Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt Consolidated Audit Trail Compliance Rule (Rules 1701-1712) To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail, 9790-9803 [2017-02542]

Download as PDF 9790 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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.’’ 34 To the extent that this proposal implements, interprets or clarifies the Plan and applies specific requirements to Industry Members, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the Proposed Rule Series implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this Proposed Rule 900A Series. Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. asabaliauskas on DSK3SPTVN1PROD with NOTICES 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 (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission shall: (a) By order approve or disapprove such proposed rule change, or (b) institute proceedings to determine whether the proposed rule change should be disapproved. 34 Approval 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: 17:36 Feb 07, 2017 Jkt 241001 • 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– Phlx–2017–07 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–Phlx–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 the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–Phlx–2017–07 and should be submitted on or before March 1, 2017. PO 00000 Frm 00082 Fmt 4703 [FR Doc. 2017–02550 Filed 2–7–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments Order at 84697. VerDate Sep<11>2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.35 Robert W. Errett, Deputy Secretary. Sfmt 4703 [Release No. 34–79937; File No. SR–MIAX– 2017–03] Self-Regulatory Organizations; Miami International Securities Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt Consolidated Audit Trail Compliance Rule (Rules 1701–1712) To Implement the Compliance Rule Regarding the National Market System Plan Governing the Consolidated Audit Trail February 2, 2017. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 30, 2017, Miami International Securities Exchange, LLC (‘‘MIAX Options’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange.3 The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to adopt the Rules 1701–1712 to implement the compliance rule (‘‘Compliance Rule’’) regarding the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).4 The text of the proposed rule change is available on the Exchange’s Web site at http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, and at the Commission’s Public Reference Room. 35 17 CFR 200.30–3(a)(12). 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– MIAX–2017–01, and the Exchange subsequently withdrew that filing on January 30, 2017 and filed this proposed rule change. 4 Unless otherwise specified, capitalized terms used in this rule filing are defined as set forth herein or in the CAT NMS Plan. 1 15 E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change asabaliauskas on DSK3SPTVN1PROD with NOTICES 1. Purpose Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC, Investors’ Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami International Securities Exchange LLC, MIAX PEARL, LLC,5 NASDAQ BX, Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. (collectively, the ‘‘Participants’’ or ‘‘SROs’’) filed with the Commission, pursuant to Section 11A of the Exchange Act 6 and Rule 608 of Regulation NMS thereunder,7 the CAT NMS Plan.8 The Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. The Plan was published for comment in the Federal Register on May 17, 2016,9 and approved by the Commission, as modified, on November 15, 2016.10 5 MIAX PEARL, LLC, became a party to the CAT NMS Plan via an Amendment to the Plan on January 12, 2017. 6 15 U.S.C. 78k–1. 7 17 CFR 242.608. 8 See Letter from the Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Participants submitted an amendment to the CAT NMS Plan. See Letter from Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. 9 See Securities Exchange Act Release No. 77724 (Apr. 27, 2016), 81 FR 30614 (May 17, 2016). 10 See Securities Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval Order’’). VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 The Plan is designed to create, implement and maintain a consolidated audit trail (‘‘CAT’’) that would capture customer and order event information for orders in NMS Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. Each Participant is required to enforce compliance by its Industry Members, as applicable, with the provisions of the Plan, by adopting a Compliance Rule applicable to their Industry Members.11 As is described more fully below, the rules contained in the proposed Chapter XVII set forth the Compliance Rule to require Industry Members to comply with the provisions of the CAT NMS Plan. The proposed Rules include twelve proposed Rules covering the following areas: (1) Definitions; (2) clock synchronization; (3) Industry Member Data reporting; (4) Customer information reporting; (5) Industry Member information reporting; (6) time stamps; (7) clock synchronization rule violations; (8) connectivity and data transmission; (9) development and testing; (10) recordkeeping; (11) timely, accurate and complete data; and (12) compliance dates. Each of these proposed Rules are discussed in detail below. (i) Definitions Proposed Rule 1701 (Consolidated Audit Trail Compliance Rule— Definitions) sets forth the definitions for the terms used in the proposed Rules 1701–1712. Each of the defined terms in proposed Rule 1701 is discussed in detail in this section. (A) Account Effective Date (I) Customer Information Approach SEC Rule 613 requires that numerous data elements be reported to the CAT to ensure there is sufficient information to create the lifecycle of an order, and provide regulators with sufficient detail about an order to perform their regulatory duties. Certain required elements are intended to ensure that the regulators can identify the Customers associated with orders. For example, SEC Rule 613(c)(7)(i)(A) requires an Industry Member to report the ‘‘Customer-IDs’’ for each Customer for the original receipt or origination of an order. ‘‘Customer-ID’’ is defined in SEC Rule 613(j)(5) to mean ‘‘with respect to a customer, a code that uniquely and consistently identifies such customer for purposes of providing data to the Central Repository.’’ SEC Rule 613(c)(8) 11 See PO 00000 SEC Rule 613(g)(1). Frm 00083 Fmt 4703 Sfmt 4703 9791 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.12 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, 12 See Securities Exchange Act Release No. 77265 (March 1, 2016), 81 FR 11856 (March 7, 2016) (‘‘Exemption Order’’). See also Letter from Participants to Brent J. Fields, Secretary, Commission, dated January 30, 2015 at 12 (‘‘Exemptive Request Letter’’); and CAT NMS Plan at Appendix C, Section A.1(a)(iii). E:\FR\FM\08FEN1.SGM 08FEN1 9792 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES and revised Firm Designated IDs or associated reportable Customer information. (II) Definition of Account Effective Date In connection with the Customer Information Approach, Industry Members would be required to report Customer Account Information to the Central Repository. ‘‘Customer Account Information’’ is defined in SEC Rule 613(j)(4) to ‘‘include, but not be limited to, account number, account type, customer type, date account opened, and large trader identifier (if applicable).’’ Therefore, when reporting Customer Account Information, an Industry Member is required to report the date an account was opened. The Participants requested and received an exemption to allow an ‘‘Account Effective Date’’ to be reported in lieu of an account open date in certain limited circumstances. The definition of ‘‘Account Effective Date’’ as set forth in Paragraph (a) of proposed Rule 1701 describes those limited circumstances in which an Industry Member may report an ‘‘Account Effective Date’’ rather than the account open date. The proposed definition is the same as the definition of ‘‘Account Effective Date’’ set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan. Specifically, Paragraph (a)(1) defines ‘‘Account Effective Date [sic] to mean, with regard to those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution: (1) When the trading relationship was established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, either (a) the date the relationship identifier was established within the Industry Member; (b) the date when trading began (i.e., the date the first order was received) using the relevant relationship identifier; or (c) if both dates are available, the earlier date will be used to the extent that the dates differ; or (2) when the trading relationship was established on or after November 15, 2018 for Industry Members other than Small Industry Members, or on or after November 15, 2019 for Small Industry Members, the date the Industry Member established the relationship identifier, which would be no later than the date the first order was received. Paragraph (a)(2) of proposed Rule 1701 states that an ‘‘Account Effective Date’’ means, where an Industry VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Member changes back office providers or clearing firms prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer. Paragraph (a)(3) states that an ‘‘Account Effective Date’’ means, where an Industry Member acquires another Industry Member prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, the date an account was established at the relevant Industry Member, either directly or via transfer. Paragraph (a)(4) states that ‘‘Account Effective Date’’ means, where there are multiple dates associated with an account established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, the earliest available date. Paragraph (a)(5) states that an ‘‘Account Effective Date’’ means, with regard to Industry Member proprietary accounts established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members: (1) The date established for the account in the Industry Member or in a system of the Industry Member or (2) the date when proprietary trading began in the account (i.e., the date on which the first orders were submitted from the account). With regard to paragraphs (a)(2)–(5), the Account Effective Date will be no later than the date trading occurs at the Industry Member or in the Industry Member’s system. (B) Active Account Under the Customer Information Approach, Industry Members are required to report Customer Identifying Information and Customer Account Information for only those accounts that are active. This will alleviate the need for Industry Members to update such information for non-active accounts, but still ensure that the Central Repository will collect audit trail data for Customer accounts that have any Reportable Events. Accordingly, paragraph (b) of proposed Rule 1701 defines an ‘‘Active Account’’ as an account that has had activity in Eligible Securities within the last six months. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 (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 613.13 Under SEC Rule 613, regulators would be able to link the subaccount to which an allocation was made to a specific order. In contrast, under the Allocation Report Approach, regulators would only be able to link an allocation to the account to which it was made, and not to a specific order. (II) Definition of Allocation Report To assist in implementing the Allocation Report Approach, paragraph (c) of proposed Rule 1701 defines an ‘‘Allocation Report.’’ Specifically, an ‘‘Allocation Report’’ means a report made to the Central Repository by an Industry Member that identifies the Firm Designated ID for any account(s), including subaccount(s), to which executed shares are allocated and provides the security that has been allocated, the identifier of the firm reporting the allocation, the price per share of shares allocated, the side of shares allocated, the number of shares allocated to each account, and the time of the allocation; provided, for the avoidance of doubt, any such Allocation Report shall not be required to be linked to particular orders or executions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (D) Business Clock To create the required audit trail, Industry Members are required to record the date and time of various Reportable Events to the Central Repository. Industry Members will use ‘‘Business Clocks’’ to record such dates and times. Accordingly, paragraph (d) of proposed Rule 1701 defines the term ‘‘Business 13 Exemptive Request Letter at 26–27; and Exemption Order. E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices Clock’’ as a clock used to record the date and time of any Reportable Event required to be reported under the Consolidated Audit Trail Compliance Rule (Rules 1701–1712). This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. This change is intended to recognize that the Industry Members’ obligations with regard to the CAT are set forth in the Consolidated Audit Trail Compliance Rule (Rules 1701–1712). (E) CAT Paragraph (e) of proposed Rule 1701 defines the term ‘‘CAT’’ to mean the consolidated audit trail contemplated by SEC Rule 613. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (F) CAT NMS Plan Paragraph (f) of proposed Rule 1701 defines the term ‘‘CAT NMS Plan’’ to mean the National Market System Plan Governing the Consolidated Audit Trail, as amended from time to time. (G) CAT-Order-ID asabaliauskas on DSK3SPTVN1PROD with NOTICES (I) Daisy Chain Approach Under the CAT NMS Plan, the Daisy Chain Approach is used to link and reconstruct the complete lifecycle of each Reportable Event in CAT. According to this Approach, Industry Members assign their own identifiers to each order event. Within the Central Repository, the Plan Processor later replaces the identifier provided by the Industry Member for each Reportable Event with a single identifier, called the CAT Order-ID, for all order events pertaining to the same order. This CAT Order-ID is used to links the Reportable Events related to the same order. (II) Definition of CAT-Order-ID To implement the Daisy Chain Approach, Paragraph (g) of proposed Rule 1701 defines the term ‘‘CAT-OrderID.’’ 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 VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 of the Industry Member.14 Such a third party, referred to in proposed Rule 1701 as a ‘‘CAT Reporting Agent,’’ would be one type of a Data Submitter, that is, a party that submits data to the Central Repository. Paragraph (h) of proposed Rule 1701 defines the term ‘‘CAT Reporting Agent’’ to mean a Data Submitter that is a third party that enters into an agreement with-an Industry Member pursuant to which the CAT Reporting Agent agrees to fulfill such Industry Member’s reporting obligations under the Consolidated Audit Trail Compliance Rule (proposed Rules 1701–1712). 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 1701 defines the term ‘‘Central Repository’’ to mean the repository responsible for the receipt, consolidation, and retention of all information reported to the CAT pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange uses the phrase ‘‘CAT NMS Plan’’ in place of the phrase ‘‘this Agreement.’’ (J) Compliance Threshold Paragraph (j) of proposed Rule 1701 defines the term ‘‘Compliance Threshold’’ as having the meaning set forth in proposed Rule 1711(d). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below with regard to proposed Rule 1711(d), each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member’s performance with regard to the CAT. This Industry Member-specific rate is the ‘‘Compliance Threshold.’’ (K) Customer Industry Members are required to submit to the Central Repository certain information related to their Customers, including Customer Identifying 14 Appendix C, Section A.1(a) of the CAT NMS Plan. PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 9793 Information and Customer Account Information, as well as data related to their Customer’s Reportable Events. Accordingly, Paragraph (k) of proposed Rule 1701 proposes to define the term ‘‘Customer.’’ Specifically, the term ‘‘Customer’’ would be defined to mean: (1) The account holder(s) of the account at an Industry Member originating the order; and (2) any person from whom the Industry Member is authorized to accept trading instructions for such account, if different from the account holder(s). This is the same definition as set forth in SEC Rule 613(j)(3), except the Exchange proposes to replace the references to a registered broker-dealer or broker-dealer with a reference to an Industry Member for consistency of terms used in the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712). The Exchange also notes that Section 1.1 of the CAT NMS Plan defines ‘‘Customer’’ by reference to SEC Rule 613(j)(3). (L) Customer Account Information As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Account Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term ‘‘Customer Account Information’’ to clarify what customer information would need to be reported to the Central Repository. Paragraph (l) of proposed Rule 1701 defines the term ‘‘Customer Account Information’’ to include, in part, account number, account type, customer type, date account opened, and large trader identifier (if applicable). Proposed Rule 1701(l), however, provides an alternative definition of ‘‘Customer Account Information’’ in two limited circumstances. First, in those circumstances in which an Industry Member has established a trading relationship with an institution but has not established an account with that institution, the Industry Member will: (1) Provide the Account Effective Date in lieu of the ‘‘date account opened’’; (2) provide the relationship identifier in lieu of the ‘‘account number’’; and (3) identify the ‘‘account type’’ as a ‘‘relationship.’’ Second, in those circumstances in which the relevant account was established prior to November 15, 2018, for Industry Members other than Small Industry Members, or prior to November 15, 2019, for Small Industry Members, and no ‘‘date account opened’’ is available for the account, the Industry Member will provide the Account Effective Date in the following circumstances: (1) E:\FR\FM\08FEN1.SGM 08FEN1 9794 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Where an Industry Member changes back office providers or clearing firms and the date account opened is changed to the date the account was opened on the new back office/clearing firm system; (2) where an Industry Member acquires another Industry Member and the date account opened is changed to the date the account was opened on the post-merger back office/clearing firm system; (3) where there are multiple dates associated with an account in an Industry Member’s system, and the parameters of each date are determined by the individual Industry Member; and (4) where the relevant account is an Industry Member proprietary account. The proposed definition is the same as the definition of ‘‘Customer Account Information’’ set forth in Section 1.1 of the CAT NMS Plan, provided, however, that specific dates have replaced the descriptions of those dates set forth in Section 1.1 of the Plan. (M) Customer Identifying Information As discussed above, under the Customer Information Approach, Industry Members are required to report Customer Identifying Information to the Central Repository as part of the customer definition process. Accordingly, the Exchange proposes to define the term ‘‘Customer Account Information’’ to clarify what Customer information would need to be reported to the Central Repository. Paragraph (m) of proposed Rule 1701 defines the term ‘‘Customer Identifying Information’’ to mean information of sufficient detail to identify a Customer. With respect to individuals, ‘‘Customer Identifying Information’’ includes, but is not limited to: Name, address, date of birth, individual tax payer identification number (‘‘ITIN’’)/social security number (‘‘SSN’’), individual’s role in the account (e.g., primary holder, joint holder, guardian, trustee, person with the power of attorney). With respect to legal entities, ‘‘Customer Identifying Information’’ includes, but is not limited to, name, address, Employer Identification Number (‘‘EIN’’)/Legal Entity Identifier (‘‘LEI’’) or other comparable common entity identifier, if applicable. The definition further notes that an Industry Member that has an LEI for a Customer must submit the Customer’s LEI in addition to other information of sufficient detail to identify the Customer. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (N) Data Submitter The CAT NMS Plan uses the term ‘‘Data Submitter’’ to refer to any person that reports data to the Central VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Repository.15 Such Data Submitters may include those entities that are required to submit data to the Central Repository (e.g., national securities exchanges, national securities associations and Industry Members), third-parties that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT Reporting Agents), and outside parties that are not required to submit data to the CAT but from which the CAT may receive data (e.g., securities information processors (‘‘SIPs’’). To include this term in the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712), the Exchange proposes to define ‘‘Data Submitter’’ in paragraph (n) of proposed Rule 1701. Specifically, paragraph (n) of proposed Rule 1701 defines a ‘‘Data Submitter’’ to mean any person that reports data to the Central Repository, including national securities exchanges, national securities associations, brokerdealers, 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 Consolidated Audit Trail Compliance Rule (Rules 1701–1712) only apply to Reportable Events in Eligible Securities. Currently, an Eligible Security includes NMS Securities and OTC Equity Securities. Accordingly, paragraph (o) of proposed Rule 1701 defines the term ‘‘Eligible Security’’ to include: (1) All NMS Securities; and (2) all OTC Equity Securities. The terms ‘‘NMS Securities’’ and ‘‘OTC Equity Securities’’ are defined, in turn, below. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (P) Error Rate (I) Maximum Error Rate Under the CAT NMS Plan, the Operating Committee sets the maximum Error Rate that the Central Repository would tolerate from an Industry Member reporting data to the Central Repository.16 The Operating Committee reviews and resets the maximum Error Rate, at least annually.17 If an Industry Member reports CAT data to the Central Repository with errors such that their error percentage exceeds the maximum 15 Appendix C, Section A.1(a) of the CAT NMS Plan. 16 Section 6.5(d)(i) of the CAT NMS Plan. 17 Appendix C, Section A.3(b) of the CAT NMS Plan. PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 Error Rate, then such Industry Member would not be in compliance with the CAT NMS Plan or Rule 613.18 As such, the Exchange or the SEC ‘‘[sic]’’ may take appropriate action against an Industry Member for failing to comply with its CAT reporting obligations.19 The CAT NMS Plan sets the initial Error Rate at 5%.20 It is anticipated that the maximum Error Rate will be reviewed and lowered by the Operating Committee once Industry Members begin to report to the Central Repository.21 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.22 (II) Definition of Error Rate To implement the requirements of the CAT NMS Plan related to the Error Rate, the Exchange proposes to define the term ‘‘Error Rate’’ in proposed Rule 1701. Paragraph (p) of proposed Rule 1701 defines the term ‘‘Error Rate’’ to mean the percentage of Reportable Events collected by the Central Repository in which the data reported does not fully and accurately reflect the order event that occurred in the market. This is the same definition as set forth 18 Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 613(g)–(h). 19 Appendix C, Section A.3(b) of the CAT NMS Plan. 20 Section 6.5(d)(i) of the CAT NMS Plan. 21 Appendix C, Section A.3(b) of the CAT NMS Plan. 22 Approval Order at 84718. E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines ‘‘Error Rate’’ by reference to SEC Rule 613(j)(6). (Q) Firm Designated ID As discussed above, under the Customer Information Approach, the CAT NMS Plan would require each Industry Member to assign a unique Firm Designated ID to each Customer. Industry Members would be permitted to use as the Firm Designated ID an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). Industry Members would be required to report only the Firm Designated ID for each new order submitted to the Central Repository, rather than the ‘‘Customer-ID’’ with individual order events. Accordingly, the Exchange proposes to define the term ‘‘Firm Designated ID’’ in proposed Rule 1701. Specifically, paragraph (q) of proposed Rule 1701 defines the term ‘‘Firm Designated ID’’ to mean a unique identifier for each trading account designated by Industry Members for purposes of providing data to the Central Repository, where each such identifier is unique among all identifiers from any given Industry Member for each business date. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. Industry Members would be permitted to use an account number or any other identifier defined by the firm, provided each identifier is unique across the firm for each business date (i.e., a single firm may not have multiple separate customers with the same identifier on any given date). (R) Industry Member Paragraph (r) of proposed Rule 1701 defines the term ‘‘Industry Member’’ to mean a member of a national securities exchange or a member of a national securities association.’’ This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. asabaliauskas on DSK3SPTVN1PROD with NOTICES (S) Industry Member Data Paragraph (s) of proposed Rule 1701 states that the term ‘‘Industry Member Data’’ has the meaning set forth in Rule 1703(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of ‘‘Industry Member Data’’ is discussed more fully in the discussion below regarding proposed Rule 1703(a)(2). VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 (T) Initial Plan Processor Paragraph (t) of proposed Rule 1701 defines the term ‘‘Initial Plan Processor’’ to mean the first Plan Processor selected by the Operating Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS Plan and the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, although the proposed definition uses the full name of the ‘‘Selection Plan.’’ (U) Listed Option or Option The CAT NMS Plan and this proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) applies to Eligible Securities, which includes NMS Securities, which, in turn, includes Listed Options. Certain requirements of the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) apply specifically to Listed Options. Accordingly, Paragraph (u) of proposed Rule 1701 defines the term ‘‘Listed Option’’ or ‘‘Option.’’ Specifically, paragraph (u) of proposed Rule 1701 states that the term ‘‘Listed Option’’ or ‘‘Option’’ has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a listed option as ‘‘any option traded on a registered national securities exchange or automated facility of a national securities association.’’ The Exchange notes that the proposed definition of ‘‘Listed Option’’ is the same definition as the definition set forth in Section 1.1 of the CAT NMS Plan. (V) Manual Order Event (I) Manual Order Event Approach The CAT NMS Plan sets forth clock synchronization and timestamp requirements for Industry Members which reflect exemptions for Manual Order Events granted by the Commission.23 Specifically, the Plan requires Industry Members to record and report the time of each Reportable Event using timestamps reflecting current industry standards (which must be at least to the millisecond) or, if an Industry Member’s order handling or execution 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 23 Exemption PO 00000 Frm 00087 Order. Fmt 4703 Sfmt 4703 9795 time the event is captured electronically in an order handling and execution system (‘‘Electronic Capture Time’’) in milliseconds. In addition, Industry Members are required to synchronize their respective Business Clocks (other than such Business Clocks used solely for Manual Order Events) at a minimum to within 50 milliseconds of the time maintained by the National Institute of Standards and Technology (‘‘NIST’’), and maintain such a synchronization. Each Industry Member is required to synchronize their Business Clocks used solely for Manual Order Events, however, at a minimum to within one second of the time maintained by the NIST. (II) Definition of Manual Order Event In order to clarify what a Manual Order Event is for clock synchronization and time stamp purposes, the Exchange proposes to define the term ‘‘Manual Order Event’’ in proposed Rule 1701. Specifically, paragraph (v) of proposed Rule 1701 defines the term ‘‘Manual Order Event’’ to mean a non-electronic communication of order-related information for which Industry Members must record and report the time of the event. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (W) Material Terms of the Order Proposed Rule 1703 requires Industry Members to record and report to the Central Repository Material Terms of the Order with certain Reportable Events (e.g., for the original receipt or origination of an order, for the routing of an order). Accordingly, the Exchange proposes to define the term ‘‘Material Terms of the Order’’ in proposed Rule 1701. Specifically, paragraph (w) of proposed Rule 1701 defines the term ‘‘Material Terms of the Order’’ to include: The NMS Security or OTC Equity Security symbol; security type; price (if applicable); size (displayed and non-displayed); side (buy/sell); order type; if a sell order, whether the order is long, short, short exempt; open/close indicator (except on transactions in equities); time in force (if applicable); if the order is for a Listed Option, option type (put/call), option symbol or root symbol, underlying symbol, strike price, expiration date, and open/close (except on market maker quotations); and any special handling instructions. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (X) NMS Security NMS Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to E:\FR\FM\08FEN1.SGM 08FEN1 9796 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices define the term ‘‘NMS Security’’ in proposed Rule 1701. Specifically, paragraph (x) of proposed Rule 1701 defines the term ‘‘NMS Security’’ to mean any security or class of securities for which transaction reports are collected, processed, and made available pursuant to an effective transaction reporting plan, or an effective national market system plan for reporting transactions in Listed Options. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (Y) NMS Stock Under the CAT NMS Plan, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47)), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. Accordingly, the Exchange proposes to define the term ‘‘NMS Stock’’ in Paragraph (y) of proposed Rule 1701 to mean any NMS Security other than an option. This is the same definition as set forth in SEC Rule 600(b)(47) of Regulation NMS. (Z) Operating Committee Paragraph (z) of proposed Rule 1701 defines the term ‘‘Operating Committee’’ to mean the governing body of the CAT NMS, LLC designated as such and described in Article IV of the CAT NMS Plan. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan, except the Exchange proposes to use the phrase ‘‘CAT NMS LLC’’ in place of the phrase ‘‘the Company’’ for clarity. asabaliauskas on DSK3SPTVN1PROD with NOTICES (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 VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 both the options exchange and the Options Market Maker, as is required by SEC Rule 613.24 In accordance with the exemptive relief, Options Market Makers would be required to report to the options exchange the time at which a quote in a Listed Option is sent to the options exchange. Such time information also will be reported to the Central Repository by the options exchange in lieu of reporting by the Options Market Maker. (II) Definition of Options Market Maker To implement the requirements related to Option Market Maker quotes, the Exchange proposes to define the term ‘‘Options Market Maker’’ in proposed Rule 1701. Specifically, paragraph (aa) of proposed Rule 1701 defines the term ‘‘Options Market Maker’’ to mean a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (BB) Order The proposed Consolidated Audit Trail Compliance Rule (Rules 1701– 1712) requires each Industry Member to record and electronically report to the Central Repository certain details for each order. Accordingly, the Exchange proposes to define the term ‘‘Order’’ in proposed Rule 1701. Specifically, paragraph (bb) of proposed Rule 1701 defines the term ‘‘Order’’, with respect to Eligible Securities, to include: (1) Any order received by an Industry Member from any person; (2) any order originated by an Industry Member; or (3) any bid or offer. This is the same definition as set forth in SEC Rule 613(j)(8), except the Exchange proposes to replace the phrase ‘‘member of a national securities exchange or national securities association’’ with the term ‘‘Industry Member.’’ The Exchange notes that Section 1.1 of the CAT NMS Plan defines ‘‘Order’’ by reference to SEC Rule 613(j)(8). (CC) OTC Equity Security OTC Equity Securities are one of the types of Eligible Securities for the CAT. Therefore, the Exchange proposes to define the term ‘‘OTC Equity Security’’ in proposed Rule 1701. Specifically, paragraph (cc) of proposed Rule 1701 defines the term ‘‘OTC Equity Security’’ to mean any equity security, other than an NMS Security, subject to prompt last sale reporting rules of a registered national securities association and 24 See Exemptive Request Letter at 2, and Exemption Order. PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 reported to one of such association’s equity trade reporting facilities. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (DD) Participant Paragraph (dd) of proposed Rule 1701 defines the term ‘‘Participant’’ to mean each Person identified as such in Exhibit A of the CAT NMS Plan, as amended, in such Person’s capacity as a Participant in CAT NMS, LLC. This is the same definition in substance as set forth in Section 1.1 of the CAT NMS Plan. (EE) Person Paragraph (ee) of proposed Rule 1701 defines the term ‘‘Person’’ to mean any individual, partnership, limited liability company, corporation, joint venture, trust, business trust, cooperative or association and any heirs, executors, administrators, legal representatives, successors and assigns of such Person where the context so permits. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (FF) Plan Processor Paragraph (ff) of proposed Rule 1701 defines the term ‘‘Plan Processor’’ to mean the Initial Plan Processor or any other Person selected by the Operating Committee pursuant to SEC Rule 613 and Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial Plan Processor, the National Market System Plan Governing the Process for Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail, to perform the CAT processing functions required by SEC Rule 613 and set forth in the CAT NMS Plan. (GG) Received Industry Member Data Paragraph (gg) of proposed Rule 1701 states that the term ‘‘Received Industry Member Data’’ has the meaning set forth in Rule 1703(a)(2). This definition has the same substantive meaning as the definition set forth in Section 1.1 of the CAT NMS Plan. The definition of ‘‘Received Industry Member Data’’ is discussed more fully in the discussion below regarding proposed Rule 1703(a)(2). (HH) Recorded Industry Member Data Paragraph (hh) of proposed Rule 1701 states that the term ‘‘Recorded Industry Member Data’’ has the meaning set forth in Rule 1703(a)(1). This definition has the same substantive meaning as the definition set forth in in Section 1.1 of the CAT NMS Plan. The definition of ‘‘Recorded Industry Member Data’’ is discussed more fully in the discussion E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices below regarding proposed Rule 1703(a)(1). (II) Reportable Event The proposed Consolidated Audit Trail Compliance Rule (Rules 1701– 1712) requires each Industry Member to record and electronically report to the Central Repository certain details for each Reportable Event. To clarify these requirements, the Exchange proposes to define the term ‘‘Reportable Event’’ in proposed Rule 1701. Specifically, paragraph (ii) of proposed Rule 1701 states that the term ‘‘Reportable Event’’ includes, but is not limited to, the original receipt or origination, modification, cancellation, routing, execution (in whole or in part) and allocation of an order, and receipt of a routed order. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. (JJ) SRO Paragraph (jj) of proposed Rule 1701 defines the term ‘‘SRO’’ to mean any self-regulatory organization within the meaning of Section 3(a)(26) of the Exchange Act. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. asabaliauskas on DSK3SPTVN1PROD with NOTICES (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).25 The CAT NMS Plan reflects the ‘‘Existing Identifier Approach’’ for purposes of identifying each Industry Member associated with an order or Reportable Event. Under the Existing Identifier Approach, Industry Members are required to record and report to the Central Repository an 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 SRO25 See Exemptive Request Letter at 19, and Exemption Order. VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Assigned Market Participant Identifiers used by its Industry Members, as well as information to identify each such Industry Member, including CRD number and LEI, if the SRO has collected such LEI of the Industry Member. Additionally, each Industry Member is required to submit to the Central Repository the CRD number of the Industry Member as well as the LEI of the Industry Member (if the Industry Member has an LEI). The Plan Processor will use this information to assign a CAT-Reporter-ID to each Industry Member for internal use within the Central Repository. (II) Definition of SRO-Assigned Market Participant Identifier To implement the Existing Identifier Approach, the Exchange proposes to define the term ‘‘SRO-Assigned Market Participant’’ in proposed Rule 1701. Specifically, paragraph (kk) of proposed Rule 1701 defines the term ‘‘SROAssigned Market Participant Identifier’’ to mean an identifier assigned to an Industry Member by an SRO or identifier used by a Participant. This is the same definition as set forth in Section 1.1 of the CAT NMS Plan. For example, an Industry Member would be permitted to use any existing 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 Consolidated Audit Trail Compliance Rule (Rules 1701–1712) differ to some extent for Small Industry Members versus Industry Members other than Small Industry Members. For example, the compliance dates for reporting data to the CAT are different for Small Industry Members versus other Industry Members. Accordingly, to clarify the requirements that apply to which Industry Members, the Exchange proposes to define the term ‘‘Small Industry Member’’ in proposed Rule 1701. Specifically, paragraph (ll) of proposed Rule 1701 defines the term ‘‘Small Industry Member’’ to mean an Industry Member that qualifies as a small broker-dealer as defined in Rule 0–10(c) under the Securities Exchange Act of 1934, as amended. This is the same in substance as the definition of ‘‘Small Industry Member’’ as set forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines a ‘‘Small Industry Member’’ as ‘‘an Industry Member that qualifies as a small broker-dealer as PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 9797 defined in SEC Rule 613.’’ The definition of a small broker-dealer under SEC Rule 613, in turn, is a small brokerdealer as defined in SEC Rule 0–10(c). (MM) Trading Day Proposed Rule 1703(b) establishes the deadlines for reporting certain data to the Central Repository using the term ‘‘Trading Day.’’ Accordingly, the Exchange proposes to define the term ‘‘Trading Day’’ in proposed Rule 1701. Specifically, Paragraph (mm) of proposed Rule 1701 states that the term ‘‘Trading Day’’ shall have the meaning as is determined by the Operating Committee. For the avoidance of doubt, the Operating Committee may establish different Trading Days for NMS Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity Securities, and any other securities that are included as Eligible Securities from time to time. (ii) Clock Synchronization SEC Rule 613(d)(1) under Regulation NMS requires Industry Members to synchronize their Business Clocks to the time maintained by NIST, consistent with industry standards. To comply with this provision, Section 6.8 of the Plan sets forth the clock synchronization requirements for Industry Members.26 To implement these provisions with regard to its Industry Members, the Exchange proposes Rule 1702 (Consolidated Audit Trail Compliance Rule-Clock Synchronization) to require its Industry Members to comply with the clock synchronization requirements of the Plan. Paragraph (a) of proposed Rule 1702 sets forth the manner in which Industry Members must synchronize their Business Clocks. Paragraph (a)(1) of proposed Rule 1702 requires each Industry Member to synchronize its Business Clocks, other than such Business Clocks used solely for Manual Order Events or used solely for the time of allocation on Allocation Reports, at a minimum to within a fifty (50) millisecond tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan. Paragraph (a)(2) of proposed Rule 1702 requires each Industry Member to synchronize (1) its Business Clocks used solely for Manual Order Events and (2) its Business Clocks used solely for the 26 In addition, Section 6.7(a)(ii) of the Plan sets forth the timeline for CAT Reporters to comply with the clock synchronization requirements. E:\FR\FM\08FEN1.SGM 08FEN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 9798 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices time of allocation on Allocation Reports at a minimum to within a one second tolerance of the time maintained by the NIST atomic clock, and maintain such synchronization. This is the same requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan. Paragraph (a)(3) of proposed Rule 1702 clarifies that the tolerance described in paragraphs (a)(1) and (2) of the proposed Rule 1702 includes all of the following: (1) The time difference between the NIST atomic clock and the Industry Member’s Business Clock; (2) the transmission delay from the source; and (3) the amount of drift of the Industry Member’s Business Clock. This description of the clock synchronization tolerance is the same as set forth in paragraph (b) of FINRA Rule 4590 (Synchronization of Member Business Clocks). Paragraph (a)(4) of proposed Rule 1702 requires Industry Members to synchronize their Business Clocks every business day before market open to ensure that timestamps for Reportable Events are accurate. In addition, to maintain clock synchronization, Business Clocks must be checked against the NIST atomic clock and 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 1702 sets forth documentation requirements with regard to clock synchronization. Specifically, paragraph (b) requires Industry Members to document and maintain their synchronization procedures for their Business Clocks. The proposed Rule requires Industry Members to keep a log of the times when they synchronize their Business Clocks and the results of the synchronization process. This log is required to include notice of any time a Business Clock drifts more than the applicable tolerance specified in paragraph (a) of the proposed Rule. Such logs must include results for a period of not less than five years ending on the then current date, or for the entire period for which the Industry Member has been required to comply with this Rule if less than five years. These documentation requirements are the same as those set forth in the ‘‘Sequencing Orders and Clock Synchronization’’ section of Appendix C of the CAT NMS Plan. Moreover, these documentation requirements regarding clock synchronization are comparable to those set forth in Supplementary Material .01 of FINRA VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Rule 4590 (Synchronization of Member Business Clocks). Paragraph (c) of proposed Rule 1702 sets forth certification requirements with regard to clock synchronization. Specifically, paragraph (c) of proposed Rule 1702 requires each Industry Member to certify to the Exchange that its Business Clocks satisfy the synchronization requirements set forth in paragraph (a) of proposed Rule 1702 periodically in accordance with the certification schedule established by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the certification schedule established by the Operating Committee via Regulatory Circular. Paragraph (d) of proposed Rule 1702 establishes reporting requirements with regard to clock synchronization. Paragraph (d) of proposed Rule 1702 requires Industry Members to report to the Plan Processor and SRO violations of paragraph (a) of this Rule pursuant to the thresholds set by the Operating Committee pursuant to the CAT NMS Plan. This requirement is the same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant thresholds established by the Operating Committee via Regulatory Circular. (iii) Industry Member Data Reporting SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set forth certain provisions requiring Industry Members to record and report data to the CAT. To comply with this provision, Section 6.4 of the CAT NMS Plan sets forth the data reporting requirements for Industry Members. To implement these provisions with regard to its Industry Members, the Exchange proposes Rule 1703 (Consolidated Audit Trail Compliance Rule—Industry Member Data Reporting) to require its Industry Members to comply with the Industry Member Data reporting requirements of the Plan. Proposed Rule 1703 has five sections covering: (1) Recording and reporting Industry Member Data, (2) timing of the recording and reporting, (3) the applicable securities covered by the recording and reporting requirements, (4) the security symbology to be used in the recording and reporting, and (5) error correction requirements, each of which is described below. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 (A) Recording and Reporting Industry Member Data Paragraph (a) of proposed Rule 1703 describes the recording and reporting of Industry Member Data to the Central Repository. Paragraph (a) consists of paragraphs (a)(1)–(a)(3), which cover Recorded Industry Member Data, Received Industry Member Data and Options Market Maker data, respectively. Paragraphs (a)(1)–(a)(3) of proposed Rule 1703 set forth the recording and reporting requirements required in Section 6.4(d)(i)–(iii) of the CAT NMS Plan, respectively. Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and electronically report to the Central Repository the following details for each order and each Reportable Event, as applicable (‘‘Recorded Industry Member Data’’) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan: • For original receipt or origination of an order: (1) Firm Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned Market Participant Identifier of the Industry Member receiving or originating the order; (4) date of order receipt or origination; (5) time of order receipt or origination (using timestamps pursuant to proposed Rule 1706); and (6) Material Terms of the Order; • for the routing of an order: (1) CATOrder-ID; (2) date on which the order is routed; (3) time at which the order is routed (using timestamps pursuant to proposed Rule 1706); (4) SRO-Assigned Market Participant Identifier of the Industry Member routing the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant to which the order is being routed; (6) if routed internally at the Industry Member, the identity and nature of the department or desk to which the order is routed; and (7) Material Terms of the Order; • for the receipt of an order that has been routed, the following information: (1) CAT-Order-ID; (2) date on which the order is received; (3) time at which the order is received (using timestamps pursuant to proposed Rule 1706); (4) SRO-Assigned Market Participant Identifier of the Industry Member receiving the order; (5) SRO-Assigned Market Participant Identifier of the Industry Member or Participant routing the order; and (6) Material Terms of the Order; • if the order is modified or cancelled: (1) CAT-Order-ID; (2) date the modification or cancellation is received or originated; (3) time at which the E:\FR\FM\08FEN1.SGM 08FEN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices modification or cancellation is received or originated (using timestamps pursuant to proposed Rule 1706); (4) price and remaining size of the order, if modified; (5) other changes in the Material Terms of the Order, if modified; and (6) whether the modification or cancellation instruction was given by the Customer or was initiated by the Industry Member; • if the order is executed, in whole or in part: (1) CAT-Order-ID; (2) date of execution; (3) time of execution (using timestamps pursuant to proposed Rule 1706; (4) execution capacity (principal, agency or riskless principal); (5) execution price and size; (6) 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 1703 requires, subject to paragraph (a)(3) regarding Options Market Makers, each Industry Member to record and report to the Central Repository the following, as applicable (‘‘Received Industry Member Data’’ and collectively with the information referred to in Rule 1703(a)(1) ‘‘Industry Member Data’’) in the manner prescribed by the Operating Committee pursuant to the CAT NMS Plan: • If the order is executed, in whole or in part: (1) An Allocation Report; (2) SRO-Assigned Market Participant Identifier of the clearing broker or prime broker, if applicable; and (3) 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 1704, Customer Account Information and Customer Identifying Information for the relevant Customer. Paragraph (a)(3) of proposed Rule 1703 states that each Industry Member that is an Options Market Maker is not required to report to the Central Repository the Industry Member Data regarding the routing, modification or cancellation of its quotes in Listed Options. Each Industry Member that is an Options Market Maker, however, is required to report to the Exchange the time at which its quote in a Listed Option is sent to the Exchange (and, if applicable, any subsequent quote modification time and/or cancellation VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 time when such modification or cancellation is originated by the Options Market Maker). This paragraph implements the Options Market Maker Quote Exemption, as discussed above. (B) Timing of Recording and Reporting Paragraph (b) of proposed Rule 1703 describes the requirements related to the timing of recording and reporting of Industry Member Data. Paragraphs (b)(1)–(b)(3) of proposed Rule 1703 set forth the requirements related to the timing of the recording and reporting requirements required in Section 6.4(b)(i)–(ii) of the CAT NMS Plan. Paragraph (b)(1) of proposed Rule 1703 requires each Industry Member to record Recorded Industry Member Data contemporaneously with the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 1703 requires each Industry Member to report: (1) Recorded Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day the Industry Member records such Recorded Industry Member Data; and (2) Received Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading Day following the day theIndustry 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 1703 describes the securities to which the recording and reporting requirements of proposed Rule 1703 apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 1703 set forth the description of applicable securities as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of proposed Rule 1703 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of proposed Rule 1703 for each NMS Security registered or listed for trading on such exchange or admitted to unlisted trading privileges on such exchange. Paragraph (c)(2) of proposed Rule 1703 requires each Industry Member to record and report to the Central Repository the Industry Member Data as set forth in paragraph (a) of this proposed Rule 1703 for each Eligible Security for which transaction reports are required to be submitted to FINRA. (D) Security Symbology Paragraph (d) of proposed Rule 1703 describes the security symbology that PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 9799 Industry Members are required to use when reporting Industry Member Data to the Central Repository. Paragraph (d)(1) of proposed Rule 1703 requires, for each exchange-listed Eligible Security, each Industry Member to report Industry Member Data to the Central Repository using the symbology format of the exchange listing the security. This requirement implements the requirement set forth in Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange symbology when reporting data to the Central Repository for exchange-listed Eligible Securities. For each Eligible Security that is not exchange-listed, however, there is no listing exchange to provide the symbology format. Moreover, to date, the requisite symbology format has not been determined. Therefore, Paragraph (d)(2) of proposed Rule 1703 requires, for each Eligible Security that is not exchange-listed, each Industry Member to report Industry Member Data to the Central Repository using such symbology format as approved by the Operating Committee pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the relevant symbology formats established by the Operating Committee via Regulatory Circular. (E) Error Correction To ensure that the CAT contains accurate data, the CAT NMS Plan requires Industry Members to correct erroneous data submitted to the Central Repository. Therefore, the Exchange proposes to adopt paragraph (e) of proposed Rule 1703, which addresses the correction of erroneous data reported to the Central Repository. Paragraph (e) of proposed Rule 1703 requires, for each Industry Member for which errors in Industry Member Data submitted to the Central Repository have been identified by the Plan Processor or otherwise, that such Industry Member submit corrected Industry Member Data to the Central Repository by 8:00 a.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Section 6 of Appendix D of the CAT NMS Plan. (iv) Customer Information Reporting Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to submit to the Central Repository certain information related to their Customers in accordance with the Customer Information Approach discussed above. The Exchange proposes Rule 1704 (Consolidated Audit Trail Compliance Rule—Customer Information Reporting) E:\FR\FM\08FEN1.SGM 08FEN1 9800 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, paragraph (a) of proposed Rule 1704 requires each Industry Member to submit to the Central Repository the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account prior to such Industry Member’s commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 1709. Paragraph (b) of proposed Rule 1704 requires each Industry Member to submit to the Central Repository any updates, additions or other changes to the Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account on a daily basis. Paragraph (c) of proposed Rule 1704 requires each Industry Member, on a periodic basis as designated by the Plan Processor and approved by the Operating Committee, to submit to the Central Repository a complete set of Firm Designated IDs, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account. This periodic refresh is intended to ensure that the Central Repository has the most current information identifying a Customer. The Exchange intends to announce to its Industry Members when such a periodic refresh is required by the Plan Processor and the Operating Committee via Regulatory Circular. Finally, paragraph (d) of proposed Rule 1704 addresses the correction of erroneous Customer data reported to the Central Repository to ensure an accurate audit trail. Paragraph (d) requires, for each Industry Member for which errors in Firm Designated ID, Customer Account Information and Customer Identifying Information for each of its Customers with an Active Account submitted to the Central Repository have been identified by the Plan Processor or otherwise, such Member to submit corrected data to the Central Repository by 5:00 p.m. Eastern Time on T+3. This requirement implements the error correction requirement set forth in Appendix C of the CAT NMS Plan. (v) Industry Member Information Reporting Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, in accordance with the Existing Identifier Approach discussed VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 above. The Exchange proposes Rule 1705 (Consolidated Audit Trail Compliance Rule—Industry Member Information Reporting) to implement this provision of the CAT NMS Plan with regard to its Industry Members. Specifically, proposed Rule 1705 requires each Industry Member to submit to the Central Repository information sufficient to identify such Industry Member, including CRD number and LEI, if such LEI has been obtained, prior to such Industry Member’s commencement of reporting to the Central Repository and in accordance with the deadlines set forth in Rule 1709, and keep such information up to date as necessary. (vi) Time Stamps SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for time stamps used by CAT Reporters in recording and reporting data to the CAT.27 To comply with this provision, Section 6.8(b) of the Plan sets forth time stamp requirements for Industry Members. To implement this provision with regard to its Industry Members, the Exchange proposes new Rule 1706 (Consolidated Audit Trail Compliance Rule—Time Stamps) to require its Industry Members to comply with the time stamp requirements of the Plan. Paragraph (a) of proposed Rule 1706 sets forth the time stamp increments to be used by Industry Members in their CAT reporting. Paragraph (a)(1) of proposed Rule 1706 requires each Industry Member to record and report Industry Member Data to the Central Repository with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of proposed Rule 1706. To the extent that any Industry Member’s order handling or execution systems utilize time stamps in increments finer than milliseconds, paragraph (a)(2) of proposed Rule 1706 requires such Industry Member to record and report Industry Member Data to the Central Repository with time stamps in such finer increment, subject to paragraph (b) of proposed Rule 1706 regarding Manual Order Events and Allocation Reports. Paragraph (b) of proposed Rule 1706 sets forth the permissible time stamp increments for Manual Order Events and Allocation Reports. Specifically, paragraph (b)(1) of proposed Rule 1706 permits each Industry Member to record and report Manual Order Events to the Central Repository in increments up to and including one second, provided that each Industry Member is required to record and report the time when a 27 17 PO 00000 CFR 242.613(d)(3). Frm 00092 Fmt 4703 Sfmt 4703 Manual Order Event has been captured electronically in an order handling and execution system of such Member (‘‘Electronic Capture Time’’) in milliseconds. In addition, paragraph (b)(2) of proposed Rule 1706 permits each Industry Member to record and report the time of Allocation Reports in increments up to and including one second. (vii) Clock Synchronization Rule Violations Proposed Rule 1707 (Consolidated Audit Trail Compliance Rule—Clock Synchronization Rule Violation) describes potential violations of the clock synchronization time period requirements set forth in the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712). Proposed Rule 1707 states that an Industry Member that engages in a pattern or practice of reporting Reportable Events outside of the required clock synchronization time period as set forth in the Consolidated Audit Trail Compliance Rule (Rules 1701–1712) without reasonable justification or exceptional circumstances may be considered in violation of this Rule. This provision implements the requirements of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to provide that a pattern or practice of reporting events outside of the required clock synchronization time period without reasonable justification or exceptional circumstances may be considered a violation of SEC Rule 613 or the CAT NMS Plan. (viii) Connectivity and Data Transmission Proposed Rule 1708 (Consolidated Audit Trail Compliance Rule— Connectivity and Data Transmission) addresses connectivity and data transmission requirements related to the CAT. Paragraph (a) of proposed Rule 1708 describes the format(s) for reporting Industry Member Data to the Central Repository, thereby implementing the formatting requirements as set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of proposed Rule 1708 requires each Industry Member to transmit data as required under the CAT NMS Plan to the Central Repository utilizing such format(s) as may be provided by the Plan Processor and approved by the Operating Committee. Paragraph (b) of proposed Rule 1708 addresses connectivity requirements related to the CAT. Paragraph (b) of proposed Rule 1708 requires each Industry Member to connect to the E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES Central Repository using a secure method(s), including, but not limited to, private line(s) and virtual private network connection(s). This provision implements the connectivity requirements set forth in Section 4 of Appendix D to the CAT NMS Plan. Paragraph (c) permits Industry Members to use CAT Reporting Agents to fulfill their data reporting obligations related to the CAT. Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS Reporting Members to enter into agreements with Reporting Agents to fulfill the OATS obligations of the OATS Reporting Member. Specifically, Paragraph (c)(1) of proposed Rule 1708 states that any Industry Member may enter into an agreement with a CAT Reporting Agent pursuant to which the CAT Reporting Agent agrees to fulfill the obligations of such Industry Member under the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712). Any such agreement must be evidenced in writing, which specifies the respective functions and responsibilities of each party to the agreement that are required to effect full compliance with the requirements of the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712). The Exchange notes that, currently, no standardized form agreement for CAT Reporting Agent arrangements has been adopted. Paragraph (c)(2) of proposed Rule 1708 requires that all written documents evidencing an agreement with a CAT Reporting Agent be maintained by each party to the agreement. Paragraph (c)(3) states that each Industry Member remains primarily responsible for compliance with the requirements of the proposed Consolidate Audit Trail Compliance Rule (Rules 1701–1712), notwithstanding the existence of an agreement described in paragraph (c) of proposed Rule 1708. (ix) Development and Testing The Exchange proposes Rule 1709 (Consolidated Audit Trail Compliance Rule—Development and Testing) to address requirements for Industry Members related to CAT development and testing. Paragraph (a) of proposed Rule 1709 sets forth the testing requirements and deadlines for Industry Members to develop and commence reporting to the Central Repository. These requirements are set forth in Appendix C to the CAT NMS Plan. Paragraph (a)(1) sets forth the deadlines related to connectivity and acceptance testing. Industry Members (other than Small Industry Members) are required to begin connectivity and acceptance testing with the Central VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 Repository no later than August 15, 2018, and Small Industry Members are required to begin connectivity and acceptance testing with the Central Repository no later than August 15, 2019. Paragraph (a)(2) sets forth the deadlines related to reporting Customer and Industry Member information. Paragraph (a)(2)(i) requires Industry Members (other than Small Industry Members) to begin reporting Customer and Industry Member information, as required by Rules 1704(a) and 1705, respectively, to the Central Repository for processing no later than October 15, 2018. Paragraph (a)(2)(ii) requires Small Industry Members to begin reporting Customer and Industry Member information, as required by Rules 1704(a) and 1705, respectively, to the Central Repository for processing no later than October 15, 2019. Paragraph (a)(3) sets forth the deadlines related to the submission of order data. Under paragraph (a)(3)(i), Industry Members (other than Small Industry Members) are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2018. In addition, Industry Members (other than Small Industry Members) are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2018. Under paragraph (a)(3)(ii), Small Industry Members are permitted, but not required, to submit order data for testing purposes beginning no later than May 15, 2019. In addition, Small Industry Members are required to participate in the coordinated and structured testing of order submission, which will begin no later than August 15, 2019. Paragraph (a)(4) states that Industry Members are permitted, but not required to, submit Quote Sent Times on Options Market Maker quotes, beginning no later than October 15, 2018. Paragraph (b) of proposed Rule 1709 implements the requirement under the CAT NMS Plan that Industry Members participate in required industry testing with the Central Repository.28 Specifically, proposed Rule 1709 requires that each Industry Member participate in testing related to the Central Repository, including any industry-wide disaster recovery testing, pursuant to the schedule established pursuant to the CAT NMS Plan. The Exchange intends to announce to its Industry Members the schedule established pursuant to the CAT NMS Plan via Regulatory Circular. 28 Adopting PO 00000 Release [sic] at 84725. Frm 00093 Fmt 4703 Sfmt 4703 9801 (x) Recordkeeping Proposed Rule 1710 (Consolidated Audit Trail Compliance Rule— Recordkeeping) sets forth the recordkeeping obligations related to the CAT for Industry Members. Proposed Rule 1710 requires each Industry Member to maintain and preserve records of the information required to be recorded under the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) for the period of time and accessibility specified in SEC Rule 17a–4(b). The records required to be maintained and preserved under the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) may be immediately produced or reproduced on ‘‘micrographic media’’ as defined in SEC Rule 17a–4(f)(1)(i) or by means of ‘‘electronic storage media’’ as defined in SEC Rule 17a–4(f)(1)(ii) that meet the conditions set forth in SEC Rule 17a–4(f) and be maintained and preserved for the required time in that form. Proposed Rule 1710 is based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping requirements related to OATS. (xi) Timely, Accurate and Complete Data SEC Rule 613 and the CAT NMS Plan emphasize the importance of the timeliness, accuracy, completeness and integrity of the data submitted to the CAT.29 Accordingly, proposed Rule 1711 (Consolidated Audit Trail Compliance Rule—Timely, Accurate and Complete Data) implements this requirement with regard to Industry Members. Paragraph (a) of proposed Rule 1711 requires that Industry Members record and report data to the Central Repository as required by the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) in a manner that ensures the timeliness, accuracy, integrity and completeness of such data. In addition, without limiting the general requirement as set forth in paragraph (a), paragraph (b) of proposed Rule 1711 requires Industry Members to accurately provide the LEIs in their records as required by the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) and states that Industry Members may not knowingly submit inaccurate LEIs to the Central Repository. Paragraph (b) notes, however, that this requirement does not impose any additional due diligence obligations on Industry Members with regard to LEIs for CAT purposes. Accordingly, this provision does not 29 See SEC Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the CAT NMS Plan. E:\FR\FM\08FEN1.SGM 08FEN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 9802 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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.30 Paragraph (c) states that, if an Industry Member reports data to the Central Repository with errors such that its error percentage exceeds the maximum Error Rate established by the Operating Committee pursuant to the CAT NMS Plan, then such Industry Member would not be in compliance with the proposed Consolidated Audit Trail Compliance Rule (Rules 1701– 1712). As discussed above, the initial maximum Error Rate is 5%, although the Error Rate is expected to be reduced over time. The Exchange intends to announce to its Industry Members changes to the Error Rate established pursuant to the CAT NMS Plan via Regulatory Circular. Furthermore, paragraph (d) of proposed Rule 1711 addresses Compliance Thresholds related to reporting data to the CAT. Proposed Rule 1711 states that each Industry Member is required to meet a separate compliance threshold which will be an Industry Member-specific rate that may be used as the basis for further review or investigation into the Industry Member’s performance with regard to the CAT (the ‘‘Compliance Thresholds’’). Compliance Thresholds will compare an Industry Member’s error rate to the aggregate Error Rate over a period of time to be defined by the Operating Committee. Compliance Thresholds will be set by the Operating Committee, and will be calculated at intervals to be set by the Operating Committee.31 Compliance Thresholds will include compliance with the data reporting and clock synchronization requirements. Proposed Rule 1711 states that an Industry Member’s performance with respect to its Compliance Threshold will not signify, as a matter of law, that such Industry Member has violated the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712). 30 Approval Order at 84745. C of the CAT NMS Plan. 31 Appendix VerDate Sep<11>2014 17:36 Feb 07, 2017 Jkt 241001 (xii) Compliance Dates Proposed Rule 1712 (Consolidated Audi [sic] Trail Compliance Rule— Compliance Dates) sets forth the compliance dates for the various provisions of the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712). Paragraph (a) of proposed Rule 1712 states that paragraphs (b) and (c) of this Rule set forth the additional details with respect to the compliance date for the Consolidated Audit Trail Compliance Rule (Rules 1701–1712). It further states that, unless otherwise noted, Rules 1701–1712 are fully effective and Members must comply with their terms. Paragraph (b) of proposed Rule 1712 establishes the compliance dates for the clock synchronization requirements as set forth in proposed Rule 1702. Paragraph (b)(1) states that each Industry Member shall comply with Rule 1702 with regard to Business Clocks that capture time in milliseconds commencing on or before March 15, 2017. Paragraph (b)(2) states that each Industry Member shall comply with Rule 1702 with regard to Business Clocks that do not capture time in milliseconds commencing on or before February 19, 2018. The compliance date set forth in paragraph (b)(1) reflects the exemptive relief requested by the Participants with regard to the clock synchronization requirements related to Business Clocks that do not capture time in milliseconds. Paragraph (c) of proposed Rule 1712 establishes the compliance dates for the data recording and reporting requirements for Industry Members. Paragraph (c)(1) requires each Industry Member (other than Small Industry Members) to record and report the Industry Member Data to the Central Repository by November 15, 2018. Paragraph (c)(2) requires that each Industry Member that is a Small Industry Member to record and report the Industry Member Data to the Central Repository by November 15, 2019. Such compliance dates are consistent with the compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and (vi) of the CAT NMS Plan. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act 32 which requires, among other things, that the Exchange’s rules must be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest, and Section 6(b)(8) of the Act 33 which requires that the Exchange’s rules not impose any burden on competition that is not necessary or appropriate. The Exchange believes that this proposal is consistent with the Act because it implements, interprets or clarifies the provisions of the Plan, and is designed to assist the Exchange and its Industry Members in meeting regulatory obligations pursuant to the Plan. In approving the Plan, the SEC noted that the Plan ‘‘is necessary and appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanism of a national market system, or is otherwise in furtherance of the purposes of the Act.’’ 34 To the extent that this proposal implements, interprets or clarifies the Plan and applies specific requirements to Industry Members, the Exchange believes that this proposal furthers the objectives of the Plan, as identified by the SEC, and is therefore consistent with the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that the proposed rule change implements provisions of the CAT NMS Plan, and is designed to assist the Exchange in meeting its regulatory obligations pursuant to the Plan. The Exchange also notes that the proposed Consolidated Audit Trail Compliance Rule (Rules 1701–1712) implementing provisions of the CAT NMS Plan will apply equally to all firms that trade NMS Securities and OTC Equity Securities. In addition, all national securities exchanges and FINRA are proposing this Consolidated Audit Trail Compliance Rule (Rules 1701–1712). Therefore, this is not a competitive rule filing, and, therefore, it does not impose a burden on competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others Written comments were neither solicited nor received. 33 15 32 15 PO 00000 U.S.C. 78f(b)(6) [sic]. Frm 00094 Fmt 4703 Sfmt 4703 U.S.C. 78f(b)(8) Order at 84697. 34 Approval E:\FR\FM\08FEN1.SGM 08FEN1 Federal Register / Vol. 82, No. 25 / Wednesday, February 8, 2017 / Notices 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. 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– MIAX–2017–03 on the subject line. asabaliauskas on DSK3SPTVN1PROD with NOTICES 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–MIAX–2017–03. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (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 17:36 Feb 07, 2017 Jkt 241001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.35 Robert W. Errett, Deputy Secretary. [FR Doc. 2017–02542 Filed 2–7–17; 8:45 am] BILLING CODE 8011–01–P IV. Solicitation of Comments VerDate Sep<11>2014 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–MIAX– 2017–03 and should be submitted on or before March 1, 2017. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79931; File No. SR–CFE– 2017–001] Self-Regulatory Organizations; CBOE Futures Exchange, LLC; Notice of Filing of a Proposed Rule Change Regarding Block Trades February 2, 2017. Pursuant to Section 19(b)(7) of the Securities Exchange Act of 1934 (‘‘Act’’),1 notice is hereby given that on January 19, 2017 CBOE Futures Exchange, LLC (‘‘CFE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change described in Items I, II, and III below, which Items have been prepared by CFE. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. CFE also has filed this proposed rule change with the Commodity Futures Trading Commission (‘‘CFTC’’). CFE filed a written certification with the CFTC under Section 5c(c) of the Commodity Exchange Act (‘‘CEA’’) 2 on January 19, 2017. I. Self-Regulatory Organization’s Description of the Proposed Rule Change The Exchange proposes to amend CFE Rule 415 related to Block Trades. The scope of this filing is limited solely to the application of the proposed rule amendments to security futures that may be traded on CFE. Although no security futures are currently listed for trading on CFE, CFE may list security futures for trading in the future. The text of the proposed rule change is attached 35 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(7). 2 7 U.S.C. 7a–2(c). PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 9803 as Exhibit 4 to the filing but is not attached to the publication of this notice. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, CFE included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. CFE has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose CFE Rule 415 sets forth requirements relating to Block Trades. The proposed rule change adds paragraph (l) to Rule 415 which relates to the front running of Block Trades. Proposed Rule 415(l) makes clear that no person may engage in the front running of a Block Trade when acting on material non-public information regarding an impending transaction by another person, acting on non-public information obtained through a confidential employee/ employer relationship, broker/customer relationship, or in breach of a preexisting duty. Proposed Rule 415(l) would apply to all products traded on CFE, including both non-security futures and security futures. The proposed rule change is being made in connection with other proposed amendments to Rule 415 which are not included as part of this proposed rule change. Those proposed amendments are to be included in new paragraph (k) of Rule 415.3 The provisions of proposed Rule 415(k) are intended to clarify certain restrictions relating to disclosure and use of nonpublic information regarding Block Trades and the extent to which counterparties to a Block Trade may enter into pre-hedging or anticipatory hedging transactions in connection with Block Trades. Proposed Rule 415(k) would only apply to non-security futures, and the Exchange is including a sentence in proposed Rule 415(k) to 3 Paragraph (k) will be filed simultaneously with paragraph (l) with CFTC which is why the provisions of paragraph (l) are marked as existing rule text in Exhibit 4. E:\FR\FM\08FEN1.SGM 08FEN1

Agencies

[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9790-9803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02542]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79937; File No. SR-MIAX-2017-03]


Self-Regulatory Organizations; Miami International Securities 
Exchange, LLC; Notice of Filing of a Proposed Rule Change To Adopt 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712) To Implement 
the Compliance Rule Regarding the National Market System Plan Governing 
the Consolidated Audit Trail

February 2, 2017.
    Pursuant to the provisions of Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on January 30, 2017, Miami International 
Securities Exchange, LLC (``MIAX Options'' or ``Exchange'') filed with 
the Securities and Exchange Commission (``Commission'') a proposed rule 
change as described in Items I and II below, which Items have been 
prepared by the Exchange.\3\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \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-MIAX-2017-01, and the Exchange 
subsequently withdrew that filing on January 30, 2017 and filed this 
proposed rule change.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt the Rules 1701-1712 to implement the 
compliance rule (``Compliance Rule'') regarding the National Market 
System Plan Governing the Consolidated Audit Trail (the ``CAT NMS 
Plan'' or ``Plan'').\4\
---------------------------------------------------------------------------

    \4\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
---------------------------------------------------------------------------

    The text of the proposed rule change is available on the Exchange's 
Web site at http://www.miaxoptions.com/rule-filings, at MIAX's 
principal office, and at the Commission's Public Reference Room.

[[Page 9791]]

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

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

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., International Securities Exchange, LLC, 
Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami 
International Securities Exchange LLC, MIAX PEARL, LLC,\5\ NASDAQ BX, 
Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc. (collectively, the ``Participants'' or ``SROs'') filed with 
the Commission, pursuant to Section 11A of the Exchange Act \6\ and 
Rule 608 of Regulation NMS thereunder,\7\ the CAT NMS Plan.\8\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\9\ and approved by the Commission, as 
modified, on November 15, 2016.\10\
---------------------------------------------------------------------------

    \5\ MIAX PEARL, LLC, became a party to the CAT NMS Plan via an 
Amendment to the Plan on January 12, 2017.
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608.
    \8\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \9\ See Securities Exchange Act Release No. 77724 (Apr. 27, 
2016), 81 FR 30614 (May 17, 2016).
    \10\ See Securities Exchange Act Release No. 79318 (Nov. 15, 
2016), 81 FR 84696 (Nov. 23, 2016) (``Approval Order'').
---------------------------------------------------------------------------

    The Plan is designed to create, implement and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\11\ As is described more fully below, the rules contained in 
the proposed Chapter XVII set forth the Compliance Rule to require 
Industry Members to comply with the provisions of the CAT NMS Plan. The 
proposed Rules include twelve proposed Rules covering the following 
areas: (1) Definitions; (2) clock synchronization; (3) Industry Member 
Data reporting; (4) Customer information reporting; (5) Industry Member 
information reporting; (6) time stamps; (7) clock synchronization rule 
violations; (8) connectivity and data transmission; (9) development and 
testing; (10) recordkeeping; (11) timely, accurate and complete data; 
and (12) compliance dates. Each of these proposed Rules are discussed 
in detail below.
---------------------------------------------------------------------------

    \11\ See SEC Rule 613(g)(1).
---------------------------------------------------------------------------

(i) Definitions
    Proposed Rule 1701 (Consolidated Audit Trail Compliance Rule--
Definitions) sets forth the definitions for the terms used in the 
proposed Rules 1701-1712. Each of the defined terms in proposed Rule 
1701 is discussed in detail in this section.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customers associated with orders. For example, SEC Rule 613(c)(7)(i)(A) 
requires an Industry Member to report the ``Customer-IDs'' for each 
Customer for the original receipt or origination of an order. 
``Customer-ID'' is defined in SEC Rule 613(j)(5) to mean ``with respect 
to a customer, a code that uniquely and consistently identifies such 
customer for purposes of providing data to the Central Repository.'' 
SEC Rule 613(c)(8) requires Industry Members to use the same Customer-
ID for each Customer. The SEC granted the Participants exemptive relief 
to permit the use of an alternative approach to the requirement that an 
Industry Member report a Customer-ID for every Customer upon original 
receipt or origination.\12\ The alternative approach is called the 
Customer Information Approach.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
---------------------------------------------------------------------------

    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,

[[Page 9792]]

and revised Firm Designated IDs or associated reportable Customer 
information.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The Participants requested and received an 
exemption to allow an ``Account Effective Date'' to be reported in lieu 
of an account open date in certain limited circumstances. The 
definition of ``Account Effective Date'' as set forth in Paragraph (a) 
of proposed Rule 1701 describes those limited circumstances in which an 
Industry Member may report an ``Account Effective Date'' rather than 
the account open date. The proposed definition is the same as the 
definition of ``Account Effective Date'' set forth in Section 1.1 of 
the CAT NMS Plan, provided, however, that specific dates have replaced 
the descriptions of those dates set forth in Section 1.1 of the Plan.
    Specifically, Paragraph (a)(1) defines ``Account Effective Date 
[sic] to mean, with regard to those circumstances in which an Industry 
Member has established a trading relationship with an institution but 
has not established an account with that institution: (1) When the 
trading relationship was established prior to November 15, 2018, for 
Industry Members other than Small Industry Members, or prior to 
November 15, 2019, for Small Industry Members, either (a) the date the 
relationship identifier was established within the Industry Member; (b) 
the date when trading began (i.e., the date the first order was 
received) using the relevant relationship identifier; or (c) if both 
dates are available, the earlier date will be used to the extent that 
the dates differ; or (2) when the trading relationship was established 
on or after November 15, 2018 for Industry Members other than Small 
Industry Members, or on or after November 15, 2019 for Small Industry 
Members, the date the Industry Member established the relationship 
identifier, which would be no later than the date the first order was 
received.
    Paragraph (a)(2) of proposed Rule 1701 states that an ``Account 
Effective Date'' means, where an Industry Member changes back office 
providers or clearing firms prior to November 15, 2018, for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019, for Small Industry Members, the date an account was established 
at the relevant Industry Member, either directly or via transfer.
    Paragraph (a)(3) states that an ``Account Effective Date'' means, 
where an Industry Member acquires another Industry Member prior to 
November 15, 2018, for Industry Members other than Small Industry 
Members, or prior to November 15, 2019, for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer.
    Paragraph (a)(4) states that ``Account Effective Date'' means, 
where there are multiple dates associated with an account established 
prior to November 15, 2018, for Industry Members other than Small 
Industry Members, or prior to November 15, 2019, for Small Industry 
Members, the earliest available date.
    Paragraph (a)(5) states that an ``Account Effective Date'' means, 
with regard to Industry Member proprietary accounts established prior 
to November 15, 2018, for Industry Members other than Small Industry 
Members, or prior to November 15, 2019, for Small Industry Members: (1) 
The date established for the account in the Industry Member or in a 
system of the Industry Member or (2) the date when proprietary trading 
began in the account (i.e., the date on which the first orders were 
submitted from the account). With regard to paragraphs (a)(2)-(5), the 
Account Effective Date will be no later than the date trading occurs at 
the Industry Member or in the Industry Member's system.
(B) Active Account
    Under the Customer Information Approach, Industry Members are 
required to report Customer Identifying Information and Customer 
Account Information for only those accounts that are active. This will 
alleviate the need for Industry Members to update such information for 
non-active accounts, but still ensure that the Central Repository will 
collect audit trail data for Customer accounts that have any Reportable 
Events. Accordingly, paragraph (b) of proposed Rule 1701 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) requires each Industry Member to record 
and report to the Central Repository ``the account number for any 
subaccounts to which the execution is allocated (in whole or in 
part).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
Industry Members to record and report to the Central Repository an 
Allocation Report that includes, among other things, the Firm 
Designated ID for any account(s) to which executed shares are allocated 
when an execution is allocated in whole or part in lieu of requiring 
the reporting of the account number for any subaccount to which an 
execution is allocated, as is required by SEC Rule 613.\13\ Under SEC 
Rule 613, regulators would be able to link the subaccount to which an 
allocation was made to a specific order. In contrast, under the 
Allocation Report Approach, regulators would only be able to link an 
allocation to the account to which it was made, and not to a specific 
order.
---------------------------------------------------------------------------

    \13\ 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 1701 defines an ``Allocation Report.'' 
Specifically, an ``Allocation Report'' means a report made to the 
Central Repository by an Industry Member that identifies the Firm 
Designated ID for any account(s), including subaccount(s), to which 
executed shares are allocated and provides the security that has been 
allocated, the identifier of the firm reporting the allocation, the 
price per share of shares allocated, the side of shares allocated, the 
number of shares allocated to each account, and the time of the 
allocation; provided, for the avoidance of doubt, any such Allocation 
Report shall not be required to be linked to particular orders or 
executions. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(D) Business Clock
    To create the required audit trail, Industry Members are required 
to record the date and time of various Reportable Events to the Central 
Repository. Industry Members will use ``Business Clocks'' to record 
such dates and times. Accordingly, paragraph (d) of proposed Rule 1701 
defines the term ``Business

[[Page 9793]]

Clock'' as a clock used to record the date and time of any Reportable 
Event required to be reported under the Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712). This is the same definition as set 
forth in Section 1.1 of the CAT NMS Plan. This change is intended to 
recognize that the Industry Members' obligations with regard to the CAT 
are set forth in the Consolidated Audit Trail Compliance Rule (Rules 
1701-1712).
(E) CAT
    Paragraph (e) of proposed Rule 1701 defines the term ``CAT'' to 
mean the consolidated audit trail contemplated by SEC Rule 613. This is 
the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(F) CAT NMS Plan
    Paragraph (f) of proposed Rule 1701 defines the term ``CAT NMS 
Plan'' to mean the National Market System Plan Governing the 
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces the identifier provided by the Industry 
Member for each Reportable Event with a single identifier, called the 
CAT Order-ID, for all order events pertaining to the same order. This 
CAT Order-ID is used to links the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of proposed 
Rule 1701 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-ID'' 
is defined to mean a unique order identifier or series of unique order 
identifiers that allows the Central Repository to efficiently and 
accurately link all Reportable Events for an order, and all orders that 
result from the aggregation or disaggregation of such order. This is 
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule 
613(j)(1).
(H) CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf of the Industry Member.\14\ Such a third party, referred to 
in proposed Rule 1701 as a ``CAT Reporting Agent,'' would be one type 
of a Data Submitter, that is, a party that submits data to the Central 
Repository. Paragraph (h) of proposed Rule 1701 defines the term ``CAT 
Reporting Agent'' to mean a Data Submitter that is a third party that 
enters into an agreement with-an Industry Member pursuant to which the 
CAT Reporting Agent agrees to fulfill such Industry Member's reporting 
obligations under the Consolidated Audit Trail Compliance Rule 
(proposed Rules 1701-1712).
---------------------------------------------------------------------------

    \14\ 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 1701 defines the term ``Central 
Repository'' to mean the repository responsible for the receipt, 
consolidation, and retention of all information reported to the CAT 
pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan, except the 
Exchange uses the phrase ``CAT NMS Plan'' in place of the phrase ``this 
Agreement.''
(J) Compliance Threshold
    Paragraph (j) of proposed Rule 1701 defines the term ``Compliance 
Threshold'' as having the meaning set forth in proposed Rule 1711(d). 
This definition has the same substantive meaning as the definition set 
forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below 
with regard to proposed Rule 1711(d), each Industry Member is required 
to meet a separate compliance threshold which will be an Industry 
Member-specific rate that may be used as the basis for further review 
or investigation into the Industry Member's performance with regard to 
the CAT. This Industry Member-specific rate is the ``Compliance 
Threshold.''
(K) Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account Information, as well as 
data related to their Customer's Reportable Events. Accordingly, 
Paragraph (k) of proposed Rule 1701 proposes to define the term 
``Customer.'' Specifically, the term ``Customer'' would be defined to 
mean: (1) The account holder(s) of the account at an Industry Member 
originating the order; and (2) any person from whom the Industry Member 
is authorized to accept trading instructions for such account, if 
different from the account holder(s). This is the same definition as 
set forth in SEC Rule 613(j)(3), except the Exchange proposes to 
replace the references to a registered broker-dealer or broker-dealer 
with a reference to an Industry Member for consistency of terms used in 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712). The Exchange also notes that Section 1.1 of the CAT NMS Plan 
defines ``Customer'' by reference to SEC Rule 613(j)(3).
(L) Customer Account Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Account Information to 
the Central Repository as part of the customer definition process. 
Accordingly, the Exchange proposes to define the term ``Customer 
Account Information'' to clarify what customer information would need 
to be reported to the Central Repository.
    Paragraph (l) of proposed Rule 1701 defines the term ``Customer 
Account Information'' to include, in part, account number, account 
type, customer type, date account opened, and large trader identifier 
(if applicable). Proposed Rule 1701(l), however, provides an 
alternative definition of ``Customer Account Information'' in two 
limited circumstances. First, in those circumstances in which an 
Industry Member has established a trading relationship with an 
institution but has not established an account with that institution, 
the Industry Member will: (1) Provide the Account Effective Date in 
lieu of the ``date account opened''; (2) provide the relationship 
identifier in lieu of the ``account number''; and (3) identify the 
``account type'' as a ``relationship.'' Second, in those circumstances 
in which the relevant account was established prior to November 15, 
2018, for Industry Members other than Small Industry Members, or prior 
to November 15, 2019, for Small Industry Members, and no ``date account 
opened'' is available for the account, the Industry Member will provide 
the Account Effective Date in the following circumstances: (1)

[[Page 9794]]

Where an Industry Member changes back office providers or clearing 
firms and the date account opened is changed to the date the account 
was opened on the new back office/clearing firm system; (2) where an 
Industry Member acquires another Industry Member and the date account 
opened is changed to the date the account was opened on the post-merger 
back office/clearing firm system; (3) where there are multiple dates 
associated with an account in an Industry Member's system, and the 
parameters of each date are determined by the individual Industry 
Member; and (4) where the relevant account is an Industry Member 
proprietary account. The proposed definition is the same as the 
definition of ``Customer Account Information'' set forth in Section 1.1 
of the CAT NMS Plan, provided, however, that specific dates have 
replaced the descriptions of those dates set forth in Section 1.1 of 
the Plan.
(M) Customer Identifying Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Identifying 
Information to the Central Repository as part of the customer 
definition process. Accordingly, the Exchange proposes to define the 
term ``Customer Account Information'' to clarify what Customer 
information would need to be reported to the Central Repository.
    Paragraph (m) of proposed Rule 1701 defines the term ``Customer 
Identifying Information'' to mean information of sufficient detail to 
identify a Customer. With respect to individuals, ``Customer 
Identifying Information'' includes, but is not limited to: Name, 
address, date of birth, individual tax payer identification number 
(``ITIN'')/social security number (``SSN''), individual's role in the 
account (e.g., primary holder, joint holder, guardian, trustee, person 
with the power of attorney). With respect to legal entities, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``LEI'') or other comparable common entity identifier, if 
applicable. The definition further notes that an Industry Member that 
has an LEI for a Customer must submit the Customer's LEI in addition to 
other information of sufficient detail to identify the Customer. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\15\ Such Data 
Submitters may include those entities that are required to submit data 
to the Central Repository (e.g., national securities exchanges, 
national securities associations and Industry Members), third-parties 
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT 
Reporting Agents), and outside parties that are not required to submit 
data to the CAT but from which the CAT may receive data (e.g., 
securities information processors (``SIPs''). To include this term in 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712), the Exchange proposes to define ``Data Submitter'' in paragraph 
(n) of proposed Rule 1701. Specifically, paragraph (n) of proposed Rule 
1701 defines a ``Data Submitter'' to mean any person that reports data 
to the Central Repository, including national securities exchanges, 
national securities associations, broker-dealers, the SIPs for the CQS, 
CTA, UTP and Plan for Reporting of Consolidated Options Last Sale 
Reports and Quotation Information (``OPRA'') Plans, and certain other 
vendors or third parties that may submit data to the Central Repository 
on behalf of Industry Members.
---------------------------------------------------------------------------

    \15\ Appendix C, Section A.1(a) of the CAT NMS Plan.
---------------------------------------------------------------------------

(O) Eligible Security
    The reporting requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) only apply to Reportable Events in 
Eligible Securities. Currently, an Eligible Security includes NMS 
Securities and OTC Equity Securities. Accordingly, paragraph (o) of 
proposed Rule 1701 defines the term ``Eligible Security'' to include: 
(1) All NMS Securities; and (2) all OTC Equity Securities. The terms 
``NMS Securities'' and ``OTC Equity Securities'' are defined, in turn, 
below. This is the same definition as set forth in Section 1.1 of the 
CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\16\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\17\ If an Industry Member reports CAT data to the Central 
Repository with errors such that their error percentage exceeds the 
maximum Error Rate, then such Industry Member would not be in 
compliance with the CAT NMS Plan or Rule 613.\18\ As such, the Exchange 
or the SEC ``[sic]'' may take appropriate action against an Industry 
Member for failing to comply with its CAT reporting obligations.\19\ 
The CAT NMS Plan sets the initial Error Rate at 5%.\20\ It is 
anticipated that the maximum Error Rate will be reviewed and lowered by 
the Operating Committee once Industry Members begin to report to the 
Central Repository.\21\
---------------------------------------------------------------------------

    \16\ Section 6.5(d)(i) of the CAT NMS Plan.
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \20\ Section 6.5(d)(i) of the CAT NMS Plan.
    \21\ Appendix C, Section A.3(b) of the CAT NMS Plan.
---------------------------------------------------------------------------

    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.\22\
---------------------------------------------------------------------------

    \22\ Approval Order at 84718.
---------------------------------------------------------------------------

(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchange proposes to define the term ``Error Rate'' in 
proposed Rule 1701. Paragraph (p) of proposed Rule 1701 defines the 
term ``Error Rate'' to mean the percentage of Reportable Events 
collected by the Central Repository in which the data reported does not 
fully and accurately reflect the order event that occurred in the 
market. This is the same definition as set forth

[[Page 9795]]

in SEC Rule 613(j)(6), and Section 1.1 of the CAT NMS Plan defines 
``Error Rate'' by reference to SEC Rule 613(j)(6).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan would require each Industry Member to assign a unique Firm 
Designated ID to each Customer. Industry Members would be permitted to 
use as the Firm Designated ID an account number or any other identifier 
defined by the firm, provided each identifier is unique across the firm 
for each business date (i.e., a single firm may not have multiple 
separate customers with the same identifier on any given date). 
Industry Members would be required to report only the Firm Designated 
ID for each new order submitted to the Central Repository, rather than 
the ``Customer-ID'' with individual order events. Accordingly, the 
Exchange proposes to define the term ``Firm Designated ID'' in proposed 
Rule 1701. Specifically, paragraph (q) of proposed Rule 1701 defines 
the term ``Firm Designated ID'' to mean a unique identifier for each 
trading account designated by Industry Members for purposes of 
providing data to the Central Repository, where each such identifier is 
unique among all identifiers from any given Industry Member for each 
business date. This is the same definition as set forth in Section 1.1 
of the CAT NMS Plan. Industry Members would be permitted to use an 
account number or any other identifier defined by the firm, provided 
each identifier is unique across the firm for each business date (i.e., 
a single firm may not have multiple separate customers with the same 
identifier on any given date).
(R) Industry Member
    Paragraph (r) of proposed Rule 1701 defines the term ``Industry 
Member'' to mean a member of a national securities exchange or a member 
of a national securities association.'' This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(S) Industry Member Data
    Paragraph (s) of proposed Rule 1701 states that the term ``Industry 
Member Data'' has the meaning set forth in Rule 1703(a)(2). This 
definition has the same substantive meaning as the definition set forth 
in Section 1.1 of the CAT NMS Plan. The definition of ``Industry Member 
Data'' is discussed more fully in the discussion below regarding 
proposed Rule 1703(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of proposed Rule 1701 defines the term ``Initial Plan 
Processor'' to mean the first Plan Processor selected by the Operating 
Committee in accordance with SEC Rule 613, Section 6.1 of the CAT NMS 
Plan and the National Market System Plan Governing the Process for 
Selecting a Plan Processor and Developing a Plan for the Consolidated 
Audit Trail. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan, although the proposed definition uses the full name 
of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and this proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) applies to Eligible Securities, which 
includes NMS Securities, which, in turn, includes Listed Options. 
Certain requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) apply specifically to Listed Options. 
Accordingly, Paragraph (u) of proposed Rule 1701 defines the term 
``Listed Option'' or ``Option.'' Specifically, paragraph (u) of 
proposed Rule 1701 states that the term ``Listed Option'' or ``Option'' 
has the meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC 
Rule 600(b)(35), in turn, defines a listed option as ``any option 
traded on a registered national securities exchange or automated 
facility of a national securities association.'' The Exchange notes 
that the proposed definition of ``Listed Option'' is the same 
definition as the definition set forth in Section 1.1 of the CAT NMS 
Plan.
(V) Manual Order Event
(I) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\23\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution system uses timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize their respective Business 
Clocks (other than such Business Clocks used solely for Manual Order 
Events) at a minimum to within 50 milliseconds of the time maintained 
by the National Institute of Standards and Technology (``NIST''), and 
maintain such a synchronization. Each Industry Member is required to 
synchronize their Business Clocks used solely for Manual Order Events, 
however, at a minimum to within one second of the time maintained by 
the NIST.
---------------------------------------------------------------------------

    \23\ Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, the Exchange proposes to 
define the term ``Manual Order Event'' in proposed Rule 1701. 
Specifically, paragraph (v) of proposed Rule 1701 defines the term 
``Manual Order Event'' to mean a non-electronic communication of order-
related information for which Industry Members must record and report 
the time of the event. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(W) Material Terms of the Order
    Proposed Rule 1703 requires Industry Members to record and report 
to the Central Repository Material Terms of the Order with certain 
Reportable Events (e.g., for the original receipt or origination of an 
order, for the routing of an order). Accordingly, the Exchange proposes 
to define the term ``Material Terms of the Order'' in proposed Rule 
1701. Specifically, paragraph (w) of proposed Rule 1701 defines the 
term ``Material Terms of the Order'' to include: The NMS Security or 
OTC Equity Security symbol; security type; price (if applicable); size 
(displayed and non-displayed); side (buy/sell); order type; if a sell 
order, whether the order is long, short, short exempt; open/close 
indicator (except on transactions in equities); time in force (if 
applicable); if the order is for a Listed Option, option type (put/
call), option symbol or root symbol, underlying symbol, strike price, 
expiration date, and open/close (except on market maker quotations); 
and any special handling instructions. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, the Exchange proposes to

[[Page 9796]]

define the term ``NMS Security'' in proposed Rule 1701. Specifically, 
paragraph (x) of proposed Rule 1701 defines the term ``NMS Security'' 
to mean any security or class of securities for which transaction 
reports are collected, processed, and made available pursuant to an 
effective transaction reporting plan, or an effective national market 
system plan for reporting transactions in Listed Options. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks (as defined in SEC Rule 
600(b)(47)), Listed Options, OTC Equity Securities, and any other 
securities that are included as Eligible Securities from time to time. 
Accordingly, the Exchange proposes to define the term ``NMS Stock'' in 
Paragraph (y) of proposed Rule 1701 to mean any NMS Security other than 
an option. This is the same definition as set forth in SEC Rule 
600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of proposed Rule 1701 defines the term ``Operating 
Committee'' to mean the governing body of the CAT NMS, LLC designated 
as such and described in Article IV of the CAT NMS Plan. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan, except 
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the 
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC Rule 613, the details for each Options Market Maker quotation 
must be reported to the Central Repository by both the Options Market 
Maker and the options exchange to which it routes its quote.
    The SROs, however, requested and received exemptive relief from SEC 
Rule 613 so that the CAT NMS Plan may permit Options Market Maker 
quotes to be reported to the Central Repository by the relevant options 
exchange in lieu of requiring that such reporting be done by both the 
options exchange and the Options Market Maker, as is required by SEC 
Rule 613.\24\ In accordance with the exemptive relief, Options Market 
Makers would be required to report to the options exchange the time at 
which a quote in a Listed Option is sent to the options exchange. Such 
time information also will be reported to the Central Repository by the 
options exchange in lieu of reporting by the Options Market Maker.
---------------------------------------------------------------------------

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

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in proposed Rule 1701. Specifically, paragraph (aa) of proposed 
Rule 1701 defines the term ``Options Market Maker'' to mean a broker-
dealer registered with an exchange for the purpose of making markets in 
options contracts traded on the exchange. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    The proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) requires each Industry Member to record and electronically report 
to the Central Repository certain details for each order. Accordingly, 
the Exchange proposes to define the term ``Order'' in proposed Rule 
1701. Specifically, paragraph (bb) of proposed Rule 1701 defines the 
term ``Order'', with respect to Eligible Securities, to include: (1) 
Any order received by an Industry Member from any person; (2) any order 
originated by an Industry Member; or (3) any bid or offer. This is the 
same definition as set forth in SEC Rule 613(j)(8), except the Exchange 
proposes to replace the phrase ``member of a national securities 
exchange or national securities association'' with the term ``Industry 
Member.'' The Exchange notes that Section 1.1 of the CAT NMS Plan 
defines ``Order'' by reference to SEC Rule 613(j)(8).
(CC) OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities 
for the CAT. Therefore, the Exchange proposes to define the term ``OTC 
Equity Security'' in proposed Rule 1701. Specifically, paragraph (cc) 
of proposed Rule 1701 defines the term ``OTC Equity Security'' to mean 
any equity security, other than an NMS Security, subject to prompt last 
sale reporting rules of a registered national securities association 
and reported to one of such association's equity trade reporting 
facilities. This is the same definition as set forth in Section 1.1 of 
the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of proposed Rule 1701 defines the term 
``Participant'' to mean each Person identified as such in Exhibit A of 
the CAT NMS Plan, as amended, in such Person's capacity as a 
Participant in CAT NMS, LLC. This is the same definition in substance 
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of proposed Rule 1701 defines the term ``Person'' to 
mean any individual, partnership, limited liability company, 
corporation, joint venture, trust, business trust, cooperative or 
association and any heirs, executors, administrators, legal 
representatives, successors and assigns of such Person where the 
context so permits. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of proposed Rule 1701 defines the term ``Plan 
Processor'' to mean the Initial Plan Processor or any other Person 
selected by the Operating Committee pursuant to SEC Rule 613 and 
Sections 4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the 
Initial Plan Processor, the National Market System Plan Governing the 
Process for Selecting a Plan Processor and Developing a Plan for the 
Consolidated Audit Trail, to perform the CAT processing functions 
required by SEC Rule 613 and set forth in the CAT NMS Plan.
(GG) Received Industry Member Data
    Paragraph (gg) of proposed Rule 1701 states that the term 
``Received Industry Member Data'' has the meaning set forth in Rule 
1703(a)(2). This definition has the same substantive meaning as the 
definition set forth in Section 1.1 of the CAT NMS Plan. The definition 
of ``Received Industry Member Data'' is discussed more fully in the 
discussion below regarding proposed Rule 1703(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 1701 states that the term 
``Recorded Industry Member Data'' has the meaning set forth in Rule 
1703(a)(1). This definition has the same substantive meaning as the 
definition set forth in in Section 1.1 of the CAT NMS Plan. The 
definition of ``Recorded Industry Member Data'' is discussed more fully 
in the discussion

[[Page 9797]]

below regarding proposed Rule 1703(a)(1).
(II) Reportable Event
    The proposed Consolidated Audit Trail Compliance Rule (Rules 1701-
1712) requires each Industry Member to record and electronically report 
to the Central Repository certain details for each Reportable Event. To 
clarify these requirements, the Exchange proposes to define the term 
``Reportable Event'' in proposed Rule 1701. Specifically, paragraph 
(ii) of proposed Rule 1701 states that the term ``Reportable Event'' 
includes, but is not limited to, the original receipt or origination, 
modification, cancellation, routing, execution (in whole or in part) 
and allocation of an order, and receipt of a routed order. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan.
(JJ) SRO
    Paragraph (jj) of proposed Rule 1701 defines the term ``SRO'' to 
mean any self-regulatory organization within the meaning of Section 
3(a)(26) of the Exchange Act. This is the same definition as set forth 
in Section 1.1 of the CAT NMS Plan.
(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The SROs requested and received exemptive relief from SEC Rule 613 
so that the CAT NMS Plan may permit the Existing Identifier Approach, 
which would allow an Industry Member to report an existing SRO-Assigned 
Market Participant Identifier in lieu of requiring the reporting of a 
universal CAT-Reporter-ID (that is, a code that uniquely and 
consistently identifies an Industry Member for purposes of providing 
data to the Central Repository).\25\ The CAT NMS Plan reflects the 
``Existing Identifier Approach'' for purposes of identifying each 
Industry Member associated with an order or Reportable Event. Under the 
Existing Identifier Approach, Industry Members are required to record 
and report to the Central Repository an SRO-Assigned Market Participant 
Identifier for orders and certain Reportable Events to be used by the 
Central Repository to assign a unique CAT-Reporter-ID to identify 
Industry Members.
    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to 
the Central Repository, on a daily basis, all SRO-Assigned Market 
Participant Identifiers used by its Industry Members, as well as 
information to identify each such Industry Member, including CRD number 
and LEI, if the SRO has collected such LEI of the Industry Member. 
Additionally, each Industry Member is required to submit to the Central 
Repository the CRD number of the Industry Member as well as the LEI of 
the Industry Member (if the Industry Member has an LEI). The Plan 
Processor will use this information to assign a CAT-Reporter-ID to each 
Industry Member for internal use within the Central Repository.
---------------------------------------------------------------------------

    \25\ See Exemptive Request Letter at 19, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange 
proposes to define the term ``SRO-Assigned Market Participant'' in 
proposed Rule 1701. Specifically, paragraph (kk) of proposed Rule 1701 
defines the term ``SRO-Assigned Market Participant Identifier'' to mean 
an identifier assigned to an Industry Member by an SRO or identifier 
used by a Participant. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan. For example, an Industry Member would 
be permitted to use any existing SRO-Assigned Market Participant 
Identifier (e.g., FINRA MPID, NASDAQ MPID, NYSE Mnemonic, CBOE User 
Acronym and CHX Acronym) when reporting order information to the 
Central Repository.
(LL) Small Industry Member
    The requirements of the proposed Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712) differ to some extent for Small 
Industry Members versus Industry Members other than Small Industry 
Members. For example, the compliance dates for reporting data to the 
CAT are different for Small Industry Members versus other Industry 
Members. Accordingly, to clarify the requirements that apply to which 
Industry Members, the Exchange proposes to define the term ``Small 
Industry Member'' in proposed Rule 1701. Specifically, paragraph (ll) 
of proposed Rule 1701 defines the term ``Small Industry Member'' to 
mean an Industry Member that qualifies as a small broker-dealer as 
defined in Rule 0-10(c) under the Securities Exchange Act of 1934, as 
amended. This is the same in substance as the definition of ``Small 
Industry Member'' as set forth in Section 1.1 of the CAT NMS Plan. 
Specifically, Section 1.1 of the CAT NMS Plan defines a ``Small 
Industry Member'' as ``an Industry Member that qualifies as a small 
broker-dealer as defined in SEC Rule 613.'' The definition of a small 
broker-dealer under SEC Rule 613, in turn, is a small broker-dealer as 
defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 1703(b) establishes the deadlines for reporting 
certain data to the Central Repository using the term ``Trading Day.'' 
Accordingly, the Exchange proposes to define the term ``Trading Day'' 
in proposed Rule 1701. Specifically, Paragraph (mm) of proposed Rule 
1701 states that the term ``Trading Day'' shall have the meaning as is 
determined by the Operating Committee. For the avoidance of doubt, the 
Operating Committee may establish different Trading Days for NMS Stocks 
(as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity 
Securities, and any other securities that are included as Eligible 
Securities from time to time.
(ii) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards. To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\26\ To implement these provisions 
with regard to its Industry Members, the Exchange proposes Rule 1702 
(Consolidated Audit Trail Compliance Rule-Clock Synchronization) to 
require its Industry Members to comply with the clock synchronization 
requirements of the Plan.
---------------------------------------------------------------------------

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

    Paragraph (a) of proposed Rule 1702 sets forth the manner in which 
Industry Members must synchronize their Business Clocks. Paragraph 
(a)(1) of proposed Rule 1702 requires each Industry Member to 
synchronize its Business Clocks, other than such Business Clocks used 
solely for Manual Order Events or used solely for the time of 
allocation on Allocation Reports, at a minimum to within a fifty (50) 
millisecond tolerance of the time maintained by the NIST atomic clock, 
and maintain such synchronization. This is the same requirement as set 
forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 1702 requires each Industry 
Member to synchronize (1) its Business Clocks used solely for Manual 
Order Events and (2) its Business Clocks used solely for the

[[Page 9798]]

time of allocation on Allocation Reports at a minimum to within a one 
second tolerance of the time maintained by the NIST atomic clock, and 
maintain such synchronization. This is the same requirement as set 
forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
    Paragraph (a)(3) of proposed Rule 1702 clarifies that the tolerance 
described in paragraphs (a)(1) and (2) of the proposed Rule 1702 
includes all of the following: (1) The time difference between the NIST 
atomic clock and the Industry Member's Business Clock; (2) the 
transmission delay from the source; and (3) the amount of drift of the 
Industry Member's Business Clock. This description of the clock 
synchronization tolerance is the same as set forth in paragraph (b) of 
FINRA Rule 4590 (Synchronization of Member Business Clocks).
    Paragraph (a)(4) of proposed Rule 1702 requires Industry Members to 
synchronize their Business Clocks every business day before market open 
to ensure that timestamps for Reportable Events are accurate. In 
addition, to maintain clock synchronization, Business Clocks must be 
checked against the NIST atomic clock and re-synchronized, as 
necessary, throughout the day. This description of the required 
frequency of clock synchronization is the same as set forth in 
paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business 
Clocks).
    Paragraph (b) of proposed Rule 1702 sets forth documentation 
requirements with regard to clock synchronization. Specifically, 
paragraph (b) requires Industry Members to document and maintain their 
synchronization procedures for their Business Clocks. The proposed Rule 
requires Industry Members to keep a log of the times when they 
synchronize their Business Clocks and the results of the 
synchronization process. This log is required to include notice of any 
time a Business Clock drifts more than the applicable tolerance 
specified in paragraph (a) of the proposed Rule. Such logs must include 
results for a period of not less than five years ending on the then 
current date, or for the entire period for which the Industry Member 
has been required to comply with this Rule if less than five years. 
These documentation requirements are the same as those set forth in the 
``Sequencing Orders and Clock Synchronization'' section of Appendix C 
of the CAT NMS Plan. Moreover, these documentation requirements 
regarding clock synchronization are comparable to those set forth in 
Supplementary Material .01 of FINRA Rule 4590 (Synchronization of 
Member Business Clocks).
    Paragraph (c) of proposed Rule 1702 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of proposed Rule 1702 requires each Industry Member to 
certify to the Exchange that its Business Clocks satisfy the 
synchronization requirements set forth in paragraph (a) of proposed 
Rule 1702 periodically in accordance with the certification schedule 
established by the Operating Committee pursuant to the CAT NMS Plan. 
This requirement is the same requirement as set forth in Section 
6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the certification schedule 
established by the Operating Committee via Regulatory Circular.
    Paragraph (d) of proposed Rule 1702 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
proposed Rule 1702 requires Industry Members to report to the Plan 
Processor and SRO violations of paragraph (a) of this Rule pursuant to 
the thresholds set by the Operating Committee pursuant to the CAT NMS 
Plan. This requirement is the same requirement as set forth in Section 
6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the relevant thresholds established 
by the Operating Committee via Regulatory Circular.
(iii) Industry Member Data Reporting
    SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to 
set forth certain provisions requiring Industry Members to record and 
report data to the CAT. To comply with this provision, Section 6.4 of 
the CAT NMS Plan sets forth the data reporting requirements for 
Industry Members. To implement these provisions with regard to its 
Industry Members, the Exchange proposes Rule 1703 (Consolidated Audit 
Trail Compliance Rule--Industry Member Data Reporting) to require its 
Industry Members to comply with the Industry Member Data reporting 
requirements of the Plan. Proposed Rule 1703 has five sections 
covering: (1) Recording and reporting Industry Member Data, (2) timing 
of the recording and reporting, (3) the applicable securities covered 
by the recording and reporting requirements, (4) the security symbology 
to be used in the recording and reporting, and (5) error correction 
requirements, each of which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 1703 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry 
Member Data, Received Industry Member Data and Options Market Maker 
data, respectively. Paragraphs (a)(1)-(a)(3) of proposed Rule 1703 set 
forth the recording and reporting requirements required in Section 
6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding 
Options Market Makers, each Industry Member to record and 
electronically report to the Central Repository the following details 
for each order and each Reportable Event, as applicable (``Recorded 
Industry Member Data'') in the manner prescribed by the Operating 
Committee pursuant to the CAT NMS Plan:
     For original receipt or origination of an order: (1) Firm 
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned 
Market Participant Identifier of the Industry Member receiving or 
originating the order; (4) date of order receipt or origination; (5) 
time of order receipt or origination (using timestamps pursuant to 
proposed Rule 1706); and (6) Material Terms of the Order;
     for the routing of an order: (1) CAT-Order-ID; (2) date on 
which the order is routed; (3) time at which the order is routed (using 
timestamps pursuant to proposed Rule 1706); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member routing the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Participant to which the order is being routed; (6) if routed 
internally at the Industry Member, the identity and nature of the 
department or desk to which the order is routed; and (7) Material Terms 
of the Order;
     for the receipt of an order that has been routed, the 
following information: (1) CAT-Order-ID; (2) date on which the order is 
received; (3) time at which the order is received (using timestamps 
pursuant to proposed Rule 1706); (4) SRO-Assigned Market Participant 
Identifier of the Industry Member receiving the order; (5) SRO-Assigned 
Market Participant Identifier of the Industry Member or Participant 
routing the order; and (6) Material Terms of the Order;
     if the order is modified or cancelled: (1) CAT-Order-ID; 
(2) date the modification or cancellation is received or originated; 
(3) time at which the

[[Page 9799]]

modification or cancellation is received or originated (using 
timestamps pursuant to proposed Rule 1706); (4) price and remaining 
size of the order, if modified; (5) other changes in the Material Terms 
of the Order, if modified; and (6) whether the modification or 
cancellation instruction was given by the Customer or was initiated by 
the Industry Member;
     if the order is executed, in whole or in part: (1) CAT-
Order-ID; (2) date of execution; (3) time of execution (using 
timestamps pursuant to proposed Rule 1706; (4) execution capacity 
(principal, agency or riskless principal); (5) execution price and 
size; (6) SRO-Assigned Market Participant Identifier of the Industry 
Member executing the order; (7) whether the execution was reported 
pursuant to an effective transaction reporting plan or the Plan for 
Reporting of Consolidated Options Last Sale Reports and Quotation 
Information; and
     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 1703 requires, subject to 
paragraph (a)(3) regarding Options Market Makers, each Industry Member 
to record and report to the Central Repository the following, as 
applicable (``Received Industry Member Data'' and collectively with the 
information referred to in Rule 1703(a)(1) ``Industry Member Data'') in 
the manner prescribed by the Operating Committee pursuant to the CAT 
NMS Plan:
     If the order is executed, in whole or in part: (1) An 
Allocation Report; (2) SRO-Assigned Market Participant Identifier of 
the clearing broker or prime broker, if applicable; and (3) CAT-Order-
ID of any contra-side order(s);
     if the trade is cancelled, a cancelled trade indicator; 
and
     for original receipt or origination of an order, the Firm 
Designated ID for the relevant Customer, and in accordance with 
proposed Rule 1704, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 1703 states that each Industry 
Member that is an Options Market Maker is not required to report to the 
Central Repository the Industry Member Data regarding the routing, 
modification or cancellation of its quotes in Listed Options. Each 
Industry Member that is an Options Market Maker, however, is required 
to report to the Exchange the time at which its quote in a Listed 
Option is sent to the Exchange (and, if applicable, any subsequent 
quote modification time and/or cancellation time when such modification 
or cancellation is originated by the Options Market Maker). This 
paragraph implements the Options Market Maker Quote Exemption, as 
discussed above.
(B) Timing of Recording and Reporting
    Paragraph (b) of proposed Rule 1703 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 1703 set forth the 
requirements related to the timing of the recording and reporting 
requirements required in Section 6.4(b)(i)-(ii) of the CAT NMS Plan.
    Paragraph (b)(1) of proposed Rule 1703 requires each Industry 
Member to record Recorded Industry Member Data contemporaneously with 
the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 1703 
requires each Industry Member to report: (1) Recorded Industry Member 
Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading 
Day following the day the Industry Member records such Recorded 
Industry Member Data; and (2) Received Industry Member Data to the 
Central Repository by 8:00 a.m. Eastern Time on the Trading Day 
following the day the-Industry Member receives such Received Industry 
Member Data. Paragraph (b)(3) states that Industry Members may, but are 
not required to, voluntarily report Industry Member Data prior to the 
applicable 8:00 a.m. Eastern Time deadline.
(C) Applicable Securities
    Paragraph (c) of proposed Rule 1703 describes the securities to 
which the recording and reporting requirements of proposed Rule 1703 
apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 1703 set forth the 
description of applicable securities as set forth in Section 6.4(c)(i) 
and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) of 
proposed Rule 1703 requires each Industry Member to record and report 
to the Central Repository the Industry Member Data as set forth in 
paragraph (a) of proposed Rule 1703 for each NMS Security registered or 
listed for trading on such exchange or admitted to unlisted trading 
privileges on such exchange. Paragraph (c)(2) of proposed Rule 1703 
requires each Industry Member to record and report to the Central 
Repository the Industry Member Data as set forth in paragraph (a) of 
this proposed Rule 1703 for each Eligible Security for which 
transaction reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of proposed Rule 1703 describes the security 
symbology that Industry Members are required to use when reporting 
Industry Member Data to the Central Repository. Paragraph (d)(1) of 
proposed Rule 1703 requires, for each exchange-listed Eligible 
Security, each Industry Member to report Industry Member Data to the 
Central Repository using the symbology format of the exchange listing 
the security. This requirement implements the requirement set forth in 
Section 2 of Appendix D of the CAT NMS Plan to use the listing exchange 
symbology when reporting data to the Central Repository for exchange-
listed Eligible Securities.
    For each Eligible Security that is not exchange-listed, however, 
there is no listing exchange to provide the symbology format. Moreover, 
to date, the requisite symbology format has not been determined. 
Therefore, Paragraph (d)(2) of proposed Rule 1703 requires, for each 
Eligible Security that is not exchange-listed, each Industry Member to 
report Industry Member Data to the Central Repository using such 
symbology format as approved by the Operating Committee pursuant to the 
CAT NMS Plan. The Exchange intends to announce to its Industry Members 
the relevant symbology formats established by the Operating Committee 
via Regulatory Circular.
(E) Error Correction
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, the Exchange proposes to adopt paragraph 
(e) of proposed Rule 1703, which addresses the correction of erroneous 
data reported to the Central Repository. Paragraph (e) of proposed Rule 
1703 requires, for each Industry Member for which errors in Industry 
Member Data submitted to the Central Repository have been identified by 
the Plan Processor or otherwise, that such Industry Member submit 
corrected Industry Member Data to the Central Repository by 8:00 a.m. 
Eastern Time on T+3. This requirement implements the error correction 
requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
(iv) Customer Information Reporting
    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository certain information related to their 
Customers in accordance with the Customer Information Approach 
discussed above. The Exchange proposes Rule 1704 (Consolidated Audit 
Trail Compliance Rule--Customer Information Reporting)

[[Page 9800]]

to implement this provision of the CAT NMS Plan with regard to its 
Industry Members. Specifically, paragraph (a) of proposed Rule 1704 
requires each Industry Member to submit to the Central Repository the 
Firm Designated ID, Customer Account Information and Customer 
Identifying Information for each of its Customers with an Active 
Account prior to such Industry Member's commencement of reporting to 
the Central Repository and in accordance with the deadlines set forth 
in Rule 1709. Paragraph (b) of proposed Rule 1704 requires each 
Industry Member to submit to the Central Repository any updates, 
additions or other changes to the Firm Designated ID, Customer Account 
Information and Customer Identifying Information for each of its 
Customers with an Active Account on a daily basis. Paragraph (c) of 
proposed Rule 1704 requires each Industry Member, on a periodic basis 
as designated by the Plan Processor and approved by the Operating 
Committee, to submit to the Central Repository a complete set of Firm 
Designated IDs, Customer Account Information and Customer Identifying 
Information for each of its Customers with an Active Account. This 
periodic refresh is intended to ensure that the Central Repository has 
the most current information identifying a Customer. The Exchange 
intends to announce to its Industry Members when such a periodic 
refresh is required by the Plan Processor and the Operating Committee 
via Regulatory Circular.
    Finally, paragraph (d) of proposed Rule 1704 addresses the 
correction of erroneous Customer data reported to the Central 
Repository to ensure an accurate audit trail. Paragraph (d) requires, 
for each Industry Member for which errors in Firm Designated ID, 
Customer Account Information and Customer Identifying Information for 
each of its Customers with an Active Account submitted to the Central 
Repository have been identified by the Plan Processor or otherwise, 
such Member to submit corrected data to the Central Repository by 5:00 
p.m. Eastern Time on T+3. This requirement implements the error 
correction requirement set forth in Appendix C of the CAT NMS Plan.
(v) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository information sufficient to identify 
such Industry Member, including CRD number and LEI, if such LEI has 
been obtained, in accordance with the Existing Identifier Approach 
discussed above. The Exchange proposes Rule 1705 (Consolidated Audit 
Trail Compliance Rule--Industry Member Information Reporting) to 
implement this provision of the CAT NMS Plan with regard to its 
Industry Members. Specifically, proposed Rule 1705 requires each 
Industry Member to submit to the Central Repository information 
sufficient to identify such Industry Member, including CRD number and 
LEI, if such LEI has been obtained, prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in Rule 1709, and keep such information up 
to date as necessary.
(vi) Time Stamps
    SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for 
time stamps used by CAT Reporters in recording and reporting data to 
the CAT.\27\ To comply with this provision, Section 6.8(b) of the Plan 
sets forth time stamp requirements for Industry Members. To implement 
this provision with regard to its Industry Members, the Exchange 
proposes new Rule 1706 (Consolidated Audit Trail Compliance Rule--Time 
Stamps) to require its Industry Members to comply with the time stamp 
requirements of the Plan.
---------------------------------------------------------------------------

    \27\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 1706 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of proposed Rule 1706 requires each Industry Member to 
record and report Industry Member Data to the Central Repository with 
time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of 
proposed Rule 1706. To the extent that any Industry Member's order 
handling or execution systems utilize time stamps in increments finer 
than milliseconds, paragraph (a)(2) of proposed Rule 1706 requires such 
Industry Member to record and report Industry Member Data to the 
Central Repository with time stamps in such finer increment, subject to 
paragraph (b) of proposed Rule 1706 regarding Manual Order Events and 
Allocation Reports.
    Paragraph (b) of proposed Rule 1706 sets forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of proposed Rule 1706 permits each 
Industry Member to record and report Manual Order Events to the Central 
Repository in increments up to and including one second, provided that 
each Industry Member is required to record and report the time when a 
Manual Order Event has been captured electronically in an order 
handling and execution system of such Member (``Electronic Capture 
Time'') in milliseconds. In addition, paragraph (b)(2) of proposed Rule 
1706 permits each Industry Member to record and report the time of 
Allocation Reports in increments up to and including one second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 1707 (Consolidated Audit Trail Compliance Rule--Clock 
Synchronization Rule Violation) describes potential violations of the 
clock synchronization time period requirements set forth in the 
proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712). 
Proposed Rule 1707 states that an Industry Member that engages in a 
pattern or practice of reporting Reportable Events outside of the 
required clock synchronization time period as set forth in the 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712) without 
reasonable justification or exceptional circumstances may be considered 
in violation of this Rule. This provision implements the requirements 
of Section 6.8 of the CAT NMS Plan which requires the Compliance Rule 
to provide that a pattern or practice of reporting events outside of 
the required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of SEC Rule 613 or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 1708 (Consolidated Audit Trail Compliance Rule--
Connectivity and Data Transmission) addresses connectivity and data 
transmission requirements related to the CAT. Paragraph (a) of proposed 
Rule 1708 describes the format(s) for reporting Industry Member Data to 
the Central Repository, thereby implementing the formatting 
requirements as set forth in Section 6.4(a) of the CAT NMS Plan. 
Specifically, paragraph (a) of proposed Rule 1708 requires each 
Industry Member to transmit data as required under the CAT NMS Plan to 
the Central Repository utilizing such format(s) as may be provided by 
the Plan Processor and approved by the Operating Committee.
    Paragraph (b) of proposed Rule 1708 addresses connectivity 
requirements related to the CAT. Paragraph (b) of proposed Rule 1708 
requires each Industry Member to connect to the

[[Page 9801]]

Central Repository using a secure method(s), including, but not limited 
to, private line(s) and virtual private network connection(s). This 
provision implements the connectivity requirements set forth in Section 
4 of Appendix D to the CAT NMS Plan.
    Paragraph (c) permits Industry Members to use CAT Reporting Agents 
to fulfill their data reporting obligations related to the CAT. 
Paragraph (c) is based on FINRA Rule 7450(c), which permits OATS 
Reporting Members to enter into agreements with Reporting Agents to 
fulfill the OATS obligations of the OATS Reporting Member. 
Specifically, Paragraph (c)(1) of proposed Rule 1708 states that any 
Industry Member may enter into an agreement with a CAT Reporting Agent 
pursuant to which the CAT Reporting Agent agrees to fulfill the 
obligations of such Industry Member under the proposed Consolidated 
Audit Trail Compliance Rule (Rules 1701-1712). Any such agreement must 
be evidenced in writing, which specifies the respective functions and 
responsibilities of each party to the agreement that are required to 
effect full compliance with the requirements of the proposed 
Consolidated Audit Trail Compliance Rule (Rules 1701-1712). The 
Exchange notes that, currently, no standardized form agreement for CAT 
Reporting Agent arrangements has been adopted. Paragraph (c)(2) of 
proposed Rule 1708 requires that all written documents evidencing an 
agreement with a CAT Reporting Agent be maintained by each party to the 
agreement. Paragraph (c)(3) states that each Industry Member remains 
primarily responsible for compliance with the requirements of the 
proposed Consolidate Audit Trail Compliance Rule (Rules 1701-1712), 
notwithstanding the existence of an agreement described in paragraph 
(c) of proposed Rule 1708.
(ix) Development and Testing
    The Exchange proposes Rule 1709 (Consolidated Audit Trail 
Compliance Rule--Development and Testing) to address requirements for 
Industry Members related to CAT development and testing. Paragraph (a) 
of proposed Rule 1709 sets forth the testing requirements and deadlines 
for Industry Members to develop and commence reporting to the Central 
Repository. These requirements are set forth in Appendix C to the CAT 
NMS Plan.
    Paragraph (a)(1) sets forth the deadlines related to connectivity 
and acceptance testing. Industry Members (other than Small Industry 
Members) are required to begin connectivity and acceptance testing with 
the Central Repository no later than August 15, 2018, and Small 
Industry Members are required to begin connectivity and acceptance 
testing with the Central Repository no later than August 15, 2019.
    Paragraph (a)(2) sets forth the deadlines related to reporting 
Customer and Industry Member information. Paragraph (a)(2)(i) requires 
Industry Members (other than Small Industry Members) to begin reporting 
Customer and Industry Member information, as required by Rules 1704(a) 
and 1705, respectively, to the Central Repository for processing no 
later than October 15, 2018. Paragraph (a)(2)(ii) requires Small 
Industry Members to begin reporting Customer and Industry Member 
information, as required by Rules 1704(a) and 1705, respectively, to 
the Central Repository for processing no later than October 15, 2019.
    Paragraph (a)(3) sets forth the deadlines related to the submission 
of order data. Under paragraph (a)(3)(i), Industry Members (other than 
Small Industry Members) are permitted, but not required, to submit 
order data for testing purposes beginning no later than May 15, 2018. 
In addition, Industry Members (other than Small Industry Members) are 
required to participate in the coordinated and structured testing of 
order submission, which will begin no later than August 15, 2018. Under 
paragraph (a)(3)(ii), Small Industry Members are permitted, but not 
required, to submit order data for testing purposes beginning no later 
than May 15, 2019. In addition, Small Industry Members are required to 
participate in the coordinated and structured testing of order 
submission, which will begin no later than August 15, 2019.
    Paragraph (a)(4) states that Industry Members are permitted, but 
not required to, submit Quote Sent Times on Options Market Maker 
quotes, beginning no later than October 15, 2018.
    Paragraph (b) of proposed Rule 1709 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\28\ Specifically, 
proposed Rule 1709 requires that each Industry Member participate in 
testing related to the Central Repository, including any industry-wide 
disaster recovery testing, pursuant to the schedule established 
pursuant to the CAT NMS Plan. The Exchange intends to announce to its 
Industry Members the schedule established pursuant to the CAT NMS Plan 
via Regulatory Circular.
---------------------------------------------------------------------------

    \28\ Adopting Release [sic] at 84725.
---------------------------------------------------------------------------

(x) Recordkeeping
    Proposed Rule 1710 (Consolidated Audit Trail Compliance Rule--
Recordkeeping) sets forth the recordkeeping obligations related to the 
CAT for Industry Members. Proposed Rule 1710 requires each Industry 
Member to maintain and preserve records of the information required to 
be recorded under the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712) for the period of time and accessibility specified in 
SEC Rule 17a-4(b). The records required to be maintained and preserved 
under the proposed Consolidated Audit Trail Compliance Rule (Rules 
1701-1712) may be immediately produced or reproduced on ``micrographic 
media'' as defined in SEC Rule 17a-4(f)(1)(i) or by means of 
``electronic storage media'' as defined in SEC Rule 17a-4(f)(1)(ii) 
that meet the conditions set forth in SEC Rule 17a-4(f) and be 
maintained and preserved for the required time in that form. Proposed 
Rule 1710 is based on FINRA Rule 7440(a)(5), which sets forth the 
recordkeeping requirements related to OATS.
(xi) Timely, Accurate and Complete Data
    SEC Rule 613 and the CAT NMS Plan emphasize the importance of the 
timeliness, accuracy, completeness and integrity of the data submitted 
to the CAT.\29\ Accordingly, proposed Rule 1711 (Consolidated Audit 
Trail Compliance Rule--Timely, Accurate and Complete Data) implements 
this requirement with regard to Industry Members. Paragraph (a) of 
proposed Rule 1711 requires that Industry Members record and report 
data to the Central Repository as required by the proposed Consolidated 
Audit Trail Compliance Rule (Rules 1701-1712) in a manner that ensures 
the timeliness, accuracy, integrity and completeness of such data.
---------------------------------------------------------------------------

    \29\ See SEC Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the 
CAT NMS Plan.
---------------------------------------------------------------------------

    In addition, without limiting the general requirement as set forth 
in paragraph (a), paragraph (b) of proposed Rule 1711 requires Industry 
Members to accurately provide the LEIs in their records as required by 
the proposed Consolidated Audit Trail Compliance Rule (Rules 1701-1712) 
and states that Industry Members may not knowingly submit inaccurate 
LEIs to the Central Repository. Paragraph (b) notes, however, that this 
requirement does not impose any additional due diligence obligations on 
Industry Members with regard to LEIs for CAT purposes. Accordingly, 
this provision does not

[[Page 9802]]

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.\30\
---------------------------------------------------------------------------

    \30\ Approval Order at 84745.
---------------------------------------------------------------------------

    Paragraph (c) states that, if an Industry Member reports data to 
the Central Repository with errors such that its error percentage 
exceeds the maximum Error Rate established by the Operating Committee 
pursuant to the CAT NMS Plan, then such Industry Member would not be in 
compliance with the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712). As discussed above, the initial maximum Error Rate 
is 5%, although the Error Rate is expected to be reduced over time. The 
Exchange intends to announce to its Industry Members changes to the 
Error Rate established pursuant to the CAT NMS Plan via Regulatory 
Circular.
    Furthermore, paragraph (d) of proposed Rule 1711 addresses 
Compliance Thresholds related to reporting data to the CAT. Proposed 
Rule 1711 states that each Industry Member is required to meet a 
separate compliance threshold which will be an Industry Member-specific 
rate that may be used as the basis for further review or investigation 
into the Industry Member's performance with regard to the CAT (the 
``Compliance Thresholds''). Compliance Thresholds will compare an 
Industry Member's error rate to the aggregate Error Rate over a period 
of time to be defined by the Operating Committee. Compliance Thresholds 
will be set by the Operating Committee, and will be calculated at 
intervals to be set by the Operating Committee.\31\ Compliance 
Thresholds will include compliance with the data reporting and clock 
synchronization requirements. Proposed Rule 1711 states that an 
Industry Member's performance with respect to its Compliance Threshold 
will not signify, as a matter of law, that such Industry Member has 
violated the proposed Consolidated Audit Trail Compliance Rule (Rules 
1701-1712).
---------------------------------------------------------------------------

    \31\ Appendix C of the CAT NMS Plan.
---------------------------------------------------------------------------

(xii) Compliance Dates
    Proposed Rule 1712 (Consolidated Audi [sic] Trail Compliance Rule--
Compliance Dates) sets forth the compliance dates for the various 
provisions of the proposed Consolidated Audit Trail Compliance Rule 
(Rules 1701-1712). Paragraph (a) of proposed Rule 1712 states that 
paragraphs (b) and (c) of this Rule set forth the additional details 
with respect to the compliance date for the Consolidated Audit Trail 
Compliance Rule (Rules 1701-1712). It further states that, unless 
otherwise noted, Rules 1701-1712 are fully effective and Members must 
comply with their terms.
    Paragraph (b) of proposed Rule 1712 establishes the compliance 
dates for the clock synchronization requirements as set forth in 
proposed Rule 1702. Paragraph (b)(1) states that each Industry Member 
shall comply with Rule 1702 with regard to Business Clocks that capture 
time in milliseconds commencing on or before March 15, 2017. Paragraph 
(b)(2) states that each Industry Member shall comply with Rule 1702 
with regard to Business Clocks that do not capture time in milliseconds 
commencing on or before February 19, 2018. The compliance date set 
forth in paragraph (b)(1) reflects the exemptive relief requested by 
the Participants with regard to the clock synchronization requirements 
related to Business Clocks that do not capture time in milliseconds.
    Paragraph (c) of proposed Rule 1712 establishes the compliance 
dates for the data recording and reporting requirements for Industry 
Members. Paragraph (c)(1) requires each Industry Member (other than 
Small Industry Members) to record and report the Industry Member Data 
to the Central Repository by November 15, 2018. Paragraph (c)(2) 
requires that each Industry Member that is a Small Industry Member to 
record and report the Industry Member Data to the Central Repository by 
November 15, 2019. Such compliance dates are consistent with the 
compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and 
Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act \32\ which requires, 
among other things, that the Exchange's rules must be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest, and Section 6(b)(8) of the Act \33\ 
which requires that the Exchange's rules not impose any burden on 
competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(6) [sic].
    \33\ 15 U.S.C. 78f(b)(8)
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies the provisions of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of the purposes of the Act.'' \34\ To the extent that this 
proposal implements, interprets or clarifies the Plan and applies 
specific requirements to Industry Members, the Exchange believes that 
this proposal furthers the objectives of the Plan, as identified by the 
SEC, and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \34\ Approval Order at 84697.
---------------------------------------------------------------------------

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

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

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

    Written comments were neither solicited nor received.

[[Page 9803]]

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-MIAX-2017-03 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-MIAX-2017-03. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (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-MIAX-2017-03 and should be 
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02542 Filed 2-7-17; 8:45 am]
BILLING CODE 8011-01-P