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, 9819-9831 [2017-02537]

Download as PDF Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices proposed amended Plan, the amended Plan should promote investor protection. 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.19 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.20 The Commission believes that the current amendment to the Plan does not raise any new regulatory issues that the Commission has not previously considered, and therefore believes that the amended Plan should become effective without any undue delay. VI. Conclusion asabaliauskas on DSK3SPTVN1PROD with NOTICES This order gives effect to the amended Plan filed with the Commission that is contained in File No. 4–618. It is therefore ordered, pursuant to Section 17(d) of the Act, that the Plan, as amended, filed with the Commission pursuant to Rule 17d–2 on January 25, 2017, is hereby approved and declared effective. It is further ordered that those SRO participants that are not the DREA as to a particular common member are relieved of those regulatory responsibilities allocated to the common member’s DREA under the amended Plan to the extent of such allocation. 19 See Paragraph 22 of the Plan. The Commission notes, however, that changes to Exhibit B to the Plan (the allocation of Common Members to DREAs) are not required to be filed with, and approved by, the Commission before they become effective. 20 See Securities Exchange Act Release No. 78552 (August 11, 2016), 81 FR 54905 (August 17, 2016). VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–02546 Filed 2–7–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79932; File No. SR–BOX– 2017–07] 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 February 2, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 31, 2017, BOX Options Exchange LLC (‘‘SRO’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization.3 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change 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 http:// boxexchange.com. 21 17 CFR 200.30–3(a)(34). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 The Exchange originally filed this proposed rule change on January 17, 2017 under File No. SR– BOX–2017–04, and the Exchange subsequently withdrew that filing on January 31, 2017 and filed this proposed rule change. 1 15 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 9819 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors’ Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the ‘‘Participants’’) filed with the Commission, pursuant to Section 11A of the Exchange Act 4 and Rule 608 of Regulation NMS thereunder,5 the CAT NMS Plan.6 The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. The Plan was published for comment in the Federal Register on May 17, 2016,7 and approved by the Commission, as modified, on November 15, 2016.8 The Plan is designed to create, implement and maintain a consolidated 4 15 U.S.C. 78k–1. CFR 242.608. 6 See Letter from the Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Participants submitted an amendment to the CAT NMS Plan. See Letter from Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. 7 Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 FR 30614 (May 17, 2016). 8 Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval Order’’). 5 17 E:\FR\FM\08FEN1.SGM 08FEN1 9820 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices audit trail (‘‘CAT’’) that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. Each Participant is required to enforce compliance by its Industry Members, as applicable, with the provisions of the Plan, by adopting a Compliance Rule applicable to their Industry Members.9 As is described more fully below, the Proposed Rule 16000 Series sets forth the Compliance Rule to require Industry Members to comply with the provisions of the CAT NMS Plan. The Proposed Rule 16000 Series includes twelve Proposed Rules covering the following areas: (1) Definitions; (2) clock synchronization; (3) Industry Member Data reporting; (4) Customer information reporting; (5) Industry Member information reporting; (6) time stamps; (7) clock synchronization rule violations; (8) connectivity and data transmission; (9) development and testing; (10) recordkeeping; (11) timely, accurate and complete data; and (12) compliance dates. Each of these Proposed Rules are discussed in detail below. (i) Definitions 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. (A) Account Effective Date asabaliauskas on DSK3SPTVN1PROD with NOTICES (I) Customer Information Approach SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customer’s [sic] associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the ‘‘Customer-IDs’’ for each Customer for the original receipt or origination of an order. ‘‘Customer-ID’’ is defined in SEC Rule 613(j)(5) to mean ‘‘with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.’’ SEC Rule 613(c)(8) requires Industry Members to use the same Customer-ID for each Customer. The SEC granted the 9 See SEC Rule 613(g)(1). VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Participants exemptive relief to permit the use of an alternative approach to the requirement that an Industry Member report a Customer-ID for every Customer upon original receipt or origination.10 The alternative approach is called the Customer Information Approach. Under the Customer Information Approach, the CAT NMS Plan would require each Industry Member to assign a unique Firm Designated ID to each Customer. As the Firm Designated ID, Industry Members would be permitted to use an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). Prior to their commencement of reporting to the CAT, Industry Members would submit an initial set of Customer information to the Central Repository, including the Firm Designated ID, Customer Identifying Information and Customer Account Information (which may include, as applicable, the Customer’s name, address, date of birth, individual tax payer identifier number (‘‘ITIN’’)/ social security number (‘‘SSN’’), individual’s role in the account (e.g., primary holder, joint holder, guardian, trustee, person with power of attorney) and LEI and/or Larger [sic] Trader ID (‘‘LTID’’). This process is referred to as the customer definition process. In accordance with the Customer Information Approach, Industry Members would be required to report only the Firm Designated ID for each new order submitted to the Central Repository, rather than the ‘‘CustomerID’’ 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. 10 See Securities Exchange Act Release No. 77265 (March 1, 2016), 81 FR 11856 (March 7, 2016) (‘‘Exemption Order’’). See also Letter from Participants to Brent J. Fields, Secretary, Commission, dated January 30, 2015 at 12 (‘‘Exemptive Request Letter’’); and CAT NMS Plan at Appendix C, Section A.1(a)(iii). PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 (II) Definition of Account Effective Date In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. ‘‘Customer Account Information’’ is defined in SEC Rule 613(j)(4) to ‘‘include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).’’ Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Participants requested and received an exemption to allow an ‘‘Account Effective Date’’ to be reported in lieu of an account open date in certain limited circumstances. The definition of ‘‘Account Effective Date’’ as set forth in Paragraph (a) of Proposed Rule 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 (i.e., the date the first order was received) using the relevant relationship identifier; or (c) if both dates are available, the earlier date will be used to the extent that the dates differ; or (2) when the trading relationship was established on or after November 15, 2018 for Industry Members other than Small Industry Members, or on or after November 15, 2019 for Small Industry Members, the date the Industry Member established the relationship identifier, which would be no later than the date the first order was received. Paragraph (a)(2) of Proposed Rule 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 E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer. Paragraph (a)(3) states that an ‘‘Account Effective Date’’ means, where an Industry Member acquires another Industry Member prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer. Paragraph (a)(4) states that ‘‘Account Effective Date’’ means, where there are multiple dates associated with an account established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members, the earliest available date. Paragraph (a)(5) states that an ‘‘Account Effective Date’’ means, with regard to Industry Member proprietary accounts established prior to November 15, 2018 for Industry Members other than Small Industry Members, or prior to November 15, 2019 for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (i.e., the date on which the first orders were submitted from the account). With regard to paragraphs (a)(2)–(5), the Account Effective Date will be no later than the date trading occurs at the Industry Member or in the Industry Member’s system. asabaliauskas on DSK3SPTVN1PROD with NOTICES (B) Active Account Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account Information for only those accounts that are active. This will alleviate the need for Industry Members to update such information for non-active accounts, but still ensure that the Central Repository will collect audit trail data for Customer accounts that have any Reportable Events. Accordingly, paragraph (b) of Proposed Rule 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. (C) Allocation Report (I) Allocation Report Approach SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record and report to the Central Repository ‘‘the VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 9821 account number for any subaccounts to which the execution is allocated (in whole or in part).’’ The SROs requested and received from the SEC exemptive relief from SEC Rule 613 for an alternative to this approach (‘‘Allocation Report Approach’’). The Allocation Report Approach would permit Industry Members to record and report to the Central Repository an Allocation Report that includes, among other things, the Firm Designated ID for any account(s) to which executed shares are allocated when an execution is allocated in whole or part in lieu of requiring the reporting of the account number for any subaccount to which an execution is allocated, as is required by SEC Rule 613.11 Under SEC Rule 613, regulators would be able to link the subaccount to which an allocation was made to a specific order. In contrast, under the Allocation Report Approach, regulators would only be able to link an allocation to the account to which it was made, and not to a specific order. 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. (II) Definition of Allocation Report 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. (I) Daisy Chain Approach (D) Business Clock To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use ‘‘Business Clocks’’ to record such dates and times. Accordingly, paragraph (d) of Proposed Rule 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 11 See Exemptive Request Letter at 26–27; and Exemption Order. PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 (E) CAT 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. (F) 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. (G) CAT-Order-ID Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to links the Reportable Events related to the same order. (II) Definition of CAT-Order-ID To implement the Daisy Chain Approach, Paragraph (g) of Proposed Rule 16010 defines the term ‘‘CATOrder-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 ‘‘CATOrder-ID’’ by reference to SEC Rule 613(j)(1). (H) CAT Reporting Agent The CAT NMS Plan permits an Industry Member to use a third party, such as a vendor, to report the required data to the Central Repository on behalf E:\FR\FM\08FEN1.SGM 08FEN1 9822 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices of the Industry Member.12 Such a third party, referred to in this Proposed Rule 16000 Series as a ‘‘CAT Reporting Agent,’’ would be one type of a Data Submitter, that is, a party that submits data to the Central Repository. Paragraph (h) of Proposed Rule 16010 defines the term ‘‘CAT Reporting Agent’’ to mean a Data Submitter that is a third party that enters into an agreement with an Industry Member pursuant to which the CAT Reporting Agent agrees to fulfill such Industry Member’s reporting obligations under this Rule 16000 Series. This definition is based on FINRA’s definition of a ‘‘Reporting Agent’’ as set forth in FINRA’s rule related to its Order Audit Trail System (‘‘OATS’’). Specifically, FINRA Rule 7410(n) defines a ‘‘Reporting Agent’’ as a third party that enters into any agreement with a member pursuant to which the Reporting Agent agrees to fulfill such member’s obligations under Rule 7450. The Reporting Agent for OATS fulfills a similar role to the CAT Reporting Agent. (I) Central Repository Paragraph (i) of Proposed Rule 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.’’ asabaliauskas on DSK3SPTVN1PROD with NOTICES (J) Compliance Threshold 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.’’ (K) Customer Industry Members are required to submit to the Central Repository certain information related to their Customers, including Customer Identifying Information and Customer Account 12 Appendix C, Section A.1(a) of the CAT NMS Plan. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 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 brokerdealer 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). 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 postmerger 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. (L) Customer Account Information As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, 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 (M) Customer Identifying Information PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 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 (e.g., primary holder, joint holder, guardian, trustee, person with the power of attorney). With respect to legal entities, ‘‘Customer Identifying Information’’ includes, but is not limited to, name, address, Employer Identification Number (‘‘EIN’’)/Legal Entity Identifier (‘‘LEI’’) or other comparable common entity identifier, if applicable. The definition further notes that an Industry Member that has an LEI for a Customer must submit the Customer’s LEI in addition to other information of sufficient detail to identify the Customer. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (N) Data Submitter The CAT NMS Plan uses the term ‘‘Data Submitter’’ to refer to any person that reports data to the Central E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices Repository.13 Such Data Submitters may include those entities that are required to submit data to the Central Repository (e.g., national securities exchanges, national securities associations and Industry Members), third-parties that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT Reporting Agents), and outside parties that are not required to submit data to the CAT but from which the CAT may receive data (e.g., securities information processors (‘‘SIPs’’)). To include this term in the Proposed Rule 16000 Series, SRO proposes to define ‘‘Data Submitter’’ in paragraph (n) of Proposed Rule 16010. Specifically, paragraph (n) of Proposed Rule 16010 defines a ‘‘Data Submitter’’ to mean any person that reports data to the Central Repository, including national securities exchanges, national securities associations, broker-dealers, the SIPs for the CQS, CTA, UTP and Plan for Reporting of Consolidated Options Last Sale Reports and Quotation Information (‘‘OPRA’’) Plans, and certain other vendors or third parties that may submit data to the Central Repository on behalf of Industry Members. (O) Eligible Security 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. (P) Error Rate asabaliauskas on DSK3SPTVN1PROD with NOTICES (I) Maximum Error Rate Under the CAT NMS Plan, the Operating Committee sets the maximum Error Rate that the Central Repository would tolerate from an Industry Member reporting data to the Central Repository.14 The Operating Committee reviews and resets the maximum Error Rate, at least annually.15 If an Industry Member reports CAT data to the Central Repository with errors such that their error percentage exceeds the maximum Error Rate, then such Industry Member would not be in compliance with the 13 Appendix C, Section A.1(a) of the CAT NMS Plan. 14 Section 6.5(d)(i) of the CAT NMS Plan. 15 Appendix C, Section A.3(b) of the CAT NMS Plan. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 CAT NMS Plan or Rule 613.16 As such, SRO or the SEC ‘‘[sic] may take appropriate action against an Industry Member for failing to comply with its CAT reporting obligations.17 The CAT NMS Plan sets the initial Error Rate at 5%.18 It is anticipated that the maximum Error Rate will be reviewed and lowered by the Operating Committee once Industry Members begin to report to the Central Repository.19 The CAT NMS Plan requires the Plan Processor to: (1) Measure and report errors every business day; (2) provide Industry Members daily statistics and error reports as they become available, including a description of such errors; (3) provide monthly reports to Industry Members that detail an Industry Member’s performance and comparison statistics; (4) define educational and support programs for Industry Members to minimize Error Rates; and (5) identify, daily, all Industry Members exceeding the maximum allowable Error Rate. To timely correct data-submitted errors to the Central Repository, the CAT NMS Plan requires that the Central Repository receive and process error corrections at all times. Further, the CAT NMS Plan requires that Industry Members be able to submit error corrections to the Central Repository through a web-interface or via bulk uploads or file submissions, and that the Plan Processor, subject to the Operating Committee’s approval, support the bulk replacement of records and the reprocessing of such records. The Participants, furthermore, require that the Plan Processor identify Industry Member data submission errors based on the Plan Processor’s validation processes.20 (II) Definition of Error Rate 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 16 Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 613(g)–(h). 17 Appendix C, Section A.3(b) of the CAT NMS Plan. 18 Section 6.5(d)(i) of the CAT NMS Plan. 19 Appendix C, Section A.3(b) of the CAT NMS Plan. 20 Approval Order at 84718. PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 9823 NMS Plan defines ‘‘Error Rate’’ by reference to SEC Rule 613(j)(6). (Q) Firm Designated ID As discussed above, under the Customer Information Approach, the CAT NMS Plan would require each Industry Member to assign a unique Firm Designated ID to each Customer. Industry Members would be permitted to use as the Firm Designated ID an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). Industry Members would be required to report only the Firm Designated ID for each new order submitted to the Central Repository, rather than the ‘‘Customer-ID’’ with individual order events. Accordingly, SRO proposes to define the term ‘‘Firm Designated ID’’ in Proposed Rule 16010. Specifically, paragraph (q) of Proposed Rule 16010 defines the term ‘‘Firm Designated ID’’ to mean a unique identifier for each trading account designated by Industry Members for purposes of providing data to the Central Repository, where each such identifier is unique among all identifiers from any given Industry Member for each business date. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. Industry Members would be permitted to use an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). (R) Industry Member Paragraph (r) of Proposed Rule 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. (S) Industry Member Data 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). (T) Initial Plan Processor Paragraph (t) of Proposed Rule 16010 defines the term ‘‘Initial Plan Processor’’ E:\FR\FM\08FEN1.SGM 08FEN1 9824 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the ‘‘Selection Plan.’’ (U) Listed Option or Option The CAT NMS Plan and this Proposed 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. (V) Manual Order Event asabaliauskas on DSK3SPTVN1PROD with NOTICES (I) Manual Order Event Approach The CAT NMS Plan sets forth clock synchronization and timestamp requirements for Industry Members which reflect exemptions for Manual Order Events granted by the Commission.21 Specifically, the Plan requires Industry Members to record and report the time of each Reportable Event using timestamps reflecting current industry standards (which must be at least to the millisecond) or, if an Industry Member’s order handling or execution system uses timestamps in increments finer than milliseconds, such finer increments, when reporting to the Central Repository. For Manual Order Events, however, the Plan provides that such events must be recorded in increments up to and including one second, provided that Industry Members record and report the time the event is captured electronically in an order handling and execution system (‘‘Electronic Capture Time’’) in milliseconds. In addition, Industry Members are required to synchronize 21 Exemption VerDate Sep<11>2014 Order. 17:36 Feb 07, 2017 Jkt 241001 their respective Business Clocks (other than such Business Clocks used solely for Manual Order Events) at a minimum to within 50 milliseconds of the time maintained by the National Institute of Standards and Technology (‘‘NIST’’), and maintain such a synchronization. Each Industry Members [sic] is required to synchronize their Business Clocks used solely for Manual Order Events, however, at a minimum to within one second of the time maintained by the NIST. (II) Definition of Manual Order Event 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. (W) Material Terms of the Order Proposed Rule 16030 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (e.g., for the original receipt or origination of an order, for the routing of an order). Accordingly, SRO proposes to define the term ‘‘Material Terms of the Order’’ in Proposed Rule 16010. Specifically, paragraph (w) of Proposed Rule 16010 defines the term ‘‘Material Terms of the Order’’ to include: The NMS Security or OTC Equity Security symbol; security type; price (if applicable); size (displayed and non-displayed); side (buy/sell); order type; if a sell order, whether the order is long, short, short exempt; open/close indicator (except on transactions in equities); time in force (if applicable); if the order is for a Listed Option, option type (put/call), option symbol or root symbol, underlying symbol, strike price, expiration date, and open/close (except on market maker quotations); and any special handling instructions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (X) NMS Security NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, 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 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (Y) NMS Stock Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, 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. (Z) Operating Committee 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. (AA) Options Market Maker (I) Options Market Maker Quote Exemption SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each Industry Member to record and electronically report to the Central Repository details for each order and each reportable event, including the routing and modification or cancellation of an order. SEC Rule 613(j)(8) defines ‘‘order’’ to include ‘‘any bid or offer.’’ Therefore, under SEC Rule 613, the details for each Options Market Maker quotation must be reported to the Central Repository by both the Options Market Maker and the options exchange to which it routes its quote. The SROs, however, requested and received exemptive relief from SEC Rule 613 so that the CAT NMS Plan may permit Options Market Maker quotes to be reported to the Central Repository by the relevant options exchange in lieu of requiring that such reporting be done by both the options exchange and the Options Market Maker, as is required by SEC Rule 613.22 In accordance with the exemptive relief, Options Market 22 See Exemptive Request Letter at 2, and Exemption Order. E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices Makers would be required to report to the options exchange the time at which a quote in a Listed Option is sent to the options exchange. Such time information also will be reported to the Central Repository by the options exchange in lieu of reporting by the Options Market Maker. (II) Definition of Options Market Maker 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES (BB) Order 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). (CC) OTC Equity Security 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. (DD) Participant Paragraph (dd) of Proposed Rule 16010 defines the term ‘‘Participant’’ to mean each Person identified as such in VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Exhibit A of the CAT NMS Plan, as amended, in such Person’s capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan. (EE) Person Paragraph (ee) of Proposed Rule 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. (FF) Plan Processor 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. (GG) Received Industry Member Data 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). (HH) Recorded Industry Member Data 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). (II) Reportable Event The Proposed Rule 16000 Series requires each Industry Member to record and electronically report to the Central Repository certain details for PO 00000 Frm 00117 Fmt 4703 Sfmt 4703 9825 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. (JJ) SRO 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. (KK) SRO-Assigned Market Participant Identifier (I) Existing Identifier Approach The SROs requested and received exemptive relief from SEC Rule 613 so that the CAT NMS Plan may permit the Existing Identifier Approach, which would allow an Industry Member to report an existing SRO-Assigned Market Participant Identifier in lieu of requiring the reporting of a universal CATReporter-ID (that is, a code that uniquely and consistently identifies an Industry Member for purposes of providing data to the Central Repository).23 The CAT NMS Plan reflects the ‘‘Existing Identifier Approach’’ for purposes of identifying each Industry Member associated with an order or Reportable Event. Under the Existing Identifier Approach, Industry Members are required to record and report to the Central Repository an SROAssigned Market Participant Identifier for orders and certain Reportable Events to be used by the Central Repository to assign a unique CAT-Reporter-ID to identify Industry Members. For the Central Repository to link the SRO-Assigned Market Participant Identifier to the CAT-Reporter-ID, each SRO will submit to the Central Repository, on a daily basis, all SROAssigned 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 23 See Exemptive Request Letter at 19, and Exemption Order. E:\FR\FM\08FEN1.SGM 08FEN1 9826 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices the Industry Member as well as the LEI of the Industry Member (if the Industry Member has a 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES (II) Definition of SRO-Assigned Market Participant Identifier 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 ‘‘SROAssigned 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 SROAssigned Market Participant Identifier (e.g., FINRA MPID, NASDAQ MPID, NYSE Mnemonic, CBOE User Acronym and CHX Acronym) when reporting order information to the Central Repository. (LL) Small Industry Member The requirements of the Proposed 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 brokerdealer as defined in Rule 0–10(c) under the Securities Exchange Act of 1934, as amended. This is the same in substance as the definition of ‘‘Small Industry Member’’ as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a ‘‘Small Industry Member’’ as ‘‘an Industry Member that qualifies as a small broker-dealer as defined in SEC Rule 613.’’ The definition of a small broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as defined in SEC Rule 0–10(c). (MM) Trading Day Proposed Rule 16030(b) establishes the deadlines for reporting certain data to the Central Repository using the term ‘‘Trading Day.’’ Accordingly, SRO VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 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. (ii) Clock Synchronization SEC Rule 613(d)(1) under Regulation NMS requires Industry Members to synchronize their Business Clocks to the time maintained by NIST, consistent with industry standards. To comply with this provision, Section 6.8 of the Plan sets forth the clock synchronization requirements for Industry Members.24 To implement these provisions with regard to its Industry Members, SRO proposes Rule 16020 (Consolidated Audit Trail—Clock Synchronization) to require its Industry Members to comply with the clock synchronization requirements of the Plan. 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 24 In addition, Section 6.7(a)(ii) of the Plan sets forth the timeline for CAT Reporters to comply with the clock synchronization requirements. PO 00000 Frm 00118 Fmt 4703 Sfmt 4703 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 resynchronized, 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 E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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. SRO intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular. 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES (iii) Industry Member Data Reporting SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, 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. (A) Recording and Reporting Industry Member Data 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. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 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) CATOrder-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) SROAssigned 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) PO 00000 Frm 00119 Fmt 4703 Sfmt 4703 9827 execution price and size; (6) SROAssigned 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) CATOrder-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. (B) Timing of Recording and Reporting 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. E:\FR\FM\08FEN1.SGM 08FEN1 9828 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES (C) Applicable Securities 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. (D) Security Symbology 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. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 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. (E) Error Correction To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, 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. (iv) Customer Information Reporting Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. 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 PO 00000 Frm 00120 Fmt 4703 Sfmt 4703 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. (v) Industry Member Information Reporting Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, in accordance with the Existing Identifier Approach discussed above. 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. E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices (vi) Time Stamps asabaliauskas on DSK3SPTVN1PROD with NOTICES 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.25 To comply with this provision, Section 6.8(b) of the Plan sets forth time stamp requirements for Industry Members. To implement this provision with regard to its Industry Members, SRO proposes new Rule 16060 (Consolidated Audit Trail—Time Stamps) to require its Industry Members to comply with the time stamp requirements of the Plan. 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. (vii) Clock Synchronization Rule Violations 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 25 17 CFR 242.613(d)(3). VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 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. (viii) Connectivity and Data Transmission 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 PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 9829 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. (ix) Development and Testing 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), E:\FR\FM\08FEN1.SGM 08FEN1 9830 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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 16080 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.26 Specifically, Proposed Rule 16080 requires that each Industry Member participate in testing related to the Central Repository, including any industry-wide disaster recovery testing, pursuant to the schedule established pursuant to the CAT NMS Plan. SRO intends to announce to its Industry Members the schedule established pursuant to the CAT NMS Plan via Regulatory Circular. asabaliauskas on DSK3SPTVN1PROD with NOTICES (x) Recordkeeping 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 26 Adopting Release [sic] at 84725. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 recordkeeping requirements related to OATS. (xi) Timely, Accurate and Complete Data SEC Rule 613 and the CAT NMS Plan emphasize the importance of the timeliness, accuracy, completeness and integrity of the data submitted to the CAT.27 Accordingly, Proposed Rule 16093 (Consolidated Audit Trail— Timely, Accurate and Complete Data) implements this requirement with regard to Industry Members. Paragraph (a) of Proposed Rule 16093 requires that Industry Members record and report data to the Central Repository as required by the Proposed Rule 16000 Series in a manner that ensures the timeliness, accuracy, integrity and completeness of such data. 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.28 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 27 See SEC Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the CAT NMS Plan. 28 Approval Order at 84745. PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 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.29 Compliance Thresholds will include compliance with the data reporting and clock synchronization requirements. Proposed Rule 16093 states that an Industry Member’s performance with respect to its Compliance Threshold will not signify, as a matter of law, that such Industry Member has violated this Proposed Rule Series. (xii) Compliance Dates 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 29 Appendix E:\FR\FM\08FEN1.SGM C of the CAT NMS Plan. 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices Business Clocks that do not capture time in milliseconds.30 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. 2. Statutory Basis asabaliauskas on DSK3SPTVN1PROD with NOTICES SRO believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,31 which require, among other things, that the SRO rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest, and Section 6(b)(8) of the Act,32 which requires that SRO rules not impose any burden on competition that is not necessary or appropriate. 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.’’ 33 To the extent that this proposal implements, interprets or clarifies the Plan and applies specific requirements to Industry Members, SRO believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition SRO does not believe that the proposed rule change will result in any burden on competition that is not 30 See Request for Exemptive Relief filed with the Commission on January 17, 2017. 31 15 U.S.C. 78f(b)(6) [sic]. 32 15 U.S.C. 78f(b)(8). 33 Approval Order at 84697. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 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. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BOX–2017–07 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BOX–2017–07. This file PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 9831 number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing will also be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BOX– 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.34 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–02537 Filed 2–7–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79935; File No. SR– NASDAQ–2017–008] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Adopt Rules Regarding the CAT NMS Plan February 2, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 31, 2017, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange 34 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\08FEN1.SGM 08FEN1

Agencies

[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9819-9831]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02537]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79932; File No. SR-BOX-2017-07]


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

February 2, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 31, 2017, BOX Options Exchange LLC (``SRO'' or the 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization.\3\ The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on 
January 17, 2017 under File No. SR-BOX-2017-04, and the Exchange 
subsequently withdrew that filing on January 31, 2017 and filed this 
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt 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 http://boxexchange.com.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of 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.

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., International Securities Exchange, LLC, 
Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami 
International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, 
Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc. (collectively, the ``Participants'') filed with the 
Commission, pursuant to Section 11A of the Exchange Act \4\ and Rule 
608 of Regulation NMS thereunder,\5\ the CAT NMS Plan.\6\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\7\ and approved by the Commission, as 
modified, on November 15, 2016.\8\
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    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
    \6\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \7\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 
FR 30614 (May 17, 2016).
    \8\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 
FR 84696 (Nov. 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a 
consolidated

[[Page 9820]]

audit trail (``CAT'') that would capture customer and order event 
information for orders in NMS Securities and OTC Equity Securities, 
across all markets, from the time of order inception through routing, 
cancellation, modification, or execution in a single consolidated data 
source. Each Participant is required to enforce compliance by its 
Industry Members, as applicable, with the provisions of the Plan, by 
adopting a Compliance Rule applicable to their Industry Members.\9\ As 
is described more fully below, the Proposed Rule 16000 Series sets 
forth the Compliance Rule to require Industry Members to comply with 
the provisions of the CAT NMS Plan. The Proposed Rule 16000 Series 
includes twelve Proposed Rules covering the following areas: (1) 
Definitions; (2) clock synchronization; (3) Industry Member Data 
reporting; (4) Customer information reporting; (5) Industry Member 
information reporting; (6) time stamps; (7) clock synchronization rule 
violations; (8) connectivity and data transmission; (9) development and 
testing; (10) recordkeeping; (11) timely, accurate and complete data; 
and (12) compliance dates. Each of these Proposed Rules are discussed 
in detail below.
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    \9\ See SEC Rule 613(g)(1).
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(i) Definitions
    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.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customer's [sic] associated with orders. For example, SEC Rule 
613(c)(7)(i)(A) requires an Industry Member to report the ``Customer-
IDs'' for each Customer for the original receipt or origination of an 
order. ``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with 
respect to a customer, a code that uniquely and consistently identifies 
such customer for purposes of providing data to the Central 
Repository.'' SEC Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer. The SEC granted the Participants 
exemptive relief to permit the use of an alternative approach to the 
requirement that an Industry Member report a Customer-ID for every 
Customer upon original receipt or origination.\10\ The alternative 
approach is called the Customer Information Approach.
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    \10\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
---------------------------------------------------------------------------

    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would be 
permitted to use an account number or any other identifier defined by 
the firm, provided each identifier is unique across the firm for each 
business date (i.e., a single firm may not have multiple separate 
customers with the same identifier on any given date). Prior to their 
commencement of reporting to the CAT, Industry Members would submit an 
initial set of Customer information to the Central Repository, 
including the Firm Designated ID, Customer Identifying Information and 
Customer Account Information (which may include, as applicable, the 
Customer's name, address, date of birth, individual tax payer 
identifier number (``ITIN'')/social security number (``SSN''), 
individual's role in the account (e.g., primary holder, joint holder, 
guardian, trustee, person with power of attorney) and LEI and/or Larger 
[sic] Trader ID (``LTID''). This process is referred to as the customer 
definition process.
    In accordance with the Customer Information Approach, Industry 
Members would be required to report only the Firm Designated ID for 
each new order submitted to the Central Repository, rather than the 
``Customer-ID'' with individual order events. Within the Central 
Repository, each Customer would be uniquely identified by identifiers 
or a combination of identifiers such as ITIN/SSN, date of birth, and as 
applicable, LEI and LTID. The Plan Processor would be required to use 
these unique identifiers to map orders to specific Customers across all 
Industry Members and Participants. To ensure information identifying a 
Customer is up to date, Industry Members would be required to submit to 
the Central Repository daily and periodic updates for reactivated 
accounts, newly established accounts, and revised Firm Designated IDs 
or associated reportable Customer information.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The Participants requested and received an 
exemption to allow an ``Account Effective Date'' to be reported in lieu 
of an account open date in certain limited circumstances. The 
definition of ``Account Effective Date'' as set forth in Paragraph (a) 
of Proposed Rule 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 (i.e., the date the first order was received) using 
the relevant relationship identifier; or (c) if both dates are 
available, the earlier date will be used to the extent that the dates 
differ; or (2) when the trading relationship was established on or 
after November 15, 2018 for Industry Members other than Small Industry 
Members, or on or after November 15, 2019 for Small Industry Members, 
the date the Industry Member established the relationship identifier, 
which would be no later than the date the first order was received.
    Paragraph (a)(2) of Proposed Rule 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

[[Page 9821]]

November 15, 2019 for Small Industry Members, the date an account was 
established at the relevant Industry Member, either directly or via 
transfer.
    Paragraph (a)(3) states that an ``Account Effective Date'' means, 
where an Industry Member acquires another Industry Member prior to 
November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer.
    Paragraph (a)(4) states that ``Account Effective Date'' means, 
where there are multiple dates associated with an account established 
prior to November 15, 2018 for Industry Members other than Small 
Industry Members, or prior to November 15, 2019 for Small Industry 
Members, the earliest available date.
    Paragraph (a)(5) states that an ``Account Effective Date'' means, 
with regard to Industry Member proprietary accounts established prior 
to November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members: (1) 
The date established for the account in the Industry Member or in a 
system of the Industry Member or (2) the date when proprietary trading 
began in the account (i.e., the date on which the first orders were 
submitted from the account). With regard to paragraphs (a)(2)-(5), the 
Account Effective Date will be no later than the date trading occurs at 
the Industry Member or in the Industry Member's system.
(B) Active Account
    Under the Customer Information Approach, Industry Members are 
required to report Customer Identifying Information and Customer 
Account Information for only those accounts that are active. This will 
alleviate the need for Industry Members to update such information for 
non-active accounts, but still ensure that the Central Repository will 
collect audit trail data for Customer accounts that have any Reportable 
Events. Accordingly, paragraph (b) of Proposed Rule 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.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
Industry Members to record and report to the Central Repository an 
Allocation Report that includes, among other things, the Firm 
Designated ID for any account(s) to which executed shares are allocated 
when an execution is allocated in whole or part in lieu of requiring 
the reporting of the account number for any subaccount to which an 
execution is allocated, as is required by SEC Rule 613.\11\ Under SEC 
Rule 613, regulators would be able to link the subaccount to which an 
allocation was made to a specific order. In contrast, under the 
Allocation Report Approach, regulators would only be able to link an 
allocation to the account to which it was made, and not to a specific 
order.
---------------------------------------------------------------------------

    \11\ See Exemptive Request Letter at 26-27; and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Allocation Report
    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.
(D) Business Clock
    To create the required audit trail, Industry Members are required 
to record the date and time of various Reportable Events to the Central 
Repository. Industry Members will use ``Business Clocks'' to record 
such dates and times. Accordingly, paragraph (d) of Proposed Rule 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.
(E) CAT
    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.
(F) 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.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to links the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of Proposed 
Rule 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).
(H) CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf

[[Page 9822]]

of the Industry Member.\12\ Such a third party, referred to in this 
Proposed Rule 16000 Series as a ``CAT Reporting Agent,'' would be one 
type of a Data Submitter, that is, a party that submits data to the 
Central Repository. Paragraph (h) of Proposed Rule 16010 defines the 
term ``CAT Reporting Agent'' to mean a Data Submitter that is a third 
party that enters into an agreement with an Industry Member pursuant to 
which the CAT Reporting Agent agrees to fulfill such Industry Member's 
reporting obligations under this Rule 16000 Series.
---------------------------------------------------------------------------

    \12\ Appendix C, Section A.1(a) of the CAT NMS Plan.
---------------------------------------------------------------------------

    This definition is based on FINRA's definition of a ``Reporting 
Agent'' as set forth in FINRA's rule related to its Order Audit Trail 
System (``OATS''). Specifically, FINRA Rule 7410(n) defines a 
``Reporting Agent'' as a third party that enters into any agreement 
with a member pursuant to which the Reporting Agent agrees to fulfill 
such member's obligations under Rule 7450. The Reporting Agent for OATS 
fulfills a similar role to the CAT Reporting Agent.
(I) Central Repository
    Paragraph (i) of Proposed Rule 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.''
(J) Compliance Threshold
    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.''
(K) Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account Information, as well as 
data related to their Customer's Reportable Events. Accordingly, 
Paragraph (k) of Proposed Rule 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).
(L) Customer Account Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Account Information to 
the Central Repository as part of the customer definition process. 
Accordingly, 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.
(M) Customer Identifying Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Identifying 
Information to the Central Repository as part of the customer 
definition process. Accordingly, 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 (e.g., primary holder, joint holder, guardian, trustee, person 
with the power of attorney). With respect to legal entities, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``LEI'') or other comparable common entity identifier, if 
applicable. The definition further notes that an Industry Member that 
has an LEI for a Customer must submit the Customer's LEI in addition to 
other information of sufficient detail to identify the Customer. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central

[[Page 9823]]

Repository.\13\ Such Data Submitters may include those entities that 
are required to submit data to the Central Repository (e.g., national 
securities exchanges, national securities associations and Industry 
Members), third-parties that may submit data to the CAT on behalf of 
CAT Reporters (i.e., CAT Reporting Agents), and outside parties that 
are not required to submit data to the CAT but from which the CAT may 
receive data (e.g., securities information processors (``SIPs'')). To 
include this term in the Proposed Rule 16000 Series, SRO proposes to 
define ``Data Submitter'' in paragraph (n) of Proposed Rule 16010. 
Specifically, paragraph (n) of Proposed Rule 16010 defines a ``Data 
Submitter'' to mean any person that reports data to the Central 
Repository, including national securities exchanges, national 
securities associations, broker-dealers, the SIPs for the CQS, CTA, UTP 
and Plan for Reporting of Consolidated Options Last Sale Reports and 
Quotation Information (``OPRA'') Plans, and certain other vendors or 
third parties that may submit data to the Central Repository on behalf 
of Industry Members.
---------------------------------------------------------------------------

    \13\ Appendix C, Section A.1(a) of the CAT NMS Plan.
---------------------------------------------------------------------------

(O) Eligible Security
    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.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\14\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\15\ If an Industry Member reports CAT data to the Central 
Repository with errors such that their error percentage exceeds the 
maximum Error Rate, then such Industry Member would not be in 
compliance with the CAT NMS Plan or Rule 613.\16\ As such, SRO or the 
SEC ``[sic] may take appropriate action against an Industry Member for 
failing to comply with its CAT reporting obligations.\17\ The CAT NMS 
Plan sets the initial Error Rate at 5%.\18\ It is anticipated that the 
maximum Error Rate will be reviewed and lowered by the Operating 
Committee once Industry Members begin to report to the Central 
Repository.\19\
---------------------------------------------------------------------------

    \14\ Section 6.5(d)(i) of the CAT NMS Plan.
    \15\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \16\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \18\ Section 6.5(d)(i) of the CAT NMS Plan.
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan.
---------------------------------------------------------------------------

    The CAT NMS Plan requires the Plan Processor to: (1) Measure and 
report errors every business day; (2) provide Industry Members daily 
statistics and error reports as they become available, including a 
description of such errors; (3) provide monthly reports to Industry 
Members that detail an Industry Member's performance and comparison 
statistics; (4) define educational and support programs for Industry 
Members to minimize Error Rates; and (5) identify, daily, all Industry 
Members exceeding the maximum allowable Error Rate. To timely correct 
data-submitted errors to the Central Repository, the CAT NMS Plan 
requires that the Central Repository receive and process error 
corrections at all times. Further, the CAT NMS Plan requires that 
Industry Members be able to submit error corrections to the Central 
Repository through a web-interface or via bulk uploads or file 
submissions, and that the Plan Processor, subject to the Operating 
Committee's approval, support the bulk replacement of records and the 
reprocessing of such records. The Participants, furthermore, require 
that the Plan Processor identify Industry Member data submission errors 
based on the Plan Processor's validation processes.\20\
---------------------------------------------------------------------------

    \20\ Approval Order at 84718.
---------------------------------------------------------------------------

(II) Definition of Error Rate
    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).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan would require each Industry Member to assign a unique Firm 
Designated ID to each Customer. Industry Members would be permitted to 
use as the Firm Designated ID an account number or any other identifier 
defined by the firm, provided each identifier is unique across the firm 
for each business date (i.e., a single firm may not have multiple 
separate customers with the same identifier on any given date). 
Industry Members would be required to report only the Firm Designated 
ID for each new order submitted to the Central Repository, rather than 
the ``Customer-ID'' with individual order events. Accordingly, SRO 
proposes to define the term ``Firm Designated ID'' in Proposed Rule 
16010. Specifically, paragraph (q) of Proposed Rule 16010 defines the 
term ``Firm Designated ID'' to mean a unique identifier for each 
trading account designated by Industry Members for purposes of 
providing data to the Central Repository, where each such identifier is 
unique among all identifiers from any given Industry Member for each 
business date. This is the same definition as set forth in Section 1.1 
of the CAT NMS Plan. Industry Members would be permitted to use an 
account number or any other identifier defined by the firm, provided 
each identifier is unique across the firm for each business date (i.e., 
a single firm may not have multiple separate customers with the same 
identifier on any given date).
(R) Industry Member
    Paragraph (r) of Proposed Rule 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.
(S) Industry Member Data
    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).
(T) Initial Plan Processor
    Paragraph (t) of Proposed Rule 16010 defines the term ``Initial 
Plan Processor''

[[Page 9824]]

to mean the first Plan Processor selected by the Operating Committee in 
accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the 
National Market System Plan Governing the Process for Selecting a Plan 
Processor and Developing a Plan for the Consolidated Audit Trail. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan, 
although the proposed definition uses the full name of the ``Selection 
Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and this Proposed 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.
(V) Manual Order Event
(I) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\21\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution system uses timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize their respective Business 
Clocks (other than such Business Clocks used solely for Manual Order 
Events) at a minimum to within 50 milliseconds of the time maintained 
by the National Institute of Standards and Technology (``NIST''), and 
maintain such a synchronization. Each Industry Members [sic] is 
required to synchronize their Business Clocks used solely for Manual 
Order Events, however, at a minimum to within one second of the time 
maintained by the NIST.
---------------------------------------------------------------------------

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

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, 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.
(W) Material Terms of the Order
    Proposed Rule 16030 requires Industry Members to record and report 
to the Central Repository Material Terms of the Order with certain 
Reportable Events (e.g., for the original receipt or origination of an 
order, for the routing of an order). Accordingly, SRO proposes to 
define the term ``Material Terms of the Order'' in Proposed Rule 16010. 
Specifically, paragraph (w) of Proposed Rule 16010 defines the term 
``Material Terms of the Order'' to include: The NMS Security or OTC 
Equity Security symbol; security type; price (if applicable); size 
(displayed and non-displayed); side (buy/sell); order type; if a sell 
order, whether the order is long, short, short exempt; open/close 
indicator (except on transactions in equities); time in force (if 
applicable); if the order is for a Listed Option, option type (put/
call), option symbol or root symbol, underlying symbol, strike price, 
expiration date, and open/close (except on market maker quotations); 
and any special handling instructions. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, 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.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks (as defined in SEC Rule 
600(b)(47)), Listed Options, OTC Equity Securities, and any other 
securities that are included as Eligible Securities from time to time. 
Accordingly, 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.
(Z) Operating Committee
    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.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC Rule 613, the details for each Options Market Maker quotation 
must be reported to the Central Repository by both the Options Market 
Maker and the options exchange to which it routes its quote.
    The SROs, however, requested and received exemptive relief from SEC 
Rule 613 so that the CAT NMS Plan may permit Options Market Maker 
quotes to be reported to the Central Repository by the relevant options 
exchange in lieu of requiring that such reporting be done by both the 
options exchange and the Options Market Maker, as is required by SEC 
Rule 613.\22\ In accordance with the exemptive relief, Options Market

[[Page 9825]]

Makers would be required to report to the options exchange the time at 
which a quote in a Listed Option is sent to the options exchange. Such 
time information also will be reported to the Central Repository by the 
options exchange in lieu of reporting by the Options Market Maker.
---------------------------------------------------------------------------

    \22\ See Exemptive Request Letter at 2, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, 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.
(BB) Order
    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).
(CC) OTC Equity Security
    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.
(DD) Participant
    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.
(EE) Person
    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.
(FF) Plan Processor
    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.
(GG) Received Industry Member Data
    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).
(HH) Recorded Industry Member Data
    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).
(II) Reportable Event
    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.
(JJ) SRO
    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.
(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The SROs requested and received exemptive relief from SEC Rule 613 
so that the CAT NMS Plan may permit the Existing Identifier Approach, 
which would allow an Industry Member to report an existing SRO-Assigned 
Market Participant Identifier in lieu of requiring the reporting of a 
universal CAT-Reporter-ID (that is, a code that uniquely and 
consistently identifies an Industry Member for purposes of providing 
data to the Central Repository).\23\ The CAT NMS Plan reflects the 
``Existing Identifier Approach'' for purposes of identifying each 
Industry Member associated with an order or Reportable Event. Under the 
Existing Identifier Approach, Industry Members are required to record 
and report to the Central Repository an SRO-Assigned Market Participant 
Identifier for orders and certain Reportable Events to be used by the 
Central Repository to assign a unique CAT-Reporter-ID to identify 
Industry Members.
---------------------------------------------------------------------------

    \23\ See Exemptive Request Letter at 19, and Exemption Order.
---------------------------------------------------------------------------

    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to 
the Central Repository, on a daily basis, all SRO-Assigned Market 
Participant Identifiers used by its Industry Members, as well as 
information to identify each such Industry Member, including CRD number 
and LEI, if the SRO has collected such LEI of the Industry Member. 
Additionally, each Industry Member is required to submit to the Central 
Repository the CRD number of

[[Page 9826]]

the Industry Member as well as the LEI of the Industry Member (if the 
Industry Member has a LEI). The Plan Processor will use this 
information to assign a CAT-Reporter-ID to each Industry Member for 
internal use within the Central Repository.
(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, 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 (e.g., FINRA MPID, NASDAQ MPID, NYSE Mnemonic, CBOE User 
Acronym and CHX Acronym) when reporting order information to the 
Central Repository.
(LL) Small Industry Member
    The requirements of the Proposed 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).
(MM) Trading Day
    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.
(ii) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards. To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\24\ To implement these provisions 
with regard to its Industry Members, SRO proposes Rule 16020 
(Consolidated Audit Trail--Clock Synchronization) to require its 
Industry Members to comply with the clock synchronization requirements 
of the Plan.
---------------------------------------------------------------------------

    \24\ In addition, Section 6.7(a)(ii) of the Plan sets forth the 
timeline for CAT Reporters to comply with the clock synchronization 
requirements.
---------------------------------------------------------------------------

    Paragraph (a) of Proposed Rule 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

[[Page 9827]]

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. SRO 
intends to announce to its Industry Members the certification schedule 
established by the Operating Committee via Regulatory Circular.
    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.
(iii) Industry Member Data Reporting
    SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to 
set forth certain provisions requiring Industry Members to record and 
report data to the CAT. To comply with this provision, Section 6.4 of 
the CAT NMS Plan sets forth the data reporting requirements for 
Industry Members. To implement these provisions with regard to its 
Industry Members, 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.
(A) Recording and Reporting Industry Member Data
    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.
(B) Timing of Recording and Reporting
    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.

[[Page 9828]]

    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.
(C) Applicable Securities
    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.
(D) Security Symbology
    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.
(E) Error Correction
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, 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.
(iv) Customer Information Reporting
    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository certain information related to their 
Customers in accordance with the Customer Information Approach 
discussed above. 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.
(v) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository information sufficient to identify 
such Industry Member, including CRD number and LEI, if such LEI has 
been obtained, in accordance with the Existing Identifier Approach 
discussed above. 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.

[[Page 9829]]

(vi) Time Stamps
    SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for 
time stamps used by CAT Reporters in recording and reporting data to 
the CAT.\25\ To comply with this provision, Section 6.8(b) of the Plan 
sets forth time stamp requirements for Industry Members. To implement 
this provision with regard to its Industry Members, SRO proposes new 
Rule 16060 (Consolidated Audit Trail--Time Stamps) to require its 
Industry Members to comply with the time stamp requirements of the 
Plan.
---------------------------------------------------------------------------

    \25\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    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.
(vii) Clock Synchronization Rule Violations
    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.
(viii) Connectivity and Data Transmission
    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.
(ix) Development and Testing
    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),

[[Page 9830]]

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 16080 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\26\ Specifically, 
Proposed Rule 16080 requires that each Industry Member participate in 
testing related to the Central Repository, including any industry-wide 
disaster recovery testing, pursuant to the schedule established 
pursuant to the CAT NMS Plan. SRO intends to announce to its Industry 
Members the schedule established pursuant to the CAT NMS Plan via 
Regulatory Circular.
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    \26\ Adopting Release [sic] at 84725.
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(x) Recordkeeping
    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.
(xi) Timely, Accurate and Complete Data
    SEC Rule 613 and the CAT NMS Plan emphasize the importance of the 
timeliness, accuracy, completeness and integrity of the data submitted 
to the CAT.\27\ Accordingly, Proposed Rule 16093 (Consolidated Audit 
Trail--Timely, Accurate and Complete Data) implements this requirement 
with regard to Industry Members. Paragraph (a) of Proposed Rule 16093 
requires that Industry Members record and report data to the Central 
Repository as required by the Proposed Rule 16000 Series in a manner 
that ensures the timeliness, accuracy, integrity and completeness of 
such data.
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    \27\ See SEC Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the 
CAT NMS Plan.
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    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.\28\
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    \28\ Approval Order at 84745.
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    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.\29\ Compliance 
Thresholds will include compliance with the data reporting and clock 
synchronization requirements. Proposed Rule 16093 states that an 
Industry Member's performance with respect to its Compliance Threshold 
will not signify, as a matter of law, that such Industry Member has 
violated this Proposed Rule Series.
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    \29\ Appendix C of the CAT NMS Plan.
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(xii) Compliance Dates
    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

[[Page 9831]]

Business Clocks that do not capture time in milliseconds.\30\
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    \30\ See Request for Exemptive Relief filed with the Commission 
on January 17, 2017.
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    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.
2. Statutory Basis
    SRO believes that the proposed rule change is consistent with the 
provisions of Section 6(b)(5) of the Act,\31\ which require, among 
other things, that the SRO rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest, and Section 6(b)(8) of the Act,\32\ which requires 
that SRO rules not impose any burden on competition that is not 
necessary or appropriate.
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    \31\ 15 U.S.C. 78f(b)(6) [sic].
    \32\ 15 U.S.C. 78f(b)(8).
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    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.'' \33\ To the extent that this proposal 
implements, interprets or clarifies the Plan and applies specific 
requirements to Industry Members, SRO believes that this proposal 
furthers the objectives of the Plan, as identified by the SEC, and is 
therefore consistent with the Act.
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    \33\ Approval Order at 84697.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    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.

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

    The Exchange has neither solicited nor received comments on the 
proposed rule change.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BOX-2017-07 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BOX-2017-07. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BOX-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.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02537 Filed 2-7-17; 8:45 am]
BILLING CODE 8011-01-P