Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Amendment No. 2 to the Proposed Rule Change To Amend the Schedule of Fees and Assessments To Adopt a Fee Schedule To Establish Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail, 59037-59040 [2017-26919]

Download as PDF Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82252; File No. SR–CHX– 2017–08] Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; Notice of Filing of Amendment No. 2 to the Proposed Rule Change To Amend the Schedule of Fees and Assessments To Adopt a Fee Schedule To Establish Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail December 8, 2017. On May 3, 2017, Chicago Stock Exchange, Inc. (‘‘Exchange’’ or ‘‘CHX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt a fee schedule to establish the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (‘‘CAT NMS Plan’’). The proposed rule change was published in the Federal Register for comment on May 22, 2017.3 The Commission received seven comment letters on the proposed rule change,4 and a response to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 80691 (May 16, 2017), 82 FR 23344 (May 22, 2017) (‘‘Original Proposal’’). 4 Since the CAT NMS Plan Participants’ proposed rule changes to adopt fees to be charged to Industry Members to fund the consolidated audit trail are substantively identical, the Commission is considering all comments received on the proposed rule changes regardless of the comment file to which they were submitted. See text accompanying notes 12–15 infra, for a list of the CAT NMS Plan Participants. See Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Brent J. Fields, Secretary, Commission (dated June 6, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1788188-153228.pdf; Letter from Patricia L. Cerny and Steven O’Malley, Compliance Consultants, to Brent J. Fields, Secretary, Commission (dated June 12, 2017), available at: https://www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1799253-153675.pdf; Letter from Daniel Zinn, General Counsel, OTC Markets Group Inc., to Eduardo A. Aleman, Assistant Secretary, Commission (dated June 13, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1801717-153703.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission (dated June 22, 2017), available at: https:// www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1819670-154195.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated June 23, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1822454-154283.pdf; and Letter from Suzanne H. Shatto, Investor, to Commission (dated June 27, 2017), available at: https://www.sec.gov/ sradovich on DSK3GMQ082PROD with NOTICES 2 17 VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 comments from the CAT NMS Plan Participants.5 On June 30, 2017, the Commission temporarily suspended and initiated proceedings to determine whether to approve or disapprove the proposed rule change.6 The Commission thereafter received seven comment letters,7 and a response to comments from the Participants.8 On November 9, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.9 On November 9, 2017, the Commission extended the time period within which to approve the proposed rule change or disapprove the proposed rule change to comments/sr-batsedgx-2017-22/batsedgx201722154443.pdf. The Commission also received a comment letter which is not pertinent to these proposed rule changes. See Letter from Christina Crouch, Smart Ltd., to Brent J. Fields, Secretary, Commission (dated June 5, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1785545-153152.htm. 5 See Letter from CAT NMS Plan Participants to Brent J. Fields, Secretary, Commission (dated June 29, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017111832632-154584.pdf. 6 See Securities Exchange Act Release No. 81067 (June 30, 2017), 82 FR 31656 (July 7, 2017). 7 See Letter from W. Hardy Callcott, Partner, Sidley Austin LLP, to Brent J. Fields, Secretary, Commission (dated July 27, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2148338-157737.pdf; Letter from Kevin Coleman, General Counsel and Chief Compliance Officer, Belvedere Trading LLC, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017112148360-157740.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2151228157745.pdf; Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https:// www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2150977-157744.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2150818-157743.pdf; Letter from John Kinahan, Chief Executive Officer, Group One Trading, L.P., to Brent J. Fields, Secretary, Commission (dated August 10, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-2214568-160619.pdf; Letter from Joseph Molluso, Executive Vice President and CFO, Virtu Financial, to Brent J. Fields, Commission (dated August 18, 2017), available at: https:// www.sec.gov/comments/sr-finra-2017-011/ finra2017011-2238648-160830.pdf. 8 See Letter from Michael Simon, Chair, CAT NMS Plan Operating Committee, to Brent J. Fields, Commission, Secretary (dated November 2, 2017), available at https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2674608161412.pdf. 9 Amendment No. 1 to the proposed rule change replaced and superseded the Original Proposal in its entirety. See Securities Exchange Act Release No. 82251 (December 8, 2017). PO 00000 Frm 00246 Fmt 4703 Sfmt 4703 59037 January 14, 2018.10 On November 30, 2017, the Exchange filed Amendment No. 2 to the proposed rule change, as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments from interested persons on Amendment No. 2. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change On May 3, 2017, the Chicago Stock Exchange, Inc. (‘‘Exchange’’ or ‘‘CHX’’) filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) proposed rule change SR–CHX–2017–08 (the ‘‘Original Proposal’’), pursuant to which the Exchange proposed to adopt a fee schedule to establish the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).11 On November 9, 2017, the Exchange filed an amendment to the Original Proposal (‘‘First Amendment’’). The Exchange files this proposed rule change (the ‘‘Second Amendment’’) to amend the Original Proposal as amended by the First Amendment. The text of this proposed rule change is available on the Exchange’s website at (www.chx.com) and in 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 CHX included statements concerning the purpose of and basis for the proposed rule changes 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 CHX has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Changes 1. Purpose The Exchange, BOX Options Exchange LLC, Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe 10 See Securities Exchange Act Release No. 82049 (November 9, 2017), 82 FR 53549 (November 16, 2017). 11 Unless otherwise specified, capitalized terms used in this fee filing are defined as set forth herein, the CAT Compliance Rule Series, in the CAT NMS Plan, or the Original Proposal. E:\FR\FM\14DEN1.SGM 14DEN1 59038 Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc.,12 Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), Investors’ Exchange LLC, Miami International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,13 NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC,14 NYSE Arca, Inc. and NYSE National, Inc.15 (collectively, the ‘‘Plan Participants’’) 16 filed with the Commission, pursuant to Section 11A of the Exchange Act 17 and Rule 608 of Regulation NMS thereunder,18 the CAT NMS Plan.19 The Plan Participants filed the Plan to comply with Rule 613 of Regulation NMS under the Exchange Act. The Plan was published for comment in the Federal Register on May 17, 2016,20 and approved by the Commission, as modified, on November 15, 2016.21 The Plan is designed to create, implement and maintain a consolidated audit trail (‘‘CAT’’) that would capture customer and order event information for orders in NMS 12 Note that Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., LLC, C2 Options Exchange, Incorporated, and Chicago Board Options Exchange, Incorporated, have been renamed Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., respectively. 13 ISE Gemini, LLC, ISE Mercury, LLC and International Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange Act Rel. No. 80248 (Mar. 15, 2017), 82 FR 14547 (Mar. 21, 2017); Securities Exchange Act Rel. No. 80326 (Mar. 29, 2017), 82 FR 16460 (Apr. 4, 2017); and Securities Exchange Act Rel. No. 80325 (Mar. 29, 2017), 82 FR 16445 (Apr. 4, 2017). 14 NYSE MKT LLC has been renamed NYSE American LLC. See Securities Exchange Act Rel. No. 80283 (Mar. 21. 2017), 82 FR 15244 (Mar. 27, 2017). 15 National Stock Exchange, Inc. has been renamed NYSE National, Inc. See Securities Exchange Act Rel. No. 79902 (Jan. 30, 2017), 82 FR 9258 (Feb. 3, 2017). 16 A ‘‘Participant’’ is a ‘‘member’’ of the Exchange for purposes of the Act. See CHX Article 1, Rule 1(s). For clarity, the term ‘‘Plan Participant’’ will be used herein when referring to Participants of the Plan. 17 15 U.S.C. 78k–1. 18 17 CFR 242.608. 19 See Letter from the Plan Participants to Brent J. Fields, Secretary, Commission, dated September 30, 2014; and Letter from Plan Participants to Brent J. Fields, Secretary, Commission, dated February 27, 2015. On December 24, 2015, the Plan Participants submitted an amendment to the CAT NMS Plan. See Letter from Plan Participants to Brent J. Fields, Secretary, Commission, dated December 23, 2015. 20 Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 FR 30614 (May 17, 2016). 21 Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘Approval Order’’). VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 Securities and OTC Equity Securities, across all markets, from the time of order inception through routing, cancellation, modification, or execution in a single consolidated data source. The Plan accomplishes this by creating CAT NMS, LLC (the ‘‘Company’’), of which each Plan Participant is a member, to operate the CAT.22 Under the CAT NMS Plan, the Operating Committee of the Company (‘‘Operating Committee’’) has discretion to establish funding for the Company to operate the CAT, including establishing fees that the Plan Participants will pay, and establishing fees for Industry Members that will be implemented by the Plan Participants (‘‘CAT Fees’’).23 The Plan Participants are required to file with the SEC under Section 19(b) of the Exchange Act any such CAT Fees applicable to Industry Members that the Operating Committee approves.24 Accordingly, the Exchange submitted the Original Proposal to propose the Consolidated Audit Trail Funding Fees, which would require Industry Members that are Exchange members to pay the CAT Fees determined by the Operating Committee. The Commission published the Original Proposal for public comment in the Federal Register on May 22, 2017,25 and received comments in response to the Original Proposal or similar fee filings by other Plan Participants.26 On June 30, 2017, the Commission suspended, and instituted proceedings to determine whether to approve or disapprove, the Original Proposal.27 The Commission received seven comment letters in response to those proceedings.28 22 The Plan also serves as the limited liability company agreement for the Company. 23 Section 11.1(b) of the CAT NMS Plan. 24 Id. 25 Exchange Act Rel. No. 80691 (May 16, 2017), 82 FR 23344 (May 22, 2017). 26 For a summary of comments, see generally Securities Exchange Act Rel. No. 81067 (June 30, 2017), 82 FR 31656 (July 7, 2017) (‘‘Suspension Order’’). 27 Suspension Order. 28 See Letter from Stuart J. Kaswell, Executive Vice President, Managing Director and General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, SEC (July 28, 2017) (‘‘MFA Letter’’); Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA, to Brent J. Fields, Secretary, SEC (July 28, 2017) (‘‘SIFMA Letter’’); Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, SEC (July 28, 2017) (‘‘FIA Principal Traders Group Letter’’); Letter from Kevin Coleman, General Counsel & Chief Compliance Officer, Belvedere Trading LLC, to Brent J. Fields, Secretary, SEC (July 28, 2017) (‘‘Belvedere Letter’’); Letter from W. Hardy Callcott, Sidley Austin LLP, to Brent J. Fields, Secretary, SEC (July 27, 2017) (‘‘Sidley Letter’’); Letter from John Kinahan, Chief Executive Officer, Group One Trading, L.P., to Brent J. Fields, Secretary, SEC (Aug. 10, 2017) (‘‘Group One PO 00000 Frm 00247 Fmt 4703 Sfmt 4703 In response to the comments on the Original Proposal, the Operating Committee determined to make the following changes to the funding model: (1) Adds two additional CAT Fee tiers for Equity Execution Venues; (2) discounts the market share of Execution Venue ATSs exclusively trading OTC Equity Securities as well as the market share of the FINRA over-the-counter reporting facility (‘‘ORF’’) by the average shares per trade ratio between NMS Stocks and OTC Equity Securities (calculated as 0.17% based on available data from the second quarter of June 2017) when calculating the market share of Execution Venue ATS exclusively trading OTC Equity Securities and FINRA; (3) discounts the Options Market Maker quotes by the trade to quote ratio for options (calculated as 0.01% based on available data for June 2016 through June 2017) when calculating message traffic for Options Market Makers; (4) discounts equity market maker quotes by the trade to quote ratio for equities (calculated as 5.43% based on available data for June 2016 through June 2017) when calculating message traffic for equity market makers; (5) decreases the number of tiers for Industry Members (other than the Execution Venue ATSs) from nine to seven; (6) changes the allocation of CAT costs between Equity Execution Venues and Options Execution Venues from 75%/25% to 67%/33%; (7) adjusts tier percentages and recovery allocations for Equity Execution Venues, Options Execution Venues and Industry Members (other than Execution Venue ATSs); (8) focuses the comparability of CAT Fees on the individual entity level, rather than primarily on the comparability of affiliated entities; (9) commences invoicing of CAT Reporters as promptly as possible following the latest of the operative date of the Consolidated Audit Trail Funding Fees for each of the Plan Participants and the operative date of the CAT NMS Plan amendment adopting CAT Fees for Plan Participants; and (10) requires the proposed fees to automatically expire two years from the operative date of the CAT NMS Plan amendment adopting CAT Fees for Plan Participants. On November 9, 2017, the Exchange filed the First Amendment and proposed to amend the Original Proposal to reflect these changes. The Exchange submits this Second Amendment to revise the proposal as set Letter’’); and Letter from Joseph Molluso, Executive Vice President, Virtu Financial, to Brent J. Fields, Secretary, SEC (Aug. 18, 2017) (‘‘Virtu Financial Letter’’). E:\FR\FM\14DEN1.SGM 14DEN1 Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices forth in the First Amendment to discount the OTC Equity Securities market share of all Execution Venue ATSs trading OTC Equity Securities, rather than applying the discount solely to those Execution Venue ATSs that exclusively trade OTC Equity Securities, when calculating the market share of Execution Venue ATS trading OTC Equity Securities. As discussed in the First Amendment: The Operating Committee determined to discount the market share of Execution Venue ATSs exclusively trading OTC Equity Securities as well as the market share of the FINRA ORF in recognition of the different trading characteristics of the OTC Equity Securities market as compared to the market in NMS Stocks. Many OTC Equity Securities are priced at less than one dollar—and a significant number at less than one penny— per share and low-priced shares tend to trade in larger quantities. Accordingly, a disproportionately large number of shares are involved in transactions involving OTC Equity Securities versus NMS Stocks. Because the proposed fee tiers are based on market share calculated by share volume, Execution Venue ATSs exclusively trading OTC Equity Securities and FINRA would likely be subject to higher tiers than their operations may warrant.29 The Operating Committee believes that this argument applies equally to both Execution Venue ATSs exclusively trading OTC Equity Securities and to Execution Venue ATSs that trade OTC Equity Securities as well as other securities. Accordingly, the Exchange proposes to amend paragraph (b)(2) of the Consolidated Audit Trail Funding Fees to apply the discount to all Execution Venue ATSs trading OTC Equity Securities. Specifically, the Exchange proposes to change the parenthetical regarding the OTC Equity Securities discount in paragraph (b)(2) of the proposed fee schedule from ‘‘with a discount for Equity ATSs exclusively trading OTC Equity Securities based on the average shares per trade ratio between NMS Stocks and OTC Equity Securities’’ to ‘‘with a discount for OTC Equity Securities market share of Equity ATSs trading OTC Equity Securities based on the average shares per trade ratio between NMS Stocks and OTC Equity Securities.’’ sradovich on DSK3GMQ082PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the provisions of Section 6(b)(5) of the Act,30 which require, among other things, that the Exchange’s rules must be designed to prevent fraudulent and 29 See Amendment No. 1 to SR–CHX–2016–08 (November 9, 2017) at 32. 30 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 manipulative acts and practices, to promote just and equitable principles of trade, and, in general, to protect investors and the public interest, and not designed to permit unfair discrimination between customers, issuers, brokers and dealer, and Section 6(b)(4) of the Act,31 which requires that exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using its facilities. The Exchange believes that the proposed change is consistent with the Act, and that the proposed fees are reasonable, equitably allocated and not unfairly discriminatory. In particular, the Exchange believes that the proposed change would treat all Equity ATSs trading OTC Equity Securities in a comparable manner when calculating applicable fees. In addition, the fee structure takes into consideration distinctions in securities trading operations of CAT Reporters, including all ATSs trading OTC Equity Securities. B. Self-Regulatory Organization’s Statement of Burden on Competition Section 6(b)(8) of the Act 32 require that the Exchange’s rules not impose any burden on competition that is not necessary or appropriate. The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously described, the Exchange believes that the proposed rule change fairly and equitably allocates costs among CAT Reporters. In particular, the proposed fee schedule is structured to impose comparable fees on similarly situated CAT Reporters. The Exchange believes that the proposed change would treat all Equity ATSs trading OTC Equity Securities in a comparable manner when calculating applicable fees. In addition, the fee structure takes into consideration distinctions in securities trading operations of CAT Reporters, including all ATSs trading OTC Equity Securities. Moreover, the Operating Committee believes that the proposed changes address certain competitive concerns raised by commenters related to ATSs trading OTC Equity Securities. C. Self-Regulatory Organization’s Statement on Comments Regarding the Proposed Rule Changes Received From Members, Plan Participants or Others The Exchange set forth responses to comments received regarding the Original Proposal in the First 31 15 32 15 PO 00000 U.S.C. 78f(b)(4). U.S.C. 78f(b)(8). Frm 00248 Fmt 4703 Sfmt 4703 59039 Amendment. In addition, the proposed changes set forth in this Second Amendment further respond to comments made regarding ATSs trading OTC Equity Securities. III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal, as amended by Amendment No. 1 and Amendment No. 2, is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CHX–2017–08 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CHX–2017–08. 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 website (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CHX–2017–08, and should E:\FR\FM\14DEN1.SGM 14DEN1 59040 Federal Register / Vol. 82, No. 239 / Thursday, December 14, 2017 / Notices be submitted on or before January 4, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26919 Filed 12–13–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82285; File No. SR– NASDAQ–2017–046] Self-Regulatory Organizations; The Nasdaq Stock Market LLC.; Notice of Filing of Amendment No. 2 to a Proposed Rule Change To Adopt Rule 7004 and Chapter XV, Section 11 December 11, 2017. On May 2, 2017, The Nasdaq Stock Market LLC. (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to adopt a fee schedule to establish the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (‘‘CAT NMS Plan’’). The proposed rule change was published in the Federal Register for comment on May 22, 2017.3 The Commission received seven comment letters on the proposed rule change,4 and a response to 33 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 80696 (May 16, 2017), 82 FR 23439 (May 22, 2017) (‘‘Original Proposal’’). 4 Since the CAT NMS Plan Participants’ proposed rule changes to adopt fees to be charged to Industry Members to fund the consolidated audit trail are substantively identical, the Commission is considering all comments received on the proposed rule changes regardless of the comment file to which they were submitted. See text accompanying notes 13–16 infra, for a list of the CAT NMS Plan Participants. See Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, Securities Industry and Financial Markets Association, to Brent J. Fields, Secretary, Commission (dated June 6, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1788188-153228.pdf; Letter from Patricia L. Cerny and Steven O’Malley, Compliance Consultants, to Brent J. Fields, Secretary, Commission (dated June 12, 2017), available at: https://www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1799253-153675.pdf; Letter from Daniel Zinn, General Counsel, OTC Markets Group Inc., to Eduardo A. Aleman, Assistant Secretary, Commission (dated June 13, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1801717-153703.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission sradovich on DSK3GMQ082PROD with NOTICES 1 15 VerDate Sep<11>2014 21:28 Dec 13, 2017 Jkt 244001 comments from the Participants.5 On June 30, 2017, the Commission temporarily suspended and initiated proceedings to determine whether to approve or disapprove the proposed rule change.6 The Commission thereafter received seven comment letters,7 and a response to comments from the Participants.8 On November 6, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.9 On (dated June 22, 2017), available at: https:// www.sec.gov/comments/sr-cboe-2017-040/ cboe2017040-1819670-154195.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated June 23, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-1822454-154283.pdf; and Letter from Suzanne H. Shatto, Investor, to Commission (dated June 27, 2017), available at: https://www.sec.gov/ comments/sr-batsedgx-2017-22/batsedgx201722154443.pdf. The Commission also received a comment letter which is not pertinent to these proposed rule changes. See Letter from Christina Crouch, Smart Ltd., to Brent J. Fields, Secretary, Commission (dated June 5, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/ batsbzx201738-1785545-153152.htm. 5 See Letter from CAT NMS Plan Participants to Brent J. Fields, Secretary, Commission (dated June 29, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017111832632-154584.pdf. 6 See Securities Exchange Act Release No. 81067 (June 30, 2017), 82 FR 31656 (July 7, 2017). 7 See Letter from W. Hardy Callcott, Partner, Sidley Austin LLP, to Brent J. Fields, Secretary, Commission (dated July 27, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2148338-157737.pdf; Letter from Kevin Coleman, General Counsel and Chief Compliance Officer, Belvedere Trading LLC, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/ comments/sr-batsbyx-2017-11/batsbyx2017112148360-157740.pdf; Letter from Joanna Mallers, Secretary, FIA Principal Traders Group, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2151228157745.pdf; Letter from Theodore R. Lazo, Managing Director and Associate General Counsel, SIFMA, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https:// www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2150977-157744.pdf; Letter from Stuart J. Kaswell, Executive Vice President and Managing Director, General Counsel, Managed Funds Association, to Brent J. Fields, Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/ batsbyx201711-2150818-157743.pdf; Letter from John Kinahan, Chief Executive Officer, Group One Trading, L.P., to Brent J. Fields, Secretary, Commission (dated August 10, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/ finra2017011-2214568-160619.pdf; Letter from Joseph Molluso, Executive Vice President and CFO, Virtu Financial, to Brent J. Fields, Commission (dated August 18, 2017), available at: https:// www.sec.gov/comments/sr-finra-2017-011/ finra2017011-2238648-160830.pdf. 8 See Letter from Michael Simon, Chair, CAT NMS Plan Operating Committee, to Brent J. Fields, Commission, Secretary (dated November 2, 2017), available at https://www.sec.gov/comments/srbatsbyx-2017-11/batsbyx201711-2674608161412.pdf. 9 Amendment No. 1 to the proposed rule change replaced and superseded the Original Proposal in PO 00000 Frm 00249 Fmt 4703 Sfmt 4703 November 9, 2017, the Commission extended the time period within which to approve the proposed rule change or disapprove the proposed rule change to January 14, 2018.10 On December 4, 2017, the Exchange filed Amendment No. 2 to the proposed rule change, as described in Items I and II below, which Items have been prepared by the Exchange.11 The Commission is publishing this notice to solicit comments from interested persons on Amendment No. 2. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change On May 2, 2017, The Nasdaq Stock Market LLC filed with the Securities and Exchange Commission (‘‘Commission’’ or ‘‘SEC’’) proposed rule change SR–NASDAQ–2017–046 (the ‘‘Original Proposal’’), pursuant to which the Exchange proposed to adopt a fee schedule to establish the fees for Industry Members related to the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’).12 The Exchange is filing this proposed rule change (the ‘‘Amendment’’) to amend the Original Proposal. On November 6, 2017, the Exchange filed an amendment to the Original Proposal (‘‘Amendment No. 1’’), which replaced the Original Proposal in its entirety. The Exchange is now filing this Amendment No. 2 to replace Amendment No. 1 in its entirety. This Amendment No. 2 describes the changes from the Original Proposal. With this Amendment No. 2, the Exchange is including Exhibit 4, which reflects the changes to the text of the proposed rule change as set forth in the Original Proposal, and Exhibit 5, which reflects all proposed changes to the Exchange’s current rule text. The text of the proposed rule change is available on the Exchange’s website at http://nasdaq.cchwallstreet.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. its entirety. Amendment No. 1 is available on the Commission’s website for Nasdaq at: https:// www.sec.gov/comments/sr-nasdaq-2017-046/ nasdaq2017046-2673136-161450.pdf. 10 See Securities Exchange Act Release No. 82049 (November 9, 2017), 82 FR 53549 (November 16, 2017). 11 Amendment No. 2 replaces and supersedes Amendment No. 1 in its entirety. 12 Unless otherwise specified, capitalized terms used in this fee filing are defined as set forth herein, the CAT Compliance Rule Series, in the CAT NMS Plan, or the Original Proposal. E:\FR\FM\14DEN1.SGM 14DEN1

Agencies

[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 59037-59040]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26919]



[[Page 59037]]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82252; File No. SR-CHX-2017-08]


Self-Regulatory Organizations; Chicago Stock Exchange, Inc.; 
Notice of Filing of Amendment No. 2 to the Proposed Rule Change To 
Amend the Schedule of Fees and Assessments To Adopt a Fee Schedule To 
Establish Fees for Industry Members Related to the National Market 
System Plan Governing the Consolidated Audit Trail

December 8, 2017.
    On May 3, 2017, Chicago Stock Exchange, Inc. (``Exchange'' or 
``CHX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to adopt a fee schedule to establish the fees for 
Industry Members related to the National Market System Plan Governing 
the Consolidated Audit Trail (``CAT NMS Plan''). The proposed rule 
change was published in the Federal Register for comment on May 22, 
2017.\3\ The Commission received seven comment letters on the proposed 
rule change,\4\ and a response to comments from the CAT NMS Plan 
Participants.\5\ On June 30, 2017, the Commission temporarily suspended 
and initiated proceedings to determine whether to approve or disapprove 
the proposed rule change.\6\ The Commission thereafter received seven 
comment letters,\7\ and a response to comments from the 
Participants.\8\ On November 9, 2017, the Exchange filed Amendment No. 
1 to the proposed rule change.\9\ On November 9, 2017, the Commission 
extended the time period within which to approve the proposed rule 
change or disapprove the proposed rule change to January 14, 2018.\10\ 
On November 30, 2017, the Exchange filed Amendment No. 2 to the 
proposed rule change, as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments from interested persons on Amendment No. 2.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80691 (May 16, 
2017), 82 FR 23344 (May 22, 2017) (``Original Proposal'').
    \4\ Since the CAT NMS Plan Participants' proposed rule changes 
to adopt fees to be charged to Industry Members to fund the 
consolidated audit trail are substantively identical, the Commission 
is considering all comments received on the proposed rule changes 
regardless of the comment file to which they were submitted. See 
text accompanying notes 12-15 infra, for a list of the CAT NMS Plan 
Participants. See Letter from Theodore R. Lazo, Managing Director 
and Associate General Counsel, Securities Industry and Financial 
Markets Association, to Brent J. Fields, Secretary, Commission 
(dated June 6, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/batsbzx201738-1788188-153228.pdf; Letter from 
Patricia L. Cerny and Steven O'Malley, Compliance Consultants, to 
Brent J. Fields, Secretary, Commission (dated June 12, 2017), 
available at: https://www.sec.gov/comments/sr-cboe-2017-040/cboe2017040-1799253-153675.pdf; Letter from Daniel Zinn, General 
Counsel, OTC Markets Group Inc., to Eduardo A. Aleman, Assistant 
Secretary, Commission (dated June 13, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/finra2017011-1801717-153703.pdf; Letter from Joanna Mallers, Secretary, FIA Principal 
Traders Group, to Brent J. Fields, Secretary, Commission (dated June 
22, 2017), available at: https://www.sec.gov/comments/sr-cboe-2017-040/cboe2017040-1819670-154195.pdf; Letter from Stuart J. Kaswell, 
Executive Vice President and Managing Director, General Counsel, 
Managed Funds Association, to Brent J. Fields, Secretary, Commission 
(dated June 23, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/finra2017011-1822454-154283.pdf; and Letter from 
Suzanne H. Shatto, Investor, to Commission (dated June 27, 2017), 
available at: https://www.sec.gov/comments/sr-batsedgx-2017-22/batsedgx201722-154443.pdf. The Commission also received a comment 
letter which is not pertinent to these proposed rule changes. See 
Letter from Christina Crouch, Smart Ltd., to Brent J. Fields, 
Secretary, Commission (dated June 5, 2017), available at: https://www.sec.gov/comments/sr-batsbzx-2017-38/batsbzx201738-1785545-153152.htm.
    \5\ See Letter from CAT NMS Plan Participants to Brent J. 
Fields, Secretary, Commission (dated June 29, 2017), available at: 
https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-1832632-154584.pdf.
    \6\ See Securities Exchange Act Release No. 81067 (June 30, 
2017), 82 FR 31656 (July 7, 2017).
    \7\ See Letter from W. Hardy Callcott, Partner, Sidley Austin 
LLP, to Brent J. Fields, Secretary, Commission (dated July 27, 
2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-2148338-157737.pdf; Letter from Kevin Coleman, 
General Counsel and Chief Compliance Officer, Belvedere Trading LLC, 
to Brent J. Fields, Secretary, Commission (dated July 28, 2017), 
available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-2148360-157740.pdf; Letter from Joanna Mallers, 
Secretary, FIA Principal Traders Group, to Brent J. Fields, 
Secretary, Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-2151228-157745.pdf; Letter from Theodore R. Lazo, Managing Director and 
Associate General Counsel, SIFMA, to Brent J. Fields, Secretary, 
Commission (dated July 28, 2017), available at: https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-2150977-157744.pdf; Letter 
from Stuart J. Kaswell, Executive Vice President and Managing 
Director, General Counsel, Managed Funds Association, to Brent J. 
Fields, Secretary, Commission (dated July 28, 2017), available at: 
https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-2150818-157743.pdf; Letter from John Kinahan, Chief Executive 
Officer, Group One Trading, L.P., to Brent J. Fields, Secretary, 
Commission (dated August 10, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/finra2017011-2214568-160619.pdf; Letter from Joseph Molluso, Executive Vice President and 
CFO, Virtu Financial, to Brent J. Fields, Commission (dated August 
18, 2017), available at: https://www.sec.gov/comments/sr-finra-2017-011/finra2017011-2238648-160830.pdf.
    \8\ See Letter from Michael Simon, Chair, CAT NMS Plan Operating 
Committee, to Brent J. Fields, Commission, Secretary (dated November 
2, 2017), available at https://www.sec.gov/comments/sr-batsbyx-2017-11/batsbyx201711-2674608-161412.pdf.
    \9\ Amendment No. 1 to the proposed rule change replaced and 
superseded the Original Proposal in its entirety. See Securities 
Exchange Act Release No. 82251 (December 8, 2017).
    \10\ See Securities Exchange Act Release No. 82049 (November 9, 
2017), 82 FR 53549 (November 16, 2017).
---------------------------------------------------------------------------

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

    On May 3, 2017, the Chicago Stock Exchange, Inc. (``Exchange'' or 
``CHX'') filed with the Securities and Exchange Commission 
(``Commission'' or ``SEC'') proposed rule change SR-CHX-2017-08 (the 
``Original Proposal''), pursuant to which the Exchange proposed to 
adopt a fee schedule to establish the fees for Industry Members related 
to the National Market System Plan Governing the Consolidated Audit 
Trail (the ``CAT NMS Plan'' or ``Plan'').\11\ On November 9, 2017, the 
Exchange filed an amendment to the Original Proposal (``First 
Amendment''). The Exchange files this proposed rule change (the 
``Second Amendment'') to amend the Original Proposal as amended by the 
First Amendment.
---------------------------------------------------------------------------

    \11\ Unless otherwise specified, capitalized terms used in this 
fee filing are defined as set forth herein, the CAT Compliance Rule 
Series, in the CAT NMS Plan, or the Original Proposal.
---------------------------------------------------------------------------

    The text of this proposed rule change is available on the 
Exchange's website at (www.chx.com) and in 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 CHX included statements 
concerning the purpose of and basis for the proposed rule changes 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 CHX has prepared summaries, set forth in sections A, 
B and C below, of the most significant aspects of such statements.

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

1. Purpose
    The Exchange, BOX Options Exchange LLC, Cboe BYX Exchange, Inc., 
Cboe BZX Exchange, Inc., Cboe

[[Page 59038]]

EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., 
Cboe Exchange, Inc.,\12\ Financial Industry Regulatory Authority, Inc. 
(``FINRA''), Investors' Exchange LLC, Miami International Securities 
Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, Inc., Nasdaq GEMX, LLC, 
Nasdaq ISE, LLC, Nasdaq MRX, LLC,\13\ NASDAQ PHLX LLC, The NASDAQ Stock 
Market LLC, New York Stock Exchange LLC, NYSE American LLC,\14\ NYSE 
Arca, Inc. and NYSE National, Inc.\15\ (collectively, the ``Plan 
Participants'') \16\ filed with the Commission, pursuant to Section 11A 
of the Exchange Act \17\ and Rule 608 of Regulation NMS thereunder,\18\ 
the CAT NMS Plan.\19\ The Plan Participants filed the Plan to comply 
with Rule 613 of Regulation NMS under the Exchange Act. The Plan was 
published for comment in the Federal Register on May 17, 2016,\20\ and 
approved by the Commission, as modified, on November 15, 2016.\21\ The 
Plan is designed to create, implement and maintain a consolidated audit 
trail (``CAT'') that would capture customer and order event information 
for orders in NMS Securities and OTC Equity Securities, across all 
markets, from the time of order inception through routing, 
cancellation, modification, or execution in a single consolidated data 
source. The Plan accomplishes this by creating CAT NMS, LLC (the 
``Company''), of which each Plan Participant is a member, to operate 
the CAT.\22\ Under the CAT NMS Plan, the Operating Committee of the 
Company (``Operating Committee'') has discretion to establish funding 
for the Company to operate the CAT, including establishing fees that 
the Plan Participants will pay, and establishing fees for Industry 
Members that will be implemented by the Plan Participants (``CAT 
Fees'').\23\ The Plan Participants are required to file with the SEC 
under Section 19(b) of the Exchange Act any such CAT Fees applicable to 
Industry Members that the Operating Committee approves.\24\ 
Accordingly, the Exchange submitted the Original Proposal to propose 
the Consolidated Audit Trail Funding Fees, which would require Industry 
Members that are Exchange members to pay the CAT Fees determined by the 
Operating Committee.
---------------------------------------------------------------------------

    \12\ Note that Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., 
Bats EDGA Exchange, Inc., Bats EDGX Exchange, Inc., LLC, C2 Options 
Exchange, Incorporated, and Chicago Board Options Exchange, 
Incorporated, have been renamed Cboe BYX Exchange, Inc., Cboe BZX 
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., 
Cboe C2 Exchange, Inc., Cboe Exchange, Inc., respectively.
    \13\ ISE Gemini, LLC, ISE Mercury, LLC and International 
Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq 
MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange 
Act Rel. No. 80248 (Mar. 15, 2017), 82 FR 14547 (Mar. 21, 2017); 
Securities Exchange Act Rel. No. 80326 (Mar. 29, 2017), 82 FR 16460 
(Apr. 4, 2017); and Securities Exchange Act Rel. No. 80325 (Mar. 29, 
2017), 82 FR 16445 (Apr. 4, 2017).
    \14\ NYSE MKT LLC has been renamed NYSE American LLC. See 
Securities Exchange Act Rel. No. 80283 (Mar. 21. 2017), 82 FR 15244 
(Mar. 27, 2017).
    \15\ National Stock Exchange, Inc. has been renamed NYSE 
National, Inc. See Securities Exchange Act Rel. No. 79902 (Jan. 30, 
2017), 82 FR 9258 (Feb. 3, 2017).
    \16\ A ``Participant'' is a ``member'' of the Exchange for 
purposes of the Act. See CHX Article 1, Rule 1(s). For clarity, the 
term ``Plan Participant'' will be used herein when referring to 
Participants of the Plan.
    \17\ 15 U.S.C. 78k-1.
    \18\ 17 CFR 242.608.
    \19\ See Letter from the Plan Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Plan Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Plan Participants 
submitted an amendment to the CAT NMS Plan. See Letter from Plan 
Participants to Brent J. Fields, Secretary, Commission, dated 
December 23, 2015.
    \20\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 
FR 30614 (May 17, 2016).
    \21\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 
FR 84696 (Nov. 23, 2016) (``Approval Order'').
    \22\ The Plan also serves as the limited liability company 
agreement for the Company.
    \23\ Section 11.1(b) of the CAT NMS Plan.
    \24\ Id.
---------------------------------------------------------------------------

    The Commission published the Original Proposal for public comment 
in the Federal Register on May 22, 2017,\25\ and received comments in 
response to the Original Proposal or similar fee filings by other Plan 
Participants.\26\ On June 30, 2017, the Commission suspended, and 
instituted proceedings to determine whether to approve or disapprove, 
the Original Proposal.\27\ The Commission received seven comment 
letters in response to those proceedings.\28\
---------------------------------------------------------------------------

    \25\ Exchange Act Rel. No. 80691 (May 16, 2017), 82 FR 23344 
(May 22, 2017).
    \26\ For a summary of comments, see generally Securities 
Exchange Act Rel. No. 81067 (June 30, 2017), 82 FR 31656 (July 7, 
2017) (``Suspension Order'').
    \27\ Suspension Order.
    \28\ See Letter from Stuart J. Kaswell, Executive Vice 
President, Managing Director and General Counsel, Managed Funds 
Association, to Brent J. Fields, Secretary, SEC (July 28, 2017) 
(``MFA Letter''); Letter from Theodore R. Lazo, Managing Director 
and Associate General Counsel, SIFMA, to Brent J. Fields, Secretary, 
SEC (July 28, 2017) (``SIFMA Letter''); Joanna Mallers, Secretary, 
FIA Principal Traders Group, to Brent J. Fields, Secretary, SEC 
(July 28, 2017) (``FIA Principal Traders Group Letter''); Letter 
from Kevin Coleman, General Counsel & Chief Compliance Officer, 
Belvedere Trading LLC, to Brent J. Fields, Secretary, SEC (July 28, 
2017) (``Belvedere Letter''); Letter from W. Hardy Callcott, Sidley 
Austin LLP, to Brent J. Fields, Secretary, SEC (July 27, 2017) 
(``Sidley Letter''); Letter from John Kinahan, Chief Executive 
Officer, Group One Trading, L.P., to Brent J. Fields, Secretary, SEC 
(Aug. 10, 2017) (``Group One Letter''); and Letter from Joseph 
Molluso, Executive Vice President, Virtu Financial, to Brent J. 
Fields, Secretary, SEC (Aug. 18, 2017) (``Virtu Financial Letter'').
---------------------------------------------------------------------------

    In response to the comments on the Original Proposal, the Operating 
Committee determined to make the following changes to the funding 
model: (1) Adds two additional CAT Fee tiers for Equity Execution 
Venues; (2) discounts the market share of Execution Venue ATSs 
exclusively trading OTC Equity Securities as well as the market share 
of the FINRA over-the-counter reporting facility (``ORF'') by the 
average shares per trade ratio between NMS Stocks and OTC Equity 
Securities (calculated as 0.17% based on available data from the second 
quarter of June 2017) when calculating the market share of Execution 
Venue ATS exclusively trading OTC Equity Securities and FINRA; (3) 
discounts the Options Market Maker quotes by the trade to quote ratio 
for options (calculated as 0.01% based on available data for June 2016 
through June 2017) when calculating message traffic for Options Market 
Makers; (4) discounts equity market maker quotes by the trade to quote 
ratio for equities (calculated as 5.43% based on available data for 
June 2016 through June 2017) when calculating message traffic for 
equity market makers; (5) decreases the number of tiers for Industry 
Members (other than the Execution Venue ATSs) from nine to seven; (6) 
changes the allocation of CAT costs between Equity Execution Venues and 
Options Execution Venues from 75%/25% to 67%/33%; (7) adjusts tier 
percentages and recovery allocations for Equity Execution Venues, 
Options Execution Venues and Industry Members (other than Execution 
Venue ATSs); (8) focuses the comparability of CAT Fees on the 
individual entity level, rather than primarily on the comparability of 
affiliated entities; (9) commences invoicing of CAT Reporters as 
promptly as possible following the latest of the operative date of the 
Consolidated Audit Trail Funding Fees for each of the Plan Participants 
and the operative date of the CAT NMS Plan amendment adopting CAT Fees 
for Plan Participants; and (10) requires the proposed fees to 
automatically expire two years from the operative date of the CAT NMS 
Plan amendment adopting CAT Fees for Plan Participants. On November 9, 
2017, the Exchange filed the First Amendment and proposed to amend the 
Original Proposal to reflect these changes.
    The Exchange submits this Second Amendment to revise the proposal 
as set

[[Page 59039]]

forth in the First Amendment to discount the OTC Equity Securities 
market share of all Execution Venue ATSs trading OTC Equity Securities, 
rather than applying the discount solely to those Execution Venue ATSs 
that exclusively trade OTC Equity Securities, when calculating the 
market share of Execution Venue ATS trading OTC Equity Securities. As 
discussed in the First Amendment:

    The Operating Committee determined to discount the market share 
of Execution Venue ATSs exclusively trading OTC Equity Securities as 
well as the market share of the FINRA ORF in recognition of the 
different trading characteristics of the OTC Equity Securities 
market as compared to the market in NMS Stocks. Many OTC Equity 
Securities are priced at less than one dollar--and a significant 
number at less than one penny--per share and low-priced shares tend 
to trade in larger quantities. Accordingly, a disproportionately 
large number of shares are involved in transactions involving OTC 
Equity Securities versus NMS Stocks. Because the proposed fee tiers 
are based on market share calculated by share volume, Execution 
Venue ATSs exclusively trading OTC Equity Securities and FINRA would 
likely be subject to higher tiers than their operations may 
warrant.\29\
---------------------------------------------------------------------------

    \29\ See Amendment No. 1 to SR-CHX-2016-08 (November 9, 2017) at 
32.

The Operating Committee believes that this argument applies equally to 
both Execution Venue ATSs exclusively trading OTC Equity Securities and 
to Execution Venue ATSs that trade OTC Equity Securities as well as 
other securities. Accordingly, the Exchange proposes to amend paragraph 
(b)(2) of the Consolidated Audit Trail Funding Fees to apply the 
discount to all Execution Venue ATSs trading OTC Equity Securities. 
Specifically, the Exchange proposes to change the parenthetical 
regarding the OTC Equity Securities discount in paragraph (b)(2) of the 
proposed fee schedule from ``with a discount for Equity ATSs 
exclusively trading OTC Equity Securities based on the average shares 
per trade ratio between NMS Stocks and OTC Equity Securities'' to 
``with a discount for OTC Equity Securities market share of Equity ATSs 
trading OTC Equity Securities based on the average shares per trade 
ratio between NMS Stocks and OTC Equity Securities.''
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act,\30\ which require, 
among other things, that the Exchange's rules must be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, and, in general, to protect 
investors and the public interest, and not designed to permit unfair 
discrimination between customers, issuers, brokers and dealer, and 
Section 6(b)(4) of the Act,\31\ which requires that exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using its 
facilities. The Exchange believes that the proposed change is 
consistent with the Act, and that the proposed fees are reasonable, 
equitably allocated and not unfairly discriminatory. In particular, the 
Exchange believes that the proposed change would treat all Equity ATSs 
trading OTC Equity Securities in a comparable manner when calculating 
applicable fees. In addition, the fee structure takes into 
consideration distinctions in securities trading operations of CAT 
Reporters, including all ATSs trading OTC Equity Securities.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78f(b)(5).
    \31\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

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

    Section 6(b)(8) of the Act \32\ require that the Exchange's rules 
not impose any burden on competition that is not necessary or 
appropriate. The Exchange does not believe that the proposed rule 
change will result in any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. As previously 
described, the Exchange believes that the proposed rule change fairly 
and equitably allocates costs among CAT Reporters. In particular, the 
proposed fee schedule is structured to impose comparable fees on 
similarly situated CAT Reporters. The Exchange believes that the 
proposed change would treat all Equity ATSs trading OTC Equity 
Securities in a comparable manner when calculating applicable fees. In 
addition, the fee structure takes into consideration distinctions in 
securities trading operations of CAT Reporters, including all ATSs 
trading OTC Equity Securities. Moreover, the Operating Committee 
believes that the proposed changes address certain competitive concerns 
raised by commenters related to ATSs trading OTC Equity Securities.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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

    The Exchange set forth responses to comments received regarding the 
Original Proposal in the First Amendment. In addition, the proposed 
changes set forth in this Second Amendment further respond to comments 
made regarding ATSs trading OTC Equity Securities.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal, as 
amended by Amendment No. 1 and Amendment No. 2, is consistent with the 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CHX-2017-08 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-CHX-2017-08. 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 website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website 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. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CHX-2017-08, and should

[[Page 59040]]

be submitted on or before January 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26919 Filed 12-13-17; 8:45 am]
 BILLING CODE 8011-01-P