Order Granting Temporary Exemptive Relief, Pursuant to Section 36 of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, From Section 8.1.1 and Section 8.1.2 of Appendix D of the National Market System Plan Governing the Consolidated Audit Trail, 83667-83671 [2020-28153]
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Arca Rule 8.900–E(d)(2)(C)(ii) provides
that, if the Exchange becomes aware
that: (i) The VIIV of a series of Managed
Portfolio Shares is not being calculated
or disseminated in one second intervals,
as required; (ii) the NAV with respect to
a series of Managed Portfolio Shares is
not disseminated to all market
participants at the same time; (iii) the
holdings of a series of Managed
Portfolio Shares are not made available
on at least a quarterly basis as required
under the 1940 Act; or (iv) such
holdings are not made available to all
market participants at the same time
(except as otherwise permitted under
the applicable Exemptive Order or noaction relief granted by the Commission
or Commission staff to the Investment
Company with respect to the series of
Managed Portfolio Shares), it will halt
trading in such series until such time as
the VIIV, the NAV, or the holdings are
available, as required.
In support of this proposal, the
Exchange has also made the following
representations:
(1) The Shares will conform to the
initial and continued listing criteria
under NYSE Arca Rule 8.900–E, as well
as all terms in the Exemptive Order.28
(2) The Exchange states that a
minimum of 100,000 Shares of each
Fund will be outstanding at the
commencement of trading on the
Exchange.29
(3) The Exchange deems the Shares to
be equity securities, thus rendering
trading in the Shares subject to the
Exchange’s existing rules governing the
trading of equity securities.30
(4) Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders (‘‘ETP
Holders’’) in an Information Bulletin
(‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares.31
order to determine whether to halt trading in a
series of Managed Portfolio Shares, and the
Exchange retains sole discretion in determining
whether trading should be halted. As provided in
the Exemptive Application, each series of Managed
Portfolio Shares would employ a pricing
verification agent to continuously compare two
intraday indicative values during regular trading
hours in order to ensure the accuracy of the VIIV.
See id. at 13, n.19.
28 See id. at 14.
29 See Amendment No. 2, supra note 5, at 3.
30 See Amendment No. 1, supra note 5, at 13.
31 The Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of
Shares; (2) NYSE Arca Rule 9.2–E(a), which
imposes a duty of due diligence on its ETP Holders
to learn the essential facts relating to every
customer prior to trading the Shares; (3) how
information regarding the VIIV is disseminated; (4)
the requirement that ETP Holders deliver a
prospectus to investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; (5) trading
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(5) FINRA, on behalf of the Exchange,
or the regulatory staff of the Exchange,
or both, will communicate as needed
regarding trading in the Shares and
certain exchange-traded instruments
with other markets and other entities
that are members of the Intermarket
Surveillance Group (‘‘ISG’’), and FINRA,
on behalf of the Exchange, or the
regulatory staff of the Exchange, or both,
may obtain trading information
regarding trading such securities from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares and certain exchange-traded
instruments from markets and other
entities that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement.32
(6) The Exchange represents that, for
initial and/or continued listing, each
Fund will be in compliance with Rule
10A–3 under the Act.33
This approval order is based on all of
the Exchange’s statements and
representations set forth above and in
Amendments No. 1 and No. 2.
Additionally, the Exchange states that
all statements and representations made
in its proposal regarding (a) the
description of the portfolio or reference
assets, (b) limitations on portfolio
holdings or reference assets, or (c) the
applicability of Exchange rules shall
constitute continued listing
requirements for listing the Shares on
the Exchange, as provided under NYSE
Arca Rule 8.900–E(b)(1). The issuer of
the Shares will be required to represent
to the Exchange that it will advise the
Exchange of any failure by a Fund to
comply with the continued listing
requirements, and, pursuant to its
obligations under Section 19(g)(1) of the
Act, the Exchange will surveil for
compliance with the continued listing
requirements. If a Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5–E(m).34
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by
Amendments No. 1 and No. 2, is
consistent with Section 6(b)(5) of the
Act 35 and Section 11A(a)(1)(C)(iii) of
the Act 36 and the rules and regulations
information; and (6) that the portfolio holdings of
the Shares are not disclosed on a daily basis. See
id. at 14–15.
32 See id. at 14.
33 See id. at 6, n.6.
34 See id. at 14.
35 15 U.S.C. 78f(b)(5).
36 15 U.S.C. 78k–1(a)(1)(C)(iii).
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83667
thereunder applicable to a national
securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,37 that the
proposed rule change (SR–NYSEArca–
2020–94), as modified by Amendments
No. 1 and No. 2, be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.38
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–28147 Filed 12–21–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90689]
Order Granting Temporary Exemptive
Relief, Pursuant to Section 36 of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) and Rule 608(e) of
Regulation NMS Under the Exchange
Act, From Section 8.1.1 and Section
8.1.2 of Appendix D of the National
Market System Plan Governing the
Consolidated Audit Trail
December 16, 2020.
I. Introduction
By letter dated December 1, 2020
(‘‘Participant Letter’’), BOX Exchange
LLC, Cboe BYX Exchange, Inc., Cboe
BZX Exchange, Inc., Cboe C2 Exchange,
Inc., Cboe EDGA Exchange, Inc., Cboe
EDGX Exchange, Inc., Cboe Exchange,
Inc., Financial Industry Regulatory
Authority, Inc. (‘‘FINRA’’), Investors
Exchange LLC, Long-Term Stock
Exchange, Inc., MEMX LLC, Miami
International Securities Exchange LLC,
MIAX Emerald, 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 American
LLC, NYSE Arca, Inc., NYSE Chicago,
Inc., and NYSE National, Inc.
(collectively, the ‘‘Participants’’) request
that the Securities and Exchange
Commission (the ‘‘Commission’’),
pursuant to the Commission’s authority
under Section 36 of the Exchange Act 1
and Rule 608(e) of Regulation NMS
under the Exchange Act,2 grant
exemptive relief from the national
market system plan governing the
37 15
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78mm.
2 17 CFR 242.608(e).
38 17
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consolidated audit trail (the ‘‘CAT NMS
Plan’’).3 Specifically, the Participants
request that the Commission provide
temporary exemptive relief from certain
requirements of the CAT NMS Plan that
relate to the online targeted query tool
(‘‘OTQT’’) described in Section
6.10(c)(i) of the CAT NMS Plan.4
For the reasons set forth below, this
Order grants the Participants’ request for
temporary exemptive relief from the
above-described provisions of the CAT
NMS Plan, subject to certain conditions.
II. Request for Relief
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In their letter, the Participants explain
that Section 6.10(c)(i) of the CAT NMS
Plan requires the Plan Processor 5 to
provide Participants and the
Commission with access to all CAT
Data 6 stored in the Central Repository 7
through three different methods: (1) The
OTQT, (2) user-defined direct queries,
and (3) and bulk extracts.8 Sections
8.1.1 and 8.1.2 of Appendix D of the
CAT NMS Plan set forth certain
functionality requirements for the
OTQT from which the Participants seek
relief.
3 The Commission approved the CAT NMS Plan,
as modified, on November 15, 2016. See Securities
Exchange Act Release Nos. 79318 (November 15,
2016), 81 FR 84696 (November 23, 2016) (‘‘CAT
NMS Plan Approval Order’’). The CAT NMS Plan
functions as the limited liability company
agreement of the jointly owned limited liability
company formed under Delaware state law through
which the Participants conduct activities related to
the consolidated audit trail (the ‘‘Company’’).
4 See id. at Appendix D, Section 8.1.1. See also
Letter from Michael Simon, CAT NMS Plan
Operating Committee Chair, to Vanessa
Countryman, Secretary, Commission, dated
December 1, 2020, available at https://
catnmsplan.com/sites/default/files/2020-12/
12.01.20-CAT-Exemption-Request-OTQT.pdf
(‘‘Participant Letter’’). The Participants state that
this exemptive relief request amends and replaces
in its entirety the request previously submitted to
the Commission on November 16, 2020. See id. at
2 n.5.
5 ‘‘Plan Processor’’ is a defined term under the
CAT NMS Plan and means ‘‘the Initial Plan
Processor or any other Person selected by the
Operating Committee pursuant to SEC Rule 613 and
Sections 4.3(b)(i) and 6.1, and with regard to the
Initial Plan Processor, the Selection Plan, to
perform the CAT processing functions required by
SEC Rule 613 and set forth in this Agreement.’’ See
CAT NMS Plan, supra note 3, at Section 1.1.
6 ‘‘CAT Data’’ is a defined term under the CAT
NMS Plan and means ‘‘data derived from
Participant Data, Industry Member Data, SIP Data,
and such other data as the Operating Committee
may designate as ‘‘CAT Data’’ from time to time.’’
See id.
7 ‘‘Central Repository’’ is a defined term under the
CAT NMS Plan and means ‘‘the repository
responsible for the receipt, consolidation, and
retention of all information reported to the CAT
pursuant to SEC Rule 613 and this Agreement.’’ See
id.
8 See Participant Letter, supra note 4, at 2; see
also CAT NMS Plan, supra note 3, at Section
6.10(c)(i).
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A. Error Correction Rate Functionality
The Participants state that the OTQT
must ‘‘provide authorized users with the
ability to retrieve CAT Data via an
online query screen that includes the
ability to choose from a variety of predefined selection criteria,’’ 9 including,
among other things, the ‘‘CAT Reporter
correction rate over time.’’ 10 The
Participants request temporary
exemptive relief from compliance with
the requirement in Section 8.1.1 of
Appendix D of the CAT NMS Plan that
authorized users must be able to
conduct targeted queries through the
OTQT with respect to the CAT Reporter
correction rate over time (the ‘‘Error
Correction Rate Functionality’’).11 The
Participants state that the Plan Processor
needs additional time to incorporate the
Error Correction Rate Functionality to
the OTQT.12 Specifically, the
Participants believe that regulators will
able to perform searches with respect to
the CAT Reporter correction rate over
time by April 30, 2021.13 The
Participants therefore request that any
exemptive relief granted by the
Commission with respect to the Error
Correction Rate Functionality extend
until April 30, 2021.14
To support their request, the
Participants state that the Participants
and the Commission currently have
access to ‘‘a variety of fields of
processed CAT Data and/or validated
(unlinked) data’’ via existing Plan
Processor tools called DIVER and
MIRS.15 The Participants further
represent that, by December 2020, the
Participants and the Commission will
have access to information regarding the
CAT Reporter correction rate over time
for ‘‘compliance review purposes’’
either through the CAT Reporter Portal
or through another existing Plan
Processor tool called BDSQL,16 such
9 See CAT NMS Plan, supra note 3, at
6.10(c)(i)(A).
10 See id. at Appendix D, Section 8.1.1. See also
Participant Letter, supra note 4, at 2.
11 See Participant Letter, supra note 4, at 2–3. The
Participants describe this functionality as ‘‘Error
Correction Time Functionality,’’ but the
Commission believes that the term ‘‘Error
Correction Rate Functionality’’ more accurately
describes the functionality.
12 See Participant Letter, supra note 4, at 3.
13 See id. at 3. The Participants note that this
schedule would align the release of the Error
Correction Rate Functionality with other
functionality releases that will add data for OTQT
queries concerning ‘‘the new equity exchange order
book and volume concentration using equity
exchange data.’’ See id. at 3.
14 See id. at 2.
15 See id. at 3. The Participants note that ‘‘DIVER’’
and ‘‘MIRS’’ are FINRA CAT’s versions of the
OTQT. See id. at 2 n.6
16 ‘‘BDSQL’’ is the name used by FINRA to
describe its proprietary user-defined direct query
tool.
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that providing the CAT Reporter
correction rate over time through the
OTQT would in many ways be
duplicative.17
B. Search Return Functionality and
Simultaneous Query Functionality
The Participants state that Section
8.1.2 of Appendix D of the CAT NMS
Plan sets forth various performance
requirements for OTQT searches. One of
these requirements sets forth timeframes
in which results must be returned for
various types of queries (‘‘Search Return
Functionality’’).18 Another requirement
set forth in Section 8.1.2 of Appendix D
is that the OTQT must ‘‘be able to
process up to 300 simultaneous query
requests with no performance
degradation’’ (‘‘Simultaneous Query
Functionality’’).19
According to the Participant Letter,
the OTQT provided by the Plan
Processor is based on a data mart model
that ‘‘supports multi-day/month/year
queries on any field in the CAT and can
return all records to the regulatory user
for further filtering and analytics.’’ 20
The Participants state that this model
has been used by FINRA in its
surveillance and market oversight
operations for approximately five years
that ‘‘has proven to be an effective and
reliable surveillance tool that produces
timely results for regulatory use
cases.’’ 21 ‘‘[I]f the user requests data for
a single symbol during a specified time
period on a single trade date, all data for
that date and symbol (hundreds of
millions of records) must be scanned to
locate the specific records requested.’’ 22
A data mart is then created which
allows a regulatory user to perform any
subsequent filtering and analysis.23 The
Participants state that, once a data mart
has been created, the results from any
subsequent filtering and analysis are
returned ‘‘well within the timeframes
set forth in Section 8.1.2 of Appendix
17 See
id. at 3.
id. at 3. See also CAT NMS Plan, supra
note 3, at Appendix D, Section 8.1.2 (setting out the
following timeframes: (1) ‘‘Within 1 minute for all
trades and related lifecycle events for a specific
Customer or CAT Reporter with the ability to filter
by security and time range for a specified time
window up to and including an entire day,’’ (2)
‘‘within 30 minutes for all trades and related
lifecycle events for a specific Customer or CAT
Reporter in a specified date range (maximum 1
month),’’ and (3) ‘‘within 6 hours for all trades and
related lifecycle events for a specific Customer or
CAT Reporter in a specified date range (maximum
12-month duration from the most recent 24
months)’’).
19 See Participant Letter, supra note 4, at 4. See
also CAT NMS Plan, supra note 3, at Section 8.1.2.
20 See Participant Letter, supra note 4, at 4.
21 See id. at 4–5.
22 See id. at 4.
23 See id.
18 See
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D.’’ 24 In some instances, however, the
Participants acknowledge that the
amount of time required by the OTQT
to populate a data mart is longer than
the timeframes set forth in the CAT
NMS Plan.25 They state, for example,
that ‘‘[i]t typically currently takes up to
four minutes for queries for a single day
involving equities trades and up to six
minutes for options trade queries for a
single day for the OTQT to create and
return a data mart in response to
targeted search requests with a required
response time of one minute under
Section 8.1.2 of Appendix D.’’ 26
The Participants therefore request
temporary exemptive relief from
compliance with the Search Return
Functionality and the Simultaneous
Query Functionality requirements of
Section 8.1.2 of Appendix D of the CAT
NMS Plan until July 31, 2023.27 During
the period of the exemption, the
Participants assert that they will
‘‘continue to assess the performance of
the OTQT and look for opportunities to
further reduce the time that it takes to
build the data mart in response to OTQT
queries on a consistent basis.’’ 28 In this
respect, the Participants represent that
they have been working with the Plan
Processor to reduce the time that it takes
to populate an OTQT data mart.29 They
explain that the Plan Processor runs
‘‘multiple benchmark queries each day
that are designed to measure system
performance given CAT Data sets and
query usage, including the times to
create data marts for various types of
queries and responses during
simultaneous querying,’’ and shares its
results with the Participants and the
Commission to identify areas for
potential performance enhancements.30
The Participant Letter further states that
such efforts have already reduced the
24 See id. With respect to complex queries, the
Participants state that the OTQT returns data marts
to regulatory users ‘‘well before’’ the 24-hour time
limit set forth in the CAT NMS Plan. See id.; see
also CAT NMS Plan, supra note 3, at Appendix D,
Section 8.1.2. However, the Participants also state
that ‘‘a request for related lifecycles makes a query
complex.’’ See Participant Letter, supra note 4, at
5 n.18. The Commission does not agree that a
request for related lifecycles makes a query
complex. See Part III infra for further discussion of
the OTQT requirements set forth in the CAT NMS
Plan. In addition, and as discussed in Part III infra,
the Commission believes that the timeframe for
‘‘returning results’’ in Section 8.1.2 of Appendix D
of the CAT NMS Plan begins with the submission
of the query in the OTQT and ends with the return
of the results of the query to the user inclusive of
related linkages.
25 See Participant Letter, supra note 4, at 4.
26 See id. at 4–5.
27 See id. at 6.
28 See id.
29 See id. at 5.
30 See id.
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time required to populate data marts in
the OTQT.31
III. Discussion
As the Participants note, Sections
6.10(c) and Appendix D, Section 8.1.1 of
the CAT NMS Plan require the OTQT to
‘‘provide authorized users with the
ability to retrieve CAT Data via an
online query screen that includes the
ability to choose from a variety of predefined selection criteria,’’ 32 including,
among other things, the ‘‘CAT Reporter
correction rate over time’’ (or, the ‘‘Error
Correction Rate Functionality’’).33
Section 8.1.2 of Appendix D of the CAT
NMS Plan further sets forth minimum
performance requirements for OTQT
searches that include equities and
options trade data only in the search
criteria, including returning results
within the following timeframes: (1)
‘‘within 1 minute for all trades and
related lifecycle events for a specific
Customer or CAT Reporter with the
ability to filter by security and time
range for a specified time window up to
and including an entire day’’; (2)
‘‘within 30 minutes for all trades and
related lifecycle events for a specific
Customer or CAT Reporter in a specified
date range (maximum 1 month)’’; and
(3) ‘‘within 6 hours for all trades and
related lifecycle events for a specific
Customer or CAT Reporter in a specified
date range (maximum 12-month
duration from the most recent 24
months).’’ 34
The timeframe for ‘‘returning results’’
in Section 8.1.2 of Appendix D (i.e., the
time to ‘‘return results’’ or the ‘‘Search
Return Functionality’’) begins with the
submission of the query in the OTQT
and ends with the return of the results
of the query to the user; it does not
begin with the population of a data
mart. ‘‘Returning results’’ captures the
entirety of the time it takes to generate
results in response to the user’s initial
query. If the query response time
requirements for ‘‘returning results’’
begins at a time later than the time the
query was submitted, query response
times would fail to fully reflect the total
time necessary for the OTQT to generate
results, and display them to the user.35
31 See
id.
CAT NMS Plan, supra note 3, at
6.10(c)(i)(A).
33 See id. at Appendix D, Section 8.1.1.
34 See id. at Appendix D, Section 8.1.2.
35 Appendix D, Section 8.1.1 requires that the
OTQT ‘‘must provide a record count of the result
set, the date and time the query request is
submitted, and the date and time the result set is
provided to the users.’’ It also requires that the
OTQT must ‘‘log submitted queries and parameters
used in the query, the user ID of the submitter, the
date and time of the submission, as well as the
delivery of results.’’ See id. at Appendix D, Section
32 See
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83669
This would be inconsistent with the
plain meaning of the CAT NMS Plan
language concerning query response
time requirements and would
undermine the purpose of the
performance standard.
Appendix D, Section 8.1.2 of the CAT
NMS Plan sets forth requirements for
‘‘related lifecycle events’’ and ‘‘complex
queries.’’ ‘‘Related lifecycle events’’ are
covered by the 1 minute, 30 minute, and
6 hour requirements in the CAT NMS
Plan set forth above,36 whereas
Appendix D, Section 8.1.2 of the CAT
NMS Plan separately provides that
‘‘[f]or the complex queries that either
scan large volumes of data (e.g.,
multiple trade dates) or return large
result sets (≤1M records), the response
time must generally be available within
24 hours of the submission of the
request.’’ 37 Under the CAT NMS Plan,
therefore, queries for ‘‘related lifecycle
events’’ are not ‘‘complex queries’’ and
thus the 24 hour requirement does not
apply. If queries including ‘‘related
lifecycle events’’ were ‘‘complex
queries,’’ then any query that included
‘‘related lifecycle events’’ would be
subject to the 24 hour requirement. This
is not consistent with the language of
the CAT NMS Plan. Rather, based on the
language of the CAT NMS Plan, ‘‘related
lifecycle events’’ are included in, and
thus are subject to, the 1 minute, 30
minute, and 6 hour requirements for
OTQT searches that include equities
and options trade data only as search
criteria. Interpreting any query that
includes ‘‘related lifecycle events’’ as a
‘‘complex query’’ contradicts the
presence of ‘‘related lifecycle events’’ in
the CAT NMS Plan language setting
forth the 1 minute, 30 minute, and 6
hour requirements.
Appendix D, Section 8.1.2 also
requires that ‘‘[t]he online targeted
query tool must be able to process up to
300 simultaneous query requests with
no performance degradation’’ (or, the
‘‘Simultaneous Query Functionality’’).38
As stated above, the timeframe for
‘‘returning results’’ begins with the
submission of the query in the OTQT
and ends with the return of the results
of the query to the user. The
Commission understands that the
Participants have not yet determined the
meaning of ‘‘performance degradation,’’
8.1.1. Since the CAT NMS Plan requires the OTQT
to record the date and time the query request is
submitted, the query response times set forth in the
CAT NMS Plan should be based on this
information.
36 See, e.g., note 34 supra.
37 See CAT NMS Plan, supra note 3, at Appendix
D, Section 8.1.2.
38 See CAT NMS Plan, supra note 3, at Appendix
D, Section 8.1.1.
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but the Commission believes
‘‘performance degradation’’ on query
requests should be based on the ability
of the OTQT to meet the abovedescribed timeframes set forth by
Appendix D, Section 8.1.2 of the CAT
NMS Plan.39 Performance degradation is
a deterioration in performance as
measured according to a certain
standard. The Commission believes it is
reasonable to assess ‘‘performance
degradation’’ based on a measurement
of performance against the CAT NMS
Plan and service level agreement
(‘‘SLA’’) requirements,40 because the
Participants are already required to meet
these standards. Thus, if the OTQT is
able to process up to 300 simultaneous
query requests while meeting the CAT
NMS Plan and SLA requirements, there
would be no ‘‘performance
degradation.’’ 41
Section 36 of the Exchange Act grants
the Commission the authority, with
certain limitations, to ‘‘conditionally or
unconditionally exempt any person,
security, or transaction . . . from any
provision or provisions of [the Exchange
Act] or of any rule or regulation
thereunder, to the extent that such
exemption is necessary or appropriate
in the public interest, and is consistent
with the protection of investors.’’ 42 Rule
608(e) of Regulation NMS under the
Exchange Act authorizes the
Commission to exempt, either
unconditionally or on specified terms
and conditions, any self-regulatory
organization, member thereof, or
specified security, from the provisions
of the rule if the Commission
determines that such exemption is
consistent with the public interest, the
protection of investors, the maintenance
of fair and orderly markets and the
removal of impediments to, and
perfection of the mechanisms of, a
national market system.43
The Commission believes that,
pursuant to Section 36 of the Exchange
Act, the temporary exemptive relief
requested by the Participants is
appropriate in the public interest and
consistent with the protection of
investors, and that, pursuant to Rule
608(e) under the Exchange Act, the
temporary exemptive relief requested by
the Participants is consistent with the
public interest, the protection of
39 See,
e.g., notes 34–37 and associated text supra.
CAT NMS Plan, supra note 3, at Appendix
D, Section 8.5 (requiring the establishment of SLAs
for ‘‘query performance and response times’’).
41 The OTQT is required at all times to meet the
CAT NMS Plan requirement to process up to 300
simultaneous query requests with no performance
degradation.
42 15 U.S.C. 78mm(a)(1).
43 17 CFR 242.608(e).
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40 See
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investors, the maintenance of fair and
orderly markets and the removal of
impediments to, and the perfection of
the mechanisms of, a national market
system. The OTQT is an important
regulatory tool required by the CAT
NMS Plan; it is one of only three access
methods that regulators have to query
CAT Data, and it is the only method that
can be used by regulatory staff without
programming experience to directly
access the CAT using tools provided by
the Plan Processor. Thus, it is consistent
with the public interest, the protection
of investors, and the maintenance of fair
and orderly markets that all facets of the
OTQT are implemented consistent with
the CAT NMS Plan. The Commission
understands that implementing the
above-described functionality will
require software development and
architectural changes to the existing
OTQT. Providing the requested
temporary exemptive relief will give the
Participants additional time to properly
implement the above-described
functionality. The Commission believes
that the long-term benefits of allowing
the Participants sufficient time to
correctly implement these facets of the
OTQT outweigh any concerns regarding
the impact of delayed implementation.
The Commission also believes that
providing the requested exemptive relief
on the schedule proposed by the
Participants is appropriate. With respect
to the Error Correction Rate
Functionality requirements, the
Participants request that temporary
exemptive relief be granted until April
30, 2021. This schedule will align the
release of the Error Correction Rate
Functionality with another planned
functionality release,44 while still
providing a certain deadline that will
encourage progress towards the
implementation of the required OTQT
functionality. The Commission believes
that such alignment will enable the
SROs to leverage planned functionality
release activities—including user
acceptance testing, documentation, and
approvals—for the release of the Error
Correction Rate Functionality.
Moreover, the Commission believes that
granting the requested exemptive relief
on the schedule proposed by the
Participants would have only a limited
impact on regulators’ utilization of the
OTQT. As stated in the Participant
Letter, the Participants and the
Commission currently have access to a
variety of fields of processed CAT Data
44 This release will include, among other things,
industry member reporting of new equity exchange
order book and volume concentration data and
expanded OTQT functionality related to this data.
See id. at 3.
PO 00000
Frm 00161
Fmt 4703
Sfmt 4703
and/or validated (unlinked) data via the
OTQT,45 and information regarding the
CAT Reporter correction rate over time
will likewise be available for
compliance review purposes through
the CAT Reporter Portal and/or the Plan
Processor’s BDSQL tool by December
2020.46
With respect to the Search Return
Functionality and the Simultaneous
Query Functionality requirements, the
Participants request that temporary
exemptive relief be granted until July
31, 2023. The Commission believes this
deadline will give the Participants and
the Plan Processor sufficient time to
develop the necessary systems and
technology.
The Commission is also conditioning
this temporary exemptive relief on the
following:
First, as a condition to this exemptive
relief, the Participants would be
required to satisfy all other
requirements of the Full
Implementation of Core Equity
Reporting Requirements milestone by
December 31, 2020.47
Second, to better enable the
Commission to monitor progress
towards the reduction of query response
times, the Participants would be
required, as a condition to this
exemptive relief, to perform the
following benchmark queries to
measure, on a monthly basis, the
timeframes in which the OTQT returns
results for the following types of
queries: (1) All trades and related
lifecycle linkages and/or events for a
specific Customer or CAT Reporter with
the ability to filter by security and time
range for a specified time window up to
and including an entire day; (2) all
trades and related lifecycle linkages
and/or events for a specific Customer or
CAT Reporter in a specified date range
45 See
id. at 3.
id. at 3. However, the Error Correction Rate
Functionality is still critical, as it will facilitate a
regulatory user’s ability to determine the quality of
CAT Data for regulatory use (versus compliance
review purposes).
47 See note 13 supra. To the extent that the
Participants are availing themselves of exemptive
relief from a CAT NMS Plan requirement, including
requirements relating to Error Correction Rate
Functionality, Search Return Functionality, and
Simultaneous Query Functionality, such
requirement shall not be included in the
requirements for the Full Implementation of Core
Equity Reporting Requirements milestone, provided
that the conditions of the exemption are satisfied.
However, to meet the Full Implementation of Core
Equity Reporting Requirements milestone, all other
functionality required by Section 8.1.1 and Section
8.1.2 of Appendix D of the CAT NMS Plan must
incorporate the relevant equities transaction data
and be available to Participants and to the
Commission. See CAT NMS Plan, supra note 3, at
Section 1.1 (‘‘Full Implementation of Core Equity
Requirements’’ definition).
46 See
E:\FR\FM\22DEN1.SGM
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Federal Register / Vol. 85, No. 246 / Tuesday, December 22, 2020 / Notices
jbell on DSKJLSW7X2PROD with NOTICES
(maximum 1 month); and (3) all trades
and related lifecycle linkages and/or
events for a specific Customer or CAT
Reporter in a specified date range
(maximum 12-month duration from the
most recent 24 months). For each
benchmark query, the Participants
should provide the average, standard
deviation, maximum, and minimum
timeframes in which the OTQT returns
results, as the Commission believes it is
important to capture not only
information regarding the average
timeframes in which the OTQT returns
results, but also information regarding
the variability and consistency of the
timeframes in which the OTQT returns
results. In addition, for each benchmark
query, the Participants should use all
available CAT Data, including
Participant data submitted by FINRA
and national securities exchanges, data
submitted by Industry Members,48 and
other data. Finally, the Participants
should provide monthly reports
regarding any actual queries done by
regulatory users with the average,
standard deviation, maximum, and
minimum timeframes in which the
OTQT returns results for actual queries.
All of the above-described
measurements should be provided to
the Operating Committee on a monthly
basis and should be clearly set forth as
factual indicators in the Quarterly
Progress Reports required by Section
6.6(c) of the CAT NMS Plan. This
condition will permit the Commission
and the public to track the Participants’
progress towards meeting the abovedescribed CAT NMS Plan requirements
and providing regulators with an
effective OTQT by the July 31, 2023
deadline.49
Third, to better enable the
Commission to monitor their progress
towards meeting the parallel processing
requirements of the CAT NMS Plan, the
Participants would also be required, as
a condition to this exemptive relief, to
measure on a monthly basis, using
benchmark queries, the time it takes to
provide results to users from OTQT
searches that are run concurrently with
either 50–100, 100–200, or 200–300
queries, and to evaluate whether such
results otherwise meet current CAT
NMS Plan and SLA performance
requirements for targeted and complex
48 ‘‘Industry Member’’ is a defined term under the
CAT NMS Plan and means ‘‘means a member of a
national securities exchange or a member of a
national securities association.’’ See CAT NMS
Plan, supra note 3, at Section 1.1.
49 Pursuant to Section 6.6(c)(ii) of the CAT NMS
Plan, Quarterly Progress Reports must be filed with
the Commission and made publicly available on
each SRO’s website or collectively on the CAT NMS
Plan website.
VerDate Sep<11>2014
17:30 Dec 21, 2020
Jkt 253001
queries. These measurements should be
provided to the Operating Committee on
a monthly basis and should be clearly
set forth as factual indicators in the
Quarterly Progress Reports required by
Section 6.6(c) of the CAT NMS Plan.
IV. Conclusion
Accordingly, it is hereby ordered,
pursuant to Section 36(a)(1) of the
Exchange Act 50 and Rule 608(e) under
the Exchange Act,51 that the
Commission grants the Participants’
request for temporary exemptive relief,
as set forth in the Participant Letter and
subject to the conditions described
herein, from the requirements in Section
8.1.1 of Appendix D of the CAT NMS
Plan with respect to the Error Correction
Rate Functionality until April 30, 2021
and from the requirements in Section
8.1.2 of Appendix D of the CAT NMS
Plan with respect to the Search Return
Functionality and the Simultaneous
Query Functionality until July 31, 2023.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
83671
L/PD, SA–5, Suite 5H03, Washington,
DC 20522–0505.
SUPPLEMENTARY INFORMATION: The
foregoing determinations were made
pursuant to the authority vested in me
by the Act of October 19, 1965 (79 Stat.
985; 22 U.S.C. 2459), Executive Order
12047 of March 27, 1978, the Foreign
Affairs Reform and Restructuring Act of
1998 (112 Stat. 2681, et seq.; 22 U.S.C.
6501 note, et seq.), Delegation of
Authority No. 234 of October 1, 1999,
and Delegation of Authority No. 236–3
of August 28, 2000.
Marie Therese Porter Royce,
Assistant Secretary, Educational and Cultural
Affairs, Department of State.
[FR Doc. 2020–28165 Filed 12–21–20; 8:45 am]
BILLING CODE 4710–05–P
DEPARTMENT OF TRANSPORTATION
Federal Aviation Administration
[Docket No. FAA–2020–0997]
[FR Doc. 2020–28153 Filed 12–21–20; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF STATE
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Agency Information Collection
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ACTION: Notice and request for
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AGENCY:
Notice of Determinations; Culturally
Significant Objects Being Imported for
Exhibition—Determinations:
‘‘Fotoclubismo: Brazilian Modernist
Photography, 1946–1964’’ Exhibition
Notice is hereby given of the
following determinations: I hereby
determine that certain objects being
imported from abroad pursuant to
agreements with their foreign owners or
custodians for temporary display in the
exhibition ‘‘Fotoclubismo: Brazilian
Modernist Photography, 1946–1964’’ at
The Museum of Modern Art, New York,
New York, and at possible additional
exhibitions or venues yet to be
determined, are of cultural significance,
and, further, that their temporary
exhibition or display within the United
States as aforementioned is in the
national interest. I have ordered that
Public Notice of these determinations be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Chi
D. Tran, Program Administrator, Office
of the Legal Adviser, U.S. Department of
State (telephone: 202–632–6471; email:
section2459@state.gov). The mailing
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SUMMARY:
50 15
51 17
PO 00000
U.S.C. 78mm(a)(1).
CFR 242.608(e).
Frm 00162
Fmt 4703
Sfmt 4703
In accordance with the
Paperwork Reduction Act of 1995, FAA
invites public comments about our
intention to request the Office of
Management and Budget (OMB)
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collection. The Federal Register Notice
with a 60-day comment period soliciting
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information was published on October
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DATES: Written comments should be
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ADDRESSES: Interested persons are
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sent via electronic mail to oira_
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SUMMARY:
E:\FR\FM\22DEN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 246 (Tuesday, December 22, 2020)]
[Notices]
[Pages 83667-83671]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-28153]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90689]
Order Granting Temporary Exemptive Relief, Pursuant to Section 36
of the Securities Exchange Act of 1934 (``Exchange Act'') and Rule
608(e) of Regulation NMS Under the Exchange Act, From Section 8.1.1 and
Section 8.1.2 of Appendix D of the National Market System Plan
Governing the Consolidated Audit Trail
December 16, 2020.
I. Introduction
By letter dated December 1, 2020 (``Participant Letter''), BOX
Exchange LLC, Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc.,
Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc.
(``FINRA''), Investors Exchange LLC, Long-Term Stock Exchange, Inc.,
MEMX LLC, Miami International Securities Exchange LLC, MIAX Emerald,
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 American LLC, NYSE Arca, Inc., NYSE
Chicago, Inc., and NYSE National, Inc. (collectively, the
``Participants'') request that the Securities and Exchange Commission
(the ``Commission''), pursuant to the Commission's authority under
Section 36 of the Exchange Act \1\ and Rule 608(e) of Regulation NMS
under the Exchange Act,\2\ grant exemptive relief from the national
market system plan governing the
[[Page 83668]]
consolidated audit trail (the ``CAT NMS Plan'').\3\ Specifically, the
Participants request that the Commission provide temporary exemptive
relief from certain requirements of the CAT NMS Plan that relate to the
online targeted query tool (``OTQT'') described in Section 6.10(c)(i)
of the CAT NMS Plan.\4\
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78mm.
\2\ 17 CFR 242.608(e).
\3\ The Commission approved the CAT NMS Plan, as modified, on
November 15, 2016. See Securities Exchange Act Release Nos. 79318
(November 15, 2016), 81 FR 84696 (November 23, 2016) (``CAT NMS Plan
Approval Order''). The CAT NMS Plan functions as the limited
liability company agreement of the jointly owned limited liability
company formed under Delaware state law through which the
Participants conduct activities related to the consolidated audit
trail (the ``Company'').
\4\ See id. at Appendix D, Section 8.1.1. See also Letter from
Michael Simon, CAT NMS Plan Operating Committee Chair, to Vanessa
Countryman, Secretary, Commission, dated December 1, 2020, available
at https://catnmsplan.com/sites/default/files/2020-12/12.01.20-CAT-Exemption-Request-OTQT.pdf (``Participant Letter''). The
Participants state that this exemptive relief request amends and
replaces in its entirety the request previously submitted to the
Commission on November 16, 2020. See id. at 2 n.5.
---------------------------------------------------------------------------
For the reasons set forth below, this Order grants the
Participants' request for temporary exemptive relief from the above-
described provisions of the CAT NMS Plan, subject to certain
conditions.
II. Request for Relief
In their letter, the Participants explain that Section 6.10(c)(i)
of the CAT NMS Plan requires the Plan Processor \5\ to provide
Participants and the Commission with access to all CAT Data \6\ stored
in the Central Repository \7\ through three different methods: (1) The
OTQT, (2) user-defined direct queries, and (3) and bulk extracts.\8\
Sections 8.1.1 and 8.1.2 of Appendix D of the CAT NMS Plan set forth
certain functionality requirements for the OTQT from which the
Participants seek relief.
---------------------------------------------------------------------------
\5\ ``Plan Processor'' is a defined term under the CAT NMS Plan
and means ``the Initial Plan Processor or any other Person selected
by the Operating Committee pursuant to SEC Rule 613 and Sections
4.3(b)(i) and 6.1, and with regard to the Initial Plan Processor,
the Selection Plan, to perform the CAT processing functions required
by SEC Rule 613 and set forth in this Agreement.'' See CAT NMS Plan,
supra note 3, at Section 1.1.
\6\ ``CAT Data'' is a defined term under the CAT NMS Plan and
means ``data derived from Participant Data, Industry Member Data,
SIP Data, and such other data as the Operating Committee may
designate as ``CAT Data'' from time to time.'' See id.
\7\ ``Central Repository'' is a defined term under the CAT NMS
Plan and means ``the repository responsible for the receipt,
consolidation, and retention of all information reported to the CAT
pursuant to SEC Rule 613 and this Agreement.'' See id.
\8\ See Participant Letter, supra note 4, at 2; see also CAT NMS
Plan, supra note 3, at Section 6.10(c)(i).
---------------------------------------------------------------------------
A. Error Correction Rate Functionality
The Participants state that the OTQT must ``provide authorized
users with the ability to retrieve CAT Data via an online query screen
that includes the ability to choose from a variety of pre-defined
selection criteria,'' \9\ including, among other things, the ``CAT
Reporter correction rate over time.'' \10\ The Participants request
temporary exemptive relief from compliance with the requirement in
Section 8.1.1 of Appendix D of the CAT NMS Plan that authorized users
must be able to conduct targeted queries through the OTQT with respect
to the CAT Reporter correction rate over time (the ``Error Correction
Rate Functionality'').\11\ The Participants state that the Plan
Processor needs additional time to incorporate the Error Correction
Rate Functionality to the OTQT.\12\ Specifically, the Participants
believe that regulators will able to perform searches with respect to
the CAT Reporter correction rate over time by April 30, 2021.\13\ The
Participants therefore request that any exemptive relief granted by the
Commission with respect to the Error Correction Rate Functionality
extend until April 30, 2021.\14\
---------------------------------------------------------------------------
\9\ See CAT NMS Plan, supra note 3, at 6.10(c)(i)(A).
\10\ See id. at Appendix D, Section 8.1.1. See also Participant
Letter, supra note 4, at 2.
\11\ See Participant Letter, supra note 4, at 2-3. The
Participants describe this functionality as ``Error Correction Time
Functionality,'' but the Commission believes that the term ``Error
Correction Rate Functionality'' more accurately describes the
functionality.
\12\ See Participant Letter, supra note 4, at 3.
\13\ See id. at 3. The Participants note that this schedule
would align the release of the Error Correction Rate Functionality
with other functionality releases that will add data for OTQT
queries concerning ``the new equity exchange order book and volume
concentration using equity exchange data.'' See id. at 3.
\14\ See id. at 2.
---------------------------------------------------------------------------
To support their request, the Participants state that the
Participants and the Commission currently have access to ``a variety of
fields of processed CAT Data and/or validated (unlinked) data'' via
existing Plan Processor tools called DIVER and MIRS.\15\ The
Participants further represent that, by December 2020, the Participants
and the Commission will have access to information regarding the CAT
Reporter correction rate over time for ``compliance review purposes''
either through the CAT Reporter Portal or through another existing Plan
Processor tool called BDSQL,\16\ such that providing the CAT Reporter
correction rate over time through the OTQT would in many ways be
duplicative.\17\
---------------------------------------------------------------------------
\15\ See id. at 3. The Participants note that ``DIVER'' and
``MIRS'' are FINRA CAT's versions of the OTQT. See id. at 2 n.6
\16\ ``BDSQL'' is the name used by FINRA to describe its
proprietary user-defined direct query tool.
\17\ See id. at 3.
---------------------------------------------------------------------------
B. Search Return Functionality and Simultaneous Query Functionality
The Participants state that Section 8.1.2 of Appendix D of the CAT
NMS Plan sets forth various performance requirements for OTQT searches.
One of these requirements sets forth timeframes in which results must
be returned for various types of queries (``Search Return
Functionality'').\18\ Another requirement set forth in Section 8.1.2 of
Appendix D is that the OTQT must ``be able to process up to 300
simultaneous query requests with no performance degradation''
(``Simultaneous Query Functionality'').\19\
---------------------------------------------------------------------------
\18\ See id. at 3. See also CAT NMS Plan, supra note 3, at
Appendix D, Section 8.1.2 (setting out the following timeframes: (1)
``Within 1 minute for all trades and related lifecycle events for a
specific Customer or CAT Reporter with the ability to filter by
security and time range for a specified time window up to and
including an entire day,'' (2) ``within 30 minutes for all trades
and related lifecycle events for a specific Customer or CAT Reporter
in a specified date range (maximum 1 month),'' and (3) ``within 6
hours for all trades and related lifecycle events for a specific
Customer or CAT Reporter in a specified date range (maximum 12-month
duration from the most recent 24 months)'').
\19\ See Participant Letter, supra note 4, at 4. See also CAT
NMS Plan, supra note 3, at Section 8.1.2.
---------------------------------------------------------------------------
According to the Participant Letter, the OTQT provided by the Plan
Processor is based on a data mart model that ``supports multi-day/
month/year queries on any field in the CAT and can return all records
to the regulatory user for further filtering and analytics.'' \20\ The
Participants state that this model has been used by FINRA in its
surveillance and market oversight operations for approximately five
years that ``has proven to be an effective and reliable surveillance
tool that produces timely results for regulatory use cases.'' \21\
``[I]f the user requests data for a single symbol during a specified
time period on a single trade date, all data for that date and symbol
(hundreds of millions of records) must be scanned to locate the
specific records requested.'' \22\ A data mart is then created which
allows a regulatory user to perform any subsequent filtering and
analysis.\23\ The Participants state that, once a data mart has been
created, the results from any subsequent filtering and analysis are
returned ``well within the timeframes set forth in Section 8.1.2 of
Appendix
[[Page 83669]]
D.'' \24\ In some instances, however, the Participants acknowledge that
the amount of time required by the OTQT to populate a data mart is
longer than the timeframes set forth in the CAT NMS Plan.\25\ They
state, for example, that ``[i]t typically currently takes up to four
minutes for queries for a single day involving equities trades and up
to six minutes for options trade queries for a single day for the OTQT
to create and return a data mart in response to targeted search
requests with a required response time of one minute under Section
8.1.2 of Appendix D.'' \26\
---------------------------------------------------------------------------
\20\ See Participant Letter, supra note 4, at 4.
\21\ See id. at 4-5.
\22\ See id. at 4.
\23\ See id.
\24\ See id. With respect to complex queries, the Participants
state that the OTQT returns data marts to regulatory users ``well
before'' the 24-hour time limit set forth in the CAT NMS Plan. See
id.; see also CAT NMS Plan, supra note 3, at Appendix D, Section
8.1.2. However, the Participants also state that ``a request for
related lifecycles makes a query complex.'' See Participant Letter,
supra note 4, at 5 n.18. The Commission does not agree that a
request for related lifecycles makes a query complex. See Part III
infra for further discussion of the OTQT requirements set forth in
the CAT NMS Plan. In addition, and as discussed in Part III infra,
the Commission believes that the timeframe for ``returning results''
in Section 8.1.2 of Appendix D of the CAT NMS Plan begins with the
submission of the query in the OTQT and ends with the return of the
results of the query to the user inclusive of related linkages.
\25\ See Participant Letter, supra note 4, at 4.
\26\ See id. at 4-5.
---------------------------------------------------------------------------
The Participants therefore request temporary exemptive relief from
compliance with the Search Return Functionality and the Simultaneous
Query Functionality requirements of Section 8.1.2 of Appendix D of the
CAT NMS Plan until July 31, 2023.\27\ During the period of the
exemption, the Participants assert that they will ``continue to assess
the performance of the OTQT and look for opportunities to further
reduce the time that it takes to build the data mart in response to
OTQT queries on a consistent basis.'' \28\ In this respect, the
Participants represent that they have been working with the Plan
Processor to reduce the time that it takes to populate an OTQT data
mart.\29\ They explain that the Plan Processor runs ``multiple
benchmark queries each day that are designed to measure system
performance given CAT Data sets and query usage, including the times to
create data marts for various types of queries and responses during
simultaneous querying,'' and shares its results with the Participants
and the Commission to identify areas for potential performance
enhancements.\30\ The Participant Letter further states that such
efforts have already reduced the time required to populate data marts
in the OTQT.\31\
---------------------------------------------------------------------------
\27\ See id. at 6.
\28\ See id.
\29\ See id. at 5.
\30\ See id.
\31\ See id.
---------------------------------------------------------------------------
III. Discussion
As the Participants note, Sections 6.10(c) and Appendix D, Section
8.1.1 of the CAT NMS Plan require the OTQT to ``provide authorized
users with the ability to retrieve CAT Data via an online query screen
that includes the ability to choose from a variety of pre-defined
selection criteria,'' \32\ including, among other things, the ``CAT
Reporter correction rate over time'' (or, the ``Error Correction Rate
Functionality'').\33\ Section 8.1.2 of Appendix D of the CAT NMS Plan
further sets forth minimum performance requirements for OTQT searches
that include equities and options trade data only in the search
criteria, including returning results within the following timeframes:
(1) ``within 1 minute for all trades and related lifecycle events for a
specific Customer or CAT Reporter with the ability to filter by
security and time range for a specified time window up to and including
an entire day''; (2) ``within 30 minutes for all trades and related
lifecycle events for a specific Customer or CAT Reporter in a specified
date range (maximum 1 month)''; and (3) ``within 6 hours for all trades
and related lifecycle events for a specific Customer or CAT Reporter in
a specified date range (maximum 12-month duration from the most recent
24 months).'' \34\
---------------------------------------------------------------------------
\32\ See CAT NMS Plan, supra note 3, at 6.10(c)(i)(A).
\33\ See id. at Appendix D, Section 8.1.1.
\34\ See id. at Appendix D, Section 8.1.2.
---------------------------------------------------------------------------
The timeframe for ``returning results'' in Section 8.1.2 of
Appendix D (i.e., the time to ``return results'' or the ``Search Return
Functionality'') begins with the submission of the query in the OTQT
and ends with the return of the results of the query to the user; it
does not begin with the population of a data mart. ``Returning
results'' captures the entirety of the time it takes to generate
results in response to the user's initial query. If the query response
time requirements for ``returning results'' begins at a time later than
the time the query was submitted, query response times would fail to
fully reflect the total time necessary for the OTQT to generate
results, and display them to the user.\35\ This would be inconsistent
with the plain meaning of the CAT NMS Plan language concerning query
response time requirements and would undermine the purpose of the
performance standard.
---------------------------------------------------------------------------
\35\ Appendix D, Section 8.1.1 requires that the OTQT ``must
provide a record count of the result set, the date and time the
query request is submitted, and the date and time the result set is
provided to the users.'' It also requires that the OTQT must ``log
submitted queries and parameters used in the query, the user ID of
the submitter, the date and time of the submission, as well as the
delivery of results.'' See id. at Appendix D, Section 8.1.1. Since
the CAT NMS Plan requires the OTQT to record the date and time the
query request is submitted, the query response times set forth in
the CAT NMS Plan should be based on this information.
---------------------------------------------------------------------------
Appendix D, Section 8.1.2 of the CAT NMS Plan sets forth
requirements for ``related lifecycle events'' and ``complex queries.''
``Related lifecycle events'' are covered by the 1 minute, 30 minute,
and 6 hour requirements in the CAT NMS Plan set forth above,\36\
whereas Appendix D, Section 8.1.2 of the CAT NMS Plan separately
provides that ``[f]or the complex queries that either scan large
volumes of data (e.g., multiple trade dates) or return large result
sets (>1M records), the response time must generally be available
within 24 hours of the submission of the request.'' \37\ Under the CAT
NMS Plan, therefore, queries for ``related lifecycle events'' are not
``complex queries'' and thus the 24 hour requirement does not apply. If
queries including ``related lifecycle events'' were ``complex
queries,'' then any query that included ``related lifecycle events''
would be subject to the 24 hour requirement. This is not consistent
with the language of the CAT NMS Plan. Rather, based on the language of
the CAT NMS Plan, ``related lifecycle events'' are included in, and
thus are subject to, the 1 minute, 30 minute, and 6 hour requirements
for OTQT searches that include equities and options trade data only as
search criteria. Interpreting any query that includes ``related
lifecycle events'' as a ``complex query'' contradicts the presence of
``related lifecycle events'' in the CAT NMS Plan language setting forth
the 1 minute, 30 minute, and 6 hour requirements.
---------------------------------------------------------------------------
\36\ See, e.g., note 34 supra.
\37\ See CAT NMS Plan, supra note 3, at Appendix D, Section
8.1.2.
---------------------------------------------------------------------------
Appendix D, Section 8.1.2 also requires that ``[t]he online
targeted query tool must be able to process up to 300 simultaneous
query requests with no performance degradation'' (or, the
``Simultaneous Query Functionality'').\38\ As stated above, the
timeframe for ``returning results'' begins with the submission of the
query in the OTQT and ends with the return of the results of the query
to the user. The Commission understands that the Participants have not
yet determined the meaning of ``performance degradation,''
[[Page 83670]]
but the Commission believes ``performance degradation'' on query
requests should be based on the ability of the OTQT to meet the above-
described timeframes set forth by Appendix D, Section 8.1.2 of the CAT
NMS Plan.\39\ Performance degradation is a deterioration in performance
as measured according to a certain standard. The Commission believes it
is reasonable to assess ``performance degradation'' based on a
measurement of performance against the CAT NMS Plan and service level
agreement (``SLA'') requirements,\40\ because the Participants are
already required to meet these standards. Thus, if the OTQT is able to
process up to 300 simultaneous query requests while meeting the CAT NMS
Plan and SLA requirements, there would be no ``performance
degradation.'' \41\
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\38\ See CAT NMS Plan, supra note 3, at Appendix D, Section
8.1.1.
\39\ See, e.g., notes 34-37 and associated text supra.
\40\ See CAT NMS Plan, supra note 3, at Appendix D, Section 8.5
(requiring the establishment of SLAs for ``query performance and
response times'').
\41\ The OTQT is required at all times to meet the CAT NMS Plan
requirement to process up to 300 simultaneous query requests with no
performance degradation.
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Section 36 of the Exchange Act grants the Commission the authority,
with certain limitations, to ``conditionally or unconditionally exempt
any person, security, or transaction . . . from any provision or
provisions of [the Exchange Act] or of any rule or regulation
thereunder, to the extent that such exemption is necessary or
appropriate in the public interest, and is consistent with the
protection of investors.'' \42\ Rule 608(e) of Regulation NMS under the
Exchange Act authorizes the Commission to exempt, either
unconditionally or on specified terms and conditions, any self-
regulatory organization, member thereof, or specified security, from
the provisions of the rule if the Commission determines that such
exemption is consistent with the public interest, the protection of
investors, the maintenance of fair and orderly markets and the removal
of impediments to, and perfection of the mechanisms of, a national
market system.\43\
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\42\ 15 U.S.C. 78mm(a)(1).
\43\ 17 CFR 242.608(e).
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The Commission believes that, pursuant to Section 36 of the
Exchange Act, the temporary exemptive relief requested by the
Participants is appropriate in the public interest and consistent with
the protection of investors, and that, pursuant to Rule 608(e) under
the Exchange Act, the temporary exemptive relief requested by the
Participants is consistent with the public interest, the protection of
investors, the maintenance of fair and orderly markets and the removal
of impediments to, and the perfection of the mechanisms of, a national
market system. The OTQT is an important regulatory tool required by the
CAT NMS Plan; it is one of only three access methods that regulators
have to query CAT Data, and it is the only method that can be used by
regulatory staff without programming experience to directly access the
CAT using tools provided by the Plan Processor. Thus, it is consistent
with the public interest, the protection of investors, and the
maintenance of fair and orderly markets that all facets of the OTQT are
implemented consistent with the CAT NMS Plan. The Commission
understands that implementing the above-described functionality will
require software development and architectural changes to the existing
OTQT. Providing the requested temporary exemptive relief will give the
Participants additional time to properly implement the above-described
functionality. The Commission believes that the long-term benefits of
allowing the Participants sufficient time to correctly implement these
facets of the OTQT outweigh any concerns regarding the impact of
delayed implementation.
The Commission also believes that providing the requested exemptive
relief on the schedule proposed by the Participants is appropriate.
With respect to the Error Correction Rate Functionality requirements,
the Participants request that temporary exemptive relief be granted
until April 30, 2021. This schedule will align the release of the Error
Correction Rate Functionality with another planned functionality
release,\44\ while still providing a certain deadline that will
encourage progress towards the implementation of the required OTQT
functionality. The Commission believes that such alignment will enable
the SROs to leverage planned functionality release activities--
including user acceptance testing, documentation, and approvals--for
the release of the Error Correction Rate Functionality. Moreover, the
Commission believes that granting the requested exemptive relief on the
schedule proposed by the Participants would have only a limited impact
on regulators' utilization of the OTQT. As stated in the Participant
Letter, the Participants and the Commission currently have access to a
variety of fields of processed CAT Data and/or validated (unlinked)
data via the OTQT,\45\ and information regarding the CAT Reporter
correction rate over time will likewise be available for compliance
review purposes through the CAT Reporter Portal and/or the Plan
Processor's BDSQL tool by December 2020.\46\
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\44\ This release will include, among other things, industry
member reporting of new equity exchange order book and volume
concentration data and expanded OTQT functionality related to this
data. See id. at 3.
\45\ See id. at 3.
\46\ See id. at 3. However, the Error Correction Rate
Functionality is still critical, as it will facilitate a regulatory
user's ability to determine the quality of CAT Data for regulatory
use (versus compliance review purposes).
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With respect to the Search Return Functionality and the
Simultaneous Query Functionality requirements, the Participants request
that temporary exemptive relief be granted until July 31, 2023. The
Commission believes this deadline will give the Participants and the
Plan Processor sufficient time to develop the necessary systems and
technology.
The Commission is also conditioning this temporary exemptive relief
on the following:
First, as a condition to this exemptive relief, the Participants
would be required to satisfy all other requirements of the Full
Implementation of Core Equity Reporting Requirements milestone by
December 31, 2020.\47\
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\47\ See note 13 supra. To the extent that the Participants are
availing themselves of exemptive relief from a CAT NMS Plan
requirement, including requirements relating to Error Correction
Rate Functionality, Search Return Functionality, and Simultaneous
Query Functionality, such requirement shall not be included in the
requirements for the Full Implementation of Core Equity Reporting
Requirements milestone, provided that the conditions of the
exemption are satisfied. However, to meet the Full Implementation of
Core Equity Reporting Requirements milestone, all other
functionality required by Section 8.1.1 and Section 8.1.2 of
Appendix D of the CAT NMS Plan must incorporate the relevant
equities transaction data and be available to Participants and to
the Commission. See CAT NMS Plan, supra note 3, at Section 1.1
(``Full Implementation of Core Equity Requirements'' definition).
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Second, to better enable the Commission to monitor progress towards
the reduction of query response times, the Participants would be
required, as a condition to this exemptive relief, to perform the
following benchmark queries to measure, on a monthly basis, the
timeframes in which the OTQT returns results for the following types of
queries: (1) All trades and related lifecycle linkages and/or events
for a specific Customer or CAT Reporter with the ability to filter by
security and time range for a specified time window up to and including
an entire day; (2) all trades and related lifecycle linkages and/or
events for a specific Customer or CAT Reporter in a specified date
range
[[Page 83671]]
(maximum 1 month); and (3) all trades and related lifecycle linkages
and/or events for a specific Customer or CAT Reporter in a specified
date range (maximum 12-month duration from the most recent 24 months).
For each benchmark query, the Participants should provide the average,
standard deviation, maximum, and minimum timeframes in which the OTQT
returns results, as the Commission believes it is important to capture
not only information regarding the average timeframes in which the OTQT
returns results, but also information regarding the variability and
consistency of the timeframes in which the OTQT returns results. In
addition, for each benchmark query, the Participants should use all
available CAT Data, including Participant data submitted by FINRA and
national securities exchanges, data submitted by Industry Members,\48\
and other data. Finally, the Participants should provide monthly
reports regarding any actual queries done by regulatory users with the
average, standard deviation, maximum, and minimum timeframes in which
the OTQT returns results for actual queries. All of the above-described
measurements should be provided to the Operating Committee on a monthly
basis and should be clearly set forth as factual indicators in the
Quarterly Progress Reports required by Section 6.6(c) of the CAT NMS
Plan. This condition will permit the Commission and the public to track
the Participants' progress towards meeting the above-described CAT NMS
Plan requirements and providing regulators with an effective OTQT by
the July 31, 2023 deadline.\49\
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\48\ ``Industry Member'' is a defined term under the CAT NMS
Plan and means ``means a member of a national securities exchange or
a member of a national securities association.'' See CAT NMS Plan,
supra note 3, at Section 1.1.
\49\ Pursuant to Section 6.6(c)(ii) of the CAT NMS Plan,
Quarterly Progress Reports must be filed with the Commission and
made publicly available on each SRO's website or collectively on the
CAT NMS Plan website.
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Third, to better enable the Commission to monitor their progress
towards meeting the parallel processing requirements of the CAT NMS
Plan, the Participants would also be required, as a condition to this
exemptive relief, to measure on a monthly basis, using benchmark
queries, the time it takes to provide results to users from OTQT
searches that are run concurrently with either 50-100, 100-200, or 200-
300 queries, and to evaluate whether such results otherwise meet
current CAT NMS Plan and SLA performance requirements for targeted and
complex queries. These measurements should be provided to the Operating
Committee on a monthly basis and should be clearly set forth as factual
indicators in the Quarterly Progress Reports required by Section 6.6(c)
of the CAT NMS Plan.
IV. Conclusion
Accordingly, it is hereby ordered, pursuant to Section 36(a)(1) of
the Exchange Act \50\ and Rule 608(e) under the Exchange Act,\51\ that
the Commission grants the Participants' request for temporary exemptive
relief, as set forth in the Participant Letter and subject to the
conditions described herein, from the requirements in Section 8.1.1 of
Appendix D of the CAT NMS Plan with respect to the Error Correction
Rate Functionality until April 30, 2021 and from the requirements in
Section 8.1.2 of Appendix D of the CAT NMS Plan with respect to the
Search Return Functionality and the Simultaneous Query Functionality
until July 31, 2023.
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\50\ 15 U.S.C. 78mm(a)(1).
\51\ 17 CFR 242.608(e).
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-28153 Filed 12-21-20; 8:45 am]
BILLING CODE 8011-01-P
