Justia Agencies And Commissions Securities And Exchange Commission Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 2 to the National Market System Plan Governing the Consolidated Audit Trail by 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., Investors' Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE Arca, Inc., NYSE MKT LLC and NYSE National, Inc., 28180-28198 [2017-12771]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 2 to the National Market System Plan Governing the Consolidated Audit Trail by 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., Investors' Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE Arca, Inc., NYSE MKT LLC and NYSE National, Inc., 28180-28198 [2017-12771]

Download as PDF 28180 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–80930; File No. 4–698] • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– ISE–2017–49 on the subject line. Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 2 to the National Market System Plan Governing the Consolidated Audit Trail by 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., Investors’ Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE Arca, Inc., NYSE MKT LLC and NYSE National, Inc. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. sradovich on DSK3GMQ082PROD with NOTICES All submissions should refer to File Number SR–ISE–2017–49. 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 (https://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–ISE– 2017–49 and should be submitted on or before July 11, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–12763 Filed 6–19–17; 8:45 am] BILLING CODE 8011–01–P 17 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 June 14, 2017. I. Introduction On May 9, 2017, the Operating Committee for CAT NMS, LLC (the ‘‘Company’’), on behalf of the following parties to the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’): 1 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, 1 On February 27, 2015, BATS–Y Exchange, Inc. (n/k/a Bats BYX Exchange, Inc.), BATS Exchange, Inc. (n/k/a Bats BZX Exchange, Inc.), BOX Options Exchange LLC, C2 Options Exchange, Incorporated, Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc. (n/k/a Bats EDGA Exchange, Inc.), EDGX Exchange, Inc. (n/k/a Bats EDGX Exchange, Inc.), Financial Industry Regulatory Authority, Inc., International Securities Exchange, LLC (n/k/a Nasdaq ISE LLC), ISE Gemini, LLC (n/k/a Nasdaq GEMX, LLC), Miami International Securities Exchange LLC, NASDAQ OMX BX, Inc. (n/k/a NASDAQ BX, Inc.), NASDAQ OMX PHLX LLC (n/k/a NASDAQ PHLX LLC), The NASDAQ Stock Market LLC, National Stock Exchange, Inc. (n/k/a NYSE National, Inc.), New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. filed with the Commission, pursuant to Section 11A of the Exchange Act and Rule 608 of Regulation NMS thereunder, the CAT NMS Plan. 15 U.S.C. 78k–1; 17 CFR 242.608. The Plan was published for comment in the Federal Register on May 17, 2016, and approved by the Commission, as modified, on November 15, 2016. See Securities Exchange Act Release Nos. 77724 (April 27, 2016), 81 FR 30614 (May 17, 2016); 79318 (November 15, 2016), 81 FR 84696 (November 23, 2016). On January 30, 2017, the Commission noticed for immediate effectiveness an amendment to the Plan to add MIAX PEARL, LLC as a Participant. See Securities Exchange Act Release No. 79898, 82 FR 9250 (February 3, 2017). PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 Chicago Stock Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors’ Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE Arca, Inc., NYSE MKT LLC and NYSE National, Inc. (collectively, the ‘‘Participants,’’ ‘‘self-regulatory organizations’’ or ‘‘SROs’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 2 and Rule 608 thereunder,3 a proposal to amend the Plan (‘‘Amendment No. 2’’).4 The proposed amendment would add a fee schedule to a new Exhibit B of the Plan which sets forth the CAT fees to be paid by the Participants. A copy of proposed Exhibit B to the CAT NMS Plan is attached as Appendix A hereto. The Participants have also included, and as attached hereto, an Appendix B containing two charts, one listing the current Equity Execution Venues, each with its rank and tier, and one listing the current Options Execution Venues, each with its rank and tier. The Commission is publishing this notice to solicit comments from interested persons on Amendment No. 2.5 II. Description of the Plan Set forth in this Section II is the statement of the purpose and summary of Amendment No. 2, along with the information required by Rule 608(a)(4) and (5) under the Exchange Act,6 prepared and submitted by the Participants to the Commission.7 A. Description of the Amendments to the CAT NMS Plan (1) Executive Summary The following provides an executive summary of the CAT funding model approved by the Operating Committee, as well as Participants’ obligations related to the payment of CAT Fees calculated pursuant to the CAT funding model. A detailed description of the CAT funding model and the CAT Fees follows this executive summary. • CAT Costs. The CAT funding model is designed to establish CAT-specific 2 15 U.S.C 78k–1(a)(3). CFR 242.608. 4 See Letter from Michael Simon, CAT NMS Plan Operating Committee Chair, to Brent J. Fields, Secretary, Commission, dated May 8, 2017 (‘‘Transmittal Letter’’). 5 17 CFR 242.608. 6 See 17 CFR 242.608(a)(4) and (a)(5). 7 See Transmittal Letter, supra note 4. 3 17 E:\FR\FM\20JNN1.SGM 20JNN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices fees to collectively recover the costs of building and operating the CAT from all CAT Reporters, including Industry Members and Participants. The overall CAT costs for the calculation of the CAT Fees in this fee filing are comprised of Plan Processor CAT costs and non-Plan Processor CAT costs incurred, and estimated to be incurred, from November 21, 2016 through November 21, 2017. (See Section A(2)(E) below) • Bifurcated Funding Model. The CAT NMS Plan requires a bifurcated funding model, where costs associated with building and operating the CAT would be borne by (1) Participants and Industry Members that are Execution Venues for Eligible Securities through fixed tier fees based on market share, and (2) Industry Members (other than alternative trading systems (‘‘ATSs’’) that execute transactions in Eligible Securities (‘‘Execution Venue ATSs’’)) through fixed tier fees based on message traffic for Eligible Securities. (See Section A(2) below) • Industry Member Fees. Each Industry Member (other than Execution Venue ATSs) will be placed into one of nine tiers of fixed fees, based on ‘‘message traffic’’ in Eligible Securities for a defined period (as discussed below). Prior to the start of CAT reporting, ‘‘message traffic’’ will be comprised of historical equity and equity options orders, cancels and quotes provided by each exchange and FINRA over the previous three months. After an Industry Member begins reporting to the CAT, ‘‘message traffic’’ will be calculated based on the Industry Member’s Reportable Events reported to the CAT. Industry Members with lower levels of message traffic will pay a lower fee and Industry Members with higher levels of message traffic will pay a higher fee. (See Section A(2)(B) below) • Execution Venue Fees. Each Equity Execution Venue will be placed in one of two tiers of fixed fees based on market share, and each Options Execution Venue will be placed in one of two tiers of fixed fees based on market share. Equity Execution Venue market share will be determined by calculating each Equity Execution Venue’s proportion of the total volume of NMS Stock and OTC Equity shares reported by all Equity Execution Venues during the relevant time period. Similarly, market share for Options Execution Venues will be determined by calculating each Options Execution Venue’s proportion of the total volume of Listed Options contracts reported by all Options Execution Venues during the relevant time period. Equity Execution Venues with a larger market share will pay a larger CAT Fee than VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 Equity Execution Venues with a smaller market share. Similarly, Options Execution Venues with a larger market share will pay a larger CAT Fee than Options Execution Venues with a smaller market share. (See Section A(2)(C) below) • Cost Allocation. For the reasons discussed below, in designing the model, the Operating Committee determined that 75 percent of total costs recovered would be allocated to Industry Members (other than Execution Venue ATSs) and 25 percent would be allocated to Execution Venues. In addition, the Operating Committee determined to allocate 75 percent of Execution Venue costs recovered to Equity Execution Venues and 25 percent to Options Execution Venues. (See Section A(2)(D) below) • Comparability of Fees. The CAT funding model requires that the CAT Fees charged to the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether Execution Venues and/or Industry Members). (See Section A(2)(F) below) • Fee Schedule. The quarterly CAT Fees for each tier for Participants are set forth in the two fee schedules in proposed Exhibit B to the CAT NMS Plan, one for Execution Venues for NMS Stocks and OTC Equity Securities and one for Execution Venues for Listed Options. (See Section A(3) below) (2) Description of the CAT Funding Model Article XI of the CAT NMS Plan requires the Operating Committee to approve the operating budget, including projected costs of developing and operating the CAT for the upcoming year. As set forth in Article XI of the CAT NMS Plan, the CAT NMS Plan requires a bifurcated funding model, where costs associated with building and operating the Central Repository would be borne by (1) Participants and Industry Members that are Execution Venues through fixed tier fees based on market share, and (2) Industry Members (other than Execution Venue ATSs) through fixed tier fees based on message traffic. In its order approving the CAT NMS Plan, the Commission determined that the proposed funding model was ‘‘reasonable’’ 8 and ‘‘reflects a reasonable exercise of the Participants’ 8 Approval PO 00000 Order at 84796. Frm 00139 Fmt 4703 Sfmt 4703 28181 funding authority to recover the Participants’ costs related to the CAT.’’ 9 More specifically, the Commission stated in approving the CAT NMS Plan that ‘‘[t]he Commission believes that the proposed funding model is reasonably designed to allocate the costs of the CAT between the Participants and Industry Members.’’ 10 The Commission further noted the following: The Commission believes that the proposed funding model reflects a reasonable exercise of the Participants’ funding authority to recover the Participants’ costs related to the CAT. The CAT is a regulatory facility jointly owned by the Participants and . . . the Exchange Act specifically permits the Participants to charge their members fees to fund their self-regulatory obligations. The Commission further believes that the proposed funding model is designed to impose fees reasonably related to the Participants’ self-regulatory obligations because the fees would be directly associated with the costs of establishing and maintaining the CAT, and not unrelated SRO services.11 Accordingly, the funding model imposes fees on both Participants and Industry Members. In addition, as discussed in Appendix C of the CAT NMS Plan, the Operating Committee considered the advantages and disadvantages of a variety of alternative funding and cost allocation models before selecting the proposed model.12 After analyzing the various alternatives, the Operating Committee determined that the proposed tiered, fixed fee funding model provides a variety of advantages in comparison to the alternatives. First, the fixed fee model, as opposed to a variable fee model, provides transparency, ease of calculation, ease of billing and other administrative functions, and predictability of a fixed fee. Such factors are crucial to estimating a reliable revenue stream for the Company and for permitting CAT Reporters to reasonably predict their payment obligations for budgeting purposes.13 Additionally, a strictly variable or metered funding model based on message volume would 9 Id. at 84794. at 84795. 11 Id. at 84794. 12 Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85006. 13 In choosing a tiered fee structure, the selfregulatory organizations concluded that the variety of benefits offered by a tiered fee structure, discussed above, outweighed the fact that Industry Members in any particular tier would pay different rates per message traffic order event (e.g., an Industry Member with the largest amount of message traffic in one tier would pay a smaller amount per order event than an Industry Member in the same tier with the least amount of message traffic). Such variation is the natural result of a tiered fee structure. 10 Id. E:\FR\FM\20JNN1.SGM 20JNN1 sradovich on DSK3GMQ082PROD with NOTICES 28182 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices be far more likely to affect market behavior and place an inappropriate burden on competition. Moreover, as the SEC noted in approving the CAT NMS Plan, ‘‘[t]he Participants also have offered a reasonable basis for establishing a funding model based on broad tiers, in that it be may be easier to implement.’’ 14 In addition, multiple reviews of current broker-dealer order and trading data submitted under existing reporting requirements showed a wide range in activity among broker-dealers, with a number of broker-dealers submitting fewer than 1,000 orders per month and other broker-dealers submitting millions and even billions of orders in the same period. Accordingly, the CAT NMS Plan includes a tiered approach to fees. The tiered approach helps ensure that fees are equitably allocated among similarly situated CAT Reporters and furthers the goal of lessening the impact on smaller firms.15 The self-regulatory organizations considered several approaches to developing a tiered model, including defining fee tiers based on such factors as size of firm, message traffic or trading dollar volume. After analyzing the alternatives, it was concluded that the tiering should be based on the relative impact of CAT Reporters on the CAT System. Accordingly, the CAT NMS Plan contemplates that costs will be allocated across the CAT Reporters on a tiered basis to allocate costs to those CAT Reporters that contribute more to the costs of creating, implementing and maintaining the CAT.16 The fees to be assessed at each tier are calculated so as to recoup a proportion of costs appropriate to the message traffic or market share (as applicable) from CAT Reporters in each tier. Therefore, Industry Members generating the most message traffic will be in the higher tiers, and therefore be charged a higher fee. Industry Members with lower levels of message traffic will be in lower tiers and will be assessed a smaller fee for the CAT.17 Correspondingly, Execution Venues with the highest market share will be in the top tier, and therefore will be charged a higher fee. Execution Venues with a lower market share will be in the lower tier and will be assessed a smaller fee for the CAT.18 The Commission also noted in approving the CAT NMS Plan that ‘‘[t]he Participants have offered a credible justification for using different criteria to charge Execution Venues (market share) and Industry Members (message traffic)’’ 19 in the CAT funding model. While there are multiple factors that contribute to the cost of building, maintaining and using the CAT, processing and storage of incoming message traffic is one of the most significant cost drivers for the CAT.20 Thus, the CAT NMS Plan provides that the fees payable by Industry Members (other than Execution Venue ATSs) will be based on the message traffic generated by such Industry Member.21 The CAT NMS Plan provides that the Operating Committee will use different criteria to establish fees for Execution Venues and non-Execution Venues due to the fundamental differences between the two types of entities. In particular, the CAT NMS Plan provides that fees charged to CAT Reporters that are Execution Venues will be based on the level of market share and that costs charged to Industry Members (other than Execution Venue ATSs) will be based upon message traffic.22 Because most Participant message traffic consists of quotations, and Participants usually disseminate quotations in all instruments they trade, regardless of execution volume, Execution Venues that are Participants generally disseminate similar amounts of message traffic. Accordingly, basing fees for Execution Venues on message traffic would not provide the same degree of differentiation among Execution Venues that it does among Industry Members (other than Execution Venue ATSs). In contrast, execution volume more accurately delineates the different levels of trading activity of Execution Venues.23 The CAT NMS Plan’s funding model also is structured to avoid a ‘‘reduction in market quality.’’ 24 The tiered, fixed fee funding model is designed to limit the disincentives to providing liquidity to the market. For example, the Participants expect that a firm that had a large volume of quotes would likely be categorized in one of the upper tiers, and would not be assessed a fee for this traffic directly as they would under a more directly metered model. In contrast, strictly variable or metered funding models based on message volume were far more likely to affect market behavior. In approving the CAT 19 Id. at 84796. B.7, Appendix C of the CAT NMS Plan, Approval Order at 85005. 21 Section 11.3(b) of the CAT NMS Plan. 22 Section 11.2(c) of the CAT NMS Plan. 23 Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85005. 24 Section 11.2(e) of the CAT NMS Plan. 20 Section 14 Approval Order at 84796. B.7, Appendix C of the CAT NMS Plan, Approval Order at 85006. 16 Approval Order at 85005. 17 Id. 18 Id. 15 Section VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 NMS Plan, the SEC stated that ‘‘[t]he Participants also offered a reasonable basis for establishing a funding model based on broad tiers, in that it may be . . . less likely to have an incremental deterrent effect on liquidity provision.’’ 25 The CAT NMS Plan is structured to avoid potential conflicts raised by the Operating Committee determining fees applicable to its own members—the Participants. First, the Company will be operated on a ‘‘break-even’’ basis, with fees imposed to cover costs and an appropriate reserve. Any surpluses will be treated as an operational reserve to offset future fees and will not be distributed to the Participants as profits.26 To ensure that the Participants’ operation of the CAT will not contribute to the funding of their other operations, Section 11.1(c) of the CAT NMS Plan specifically states that ‘‘[a]ny surplus of the Company’s revenues over its expenses shall be treated as an operational reserve to offset future fees.’’ In addition, as set forth in Article VIII of the CAT NMS Plan, the Company ‘‘intends to operate in a manner such that it qualifies as a ‘business league’ within the meaning of Section 501(c)(6) of the [Internal Revenue] Code.’’ To qualify as a business league, an organization must ‘‘not [be] organized for profit and no part of the net earnings of [the organization can] inure[] to the benefit of any private shareholder or individual.’’ 27 As the SEC stated when approving the CAT NMS Plan, ‘‘the Commission believes that the Company’s application for Section 501(c)(6) business league status addresses issues raised by commenters about the Plan’s proposed allocation of profit and loss by mitigating concerns that the Company’s earnings could be used to benefit individual Participants.’’ 28 Finally, by adopting a CAT-specific fee, the Participants will be fully transparent regarding the costs of the CAT. Charging a general regulatory fee, which would be used to cover CAT costs as well as other regulatory costs, would be less transparent than the selected approach of charging a fee designated to cover CAT costs only. A full description of the funding model is set forth below. This description includes the framework for the funding model as set forth in the CAT NMS Plan, as well as the details as to how the funding model will be 25 Approval Order at 84796. at 84792. 27 26 U.S.C. 501(c)(6). 28 Approval Order at 84793. 26 Id. E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices applied in practice, including the number of fee tiers and the applicable fees for each tier. The complete funding model is described below, including those fees that are to be paid by Industry Members. Proposed Exhibit B, however, does not apply to Industry Members; proposed Exhibit B only applies to Participants. The CAT Fees for Industry Members will be imposed separately by the Operating Committee pursuant to rules adopted by the individual selfregulatory organizations. sradovich on DSK3GMQ082PROD with NOTICES (A) Funding Principles Section 11.2 of the CAT NMS Plan sets forth the principles that the Operating Committee applied in establishing the funding for the Company. The Operating Committee has considered these funding principles as well as the other funding requirements set forth in the CAT NMS Plan and in Rule 613 in developing the proposed funding model. The following are the funding principles in Section 11.2 of the CAT NMS Plan: • To create transparent, predictable revenue streams for the Company that are aligned with the anticipated costs to build, operate and administer the CAT and other costs of the Company; • To establish an allocation of the Company’s related costs among Participants and Industry Members that is consistent with the Exchange Act, taking into account the timeline for implementation of the CAT and distinctions in the securities trading operations of Participants and Industry Members and their relative impact upon the Company’s resources and operations; • To establish a tiered fee structure in which the fees charged to: (i) CAT Reporters that are Execution Venues, including ATSs, are based upon the level of market share; (ii) Industry Members’ non-ATS activities are based upon message traffic; (iii) the CAT Reporters with the most CAT-related activity (measured by market share and/ or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether Execution Venue and/or Industry Members); • To provide for ease of billing and other administrative functions; • To avoid any disincentives such as placing an inappropriate burden on competition and a reduction in market quality; and • To build financial stability to support the Company as a going concern. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 (B) Industry Member Tiering Under Section 11.3(b) of the CAT NMS Plan, the Operating Committee is required to establish fixed fees to be payable by Industry Members, based on message traffic generated by such Industry Member, with the Operating Committee establishing at least five and no more than nine tiers. The CAT NMS Plan clarifies that the fixed fees payable by Industry Members pursuant to Section 11.3(b) shall, in addition to any other applicable message traffic, include message traffic generated by: (i) An ATS that does not execute orders that is sponsored by such Industry Member; and (ii) routing orders to and from any ATS sponsored by such Industry Member. In addition, the Industry Member fees will apply to Industry Members that act as routing broker-dealers for exchanges. The Industry Member fees will not be applicable, however, to an ATS that qualifies as an Execution Venue, as discussed in more detail in the section on Execution Venue tiering. In accordance with Section 11.3(b), the Operating Committee approved a tiered fee structure for Industry Members (other than Execution Venue ATSs) as described in this section. In determining the tiers, the Operating Committee considered the funding principles set forth in Section 11.2 of the CAT NMS Plan, seeking to create funding tiers that take into account the relative impact on CAT System resources of different Industry Members, and that establish comparable fees among the CAT Reporters with the most Reportable Events. The Operating Committee has determined that establishing nine tiers results in the fairest allocation of fees, best distinguishing between Industry Members with differing levels of message traffic. Thus, each such Industry Member will be placed into one of nine tiers of fixed fees, based on ‘‘message traffic’’ for a defined period (as discussed below). A nine tier structure was selected to provide the widest range of levels for tiering Industry Members such that Industry Members submitting significantly less message traffic to the CAT would be adequately differentiated from Industry Members submitting substantially more message traffic. The Operating Committee considered historical message traffic generated by Industry Members across all exchanges and as submitted to FINRA’s Order Audit Trail System (‘‘OATS’’), and considered the distribution of firms with similar levels of message traffic, grouping together firms with similar levels of message PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 28183 traffic. Based on this, the Operating Committee determined that nine tiers would best group firms with similar levels of message traffic, charging those firms with higher impact on the CAT more, while lowering the burden of Industry Members that have less CATrelated activity. Each Industry Member (other than Execution Venue ATSs) will be ranked by message traffic and tiered by predefined Industry Member percentages (the ‘‘Industry Member Percentages’’). The Operating Committee determined to use predefined percentages rather than fixed volume thresholds to allow the funding model to ensure that the total CAT fees collected recover the intended CAT costs regardless of changes in the total level of message traffic. To determine the fixed percentage of Industry Members in each tier, the Operating Committee analyzed historical message traffic generated by Industry Members across all exchanges and as submitted to OATS, and considered the distribution of firms with similar levels of message traffic, grouping together firms with similar levels of message traffic. Based on this, the Operating Committee identified tiers that would group firms with similar levels of message traffic, charging those firms with higher impact on the CAT more, while lowering the burden on Industry Members that have less CAT-related activity. The percentage of costs recovered by each Industry Member tier will be determined by predefined percentage allocations (the ‘‘Industry Member Recovery Allocation’’). In determining the fixed percentage allocation of costs recovered for each tier, the Operating Committee considered the impact of CAT Reporter message traffic on the CAT System as well as the distribution of total message volume across Industry Members while seeking to maintain comparable fees among the largest CAT Reporters. Accordingly, following the determination of the percentage of Industry Members in each tier, the Operating Committee identified the percentage of total market volume for each tier based on the historical message traffic upon which Industry Members had been initially ranked. Taking this into account along with the resulting percentage of total recovery, the percentage allocation of costs recovered for each tier were assigned, allocating higher percentages of recovery to tiers with higher levels of message traffic while avoiding any inappropriate burden on competition. Furthermore, by using percentages of Industry Members and costs recovered per tier, the Operating Committee sought to include E:\FR\FM\20JNN1.SGM 20JNN1 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices stability and elasticity within the funding model, allowing the funding model to respond to changes in either the total number of Industry Members or the total level of message traffic. The following chart illustrates the breakdown of nine Industry Member tiers across the monthly average of total equity and equity options orders, cancels and quotes in Q1 2016 and identifies relative gaps across varying levels of Industry Member message traffic as well as message traffic thresholds between the largest of Industry Member message traffic gaps. The Operating Committee referenced similar distribution illustrations to determine the appropriate division of Industry Member percentages in each tier by considering the grouping of firms with similar levels of message traffic and seeking to identify relative breakpoints in the message traffic between such groupings. In reviewing the chart and its corresponding table, note that while these distribution illustrations were referenced to help differentiate between Industry Member tiers, the proposed funding model is directly driven, not by fixed message traffic thresholds, but rather by fixed percentages of Industry Members across tiers to account for fluctuating levels of message traffic across time and to provide for the financial stability of the CAT by ensuring that the funding model will recover the required amounts regardless of changes in the number of Industry Members or the amount of message traffic. Actual messages in any tier will vary based on the actual traffic in a given measurement period, as well as the number of firms included in the measurement period. The Industry Member Percentages and Industry Member Recovery Allocation for each tier will remain fixed with each Industry Member’s tier to be reassigned periodically, as described below in Section A(2)(H). Monthly average message traffic per industry member (orders, quotes and cancels) Industry member tier sradovich on DSK3GMQ082PROD with NOTICES Tier Tier Tier Tier Tier Tier Tier Tier Tier 1 2 3 4 5 6 7 8 9 .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. .............................................................................................................................................................................................. Based on the above analysis, the Operating Committee approved the VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 >10,000,000,000 >1,000,000,000 >100,000,000 >2,500,000 >200,000 >50,000 >5,000 >1,000 ≤1,000 following Industry Member Percentages and Recovery Allocations: PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 EN20JN17.000</GPH> 28184 28185 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices Percentage of industry members Industry member tier Tier Tier Tier Tier Tier Tier Tier Tier Tier 1 2 3 4 5 6 7 8 9 Percentage of industry member recovery Percentage of total recovery ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ 0.500 2.500 2.125 4.625 3.625 4.000 17.500 20.125 45.000 8.50 35.00 21.25 15.75 7.75 5.25 4.50 1.50 0.50 6.38 26.25 15.94 11.81 5.81 3.94 3.38 1.13 0.38 Total ...................................................................................................................................... 100 100 75 sradovich on DSK3GMQ082PROD with NOTICES For the purposes of creating these tiers based on message traffic, the Operating Committee determined to define the term ‘‘message traffic’’ separately for the period before the commencement of CAT reporting and for the period after the start of CAT reporting. The different definition for message traffic is necessary as there will be no Reportable Events as defined in the Plan, prior to the commencement of CAT reporting. Accordingly, prior to the start of CAT reporting, ‘‘message traffic’’ will be comprised of historical equity and equity options orders, cancels and quotes provided by each exchange and FINRA over the previous three months.29 Prior to the start of CAT reporting, orders would be comprised of the total number of equity and equity options orders received and originated by a member of an exchange or FINRA over the previous three-month period, including principal orders, cancel/ replace orders, market maker orders originated by a member of an exchange, and reserve (iceberg) orders as well as order routes and executions originated by a member of FINRA, and excluding order rejects and implied orders.30 In addition, prior to the start of CAT reporting, cancels would be comprised of the total number of equity and equity 29 The SEC approved exemptive relief permitting 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 required by Rule 613 of Regulation NMS. See Securities Exchange Act Release No. 77265 (Mar. 1, 2017 [sic], 81 FR 11856 (Mar. 7, 2016). This exemption applies to Options Market Maker quotes for CAT reporting purposes only. Therefore, notwithstanding the reporting exemption provided for Options Market Maker quotes, Options Market Maker quotes will be included in the calculation of total message traffic for Options Market Makers for purposes of tiering under the CAT funding model both prior to CAT reporting and once CAT reporting commences. 30 Consequently, firms that do not have ‘‘message traffic’’ reported to an exchange or OATS before they are reporting to the CAT would not be subject to a fee until they begin to report information to CAT. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 option cancels received and originated by a member of an exchange or FINRA over a three-month period, excluding order modifications (e.g., order updates, order splits, partial cancels). Furthermore, prior to the start of CAT reporting, quotes would be comprised of information readily available to the exchanges and FINRA, such as the total number of historical equity and equity options quotes received and originated by a member of an exchange or FINRA over the prior three-month period. After an Industry Member begins reporting to the CAT, ‘‘message traffic’’ will be calculated based on the Industry Member’s Reportable Events reported to the CAT as will be defined in the Technical Specifications.31 The Operating Committee has determined to calculate fee tiers every three months, on a calendar quarter basis, based on message traffic from the prior three months. Based on its analysis of historical data, the Operating Committee believes that calculating tiers based on three months of data will provide the best balance between reflecting changes in activity by Industry Members while still providing predictability in the tiering for Industry Members. Because fee tiers will be calculated based on message traffic from the prior three months, the Operating Committee will begin calculating message traffic based on an Industry Member’s Reportable Events reported to the CAT once the Industry Member has been reporting to the CAT for three months. Prior to that, fee tiers will be calculated as discussed above with regard to the period prior to CAT reporting. 31 If an Industry Member (other than an Execution Venue ATS) has no orders, cancels or quotes prior to the commencement of CAT Reporting, or no Reportable Events after CAT reporting commences, then the Industry Member would not have a CAT fee obligation. PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 (C) Execution Venue Tiering Under Section 11.3(a) of the CAT NMS Plan, the Operating Committee is required to establish fixed fees payable by Execution Venues. Section 1.1 of the CAT NMS Plan defines an Execution Venue as ‘‘a Participant or an alternative trading system (‘‘ATS’’) (as defined in Rule 300 of Regulation ATS) that operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS that does not execute orders).’’ 32 The Participants determined that ATSs should be included within the definition of Execution Venue. Given the similarity between the activity of exchanges and ATSs, both of which meet the definition of an ‘‘exchange’’ as set forth in the Exchange Act and the fact that the similar trading models would have similar anticipated burdens on the CAT, the Participants determined that ATSs should be treated in the same manner as the exchanges for the purposes of determining the level of fees associated with the CAT.33 Given the differences between Execution Venues that trade NMS Stocks and/or OTC Equity Securities and Execution Venues that trade Listed Options, Section 11.3(a) addresses Execution Venues that trade NMS Stocks and/or OTC Equity Securities separately from Execution Venues that trade Listed Options. Equity and Options Execution Venues are treated separately for two reasons. First, the differing quoting behavior of Equity and Options Execution Venues makes comparison of activity between Execution Venues difficult. Second, Execution Venue tiers are calculated based on market share of share volume, and it is therefore difficult to compare market share between asset classes (i.e., equity shares versus options contracts). 32 Although FINRA does not operate an execution venue, because it is a Participant, it is considered an ‘‘Execution Venue’’ under the Plan for purposes of determining fees. 33 Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85005. E:\FR\FM\20JNN1.SGM 20JNN1 28186 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices Discussed below is how the funding model treats the two types of Execution Venues. (I) NMS Stocks and OTC Equity Securities Section 11.3(a)(i) of the CAT NMS Plan states that each Execution Venue that (i) executes transactions or, (ii) in the case of a national securities association, has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange, in NMS Stocks or OTC Equity Securities will pay a fixed fee depending on the market share of that Execution Venue in NMS Stocks and OTC Equity Securities, with the Operating Committee establishing at least two and not more than five tiers of fixed fees, based on an Execution Venue’s NMS Stocks and OTC Equity Securities market share. For these purposes, market share for Execution Venues that execute transactions will be calculated by share volume, and market share for a national securities association that has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange in NMS Stocks or OTC Equity Securities will be calculated based on share volume of trades reported, provided, however, that the share volume reported to such national securities association by an Execution Venue shall not be included in the calculation of such national security association’s market share. In accordance with Section 11.3(a)(i) of the CAT NMS Plan, the Operating Committee approved a tiered fee structure for Equity Execution Venues and Option Execution Venues. In determining the Equity Execution Venue Tiers, the Operating Committee considered the funding principles set forth in Section 11.2 of the CAT NMS Plan, seeking to create funding tiers that take into account the relative impact on system resources of different Equity Execution Venues, and that establish comparable fees among the CAT Reporters with the most Reportable Events. Each Equity Execution Venue will be placed into one of two tiers of fixed fees, based on the Execution Venue’s NMS Stocks and OTC Equity Securities market share. In choosing two tiers, the Operating Committee performed an analysis similar to that discussed above with regard to the nonExecution Venue Industry Members to determine the number of tiers for Equity Execution Venues. The Operating Committee determined to establish two tiers for Equity Execution Venues, rather than a larger number of tiers as established for non-Execution Venue Industry Members, because the two tiers were sufficient to distinguish between the smaller number of Equity Execution Venues based on market share. Furthermore, the incorporation of additional Equity Execution Venue tiers would result in significantly higher fees for Tier 1 Equity Execution Venues and diminish comparability between Execution Venues and Industry Members. Each Equity Execution Venue will be ranked by market share and tiered by predefined Execution Venue percentages, (the ‘‘Equity Execution Venue Percentages’’). In determining the fixed percentage of Equity Execution Venues in each tier, the Operating Committee looked at historical market share of share volume for execution venues. Equities Execution Venue market share of share volume were sourced from market statistics made publicly-available by Bats Global Markets, Inc. (‘‘Bats’’). ATS market share of share volume was sourced from market statistics made publiclyavailable by FINRA. FINRA trading [sic] reporting facility (‘‘TRF’’) market share of share volume was sourced from market statistics made publicly available by Bats. As indicated by FINRA, ATSs accounted for 37.80% of the share volume across the TRFs during the recent tiering period. A 37.80/62.20 split was applied to the ATS and non-ATS breakdown of FINRA market share, with FINRA tiered based only on the non-ATS portion of its TRF market share of share volume. Based on this, the Operating Committee considered the distribution of Execution Venues, and grouped together Execution Venues with similar levels of market share of share volume. In doing so, the Participants considered Percentage of Equity Execution Venues Equity Execution Venue tier sradovich on DSK3GMQ082PROD with NOTICES that, as previously noted, Execution Venues in many cases have similar levels of message traffic due to quoting activity, and determined that it was simpler and more appropriate to have fewer, rather than more, Execution Venue tiers to distinguish between Execution Venues. The percentage of costs recovered by each Equity Execution Venue tier will be determined by predefined percentage allocations (the ‘‘Equity Execution Venue Recovery Allocation’’). In determining the fixed percentage allocation of costs recovered for each tier, the Operating Committee considered the impact of CAT Reporter market share activity on the CAT System as well as the distribution of total market volume across Equity Execution Venues while seeking to maintain comparable fees among the largest CAT Reporters. Accordingly, following the determination of the percentage of Execution Venues in each tier, the Operating Committee identified the percentage of total market volume for each tier based on the historical market share upon which Execution Venues had been initially ranked. Taking this into account along with the resulting percentage of total recovery, the percentage allocation of costs recovered for each tier were assigned, allocating higher percentages of recovery to the tier with a higher level of market share while avoiding any inappropriate burden on competition. Furthermore, due to the similar levels of impact on the CAT System across Execution Venues, there is less variation in CAT Fees between the highest and lowest of tiers for Execution Venues. Furthermore, by using percentages of Equity Execution Venues and costs recovered per tier, the Operating Committee sought to include stability and elasticity within the funding model, allowing the funding model to respond to changes in either the total number of Equity Execution Venues or changes in market share. Based on this analysis, the Operating Committee approved the following Equity Execution Venue Percentages and Recovery Allocations: Percentage of Execution Venue recovery Percentage of total recovery Tier 1 ............................................................................................................................................ Tier 2 ............................................................................................................................................ 25.00 75.00 26.00 49.00 6.50 12.25 Total ...................................................................................................................................... 100 75 18.75 VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 28187 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices In accordance with Section 11.3(a)(ii) of the CAT NMS Plan, the Operating Committee approved a tiered fee structure for Options Execution Venues. In determining the tiers, the Operating Committee considered the funding principles set forth in Section 11.2 of the CAT NMS Plan, seeking to create funding tiers that take into account the relative impact on system resources of different Options Execution Venues, and that establish comparable fees among the CAT Reporters with the most Reportable Events. Each Options Execution Venue will be placed into one of two tiers of fixed fees, based on the Execution Venue’s Listed Options market share. In choosing two tiers, the Operating Committee performed an analysis similar to that discussed above with regard to Industry Members (other than Execution Venue ATSs) to determine the number of tiers for Options Execution Venues. The Operating Committee determined to establish two tiers for Options Equity market Execution Venues, rather than a larger Equity Execution share of Venue tier share volume number of tiers as established for Industry Members (other than Execution (%) Venue ATSs), because the two tiers Tier 1 .................................... ≥1 were sufficient to distinguish between Tier 2 .................................... <1 the smaller number of Options Execution Venues based on market (II) Listed Options share. Furthermore, due to the smaller Section 11.3(a)(ii) of the CAT NMS number of Options Execution Venues, Plan states that each Execution Venue the incorporation of additional Options that executes transactions in Listed Execution Venue tiers would result in Options will pay a fixed fee depending significantly higher fees for Tier 1 on the Listed Options market share of Options Execution Venues and reduce that Execution Venue, with the comparability between Execution Operating Committee establishing at Venues and Industry Members. least two and no more than five tiers of Each Options Execution Venue will fixed fees, based on an Execution be ranked by market share and tiered by Venue’s Listed Options market share. predefined Execution Venue For these purposes, market share will be percentages, (the ‘‘Options Execution calculated by contract volume. Venue Percentages’’). To determine the The following table exhibits the relative separation of market share of share volume between Tier 1 and Tier 2 Equity Execution Venues. In reviewing the table, note that while this division was referenced as a data point to help differentiate between Equity Execution Venue tiers, the proposed funding model is directly driven not by market share thresholds, but rather by fixed percentages of Equity Execution Venues across tiers to account for fluctuating levels of market share across time. Actual market share in any tier will vary based on the actual market activity in a given measurement period, as well as the number of Equity Execution Venues included in the measurement period. The Equity Execution Venue Percentages and Equity Execution Venue Recovery Allocation for each tier will remain fixed with each Equity Execution Venue tier to be reassigned periodically, as described below in Section A(2)(H). fixed percentage of Options Execution Venues in each tier, the Operating Committee analyzed the historical and publicly available market share of Options Execution Venues to group Options Execution Venues with similar market shares across the tiers. Options Execution Venue market share of share volume were sourced from market statistics made publicly-available by Bats. The process for developing the Options Execution Venue Percentages was the same as discussed above with regard to Equity Execution Venues. The percentage of costs recovered by each Options Execution Venue tier will be determined by predefined percentage allocations (the ‘‘Options Execution Venue Recovery Allocation’’). In determining the fixed percentage allocation of costs recovered for each tier, the Operating Committee considered the impact of CAT Reporter market share activity on the CAT System as well as the distribution of total market volume across Options Execution Venues while seeking to maintain comparable fees among the largest CAT Reporters. Furthermore, by using percentages of Options Execution Venues and costs recovered per tier, the Operating Committee sought to include stability and elasticity within the funding model, allowing the funding model to respond to changes in either the total number of Options Execution Venues or changes in market share. The process for developing the Options Execution Venue Recovery Allocation was the same as discussed above with regard to Equity Execution Venues. Based on this analysis, the Operating Committee approved the following Options Execution Venue Percentages and Recovery Allocations: Percentage of Options Execution Venues Options Execution Venue tier Percentage of Execution Venue recovery Percentage of total recovery 75.00 25.00 20.00 5.00 5.00 1.25 Total ...................................................................................................................................... sradovich on DSK3GMQ082PROD with NOTICES Tier 1 ............................................................................................................................................ Tier 2 ............................................................................................................................................ 100 25 6.25 The following table exhibits the relative separation of market share of share volume between Tier 1 and Tier 2 Options Execution Venues. In reviewing the table, note that while this division was referenced as a data point to help differentiate between Options Execution Venue tiers, the proposed funding model is directly driven, not by market share thresholds, but rather by fixed percentages of Options Execution VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 Venues across tiers to account for fluctuating levels of market share across time. Actual market share in any tier will vary based on the actual market activity in a given measurement period, as well as the number of Options Execution Venues included in the measurement period. The Options Execution Venue Percentages and Equity Execution Venue Recovery Allocation for each tier will remain PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 fixed with each Options Execution Venue tier to be reassigned periodically, as described below in Section A(2)(H). Options Execution Venue tier Tier 1 .................................... Tier 2 .................................... E:\FR\FM\20JNN1.SGM 20JNN1 Options market share of share volume (%) ≥1 <1 28188 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices (III) Market Share/Tier Assignments The Operating Committee determined that, prior to the start of CAT reporting, market share for Execution Venues would be sourced from publiclyavailable market data. Options and equity volumes for Participants will be sourced from market data made publicly available by Bats while Execution Venue ATS volumes will be sourced from market data made publicly available by FINRA. Set forth in Appendix B to this letter are two charts, one listing the current Equity Execution Venues, each with its rank and tier, and one listing the current Options Execution Venues, each with its rank and tier. After the commencement of CAT reporting, market share for Execution Venues will be sourced from data reported to the CAT. Equity Execution Venue market share will be determined by calculating each Equity Execution Venue’s proportion of the total volume of NMS Stock and OTC Equity shares reported by all Equity Execution Venues during the relevant time period. Similarly, market share for Options Execution Venues will be determined by calculating each Options Execution Venue’s proportion of the total volume of Listed Options contracts reported by all Options Execution Venues during the relevant time period. The Operating Committee has determined to calculate fee tiers for Execution Venues every three months based on market share from the prior three months. Based on its analysis of historical data, the Operating Committee believes calculating tiers based on three months of data will provide the best balance between reflecting changes in activity by Execution Venues while still providing predictability in the tiering for Execution Venues. sradovich on DSK3GMQ082PROD with NOTICES (D) Allocation of Costs In addition to the funding principles discussed above, including comparability of fees, Section 11.1(c) of the CAT NMS Plan also requires expenses to be fairly and reasonably shared among the Participants and Industry Members. Accordingly, in developing the proposed fee schedules pursuant to the funding model, the Operating Committee calculated how the CAT costs would be allocated between Industry Members and Execution Venues, and how the portion of CAT costs allocated to Execution Venues would be allocated between Equity Execution Venues and Options Execution Venues. These determinations are described below. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 (I) Allocation Between Industry Members and Execution Venues In determining the cost allocation between Industry Members (other than Execution Venue ATSs) and Execution Venues, the Operating Committee analyzed a range of possible splits for revenue recovered from such Industry Members and Execution Venues. Based on this analysis, the Operating Committee determined that 75 percent of total costs recovered would be allocated to Industry Members (other than Execution Venue ATSs) and 25 percent would be allocated to Execution Venues. The Operating Committee determined that this 75/25 division maintained the greatest level of comparability across the funding model, keeping in view that comparability should consider affiliations among or between CAT Reporters (e.g., firms with multiple Industry Members and/or exchange licenses). For example, the cost allocation establishes fees for the largest Industry Members (i.e., those Industry Members in Tiers 1, 2 and 3) that are comparable to the largest Equity Execution Venues and Options Execution Venues (i.e., those Execution Venues in Tier 1). In addition, the cost allocation establishes fees for Execution Venue complexes that are comparable to those of Industry Member complexes. For example, when analyzing alternative allocations, other possible allocations led to much higher fees for larger Industry Members than for larger Execution Venues or vice versa, and/or led to much higher fees for Industry Member complexes than Execution Venue complexes or vice versa. Furthermore, the allocation of total CAT costs recovered recognizes the difference in the number of CAT Reporters that are Industry Members versus CAT Reporters that are Execution Venues. Specifically, the cost allocation takes into consideration that there are approximately 25 times more Industry Members expected to report to the CAT than Execution Venues (e.g., an estimated 1,630 Industry Members versus 70 Execution Venues as of January 2017). (II) Allocation Between Equity Execution Venues and Options Execution Venues The Operating Committee also analyzed how the portion of CAT costs allocated to Execution Venues would be allocated between Equity Execution Venues and Options Execution Venues. In considering this allocation of costs, the Operating Committee analyzed a range of alternative splits for revenue recovered between Equity and Options PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 Execution Venues, including a 70/30, 67/33, 65/35, 50/50 and 25/75 split. Based on this analysis, the Operating Committee determined to allocate 75 percent of Execution Venue costs recovered to Equity Execution Venues and 25 percent to Options Execution Venues. The Operating Committee determined that a 75/25 division between Equity and Options Execution Venues maintained elasticity across the funding model as well the greatest level of fee equitability and comparability based on the current number of Equity and Options Execution Venues. For example, the allocation establishes fees for the larger Equity Execution Venues that are comparable to the larger Options Execution Venues, and fees for the smaller Equity Execution Venues that are comparable to the smaller Options Execution Venues. In addition to fee comparability between Equity Execution Venues and Options Execution Venues, the allocation also establishes equitability between larger (Tier 1) and smaller (Tier 2) Execution Venues based upon the level of market share. Furthermore, the allocation is intended to reflect the relative levels of current equity and options order events. (E) Fee Levels The Operating Committee determined to establish a CAT-specific fee to collectively recover the costs of building and operating the CAT. Accordingly, under the funding model, the sum of the CAT Fees is designed to recover the total cost of the CAT. The Operating Committee has determined overall CAT costs to be comprised of Plan Processor costs and non-Plan Processor costs, which are estimated to be $50,700,000 in total for the year beginning November 21, 2016.34 The Plan Processor costs relate to costs incurred by the Plan Processor and consist of the Plan Processor’s current estimates of average yearly ongoing costs, including development cost, which total $37,500,000. This amount is based upon the fees due to the Plan Processor pursuant to the agreement with the Plan Processor. The non-Plan Processor estimated costs incurred and to be incurred by the Company through November 21, 2017 consist of three categories of costs. The first category of such costs are third party support costs, which include historic legal fees, consulting fees and audit fees from November 21, 2016 until the date of filing as well as estimated third party support costs for the rest of 34 It is anticipated that CAT-related costs incurred prior to November 21, 2016 will be addressed via a separate filing. E:\FR\FM\20JNN1.SGM 20JNN1 28189 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices the year. These amount to an estimated $5,200,000. The second category of nonPlan Processor costs are estimated insurance costs for the year. Based on discussions with potential insurance providers, assuming $2–5 million insurance premium on $100 million in coverage, the Company has received an estimate of $3,000,000 for the annual cost. The final cost figures will be determined following receipt of final underwriter quotes. The third category of non-Plan Processor costs is the operational reserve, which is comprised of three months of ongoing Plan Processor costs ($9,375,000), third party support costs ($1,300,000) and insurance costs ($750,000). The Operating Committee aims to accumulate the necessary funds for the establishment of the three-month operating reserve for the Company through the CAT Fees charged to CAT Reporters for the year. On an ongoing basis, the Operating Committee will account for any potential need for the replenishment of the operating reserve or other changes to total cost during its annual budgeting process. The following table summarizes the Plan Processor and non-Plan Processor cost components which comprise the total CAT costs of $50,700,000. Cost category Cost component Plan Processor ............................................................................ Operational Costs ...................................................................... Third Party Support Costs ......................................................... Operational Reserve .................................................................. Insurance Costs ......................................................................... $37,500,000 5,200,000 35 5,000,000 3,000,000 .................................................................................................... 50,700,000 Non-Plan Processor .................................................................... Estimated Total .................................................................... Based on the estimated costs and the calculations for the funding model described above, the Operating Committee determined to impose the following fees: 36 For Industry Members (other than Execution Venue ATSs): Monthly CAT fee Tier 1 2 3 4 5 6 7 8 9 Amount ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... ................................................................................................................................................... $33,668 27,051 19,239 6,655 4,163 2,560 501 145 22 Quarterly CAT fee $101,004 81,153 57,717 19,965 12,489 7,680 1,503 435 66 CAT fees paid annually 37 $404,016 324,612 230,868 79,860 49,956 30,720 6,012 1,740 264 For Execution Venues for NMS Stocks and OTC Equity Securities: Monthly CAT fee Tier 1 ................................................................................................................................................... 2 ................................................................................................................................................... $21,125 12,940 Quarterly CAT fee $63,375 38,820 CAT fees paid annually 38 $253,500 155,280 For Execution Venues for Listed Options: Monthly CAT fee Tier sradovich on DSK3GMQ082PROD with NOTICES 1 ................................................................................................................................................... 2 ................................................................................................................................................... $19,205 13,204 Quarterly CAT fee $57,615 39,612 CAT fees paid annually 39 $230,460 158,448 As noted above, the fees set forth in the tables reflect the Operating Committee’s decision to ensure comparable fees between Execution Venues and Industry Members. The fees of the top tiers for Industry Members 35 This $5,000,000 represents the gradual accumulation of the funds for a target operating reserve of $11,425,000. 36 Note that all monthly, quarterly and annual CAT Fees have been rounded to the nearest dollar. 37 This column represents the approximate total CAT Fees paid each year by each Industry Member (other than Execution Venue ATSs) (i.e., ‘‘CAT Fees Paid Annually’’ = ‘‘Monthly CAT Fee’’ × 12 months). 38 This column represents the approximate total CAT Fees paid each year by each Execution Venue for NMS Stocks and OTC Equity Securities (i.e., ‘‘CAT Fees Paid Annually’’ = ‘‘Monthly CAT Fee’’ × 12 months). 39 This column represents the approximate total CAT Fees paid each year by each Execution Venue for Listed Options (i.e., ‘‘CAT Fees Paid Annually’’ = ‘‘Monthly CAT Fee’’ × 12 months). VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 PO 00000 Frm 00147 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 28190 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices (other than Execution Venue ATSs) are not identical to the top tier for Execution Venues, however, because the Operating Committee also determined that the fees for Execution Venue complexes should be comparable to those of Industry Member complexes. The difference in the fees reflects this decision to recognize affiliations. The Operating Committee has calculated the schedule of effective fees for Industry Members (other than Execution Venue ATSs) and Execution Venues in the following manner. Note that the calculation of CAT Reporter fees assumes 53 Equity Execution Venues, 15 Options Execution Venues and 1,631 Industry Members (other than Execution Venue ATSs) as of January 2017. CALCULATION OF ANNUAL TIER FEES FOR INDUSTRY MEMBERS (‘‘IM’’) Percentage of Industry Members Industry Member tier Tier Tier Tier Tier Tier Tier Tier Tier Tier 1 2 3 4 5 6 7 8 9 Percentage of Industry Member recovery Percentage of total recovery ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ ............................................................................................................................................ 0.500 2.500 2.125 4.625 3.625 4.000 17.500 20.125 45.000 8.50 35.00 21.25 15.75 7.75 5.25 4.50 1.50 0.50 6.38 26.25 15.94 11.81 5.81 3.94 3.38 1.13 0.38 Total ...................................................................................................................................... 100 100 75 Estimated number of Industry Members Industry Member tier Tier Tier Tier Tier Tier Tier Tier Tier Tier 1 2 3 4 5 6 7 8 9 .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... .................................................................................................................................................................................................... 8 41 35 75 59 65 285 328 735 Total .............................................................................................................................................................................................. 1,631 sradovich on DSK3GMQ082PROD with NOTICES BILLING CODE 8011–01–P VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 PO 00000 Frm 00148 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 28191 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices BILLING CODE 8011–01–C CALCULATION OF ANNUAL TIER FEES FOR EQUITY EXECUTION VENUES (‘‘EV’’) Percentage of Equity Execution Venues Percentage of Execution Venue recovery Percentage of total recovery Tier 1 ............................................................................................................................................ Tier 2 ............................................................................................................................................ 25.00 75.00 26.00 49.00 6.50 12.25 Total ...................................................................................................................................... 100 75 18.75 VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 PO 00000 Frm 00149 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 EN20JN17.001</GPH> sradovich on DSK3GMQ082PROD with NOTICES Equity Execution Venue tier 28192 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices Estimated number of Equity Execution Venues Equity Execution Venue tier Tier 1 .................................................................................................................................................................................................... Tier 2 .................................................................................................................................................................................................... 13 40 Total .............................................................................................................................................................................................. 53 CALCULATION OF ANNUAL TIER FEES FOR OPTIONS EXECUTION VENUES (‘‘EV’’) Percentage of Options Execution Venues Options Execution Venue tier Percentage of Execution Venue recovery Percentage of total recovery Tier 1 ............................................................................................................................................ Tier 2 ............................................................................................................................................ 75.00 25.00 20.00 5.00 5.00 1.25 Total ...................................................................................................................................... 100 25 6.25 Estimated number of Options Execution Venues Options Execution Venue tier Tier 1 .................................................................................................................................................................................................... Tier 2 .................................................................................................................................................................................................... 11 4 Total .............................................................................................................................................................................................. 15 TRACEABILITY OF TOTAL CAT FEES 18:01 Jun 19, 2017 Jkt 241001 PO 00000 1 2 3 4 5 6 7 .............................................................. .............................................................. .............................................................. .............................................................. .............................................................. .............................................................. .............................................................. Frm 00150 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 8 41 35 75 59 65 285 20JNN1 $404,016 324,612 230,868 79,860 49,956 30,720 6,012 Total recovery $3,232,128 13,309,092 8,080,380 5,989,500 2,947,404 1,996,800 1,713,420 EN20JN17.003</GPH> Tier Tier Tier Tier Tier Tier Tier CAT fees paid annually EN20JN17.002</GPH> sradovich on DSK3GMQ082PROD with NOTICES Industry Members ........................................... VerDate Sep<11>2014 Estimated number of members Industry Member tier Type 28193 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices TRACEABILITY OF TOTAL CAT FEES—Continued Estimated number of members Industry Member tier Type CAT fees paid annually Total recovery Tier 8 .............................................................. Tier 9 .............................................................. 328 735 1,740 264 570,720 194,040 Total ......................................................... ......................................................................... 1,631 ........................ 38,033,484 Equity Execution Venues ................................ Tier 1 .............................................................. Tier 2 .............................................................. 13 40 253,500 155,280 3,295,500 6,211,200 Total ......................................................... ......................................................................... 53 ........................ 9,506,700 Options Execution Venues ............................. Tier 1 .............................................................. Tier 2 .............................................................. 11 4 230,460 158,448 2,535,060 633,792 Total ......................................................... Total .................................................. ......................................................................... ......................................................................... 15 ........................ ........................ ........................ 3,168,852 50,709,036 Excess 40 ........................................... ......................................................................... ........................ ........................ 9,036 (F) Comparability of Fees The funding principles require a funding model in which the fees charged to the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether Execution Venue and/or Industry Members). Accordingly, in creating the aggregate fees that would be paid by such firms. While the proposed fees for Tier 1 and Tier 2 Industry Members are relatively higher than those of Tier 1 and Tier 2 Execution Venues, Execution Venue complex fees are relatively higher than those of Industry Member complexes largely due to affiliations between Execution Venues. The tables set forth below describe the largest Execution Venue and Industry Member complexes and their associated fees: 41 model, the Operating Committee sought to take account of the affiliations between or among CAT Reporters—that is, where affiliated entities may have multiple Industry Member and/or Execution Venue licenses, by maintaining relative comparability of fees among such affiliations with the most expected CAT-related activity. To do this, the Participants identified representative affiliations in the largest tier of both Execution Venues and Industry Members and compared the EXECUTION VENUE COMPLEXES Execution Venue complex Listing of Equity Execution Venue tiers Execution Venue Complex 1 .................................................... • Tier 1 (x2) ............................ • Tier 2 (x1) • Tier 1 (x2) ............................ Execution Venue Complex 2 .................................................... Execution Venue Complex 3 .................................................... • Tier 1 (x2) ............................ • Tier 2 (x2) Listing of Options Execution Venue tier • • • • • Tier Tier Tier Tier Tier 1 2 1 2 1 (x4) ............................ (x2) (x2) ............................ (x1) (x2) ............................ Total fees by EV complex $1,900,962 1,863,801 1,278,447 INDUSTRY MEMBER COMPLEXES Listing of Industry Member tiers Industry Member complex Industry Member Complex 1 .................................................... Industry Member Complex 2 .................................................... Industry Member Complex 3 .................................................... sradovich on DSK3GMQ082PROD with NOTICES Industry Member Complex 4 .................................................... Industry Member Complex 5 .................................................... 40 The amount in excess of the total CAT costs will contribute to the gradual accumulation of the target operating reserve of $11.425 million. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 • • • • • • • • • • • Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier Tier 1 1 4 1 2 1 2 4 2 3 4 (x2) (x1) (x1) (x1) (x1) (x1) (x1) (x1) (x1) (x1) (x1) Frm 00151 Fmt 4703 Total fees by IM complex ............................ ............................ • Tier 2 (x1) ............................ • Tier 2 (x3) ............................ $963,300 949,674 ............................ • Tier 2 (x1) ............................ 883,888 ............................ N/A .......................................... 808,472 ............................ • Tier 2 (x1) ............................ 796,595 41 Note that the analysis of the complexes was performed on a best efforts basis, as all affiliations PO 00000 Listing of ATS tiers Sfmt 4703 between the 1631 Industry Members may not be included. E:\FR\FM\20JNN1.SGM 20JNN1 28194 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices INDUSTRY MEMBER COMPLEXES—Continued Listing of Industry Member tiers Industry Member complex Total fees by IM complex Listing of ATS tiers • Tier 7 (x1) (G) Billing Onset Under Section 11.1(c) of the CAT NMS Plan, to fund the development and implementation of the CAT, the Company shall time the imposition and collection of all fees on Participants and Industry Members in a manner reasonably related to the timing when the Company expects to incur such development and implementation costs. The Company is currently incurring such development and implementation costs and will continue to do so prior to the commencement of CAT reporting and thereafter. For example, the Plan Processor has required up-front payments to begin building the CAT. In addition, the Company continues to incur consultant and legal expenses on an on-going basis to implement the CAT. Accordingly, the Operating Committee determined that all CAT Reporters, including both Industry Members and Execution Venues (including Participants), would begin to be invoiced as promptly as possible following the establishment of a billing mechanism. The Operating Committee will issue a notice to the Participants when the billing mechanism has been established, specifying the date when such invoicing of Participants will commence. (H) Changes to Fee Levels and Tiers Section 11.3(d) of the CAT NMS Plan states that ‘‘[t]he Operating Committee shall review such fee schedule on at least an annual basis and shall make any changes to such fee schedule that it deems appropriate. The Operating Committee is authorized to review such fee schedule on a more regular basis, but shall not make any changes on more than a semi-annual basis unless, pursuant to a Supermajority Vote, the Operating Committee concludes that such change is necessary for the adequate funding of the Company.’’ With such reviews, the Operating Committee will review the distribution of Industry Members and Execution Venues across tiers, and make any updates to the percentage of CAT Reporters allocated to each tier as may be necessary. In addition, the reviews will evaluate the estimated ongoing CAT costs and the level of the operating reserve. To the extent that the total CAT costs decrease, the fees would be adjusted downward, and, to the extent that the total CAT costs increase, the fees would be adjusted upward.42 Furthermore, any surplus of the Company’s revenues over its expenses is to be included within the operational reserve to offset future fees. The limitations on more frequent changes to the fee, however, are intended to provide budgeting certainty for the CAT Reporters and the Company.43 To the extent that the Operating Committee approves changes to the number of tiers in the funding model or the fees assigned to each tier, then the Operating Committee will file such changes with the SEC pursuant to Rule 608 of the Exchange Act, and any such changes will become effective in accordance with the requirements of Rule 608. (I) Initial and Periodic Tier Reassignments The Operating Committee has determined to calculate fee tiers every three months based on market share or message traffic, as applicable, from the prior three months. For the initial tier assignments, the Company will calculate the relevant tier for each CAT Reporter using the three months of data prior to the commencement date. As with the initial tier assignment, for the tri-monthly reassignments, the Company will calculate the relevant tier using the three months of data prior to the relevant tri-monthly date. Any movement of CAT Reporters between tiers will not change the criteria for each tier or the fee amount corresponding to each tier. In performing the tri-monthly reassignments, the percentage of CAT Reporters in each assigned tier is relative. Therefore, a CAT Reporter’s assigned tier will depend, not only on its own message traffic or market share, but it also will depend on the message traffic/market share across all CAT Reporters. For example, the percentage of Industry Members (other than Execution Venue ATSs) in each tier is relative such that such Industry Member’s assigned tier will depend on message traffic generated across all CAT Reporters as well as the total number of CAT Reporters. The Operating Committee will inform CAT Reporters of their assigned tier every three months following the periodic tiering process, as the funding model will compare an individual CAT Reporter’s activity to that of other CAT Reporters in the marketplace. The following demonstrates a tier reassignment. In accordance with the funding model, the top 75% of Options Execution Venues in market share are categorized as Tier 1 while the bottom 25% of Options Execution Venues in market share are categorized as Tier 2. In the sample scenario below, Options Execution Venue L is initially categorized as a Tier 2 Options Execution Venue in Period A due to its market share. When market share is recalculated for Period B, the market share of Execution Venue L increases, and it is therefore subsequently reranked and reassigned to Tier 1 in Period B. Correspondingly, Options Execution Venue K, initially a Tier 1 Options Execution Venue in Period A, is reassigned to Tier 2 in Period B due to decreases in its market share of share volume. sradovich on DSK3GMQ082PROD with NOTICES Period A Period B Market share rank Options Execution Venue Options Execution Venue A ............. 1 42 The CAT Fees are designed to recover the costs associated with the CAT. Accordingly, CAT Fees would not be affected by increases or decreases in other non-CAT expenses incurred by the self- VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 Tier 1 Options Execution Venue A ............ regulatory organizations, such as any changes in costs related to the retirement of existing regulatory systems, such as OATS. PO 00000 Frm 00152 Market share rank Options Execution Venue Fmt 4703 Sfmt 4703 Tier 1 1 43 Section B.7, Appendix C of the CAT NMS Plan, Approval Order at 85006. E:\FR\FM\20JNN1.SGM 20JNN1 28195 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices Period A Market share rank Options Execution Venue Options Options Options Options Options Options Options Options Options Options Options Options Options Options Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Period B B ............. C ............. D ............. E ............. F .............. G ............. H ............. I ............... J .............. K ............. L .............. M ............. N ............. O ............. 2 3 4 5 6 7 8 9 10 11 12 13 14 15 (3) Proposed CAT Fee Schedule sradovich on DSK3GMQ082PROD with NOTICES The Operating Committee proposes to add Exhibit B to the CAT NMS Plan to add a fee schedule setting forth the CAT Fees applicable to Participants. Proposed Exhibit B is set forth in Appendix A to this letter. Paragraph (a)(1) of proposed Exhibit B sets forth the CAT Fees applicable to Execution Venues for NMS Stocks and OTC Equity Securities. Specifically, paragraph (a)(1) states that the Company will assign each Execution Venue for NMS Stocks and/ or OTC Equity Securities to a fee tier once every quarter, where such tier assignment is calculated by ranking each such Execution Venue based on its total market share for the three months prior to the quarterly tier calculation day and assigning each such Execution Venue to a tier based on that ranking and predefined percentages for such Execution Venues. The Execution Venues for NMS Stocks and/or OTC Equity Securities with the higher total quarterly market share will be ranked in Tier 1, and such Execution Venues with the lower quarterly market share will be ranked in Tier 2. Specifically, paragraph (a)(1) states that, each quarter, each Execution Venue for NMS Stocks and/ or OTC Equity Securities shall pay in the manner prescribed by the Company the following CAT Fee corresponding to the tier assigned by the CAT NMS, LLC for such Execution Venue for that quarter: Tier 1 ................ 2 ................ VerDate Sep<11>2014 Percentage of Execution Venues for NMS stocks and/or OTC equity securities 25.00 75.00 18:01 Jun 19, 2017 Tier Market share rank Options Execution Venue 1 1 1 1 1 1 1 1 1 1 2 2 2 2 Options Options Options Options Options Options Options Options Options Options Options Options Options Options Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Execution Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue Venue In addition, paragraph (a)(2) of the proposed Exhibit B states that the Company will assign each Execution Venue for Listed Options to a fee tier once every quarter, where such tier assignment is calculated by ranking each such Execution Venue based on its total market share for the three months prior to the quarterly tier calculation day and assigning each such Execution Venue to a tier based on that ranking and predefined percentages for such Execution Venues. The Execution Venues for Listed Options with the higher total quarterly market share will be ranked in Tier 1, and such Execution Venues with the lower quarterly market share will be ranked in Tier 2. Specifically, paragraph (b)(1) states that, each quarter, each Execution Venue for Listed Options shall pay in the manner prescribed by the Company the following CAT Fee corresponding to the tier assigned by the CAT NMS, LLC for such Execution Venue for that quarter: B ............ C ............ D ............ E ............ F ............. I .............. H ............ G ............ J ............. L ............. K ............ N ............ M ............ O ............ Tier 2 3 4 5 6 7 8 9 10 11 12 13 14 15 such fees or other charges to the sponsors and/or participants).44 At any time within sixty days of the filing of this amendment, the Commission may summarily abrogate the amendment and require that it be refiled pursuant to paragraph (b)(1) [sic] of Rule 608, if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors or the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system or otherwise in furtherance of the purposes of the Exchange Act. D. Development and Implementation Phases Not applicable. E. Analysis of Impact on Competition The Operating Committee does not believe that the proposed amendment will result in any burden on competition that is not necessary or appropriate in furtherance of the Percentage of Execution purposes of the Exchange Act. The Venues for Quarterly Operating Committee notes that the Tier listed CAT fee proposed amendment implements options provisions of the CAT NMS Plan (%) approved by the Commission, and is 1 ................ 25.00 $57,615 designed to assist the Participants in 2 ................ 75.00 39,612 meeting their regulatory obligations pursuant to the Plan. Because all B. Governing or Constituent Documents national securities exchanges and FINRA are subject to the proposed CAT Not applicable. Fees set forth in the proposed C. Implementation of Amendment amendment, this is not a competitive filing that raises competition issues The terms of the proposed between and among the exchanges and amendment will become effective upon filing pursuant to Rule 608(b)(3)(i) of the FINRA. Quarterly Moreover, as previously described, Exchange Act because it establishes a CAT fee the Operating Committee believes that fee or other charge collected on behalf the proposed fee schedule fairly and of all of the Participants in connection equitably allocates costs among CAT with access to, or use of, any facility Reporters. In particular, the proposed contemplated by the plan (including $63,375 changes in any provision with respect to 38,820 44 17 CFR 242.608(b)(3)(i). distribution of any net proceeds from Jkt 241001 PO 00000 Frm 00153 Fmt 4703 Sfmt 4703 1 1 1 1 1 1 1 1 1 1 2 2 2 2 E:\FR\FM\20JNN1.SGM 20JNN1 28196 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices fee schedule is structured to impose comparable fees on similarly situated CAT Reporters, and lessen the impact on smaller CAT Reporters. CAT Reporters with similar levels of CAT activity will pay similar fees. For example, Industry Members (other than Execution Venue ATSs) with higher levels of message traffic will pay higher fees, and those with lower levels of message traffic will pay lower fees. Similarly, Execution Venue ATSs and other Execution Venues with larger market share will pay higher fees, and those with lower levels of market share will pay lower fees. Therefore, given that there is generally a relationship between message traffic and market share to the CAT Reporter’s size, smaller CAT Reporters generally pay less than larger CAT Reporters. Accordingly, the Operating Committee does not believe that the CAT Fees would have a disproportionate effect on smaller or larger CAT Reporters. In addition, ATSs and exchanges will pay the same fees based on market share. Therefore, the Operating Committee does not believe that the fees will impose any burden on the competition between ATSs and exchanges. Accordingly, SRO [sic] believes that the proposed fees will minimize the potential for adverse effects on competition between CAT Reporters in the market. Furthermore, the tiered, fixed fee funding model limits the disincentives to providing liquidity to the market. Therefore, the proposed fees are structured to limit burdens on competitive quoting and other liquidity provision in the market. F. Written Understanding or Agreements Relating to Interpretation of, or Participation in, Plan Not applicable. sradovich on DSK3GMQ082PROD with NOTICES G. Approval by Plan Sponsors in Accordance With Plan Section 12.3 of the Plan states that, subject to certain exceptions, the Plan may be amended from time to time only by a written amendment, authorized by the affirmative vote of not less than twothirds of all of the Participants, that has been approved by the SEC pursuant to Rule 608 or has otherwise become effective under Rule 608. In addition, Section 4.3(a)(vi) of the Plan requires the Operating Committee, by Majority Vote, to authorize action to determine the appropriate funding-related policies, procedures and practices-consistent with Article XI. The Operating Committee has satisfied both of these requirements. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 H. Description of Operation of Facility Contemplated by the Proposed Amendment Not applicable. I. Terms and Conditions of Access Not applicable. J. Method of Determination and Imposition, and Amount of, Fees and Charges Section A of this letter describes in detail how the Operating Committee developed the proposed CAT fees, including a detailed discussion of the proposed funding model for the CAT. K. Method and Frequency of Processor Evaluation Not applicable. L. Dispute Resolution Section 11.5 of the CAT NMS Plan addresses the resolution of disputes regarding Participants’ CAT fees charged to Participants and Industry Members. Specifically, Section 11.5 states that disputes with respect to fees the Company charges Participants pursuant to Article XI of the CAT NMS Plan shall be determined by the Operating Committee or a Subcommittee designated by the Operating Committee. Decisions by the Operating Committee or such designated Subcommittee on such matters shall be binding on Participants, without prejudice to the rights of any Participant to seek redress from the SEC pursuant to Rule 608 or in any other appropriate forum. III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the amendment is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number 4– 698 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 4–698.This file number should be included on the subject line if email is used. To help the Commission process and review your comments PO 00000 Frm 00154 Fmt 4703 Sfmt 4703 more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/rules/ sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan amendment that are filed with the Commission, and all written communications relating to the amendment 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 also will be available for inspection and copying at the Participants’ offices. 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 4–698 and should be submitted on or before July 11, 2017. By the Commission. Eduardo A. Aleman, Assistant Secretary. Appendix A [Additions underlined; deletions bracketed] Exhibit B CAT Fees (a) Participant CAT Fee Schedule. (1) CAT Fees: Execution Venues for NMS Stocks and/or OTC Equity Securities. The CAT NMS, LLC will assign each Execution Venue for NMS Stocks and/or OTC Equity Securities to a fee tier once every quarter, where such tier assignment is calculated by ranking each such Execution Venue based on its total market share for the three months prior to the quarterly tier calculation day and assigning each such Execution Venue to a tier based on that ranking and predefined percentages for such Execution Venues. The Execution Venues for NMS Stocks and/or OTC Equity Securities with the higher total quarterly market share will be ranked in Tier 1, and such Execution Venues with the lower quarterly market share will be ranked in Tier 2. Each quarter, each Execution Venue for NMS Stocks and/or OTC Equity Securities shall pay in the manner prescribed by the CAT NMS, LLC the following CAT Fee corresponding to the tier assigned by the CAT NMS, LLC for such Execution Venue for that quarter: E:\FR\FM\20JNN1.SGM 20JNN1 28197 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices Tier 1 ................ 2 ................ Percentage of Execution Venues for NMS stocks and/or OTC equity securities (%) 25.00 75.00 Quarterly CAT fee $63,375 38,820 (2) CAT Fees: Execution Venues for Listed Options The CAT NMS, LLC will assign each Execution Venue for Listed Options to a fee tier once every quarter, where such tier assignment is calculated by ranking each such Execution Venue based on its total market share for the three months prior to the quarterly tier calculation day and assigning each such Execution Venue to a tier based on that ranking and predefined percentages for such Execution Venues. The Execution Venues for Listed Options with the higher total quarterly market share will be ranked in Tier 1, and such Execution Venues with the lower quarterly market share will be ranked in Tier 2. Each quarter, each Execution Venue for Listed Options shall pay in the manner prescribed by the CAT NMS, LLC the following CAT Fee corresponding to the tier assigned by the CAT NMS, LLC for such Execution Venue for that quarter: Percentage of Execution Venues for listed options (%) Tier 1 ................ 2 ................ Quarterly CAT fee 25.00 75.00 $57,615 39,612 Appendix B EQUITY EXECUTION VENUE RANK AND TIER Market share of share volume 45 (%) sradovich on DSK3GMQ082PROD with NOTICES Market participant OTC LINK ATS ............................................................................................................................................ Financial Industry Regulatory Authority, Inc ................................................................................................ The NASDAQ Stock Market LLC ................................................................................................................ New York Stock Exchange LLC .................................................................................................................. NYSE Arca, Inc ............................................................................................................................................ Bats EDGX Exchange, Inc .......................................................................................................................... Bats BZX Exchange, Inc ............................................................................................................................. Bats BYX Exchange, Inc ............................................................................................................................. NASDAQ BX, Inc ......................................................................................................................................... UBS ATS ..................................................................................................................................................... Bats EDGA Exchange, Inc .......................................................................................................................... Investors’ Exchange, LLC ............................................................................................................................ CROSSFINDER ........................................................................................................................................... SUPERX ...................................................................................................................................................... MS POOL (ATS–4) ...................................................................................................................................... NASDAQ PHLX LLC ................................................................................................................................... J.P. MORGAN AST (‘‘JPM–X’’) ................................................................................................................... LEVEL ATS .................................................................................................................................................. INSTINCT X ................................................................................................................................................. BIDS TRADING L.P ..................................................................................................................................... BARCLAYS ATS (‘‘LX’’) .............................................................................................................................. KCG MATCHIT ............................................................................................................................................ SIGMA X ...................................................................................................................................................... INSTINET CONTINUOUS BLOCK CROSSING SYSTEM (CBX) .............................................................. Chicago Stock Exchange, Inc ..................................................................................................................... POSIT .......................................................................................................................................................... CROSSSTREAM ......................................................................................................................................... MS TRAJECTORY CROSS (ATS–1) .......................................................................................................... NYSE MKT LLC ........................................................................................................................................... LIQUIDNET ATS .......................................................................................................................................... IBKR ATS .................................................................................................................................................... MILLENNIUM ............................................................................................................................................... GLOBAL OTC .............................................................................................................................................. DEALERWEB, INC ...................................................................................................................................... CITICROSS ................................................................................................................................................. BLOCKCROSS ATS .................................................................................................................................... LIQUIDNET H20 ATS .................................................................................................................................. CODA MARKETS, INC ................................................................................................................................ INSTINET CROSSING, INSTINET BLX ...................................................................................................... LUMINEX TRADING & ANALYTICS LLC ................................................................................................... LIGHT POOL ............................................................................................................................................... MS RETAIL POOL ....................................................................................................................................... CITIBLOC .................................................................................................................................................... NYSE National, Inc ...................................................................................................................................... USTOCKTRADE SECURITIES, INC ........................................................................................................... AQUA SECURITIES L.P ............................................................................................................................. XE ................................................................................................................................................................ LIQUIFI ........................................................................................................................................................ VARIABLE INVESTMENT ADVISORS, INC. ATS (VIAATS) ..................................................................... BARCLAYS DIRECTEX .............................................................................................................................. 29.90 16.50 9.67 9.08 7.05 4.89 4.24 3.06 1.85 1.78 1.69 1.25 1.09 0.79 0.68 0.66 0.56 0.49 0.48 0.44 0.43 0.42 0.39 0.34 0.31 0.30 0.25 0.16 0.14 0.13 0.13 0.12 0.12 0.11 0.09 0.08 0.07 0.07 0.06 0.03 0.02 0.02 0.02 0.01 0.01 0.0047 0.0037 0.0014 0.000073 0.0000303 45 Based on November 2016 through January 2017 volume sourced from Bats and FINRA. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 PO 00000 Frm 00155 Fmt 4703 Sfmt 4703 E:\FR\FM\20JNN1.SGM 20JNN1 Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 Tier 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 28198 Federal Register / Vol. 82, No. 117 / Tuesday, June 20, 2017 / Notices EQUITY EXECUTION VENUE RANK AND TIER—Continued Market share of share volume 45 (%) Market participant FNC AG STOCK, LLC ................................................................................................................................. AX TRADING, LLC ...................................................................................................................................... PRO SECURITIES ATS .............................................................................................................................. 0.0000225 0.0000026 0.0000002 Rank Tier 51 52 53 2 2 2 OPTIONS EXECUTION VENUE RANK AND TIER Market share of share volume (Options contracts) 46 (%) Market participant NASDAQ PHLX LLC ................................................................................................................................... Chicago Board Options Exchange, Incorporated ........................................................................................ Bats BZX Options Exchange, Inc. ............................................................................................................... Nasdaq ISE, LLC ......................................................................................................................................... NYSE Arca, Inc. ........................................................................................................................................... The NASDAQ Options Market LLC ............................................................................................................. NYSE MKT LLC ........................................................................................................................................... Miami International Securities Exchange, LLC ........................................................................................... Nasdaq GEMX, LLC .................................................................................................................................... Chicago Board Options Exchange, Incorporated 2 ..................................................................................... BOX Options Exchange LLC ....................................................................................................................... Bats EDGX Options Exchange, Inc. ............................................................................................................ NASDAQ BX, Inc. ........................................................................................................................................ Nasdaq MRX, LLC ....................................................................................................................................... MIAX PEARL, LLC ...................................................................................................................................... [FR Doc. 2017–12771 Filed 6–19–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80927; File No. SR– BatsBZX–2017–40] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rule 21.5 of Bats BZX Exchange, Inc. To Extend Through December 31, 2017, the Penny Pilot Program in Options Classes in Certain Issues sradovich on DSK3GMQ082PROD with NOTICES June 14, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on June 13, 2017, Bats BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule 46 Based on November 2016 through January 2017 volume sourced from Bats. 47 No market statistics as of January 2017. Launched trading operations on February 6, 2017. 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 18:01 Jun 19, 2017 Jkt 241001 change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange has designated this proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A) of the Act 3 and Rule 19b–4(f)(6)(iii) thereunder,4 which renders it effective upon filing with the Commission. 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 filed a proposal to extend through December 31, 2017, the Penny Pilot Program (‘‘Penny Pilot’’) in options classes in certain issues (‘‘Pilot Program’’) previously approved by the Commission.5 3 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6)(iii). 5 The rules of BZX Options, including rules applicable to BZX Options’ participation in the Penny Pilot, were approved on January 26, 2010. See Securities Exchange Act Release No. 61419 (January 26, 2010), 75 FR 5157 (February 1, 2010) (SR–BATS–2009–031). BZX Options commenced operations on February 26, 2010. The Penny Pilot was most recently extended for BZX Options through June 30, 2017. See Securities Exchange Act Release No. 34–79523 (December 9, 2016), 81 FR 90895 (December 16, 2016) (SR-BatsBZX–2016–84). 4 17 PO 00000 Frm 00156 Fmt 4703 Sfmt 4703 16.68 16.08 11.53 10.63 9.52 9.01 8.01 5.84 4.16 3.33 3.02 1.31 0.67 0.21 N/A 47 Rank Tier 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of this filing is to extend the Penny Pilot, which was previously approved by the Commission, through December 31, 2017, and to provide revised dates for adding replacement E:\FR\FM\20JNN1.SGM 20JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 82, Number 117 (Tuesday, June 20, 2017)]
[Notices]
[Pages 28180-28198]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12771]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80930; File No. 4-698]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment No. 2 to the National Market System Plan Governing the
Consolidated Audit Trail by 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., Investors' Exchange LLC, Miami
International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX,
Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX
LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE
Arca, Inc., NYSE MKT LLC and NYSE National, Inc.

June 14, 2017.

I. Introduction

On May 9, 2017, the Operating Committee for CAT NMS, LLC (the
``Company''), on behalf of the following parties to the National Market
System Plan Governing the Consolidated Audit Trail (the ``CAT NMS
Plan'' or ``Plan''): \1\ 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., Investors' Exchange LLC, Miami
International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX,
Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX
LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE
Arca, Inc., NYSE MKT LLC and NYSE National, Inc. (collectively, the
``Participants,'' ``self-regulatory organizations'' or ``SROs'') filed
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934
(``Exchange Act'') \2\ and Rule 608 thereunder,\3\ a proposal to amend
the Plan (``Amendment No. 2'').\4\ The proposed amendment would add a
fee schedule to a new Exhibit B of the Plan which sets forth the CAT
fees to be paid by the Participants. A copy of proposed Exhibit B to
the CAT NMS Plan is attached as Appendix A hereto. The Participants
have also included, and as attached hereto, an Appendix B containing
two charts, one listing the current Equity Execution Venues, each with
its rank and tier, and one listing the current Options Execution
Venues, each with its rank and tier. The Commission is publishing this
notice to solicit comments from interested persons on Amendment No.
2.\5\
---------------------------------------------------------------------------

\1\ On February 27, 2015, BATS-Y Exchange, Inc. (n/k/a Bats BYX
Exchange, Inc.), BATS Exchange, Inc. (n/k/a Bats BZX Exchange,
Inc.), BOX Options Exchange LLC, C2 Options Exchange, Incorporated,
Chicago Board Options Exchange, Incorporated, Chicago Stock
Exchange, Inc., EDGA Exchange, Inc. (n/k/a Bats EDGA Exchange,
Inc.), EDGX Exchange, Inc. (n/k/a Bats EDGX Exchange, Inc.),
Financial Industry Regulatory Authority, Inc., International
Securities Exchange, LLC (n/k/a Nasdaq ISE LLC), ISE Gemini, LLC (n/
k/a Nasdaq GEMX, LLC), Miami International Securities Exchange LLC,
NASDAQ OMX BX, Inc. (n/k/a NASDAQ BX, Inc.), NASDAQ OMX PHLX LLC (n/
k/a NASDAQ PHLX LLC), The NASDAQ Stock Market LLC, National Stock
Exchange, Inc. (n/k/a NYSE National, Inc.), New York Stock Exchange
LLC, NYSE MKT LLC, and NYSE Arca, Inc. filed with the Commission,
pursuant to Section 11A of the Exchange Act and Rule 608 of
Regulation NMS thereunder, the CAT NMS Plan. 15 U.S.C. 78k-1; 17 CFR
242.608. The Plan was published for comment in the Federal Register
on May 17, 2016, and approved by the Commission, as modified, on
November 15, 2016. See Securities Exchange Act Release Nos. 77724
(April 27, 2016), 81 FR 30614 (May 17, 2016); 79318 (November 15,
2016), 81 FR 84696 (November 23, 2016). On January 30, 2017, the
Commission noticed for immediate effectiveness an amendment to the
Plan to add MIAX PEARL, LLC as a Participant. See Securities
Exchange Act Release No. 79898, 82 FR 9250 (February 3, 2017).
\2\ 15 U.S.C 78k-1(a)(3).
\3\ 17 CFR 242.608.
\4\ See Letter from Michael Simon, CAT NMS Plan Operating
Committee Chair, to Brent J. Fields, Secretary, Commission, dated
May 8, 2017 (``Transmittal Letter'').
\5\ 17 CFR 242.608.
---------------------------------------------------------------------------

II. Description of the Plan

Set forth in this Section II is the statement of the purpose and
summary of Amendment No. 2, along with the information required by Rule
608(a)(4) and (5) under the Exchange Act,\6\ prepared and submitted by
the Participants to the Commission.\7\
---------------------------------------------------------------------------

\6\ See 17 CFR 242.608(a)(4) and (a)(5).
\7\ See Transmittal Letter, supra note 4.
---------------------------------------------------------------------------

A. Description of the Amendments to the CAT NMS Plan

(1) Executive Summary
The following provides an executive summary of the CAT funding
model approved by the Operating Committee, as well as Participants'
obligations related to the payment of CAT Fees calculated pursuant to
the CAT funding model. A detailed description of the CAT funding model
and the CAT Fees follows this executive summary.
CAT Costs. The CAT funding model is designed to establish
CAT-specific

[[Page 28181]]

fees to collectively recover the costs of building and operating the
CAT from all CAT Reporters, including Industry Members and
Participants. The overall CAT costs for the calculation of the CAT Fees
in this fee filing are comprised of Plan Processor CAT costs and non-
Plan Processor CAT costs incurred, and estimated to be incurred, from
November 21, 2016 through November 21, 2017. (See Section A(2)(E)
below)
Bifurcated Funding Model. The CAT NMS Plan requires a
bifurcated funding model, where costs associated with building and
operating the CAT would be borne by (1) Participants and Industry
Members that are Execution Venues for Eligible Securities through fixed
tier fees based on market share, and (2) Industry Members (other than
alternative trading systems (``ATSs'') that execute transactions in
Eligible Securities (``Execution Venue ATSs'')) through fixed tier fees
based on message traffic for Eligible Securities. (See Section A(2)
below)
Industry Member Fees. Each Industry Member (other than
Execution Venue ATSs) will be placed into one of nine tiers of fixed
fees, based on ``message traffic'' in Eligible Securities for a defined
period (as discussed below). Prior to the start of CAT reporting,
``message traffic'' will be comprised of historical equity and equity
options orders, cancels and quotes provided by each exchange and FINRA
over the previous three months. After an Industry Member begins
reporting to the CAT, ``message traffic'' will be calculated based on
the Industry Member's Reportable Events reported to the CAT. Industry
Members with lower levels of message traffic will pay a lower fee and
Industry Members with higher levels of message traffic will pay a
higher fee. (See Section A(2)(B) below)
Execution Venue Fees. Each Equity Execution Venue will be
placed in one of two tiers of fixed fees based on market share, and
each Options Execution Venue will be placed in one of two tiers of
fixed fees based on market share. Equity Execution Venue market share
will be determined by calculating each Equity Execution Venue's
proportion of the total volume of NMS Stock and OTC Equity shares
reported by all Equity Execution Venues during the relevant time
period. Similarly, market share for Options Execution Venues will be
determined by calculating each Options Execution Venue's proportion of
the total volume of Listed Options contracts reported by all Options
Execution Venues during the relevant time period. Equity Execution
Venues with a larger market share will pay a larger CAT Fee than Equity
Execution Venues with a smaller market share. Similarly, Options
Execution Venues with a larger market share will pay a larger CAT Fee
than Options Execution Venues with a smaller market share. (See Section
A(2)(C) below)
Cost Allocation. For the reasons discussed below, in
designing the model, the Operating Committee determined that 75 percent
of total costs recovered would be allocated to Industry Members (other
than Execution Venue ATSs) and 25 percent would be allocated to
Execution Venues. In addition, the Operating Committee determined to
allocate 75 percent of Execution Venue costs recovered to Equity
Execution Venues and 25 percent to Options Execution Venues. (See
Section A(2)(D) below)
Comparability of Fees. The CAT funding model requires that
the CAT Fees charged to the CAT Reporters with the most CAT-related
activity (measured by market share and/or message traffic, as
applicable) are generally comparable (where, for these comparability
purposes, the tiered fee structure takes into consideration
affiliations between or among CAT Reporters, whether Execution Venues
and/or Industry Members). (See Section A(2)(F) below)
Fee Schedule. The quarterly CAT Fees for each tier for
Participants are set forth in the two fee schedules in proposed Exhibit
B to the CAT NMS Plan, one for Execution Venues for NMS Stocks and OTC
Equity Securities and one for Execution Venues for Listed Options. (See
Section A(3) below)
(2) Description of the CAT Funding Model
Article XI of the CAT NMS Plan requires the Operating Committee to
approve the operating budget, including projected costs of developing
and operating the CAT for the upcoming year. As set forth in Article XI
of the CAT NMS Plan, the CAT NMS Plan requires a bifurcated funding
model, where costs associated with building and operating the Central
Repository would be borne by (1) Participants and Industry Members that
are Execution Venues through fixed tier fees based on market share, and
(2) Industry Members (other than Execution Venue ATSs) through fixed
tier fees based on message traffic. In its order approving the CAT NMS
Plan, the Commission determined that the proposed funding model was
``reasonable'' \8\ and ``reflects a reasonable exercise of the
Participants' funding authority to recover the Participants' costs
related to the CAT.'' \9\
---------------------------------------------------------------------------

\8\ Approval Order at 84796.
\9\ Id. at 84794.
---------------------------------------------------------------------------

More specifically, the Commission stated in approving the CAT NMS
Plan that ``[t]he Commission believes that the proposed funding model
is reasonably designed to allocate the costs of the CAT between the
Participants and Industry Members.'' \10\ The Commission further noted
the following:
---------------------------------------------------------------------------

\10\ Id. at 84795.

The Commission believes that the proposed funding model reflects
a reasonable exercise of the Participants' funding authority to
recover the Participants' costs related to the CAT. The CAT is a
regulatory facility jointly owned by the Participants and . . . the
Exchange Act specifically permits the Participants to charge their
members fees to fund their self-regulatory obligations. The
Commission further believes that the proposed funding model is
designed to impose fees reasonably related to the Participants'
self-regulatory obligations because the fees would be directly
associated with the costs of establishing and maintaining the CAT,
and not unrelated SRO services.\11\
---------------------------------------------------------------------------

\11\ Id. at 84794.

Accordingly, the funding model imposes fees on both Participants and
---------------------------------------------------------------------------
Industry Members.

In addition, as discussed in Appendix C of the CAT NMS Plan, the
Operating Committee considered the advantages and disadvantages of a
variety of alternative funding and cost allocation models before
selecting the proposed model.\12\ After analyzing the various
alternatives, the Operating Committee determined that the proposed
tiered, fixed fee funding model provides a variety of advantages in
comparison to the alternatives. First, the fixed fee model, as opposed
to a variable fee model, provides transparency, ease of calculation,
ease of billing and other administrative functions, and predictability
of a fixed fee. Such factors are crucial to estimating a reliable
revenue stream for the Company and for permitting CAT Reporters to
reasonably predict their payment obligations for budgeting
purposes.\13\ Additionally, a strictly variable or metered funding
model based on message volume would

[[Page 28182]]

be far more likely to affect market behavior and place an inappropriate
burden on competition. Moreover, as the SEC noted in approving the CAT
NMS Plan, ``[t]he Participants also have offered a reasonable basis for
establishing a funding model based on broad tiers, in that it be may be
easier to implement.'' \14\
---------------------------------------------------------------------------

\12\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order
at 85006.
\13\ In choosing a tiered fee structure, the self-regulatory
organizations concluded that the variety of benefits offered by a
tiered fee structure, discussed above, outweighed the fact that
Industry Members in any particular tier would pay different rates
per message traffic order event (e.g., an Industry Member with the
largest amount of message traffic in one tier would pay a smaller
amount per order event than an Industry Member in the same tier with
the least amount of message traffic). Such variation is the natural
result of a tiered fee structure.
\14\ Approval Order at 84796.
---------------------------------------------------------------------------

In addition, multiple reviews of current broker-dealer order and
trading data submitted under existing reporting requirements showed a
wide range in activity among broker-dealers, with a number of broker-
dealers submitting fewer than 1,000 orders per month and other broker-
dealers submitting millions and even billions of orders in the same
period. Accordingly, the CAT NMS Plan includes a tiered approach to
fees. The tiered approach helps ensure that fees are equitably
allocated among similarly situated CAT Reporters and furthers the goal
of lessening the impact on smaller firms.\15\ The self-regulatory
organizations considered several approaches to developing a tiered
model, including defining fee tiers based on such factors as size of
firm, message traffic or trading dollar volume. After analyzing the
alternatives, it was concluded that the tiering should be based on the
relative impact of CAT Reporters on the CAT System.
---------------------------------------------------------------------------

\15\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order
at 85006.
---------------------------------------------------------------------------

Accordingly, the CAT NMS Plan contemplates that costs will be
allocated across the CAT Reporters on a tiered basis to allocate costs
to those CAT Reporters that contribute more to the costs of creating,
implementing and maintaining the CAT.\16\ The fees to be assessed at
each tier are calculated so as to recoup a proportion of costs
appropriate to the message traffic or market share (as applicable) from
CAT Reporters in each tier. Therefore, Industry Members generating the
most message traffic will be in the higher tiers, and therefore be
charged a higher fee. Industry Members with lower levels of message
traffic will be in lower tiers and will be assessed a smaller fee for
the CAT.\17\ Correspondingly, Execution Venues with the highest market
share will be in the top tier, and therefore will be charged a higher
fee. Execution Venues with a lower market share will be in the lower
tier and will be assessed a smaller fee for the CAT.\18\
---------------------------------------------------------------------------

\16\ Approval Order at 85005.
\17\ Id.
\18\ Id.
---------------------------------------------------------------------------

The Commission also noted in approving the CAT NMS Plan that
``[t]he Participants have offered a credible justification for using
different criteria to charge Execution Venues (market share) and
Industry Members (message traffic)'' \19\ in the CAT funding model.
While there are multiple factors that contribute to the cost of
building, maintaining and using the CAT, processing and storage of
incoming message traffic is one of the most significant cost drivers
for the CAT.\20\ Thus, the CAT NMS Plan provides that the fees payable
by Industry Members (other than Execution Venue ATSs) will be based on
the message traffic generated by such Industry Member.\21\
---------------------------------------------------------------------------

\19\ Id. at 84796.
\20\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order
at 85005.
\21\ Section 11.3(b) of the CAT NMS Plan.
---------------------------------------------------------------------------

The CAT NMS Plan provides that the Operating Committee will use
different criteria to establish fees for Execution Venues and non-
Execution Venues due to the fundamental differences between the two
types of entities. In particular, the CAT NMS Plan provides that fees
charged to CAT Reporters that are Execution Venues will be based on the
level of market share and that costs charged to Industry Members (other
than Execution Venue ATSs) will be based upon message traffic.\22\
Because most Participant message traffic consists of quotations, and
Participants usually disseminate quotations in all instruments they
trade, regardless of execution volume, Execution Venues that are
Participants generally disseminate similar amounts of message traffic.
Accordingly, basing fees for Execution Venues on message traffic would
not provide the same degree of differentiation among Execution Venues
that it does among Industry Members (other than Execution Venue ATSs).
In contrast, execution volume more accurately delineates the different
levels of trading activity of Execution Venues.\23\
---------------------------------------------------------------------------

\22\ Section 11.2(c) of the CAT NMS Plan.
\23\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order
at 85005.
---------------------------------------------------------------------------

The CAT NMS Plan's funding model also is structured to avoid a
``reduction in market quality.'' \24\ The tiered, fixed fee funding
model is designed to limit the disincentives to providing liquidity to
the market. For example, the Participants expect that a firm that had a
large volume of quotes would likely be categorized in one of the upper
tiers, and would not be assessed a fee for this traffic directly as
they would under a more directly metered model. In contrast, strictly
variable or metered funding models based on message volume were far
more likely to affect market behavior. In approving the CAT NMS Plan,
the SEC stated that ``[t]he Participants also offered a reasonable
basis for establishing a funding model based on broad tiers, in that it
may be . . . less likely to have an incremental deterrent effect on
liquidity provision.'' \25\
---------------------------------------------------------------------------

\24\ Section 11.2(e) of the CAT NMS Plan.
\25\ Approval Order at 84796.
---------------------------------------------------------------------------

The CAT NMS Plan is structured to avoid potential conflicts raised
by the Operating Committee determining fees applicable to its own
members--the Participants. First, the Company will be operated on a
``break-even'' basis, with fees imposed to cover costs and an
appropriate reserve. Any surpluses will be treated as an operational
reserve to offset future fees and will not be distributed to the
Participants as profits.\26\ To ensure that the Participants' operation
of the CAT will not contribute to the funding of their other
operations, Section 11.1(c) of the CAT NMS Plan specifically states
that ``[a]ny surplus of the Company's revenues over its expenses shall
be treated as an operational reserve to offset future fees.'' In
addition, as set forth in Article VIII of the CAT NMS Plan, the Company
``intends to operate in a manner such that it qualifies as a `business
league' within the meaning of Section 501(c)(6) of the [Internal
Revenue] Code.'' To qualify as a business league, an organization must
``not [be] organized for profit and no part of the net earnings of [the
organization can] inure[] to the benefit of any private shareholder or
individual.'' \27\ As the SEC stated when approving the CAT NMS Plan,
``the Commission believes that the Company's application for Section
501(c)(6) business league status addresses issues raised by commenters
about the Plan's proposed allocation of profit and loss by mitigating
concerns that the Company's earnings could be used to benefit
individual Participants.'' \28\
---------------------------------------------------------------------------

\26\ Id. at 84792.
\27\ 26 U.S.C. 501(c)(6).
\28\ Approval Order at 84793.
---------------------------------------------------------------------------

Finally, by adopting a CAT-specific fee, the Participants will be
fully transparent regarding the costs of the CAT. Charging a general
regulatory fee, which would be used to cover CAT costs as well as other
regulatory costs, would be less transparent than the selected approach
of charging a fee designated to cover CAT costs only.
A full description of the funding model is set forth below. This
description includes the framework for the funding model as set forth
in the CAT NMS Plan, as well as the details as to how the funding model
will be

[[Page 28183]]

applied in practice, including the number of fee tiers and the
applicable fees for each tier. The complete funding model is described
below, including those fees that are to be paid by Industry Members.
Proposed Exhibit B, however, does not apply to Industry Members;
proposed Exhibit B only applies to Participants. The CAT Fees for
Industry Members will be imposed separately by the Operating Committee
pursuant to rules adopted by the individual self-regulatory
organizations.
(A) Funding Principles
Section 11.2 of the CAT NMS Plan sets forth the principles that the
Operating Committee applied in establishing the funding for the
Company. The Operating Committee has considered these funding
principles as well as the other funding requirements set forth in the
CAT NMS Plan and in Rule 613 in developing the proposed funding model.
The following are the funding principles in Section 11.2 of the CAT NMS
Plan:
To create transparent, predictable revenue streams for the
Company that are aligned with the anticipated costs to build, operate
and administer the CAT and other costs of the Company;
To establish an allocation of the Company's related costs
among Participants and Industry Members that is consistent with the
Exchange Act, taking into account the timeline for implementation of
the CAT and distinctions in the securities trading operations of
Participants and Industry Members and their relative impact upon the
Company's resources and operations;
To establish a tiered fee structure in which the fees
charged to: (i) CAT Reporters that are Execution Venues, including
ATSs, are based upon the level of market share; (ii) Industry Members'
non-ATS activities are based upon message traffic; (iii) the CAT
Reporters with the most CAT-related activity (measured by market share
and/or message traffic, as applicable) are generally comparable (where,
for these comparability purposes, the tiered fee structure takes into
consideration affiliations between or among CAT Reporters, whether
Execution Venue and/or Industry Members);
To provide for ease of billing and other administrative
functions;
To avoid any disincentives such as placing an
inappropriate burden on competition and a reduction in market quality;
and
To build financial stability to support the Company as a
going concern.
(B) Industry Member Tiering
Under Section 11.3(b) of the CAT NMS Plan, the Operating Committee
is required to establish fixed fees to be payable by Industry Members,
based on message traffic generated by such Industry Member, with the
Operating Committee establishing at least five and no more than nine
tiers.
The CAT NMS Plan clarifies that the fixed fees payable by Industry
Members pursuant to Section 11.3(b) shall, in addition to any other
applicable message traffic, include message traffic generated by: (i)
An ATS that does not execute orders that is sponsored by such Industry
Member; and (ii) routing orders to and from any ATS sponsored by such
Industry Member. In addition, the Industry Member fees will apply to
Industry Members that act as routing broker-dealers for exchanges. The
Industry Member fees will not be applicable, however, to an ATS that
qualifies as an Execution Venue, as discussed in more detail in the
section on Execution Venue tiering.
In accordance with Section 11.3(b), the Operating Committee
approved a tiered fee structure for Industry Members (other than
Execution Venue ATSs) as described in this section. In determining the
tiers, the Operating Committee considered the funding principles set
forth in Section 11.2 of the CAT NMS Plan, seeking to create funding
tiers that take into account the relative impact on CAT System
resources of different Industry Members, and that establish comparable
fees among the CAT Reporters with the most Reportable Events. The
Operating Committee has determined that establishing nine tiers results
in the fairest allocation of fees, best distinguishing between Industry
Members with differing levels of message traffic. Thus, each such
Industry Member will be placed into one of nine tiers of fixed fees,
based on ``message traffic'' for a defined period (as discussed below).
A nine tier structure was selected to provide the widest range of
levels for tiering Industry Members such that Industry Members
submitting significantly less message traffic to the CAT would be
adequately differentiated from Industry Members submitting
substantially more message traffic. The Operating Committee considered
historical message traffic generated by Industry Members across all
exchanges and as submitted to FINRA's Order Audit Trail System
(``OATS''), and considered the distribution of firms with similar
levels of message traffic, grouping together firms with similar levels
of message traffic. Based on this, the Operating Committee determined
that nine tiers would best group firms with similar levels of message
traffic, charging those firms with higher impact on the CAT more, while
lowering the burden of Industry Members that have less CAT-related
activity.
Each Industry Member (other than Execution Venue ATSs) will be
ranked by message traffic and tiered by predefined Industry Member
percentages (the ``Industry Member Percentages''). The Operating
Committee determined to use predefined percentages rather than fixed
volume thresholds to allow the funding model to ensure that the total
CAT fees collected recover the intended CAT costs regardless of changes
in the total level of message traffic. To determine the fixed
percentage of Industry Members in each tier, the Operating Committee
analyzed historical message traffic generated by Industry Members
across all exchanges and as submitted to OATS, and considered the
distribution of firms with similar levels of message traffic, grouping
together firms with similar levels of message traffic. Based on this,
the Operating Committee identified tiers that would group firms with
similar levels of message traffic, charging those firms with higher
impact on the CAT more, while lowering the burden on Industry Members
that have less CAT-related activity.
The percentage of costs recovered by each Industry Member tier will
be determined by predefined percentage allocations (the ``Industry
Member Recovery Allocation''). In determining the fixed percentage
allocation of costs recovered for each tier, the Operating Committee
considered the impact of CAT Reporter message traffic on the CAT System
as well as the distribution of total message volume across Industry
Members while seeking to maintain comparable fees among the largest CAT
Reporters. Accordingly, following the determination of the percentage
of Industry Members in each tier, the Operating Committee identified
the percentage of total market volume for each tier based on the
historical message traffic upon which Industry Members had been
initially ranked. Taking this into account along with the resulting
percentage of total recovery, the percentage allocation of costs
recovered for each tier were assigned, allocating higher percentages of
recovery to tiers with higher levels of message traffic while avoiding
any inappropriate burden on competition. Furthermore, by using
percentages of Industry Members and costs recovered per tier, the
Operating Committee sought to include

[[Page 28184]]

stability and elasticity within the funding model, allowing the funding
model to respond to changes in either the total number of Industry
Members or the total level of message traffic.
The following chart illustrates the breakdown of nine Industry
Member tiers across the monthly average of total equity and equity
options orders, cancels and quotes in Q1 2016 and identifies relative
gaps across varying levels of Industry Member message traffic as well
as message traffic thresholds between the largest of Industry Member
message traffic gaps. The Operating Committee referenced similar
distribution illustrations to determine the appropriate division of
Industry Member percentages in each tier by considering the grouping of
firms with similar levels of message traffic and seeking to identify
relative breakpoints in the message traffic between such groupings. In
reviewing the chart and its corresponding table, note that while these
distribution illustrations were referenced to help differentiate
between Industry Member tiers, the proposed funding model is directly
driven, not by fixed message traffic thresholds, but rather by fixed
percentages of Industry Members across tiers to account for fluctuating
levels of message traffic across time and to provide for the financial
stability of the CAT by ensuring that the funding model will recover
the required amounts regardless of changes in the number of Industry
Members or the amount of message traffic. Actual messages in any tier
will vary based on the actual traffic in a given measurement period, as
well as the number of firms included in the measurement period. The
Industry Member Percentages and Industry Member Recovery Allocation for
each tier will remain fixed with each Industry Member's tier to be
reassigned periodically, as described below in Section A(2)(H).
[GRAPHIC] [TIFF OMITTED] TN20JN17.000

------------------------------------------------------------------------
Monthly average
message traffic
per industry
Industry member tier member (orders,
quotes and
cancels)
------------------------------------------------------------------------
Tier 1............................................... >10,000,000,000
Tier 2............................................... >1,000,000,000
Tier 3............................................... >100,000,000
Tier 4............................................... >2,500,000
Tier 5............................................... >200,000
Tier 6............................................... >50,000
Tier 7............................................... >5,000
Tier 8............................................... >1,000
Tier 9............................................... <=1,000
------------------------------------------------------------------------

Based on the above analysis, the Operating Committee approved the
following Industry Member Percentages and Recovery Allocations:

[[Page 28185]]

----------------------------------------------------------------------------------------------------------------
Percentage of
Percentage of industry Percentage of
Industry member tier industry member total recovery
members recovery
----------------------------------------------------------------------------------------------------------------
Tier 1.......................................................... 0.500 8.50 6.38
Tier 2.......................................................... 2.500 35.00 26.25
Tier 3.......................................................... 2.125 21.25 15.94
Tier 4.......................................................... 4.625 15.75 11.81
Tier 5.......................................................... 3.625 7.75 5.81
Tier 6.......................................................... 4.000 5.25 3.94
Tier 7.......................................................... 17.500 4.50 3.38
Tier 8.......................................................... 20.125 1.50 1.13
Tier 9.......................................................... 45.000 0.50 0.38
-----------------------------------------------
Total....................................................... 100 100 75
----------------------------------------------------------------------------------------------------------------

For the purposes of creating these tiers based on message traffic,
the Operating Committee determined to define the term ``message
traffic'' separately for the period before the commencement of CAT
reporting and for the period after the start of CAT reporting. The
different definition for message traffic is necessary as there will be
no Reportable Events as defined in the Plan, prior to the commencement
of CAT reporting. Accordingly, prior to the start of CAT reporting,
``message traffic'' will be comprised of historical equity and equity
options orders, cancels and quotes provided by each exchange and FINRA
over the previous three months.\29\ Prior to the start of CAT
reporting, orders would be comprised of the total number of equity and
equity options orders received and originated by a member of an
exchange or FINRA over the previous three-month period, including
principal orders, cancel/replace orders, market maker orders originated
by a member of an exchange, and reserve (iceberg) orders as well as
order routes and executions originated by a member of FINRA, and
excluding order rejects and implied orders.\30\ In addition, prior to
the start of CAT reporting, cancels would be comprised of the total
number of equity and equity option cancels received and originated by a
member of an exchange or FINRA over a three-month period, excluding
order modifications (e.g., order updates, order splits, partial
cancels). Furthermore, prior to the start of CAT reporting, quotes
would be comprised of information readily available to the exchanges
and FINRA, such as the total number of historical equity and equity
options quotes received and originated by a member of an exchange or
FINRA over the prior three-month period.
---------------------------------------------------------------------------

\29\ The SEC approved exemptive relief permitting 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 required by Rule 613 of Regulation NMS. See Securities Exchange
Act Release No. 77265 (Mar. 1, 2017 [sic], 81 FR 11856 (Mar. 7,
2016). This exemption applies to Options Market Maker quotes for CAT
reporting purposes only. Therefore, notwithstanding the reporting
exemption provided for Options Market Maker quotes, Options Market
Maker quotes will be included in the calculation of total message
traffic for Options Market Makers for purposes of tiering under the
CAT funding model both prior to CAT reporting and once CAT reporting
commences.
\30\ Consequently, firms that do not have ``message traffic''
reported to an exchange or OATS before they are reporting to the CAT
would not be subject to a fee until they begin to report information
to CAT.
---------------------------------------------------------------------------

After an Industry Member begins reporting to the CAT, ``message
traffic'' will be calculated based on the Industry Member's Reportable
Events reported to the CAT as will be defined in the Technical
Specifications.\31\
---------------------------------------------------------------------------

\31\ If an Industry Member (other than an Execution Venue ATS)
has no orders, cancels or quotes prior to the commencement of CAT
Reporting, or no Reportable Events after CAT reporting commences,
then the Industry Member would not have a CAT fee obligation.
---------------------------------------------------------------------------

The Operating Committee has determined to calculate fee tiers every
three months, on a calendar quarter basis, based on message traffic
from the prior three months. Based on its analysis of historical data,
the Operating Committee believes that calculating tiers based on three
months of data will provide the best balance between reflecting changes
in activity by Industry Members while still providing predictability in
the tiering for Industry Members. Because fee tiers will be calculated
based on message traffic from the prior three months, the Operating
Committee will begin calculating message traffic based on an Industry
Member's Reportable Events reported to the CAT once the Industry Member
has been reporting to the CAT for three months. Prior to that, fee
tiers will be calculated as discussed above with regard to the period
prior to CAT reporting.
(C) Execution Venue Tiering
Under Section 11.3(a) of the CAT NMS Plan, the Operating Committee
is required to establish fixed fees payable by Execution Venues.
Section 1.1 of the CAT NMS Plan defines an Execution Venue as ``a
Participant or an alternative trading system (``ATS'') (as defined in
Rule 300 of Regulation ATS) that operates pursuant to Rule 301 of
Regulation ATS (excluding any such ATS that does not execute orders).''
\32\
---------------------------------------------------------------------------

\32\ Although FINRA does not operate an execution venue, because
it is a Participant, it is considered an ``Execution Venue'' under
the Plan for purposes of determining fees.
---------------------------------------------------------------------------

The Participants determined that ATSs should be included within the
definition of Execution Venue. Given the similarity between the
activity of exchanges and ATSs, both of which meet the definition of an
``exchange'' as set forth in the Exchange Act and the fact that the
similar trading models would have similar anticipated burdens on the
CAT, the Participants determined that ATSs should be treated in the
same manner as the exchanges for the purposes of determining the level
of fees associated with the CAT.\33\
---------------------------------------------------------------------------

\33\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order
at 85005.
---------------------------------------------------------------------------

Given the differences between Execution Venues that trade NMS
Stocks and/or OTC Equity Securities and Execution Venues that trade
Listed Options, Section 11.3(a) addresses Execution Venues that trade
NMS Stocks and/or OTC Equity Securities separately from Execution
Venues that trade Listed Options. Equity and Options Execution Venues
are treated separately for two reasons. First, the differing quoting
behavior of Equity and Options Execution Venues makes comparison of
activity between Execution Venues difficult. Second, Execution Venue
tiers are calculated based on market share of share volume, and it is
therefore difficult to compare market share between asset classes
(i.e., equity shares versus options contracts).

[[Page 28186]]

Discussed below is how the funding model treats the two types of
Execution Venues.
(I) NMS Stocks and OTC Equity Securities
Section 11.3(a)(i) of the CAT NMS Plan states that each Execution
Venue that (i) executes transactions or, (ii) in the case of a national
securities association, has trades reported by its members to its trade
reporting facility or facilities for reporting transactions effected
otherwise than on an exchange, in NMS Stocks or OTC Equity Securities
will pay a fixed fee depending on the market share of that Execution
Venue in NMS Stocks and OTC Equity Securities, with the Operating
Committee establishing at least two and not more than five tiers of
fixed fees, based on an Execution Venue's NMS Stocks and OTC Equity
Securities market share. For these purposes, market share for Execution
Venues that execute transactions will be calculated by share volume,
and market share for a national securities association that has trades
reported by its members to its trade reporting facility or facilities
for reporting transactions effected otherwise than on an exchange in
NMS Stocks or OTC Equity Securities will be calculated based on share
volume of trades reported, provided, however, that the share volume
reported to such national securities association by an Execution Venue
shall not be included in the calculation of such national security
association's market share.
In accordance with Section 11.3(a)(i) of the CAT NMS Plan, the
Operating Committee approved a tiered fee structure for Equity
Execution Venues and Option Execution Venues. In determining the Equity
Execution Venue Tiers, the Operating Committee considered the funding
principles set forth in Section 11.2 of the CAT NMS Plan, seeking to
create funding tiers that take into account the relative impact on
system resources of different Equity Execution Venues, and that
establish comparable fees among the CAT Reporters with the most
Reportable Events. Each Equity Execution Venue will be placed into one
of two tiers of fixed fees, based on the Execution Venue's NMS Stocks
and OTC Equity Securities market share. In choosing two tiers, the
Operating Committee performed an analysis similar to that discussed
above with regard to the non-Execution Venue Industry Members to
determine the number of tiers for Equity Execution Venues. The
Operating Committee determined to establish two tiers for Equity
Execution Venues, rather than a larger number of tiers as established
for non-Execution Venue Industry Members, because the two tiers were
sufficient to distinguish between the smaller number of Equity
Execution Venues based on market share. Furthermore, the incorporation
of additional Equity Execution Venue tiers would result in
significantly higher fees for Tier 1 Equity Execution Venues and
diminish comparability between Execution Venues and Industry Members.
Each Equity Execution Venue will be ranked by market share and
tiered by predefined Execution Venue percentages, (the ``Equity
Execution Venue Percentages''). In determining the fixed percentage of
Equity Execution Venues in each tier, the Operating Committee looked at
historical market share of share volume for execution venues. Equities
Execution Venue market share of share volume were sourced from market
statistics made publicly-available by Bats Global Markets, Inc.
(``Bats''). ATS market share of share volume was sourced from market
statistics made publicly-available by FINRA. FINRA trading [sic]
reporting facility (``TRF'') market share of share volume was sourced
from market statistics made publicly available by Bats. As indicated by
FINRA, ATSs accounted for 37.80% of the share volume across the TRFs
during the recent tiering period. A 37.80/62.20 split was applied to
the ATS and non-ATS breakdown of FINRA market share, with FINRA tiered
based only on the non-ATS portion of its TRF market share of share
volume.
Based on this, the Operating Committee considered the distribution
of Execution Venues, and grouped together Execution Venues with similar
levels of market share of share volume. In doing so, the Participants
considered that, as previously noted, Execution Venues in many cases
have similar levels of message traffic due to quoting activity, and
determined that it was simpler and more appropriate to have fewer,
rather than more, Execution Venue tiers to distinguish between
Execution Venues.
The percentage of costs recovered by each Equity Execution Venue
tier will be determined by predefined percentage allocations (the
``Equity Execution Venue Recovery Allocation''). In determining the
fixed percentage allocation of costs recovered for each tier, the
Operating Committee considered the impact of CAT Reporter market share
activity on the CAT System as well as the distribution of total market
volume across Equity Execution Venues while seeking to maintain
comparable fees among the largest CAT Reporters. Accordingly, following
the determination of the percentage of Execution Venues in each tier,
the Operating Committee identified the percentage of total market
volume for each tier based on the historical market share upon which
Execution Venues had been initially ranked. Taking this into account
along with the resulting percentage of total recovery, the percentage
allocation of costs recovered for each tier were assigned, allocating
higher percentages of recovery to the tier with a higher level of
market share while avoiding any inappropriate burden on competition.
Furthermore, due to the similar levels of impact on the CAT System
across Execution Venues, there is less variation in CAT Fees between
the highest and lowest of tiers for Execution Venues. Furthermore, by
using percentages of Equity Execution Venues and costs recovered per
tier, the Operating Committee sought to include stability and
elasticity within the funding model, allowing the funding model to
respond to changes in either the total number of Equity Execution
Venues or changes in market share.
Based on this analysis, the Operating Committee approved the
following Equity Execution Venue Percentages and Recovery Allocations:

----------------------------------------------------------------------------------------------------------------
Percentage of
Equity Percentage of Percentage of
Equity Execution Venue tier Execution Execution total recovery
Venues Venue recovery
----------------------------------------------------------------------------------------------------------------
Tier 1.......................................................... 25.00 26.00 6.50
Tier 2.......................................................... 75.00 49.00 12.25
-----------------------------------------------
Total....................................................... 100 75 18.75
----------------------------------------------------------------------------------------------------------------

[[Page 28187]]

The following table exhibits the relative separation of market
share of share volume between Tier 1 and Tier 2 Equity Execution
Venues. In reviewing the table, note that while this division was
referenced as a data point to help differentiate between Equity
Execution Venue tiers, the proposed funding model is directly driven
not by market share thresholds, but rather by fixed percentages of
Equity Execution Venues across tiers to account for fluctuating levels
of market share across time. Actual market share in any tier will vary
based on the actual market activity in a given measurement period, as
well as the number of Equity Execution Venues included in the
measurement period. The Equity Execution Venue Percentages and Equity
Execution Venue Recovery Allocation for each tier will remain fixed
with each Equity Execution Venue tier to be reassigned periodically, as
described below in Section A(2)(H).

------------------------------------------------------------------------
Equity market
Equity Execution Venue tier share of share
volume (%)
------------------------------------------------------------------------
Tier 1.................................................. >=1
Tier 2.................................................. <1
------------------------------------------------------------------------

(II) Listed Options
Section 11.3(a)(ii) of the CAT NMS Plan states that each Execution
Venue that executes transactions in Listed Options will pay a fixed fee
depending on the Listed Options market share of that Execution Venue,
with the Operating Committee establishing at least two and no more than
five tiers of fixed fees, based on an Execution Venue's Listed Options
market share. For these purposes, market share will be calculated by
contract volume.
In accordance with Section 11.3(a)(ii) of the CAT NMS Plan, the
Operating Committee approved a tiered fee structure for Options
Execution Venues. In determining the tiers, the Operating Committee
considered the funding principles set forth in Section 11.2 of the CAT
NMS Plan, seeking to create funding tiers that take into account the
relative impact on system resources of different Options Execution
Venues, and that establish comparable fees among the CAT Reporters with
the most Reportable Events. Each Options Execution Venue will be placed
into one of two tiers of fixed fees, based on the Execution Venue's
Listed Options market share. In choosing two tiers, the Operating
Committee performed an analysis similar to that discussed above with
regard to Industry Members (other than Execution Venue ATSs) to
determine the number of tiers for Options Execution Venues. The
Operating Committee determined to establish two tiers for Options
Execution Venues, rather than a larger number of tiers as established
for Industry Members (other than Execution Venue ATSs), because the two
tiers were sufficient to distinguish between the smaller number of
Options Execution Venues based on market share. Furthermore, due to the
smaller number of Options Execution Venues, the incorporation of
additional Options Execution Venue tiers would result in significantly
higher fees for Tier 1 Options Execution Venues and reduce
comparability between Execution Venues and Industry Members.
Each Options Execution Venue will be ranked by market share and
tiered by predefined Execution Venue percentages, (the ``Options
Execution Venue Percentages''). To determine the fixed percentage of
Options Execution Venues in each tier, the Operating Committee analyzed
the historical and publicly available market share of Options Execution
Venues to group Options Execution Venues with similar market shares
across the tiers. Options Execution Venue market share of share volume
were sourced from market statistics made publicly-available by Bats.
The process for developing the Options Execution Venue Percentages was
the same as discussed above with regard to Equity Execution Venues.
The percentage of costs recovered by each Options Execution Venue
tier will be determined by predefined percentage allocations (the
``Options Execution Venue Recovery Allocation''). In determining the
fixed percentage allocation of costs recovered for each tier, the
Operating Committee considered the impact of CAT Reporter market share
activity on the CAT System as well as the distribution of total market
volume across Options Execution Venues while seeking to maintain
comparable fees among the largest CAT Reporters. Furthermore, by using
percentages of Options Execution Venues and costs recovered per tier,
the Operating Committee sought to include stability and elasticity
within the funding model, allowing the funding model to respond to
changes in either the total number of Options Execution Venues or
changes in market share. The process for developing the Options
Execution Venue Recovery Allocation was the same as discussed above
with regard to Equity Execution Venues.
Based on this analysis, the Operating Committee approved the
following Options Execution Venue Percentages and Recovery Allocations:

----------------------------------------------------------------------------------------------------------------
Percentage of
Options Percentage of Percentage of
Options Execution Venue tier Execution Execution total recovery
Venues Venue recovery
----------------------------------------------------------------------------------------------------------------
Tier 1.......................................................... 75.00 20.00 5.00
Tier 2.......................................................... 25.00 5.00 1.25
-----------------------------------------------
Total....................................................... 100 25 6.25
----------------------------------------------------------------------------------------------------------------

The following table exhibits the relative separation of market
share of share volume between Tier 1 and Tier 2 Options Execution
Venues. In reviewing the table, note that while this division was
referenced as a data point to help differentiate between Options
Execution Venue tiers, the proposed funding model is directly driven,
not by market share thresholds, but rather by fixed percentages of
Options Execution Venues across tiers to account for fluctuating levels
of market share across time. Actual market share in any tier will vary
based on the actual market activity in a given measurement period, as
well as the number of Options Execution Venues included in the
measurement period. The Options Execution Venue Percentages and Equity
Execution Venue Recovery Allocation for each tier will remain fixed
with each Options Execution Venue tier to be reassigned periodically,
as described below in Section A(2)(H).

------------------------------------------------------------------------
Options market
Options Execution Venue tier share of share
volume (%)
------------------------------------------------------------------------
Tier 1.................................................. >=1
Tier 2.................................................. <1
------------------------------------------------------------------------

[[Page 28188]]

(III) Market Share/Tier Assignments
The Operating Committee determined that, prior to the start of CAT
reporting, market share for Execution Venues would be sourced from
publicly-available market data. Options and equity volumes for
Participants will be sourced from market data made publicly available
by Bats while Execution Venue ATS volumes will be sourced from market
data made publicly available by FINRA. Set forth in Appendix B to this
letter are two charts, one listing the current Equity Execution Venues,
each with its rank and tier, and one listing the current Options
Execution Venues, each with its rank and tier.
After the commencement of CAT reporting, market share for Execution
Venues will be sourced from data reported to the CAT. Equity Execution
Venue market share will be determined by calculating each Equity
Execution Venue's proportion of the total volume of NMS Stock and OTC
Equity shares reported by all Equity Execution Venues during the
relevant time period. Similarly, market share for Options Execution
Venues will be determined by calculating each Options Execution Venue's
proportion of the total volume of Listed Options contracts reported by
all Options Execution Venues during the relevant time period.
The Operating Committee has determined to calculate fee tiers for
Execution Venues every three months based on market share from the
prior three months. Based on its analysis of historical data, the
Operating Committee believes calculating tiers based on three months of
data will provide the best balance between reflecting changes in
activity by Execution Venues while still providing predictability in
the tiering for Execution Venues.
(D) Allocation of Costs
In addition to the funding principles discussed above, including
comparability of fees, Section 11.1(c) of the CAT NMS Plan also
requires expenses to be fairly and reasonably shared among the
Participants and Industry Members. Accordingly, in developing the
proposed fee schedules pursuant to the funding model, the Operating
Committee calculated how the CAT costs would be allocated between
Industry Members and Execution Venues, and how the portion of CAT costs
allocated to Execution Venues would be allocated between Equity
Execution Venues and Options Execution Venues. These determinations are
described below.
(I) Allocation Between Industry Members and Execution Venues
In determining the cost allocation between Industry Members (other
than Execution Venue ATSs) and Execution Venues, the Operating
Committee analyzed a range of possible splits for revenue recovered
from such Industry Members and Execution Venues. Based on this
analysis, the Operating Committee determined that 75 percent of total
costs recovered would be allocated to Industry Members (other than
Execution Venue ATSs) and 25 percent would be allocated to Execution
Venues. The Operating Committee determined that this 75/25 division
maintained the greatest level of comparability across the funding
model, keeping in view that comparability should consider affiliations
among or between CAT Reporters (e.g., firms with multiple Industry
Members and/or exchange licenses). For example, the cost allocation
establishes fees for the largest Industry Members (i.e., those Industry
Members in Tiers 1, 2 and 3) that are comparable to the largest Equity
Execution Venues and Options Execution Venues (i.e., those Execution
Venues in Tier 1). In addition, the cost allocation establishes fees
for Execution Venue complexes that are comparable to those of Industry
Member complexes. For example, when analyzing alternative allocations,
other possible allocations led to much higher fees for larger Industry
Members than for larger Execution Venues or vice versa, and/or led to
much higher fees for Industry Member complexes than Execution Venue
complexes or vice versa.
Furthermore, the allocation of total CAT costs recovered recognizes
the difference in the number of CAT Reporters that are Industry Members
versus CAT Reporters that are Execution Venues. Specifically, the cost
allocation takes into consideration that there are approximately 25
times more Industry Members expected to report to the CAT than
Execution Venues (e.g., an estimated 1,630 Industry Members versus 70
Execution Venues as of January 2017).
(II) Allocation Between Equity Execution Venues and Options Execution
Venues
The Operating Committee also analyzed how the portion of CAT costs
allocated to Execution Venues would be allocated between Equity
Execution Venues and Options Execution Venues. In considering this
allocation of costs, the Operating Committee analyzed a range of
alternative splits for revenue recovered between Equity and Options
Execution Venues, including a 70/30, 67/33, 65/35, 50/50 and 25/75
split. Based on this analysis, the Operating Committee determined to
allocate 75 percent of Execution Venue costs recovered to Equity
Execution Venues and 25 percent to Options Execution Venues. The
Operating Committee determined that a 75/25 division between Equity and
Options Execution Venues maintained elasticity across the funding model
as well the greatest level of fee equitability and comparability based
on the current number of Equity and Options Execution Venues. For
example, the allocation establishes fees for the larger Equity
Execution Venues that are comparable to the larger Options Execution
Venues, and fees for the smaller Equity Execution Venues that are
comparable to the smaller Options Execution Venues. In addition to fee
comparability between Equity Execution Venues and Options Execution
Venues, the allocation also establishes equitability between larger
(Tier 1) and smaller (Tier 2) Execution Venues based upon the level of
market share. Furthermore, the allocation is intended to reflect the
relative levels of current equity and options order events.
(E) Fee Levels
The Operating Committee determined to establish a CAT-specific fee
to collectively recover the costs of building and operating the CAT.
Accordingly, under the funding model, the sum of the CAT Fees is
designed to recover the total cost of the CAT. The Operating Committee
has determined overall CAT costs to be comprised of Plan Processor
costs and non-Plan Processor costs, which are estimated to be
$50,700,000 in total for the year beginning November 21, 2016.\34\
---------------------------------------------------------------------------

\34\ It is anticipated that CAT-related costs incurred prior to
November 21, 2016 will be addressed via a separate filing.
---------------------------------------------------------------------------

The Plan Processor costs relate to costs incurred by the Plan
Processor and consist of the Plan Processor's current estimates of
average yearly ongoing costs, including development cost, which total
$37,500,000. This amount is based upon the fees due to the Plan
Processor pursuant to the agreement with the Plan Processor.
The non-Plan Processor estimated costs incurred and to be incurred
by the Company through November 21, 2017 consist of three categories of
costs. The first category of such costs are third party support costs,
which include historic legal fees, consulting fees and audit fees from
November 21, 2016 until the date of filing as well as estimated third
party support costs for the rest of

[[Page 28189]]

the year. These amount to an estimated $5,200,000. The second category
of non-Plan Processor costs are estimated insurance costs for the year.
Based on discussions with potential insurance providers, assuming $2-5
million insurance premium on $100 million in coverage, the Company has
received an estimate of $3,000,000 for the annual cost. The final cost
figures will be determined following receipt of final underwriter
quotes. The third category of non-Plan Processor costs is the
operational reserve, which is comprised of three months of ongoing Plan
Processor costs ($9,375,000), third party support costs ($1,300,000)
and insurance costs ($750,000). The Operating Committee aims to
accumulate the necessary funds for the establishment of the three-month
operating reserve for the Company through the CAT Fees charged to CAT
Reporters for the year. On an ongoing basis, the Operating Committee
will account for any potential need for the replenishment of the
operating reserve or other changes to total cost during its annual
budgeting process. The following table summarizes the Plan Processor
and non-Plan Processor cost components which comprise the total CAT
costs of $50,700,000.

------------------------------------------------------------------------
Cost category Cost component Amount
------------------------------------------------------------------------
Plan Processor................. Operational Costs...... $37,500,000
Third Party Support 5,200,000
Costs.
Non-Plan Processor............. Operational Reserve.... 35 5,000,000
Insurance Costs........ 3,000,000
---------------
Estimated Total............ ....................... 50,700,000
------------------------------------------------------------------------

Based on the estimated costs and the calculations for the funding
model described above, the Operating Committee determined to impose the
following fees: \36\
---------------------------------------------------------------------------

\35\ This $5,000,000 represents the gradual accumulation of the
funds for a target operating reserve of $11,425,000.
\36\ Note that all monthly, quarterly and annual CAT Fees have
been rounded to the nearest dollar.
\37\ This column represents the approximate total CAT Fees paid
each year by each Industry Member (other than Execution Venue ATSs)
(i.e., ``CAT Fees Paid Annually'' = ``Monthly CAT Fee'' x 12
months).
---------------------------------------------------------------------------

For Industry Members (other than Execution Venue ATSs):

----------------------------------------------------------------------------------------------------------------
CAT fees paid
Tier Monthly CAT Quarterly CAT annually 37
fee fee
----------------------------------------------------------------------------------------------------------------
1............................................................... $33,668 $101,004 $404,016
2............................................................... 27,051 81,153 324,612
3............................................................... 19,239 57,717 230,868
4............................................................... 6,655 19,965 79,860
5............................................................... 4,163 12,489 49,956
6............................................................... 2,560 7,680 30,720
7............................................................... 501 1,503 6,012
8............................................................... 145 435 1,740
9............................................................... 22 66 264
----------------------------------------------------------------------------------------------------------------

For Execution Venues for NMS Stocks and OTC Equity Securities:
---------------------------------------------------------------------------

\38\ This column represents the approximate total CAT Fees paid
each year by each Execution Venue for NMS Stocks and OTC Equity
Securities (i.e., ``CAT Fees Paid Annually'' = ``Monthly CAT Fee'' x
12 months).

For Execution Venues for Listed Options:
---------------------------------------------------------------------------

\39\ This column represents the approximate total CAT Fees paid
each year by each Execution Venue for Listed Options (i.e., ``CAT
Fees Paid Annually'' = ``Monthly CAT Fee'' x 12 months).

As noted above, the fees set forth in the tables reflect the
Operating Committee's decision to ensure comparable fees between
Execution Venues and Industry Members. The fees of the top tiers for
Industry Members

[[Page 28190]]

(other than Execution Venue ATSs) are not identical to the top tier for
Execution Venues, however, because the Operating Committee also
determined that the fees for Execution Venue complexes should be
comparable to those of Industry Member complexes. The difference in the
fees reflects this decision to recognize affiliations.
The Operating Committee has calculated the schedule of effective
fees for Industry Members (other than Execution Venue ATSs) and
Execution Venues in the following manner. Note that the calculation of
CAT Reporter fees assumes 53 Equity Execution Venues, 15 Options
Execution Venues and 1,631 Industry Members (other than Execution Venue
ATSs) as of January 2017.

Calculation of Annual Tier Fees for Industry Members (``IM'')
----------------------------------------------------------------------------------------------------------------
Percentage of
Percentage of Industry Percentage of
Industry Member tier Industry Member total recovery
Members recovery
----------------------------------------------------------------------------------------------------------------
Tier 1.......................................................... 0.500 8.50 6.38
Tier 2.......................................................... 2.500 35.00 26.25
Tier 3.......................................................... 2.125 21.25 15.94
Tier 4.......................................................... 4.625 15.75 11.81
Tier 5.......................................................... 3.625 7.75 5.81
Tier 6.......................................................... 4.000 5.25 3.94
Tier 7.......................................................... 17.500 4.50 3.38
Tier 8.......................................................... 20.125 1.50 1.13
Tier 9.......................................................... 45.000 0.50 0.38
-----------------------------------------------
Total....................................................... 100 100 75
----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------
Estimated
number of
Industry Member tier Industry
Members
------------------------------------------------------------------------
Tier 1.................................................. 8
Tier 2.................................................. 41
Tier 3.................................................. 35
Tier 4.................................................. 75
Tier 5.................................................. 59
Tier 6.................................................. 65
Tier 7.................................................. 285
Tier 8.................................................. 328
Tier 9.................................................. 735
---------------
Total............................................... 1,631
------------------------------------------------------------------------

BILLING CODE 8011-01-P

[[Page 28191]]

[GRAPHIC] [TIFF OMITTED] TN20JN17.001

BILLING CODE 8011-01-C

Calculation of Annual Tier Fees for Equity Execution Venues (``EV'')
----------------------------------------------------------------------------------------------------------------
Percentage of
Equity Percentage of Percentage of
Equity Execution Venue tier Execution Execution total recovery
Venues Venue recovery
----------------------------------------------------------------------------------------------------------------
Tier 1.......................................................... 25.00 26.00 6.50
Tier 2.......................................................... 75.00 49.00 12.25
-----------------------------------------------
Total....................................................... 100 75 18.75
----------------------------------------------------------------------------------------------------------------

[[Page 28192]]

------------------------------------------------------------------------
Estimated
number of
Equity Execution Venue tier Equity
Execution
Venues
------------------------------------------------------------------------
Tier 1.................................................. 13
Tier 2.................................................. 40
---------------
Total............................................... 53
------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TN20JN17.002

Calculation of Annual Tier Fees for Options Execution Venues (``EV'')
----------------------------------------------------------------------------------------------------------------
Percentage of Percentage of
Options Execution Percentage of
Options Execution Venue tier Execution Venue total
Venues recovery recovery
----------------------------------------------------------------------------------------------------------------
Tier 1.......................................................... 75.00 20.00 5.00
Tier 2.......................................................... 25.00 5.00 1.25
-----------------------------------------------
Total....................................................... 100 25 6.25
----------------------------------------------------------------------------------------------------------------

------------------------------------------------------------------------
Estimated
number of
Options Execution Venue tier Options
Execution
Venues
------------------------------------------------------------------------
Tier 1.................................................. 11
Tier 2.................................................. 4
---------------
Total............................................... 15
------------------------------------------------------------------------

[GRAPHIC] [TIFF OMITTED] TN20JN17.003

Traceability of Total CAT Fees
----------------------------------------------------------------------------------------------------------------
Estimated
Type Industry Member tier number of CAT fees paid Total
members annually recovery
----------------------------------------------------------------------------------------------------------------
Industry Members...................... Tier 1.................. 8 $404,016 $3,232,128
Tier 2.................. 41 324,612 13,309,092
Tier 3.................. 35 230,868 8,080,380
Tier 4.................. 75 79,860 5,989,500
Tier 5.................. 59 49,956 2,947,404
Tier 6.................. 65 30,720 1,996,800
Tier 7.................. 285 6,012 1,713,420

[[Page 28193]]

Tier 8.................. 328 1,740 570,720
Tier 9.................. 735 264 194,040
-----------------------------------------------
Total............................. ........................ 1,631 .............. 38,033,484
----------------------------------------------------------------------------------------------------------------
Equity Execution Venues............... Tier 1.................. 13 253,500 3,295,500
Tier 2.................. 40 155,280 6,211,200
-----------------------------------------------
Total............................. ........................ 53 .............. 9,506,700
----------------------------------------------------------------------------------------------------------------
Options Execution Venues.............. Tier 1.................. 11 230,460 2,535,060
Tier 2.................. 4 158,448 633,792
-----------------------------------------------
Total............................. ........................ 15 .............. 3,168,852
Total......................... ........................ .............. .............. 50,709,036
-----------------------------------------------
Excess \40\................... ........................ .............. .............. 9,036
----------------------------------------------------------------------------------------------------------------

(F) Comparability of Fees
---------------------------------------------------------------------------

\40\ The amount in excess of the total CAT costs will contribute
to the gradual accumulation of the target operating reserve of
$11.425 million.
---------------------------------------------------------------------------

The funding principles require a funding model in which the fees
charged to the CAT Reporters with the most CAT-related activity
(measured by market share and/or message traffic, as applicable) are
generally comparable (where, for these comparability purposes, the
tiered fee structure takes into consideration affiliations between or
among CAT Reporters, whether Execution Venue and/or Industry Members).
Accordingly, in creating the model, the Operating Committee sought to
take account of the affiliations between or among CAT Reporters--that
is, where affiliated entities may have multiple Industry Member and/or
Execution Venue licenses, by maintaining relative comparability of fees
among such affiliations with the most expected CAT-related activity. To
do this, the Participants identified representative affiliations in the
largest tier of both Execution Venues and Industry Members and compared
the aggregate fees that would be paid by such firms.
While the proposed fees for Tier 1 and Tier 2 Industry Members are
relatively higher than those of Tier 1 and Tier 2 Execution Venues,
Execution Venue complex fees are relatively higher than those of
Industry Member complexes largely due to affiliations between Execution
Venues. The tables set forth below describe the largest Execution Venue
and Industry Member complexes and their associated fees: \41\
---------------------------------------------------------------------------

\41\ Note that the analysis of the complexes was performed on a
best efforts basis, as all affiliations between the 1631 Industry
Members may not be included.

Execution Venue Complexes
----------------------------------------------------------------------------------------------------------------
Listing of Equity Listing of Options Total fees by
Execution Venue complex Execution Venue tiers Execution Venue tier EV complex
----------------------------------------------------------------------------------------------------------------
Execution Venue Complex 1............... Tier 1 (x2)...... Tier 1 (x4)...... $1,900,962
Tier 2 (x1) Tier 2 (x2)
Execution Venue Complex 2............... Tier 1 (x2)...... Tier 1 (x2)...... 1,863,801
Tier 2 (x1)
Execution Venue Complex 3............... Tier 1 (x2)...... Tier 1 (x2)...... 1,278,447
Tier 2 (x2)
----------------------------------------------------------------------------------------------------------------

Industry Member Complexes
----------------------------------------------------------------------------------------------------------------
Listing of Industry Member Total fees by
Industry Member complex tiers Listing of ATS tiers IM complex
----------------------------------------------------------------------------------------------------------------
Industry Member Complex 1............... Tier 1 (x2)...... Tier 2 (x1)...... $963,300
Industry Member Complex 2............... Tier 1 (x1)...... Tier 2 (x3)...... 949,674
Tier 4 (x1)
Industry Member Complex 3............... Tier 1 (x1)...... Tier 2 (x1)...... 883,888
Tier 2 (x1)
Industry Member Complex 4............... Tier 1 (x1)...... N/A....................... 808,472
Tier 2 (x1)
Tier 4 (x1)
Industry Member Complex 5............... Tier 2 (x1)...... Tier 2 (x1)...... 796,595
Tier 3 (x1)
Tier 4 (x1)

[[Page 28194]]

Tier 7 (x1)
----------------------------------------------------------------------------------------------------------------

(G) Billing Onset
Under Section 11.1(c) of the CAT NMS Plan, to fund the development
and implementation of the CAT, the Company shall time the imposition
and collection of all fees on Participants and Industry Members in a
manner reasonably related to the timing when the Company expects to
incur such development and implementation costs. The Company is
currently incurring such development and implementation costs and will
continue to do so prior to the commencement of CAT reporting and
thereafter. For example, the Plan Processor has required up-front
payments to begin building the CAT. In addition, the Company continues
to incur consultant and legal expenses on an on-going basis to
implement the CAT. Accordingly, the Operating Committee determined that
all CAT Reporters, including both Industry Members and Execution Venues
(including Participants), would begin to be invoiced as promptly as
possible following the establishment of a billing mechanism. The
Operating Committee will issue a notice to the Participants when the
billing mechanism has been established, specifying the date when such
invoicing of Participants will commence.
(H) Changes to Fee Levels and Tiers
Section 11.3(d) of the CAT NMS Plan states that ``[t]he Operating
Committee shall review such fee schedule on at least an annual basis
and shall make any changes to such fee schedule that it deems
appropriate. The Operating Committee is authorized to review such fee
schedule on a more regular basis, but shall not make any changes on
more than a semi-annual basis unless, pursuant to a Supermajority Vote,
the Operating Committee concludes that such change is necessary for the
adequate funding of the Company.'' With such reviews, the Operating
Committee will review the distribution of Industry Members and
Execution Venues across tiers, and make any updates to the percentage
of CAT Reporters allocated to each tier as may be necessary. In
addition, the reviews will evaluate the estimated ongoing CAT costs and
the level of the operating reserve. To the extent that the total CAT
costs decrease, the fees would be adjusted downward, and, to the extent
that the total CAT costs increase, the fees would be adjusted
upward.\42\ Furthermore, any surplus of the Company's revenues over its
expenses is to be included within the operational reserve to offset
future fees. The limitations on more frequent changes to the fee,
however, are intended to provide budgeting certainty for the CAT
Reporters and the Company.\43\ To the extent that the Operating
Committee approves changes to the number of tiers in the funding model
or the fees assigned to each tier, then the Operating Committee will
file such changes with the SEC pursuant to Rule 608 of the Exchange
Act, and any such changes will become effective in accordance with the
requirements of Rule 608.
---------------------------------------------------------------------------

\42\ The CAT Fees are designed to recover the costs associated
with the CAT. Accordingly, CAT Fees would not be affected by
increases or decreases in other non-CAT expenses incurred by the
self-regulatory organizations, such as any changes in costs related
to the retirement of existing regulatory systems, such as OATS.
\43\ Section B.7, Appendix C of the CAT NMS Plan, Approval Order
at 85006.
---------------------------------------------------------------------------

(I) Initial and Periodic Tier Reassignments
The Operating Committee has determined to calculate fee tiers every
three months based on market share or message traffic, as applicable,
from the prior three months. For the initial tier assignments, the
Company will calculate the relevant tier for each CAT Reporter using
the three months of data prior to the commencement date. As with the
initial tier assignment, for the tri-monthly reassignments, the Company
will calculate the relevant tier using the three months of data prior
to the relevant tri-monthly date. Any movement of CAT Reporters between
tiers will not change the criteria for each tier or the fee amount
corresponding to each tier.
In performing the tri-monthly reassignments, the percentage of CAT
Reporters in each assigned tier is relative. Therefore, a CAT
Reporter's assigned tier will depend, not only on its own message
traffic or market share, but it also will depend on the message
traffic/market share across all CAT Reporters. For example, the
percentage of Industry Members (other than Execution Venue ATSs) in
each tier is relative such that such Industry Member's assigned tier
will depend on message traffic generated across all CAT Reporters as
well as the total number of CAT Reporters. The Operating Committee will
inform CAT Reporters of their assigned tier every three months
following the periodic tiering process, as the funding model will
compare an individual CAT Reporter's activity to that of other CAT
Reporters in the marketplace.
The following demonstrates a tier reassignment. In accordance with
the funding model, the top 75% of Options Execution Venues in market
share are categorized as Tier 1 while the bottom 25% of Options
Execution Venues in market share are categorized as Tier 2. In the
sample scenario below, Options Execution Venue L is initially
categorized as a Tier 2 Options Execution Venue in Period A due to its
market share. When market share is recalculated for Period B, the
market share of Execution Venue L increases, and it is therefore
subsequently reranked and reassigned to Tier 1 in Period B.
Correspondingly, Options Execution Venue K, initially a Tier 1 Options
Execution Venue in Period A, is reassigned to Tier 2 in Period B due to
decreases in its market share of share volume.

--------------------------------------------------------------------------------------------------------------------------------------------------------
Period A Period B
--------------------------------------------------------------------------------------------------------------------------------------------------------
Market share Market share
Options Execution Venue rank Tier Options Execution Venue rank Tier
--------------------------------------------------------------------------------------------------------------------------------------------------------
Options Execution Venue A...................... 1 1 Options Execution Venue A............. 1 1

[[Page 28195]]

Options Execution Venue B...................... 2 1 Options Execution Venue B............. 2 1
Options Execution Venue C...................... 3 1 Options Execution Venue C............. 3 1
Options Execution Venue D...................... 4 1 Options Execution Venue D............. 4 1
Options Execution Venue E...................... 5 1 Options Execution Venue E............. 5 1
Options Execution Venue F...................... 6 1 Options Execution Venue F............. 6 1
Options Execution Venue G...................... 7 1 Options Execution Venue I............. 7 1
Options Execution Venue H...................... 8 1 Options Execution Venue H............. 8 1
Options Execution Venue I...................... 9 1 Options Execution Venue G............. 9 1
Options Execution Venue J...................... 10 1 Options Execution Venue J............. 10 1
Options Execution Venue K...................... 11 1 Options Execution Venue L............. 11 1
Options Execution Venue L...................... 12 2 Options Execution Venue K............. 12 2
Options Execution Venue M...................... 13 2 Options Execution Venue N............. 13 2
Options Execution Venue N...................... 14 2 Options Execution Venue M............. 14 2
Options Execution Venue O...................... 15 2 Options Execution Venue O............. 15 2
--------------------------------------------------------------------------------------------------------------------------------------------------------

(3) Proposed CAT Fee Schedule
The Operating Committee proposes to add Exhibit B to the CAT NMS
Plan to add a fee schedule setting forth the CAT Fees applicable to
Participants. Proposed Exhibit B is set forth in Appendix A to this
letter. Paragraph (a)(1) of proposed Exhibit B sets forth the CAT Fees
applicable to Execution Venues for NMS Stocks and OTC Equity
Securities. Specifically, paragraph (a)(1) states that the Company will
assign each Execution Venue for NMS Stocks and/or OTC Equity Securities
to a fee tier once every quarter, where such tier assignment is
calculated by ranking each such Execution Venue based on its total
market share for the three months prior to the quarterly tier
calculation day and assigning each such Execution Venue to a tier based
on that ranking and predefined percentages for such Execution Venues.
The Execution Venues for NMS Stocks and/or OTC Equity Securities with
the higher total quarterly market share will be ranked in Tier 1, and
such Execution Venues with the lower quarterly market share will be
ranked in Tier 2. Specifically, paragraph (a)(1) states that, each
quarter, each Execution Venue for NMS Stocks and/or OTC Equity
Securities shall pay in the manner prescribed by the Company the
following CAT Fee corresponding to the tier assigned by the CAT NMS,
LLC for such Execution Venue for that quarter:

------------------------------------------------------------------------
Percentage of
Execution
Venues for NMS Quarterly CAT
Tier stocks and/or fee
OTC equity
securities
------------------------------------------------------------------------
1....................................... 25.00 $63,375
2....................................... 75.00 38,820
------------------------------------------------------------------------

In addition, paragraph (a)(2) of the proposed Exhibit B states that
the Company will assign each Execution Venue for Listed Options to a
fee tier once every quarter, where such tier assignment is calculated
by ranking each such Execution Venue based on its total market share
for the three months prior to the quarterly tier calculation day and
assigning each such Execution Venue to a tier based on that ranking and
predefined percentages for such Execution Venues. The Execution Venues
for Listed Options with the higher total quarterly market share will be
ranked in Tier 1, and such Execution Venues with the lower quarterly
market share will be ranked in Tier 2. Specifically, paragraph (b)(1)
states that, each quarter, each Execution Venue for Listed Options
shall pay in the manner prescribed by the Company the following CAT Fee
corresponding to the tier assigned by the CAT NMS, LLC for such
Execution Venue for that quarter:

------------------------------------------------------------------------
Percentage of
Execution
Tier Venues for Quarterly CAT
listed options fee
(%)
------------------------------------------------------------------------
1....................................... 25.00 $57,615
2....................................... 75.00 39,612
------------------------------------------------------------------------

B. Governing or Constituent Documents

Not applicable.

C. Implementation of Amendment

The terms of the proposed amendment will become effective upon
filing pursuant to Rule 608(b)(3)(i) of the Exchange Act because it
establishes a fee or other charge collected on behalf of all of the
Participants in connection with access to, or use of, any facility
contemplated by the plan (including changes in any provision with
respect to distribution of any net proceeds from such fees or other
charges to the sponsors and/or participants).\44\ At any time within
sixty days of the filing of this amendment, the Commission may
summarily abrogate the amendment and require that it be refiled
pursuant to paragraph (b)(1) [sic] of Rule 608, if it appears to the
Commission that such action is necessary or appropriate in the public
interest, for the protection of investors or the maintenance of fair
and orderly markets, to remove impediments to, and perfect the
mechanisms of, a national market system or otherwise in furtherance of
the purposes of the Exchange Act.
---------------------------------------------------------------------------

\44\ 17 CFR 242.608(b)(3)(i).
---------------------------------------------------------------------------

D. Development and Implementation Phases

Not applicable.

E. Analysis of Impact on Competition

The Operating Committee does not believe that the proposed
amendment will result in any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. The Operating Committee notes that the proposed amendment
implements provisions of the CAT NMS Plan approved by the Commission,
and is designed to assist the Participants in meeting their regulatory
obligations pursuant to the Plan. Because all national securities
exchanges and FINRA are subject to the proposed CAT Fees set forth in
the proposed amendment, this is not a competitive filing that raises
competition issues between and among the exchanges and FINRA.
Moreover, as previously described, the Operating Committee believes
that the proposed fee schedule fairly and equitably allocates costs
among CAT Reporters. In particular, the proposed

[[Page 28196]]

fee schedule is structured to impose comparable fees on similarly
situated CAT Reporters, and lessen the impact on smaller CAT Reporters.
CAT Reporters with similar levels of CAT activity will pay similar
fees. For example, Industry Members (other than Execution Venue ATSs)
with higher levels of message traffic will pay higher fees, and those
with lower levels of message traffic will pay lower fees. Similarly,
Execution Venue ATSs and other Execution Venues with larger market
share will pay higher fees, and those with lower levels of market share
will pay lower fees. Therefore, given that there is generally a
relationship between message traffic and market share to the CAT
Reporter's size, smaller CAT Reporters generally pay less than larger
CAT Reporters. Accordingly, the Operating Committee does not believe
that the CAT Fees would have a disproportionate effect on smaller or
larger CAT Reporters. In addition, ATSs and exchanges will pay the same
fees based on market share. Therefore, the Operating Committee does not
believe that the fees will impose any burden on the competition between
ATSs and exchanges. Accordingly, SRO [sic] believes that the proposed
fees will minimize the potential for adverse effects on competition
between CAT Reporters in the market.
Furthermore, the tiered, fixed fee funding model limits the
disincentives to providing liquidity to the market. Therefore, the
proposed fees are structured to limit burdens on competitive quoting
and other liquidity provision in the market.

F. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan

Not applicable.

G. Approval by Plan Sponsors in Accordance With Plan

Section 12.3 of the Plan states that, subject to certain
exceptions, the Plan may be amended from time to time only by a written
amendment, authorized by the affirmative vote of not less than two-
thirds of all of the Participants, that has been approved by the SEC
pursuant to Rule 608 or has otherwise become effective under Rule 608.
In addition, Section 4.3(a)(vi) of the Plan requires the Operating
Committee, by Majority Vote, to authorize action to determine the
appropriate funding-related policies, procedures and practices-
consistent with Article XI. The Operating Committee has satisfied both
of these requirements.

H. Description of Operation of Facility Contemplated by the Proposed
Amendment

Not applicable.

I. Terms and Conditions of Access

Not applicable.

J. Method of Determination and Imposition, and Amount of, Fees and
Charges

Section A of this letter describes in detail how the Operating
Committee developed the proposed CAT fees, including a detailed
discussion of the proposed funding model for the CAT.

K. Method and Frequency of Processor Evaluation

Not applicable.

L. Dispute Resolution

Section 11.5 of the CAT NMS Plan addresses the resolution of
disputes regarding Participants' CAT fees charged to Participants and
Industry Members. Specifically, Section 11.5 states that disputes with
respect to fees the Company charges Participants pursuant to Article XI
of the CAT NMS Plan shall be determined by the Operating Committee or a
Subcommittee designated by the Operating Committee. Decisions by the
Operating Committee or such designated Subcommittee on such matters
shall be binding on Participants, without prejudice to the rights of
any Participant to seek redress from the SEC pursuant to Rule 608 or in
any other appropriate forum.

III. Solicitation of Comments

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

Electronic Comments

Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number 4-698 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 4-698.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 (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan amendment that are filed
with the Commission, and all written communications relating to the
amendment 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 also will be available for inspection
and copying at the Participants' offices. 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 4-698 and should be submitted on or before
July 11, 2017.

By the Commission.
Eduardo A. Aleman,
Assistant Secretary.

Appendix A

[Additions underlined; deletions bracketed]

Exhibit B

CAT Fees

(a) Participant CAT Fee Schedule.
(1) CAT Fees: Execution Venues for NMS Stocks and/or OTC Equity
Securities.
The CAT NMS, LLC will assign each Execution Venue for NMS Stocks
and/or OTC Equity Securities to a fee tier once every quarter, where
such tier assignment is calculated by ranking each such Execution
Venue based on its total market share for the three months prior to
the quarterly tier calculation day and assigning each such Execution
Venue to a tier based on that ranking and predefined percentages for
such Execution Venues. The Execution Venues for NMS Stocks and/or
OTC Equity Securities with the higher total quarterly market share
will be ranked in Tier 1, and such Execution Venues with the lower
quarterly market share will be ranked in Tier 2. Each quarter, each
Execution Venue for NMS Stocks and/or OTC Equity Securities shall
pay in the manner prescribed by the CAT NMS, LLC the following CAT
Fee corresponding to the tier assigned by the CAT NMS, LLC for such
Execution Venue for that quarter:

[[Page 28197]]

------------------------------------------------------------------------
Percentage of
Execution
Venues for NMS
stocks and/or
Tier OTC equity Quarterly CAT
securities (%) fee

------------------------------------------------------------------------
1....................................... 25.00 $63,375
2....................................... 75.00 38,820
------------------------------------------------------------------------

(2) CAT Fees: Execution Venues for Listed Options
The CAT NMS, LLC will assign each Execution Venue for Listed
Options to a fee tier once every quarter, where such tier assignment
is calculated by ranking each such Execution Venue based on its
total market share for the three months prior to the quarterly tier
calculation day and assigning each such Execution Venue to a tier
based on that ranking and predefined percentages for such Execution
Venues. The Execution Venues for Listed Options with the higher
total quarterly market share will be ranked in Tier 1, and such
Execution Venues with the lower quarterly market share will be
ranked in Tier 2. Each quarter, each Execution Venue for Listed
Options shall pay in the manner prescribed by the CAT NMS, LLC the
following CAT Fee corresponding to the tier assigned by the CAT NMS,
LLC for such Execution Venue for that quarter:

------------------------------------------------------------------------
Percentage of
Execution
Venues for
Tier listed options Quarterly CAT
(%) fee

------------------------------------------------------------------------
1....................................... 25.00 $57,615
2....................................... 75.00 39,612
------------------------------------------------------------------------

Appendix B

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

\45\ Based on November 2016 through January 2017 volume sourced
from Bats and FINRA.

Equity Execution Venue Rank and Tier
------------------------------------------------------------------------
Market share
of share
Market participant volume \45\ Rank Tier
(%)
------------------------------------------------------------------------
OTC LINK ATS...................... 29.90 1 1
Financial Industry Regulatory 16.50 2 1
Authority, Inc...................
The NASDAQ Stock Market LLC....... 9.67 3 1
New York Stock Exchange LLC....... 9.08 4 1
NYSE Arca, Inc.................... 7.05 5 1
Bats EDGX Exchange, Inc........... 4.89 6 1
Bats BZX Exchange, Inc............ 4.24 7 1
Bats BYX Exchange, Inc............ 3.06 8 1
NASDAQ BX, Inc.................... 1.85 9 1
UBS ATS........................... 1.78 10 1
Bats EDGA Exchange, Inc........... 1.69 11 1
Investors' Exchange, LLC.......... 1.25 12 1
CROSSFINDER....................... 1.09 13 1
SUPERX............................ 0.79 14 2
MS POOL (ATS-4)................... 0.68 15 2
NASDAQ PHLX LLC................... 0.66 16 2
J.P. MORGAN AST (``JPM-X'')....... 0.56 17 2
LEVEL ATS......................... 0.49 18 2
INSTINCT X........................ 0.48 19 2
BIDS TRADING L.P.................. 0.44 20 2
BARCLAYS ATS (``LX'')............. 0.43 21 2
KCG MATCHIT....................... 0.42 22 2
SIGMA X........................... 0.39 23 2
INSTINET CONTINUOUS BLOCK CROSSING 0.34 24 2
SYSTEM (CBX).....................
Chicago Stock Exchange, Inc....... 0.31 25 2
POSIT............................. 0.30 26 2
CROSSSTREAM....................... 0.25 27 2
MS TRAJECTORY CROSS (ATS-1)....... 0.16 28 2
NYSE MKT LLC...................... 0.14 29 2
LIQUIDNET ATS..................... 0.13 30 2
IBKR ATS.......................... 0.13 31 2
MILLENNIUM........................ 0.12 32 2
GLOBAL OTC........................ 0.12 33 2
DEALERWEB, INC.................... 0.11 34 2
CITICROSS......................... 0.09 35 2
BLOCKCROSS ATS.................... 0.08 36 2
LIQUIDNET H20 ATS................. 0.07 37 2
CODA MARKETS, INC................. 0.07 38 2
INSTINET CROSSING, INSTINET BLX... 0.06 39 2
LUMINEX TRADING & ANALYTICS LLC... 0.03 40 2
LIGHT POOL........................ 0.02 41 2
MS RETAIL POOL.................... 0.02 42 2
CITIBLOC.......................... 0.02 43 2
NYSE National, Inc................ 0.01 44 2
USTOCKTRADE SECURITIES, INC....... 0.01 45 2
AQUA SECURITIES L.P............... 0.0047 46 2
XE................................ 0.0037 47 2
LIQUIFI........................... 0.0014 48 2
VARIABLE INVESTMENT ADVISORS, INC. 0.000073 49 2
ATS (VIAATS).....................
BARCLAYS DIRECTEX................. 0.0000303 50 2

[[Page 28198]]

FNC AG STOCK, LLC................. 0.0000225 51 2
AX TRADING, LLC................... 0.0000026 52 2
PRO SECURITIES ATS................ 0.0000002 53 2
------------------------------------------------------------------------

Options Execution Venue Rank and Tier
------------------------------------------------------------------------
Market share
of share
volume
Market participant (Options Rank Tier
contracts)
\46\ (%)
------------------------------------------------------------------------
NASDAQ PHLX LLC................... 16.68 1 1
Chicago Board Options Exchange, 16.08 2 1
Incorporated.....................
Bats BZX Options Exchange, Inc.... 11.53 3 1
Nasdaq ISE, LLC................... 10.63 4 1
NYSE Arca, Inc.................... 9.52 5 1
The NASDAQ Options Market LLC..... 9.01 6 1
NYSE MKT LLC...................... 8.01 7 1
Miami International Securities 5.84 8 1
Exchange, LLC....................
Nasdaq GEMX, LLC.................. 4.16 9 1
Chicago Board Options Exchange, 3.33 10 1
Incorporated 2...................
BOX Options Exchange LLC.......... 3.02 11 1
Bats EDGX Options Exchange, Inc... 1.31 12 2
NASDAQ BX, Inc.................... 0.67 13 2
Nasdaq MRX, LLC................... 0.21 14 2
MIAX PEARL, LLC................... N/A \47\ 15 2
------------------------------------------------------------------------

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

\46\ Based on November 2016 through January 2017 volume sourced
from Bats.
\47\ No market statistics as of January 2017. Launched trading
operations on February 6, 2017.
---------------------------------------------------------------------------

[FR Doc. 2017-12771 Filed 6-19-17; 8:45 am]
BILLING CODE 8011-01-P

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