pojoaque, NM 87506.
Menice Santistevan, Northern New Mexico Citizens' Advisory Board, 94 Cities of Gold Road, Santa Fe, NM 87506. Phone (505) 995-0393; Fax (505) 989-1752 or Email:
Department of Energy.
Notice of open meeting.
This notice announces a meeting of the Environmental Management Site-Specific Advisory Board (EM SSAB), Idaho National Laboratory. The Federal Advisory Committee Act requires that public notice of this meeting be announced in the
Thursday, February 23, 2017, 8:00 a.m.-1:00 p.m.
The opportunity for public comment is at 10:30 a.m.
This time is subject to change; please contact the Federal Coordinator (below) for confirmation of times prior to the meeting.
Hilton Garden Inn, 700 Lindsay Boulevard, Idaho Falls, ID 83402.
Robert L. Pence, Federal Coordinator, Department of Energy, Idaho Operations Office, 1955 Fremont Avenue, MS-1203, Idaho Falls, Idaho 83415. Phone (208) 526-6518; Fax (208) 526-8789 or email:
Office of Science, Department of Energy.
Notice of open meeting.
This notice announces a meeting of the Basic Energy Sciences Advisory Committee (BESAC). The Federal Advisory Committee Act requires that public notice of these meetings be announced in the
Thursday, February 23, 2017; 8:00 a.m. to 5:00 p.m. and Friday, February 24, 2017; 8:00 a.m. to 12:00 noon.
Hilton Washington DC/Rockville Hotel & Executive Meeting Center, 1750 Rockville Pike, Rockville, MD 20852.
Katie Runkles; Office of Basic Energy Sciences; U.S. Department of Energy; Germantown Building, 1000 Independence Avenue SW., Washington, DC 20585; Telephone: (301) 903-6529.
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
The filings are accessible in the Commission's eLibrary system by
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission has received the following Natural Gas Pipeline Rate and Refund Report filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
On February 2, 2017, the Commission issued an order in Docket No. EL17-27-000, pursuant to section 206 of the Federal Power Act (FPA), 16 U.S.C. 824e (2012), instituting an investigation into whether the proposed rate decreases of PacifiCorp are just and reasonable.
The refund effective date in Docket No. EL17-27-000, established pursuant to section 206(b) of the FPA, will be the date of publication of this notice in the
Any interested person desiring to be heard in Docket No. EL17-27-000 must file a notice of intervention or motion to intervene, as appropriate, with the Federal Energy Regulatory Commission, 888 First Street NE., Washington, DC 20426, in accordance with Rule 214 of the Commission's Rules of Practice and Procedure, 18 CFR 385.214, within 21 days of the date of issuance of the order.
Take notice that the Commission received the following electric corporate filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following public utility holding company filings:
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Take notice that the Commission received the following exempt wholesale generator filings:
Take notice that the Commission received the following electric rate filings:
Take notice that the Commission received the following electric securities filings:
Description: Application under Section 204 of the Federal Power Act of Xcel Energy Southwest Transmission Company, LLC.
Description: Application under Section 204 of the Federal Power Act of Xcel Energy Transmission Development Company, LLC.
The filings are accessible in the Commission's eLibrary system by clicking on the links or querying the docket number.
Any person desiring to intervene or protest in any of the above proceedings must file in accordance with Rules 211 and 214 of the Commission's Regulations (18 CFR 385.211 and 385.214) on or before 5:00 p.m. Eastern time on the specified comment date. Protests may be considered, but intervention is necessary to become a party to the proceeding.
eFiling is encouraged. More detailed information relating to filing requirements, interventions, protests, service, and qualifying facilities filings can be found at:
Environmental Protection Agency (EPA).
Notice.
The Environmental Protection Agency is planning to submit an information collection request (ICR), “General Administrative Requirements for Assistance Programs” (EPA ICR No. 0938.21, OMB Control No. 2030-0020) to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act (44 U.S.C. 3501
Comments must be submitted on or before April 10, 2017.
Submit your comments, referencing Docket ID No. EPA-HQ-OARM-2016-0762, online using
EPA's policy is that all comments received will be included in the public docket without change including any personal information provided, unless the comment includes profanity, threats, information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute.
Elizabeth January, Office of Grants and Debarment, National Policy, Training and Compliance Division, Mail Code: 3903R, Environmental Protection
Supporting documents which explain in detail the information that the EPA will be collecting are available in the public docket for this ICR. The docket can be viewed online at
Pursuant to section 3506(c)(2)(A) of the PRA, EPA is soliciting comments and information to enable it to: (i) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the Agency, including whether the information will have practical utility; (ii) evaluate the accuracy of the Agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (iii) enhance the quality, utility, and clarity of the information to be collected; and (iv) minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated electronic, mechanical, or other technological collection techniques or other forms of information technology,
Environmental Protection Agency (EPA).
Notice.
Section 5(g) of the Toxic Substances Control Act (TSCA) requires EPA to publish in the
This action is directed to the public in general. As such, the Agency has not attempted to describe the specific entities that this action may apply to. Although others may be affected, this action applies directly to the submitters of the PMNs addressed in this action.
The docket for this action, identified by docket identification (ID) number EPA-HQ-OPPT-2016-0511, is available at
This document lists the statements of findings made by EPA after review of notices submitted under TSCA section 5(a) that certain new chemical substances or significant new uses are not likely to present an unreasonable risk of injury to health or the environment. This document presents statements of findings made by EPA during the period from October 25, 2016 to November 30, 2016.
TSCA section 5(a)(3) requires EPA to review a TSCA section 5(a) notice and make one of the following specific findings:
• The chemical substance or significant new use presents an unreasonable risk of injury to health or the environment;
• The information available to EPA is insufficient to permit a reasoned evaluation of the health and environmental effects of the chemical substance or significant new use;
• The information available to EPA is insufficient to permit a reasoned evaluation of the health and environmental effects and the chemical substance or significant new use may present an unreasonable risk of injury to health or the environment;
• The chemical substance is or will be produced in substantial quantities, and such substance either enters or may reasonably be anticipated to enter the environment in substantial quantities or there is or may be significant or substantial human exposure to the substance; or
• The chemical substance or significant new use is not likely to present an unreasonable risk of injury to health or the environment.
Unreasonable risk findings must be made without consideration of costs or other non-risk factors, including an unreasonable risk to a potentially exposed or susceptible subpopulation identified as relevant under the conditions of use. The term “conditions of use” is defined in TSCA section 3 to mean “the circumstances, as determined by the Administrator, under which a chemical substance is intended, known, or reasonably foreseen to be manufactured, processed, distributed in commerce, used, or disposed of.”
EPA is required under TSCA section 5(g) to publish in the
Anyone who plans to manufacture (which includes import) a new chemical substance for a non-exempt commercial purpose and any manufacturer or processor wishing to engage in a use of a chemical substance designated by EPA as a significant new use must submit a notice to EPA at least 90 days before commencing manufacture of the new chemical substance or before engaging in the significant new use.
The submitter of a notice to EPA for which EPA has made a finding of “not likely to present an unreasonable risk of injury to health or the environment” may commence manufacture of the chemical substance or manufacture or processing for the significant new use notwithstanding any remaining portion of the applicable review period.
In this unit, EPA provides the following information (to the extent that such information is not claimed as Confidential Business Information (CBI)) on the PMNs, MCANs and SNUNs for which, during this period, EPA has made findings under TSCA section 5(a)(3)(C) that the new chemical substances or significant new uses are not likely to present an unreasonable risk of injury to health or the environment:
• EPA case number assigned to the TSCA section 5(a) notice.
• Chemical identity (generic name, if the specific name is claimed as CBI).
• Web site link to EPA's decision document describing the basis of the “not likely to present an unreasonable risk” finding made by EPA under TSCA section 5(a)(3)(C).
15 U.S.C. 2601
Federal Deposit Insurance Corporation (FDIC).
Notice and request for comment.
The FDIC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on the renewal of existing information collections, as required by the Paperwork Reduction Act of 1995 (44 U.S.C. chapter 35). On May 24, 2016, (81 FR 35752), the FDIC requested comment for 60 days on a proposal to renew the information collections described below. No comments were received. The FDIC hereby gives notice of its plan to submit to OMB a request to approve the renewal of these collections, and again invites comment on this renewal.
Comments must be submitted on or before March 10, 2017.
Interested parties are invited to submit written comments to the FDIC by any of the following methods:
•
•
•
•
All comments should refer to the relevant OMB control number. A copy of the comments may also be submitted to the OMB desk officer for the FDIC: Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Washington, DC 20503.
Manny Cabeza, at the FDIC address above.
The FDIC is considering possible revisions to the following collection of information:
The FDIC recognizes that public confidence in the banking system is strengthened when banks effectively serve the broadest possible set of consumers. As a result, the agency is committed to increasing the participation of unbanked and underbanked households in the financial mainstream by ensuring that all Americans have access to safe, secure, and affordable banking services. The National Survey of Unbanked and Underbanked Households is one contribution to this end.
The National Survey of Unbanked and Underbanked Households is also a key component of the FDIC's efforts to comply with a Congressional mandate contained in section 7 of the Federal Deposit Insurance Reform Conforming Amendments Act of 2005 (“Reform Act”) (Pub. L. 109-173), which calls for the FDIC to conduct ongoing surveys “on efforts by insured depository institutions to bring those individuals and families who have rarely, if ever, held a checking account, a savings account or other type of transaction or check cashing account at an insured depository institution (hereafter in this section referred to as the `unbanked') into the conventional finance system.” Section 7 further instructs the FDIC to consider several factors in its conduct of the surveys, including: (1) “what cultural, language and identification issues as well as transaction costs appear to most prevent `unbanked' individuals from establishing conventional accounts”; and (2) “what is a fair estimate of the size and worth of the “unbanked” market in the United States.” The National Survey of Unbanked and Underbanked Households is designed to address these factors and provide a factual basis on the proportions of unbanked households. Such a factual basis is
To obtain this information, the FDIC partnered with the U.S. Census Bureau, which administered the Household Survey supplement (“FDIC Supplement') to households that participated in the January 2009, June 2011, June 2013 and June 2015 CPS. The results of these surveys were released to the public in December 2009, September 2012, October 2014, and October 2016, respectively.
The FDIC supplement has yielded nationally-representative data, not otherwise available, on the size and characteristics of the population that is unbanked or underbanked, the use by this population of alternative financial services, and the reasons why some households do not make greater use of mainstream banking services. The National Survey of Unbanked and Underbanked Households is the only population-representative survey conducted at the national level that provides state-level estimates of the size and characteristics of unbanked and underbanked households for all 50 states and the District of Columbia. An executive summary of the results of the previous Household Surveys, the full reports, and the survey questionnaires can be accessed through the following link:
Consistent with the statutory mandate to conduct the surveys on an ongoing basis, the FDIC already has in place arrangements for conducting the fourth Household Survey as a supplement to the June 2017 CPS. However, prior to finalizing the next survey questionnaire, the FDIC seeks to solicit public comment on whether changes to the existing instrument are desirable and, if so, to what extent. It should be noted that, as a supplement of the CPS survey, the Household Survey needs to adhere to specific parameters that include limits in the length and sensitivity of the questions that can be asked of CPS respondents. Specifically, there is a strict limitation on the number of questions permitted and the average time required to complete the survey.
The Commission hereby gives notice of the filing of the following agreements under the Shipping Act of 1984. Interested parties may submit comments on the agreements to the Secretary, Federal Maritime Commission, Washington, DC 20573, within twelve days of the date this notice appears in the
By Order of the Federal Maritime Commission.
11:00 a.m., Thursday, February 16, 2017.
The Richard V. Backley Hearing Room, Room 511N, 1331 Pennsylvania Avenue NW., Washington, DC 20004 (enter from F Street entrance).
Open.
The Commission will consider and act upon the following in open session:
Any person attending this meeting who requires special accessibility features and/or auxiliary aids, such as
Emogene Johnson (202) 434-9935/(202) 708-9300 for TDD Relay/1-800-877-8339 for toll free.
1-(866) 867-4769, Passcode: 129-339.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than March 3, 2017.
1.
1.
The notificant listed below has applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than February 23, 2017.
1.
The notificant listed below has applied under the Change in Bank Control Act (12 U.S.C. 1817(j)) and § 225.41 of the Board's Regulation Y (12 CFR 225.41) to acquire shares of a bank or bank holding company. The factors that are considered in acting on the notices are set forth in paragraph 7 of the Act (12 U.S.C. 1817(j)(7)).
The notices are available for immediate inspection at the Federal Reserve Bank indicated. The notices also will be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing to the Reserve Bank indicated for that notice or to the offices of the Board of Governors. Comments must be received not later than February 22, 2017.
1.
1.
The companies listed in this notice have applied to the Board for approval, pursuant to the Bank Holding Company Act of 1956 (12 U.S.C. 1841
The applications listed below, as well as other related filings required by the Board, are available for immediate inspection at the Federal Reserve Bank indicated. The applications will also be available for inspection at the offices of the Board of Governors. Interested persons may express their views in writing on the standards enumerated in the BHC Act (12 U.S.C. 1842(c)). If the proposal also involves the acquisition of a nonbanking company, the review also includes whether the acquisition of the nonbanking company complies with the standards in section 4 of the BHC Act (12 U.S.C. 1843). Unless otherwise noted, nonbanking activities will be conducted throughout the United States.
Unless otherwise noted, comments regarding each of these applications must be received at the Reserve Bank indicated or the offices of the Board of Governors not later than March 3, 2017.
1.
The Centers for Disease Control and Prevention (CDC) has submitted the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The notice for the proposed information collection is published to obtain comments from the public and affected agencies.
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address any of the following: (a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) Enhance the quality, utility, and clarity of the information to be collected; (d) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570 or send an email to
Data Calls for the Laboratory Response Network (OMB Control Number 0920-0881, Expires 4/30/2017)—Revision—National Center for Emerging and Zoonotic Infectious Diseases (NCEZID), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC) is submitting a request for a three year revision for OMB Control No. 0920-0881, an existing collection conducted by Laboratory Response Network (LRN), National Center for Emerging and Zoonotic Infectious Diseases (NCEZID).
The Department of Health and Human Services established LRN in accordance with Presidential Decision Directive 39, which outlined national anti-terrorism policies and assigned specific missions to Federal departments and agencies. The LRN's mission is to maintain an integrated national and international network of laboratories that can respond to acts of biological, chemical, or radiological terrorism and other public health emergencies. Federal, state and local public health laboratories voluntarily join the LRN.
The LRN Program Office maintains a database of information for each member laboratory that includes contact information as well as staff and equipment inventories. However, semiannually or during emergency response, the LRN Program Office may conduct a Special Data Call to obtain additional information from LRN Member Laboratories in regards to biological or chemical terrorism preparedness.
LRN has used the “Data Calls for the Laboratory Response Network” generic mechanism (OMB Control No. 0920-0881) twice during the last three years. Once in 2014, LRN surveyed its members to ascertain which, if any, labs would be willing to test clinical specimens for Ebola virus. The information gathered led to an emergency deployment of a new Ebola assay for LRN members. It is critical for the LRN to know which labs have equipment to support an agent specific assay during an emergency. In 2015, LRN surveyed members via broadcast email asking how many facilities had a specific version of an instrument. The information was used to help the LRN program office determine if new procedures should be written and made available to members to support the instrument in question.
Special Data calls may be conducted via queries that are distributed by broadcast emails or by survey tools (
The only cost to respondents is their time to respond to the data call. Authorizing legislation comes from Section 301 of the Public Health Service Act.
The Centers for Disease Control and Prevention (CDC) has submitted the following request for reinstatement with change to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act of 1995. The notice for the proposed information collection is published to obtain comments from the public and affected agencies.
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information are encouraged. Your comments should address any of the following: (a) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (c) Enhance the quality, utility, and clarity of the information to be collected; (d) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
To request additional information on the proposed project or to obtain a copy of the information collection plan and instruments, call (404) 639-7570 or send an email to
National Network of Sexually Transmitted Diseases Clinical Prevention Training Centers (NNPTC): Evaluation (OMB Control No. 0920-0995, Expiration 10/31/2016)—Reinstatement with Change—National Center for HIV/AIDS, Viral Hepatitis, STD, and TB Prevention (NCHHSTP), Centers for Disease Control and Prevention (CDC).
The Centers for Disease Control and Prevention (CDC), Division of STD Prevention (DSTDP) requests a three-year approval for this reinstatement with change to the previously OMB approved information collection project entitled, “
The Prevention Training Centers (PTCs) offer classroom, web-based, and experiential training, clinical consultation, and capacity building assistance to maintain and enhance the capacity of health care professionals to screen for, diagnose, treat, manage, and prevent STDs. Previously, there has not been a systematic evaluation of the outcomes of the NNPTC program. The CDC's Funding Opportunity Announcement PS 14-1407, National Network of Sexually Transmitted Diseases Clinical Prevention Training Centers (NNPTC) requires the collection of demographic information on trainees and the collection of national evaluation outcomes. Therefore, the 14 new evaluation forms were needed and the previously approved HPAT registration form was shortened to decrease the burden on respondents. This evaluation will provide the CDC with information to assess the performance of their grantees, and will provide the NNPTC with information to improve program processes and operations in order to improve the quality of STD prevention and treatment, a key public health and evaluation activity promoted by the CDC and DSTDP.
The NNPTC HPAT will serve as the standard application and registration form for all NNPTC trainings collecting demographic information such as race, gender, work contact information, profession, functional role, work setting, programmatic focus, and at-risk populations served. NNPTC HPAT data will be used to plan and organize trainings, and determine whether NNPTC trainings are reaching the designated priority audiences: STD experts and primary care providers who serve adolescents, young adults, pregnant women, and men who have sex with men. Evaluation instruments will be used to assess satisfaction with the training, and measure participant changes in knowledge, skills, intentions to change clinical practices, and actual changes in clinical practices.
Data will be collected up to three times annually from 4,500 healthcare professionals who provide STD screening, diagnosis, and treatment or provide services to populations at risk of STD and receive NNPTC training or technical assistance. This is a decrease from the origionally approved 7,400 due to a decrease in the number of PTCs and therefore number of healthcare professionals trained. All 4,500 healthcare professionals will complete the NNPTC HPAT registration and all will be asked via two emails to voluntarily complete one evaluation within several days after training (Post-Course Evaluation) and a second
The 3-minute NNPTC HPAT provides an efficient online registration process for all PTCs and takes two minutes less to complete than the previously approved version. The 14 evaluation instruments vary in number of questions based on the intensity of the training. Time to complete the different evaluation instruments ranges from 2 minutes for a one-hour training to 16 minutes for a multi-day training. Burden is calculated for each instrument separately based on number of respondents and number of questions in each instrument.
There are no costs to respondents other than their time. The estimated annualized burden hours for this data collection are 416 hours as compared to 617 for the previous approval. This reduction in burden is due to the shorter time needed to complete the HPAT (3 minutes versus the previously approved 5 minutes) and the smaller number of estimated respondents (4,500 versus 7,400) since there are now fewer PTCs conducting training. This savings for the HPAT burden is greater than the additional burden created by adding 14 new evaluation instruments since only a subset of the 4,500 respondents will complete the post-course evaluation and 90-day long-term evaluation.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of a meeting of the Board of Scientific Counselors, NIDCD. The meeting will be closed to the public as indicated below in accordance with the provisions set forth in section 552b(c)(6), Title 5 U.S.C., as amended for the review, discussion, and evaluation of individual intramural programs and projects conducted by the National Institute on Deafness and Other Communication Disorders, including consideration of personnel qualifications and performance, and the competence of individual investigators, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Information is also available on the Institute's/Center's home page:
Notice is hereby given of a change in the meeting of the Center for Scientific Review Special Emphasis Panel, February 09, 2017, 08:00 a.m. to February 09, 2017, 05:00 p.m., National Institutes of Health, 6701 Rockledge Drive, Bethesda, MD 20892 which was published in the
The meeting will be held at JW Marriott, 614 Canal St., New Orleans, LA 70130. The meeting time has not changed. The meeting is closed to the public.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meeting.
The meeting will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
Pursuant to section 10(d) of the Federal Advisory Committee Act, as amended (5 U.S.C. App.), notice is hereby given of the following meetings.
The meetings will be closed to the public in accordance with the provisions set forth in sections 552b(c)(4) and 552b(c)(6), Title 5 U.S.C., as amended. The grant applications and the discussions could disclose confidential trade secrets or commercial property such as patentable material, and personal information concerning individuals associated with the grant applications, the disclosure of which would constitute a clearly unwarranted invasion of personal privacy.
U.S. Customs and Border Protection, Department of Homeland Security.
60-Day notice and request for comments; extension of an existing collection of information.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security will be submitting the following information collection request to the Office of Management and Budget (OMB) for review and approval in accordance with the Paperwork Reduction Act: Temporary Scientific or Education Purposes. CBP is proposing that this information collection be extended with no change to the burden hours or to the information collected. This document is published to obtain comments from the public and affected agencies.
Written comments should be received on or before April 10, 2017 to be assured of consideration.
All submissions received must include the OMB Control Number 1651-0036 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1)
(2)
Requests for additional PRA information should be directed to Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Regulations and Rulings, Office of Trade, 90 K Street NE., 10th Floor, Washington, DC 20229-1177, or via email (
CBP invites the general public and other Federal agencies to comment on proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501). The comments should address: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimates of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden including the use of automated collection techniques or the use of other forms of information technology; and (e) the annual cost burden to respondents or record keepers from the collection of information (total capital/startup costs and operations and maintenance costs). The comments that are submitted will be summarized and included in the CBP request for OMB approval. All comments will become a matter of public record. In this document, CBP is soliciting comments concerning the following Information collection:
U.S. Customs and Border Protection, Department of Homeland Security.
60-Day Notice and request for comments; extension of an existing collection of information.
U.S. Customs and Border Protection (CBP) of the Department of Homeland Security will be submitting the following information collection
Written comments should be received on or before April 10, 2017 to be assured of consideration.
All submissions received must include the OMB Control Number 1651-0050 in the subject line and the agency name. To avoid duplicate submissions, please use only
(1) Email. Submit comments to: (
(2) Mail. Submit written comments to CBP PRA Officer, U.S. Customs and Border Protection, Office of Trade, Regulations and Rulings, Economic Impact Analysis Branch, 10th Floor, 90 K St. NE., Washington, DC 20229-1177.
Requests for additional PRA information should be directed to Paperwork Reduction Act Officer, U.S. Customs and Border Protection, Regulations and Rulings, Office of Trade, 90 K Street NE., 10th Floor, Washington, DC 20229-1177, or via email (
CBP invites the general public and other Federal agencies to comment on proposed and/or continuing information collections pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501). The comments should address: (a) Whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information shall have practical utility; (b) the accuracy of the agency's estimates of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information to be collected; (d) ways to minimize the burden including the use of automated collection techniques or the use of other forms of information technology; and (e) the annual cost burden to respondents or record keepers from the collection of information (total capital/startup costs and operations and maintenance costs). The comments that are submitted will be summarized and included in the CBP request for OMB approval. All comments will become a matter of public record. In this document, CBP is soliciting comments concerning the following Information collection:
Surety bonds are usually executed by an agent of the surety. The surety company grants authority to the agent via a Corporate Surety Power of Attorney, CBP Form 5297. This power is vested with CBP so that when a bond is filed, the validity of the authority of the agent executing the bond and the name of the surety can be verified to the surety's grant. CBP Form 5297 is available at:
U.S. Immigration and Customs Enforcement, Department of Homeland Security.
60-Day notice of information collection for review; standards to prevent, detect, and respond to sexual abuse and assault in confinement facilities; OMB control No. 1653-0051.
The Department of Homeland Security, U.S. Immigration and Customs Enforcement (USICE), is submitting the following information collection request for review and clearance in accordance with the Paperwork Reduction Act of 1995. The information collection is published in the
Written comments and suggestions regarding items contained in this notice and especially with regard to the estimated public burden and associated response time should be directed to the Department of Homeland Security (DHS), Scott Elmore, PRA Clearance Officer, U.S. Immigrations and Customs Enforcement, 801 I Street NW., Mailstop 5800, Washington, DC 20536-5800.
Written comments and suggestions from the public and affected agencies concerning the proposed collection of information should address one or more of the following four points:
(1) Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility;
(2) Evaluate the accuracy of the agencies estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used;
(3) Enhance the quality, utility, and clarity of the information to be collected; and
(4) Minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,
(1)
(2)
(3)
(4)
(6)
Office of the Assistant Secretary for Community Planning and Development, HUD.
Notice.
This Notice modifies a waiver and alternative requirement for the State of New Jersey's tenant-based rental assistance program funded through its Community Development Block Grant disaster recovery (CDBG-DR) grant pursuant to the Disaster Relief Appropriations Act, 2013 (Pub. L. 113-2) (the Appropriations Act). A waiver and alternative requirement for the tenant-based rental assistance program was initially published in a
Jessie Handforth Kome, Acting Director, Office of Block Grant Assistance, Department of Housing and Urban Development, 451 7th Street SW., Room 7286, Washington, DC 20410, telephone number 202-708-3587. Persons with hearing or speech impairments may access this number via TTY by calling the Federal Relay Service at 800-877-8339. Facsimile inquiries may be sent to Mr. Stan Gimont at 202-401-2044. (Except for the“800” number, these telephone numbers are not toll-free.) Email inquiries may be sent to
The Appropriations Act made available $16 billion in Community Development Block Grant disaster recovery funds for necessary expenses related to disaster relief, long-term recovery, restoration of infrastructure and housing, and economic revitalization in the most impacted and distressed areas, resulting from a major disaster declared pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121
The Appropriations Act authorizes the Secretary to waive, or specify alternative requirements for, any provision of any statute or regulation that the Secretary administers in connection with HUD's obligation or use by the recipient of these funds (except for requirements related to fair housing, nondiscrimination, labor standards, and the environment). Waivers and alternative requirements are based upon a determination by the
For the waiver and alternative requirement described in this notice, the Secretary has determined that good cause exists and that the waiver and alternative requirement are not inconsistent with the overall purpose of Title I of the HCDA. Grantees may request waivers and alternative requirements from the Department as needed to address specific needs related to their recovery activities. Under the requirements of the Appropriations Act, waivers must be published in the
The State later requested that HUD increase the amount covered by the waiver from $17 million to $32 million, and extend the period of assistance by two years, to January 1, 2018, in order to meet the goals of a Voluntary Compliance Agreement (VCA) with the Department. HUD granted this waiver extension in the April 2, 2015
The State of New Jersey recently requested an extension to the expenditure deadline to January 1, 2019, to allow the State to provide up to two years of assistance to this LMI population. Without this extension, 85% of this LMI population would not be able to receive the full two years of assistance under the TBRA program. Because the Department is committed to assisting this population and allowing the State to disburse the full amount of assistance made available by the VCA, HUD is modifying its waiver of 42 U.S.C. 5305(a) to the extent necessary to allow the State to disburse the $32 million in Community Development Block Grant disaster recovery (CDBG-DR) funds allocated to State's TBRA program until January 1, 2019. The funds extended through this waiver are subject to the 24-month limitation on assistance and all other waiver and alternative requirements related to the TBRA program in the notice published on July 11, 2014 (79 FR 40133), as modified by the notice published on April 2, 2015 (80 FR 17772), as well as the requirements of the VCA and any subsequent amendments to the VCA.
The Catalog of Federal Domestic Assistance numbers for the disaster recovery grants under this Notice is 14.269.
This Notice does not direct, provide for assistance or loan and mortgage insurance for, or otherwise govern or regulate, real property acquisition, disposition, leasing (other than tenant-based rental assistance), rehabilitation, alteration, demolition, or new construction, or establish, revise or provide for standards for construction or construction materials, manufactured housing, or occupancy. Accordingly, under 24 CFR 50.19(c)(1), this Notice is categorically excluded from environmental review under the National Environmental Policy Act of 1969 (42 U.S.C 4321).
U.S. International Trade Commission.
Notice.
Notice is hereby given that the U.S. International Trade Commission has received a complaint entitled
Lisa R. Barton, Secretary to the Commission, U.S. International Trade Commission, 500 E Street SW., Washington, DC 20436, telephone (202) 205-2000. The public version of the complaint can be accessed on the Commission's Electronic Document Information System (EDIS) at
General information concerning the Commission may also be obtained by accessing its Internet server at United States International Trade Commission (USITC) at
The Commission has received a complaint and a submission pursuant to § 210.8(b) of the Commission's Rules of Practice and Procedure filed on behalf of Paice LLC and Abell Foundation, Inc. on February 3, 2017. The complaint alleges violations of section 337 of the Tariff Act of 1930 (19 U.S.C. 1337) in the importation into the United States, the sale for importation, and the sale within the United States after importation of certain hybrid vehicles and components thereof. The complaint names as a respondent, Ford Motor Company of Dearborn, MI. The complainant requests that the Commission issue a limited exclusion order, cease and desist order and impose a bond upon respondents' alleged infringing articles during the 60-day Presidential review period pursuant to 19 U.S.C. 1337(j).
Proposed respondents, other interested parties, and members of the public are invited to file comments, not to exceed five (5) pages in length, inclusive of attachments, on any public interest issues raised by the complaint or § 210.8(b) filing. Comments should address whether issuance of the relief specifically requested by the complainant in this investigation would affect the public health and welfare in the United States, competitive
In particular, the Commission is interested in comments that:
(i) Explain how the articles potentially subject to the requested remedial orders are used in the United States;
(ii) identify any public health, safety, or welfare concerns in the United States relating to the requested remedial orders;
(iii) identify like or directly competitive articles that complainant, its licensees, or third parties make in the United States which could replace the subject articles if they were to be excluded;
(iv) indicate whether complainant, complainant's licensees, and/or third party suppliers have the capacity to replace the volume of articles potentially subject to the requested exclusion order and/or a cease and desist order within a commercially reasonable time; and
(v) explain how the requested remedial orders would impact United States consumers.
Written submissions must be filed no later than by close of business, eight calendar days after the date of publication of this notice in the
Persons filing written submissions must file the original document electronically on or before the deadlines stated above and submit 8 true paper copies to the Office of the Secretary by noon the next day pursuant to § 210.4(f) of the Commission's Rules of Practice and Procedure (19 CFR 210.4(f)). Submissions should refer to the docket number (“Docket No. 3196”) in a prominent place on the cover page and/or the first page. (
Any person desiring to submit a document to the Commission in confidence must request confidential treatment. All such requests should be directed to the Secretary to the Commission and must include a full statement of the reasons why the Commission should grant such treatment.
This action is taken under the authority of section 337 of the Tariff Act of 1930, as amended (19 U.S.C. 1337), and of §§ 201.10 and 210.8(c) of the Commission's Rules of Practice and Procedure (19 CFR 201.10, 210.8(c)).
By order of the Commission.
The Foreign Claims Settlement Commission, pursuant to its regulations (45 CFR part 503.25) and the Government in the Sunshine Act (5 U.S.C. 552b), hereby gives notice in regard to the scheduling of open meetings as follows:
Open.
All meetings are held at the Foreign Claims Settlement Commission, 600 E Street NW., Washington, DC. Requests for information, or advance notices of intention to observe an open meeting, may be directed to: Patricia M. Hall, Foreign Claims Settlement Commission, 600 E Street NW., Suite 6002, Washington, DC 20579. Telephone: (202) 616-6975.
National Aeronautics and Space Administration.
Notice of meeting.
In accordance with the Federal Advisory Committee Act, Public Law 92-463, as amended, the National Aeronautics and Space Administration (NASA) announces a meeting of the Ad Hoc Big Data Task Force. This task force reports to the NASA Advisory Council's Science Committee. The meeting will be held for the purpose of soliciting and discussing, from the scientific community and other persons, scientific and technical information relevant to big data.
Monday, March 6, 2017, 9:00 a.m.-5:00 p.m.; and Tuesday, March 7, 2017, 9:00 a.m.-5:00 p.m., Local Time.
NASA Headquarters, Room 5H41-A, 300 E Street SW., Washington, DC 20546.
Ms. KarShelia Henderson, Science Mission Directorate, NASA Headquarters, Washington, DC 20546, (202) 358-2355, fax (202) 358-2779, or
The meeting will be open to the public up to the capacity of the room. The meeting will also be available telephonically and by WebEx. You must use a touch tone phone to participate in this meeting. Any interested person may call the USA toll free conference call number 1-888-324-9653 or toll number 1-312-470-
Attendees will be requested to sign a register and to comply with NASA Headquarters security requirements, including the presentation of a valid picture ID to Security before access to NASA Headquarters. Due to the Real ID Act, any attendees with drivers licenses issued from non-compliant states must present a second form of ID. Non-compliant states are: Maine, Minnesota, Missouri, Montana, and Washington. Foreign nationals attending this meeting will be required to provide a copy of their passport and visa in addition to providing the following information no less than 10 days prior to the meeting: Full name; gender; date/place of birth; citizenship; passport information (number, country, telephone); visa information (number, type, expiration date); employer/affiliation information (name of institution, address, country, telephone); title/position of attendee. To expedite admittance, attendees that are U.S. citizens and Permanent Residents (green card holders) are requested to provide full name and citizenship status 3 working days in advance. Information should be sent to Ms. KarShelia Henderson, via email at
The National Science Board's Committee on National Science and Engineering Policy (SEP), pursuant to NSF regulations (45 CFR part 614), the National Science Foundation Act, as amended (42 U.S.C. 1862n-5), and the Government in the Sunshine Act (5 U.S.C. 552b), hereby gives notice of the scheduling of a teleconference for the transaction of National Science Board business, as follows:
Monday, February 13, 2017 at 4:00 p.m. EST.
Discussion of a companion brief, Career Pathways for STEM Ph.D.s.
Open.
This meeting will be held by teleconference at the National Science Foundation, 4201 Wilson Blvd., Arlington, VA 22230. An audio link will be available for the public. Members of the public must contact the Board Office to request the public audio link by sending an email to
Please refer to the National Science Board Web site
Nuclear Regulatory Commission.
Draft NUREG; request for comment.
The U.S. Nuclear Regulatory Commission (NRC) is revising its licensing guidance for licenses authorizing initial distribution of byproduct material or source material to persons exempt from the requirements (exempt distribution) for an NRC license. The NRC is requesting public comment on draft NUREG-1556, Volume 8, Revision 1, “Consolidated Guidance About Materials Licenses: Program-Specific Guidance About Exempt Distribution Licenses.” The document has been updated from the original version to include information on safety culture, protection of sensitive information, and changes in regulatory policies and practices. This document is intended for use by applicants, licensees, and the NRC staff.
Submit comments by March 17, 2017. Comments received after this date will be considered if it is practicable to do so, but the NRC is only able to assure consideration of comments received on or before this date.
You may submit comments by any of the following methods (unless this document describes a different method for submitting comments on a specific subject):
•
•
For additional direction on obtaining information and submitting comments, see “Obtaining Information and Submitting Comments” in the
Katie Wagner, Office of Nuclear Material Safety and Safeguards; U.S. Nuclear Regulatory Commission, Washington, DC 20555-0001; telephone: 301-415-6202; email:
Please refer to Docket ID NRC-2016-0227 when contacting the NRC about the availability of information regarding this document. You may obtain publicly-available information related to this action by the following methods:
•
•
•
Please include Docket ID NRC-2016-0227 in the subject line of your comment submission, in order to ensure that the NRC is able to make your comment submission available to the public in this docket.
The NRC cautions you not to include identifying or contact information that you do not want publicly disclosed in your comment submission. The NRC will post all comment submissions at
If you are requesting or aggregating comments from other persons for submission to the NRC, then you should inform those persons not to include identifying or contact information that they do not want to be publicly disclosed in their comment submission. Your request should state that the NRC does not routinely edit comment submissions to remove such information before making the comment submissions available to the public or entering the comment submissions into ADAMS.
This NUREG provides guidance to existing licensees initially distributing byproduct material or source material to persons exempt from the requirements (exempt distribution) for an NRC license under 10 CFR 30.14, 10 CFR 30.15, 10 CFR 30.18, 10 CFR 30.19, 10 CFR 30.20, 10 CFR 30.21, 10 CFR 30.22, and 10 CFR 40.13(c) and exempt from licensing requirements under the equivalent provisions in Agreement State regulations. This NUREG also provides guidance to applicants preparing a license application to distribute such materials. Additionally, this NUREG provides NRC reviewers with criteria for evaluating such a license application. The purpose of this notice is to provide the public an opportunity to review and comment on draft NUREG-1556, Volume 8, Revision 1, “Consolidated Guidance About Materials Licenses: Program-Specific Guidance About Exempt Distribution Licenses.” These comments will be considered in the final version or subsequent revisions.
For the U.S. Nuclear Regulatory Commission.
Notice is hereby given that the Securities and Exchange Commission (“Commission”) has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (“Act”),
Section 19(g)(1) of the Act,
Section 17(d)(1) of the Act
To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.
To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.
On September 8, 1983, the Commission approved the SRO participants' plan for allocating regulatory responsibilities pursuant to Rule 17d-2.
The plan reduces regulatory duplication for a large number of firms currently members of two or more of the SRO participants by allocating regulatory responsibility for certain options-related sales practice matters to one of the SRO participants. Generally, under the plan, the SRO participant responsible for conducting options-related sales practice examinations of a firm, and investigating options-related customer complaints and terminations for cause of associated persons of that firm, is known as the firm's “Designated Options Examining Authority” (“DOEA”). Pursuant to the plan, any other SRO of which the firm is a member is relieved of these responsibilities during the period in which the firm is assigned to another SRO acting as that firm's DOEA.
On January 13, 2017, the Parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add MIAX PEARL as a participant to the Plan. The text of the proposed amended 17d-2 plan is as follows (additions are
This agreement (“Agreement”), by and among [BATS]
This Agreement amends and restates the agreement entered into among the Participants on [October 8, 2015]
I. As used herein the term Designated Options Examining Authority (“DOEA”) shall mean: (1) FINRA insofar as it shall perform Regulatory Responsibility (as hereinafter defined) for its broker-dealer members that also are members of another Participant or (2) the Designated Examination Authority (“DEA”) pursuant to SEC Rule 17d-1 under the Securities Exchange Act (“Rule 17d-1”) for a broker-dealer that is a member of a more than one Participant (but not a member of FINRA).
II. As used herein, the term “Regulatory Responsibility” shall mean the examination and enforcement responsibilities relating to compliance by Common Members with the rules of the applicable Participant that are substantially similar to the rules of the other Participants (the “Common Rules”), insofar as they apply to the conduct of accounts for Covered Securities. A list of the current Common Rules of each Participant applicable to the conduct of accounts for Covered Securities is attached hereto as Exhibit A. Each year within 30 days of the anniversary date of the commencement of operation of this Agreement, each Participant shall submit in writing to FINRA and each DEA performing as a DOEA for any members of such Participant any revisions to Exhibit A reflecting changes in the rules of the Participant, and confirm that all other rules of the Participant listed in Exhibit A continue to meet the definition of Common Rules as defined in this Agreement. Within 30 days from the date that FINRA and each DEA performing as a DOEA has received revisions and/or confirmation that no change has been made to Exhibit A from all Participants, FINRA and each DEA performing as a DOEA shall confirm in writing to each Participant whether the rules listed in any updated Exhibit A are Common Rules as defined in this Agreement. Notwithstanding anything herein to the contrary, it is explicitly understood that the term “Regulatory Responsibility” does not include, and each of the Participants shall (unless allocated pursuant to Rule 17d-2 otherwise than under this Agreement) retain full responsibility for, each of the following:
(a) Surveillance and enforcement with respect to trading activities or practices involving its own marketplace, including without limitation its rules relating to the rights and obligations of specialists and other market makers;
(b) Registration pursuant to its applicable rules of associated persons;
(c) Discharge of its duties and obligations as a DEA; and
(d) Evaluation of advertising, responsibility for which shall remain with the Participant to which a Common Member submits same for approval.
III. Apparent violations of another Participant's rules discovered by a DOEA, but which rules are not within the scope of the discovering DOEA's Regulatory Responsibility, shall be referred to the relevant Participant for such action as the Participant to which such matter has been referred deems appropriate. Notwithstanding the foregoing, nothing contained herein shall preclude a DOEA in its discretion from requesting that another Participant conduct an enforcement proceeding on a matter for which the requesting DOEA has Regulatory Responsibility. If such other Participants agree, the Regulatory Responsibility in such case shall be deemed transferred to the accepting Participant and confirmed in writing by the Participants involved. Each Participant agrees, upon request, to make available promptly all relevant files, records and/or witnesses necessary to assist another Participant in an investigation or enforcement proceeding.
IV. The Council shall be composed of one representative designated by each of the Participants. Each Participant shall also designate one or more persons as its alternate representative(s). In the absence of the representative of a Participant, such alternate representative shall have the same powers, duties and responsibilities as the representative. Each Participant may, at any time, by notice to the then Chair of the Council, replace its representative and/or its alternate representative on such Council. A majority of the Council shall constitute a quorum and, unless specifically otherwise required, the affirmative vote of a majority of the Council members present (in person, by telephone or by written consent) shall be necessary to constitute action by the Council. The representative from FINRA shall serve as Chair of the Council. All notices and other communications for the Council shall be sent to it in care of the Chair or to each of the representatives.
V. The Council shall determine the times and locations of Council meetings, provided that the Chair, acting alone, may also call a meeting of the Council in the event the Chair determines that there is good cause to do so. To the extent reasonably possible, notice of any meeting shall be given at least ten-business days prior thereto. Notwithstanding anything herein to the contrary, representatives shall always be given the option of participating in any meeting telephonically at their own expense rather than in person.
VI. FINRA shall have Regulatory Responsibility for all Common Members that are members of FINRA. For the
VII. Each DOEA shall conduct an examination of each Common Member. The Participants agree that, upon request, relevant information in their respective files relative to a Common Member will be made available to the applicable DOEA. At each meeting of the Council, each DOEA shall be prepared to report on the status of its examination program for the previous quarter and any period prior thereto that has not previously been reported to the Council.
VIII. Each DOEA will promptly furnish a copy of the Examination report, relating to Covered Securities, of any examination made pursuant to the provisions of this Agreement to each other Participant of which the Common Member examined is a member.
IX. Each DOEA's Regulatory Responsibility shall for each Common Member allocated to it include investigations into terminations “for cause” of associated persons relating to Covered Securities, unless such termination is related solely to another Participant's market. In the latter instance, that Participant to whose market the termination for cause relates shall discharge Regulatory Responsibility with respect to such termination for cause. In connection with a DOEA's examination, investigation and/or enforcement proceeding regarding a Covered Security-related termination for cause, the other Participants of which the Common Member is a member shall furnish, upon request, copies of all pertinent materials related thereto in their possession. As used in this Section, “for cause” shall include, without limitation, terminations characterized on Form U5 under the label “Permitted to Resign,” “Discharge” or “Other.”
X. Each DOEA shall discharge the Regulatory Responsibility for each Common Member allocated to it relative to a Covered Securities-related customer complaint
XI. Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, or by a comparable means of electronic communication to each Participant entitled to receipt thereof, to the attention of the Participant's representative on the Council at the Participant's then principal office or by email at such address as the representative shall have filed in writing with the Chair.
XII. The Participants shall notify the Common Members of this Agreement by means of a uniform joint notice approved by the Council.
XIII. This Agreement may be amended to add a new Participant provided that such Participant does not assume Regulatory Responsibility, solely by an amendment by FINRA and such new Participant. All other Participants expressly consent to allow FINRA to add new Participants to this Agreement as provided above. FINRA will promptly notify all Participants of any such amendments to add new Participants. All other amendments to this Agreement must be approved in writing by each Participant. All amendments, including adding a new Participant, must be filed with and approved by the SEC before they become effective.
XIV. Any of the Participants may manifest its intention to cancel its participation in this Agreement at any time by giving the Council written notice thereof at least 90 days prior to the effective date of such cancellation. Upon receipt of such notice the Council shall allocate, in accordance with the provisions of this Agreement, any Common Members for which the petitioning party was the DOEA. Until such time as the Council has completed the reallocation described above; the petitioning Participant shall retain all its rights, privileges, duties and obligations hereunder.
XV. The cancellation of its participation in this Agreement by any Participant shall not terminate this Agreement as to the remaining Participants. This Agreement will only terminate following notice to the Commission, in writing, by the then Participants that they intend to terminate the Agreement and the expiration of the applicable notice period. Such notice shall be given at least six months prior to the intended date of termination, provided that in the event a notice of cancellation is received from a Participant that, assuming the effectiveness thereof, would result in there being just one remaining member of the Council, notice to the Commission of termination of this Agreement shall be given promptly upon the receipt of such notice of cancellation, which termination shall be effective upon the effectiveness of the cancellation that triggered the notice of termination to the Commission.
XVI. No Participant nor the Council nor any of their respective directors, governors, officers, employees or representatives shall be liable to any other Participant in this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibility as provided hereby or for the failure to provide any such Responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or more of the Participants and caused by the willful misconduct of one or more of the other participants or their respective directors, governors, officers, employees or representatives. No warranties, express or implied, are made by any or all of the Participants or the Council with respect to any Regulatory Responsibility to be performed by each of them hereunder.
XVII. Pursuant to Section 17(d)(1)(A) of the Securities Exchange Act of 1934 and Rule 17d-2 promulgated pursuant thereto, the Participants join in requesting the Securities and Exchange Commission, upon its approval of this Agreement or any part thereof, to relieve those Participants which are from time to time participants in this Agreement which are not the DOEA as to a Common Member of any and all Regulatory Responsibility with respect to the matters allocated to the DOEA.
Pursuant to Section II of the Agreement by and among [BATS]
Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
The Commission continues to believe that the proposed plan is an achievement in cooperation among the SRO participants. The Plan, as amended, will reduce unnecessary regulatory duplication by allocating to the designated SRO the responsibility for certain options-related sales practice matters that would otherwise be performed by multiple SROs. The plan promotes efficiency by reducing costs to firms that are members of more than one of the SRO participants. In addition, because the SRO participants coordinate their regulatory functions in accordance with the plan, the plan promotes, and will continue to promote, investor protection.
Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purpose of the amendment is to add MIAX PEARL as a participant to the Plan. By declaring it effective today, the amended Plan can become effective and be implemented without undue delay.
This order gives effect to the amended Plan submitted to the Commission that is contained in File No. S7-966.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to adopt Rules 4.5 through 4.16 to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available at the Exchange's Web site at
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
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Exchange Act
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.
Proposed Rule 4.5 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Proposed Rules 4.5 through 4.16. Each of the defined terms in Proposed Rule 4.5 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-ID” for each Customer for the original receipt or origination of an order. “Customer-ID” is defined in SEC Rule 613(j)(5) to mean “with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.” SEC Rule 613(c)(8) requires Industry Members to use the same Customer-ID for each Customer. The SEC granted the Participants exemptive relief to permit the use of an alternative approach to the requirement that an Industry Member report a Customer-ID for every Customer upon original receipt or origination.
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 (
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.
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
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 (
Paragraph (a)(2) of Proposed Rule 4.5 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account Information for only those accounts that are active. This will alleviate the need for Industry Members to update such information for non-active accounts, but still ensure that the Central Repository will collect audit trail data for Customer accounts that have any Reportable Events. Accordingly, paragraph (b) of Proposed Rule 4.5 defines an “Active Account” as an account that has had activity in Eligible Securities within the last six months. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 4.5 defines an “Allocation Report.” Specifically, an “Allocation Report” means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use “Business Clocks” to record such dates and times. Accordingly, paragraph (d) of Proposed Rule 4.5 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under Rules 4.5 through 4.16. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under Rules 4.5 through 4.16.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in Rules 4.5 through 4.16.
Paragraph (e) of Proposed Rule 4.5 defines the term “CAT” to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (f) of Proposed Rule 4.5 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 4.5 defines the term “CAT-Order-ID.” The term “CAT-Order-ID” is defined to mean a unique order identifier or series of unique order identifiers that allows the Central Repository to efficiently and accurately link all Reportable Events for an order, and all orders that result from the aggregation or disaggregation of such order. This is the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 of the CAT NMS Plan defines “CAT-Order-ID” by reference to SEC Rule 613(j)(1).
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.
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.
Paragraph (i) of Proposed Rule 4.5 defines the term “Central Repository” to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of Proposed Rule 4.5 defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 4.15(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to Proposed Rule 4.15(d), each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT. This Industry Member-specific rate is the “Compliance Threshold.”
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 4.5 proposes to define the term “Customer.” Specifically, the term “Customer” would be defined to mean: (1) The account holder(s) of the account at an Industry Member originating the order; and (2) any person from whom the Industry Member is authorized to accept trading instructions for such account, if different from the account holder(s). This is the same definition as set forth in SEC Rule 613(j)(3), except the Exchange proposes to replace the references to a registered broker-dealer or broker-dealer with a reference to an Industry Member for consistency of terms used in the Proposed Rules 4.5 through 4.16. The Exchange also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what customer information would need to be reported to the Central Repository.
Paragraph (l) of Proposed Rule 4.5 defines the term “Customer Account Information” to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 4.5(l), however, provides an alternative definition of “Customer Account Information” in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (1) Provide the Account Effective Date in lieu of the “date account opened”; (2) provide the relationship identifier in lieu of the “account number”; and (3) identify the “account type” as a “relationship.” Second, in those circumstances in which the relevant account was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, and no “date account opened” is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (1) Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (2) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (3) where there are multiple dates associated with an account in an Industry Member's system, and the parameters of each date are determined by the individual Industry Member; and (4) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of “Customer Account Information” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Identifying Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what Customer information would need to be reported to the Central Repository.
Paragraph (m) of Proposed Rule 4.5 defines the term “Customer Identifying Information” to mean information of sufficient detail to identify a Customer. With respect to individuals, “Customer Identifying Information” includes, but is not limited to: name, address, date of birth, individual tax payer identification number (“ITIN”)/social security number (“SSN”), individual's role in the account (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Proposed Rules 4.5 through 4.16 only apply to Reportable Events in Eligible Securities. Currently, an Eligible Security includes NMS Securities and OTC Equity Securities. Accordingly, paragraph (p) [sic] of Proposed Rule 4.5 defines the term “Eligible Security” to include: (1) All NMS Securities; and (2) all OTC Equity Securities. The terms “NMS Securities” and “OTC Equity Securities” are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
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.
To implement the requirements of the CAT NMS Plan related to the Error Rate, the Exchange proposes to define the term “Error Rate” in Proposed Rule 4.5. Paragraph (p) of Proposed Rule 4.5 defines the term “Error Rate” to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines “Error Rate” by reference to SEC Rule 613(j)(6).
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 (
Paragraph (r) of Proposed Rule 4.5 defines the term “Industry Member” to mean a member of a national securities exchange or a member of a national securities association.” This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (s) of Proposed Rule 4.5 states that the term “Industry Member Data” has the meaning set forth in Rule 4.7(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(2).
Paragraph (t) of Proposed Rule 4.5 defines the term “Initial Plan Processor” to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the “Selection Plan.”
The CAT NMS Plan and the Proposed Rules 4.5 through 4.16 apply to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rules 4.5 through 4.16 apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 4.5 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 4.5 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, the Exchange proposes to define the term “Manual Order Event” in Proposed Rule 4.5. Specifically, paragraph (v) of Proposed Rule 4.5 defines the term “Manual Order Event” to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Proposed Rule 4.7 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “NMS Security” in Proposed Rule 4.5. Specifically, paragraph (x) of Proposed Rule 4.5 defines the term “NMS Security” to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, the Exchange proposes to define the term “NMS Stock” in Paragraph (y) of Proposed Rule 4.5 to mean any NMS Security other than an option. This is the same
Paragraph (z) of Proposed Rule 4.5 defines the term “Operating Committee” to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in Proposed Rule 4.5. Specifically, paragraph (aa) of Proposed Rule 4.5 defines the term “Options Market Makers” to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
The Proposed Rules 4.5 through 4.16 require each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, the Exchange proposes to define the term “Order” in Proposed Rule 4.5. Specifically, paragraph (bb) of Proposed Rule 4.5 defines the term “Order”, with respect to Eligible Securities, to include: (1) Any order received by an Industry Member from any person; (2) any order originated by an Industry Member; or (3) any bid or offer. This is the same definition as set forth in SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” The Exchange notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “OTC Equity Security” in Proposed Rule 4.5. Specifically, paragraph (cc) of Proposed Rule 4.5 defines the term “OTC Equity Security” to mean any equity security, other than an NMS Security, subject to prompt last sale reporting rules of a registered national securities association and reported to one of such association's equity trade reporting facilities. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (dd) of Proposed Rule 4.5 defines the term “Participant” to mean each Person identified as such in Exhibit A of the CAT NMS Plan, as amended, in such Person's capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ee) of Proposed Rule 4.5 defines the term “Person” to mean any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association and any heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so permits. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ff) of Proposed Rule 4.5 defines the term “Plan Processor” to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan.
Paragraph (gg) of Proposed Rule 4.5 states that the term “Received Industry Member Data” has the meaning set forth in Rule 4.7(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Received Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(2).
Paragraph (hh) of Proposed Rule 4.5 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 4.7(a)(1). This definition has the same substantive meaning as the definition set forth in in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(1).
The Proposed Rules 4.5 through 4.16 require each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term “Reportable Event” in Proposed Rule 4.5. Specifically, paragraph (ii) of Proposed Rule 4.5 states that the term “Reportable Event” includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (jj) of Proposed Rule 4.5 defines the term “SRO” to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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).
For the Central Repository to link the SRO-Assigned Market Participant Identifier to the CAT-Reporter-ID, each SRO will submit to the Central Repository, on a daily basis, all SRO-Assigned Market Participant Identifiers used by its Industry Members or itself; and information to identify each such Industry Member, including the CRD number and LEI if such LEI has been obtained, and itself, including LEI, if such LEI has been obtained. Additionally, each Industry Member is required to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained. The Plan Processor will use this information to assign a CAT-Reporter-ID to each Industry Member for internal use within the Central Repository.
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant Identifier” in Proposed Rule 4.5. Specifically, paragraph (kk) of Proposed Rule 4.5 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rules 4.5 through 4.16 differ to some extent for Small Industry Members versus Industry Members other than Small Industry Members. For example, the compliance dates for reporting data to the CAT are different for Small Industry Members versus other Industry Members. Accordingly, to clarify the requirements that apply to which Industry Members, the Exchange proposes to define the term “Small Industry Member” in Proposed Rule 4.5. Specifically, paragraph (ll) of Proposed Rule 4.5 defines the term “Small Industry Member” to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as amended. This is the same in substance as the definition of “Small Industry Member” as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a “Small Industry Member” as “an Industry Member that qualifies as a small broker-dealer as defined in SEC Rule 613.” The definition of a small broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as defined in SEC Rule 0-10(c).
Proposed Rule 4.7(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, the Exchange proposes to define the term “Trading Day” in Proposed Rule 4.5. Specifically, Paragraph (mm) of Proposed Rule 4.5 states that the term “Trading Day” shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time.
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.
Paragraph (a) of Proposed Rule 4.6 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 4.6 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
Paragraph (a)(2) of Proposed Rule 4.6 requires each Industry Member to synchronize (1) its Business Clocks used solely for Manual Order Events and (2) its Business Clocks used solely for the time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(3) of Proposed Rule 4.6 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the Proposed Rule 4.6 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(4) of Proposed Rule 4.6 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and re-synchronized, as necessary, throughout the day. This description of the required
Paragraph (b) of Proposed Rule 4.6 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The Proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the Proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the “Sequencing Orders and Clock Synchronization” section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (c) of Proposed Rule 4.6 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 4.6 requires each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 4.6 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular.
Paragraph (d) of Proposed Rule 4.6 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 4.6 requires Industry Members to report to the Plan Processor and the Exchange, violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular.
SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, the Exchange proposes Rule 4.7 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 4.7 has six sections [sic] covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities covered by the recording and reporting requirements, (4) the security symbology to be used in the recording and reporting, and (5) error correction requirements, each of which is described below.
Paragraph (a) of Proposed Rule 4.7 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 4.7 set forth the recording and reporting requirements required in Section 6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (“Recorded Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant Identifier of the Industry Member receiving or originating the order; (4) date of order receipt or origination; (5) time of order receipt or origination (using timestamps pursuant to Proposed Rule 4.10); and (6) Material Terms of the Order;
• for the routing of an order: (1) CAT-Order-ID; (2) date on which the order is routed; (3) time at which the order is routed (using timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant to which the order is being routed; (6) if routed internally at the Industry Member, the identity and nature of the department or desk to which the order is routed; and (7) Material Terms of the Order;
• for the receipt of an order that has been routed, the following information: (1) CAT-Order-ID; (2) date on which the order is received; (3) time at which the order is received (using timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant routing the order; and (6) Material Terms of the Order;
• if the order is modified or cancelled: (1) CAT-Order-ID; (2) date the modification or cancellation is received or originated; (3) time at which the modification or cancellation is received or originated (using timestamps pursuant to Proposed Rule 4.10); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member;
• if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using timestamps pursuant to Proposed Rule 4.10; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) SRO-Assigned Market Participant Identifier of the Industry Member executing the order; (7) whether the execution was reported pursuant to an effective transaction reporting plan or the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information; and
• other information or additional events as may be prescribed pursuant to the CAT NMS Plan.
Paragraph (a)(2) of Proposed Rule 4.7 requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (“Received Industry Member Data” and collectively with the information referred to in Rule 4.7(a)(1) “Industry Member Data”)) in the
• If the order is executed, in whole or in part: (1) An Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) CAT-Order-ID of any contra-side order(s);
• if the trade is cancelled, a cancelled trade indicator; and
• for original receipt or origination of an order, the Firm Designated ID for the relevant Customer, and in accordance with Proposed Rule 4.8, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 4.7 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is required to report to the Exchange the time at which its quote in a Listed Option is sent to the Exchange (and, if applicable, any subsequent quote modification time and/or cancellation time when such modification or cancellation is originated by the Options Market Maker). This paragraph implements the Options Market Maker Quote Exemption, as discussed above.
Paragraph (b) of Proposed Rule 4.7 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 4.7 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
Paragraph (b)(1) of Proposed Rule 4.7 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 4.7 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of Proposed Rule 4.7 describes the securities to which the recording and reporting requirements of Proposed Rule 4.7 apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 4.7 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of Proposed Rule 4.7 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of Proposed Rule 4.7 for each NMS Security registered or listed for trading on such exchange or admitted to unlisted trading privileges on such exchange. Paragraph (c)(2) of Proposed Rule 4.7 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of this Proposed Rule 4.7 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 4.7 describes the security symbology that Industry Members are required to use when reporting Industry Member Data to the Central Repository. Paragraph (d)(1) of Proposed Rule 4.7 requires, for each exchange-listed Eligible Security, each Industry Member to report Industry Member Data to the Central Repository using the symbology format of the exchange listing the security. This requirement implements the requirement set forth in Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange symbology when reporting data to the Central Repository for exchange-listed Eligible Securities.
For each Eligible Security that is not exchange-listed, however, there is no listing exchange to provide the symbology format. Moreover, to date, the requisite symbology format has not been determined. Therefore, Paragraph (d)(2) of Proposed Rule 4.7 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Regulatory Circular.
To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, the Exchange proposes to adopt paragraph (e) of Proposed Rule 4.7, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 4.7 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. The Exchange proposes Rule 4.8 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 4.8 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 4.13. Paragraph (b) of Proposed Rule 4.8 requires each Industry Member to submit to the Central Repository any updates, additions or other changes to the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account on a daily basis. Paragraph (c) of Proposed Rule 4.8 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. The Exchange intends to announce to its
Finally, paragraph (d) of Proposed Rule 4.8 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan.
Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, in accordance with the Existing Identifier Approach discussed above. The Exchange proposes Rule 4.9 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 4.9 requires each Industry Member to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 4.13, and keep such information up to date as necessary.
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.
Paragraph (a) of Proposed Rule 4.10 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 4.10 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of Proposed Rule 4.10. To the extent that any Industry Member's order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(2) of Proposed Rule 4.10 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of Proposed Rule 4.10 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 4.10 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 4.10 permits each Industry Member to record and report Manual Order Events to the Central Repository in increments up to and including one second, provided that each Industry Member is required to record and report the time when a Manual Order Event has been captured electronically in an order handling and execution system of such Member (“Electronic Capture Time”) in milliseconds. In addition, paragraph (b)(2) of Proposed Rule 4.10 permits each Industry Member to record and report the time of Allocation Reports in increments up to and including one second.
Proposed Rule 4.11 (Consolidated Audit Trail—Clock Synchronization Rule Violations) describes potential violations of the clock synchronization time period requirements set forth in the Proposed Rules 4.5 through 4.16. Proposed Rule 4.11 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in the Proposed Rules 4.5 through 4.16 without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 4.12 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 4.12 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of Proposed Rule 4.12 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee.
Paragraph (b) of Proposed Rule 4.12 addresses connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 4.12 requires each Industry Member to connect to the Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, Paragraph (c)(1) of Proposed Rule 4.12 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under the Proposed Rules 4.5 through 4.16. Any such agreement must be evidenced in writing, which specifies the respective functions and responsibilities of each party to the agreement that are required to effect full compliance with the requirements of the Proposed Rules 4.5 through 4.16. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 4.12 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) states that each Industry Member
The Exchange proposes Rule 4.13 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 4.13 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan.
Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 4.8(a) and 4.9, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 4.8(a) and 4.9, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of Proposed Rule 4.13 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 4.14 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 4.14 requires each Industry Member to maintain and preserve records of the information required to be recorded in accordance with the Proposed Rules 4.5 through 4.16, for the period of time and accessibility specified in SEC Rule 17a-4(b). The records required to be maintained and preserved in accordance with Proposed Rules 4.5 through 4.16, may be immediately produced or reproduced on “micrographic media” as defined in SEC Rule 17a-4(f)(1)(i) or by means of “electronic storage media” as defined in SEC Rule 17a-4(f)(1)(ii) that meet the conditions set forth in SEC Rule 17a-4(f) and be maintained and preserved for the required time in that form. Proposed Rule 4.14 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of Proposed Rule 4.15 requires Industry Members to accurately provide the LEIs in their records as required by the Proposed Rules 4.5 through 4.16 and states that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) notes, however, that this requirement does not impose any additional due diligence obligations on Industry Members with regard to LEIs for CAT purposes. Accordingly, this provision does not impose any due diligence obligations beyond those that may exist today with respect to information associated with an LEI. Although Industry Members will not be required to perform additional due diligence with regard to the LEIs for CAT purposes, Industry Members will be required to accurately provide the LEIs in their records and may not knowingly submit inaccurate LEIs to the CAT. Paragraph (b) is consistent with the SEC's statements in the Approval Order for the CAT NMS Plan regarding an Industry Member's obligations regarding LEIs.
Paragraph (c) states that, if an Industry Member reports data to the Central Repository with errors such that its error percentage exceeds the maximum Error Rate established by the Operating Committee pursuant to the CAT NMS Plan, then such Industry Member would not be in compliance with the Rules 4.5 through 4.16. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. The Exchange intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Regulatory Circular.
Furthermore, paragraph (d) of Proposed Rule 4.15 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 4.15 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT (the “Compliance Thresholds”). Compliance Thresholds will compare an Industry Member's error rate to the aggregate Error Rate
Proposed Rule 4.16 (Consolidated Audit Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rules 4.5 through 4.16. Paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date of the Proposed Rules 4.5 through 4.16. Unless otherwise noted, the Proposed Rules 4.5 through 4.16 will be fully effective upon approval by the Commission and Members must comply with their terms.
Paragraph (b) of Proposed Rule 4.16 establishes the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 4.6. Paragraph (b)(1) states that each Industry Member shall comply with Rule 4.6 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 4.6 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of Proposed Rule 4.16 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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.”
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the Proposed Rules 4.5 through 4.16 implement provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing similar rules to apply the requirements of the CAT NMS Plan to their members. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to adopt the Rule 900A Series to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available on the Exchange's Web site at
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.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Exchange Act
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.
Proposed Rule 910A (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Proposed Rule 900A Series. Each of the defined terms in Proposed Rule 910A is discussed in detail in this section.
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
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 (
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.
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 910A 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 (
Paragraph (a)(2) of Proposed Rule 910A states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
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
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 Participants 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.
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 910A 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.
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 910A defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under this Rule 900A Series. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Rule Series.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in this Rule 900A Series.
Paragraph (e) of Proposed Rule 910A 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.
Paragraph (f) of Proposed Rule 910A defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 910A 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).
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.
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.
Paragraph (i) of Proposed Rule 910A 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.”
Paragraph (j) of Proposed Rule 910A defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 993A(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 993A(d), each Industry Member is required to meet a separate
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 910A 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 Rule 900A Series. The Exchange also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
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 910A 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 910A(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.
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 910A 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 (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Proposed Rule 900A Series 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 910A 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.
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
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.
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 910A. Paragraph (p) of Proposed Rule 910A 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).
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 (
Paragraph (r) of Proposed Rule 910A 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.
Paragraph (s) of Proposed Rule 910A states that the term “Industry Member Data” has the meaning set forth in Proposed Rule 930A(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 930A(a)(2).
Paragraph (t) of Proposed Rule 910A 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.”
The CAT NMS Plan and this Proposed Rule 900A Series applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rule 900A Series apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 910A defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 910A states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
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 910A. Specifically, paragraph (v) of Proposed Rule 910A 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.
Proposed Rule 930A requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
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 910A. Specifically, paragraph (x) of Proposed Rule 910A 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.
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 910A 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.
Paragraph (z) of Proposed Rule 910A 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.
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 Participants, 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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in Proposed Rule 910A. Specifically, paragraph (aa) of Proposed Rule 910A 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.
The Proposed Rule 900A Series 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 910A. Specifically, paragraph (bb) of Proposed Rule 910A 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).
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 910A. Specifically,
Paragraph (dd) of Proposed Rule 910A 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.
Paragraph (ee) of Proposed Rule 910A 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.
Paragraph (ff) of Proposed Rule 910A 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.
Paragraph (gg) of Proposed Rule 910A states that the term “Received Industry Member Data” has the meaning set forth in Proposed Rule 930A(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 930A(a)(2).
Paragraph (hh) of Proposed Rule 910A states that the term “Recorded Industry Member Data” has the meaning set forth in Proposed Rule 930A(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 930A(a)(1).
The Proposed Rule 900A Series 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 910A. Specifically, paragraph (ii) of Proposed Rule 910A 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.
Paragraph (jj) of Proposed Rule 910A 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.
The Participants 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).
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.
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant” in Proposed Rule 910A. Specifically, paragraph (kk) of Proposed Rule 910A defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO, or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rule 900A Series 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 910A. Specifically, paragraph (ll) of Proposed Rule 910A 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
Proposed Rule 930A(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 910A. Specifically, Paragraph (mm) of Proposed Rule 910A 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.
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.
Paragraph (a) of Proposed Rule 920A sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 920A 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 920A 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 920A clarifies that the tolerance described in paragraphs (a)(1) and (2) of the Proposed Rule 920A 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 920A 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 920A 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 920A sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 920A 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 920A 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 an information circular (“Circular”).
Paragraph (d) of Proposed Rule 920A establishes reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 920A requires Industry Members to report to the Plan Processor and the Exchange violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Circular.
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 930A (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 930A has six sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities cover[sic] by the recording and reporting requirements, (4) format, (5) the security symbology to be used in the recording and reporting, and (6) error correction
Paragraph (a) of Proposed Rule 930A 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 930A 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 960A); 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 960A); (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 960A); (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 960A); (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 960A; (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 930A 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 930A(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 940A, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 930A 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.
Paragraph (b) of Proposed Rule 930A describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 930A 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 930A requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 930A requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m., Eastern Time, on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m., Eastern Time, on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m., Eastern Time, deadline.
Paragraph (c) of Proposed Rule 930A describes the securities to which the recording and reporting requirements of Proposed Rule 930A apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 930A 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 930A 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 930A 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 930A 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 930A for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 930A 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 930A 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 930A 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 Circular.
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 930A, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 930A 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.
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 940A (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 940A 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 980A. Paragraph (b) of Proposed Rule 940A 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 940A 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 Circular.
Finally, paragraph (d) of Proposed Rule 940A 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.
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 950A (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 950A 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 980A, and keep such information up to date as necessary.
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.
Paragraph (a) of Proposed Rule 960A sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 960A 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 960A. 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 960A 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 960A regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 960A sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 960A permits each Industry Member to record and report Manual Order Events to the
Proposed Rule 965A (Consolidated Audit Trail—Clock Synchronization Rule Violations) describes potential violations of the clock synchronization time period requirements set forth in the Proposed Rule 900A Series. Proposed Rule 965A states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Rule Series without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 970A (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 970A 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 970A 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 970A addresses connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 970A 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 970A 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 Rule 900A Series. 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 Rule 900A Series. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 970A 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 Rule 900A Series, notwithstanding the existence of an agreement described in paragraph (c) of Proposed Rule 970A.
The Exchange proposes Rule 980A (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 980A 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 940A(a) and 950A, 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 940A(a) and 950A, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of Proposed Rule 980A implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 990A (Consolidated Audit Trail—Recordkeeping) sets forth
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of Proposed Rule 993A requires Industry Members to accurately provide the LEIs in their records as required by the Proposed Rule 900A Series 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.
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 Rule 900A Series. 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 Circular.
Furthermore, paragraph (d) of Proposed Rule 993A addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 993A 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.
Proposed Rule 995A (Consolidated Audi Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rule 900A Series. Paragraph (a) of Proposed Rule 995A states that, except as set forth in paragraphs (b) and (c) of this Rule or otherwise set forth in this Rule Series, these rules are fully effective and members must comply with their terms.
Paragraph (b) of Proposed Rule 995A establishes the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 920A. Paragraph (b)(1) states that each Industry Member shall comply with Rule 920A 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 920A with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of Proposed Rule 995A 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.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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
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 Rule Series implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this Proposed Rule 900A Series. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
No written comments were either solicited or received.
Within 45 days of the date of publication of this notice in the
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-Phlx-2017-07 and should be submitted on or before March 1, 2017.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange proposes to adopt the Rules 1701-1712 to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available on the Exchange's Web site at
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.
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,
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.
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.
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.
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 (
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,
In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. “Customer Account Information” is defined in SEC Rule 613(j)(4) to “include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).” Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Participants requested and received an exemption to allow an “Account Effective Date” to be reported in lieu of an account open date in certain limited circumstances. The definition of “Account Effective Date” as set forth in Paragraph (a) of proposed Rule 1701 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, Paragraph (a)(1) defines “Account Effective Date [sic] to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When the trading relationship was established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, either (a) the date the relationship identifier was established within the Industry Member; (b) the date when trading began (
Paragraph (a)(2) of proposed Rule 1701 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
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.
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.
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.
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
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.
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.
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.
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).
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.
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.
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.”
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.”
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).
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)
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 (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
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.
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.
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.
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
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 (
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.
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).
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.”
The CAT NMS Plan and this proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712) applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712) apply specifically to Listed Options. Accordingly, Paragraph (u) of proposed Rule 1701 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of proposed Rule 1701 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
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.
Proposed Rule 1703 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to
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.
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.
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.
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.
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).
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.
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.
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.
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.
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).
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
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.
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.
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).
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.
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant” in proposed Rule 1701. Specifically, paragraph (kk) of proposed Rule 1701 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
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).
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.
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.
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
Paragraph (a)(3) of proposed Rule 1702 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the proposed Rule 1702 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(4) of proposed Rule 1702 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and re-synchronized, as necessary, throughout the day. This description of the required frequency of clock synchronization is the same as set forth in paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (b) of proposed Rule 1702 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the “Sequencing Orders and Clock Synchronization” section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (c) of proposed Rule 1702 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of proposed Rule 1702 requires each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of proposed Rule 1702 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular.
Paragraph (d) of proposed Rule 1702 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of proposed Rule 1702 requires Industry Members to report to the Plan Processor and SRO violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular.
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.
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
• 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.
Paragraph (b) of proposed Rule 1703 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 1703 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
Paragraph (b)(1) of proposed Rule 1703 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 1703 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the-Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
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.
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.
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.
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)
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.
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.
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.
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.
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.
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
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.
The Exchange proposes Rule 1709 (Consolidated Audit Trail Compliance Rule—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of proposed Rule 1709 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan.
Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 1704(a) and 1705, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 1704(a) and 1705, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of proposed Rule 1709 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
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.
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.
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
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.
Proposed Rule 1712 (Consolidated Audi [sic] Trail Compliance Rule—Compliance Dates) sets forth the compliance dates for the various provisions of the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712). Paragraph (a) of proposed Rule 1712 states that paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date for the Consolidated Audit Trail Compliance Rule (Rules 1701-1712). It further states that, unless otherwise noted, Rules 1701-1712 are fully effective and Members must comply with their terms.
Paragraph (b) of proposed Rule 1712 establishes the compliance dates for the clock synchronization requirements as set forth in proposed Rule 1702. Paragraph (b)(1) states that each Industry Member shall comply with Rule 1702 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 1702 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of proposed Rule 1712 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act
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.”
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.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-MIAX-2017-03. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to amend CFE Rule 415 related to Block Trades. The scope of this filing is limited solely to the application of the proposed rule amendments to security futures that may be traded on CFE. Although no security futures are currently listed for trading on CFE, CFE may list security futures for trading in the future. The text of the proposed rule change is attached as Exhibit 4 to the filing but is not attached to the publication of this notice.
In its filing with the Commission, CFE 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. CFE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
CFE Rule 415 sets forth requirements relating to Block Trades. The proposed rule change adds paragraph (l) to Rule 415 which relates to the front running of Block Trades. Proposed Rule 415(l) makes clear that no person may engage in the front running of a Block Trade when acting on material non-public information regarding an impending transaction by another person, acting on non-public information obtained through a confidential employee/employer relationship, broker/customer relationship, or in breach of a pre-existing duty. Proposed Rule 415(l) would apply to all products traded on CFE, including both non-security futures and security futures.
The proposed rule change is being made in connection with other proposed amendments to Rule 415 which are not included as part of this proposed rule change. Those proposed amendments are to be included in new paragraph (k) of Rule 415.
The Exchange is also re-lettering certain paragraphs in Rule 415 to accommodate for the new provisions that are being added.
The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,
• To prevent fraudulent and manipulative acts and practices,
• to promote just and equitable principles of trade, and
• to remove impediments to and perfect the mechanism of a free and open market and a national market system, and in general, to protect investors and the public interest.
The Exchange believes that the proposed rule change would provide additional guidance to CFE market participants related to the front running of Block Trades. The proposed rule change would also contribute to enhanced protection of CFE's market and market participants.
CFE does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act, in that the proposed rule change is consistent with similar guidance provided by other designated contracts markets.
No written comments were solicited or received with respect to the proposed rule change.
The proposed rule change will become operative on February 2, 2017. At any time within 60 days of the date of effectiveness of the proposed rule change, the Commission, after consultation with the CFTC, may summarily abrogate the proposed rule change and require that the proposed rule change be refiled in accordance with the provisions of Section 19(b)(1) of the Act.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal related to functionality offered by the Exchange's options platform (“EDGX Options”) to adopt Qualified Contingent Cross Orders, as described below.
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
The Exchange is filing this proposal related to functionality offered by EDGX Options to adopt Qualified Contingent Cross Orders (“QCC Orders”), as described below.
The purpose of this filing is to adopt rules related to QCC Orders. The proposed rule change is based on the rules of other options exchanges, including an International Securities Exchange (“ISE”) proposal that was previously approved by the Securities and Exchange Commission (“Commission”).
The Exchange is currently a party to the Options Order Protection and Locked/Crossed Market Plan (“Linkage Plan”), and has implemented Exchange rules in conjunction with that plan, which are set forth in Chapter XXVII of the Exchange's Rules (the “Linkage Rules”). Similar to Regulation NMS under the Act, the Linkage Plan requires, among other things, that the Exchange establish, maintain and enforce written policies and procedures that are reasonably designed to prevent “Trade-Throughs.”
The purpose of the proposed change is to provide the Exchange Users
The Exchange proposes to adopt new paragraph (d)(11) to Rule 21.1 to govern the operation of Qualified Contingent Cross Orders. As proposed, a Qualified Contingent Cross Order would be an originating order to buy or sell at least 1,000 standard option contracts that is identified as being part of a qualified contingent trade (as that term is proposed to be defined in paragraph (d)(11)(A) to Rule 21.1), coupled with a contra-side order or orders totaling an equal number of contracts. As proposed, a “qualified contingent trade” is a transaction consisting of two or more component orders, executed as agent or principal, where: (i) At least one component is an NMS stock, as defined in Rule 600 of Regulation NMS under the Act; (ii) all components are effected with a product or price contingency that either has been agreed to by all the respective counterparties or arranged for by a broker-dealer as principal or agent; (iii) the execution of one component is contingent upon the execution of all other components at or near the same time; (iv) the specific relationship between the component orders (
As proposed, Qualified Contingent Cross Orders would be allowed to execute automatically on entry without exposure provided the execution: (i) Is not at the same price as a Priority Customer Order
The Exchange will track and monitor QCC Orders to determine which is the originating side of the order and which is the contra-side(s) of the order to ensure that Members are complying with the minimum 1,000 contract size limitation on the originating side of the QCC Order. The Exchange will check to see if Members are aggregating multiple orders to meet the 1,000 contract minimum on the originating side of the trade in violation of the requirements of the rule. The rule requires that the originating side of the trade consist of one party who is submitting a QCC Order for at least 1,000 contracts. The Exchange represents that it will enforce compliance with this portion of the rule by checking to see if a Member breaks up the originating side of the order in a post trade allocation to different clearing firms, allocating less than 1,000 contracts to a party or multiple parties. For example, a Member enters a QCC Order into the system for 1,500 contracts and receives an execution. Subsequent to the execution, the Member allocates the originating side of the order to two different clearing firms
With regard to order entry, a Member will have to mark the originating side as the first order in the system and the contra-side(s) as the second. The Exchange will monitor order entries to ensure that Members are properly entering QCC Orders into the system.
The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.
The proposed rules are consistent with the protection of investors in that they are designed to prevent Trade-Throughs. In addition, the proposed rule change would promote a free and open market by permitting the Exchange to compete with other options exchanges for these types of orders. In this regard, competition would result in benefits to the investing public, whereas a lack of competition would serve to limit the choices that participants have for execution of their options business. As noted above, the proposed operation of Qualified Contingent Cross Orders on the Exchange is substantially similar in all material respects to the operation of such orders on such other exchanges.
The Exchange does not believe that the proposed rule change to adopt QCC Orders will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange's proposed functionality is open to all market participants. Further, the proposed rule will allow the Exchange to compete with other options exchanges that currently offer QCC Orders, thus alleviating the burden on competition that would arise if such exchanges were permitted to continue offering such functionality and the Exchange was not. For these reasons, the Exchange does not believe that the proposed rule changes will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act, and believes the proposed change will enhance competition.
The Exchange has neither solicited nor received written comments on the proposed rule change. The Exchange has not received any written comments from members or other interested parties.
Because the foregoing proposed rule change does not: (A) Significantly affect the protection of investors or the public interest; (B) impose any significant burden on competition; and (C) by its terms, become operative for 30 days from the date on which it was filed or such shorter time as the Commission may designate it has become effective pursuant to Section 19(b)(3)(A) of the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (1) Necessary or appropriate in the public interest; (2) for the protection of investors; or (3) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
submit only information that you wish to make available publicly. All submissions should refer to File
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that the Securities and Exchange Commission (“Commission”) has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (“Act”),
Section 19(g)(1) of the Act,
Section 17(d)(1) of the Act
To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.
To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.
On December 11, 2007, the Commission declared effective the Participating Organizations' Plan for allocating regulatory responsibilities pursuant to Rule 17d-2.
The Plan is designed to reduce regulatory duplication for common members by allocating regulatory responsibility for certain options-related market surveillance matters among the Participating Organizations. Generally, under the Plan, a Participating Organization will serve as the Designated Options Surveillance Regulator (“DOSR”) for each common member assigned to it and will assume regulatory responsibility with respect to that common member's compliance with applicable common rules for certain accounts. When an SRO has been named as a common member's DOSR, all other SROs to which the common member belongs will be relieved of regulatory responsibility for that common member, pursuant to the terms of the Plan, with respect to the applicable common rules specified in Exhibit A to the Plan.
On January 31, 2017, the parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add MIAX PEARL as a Participant to the Plan. The text of the proposed amended 17d-2 plan is as follows (additions are
This agreement (this “Agreement”), by and among NYSE MKT LLC (“MKT”), [BATS]
I. Except as otherwise provided in this Agreement, each Participant shall assume Regulatory Responsibility (as defined below) for the Common Members that are allocated or assigned to such Participant in accordance with the terms of this Agreement and shall be relieved of its Regulatory Responsibility as to the remaining Common Members. For purposes of this Agreement, a Participant shall be considered to be the Designated Options Surveillance Regulator (“DOSR”) for each Common Member that is allocated to it in accordance with Section VII.
II. As used in this Agreement, the term “Regulatory Responsibility” shall mean surveillance, investigation and enforcement responsibilities relating to compliance by the Common Members with such Options rules of the Participants as the Participants shall determine are substantially similar and shall approve from time to time, insofar as such rules relate to market surveillance (collectively, the “Common Rules”). For the purposes of this Agreement the list of Common Rules is attached as Exhibit A hereto, which may only be amended upon unanimous written agreement by the Participants. The DOSR assigned to each Common Member shall assume Regulatory Responsibility with regard to that Common Member's compliance with the applicable Common Rules for certain accounts.
The term “Regulatory Responsibility” does not include, and each Participant shall retain full responsibility with respect to:
(a) Surveillance, investigative and enforcement responsibilities other than those included in the definition of Regulatory Responsibility;
(b) any aspects of the rules of a Participant that are not substantially similar to the Common Rules or that are allocated for a separate surveillance purpose under any other agreement made pursuant to Rule 17d-2. Any such aspects of a Common Rule will be noted as excluded on Exhibit A. With respect to options position limits, the term Regulatory Responsibility shall include examination responsibilities for the delta hedging exemption. Specifically, the Participants intend that FINRA will conduct examinations for delta hedging for all Common Members that are members of FINRA notwithstanding the fact that FINRA's position limit rule is, in some cases, limited to only firms that are not members of an options exchange (
III. Each year within 30 days of the anniversary date of the commencement of operation of this Agreement, or more frequently if required by changes in the rules of a Participant, each Participant shall submit to the other Participants, through the Chair of the OSG, an updated list of Common Rules for review. This updated list may add Common Rules to Exhibit A, shall delete from Exhibit A rules of that Participant that are no longer identical or substantially similar to the Common Rules, and shall confirm that the remaining rules of the Participant included on Exhibit A continue to be identically or substantially similar to the Common Rules. Within 30 days from the date that each Participant has received revisions to Exhibit A from the Chair of the OSG, each Participant shall confirm in writing to the Chair of the OSG whether that Participant's rules listed in Exhibit A are Common Rules.
IV. Apparent violation of another Participant's rules discovered by a DOSR, but which rules are not within the scope of the discovering DOSR's Regulatory Responsibility, shall be referred to the relevant Participant for such action as is deemed appropriate by that Participant. Notwithstanding the foregoing, nothing contained herein shall preclude a DOSR in its discretion from requesting that another Participant conduct an investigative or enforcement proceeding (“Proceeding”) on a matter for which the requesting DOSR has Regulatory Responsibility. If such other Participant agrees, the Regulatory Responsibility in such case shall be deemed transferred to the accepting Participant and confirmed in writing by the Participants involved. Additionally, nothing in this Agreement shall prevent another Participant on whose market potential violative activity took place from conducting its own Proceeding on a matter. The Participant conducting the Proceeding shall advise the assigned DOSR. Each Participant agrees, upon request, to make available promptly all relevant files, records and/or witnesses necessary to assist another Participant in a Proceeding.
V. The OSG shall be composed of one representative designated by each of the Participants (a “Representative”). Each Participant shall also designate one or more persons as its alternate representative(s) (an “Alternate Representative”). In the absence of the Representative, the Alternate Representative shall assume the powers, duties and responsibilities of the Representative. Each Participant may at any time replace its Representative and/or its Alternate Representative to the Group.
VI. The OSG shall determine the times and locations of Group meetings, provided that the Chair, acting alone, may also call a meeting of the Group in the event the Chair determines that there is good cause to do so. To the extent reasonably possible, notice of any meeting shall be given at least ten business days prior to the meeting date. Representatives shall always be given the option of participating in any meeting telephonically at their own expense rather than in person.
VII. No less frequently than every two years, in such manner as the Group deems appropriate, the OSG shall allocate Common Members that conduct an Options business among the Participants (“Allocation”), and the Participant to which a Common Member is allocated will serve as the DOSR for that Common Member. Any Allocation shall be based on the following principles, except to the extent all affected Participants consent to one or more different principles:
(a) The OSG may not allocate a Common Member to a Participant unless the Common Member is a member of that Participant.
(b) To the extent practicable, Common Members that conduct an Options business shall be allocated among the Participants of which they are members in such manner as to equalize as nearly as possible the allocation among such Participants, provided that no Common Members shall be allocated to FINRA. For example, if sixteen Common Members that conduct an Options business are members only of three Participants, none of which is FINRA, those Common Members shall be allocated among the three Participants such that no Participant is allocated
(c) To the extent practicable, Allocation shall take into account the amount of Options activity conducted by each Common Member in order to most evenly divide the Common Members with the largest amount of activity among the Participants of which they are members. Allocation will also take into account similar allocations pursuant to other plans or agreements to which the Common Members are party to maintain consistency in oversight of the Common Members.
(d) To the extent practicable, Allocation of Common Members to Participants will be rotated among the applicable Participants such that a Common Member shall not be allocated to a Participant to which that Common Member was allocated within the previous two years. The assignment of DOSRs pursuant to the Allocation is attached as Exhibit B hereto, and will be updated from time to time to reflect Common Member Allocation changes.
(e) The Group may reallocate Common Members from time-to-time, as it deems appropriate.
(f) Whenever a Common Member ceases to be a member of its DOSR, the DOSR shall promptly inform the Group, which shall review the matter and allocate the Common Member to another Participant.
(g) A DOSR may request that a Common Member to which it is assigned be reallocated to another Participant by giving 30 days written notice to the Chair of the OSG. The Group, in its discretion, may approve such request and reallocate the Common Member to another Participant.
(h) All determinations by the Group with respect to Allocation shall be made by the affirmative vote of a majority of the Participants that, at the time of such determination, share the applicable Common Member being allocated; a Participant shall not be entitled to vote on any Allocation relating to a Common Member unless the Common Member is a member of such Participant.
VIII. Each DOSR shall conduct routine surveillance reviews to detect violations of the applicable Common Rules by each Common Member allocated to it with a frequency (daily, weekly, monthly, quarterly, semi-annually or annually as noted on Exhibit A) not less than that determined by the Group. The other Participants agree that, upon request, relevant information in their respective files relative to a Common Member will be made available to the applicable DOSR. In addition, each Participant shall provide, to the extent not otherwise already provided, information pertaining to its surveillance program that would be relevant to FINRA or the Participant(s) conducting routine examinations for the delta hedging exemption.
At each meeting of the OSG, each Participant shall be prepared to report on the status of its surveillance program for the previous quarter and any period prior thereto that has not previously been reported to the Group. In the event a DOSR believes it will not be able to complete its Regulatory Responsibility for its allocated Common Members, it will so advise the Group in writing promptly. The Group will undertake to remedy this situation by reallocating the subject Common Members among the remaining Participants. In such instance, the Group may determine to impose a regulatory fee for services provided to the DOSR that was unable to fulfill its Regulatory Responsibility.
IX. Each Participant will, upon request, promptly furnish a copy of the report or applicable portions thereof relating to any investigation made pursuant to the provisions of this Agreement to each other Participant of which the Common Member under investigation is a member.
X. Each Participant will routinely populate a common database, to be accessed by the Group relating to any formal regulatory action taken during the course of a Proceeding with respect to the Common Rules concerning a Common Member.
XI. Any written notice required or permitted to be given under this Agreement shall be deemed given if sent by certified mail, return receipt requested, to any Participant to the attention of that Participant's Representative, to the Participant's principal place of business or by email at such address as the Representative shall have filed in writing with the Chair.
XII. The costs incurred by each Participant in discharging its Regulatory Responsibility under this Agreement are not reimbursable. However, any of the Participants may agree that one or more will compensate the other(s) for costs incurred.
XIII. The Participants shall notify the Common Members of this Agreement by means of a uniform joint notice approved by the Group. Each Participant will notify the Common Members that have been allocated to it that such Participant will serve as DOSR for that Common Member.
XIV. This Agreement shall be effective upon approval of the Commission. This Agreement may only be amended in writing duly approved by each Participant. All amendments to this Agreement, excluding changes to Exhibits A, B and C, must be filed with and approved by the Commission.
XV. Any Participant may manifest its intention to cancel its participation in this Agreement at any time upon providing written notice to (i) the Group six months prior to the date of such cancellation, or such other period as all the Participants may agree, and (ii) the Commission. Upon receipt of the notice the Group shall allocate, in accordance with the provisions of this Agreement, those Common Members for which the canceling Participant was the DOSR. The canceling Participant shall retain its Regulatory Responsibility and other rights, privileges and duties pursuant to this Agreement until the Group has completed the reallocation as described above, and the Commission has approved the cancellation.
XVI. The cancellation of its participation in this Agreement by any Participant shall not terminate this Agreement as to the remaining Participants. This Agreement will only terminate following notice to the Commission, in writing, by the then Participants that they intend to terminate the Agreement and the expiration of the applicable notice period. Such notice shall be given at least six months prior to the intended date of termination, or such other period as all the Participants may agree. Such termination will become effective upon Commission approval.
XVII. Participation in the Group shall be strictly limited to the Participants and no other party shall have any right to attend or otherwise participate in the Group except with the unanimous approval of all Participants. Notwithstanding the foregoing, any national securities exchange registered with the SEC under Section 6(a) of the Act or any national securities association registered with the SEC under section 15A of the Act may become a Participant to this Agreement provided that: (i) Such applicant has adopted rules substantially similar to the Common Rules, and received approval thereof from the SEC; (ii) such applicant has provided each Participant
XVIII. This Agreement is wholly separate from the multiparty Agreement made pursuant to Rule 17d-2 by and among the NYSE MKT LLC, the [BATS]
No Participant nor the Group nor any of their respective directors, governors, officers, employees or representatives shall be liable to any other Participant in this Agreement for any liability, loss or damage resulting from or claimed to have resulted from any delays, inaccuracies, errors or omissions with respect to the provision of Regulatory Responsibility as provided hereby or for the failure to provide any such Regulatory Responsibility, except with respect to such liability, loss or damages as shall have been suffered by one or more of the Participants and caused by the willful misconduct of one or more of the other Participants or its respective directors, governors, officers, employees or representatives. No warranties, express or implied, are made by the Participants, individually or as a group, or by the OSG with respect to any Regulatory Responsibility to be performed hereunder.
Pursuant to Section 17(d)(1)(A) of the Exchange Act and Rule 17d-2, the Participants join in requesting the Commission, upon its approval of this Agreement or any part thereof, to relieve the Participants that are party to this Agreement and are not the DOSR as to a Common Member of any and all Regulatory Responsibility with respect to the matters allocated to the DOSR.
Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
The Commission continues to believe that the Plan, as proposed to be amended, is an achievement in cooperation among the SRO participants. The Plan, as amended, will reduce unnecessary regulatory duplication by allocating to the designated SRO the responsibility for certain options-related market surveillance matters that would otherwise be performed by multiple SROs. The Plan promotes efficiency by reducing costs to firms that are members of more than one of the SRO participants. In addition, because the SRO participants coordinate their regulatory functions in accordance with the Plan, the Plan promotes, and will continue to promote, investor protection. Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. The primary purpose of the amendment is to add MIAX PEARL as a Participant to the Plan. By declaring it effective today, the amended Plan can become effective and be implemented without undue delay.
This order gives effect to the amended Plan submitted to the Commission that is contained in File No. 4-551.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Notice is hereby given that the Securities and Exchange Commission (“Commission”) has issued an Order, pursuant to Section 17(d) of the Securities Exchange Act of 1934 (“Act”),
Section 19(g)(1) of the Act,
Section 17(d)(1) of the Act
To implement Section 17(d)(1), the Commission adopted two rules: Rule 17d-1 and Rule 17d-2 under the Act.
To address regulatory duplication in these and other areas, the Commission adopted Rule 17d-2 under the Act.
On December 3, 2010, the Commission approved the SRO participants' plan for allocating regulatory responsibilities pursuant to Rule 17d-2.
The proposed 17d-2 Plan is intended to reduce regulatory duplication for firms that are members of more than one
The text of the Plan delineates the proposed regulatory responsibilities with respect to the Parties. Included in the proposed Plan is an exhibit (the “Covered Regulation NMS Rules”) that lists the federal securities laws, rules, and regulations, for which the applicable DREA would bear examination and enforcement responsibility under the Plan for common members of the Participating Organization and their associated persons.
Specifically, the applicable DREA assumes examination and enforcement responsibility relating to compliance by common members with the Covered Regulation NMS Rules. Covered Regulation NMS Rules do not include the application of any rule of a Participating Organization, or any rule or regulation under the Act, to the extent that it pertains to violations of insider trading activities, because such matters are covered by a separate multiparty agreement under Rule 17d-2.
On January 25, 2017, the parties submitted a proposed amendment to the Plan. The primary purpose of the amendment is to add MIAX PEARL as a Participant to the Plan.
The text of the proposed amended 17d-2 Plan is as follows (additions in italics; deletions are in brackets):
This agreement (the “Agreement”) by and among Bats BZX Exchange, Inc. (“BATS”), Bats BYX Exchange, Inc. (“BATS Y”), BOX Options Exchange LLC (“BOX”), Chicago Board Options Exchange, Incorporated (“CBOE”), C2 Options Exchange, Incorporated (“C2”), Chicago Stock Exchange, Inc. (“CHX”), Bats EDGA Exchange, Inc. (“EDGA”), Bats EDGX Exchange, Inc. (“EDGX”), Financial Industry Regulatory Authority, Inc. (“FINRA”), International Securities Exchange, LLC (“ISE”), ISE Gemini, LLC (“ISE Gemini”), ISE Mercury, LLC (“ISE Mercury”), Investors Exchange LLC (“IEX”), Miami International Securities Exchange, LLC (“MIAX”),
1.
a. For Covered Regulation NMS Rules Pertaining to “NMS stocks” (as defined in Regulation NMS) (
b. For Covered Regulation NMS Rules Pertaining to “NMS securities” (as defined in Regulation NMS) (
c. For purposes of this paragraph 1, any allocation of a Common Member to a Participating Organization other than as specified in paragraphs a. and b. above shall be based on the following principles, except to the extent all affected Participating Organizations consent to one or more different principles and any such agreement to different principles would be deemed an amendment to this Agreement as provided in paragraph 22:
i. The Participating Organizations shall not allocate a Common Member to a Participating Organization unless the Common Member is a member of that Participating Organization.
ii. To the extent practicable, Common Members shall be allocated among the Participating Organizations of which they are members in such a manner as to equalize, as nearly as possible, the allocation among such Participating Organizations.
iii. To the extent practicable, the allocation will take into account the amount of NMS stock activity (or NMS security activity, as applicable) conducted by each Common Member in order to most evenly divide the Common Members with the largest amount of activity among the Participating Organizations of which they are a members. The allocation will also take into account similar allocations pursuant to other plans or agreements to which the Participating Organizations are party to maintain consistency in oversight of the Common Members.
iv. The Participating Organizations may reallocate Common Members from time-to-time and in such manner as they deem appropriate consistent with the terms of this Agreement.
v. Whenever a Common Member ceases to be a member of its DREA (including FINRA), the DREA shall promptly inform the Participating Organizations, who shall review the matter and reallocate the Common Member to another Participating Organization.
vi. The DEA or DREA (including FINRA) may request that a Common Member be reallocated to another Participating Organization (including the DEA or DREA (including FINRA)) by giving 30 days written notice to the Participating Organizations. The Participating Organizations shall promptly consider such request and, in their discretion, may approve or disapprove such request and if approved, reallocate the Common Member to such Participating Organization.
vii. All determinations by the Participating Organizations with respect to allocations shall be by the affirmative vote of a majority of the Participating Organizations that, at the time of such determination, share the applicable Common Member being allocated; a Participating Organization shall not be entitled to vote on any allocation related to a Common Member unless the Common Member is a member of such Participating Organization.
d. The Participating Organizations agree that they shall conduct meetings among them as needed for the purposes of ensuring proper allocation of Common Members and identifying issues or concerns with respect to the regulation of Common Members.
2.
3.
4.
5.
6.
7.
a. Sharing. A Participating Organization shall make available to the DREA information necessary to assist the DREA in fulfilling the Regulatory Responsibility assumed under the terms of this Agreement. Such information shall include
b. No Waiver of Privilege. The sharing of documents or information between the parties pursuant to this Agreement shall not be deemed a waiver as against third parties of regulatory or other privileges relating to the discovery of documents or information.
8.
9.
a. Negotiation. The Participating Organizations will attempt to resolve any disputes through good faith negotiation and discussion, escalating such discussion up through the appropriate management levels until reaching the executive management level. In the event a dispute cannot be settled through these means, the Participating Organizations shall refer the dispute to binding arbitration.
b. Binding Arbitration. All claims, disputes, controversies, and other matters in question between the Participating Organizations to this Agreement arising out of or relating to this Agreement or the breach thereof that cannot be resolved by the Participating Organizations will be resolved through binding arbitration. Unless otherwise agreed by the Participating Organizations, a dispute submitted to binding arbitration pursuant to this paragraph shall be resolved using the following procedures:
(i) The arbitration shall be conducted in a city selected by the DREA in which it maintains a principal office or where otherwise agreed to by the Participating Organizations in accordance with the Commercial Arbitration Rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof; and
(ii) There shall be three arbitrators, and the chairperson of the arbitration panel shall be an attorney. The arbitrators shall be appointed in accordance with the Commercial Arbitration Rules of the American Arbitration Association.
10.
11.
a. The Participating Organizations agree to file promptly this Agreement with the SEC for its review and approval. FINRA shall file this Agreement on behalf, and with the explicit consent, of all Participating Organizations.
b. If approved by the SEC, the Participating Organizations will notify their members of the general terms of the Agreement and of its impact on their members.
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18.
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20.
21.
22.
a. This Agreement may be amended to add a new Participating Organization, provided that such Participating Organization does not assume regulatory responsibility, by an amendment executed by all applicable DREAs and such new Participating Organization. All other Participating Organizations expressly consent to allow such DREAs to jointly add new Participating Organizations to the Agreement as provided above. Such DREAs will promptly notify all Participating Organizations of any such amendments to add a new Participating Organization.
b. All other amendments must be approved by each Participating Organization. All amendments, including adding a new Participating Organization but excluding changes to Exhibit B, must be filed with and approved by the Commission before they become effective.
23.
24.
SEA Rule 606—Disclosure of Order Routing Information.*
SEA Rule 607—Customer Account Statements.
SEA Rule 611—Order Protection Rule.
SEA Rule 612—Minimum Pricing Increment.
* Covered Regulation NMS Rules with asterisks (*) pertain to NMS securities. Covered Regulation NMS Rules without asterisks pertain to NMS stocks
Interested persons are invited to submit written data, views, and arguments concerning the foregoing. Comments may be submitted by any of the following methods:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
The Commission finds that the Plan, as amended, is consistent with the factors set forth in Section 17(d) of the Act
The Commission is hereby declaring effective a plan that allocates regulatory responsibility for certain provisions of the federal securities laws, rules, and regulations as set forth in Exhibit A to the Plan. The Commission notes that any amendment to the Plan must be approved by the relevant Parties as set forth in Paragraph 22 of the Plan and must be filed with and approved by the Commission before it may become effective.
Under paragraph (c) of Rule 17d-2, the Commission may, after appropriate notice and comment, declare a plan, or any part of a plan, effective. In this instance, the Commission believes that appropriate notice and comment can take place after the proposed amendment is effective. In particular, the purpose of the amendment is to add MIAX PEARL as a Participating Organization. The Commission notes that the most recent prior amendment to the Plan was published for comment and the Commission did not receive any comments thereon.
This order gives effect to the amended Plan filed with the Commission that is contained in File No. 4-618.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to adopt Rule 16000 Series to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”). The text of the proposed rule change is available from the principal office of the Exchange, at the Commission's Public Reference Room and also on the Exchange's Internet Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Exchange Act
The Plan is designed to create, implement and maintain a consolidated
Proposed Rule 16010 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Proposed Rule 16000 Series. Each of the defined terms in Proposed Rule 16010 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's [sic] associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-IDs” for each Customer for the original receipt or origination of an order. “Customer-ID” is defined in SEC Rule 613(j)(5) to mean “with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.” SEC Rule 613(c)(8) requires Industry Members to use the same Customer-ID for each Customer. The SEC granted the 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.
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 (
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.
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 16010 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 (
Paragraph (a)(2) of Proposed Rule 16010 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
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
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 16010 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.
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.
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 16010 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.
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 16010 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under this Rule 16000 Series. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except SRO proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Rule Series.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in this Rule 16000 Series.
Paragraph (e) of Proposed Rule 16010 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.
Paragraph (f) of Proposed Rule 16010 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
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.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 16010 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).
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
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.
Paragraph (i) of Proposed Rule 16010 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 SRO uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of Proposed Rule 16010 defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 16093(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 16093(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.”
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 16010 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 SRO 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 Rule 16000 Series. SRO also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
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, SRO 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 16010 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 16010(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.
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, SRO 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 16010 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 (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central
The reporting requirements of the Proposed Rule 16000 Series 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 16010 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.
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.
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.
To implement the requirements of the CAT NMS Plan related to the Error Rate, SRO proposes to define the term “Error Rate” in Proposed Rule 16010. Paragraph (p) of Proposed Rule 16010 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).
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 (
Paragraph (r) of Proposed Rule 16010 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.
Paragraph (s) of Proposed Rule 16010 states that the term “Industry Member Data” has the meaning set forth in Rule 16030(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 16030(a)(2).
Paragraph (t) of Proposed Rule 16010 defines the term “Initial Plan Processor”
The CAT NMS Plan and this Proposed Rule 16000 Series applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rule 16000 Series apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 16010 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 16010 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” SRO 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.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, SRO proposes to define the term “Manual Order Event” in Proposed Rule 16010. Specifically, paragraph (v) of Proposed Rule 16010 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.
Proposed Rule 16030 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, SRO proposes to define the term “NMS Security” in Proposed Rule 16010. Specifically, paragraph (x) of Proposed Rule 16010 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.
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, SRO proposes to define the term “NMS Stock” in Paragraph (y) of Proposed Rule 16010 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.
Paragraph (z) of Proposed Rule 16010 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 SRO proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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.
To implement the requirements related to Option Market Maker quotes, SRO proposes to define the term “Options Market Maker” in Proposed Rule 16010. Specifically, paragraph (aa) of Proposed Rule 16010 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.
The Proposed Rule 16000 Series requires each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, SRO proposes to define the term “Order” in Proposed Rule 16010. Specifically, paragraph (bb) of Proposed Rule 16010 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 SRO proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” SRO notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, SRO proposes to define the term “OTC Equity Security” in Proposed Rule 16010. Specifically, paragraph (cc) of Proposed Rule 16010 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.
Paragraph (dd) of Proposed Rule 16010 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.
Paragraph (ee) of Proposed Rule 16010 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.
Paragraph (ff) of Proposed Rule 16010 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.
Paragraph (gg) of Proposed Rule 16010 states that the term “Received Industry Member Data” has the meaning set forth in Rule 16030(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 16030(a)(2).
Paragraph (hh) of Proposed Rule 16010 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 16030(a)(1). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 16030(a)(1).
The Proposed Rule 16000 Series requires each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, SRO proposes to define the term “Reportable Event” in Proposed Rule 16010. Specifically, paragraph (ii) of Proposed Rule 16010 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.
Paragraph (jj) of Proposed Rule 16010 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.
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).
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
To implement the Existing Identifier Approach, SRO proposes to define the term “SRO-Assigned Market Participant” in Proposed Rule 16010. Specifically, paragraph (kk) of Proposed Rule 16010 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rule 16000 Series 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, SRO proposes to define the term “Small Industry Member” in Proposed Rule 16010. Specifically, paragraph (ll) of Proposed Rule 16010 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).
Proposed Rule 16030(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, SRO proposes to define the term “Trading Day” in Proposed Rule 16010. Specifically, Paragraph (mm) of Proposed Rule 16010 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.
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.
Paragraph (a) of Proposed Rule 16020 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 16020 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 16020 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 16020 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the Proposed Rule 16020 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 16020 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 16020 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 16020 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 16020 requires each Industry Member to certify to SRO that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 16020 periodically in accordance with the
Paragraph (d) of Proposed Rule 16020 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 16020 requires Industry Members to report to the Plan Processor and SRO violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. SRO intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular.
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, SRO proposes Rule 16030 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 16030 has six [sic] sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities cover [sic] by the recording and reporting requirements, (4) format, [sic] (5) the security symbology to be used in the recording and reporting, and (6) error correction requirements, each of which is described below.
Paragraph (a) of Proposed Rule 16030 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 16030 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 16060); 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 16060); (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 16060); (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 16060); (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 16060; (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 16030 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 16030(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 16040, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 16030 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.
Paragraph (b) of Proposed Rule 16030 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1-(b)(3) of Proposed Rule 16030 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 16030 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 16030 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of Proposed Rule 16030 describes the securities to which the recording and reporting requirements of Proposed Rule 16030 apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 16030 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 16030 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 16030 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 16030 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 16030 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 16030 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 16030 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 16030 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. SRO intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Regulatory Circular.
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, SRO proposes to adopt paragraph (e) of Proposed Rule 16030, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 16030 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.
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. SRO proposes Rule 16040 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 16040 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 16080. Paragraph (b) of Proposed Rule 16040 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 16040 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. SRO 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 16040 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.
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. SRO proposes Rule 16050 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 16050 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 16080, and keep such information up to date as necessary.
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.
Paragraph (a) of Proposed Rule 16060 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 16060 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 16060. 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 16060 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 16060 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 16060 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 16060 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 16060 permits each Industry Member to record and report the time of Allocation Reports in increments up to and including one second.
Proposed Rule 16065 (Consolidated Audit Trail—Clock Synchronization Rule Violations [sic]) describes potential violations of the clock synchronization time period requirements set forth in the Proposed Rule 16000 Series. Proposed Rule 16065 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Rule Series without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 16070 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 16070 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 16070 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 16070 addresses connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 16070 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 16070 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 Rule 16000 Series. 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 Rule 16000 Series. SRO notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 16070 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 Rule 16000 Series, notwithstanding the existence of an agreement described in paragraph (c) of Proposed Rule 16070.
SRO proposes Rule 16080 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 16080 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 16040(a) and 16050, 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 16040(a) and 16050, 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),
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 16080 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 16090 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 16090 requires each Industry Member to maintain and preserve records of the information required to be recorded under the Proposed Rule 16000 Series 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 Rule 16000 Series 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 16090 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of Proposed Rule 16093 requires Industry Members to accurately provide the LEIs in their records as required by the Proposed Rule 16000 Series 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.
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 Rule 16000 Series. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. SRO 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 16093 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 16093 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.
Proposed Rule 16095 (Consolidated Audi [sic] Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rule 16000 Series. Paragraph (a) of Proposed Rule 16095 states that, paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date of Rules 16000 through 16095. Unless otherwise noted, Rules 16000 through 16095 are fully effective and Members must comply with their terms.
Paragraph (b) of Proposed Rule 16095 establishes the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 16020. Paragraph (b)(1) states that each Industry Member shall comply with Rule 16020 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 16020 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to
Paragraph (c) of Proposed Rule 16095 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.
SRO believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
SRO 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 SRO 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.”
SRO 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. SRO notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist SRO in meeting its regulatory obligations pursuant to the Plan. SRO also notes that the Proposed Rule Series implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this Proposed Rule 16000 Series. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
The Exchange has neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”),
The Exchange proposes to adopt rules to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available on the Exchange's Web site at
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.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Exchange Act
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.
Proposed Rule 6810 and paragraph (a) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Definitions) set forth the definitions for the terms used in the Proposed Rules. Each of the defined terms in Proposed Rule 6810 and paragraph (a) of Proposed Chapter IX, Section 8 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's[sic] associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-IDs” for each Customer for the original receipt or origination of an order. “Customer-ID” is defined in SEC Rule 613(j)(5) to mean “with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository[sic].” 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.
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 (
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.
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 6810 and paragraph (a)(i) of Proposed Chapter IX, Section 8 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, the rules define “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 (
Paragraph (a)(2) of Proposed Rule 6810 and paragraph (a)(i)(2) of Proposed Chapter IX, Section 8 state 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) of Proposed Rule 6810 and paragraph (a)(i)(3) of Proposed Chapter IX, Section 8 state 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) of Proposed Rule 6810 and paragraph (a)(i)(4) of Proposed Chapter IX, Section 8 state 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) of Proposed Rule 6810 and paragraph (a)(i)(5) of Proposed Chapter IX, Section 8 state that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
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 6810 and paragraph (a)(ii) of Proposed Chapter IX, Section 8 define 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.
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 Participants 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
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 6810 and paragraph (a)(iii) of Proposed Chapter IX, Section 8 define 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.
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 6810 and paragraph (a)(iv) of Proposed Chapter IX, Section 8 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under this Rule 6800 Series. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Rule Series.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in the Proposed Rules.
Paragraph (e) of Proposed Rule 6810 and paragraph (a)(v) of Proposed Chapter IX, Section 8 define 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.
Paragraph (f) of Proposed Rule 6810 paragraph (a)(vi) of Proposed Chapter IX, Section 8 define the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, paragraph (g) of Proposed Rule 6810 and paragraph (a)(vii) of Proposed Chapter IX, Section 8 define 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).
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.
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.
Paragraph (i) of Proposed Rule 6810 and paragraph (a)(ix) of Proposed Chapter IX, Section 8 define 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.”
Paragraph (j) of Proposed Rule 6810 and paragraph (a)(x) of Proposed Chapter IX, Section 8 define the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 6893(d) and paragraph (k) of Proposed Chapter IX, Section 8. 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 6893(d) and paragraph (k) of Proposed Chapter IX, Section 8, 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.”
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 6810 and paragraph (a)(xi) of Proposed Chapter IX, Section 8 propose to define the term “Customer.” Specifically, the term “Customer”
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 6810 and paragraph (a)(xii) of Proposed Chapter IX, Section 8 define 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 6810(l) and paragraph (a)(xii) of Proposed Chapter IX, Section 8, however, provide 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.
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 6810 and paragraph (a)(xiii) of Proposed Chapter IX, Section 8 define 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 (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8 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 6810 and paragraph (a)(xv) of Proposed Chapter IX, Section 8 define 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.
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.
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.
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 6810 and paragraph (a)(xvi) of Proposed Chapter IX, Section 8. Paragraph (p) of Proposed Rule 6810 and paragraph (a)(xvi) of Proposed Chapter IX, Section 8 define 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).
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 (
Paragraph (r) of Proposed Rule 6810 and paragraph (a)(xiii) of Proposed Chapter IX, Section 8 define 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.
Paragraph (s) of Proposed Rule 6810 and paragraph (a)(xix) of Proposed Chapter IX, Section 8 state that the term “Industry Member Data” has the meaning set forth in Proposed Rule 6830(a)(2) and paragraph (c)(i)(2) of Proposed Chapter IX, Section 8, respectively. 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 6830(a)(2) and paragraph (c)(i)(2) of Proposed Chapter IX, Section 8, respectively.
Paragraph (t) of Proposed Rule 6810 and paragraph (a)(xx) of Proposed Chapter IX, Section 8 define 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.”
The CAT NMS Plan and this Proposed Rule 6800 Series applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rules apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 6810 and paragraph (a)(xxi) of Proposed Chapter IX, Section 8 define the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 6810 and paragraph (a)(xxi) of Proposed Chapter IX, Section 8 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
The CAT NMS Plan sets forth clock synchronization and timestamp requirements for Industry Members
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 6810 and paragraph (a)(xxii) of Proposed Chapter IX, Section 8. Specifically, paragraph (v) of Proposed Rule 6810 and paragraph (a)(xxii) of Proposed Chapter IX, Section 8 define 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.
Proposed Rule 6830 and paragraph (c) of Proposed Chapter IX, Section 8 require Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
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 6810 and paragraph (a)(xxiv) of Proposed Chapter IX, Section 8. Specifically, paragraph (x) of Proposed Rule 6810 and paragraph (a)(xxiv) of Proposed Chapter IX, Section 8 define 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.
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 6810 and paragraph (a)(xxv) of Proposed Chapter IX, Section 8 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.
Paragraph (z) of Proposed Rule 6810 and paragraph (a)(xxvi) of Proposed Chapter IX, Section 8 define 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.
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 Participants, 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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in Proposed Rule 6810 and paragraph (a)(xxvii) of Proposed Chapter IX, Section 8. Specifically, paragraph (aa) of Proposed Rule 6810 and paragraph (a)(xxvii) of Proposed Chapter IX, Section 8 define 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.
The Proposed Rules require each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, the Exchange proposes to define the term “Order” in Proposed Rule 6810 and paragraph (a)(xxviii) of Proposed Chapter IX, Section 8. Specifically, paragraph (bb) of Proposed Rule 6810 and paragraph (a)(xxviii) of Proposed Chapter IX, Section 8 define 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).
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 6810 and paragraph (a)(xxix) of Proposed Chapter IX, Section 8. Specifically, paragraph (cc) of Proposed Rule 6810 and paragraph (a)(xxix) of Proposed Chapter IX, Section 8 define 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.
Paragraph (dd) of Proposed Rule 6810 and paragraph (a)(xxx) of Proposed Chapter IX, Section 8 define 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.
Paragraph (ee) of Proposed Rule 6810 and paragraph (a)(xxxi) of Proposed Chapter IX, Section 8 define 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.
Paragraph (ff) of Proposed Rule 6810 and paragraph (a)(xxxii) of Proposed Chapter IX, Section 8 define 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.
Paragraph (gg) of Proposed Rule 6810 and paragraph (a)(xxxiii) of Proposed Chapter IX, Section 8 state that the term “Received Industry Member Data” has the meaning set forth in Proposed Rule 6830(a)(2) and paragraph (c)(i)(2) of Proposed Chapter IX, Section 8. 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 6830(a)(2) and paragraph (c)(i)(2) of Proposed Chapter IX, Section 8.
Paragraph (hh) of Proposed Rule 6810 and paragraph (a)(xxxiv) of Proposed Chapter IX, Section 8 state that the term “Recorded Industry Member Data” has the meaning set forth in Proposed Rule 6830(a)(1) and paragraph (c)(i)(1) of Proposed Chapter IX, Section 8. 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 6830(a)(1) and paragraph (c)(i)(1) of Proposed Chapter IX, Section 8.
The Proposed Rules require each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term “Reportable Event” in Proposed Rule 6810 and paragraph (a)(xxxv) of Proposed Chapter IX, Section 8. Specifically, paragraph (ii) of Proposed Rule 6810 and paragraph (a)(xxxv) of Proposed Chapter IX, Section 8 state 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.
Paragraph (jj) of Proposed Rule 6810 and paragraph (a)(xxxvi) of Proposed Chapter IX, Section 8 define 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.
The Participants 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).
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
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant” in Proposed Rule 6810 and paragraph (a)(xxxvii) of Proposed Chapter IX, Section 8. Specifically, paragraph (kk) of Proposed Rule 6810 and paragraph (a)(xxxvii) of Proposed Chapter IX, Section 8 define the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO, or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rule 6800 Series 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 6810 and paragraph (a)(xxxviii) of Proposed Chapter IX, Section 8. Specifically, paragraph (ll) of Proposed Rule 6810 and paragraph (a)(xxxviii) of Proposed Chapter IX, Section 8 define 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).
Proposed Rule 6830(b) and paragraph (c)(ii) of Proposed Chapter IX, Section 8 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 6810 and paragraph (a)(xxxix) of Proposed Chapter IX, Section 8. Specifically, Paragraph (mm) of Proposed Rule 6810 and paragraph (a)(xxxix) of Proposed Chapter IX, Section 8 state 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.
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.
Paragraph (a) of Proposed Rule 6820 and paragraph (b)(i) of Proposed Chapter IX, Section 8 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 6820 and paragraph (b)(i)(1) of Proposed Chapter IX, Section 8 require 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 6820 and paragraph (b)(i)(2) of Proposed Chapter IX, Section 8 require 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 6820 and paragraph (b)(i)(3) of Proposed Chapter IX, Section 8 clarify that the tolerance described in paragraphs (a)(1) and (2) of Proposed Rule 6820 and paragraph (b)(i)(1) and (b)(i)(2) of Proposed Chapter IX, Section 8 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 6820 and paragraph (b)(i)(4) of Proposed Chapter IX, Section 8 require 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 6820 and paragraph (b)(ii) of Proposed Chapter IX, Section 8 set forth documentation requirements with regard to clock synchronization. Specifically, those paragraphs require 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 (c) of Proposed Rule 6820 and paragraph (b)(iii) of Proposed Chapter IX, Section 8 set forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 6820 and paragraph (b)(iii) of Proposed Chapter IX, Section 8 require each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 6820 and paragraph (b)(i) of Proposed Chapter IX, Section 8 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 an information circular (“Circular”).
Paragraph (d) of Proposed Rule 6820 and paragraph (b)(iv) of Proposed Chapter IX, Section 8 establish reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 6820 and paragraph (b)(iv) of Proposed Chapter IX, Section 8 require Industry Members to report to the Plan Processor and the Exchange violations of paragraph (a) of Proposed Rule 6820 and paragraph (b)(i) of Proposed Chapter IX, Section 8 pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Circular.
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 6830 and paragraph (c) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 6830 has six sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities cover[sic] by the recording and reporting requirements, (4) format, (5) the security symbology to be used in the recording and reporting, and (6) error correction requirements, each of which is described below.
Paragraph (a) of Proposed Rule 6830 and paragraph (c)(i) of Proposed Chapter IX, Section 8 describe the recording and reporting of Industry Member Data to the Central Repository. Paragraph (a) of Proposed Rule 6830 and paragraph (c)(i) of Proposed Chapter IX, Section 8 each consist of three paragraphs, which cover Recorded Industry Member Data, Received Industry Member Data and Options Market Maker data, respectively. Paragraphs (a)(1)-(a)(3) of Proposed Rule 6830 and paragraph (c)(i)(1)-(i)(3) of Proposed Chapter IX, Section 8 set forth the recording and reporting requirements required in Section 6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
Paragraph (a)(1) of Proposed Rule 6830 and paragraph (c)(i)(1) of Proposed Chapter IX, Section 8 require, subject to paragraph (a)(3) and paragraph (c)(i)(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 6860 and paragraph (f) of Proposed Chapter IX, Section 8); 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 6860 and paragraph (f) of Proposed Chapter IX, Section 8); (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 6860 and paragraph (f) of Proposed Chapter IX, Section 8); (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 6860 and paragraph (f) of Proposed Chapter IX, Section 8); (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 6860 and paragraph (f) of Proposed Chapter IX, Section 8; (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 6830 and paragraph (c)(i)(2) of Proposed Chapter IX, Section 8 require, subject to paragraph (a)(3) and paragraph (c)(i)(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 paragraph (c)(i)(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 6840 and paragraph (d) of Proposed Chapter IX, Section 8, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 6830 and paragraph (c)(i)(3) of Proposed Chapter IX, Section 8 state 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.
Paragraph (b) of Proposed Rule 6830 and paragraph (c)(ii) of Proposed Chapter IX, Section 8 describe the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 6830 and paragraph (c)(ii)(1)-(3) of Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(ii)(1) of Proposed Chapter IX, Section 8 require each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 6830 and paragraph (c)(ii)(2) of Proposed Chapter IX, Section 8 require each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m., Eastern Time, on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m., Eastern Time, on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) and paragraph (c)(ii)(3) of Proposed Chapter IX, Section 8 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.
Paragraph (c) of Proposed Rule 6830 and paragraph (c)(iii) of Proposed Chapter IX, Section 8 describe the securities to which the recording and reporting requirements of Proposed Rule 6830 and paragraph (c)(iii) of Proposed Chapter IX, Section 8 apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 6830 and paragraph (c)(iii)(1) and (2) of Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(iii)(1) of Proposed Chapter IX, Section 8 require each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of Proposed Rule 6830 and paragraph (c)(i) of Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(iii)(2) of Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(i) of Proposed Chapter IX, Section 8 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 6830 and paragraph (c)(iv) of Proposed Chapter IX, Section 8 describe 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 6830 and paragraph (c)(iv)(1) of Proposed Chapter IX, Section 8 require, 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 6830 and paragraph (c)(iv)(2) of Proposed Chapter IX, Section 8 require, 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 Circular.
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 6830 and paragraph (c)(v) of Proposed Chapter IX, Section 8, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 6830 and paragraph (c)(v) of Proposed Chapter IX, Section 8 require, 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.
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 6840 and paragraph (d) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 6840 and paragraph (d)(i) of Proposed Chapter IX, Section 8 require 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 6880 and paragraph (i) of Proposed Chapter IX, Section 8. Paragraph (b) of Proposed Rule 6840 and paragraph (d)(ii) of Proposed Chapter IX, Section 8 require 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 6840 and paragraph (d)(iii) of Proposed Chapter IX, Section 8 require 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 Circular.
Finally, paragraph (d) of Proposed Rule 6840 and paragraph (d)(iv) of Proposed Chapter IX, Section 8 address the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) and paragraph (d)(iv) require, 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.
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 6850 and paragraph (e) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 6850 and paragraph (e) of Proposed Chapter IX, Section 8 require 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 6880 and paragraph (i) of Proposed Chapter IX, Section 8, and keep such information up to date as necessary.
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.
Paragraph (a) of Proposed Rule 6860 and paragraph (f)(i) of Proposed Chapter IX, Section 8 set forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 6860 and paragraph (f)(i)(1) of Proposed Chapter IX, Section 8 require 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 6860 and subparagraphs (f)(i)(2) and (f)(ii) of Proposed Chapter IX, Section 8. 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 6860 and paragraph (f)(i)(2) of Proposed Chapter IX, Section 8 require 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 6860 and paragraph (f)(ii) of Proposed Chapter IX, Section 8 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 6860 and paragraph (f)(ii) of Proposed Chapter IX, Section 8 set forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 6860 and paragraph (f)(ii)(1) of Proposed Chapter IX, Section 8 permit 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 6860 and paragraph (f)(ii)(2) of Proposed Chapter IX, Section 8 permit each Industry Member to record and report the time of Allocation Reports in increments up to and including one second.
Proposed Rule 6865 and paragraph (g) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Clock Synchronization Rule Violations) describe potential violations of the clock synchronization time period requirements set forth in the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8. Proposed Rule 6865 and paragraph (g) of Proposed Chapter IX, Section 8 state that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Rule Series without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the
Proposed Rule 6870 and paragraph (h) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 6870 and paragraph (h)(i) of Proposed Chapter IX, Section 8 describe 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 6870 and paragraph (h)(i) of Proposed Chapter IX, Section 8 require 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 6870 and paragraph (h)(ii) of Proposed Chapter IX, Section 8 address connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 6870 and paragraph (h)(ii) of Proposed Chapter IX, Section 8 require 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) of Proposed Rule 6870 and paragraph (h)(iii) of Proposed Chapter IX, Section 8 permit Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) of Proposed Rule 6870 and paragraph (h)(iii) of Proposed Chapter IX, Section 8 are 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 6870 and paragraph (h)(iii)(1) of Proposed Chapter IX, Section 8 state 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 Rule 6800 Series and Proposed Chapter IX, Section 8. 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 Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 6870 and paragraph (h)(iii)(2) of Proposed Chapter IX, Section 8 require that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) of Proposed Rule 6870 and paragraph (h)(iii)(3) of Proposed Chapter IX, Section 8 state that each Industry Member remains primarily responsible for compliance with the requirements of the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable, notwithstanding the existence of an agreement described in paragraph (c) of Proposed Rule 6870 and paragraph (h)(iii) of Proposed Chapter IX, Section 8.
The Exchange proposes Rule 6880 and paragraph (i) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 6880 and paragraph (i)(i) of Proposed Chapter IX, Section 8 set 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) of Proposed Rule 6880 and paragraph (i)(i)(1) of Proposed Chapter IX, Section 8 set 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) of Proposed Rule 6880 and paragraph (i)(i)(2) of Proposed Chapter IX, Section 8 set forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8 requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Proposed Rules 6840(a) and 6850 and paragraphs (d)(i) and (e) of Proposed Chapter IX, Section 8, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8 require Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 6840(a) and 6850 and paragraphs (d)(i) and (e) of Proposed Chapter IX, Section 8, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8 sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8, Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8, 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) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8 state 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 6880 and paragraph (i)(ii) of Proposed Chapter IX, Section 8 implement the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the
Proposed Rule 6890 and paragraph (j) of Proposed Chapter IX, Section 8 (Consolidated Audit Trail—Recordkeeping) set forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 6890 and paragraph (j) of Proposed Chapter IX, Section 8 require each Industry Member to maintain and preserve records of the information required to be recorded under the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable, 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 Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable, 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 6890 and paragraph (j) of Proposed Chapter IX, Section 8 are based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a) of Proposed Rule 6893 and paragraph (k)(i) of Proposed Chapter IX, Section 8, paragraph (b) of Proposed Rule 6893 and paragraph (k)(ii) of Proposed Chapter IX, Section 8 require Industry Members to accurately provide the LEIs in their records as required by the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable, and state that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) of Proposed Rule 6893 and paragraph (k)(ii) of Proposed Chapter IX, Section 8 note, 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) of Proposed Rule 6893 and paragraph (k)(ii) of Proposed Chapter IX, Section 8 are consistent with the SEC's statements in the Approval Order for the CAT NMS Plan regarding an Industry Member's obligations regarding LEIs.
Paragraph (c) of Proposed Rule 6893 and paragraph (k)(iii) of Proposed Chapter IX, Section 8 state 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 Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable. 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 Circular.
Furthermore, paragraph (d) of Proposed Rule 6893 and paragraph (k)(iv) of Proposed Chapter IX, Section 8 address Compliance Thresholds related to reporting data to the CAT. Proposed Rule 6893(d) and paragraph (k)(iv) of Proposed Chapter IX, Section 8 state 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.
Proposed Rule 6895 and paragraph (l) of Proposed Chapter IX, Section 8 (Consolidated Audi Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8, as applicable. Paragraph (a) of Proposed Rule 6895 and paragraph (l)(i) of Proposed Chapter IX, Section 8 state that, except as set forth in paragraphs (b) and (c) of Proposed Rule 6895 and paragraph (l)(ii) and (l)(iii) of Proposed Chapter IX, Section 8, as applicable, or otherwise set forth in the Proposed Rules, these rules are fully effective and members must comply with their terms.
Paragraph (b) of Proposed Rule 6895 and paragraph (l)(ii) of Proposed Chapter IX, Section 8 establish the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 6820 and paragraph (b) of Proposed Chapter IX, Section 8. Paragraph (b)(1) of Proposed Rule 6895 and paragraph (l)(ii)(1) of Proposed Chapter IX, Section 8 state that each Industry Member shall comply with Proposed Rule 6820 and paragraph (b) of Proposed Chapter IX, Section 8, as applicable, with regard to Business Clocks that capture time in milliseconds commencing on or before March 15,
Paragraph (c) of Proposed Rule 6895 and paragraph (l)(iii) of Proposed Chapter IX, Section 8 establish the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) of Proposed Rule 6895 and paragraph (l)(iii)(1) of Proposed Chapter IX, Section 8 require 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) of Proposed Rule 6895 and paragraph (l)(iii)(2) of Proposed Chapter IX, Section 8 require 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.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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.”
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 Rule Series 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 the rules reflected in the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
No written comments were either solicited or received.
Within 45 days of the date of publication of this notice in the
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly.
All submissions should refer to File Number SR-NASDAQ-2017-008 and should be submitted on or before March 1, 2017.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to adopt Rules 4.5 through 4.16 to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Exchange Act
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.
Proposed Rule 4.5 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Proposed Rules 4.5 through 4.16. Each of the defined terms in Proposed Rule 4.5 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-ID” for each Customer for the original receipt or origination of an order. “Customer-ID” is defined in SEC Rule 613(j)(5) to mean “with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.” SEC Rule 613(c)(8) requires Industry Members to use the same Customer-ID for each Customer.
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 (
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.
In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. “Customer Account Information” is defined in SEC Rule 613(j)(4) to “include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).” Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Participants requested and received an exemption to allow an “Account Effective Date” to be reported in lieu of an account open date in certain limited circumstances. The definition of “Account Effective Date” as set forth in Paragraph (a) of Proposed Rule 4.5 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, Paragraph (a)(1) defines “Account Effective Date to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When the trading relationship was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, either (a) the date the relationship identifier was established within the Industry Member; (b) the date when trading began (
Paragraph (a)(2) of Proposed Rule 4.5 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account Information for only those accounts that are active. This will alleviate the need for Industry Members to update such information for non-active accounts, but still ensure that the Central Repository will collect audit trail data for Customer accounts that have any Reportable Events. Accordingly, paragraph (b) of Proposed Rule 4.5 defines an “Active Account” as an account that has had activity in Eligible Securities within the last six months. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record and
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 4.5 defines an “Allocation Report.” Specifically, an “Allocation Report” means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use “Business Clocks” to record such dates and times. Accordingly, paragraph (d) of Proposed Rule 4.5 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under Rules 4.5 through 4.16. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under Rules 4.5 through 4.16.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in Rules 4.5 through 4.16.
Paragraph (e) of Proposed Rule 4.5 defines the term “CAT” to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (f) of Proposed Rule 4.5 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 4.5 defines the term “CAT-Order-ID.” The term “CAT-Order-ID” is defined to mean a unique order identifier or series of unique order identifiers that allows the Central Repository to efficiently and accurately link all Reportable Events for an order, and all orders that result from the aggregation or disaggregation of such order. This is the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 of the CAT NMS Plan defines “CAT-Order-ID” by reference to SEC Rule 613(j)(1).
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.
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.
Paragraph (i) of Proposed Rule 4.5 defines the term “Central Repository” to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of Proposed Rule 4.5 defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 4.15(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to Proposed Rule 4.15(d), each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT. This Industry Member-specific rate is the “Compliance Threshold.”
Industry Members are required to submit to the Central Repository certain information related to their Customers, including Customer Identifying Information and Customer Account
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what customer information would need to be reported to the Central Repository.
Paragraph (l) of Proposed Rule 4.5 defines the term “Customer Account Information” to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 4.5(l), however, provides an alternative definition of “Customer Account Information” in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (1) Provide the Account Effective Date in lieu of the “date account opened”; (2) provide the relationship identifier in lieu of the “account number”; and (3) identify the “account type” as a “relationship.” Second, in those circumstances in which the relevant account was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, and no “date account opened” is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (1) Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (2) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (3) where there are multiple dates associated with an account in an Industry Member's system, and the parameters of each date are determined by the individual Industry Member; and (4) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of “Customer Account Information” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Identifying Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what Customer information would need to be reported to the Central Repository.
Paragraph (m) of Proposed Rule 4.5 defines the term “Customer Identifying Information” to mean information of sufficient detail to identify a Customer. With respect to individuals, “Customer Identifying Information” includes, but is not limited to: Name, address, date of birth, individual tax payer identification number (“ITIN”)/social security number (“SSN”), individual's role in the account (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Proposed Rules 4.5 through 4.16 only apply to Reportable Events in Eligible Securities. Currently, an Eligible Security includes NMS Securities and OTC Equity Securities. Accordingly, paragraph (p) [sic] of Proposed Rule 4.5 defines the term “Eligible Security” to include: (1) All NMS Securities; and (2) all OTC Equity Securities. The terms “NMS Securities” and “OTC Equity Securities” are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
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.
To implement the requirements of the CAT NMS Plan related to the Error Rate, the Exchange proposes to define the term “Error Rate” in Proposed Rule 4.5. Paragraph (p) of Proposed Rule 4.5 defines the term “Error Rate” to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines “Error Rate” by reference to SEC Rule 613(j)(6).
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 (
Paragraph (r) of Proposed Rule 4.5 defines the term “Industry Member” to mean a member of a national securities exchange or a member of a national securities association.” This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (s) of Proposed Rule 4.5 states that the term “Industry Member Data” has the meaning set forth in Rule 4.7(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(2).
Paragraph (t) of Proposed Rule 4.5 defines the term “Initial Plan Processor” to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the “Selection Plan.”
The CAT NMS Plan and the Proposed Rules 4.5 through 4.16 apply to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rules 4.5 through 4.16 apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 4.5 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 4.5 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, the Exchange proposes to define the term “Manual Order Event” in Proposed Rule 4.5. Specifically, paragraph (v) of Proposed Rule 4.5 defines the term “Manual Order Event” to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Proposed Rule 4.7 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “NMS Security” in Proposed Rule 4.5. Specifically, paragraph (x) of Proposed Rule 4.5 defines the term “NMS Security” to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, the Exchange proposes to define the term “NMS Stock” in Paragraph (y) of Proposed Rule 4.5 to mean any NMS Security other than an option. This is the same definition as set forth in SEC Rule 600(b)(47) of Regulation NMS.
Paragraph (z) of Proposed Rule 4.5 defines the term “Operating Committee” to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in Proposed Rule 4.5. Specifically, paragraph (aa) of Proposed Rule 4.5 defines the term “Options Market Makers” to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
The Proposed Rules 4.5 through 4.16 require each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, the Exchange proposes to define the term “Order” in Proposed Rule 4.5. Specifically, paragraph (bb) of Proposed Rule 4.5 defines the term “Order”, with respect to Eligible Securities, to include: (1) Any order received by an Industry Member from any person; (2) any order originated by an Industry Member; or (3) any bid or offer. This is the same definition as set forth in SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” The Exchange notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “OTC Equity Security” in Proposed Rule 4.5. Specifically, paragraph (cc) of Proposed Rule 4.5 defines the term “OTC Equity Security” to mean any equity security, other than an NMS Security, subject to prompt last sale reporting rules of a registered national securities association and reported to one of such association's equity trade reporting facilities. This is
Paragraph (dd) of Proposed Rule 4.5 defines the term “Participant” to mean each Person identified as such in Exhibit A of the CAT NMS Plan, as amended, in such Person's capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ee) of Proposed Rule 4.5 defines the term “Person” to mean any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association and any heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so permits. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ff) of Proposed Rule 4.5 defines the term “Plan Processor” to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan.
Paragraph (gg) of Proposed Rule 4.5 states that the term “Received Industry Member Data” has the meaning set forth in Rule 4.7(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Received Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(2).
Paragraph (hh) of Proposed Rule 4.5 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 4.7(a)(1). This definition has the same substantive meaning as the definition set forth in in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(1).
The Proposed Rules 4.5 through 4.16 require each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term “Reportable Event” in Proposed Rule 4.5. Specifically, paragraph (ii) of Proposed Rule 4.5 states that the term “Reportable Event” includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (jj) of Proposed Rule 4.5 defines the term “SRO” to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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).
For the Central Repository to link the SRO-Assigned Market Participant Identifier to the CAT-Reporter-ID, each SRO will submit to the Central Repository, on a daily basis, all SRO-Assigned Market Participant Identifiers used by its Industry Members or itself; and information to identify each such Industry Member, including the CRD number and LEI if such LEI has been obtained, and itself, including LEI, if such LEI has been obtained. Additionally, each Industry Member is required to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained. The Plan Processor will use this information to assign a CAT-Reporter-ID to each Industry Member for internal use within the Central Repository.
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant Identifier” in Proposed Rule 4.5. Specifically, paragraph (kk) of Proposed Rule 4.5 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rules 4.5 through 4.16 differ to some extent for Small Industry Members versus Industry Members other than Small Industry Members. For example, the compliance dates for reporting data to the CAT are different for Small Industry Members versus other Industry Members. Accordingly, to clarify the requirements that apply to which Industry Members, the Exchange proposes to define the term “Small Industry Member” in Proposed Rule 4.5. Specifically, paragraph (ll) of Proposed Rule 4.5 defines the term “Small Industry Member” to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as amended. This is the same in substance as the definition of “Small Industry Member” as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a “Small Industry Member” as “an Industry Member that qualifies as a small broker-dealer as defined in SEC Rule 613.” The definition of a small broker-dealer under SEC Rule 613, in
Proposed Rule 4.7(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, the Exchange proposes to define the term “Trading Day” in Proposed Rule 4.5. Specifically, Paragraph (mm) of Proposed Rule 4.5 states that the term “Trading Day” shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time.
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.
Paragraph (a) of Proposed Rule 4.6 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 4.6 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
Paragraph (a)(2) of Proposed Rule 4.6 requires each Industry Member to synchronize (1) its Business Clocks used solely for Manual Order Events and (2) its Business Clocks used solely for the time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(3) of Proposed Rule 4.6 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the Proposed Rule 4.6 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(4) of Proposed Rule 4.6 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and re-synchronized, as necessary, throughout the day. This description of the required frequency of clock synchronization is the same as set forth in paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (b) of Proposed Rule 4.6 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The Proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the Proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the “Sequencing Orders and Clock Synchronization” section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (c) of Proposed Rule 4.6 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 4.6 requires each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 4.6 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular.
Paragraph (d) of Proposed Rule 4.6 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 4.6 requires Industry Members to report to the Plan Processor and the Exchange, violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular.
SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, the Exchange proposes Rule 4.7 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 4.7 has six sections [sic] covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities covered by the recording and reporting requirements, (4) the security symbology to be used in the recording and reporting, and (5) error correction requirements, each of which is described below.
Paragraph (a) of Proposed Rule 4.7 describes the recording and reporting of Industry Member Data to the Central Repository. Paragraph (a) consists of
Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (“Recorded Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant Identifier of the Industry Member receiving or originating the order; (4) date of order receipt or origination; (5) time of order receipt or origination (using timestamps pursuant to Proposed Rule 4.10); and (6) Material Terms of the Order;
• for the routing of an order: (1) CAT-Order-ID; (2) date on which the order is routed; (3) time at which the order is routed (using timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant to which the order is being routed; (6) if routed internally at the Industry Member, the identity and nature of the department or desk to which the order is routed; and (7) Material Terms of the Order;
• for the receipt of an order that has been routed, the following information: (1) CAT-Order-ID; (2) date on which the order is received; (3) time at which the order is received (using timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant routing the order; and (6) Material Terms of the Order;
• if the order is modified or cancelled: (1) CAT-Order-ID; (2) date the modification or cancellation is received or originated; (3) time at which the modification or cancellation is received or originated (using timestamps pursuant to Proposed Rule 4.10); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member;
• if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using timestamps pursuant to Proposed Rule 4.10; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) SRO-Assigned Market Participant Identifier of the Industry Member executing the order; (7) whether the execution was reported pursuant to an effective transaction reporting plan or the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information; and
• other information or additional events as may be prescribed pursuant to the CAT NMS Plan.
Paragraph (a)(2) of Proposed Rule 4.7 requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (“Received Industry Member Data” and collectively with the information referred to in Rule 4.7(a)(1) “Industry Member Data”)) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• If the order is executed, in whole or in part: (1) An Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) CAT-Order-ID of any contra-side order(s);
• if the trade is cancelled, a cancelled trade indicator; and
• for original receipt or origination of an order, the Firm Designated ID for the relevant Customer, and in accordance with Proposed Rule 4.8, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 4.7 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is required to report to the Exchange the time at which its quote in a Listed Option is sent to the Exchange (and, if applicable, any subsequent quote modification time and/or cancellation time when such modification or cancellation is originated by the Options Market Maker). This paragraph implements the Options Market Maker Quote Exemption, as discussed above.
Paragraph (b) of Proposed Rule 4.7 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 4.7 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
Paragraph (b)(1) of Proposed Rule 4.7 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 4.7 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of Proposed Rule 4.7 describes the securities to which the recording and reporting requirements of Proposed Rule 4.7 apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 4.7 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of Proposed Rule 4.7 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of Proposed Rule 4.7 for each NMS Security registered or listed for trading on such exchange or admitted to unlisted trading privileges on such exchange. Paragraph (c)(2) of Proposed Rule 4.7 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of this Proposed Rule 4.7 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 4.7 describes the security symbology that Industry Members are required to use when reporting Industry Member Data to the Central Repository. Paragraph (d)(1) of Proposed Rule 4.7 requires, for each exchange-listed Eligible Security,
For each Eligible Security that is not exchange-listed, however, there is no listing exchange to provide the symbology format. Moreover, to date, the requisite symbology format has not been determined. Therefore, Paragraph (d)(2) of Proposed Rule 4.7 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Regulatory Circular.
To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, the Exchange proposes to adopt paragraph (e) of Proposed Rule 4.7, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 4.7 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. The Exchange proposes Rule 4.8 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 4.8 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 4.13. Paragraph (b) of Proposed Rule 4.8 requires each Industry Member to submit to the Central Repository any updates, additions or other changes to the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account on a daily basis. Paragraph (c) of Proposed Rule 4.8 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. The Exchange intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via Regulatory Circular.
Finally, paragraph (d) of Proposed Rule 4.8 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan.
Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, in accordance with the Existing Identifier Approach discussed above. The Exchange proposes Rule 4.9 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 4.9 requires each Industry Member to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 4.13, and keep such information up to date as necessary.
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.
Paragraph (a) of Proposed Rule 4.10 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 4.10 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of Proposed Rule 4.10. To the extent that any Industry Member's order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(2) of Proposed Rule 4.10 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of Proposed Rule 4.10 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 4.10 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 4.10 permits each Industry Member to record and report Manual Order Events to the Central Repository in increments up to and including one second, provided that each Industry Member is required to record and report the time when a Manual Order Event has been captured electronically in an order handling and execution system of such Member (“Electronic Capture Time”) in milliseconds. In addition, paragraph (b)(2) of Proposed Rule 4.10 permits each Industry Member to record and report the time of Allocation Reports in
Proposed Rule 4.11 (Consolidated Audit Trail—Clock Synchronization Rule Violations) describes potential violations of the clock synchronization time period requirements set forth in the Proposed Rules 4.5 through 4.16. Proposed Rule 4.11 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in the Proposed Rules 4.5 through 4.16 without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 4.12 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 4.12 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of Proposed Rule 4.12 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee.
Paragraph (b) of Proposed Rule 4.12 addresses connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 4.12 requires each Industry Member to connect to the Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, Paragraph (c)(1) of Proposed Rule 4.12 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under the Proposed Rules 4.5 through 4.16. Any such agreement must be evidenced in writing, which specifies the respective functions and responsibilities of each party to the agreement that are required to effect full compliance with the requirements of the Proposed Rules 4.5 through 4.16. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 4.12 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) states that each Industry Member remains primarily responsible for compliance with the requirements of the Proposed Rules 4.5 through 4.16, notwithstanding the existence of an agreement described in paragraph (c) of Proposed Rule 4.12.
The Exchange proposes Rule 4.13 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 4.13 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan.
Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 4.8(a) and 4.9, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 4.8(a) and 4.9, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of Proposed Rule 4.13 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 4.14 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 4.14 requires each Industry Member to maintain and preserve records of the information required to be recorded in accordance with the Proposed Rules 4.5 through 4.16, for the period of time and accessibility specified in SEC Rule 17a-4(b). The records required to be maintained and preserved in accordance
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of Proposed Rule 4.15 requires Industry Members to accurately provide the LEIs in their records as required by the Proposed Rules 4.5 through 4.16 and states that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) notes, however, that this requirement does not impose any additional due diligence obligations on Industry Members with regard to LEIs for CAT purposes. Accordingly, this provision does not impose any due diligence obligations beyond those that may exist today with respect to information associated with an LEI. Although Industry Members will not be required to perform additional due diligence with regard to the LEIs for CAT purposes, Industry Members will be required to accurately provide the LEIs in their records and may not knowingly submit inaccurate LEIs to the CAT. Paragraph (b) is consistent with the SEC's statements in the Approval Order for the CAT NMS Plan regarding an Industry Member's obligations regarding LEIs.
Paragraph (c) states that, if an Industry Member reports data to the Central Repository with errors such that its error percentage exceeds the maximum Error Rate established by the Operating Committee pursuant to the CAT NMS Plan, then such Industry Member would not be in compliance with the Rules 4.5 through 4.16. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. The Exchange intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Regulatory Circular.
Furthermore, paragraph (d) of Proposed Rule 4.15 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 4.15 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT (the “Compliance Thresholds”). Compliance Thresholds will compare an Industry Member's error rate to the aggregate Error Rate over a period of time to be defined by the Operating Committee. Compliance Thresholds will be set by the Operating Committee, and will be calculated at intervals to be set by the Operating Committee.
Proposed Rule 4.16 (Consolidated Audit Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rules 4.5 through 4.16. Paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date of the Proposed Rules 4.5 through 4.16. Unless otherwise noted, the Proposed Rules 4.5 through 4.16 will be fully effective upon approval by the Commission and Members must comply with their terms.
Paragraph (b) of Proposed Rule 4.16 establishes the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 4.6. Paragraph (b)(1) states that each Industry Member shall comply with Rule 4.6 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 4.6 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of Proposed Rule 4.16 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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 Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the Proposed Rules 4.5 through 4.16 implement provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing similar rules to apply the requirements of the CAT NMS Plan to their members. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
Pursuant to the provisions of Section 19(b)(1) under the Securities Exchange Act of 1934 (“Act”),
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
The Exchange proposes to amend IEX Rule 16.135 to adopt generic listing standards for Managed Fund Shares. The proposed rule change is substantially identical to existing rules of the Nasdaq Stock Market (“Nasdaq”).
The Exchange proposes to amend IEX Rule 16.135 to adopt generic listing standards for Managed Fund Shares, as well as to make additional changes as described below. Under the Exchange's current rules, a proposed rule change would need to be filed with the Commission for the listing and trading of each new series of Managed Fund Shares. The Exchange believes that it is appropriate to codify certain rules within Rule 16.135 that would generally eliminate the need for such proposed rule changes, which would create greater efficiency and promote uniform standards in the listing process.
The Exchange does not currently list any Managed Fund Shares. The proposed rule change would be applicable in the event IEX lists Managed Fund Shares.
Rule 16.135 sets forth certain rules related to the listing and trading of Managed Fund Shares.
(a) Represents an interest in a registered investment company (“Investment Company”) organized as an open-end management investment company or similar entity, that invests in a portfolio of securities selected by the Investment Company's investment adviser (hereinafter “Adviser”) consistent with the Investment Company's investment objectives and policies;
(b) is issued in a specified aggregate minimum number in return for a deposit of a specified portfolio of securities and/or a cash amount with a value equal to the next determined net asset value; and
(c) when aggregated in the same specified minimum number, may be redeemed at a holder's request, which holder will be paid a specified portfolio of securities and/or cash with a value equal to the next determined net asset value.
Effectively, Managed Fund Shares are securities issued by an actively-managed open-end Investment Company (
All Managed Fund Shares listed and/or traded pursuant to Rule 16.135 (including pursuant to unlisted trading privileges) are subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange.
In addition, Rule 16.135(d) currently provides for the criteria that Managed Fund Shares must satisfy for initial and continued listing on the Exchange, including, for example, that a minimum number of Managed Fund Shares are required to be outstanding at the time of commencement of trading on the Exchange. However, the current process for listing and trading new series of Managed Fund Shares on the Exchange would require that the Exchange submit a proposed rule change with the Commission. In this regard, Rule 16.135(b)(1) specifies that the Exchange will file separate proposals under Section 19(b) of the Act (hereinafter, a “proposed rule change”) before listing and trading shares of an issue of Managed Fund Shares.
The Exchange proposes to amend Rule 16.135(b)(1) to specify that the Exchange may approve Managed Fund Shares for listing and/or trading (including pursuant to unlisted trading privileges) pursuant to SEC Rule 19b-4(e) under the Act, which pertains to derivative securities products (“SEC Rule 19b-4(e)”).
The Exchange would also specify within Rule 16.135(b)(1) that components of Managed Fund Shares listed pursuant to SEC Rule 19b-4(e) must satisfy, upon initial listing and on a continual basis, certain specific criteria, which the Exchange would include within Rule 16.135(b)(1), as described in greater detail below. As proposed, the Exchange would file separate proposed rule changes before the listing and trading of Managed Fund Shares with components that do not satisfy the additional criteria described below or components other than those specified below. For example, if the components of a Managed Fund Share exceeded one of the applicable thresholds, the Exchange would file a separate proposed rule change before listing and trading such Managed Fund Share. Similarly, if the components of a Managed Fund Share included a security or asset that is not specified below, the Exchange would file a separate proposed rule change.
The Exchange would also add to Rule 16.135(c) to provide that the Web site for each series of Managed Fund Shares shall disclose certain information regarding the Disclosed Portfolio, to the extent applicable. The required information includes the following, to the extent applicable: Ticker symbol, CUSIP or other identifier, a description of the holding, identity of the asset upon which the derivative is based, the strike price for any options, the quantity of each security or other asset held as
In addition, the Exchange would amend Rule 16.135(d) to specify that all Managed Fund Shares must have a stated investment objective, which must be adhered to under normal market conditions.
Finally, the Exchange would also amend the continued listing requirements in Rule 16.135(d)(2)(A) by changing the requirement that an Intraday Indicative Value for Managed Fund Shares be widely disseminated by one or more major market data vendors at least every 15 seconds during the time when the Managed Fund Shares trade on the Exchange to a requirement that an Intraday Indicative Value be widely disseminated by one or more major market data vendors at least every 15 seconds during the Regular Market Session (as defined in Rule 1.160(gg)).
The Exchange is proposing standards that would pertain to Managed Fund Shares to qualify for listing and trading pursuant to SEC Rule 19b-4(e). These standards would be grouped according to security or asset type. The Exchange notes that the standards proposed for a Managed Fund Share portfolio that holds U.S. Component Stocks, Non-U.S. Component Stocks, Exchange Traded Derivative Securities, and Linked Securities are based in large part on the existing equity security standards applicable to Index Fund Shares in Rule 16.105(b)(3).
The standards proposed for a Managed Fund Share portfolio that holds fixed income securities are based in large part on the existing fixed income security standards applicable to Index Fund Shares in Rule 16.105(b)(4). Many of the standards proposed for other types of holdings in a Managed Fund Share portfolio are based on previous rule changes by Nasdaq and NYSE Arca for specific series of Managed Fund Shares.
Proposed Rule 16.135(b)(1)(A) would describe the standards for a Managed Fund Share portfolio that holds equity securities, which are defined to be U.S. Component Stocks,
As proposed in Rule 16.135(b)(1)(A)(i), the component stocks of the equity portion of a portfolio that are U.S. Component Stocks shall meet the following criteria initially and on a continuing basis:
(1) Component stocks (excluding Exchange Traded Derivative Securities and Linked Securities) that in the aggregate account for at least 90% of the equity weight of the portfolio (excluding such Exchange Traded Derivative Securities and Linked Securities) each must have a minimum market value of at least $75 million;
(2) Component stocks (excluding Exchange Traded Derivative Securities and Linked Securities) that in the aggregate account for at least 70% of the equity weight of the portfolio (excluding such Exchange Traded Derivative Securities and Linked Securities) each must have a minimum monthly trading volume of 250,000 shares or minimum notional volume traded per month of $25,000,000, averaged, over the last six months;
(3) The most heavily weighted component stock (excluding Exchange
(4) Where the equity portion of the portfolio does not include Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 13 component stocks; provided, however, that there shall be no minimum number of component stocks if (a) one or more series of Exchange Traded Derivative Securities or Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (b) one or more series of Exchange Traded Derivative Securities or Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares;
(5) Except as provided in proposed Rule 16.135(b)(1)(A), equity securities in the portfolio must be U.S. Component Stocks listed on a national securities exchange and must be NMS Stocks as defined in Rule 600 of Regulation NMS;
(6) American Depositary Receipts (“ADRs”) may be exchange-traded or non-exchange-traded. However, no more than 10% of the equity weight of the portfolio shall consist of non-exchange-traded ADRs.
As proposed in Rule 16.135(b)(1)(A)(ii), the component stocks of the equity portion of a portfolio that are Non-U.S. Component Stocks shall meet the following criteria initially and on a continuing basis:
(1) Non-U.S. Component Stocks each shall have a minimum market value of at least $100 million;
(2) Non-U.S. Component Stocks each shall have a minimum global monthly trading volume of 250,000 shares, or minimum global notional volume traded per month of $25,000,000, averaged over the last six months;
(3) The most heavily weighted Non-U.S. Component Stock shall not exceed 25% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted Non-U.S. Component Stocks shall not exceed 60% of the equity weight of the portfolio;
(4) Where the equity portion of the portfolio includes Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 20 component stocks; provided, however, that there shall be no minimum number of component stocks if (i) one or more series of Exchange Traded Derivative Securities or Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (ii) one or more series of Exchange Traded Derivative Securities or Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares;
(5) Each Non-U.S. Component Stock shall be listed and traded on an exchange that has last-sale reporting.
The Exchange notes that it is not proposing to require that any of the equity portion of the equity portfolio composed of Non-U.S. Component Stocks be listed on markets that are either a member of the Intermarket Surveillance Group (“ISG”) or a market with which the Exchange has a comprehensive surveillance sharing agreement (“CSSA”).
The Exchange notes that the generic listing standards for Index Fund Shares based on foreign indexes in Rule 16.105 do not include specific ISG or CSSA requirements.
Proposed Rule 16.135(b)(1)(B) would describe the standards for a Managed Fund Share portfolio that holds fixed income securities, which are debt securities
In addition, to the extent that a portfolio includes convertible securities, the fixed income security into which such security is converted would be required to meet the criteria of Rule 16.135(b)(1)(B) after converting.
The components of the fixed income portion of the portfolio must meet the following criteria initially and on a continuing basis:
(1) Components that in the aggregate account for at least 75% of the fixed income weight of the portfolio each shall have a minimum original principal amount outstanding of $100 million or more;
(2) No component fixed-income security (excluding Treasury Securities and GSE Securities could represent more than 30% of the fixed income weight of the portfolio; and the five most heavily weighted component fixed income securities in the portfolio (excluding Treasury Securities and GSE Securities) must not in the aggregate account for more than 65% of the fixed income weight of the portfolio;
(3) An underlying portfolio (excluding exempted securities) that includes fixed income securities must include a minimum of 13 non-affiliated issuers; provided, however, that there shall be no minimum number of non-affiliated issuers required for fixed income securities if at least 70% of the weight of the portfolio consists of equity securities as described in proposed Rule 16.135(b)(1)(A);
(4) Component securities that in aggregate account for at least 90% of the fixed income weight of the portfolio must be either (a) from issuers that are required to file reports pursuant to Sections 13 and 15(d) of the Act; (b) from issuers that have a worldwide market value of outstanding common equity held by non-affiliates of $700 million or more; (c) from issuers that have outstanding securities that are notes, bonds, debentures, or evidence of indebtedness having a total remaining principal amount of at least $1 billion;
(5) Non-agency, non-GSE, and privately-issued mortgage-related and other asset backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio.
Proposed Rule 16.135(b)(1)(C) would describe the standards for a Managed Fund Share portfolio that holds cash and cash equivalents.
(1) U.S. Government securities, including bills, notes, and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. Government agencies or instrumentalities;
(2) certificates of deposit issued against funds deposited in a bank or savings and loan association;
(3) bankers' acceptances, which are short-term credit instruments used to finance commercial transactions;
(4) repurchase agreements and reverse repurchase agreements;
(5) bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest;
(6) commercial paper, which are short-term unsecured promissory notes; and
(7) money market funds.
Proposed Rule 16.135(b)(1)(D) would describe the standards for a Managed Fund Share portfolio that holds listed derivatives, including futures, options, and swaps on commodities, currencies, and financial instruments (
(1) In the aggregate, at least 90% of the weight of such holdings invested in futures, exchange-traded options, and listed swaps shall, on both an initial and continuing basis, consist of futures, options, and swaps for which the Exchange may obtain information via the ISG from other members or affiliates of the ISG or for which the principal market is a market with which the Exchange has a comprehensive surveillance sharing agreement (for purposes of calculating this limitation, a portfolio's investment in listed derivatives will be calculated as the aggregate gross notional value of the listed derivatives); and
(2) the aggregate gross notional value of listed derivatives based on any five or fewer underlying reference assets shall not exceed 65% of the weight of the portfolio (including gross notional exposures), and the aggregate gross notional value of listed derivatives based on any single underlying reference asset shall not exceed 30% of the weight of the portfolio (including gross notional exposures).
Proposed Rule 16.135(b)(1)(E) would describe the standards for a Managed Fund Share portfolio that holds over the counter (“OTC”) derivatives, including forwards, options and swaps on commodities, currencies and financial instruments (
Proposed Rule 16.135(b)(1)(F) would provide that, to the extent that listed or OTC derivatives are used to gain exposure to individual equities and/or fixed income securities, or to indexes of equities and/or fixed income securities, the aggregate gross notional value of such exposure shall meet the criteria set forth in Rules 16.135(b)(1)(A) and (B) (including gross notional exposures), respectively.
The following examples illustrate how certain of the proposed generic criteria of Rule 16.135 would be applied:
1. An actively managed ETF holds non-agency MBS that represent 15% of the weight of the fixed income portion of the portfolio. The fixed income portion of the portfolio meets all the requirements of Rule 16.135(b)(1)(B). The ETF also holds an OTC swap on a non-agency MBS Index that represents 10% of the fixed income weight of the portfolio calculated on a notional value basis. Separately, the OTC swap and fixed income portion of the portfolio would meet the requirements of Rule 16.135(b)(1). However, when the 15% weight in non-agency MBS and the 10% weight in the non-agency MBS Index OTC swap are combined, as required by proposed 16.135(b)(1)(F), the 25% total weight would exceed the 20% limit for non-agency GSE and privately-issued mortgage-related securities in Rule 16.135(b)(1)(B)(v). The portfolio, therefore, would not meet the proposed generic criteria of Rule 16.135.
2. An actively managed ETF holds a portfolio of non-U.S. equity securities, S&P 500 Index and gold futures. S&P 500 Index futures and the gold futures held by the fund are listed on an ISG member exchange. The equity portion of the portfolio consists of developed and emerging markets equity securities with a current aggregate market value of $15 million and all components meet the requirements under Rule 16.135(b)(1)(A)(ii). The gold futures contract trading unit size is 100 troy ounces and an ounce of gold is currently worth $1200. The fund holds 500 gold futures contracts with a notional value of $60 million (500*100*$1200). One S&P 500 contract represents 250 units of the S&P 500 Index and the S&P 500 Index is trading at $2,000. The portfolio holds 50 contracts, so the notional value of the S&P 500 Index futures position is $25 million (50*250*$2000). The S&P 500 Index futures meet the requirement under Rule 16.135(b)(1)(F), that is, the S&P 500 Index meets the criteria in Rule 16.135(b)(1)(A). The weights of the components are as follows; equity securities represent 15% of the portfolio, gold futures represent 60% of the portfolio and S&P 500 Index futures represent 25% of the portfolio. The gold futures represent 60% of the portfolio and exceeds the 30% concentration limitation on any single underlying reference asset as outlined in proposed Rule 16.135(b)(1)(D)(ii). The portfolio, therefore, would not meet the proposed generic criteria of Rule 16.135.
3. An actively managed ETF holds a portfolio of equity securities and call option contracts on company XYZ. The equity portion of the portfolio meets the requirements under Rule 16.135(b)(1)(A). Company XYZ represents 20% of the weight of the equity portion of the portfolio. The equity portion of the fund has a market value of $100 million and the market value of the fund's holdings in company XYZ has a market value of $20 million. The fund also holds 10,000 call option contracts on company XYZ which has a current market price of $50 a share and, therefore, a notional value of $50 million (50*100*10,000) (that is, the $50 market price per share times the multiplier of 100 times 10,000 contracts). The option contracts are traded on an ISG member exchange. The total exposure to company XYZ is therefore $70 million and represents 46.7% ($70 million/$150 million=46.7%) of the portfolio. This fund would not meet the requirements of Rule 16.135 because the exposure to XYZ at 46.7% exceeds the 30% concentration limitation of proposed Rule 16.135(b)(1)(D)(ii).
The Exchange believes that the proposed standards would ensure transparency surrounding the listing process for Managed Fund Shares. Additionally, the Exchange believes that the proposed portfolio standards for listing and trading Managed Fund Shares, many of which track existing Exchange rules relating to Index Fund Shares, are reasonably designed to promote a fair and orderly market for such Managed Fund Shares. These proposed standards would also work in conjunction with the existing initial and continued listing criteria related to surveillance procedures and trading guidelines.
In support of this proposal, the Exchange represents that:
1. Any Managed Fund Shares listed and traded on IEX will conform to the initial and continued listing criteria under Rule 16.135;
2. the Exchange's surveillance procedures are adequate to continue to properly monitor the trading of the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules. Specifically, the Exchange intends to utilize its existing surveillance procedures applicable to derivative products, which will include Managed Fund Shares, to monitor trading in the Managed Fund Shares;
3. prior to the commencement of trading of a particular series of Managed Fund Shares, the Exchange will inform its members in an information circular (“Circular”) of the special characteristics and risks associated with trading the Managed Fund Shares, including procedures for purchases and redemptions of Managed Fund Shares, suitability requirements under Rules 3.150 and 3.170, the risks involved in trading the Managed Fund Shares during the Pre-Market and Post-Market Sessions when an updated Intraday Indicative Value will not be calculated or publicly disseminated, information regarding the Intraday Indicative Value and the Disclosed Portfolio, prospectus delivery requirements, and other trading information. In addition, the Circular will disclose that the Managed Fund Shares are subject to various fees and expenses, as described in the applicable registration statement, and will discuss
4. the issuer of a series of Managed Fund Shares will be required to comply with Rule 10A-3 under the Act for the initial and continued listing of Managed Fund Shares, as provided under the IEX Rule Series 14.400.
The Exchange, on a periodic basis and no less than annually, will review issues of Managed Fund Shares generically listed pursuant to Rule 16.135, and will provide a report to the Regulatory Oversight Committee of the Exchange's Board of Directors regarding the Exchange's findings. In addition, the Exchange will provide the Commission staff with a report each calendar quarter that includes the following information for issues of Managed Fund Shares listed during such calendar quarter under Rule 16.135(b)(1): (1) Trading symbol and date of listing on the Exchange; (2) the number of active authorized participants and a description of any failure of an issue of Managed Fund Shares or of an authorized participant to deliver shares, cash, or cash and financial instruments in connection with creation or redemption orders; and (3) a description of any failure of an issue of Managed Fund Shares to comply with Rule 16.135.
Prior to listing pursuant to proposed amended Rule 16.135(b)(1), an issuer would be required to represent to the Exchange that it will advise the Exchange of any failure by a series of Managed Fund Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under IEX Rule Series 14.500.
The Exchange notes that the proposed change is not otherwise intended to address any other issues and that the Exchange is not aware of any problems that members or issuers would have in complying with the proposed change.
IEX believes that the proposed rule change is consistent with Section 6(b)
The Exchange believes that the proposed change to adopt generic listing standards for Managed Fund Shares is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest because it would facilitate the potential listing and trading of Managed Fund Shares on the Exchange, which would enhance competition among market participants, to the benefit of investors and the marketplace. The proposed change would codify in Rule 16.135 specified criteria that have been the basis for proposed rule filings by Nasdaq and NYSE Arca with the Commission for the listing and trading of each new series of Managed Fund Shares. The Exchange believes that such codification is appropriate in that it would facilitate the listing and trading of additional types of Managed Fund Shares that have investment portfolios that are similar to investment portfolios for Index Fund Shares, which have been approved for listing and trading, thereby creating greater efficiencies in the listing process for the Exchange and the Commission should the Exchange seek to list Managed Fund Shares. Moreover, the proposed generic standards for Managed Fund Shares are substantially identical to those that the Commission approved for Nasdaq, finding that such standards are consistent with the Section 6(b)(5) of the Act, noting that Nasdaq's proposal in turn was substantially identical to proposals the Commission had recently approved for NYSE Arca and Bats BZX Exchange (previously BATS Exchange).
The Exchange further believes that the proposed rule change is designed to protect investors and the public interest because Managed Fund Shares listed and traded pursuant to Rule 16.135, including pursuant to the proposed new portfolio standards, would continue to be subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange.
The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because the Managed Fund Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Rule 16.135. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. FINRA, on behalf of the Exchange, or the regulatory staff of the Exchange, will communicate as needed regarding trading in Managed Fund Shares with other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the components are traded.
In addition, the Exchange may obtain information regarding trading in Managed Fund Shares from other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the components are traded, or with which the Exchange has in place a CSSA.
The Exchange also believes that the proposed rule change would fulfill the intended objective of Rule 19b-4(e) under the Act by allowing Managed Fund Shares that satisfy the proposed listing standards to be listed and traded without separate Commission approval. However, as proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Managed Fund Shares that do not satisfy the additional criteria described above.
The Exchange, on a periodic basis and no less than annually, will review issues of Managed Fund Shares listed pursuant to Rule 16.135(b)(1), and will provide a report to the Regulatory Oversight Committee of the Exchange's Board of Directors regarding the Exchange's findings. In addition, the Exchange will provide the Commission staff with a report each calendar quarter that includes the following information for issues of Managed Fund Shares listed during such calendar quarter under Rule 16.135(b)(1): (1) Trading symbol and date of listing on the Exchange; (2) the number of active authorized participants and a description of any failure of an issue of Managed Fund Shares listed pursuant to Rule 16.135(b)(1) or of an authorized participant to deliver shares, cash, or cash and financial instruments in connection with creation or redemption orders; and (3) a description of any
Prior to listing pursuant to proposed amended Rule 16.136(b)(1), an issuer would be required to represent to the Exchange that it will advise the Exchange of any failure by a series of Managed Fund Shares to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under IEX Rule Series 14.500.
Accordingly, based on the foregoing, the Exchange believes that the proposed generic listing standards for Managed Fund Shares are consistent with Section 6(b)(5) of the Act.
IEX 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 believes that the proposed change would facilitate the listing and trading of additional types of Managed Fund Shares and result in a significantly more efficient process for the listing and trading of Managed Fund Shares, thereby enhancing competition among market participants, including issuers and exchanges. Further, the Exchange believes that applying uniform and transparent listing standards would make the process for listing Managed Fund Shares more competitive.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove such proposed rule change; or
B. institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal to amend MIAX PEARL Rules 100, 404, 519C, and to adopt new MIAX PEARL Rule 1018, in order to bring MIAX PEARL Rules up to date with recent changes that have been made to the rules of the Exchange's affiliate, Miami International Securities Exchange, LLC (“MIAX Options”).
The text of the proposed rule change is available on the Exchange's Web site at
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
The Exchange proposes to amend MIAX PEARL Rules 100, 404, 519C, and to adopt MIAX PEARL Rule 1018, in order to bring the MIAX PEARL Rules up to date with the changes that were made to the rules of MIAX Options while MIAX PEARL's Form 1 Application to register as a national securities exchange was pending approval.
MIAX PEARL plans to commence operations as a national securities exchange registered under Section 6 of the Act
The Exchange proposes to expand the Short Term Option Series Program outlined in Rule 404, Interpretations and Policies .02, to allow the listing and trading of SPDR S&P 500 ETF Trust (“SPY”) options with Wednesday expirations. These changes would make MIAX PEARL Rule 404 consistent with MIAX Options Rule 404 and are identical to changes made by MIAX Options when it modified its rule.
Currently, under the Short Term Option Series Program the Exchange may open for trading on any Thursday or Friday that is a business day (“Short Term Option Opening Date”) series of options on that class that expire at the close of business on each of the next five Fridays that are business days, and are not Fridays in which monthly option series or Quarterly Options Series expire (“Short Term Option Expiration Dates”). The Exchange is now proposing to amend MIAX PEARL Rule 404, Interpretations and Policies .02, to permit the listing of SPY options expiring on Wednesdays. Specifically, the Exchange is proposing that it may open for trading on any Tuesday or Wednesday that is a business day, series of SPY options that expire on any Wednesday of the month that is a business day, and is not a Wednesday on which Quarterly Options Series expire (“Wednesday SPY Expirations”). The proposed Wednesday SPY Expiration series would be similar to the current Short Term Options Series, with certain exceptions.
The Exchange represents that is has an adequate surveillance program in place to detect manipulative trading in Wednesday SPY Expirations in the same way it monitors trading in the current Short Term Option Series. Additionally, the Exchange represents that it has the necessary system capacity to support the new options series.
The Exchange proposes to amend Exchange Rule 100, which sets forth the definition of Short Term Option Series. The definition set forth in Rule 100 is redundant to the terms for Short Term Option Series set forth in Rule 404, Interpretations and Policies .02. As a result, the Exchange believes that amending Rule 100 by including an internal cross reference to Rule 404, Interpretations and Policies .02 and by deleting redundant language would result in a clearer definition and would make the Rulebook more precise. Additionally, this change is identical to changes made by MIAX Options when it modified its rule.
The Exchange also proposes to amend Exchange Rule 519C, Mass Cancellation of Trading Interest, to align the process and procedure of cancelling orders and quotes from the order book to that of MIAX Options. The proposed rule change will amend the first paragraph for clarity and ease of reference and adopt new section (b) to provide that Exchange staff, upon request from a Member,
The Exchange proposes to add a new heading entitled “Cancel” to the first paragraph, and proposes to identify the first paragraph with the letter “(a)” for clarity and ease of reference. Additionally, the Exchange proposes to make a clarifying change to the wording of the first paragraph. The paragraph currently states that, “[a] Member may cancel all of its quotations and/or all or any subset of its orders [. . .].” The Exchange proposes to replace the word “cancel” with “remove” and to insert the word “cancel” after “and/or,” as this language more accurately describes
MIAX PEARL currently offers two Membership types, Market Maker (“MM”)
The proposal would allow a Member to submit a request to remove all of its outstanding quotations, as described above, and cancel all of its open orders and block all new inbound quotations and orders by firm name or Market Participant Identifier (“MPID”). The form of such requests includes, but is not limited to, email or a phone call from authorized individuals. The removal of quotes and the cancellation of orders as described herein does not disconnect Members from the Exchange's System.
The proposed changes would make MIAX PEARL Rule 519C, Mass Cancellation of Trading Interest, consistent with MIAX Options Rule 519C, Mass Cancellation of Trading Interest, and are identical to changes made by MIAX Options when it modified its rule.
MIAX PEARL incorporates certain chapters of the MIAX Options Rulebook into its rulebook in their entirety by reference. Specifically, MIAX Options Rulebook, Chapter III, Business Conduct, is incorporated by reference, and contains Rule 322, Disruptive Quoting and Trading Activity Prohibited, which was adopted by MIAX Options to prohibit disruptive quoting and trading on MIAX Options.
The Exchange proposes to adopt new Rule 1018, to set forth procedures for issuing suspension orders, immediately prohibiting a Member from conducting continued disruptive quoting and trading activity on the Exchange. Importantly, these procedures would also provide the Exchange the authority to order a Member to cease and desist from providing access to the Exchange to a client of the Member that is conducting disruptive quoting and trading activity in violation of Rule 322. The Exchange notes that the proposed change would make MIAX PEARL Rule 1018 consistent with MIAX Options Rule 1018 and is identical to the rule text adopted by MIAX Options when it adopted its rule.
MIAX PEARL believes that its proposed rule change is consistent with Section 6(b) of the Act
The Exchange is proposing to amend Rule 404, Series of Option Contracts Open for Trading. The Exchange believes the Short Term Option Series Program has been successful to date and that Wednesday SPY Expirations simply expand the ability of investors to hedge risk against market movements stemming from economic releases or market events that occur throughout the month in the same way that the Short Term Option Series Program has expanded the landscape of hedging. Similarly, the Exchange believes Wednesday SPY Expirations should create greater trading and hedging opportunities and flexibility, and provide customers with the ability to more closely tailor their investment objectives. The Exchange believes that allowing Wednesday SPY Expirations and monthly SPY expirations in the same week would benefit investors and minimize investor confusion by providing Wednesday SPY Expirations in a continuous and uniform manner.
The Exchange is also proposing to amend Rule 100, Definitions, which sets forth the definition of Short Term Option Series. The definition set forth in current Rule 100 is redundant to the terms for Short Term Option Series set forth in Rule 404, Interpretations and Policies .02. As a result, the Exchange believes that amending Rule 100 by including an internal cross reference to Rule 404, Interpretations and Policies .02 and deleting redundant language would result in a clearer definition and would make the Rulebook more precise and user friendly. Clarity and transparency of the Exchange's rules benefits investors and the public by eliminating the potential for confusion.
The Exchange is also proposing to amend Rule 519C, Mass Cancellation of Trading Interest, to add another risk protection tool for Members and provide that the Exchange may take action on their behalf. The proposed rule protects investors and the public interest by increasing the number of risk protection tools available to Members on the Exchange. The Exchange is also making
The Exchange is also proposing to adopt Rule 1018, Expedited Suspension Proceeding, which will provide the Exchange a mechanism to promptly initiate expedited suspension proceedings in the event the Exchange believes that it has sufficient proof that a violation of Rule 322 has occurred and is ongoing. The Exchange believes that the proposal is consistent with Sections 6(b)(1) and 6(b)(6) of the Act,
Also, the Exchange notes that if this type of conduct is allowed to continue on the Exchange, the Exchange's reputation could be harmed because it may appear to the public that the Exchange is not acting to address the behavior. The expedited process would enable the Exchange to address the behavior with greater speed.
The Exchange notes that is has defined the prohibited disruptive quoting and trading activity by modifying the traditional definitions of layering
The Exchange believes that this proposal will provide the Exchange with the necessary means to enforce against such behavior in an expedited manner while providing Members with the necessary due process. The Exchange believes that its proposal is consistent with the Act because it provides the Exchange with the ability to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general to protect investors and the public interest from such ongoing behavior. Further, the Exchange believes that adopting a rule applicable to market participants is consistent with the Act because the Exchange believes that this type of behavior should be prohibited for all Members. While this behavior may not be as prevalent on the options markets today, the Exchange does not believe the possibility of such behavior in the future would not have the same market impact and thereby warrant an expedited process.
The Exchange believes that the proposal is consistent Section 6(b)(7) of the Act,
The Exchange believes the proposal removes impediments to and perfects the mechanisms of a free and open market. Specifically, the Exchange believes that although MIAX PEARL rules may, in certain instances, intentionally differ from MIAX Options rules, the proposed changes will promote uniformity with MIAX Options with respect to rules that are intended to be identical but which were not modified while MIAX PEARL's Form 1 application was pending approval. The Exchange believes that it will reduce the potential for confusion by its members that are also members of MIAX Options if it commences operations with only those differences between MIAX PEARL and the MIAX Options Exchange rules that are intentional.
The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
To be published.
Thursday, February 9, 2017.
The following matter will also be considered during the 2 p.m. Closed Meeting scheduled for Thursday, February 9, 2017: Exemption Relief Order.
For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551-5400.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
The Exchange is filing a proposal rule change to amend Exchange Rule 515, Execution of Orders and Quotes.
The text of the proposed rule change is available on the Exchange's Web site at
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
The purpose of the proposal is to amend Exchange Rule 515(c) to implement a new procedure for certain orders on the Book
The Exchange provides a price protection process for all orders as part of its commitment to providing risk protection for Member's
Except as discussed below, orders can be received by the Exchange either prior to or after completion of the Opening Process.
For purposes of this Rule 515(c), the Exchange is proposing to consider the effective limit price of a limit order to be the limit price of the order. Depending upon the NBBO at the time of receipt by the System, and the order's price protection instructions, the order's price protection limit can be considered either “more aggressive” (equal to or higher than the order's effective limit price for a buy order or equal to or lower than the order's effective limit price for a sell order) or “less aggressive” (lower than the order's effective limit price for a buy order or higher than the order's effective limit price for a sell order) than the order's effective limit price. When an order's price protection limit is equal to or more aggressive than its effective limit price, the order's effective price protection limit will be the order's limit price, as an order will never trade through its limit price on the Exchange.
Non-routable market orders to sell are managed in accordance to Rule 515(d)(2). For purposes of evaluating orders under the proposed price protection process outlined in this Rule, the Exchange is proposing to consider the effective limit price of a market order to buy to be the maximum price currently permitted by the Exchange's System,
Depending upon the NBBO at the time of receipt by the System, and the order's price protection instructions, the order's price protection limit can either be more aggressive (equal to or higher than the order's effective limit price for a buy order or equal to or lower than the order's effective limit price for a sell order) or less aggressive (lower than the order's effective limit price for a buy order or higher than the order's effective limit price for a sell order) than the order's effective limit price.
For both limit and market orders, when the order's price protection limit is triggered, the order, or the remaining contracts of the order, will be canceled. Under the current rule, this cancellation will only occur during regular trading and can possibly result in an order not receiving an execution at the price anticipated by the Member when the order was submitted, as a result of a price protection limit that is less aggressive than the order's effective limit price. Under the current rule, an order with a price protection limit less aggressive than the order's effective limit price will persist throughout the course of an entire trading day, including through a trading halt,
The Exchange now proposes to evaluate orders at the conclusion of each trading session (including after a trading halt as defined in Rule 504), to identify those orders that have a price protection limit that is less aggressive than the order's effective limit price, in addition to current functionality. The Exchange believes it is in the best interest of its Members to proactively identify orders on the Book that have a price protection limit that is less aggressive than the order's effective limit price at the conclusion of each trading session when the market is not in a regular trading state. Given that these orders will never trade to their effective limit price, the Exchange proposes to cancel these orders from the Book so that Members can benefit from an increase in the amount of time available to re-evaluate the current market conditions prior to resubmitting the order to the Exchange.
The following examples demonstrate how the proposed process would work for non-routable limit orders.
The Market closes (or Halts as per Rule 504).
• Order #1 is canceled as the order's price protection limit ($1.05) is less aggressive than its effective limit price ($1.08). Under proposed Interpretations and Policies .02, the System will cancel a buy order when the order's price protection limit is lower than the order's effective limit price.
• Order #2 is maintained on the Book as the order's price protection limit ($1.05) is more aggressive than its effective limit price ($1.04). Under proposed Interpretations and Policies .02, the System will not cancel a buy order when the order's price protection limit is higher than the order's effective limit price.
The following examples demonstrate how the proposed process would work for non-routable market orders.
The Market closes (or Halts as per Rule 504).
• Order #3 is canceled as the order's price protection limit ($1.05) is less aggressive than the orders effective limit price ($1,999.99). Under proposed Interpretations and Policies .02, the System will cancel a buy order when the order's price protection limit is lower than the order's effective limit price.
• Order #4 is canceled as the order's price protection limit ($0.03) is less aggressive than its effective limit price ($0.01). Under proposed Interpretations and Policies .02, the System will cancel a sell order when the order's price protection limit is higher than the order's effective limit price.
• Order #5 is maintained on the Book as the order's price protection limit ($0.01) is equal to its effective limit price ($0.01). Under proposed Interpretations and Policies .02, the System will not cancel a sell order when the order's price protection limit is not higher than the order's effective limit price.
The Exchange believes that its proposal to cancel orders at the end of a trading session, when the order's price protection limit is less aggressive than the order's effective limit price, will afford market participants the opportunity to evaluate whether to re-submit their orders and/or establish a different price and/or price protection instructions, based on then-current market conditions, prior to the opening of the next trading session. Given that the Exchange can discern when an order may not fill at the price levels anticipated, (based on an order having a price protection limit that is less aggressive than the order's effective limit price), the Exchange believes the most prudent course of action in these circumstances is to return the order to the Member for analysis and evaluation, while the market is not in a regular trading state, (
Specifically, the Exchange proposes to adopt new Interpretations and Policies .02, to state that the System will cancel certain orders from the Book immediately following the commencement of a trading halt pursuant to Rule 504, and at the end of each trading session, when the order's price protection limit is less aggressive than the order's effective limit price. Interpretations and Policies .02 further states that, for the purposes of this Rule, the effective limit price of a limit order will be the order's limit price; the effective limit price of a market order to buy, will be the maximum price currently permitted by the Exchange;
Additionally, the Exchange also proposes to clarify the method for establishing a price protection limit for orders that are received prior to the opening and for those orders remaining on the Book from a prior trading session, either from the prior day's trading session or before a trading halt. For orders received prior to the opening that are priced through the Opening Price, the System will assign an IRP equal to the Opening Price.
Orders that are received prior to the opening that are not priced through the Opening Price and not executed during the Opening Process will be booked and managed at their limit price without additional price protection. The most appropriate price protection limit for a non-routable order that is not executed during the Opening Process and that is not priced through the Opening Price is the order's effective limit price. The price available to these orders during the Opening Process is effectively bound at the Opening Price and these orders can only execute at a price equal to, or better than, the Opening Price and equal to, or better than, the order's limit price. An order with a price protection limit more aggressive than its effective limit price is managed to its limit price, as an order on the Exchange will never trade through its limit price. By default, orders received prior to the opening that are not priced through the opening price, will have a price protection limit that is more aggressive than the order's limit price, therefore, booking and posting these orders at their limit price affords them the same price protection as the price protection process would have provided.
As proposed, orders that are carried over from a prior day's trading session or that remain on the Book from before a trading halt will be booked and managed at the order's limit price. During a regular trading session, if an order's price protection limit is equal to or more aggressive than its effective limit price, the order will trade or post to its limit price and no further; if the order's price protection limit is less aggressive than its effective limit price, or if the order is a market order, the price protection process will cancel the order, or the remaining contracts of the order, when the price protection limit is triggered, which in all cases will be before the order has a chance to trade or post to its limit price. If at the end of a trading session an order remains on the Book with a price protection limit less aggressive than its effective limit price, the new proposed behavior of the price protection process will remove the order from the Book. Therefore, any order carried over from either the prior day's trading session, or that remains on the Book from before a trading halt, will by necessity have a price protection limit which is more aggressive than the order's effective limit price. Given the fact that an order will never trade through its limit price
MIAX PEARL believes that its proposed rule change is consistent with Section 6(b) of the Act
The Exchange believes that its proposal to remove orders with a price protection limit less aggressive than the order's effective limit price at the conclusion of a trading session (or after a trading halt as defined in Rule 504) to be in the best interest of the investor as these orders will never fill to their effective limit price. The price protection process will cancel an order, or the remaining contracts of an order, when the price protection limit is triggered during regular trading. The Exchange believes it is in the best interest of investors for the Exchange to return an order with a price protection limit which is less aggressive than the order's effective limit price to the Member, while the market is not in regular trading, so that the Member has more time to evaluate whether to re-submit the order and/or establish a different price and/or different price protection instructions, based on the then-current market conditions. Specifically, the Exchange believes the proposed change will remove impediments to and perfect the mechanism of a free and open market by providing market participants with more time to evaluate their orders which will promote fair and orderly markets, increase overall market confidence, and promote the protection of investors.
The Exchange proposes to clarify the method for establishing a price protection limit for orders received prior to the opening that are priced through the Opening Price. The Exchange has a rigorous opening process and believes that using the Opening Price as the order's IRP to be the best price available for use as a benchmark in establishing an order's price protection level. The Exchange believes this proposal would assist with the maintenance of a fair and orderly market by ensuring that orders being re-introduced to the market have a reasonable price protection limit and an adequate level of risk protection.
The Exchange believes that clarifying the method for establishing a price protection limit for orders that are received prior to the opening that are not priced through the Opening Price and for orders that remain on the book from a prior day's trading session, or from before a trading halt, provides
The Exchange believes its proposal to add new Interpretations and Policies .02 protects investors and the public interest by clearly stating in the Exchange's rules the method by which the Exchange is evaluating orders for removal by the System. Further, the Exchange believes that providing the definition of effective limit price provides clarity and transparency in the Exchange's rules. Additionally, the Exchange's proposal to remove orders where the price protection limit for a buy order is lower than the order's effective limit price; and where the price protection limit for a sell order is higher than the order's effective limit price, contributes to the maintenance of a fair and orderly market by returning orders that would not fill to their effective limit price to the market participant for re-evaluation while the market is not in a regular trading state. Market participants can evaluate the current market conditions and consider re-submitting their order with a new price and/or new price protection instructions while the market is not active.
The Exchange believes this proposal will provide MIAX PEARL participants with a better understanding of the Exchange's price protection process. The description of the System's functionality is designed to promote just and equitable principles of trade by providing a clear and accurate description to all participants of how the price protection process is applied and should assist investors in making decisions concerning their orders. Further, the Exchange believes that the price protection process provides market participants with an appropriate level of risk protection on their orders and contributes to the maintenance of a fair and orderly market.
The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. Specifically, the Exchange believes the proposed changes will not impose any burden on intra-market competition because it applies to all MIAX PEARL participants equally. In addition, the Exchange does not believe the proposal will impose any burden on inter-market competition as the proposal is intended to protect investors by providing further enhancements and transparency regarding the Exchange's price protection functionality.
Written comments were neither solicited nor received.
Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act
A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the Act
At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange filed a proposal to adopt Rules 4.5 through 4.16 to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Exchange Act
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.
Proposed Rule 4.5 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Proposed Rules 4.5 through 4.16. Each of the defined terms in Proposed Rule 4.5 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to
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 (
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.
In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. “Customer Account Information” is defined in SEC Rule 613(j)(4) to “include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).” Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Participants requested and received an exemption to allow an “Account Effective Date” to be reported in lieu of an account open date in certain limited circumstances. The definition of “Account Effective Date” as set forth in Paragraph (a) of Proposed Rule 4.5 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, Paragraph (a)(1) defines “Account Effective Date to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When the trading relationship was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, either (a) the date the relationship identifier was established within the Industry Member; (b) the date when trading began (
Paragraph (a)(2) of Proposed Rule 4.5 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account
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.
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 4.5 defines an “Allocation Report.” Specifically, an “Allocation Report” means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use “Business Clocks” to record such dates and times. Accordingly, paragraph (d) of Proposed Rule 4.5 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under Rules 4.5 through 4.16. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under Rules 4.5 through 4.16.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in Rules 4.5 through 4.16.
Paragraph (e) of Proposed Rule 4.5 defines the term “CAT” to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (f) of Proposed Rule 4.5 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 4.5 defines the term “CAT-Order-ID.” The term “CAT-Order-ID” is defined to mean a unique order identifier or series of unique order identifiers that allows the Central Repository to efficiently and accurately link all Reportable Events for an order, and all orders that result from the aggregation or disaggregation of such order. This is the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 of the CAT NMS Plan defines “CAT-Order-ID” by reference to SEC Rule 613(j)(1).
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.
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.
Paragraph (i) of Proposed Rule 4.5 defines the term “Central Repository” to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of Proposed Rule 4.5 defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 4.15(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to
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 4.5 proposes to define the term “Customer.” Specifically, the term “Customer” would be defined to mean: (1) The account holder(s) of the account at an Industry Member originating the order; and (2) any person from whom the Industry Member is authorized to accept trading instructions for such account, if different from the account holder(s). This is the same definition as set forth in SEC Rule 613(j)(3), except the Exchange proposes to replace the references to a registered broker-dealer or broker-dealer with a reference to an Industry Member for consistency of terms used in the Proposed Rules 4.5 through 4.16. The Exchange also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what customer information would need to be reported to the Central Repository.
Paragraph (l) of Proposed Rule 4.5 defines the term “Customer Account Information” to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 4.5(l), however, provides an alternative definition of “Customer Account Information” in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (1) Provide the Account Effective Date in lieu of the “date account opened”; (2) provide the relationship identifier in lieu of the “account number”; and (3) identify the “account type” as a “relationship.” Second, in those circumstances in which the relevant account was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, and no “date account opened” is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (1) Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (2) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (3) where there are multiple dates associated with an account in an Industry Member's system, and the parameters of each date are determined by the individual Industry Member; and (4) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of “Customer Account Information” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Identifying Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what Customer information would need to be reported to the Central Repository.
Paragraph (m) of Proposed Rule 4.5 defines the term “Customer Identifying Information” to mean information of sufficient detail to identify a Customer. With respect to individuals, “Customer Identifying Information” includes, but is not limited to: Name, address, date of birth, individual tax payer identification number (“ITIN”)/social security number (“SSN”), individual's role in the account (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Proposed Rules 4.5 through 4.16 only apply to Reportable Events in Eligible Securities. Currently, an Eligible Security includes NMS Securities and OTC Equity Securities. Accordingly, paragraph (p) [sic] of Proposed Rule 4.5 defines the term “Eligible Security” to include: (1) All NMS Securities; and (2) all OTC Equity Securities. The terms “NMS Securities” and “OTC Equity Securities” are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Under the CAT NMS Plan, the Operating Committee sets the maximum Error Rate that the Central Repository
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.
To implement the requirements of the CAT NMS Plan related to the Error Rate, the Exchange proposes to define the term “Error Rate” in Proposed Rule 4.5. Paragraph (p) of Proposed Rule 4.5 defines the term “Error Rate” to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines “Error Rate” by reference to SEC Rule 613(j)(6).
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 (
Paragraph (r) of Proposed Rule 4.5 defines the term “Industry Member” to mean a member of a national securities exchange or a member of a national securities association.” This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (s) of Proposed Rule 4.5 states that the term “Industry Member Data” has the meaning set forth in Rule 4.7(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(2).
Paragraph (t) of Proposed Rule 4.5 defines the term “Initial Plan Processor” to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the “Selection Plan.”
The CAT NMS Plan and the Proposed Rules 4.5 through 4.16 apply to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rules 4.5 through 4.16 apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 4.5 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 4.5 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, the Exchange proposes to define the term “Manual Order Event” in Proposed Rule 4.5. Specifically, paragraph (v) of Proposed Rule 4.5 defines the term “Manual Order Event” to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Proposed Rule 4.7 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “NMS Security” in Proposed Rule 4.5. Specifically, paragraph (x) of Proposed Rule 4.5 defines the term “NMS Security” to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, the Exchange proposes to define the term “NMS Stock” in Paragraph (y) of Proposed Rule 4.5 to mean any NMS Security other than an option. This is the same definition as set forth in SEC Rule 600(b)(47) of Regulation NMS.
Paragraph (z) of Proposed Rule 4.5 defines the term “Operating Committee” to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in Proposed Rule 4.5. Specifically, paragraph (aa) of Proposed Rule 4.5 defines the term “Options Market Makers” to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
The Proposed Rules 4.5 through 4.16 require each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, the Exchange proposes to define the term “Order” in Proposed Rule 4.5. Specifically, paragraph (bb) of Proposed Rule 4.5 defines the term “Order”, with respect to Eligible Securities, to include: (1) Any order received by an Industry Member from any person; (2) any order originated by an Industry Member; or (3) any bid or offer. This is the same definition as set forth in SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” The Exchange notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT.
Paragraph (dd) of Proposed Rule 4.5 defines the term “Participant” to mean each Person identified as such in Exhibit A of the CAT NMS Plan, as amended, in such Person's capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ee) of Proposed Rule 4.5 defines the term “Person” to mean any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association and any heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so permits. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ff) of Proposed Rule 4.5 defines the term “Plan Processor” to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan.
Paragraph (gg) of Proposed Rule 4.5 states that the term “Received Industry Member Data” has the meaning set forth in Rule 4.7(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Received Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(2).
Paragraph (hh) of Proposed Rule 4.5 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 4.7(a)(1). This definition has the same substantive meaning as the definition set forth in in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 4.7(a)(1).
The Proposed Rules 4.5 through 4.16 require each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term “Reportable Event” in Proposed Rule 4.5. Specifically, paragraph (ii) of Proposed Rule 4.5 states that the term “Reportable Event” includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (jj) of Proposed Rule 4.5 defines the term “SRO” to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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).
For the Central Repository to link the SRO-Assigned Market Participant Identifier to the CAT-Reporter-ID, each SRO will submit to the Central Repository, on a daily basis, all SRO-Assigned Market Participant Identifiers used by its Industry Members or itself; and information to identify each such Industry Member, including the CRD number and LEI if such LEI has been obtained, and itself, including LEI, if such LEI has been obtained. Additionally, each Industry Member is required to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained. The Plan Processor will use this information to assign a CAT-Reporter-ID to each Industry Member for internal use within the Central Repository.
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant Identifier” in Proposed Rule 4.5. Specifically, paragraph (kk) of Proposed Rule 4.5 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rules 4.5 through 4.16 differ to some extent for Small Industry Members versus Industry Members other than Small Industry Members. For example, the compliance dates for reporting data to the CAT are different for Small Industry Members versus other Industry Members. Accordingly, to clarify the requirements that apply to which Industry Members, the Exchange proposes to define the term “Small Industry Member” in Proposed Rule 4.5. Specifically, paragraph (ll) of Proposed Rule 4.5 defines the term “Small Industry Member” to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0-10(c) under
Proposed Rule 4.7(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, the Exchange proposes to define the term “Trading Day” in Proposed Rule 4.5. Specifically, Paragraph (mm) of Proposed Rule 4.5 states that the term “Trading Day” shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time.
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.
Paragraph (a) of Proposed Rule 4.6 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 4.6 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
Paragraph (a)(2) of Proposed Rule 4.6 requires each Industry Member to synchronize (1) its Business Clocks used solely for Manual Order Events and (2) its Business Clocks used solely for the time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(3) of Proposed Rule 4.6 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the Proposed Rule 4.6 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(4) of Proposed Rule 4.6 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and re-synchronized, as necessary, throughout the day. This description of the required frequency of clock synchronization is the same as set forth in paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (b) of Proposed Rule 4.6 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The Proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the Proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the “Sequencing Orders and Clock Synchronization” section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (c) of Proposed Rule 4.6 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 4.6 requires each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 4.6 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular.
Paragraph (d) of Proposed Rule 4.6 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 4.6 requires Industry Members to report to the Plan Processor and the Exchange, violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular.
SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, the Exchange proposes Rule 4.7 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 4.7 has six sections [sic] covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities covered by the recording and reporting requirements,
Paragraph (a) of Proposed Rule 4.7 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 4.7 set forth the recording and reporting requirements required in Section 6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (“Recorded Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant Identifier of the Industry Member receiving or originating the order; (4) date of order receipt or origination; (5) time of order receipt or origination (using timestamps pursuant to Proposed Rule 4.10); and (6) Material Terms of the Order;
• for the routing of an order: (1) CAT-Order-ID; (2) date on which the order is routed; (3) time at which the order is routed (using timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant to which the order is being routed; (6) if routed internally at the Industry Member, the identity and nature of the department or desk to which the order is routed; and (7) Material Terms of the Order;
• for the receipt of an order that has been routed, the following information: (1) CAT-Order-ID; (2) date on which the order is received; (3) time at which the order is received (using timestamps pursuant to Proposed Rule 4.10); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant routing the order; and (6) Material Terms of the Order;
• if the order is modified or cancelled: (1) CAT-Order-ID; (2) date the modification or cancellation is received or originated; (3) time at which the modification or cancellation is received or originated (using timestamps pursuant to Proposed Rule 4.10); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member;
• if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using timestamps pursuant to Proposed Rule 4.10; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) SRO-Assigned Market Participant Identifier of the Industry Member executing the order; (7) whether the execution was reported pursuant to an effective transaction reporting plan or the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information; and
• other information or additional events as may be prescribed pursuant to the CAT NMS Plan.
Paragraph (a)(2) of Proposed Rule 4.7 requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (“Received Industry Member Data” and collectively with the information referred to in Rule 4.7(a)(1) “Industry Member Data”)) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• If the order is executed, in whole or in part: (1) An Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) CAT-Order-ID of any contra-side order(s);
• if the trade is cancelled, a cancelled trade indicator; and
• for original receipt or origination of an order, the Firm Designated ID for the relevant Customer, and in accordance with Proposed Rule 4.8, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 4.7 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is required to report to the Exchange the time at which its quote in a Listed Option is sent to the Exchange (and, if applicable, any subsequent quote modification time and/or cancellation time when such modification or cancellation is originated by the Options Market Maker). This paragraph implements the Options Market Maker Quote Exemption, as discussed above.
Paragraph (b) of Proposed Rule 4.7 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of Proposed Rule 4.7 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
Paragraph (b)(1) of Proposed Rule 4.7 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 4.7 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of Proposed Rule 4.7 describes the securities to which the recording and reporting requirements of Proposed Rule 4.7 apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 4.7 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of Proposed Rule 4.7 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of Proposed Rule 4.7 for each NMS Security registered or listed for trading on such exchange or admitted to unlisted trading privileges on such exchange. Paragraph (c)(2) of Proposed Rule 4.7 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of this Proposed Rule 4.7 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 4.7 describes the security symbology that Industry Members are required to use when reporting Industry Member Data to the Central Repository. Paragraph (d)(1) of Proposed Rule 4.7 requires, for each exchange-listed Eligible Security, each Industry Member to report Industry Member Data to the Central Repository using the symbology format of the exchange listing the security. This requirement implements the requirement set forth in Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange symbology when reporting data to the Central Repository for exchange-listed Eligible Securities.
For each Eligible Security that is not exchange-listed, however, there is no listing exchange to provide the symbology format. Moreover, to date, the requisite symbology format has not been determined. Therefore, Paragraph (d)(2) of Proposed Rule 4.7 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Regulatory Circular.
To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, the Exchange proposes to adopt paragraph (e) of Proposed Rule 4.7, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 4.7 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. The Exchange proposes Rule 4.8 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 4.8 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 4.13. Paragraph (b) of Proposed Rule 4.8 requires each Industry Member to submit to the Central Repository any updates, additions or other changes to the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account on a daily basis. Paragraph (c) of Proposed Rule 4.8 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. The Exchange intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via Regulatory Circular.
Finally, paragraph (d) of Proposed Rule 4.8 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan.
Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, in accordance with the Existing Identifier Approach discussed above. The Exchange proposes Rule 4.9 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 4.9 requires each Industry Member to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 4.13, and keep such information up to date as necessary.
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.
Paragraph (a) of Proposed Rule 4.10 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 4.10 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of Proposed Rule 4.10. To the extent that any Industry Member's order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(2) of Proposed Rule 4.10 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of Proposed Rule 4.10 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 4.10 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 4.10 permits each Industry Member to record and report Manual Order Events to the Central Repository in increments up to and including one second, provided that each Industry Member is required to record and report the time when a
Proposed Rule 4.11 (Consolidated Audit Trail—Clock Synchronization Rule Violations) describes potential violations of the clock synchronization time period requirements set forth in the Proposed Rules 4.5 through 4.16. Proposed Rule 4.11 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in the Proposed Rules 4.5 through 4.16 without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 4.12 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 4.12 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of Proposed Rule 4.12 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee.
Paragraph (b) of Proposed Rule 4.12 addresses connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 4.12 requires each Industry Member to connect to the Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, Paragraph (c)(1) of Proposed Rule 4.12 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under the Proposed Rules 4.5 through 4.16. Any such agreement must be evidenced in writing, which specifies the respective functions and responsibilities of each party to the agreement that are required to effect full compliance with the requirements of the Proposed Rules 4.5 through 4.16. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 4.12 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) states that each Industry Member remains primarily responsible for compliance with the requirements of the Proposed Rules 4.5 through 4.16, notwithstanding the existence of an agreement described in paragraph (c) of Proposed Rule 4.12.
The Exchange proposes Rule 4.13 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 4.13 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan.
Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 4.8(a) and 4.9, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 4.8(a) and 4.9, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of Proposed Rule 4.13 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 4.14 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 4.14 requires each
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of Proposed Rule 4.15 requires Industry Members to accurately provide the LEIs in their records as required by the Proposed Rules 4.5 through 4.16 and states that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) notes, however, that this requirement does not impose any additional due diligence obligations on Industry Members with regard to LEIs for CAT purposes. Accordingly, this provision does not impose any due diligence obligations beyond those that may exist today with respect to information associated with an LEI. Although Industry Members will not be required to perform additional due diligence with regard to the LEIs for CAT purposes, Industry Members will be required to accurately provide the LEIs in their records and may not knowingly submit inaccurate LEIs to the CAT. Paragraph (b) is consistent with the SEC's statements in the Approval Order for the CAT NMS Plan regarding an Industry Member's obligations regarding LEIs.
Paragraph (c) states that, if an Industry Member reports data to the Central Repository with errors such that its error percentage exceeds the maximum Error Rate established by the Operating Committee pursuant to the CAT NMS Plan, then such Industry Member would not be in compliance with the Rules 4.5 through 4.16. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. The Exchange intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Regulatory Circular.
Furthermore, paragraph (d) of Proposed Rule 4.15 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 4.15 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT (the “Compliance Thresholds”). Compliance Thresholds will compare an Industry Member's error rate to the aggregate Error Rate over a period of time to be defined by the Operating Committee. Compliance Thresholds will be set by the Operating Committee, and will be calculated at intervals to be set by the Operating Committee.
Proposed Rule 4.16 (Consolidated Audit Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rules 4.5 through 4.16. Paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date of the Proposed Rules 4.5 through 4.16. Unless otherwise noted, the Proposed Rules 4.5 through 4.16 will be fully effective upon approval by the Commission and Members must comply with their terms.
Paragraph (b) of Proposed Rule 4.16 establishes the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 4.6. Paragraph (b)(1) states that each Industry Member shall comply with Rule 4.6 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 4.6 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of Proposed Rule 4.16 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the Proposed Rules 4.5 through 4.16 implement provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing similar rules to apply the requirements of the CAT NMS Plan to their members. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
On October 26, 2016, BOX Options Exchange LLC (the “Exchange”) filed with the Securities and Exchange Commission (“Commission”), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
Pursuant to a twelve-month pilot program, the Exchange proposes to amend its rules to list and trade on the Exchange RealDay Options on the SPDR® S&P 500® Exchange Traded Fund (“SPY”). The Exchange states that RealDay Options are designed and exclusively licensed by the RealDay Options Corporation, and would be exclusively listed on BOX. RealDay Options would share many characteristics of existing standardized options with some distinct variations. Most notably, at the commencement of trading of a particular RealDay Option and until the close of trading on the last trading day before its expiration, the numerical value of the strike price would not be known. However, the formula used to calculate the strike price would be fixed and known from the time of listing.
The trading of RealDay Options would in essence be divided into two periods: The anticipatory period and the active period. The anticipatory period would be the period of time from the day the option is listed up until the close of trading on the last trading day before expiration. The active period would be the expiration day of the option. During the anticipatory period, the strike intervals and strike price setting formula would be known, but not the numerical value of the strike prices, because they would depend on the closing price of SPY from the last trading day before expiration. RealDay Options could still be traded in the anticipatory period in the same manner as standard options on SPY. During the active period, the numerical value of the strike prices would be known. Although the active period is only one trading day, RealDay Options could be listed for up to nine months in advance of the expiration date, but at least two weeks prior to their expiration.
The Exchange has only proposed to list RealDay Options on SPY, but the Exchange states that it may seek to list RealDay Options on additional securities in the future.
While the numerical value of the strike prices for RealDay Options would not be known until the close of trading on the last trading day before expiration, the strike intervals and strike price setting formula would be fixed from inception.
The Exchange also proposes additional procedures in determining the exact number of strike prices that may be listed for a RealDay Option.
The strike price formula would be used after the close of trading on the last trading day before expiration in order to calculate the numerical values of the strike prices. Specifically, the strike prices would be determined by multiplying the Strike Setting Price by the Strike Multiplier. Rather than applying the Exchange's general strike price interval rules, the strike prices for RealDay Options would have fixed strike intervals of 0.50%.
The Exchange proposes to calculate the exercise and settlement price of RealDay Options based on the closing price of SPY on the trading day of expiration. The exercise-settlement amount would be equal to the difference between the settlement price and the exercise price of the option multiplied by 100. Exercise would result in the delivery of cash on the business day following expiration. If SPY does not open for trading on the trading day of expiration, at the close of trading on expiration, RealDay Options would have an exercise price that is equal to the
The Exchange proposes that RealDay Options be P.M. cash-settled and have European-style exercise provisions.
The Exchange proposes to list RealDay Options on SPY with the symbol “SPYZ.” During the anticipatory period, the Exchange proposes to list the strike prices as the Strike Multiplier because the numerical value of the strike price would not yet be known. The Exchange proposes to use three decimal places to indicate the strike prices as the Strike Multiplier during the anticipatory period.
After the close of trading on the last trading day before expiration, the decimal would be converted into the numerical strike price by multiplying the Strike Setting Price by the Strike Multiplier.
The Exchange proposes for RealDay Options to overlie 100 shares of SPY in the same manner as standard options on SPY. The Exchange's standard trading hours for SPY options would also apply to trading in RealDay Options. The Exchange proposes to apply margin requirements for the purchase and sale of RealDay Options that are identical to the margin requirements for standard options on SPY.
The Exchange proposes to apply Section 4000 of its rules, which is designed to protect public customer trading, to trading in RealDay Options. Specifically, Exchange Rules 4020(a) and (b) prohibit Order Flow Providers (“OFPs”)
The Exchange represents that it has an adequate surveillance program in place for RealDay Options and intends to apply the same program procedures that it applies to the Exchange's other options products, which the Exchange believes would adequately monitor trading in RealDay Options.
The Exchange further represents that it has the necessary system capacity to support the additional quotations and messages that would result from the listing and trading of RealDay Options.
The Exchange has filed this proposal on a pilot basis for a period of twelve months (the “Pilot Program” or “Pilot Period”).
The Exchange proposes to submit a report to the Commission two months prior to the expiration date of the Pilot Program (the “Pilot Report”).
The Exchange states that the Pilot Report would contain the following volume and open interest data for RealDay Options:
(1) Daily contract trading volume aggregated for all trades, for all option series with less than 31 days until expiration;
(2) daily contract trading volume aggregated by expiration date, for all option series with less than 31 days until expiration;
(3) daily contract trading volume for each individual series;
(4) daily open interest aggregated for all series, for all option series with less than 31 days until expiration;
(5) daily open interest aggregated for all series by expiration date, for all option series with less than 31 days until expiration;
(6) daily open interest for each individual series;
(7) statistics on the distribution of trade sizes;
(8) type of market participant trading (
(9) 5-minute returns, level changes, and trading volume for the S&P 500 Index, VIX, SPY, IVV, and expiring RealDay options between open and close for the first and second Wednesday of the month that is a trading day and trading days when standard SPY options expire.
In addition to the Pilot Report, the Exchange would periodically provide the Commission with interim reports of the information listed in items (1) through (9) above as required by the Commission while the Pilot Program is in effect. These interim reports will also be provided on a confidential basis. The initial period of the Exchange's proposed Pilot Program is set to expire on February 2, 2018.
The Commission received a comment letter from the Chicago Board Options Exchange opposing the Exchange's RealDay Options proposal.
In its filing, the Exchange cited to CBOE's Delayed Start Options (“DSOs”) as precedent for the approval of RealDay Options.
In addition, the commenter states that it would be unprecedented to have a cash-settled option on an ETF.
The Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.
The Commission disagrees with the commenter's assertion that, with respect to the timing of strike price setting, there is no precedent for RealDay Options or their classification as securities options. As noted by both the Exchange and the commenter, the Commission previously approved an options product with a strike price not specified at the time of issuance (
As noted above, CBOE also asserts that the Exchange's RealDay Options proposal is unprecedented because of its proposed settlement and exercise methodologies. Among other things, the commenter criticizes the Exchange for misleadingly making assertions regarding cash settlement and options, noting that while it is not unusual for index and currency options to be cash settled, that is not the case with ETF options (such as the proposed RealDay Options product). In the Notice, the Exchange argues that its proposed settlement and exercise methodologies are appropriate for the proposed RealDay Options product.
The Commission is cognizant that the proposed settlement and exercise features of RealDay Options—while they exist in options more broadly—would, taken together, be unique. However, given the significant liquidity of the underlying ETF for the proposed product,
The Commission believes that the Exchange's proposal to impose no position limits on RealDay Options is appropriate and consistent with the Act. As noted above, the Exchange proposed to initially list RealDay Options only on SPY. The Commission notes that SPY options are the most actively-traded options in terms of average daily volume. The Commission believes that because these options are extremely liquid, the potential manipulation and potential market disruption concerns that position limits are designed to address are mitigated in the case of this product. Moreover, the Commission believes that having no position limits for these options may benefit investors by bringing additional depth and liquidity to these options without raising significant concerns about potential manipulation or potential market disruption. Further, the Commission notes that standard options on SPY are currently not subject to any position limits under a pilot program, and the Exchange has proposed to apply any position limits for standard options on SPY if that pilot program were discontinued.
The Commission also believes that it is consistent with the Act to apply margin requirements to the proposed RealDay Options that are otherwise applicable to standard options on SPY. The Commission further believes that the Exchange's proposed minimum trading increments, strike price setting process,
As a national securities exchange, the Exchange is required, under Section 6(b)(1) of the Act,
Given the size and liquidity of the market for SPY, the Commission believes that the risks of manipulation and potential market disruption are significantly mitigated as discussed above. Notwithstanding this and the Exchange's representations in this regard, the Commission believes that a prudent approach is warranted with respect to the Exchange's proposal to list RealDay Options on SPY. To the extent the potential for adverse effects with regard to the markets for the SPY ETF, the S&P 500 component securities underlying the SPY ETF, or RealDay Options on SPY continues to exist, the Exchange's proposal to implement this change on a pilot basis should help to address this concern. Accordingly, the Commission is approving the proposal on a twelve-month pilot basis. Within two months of the end of the Pilot Program the Exchange will be required to submit to the Commission the Pilot Report. As described in more detail above,
The Commission expects that, throughout the Pilot Program, the Exchange will monitor for any problems and collect and analyze on an ongoing basis the data and information that the Exchange ultimately intends to include in the Pilot Report. The Commission also expects that the Exchange will take prompt action, including timely communication with the Commission and with other marketplace self-regulatory organizations responsible for oversight of trading in component stocks, should any unanticipated adverse market effects develop.
Based on the Exchange's representations with respect to the proposed RealDay Options on SPY and for the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Act.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1)
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”),
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock
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.
Proposed Rule 11.610 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Proposed Rule 11.600 Series. Each of the defined terms in Proposed Rule 11.610 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-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.
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 (
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.
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 11.610 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, Paragraph (a)(1) defines “Account Effective Date [sic] to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When
Paragraph (a)(2) of Proposed Rule 11.610 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
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 11.610 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.
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.
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 11.610 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.
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 11.610 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under this Rule 11.600 Series. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except IEX proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Rule Series.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in this Rule 11.600 Series.
Paragraph (e) of Proposed Rule 11.610 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.
Paragraph (f) of Proposed Rule 11.610 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
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.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 11.610 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).
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.
This definition is based on FINRA's definition of a “Reporting Agent” as set forth in FINRA's rule related to its Order Audit Trail System (“OATS”). Specifically, FINRA Rule 7410(n) defines a “Reporting Agent” as a third party that enters into any agreement with a member pursuant to which the Reporting Agent agrees to fulfill such member's reporting obligations under Rule 7450. The Reporting Agent for OATS fulfills a similar role to the CAT Reporting Agent.
Paragraph (i) of Proposed Rule 11.610 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 IEX uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of Proposed Rule 11.610 defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 11.693(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to Proposed Rule 11.693(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.”
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 11.610 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 IEX 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 Rule 11.600 Series. IEX also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
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, IEX 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 11.610 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 11.610(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.
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, IEX 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 11.610 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
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Proposed Rule 11.600 Series 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 11.610 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.
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.
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.
To implement the requirements of the CAT NMS Plan related to the Error Rate, IEX proposes to define the term “Error Rate” in Proposed Rule 11.610. Paragraph (p) of Proposed Rule 11.610 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).
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 (
Paragraph (r) of Proposed Rule 11.610 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.
Paragraph (s) of Proposed Rule 11.610 states that the term “Industry Member Data” has the meaning set forth in Rule 11.630(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 11.630(a)(2).
Paragraph (t) of Proposed Rule 11.610 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.”
The CAT NMS Plan and this Proposed Rule 11.600 Series applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Proposed Rule 11.600 Series apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 11.610 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 11.610 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” IEX 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.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, IEX proposes to define the term “Manual Order Event” in Proposed Rule 11.610. Specifically, paragraph (v) of Proposed Rule 11.610 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.
Proposed Rule 11.630 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, IEX proposes to define the term “NMS Security” in Proposed Rule 11.610. Specifically, paragraph (x) of Proposed Rule 11.610 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.
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, IEX proposes to define the term “NMS Stock” in Paragraph (y) of Proposed Rule 11.610 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.
Paragraph (z) of Proposed Rule 11.610 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 IEX proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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
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.
To implement the requirements related to Option Market Maker quotes, IEX proposes to define the term “Options Market Maker” in Proposed Rule 11.610. Specifically, paragraph (aa) of Proposed Rule 11.610 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.
The Proposed Rule 11.600 Series requires each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, IEX proposes to define the term “Order” in Proposed Rule 11.610. Specifically, paragraph (bb) of Proposed Rule 11.610 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 IEX proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” IEX notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, IEX proposes to define the term “OTC Equity Security” in Proposed Rule 11.610. Specifically, paragraph (cc) of Proposed Rule 11.610 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.
Paragraph (dd) of Proposed Rule 11.610 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.
Paragraph (ee) of Proposed Rule 11.610 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.
Paragraph (ff) of Proposed Rule 11.610 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.
Paragraph (gg) of Proposed Rule 11.610 states that the term “Received Industry Member Data” has the meaning set forth in Rule 11.630(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 11.630(a)(2).
Paragraph (hh) of Proposed Rule 11.610 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 11.630(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 11.630(a)(1).
The Proposed Rule 11.600 Series requires each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, IEX proposes to define the term “Reportable Event” in Proposed Rule 11.610. Specifically, paragraph (ii) of Proposed Rule 11.610 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.
Paragraph (jj) of Proposed Rule 11.610 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.
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).
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.
To implement the Existing Identifier Approach, IEX proposes to define the term “SRO-Assigned Market Participant” in Proposed Rule 11.610. Specifically, paragraph (kk) of Proposed Rule 11.610 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the Proposed Rule 11.600 Series 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, IEX proposes to define the term “Small Industry Member” in Proposed Rule 11.610. Specifically, paragraph (ll) of Proposed Rule 11.610 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).
Proposed Rule 11.630(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, IEX proposes to define the term “Trading Day” in Proposed Rule 11.610. Specifically, Paragraph (mm) of Proposed Rule 11.610 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.
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.
Paragraph (a) of Proposed Rule 11.620 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 11.620 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 11.620 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 11.620 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the Proposed Rule 11.620 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 11.620 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 11.620 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
Paragraph (c) of Proposed Rule 11.620 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of Proposed Rule 11.620 requires each Industry Member to certify to IEX that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 11.620 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. IEX intends to announce to its Industry Members the certification schedule established by the Operating Committee via Information Circular.
Paragraph (d) of Proposed Rule 11.620 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 11.620 requires Industry Members to report to the Plan Processor and IEX violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. IEX intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Information Circular.
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, IEX proposes Rule 11.630 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 11.630 has six sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities cover [sic] by the recording and reporting requirements, (4) format, (5) the security symbology to be used in the recording and reporting, and (6) error correction requirements, each of which is described below.
Paragraph (a) of Proposed Rule 11.630 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 11.630 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 11.660); 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 11.660); (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 11.660); (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 11.660); (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 11.660); (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 11.630 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 11.630(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 11.640, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of Proposed Rule 11.630 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.
Paragraph (b) of Proposed Rule 11.630 describes the requirements related to the
Paragraph (b)(1) of Proposed Rule 11.630 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 11.630 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of Proposed Rule 11.630 describes the securities to which the recording and reporting requirements of Proposed Rule 11.630 apply. Paragraphs (c)(1) and (c)(2) of Proposed Rule 11.630 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 11.630 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 11.630 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 11.630 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 11.630 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of Proposed Rule 11.630 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 11.630 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 11.630 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. IEX intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Information Circular.
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, IEX proposes to adopt paragraph (e) of Proposed Rule 11.630, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of Proposed Rule 11.630 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.
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. IEX proposes Rule 11.640 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of Proposed Rule 11.640 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 11.680. Paragraph (b) of Proposed Rule 11.640 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 11.640 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. IEX intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via Information Circular.
Finally, paragraph (d) of Proposed Rule 11.640 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.
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. IEX proposes Rule 11.650 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, Proposed Rule 11.650 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
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.
Paragraph (a) of Proposed Rule 11.660 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of Proposed Rule 11.660 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 11.660. 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 11.660 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 11.660 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of Proposed Rule 11.660 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of Proposed Rule 11.660 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 11.660 permits each Industry Member to record and report the time of Allocation Reports in increments up to and including one second.
Proposed Rule 11.665 (Consolidated Audit Trail—Clock Synchronization Rule Violations) describes potential violations of the clock synchronization time period requirements set forth in the Proposed Rule 11.600 Series. Proposed Rule 11.665 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Rule Series without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 11.670 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 11.670 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 11.670 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 11.670 addresses connectivity requirements related to the CAT. Paragraph (b) of Proposed Rule 11.670 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 11.670 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 Rule 11.600 Series. 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 Rule 11.600 Series. IEX notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of Proposed Rule 11.670 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 Rule 11.600 Series, notwithstanding the existence of an agreement described in paragraph (c) of Proposed Rule 11.670.
IEX proposes Rule 11.680 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 11.680 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 11.640(a) and 11.650, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of Proposed Rule 11.680 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 11.690 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 11.690 requires each Industry Member to maintain and preserve records of the information required to be recorded under the Proposed Rule 11.600 Series 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 Rule 11.600 Series 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 11.690 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of Proposed Rule 11.693 requires Industry Members to accurately provide the LEIs in their records as required by the Proposed Rule 11.600 Series 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.
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 Rule 11.600 Series. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. IEX intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Information Circular.
Furthermore, paragraph (d) of Proposed Rule 11.693 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 11.693 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.
Proposed Rule 11.695 (Consolidated Audi Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the Proposed Rule 11.600 Series. Paragraph (a) of Proposed Rule 11.695 states that, except as set forth in paragraphs (b) and (c) of this Rule or otherwise set forth in this Rule Series, the compliance date for the proposed Rule Series 11.600 shall be the date the proposed Rule Series 11.600 is approved by the Commission.
Paragraph (b) of Proposed Rule 11.695 establishes the compliance dates for the clock synchronization requirements as set forth in Proposed Rule 11.620. Paragraph (b)(1) states that each Industry Member shall comply with Rule 11.620 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 11.620 with regard to Business Clocks that do not capture time in milliseconds commencing on or before
Paragraph (c) of Proposed Rule 11.695 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.
IEX believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
IEX 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 IEX 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.”
IEX 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. IEX notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist IEX in meeting its regulatory obligations pursuant to the Plan. IEX also notes that the Proposed Rule Series implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this Proposed Rule 11.600 Series. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Exchange Act”)
CHX proposes to amend the Rules of the Exchange (“CHX Rules”) to adopt Article 23 of the Rules of the Exchange (“CHX Rules”) to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or “Plan”).
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B and C below, of the most significant parts of such statements.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, the Exchange, Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Plan Participants”
The Plan is designed to create, implement and maintain a consolidated audit trail (“CAT”) that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. Each Plan Participant is required to enforce compliance by its Industry Members, as applicable, with the provisions of the Plan, by adopting a Compliance Rule applicable to their Industry Members.
Proposed Rule 1 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in proposed Article 23. Each of the defined terms in proposed Rule 1 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's [sic] associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-IDs” for each Customer for the original receipt or origination of an order. “Customer-ID” is defined in SEC Rule 613(j)(5) to mean “with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.” SEC Rule 613(c)(8) requires Industry Members to use the same Customer-ID for each Customer. The SEC granted the Plan Participants exemptive relief to permit the use of an alternative approach to the requirement that an Industry Member report a Customer-ID for every Customer upon original receipt or origination.
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 (
In accordance with the Customer Information Approach, Industry Members would be required to report only the Firm Designated ID for each new order submitted to the Central Repository, rather than the “Customer-ID” with individual order events. Within the Central Repository, each Customer would be uniquely identified by identifiers or a combination of identifiers such as ITIN/SSN, date of birth, and as applicable, LEI and LTID. The Plan Processor would be required to use these unique identifiers to map orders to specific Customers across all Industry Members and Plan Participants. To ensure information identifying a Customer is up to date, Industry Members would be required to submit to the Central Repository daily and periodic updates for reactivated accounts, newly established accounts, and revised Firm Designated IDs or associated reportable Customer information.
In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. “Customer Account Information” is defined in SEC Rule 613(j)(4) to “include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).” Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Plan Participants requested and received an exemption to allow an “Account Effective Date” to be reported in lieu of an account open date in certain limited circumstances. The definition of “Account Effective Date” as set forth in Paragraph (a) of proposed Rule 1 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, paragraph (a)(1) defines “Account Effective Date [sic] to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When the trading relationship was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, either (a) the date the relationship identifier was established within the Industry Member; (b) the date when trading began (
Paragraph (a)(2) of proposed Rule 1 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account Information for only those accounts that are active. This will alleviate the need for Industry Members to update such information for non-active accounts, but still ensure that the Central Repository will collect audit trail data for Customer accounts that have any Reportable Events. Accordingly, paragraph (b) of proposed Rule 1 defines an “Active Account” as an account that has had activity in Eligible Securities within the last six months. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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
To assist in implementing the Allocation Report Approach, paragraph (c) of proposed Rule 1 defines an “Allocation Report.” Specifically, an “Allocation Report” means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use “Business Clocks” to record such dates and times. Accordingly, paragraph (d) of proposed Rule 1 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under this Article 23. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Article 23.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in this Article 23.
Paragraph (e) of proposed Rule 1 defines the term “CAT” to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (f) of proposed Rule 1 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
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.
To implement the Daisy Chain Approach, Paragraph (g) of proposed Rule 1 defines the term “CAT-Order-ID.” The term “CAT-Order-ID” is defined to mean a unique order identifier or series of unique order identifiers that allows the Central Repository to efficiently and accurately link all Reportable Events for an order, and all orders that result from the aggregation or disaggregation of such order. This is the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 of the CAT NMS Plan defines “CAT-Order-ID” by reference to SEC Rule 613(j)(1).
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.
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.
Paragraph (i) of proposed Rule 1 defines the term “Central Repository” to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of proposed Rule 1 defines the term “Compliance Threshold” as having the meaning set forth in proposed Rule 11(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to proposed Rule 11(d), each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT. This Industry Member-specific rate is the “Compliance Threshold.”
Industry Members are required to submit to the Central Repository certain information related to their Customers, including Customer Identifying Information and Customer Account Information, as well as data related to their Customer's Reportable Events. Accordingly, Paragraph (k) of proposed Rule 1 proposes to define the term “Customer.” Specifically, the term “Customer” would be defined to mean: (1) The account holder(s) of the account at an Industry Member originating the order; and (2) any person from whom the Industry Member is authorized to accept trading instructions for such
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what customer information would need to be reported to the Central Repository.
Paragraph (l) of proposed Rule 1 defines the term “Customer Account Information” to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 1(l), however, provides an alternative definition of “Customer Account Information” in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (1) Provide the Account Effective Date in lieu of the “date account opened”; (2) provide the relationship identifier in lieu of the “account number”; and (3) identify the “account type” as a “relationship.” Second, in those circumstances in which the relevant account was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, and no “date account opened” is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (1) Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (2) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (3) where there are multiple dates associated with an account in an Industry Member's system, and the parameters of each date are determined by the individual Industry Member; and (4) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of “Customer Account Information” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Identifying Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term “Customer Account Information” to clarify what Customer information would need to be reported to the Central Repository.
Paragraph (m) of proposed Rule 1 defines the term “Customer Identifying Information” to mean information of sufficient detail to identify a Customer. With respect to individuals, “Customer Identifying Information” includes, but is not limited to: Name, address, date of birth, individual tax payer identification number (“ITIN”)/social security number (“SSN”), individual's role in the account (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of proposed Article 23 only apply to Reportable Events in Eligible Securities. Currently, an Eligible Security includes NMS Securities and OTC Equity Securities. Accordingly, paragraph (o) of proposed Rule 1 defines the term “Eligible Security” to include: (1) All NMS Securities; and (2) all OTC Equity Securities. The terms “NMS Securities” and “OTC Equity Securities” are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
The CAT NMS Plan requires the Plan Processor to: (1) Measure and report errors every business day; (2) provide Industry Members daily statistics and error reports as they become available, including a description of such errors; (3) provide monthly reports to Industry Members that detail an Industry Member's performance and comparison statistics; (4) define educational and support programs for Industry Members to minimize Error Rates; and (5) identify, daily, all Industry Members exceeding the maximum allowable Error Rate. To timely correct data-submitted errors to the Central Repository, the CAT NMS Plan requires that the Central Repository receive and process error corrections at all times. Further, the CAT NMS Plan requires that Industry Members be able to submit error corrections to the Central Repository through a web-interface or via bulk uploads or file submissions, and that the Plan Processor, subject to the Operating Committee's approval, support the bulk replacement of records and the reprocessing of such records. The Plan Participants, furthermore, require that the Plan Processor identify Industry Member data submission errors based on the Plan Processor's validation processes.
To implement the requirements of the CAT NMS Plan related to the Error Rate, the Exchange proposes to define the term “Error Rate” in proposed Rule 1. Paragraph (p) of proposed Rule 1 defines the term “Error Rate” to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines “Error Rate” by reference to SEC Rule 613(j)(6).
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 (
Paragraph (r) of proposed Rule 1 defines the term “Industry Member” to mean a member of a national securities exchange or a member of a national securities association.” This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (s) of proposed Rule 1 states that the term “Industry Member Data” has the meaning set forth in Rule 3(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Industry Member Data” is discussed more fully in the discussion below regarding proposed Rule 3(a)(2).
Paragraph (t) of proposed Rule 1 defines the term “Initial Plan Processor” to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the “Selection Plan.”
The CAT NMS Plan and this proposed Article 23 applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of proposed Article 23 apply specifically to Listed Options. Accordingly, paragraph (u) of proposed Rule 1 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of proposed Rule 1 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, the Exchange proposes to define the term “Manual Order Event” in proposed Rule 1. Specifically, paragraph (v) of proposed Rule 1 defines the term “Manual Order Event” to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Proposed Rule 3 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “NMS Security” in proposed Rule 1. Specifically, paragraph (x) of proposed Rule 1 defines the term “NMS Security” to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, the Exchange proposes to define the term “NMS Stock” in Paragraph (y) of proposed Rule 1 to mean any NMS Security other than an option. This is the same definition as set forth in SEC Rule 600(b)(47) of Regulation NMS.
Paragraph (z) of proposed Rule 1 defines the term “Operating Committee” to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in proposed Rule 1. Specifically, paragraph (aa) of proposed Rule 1 defines the term “Options Market Maker” to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
The proposed Article 23 requires each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, the Exchange proposes to define the term “Order” in proposed Rule 1. Specifically, paragraph (bb) of proposed Rule 1 defines the term “Order”, with respect to Eligible Securities, to include: (1) Any order received by an Industry Member from any person; (2) any order originated by an Industry Member; or (3) any bid or offer. This is the same definition as set forth in SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” The Exchange notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term “OTC Equity Security” in proposed Rule 1. Specifically, paragraph (cc) of proposed Rule 1 defines the term “OTC Equity Security” to mean any equity security, other than an NMS Security, subject to prompt last sale reporting rules of a registered national securities association and reported to one of such association's equity trade reporting facilities. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (dd) of proposed Rule 1 defines the term “Plan Participant” to mean each Person identified as such in Exhibit A of the CAT NMS Plan, as amended, in such Person's capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ee) of proposed Rule 1 defines the term “Person” to mean any
Paragraph (ff) of proposed Rule 1 defines the term “Plan Processor” to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan.
Paragraph (gg) of proposed Rule 1 states that the term “Received Industry Member Data” has the meaning set forth in Rule 3(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Received Industry Member Data” is discussed more fully in the discussion below regarding proposed Rule 3(a)(2).
Paragraph (hh) of proposed Rule 1 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 3(a)(1). This definition has the same substantive meaning as the definition set forth in in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding proposed Rule 3(a)(1).
The proposed Article 23 requires each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term “Reportable Event” in proposed Rule 1. Specifically, paragraph (ii) of proposed Rule 1 states that the term “Reportable Event” includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (jj) of proposed Rule 1 defines the term “SRO” to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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).
For the Central Repository to link the SRO-Assigned Market Participant Identifier to the CAT-Reporter-ID, each SRO will submit to the Central Repository, on a daily basis, all SRO-Assigned Market Participant Identifiers used by its Industry Members, as well as information to identify each such Industry Member, including CRD number and LEI, if the SRO has collected such LEI of the Industry Member. Additionally, each Industry Member is required to submit to the Central Repository the CRD of the Industry Member, as well as the LEI of the Industry Member (if the Industry Member has an LEI). The Plan Processor will use this information to assign a CAT-Reporter-ID to each Industry Member for internal use within the Central Repository.
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant” in proposed Rule 1. Specifically, paragraph (kk) of proposed Rule 1 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Plan Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of proposed Article 23 differ to some extent for Small Industry Members versus Industry Members other than Small Industry Members. For example, the compliance dates for reporting data to the CAT are different for Small Industry Members versus other Industry Members. Accordingly, to clarify the requirements that apply to which Industry Members, the Exchange proposes to define the term “Small Industry Member” in proposed Rule 1. Specifically, paragraph (ll) of proposed Rule 1 defines the term “Small Industry Member” to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as amended. This is the same in substance as the definition of “Small Industry Member” as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a “Small Industry Member” as “an Industry Member that qualifies as a small broker-dealer as defined in SEC Rule 613.” The definition of a small broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as defined in SEC Rule 0-10(c).
Proposed Rule 3(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, the Exchange proposes to define the term “Trading Day” in proposed Rule 1. Specifically, Paragraph (mm) of proposed Rule 1 states that the term “Trading Day” shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time.
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.
Paragraph (a) of proposed Rule 2 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of proposed Rule 2 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
Paragraph (a)(2) of proposed Rule 2 requires each Industry Member to synchronize (1) its Business Clocks used solely for Manual Order Events and (2) its Business Clocks used solely for the time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(3) of proposed Rule 2 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the proposed Rule 2 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(4) of proposed Rule 2 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and re-synchronized, as necessary, throughout the day. This description of the required frequency of clock synchronization is the same as set forth in paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (b) of proposed Rule 2 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the “Sequencing Orders and Clock Synchronization” section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (c) of proposed Rule 2 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of proposed Rule 2 requires each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of proposed Rule 2 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the certification schedule established by the Operating Committee via Information Memorandum.
Paragraph (d) of proposed Rule 2 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of proposed Rule 2 requires Industry Members to report to the Plan Processor and SRO violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Information Memorandum.
SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, the Exchange proposes Rule 3 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 3 has six [sic] sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities cover by the recording and reporting requirements, (4) format, [sic] (5) the security symbology to be used in the recording and reporting, and (6) error correction requirements, each of which is described below.
Paragraph (a) of proposed Rule 3 describes the recording and reporting of Industry Member Data to the Central Repository. Paragraph (a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry Member Data, Received Industry Member Data and Options Market Maker data, respectively. Paragraphs (a)(1)-(a)(3) of proposed Rule 3 set forth the recording and reporting requirements required in Section 6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (“Recorded Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant
• for the routing of an order: (1) CAT-Order-ID; (2) date on which the order is routed; (3) time at which the order is routed (using timestamps pursuant to proposed Rule 6); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Plan Participant to which the order is being routed; (6) if routed internally at the Industry Member, the identity and nature of the department or desk to which the order is routed; and (7) Material Terms of the Order;
• for the receipt of an order that has been routed, the following information: (1) CAT-Order-ID; (2) date on which the order is received; (3) time at which the order is received (using timestamps pursuant to proposed Rule 6); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Plan Participant routing the order; and (6) Material Terms of the Order;
• if the order is modified or cancelled: (1) CAT-Order-ID; (2) date the modification or cancellation is received or originated; (3) time at which the modification or cancellation is received or originated (using timestamps pursuant to proposed Rule 6); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member;
• if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using timestamps pursuant to proposed Rule 6; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) SRO-Assigned Market Participant Identifier of the Industry Member executing the order; (7) whether the execution was reported pursuant to an effective transaction reporting plan or the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information; and
• other information or additional events as may be prescribed pursuant to the CAT NMS Plan.
Paragraph (a)(2) of proposed Rule 3 requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (“Received Industry Member Data” and collectively with the information referred to in Rule 3(a)(1) “Industry Member Data”)) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• If the order is executed, in whole or in part: (1) An Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) CAT-Order-ID of any contra-side order(s);
• if the trade is cancelled, a cancelled trade indicator; and
• for original receipt or origination of an order, the Firm Designated ID for the relevant Customer, and in accordance with proposed Rule 4, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of proposed Rule 3 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is required to report to the Exchange the time at which its quote in a Listed Option is sent to the Exchange (and, if applicable, any subsequent quote modification time and/or cancellation time when such modification or cancellation is originated by the Options Market Maker). This paragraph implements the Options Market Maker Quote Exemption, as discussed above.
Paragraph (b) of proposed Rule 3 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 3 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
Paragraph (b)(1) of proposed Rule 3 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 3 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of proposed Rule 3 describes the securities to which the recording and reporting requirements of proposed Rule 3 apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 3 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of proposed Rule 3 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of proposed Rule 3 for each NMS Security registered or listed for trading on such exchange or admitted to unlisted trading privileges on such exchange. Paragraph (c)(2) of proposed Rule 3 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of this proposed Rule 3 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of proposed Rule 3 describes the security symbology that Industry Members are required to use when reporting Industry Member Data to the Central Repository. Paragraph (d)(1) of proposed Rule 3 requires, for each exchange-listed Eligible Security, each Industry Member to report Industry Member Data to the Central Repository using the symbology format of the exchange listing the security. This requirement implements the requirement set forth in Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange symbology when reporting data to the Central Repository for exchange-listed Eligible Securities.
For each Eligible Security that is not exchange-listed, however, there is no listing exchange to provide the symbology format. Moreover, to date, the requisite symbology format has not been determined. Therefore, paragraph (d)(2) of proposed Rule 3 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the
To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, the Exchange proposes to adopt paragraph (e) of proposed Rule 3, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of proposed Rule 3 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. The Exchange proposes Rule 4 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of proposed Rule 4 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 9. Paragraph (b) of proposed Rule 4 requires each Industry Member to submit to the Central Repository any updates, additions or other changes to the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account on a daily basis. Paragraph (c) of proposed Rule 4 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. The Exchange intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via Information Memorandum.
Finally, paragraph (d) of proposed Rule 4 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan.
Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, in accordance with the Existing Identifier Approach discussed above. The Exchange proposes Rule 5 (Consolidated Audit Trail—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, proposed Rule 5 requires each Industry Member to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 9, and keep such information up to date as necessary.
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.
Paragraph (a) of proposed Rule 6 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of proposed Rule 6 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of proposed Rule 6. To the extent that any Industry Member's order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(2) of proposed Rule 6 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of proposed Rule 6 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of proposed Rule 6 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of proposed Rule 6 permits each Industry Member to record and report Manual Order Events to the Central Repository in increments up to and including one second, provided that each Industry Member is required to record and report the time when a Manual Order Event has been captured electronically in an order handling and execution system of such Member (“Electronic Capture Time”) in milliseconds. In addition, paragraph (b)(2) of proposed Rule 6 permits each Industry Member to record and report the time of Allocation Reports in increments up to and including one second.
Proposed Rule 7 (Consolidated Audit Trail—Clock Synchronization Rule Violations [sic]) describes potential violations of the clock synchronization time period requirements set forth in proposed Article 23. Proposed Rule 7 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Article 23 without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional
Proposed Rule 8 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of proposed Rule 8 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of proposed Rule 8 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee.
Paragraph (b) of proposed Rule 8 addresses connectivity requirements related to the CAT. Paragraph (b) of proposed Rule 8 requires each Industry Member to connect to the Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, Paragraph (c)(1) of proposed Rule 8 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the reporting obligations of such Industry Member under proposed Article 23. Any such agreement must be evidenced in writing, which specifies the respective functions and responsibilities of each party to the agreement that are required to effect full compliance with the requirements of proposed Article 23. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of proposed Rule 8 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) states that each Industry Member remains primarily responsible for compliance with the requirements of proposed Article 23, notwithstanding the existence of an agreement described in paragraph (c) of proposed Rule 8.
The Exchange proposes Rule 9 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of proposed Rule 9 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan.
Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 4 and 5, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 4 and 5, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018
Paragraph (b) of proposed Rule 9 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 10 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 10 requires each Industry Member to maintain and preserve records of the information required to be recorded under proposed Article 23 for the period of time and accessibility specified in SEC Rule 17a-4(b). The records required to be maintained and preserved under proposed Article 23 may be immediately produced or reproduced on “micrographic media” as defined in SEC Rule 17a-4(f)(1)(i) or by means of “electronic storage media” as defined in SEC Rule 17a-4(f)(1)(ii) that meet the conditions set forth in SEC Rule 17a-4(f) and be maintained and preserved for the required time in that form. Proposed Rule 10 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of proposed Rule 11 requires Industry Members to accurately provide the LEIs in their records as required by proposed Article 23 and states that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) notes, however, that this requirement does not impose any additional due diligence obligations on Industry Members with regard to LEIs for CAT purposes. Accordingly, this provision does not impose any due diligence obligations beyond those that may exist today with respect to information associated with an LEI. Although Industry Members will not be required to perform additional due diligence with regard to the LEIs for CAT purposes, Industry Members will be required to accurately provide the LEIs in their records and may not knowingly submit inaccurate LEIs to the CAT. Paragraph (b) is consistent with the SEC's statements in the Approval Order for the CAT NMS Plan regarding an Industry Member's obligations regarding LEIs.
Paragraph (c) states that, if an Industry Member reports data to the Central Repository with errors such that its error percentage exceeds the maximum Error Rate established by the Operating Committee pursuant to the CAT NMS Plan, then such Industry Member would not be in compliance with the Article 23. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. The Exchange intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Information Memorandum.
Furthermore, paragraph (d) of proposed Rule 11 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 11 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT (the “Compliance Thresholds”). Compliance Thresholds will compare an Industry Member's error rate to the aggregate Error Rate over a period of time to be defined by the Operating Committee. Compliance Thresholds will be set by the Operating Committee, and will be calculated at intervals to be set by the Operating Committee.
Proposed Rule 12 (Consolidated Audi [sic] Trail—Compliance Dates) sets forth the compliance dates for the various provisions of proposed Article 23. Paragraph (a) of proposed Rule 12 states that paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date of Article 23. Unless otherwise noted, Article 23 is fully effective and Industry Members must comply with their terms.
Paragraph (b) of proposed Rule 12 establishes the compliance dates for the clock synchronization requirements as set forth in proposed Rule 2. Paragraph (b)(1) states that each Industry Member shall comply with Rule 2 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 2 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Plan Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of proposed Rule 12 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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.”
The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the proposed rules implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this proposed Article 23. Therefore, this is not a competitive rule filing, and, therefore, it
No written comments were solicited or received with respect to the proposed rule change.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”),
The Exchange proposes to adopt Chapter VI, Section F to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan” or the “Plan”). The text of the proposed rule change is available on the Exchange's Web site (
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.
Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, CBOE, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc. (“FINRA”), International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the “Participants”) filed with the Commission, pursuant to Section 11A of the Act
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.
Proposed Rule 6.85 (Definitions) sets forth the definitions for the terms used in proposed Section F. Each of the defined terms in proposed Rule 6.85 is discussed in detail in this section.
SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer's associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the “Customer-ID” for each Customer for the original receipt or origination of an order. “Customer-ID” is defined in SEC Rule 613(j)(5) to mean “with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.” SEC Rule 613(c)(8) requires Industry Members to use the same Customer-ID for each Customer. The SEC granted the Participants exemptive relief to permit the use of an alternative approach to the requirement that an Industry Member report a Customer-ID for every Customer upon original receipt or origination.
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 (
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.
In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. “Customer Account Information” is defined in SEC Rule 613(j)(4) to “include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).” Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Participants requested and received an exemption to allow an “Account Effective Date” to be reported in lieu of an account open date in certain limited circumstances. The definition of “Account Effective Date” as set forth in paragraph (a) of proposed Rule 6.85 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, paragraph (a)(i) defines “Account Effective Date to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (A) When the trading relationship was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, either (1) the date the relationship identifier was established within the Industry Member; (2) the date when trading began (
Paragraph (a)(ii) states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(iii) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(iv) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(v) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (A) The date established for the account in the Industry Member or in a system of the Industry Member or (B) the date when proprietary trading began in the account (
Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account Information for only those accounts that are active. This will alleviate the need for Industry Members to update such information for non-active accounts, but still ensure that the Central Repository will collect audit trail data for Customer accounts that have any Reportable Events. Accordingly, paragraph (b) of proposed Rule 6.85 defines an “Active Account” as an account that has had activity in Eligible Securities within the last six months. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
To assist in implementing the Allocation Report Approach, paragraph (c) of proposed Rule 6.85 defines an “Allocation Report.” Specifically, an “Allocation Report” means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use “Business Clocks” to record such dates and times. Accordingly, paragraph (d) of proposed Rule 6.85 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under proposed Section F. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except CBOE proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Rule Series.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in proposed Section F.
Paragraph (e) of proposed Rule 6.85 defines the term “CAT” to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (f) of proposed Rule 6.85 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, paragraph (g) of proposed Rule 6.85 defines the term “CAT-Order-ID.” The term “CAT-Order-ID” is defined to mean a unique order identifier or series of unique order identifiers that allows the Central Repository to efficiently and accurately link all Reportable Events for an order, and all orders that result from the aggregation or disaggregation of such
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.
This definition is based on FINRA's definition of a “Reporting Agent” as set forth in FINRA's rule related to its Order Audit Trail System (“OATS”). Specifically, FINRA Rule 7410(n) defines a “Reporting Agent” as a third party that enters into any agreement with a member pursuant to which the Reporting Agent agrees to fulfill such member's reporting obligations under Rule 7450. The Reporting Agent for OATS fulfills a similar role to the CAT Reporting Agent.
Paragraph (i) of proposed Rule 6.85 defines the term “Central Repository” to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except CBOE uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of proposed Rule 6.85 defines the term “Compliance Threshold” as having the meaning set forth in proposed Rule 6.95(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to proposed Rule 6.95(d), each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT. This Industry Member-specific rate is the “Compliance Threshold.”
Industry Members are required to submit to the Central Repository certain information related to their Customers, including Customer Identifying Information and Customer Account Information, as well as data related to their Customer's Reportable Events. Accordingly, paragraph (k) of proposed Rule 6.85 proposes to define the term “Customer.” Specifically, the term “Customer” would be defined to mean: (i) The account holder(s) of the account at an Industry Member originating the order; and (ii) any person from whom the Industry Member is authorized to accept trading instructions for such account, if different from the account holder(s). This is the same definition as set forth in SEC Rule 613(j)(3), except CBOE proposes to replace the references to a registered broker-dealer or broker-dealer with a reference to an Industry Member for consistency of terms used in proposed Section F. CBOE also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, CBOE proposes to define the term “Customer Account Information” to clarify what customer information would need to be reported to the Central Repository.
Paragraph (l) of proposed Rule 6.85 defines the term “Customer Account Information” to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 6.85(l), however, provides an alternative definition of “Customer Account Information” in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (i) Provide the Account Effective Date in lieu of the “date account opened”; (ii) provide the relationship identifier in lieu of the “account number”; and (iii) identify the “account type” as a “relationship.” Second, in those circumstances in which the relevant account was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, and no “date account opened” is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (i) Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (ii) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (iii) where there are multiple dates associated with an account in an Industry Member's system, and the parameters of each date are determined by the individual Industry Member; and (iv) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of “Customer Account Information” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Identifying Information to the Central Repository as part of the customer definition process. Accordingly, CBOE proposes to define the term “Customer Account Information” to clarify what Customer information would need to be reported to the Central Repository.
Paragraph (m) of proposed Rule 6.85 defines the term “Customer Identifying Information” to mean information of sufficient detail to identify a Customer. With respect to individuals, “Customer Identifying Information” includes, but is not limited to: Name, address, date of birth, individual tax payer identification number (“ITIN”)/social security number (“SSN”), individual's role in the account (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of proposed Section F only apply to Reportable Events in Eligible Securities. Currently, an Eligible Security includes NMS Securities and OTC Equity Securities. Accordingly, paragraph (o) of proposed Rule 6.85 defines the term “Eligible Security” to include: (i) All NMS Securities; and (ii) all OTC Equity Securities. The terms “NMS Securities” and “OTC Equity Securities” are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
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.
To implement the requirements of the CAT NMS Plan related to the Error Rate, CBOE proposes to define the term “Error Rate” in proposed Rule 6.85. Paragraph (p) of proposed Rule 6.85 defines the term “Error Rate” to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines “Error Rate” by reference to SEC Rule 613(j)(6).
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 (
Paragraph (r) of proposed Rule 6.85 defines the term “Industry Member” to mean a member of a national securities exchange or a member of a national securities association.” This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (s) of proposed Rule 6.85 states that the term “Industry Member Data” has the meaning set forth in Rule 6.87(a)(ii). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Industry
Paragraph (t) of proposed Rule 6.85 defines the term “Initial Plan Processor” to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the “Selection Plan.”
The CAT NMS Plan and proposed Section F applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of proposed Section F apply specifically to Listed Options. Accordingly, paragraph (u) of proposed Rule 6.85 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of proposed Rule 6.85 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” CBOE notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, CBOE proposes to define the term “Manual Order Event” in proposed Rule 6.85. Specifically, paragraph (v) of proposed Rule 6.85 defines the term “Manual Order Event” to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Proposed Rule 6.87 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, CBOE proposes to define the term “NMS Security” in proposed Rule 6.85. Specifically, paragraph (x) of proposed Rule 6.85 defines the term “NMS Security” to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, CBOE proposes to define the term “NMS Stock” in paragraph (y) of proposed Rule 6.85(y) to mean any NMS Security other than an option. This is the same definition as set forth in SEC Rule 600(b)(47) of Regulation NMS.
Paragraph (z) of proposed Rule 6.85 defines the term “Operating Committee” to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except CBOE proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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
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.
To implement the requirements related to Option Market Maker quotes, CBOE proposes to define the term “Options Market Maker” in proposed Rule 6.85. Specifically, paragraph (aa) of proposed Rule 6.85 defines the term “Options Market Makers” to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Section F requires each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, CBOE proposes to define the term “Order” in proposed Rule 6.85. Specifically, paragraph (bb) of proposed Rule 6.85 defines the term “Order,” with respect to Eligible Securities, to include: (i) Any order received by an Industry Member from any person; (ii) any order originated by an Industry Member; or (iii) any bid or offer. This is the same definition as set forth in SEC Rule 613(j)(8), except CBOE proposes to replace the phrase “member of a national securities exchange or national securities association” with the term “Industry Member.” CBOE notes that Section 1.1 of the CAT NMS Plan defines “Order” by reference to SEC Rule 613(j)(8).
OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, CBOE proposes to define the term “OTC Equity Security” in proposed Rule 6.85. Specifically, paragraph (cc) of proposed Rule 6.85 defines the term “OTC Equity Security” to mean any equity security, other than an NMS Security, subject to prompt last sale reporting rules of a registered national securities association and reported to one of such association's equity trade reporting facilities. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (dd) of proposed Rule 6.85 defines the term “Participant” to mean each Person identified as such in Exhibit A of the CAT NMS Plan, as amended, in such Person's capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ee) of proposed Rule 6.85 defines the term “Person” to mean any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association and any heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so permits. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (ff) of proposed Rule 6.85 defines the term “Plan Processor” to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan.
Paragraph (gg) of proposed Rule 6.85 states that the term “Received Industry Member Data” has the meaning set forth in proposed Rule 6.87(a)(ii). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Received Industry Member Data” is discussed more fully in the discussion below regarding proposed Rule 6.87(a)(ii).
Paragraph (hh) of proposed Rule 6.85 states that the term “Recorded Industry Member Data” has the meaning set forth in proposed Rule 6.87(a)(i). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding proposed Rule 6.87(a)(i).
Proposed Section F requires each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, CBOE proposes to define the term “Reportable Event” in proposed Rule 6.85. Specifically, paragraph (ii) of proposed Rule 6.85 states that the term “Reportable Event” includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (jj) of proposed Rule 6.85 defines the term “SRO” to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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).
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.
To implement the Existing Identifier Approach, CBOE proposes to define the term “SRO-Assigned Market Participant Identifier” in proposed Rule 6.85. Specifically, paragraph (kk) of proposed Rule 6.85 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of proposed Section F differ to some extent for Small Industry Members versus Industry Members other than Small Industry Members. For example, the compliance dates for reporting data to the CAT are different for Small Industry Members versus other Industry Members. Accordingly, to clarify the requirements that apply to which Industry Members, CBOE proposes to define the term “Small Industry Member” in proposed Rule 6.85. Specifically, paragraph (ll) of proposed Rule 6.85 defines the term “Small Industry Member” to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0-10(c) under the Act. This is the same in substance as the definition of “Small Industry Member” as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a “Small Industry Member” as “an Industry Member that qualifies as a small broker-dealer as defined in SEC Rule 613.” The definition of a small broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as defined in SEC Rule 0-10(c).
Proposed Rule 6.87(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, CBOE proposes to define the term “Trading Day” in proposed Rule 6.85. Specifically, paragraph (mm) of proposed Rule 6.85 states that the term “Trading Day” shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time.
SEC Rule 613(d)(1) under Regulation NMS requires Industry Members to synchronize their Business Clocks to the time maintained by the National Institute of Standards and Technology (“NIST”), consistent with industry standards. To comply with this provision, Section 6.8 of the Plan sets forth the clock synchronization requirements for Industry Members.
Paragraph (a) of proposed Rule 6.86 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(i) of proposed Rule 6.86 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
Paragraph (a)(ii) of proposed Rule 6.86 requires each Industry Member to synchronize (A) its Business Clocks used solely for Manual Order Events and (B) its Business Clocks used solely for the time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(iii) of proposed Rule 6.86 clarifies that the tolerance described in paragraphs (a)(i) and (ii) of the proposed Rule 6.86 includes all of the following: (A) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (B) the transmission delay from the source; and (C) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(iv) of proposed Rule 6.86 requires Industry Members to synchronize their Business Clocks every business day before market open
Paragraph (b) of proposed Rule 6.86 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry
Paragraph (c) of proposed Rule 6.86 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of proposed Rule 6.86 requires each Industry Member to certify to CBOE that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of proposed Rule 6.86 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. CBOE intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular.
Paragraph (d) of proposed Rule 6.86 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of proposed Rule 6.86 requires Industry Members to report to the Plan Processor and CBOE violations of paragraph (a) of this proposed Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. CBOE intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular.
SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, CBOE proposes Rule 6.87 (Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 6.87 has five sections covering: (a) Recording and reporting Industry Member Data, (b) timing of the recording and reporting, (c) the applicable securities covered by the recording and reporting requirements, (d) the security symbology to be used in the recording and reporting, and (e) error correction requirements, each of which is described below.
Paragraph (a) of proposed Rule 6.87 describes the recording and reporting of Industry Member Data to the Central Repository. Paragraph (a) consists of paragraphs (a)(i) through (a)(iii), which cover Recorded Industry Member Data, Received Industry Member Data and Options Market Maker data, respectively. Paragraphs (a)(i) through (a)(iii) of proposed Rule 6.87 set forth the recording and reporting requirements required in Section 6.4(d)(i) through (iii) of the CAT NMS Plan, respectively.
Paragraph (a)(i) requires, subject to paragraph (a)(iii) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (“Recorded Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
(A) For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant Identifier of the Industry Member receiving or originating the order; (4) date of order receipt or origination; (5) time of order receipt or origination (using time stamps pursuant to proposed Rule 6.90); and (6) Material Terms of the Order;
(B) for the routing of an order: (1) CAT-Order-ID; (2) date on which the order is routed; (3) time at which the order is routed (using time stamps pursuant to proposed Rule 6.90); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant to which the order is being routed; (6) if routed internally at the Industry Member, the identity and nature of the department or desk to which the order is routed; and (7) Material Terms of the Order;
(C) for the receipt of an order that has been routed, the following information: (1) CAT-Order-ID; (2) date on which the order is received; (3) time at which the order is received (using time stamps pursuant to proposed Rule 6.90); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant routing the order; and (6) Material Terms of the Order;
(D) if the order is modified or cancelled: (1) CAT-Order-ID; (2) date the modification or cancellation is received or originated; (3) time at which the modification or cancellation is received or originated (using time stamps pursuant to proposed Rule 6.90); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member;
(E) if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using time stamps pursuant to proposed Rule 6.90; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) SRO-Assigned Market Participant Identifier of the Industry Member executing the order; and (7) whether the execution was reported pursuant to an effective transaction reporting plan or OPRA; and
(F) other information or additional events as may be prescribed pursuant to the CAT NMS Plan.
Paragraph (a)(ii) of proposed Rule 6.87 requires, subject to paragraph (a)(iii) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (“Received Industry Member Data” and collectively with the information referred to in proposed Rule 6.87(a)(i) “Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
(A) If the order is executed, in whole or in part: (1) Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) CAT-Order-ID of any contra-side order(s);
(B) if the trade is cancelled, a cancelled trade indicator; and
(C) for original receipt or origination of an order, the Firm Designated ID for the relevant Customer, and in accordance with Proposed Rule 6.88, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(iii) of proposed Rule 6.87 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is
Paragraph (b) of proposed Rule 6.87 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(i) through (b)(iii) of proposed Rule 6.87 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i) through (ii) of the CAT NMS Plan.
Paragraph (b)(i) of proposed Rule 6.87 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(ii) of proposed Rule 6.87 requires each Industry Member to report: (A) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (B) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(iii) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern time deadline.
Paragraph (c) of proposed Rule 6.87 describes the securities to which the recording and reporting requirements of proposed Rule 6.87 apply. Paragraphs (c)(i) and (c)(ii) of proposed Rule 6.87 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(i) of proposed Rule 6.87 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of proposed Rule 6.87 for each NMS Security registered or listed for trading on an exchange or admitted to unlisted trading privileges on an exchange. Paragraph (c)(ii) of proposed Rule 6.87 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of proposed Rule 6.87 for each Eligible Security for which transaction reports are required to be submitted to a national securities association.
Paragraph (d) of proposed Rule 6.87 describes the security symbology that Industry Members are required to use when reporting Industry Member Data to the Central Repository. Paragraph (d)(i) of proposed Rule 6.87 requires, for each exchange-listed Eligible Security, each Industry Member to report Industry Member Data to the Central Repository using the symbology format of the exchange listing the security. This requirement implements the requirement set forth in Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange symbology when reporting data to the Central Repository for exchange-listed Eligible Securities.
For each Eligible Security that is not exchange-listed, however, there is no listing exchange to provide the symbology format. Moreover, to date, the requisite symbology format has not been determined. Therefore, paragraph (d)(ii) of proposed Rule 6.87 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. CBOE intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Regulatory Circular.
To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, CBOE proposes to adopt paragraph (e) of proposed Rule 6.87, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of proposed Rule 6.87 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. CBOE proposes Rule 6.88 (Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of proposed Rule 6.88 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 6.93.
Paragraph (b) of proposed Rule 6.88 requires each Industry Member to submit to the Central Repository any updates, additions or other changes to the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account on a daily basis.
Paragraph (c) of proposed Rule 6.88 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. CBOE intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via Regulatory Circular.
Finally, paragraph (d) of proposed Rule 6.88 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan.
Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to
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.
Paragraph (a) of proposed Rule 6.90 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of proposed Rule 6.90 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(ii) and (b) of proposed Rule 6.90. To the extent that any Industry Member's order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(ii) of proposed Rule 6.90 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of proposed Rule 6.90 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of proposed Rule 6.90 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(i) of proposed Rule 6.90 permits each Industry Member to record and report Manual Order Events to the Central Repository in increments up to and including one second, provided that each Industry Member is required to record and report the time when a Manual Order Event has been captured electronically in an order handling and execution system of such Member (
Proposed Rule 6.91 (Clock Synchronization Rule Violations) describes potential violations of the clock synchronization time period requirements set forth in proposed Section F. Proposed Rule 6.91 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Rule Series without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 6.92 (Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of proposed Rule 6.92 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of proposed Rule 6.92 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee.
Paragraph (b) of proposed Rule 6.92 addresses connectivity requirements related to the CAT. Paragraph (b) of proposed Rule 6.92 requires each Industry Member to connect to the Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, paragraph (c)(1) of proposed Rule 6.92 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under proposed Section F. Any such agreement must be evidenced in writing, which specifies the respective functions and responsibilities of each party to the agreement that are required to effect full compliance with the requirements of proposed Section F. CBOE notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(ii) of proposed Rule 6.92 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(iii) of proposed Rule 6.92 states that each Industry Member remains primarily responsible for compliance with the requirements of proposed Section F, notwithstanding the existence of an agreement described in paragraph (c) of proposed Rule 6.92.
CBOE proposes Rule 6.93 (Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of proposed Rule 6.93 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan.
Paragraph (a)(i) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(ii) sets forth the deadlines related to reporting Customer
Paragraph (a)(iii) sets forth the deadlines related to the submission of order data. Under paragraph (a)(iii)(A), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(iii)(B), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019.
Paragraph (a)(iv) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of proposed Rule 6.93 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 6.94 (Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 6.94 requires each Industry Member to maintain and preserve records of the information required to be recorded under proposed Section F for the period of time and accessibility specified in SEC Rule 17a-4(b). The records required to be maintained and preserved under proposed Section F may be immediately produced or reproduced on “micrographic media” as defined in SEC Rule 17a-4(f)(1)(i) or by means of “electronic storage media” as defined in SEC Rule 17a-4(f)(1)(ii) that meet the conditions set forth in SEC Rule 17a-4(f) and be maintained and preserved for the required time in that form. Proposed Rule 6.94 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of proposed Rule 6.95 requires Industry Members to accurately provide the LEIs in their records as required by proposed Section F and states that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) notes, however, that this requirement does not impose any additional due diligence obligations on Industry Members with regard to LEIs for CAT purposes. Accordingly, this provision does not impose any due diligence obligations beyond those that may exist today with respect to information associated with an LEI. Although Industry Members will not be required to perform additional due diligence with regard to the LEIs for CAT purposes, Industry Members will be required to accurately provide the LEIs in their records and may not knowingly submit inaccurate LEIs to the CAT. Paragraph (b) is consistent with the SEC's statements in the Approval Order for the CAT NMS Plan regarding an Industry Member's obligations regarding LEIs.
Paragraph (c) states that, if an Industry Member reports data to the Central Repository with errors such that its error percentage exceeds the maximum Error Rate established by the Operating Committee pursuant to the CAT NMS Plan, then such Industry Member would not be in compliance with proposed Section F. As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. CBOE intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Regulatory Circular.
Furthermore, paragraph (d) of proposed Rule 6.95 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 6.95 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT (the “Compliance Thresholds”). Compliance Thresholds will compare an Industry Member's error rate to the aggregate Error Rate over a period of time to be defined by the Operating Committee. Compliance Thresholds will be set by the Operating Committee, and will be calculated at intervals to be set by the Operating Committee.
Proposed Rule 6.96 (Compliance Dates) sets forth the compliance dates for the various provisions of proposed Section F. Paragraph (a) of proposed Rule 6.96 states that, except as set forth in paragraphs (b) and (c) of proposed Rule 6.96 or otherwise set forth in proposed Section F, the compliance date for proposed Section F is the approval date of the filing.
Paragraph (b) of proposed Rule 6.96 establishes the compliance dates for the clock synchronization requirements as set forth in proposed Rule 6.96. Paragraph (b)(i) states that each Industry Member shall comply with 6.86 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(ii) states that each Industry Member shall comply with Rule 6.86 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(i) reflects the exemptive relief the Participants intend to request with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of proposed Rule 6.96 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(i) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(ii) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.
The Exchange believes that this proposal is consistent with the Act because it implements, interprets or clarifies the provisions of the Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the Commission noted the Plan “is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.”
CBOE does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. CBOE notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist CBOE in meeting its regulatory obligations pursuant to the Plan. CBOE also notes that proposed Section F implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing rules virtually identical to proposed Section F. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition.
The Exchange neither solicited nor received comments on the proposed rule change.
Within 45 days of the date of publication of this notice in the
A. By order approve or disapprove such proposed rule change, or
B. institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)
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”).
The text of the proposed rule change is available on the Exchange's Web site at
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.
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,
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.
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
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.
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.
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 (
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.
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 (
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
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.
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.
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.
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).
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.
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.
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.
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).
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.
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.
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.”
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.”
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).
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.
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 (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
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.
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.
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.
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).
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 (
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.
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).
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.”
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.
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.
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.
Proposed Rule 1703 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
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.
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.
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.
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.
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.
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).
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.
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.
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.
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.
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).
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).
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.
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.
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).
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant” in proposed Rule 1701. Specifically, paragraph (kk) of proposed Rule 1701 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or identifier used by a Participant. This is
The 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).
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.
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.
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
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.
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.
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
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.
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.
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.
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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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.
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.
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
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.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act
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.”
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.
Written comments were neither solicited nor received.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”)
The Exchange filed a proposal to amend Chapter XIV of its rules to implement the compliance rule (“Compliance Rule”) regarding the National Market System Plan Governing the Consolidated Audit Trail. [sic] (the “CAT NMS Plan” or “Plan”).
The text of the proposed rule change is available at the Exchange's Web site at
In its filing with the Commission, the Exchange included statements concerning the purpose of and statutory basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.
Bats BZX Exchange, Inc., Bats BYX 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. (“FINRA”), International Securities Exchange, LLC, Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc. [sic] NASDAQ PHLX LLC) [sic], The NASDAQ Stock Market LLC, NSX, New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, “self-regulatory organizations”, “SROs” or “Participants”), filed with the Commission a National Market System (“NMS”) Plan Governing the Consolidated Audit Trail (the “CAT NMS Plan,” “CAT Plan” or “Plan”).
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.
Proposed Rule 14.1 (Consolidated Audit Trail—Definitions) sets forth the definitions for the terms used in the Chapter XIV Rule Series. Each of the defined terms in Proposed Rule 14.1 is discussed in detail in this section.
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, 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.
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 (
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.
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 14.1 describes those limited circumstances in which an Industry Member may report an “Account Effective Date” rather than the account open date. The proposed definition is the same as the definition of “Account Effective Date” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
Specifically, Paragraph (a)(1) defines “Account Effective Date [sic] to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When the trading relationship was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, either (a) the date the relationship identifier was established within the Industry Member; (b) the date when trading began (
Paragraph (a)(2) of Proposed Rule 14.1 states that an “Account Effective Date” means, where an Industry Member changes back office providers or clearing firms prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(3) states that an “Account Effective Date” means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer.
Paragraph (a)(4) states that “Account Effective Date” means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date.
Paragraph (a)(5) states that an “Account Effective Date” means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (
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 14.1 defines an “Active Account” as an account that has had activity in Eligible Securities within the last six months. This is the same
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 Participants 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.
To assist in implementing the Allocation Report Approach, paragraph (c) of Proposed Rule 14.1 defines an “Allocation Report.” Specifically, an “Allocation Report” means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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 14.1 defines the term “Business Clock” as a clock used to record the date and time of any Reportable Event required to be reported under the Rules in Chapter XIV. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to replace the phrase “under SEC Rule 613” at the end of the definition in Section 1.1 of the Plan with the phrase “under this Rule Series.” This change is intended to recognize that the Industry Members' obligations with regard to the CAT are set forth in this [sic] Rules contained in Chapter XIV.
Paragraph (e) of Proposed Rule 14.1 defines the term “CAT” to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (f) of Proposed Rule 14.1 defines the term “CAT NMS Plan” to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time.
Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to link the Reportable Events related to the same order.
To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 14.1 defines the term “CAT-Order-ID.” The term “CAT-Order-ID” is defined to mean a unique order identifier or series of unique order identifiers that allows the Central Repository to efficiently and accurately link all Reportable Events for an order, and all orders that result from the aggregation or disaggregation of such order. This is the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 of the CAT NMS Plan defines “CAT-Order-ID” by reference to SEC Rule 613(j)(1).
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.
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.
Paragraph (i) of Proposed Rule 14.1 defines the term “Central Repository” to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange uses the phrase “CAT NMS Plan” in place of the phrase “this Agreement.”
Paragraph (j) of Proposed Rule 14.1 defines the term “Compliance Threshold” as having the meaning set forth in Proposed Rule 14.11(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to Proposed Rule 14.11(d), each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT. This Industry Member-specific rate is the “Compliance Threshold.”
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 14.1 proposes to define the term “Customer.” Specifically, the term “Customer” would be defined to mean: (1) The account holder(s) of the account at an Industry Member originating the order; and (2) any person from whom the Industry Member is authorized to accept trading instructions for such 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 Chapter XIV Rule Series. The Exchange also notes that Section 1.1 of the CAT NMS Plan defines “Customer” by reference to SEC Rule 613(j)(3).
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 14.1 defines the term “Customer Account Information” to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 14.1(l), however, provides an alternative definition of “Customer Account Information” in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (1) Provide the Account Effective Date in lieu of the “date account opened”; (2) provide the relationship identifier in lieu of the “account number”; and (3) identify the “account type” as a “relationship.” Second, in those circumstances in which the relevant account was established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, and no “date account opened” is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (1) Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (2) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (3) where there are multiple dates associated with an account in an Industry Member's system, and the parameters of each date are determined by the individual Industry Member; and (4) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of “Customer Account Information” set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan.
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 14.1 defines the term “Customer Identifying Information” to mean information of sufficient detail to identify a Customer. With respect to individuals, “Customer Identifying Information” includes, but is not limited to: Name, address, date of birth, individual tax payer identification number (“ITIN”)/social security number (“SSN”), individual's role in the account (
The CAT NMS Plan uses the term “Data Submitter” to refer to any person that reports data to the Central Repository.
The reporting requirements of the Chapter XIV Rule Series 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 14.1 defines the term “Eligible Security” to include: (1) All NMS Securities; and (2) all OTC Equity Securities. The terms “NMS Securities” and “OTC Equity Securities” are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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.
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.
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 14.1. Paragraph (p) of Proposed Rule 14.1 defines the term “Error Rate” to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines “Error Rate” by reference to SEC Rule 613(j)(6).
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 (
Specifically, paragraph (q) of Proposed Rule 14.1 defines the term “Firm Designated ID” to mean a unique identifier for each trading account designated by Industry Members for purposes of providing data to the Central Repository, where each such identifier is unique among all identifiers from any given Industry Member for each business date. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. Industry Members would be permitted to use an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (
Paragraph (r) of Proposed Rule 14.1 defines the term “Industry Member” to mean a member of a national securities exchange or a member of a national securities association.” This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (s) of Proposed Rule 14.1 states that the term “Industry Member Data” has the meaning set forth in Rule 14.3(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 14.3(a)(2).
Paragraph (t) of Proposed Rule 14.1 defines the term “Initial Plan Processor” to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the “Selection Plan.”
The CAT NMS Plan and this Chapter XIV Rule Series apply to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the Chapter XIV Rule Series apply specifically to Listed Options. Accordingly, Paragraph (u) of Proposed Rule 14.1 defines the term “Listed Option” or “Option.” Specifically, paragraph (u) of Proposed Rule 14.1 states that the term “Listed Option” or “Option” has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as “any option traded on a registered national securities exchange or automated facility of a national securities association.” The Exchange notes that the proposed definition of “Listed Option” is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan.
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.
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 14.1. Specifically, paragraph (v) of Proposed Rule 14.1 defines the term “Manual Order Event” to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Proposed Rule 14.3 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (
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 14.1. Specifically, paragraph (x) of proposed Rule 14.1 defines the term “NMS Security” to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
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 14.1 to mean any NMS Security other than an option. This is the same definition as set forth in SEC Rule 600(b)(47) of Regulation NMS.
Paragraph (z) of Proposed Rule 14.1 defines the term “Operating Committee” to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to use the phrase “CAT NMS LLC” in place of the phrase “the Company” for clarity.
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 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 Participants, however, requested and received exemptive relief from 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.
To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term “Options Market Maker” in Proposed Rule 14.1. Specifically, paragraph (aa) of Proposed Rule 14.1 defines the term “Options Market Maker” to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on such exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
The Chapter XIV Rule Series 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 14.1. Specifically, paragraph (bb) of Proposed Rule 14.1 defines the term “Order”, with respect to Eligible Securities, to include: (1) Any order received by an Industry Member from any person; (2) any order originated by an Industry Member; or (3) any bid or offer. This is the same definition as set forth in 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).
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 14.1. Specifically, paragraph (cc) of proposed Rule 14.1 defines the term “OTC Equity Security” to mean any equity security, other than an NMS Security, subject to prompt last sale reporting rules of a registered national securities association and reported to one of such association's equity trade reporting facilities. This is
Paragraph (dd) of Proposed Rule 14.1 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.
Paragraph (ee) of proposed Rule 14.1 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.
Paragraph (ff) of proposed Rule 14.1 defines the term “Plan Processor” to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan.
Paragraph (gg) of proposed Rule 14.1 states that the term “Received Industry Member Data” has the meaning set forth in Rule 14.3(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Received Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 14.3(a)(2).
Paragraph (hh) of proposed Rule 14.1 states that the term “Recorded Industry Member Data” has the meaning set forth in Rule 14.3(a)(1). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of “Recorded Industry Member Data” is discussed more fully in the discussion below regarding Proposed Rule 14.3(a)(1).
Proposed Rules 14.1 through 14.12 require each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term “Reportable Event” in Proposed Rule 14.1. Specifically, paragraph (ii) of Proposed Rule 14.1 states that the term “Reportable Event” includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
Paragraph (jj) of proposed Rule 14.1 defines the term “SRO” to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
The Participants requested and received exemptive relief from 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).
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 [sic], including CRD number or [sic]
To implement the Existing Identifier Approach, the Exchange proposes to define the term “SRO-Assigned Market Participant” in Proposed Rule 14.1. Specifically, paragraph (kk) of proposed Rule 14.1 defines the term “SRO-Assigned Market Participant Identifier” to mean an identifier assigned to an Industry Member by an SRO or an identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing SRO-Assigned Market Participant Identifier (
The requirements of the proposed rules 14.1 through 14.12 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 14.1. Specifically, paragraph (ll) of proposed Rule 14.1 defines the term “Small Industry Member” to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as amended. This is the same in substance as the definition of “Small Industry Member” as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a “Small Industry Member” as “an Industry Member that
Proposed Rule 14.3(b) establishes the deadlines for reporting certain data to the Central Repository using the term “Trading Day.” Accordingly, the Exchange proposes to define the term “Trading Day” in proposed Rule 14.1. Specifically, Paragraph (mm) of proposed Rule 14.1 states that the term “Trading Day” shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time.
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.
Paragraph (a) of proposed Rule 14.2 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of Proposed Rule 14.2 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
Paragraph (a)(2) of proposed Rule 14.2 requires each Industry Member to synchronize (1) its Business Clocks used solely for Manual Order Events and (2) its Business Clocks used solely for the time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(3) of proposed Rule 14.2 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the proposed Rule 14.2 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member's Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member's Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (a)(4) of proposed Rule 14.2 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and re-synchronized, as necessary, throughout the day. This description of the required frequency of clock synchronization is the same as set forth in paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (b) of Proposed Rule 14.2 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The Proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the Proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the “Sequencing Orders and Clock Synchronization” section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA Rule 4590 (Synchronization of Member Business Clocks).
Paragraph (c) of proposed Rule 14.2 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of proposed Rule 14.2 requires each Industry Member to periodically certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of Proposed Rule 14.2, 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 an Information Circular.
Paragraph (d) of Proposed Rule 14.2 establishes further reporting requirements with regard to clock synchronization. Paragraph (d) of Proposed Rule 14.2 requires Industry Members to report to the Plan Processor and to the Exchange violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via an Information Circular.
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 14.3 (Consolidated Audit Trail—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 14.3 has six [sic] sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities cover [sic] by the recording and reporting requirements, (4) format, [sic] (5) the security symbology to be used in the recording and reporting, and (6) error correction requirements, each of which is described below.
Paragraph (a) of proposed Rule 14.3 describes the recording and reporting of Industry Member Data to the Central Repository. Paragraph (a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry Member Data, Received Industry Member Data and Options Market Maker data, respectively. Paragraphs (a)(1)-(a)(3) of Proposed Rule 14.3 set forth the recording and reporting requirements required in Section 6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (“Recorded Industry Member Data”) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant 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 14.6); and (6) Material Terms of the Order;
• for the routing of an order: (1) CAT-Order-ID; (2) date on which the order is routed; (3) time at which the order is routed (using timestamps pursuant to Proposed Rule 14.6); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or 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 14.6); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or 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 14.6); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member;
• if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using timestamps pursuant to Proposed Rule 14.6; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) SRO-Assigned Market Participant Identifier of the Industry Member executing the order; (7) whether the execution was reported pursuant to an effective transaction reporting plan or the Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information; and
• other information or additional events as may be prescribed pursuant to the CAT NMS Plan.
Paragraph (a)(2) of proposed Rule 14.3 requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (“Received Industry Member Data” and collectively with the information referred to in Rule 14.3(a)(1) “Industry Member Data”)) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan:
• If the order is executed, in whole or in part: (1) An Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) CAT-Order-ID of any contra-side order(s);
• if the trade is cancelled, a cancelled trade indicator; and
• for original receipt or origination of an order, the Firm Designated ID for the relevant Customer, and in accordance with Proposed Rule 14.4, Customer Account Information and Customer Identifying Information for the relevant Customer.
Paragraph (a)(3) of proposed Rule 14.3 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is required to report to the Exchange the time at which its quote in a Listed Option is sent to the Exchange (and, if applicable, any subsequent quote modification time and/or cancellation time when such modification or cancellation is originated by the Options Market Maker). This paragraph implements the Options Market Maker Quote Exemption, as discussed above.
Paragraph (b) of proposed Rule 14.3 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 14.3 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
Paragraph (b)(1) of proposed Rule 14.3 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 14.3 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member receives such Received Industry Member Data. Paragraph (b)(3) states that Industry Members may, but are not required to, voluntarily report Industry Member Data prior to the applicable 8:00 a.m. Eastern Time deadline.
Paragraph (c) of proposed Rule 14.3 describes the securities to which the recording and reporting requirements of proposed Rule 14.3 apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 14.3 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of proposed Rule 14.3 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of proposed Rule 14.3 for each NMS Security registered or listed for trading on such exchange or admitted to unlisted trading privileges on such exchange. Paragraph (c)(2) of proposed Rule 14.3 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of this Proposed Rule 14.3 for each Eligible Security for which transaction reports are required to be submitted to FINRA.
Paragraph (d) of proposed Rule 14.3 describes the security symbology that
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 14.3 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via an Information Circular.
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 14.3, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of proposed Rule 14.3 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
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 14.4 (Consolidated Audit Trail—Customer Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of proposed Rule 14.4 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member's commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 14.9.
Paragraph (b) of proposed Rule 14.4 requires each Industry Member to submit to the Central Repository on a daily basis 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.
Paragraph (c) of proposed Rule 14.4 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. The Exchange intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via an Information Circular.
Finally, paragraph (d) of proposed Rule 14.4 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan.
Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository, on a daily basis [sic],
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.
Paragraph (a) of proposed Rule 14.6 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of proposed Rule 14.6 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of proposed Rule 14.6. To the extent that any Industry Member's order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(2) of Proposed Rule 14.6 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of Proposed Rule 14.6 regarding Manual Order Events and Allocation Reports.
Paragraph (b) of proposed Rule 14.6 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of proposed Rule 14.6
Proposed Rule 14.7 (Consolidated Audit Trail—Clock Synchronization Rule Violations [sic]) describes potential violations of the clock synchronization time period requirements set forth in the Chapter XIV Rule Series. Proposed Rule 14.7 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in this Rule Series without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan.
Proposed Rule 14.8 (Consolidated Audit Trail—Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of Proposed Rule 14.8 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of proposed Rule 14.8 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee.
Paragraph (b) of proposed Rule 14.8 addresses connectivity requirements related to the CAT. Paragraph (b) of proposed Rule 14.8 requires each Industry Member to connect to the Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, Paragraph (c)(1) of proposed Rule 14.8 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under the Chapter XIV Rule Series. 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 Chapter XIV Rule Series. The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of proposed Rule 14.8 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) states that each Industry Member remains primarily responsible for compliance with the requirements of the Chapter XIV Rule Series, notwithstanding the existence of an agreement described in paragraph (c) of proposed Rule 14.8.
The Exchange proposes Rule 14.9 (Consolidated Audit Trail—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of Proposed Rule 14.9 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan. Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019.
Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 14.4(a) and 14.5, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 14.4(a) and 14.5, respectively, to the Central Repository for processing no later than October 15, 2019.
Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019. Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018.
Paragraph (b) of Proposed Rule 14.9 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.
Proposed Rule 14.10 (Consolidated Audit Trail—Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 14.10 requires each Industry Member to maintain and preserve records of the information required to be recorded under the Chapter XIV Rule Series for the period of time and accessibility specified in SEC Rule 17a-4(b). The records required to be maintained and preserved under the Chapter XIV Rule Series 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 14.10 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS.
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.
In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of proposed Rule 14.11 requires Industry Members to accurately provide the LEIs in their records as required by the Chapter XIV Rule Series 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.
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 Chapter XIV Rule Series. 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 an Information Circular.
Furthermore, paragraph (d) of proposed Rule 14.11 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 14.11 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member's performance with regard to the CAT (the “Compliance Thresholds”). Compliance Thresholds will compare an Industry Member's error rate to the aggregate Error Rate over a period of time to be defined by the Operating Committee. Compliance Thresholds will be set by the Operating Committee, and will be calculated at intervals to be set by the Operating Committee.
Proposed Rule 14.12 (Consolidated Audi [sic] Trail—Compliance Dates) sets forth the compliance dates for the various provisions of the rules contained in Chapter XIV. Proposed paragraph (a) specifies that paragraphs (b) and (c) of proposed Rule 14.12 set forth the additional details with respect to the compliance dates of the Rules in Chapter XIV. Furthermore, paragraph (a) specifies that, unless otherwise noted, the Rules set forth in Chapter XIV are fully effective and ETP Holders must comply with their terms.
Paragraph (b) of Proposed Rule 14.12 establishes the compliance dates for the clock synchronization requirements as set forth in proposed Rule 14.2. Paragraph (b)(1) states that each Industry Member shall comply with Rule 14.2 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 14.2 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds.
Paragraph (c) of proposed Rule 14.12 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,
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 SRO 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.”
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 rule change 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 the same rules. Therefore, this rule filing does not present any competitive issues and, therefore, it does not impose a burden on competition.
The Exchange has not solicited or received any comments on the proposed rule change from market participants or others.
Within 45 days of the date of publication of this notice in the
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule change should be disapproved.
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:
• Use the Commission's Internet comment form (
• Send an email to
• Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
U.S. Small Business Administration.
Notice.
This is a notice of an Administrative declaration of a disaster for the State of Tennessee dated 02/01/2017.
Submit completed loan applications to: U.S. Small Business Administration, Processing and Disbursement Center, 14925 Kingsport Road, Fort Worth, TX 76155.
A. Escobar, Office of Disaster Assistance, U.S. Small Business Administration, 409 3rd Street SW., Suite 6050, Washington, DC 20416.
Notice is hereby given that as a result of the Administrator's disaster declaration, applications for disaster loans may be filed at the address listed above or other locally announced locations.
The following areas have been determined to be adversely affected by the disaster:
The number assigned to this disaster for physical damage is 15035 C and for economic injury is 15036 0.
The States which received an EIDL Declaration # is Tennessee.
Notice of request for public comment.
The Department of State is seeking Office of Management and Budget (OMB) approval for the information collection described below. In accordance with the Paperwork Reduction Act of 1995, we are requesting comments on this collection from all interested individuals and organizations. The purpose of this notice is to allow 60 days for public comment preceding submission of the collection to OMB.
The Department will accept comments from the public up to April 10, 2017.
Include any address that the public needs to know, such as: Attending a public hearing or meeting, examining any material available for public inspection. For public comments, use the following text:
You may submit comments by any of the following methods:
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You must include the DS form number (if applicable), information collection title, and the OMB control number in any correspondence.
Direct requests for additional information regarding the collection listed in this notice, including requests for copies of the proposed collection instrument and supporting documents, to G. Kevin Saba, Acting Deputy Assistant Secretary for Private Sector Exchange, ECA/EC, SA-5, Floor 5, Department of State, 2200 C Street NW., Washington, DC 20522-0505, who may be reached via
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We are soliciting public comments to permit the Department to:
• Evaluate whether the proposed information collection is necessary for the proper functions of the Department.
• Evaluate the accuracy of our estimate of the time and cost burden for this proposed collection, including the validity of the methodology and assumptions used.
• Enhance the quality, utility, and clarity of the information to be collected.
• Minimize the reporting burden on those who are to respond, including the use of automated collection techniques or other forms of information technology.
Annual reports from designated program sponsors assist the Department in oversight and administration of the J-NONIMMIGRANT visa program. The reports provide qualitative data on the number of exchange participants an organization sponsored annually per category of exchange. The reports also provide a summary of the activities in which exchange visitors were engaged and indicate information about program effectiveness. Program sponsors include government agencies, academic institutions, and private sector not-for-profit and for-profit entities. Annual reports are completed through the Student and Exchange Visitor Information System (SEVIS) and then printed and signed by a sponsor official, and sent to the Department by email or postal mail.
Maritime Administration, Department of Transportation.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before March 10, 2017.
Comments should refer to docket number MARAD-2017-0013. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel SOUTHERN SPORT is:
In accordance with 5 U.S.C. 553(c), DOT/MARAD solicits comments from the public to better inform its rulemaking process. DOT/MARAD posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121.
By Order of the Maritime Administrator.
Maritime Administration, Department of Transportation.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before March 10, 2017.
Comments should refer to docket number MARAD-2017-0011. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel ONE is:
In accordance with 5 U.S.C. 553(c), DOT/MARAD solicits comments from the public to better inform its rulemaking process. DOT/MARAD posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121
By Order of the Maritime Administrator.
Maritime Administration
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before March 10, 2017.
Comments should refer to docket number MARAD-2017-0012. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel MAKARA is:
In accordance with 5 U.S.C. 553(c), DOT/MARAD solicits comments from the public to better inform its rulemaking process. DOT/MARAD posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121.
By Order of the Maritime Administrator.
Maritime Administration, Department of Transportation.
Notice.
The Secretary of Transportation, as represented by the Maritime Administration (MARAD), is authorized to grant waivers of the U.S.-build requirement of the coastwise laws under certain circumstances. A request for such a waiver has been received by MARAD. The vessel, and a brief description of the proposed service, is listed below.
Submit comments on or before March 10, 2017.
Comments should refer to docket number MARAD-2017-0014. Written comments may be submitted by hand or by mail to the Docket Clerk, U.S. Department of Transportation, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590. You may also send comments electronically via the Internet at
Bianca Carr, U.S. Department of Transportation, Maritime Administration, 1200 New Jersey Avenue SE., Room W23-453, Washington, DC 20590. Telephone 202-366-9309, Email
As described by the applicant the intended service of the vessel MASCALZONE is:
In accordance with 5 U.S.C. 553(c), DOT/MARAD solicits comments from the public to better inform its rulemaking process. DOT/MARAD posts these comments, without edit, to
49 CFR 1.93(a), 46 U.S.C. 55103, 46 U.S.C. 12121
By Order of the Maritime Administrator,
Office of the Comptroller of the Currency (OCC), Treasury.
Notice and request for comment.
The OCC, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other Federal agencies to take this opportunity to comment on a continuing information collection as required by the Paperwork Reduction Act of 1995 (PRA).
In accordance with the requirements of the PRA, the OCC may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number.
The OCC is soliciting comment concerning renewal of its information collection titled “Capital Adequacy Standards.”
Comments must be submitted on or before April 10, 2017.
Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by email, if possible. Comments may be sent to: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, Attention: 1557-0318, 400 7th Street SW., Suite 3E-218, mail stop 9W-11, Washington, DC 20219. In addition, comments may be sent by fax to (571) 465-4326 or by electronic mail to
All comments received, including attachments and other supporting materials, are part of the public record and subject to public disclosure. Do not include any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure.
Shaquita Merritt, OCC Clearance Officer, (202) 649-5490 or, for persons who are deaf or hard of hearing, TTY, (202) 649-5597, Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219.
Under the PRA (44 U.S.C. 3501-3520), Federal agencies must obtain approval from OMB for each collection of information that they conduct or sponsor. “Collection of information” is defined in 44 U.S.C. 3502(3) and 5 CFR 1320.3(c) to include agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. Section 3506(c)(2)(A) of title 44 requires Federal agencies to provide a 60-day notice in the
Twelve CFR part 3 sets forth the OCC's minimum capital requirements and overall capital adequacy standards for national banks and Federal savings associations (institutions).
Section 3.3(c) allows for the recognition of netting across multiple types of transactions or agreements if an institution obtains a written legal opinion verifying the validity and enforceability of the agreement under certain circumstances and maintains sufficient written documentation of this legal review.
Section 3.22(h)(2)(iii)(A) permits the use of a conservative estimate of the amount of an institution's investment in its own capital or the capital of unconsolidated financial institutions held through the index security with prior approval by the OCC.
Section 3.35(b)(3)(i)(A) requires, for a cleared transaction with a qualified central counterparty (QCCP), that a client bank apply a risk weight of two percent, provided that the collateral posted by the bank to the QCCP is subject to certain arrangements and the client bank has conducted a sufficient legal review (and maintains sufficient written documentation of the legal review) to conclude with a well-founded basis that the arrangements, in the event of a legal challenge, would be found to be legal, valid, binding, and enforceable under the law of the relevant jurisdictions.
Section 3.37(c)(4)(i)(E), regarding collateralized transactions, requires that an institution have policies and procedures in place describing how it determines the period of significant financial stress used to calculate its own internal estimates for haircuts and be able to provide empirical support for the period used.
Section 3.41(b)(3) which sets forth operational requirements for securitization exposures, allows an institution to recognize for risk-based capital purposes, in the case of synthetic securitizations, a credit risk mitigant to hedge underlying exposures if certain conditions are met, including a requirement that the institution obtain a well-reasoned opinion from legal counsel that confirms the enforceability of the credit risk mitigant in all relevant jurisdictions.
Section 3.41(c)(2)(i) requires that an institution demonstrate its comprehensive understanding of a
If an institution provides non-contractual support to a securitization, § 3.42(e)(2) requires the institution to publicly disclose that it has provided implicit support to a securitization and the risk-based capital impact to the bank of providing such implicit support.
Section 3.62 sets forth disclosure requirements related to the capital requirements of an institution. These requirements apply to an institution with total consolidated assets of $50 billion or more that is not a consolidated subsidiary of an entity that is itself subject to Basel III disclosures. Section 3.62(a) requires quarterly disclosure of information in the applicable tables in section 3.63 and, if a significant change occurs, such that the most recent reported amounts are no longer reflective of the institution's capital adequacy and risk profile, § 3.62(a) requires the institution to disclose as soon as practicable thereafter, a brief discussion of the change and its likely impact. Section 3.62(a) permits annual disclosure of qualitative information that typically does not change each quarter, provided that any significant changes are disclosed in the interim. Section 3.62(b) requires that an institution have a formal disclosure policy approved by the board of directors that addresses its approach for determining the disclosures it makes. The policy must address the associated internal controls and disclosure controls and procedures. Section 3.62(c) permits an institution to disclose more general information about certain subjects if the institution concludes that the specific commercial or financial information required to be disclosed under § 3.62 is exempt from disclosure under the Freedom of Information Act (5 U.S.C. 552), and the institution provides the reason the specific items of information have not been disclosed.
Section 3.63 sets forth the specific disclosure requirements for a non-advanced approaches institution with total consolidated assets of $50 billion or more that is not a consolidated subsidiary of an entity that is itself subject to Basel III disclosure requirements. Section 3.63(a) requires those institutions to make the disclosures in Tables 1 through 10 to § 3.63 and in § 3.63(b) for each of the last three years beginning on the effective date of the rule. Section 3.63(b) requires quarterly disclosure of an institution's common equity tier 1 capital, additional tier 1 capital, tier 2 capital, tier 1 and total capital ratios, including the regulatory capital elements and all the regulatory adjustments and deductions needed to calculate the numerator of such ratios; total risk-weighted assets, including the different regulatory adjustments and deductions needed to calculate total risk-weighted assets; regulatory capital ratios during any transition periods, including a description of all the regulatory capital elements and all regulatory adjustments and deductions needed to calculate the numerator and denominator of each capital ratio during any transition period; and a reconciliation of regulatory capital elements as they relate to its balance sheet in any audited consolidated financial statements. Tables 1 through 10 to § 3.63 set forth qualitative and/or quantitative requirements for scope of application, capital structure, capital adequacy, capital conservation buffer, credit risk, counterparty credit risk-related exposures, credit risk mitigation, securitizations, equities not subject to Subpart F (Market Risk requirements) of the rule, and interest rate risk for non-trading activities.
Section 3.121 requires an institution subject to the advanced approaches risk-based capital requirements to adopt a written implementation plan to address how it will comply with the advanced capital adequacy framework's qualification requirements and also develop and maintain a comprehensive and sound planning and governance process to oversee the implementation efforts described in the plan. Section 3.122 further requires these institutions to: Develop processes for assessing capital adequacy in relation to an organization's risk profile; establish and maintain internal risk rating and segmentation systems for wholesale and retail risk exposures, including comprehensive risk parameter quantification processes and processes for annual reviews and analyses of reference data to determine their relevance; document their processes for identifying, measuring, monitoring, controlling, and internally reporting operational risk; verify the accurate and timely reporting of risk-based capital requirements; and monitor, validate, and refine their advanced systems.
Section 3.123 sets forth ongoing qualification requirements that require an institution to notify the OCC of any material change to an advance system and to establish and submit to the OCC a plan for returning to compliance with the qualification requirements.
Section 3.124 requires an institution to submit to the OCC, within 90 days of consummating a merger or acquisition, an implementation plan for using its advanced systems for the merged or acquired company.
Section 3.132(b)(2)(iii)(A) addresses counterparty credit risk of repo-style transactions, eligible margin loans, and over-the-counter (OTC) derivative contracts, and internal estimates for haircuts. With the prior written approval of the OCC, an institution may calculate haircuts using its own internal estimates of the volatilities of market prices and foreign exchange rates. The section requires institutions to satisfy certain minimum quantitative standards in order to receive OCC approval to use its own internal estimates.
Section 3.132(b)(3) covers counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts, and simple Value-at-Risk (VaR) methodology. With the prior written approval of the OCC, an institution may estimate exposure at default (EAD) for a netting set using a VaR model that meets certain requirements.
Section 3.132(d)(1) permits the use of the internal models methodology (IMM) to determine EAD for counterparty credit risk for derivative contracts with prior written approval from the OCC. Section 3.132(d)(1)(iii) permits the use of the internal models methodology for derivative contracts, eligible margin loans, and repo-style transactions subject to a qualifying cross-product netting agreement with prior written approval from the OCC.
Section 3.132(d)(2)(iv) addresses counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts, and risk-weighted assets using IMM. Under the IMM, an institution uses an internal model to estimate the expected exposure (EE) for a netting set and then calculates EAD based on that EE. An institution must calculate two EEs and two EADs (one stressed and one unstressed) for each netting as outlined in this section. An institution may use a conservative measure of EAD subject to prior written approval of the OCC.
Section 3.132(d)(3)(vi) addresses counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts. To obtain OCC approval to calculate the distributions of exposures upon which the EAD calculation is based, an institution must demonstrate to the satisfaction of the OCC that it has been using for at least one year an internal model that broadly meets the minimum standards, with which the institution
Section 3.132(d)(3)(viii) addresses counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts. When estimating model parameters based on a stress period, an institution must use at least three years of historical data that include a period of stress to the credit default spreads of the institution's counterparties. The institution must review the data set and update the data as necessary, particularly for any material changes in its counterparties. The institution must demonstrate at least quarterly that the stress period coincides with increased credit default swap (CDS) or other credit spreads of the institution's counterparties. The institution must have procedures to evaluate the effectiveness of its stress calibration that include a process for using benchmark portfolios that are vulnerable to the same risk factors as the institution's portfolio. The OCC may require the institution to modify its stress calibration to better reflect actual historic losses of the portfolio.
Section 3.132(d)(3)(ix), regarding counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts, requires that an institution must subject its internal model to an initial validation and annual model review process that includes consideration of whether the inputs and risk factors, as well as the model outputs, are appropriate. This section requires institutions to have a backtesting program for its model that includes a process by which unacceptable model performance will be determined and remedied.
Section 3.132(d)(3)(x), regarding counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts, provides that an institution must have policies for the measurement, management, and control of collateral and margin amounts.
Section 3.132(d)(3)(xi), concerning counterparty credit risk of repo-style transactions, eligible margin loans, and OTC derivative contracts, states that an institution must have a comprehensive stress testing program that captures all credit exposures to counterparties, and incorporates stress testing of principal market risk factors and creditworthiness of counterparties.
Section 3.141 relates to operational criteria for recognizing the transfer of risk in connection with a securitization. Section 3.141(b)(3) requires an institution to obtain a well-reasoned legal opinion confirming the enforceability of the credit risk mitigant in all relevant jurisdictions in order to recognize the transference of risk in connection with a synthetic securitization. An institution must demonstrate its comprehensive understanding of a securitization exposure under § 3.141(c)(2) for each securitization exposure by conducting an analysis of the risk characteristics of a securitization exposure prior to acquiring the exposure and document such analysis within three business days after acquiring the exposure. Sections 3.141(c)(2)(i) and (ii) require that institutions, on an on-going basis (at least quarterly), evaluate, review, and update as appropriate the analysis required under this section for each securitization exposure.
Section 3.142(h)(2), regarding the capital treatment for securitization exposures, requires an institution to disclose publicly if it has provided implicit support to a securitization and the regulatory capital impact to the institution of providing such implicit support.
Section 3.153(b), outlining the Internal Models Approach (IMA) for calculating risk-weighted assets for equity exposures, specifies that an institution must receive prior written approval from the OCC before it can use IMA.
Section 3.172 specifies that each advanced approaches institution that has completed the parallel run process must publicly disclose its total and tier 1 risk-based capital ratios and their components.
Section 3.173 addresses disclosures by an advanced approaches institution that is not a consolidated subsidiary of an equity that is subject to the Basel III disclosure requirements. An advanced approaches institution that is subject to the disclosure requirements must make the disclosures described in Tables 1 through 12. The institution must make these disclosures publicly available for each of the last three years (that is, twelve quarters) or such shorter period beginning on the effective date of this subpart E.
The tables to § 3.173 require qualitative and quantitative public disclosures for capital structure, capital adequacy, capital conservation and countercyclical buffers, credit risk, securitization, operational risk, equities not subject to the market risk capital requirements, and interest rate risk for non-trading activities.
Comments submitted in response to this notice will be summarized and included in the request for OMB approval. All comments will become a matter of public record. Comments are invited on:
(a) Whether the collections of information are necessary for the proper performance of the OCC's functions, including whether the information has practical utility;
(b) The accuracy of the OCC's estimates of the burden of the information collections, including the validity of the methodology and assumptions used;
(c) Ways to enhance the quality, utility, and clarity of the information to be collected; and
(d) Ways to minimize the burden of information collections on respondents, including through the use of automated collection techniques or other forms of information technology.
Office of Foreign Assets Control, Treasury.
Notice.
The U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of nine individuals and eight entities whose property and interests in property are blocked pursuant to Executive Order (E.O.) 13382.
OFAC's actions described in this notice were effective on February 3, 2017, as further specified below.
The Department of the Treasury's Office of Foreign Assets Control: Assistant Director for Licensing, tel.: 202-622-2480, Assistant Director for Regulatory Affairs, tel.: 202-622-4855, Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490; or the Department of the Treasury's Office of the Chief Counsel (Foreign Assets Control), Office of the General Counsel, tel.: 202-622-2410.
The Specially Designated Nationals and Blocked Persons List and additional information concerning OFAC sanctions programs are available on OFAC's Web site (
On February 3, 2017, OFAC blocked the property and interests in property of the following nine persons pursuant to E.O. 13382, “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters”:
1. ASGHARZADEH, Abdollah; DOB 16 Sep 1968; Additional Sanctions Information—Subject to Secondary Sanctions (individual) [NPWMD] [IFSR].
2. DARIAN, Tenny (a.k.a. SHAKHDARIAN, Tenny); DOB 06 Sep 1979; POB Tehran, Iran; citizen Iran; Additional Sanctions Information—Subject to Secondary Sanctions; Passport B23545963 expires 05 Mar 2017 (individual) [NPWMD] [IFSR].
3. XIANHUA, Qin (a.k.a. QIN, Jack; a.k.a. XIANHUA, Jack); DOB 08 Jan 1979; citizen China; Additional Sanctions Information—Subject to Secondary Sanctions; Passport E31457650 expires 21 Oct 2023 (individual) [NPWMD] [IFSR].
4. YUE, Richard (a.k.a. YAODONG, Yue); DOB 22 May 1974; Additional Sanctions Information—Subject to Secondary Sanctions (individual) [NPWMD] [IFSR].
5. ZHOU, Carol; DOB 30 Oct 1982; Additional Sanctions Information—Subject to Secondary Sanctions (individual) [NPWMD] [IFSR].
6. MAGHAM, Mohammad; DOB 16 Sep 1970; nationality Iran; Additional Sanctions Information—Subject to Secondary Sanctions; Passport H22452336 (Iran) (individual) [NPWMD] [IFSR].
7. ZAHEDI, Mostafa (a.k.a. KHAZE, Karim; a.k.a. LIU, Jhon; a.k.a. OMAR, Asem; a.k.a. “IBRAHIM, Mohammad”; a.k.a. “IBRAHIM, Mohammed”); DOB 29 Jun 1978; Additional Sanctions Information—Subject to Secondary Sanctions (individual) [NPWMD] [IFSR].
8. ZARGARI, Ghodrat (a.k.a. ZARGARI, Ghodratollah); DOB 1944; Additional Sanctions Information—Subject to Secondary Sanctions (individual) [NPWMD] [IFSR].
9. ROSTAMIAN, Kambiz, Villa No. 13, Cluster 31 Juemierah Islands, Dubai, United Arab Emirates; DOB 27 Aug 1960; Additional Sanctions Information—Subject to Secondary Sanctions; Passport RE0003026 (Saint Kitts and Nevis); alt. Passport I17217816 (Iran) (individual) [NPWMD] [IFSR].
On February 3, 2017, OFAC blocked the property and interests in property of the following eight entities pursuant to E.O. 13382, “Blocking Property of Weapons of Mass Destruction Proliferators and Their Supporters”:
1. COSAILING BUSINESS TRADING COMPANY LIMITED, 2808 Number 1 Building, 98 Nanjing Road, Shinan District, Qingdao, China; Additional Sanctions Information—Subject to Secondary Sanctions [NPWMD] [IFSR].
2. EAST STAR COMPANY (a.k.a. SATEREH SHARGH MOBIN CO.; a.k.a. SATEREH SHARGH SAMIN CO., LTD.; a.k.a. SETAREH SHARGH CO.), Unit 5, Third Floor, 15th Street, Bokharest Avenue, Tehran, Iran; Additional Sanctions Information—Subject to Secondary Sanctions [NPWMD] [IFSR].
3. NINGBO NEW CENTURY IMPORT AND EXPORT COMPANY, LTD. (a.k.a. NEW CENTURY IMPORT AND EXPORT CO. LTD), 5 Hongtang South Road, Jiangbei, Ningbo 315033, China; Additional Sanctions Information—Subject to Secondary Sanctions [NPWMD] [IFSR].
4. OFOG SABZE DARYA COMPANY, Unit Seven, Fourth Floor, Number 18, 15th Street, Khaled Eslamboli Street, Beheshti Avenue, Tehran, Iran; Additional Sanctions Information—Subject to Secondary Sanctions [NPWMD] [IFSR].
5. ERVIN DANESH ARYAN COMPANY (a.k.a. ERVIN DANESH), 5th Floor, No. 78, Forsat Shirazi Street, North Kargar Street, Tehran, Iran; Additional Sanctions Information—Subject to Secondary Sanctions [NPWMD] [IFSR].
6. ZIST TAJHIZ POOYESH COMPANY (a.k.a. POOYESH ENVIRONMENTAL INSTRUMENTS; a.k.a. ZIEST TAJHIEZ POOYESH), 16, Afshar Alley, Fajr Street, Motahari Avenue, Tehran, Iran; Web site
7. MKS INTERNATIONAL CO. LTD. (a.k.a. MKS INTERNATIONAL; a.k.a. MKS INTERNATIONAL GROUP), Office No. 4, Babataher Street, Dr Fatemi Avenue, Tehran, Iran; P.O. BOX 14155-4618, Tehran, Iran; Additional Sanctions Information—Subject to Secondary Sanctions [NPWMD] [IFSR].
8. ROYAL PEARL GENERAL T.R.D. (a.k.a. ROYAL PEARL CHEMICAL; a.k.a. ROYAL PEARLS; a.k.a. ROYAL PEARLS GENERAL TRADING), P.O. Box 74382, Dubai, United Arab Emirates; Office No. 8, Near Regal International, Sheikh Zayed Road, Dubai 74382, United Arab Emirates; Web site
Office of Foreign Assets Control, Treasury.
Notice.
The Department of the Treasury's Office of Foreign Assets Control (OFAC) is publishing the names of 4 individuals and 4 entities whose property and interests in property are blocked pursuant to Executive Order 13224 of September 23, 2001, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism.”
OFAC's actions described in this notice were effective on February 3, 2017.
Associate Director for Global Targeting, tel.: 202-622-2420, Assistant Director for Sanctions Compliance & Evaluation, tel.: 202-622-2490, Assistant Director for Licensing, tel.: 202-622-2480, Office of Foreign Assets Control, or Chief Counsel (Foreign Assets Control), tel.: 202-622-2410, Office of the General Counsel, Department of the Treasury (not toll free numbers).
The SDN List and additional information concerning OFAC sanctions programs are available from OFAC's Web site (
On February 3, 2017, OFAC blocked the property and interests in property of the following 4 individuals and 4 entities pursuant to E.O. 13224, “Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten To Commit, or Support Terrorism”:
1. AL-HAJJ, Yahya (a.k.a. AL-HAJ, Yahya; a.k.a. AL-HAJ, Yehia Issa Mohamad); DOB 23 May 1959; POB Aramta, Lebanon; Additional Sanctions Information—Subject to Secondary Sanctions; Gender Male; Passport RL 2544590 (Lebanon) issued 07 Jun 2013 expires 07 Jun 2018 (individual) [SDGT] [IRGC] [IFSR].
2. EBRAHIMI, Hasan Dehghan (a.k.a. IBRAHIMI, Hasan Dahqan); DOB 21 Mar 1961; POB Dezfool, Iran; Additional Sanctions Information—Subject to Secondary Sanctions; Gender Male; Passport U19707756 (Iran) issued 12 May 2011 expires 11 May 2016 (individual) [SDGT] [IRGC] [IFSR].
3. FARHAT, Muhammad 'Abd-al-Amir (a.k.a. FARHAT, Mohammad; a.k.a. FARHAT, Mohammad Abdul Amir); DOB 23 Aug 1969; POB Kuwait; Additional Sanctions Information—Subject to Secondary Sanctions; Gender Male; Passport RL 2325452 (Lebanon) expires 31 Jul 2017 (individual) [SDGT] [IRGC] [IFSR].
4. SHARIFI, Ali (a.k.a. SALEHI, Ali); DOB 23 Feb 1966; POB Tehran, Iran; Additional Sanctions Information—Subject to Secondary Sanctions; Gender Male; Passport
1. MAHER TRADING AND CONSTRUCTION COMPANY (a.k.a. MAHER TRADING AND ENGINEERING; a.k.a. “MAHER COMPANY”), Concord building, 7th floor, Verdan, Beirut, Lebanon; Harik Harik, on the street near al-Husnayn Mosque, Malik bin Qazzam, 5th floor, Beirut, Lebanon; Additional Sanctions Information—Subject to Secondary Sanctions [SDGT] [IRGC] [IFSR].
2. MIRAGE FOR ENGINEERING AND TRADING (a.k.a. “MIRAGE FOR ENGINEERING”), Kalim Bechara Building, 2nd floor, Trabulsi Street, Badaro, Beirut, Lebanon; Additional Sanctions Information—Subject to Secondary Sanctions [SDGT] [IRGC] [IFSR].
3. MIRAGE FOR WASTE MANAGEMENT AND ENVIRONMENTAL SERVICES SARL, P.O. Box 113/6655, Msieleh Main Road, Rabiyeh Building, 2nd floor, Msieheh, Lebanon; Web site
4. REEM PHARMACEUTICAL (a.k.a. REEM PHARMACEUTICAL, LLC; a.k.a. REEM PHARMACEUTICAL, S.A.R.L.; a.k.a. REEM PHARMACEUTICAL, SAL), Kalim Bechara Building, 2nd floor, Trabolsi Street, Badaro, Beirut, Lebanon; Web site
Office of Financial Research, Department of the Treasury.
Notice of open meeting.
The Financial Research Advisory Committee for the Treasury's Office of Financial Research (OFR) is convening for its ninth meeting on Thursday, February 23, 2017, in the Cash Room, Main Treasury Building, 1500 Pennsylvania Avenue NW., Washington, DC 20220, beginning at 9:15 a.m. Eastern Time. The meeting will be open to the public via live Web cast at
The meeting will be held on Thursday, February 23, 2017, beginning at 9:15 a.m. Eastern Time.
The meeting will be held in the Cash Room, Main Treasury Building, 1500 Pennsylvania Avenue NW., Washington, DC 20220. The meeting will be open to the public via live webcast at
Susan Stiehm, Designated Federal Officer, Office of Financial Research, Department of the Treasury, 1500 Pennsylvania Avenue NW., Washington, DC 20220, (212) 376-9808 (this is not a toll-free number),
Notice of this meeting is provided in accordance with the Federal Advisory Committee Act, 5 U.S.C. App. 2, 10(a)(2), through implementing regulations at 41 CFR 102-3.150,
•
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The OFR will post statements on the Committee's Web site,
This is the ninth meeting of the Financial Research Advisory Committee. Topics to be discussed among all members include potential risks to financial stability, as well as updates on the data quality, CCP and Financial Institutions programs. For more information on the OFR and the Committee, please visit the OFR Web site at
(a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth;
(b) prevent taxpayer-funded bailouts;
(c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry;
(d) enable American companies to be competitive with foreign firms in domestic and foreign markets;
(e) advance American interests in international financial regulatory negotiations and meetings;
(f) make regulation efficient, effective, and appropriately tailored; and
(g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework.
(b) This order shall be implemented consistent with applicable law and subject to the availability of appropriations.
(c) This order is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.
Category | Regulatory Information | |
Collection | Federal Register | |
sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
Publisher | Office of the Federal Register, National Archives and Records Administration |