Justia Agencies And Commissions Securities And Exchange Commission Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail by BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami International Securities Exchange LLC, MEMX, 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; and New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc., 21050-21080 [2021-08049]

Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail by BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami International Securities Exchange LLC, MEMX, 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; and New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc., 21050-21080 [2021-08049]

Download as PDF 21050 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91555; File No. 4–698] Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail by BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami International Securities Exchange LLC, MEMX, 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; and New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc. April 14, 2021. khammond on DSKJM1Z7X2PROD with NOTICES3 I. Introduction On March 31, 2021, the Operating Committee for Consolidated Audit Trail, LLC (‘‘CAT LLC’’), on behalf of the following parties to the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’): 1 BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc., 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,’’ ‘‘self-regulatory organizations,’’ or ‘‘SROs’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’),2 and Rule 608 1 The CAT NMS Plan is a national market system plan approved by the Commission pursuant to Section 11A of the Exchange Act and the rules and regulations thereunder. See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 2016). 2 15 U.S.C 78k–1(a)(3). VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 thereunder,3 a proposed amendment to the CAT NMS Plan to implement a revised funding model (‘‘Proposed Funding Model’’) for the consolidated audit trail (‘‘CAT’’) and to establish a fee schedule for Participant CAT fees in accordance with the Proposed Funding Model.4 Exhibit A, attached hereto, contains proposed revisions to Articles I and XI of the CAT NMS Plan as well as proposed Appendix B to the Plan containing the fee schedule setting forth the CAT fees to be paid by the Participants. In addition, the Operating Committee provided an example of how the Proposed Funding Model would operate for illustrative purposes only, as attached hereto as Exhibit B. The example is provided in three charts setting forth illustrative CAT fees for each Participant and Industry Member CAT Reporter. The Commission is publishing this notice to solicit comments from interested persons on the amendment.5 II. Description of the Plan Set forth in this Section II is the statement of the purpose and summary of the amendment, along with information required by Rule 608(a) under the Exchange Act,6 substantially as prepared and submitted by the Participants to the Commission.7 A. Description of the Amendments to the CAT NMS Plan The Operating Committee proposes to revise certain aspects of the funding model set forth in Article XI of the CAT NMS Plan (the ‘‘Original Funding Model’’). The Original Funding Model requires a bifurcated funding model, where costs associated with building and operating the CAT would be borne by (1) Industry Members (other than alternative trading systems (‘‘ATSs’’) that execute transactions in Eligible Securities (‘‘Execution Venue ATSs’’)) through fixed tiered fees based on message traffic for Eligible Securities, and (2) Participants and Industry Members that are Execution Venue ATSs for Eligible Securities through fixed tiered fees based on market share. The Operating Committee proposes to amend the CAT NMS Plan to adopt the Proposed Funding Model. The Proposed Funding Model would continue to 3 17 CFR 242.608. Letter from Michael Simon, CAT NMS Plan Operating Committee Chair, to Vanessa Countryman, Secretary, Commission, dated March 31, 2021 (‘‘Transmittal Letter’’). 5 17 CFR 242.608. 6 See 17 CFR 242.608(a). 7 See Transmittal Letter, supra note 4. Unless otherwise defined herein, capitalized terms used herein are defined as set forth in the CAT NMS Plan. 4 See PO 00000 Frm 00002 Fmt 4701 Sfmt 4703 require many of the same elements as the Original Funding Model, including the bifurcated funding approach, and the use of market share and message traffic for allocating costs. The Proposed Funding Model, however, would revise the Original Funding Model in certain ways, including (1) dividing the CAT costs between Participants and Industry Members, rather than between Execution Venues and Industry Members (other than Execution Venue ATSs); (2) eliminating the use of tiers in calculating CAT fees for Participants and Industry Members; (3) adopting certain minimum and maximum CAT fees for Industry Members and Participants; and (4) imposing certain discounts for market making activity when calculating Industry Member CAT fees. The Operating Committee also proposes to adopt a fee schedule to establish the CAT fees applicable to Participants based on the Proposed Funding Model. The fee schedule would establish the allocation percentages and other variables for calculating the CAT fees under the Proposed Funding Model. 1. Executive Summary of the Proposed Funding Model Under the Proposed Funding Model, the CAT fees for the relevant period would be designed to cover the total CAT costs associated with developing, implementing and operating the CAT for the relevant period (‘‘Total CAT Costs’’).8 The Proposed Funding Model would implement a bifurcated funding model, where these costs would be borne by both Participants and Industry Members. Industry Members as a group would pay 75% of the Total CAT Costs (the ‘‘Industry Member Allocation’’), and Participants as a group would pay 25% of the Total CAT Costs (the ‘‘Participant Allocation’’).9 The Industry Member Allocation would be allocated to each Industry Member based on message traffic. This is similar to the Original Funding Model, which allocated the Industry Member Allocation among Industry Members (other than Execution Venue ATSs) based on message traffic. The Proposed Funding Model would differ from the Original Funding Model because it would eliminate tiering, and it would include certain market maker discounts and a minimum and 8 Note that certain costs would be excluded from the Historical CAT Assessment Costs, as discussed in more detail below. 9 Each Industry Member and Participant CAT Reporter would be required to pay CAT fees as established via the Proposed Funding Model. CAT Reporting Agents acting in their role as such would not have an obligation to pay CAT fees. E:\FR\FM\21APN3.SGM 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices maximum CAT fee for Industry Members. Under the Proposed Funding Model, each Industry Member would pay a CAT fee that is calculated by multiplying each Industry Member’s percentage of the total message traffic of all Industry Members each quarter by the Industry Member Allocation, subject to certain market making discounts, a minimum fee and a maximum fee. Each Industry Member that is an Options Market Maker 10 would have a discount based on the options trade-to-quote ratio applied to its options market making message traffic when calculating that Industry Member’s message traffic to prevent a potentially disproportionate effect on options market making due to such message traffic. Similarly, to prevent a potentially disproportionate effect on market making in NMS Stocks, each Industry Member that is an equity market maker in NMS Stocks (‘‘Equity Market Maker’’) would have a discount based on the NMS Stock trade-to-quote ratio applied to its market making message traffic in NMS Stocks when calculating that Industry Member’s message traffic.11 In addition, each Industry Member CAT Reporter would pay a minimum CAT fee (‘‘Minimum Industry Member CAT Fee’’) of $125 per quarter if its CAT fee would be less than $125 per quarter when calculated based on message traffic. Furthermore, an Industry Member’s CAT fee would be subject to a maximum fee (‘‘Maximum Industry Member CAT Fee’’). The Maximum Industry Member CAT Fee would be the fee calculated based on 8% of the total message traffic for all Industry Members. If an Industry Member’s fee is limited to the Maximum Industry Member CAT Fee, any excess amount which the Industry Member would have paid as a fee above such Maximum Industry Member CAT Fee will be re-allocated among all Industry Members (including any Industry Members subject to the Maximum Industry Member CAT Fee and any Industry Members subject to the Minimum Industry Member CAT Fee) in accordance with each Industry Member’s percentage of total message traffic. As for the Participant Allocation, each Participant would pay a minimum CAT fee of 0.75% of the Participant Allocation (the ‘‘Minimum Participant Fee’’). The Participant Allocation minus the total Minimum Participant Fees required to be paid by all Participants (the ‘‘Adjusted Participant Allocation’’) would be divided between Participants that execute transactions in, or in the case of a national securities association, has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange, in Eligible Securities that are NMS Stocks (‘‘Equities Participants’’) and Participants that execute transactions in Listed Options (‘‘Options Participants’’). Equities Participants as a group would pay 60% of the Adjusted Participant Allocation (‘‘Equities Participant Allocation’’) and Options Participants as a group would pay 40% of the Adjusted Participant Allocation (‘‘Options Participant Allocation’’).12 The Equities Participant Allocation would be divided among Equities Participants based on each Equities Participant’s market share in NMS Stocks. Each Equities Participant would pay a CAT fee that is calculated by multiplying its percentage of the total market share of NMS Stock for all Equities Participants during the relevant time period by the Equities Participant Allocation, subject to a maximum Equities Participant fee. Total market share in NMS Stocks would be determined by calculating the total volume in NMS Stocks reported by all Equities Participants during the relevant time period. A national securities association (currently, only FINRA) Original funding model (as proposed in prior fee proposal) khammond on DSKJM1Z7X2PROD with NOTICES3 VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 75% Industry Member Allocation. 25% Participant Allocation. All ATSs would be included as Industry Members. 11, 2018) (‘‘Prior Fee Proposal Release’’). The Participants later withdrew this proposed amendment. Securities Exchange Act Rel. No. 82892 (Mar. 16, 2018), 83 FR 12633 (Mar. 22, 2018) (‘‘Withdrawal Release’’). 12 For the avoidance of doubt, the Equities Participant Allocation would be divided among Equities Participants based only on each Participant’s market share in NMS Stocks. Unlike the Original Funding Model, the allocation of the PO 00000 would pay its respective share of the Equities Participant Allocation calculated based on market share, provided that the national securities association would not pay more than a maximum Equities Participant fee, which would be the greater of (x) 20% of the Equities Participant Allocation or (y) the highest CAT fee required to be paid by any other Equities Participant plus 5% of such highest CAT fee (‘‘Maximum Equities Participant Fee’’), plus any additional fee required by the re-allocation of any excess amount which such Participant otherwise would have paid if not subject to the Maximum Equities Participant Fee. Specifically, if any Participant’s fee is limited to the Maximum Equities Participant Fee, any excess amount which such Participant otherwise would have paid as a fee above such Maximum Equities Participant Fee will be re-allocated among all Equities Participants (including any Equities Participant subject to the Maximum Equities Participant Fee) in accordance with their market share. The Options Participant Allocation would be divided among Options Participants based on each Options Participant’s market share in Listed Options. Each Options Participant would pay a CAT fee that is calculated by multiplying its percentage of the total market share in Listed Options during the relevant time period by the Options Participant Allocation. Total market share in Listed Options would be determined by calculating the total volume of Listed Options contracts reported by all Options Participants during the relevant time period. The following chart summarizes certain similarities and differences between the Original Funding Model 13 (as well as certain aspects that were proposed in the Prior Fee Proposal 14) and the Proposed Funding Model: Proposed funding model Bifurcated Cost Allocation: 75% Industry Member Allocation ...................................................... 25% Execution Venue Allocation ...................................................... Execution Venues include Participants and Execution Venue ATSs 10 Section 1.1 of the CAT NMS Plan defines an ‘‘Options Market Maker’’ as ‘‘a broker-dealer registered with an exchange for the purpose of making markets in options contracts traded on the exchange.’’ 11 The proposed market making discounts are consistent with a prior CAT fee proposal filed with the SEC (‘‘Prior Fee Proposal’’). For a description of the Prior Fee Proposal, see Securities Exchange Act Rel. No. 82451 (Jan. 5, 2018), 83 FR 1399 (Jan. 21051 Frm 00003 Fmt 4701 Sfmt 4703 Equities Participant Allocation among Equities Participants under the Proposed Funding Model will not take into consideration market share associated with OTC Equity Securities for which FINRA facilitates trade reporting. 13 The Original Funding Model is set forth in the CAT NMS Plan, which was approved in 2016. See CAT NMS Plan Approval Order at 84793–84798. 14 See generally Prior Fee Proposal Release. E:\FR\FM\21APN3.SGM 21APN3 21052 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices Original funding model (as proposed in prior fee proposal) Proposed funding model Note that the bifurcated model to allocate costs among Industry Members (other than Execution Venue ATSs) and Execution Venues is part of the Original Funding Model; the 75%–25% allocation had been proposed in the Prior Fee Proposal. 75% Industry Member Allocation: Message Traffic Approach with Tiering: Count each Industry Member’s messages so the Industry Member can be assigned to a tier and allocated a proportionate share of cost for that tier. Note that the discounts for market making had been proposed in the Prior Fee Proposal. 25% Participant Allocation: Market Share Approach with Tiering: No Minimum Participant Fee. khammond on DSKJM1Z7X2PROD with NOTICES3 Market Group Split: • 67% of costs allocated to NMS Stock and OTC Equities Execution Venues. • 33% of costs allocated to Listed Options Execution Venues. Note that the split between NMS Stock and OTC Equities Execution Venues and Listed Options Execution Venues is part of the Original Funding Model; the 67%–33% allocation had been proposed in the Prior Fee Proposal. Market Share-Based Tier Allocation: • Within NMS Stock and OTC Equities market group, determine each Execution Venue’s market share so the Execution Venue can be assigned to a tier and allocated a proportionate share of cost for that tier. • Within Listed Options market group, determine each Execution Venue’s market share so the Execution Venue can be assigned to a tier and allocated a proportionate share of cost for that tier. As discussed in detail below, the Operating Committee believes that the Proposed Funding Model satisfies the applicable requirements of the Exchange Act as well as the funding principles and other requirements of the CAT NMS Plan, as proposed to be revised herein. For example, the Operating Committee believes that the Proposed Funding Model provides for the ‘‘equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities necessary or appropriate in furtherance of the purposes of this chapter.’’ 15 The Operating Committee also believes that the Proposed Funding Model is ‘‘not designed to permit unfair discrimination between customers, issuers, brokers, or dealers.’’ 16 Furthermore, the Operating Committee believes that the Proposed Funding Model does ‘‘not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter.’’ 17 Accordingly, the Operating Committee 15 Sections 6(b)(4) and 15A(b)(5) of the Exchange Act. 16 Sections 6(b)(5) and 15A(b)(6) of the Exchange Message Traffic Approach: Count each Industry Member’s messages so the Industry Member can be allocated a proportionate share of cost compared to total Industry Member messages, subject to certain discounts for market making, a minimum fee, and a maximum fee. Market Share Approach: Minimum Participant Fee: 0.75% of the Participant Allocation allocated to each Participant. Market Group Split: • 60% of costs allocated to NMS Stock Participants. • 40% of costs allocated Listed Options Participants. Note OTC Equity Security market share would not be considered. Market Share-Based Allocation: • Within NMS Stock market group, determine each Participant’s market share, subject to a FINRA-related cap allocation/reallocation, so the Participant can be allocated a proportionate share of cost. • Within Listed Options market group, determine each Participant’s market share so it can be allocated a proportionate share of cost. believes that the Proposed Funding Model satisfies the requirements of the Exchange Act. The Participants also believe that the Proposed Funding Model satisfies the funding principles set forth in Section 11.2 of the CAT NMS Plan, as proposed to be modified herein, as well as the requirements in Section 11.1(c) of the CAT NMS Plan. The Operating Committee therefore believes that the Commission should approve the Proposed Funding Model as it ‘‘is necessary or appropriate in the public interest, for the protection of investors and the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system, or otherwise in furtherance of the purposes of the Act.’’ 18 Under the Proposed Funding Model, both Participants and Industry Members would contribute to the funding of the CAT by paying a CAT fee. As permitted by Rule 613, the CAT NMS Plan requires Industry Members to pay a CAT fee. Nevertheless, the Participants have paid the full cost of the creation, implementation and maintenance of the CAT since 2012, pending Commission approval of a fee program. The continued funding of the CAT solely by the Participants was and is not contemplated by the CAT NMS Plan, nor is it a financially sustainable approach. Rule 613(a)(1)(vii)(D) contemplates Industry Members contributing to the payment of CAT costs. Specifically, this provision requires the CAT NMS Plan to address ‘‘[h]ow the plan sponsors propose to fund the creation, implementation, and maintenance of the consolidated audit trail, including the proposed allocation of such estimated costs among the plan sponsors, and between the plan sponsors and members of the plan sponsors.’’ In addition, as approved by the SEC, the CAT NMS Plan specifically contemplates CAT fees to be paid by both Industry Members and Participants. Section 11.1(b) states that ‘‘the Operating Committee shall have discretion to establish funding for the Company,19 including: (i) Establishing 18 Rule 608(b)(2) of Regulation NMS under the Exchange Act. 19 As defined in the CAT NMS Plan, the Company is the Consolidated Audit Trail, LLC. 2. Allocation of CAT Costs Between Industry Members and Participants a. CAT Fees for Both Industry Members and Participants Act. 17 Sections 6(b)(8) and 15A(b)(9) of the Exchange Act. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4703 E:\FR\FM\21APN3.SGM 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices fees that the Participants shall pay; and (ii) establishing fees for Industry Members that shall be implemented by the Participants.’’ 20 The Commission stated in approving the CAT NMS Plan the following: The Commission believes that the proposed funding model reflects a reasonable exercise of the Participants’ funding authority to recover the Participants’ costs related to the CAT. The CAT is a regulatory facility jointly owned by the Participants and, as noted above, the Exchange Act specifically permits the Participants to charge members fees to fund their selfregulatory obligations. The Commission further believes that the proposed funding model is designed to impose fees reasonably related to the Participants’ self-regulatory obligations because the fees would be directly associated with the costs of establishing and maintaining the CAT, and not unrelated SRO services.21 In its recent amendments to the CAT NMS Plan, the SEC reaffirmed the ability for the Participants to charge Industry Members a CAT fee. Specifically, the SEC noted that the amendments were not intended to change the basic funding structure for the CAT, which may include fees established by the Operating Committee, and implemented by the Participants, to recover from Industry Members the costs and expenses incurred by the Participants in connection with the development and implementation of the CAT.22 Finally, as noted by the SEC, the CAT ‘‘substantially enhance[s] the ability of the SROs and the Commission to oversee today’s securities markets,’’ 23 thereby benefitting all market participants. As such, both Participants and Industry Members should contribute to covering the cost of the CAT. khammond on DSKJM1Z7X2PROD with NOTICES3 b. Categorization of Alternative Trading Systems The Original Funding Model employs a bifurcated approach in which costs associated with building and operating the CAT would be borne by (1) Participants and Industry Members that are Execution Venue ATSs for Eligible Securities, and (2) Industry Members (other than Execution Venue ATSs). 20 See also Sections 11.1(c), 11.2(c), and 11.3(a) and (b) of the CAT NMS Plan. 21 CAT NMS Plan Approval Order at 84794. 22 Securities Exchange Act Rel. No. 88890 (May 15, 2020), 85 FR 31322, 31329 (May 22, 2020) (‘‘Financial Accountability Milestone Release’’). 23 Securities Exchange Act Rel. No. 67457 (Jul. 18, 2012), 77 FR 45722, 45726 (Aug. 1, 2012) (‘‘Rule 613 Adopting Release’’). VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 21053 Under the Proposed Funding Model, the concept of an Execution Venue would be eliminated, and CAT costs would be divided between Participants as a group and Industry Members as a group; Execution Venue ATSs would be treated like other Industry Members, not Participants. Accordingly, the Operating Committee proposes to delete the definition of the term ‘‘Execution Venue’’ and related provisions from the CAT NMS Plan. The Operating Committee believes that this change would address prior comments regarding the inclusion of ATSs in the Execution Venue category with Participants. First, this proposed change would simplify the model by requiring all Industry Members to pay a fee based on message traffic, rather than treating certain Industry Members— Execution Venue ATSs—in the same manner as Participants, which would pay a fee based on market share. Second, this proposed change would address comments that treating Execution Venue ATSs like Participants would act as a barrier to entry for smaller ATSs.24 Whether or not such a potential would exist, under the Proposed Funding Model, smaller ATSs would be treated like any other smaller Industry Member when calculating their CAT fee, thereby rendering comments regarding potential barriers to entry for smaller ATSs moot. Section 1.1 of the CAT NMS Plan defines the term ‘‘Execution Venue’’ to mean ‘‘a Participant or an alternative trading system (‘ATS’) (as defined in Rule 300 of Regulation ATS) that operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS that does not execute orders).’’ The Operating Committee proposes to delete this term and its definition from Section 1.1 of the CAT NMS Plan as the concept will no longer be necessary for the Proposed Funding Model. The Operating Committee also proposes to amend Section 11.2(c)(i) and (ii) of the CAT NMS Plan to reflect the new approach of the Proposed Funding Model. Section 11.2(c)(i) of the CAT NMS Plan states that the fees charged to ‘‘CAT Reporters that are Execution Venues, including ATSs, are based upon the level of market share.’’ Under the Proposed Funding Model, fees charged to Participants only would be based on market share; fees charged to all Industry Members, including ATSs, will be based on message traffic. Accordingly, the Operating Committee proposes to replace the phrase ‘‘CAT Reporters that are Execution Venues, including ATSs’’ with the term ‘‘Participants.’’ Section 11.2(c)(ii) of the CAT NMS Plan states that the fees charged to ‘‘Industry Members’ non-ATS activities are based upon message traffic.’’ Under the Proposed Funding Model, both the ATS and non-ATS activity of Industry Members will be used as the basis for the fees charged to Industry Members. Accordingly, the Operating Committee proposes to delete the phrase ‘‘non-ATS activities’’ from Section 11.2(c)(ii) of the CAT NMS Plan. Section 11.3(a) describes the CAT fees to be paid by Execution Venues. Because these fees would be limited to Participants, not to Execution Venues more broadly, the Operating Committee proposes to replace the references to ‘‘Execution Venues’’ with ‘‘Participants’’ in Section 11.3(a) of the CAT NMS Plan. The Operating Committee proposes to replace the reference to ‘‘Execution Venues’’ with ‘‘Participants’’ in Section 11.3(a) of the CAT NMS Plan, which currently states that ‘‘[t]he Operating Committee will establish fixed fees to be payable by Execution Venues as provided in this Section 11.3(a).’’ The Operating Committee also proposes to replace the references to ‘‘Execution Venue’’ with ‘‘Participants’’ in Section 11.3(a)(i) of the CAT NMS Plan,25 which currently states: (i) Each Execution Venue that: (A) Executes transactions; or (B) in the case of a national securities association, has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange, in NMS Stocks or OTC Equity Securities will pay a fixed fee depending on the market share of that Execution Venue in NMS Stocks and OTC Equity Securities, with the Operating Committee establishing at least two and no more than five tiers of fixed fees, based on an Execution Venue’s NMS Stocks and OTC Equity Securities market share. For these purposes, market share for Execution Venues that execute transactions will be calculated by share volume, and market share for a national securities association that has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange in NMS Stocks or OTC Equity Securities will be calculated based on share volume of trades reported, provided, however, that the share volume reported to such national 24 See, e.g., Securities Exchange Act Rel. No. 81067 (June 30, 2017), 82 FR 31656, 31664 (July 7, 2017) (‘‘Suspension Order’’). 25 Note that, as discussed below, references to tiers and OTC Equity Securities in this provision will be deleted as well. PO 00000 Frm 00005 Fmt 4701 Sfmt 4703 E:\FR\FM\21APN3.SGM 21APN3 khammond on DSKJM1Z7X2PROD with NOTICES3 21054 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices securities association by an Execution Venue shall not be included in the calculation of such national security association’s market share. In addition, the Operating Committee proposes to delete the final clause in Section 11.3(a)(i), which states ‘‘provided, however, that the share volume reported to such national securities association by an Execution Venue shall not be included in the calculation of the such national security association’s market share.’’ This proviso was included to clarify how the share volume of an Execution Venue ATS was treated in the context of calculating a national security association’s market share when Execution Venue ATSs and Participants were in the same fee category. As Execution Venue ATSs would be treated as Industry Members under the Proposed Funding Model, the Operating Committee proposes to delete this proviso from Section 11.3(a)(i) of the CAT NMS Plan. Similarly, Section 11.3(a)(ii) of the CAT NMS Plan states that ‘‘[e]ach Execution Venue that executes transactions in Listed Options will pay a fixed fee depending on the Listed Options market share of that Execution Venue.’’ The Operating Committee proposes to replace both references to ‘‘Execution Venue’’ with ‘‘Participant.’’ Section 11.3(b) of the CAT NMS Plan provides guidance as to how the message traffic for certain ATS activity would be included in the Industry Member message traffic calculations. Specifically, Section 11.3(b) of the CAT NMS Plan, in part, states, the following: For the avoidance of doubt, the fixed fees payable by Industry Members pursuant to this paragraph shall, in addition to any other applicable message traffic, include message traffic generated by: (i) An ATS that does not execute orders that is sponsored by such Industry Member; and (ii) routing orders to and from any ATS sponsored by such Industry Member. Under the Original Funding Model, Execution Venue ATSs were treated as Execution Venues, but other ATSs were treated as Industry Members. Accordingly, this statement clarified how message traffic would be counted for ATSs that were not Execution Venue ATSs and for routing to and from ATSs. Under the Proposed Funding Model, however, all ATS activity would be treated as Industry Member activity for purposes of calculating the Industry Member CAT fees. Therefore, because this clarifying statement is unnecessary under the Proposed Funding Model, the Operating Committee proposes to delete VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 this sentence from Section 11.3(b) of the CAT NMS Plan. c. 75%–25% Allocation Between Industry Members and Participants As discussed above, the CAT NMS Plan as approved by the Commission provides the Operating Committee with discretion to establish CAT fees to be paid by Participants and Industry Members. The Proposed Funding Model contemplates allocating CAT costs between Participants and Industry Members to permit the calculation of CAT fees based on market share for Participants and based on message traffic for Industry Members.26 The Operating Committee proposes to implement this allocation through a 75%–25% allocation between Industry Members and Participants. Specifically, in calculating CAT fees for the relevant period under the Proposed Funding Model, Industry Members as a group would pay 75% of the Total CAT Costs for the relevant period (‘‘Industry Member Allocation’’), and Participants as a group would pay 25% of the Total CAT Costs for the relevant period (‘‘Participant Allocation’’). In proposing a 75%–25% allocation between Industry Members and Participants, Participants considered a variety of different potential allocations between Industry Members and Participants. After analyzing the various alternatives, the Participants determined that the 75%–25% allocation continues to be an equitable allocation of reasonable CAT fees between Industry Members and Participants that balances the costs paid by each CAT Reporter and the regulatory benefits each receives. The Operating Committee notes that the 75%–25% allocation would have the effect of increasing the cost allocation to Participants by approximately 8% of the total CAT costs in comparison to the Prior Fee Proposal.27 The Prior Fee Proposal also relied upon a 75%–25% allocation between CAT Reporters, but the allocation was structured differently than in the Proposed Funding Model. In the Prior Fee Proposal, Industry Members (other than Execution Venue ATSs) would have paid 75% of the total CAT costs, and Participants and Execution Venue ATSs would have paid 26 See, e.g., Sections 11.2(b)–(c) and 11.3(a)–(b) of the CAT NMS Plan. In the Original Funding Model, costs were allocated between Execution Venues and certain Industry Members, whereas the Proposed Funding Model proposes to allocate costs between Participants and Industry Members. 27 For a description of the Prior Fee Proposal, see generally Prior Fee Proposal Release. The Participants later withdrew this amendment. See Withdrawal Release. PO 00000 Frm 00006 Fmt 4701 Sfmt 4703 25% of the total CAT costs.28 Most ATSs were included in the 25% allocation for Execution Venues. ATSs accounted for approximately 8% of the total CAT costs in the Prior Fee Proposal, and approximately 32% of the Execution Venue allocation. By moving ATSs to the Industry Member Allocation, Participants would pay the full 25% of the total CAT costs allocated to Participants rather than approximately 68% of the 25% of Total CAT costs allocated to Execution Venues under the Prior Fee Proposal. Using total CAT cost data for 2020, 8% of total CAT costs would be approximately $6.8 million for 2020. The Operating Committee believes that this substantial increase in the Participant share of the total CAT costs addresses comments suggesting that Execution Venue ATSs should be treated like other Industry Members (rather than as Execution Venues) and indicating that the size of the percentage of total CAT costs to be paid by Industry Members as a group was too large.29 Correspondingly, the 75% Industry Member Allocation would be shared among more Industry Members under the Proposed Funding Model as all ATSs will be Industry Members for purposes of CAT fees, not just ATSs other than Execution Venue ATSs. The Operating Committee also considered alternatives to the Participant contribution besides the proposed 25% in which Participants paid larger contributions than 25% of the total CAT costs (e.g., a 50%–50% allocation between Industry Members and Participants) and Participants paid smaller contributions than 25% of the total CAT costs.30 In considering these alternative allocations with percentages greater than 25% of total CAT costs allocated to Participants, the Participants noted that there are far more Industry Members than Participants. There are only 25 Participants and approximately 1237 Industry Members, as of December 2020. Moreover, based upon an analysis of available CAT Reporter revenue, Participants only represented 28 Prior Fee Proposal Release at 1408. Suspension Order at 31662–3. 30 In the development of the Prior Fee Proposal and the Proposed Funding Model, the Participants explored a variety of other possible allocations. For example, in determining the cost allocation between Industry Members (other than Execution Venue ATSs) and Execution Venues for the Prior Fee Proposal, the Participants analyzed a range of possible splits for revenue recovery from such Industry Members and Execution Venues, including 80%–20%, 75%–25%, 70%–30% and 65%–35% allocations between Industry Members and Execution Venues. See, e.g., Prior Fee Proposal Release at 1408. 29 See E:\FR\FM\21APN3.SGM 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 approximately 4% of the total CAT Reporter revenue; Industry Members represented 96% of the total CAT Reporter revenue.31 In addition, various Industry Members have revenue in excess of some or all of the Participants. Accordingly, the Operating Committee determined that allocating more than 25% of the total CAT costs to the Participants was not a fair and equitable approach. Furthermore, with this allocation, the Industry Members with the most message traffic and the Participant complexes with the most market share would pay comparable CAT fees. For example, based on the data from the fourth quarter of 2020, the three Industry Members with the most message traffic would be subject to an annual CAT fee in the range of $5 to $6 million, and the Participant complexes with the highest CAT fees would pay an annual CAT fee in a similar range. The Operating Committee also analyzed the possibility of allocating CAT costs among CAT Reporters—both Participants and Industry Members— based on revenue. Such a revenue-based allocation would impose a more significant portion of the CAT costs on Industry Members. Industry Members would pay approximately 96% of the CAT costs and Participants would pay approximately 4% of the CAT costs. Because the revenue-based allocation would impose such a significant percentage of CAT costs on Industry Members, the Operating Committee determined not to pursue that approach. The Operating Committee also recognized the practical difficulties with determining the appropriate revenue figures for all CAT Reporters. The Industry Member Allocation of 75% of Total CAT Costs and the Participant Allocation of 25% of Total CAT Costs would be included in the fee schedule for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan. Because the Participant CAT fees would be charged on a quarterly basis, this provision would indicate that the Industry Member Allocation and the Participant Allocation would be calculated based on 1/4th of the Total CAT Costs for the relevant year. Specifically, proposed paragraph (b)(1) of Appendix B of the CAT NMS Plan would state that ‘‘The Industry Member Allocation for each quarter shall be 75% 31 Industry Member revenue was calculated based on the total revenue reported in the Industry Member’s FOCUS reports. Participant revenue was calculated based on revenue information provided in Form 1 amendments and/or publicly reported figures. Participants are not required to file uniform FOCUS-type reports regarding revenue like Industry Members. Accordingly, the revenue calculation for Participants is not as straightforward as for Industry Members. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 of 1/4th of the Total CAT Costs for the relevant year. The Participant Allocation for each quarter shall be 25% of 1/4th of the Total CAT Costs for the relevant year.’’ 3. Industry Member CAT Fee Under the Proposed Funding Model, each Industry Member will pay a CAT fee that is calculated by multiplying each Industry Member’s message traffic percentage of the total message traffic of all Industry Members during the relevant time period by the Industry Member Allocation, subject to certain market maker message traffic discounts, a Minimum Industry Member CAT Fee and a Maximum Industry Member CAT Fee. Each Industry Member that is an Options Market Maker will have a discount based on the options trade-toquote ratio applied to its Options Market Maker message traffic when calculating that Industry Member’s message traffic, and each Industry Member that is an Equity Market Maker will have a discount based on the NMS Stock trade-to-quote ratio applied to its Equity Market Maker message traffic when calculating that Industry Member’s message traffic. In addition, each Industry Member CAT Reporter will pay a Minimum Industry Member CAT Fee of $125 per quarter if its CAT fee would be less than $125 per quarter when calculated based on message traffic. Furthermore, an Industry Member’s CAT fee would be subject to the Maximum Industry Member CAT Fee. The Maximum Industry Member CAT Fee would be the fee calculated based on 8% of the total message traffic for all Industry Members. If an Industry Member’s CAT fee is limited to the Maximum Industry Member CAT Fee, any excess amount which the Industry Member would have paid as a fee above such Maximum Industry Member CAT Fee will be re-allocated among all Industry Members (including any Industry Members subject to the Maximum Industry Member CAT Fee and any Industry Members subject to the Minimum Industry Member CAT Fee) in accordance with each Industry Member’s percentage of total message traffic. Each of these aspects of the Industry Member CAT fee are discussed in more detail below. a. Use of Message Traffic Consistent with the Original Funding Model, the Industry Member Allocation would be allocated among Industry Members based on message traffic. The CAT NMS Plan, as approved by the SEC, contemplates the use of message traffic to apportion the Industry Member PO 00000 Frm 00007 Fmt 4701 Sfmt 4703 21055 Allocation among Industry Members.32 Although the Operating Committee analyzed various alternative methods for allocating costs among Industry Members, the Operating Committee continued to conclude that using message traffic would equitably allocate CAT fees among Industry Members. This approach is consistent with the approach set forth in Section 11.3(b) of the CAT NMS Plan, which states that ‘‘[t]he Operating Committee will establish fixed fees to be payable by Industry Members, based on the message traffic generated by such Industry Member.’’ 33 Accordingly, the use of message traffic for allocating CAT costs among Industry Members is consistent with the CAT NMS Plan as approved by the Commission. The Operating Committee also analyzed the possibility of allocating the Industry Member Allocation among Industry Members based on revenue related to activities in Eligible Securities, which would have been derived from Industry Member revenue reported on FOCUS reports.34 The Operating Committee concluded that it may be difficult to determine which types of Industry Member revenue should be included in the calculation for a CAT fee under such an approach. b. Calculating Industry Member CAT Fees i. No Tiered Fees for Industry Members While continuing to utilize a message traffic-based model for Industry Members, the Operating Committee proposes to eliminate the use of tiered fees for Industry Members in the Proposed Funding Model. Instead, under the Proposed Funding Model, each Industry Member would pay a fee based solely on its percentage of total Industry Member message traffic (subject to the market maker message traffic discounts, the Minimum Industry Member CAT Fee and the Maximum Industry Member CAT Fee).35 The Operating Committee therefore proposes to amend Sections 11.1(d), 11.2(c), 11.3(a) and 11.3(b) to eliminate the 32 See, e.g., Sections 11.2(c) and 11.3(b) of the CAT NMS Plan. 33 See also Section 11.2(c) of the CAT NMS Plan. 34 This approach would have been similar to FINRA’s imposition of the Gross Income Assessment, which is based on FOCUS report revenue. See Section 1(c) and (d) of Schedule A of FINRA By-Laws. 35 Similarly, as discussed further below, the Operating Committee proposes to allocate the Participant Allocation among Participants based on the Participant’s market share, consistent with the Original Funding Model, except it too would be calculated without relying on tiered fees. E:\FR\FM\21APN3.SGM 21APN3 21056 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 concept of tiered fees from the CAT NMS Plan. (a) Advantages of No Tiered Fees By removing the concept of fee tiering for both Industry Members and Participant Allocations, the Proposed Funding Model addresses various comments regarding the use of tiering.36 Utilizing a tiered fee structure, by its nature, would create certain inequities among the CAT fees paid by Industry Members. For example, two Industry Members with similar levels of message traffic may pay notably different fees if one falls in a higher tier and the other falls within a lower tier. Correspondingly, a tiered fee structure generally reduces fees for Industry Members with higher message traffic in one tier, while increasing fees for Industry Members with lower levels of message traffic in the same tier, as compared to a non-tiered fee. Furthermore, Industry Members in lower tiers potentially pay more than they would without the use of tiers. While tiering exists in various other fee programs and generally itself may not be an unfairly discriminatory practice, in response to feedback on the Prior Fee Proposal, the Participants are proposing to eliminate the tiering concept, rendering past comments about potential inequities that may exist using a tiering model moot. By charging each Industry Member a CAT fee directly based on its own message traffic, rather than charging a tiered fee, the Proposed Funding Model will result in an Industry Member’s CAT fee being tied more directly to the Industry Member’s message traffic in the CAT. In contrast, with a tiered fee, Industry Members with different levels of message traffic that are placed in the same tier would all pay the same CAT fee, thereby limiting the correlation between an Industry Member’s message traffic in the CAT and its CAT fee. The proposed non-tiering approach is, arguably, more simplistic and objective to administer than the tiering approach. With a tiering approach, the number of tiers for Industry Members, the boundaries for each tier and the fees assigned to each tier must be established. In the absence of clear groupings of Industry Members by message traffic, selecting the number of, boundaries, and the fees associated with each tier would be subject to some level of subjectivity. Furthermore, the establishment of tiers would need to be continually reassessed based on changes in message traffic, thereby requiring regular subjective assessments. 36 See, e.g., Suspension Order at 31667. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Accordingly, the removal of tiering from the funding model eliminates a variety of subjective analyses and judgments from the model, and simplifies the determination of Industry Member CAT fees. (2) Proposed Amendments to the CAT NMS Plan The Operating Committee proposes to amend Sections 11.1(d), 11.2(c), 11.3(a) and 11.3(b) of the CAT NMS Plan to eliminate references to the use of tiered fees and related concepts. Section 11.1(d) of the CAT NMS Plan states that ‘‘[c]onsistent with this Article XI, the Operating Committee shall adopt policies, procedures, and practices regarding the budget and budgeting process, assignment of tiers, resolution of disputes, billing and collection of fees, and other related matters.’’ With the elimination of tiered fees, the reference to the ‘‘assignment of tiers’’ would no longer be applicable for the Proposed Funding Model. Therefore, the Operating Committee proposes to delete the reference to ‘‘assignment of tiers’’ from Section 11.1(d). Section 11.1(d) of the CAT NMS Plan also states that: For the avoidance of doubt, as part of its regular review of fees for the CAT, the Operating Committee shall have the right to change the tier assigned to any particular Person in accordance with fee schedules previously filed with the Commission that are reasonable, equitable and not unfairly discriminatory and subject to public notice and comment, pursuant to this Article XI. Any such changes will be effective upon reasonable notice to such Person. As noted above, unlike the Original Funding Model, the Proposed Funding Model would not utilize tiered fees. Accordingly, these two sentences would no longer be applicable to the Proposed Funding Model. Therefore, the Operating Committee proposes to delete these two sentences from Section 11.1(d) of the CAT NMS Plan. The Operating Committee proposes to delete the reference to ‘‘tiered’’ fees from Section 11.2(c) of the CAT NMS Plan. Section 11.2(c) of the CAT NMS Plan states that ‘‘[i]n establishing the funding of the Company, the Operating Committee shall seek: . . . (c) to establish a tiered fee structure . . .’’ The Participants propose to delete the word ‘‘tiered’’ from this provision as the CAT fees would not be tiered under the Proposed Funding Model. The Operating Committee also proposes to delete paragraph (iii) of Section 11.2(c) of the CAT NMS Plan. Paragraph (iii) of Section 11.2(c) of the CAT NMS Plan states that the Operating Committee shall seek to establish a PO 00000 Frm 00008 Fmt 4701 Sfmt 4703 tiered fee structure in which fees charged to: the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) be generally comparable (where for these comparability purposes, the tiered fee structures takes into consideration affiliations between or among CAT Reporters, whether Execution Venues and/or Industry Members). Under the Original Funding Model, the comparability provision was an important factor in determining the tiers for Industry Members and Execution Venues. Under the Proposed Funding Model, however, the comparability provision is no longer relevant, as a tiered fee structure would not be used for Industry Members or Participants.37 The Operating Committee further proposes to delete the references to tiers in Sections 11.3(a)(i) and (ii) and 11.3(b) of the CAT NMS Plan. Specifically, Section 11.3(a)(i) of the CAT NMS Plan states that the Operating Committee, when establishing fees for Execution Venues for NMS Stocks and OTC Equity Securities, will establish ‘‘at least two and no more than five tiers of fixed fees, based on an Execution Venue’s NMS Stocks and OTC Equity Securities market share.’’ 38 Similarly, Section 11.3(a)(ii) of the CAT NMS Plan states that the Operating Committee, when establishing fees for Execution Venues that execute transactions in Listed Options, will establish ‘‘at least two and no more than five tiers of fixed fees, based on an Execution Venue’s Listed Options market share.’’ Section 11.3(b) of the CAT NMS Plan states that the Operating Committee, when establishing fees to be payable by Industry Members, will establish ‘‘at least five and no more than nine tiers of fixed fees, based on message traffic.’’ The Operating Committee proposes to delete each of these references to tiers from the CAT NMS Plan. ii Definition of Message Traffic Message traffic will be calculated based on Industry Members’ Reportable Events reported to the CAT as defined in the CAT Reporting Technical Specifications for Industry Members (‘‘IM Reporting Tech Specs’’) as amended from time to time.39 The Reportable Events may vary over time if the IM Reporting Tech Specs are 37 This change also would address the comments regarding the use of comparability in the Original Funding Model. See Suspension Order at 31662–3. 38 Note that, as discussed below, the Operating Committee also proposes to delete the reference to OTC Equity Securities. 39 The CAT Reporting Technical Specifications for Industry Members are available at www.catnmsplan.com. E:\FR\FM\21APN3.SGM 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices amended.40 However, Reportable Events in the current IM Reporting Tech Specs that will be counted as message traffic include, but are not limited to, such events as the New Order Event, the Order Route Event and Trade Event. In addition, under the Proposed Funding Model, message traffic will not include reporting activity related to Customer information as set forth in the CAT Reporting Customer and Account Technical Specifications for Industry Members.41 iii. Market Maker Discounts khammond on DSKJM1Z7X2PROD with NOTICES3 In the Original Funding Model, Options Market Maker message traffic and Equity Market Maker message traffic would have been treated the same as other message traffic for purposes of calculating Industry Member CAT fees.42 The Commission and commenters raised questions as to whether this treatment of market maker quotes may result in an undue or inappropriate burden on competition or may lead to a reduction in market quality.43 For example, commenters noted that charging Industry Members on the basis of message traffic would impact market makers disproportionately because of their continuous quoting obligations. Moreover, in the context of Options Market Makers, message traffic would include bids and offers for every Listed Options strikes and series.44 To address these issues, the Operating Committee proposes to discount Options Market Maker message traffic by the trade-toquote ratio for Listed Options when calculating message traffic for Options 40 The Operating Committee recognizes that, due to the Phased Reporting approach, all Reportable Events will not be reported until all Industry Members are reporting all Reportable Events to the CAT. For example, Phase 2d CAT reporting is scheduled for December 2021, and Small Industry Non-OATS Reporters are not required to report until December 2021. In addition, certain Reportable Events, such as simple options manual orders and OTC link messages, are not required to be reported until later in the Phased Reporting. For a detailed description of such Reportable Events, see CAT Reporting Technical Specifications for Industry Members (available at www.catnmsplan.com). For the Industry Member CAT reporting timeline, see, e.g., FINRA Rule 6895(c). The Operating Committee proposes to allocate costs based on the Reportable Events reported to the CAT in any relevant quarter, regardless of whether all Industry Members are reporting to the CAT or all Reportable Events are required to be reported to the CAT for the relevant quarter. 41 The CAT Reporting Customer and Account Technical Specifications for Industry Members are available at www.catnmsplan.com. 42 Note, however, that market maker discounts were included in the Prior Fee Proposal. See Prior Fee Proposal Release at 1418–9. 43 See Suspension Order at 31663–4. 44 Id. at 31664. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Market Makers, and to discount Equity Market Maker message traffic by the trade-to-quote ratio for NMS Stocks when calculating message traffic for Equity Market Makers. The message traffic of Options Market Makers and Equity Market Makers, as discounted, would be counted as part of the total message traffic for all Industry Members. The practical effect of applying such discounts for market making activity would be to lower the CAT fees for Options Market Makers and Equity Market Makers. By imposing a discount on Options Market Makers and Equity Market Makers’ message traffic for the calculation of message traffic, the Operating Committee believes that the proposed CAT fees for market makers would satisfy the requirements of the funding principles set forth in Section 11.2 of the CAT NMS Plan as well as the requirements of the Exchange Act. First, the proposed market maker discounts are designed to address comments that the Original Funding Model could disproportionately affect market makers, thereby leading to a reduction in liquidity and market quality. Commenters noted that charging Industry Members on the basis of message traffic will impact market makers disproportionately because of their continuous quoting obligations. With their continuous quoting obligations, market makers would have higher levels of message traffic, and the type of message traffic (bids and offers rather than transactions) are not necessarily related to higher revenue. The SEC repeatedly has recognized the value of protecting the provision of market liquidity, and afforded market makers favorable regulatory treatment by virtue of their role as liquidity providers. For example, market makers receive favorable treatment under short sale rules,45 margin rules,46 pursuant to exchange fee schedules,47 and under the Volcker Rule.48 The proposed discounts are designed to put market makers and other market participants on a level playing field in the Proposed Funding Model, thereby preserving and incentivizing the ability of market makers to provide liquidity to the market, which liquidity ultimately 45 See, e.g., Rule 203(b)(2)(iii) of Regulation SHO under the Exchange Act (market maker exception for short sale locate requirement). 46 See, e.g., Section 7(c)(3) of the Exchange Act (market maker exception regarding margin requirements). 47 See, e.g., NYSE Arca Rule 8.800–E and Market Maker Fees and Credits, NYSE Arca Fees and Charges (incentive programs for market makers). 48 See Section __.4(b) (market making exemption from the proprietary trading prohibition). PO 00000 Frm 00009 Fmt 4701 Sfmt 4703 21057 benefits all market participants. Market makers’ primary role is to provide the markets with competitive prices and quotes against which others may execute their orders. Market makers update their quotes continuously throughout each trading day to reflect changes in the market, and each update is additional message traffic that will be reported to CAT. If CAT fees made it unduly costly for market makers to provide this competitive liquidity, it could reduce the available liquidity against which customers could execute orders and create worse pricing for customers that do receive executions. Second, although the proposed discounts would provide market makers with a benefit not provided to other market participants, such discounts would not amount to unfair discrimination or an unnecessary or inappropriate burden on competition. As discussed above, the SEC has recognized repeatedly that such favorable treatment for market makers in other contexts was not unfairly discriminatory or a burden on competition in light of its positive effects on market quality, nor was it considered to involve an inequitable allocation of fees among members. Third, the Operating Committee believes that the proposed fees appropriately take into account the distinctions in the securities trading operations of different Industry Members, and avoid disincentives, such as a reduction in market quality, as required under the funding principles of the CAT NMS Plan.49 The proposed discounts recognize the different types of trading operations presented by Options Market Makers and Equity Market Makers, as well as the value of the market makers’ quoting activity to the markets as a whole. Accordingly, the Operating Committee believes that the proposed discounts will not impact the ability of Options Market Makers or Equity Market Makers to provide liquidity. Finally, the Operating Committee believes that the trade-to-quote ratio is an appropriate method for discounting market maker message traffic, including because of the relatively few quotes that ultimately execute. As discussed above, the vast majority of quotes market makers submit are intended to price the market and provide liquidity against which orders may execute. The Operating Committee proposes to use the trade-to-quote ratio for calculating the discount because it directly relates to the issue regarding the quoting requirement (i.e., fewer trades per quote 49 Section E:\FR\FM\21APN3.SGM 11.2(b) of the CAT NMS Plan. 21APN3 21058 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices for market makers due to their quoting activity) and it is an objective discounting method. khammond on DSKJM1Z7X2PROD with NOTICES3 (a) Options Market Maker Discount To address issues regarding the potential burdens on competition and market quality of including Options Market Maker message traffic in the calculation of message traffic, the Operating Committee proposes to discount Options Market Maker message traffic based on the trade-to-quote ratio for options when calculating the message traffic for Options Market Makers.50 Specifically, for each Options Market Maker, a discount would be applied to (1) all message traffic reported to the CAT by the Options Market Maker related to an order originated by a market maker in its market making account for a security in which it is registered, regardless of where the order is ultimately routed or executed; 51 and (2) all message traffic for which a ‘‘quote sent time’’ is reported by an Options Exchange on behalf of the given Options Market Maker. The relevant trade-to-quote ratio for the Options Market Maker discount would be calculated each quarter based on the prior quarter’s CAT data. The discount is calculated by dividing the adjusted trade count (that is, the total number of trades for the quarter minus the total number of trade busts) by the total number of quotes received by the securities information processors (‘‘SIP’’) from an exchange. As an example, the trade-to-quote ratio for Listed Options for the fourth quarter of 2020 was 0.01%. Accordingly, each Options Market Maker’s discounted message traffic 50 The SEC approved exemptive relief permitting Options Market Maker quotes to be reported to the Central Repository by the relevant Options Exchange in lieu of requiring that such reporting be done by both the Options Exchange and the Options Market Maker, as required by Rule 613 of Regulation NMS. See Securities Exchange Act Rel. No. 77265 (Mar. 1, 2016), 81 FR 11856 (Mar. 7, 2016). This exemption applies to Options Market Maker quotes for CAT reporting purposes only. Therefore, notwithstanding the reporting exemption provided for Options Market Maker quotes, Options Market Maker quote messages that are reported to the CAT by Options Exchanges will be included in the calculation of total message traffic and for the calculation of individual Options Market Makers message traffic, subject to the proposed discounts. 51 Under the current version of the IM Reporting Tech Specs, the discount would apply to new order messages and all related messages reported to the CAT by an Options Market Maker with an accountHolderType = O. See CAT FAQ C5 (available at www.catnmsplan.com). The discount would not apply to messages by an Industry Member that are associated with any other accountHolderType. The IM Reporting Tech Specs may be amended from time to time and this designation could be changed. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 count would be calculated by multiplying its message traffic by the options trade-to-quote ratio. The Options Market Maker’s CAT fee then would be calculated by multiplying its discounted percentage of the total message traffic of all Industry Members during the relevant time 52 period by the Industry Member Allocation, subject to the Minimum Industry Member CAT Fee and the Maximum Industry Member CAT Fee. (b) Equity Market Maker Discount Similar to the treatment of Options Market Maker message traffic, the Operating Committee proposes to discount Equity Market Maker message traffic based on the trade-to-quote ratio for NMS Stocks when calculating the message traffic for Equity Market Makers. Specifically, for each Equities Market Maker, a discount would be applied to all message traffic reported to the CAT by the Equities Market Maker related to an order originated by a market maker in its market making account for a security in which it is registered,53 regardless of where the order is ultimately routed or executed.54 The relevant trade-to-quote ratio for the Equity Market Maker discount would be calculated each quarter based on the prior quarter’s CAT data. The discount is calculated by dividing the adjusted trade count (that is, the total number of trades for the quarter minus the total number of trade busts) by the total number of quotes received by the SIP from an exchange. As an example, the trade-to-quote ratio for NMS Stocks for the fourth quarter of 2020 was 4.77%. The Equity Market Maker CAT fee would be calculated in the same manner as the Options Market Maker CAT fee. Each Equity Market Maker’s discounted message traffic count would be calculated by multiplying its message traffic by the NMS Stock trade-to-quote ratio. The Equity Market Maker CAT fee then would be calculated by 52 Note that the total message traffic of all Industry Members during the relevant time period will be calculated using the discounted total for all Options Market Makers. 53 Note that Equity Market Makers do not have a quote sent time exemption comparable to the Options Market Maker quote sent time exemption, as discussed above. 54 Under the current version of the IM Reporting Tech Specs, the discount would apply to new order messages and all related messages reported to the CAT by an Equities Market Maker with an accountHolderType = O. See CAT FAQ C5 (available at www.catnmsplan.com). The discount would not apply to messages by the Industry Member that are associated with any other accountHolderType. The IM Reporting Tech Specs may be amended from time to time and this designation could be changed. PO 00000 Frm 00010 Fmt 4701 Sfmt 4703 multiplying its discounted percentage of the total message traffic of all Industry Members during the relevant time period 55 by the Industry Member Allocation, subject to the Minimum Industry Member CAT Fee and the Maximum Industry Member CAT Fee. (c) Proposed Amendments To implement the proposed market maker discounts, the Operating Committee proposes to revise Section 11.3(b) of the CAT NMS Plan to reflect the application of such discounts. Specifically, the Operating Committee proposes to amend the statement in Section 11.3(b) that ‘‘[t]he Operating Committee will establish fixed fees to be payable by Industry Members, based on the message traffic generated by such Industry Members’’ to add the concept of the market maker discounts. Specifically, the Operating Committee proposes to qualify this statement by the phrase ‘‘subject to . . . discounts for market maker message traffic.’’ iv. Minimum Industry Member CAT Fee The Operating Committee proposes to require all Industry Members to pay at least a minimum fee for each relevant period. Specifically, the Operating Committee proposes to impose a Minimum Industry Member CAT Fee of $125 per quarter on an Industry Member if its CAT fee would be less than $125 per quarter when calculated based on message traffic. All Industry Members required to report to the CAT, including those that have not yet begun to report to the CAT due to the phased implementation schedule for the CAT, would be subject to the Minimum Industry Member CAT Fee. If any Industry Member is required to pay the Minimum Industry Member CAT Fee, the total additional amount paid by all such Industry Members over the amount they otherwise would have paid as a result of their message traffic calculation would be discounted from all Industry Members other than those that were subject to a Minimum Industry Member CAT Fee in accordance with their message traffic percentage.56 Such a minimum fee satisfies the purposes of the CAT as well as the funding principles of the CAT NMS Plan. A minimum fee of $125 per quarter ensures that all Industry Members 55 Note that the total message traffic of all Industry Members during the relevant time period will be calculated using the discounted total for all Equity Market Makers. 56 Options Market Makers and Equity Market Makers will be required to pay the Minimum Industry CAT Member Fee if their quarterly CAT fee calculated with the market maker discounts is less than $125 per quarter. E:\FR\FM\21APN3.SGM 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 provide a meaningful contribution to the funding of the CAT, as the CAT is intended to assist all market participants by creating enhanced oversight of the markets, and thus benefits all Industry Members, including those with small levels of message traffic.57 Because some Industry Members may have very small levels of message traffic, their proposed CAT fee may be commensurately very small (e.g., they could pay a CAT fee of pennies). However, the size of the $125 minimum quarterly fee is not so large as to be overly burdensome to Industry Members with small levels of message traffic. Accordingly, the minimum fee would be in keeping with the funding principle requiring the funding model to ‘‘avoid disincentives such as placing an inappropriate burden on competition and a reduction in market quality.’’ 58 Such a minimum fee also would contribute to the ease of billing and other administrative functions, in accordance with the funding principle set forth in Section 11.2(d) of the CAT NMS Plan.59 Without such a minimum fee, the Participants would be required to oversee the payment of fees as little as pennies for certain Industry Members given their limited message traffic. To implement the Minimum Industry Member CAT Fee, the Operating Committee proposes to revise Section 11.3(b) of the CAT NMS Plan to reflect the imposition of a minimum fee. Specifically, the Operating Committee proposes to amend the statement in Section 11.3(b) that ‘‘[t]he Operating Committee will establish fixed fees 60 to be payable by Industry Members, based on the message traffic generated by such Industry Members’’ to add the concept of the minimum fee. Specifically, the Operating Committee proposes to qualify this statement with the phrase ‘‘subject to a base minimum fee.’’ v. Maximum Industry Member CAT Fee The Operating Committee proposes to establish a maximum fee to be paid by Industry Members. Under the Proposed Funding Model, Industry Members would pay a CAT fee based on their proportionate message traffic in NMS Stocks, subject to a maximum fee. The maximum fee for Industry Members would be the fee calculated based on 8% of the total message traffic for Industry Members. If an Industry Member’s fee is limited to the Maximum 57 See, e.g., CAT NMS Plan Approval Order at 84698. 58 Section 11.2(e) of the CAT NMS Plan. 59 Section 11.2(d) of the CAT NMS Plan. 60 As noted below, the Operating Committee also proposes to delete the term ‘‘fixed’’ from this provision. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Industry Member CAT Fee, any excess amount which the Industry Member otherwise would have paid as a fee above such Maximum Industry Member CAT Fee would be re-allocated among all Industry Members including any Industry Members subject to the Maximum Industry Member CAT Fee and any Industry Members subject to the Minimum Industry Member CAT Fee in accordance with its message traffic. The imposition of the Maximum Industry Member CAT Fee serves as a method to institute a cap on fees in order to fairly allocate costs to Industry Members as using message traffic alone potentially may result in certain Industry Members paying a significant allocation of Total CAT Costs. In this way, the proposed Maximum Industry Member CAT Fee would address the potential for outsized fees that were previously addressed via the tiering and comparability provisions set forth in the Original Funding Model and the Prior Fee Proposal. These provisions sought to impose similar levels of fees on comparable CAT Reporters.61 Specifically, the Operating Committee proposes to limit the Industry Member CAT fee to 8% of the total message traffic as 8% would limit Industry Members to paying a fee comparable to the highest fee for Participant complexes. For example, using the CAT Data from the fourth quarter of 2020, the top three Industry Members would be subject to the Maximum Industry Member CAT Fee, as their message traffic exceeds 8% of the total Industry Member message traffic. These three Industry Members would be subject to annual CAT fees in the range of $5 to 6 million. Similarly, the Participant complexes with the highest CAT fees would pay an annual CAT fee in a similar range. Without the imposition of the Maximum Industry Member CAT Fee, the Industry Member with the highest CAT fee would pay almost $10 million for its annual CAT fee. The Operating Committee proposes to revise Section 11.3(b) of the CAT NMS Plan to implement the proposed Maximum Industry Member CAT Fee. Specifically, the Operating Committee proposes to amend Section 11.3(b) of the CAT NMS Plan to state that any Industry Member shall pay a maximum fee established by the Operating Committee instead of the higher fee calculated based on such Industry Member’s message traffic. If an Industry Member’s fee is limited to such maximum fee, any excess amount which the Industry Member otherwise would have paid 61 The proposed deletion of the tiering and comparability provisions are discussed above. PO 00000 Frm 00011 Fmt 4701 Sfmt 4703 21059 as a fee above such maximum fee will be reallocated among all Industry Members, including any Industry Member that is subject to the maximum fee or subject to the base minimum fee, in accordance with their message traffic. vi. No Fixed Fees The Operating Committee proposes to eliminate references in the CAT NMS Plan to ‘‘fixed fees’’ used with regard to the CAT fees to be paid by Industry Members. The CAT fees to be paid by Industry Members may vary from time to time in accordance with their message traffic. Accordingly, the Operating Committee proposes to replace the reference to ‘‘fixed fees’’ for Industry Members in Section 11.3(b) with references to ‘‘fees.’’ 4. Participant CAT Fee Like Industry Members, Participants would also be required to pay a CAT fee. The total CAT fees to be paid by Participants as a group would be designed to cover the Participant Allocation. Each Participant would pay a minimum CAT fee of 0.75% of the Participant Allocation, referred to as the ‘‘Minimum Participant Fee.’’ The Participant Allocation minus the total Minimum Participant Fees required to be paid by each Participant (the ‘‘Adjusted Participant Allocation’’) would be divided between Equities Participants and Options Participants. Equities Participants as a group would pay 60% of the Adjusted Participant Allocation (‘‘Equities Participant Allocation’’) and Options Participants as a group would pay 40% of the Adjusted Participant Allocation (the ‘‘Options Participant Allocation’’). The Equities Participant Allocation would be divided among Equities Participants based on market share of NMS Stocks, although FINRA would not pay more than the Maximum Equities Participant Fee (plus any additional re-allocation of costs above the fee cap). The Options Participant Allocation would be divided among Options Participants based on market share in Listed Options. The Operating Committee notes that allocating the Participant Allocation among the Participants is different from allocating the Industry Member Allocation among Industry Members. Unlike Industry Members, the Participants are each parties to the CAT NMS Plan and, therefore, have been engaged in negotiations among themselves regarding the allocation of CAT costs among Participants and the amendment of the CAT NMS Plan to address the CAT funding model. Accordingly, the Participants believe that the proposed method for allocating E:\FR\FM\21APN3.SGM 21APN3 21060 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 the costs among Participants should be afforded some deference, provided the proposed fees satisfy the requirements of the Exchange Act and the CAT NMS Plan, which are discussed in detail in Section A.8 below. a. Minimum Participant Fee The Operating Committee proposes to require each Participant to pay at least a minimum CAT fee, regardless of its market share. Specifically, the Operating Committee proposes to require each Participant to pay a minimum CAT fee of 0.75% of the Participant Allocation, referred to as the Minimum Participant Fee. The Minimum Participant Fee will be paid by each registered national securities exchange that is a Participant and each registered national securities association that is a Participant, not by each market operated by the Participants. This Minimum Participant Fee is intended to ensure that all Participants provide a meaningful contribution to the funding of the CAT, as the CAT is intended to assist all market participants by creating enhanced oversight of the markets.62 All Participants, regardless of their market share, are required to regulate their markets and members, and they may do so using the CAT. Therefore, all Participants receive benefits from the CAT and should pay a meaningful portion of the CAT costs. However, the size of the minimum fee is not so large as to be overly burdensome to Participants with a smaller market share. The Operating Committee proposes to revise Section 11.3(a) of the CAT NMS Plan to reflect the imposition of the Minimum Participant Fee. Specifically, the Operating Committee proposes to amend Section 11.3(a) of the CAT NMS Plan to state that ‘‘[t]he Operating Committee will establish a minimum fee to be payable by each Participant’’ in addition to fees based on market share. In addition, as discussed below, the Minimum Participant Fee would be included in the fee schedule for the Consolidated Audit Trail Funding Fees set forth in Appendix B of the CAT NMS Plan. Proposed paragraph (a)(1)(A) of Appendix B of the CAT NMS Plan would state that each Participant would pay a CAT fee that includes the Minimum Participant Fee. Paragraph (b)(2) of Appendix B would state that ‘‘[t]he Minimum Participant Fee is 0.75% of the Participant Allocation.’’ Paragraph (b)(2) of Appendix B would further clarify how the Minimum Participant Fee would be imposed by stating that ‘‘[f]or avoidance of doubt, 62 CAT NMS Plan Approval Order at 84698. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 the Minimum Participant Fee will be paid by each registered national securities exchange that is a Participant and each registered national securities association that is a Participant.’’ b. Allocation of Adjusted Participant Allocation Among Participants The Participant Allocation minus the total Minimum Participant Fees required to be paid by each Participant, referred to as the ‘‘Adjusted Participant Allocation,’’ will be divided among the Participants as described below. The Operating Committee proposes to include this definition of ‘‘Adjusted Participant Allocation’’ in proposed paragraph (b)(3) of the Appendix B. Specifically, proposed paragraph (b)(3) of Appendix B would state that ‘‘[t]he Adjusted Participant Allocation is the Participant Allocation minus the sum of all Minimum Participant Fees required to be paid by each Participant.’’ i. Use of Market Share Under the Proposed Funding Model, the Adjusted Participant Allocation would be allocated among Participants based on market share. The use of market share for this purpose is in accordance with the CAT NMS Plan as adopted by the SEC. Specifically, the CAT NMS Plan contemplates Participants paying a CAT fee based upon market share.63 The Operating Committee analyzed various alternative methods for allocating costs among Participants other than market share and continued to determine that using market share would equitably allocate CAT fees among Participants. In contrast to Industry Members, which determine the degree to which they produce message traffic that constitutes Reportable Events, the Reportable Events of Participants are largely derivative of quotations and orders received from Industry Members that they are required to display. The business models for Participants, however, generally are focused on executions and/or trade reporting in their marketplaces. As a result, the Operating Committee believes that it is more equitable to charge Participants based on their market share rather than their message traffic. Moreover, relying on market share would provide the Participants with a straightforward calculation using readily available market data. Such a basic calculation would be consistent with the CAT funding principle, which requires the model to ‘‘provide for ease of billing and 63 See Sections 11.2(c), 11.3(a)(i) and 11.3(a)(ii) of the CAT NMS Plan. PO 00000 Frm 00012 Fmt 4701 Sfmt 4703 other administrative functions.’’ 64 Finally, the Participants have been voluntarily allocating CAT costs based on market share for the past eight years and are comfortable that allocating CAT cost based on market share is an appropriate way to allocate CAT costs, as it is consistent with the CAT NMS Plan. The Operating Committee proposes to amend Section 11.3(a) of the CAT NMS Plan to clarify that the Participants will pay a fee based on market share. Specifically, the Operating Committee proposes to add the phrase ‘‘based on market share’’ to Section 11.3(a) of the CAT NMS Plan. With this change and the changes discussed above, Section 11.3(a) of the CAT NMS Plan would state that ‘‘[t]he Operating Committee will establish a minimum fee to be payable by each Participant in addition to fees based on market share to be payable by Participants as provided in this Section 11.3(a).’’ ii. No Tiered Fees for Participants The Operating Committee proposes to eliminate the use of tiered fees for Participants in the Proposed Funding Model. The Operating Committee proposes to allocate the Adjusted Participant Allocation among Participants based on the Participant’s market share without relying on tiered fees for the reasons discussed above with regard to Industry Members. As discussed above, the Operating Committee proposes to amend Sections 11.1(d), 11.2(c), 11.3(a) and 11.3(b) to eliminate the concept of tiered fees from the CAT NMS Plan. iii. 60%–40% Allocation Between Equities Participants and Options Participants The Operating Committee proposes to divide the Adjusted Participant Allocation between Equities Participants and Options Participants because it is difficult to compare market share between asset classes (i.e., equity shares versus options contracts). This bifurcated approach to allocating costs among Equities Participants and Options Participants is consistent with the CAT NMS Plan, which specifically contemplates allocating Participant CAT fees based on options and equity activity.65 Note that, unlike the Original Funding Model, the Operating Committee has determined not to allocate any portion of the Adjusted Participant Allocation based on OTC Equity Securities market share. 64 Section 65 See E:\FR\FM\21APN3.SGM 11.2(d) of the CAT NMS Plan. Section 11.3(a) of the CAT NMS Plan. 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 Under the Proposed Funding Model, the Equities Participant Allocation would be 60% of the Adjusted Participant Allocation and, correspondingly, the Options Participants Allocation would be 40% of the Adjusted Participant Allocation. If a Participant has both options and equities market share, then such Participant will be treated as both an Equities Participant and an Options Participant.66 The Operating Committee believes that the proposed 60%–40% allocation between Equities Participants and Options Participants is an appropriate allocation among Participants. The allocation among the Equities and Options Participants has been the subject of negotiations among the Participants. In addition, in the Prior Fee Proposal, the Operating Committee proposed a 67%/33% allocation between Equity Execution Venues and Options Execution Venues based on the comparability concept.67 As discussed below, the 60%–40% allocation of the Adjusted Participant Allocation between Equities Participants and Options Participants would be included in the fee schedule for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan. Proposed paragraph (b)(4) of Appendix B of the CAT NMS Plan would state that ‘‘[t]he Equities Participant Allocation is 60% of the Adjusted Participant Allocation,’’ and proposed paragraph (b)(5) of Appendix B of the CAT NMS Plan would state that ‘‘[t]he Options Participant Allocation is 40% of the Adjusted Participant Allocation.’’ iv. Equities Participant Allocation The Equities Participant Allocation would be divided among Equities Participants based on market share of NMS Stocks in accordance with Section 11.3(a)(i) of the CAT NMS Plan. An Equities Participant’s market share in NMS Stocks would be determined by calculating each Equities Participant’s proportion of the total volume of NMS Stock shares reported by all Equities Participants during the relevant time period. Accordingly, in addition to the Minimum Participant Fee, each Equities Participant will pay a CAT fee that is calculated by multiplying (x) each Equities Participant’s percentage of the total volume of NMS Stock shares 66 The Operating Committee proposes to clarify this point in the CAT NMS Plan by including the following statement in proposed paragraph (a)(1) of Appendix B of the CAT NMS Plan: ‘‘For the avoidance of doubt, Participants with both options and equities market share shall be considered both Equities Participants and Options Participants.’’ 67 See Prior Fee Proposal at 1408. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 during the relevant time period by (y) the Equities Participant Allocation, subject to the Maximum Equities Participant Fee. As discussed below, the Operating Committee proposes to include the allocation of the Equities Participant Allocation in the fee schedule for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan. Proposed paragraph (a)(1)(B) of Appendix B of the CAT NMS Plan would state that Equities Participants would pay a CAT fee calculated by adding the sum of the Minimum Participant Fee and the lesser of ‘‘the product of multiplying the Equities Participant’s percentage of total market share of NMS Stocks for all Equities Participants against the Equities Participant Allocation; or (ii) the Maximum Equities Participant Fee, if applicable.’’ (a) Treatment of OTC Equity Securities Under the Original Funding Model, market share for a national securities association was calculated based on the share volume of trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange in NMS Stocks or OTC Equity Securities. Under the Proposed Funding Model, the Operating Committee proposes to calculate market share for national securities associations solely based on share volume of trades reported in NMS Stocks. Correspondingly. [sic] the calculation of total market share and market share for each Equities Participant would not include reported share volume in OTC Equity Securities. The Operating Committee proposes to calculate market share for national securities associations without reference to trades reported in OTC Equity Securities. 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 large number of shares are involved in transactions involving OTC Equity Securities versus NMS Stocks. Because the proposed CAT fees for Equities Participants are based on market share calculated by share volume, FINRA would likely be subject to higher fees if OTC Equity Securities were included in the calculation of market share. The Operating Committee proposes to exclude OTC Equity Securities share volume in the calculation of market share, rather than to use a discounting approach proposed in the Prior Fee Proposal. In the Prior Fee Proposal, the Operating Committee proposed to PO 00000 Frm 00013 Fmt 4701 Sfmt 4703 21061 discount the share volume of trades reported in OTC Equity Securities when calculating the market share for national securities associations and Execution Venue ATSs.68 At this time, the Operating Committee has determined that excluding OTC Equity Share volume entirely would be a more simple and straightforward approach from an administrative perspective. The Operating Committee believes that this approach to OTC Equity Share volume addresses comments about prior fee proposals regarding the different trading characteristics of NMS Stocks and OTC Equity Securities.69 To implement this proposed change, the Operating Committee proposes to delete the references to OTC Equity Securities from Section 11.3(a)(i) of the CAT NMS Plan. Specifically, the Operating Committee proposes to delete the phrase ‘‘or OTC Equity Securities’’ from Section 11.3(a)(i)(B) of the CAT NMS Plan, which states in relevant part ‘‘in the case of a national securities association, has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange, in NMS Stocks or OTC Equity Securities.’’ Similarly, the Operating Committee proposes to delete the phrase to ‘‘or OTC Equity Securities’’ in the statement in Section 11.3(a)(i) of the CAT NMS Plan that ‘‘market share for a national securities association that has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange in NMS Stocks or OTC Equity Securities will be calculated based on share volume of trades reported.’’ (b) Maximum Equities Participant Fee The Operating Committee proposes to establish a maximum fee to be paid by a national securities association that is a Participant. Currently, FINRA is the only national securities association that is a Participant in the CAT NMS Plan. Under the Proposed Funding Model, FINRA would pay a CAT fee based on its proportionate market share in NMS Stocks, subject to a maximum fee. The maximum fee allocated to FINRA would be the greater of (x) 20% of the Equities Participant Allocation or (y) the highest CAT fee required to be paid by any other Equities Participant plus 5% of such highest CAT fee (the ‘‘Maximum Equities Participant Fee’’). If FINRA’s fee is limited to the Maximum Equities Participant Fee, any excess amount which FINRA otherwise would have 68 Prior Fee Proposal at 1406. Order at 31664–5. 69 Suspension E:\FR\FM\21APN3.SGM 21APN3 21062 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 paid as a fee above such Maximum Equities Participant Fee would be reallocated among all Equities Participants including FINRA in accordance with their market share. The imposition of the Maximum Equities Participant Fee serves as a method to institute a cap on fees in order to fairly allocate costs to FINRA given that a market share approach potentially may result in FINRA having a significant allocation given the large volume of NMS Stock activity that is subject to trading reporting on FINRA facilities, and potentially may not accurately reflect a fair allocation of costs to FINRA. In this way, the proposed Maximum Equities Participant Fee would address the potential for outsized fees that were previously addressed via the tiering and comparability provisions set forth in the Original Funding Model and the Prior Fee Proposal. These provisions sought to impose similar levels of fees on comparable CAT Reporters.70 Finally, along with the other components of the calculation of the Participant CAT fee, the Operating Committee believes the use of market share is a fair and reasonable basis for assessing regulatory usage, expense and burden among the Participants. FINRA is expected to be one of the largest regulatory users of the CAT and it would be fair and reasonable for the FINRA to pay a proportionate percentage of the CAT fees commensurate with FINRA’s comparable market share, which is subject to the Maximum Equities Participant Fee and also not subject to any fee for OTC Equity Security market share. The Operating Committee proposes to revise Section 11.3(a)(i) of the CAT NMS Plan to implement the proposed Maximum Equities Participant Fee. Specifically, the Operating Committee proposes to amend Section 11.3(a)(i) of the CAT NMS Plan to state that any Participant that is a national securities association shall pay a maximum fee established by the Operating Committee instead of the higher fee calculated based on such Participant’s market share. If a Participant’s fee is limited to such maximum fee, any excess amount which the Participant otherwise would have paid as a fee above such maximum fee will be re-allocated among all Equities Participants (including any Equities Participant subject to the maximum fee) in accordance with their market share. In addition, as discussed below, the Operating Committee proposes to include the Maximum Equities 70 The proposed deletion of the tiering and comparability provisions are discussed above. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Participant Fee in the fee schedule for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan. Proposed paragraph (a)(1)(B)(ii) of Appendix B of the CAT NMS Plan would describe the application of the Maximum Equities Participant Fee. Specifically, proposed paragraph (a)(1)(B) would state that Equities Participants would pay a CAT fee calculated by adding the sum of the Minimum Participant Fee and the following: (B) For Equities Participants, the lesser of: (i) the product of multiplying the Equities Participant’s percentage of total market share of NMS Stocks for all Equities Participants against the Equities Participant Allocation; or (ii) the Maximum Equities Participant Fee, if applicable; and If any Participant’s fee is limited to the Maximum Equities Participant Fee, any excess amount which such Participant otherwise would have paid as a fee above such Maximum Equities Participant Fee will be re-allocated among all Equities Participants (including any Equities Participant subject to the Maximum Equities Participant Fee) in accordance with their market share. Furthermore, proposed paragraph (b)(6) of Appendix B of the CAT NMS Plan would state: The Maximum Equities Participant Fee is the greater of (x) 20% of the Equities Participant Allocation or (y) the highest CAT fee required to be paid by any other Equities Participant plus 5% of such highest CAT fee. The Maximum Equities Participant Fee only applies to a Participant that is a national securities association. v. Options Participant Allocation The Options Participant Allocation would be divided among Options Participants based on market share in Listed Options in accordance with Section 11.3(a)(ii) of the CAT NMS Plan. An Options Participant’s market share in Listed Options would be determined by calculating the total volume of Listed Options contracts reported by all Options Participants during the relevant time period. Accordingly, each Options Participant would pay a CAT fee that is calculated by multiplying (x) each Options Participant’s percentage of the total market share in Listed Options during the relevant time period by (y) the Options Participant Allocation. As discussed below, the Operating Committee proposes to include the allocation of the Options Participant Allocation in the fee schedule for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan. Proposed paragraph (a)(1)(C) of Appendix B of the CAT NMS Plan would state that Options Participants would pay a CAT fee calculated by adding the sum of the Minimum Participant Fee and ‘‘the PO 00000 Frm 00014 Fmt 4701 Sfmt 4703 product of multiplying the Participant’s percentage of total market share of Listed Options contracts for all Options Participants against the Options Participant Allocation.’’ vi. No Fixed Fees The Operating Committee proposes to eliminate references to ‘‘fixed fees’’ used with regard to the CAT fees to be paid by Participants. As discussed above with regard to Industry Member CAT fees, the CAT fees to be paid by Participants may vary from time to time in accordance with their market share. Accordingly, the Operating Committee proposes to replace the references to ‘‘fixed fees’’ for Participants in Sections 11.3(a), 11.3(a)(i) and 11.3(a)(ii) with references to ‘‘fees.’’ 5. Proposed CAT Fees a. Participant CAT Fee To recover the costs of the CAT going forward, the Operating Committee proposes to charge Participants a quarterly CAT fee calculated based on the allocation of Total CAT Costs pursuant to the Proposed Funding Model. The Operating Committee will use the costs set forth in the annual operating budget as the Total CAT Costs in the calculation of the Participant CAT Fee.71 Specifically, the Total CAT Costs budgeted for the upcoming year will be the costs set forth in the annual operating budget for the Company required pursuant to Section 11.1(a) of the CAT NMS Plan. Section 11.1(a) states that ‘‘[o]n an annual basis the Operating Committee shall approve an operating budget for the Company. The budget shall include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenue to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for prudent operation of the Company.’’ In addition, to address potential changes in the budget during the year, the total budgeted costs for the CAT for the relevant year may be adjusted on a quarterly basis as the Operating Committee reasonably deems appropriate for the prudent operation of the Company. To the extent that the Operating Committee adjusts the total 71 Note that all Participant CAT fees would be paid prospectively based on budgeted Total CAT Costs. This contrasts with the Historical CAT Assessment, the Period 3 CAT Fee and the Period 4 CAT Fee for the Industry Members which would be paid based on actual past costs incurred due to the application of the Financial Accountability Milestones. The Quarterly CAT Fee for Industry Members also would be paid prospectively based on budgeted Total CAT Costs. E:\FR\FM\21APN3.SGM 21APN3 21063 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 budgeted costs for the CAT for the relevant year during its quarterly budget review, the adjusted total budgeted costs for the CAT will be used in calculating the remaining quarterly CAT fees for that year. Using budgeted CAT costs, rather than CAT costs already incurred, allows the Consolidated Audit Trail, LLC to collect fees prior to when bills become payable. The Total CAT Costs budgeted for the year would be comprised of all fees, costs and expenses estimated to be incurred by or for the Company in connection with the development, implementation and operation of the CAT during this period. These CAT costs would include, but not be limited to, Plan Processor costs, insurance costs, third-party support costs and an operational reserve. The Plan Processor costs would consist of the Plan Processor’s ongoing costs, including development costs. This amount would be based upon the fees due to the Plan Processor pursuant to the Company’s agreement with the Plan Processor. Insurance costs would include cyber insurance and director liability insurance. The third-party support costs would include legal fees, consulting fees, vendor fees and audit fees. In addition, the Operating Committee aims to accumulate the necessary funds to establish an operating reserve for the Company through the CAT fees charged to CAT Reporters. As set forth in Section 11.1(a) of the CAT NMS Plan, the Operating Committee may include in the budget ‘‘funding of any reserve that the Operating Committee reasonably deems appropriate for prudent operation of the Company.’’ 72 As required by Section 11.1(c) of the CAT NMS Plan, any surpluses collected will be treated as an operational reserve to offset future fees and will not be distributed to the Participants as profits.73 Using these budgeted Total CAT Costs, the Operating Committee will calculate the quarterly CAT fee owed by each Participant in accordance with the Proposed Funding Model. To implement the Participant CAT fees, the Exchange proposes to add a fee schedule, entitled ‘‘Consolidated Audit Trail Funding Fees,’’ to Exhibit [sic] B of the CAT NMS Plan. As discussed above, proposed paragraph (a) states the following: Each Participant shall pay to Consolidated Audit Trail, LLC in the manner prescribed by the Consolidated Audit Trail, LLC a CAT fee calculated as follows: (1) Commencing upon SEC approval of the CAT fee, each Participant shall pay a quarterly CAT fee based on market share from the prior quarter calculated by adding the sum of the following: (A) For all Participants, the Minimum Participant Fee; (B) For Equities Participants, the lesser of: (i) the product of multiplying the Equities Participant’s percentage of total market share of NMS Stocks for all Equities Participants against the Equities Participant Allocation; or (ii) the Maximum Equities Participant Fee, if applicable; and If any Participant’s fee is limited to the Maximum Equities Participant Fee, any excess amount which such Participant otherwise would have paid as a fee above such Maximum Equities Participant Fee will be re-allocated among all Equities Participants (including any Equities Participant that is subject to the Maximum Equities Participant Fee) in accordance with their market share. (C) For Options Participants, the product of multiplying the Participant’s percentage of total market share of Listed Options contracts for all Options Participants against the Options Participant Allocation; For the avoidance of doubt, Participants with both options and equities market share shall be considered both Equities Participants and Options Participants. As described above, proposed paragraph (b) of Appendix B of the CAT NMS Plan would provide the variables necessary to calculate Participant CAT fees in accordance with paragraph (a). Specifically, paragraph (b) would state that ‘‘[t]he CAT fees set forth in paragraph (a) will be calculated based on the following.’’ Proposed paragraph (b)(1) of the fee schedule would state that ‘‘[t]he Industry Member Allocation for each quarter shall be 75% of 1/4th of the Total CAT Costs for the relevant year. The Participant Allocation for each quarter shall be 25% of 1/4th of the Total CAT Costs for the relevant year.’’ Proposed paragraph (b)(2) of the fee schedule would state that ‘‘[t]he Minimum Participant Fee is 0.75% of the Participant Allocation. For avoidance of doubt, the Minimum Participant Fee will be paid by each registered national securities exchange that is a Participant and each registered national securities association that is a Participant.’’ Proposed paragraph (b)(3) of the fee schedule would state that ‘‘[t]he Adjusted Participant Allocation is the Participant Allocation minus the sum of all Minimum Participant Fees required to be paid by each Participant.’’ Proposed paragraph (b)(4) of the fee schedule would state that ‘‘[t]he Equities Participant Allocation is 60% of the Adjusted Participant Allocation.’’ Proposed paragraph (b)(5) of the fee schedule would state that ‘‘[t]he Options Participant Allocation is 40% of the Adjusted Participant Allocation.’’ Proposed paragraph (b)(6) of the fee schedule would state that the ‘‘[t]he Maximum Equities Participant Fee is the greater of (x) 20% of the Equities Participant Allocation or (y) the highest CAT fee required to be paid by any other Equities Participant plus 5% of such second highest CAT fee. The Maximum Equities Participant Fee only applies to a Participant that is a national securities association.’’ Finally, proposed paragraph (b)(7) of the fee schedule would state that ‘‘[t]he Total CAT Costs shall be the total annual budgeted costs for the CAT for the relevant year.’’ Proposed paragraph (b)(7) of the fee schedule would further state that ‘‘[t]he total budgeted costs for the CAT for the relevant year may be adjusted on a quarterly basis as the Operating Committee reasonably deems appropriate for the prudent operation of the Company. To the extent that the Operating Committee adjusts the total budgeted costs for the CAT for the relevant year during its quarterly budget review, the adjusted total budgeted costs for the CAT will be used in calculating the remaining quarterly CAT fees for that year.’’ The following chart summarizes the imposition of the Quarterly CAT Fee for Participants each year commencing upon approval by the SEC and continuing each year thereafter. Quarterly CAT fee Quarterly participant allocation CAT data used for market share calculation Quarterly CAT Fee #1 ............... 1/4th of 25% of the budgeted annual CAT costs for the relevant year. 1/4th of 25% of the budgeted annual CAT costs for the relevant year. 1/4th of 25% of the budgeted annual CAT costs for the relevant year. CAT Data from first quarter of the relevant year. CAT Data from second quarter of the relevant year. CAT Data from third quarter of the relevant year. Quarterly CAT Fee #2 ............... Quarterly CAT Fee #3 ............... 72 Although the Operating Committee may determine at its discretion that a different level of reserves is appropriate in the future, the Operating VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Committee proposes to include in the budget an operational reserve comprised of three months of PO 00000 Frm 00015 Fmt 4701 Sfmt 4703 Payment due 2nd quarter of the relevant year. 3rd quarter of the relevant year. 4th quarter of the relevant year. ongoing CAT costs, such as Plan Processor costs, third party support costs and insurance costs. 73 CAT NMS Plan Approval Order at 84792. E:\FR\FM\21APN3.SGM 21APN3 21064 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices Quarterly CAT fee Quarterly participant allocation CAT data used for market share calculation Payment due Quarterly CAT Fee #4 ............... 1/4th of 25% of the budgeted annual CAT costs for the relevant year. CAT Data from fourth quarter of the relevant year. 1st quarter of year following the relevant year. Note that, if the SEC approves the proposed CAT fees mid-year, the Operating Committee proposes to require Participants to commence payment of the Participant CAT Fee in the first quarter after the quarter in which the SEC approves the fee. Participants will be required to pay a quarterly fee for the remaining quarter(s) of the year based on CAT Data from the prior quarter, using the portion of the annual budget for those remaining quarter(s) of the year. For example, if the SEC approves the CAT fees in the third quarter of 2021, then the Participants would be required to pay their first quarterly CAT fee during the fourth quarter of 2021 based on the market share calculation using CAT Data from the third quarter of 2021 and one quarter of the budgeted annual CAT costs for 2021. khammond on DSKJM1Z7X2PROD with NOTICES3 b. Industry Member CAT Fees The Operating Committee has determined to charge Industry Members fees related to CAT costs in accordance with the Proposed Funding Model. To implement these CAT fees, each Participant would submit a fee filing pursuant to Section 19(b) of the Exchange Act to propose to add a section entitled ‘‘Consolidated Audit Trail Funding Fees’’ to its fee schedule, and to describe the following CAT fees in that section. Because the Participants have funded the CAT to date and CAT fees imposed on Industry Members are guided by the Financial Accountability Milestones, the Operating Committee proposes four categories of CAT fees: the Historical CAT Assessment (for prePeriod 1, Period 1 and Period 2), Period 3 CAT Fee, Period 4 CAT Fee, and the Quarterly CAT Fee. i. Historical CAT Assessment (for PrePeriod 1, Period 1 and Period 2) The Operating Committee determined to charge Industry Members a historical assessment (‘‘Historical CAT Assessment’’) to recover certain CAT costs incurred prior to January 1, 2021 (‘‘Historical CAT Assessment Costs’’). Specifically, the Historical CAT Assessment is intended to collect from Industry Members 75% of certain costs incurred through June 22, 2020, the effective date for the Financial Accountability Milestones,74 certain 74 See generally Financial Accountability Milestone Release. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 costs from Period 1 of the Financial Accountability Milestones (which covered the period from June 22, 2020– July 31, 2020) and certain costs from Period 2 of the Financial Accountability Milestones (which covered the period from August 1, 2020–December 31, 2020). The Total CAT Costs for these periods, excluding Excluded Costs (as defined below) and certain costs related to the conclusion of the relationship with Thesys CAT, LLC is $193,273,342. The Historical CAT Assessment is designed to recover 75% of these CAT costs. Accordingly, the Historical CAT Assessment Costs would be $144,955,006. The Participants have already funded all CAT costs incurred prior to January 1, 2021. Accordingly, only Industry Members would be required to pay the Historical CAT Assessment. To implement the Historical CAT Assessment, each Participant would submit a fee filing pursuant to Section 19(b) of the Exchange Act describing the Historical CAT Assessment. The following describes the Historical CAT Assessment Costs for the period prior to June 22, 2020 and the period from June 22, 2020 through December 31, 2020 in more detail. The Total CAT Costs incurred prior to June 22, 2020 (other than Excluded Costs and certain costs related to the conclusion of the relationship with Thesys CAT, LLC) is $153,268,597. The Historical CAT Assessment to be paid by Industry Members would be designed to recover 75% of these total costs, which is $114,951,448. These cost figures are further described below. • In accordance with Section 11.1(c) of the CAT NMS Plan, the Historical CAT Assessment Costs would include ‘‘fees, costs and expenses (including legal and consulting fees and expenses) incurred by the Participants on behalf of the Company prior to the Effective Date in connection with the creation and implementation of the CAT.’’ Specifically, the Historical CAT Assessment Costs include costs incurred from 2012 through November 20, 2016 related to the development of the National Market System Plan Governing the Process of Selecting a Plan Processor and Developing a Plan for the Consolidated Audit Trail 75 (‘‘Selection Plan’’) and the CAT NMS Plan as well 75 See, e.g., Securities Exchange Act Rel. No. 71596, 79 FR 11152 (Feb. 27, 2014). PO 00000 Frm 00016 Fmt 4701 Sfmt 4703 as the Plan Processor selection process pursuant to the Selection Plan. The Total CAT Costs incurred during this period are $13,842,881. The Historical CAT Assessment would be designed to recover 75% of these total costs, which is $10,382,161. • The Historical CAT Assessment Costs would include costs incurred after the formation of the CAT NMS Plan and prior to the selection of Thesys CAT, LLC as the Plan Processor for the CAT, which covers the period from November 21, 2016 through April 5, 2017. The total cost for this period is $2,933,869. The Historical CAT Assessment would be designed to recover 75% of these total costs, which is $2,200,402. • The Historical CAT Assessment Costs would include costs incurred during the period in which Thesys CAT, LLC was the Plan Processor for the CAT, which was April 6, 2017 through March 28, 2019. The total costs for this period are $106,256,258. The Participants, however, have determined to exclude from the Historical CAT Assessment Costs all costs incurred from November 15, 2017 through November 15, 2018 (‘‘Excluded Costs’’) due to the delay in the reporting to the CAT. The Excluded Costs are $48,874,937. Accordingly, the total costs for this period are $57,381,321. The Historical CAT Assessment would be designed to recover 75% of these total costs, which is $43,035,991. • The Historical CAT Assessment Costs would include the Total CAT Costs from the date of FINRA CAT’s selection as the Plan Processor on March 29, 2019 through June 21, 2020. The total costs for this period are $79,110,525.76 The Historical CAT Assessment would be designed to recover 75% of these total costs, which is $59,332,894. The Historical CAT Assessment Costs also would include the certain CAT costs incurred from June 22, 2020 through July 31, 2020, which is Period 1 of the Financial Accountability Milestones, as well as the Total CAT Costs incurred from August 1, 2020 through December 31, 2020, which is Period 2 of the Financial Accountability Milestones, subject to certain 76 These costs do not include costs incurred in relation to the conclusion of the relationship with Thesys CAT, LLC. E:\FR\FM\21APN3.SGM 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices exceptions.77 The total costs incurred from June 22, 2020 through December 31, 2020 are $40,004,745. The Historical CAT Assessment to be paid by the Industry Members would be designed to recover 75% of these total costs, which is $30,003,559. Using the Historical CAT Assessment Costs, the Operating Committee would calculate the Historical CAT Assessment owed by each Industry Member in accordance with the Proposed Funding Model. The Operating Committee proposes to seek to recover the Historical CAT Assessment Costs over a period of four calendar quarters, khammond on DSKJM1Z7X2PROD with NOTICES3 Quarterly CAT fee commencing upon the SEC’s approval of the Historical CAT Assessment. Each quarter, each Industry Member would pay the greater of the minimum fee of $125 or the Industry Member’s fee calculated based on message traffic (subject to the market making discounts and the maximum fee). The message traffic fee would be calculated by multiplying the percentage of the Industry Member’s message traffic of the total Industry Member message traffic (subject to applicable discounts for Options and Equity Market Maker message traffic and the Maximum Quarterly industry member allocation Industry Member CAT Fee) by $36,238,752, which is 1/4th of the Historical CAT Assessment Costs. Each Industry Member’s message traffic would be calculated using CAT Data from the prior quarter. The Operating Committee proposes to commence charging the Historical CAT Assessment in the first quarter after SEC approval of the Historical CAT Assessment, based on CAT Data from the quarter in which the SEC approved the CAT fees. The following chart summarizes the imposition of the Historical CAT Assessment: CAT data used for message traffic calculation Quarterly CAT Fee #1 ............... $36,238,752 Quarter of SEC approval of Historical CAT Assessment. Quarterly CAT Fee #2 ............... 36,238,752 1st quarter after SEC approval of Historical CAT Assessment. Quarterly CAT Fee #3 ............... 36,238,752 2nd quarter after SEC approval of Historical CAT Assessment. Quarterly CAT Fee #4 ............... 36,238,752 3rd quarter after SEC approval of Historical CAT Assessment. 21065 Payment due 1st quarter after SEC approval of Industry CAT Fees set forth in this Proposed Plan ment. 2nd quarter after SEC approval of Industry CAT Fees set forth in this Proposed Plan ment. 3rd quarter after SEC approval of Industry CAT Fees set forth in this Proposed Plan ment. 4th quarter after SEC approval of Industry CAT Fees set forth in this Proposed Plan ment. Member AmendMember AmendMember AmendMember Amend- In accordance with Section 11.6(b) of the CAT NMS Plan, the Operating Committee indicates that the proposed Historical CAT Assessment seeks to recover costs that are related to PostAmendment Expenses incurred during Period 1. Period 1 began on June 22, 2020, the effective date of Section 11.6 of the CAT NMS Plan, and concluded on July 31, 2020, the date of Initial Industry Member Core Equity and Options Reporting. As indicated by the Participants’ Quarterly Progress Report,78 Initial Industry Member Core Equity and Option Reporting was completed on schedule by July 31, 2020. As discussed above, the Historical CAT Assessment Costs to be recovered via the Historical CAT Assessment would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from June 22, 2020 through July 31, 2020. The Operating Committee also indicates that the proposed Historical CAT Assessment seeks to recover costs that are related to Post-Amendment Expenses incurred during Period 2. Period 2 began on August 1, 2020, and concluded on December 31, 2020, the date of the Full Implementation of Core Equity Reporting. As indicated by the Participants’ Quarterly Progress Report,79 Full Implementation of Core Equity Reporting was completed on schedule by December 31, 2020. As discussed above, the Historical CAT Assessment Costs to be recovered via the Historical CAT Assessment would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from August 1, 2020 through December 31, 2020. The Operating Committee also determined to charge Industry Members a quarterly fee to recover the Total CAT Costs incurred from January 1, 2021 through December 31, 2021, referred to as the Period 3 CAT Fee. The Total CAT Costs incurred from January 1, 2021 through December 31, 2021 (‘‘Period 3 CAT Costs’’) will be calculated at the completion of 2021. Specifically, the Period 3 CAT Costs will be the total actual costs incurred for the CAT for 2021 as set forth in the 2021 financial statements for the Company. Using the Period 3 CAT Costs, the Operating Committee will calculate the Period 3 CAT Fee owed by each Industry Member in accordance with the Proposed Funding Model. The Operating Committee proposes to seek to recover Period 3 CAT Costs over a period of four calendar quarters, commencing in 2022.80 Each quarter, each Industry Member will pay the greater of the minimum fee of $125 or the Industry Member’s fee calculated based on message traffic. The message traffic fee would be calculated by multiplying the percentage of the Industry Member’s message traffic of the total Industry Member message traffic (subject to applicable discounts for Options Market Maker message traffic and Equity Market Maker message traffic, and the Maximum Industry Member CAT Fee) by 1/4th of 75% of the Period 3 CAT Costs. Each Industry Member’s message traffic would be calculated using CAT Data from the prior quarter. The Operating Committee proposes to commence charging the Period 3 CAT Fee in the second quarter of 2022, based on CAT Data from the first quarter of 2022. The following chart summarizes the imposition of the Period 3 CAT Fee: 77 These costs do not include costs incurred in relation to the conclusion of the relationship with Thesys CAT, LLC. 78 Q3 2020 Quarterly Progress Report (Oct. 30, 2020) (available at www.catnmsplan.com). 79 Q4 2020 Quarterly Progress Report (Jan. 29, 2021) (available at www.catnmsplan.com). 80 Because the Period 3 CAT Fee is subject to the requirements of the Financial Accountability Milestones, the Period 3 CAT Fee will be imposed at the end of this time period. In contrast, because the Participant CAT fee for this time period is not subject to the requirements of the Financial Accountability Milestones, the Participant CAT fee for this period will be imposed prospectively. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 ii. Period 3 CAT Fee PO 00000 Frm 00017 Fmt 4701 Sfmt 4703 E:\FR\FM\21APN3.SGM 21APN3 21066 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices Quarterly CAT fee Quarterly CAT Fee #1 ............... Quarterly CAT Fee #2 ............... Quarterly CAT Fee #3 ............... Quarterly CAT Fee #4 ............... 1/4th of 75% Costs 81. 1/4th of 75% of 1/4th of 75% of 1/4th of 75% of Quarterly CAT fee CAT Data from first quarter of 2022 ......... 2nd quarter of 2022. the Period 3 CAT Costs .. the Period 3 CAT Costs .. the Period 3 CAT Costs .. CAT Data from second quarter of 2022 ... CAT Data from third quarter of 2022 ........ CAT Data from fourth quarter of 2022 ...... 3rd quarter of 2022. 4th quarter of 2022. 1st quarter of 2023. khammond on DSKJM1Z7X2PROD with NOTICES3 Quarterly CAT Fee #2 ............... Quarterly CAT Fee #3 ............... Quarterly CAT Fee #4 ............... incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2020 through December 31, 2021. The Participants’ collection of the full amount of the Period 3 CAT Fee will depend upon the achievement of Full Availability and Regulatory Utilization of Transaction Database Functionality by December 31, 2021; if not, the amount of the Period 3 CAT Fee that may be collected from the Industry Members will depend upon the fee limitations set forth in Section 11.6 of the CAT NMS Plan. iii. Period 4 CAT Fee The Operating Committee also determined to charge Industry Members a quarterly fee to recover the Total CAT Costs incurred from January 1, 2022 through December 31, 2022, referred to as the Period 4 CAT Fee. The Total CAT Costs incurred from January 1, 2022 through December 31, 2022 (‘‘Period 4 CAT Costs’’) will be calculated at the completion of 2022. Specifically, the Period 4 CAT Costs will be the total actual costs incurred for the CAT for 2022 as set forth in the 2022 financial statements for the Company. Using the Period 4 CAT Costs, the Operating Committee will calculate the Period 4 CAT Fee owed by each Industry Member in accordance with the Proposed Funding Model. The Operating Committee proposes to seek to recover Period 4 CAT Costs over a period of four calendar quarters, commencing in 2023.83 Each quarter, each Industry Member will pay the greater of the minimum fee of $125 or the Industry Member’s fee calculated based on message traffic. The message traffic fee would be calculated by multiplying the percentage of the Industry Member’s message traffic of the total Industry Member message traffic (subject to applicable discounts for Options Market Maker message traffic and Equity Market Maker message traffic, and the Maximum Industry Member CAT Fee) by 1/4th of 75% of the Period 4 CAT Costs. Each Industry Member’s message traffic would be calculated using CAT Data from the prior quarter. The Operating Committee proposes to commence charging the Period 4 CAT fee in the second quarter of 2023, based on data from the first quarter of 2023. The following chart summarizes the imposition of the Period 4 CAT Fee: CAT data used for message traffic calculation Quarterly industry member allocation 1/4th of 75% Costs 84. 1/4th of 75% of 1/4th of 75% of 1/4th of 75% of Payment due of the Period 3 CAT To implement the Period 3 CAT Fee, each Participant would submit a fee filing pursuant to Section 19(b) of the Exchange Act describing the Period 3 CAT Fee. The Operating Committee will announce via a CAT alert after the end of 2021 the Total CAT Costs for 2021 to be used in calculating the quarterly Period 3 CAT Fees.82 Such Total CAT Costs will be set forth in the year-end financial statements of the Consolidated Audit Trail, LLC. Such financial statements are required to be prepared in accordance Section 9.2 of the CAT NMS Plan, including requirements related to compliance with GAAP, auditing by an independent public accounting firm and making the statements publicly available. The Operating Committee indicates that the proposed Period 3 CAT Fee seeks to recover costs that will be related to Post-Amendment Expenses incurred during Period 3. Period 3 began on January 1, 2021 and is expected to conclude on December 31, 2021, the date of Full Availability and Regulatory Utilization of Transactional Database Functionality. As discussed above, the Period 3 CAT Costs to be recovered via the Period 3 CAT Fee would include fees, costs and expenses Quarterly CAT Fee #1 ............... CAT data used for message traffic calculation Quarterly industry member allocation Payment due of the Period 4 CAT CAT Data from first quarter of 2023 ......... 2nd quarter of 2023. the Period 4 CAT Costs .. the Period 4 CAT Costs .. the Period 4 CAT Costs .. CAT Data from second quarter of 2023 ... CAT Data from third quarter of 2023 ........ CAT Data from fourth quarter of 2023 ...... 3rd quarter of 2023. 4th quarter of 2023. 1st quarter of 2024. To implement the Period 4 CAT Fee, each Participant would submit a fee filing pursuant to Section 19(b) of the Exchange Act describing the method for calculating the Period 4 CAT Fee. The Operating Committee will announce via a CAT alert after the end of 2022 the Total CAT Costs for 2022 to be used in calculating the quarterly Period 4 CAT Fees.85 Such Total CAT Costs will be set forth in the year-end financial statements of the Consolidated Audit Trail, LLC. As noted above, such financial statements are required to be prepared in accordance with the requirements set forth in Section 9.2 of the CAT NMS Plan. The Operating Committee indicates that the proposed Period 4 CAT Fee seeks to recover costs that will be related to Post-Amendment Expenses incurred during Period 4. Period 4 is expected to begin on January 1, 2022 81 The Period 3 CAT Costs will be the total actual costs incurred for the CAT for 2021 as set forth in the 2021 financial statements for the Company. 82 The Participants intend to file a fee filing under Section 19(b) of the Exchange Act describing the calculation method for the Period 3 CAT Fee, and then announce via CAT alert the Total CAT Costs to be used in calculating the CAT fees via the method described in the fee filing. The Participants do not intend to file a separate fee filing setting forth the Total CAT Costs relevant for the Period 3 CAT Fee. 83 Because the Period 4 CAT Fee is subject to the requirements of the Financial Accountability Milestones, the Period 4 CAT Fee will be imposed at the end of this time period. In contrast, because the Participant CAT Fee for this time period is not subject to the requirements of the Financial Accountability Milestones, the Participant CAT Fee for this period will be imposed prospectively. 84 The Period 4 CAT Costs will be the total actual costs incurred for the CAT for 2022 as set forth in the 2022 financial statements for the Company. 85 The Participants intend to file one fee filing under Section 19(b) of the Exchange describing the calculation method for the Period 4 CAT Fee, and announce via CAT alert the Total CAT Costs to be used in calculating the CAT fees via the method described in the fee filing. The Participants do not intend to file a separate fee filing setting forth the Total CAT Costs relevant for the Period 4 CAT Fee. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4703 E:\FR\FM\21APN3.SGM 21APN3 21067 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices and conclude on December 31, 2022, the date of Full Implementation of CAT NMS Plan Requirements. As discussed above, the Period 4 CAT Costs to be recovered via the Period 4 CAT Fee would include fees, costs and expenses incurred by or for the Company in connection with the development, implementation and operation of the CAT during the period from January 1, 2022 through December 31, 2022. The Participants’ collection of the full amount of the Period 4 CAT Fee will depend upon the achievement of Full Implementation of CAT NMS Plan Requirements by December 31, 2022; if not, the amount of the Period 4 CAT Fee that may be collected from the Industry Members will depend upon the fee limitations set forth in Section 11.6 of the CAT NMS Plan. iv. Quarterly CAT Fee—Beginning 2023 To recover the costs of the CAT going forward beginning in 2023, the Operating Committee determined to charge Industry Members an ongoing quarterly CAT fee calculated based on the allocation of Total CAT Costs pursuant to the Proposed Funding Model (‘‘Quarterly CAT Fee’’). The Operating Committee will use the costs set forth in the annual operating budget as the Total CAT Costs in the Quarterly CAT fee Quarterly CAT Fee #1 ............... Quarterly CAT Fee #2 ............... Quarterly CAT Fee #3 ............... khammond on DSKJM1Z7X2PROD with NOTICES3 Quarterly CAT Fee #4 ............... calculation of the Quarterly CAT Fee. Specifically, the Total CAT Costs budgeted for the upcoming year will be the costs set forth in the annual operating budget for the Company required pursuant to Section 11.1(a) of the CAT NMS Plan. As discussed above with regard to the Participant CAT fee, CAT costs would include, but not be limited to, Plan Processor costs, insurance costs, third-party support costs and an operational reserve.86 As required by Section 11.1(c) of the CAT NMS Plan, any surpluses collected will be treated as an operational reserve to offset future fees and will not be distributed to the Participants as profits.87 In addition, to address potential changes in the budget during the year, the total budgeted costs for the CAT for the relevant year may be adjusted on a quarterly basis as the Operating Committee reasonably deems appropriate for the prudent operation of the Company. To the extent that the Operating Committee adjusts the total budgeted costs for the CAT for the relevant year during its quarterly budget review, the adjusted total budgeted costs for the CAT will be used in calculating the remaining quarterly CAT fees for that year. Using these budgeted Total CAT Costs, the Operating Committee Quarterly industry member allocation 1/4th of 75% of the budgeted costs for the relevant year. 1/4th of 75% of the budgeted costs for the relevant year. 1/4th of 75% of the budgeted costs for the relevant year. 1/4th of 75% of the budgeted costs for the relevant year. annual CAT annual CAT annual CAT annual CAT will calculate the Quarterly CAT Fee owed by each Industry Member in accordance with the Proposed Funding Model. The Operating Committee proposes to seek to recover the budgeted Total CAT Costs over the course of the year. Each quarter, each Industry Member will pay the greater of the minimum fee of $125 or the Industry Member’s fee calculated based on message traffic.88 The message traffic fee would be calculated by multiplying the percentage of the Industry Member’s message traffic of the total Industry Member message traffic (subject to applicable discounts for Options Market Maker message traffic and Equity Market Maker message traffic, and the Maximum Industry Member CAT Fee) by 1/4th of 75% of the budgeted Total CAT Costs for the year. Each Industry Member’s message traffic would be calculated using data from the prior calendar quarter. The Operating Committee proposes to commence charging this CAT fee in the second quarter of 2023, based on CAT Data from the first quarter of 2023. The following chart summarizes the imposition of the Quarterly CAT Fee for Industry Members each year commencing in 2023 and continuing each year thereafter: CAT data used for message traffic calculation CAT Data from first quarter of the evant year. CAT Data from second quarter of the evant year. CAT Data from third quarter of the evant year. CAT Data from fourth quarter of the evant year. Payment due rel- 2nd quarter of the relevant year. rel- 3rd quarter of the relevant year. rel- 4th quarter of the relevant year. rel- 1st quarter of year following the relevant year. To implement the Quarterly CAT Fee, each Participant would submit a fee filing pursuant to Section 19(b) of the Exchange Act describing the method for calculating the Quarterly CAT Fee. The Operating Committee will announce at the beginning of the relevant year via a CAT alert the budgeted Total CAT Costs to be used in calculating the Quarterly CAT Fees for that year.89 The budgeted Total CAT Costs will be the costs set forth in the annual operating budget for the Company required pursuant to Section 11.1(a) of the CAT NMS Plan. Section 11.1(a) states that ‘‘[o]n an annual basis the Operating Committee shall approve an operating budget for the Company. The budget shall include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenues to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for prudent operation of the Company.’’ To the extent that the Operating Committee adjusts the budgeted Total CAT Costs for the year during its quarterly budget review, the 86 As set forth in Section 11.1(a) of the CAT NMS Plan, the Operating Committee may include in the budget ‘‘the funding of any reserve that the Operating Committee reasonably deems appropriate for prudent operation of the Company.’’ Although the Operating Committee may determine at its discretion that a different level of reserves is appropriate in the future, the Operating Committee proposes to include in the budget an operational reserve comprised of three months of ongoing CAT costs, such as Plan Processor costs, third party support costs and insurance costs. 87 CAT NMS Plan Approval Order at 84792. 88 To the extent that any two or more of the four categories of Industry Member CAT fees (i.e., the Historical CAT Assessment, Period 3 CAT Fee, Period 4 CAT Fee and the Quarterly CAT Fee) are due during the same quarter, any Industry Member obligated to pay one or more categories of fees is required to pay each category of fee for that quarter. For example, if an Industry Member would be subject to the Minimum Industry Member CAT Fee for the Period 4 CAT Fee and the Minimum Industry Member CAT Fee for Quarterly CAT Fee during the same quarter, the Industry Member would be required to pay two minimum $125 fee that quarter for a total of $250. As another example, suppose that an Industry Member owed a CAT fee (other than the minimum fee of $125) for both the Historical CAT Assessment and the Period 3 CAT Fee, the Industry Member would be required to pay both fees that quarter. 89 The Participants intend to file one fee filing under Section 19(b) of the Exchange Act describing the calculation method for the Quarterly CAT Fee, and then announce via CAT alert the budgeted Total CAT Costs to be used in calculating the CAT fees each year via the method described in the fee filing. The Participants do not intend to file a separate fee filing each year setting forth the budgeted Total CAT Costs relevant for the Quarterly CAT Fee. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4703 E:\FR\FM\21APN3.SGM 21APN3 21068 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 Operating Committee will announce any such quarterly budget adjustments to be used in calculating the remaining Quarterly CAT Fees for that year via a CAT alert. 6. Collection of Fees Pursuant to Section 11.4 of the CAT NMS Plan, the Operating Committee proposes to establish a system for the collection of CAT fees. The Consolidated Audit Trail, LLC will provide each Participant with an invoice setting forth the Participants’ quarterly CAT fee for each payment period. Each Participant will pay its CAT fees to the Consolidated Audit Trail, LLC via the centralized system for the collection of CAT fees established by the Consolidated Audit Trail, LLC in the manner prescribed by the Consolidated Audit Trail, LLC. As set forth in Section 11.4 of the CAT NMS Plan, each Participant shall pay all its CAT fees authorized under the CAT NMS Plan as required by Section 3.7(b) of the CAT NMS Plan. The Operating Committee also determined the time and manner in which Industry Member CAT fees will be paid. The Operating Committee determined that the Consolidated Audit Trail, LLC will provide each Industry Member with an invoice setting forth the Industry Member’s Historical CAT Assessment, Period 3 CAT Fee, Period 4 CAT Fee and/or Quarterly CAT Fee (as applicable) for each payment period. Consolidated Audit Trail, LLC will provide each Industry Member with one invoice each payment period for its CAT fees, regardless of whether the Industry Member is a member of multiple selfregulatory organizations. Each Industry Member will pay its CAT fees to the Consolidated Audit Trail, LLC via the centralized system for the collection of CAT fees established by the Consolidated Audit Trail, LLC in the manner prescribed by the Consolidated Audit Trail, LLC. Finally, as set forth in Section 11.4 of the CAT NMS Plan, Industry Members would be required to pay their CAT fees within thirty days after receipt of an invoice or other notice indicating payment is due (unless a longer payment period is otherwise indicated). If an Industry Member fails to pay any such fee when due, such Industry Member shall pay interest on the outstanding balance from such due date until such fee is paid at a per annum rate equal to the lesser of (i) the Prime Rate plus 300 basis points, or (ii) the maximum rate permitted by applicable law.90 To implement the 90 CAT Reporters will be responsible for each quarterly fee in which they are a CAT Reporter. If VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 requirements related to the timing and manner of payment of the CAT fees for Industry Members, each Participant would submit a fee filing pursuant to Section 19(b) of the Exchange Act describing such requirements as discussed above. 7. Example of Application of Proposed Funding Model The Operating Committee has prepared an example of how the Proposed Funding Model would operate for illustrative purposes only. Specifically, the Operating Committee has prepared an example of CAT fees calculated under the Proposed Funding Model based on budgeted Total CAT Costs for 2021 as well as message traffic and market share data for the fourth quarter of 2020. Set forth in Exhibit B to this letter are three charts setting forth illustrative CAT fees for each Equities Participant, Options Participant and Industry Member CAT Reporter. Note Exhibit B only provides an illustrative example of how the Proposed Funding Model would operate; the calculation of actual fees will differ from this example in various ways. For example, the Participants have paid or will have paid 100% of these costs up to the time of the SEC approval of the Proposed Funding Model, and, as a result, Participants would not be obligated to pay CAT fees related to 2021 CAT costs to the extent the Participants have already paid such costs. Furthermore, Period 3 CAT Fees for Industry Members will be calculated based on actual Total CAT Costs for 2021, not budgeted CAT Costs for 2021, and based on CAT Data from 2022, not from 2020. 8. Satisfaction of Exchange Act and CAT NMS Plan Requirements The Operating Committee believes that the Proposed Funding Model offers a variety of benefits and satisfies the funding principles and other requirements of the CAT NMS Plan, as proposed to be revised herein, as well as the applicable requirements of the Exchange Act. a. Funding Principle: Section 11.2(a) of the CAT NMS Plan The Participants believe that the Proposed Funding Model satisfies the funding principles set forth in Section 11.2(a) of the CAT NMS Plan, as proposed to be modified herein. Section 11.2(a) requires the Operating a CAT Reporter ceases to the meet the definition of a CAT Reporter during a quarter, the CAT Reporter will still be responsible for CAT fees attributable to its message traffic (or, the minimum fee in the alternative) during that quarter. PO 00000 Frm 00020 Fmt 4701 Sfmt 4703 Committee, in establishing the funding of the Company, to seek ‘‘to create transparent, predictable revenue streams for the Company that are aligned with the anticipated costs to build, operate and administer the CAT and the other costs of the Company.’’ First, by adopting a CAT-specific fee tied to Total CAT Costs, the Operating Committee will be fully transparent regarding the costs of the CAT and how those costs will be allocated among CAT Reporters. In contrast, charging a general regulatory fee, which might otherwise be used to cover CAT costs as well as other regulatory costs, would be less transparent than the selected approach of charging a fee designated to cover CAT-related costs only. Second, the Proposed Funding Model would provide a predictable revenue stream for the Company. The Proposed Funding Model provides for a predictable revenue stream as the Proposed Funding Model is designed to divide the Total CAT Costs among the CAT Reporters. In addition, to address the possibility of some variability in the collected CAT fees or an unexpected increase in costs, the Total CAT Costs covered by the Proposed Funding Model include an operational reserve. The operational reserve could be used in the event that the total fees are not collected from the CAT Reporters, or costs increase due to outside events. Third, the Proposed Funding Model provides for a revenue stream for the Company that is aligned with the anticipated costs to build, operate and administer the CAT and the other costs of the Company. The total fees to be collected from Participants and Industry Members are designed to cover the Total CAT Costs. Any surpluses collected will be treated as an operational reserve to offset future fees and will not be distributed to the Participants as profits.91 b. Funding Principle: Section 11.2(b) of the CAT NMS Plan The Operating Committee also believes that the Proposed Funding Model satisfies the funding principle set forth in Section 11.2(b) of the CAT NMS Plan, which requires the Operating Committee to seek ‘‘to establish an allocation of the Company’s related costs among Participants and Industry Members that is consistent with the Exchange Act, taking into account the timeline for implementation of the CAT and distinctions in the securities trading operations of Participants and Industry Members and their relative impact upon Company resources and operations.’’ As 91 CAT E:\FR\FM\21APN3.SGM NMS Plan Approval Order at 84792. 21APN3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 discussed above, the Proposed Funding Model allocation between Participants and Industry Members takes into account the timeline for implementation, as the Company has been incurring CAT costs with the development and implementation of the CAT, and Participants and certain Industry Members have been reporting to the CAT. The Proposed Funding Model also recognizes the ‘‘distinctions in the securities trading operations of Participants and Industry Members’’ in various ways. In light of their different roles, Participants will pay a fee based on market share and Industry Members will pay a fee based on message traffic, as approved by the Commission in the CAT NMS Plan. The Proposed Funding Model also recognizes the different trading characteristics of the equities and options markets by allocating the Adjusted Participant Allocation to Equities Participants and Options Participants separately. Furthermore, the Operating Committee proposes to discount Options Market Maker message traffic and Equity Market Maker message traffic in recognition of their distinct roles as liquidity providers in the securities markets and to avoid potentially and inadvertently affecting market quality. The Proposed Funding Model also recognizes the different trading characteristics of OTC Equity Securities by not including them in the market share calculation for Participants. The Proposed Funding Model also is designed to take into account Participants and Industry Members’ relative impact upon Company resources and operations through the use of message traffic and market share in calculating CAT fees. c. Funding Principle: Section 11.2(c) of the CAT NMS Plan The Operating Committee also believes that the Proposed Funding Model satisfies the funding principle set forth in Section 11.2(c) of the CAT NMS Plan, as proposed to be modified herein. Section 11.2(c), as proposed to be modified herein, requires the Operating Committee to seek ‘‘to establish a fee structure in which the fees charged to: (i) Participants are based upon the level of market share; and (ii) Industry Members are based upon message traffic.’’ The Proposed Funding Model requires Participants to pay a fee based on market share, and Industry Members to pay a fee based on message traffic. d. Funding Principle: Section 11.2(d) of the CAT NMS Plan The Operating Committee also believes that the Proposed Funding VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Model satisfies the funding principle set forth in Section 11.2(d) of the CAT NMS Plan, which requires the Operating Committee to seek ‘‘to provide for ease of billing and other administrative functions.’’ The Operating Committee believes that calculating CAT fees under the Proposed Funding Model will be manageable as the message traffic and market share data will be readily available. In addition, the elimination of tiers simplifies the billing process as it removes the subjective determination of the tier levels. In addition, the Operating Committee proposes a Minimum Industry Member CAT Fee to ease the administrative burden associated with very small payments. e. Funding Principle: Section 11.2(e) of the CAT NMS Plan The Operating Committee also believes that the Proposed Funding Model satisfies the funding principle set forth in Section 11.2(e) of the CAT NMS Plan, which requires the Operating Committee to seek ‘‘to avoid any disincentives such as placing an inappropriate burden on competition and a reduction in market quality.’’ As discussed above, the Operating Committee has proposed various measures to address potential disincentives, including the market maker message traffic discounts, the Maximum Industry Member CAT Fee, the Maximum Equities Participant Fee and the treatment of OTC Equity Securities for the market share calculation for Participants. The Proposed Funding Model also is structured to avoid a reduction in market quality because it discounts Options Market Maker message traffic and Equity Market Maker message traffic when calculating message traffic for Options Market Makers and Equity Market Makers, respectively. The proposed discounts recognize the value of the market making activity to the market as a whole. f. Funding Principle: Section 11.2(f) of the CAT NMS Plan The Operating Committee also believes that the Proposed Funding Model satisfies the funding principle set forth in Section 11.2(f) of the CAT NMS Plan, which requires the Operating Committee to seek ‘‘to build financial stability to support the Company as a going concern.’’ The Operating Committee believes that the Proposed Funding Model is structured to collect sufficient funds to pay the Total CAT Costs. In addition, the Proposed Funding Model would collect an operational reserve for the CAT. This operational reserve is intended to PO 00000 Frm 00021 Fmt 4701 Sfmt 4703 21069 address potential shortfalls in collected CAT fees versus actual CAT costs. g. Section 11.1(c) of the CAT NMS Plan The Operating Committee also believes that the Proposed Funding Model would satisfy the requirements in Section 11.1(c) of the CAT NMS Plan. Section 11.1(c) of the CAT NMS Plan states that ‘‘[t]o fund the development and implementation of the CAT, the Company shall time the imposition and collection of all fees on Participants and Industry Members in a manner reasonably related to the timing when the Company expects to incur such development and implementation costs.’’ The Company has been and continues to incur development and implementation costs for the CAT, and the Operating Committee intends for the fees to help cover these costs. In addition, the CAT fees going forward are proposed to be imposed close in time to when costs are incurred. Section 11.1(c) of the CAT NMS Plan also requires that ‘‘[a]ny surplus of the Company’s resources over its expenses shall be treated as an operational reserve to offset future fees.’’ The Company will operate on a ‘‘break-even’’ basis, with fees imposed to cover costs and an appropriate reserve. Any surpluses will be treated as an operational reserve to offset future fees and will not be distributed to the Participants as profits.92 To ensure that the Participants’ operation of the CAT will not contribute to the funding of their other operations, Section 11.1(c) of the CAT NMS Plan specifically states that ‘‘[a]ny surplus of the Company’s revenues over its expenses shall be treated as an operational reserve to offset future fees.’’ In addition, as set forth in Article VIII of the CAT NMS Plan, the Company ‘‘intends to operate in a manner such that it qualifies as a ‘business league’ within the meaning of Section 501(c)(6) of the [Internal Revenue] Code.’’ To qualify as a business league, an organization must ‘‘not [be] organized for profit and no part of the net earnings of [the organization can] inure[ ] to the benefit of any private shareholder or individual.’’ 93 As the SEC stated when approving the CAT NMS Plan, ‘‘the Commission believes that the Company’s application for Section 501(c)(6) business league status addresses issues raised by commenters about the Plan’s proposed allocation of profit and loss by mitigating concerns that the Company’s earnings could be used to benefit individual 92 CAT 93 26 E:\FR\FM\21APN3.SGM NMS Plan Approval Order at 84792. U.S.C. 501(c)(6). 21APN3 21070 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices Participants.’’ 94 The Internal Revenue Service has determined that the Company is exempt from federal income tax under Section 501(c)(6) of the Internal Revenue Code. khammond on DSKJM1Z7X2PROD with NOTICES3 h. Equitable Allocation of Reasonable Fees The Operating Committee believes that the proposed CAT fees provide for the ‘‘equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities necessary or appropriate in furtherance of the purposes of this chapter,’’ 95 as required by the Exchange Act. The Operating Committee believes that the CAT fees equitably allocate CAT costs between and among Participants and Industry Members, as discussed in detailed above. For the reasons discussed above, the Operating Committee believes that the allocation percentages in the Proposed Funding Model as well as the use of message traffic for allocating costs among Industry Members and the use of market share for allocating costs among Participants provide for an equitable allocation of CAT costs among CAT Reporters. In addition, as discussed above, the Operating Committee believes that the imposition of minimum and maximum fees and market maker discounts as well as the treatment of OTC Equity Securities for the market share calculation for Participants would operate to provide for an equitable allocation of CAT costs among CAT Reporters. i. No Unfair Discrimination The Operating Committee believes that the Proposed Funding Model is ‘‘not designed to permit unfair discrimination between customers, issuers, brokers, or dealers,’’ 96 as required by the Exchange Act. In addition, the Proposed Funding Model does not unfairly discriminate between Industry Members and Participants, among Industry Members or among Participants. All Industry Members are grouped together for the purpose of determining CAT fees, and all Participants are grouped together for the purpose of determining CAT fees. CAT Reporters with similar levels of activity will pay similar fees. For example, Industry Members with higher levels of message traffic will pay higher fees, and those with lower levels of message traffic will pay lower fees. Similarly, Participants with larger market share 94 CAT NMS Plan Approval Order at 84793. 6(b)(4) and 15A(b)(5) of the Exchange 95 Sections Act. 96 Sections 6(b)(5) and 15A(b)(6) of the Exchange Act. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 will pay higher fees, and those with lower levels of market share will pay lower fees. With the elimination of tiers, fees for Industry Members and Participants are directly related to their message traffic and market share, respectively. With tiers, the relationship between message traffic or market share and the CAT fee would not have been as direct. In addition, where the method of fee calculation may potentially affect certain groups of CAT Reporters adversely, the Operating Committee has sought to limit such adverse effects. For example, the Operating Committee has proposed market maker discounts to address the high levels of message traffic generally exhibited by market makers. As discussed above, the SEC has recognized repeatedly that such favorable treatment for market makers in other contexts was not unfairly discriminatory or a burden on competition in light of its positive effects on market quality, nor was it considered to involve an inequitable allocation of fees among members. The Operating Committee also has proposed the Maximum Equities Participant Fee to address the potential for higher market share for FINRA due to the trade reporting to FINRA. The Maximum Equities Participant Fee serves as a method to institute a cap on fees to fairly allocate costs to FINRA given that a market share approach may result in FINRA having a significant allocation given the large volume of NMS Stock activity that is subject to trade reporting to FINRA. Similarly, the Operating Committee also has proposed the Maximum Industry Member CAT Fee to address the potential for significant fees based on outsized message traffic for certain Industry Members. The Maximum Industry Member CAT Fee serves as a method to institute a cap on fees to fairly allocate costs to Industry Members. Such a fee would prevent Industry Members from paying significantly larger CAT fees than Participant complexes. The Operating Committee also proposes to calculate market share for national securities associations without reference to trades reported in OTC Equity Securities in light of the differences in the markets for NMS Stocks and OTC Equity Securities. Because the proposed CAT fees for Equities Participants are based on market share calculated by share volume, FINRA would likely be subject to higher fees if OTC Equity Securities were included in the calculation of market share. PO 00000 Frm 00022 Fmt 4701 Sfmt 4703 j. No Burden on Competition The Operating Committee believes that the Proposed Funding Model does ‘‘not impose any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter,’’ 97 as required by the Exchange Act. Moreover, the Operating Committee believes that the proposed fee schedule fairly and equitably allocates costs among CAT Reporters. In particular, as described above, the cost allocation between Participants and Industry Members recognizes the greater number of Industry Members as compared to the Participants and the greater collective revenue of Industry Members as compared to Participants. In addition, cost allocations among Industry Members based on message traffic and cost allocations among Participants based on market share fairly and equitably distributes CAT costs. Furthermore, the market maker discounts, Maximum Industry Member CAT Fee and Maximum Equities Participant Fee address the potential for burdens on market makers, Industry Members with outsized message traffic and FINRA potentially resulting from the proposed fee calculations. Moreover, the Operating Committee does not believe that the Minimum Industry Member CAT Fee or the Minimum Participant Fee would act as barriers to entry for smaller CAT Reporters. 9. Alternative Models Considered The Operating Committee has determined to propose the Proposed Funding Model to fund the CAT for the reasons discussed above. In reaching this conclusion, the Operating Committee considered the advantages and disadvantages of a variety of possible alternative funding and cost allocations models for the CAT in detail. After analyzing the various alternatives, the Operating Committee determined that the Proposed Funding Model provides a variety of advantages in comparison to the alternatives. In addition, although various funding models may be appropriate, the Proposed Funding Model provides for an equitable allocation of reasonable fees among CAT Reporters. The Operating Committee previously filed a fee proposal in line with the CAT NMS Plan—the Prior Fee Proposal. Under that model, the Operating Committee, among other things, proposed a 75%–25% allocation between Execution Venues (which included Participants and Execution Venue ATSs) and Industry Members 97 Sections 6(b)(8) and 15A(b)(9) of the Exchange Act. E:\FR\FM\21APN3.SGM 21APN3 khammond on DSKJM1Z7X2PROD with NOTICES3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices (other than Execution Venue ATSs), and required Execution Venues to pay fees based on market share, and Industry Members (other than Execution Venue ATSs) to pay fees based on message traffic. This Prior Fee Proposal was a very complex model with many interrelated parts, including allocation percentages, discounts for certain market behavior, and multiple tiered fees, and the complexity raised concerns from the Commission regarding its use as the CAT funding model. In addition, in response to the proposal, the industry raised a number of other issues related to the proposal, including issues regarding the proposed allocation of CAT costs between Participants and Industry Members, and the ability of certain market segments to afford the proposed CAT fee.98 Accordingly, the Operating Committee determined to revise various aspects of the Prior Fee Proposal, thereby developing the Proposed Funding Model. In developing the Prior Fee Proposal, the Operating Committee considered many variations of different aspects of that model. For example, the Operating Committee evaluated different cost allocations between Industry Members (other than Execution Venue ATSs) and Execution Venues, including 80%–20%, 75%–25%, 70%–30% and 65%–35% allocations, and different cost allocations between Equity and Options Execution Venues.99 The Operating Committee also considered different discounts for equities and options market makers, different numbers of tiers of Industry Members and Execution Venues, different fee levels for each tier, and other aspects of the model. Furthermore, the Operating Committee considered a model in which all CAT Reporters, including both Industry Members and Participants, would pay based solely on revenue. The concept underlying this proposal is that CAT costs would be borne by CAT Reporters based on the ability to pay. Industry Member revenue would be calculated based on revenue reported in FOCUS reports, and Participant revenue would have been calculated based on revenue information in Form 1 amendments and other publicly reported figures. The Operating Committee did not select this model for various reasons. As discussed above, under this approach, Participants as a group would only pay approximately 4% of the total CAT costs. Given their 98 For a discussion of comments made regarding the Original Funding Model and the Prior Fee Proposal, see generally Prior Fee Proposal Release. 99 See Prior Fee Proposal Release at 1408. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 role as self-regulatory organizations and their use of the CAT, the Operating Committee did not believe that such a small allocation of the CAT costs to the Participants was appropriate. Using revenue also raised a variety of practical issues. For example, questions were raised as to what revenue was appropriate to include in the calculation of revenue for Industry Members. The gross revenue set forth on FOCUS reports was proposed, as it was similar to an existing FINRA regulatory fee.100 However, questions were raised as to whether revenue unrelated to NMS Securities or OTC Equity Securities, or otherwise unrelated to the CAT, should be included for calculation of the CAT fee. Eliminating revenue unrelated to CAT-related activity would have been difficult or impossible. In addition, the lack of a uniform approach to calculating revenue for the Participants could raise inequities in the imposition of a CAT fee. To address the issues regarding the 96%–4% allocation and the calculation of the Participant revenue in the straight revenue model described above, the Operating Committee considered an alternative version of the revenue model in which the CAT costs would be allocated between Industry Members and Participants based on a set percentage (e.g., 75%–25%) and the Industry Member allocation would be allocated among Industry Members based on revenue and the Participant allocation would be allocated among Participants based on market share. However, this alternative revenue model failed to address the issues regarding the appropriate revenue calculations for Industry Members. The Operating Committee considered a funding model in which CAT costs were allocated across all CAT Reporters—both Industry Members and Participants—based on message traffic. Specifically, the Operating Committee considered eliminating the concepts of the Participant Allocation and the Industry Member Allocation entirely, and treating Participants and Industry Members the same under the model. The Operating Committee, however, determined that the bifurcated approach set forth in the CAT NMS Plan continued to be a fair and reasonable approach. The Operating Committee also considered other possible funding models. For example, the Participants considered allocating the CAT costs equally among each of the Participants, 100 See paragraph (c) and (d) of Section 1 of Schedule A of FINRA’s Bylaws regarding FINRA’s annual Gross Income Assessment. PO 00000 Frm 00023 Fmt 4701 Sfmt 4703 21071 and then permitting each Participant to charge its own members as it deems appropriate. The Operating Committee determined that such an approach raised a variety of issues, including the likely inconsistency of the ensuing charges, potential for lack of transparency, and the impracticality of multiple SROs submitting invoices for CAT charges. The Operating Committee also discussed the advantages and disadvantages of various alternative models during development of the CAT NMS Plan, such as a cost allocation based on a strict pro-rata distribution, regardless of the type or size of the CAT Reporters, or a cost allocation based on trades.101 The Operating Committee believes that the Proposed Funding Model provides advantages over each of these previously considered models and provides an equitable allocation of reasonable fees among CAT Reporters. B. Governing or Constituent Documents Not applicable. C. Implementation of Amendment The Participants are filing this proposed amendment pursuant to Rule 608(b)(1) of Regulation NMS under the Exchange Act.102 D. Development and Implementation Phases The Participants expect to implement the proposed Participant CAT fees upon approval by the SEC. E. Analysis of Impact on Competition The Operating Committee does not believe that the proposed amendment will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The Operating Committee notes that the proposed amendment implements provisions of the CAT NMS Plan approved by the Commission, subject to proposed revisions to the CAT NMS Plan described above, and is designed to assist the Participants in meeting their regulatory obligations pursuant to the Plan. Because all Participants are subject to the Proposed Funding Model set forth in the proposed amendment, this is not a competitive filing that raises competition issues between and among the Participants. Furthermore, for the reasons discussed above, including in Section A.8 above, the Operating Committee does not believe that the Proposed Funding Model will result in any burden on competition that 101 For a discussion of alternatives considered in the drafting of the CAT NMS Plan, see Appendix C of the CAT NMS Plan at C–88—C–89. 102 17 CFR 242.608(b)(1). E:\FR\FM\21APN3.SGM 21APN3 21072 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices is not necessary or appropriate in furtherance of the purpose of the Exchange Act. F. Written Understanding or Agreements Relating to Interpretation of, or Participation in, Plan Not applicable. G. Approval by Plan Sponsors in Accordance With Plan Section 12.3 of the CAT NMS Plan states that, subject to certain exceptions, the CAT NMS Plan may be amended from time to time only by a written amendment, authorized by the affirmative vote of not less than twothirds of all of the Participants, that has been approved by the SEC pursuant to Rule 608 of Regulation NMS under the Exchange Act or has otherwise become effective under Rule 608 of Regulation NMS under the Exchange Act. In addition, Section 4.3(a)(vi) of the Plan requires the Operating Committee, by Majority Vote, to authorize action to determine the appropriate fundingrelated policies, procedures and practices-consistent with Article XI. The Operating Committee has satisfied both of these requirements. In addition, the Proposed Funding Model was discussed and voted on during a general session of the Operating Committee. H. Description of Operation of Facility Contemplated by the Proposed Amendment Not applicable. I. Terms and Conditions of Access Not applicable. I. Method of Determination and Imposition, and Amount of, Fees and Charges Section A of this letter describes in detail how the Participants developed the Proposed Funding Model for the CAT. J. Method and Frequency of Processor Evaluation Not applicable. khammond on DSKJM1Z7X2PROD with NOTICES3 K. Dispute Resolution Section 11.5 of the CAT NMS Plan addresses the resolution of disputes regarding CAT fees charged to Participants and Industry Members. Specifically, Section 11.5 of the CAT NMS Plan states that disputes with respect to fees the Company charges Participants pursuant to Article XI of the CAT NMS Plan shall be determined by the Operating Committee or a Subcommittee designated by the Operating Committee. Decisions by the Operating Committee or such VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 designated Subcommittee on such matters shall be binding on Participants, without prejudice to the rights of any Participant to seek redress from the SEC pursuant to Rule 608 of Regulation NMS under the Exchange Act or in any other appropriate forum. In addition, the Participants adopted rules to establish the procedures for resolving potential disputes related to CAT fees charged to Industry Members.103 III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the amendment is consistent with the Exchange Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number 4– 698 on the subject line. Paper Comments • Send paper comments to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number 4–698. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/rules/ sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed plan amendment that are filed with the Commission, and all written communications relating to the amendment between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for 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 such filing also will be available for inspection and copying at the Participants’ offices. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from 103 See Securities Exchange Act Rel. No. 81500 (Aug. 30, 2017), 82 FR 42143 (Sept. 6, 2017). PO 00000 Frm 00024 Fmt 4701 Sfmt 4703 comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number 4–698 and should be submitted on or before May 12, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.104 J. Matthew DeLesDernier, Assistant Secretary. Exhibit A Additions italicized; deletions [bracketed] * * * * * Article I Definitions * * * * * [‘‘Execution Venue’’ means a Participant or an alternative trading system (‘‘ATS’’) (as defined in Rule 300 of Regulation ATS) that operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS that does not execute orders).] * * * * * Article XI Funding of the Company Section 11.1. Funding Authority. (a) On an annual basis the Operating Committee shall approve an operating budget for the Company. The budget shall include the projected costs of the Company, including the costs of developing and operating the CAT for the upcoming year, and the sources of all revenues to cover such costs, as well as the funding of any reserve that the Operating Committee reasonably deems appropriate for prudent operation of the Company. (b) Subject to Section 11.2, the Operating Committee shall have discretion to establish funding for the Company, including: (i) Establishing fees that the Participants shall pay; and (ii) establishing fees for Industry Members that shall be implemented by Participants. The Participants shall file with the SEC under Section 19(b) of the Exchange Act any such fees on Industry Members that the Operating Committee approves, and such fees shall be labeled as ‘‘Consolidated Audit Trail Funding Fees.’’ (c) To fund the development and implementation of the CAT, the Company shall time the imposition and collection of all fees on Participants and Industry Members in a manner reasonably related to the timing when the Company expects to incur such development and implementation costs. 104 17 E:\FR\FM\21APN3.SGM CFR 200.30–3(a)(85). 21APN3 khammond on DSKJM1Z7X2PROD with NOTICES3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices In determining fees on Participants and Industry Members the Operating Committee shall take into account fees, costs and expenses (including legal and consulting fees and expenses) incurred by the Participants on behalf of the Company prior to the Effective Date in connection with the creation and implementation of the CAT, and such fees, costs and expenses shall be fairly and reasonably shared among the Participants and Industry Members. Any surplus of the Company’s revenues over its expenses shall be treated as an operational reserve to offset future fees. (d) Consistent with this Article XI, the Operating Committee shall adopt policies, procedures, and practices regarding the budget and budgeting process, [assignment of tiers,] resolution of disputes, billing and collection of fees, and other related matters. [For the avoidance of doubt, as part of its regular review of fees for the CAT, the Operating Committee shall have the right to change the tier assigned to any particular Person in accordance with fee schedules previously filed with the Commission that are reasonable, equitable and not unfairly discriminatory and subject to public notice and comment, pursuant to this Article XI. Any such changes will be effective upon reasonable notice to such Person.] Section 11.2. Funding Principles. In establishing the funding of the Company, the Operating Committee shall seek: (a) To create transparent, predictable revenue streams for the Company that are aligned with the anticipated costs to build, operate and administer the CAT and the other costs of the Company; (b) to establish an allocation of the Company’s related costs among Participants and Industry Members that is consistent with the Exchange Act, taking into account the timeline for implementation of the CAT and distinctions in the securities trading operations of Participants and Industry Members and their relative impact upon Company resources and operations; (c) to establish a [tiered] fee structure in which the fees charged to: (i) Participants [CAT Reporters that are Execution Venues, including ATSs,] are based upon the level of market share; and (ii) Industry Members[’ non-ATS activities] are based upon message traffic[; and (iii) the CAT Reporters with the most CAT-related activity (measured by market share and/or message traffic, as applicable) are generally comparable (where, for these comparability purposes, the tiered fee structure takes into consideration affiliations between or among CAT Reporters, whether VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Execution Venues and/or Industry Members)]. (d) to provide for ease of billing and other administrative functions; (e) to avoid any disincentives such as placing an inappropriate burden on competition and a reduction in market quality; and (f) to build financial stability to support the Company as a going concern. Section 11.3. Recovery. (a) The Operating Committee will establish a minimum fee to be payable by each Participant in addition to [fixed] fees based on market share to be payable by Participants [Execution Venues] as provided in this Section 11.3(a): (i) Each Participant [Execution Venue] that: (A) Executes transactions; or (B) in the case of a national securities association, has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange, in NMS Stocks [or OTC Equity Securities] will pay a [fixed] fee depending on the market share of that Participant [Execution Venue] in NMS Stocks (‘‘Equities Participant’’) [and OTC Equity Securities, with the Operating Committee establishing at least two and no more than five tiers of fixed fees, based on an Execution Venue’s NMS Stocks and OTC Equity Securities market share]. For these purposes, market share for Participants [Execution Venues] that execute transactions will be calculated by share volume, and market share for a national securities association that has trades reported by its members to its trade reporting facility or facilities for reporting transactions effected otherwise than on an exchange in NMS Stocks [or OTC Equity Securities] will be calculated based on share volume of trades reported, provided, however, that any Participant that is a national securities association shall pay a maximum fee established by the Operating Committee instead of the higher fee calculated based on such Participant’s market share. If a Participant’s fee is limited to such maximum fee, any excess amount which the Participant otherwise would have paid as a fee above such maximum fee will be re4allocated among all Equities Participants, including any Equities Participant that is subject to the maximum fee, in accordance with their market share [the share volume reported to such national securities association by an Execution Venue shall not be included in the calculation of such national security association’s market share]. PO 00000 Frm 00025 Fmt 4701 Sfmt 4703 21073 (ii) Each Participant [Execution Venue] that executes transactions in Listed Options (‘‘Options Participant’’) will pay a [fixed] fee depending on the Listed Options market share of that Participant[, Execution Venue, with the Operating Committee establishing at least two and no more than five tiers of fixed fees, based on an Execution Venue’s Listed Options market share]. For these purposes, market share will be calculated by contract volume. (b) The Operating Committee will establish [fixed] fees to be payable by Industry Members, based on the message traffic generated by such Industry Member subject to a base minimum fee and discounts for market maker message traffic [, with the Operating Committee establishing at least five and no more than nine tiers of fixed fees, based on message traffic. For the avoidance of doubt, the fixed fees payable by Industry Members pursuant to this paragraph shall, in addition to any other applicable message traffic, include message traffic generated by: (i) An ATS that does not execute orders that is sponsored by such Industry Member; and (ii) routing orders to and from any ATS sponsored by such Industry Member.], provided, however, that any Industry Member shall pay a maximum fee established by the Operating Committee instead of the higher fee calculated based on such Industry Member’s message traffic. If an Industry Member’s fee is limited to such maximum fee, any excess amount which the Industry Member otherwise would have paid as a fee above such maximum fee will be re-allocated among all Industry Members, including any Industry Member that is subject to the maximum fee or subject to the base minimum fee, in accordance with their message traffic. (c) The Operating Committee may establish any other fees ancillary to the operation of the CAT that it reasonably determines appropriate, including fees: (i) For the late or inaccurate reporting of information to the CAT; (ii) for correcting submitted information; and (iii) based on access and use of the CAT for regulatory and oversight purposes (and not including any reporting obligations). (d) The Company shall make publicly available a schedule of effective fees and charges adopted pursuant to this Agreement as in effect from time to time. The Operating Committee shall review such fee schedule on at least an annual basis and shall make any changes to such fee schedule that it deems appropriate. The Operating Committee is authorized to review such fee schedule on a more regular basis, but E:\FR\FM\21APN3.SGM 21APN3 21074 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices shall not make any changes on more than a semiannual basis unless, pursuant to a Supermajority Vote, the Operating Committee concludes that such change is necessary for the adequate funding of the Company. * * * * * Appendix B khammond on DSKJM1Z7X2PROD with NOTICES3 Fee Schedule Consolidated Audit Trail Funding Fees (a) Each Participant shall pay to Consolidated Audit Trail, LLC in the manner prescribed by the Consolidated Audit Trail, LLC a CAT fee calculated as follows: (1) Commencing upon SEC approval of the CAT fee, each Participant shall pay a quarterly CAT fee calculated based on market share from the prior quarter by adding the sum of the following: (A) For all Participants, the Minimum Participant Fee; (B) For Equities Participants, the lesser of: (i) The product of multiplying the Equities Participant’s percentage of total market share of NMS Stocks for all Equities Participants against the Equities Participant Allocation; or (ii) the Maximum Equities Participant Fee, if applicable; and If any Participant’s fee is limited to the Maximum Equities Participant Fee, any excess amount which such Participant otherwise would have paid as a fee above such Maximum Equities Participant Fee will be re-allocated among all Equities Participants (including any Equities Participant subject to the Maximum Equities Participant Fee) in accordance with their market share. (C) For Options Participants, the product of multiplying the Participant’s percentage of total market share of Listed Options contracts for all Options Participants against the Options Participant Allocation; For the avoidance of doubt, Participants with both options and equities market share shall be considered both Equities Participants and Options Participants. (b) The CAT fees set forth in paragraph (a) will be calculated based on the following: (1) Industry Member/Participant Allocation. The Industry Member Allocation for each quarter shall be 75% of 1/4th of the Total CAT Costs for the relevant year. The Participant Allocation for each quarter shall be 25% of 1/4th of the Total CAT Costs for the relevant year. (2) Minimum Participant Fee. The Minimum Participant Fee is 0.75% of VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 the Participant Allocation. For avoidance of doubt, the Minimum Participant Fee will be paid by each registered national securities exchange that is a Participant and each registered national securities association that is a Participant. (3) Adjusted Participant Allocation. The Adjusted Participant Allocation is the Participant Allocation minus the sum of all Minimum Participant Fees required to be paid by each Participant. (4) Equities Participant Allocation. The Equities Participant Allocation is 60% of the Adjusted Participant Allocation. (5) Options Participant Allocations. The Options Participant Allocation is 40% of the Adjusted Participant Allocation. (6) Maximum Equities Participant Fee. The Maximum Equities Participant Fee is the greater of (x) 20% of the Equities Participant Allocation or (y) the highest CAT fee required to be paid by any other Equities Participant plus 5% of such highest CAT fee. The Maximum Equities Participant Fee only applies to a Participant that is a national securities association. (7) Total CAT Costs. The Total CAT Costs shall be the total budgeted costs for the CAT for the relevant year. The total budgeted costs for the CAT for the relevant year shall be the total CAT costs set forth in the annual operating budget approved by the Operating Committee pursuant to Section 11.1(a) of the CAT NMS Plan. The total budgeted costs for the CAT for the relevant year may be adjusted on a quarterly basis as the Operating Committee reasonably deems appropriate for the prudent operation of the Company. To the extent that the Operating Committee adjusts the total budgeted costs for the CAT for the relevant year during its quarterly budget review, the adjusted budgeted costs for the CAT will be used in calculating the remaining CAT fees for that year. * * * * * Exhibit B The following sets forth an illustrative example of CAT fees calculated under the Proposed Funding Model based on budgeted Total CAT Costs for 2021 and message traffic and market share data for the fourth quarter of 2020. Note Exhibit B only provides an illustrative example of how the Proposed Funding Model would operate; the calculation of actual fees will differ from this example in various ways. For example, the Participants have paid or will have paid 100% of these costs up to the time of the SEC approval of the Proposed Funding Model, and, as a result, Participants PO 00000 Frm 00026 Fmt 4701 Sfmt 4703 would not be obligated to pay CAT fees related to 2021 CAT costs to the extent the Participants have already paid such costs. Furthermore, Period 3 CAT Fees for Industry Members will be calculated based on actual Total CAT Costs for 2021, not budgeted CAT Costs for 2021, and based on CAT Data from 2022, not from 2020. CAT Fee Example for Illustrative Purposes Only Budgeted Total CAT Costs for 2021: $132,522,082 Budgeted Quarterly Total CAT Costs: $33,130,502.50 Quarterly Participant CAT Fees Participant Allocation (25% of Total CAT Costs): $8,282,625.62 Minimum Participant Fee (0.75% of Participant Allocation): $62,119.73 Equities Participant Allocation (60% of Adjusted Participant Allocation with Minimum Participant Fee): $4,845,413.60 Options Participant Allocation (40% of Adjusted Participant Allocation with Minimum Participant Fee): $3,437,291.50 Maximum Equities Participant Fee (with Minimum Participant Fee): $904,261.77 EQUITIES PARTICIPANTS Equities participant 1 .............................. 2 .............................. 3 .............................. 4 .............................. 5 .............................. 6 .............................. 7 .............................. 8 .............................. 9 .............................. 10 ............................ 11 ............................ 12 ............................ 13 ............................ 14 ............................ 15 ............................ 16 ............................ 17 ............................ % of total market share 44.036 15.857 10.311 8.465 7.276 4.823 2.404 1.572 1.439 1.105 0.732 0.658 0.562 0.464 0.244 0.052 0.000 Quarterly CAT fee 105 $1,316,397.13 819,716.78 574,962.49 452,089.70 392,929.38 270,943.47 181,695.58 140,305.36 133,707.03 117,096.53 67,479.86 63,773.04 90,079.89 54,132.27 74,252.16 33,652.74 62,125.23 OPTIONS PARTICIPANTS Options participant 1 2 3 4 5 6 7 .............................. .............................. .............................. .............................. .............................. .............................. .............................. % of total market share 15.832 12.919 9.424 8.742 8.640 8.586 7.327 Quarterly CAT fee 106 $488,295.85 378,833.92 284,742.41 266,385.07 263,642.40 262,187.01 259,360.77 105 These fees reflect the Minimum Participant Fee, the Maximum Equities Participant Fee and the re-allocation related to the Maximum Equities Participant Fee. E:\FR\FM\21APN3.SGM 21APN3 21075 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices OPTIONS PARTICIPANTS—Continued Options participant 8 .............................. 9 .............................. 10 ............................ 11 ............................ 12 ............................ 13 ............................ 14 ............................ 15 ............................ 16 ............................ % of total market share 6.048 3.147 4.246 3.873 3.267 3.304 3.404 1.020 0.221 Quarterly CAT fee 106 224,933.08 115,761.83 176,402.53 135,311.97 150,063.18 151,047.18 153,759.91 89,566.40 36,997.99 khammond on DSKJM1Z7X2PROD with NOTICES3 Quarterly Industry Member CAT Fees Industry Member Allocation (75% of Total CAT Costs): $24,847,876.90 Minimum Industry Member CAT Fee: $125 per quarter Maximum Industry Member CAT Fee: 8% of message traffic Industry member % of total message traffic 107 Quarterly CAT fee 108 1 .............................. 2 .............................. 3 .............................. 4 .............................. 5 .............................. 6 .............................. 7 .............................. 8 .............................. 9 .............................. 10 ............................ 11 ............................ 12 ............................ 13 ............................ 14 ............................ 15 ............................ 16 ............................ 17 ............................ 18 ............................ 19 ............................ 20 ............................ 21 ............................ 22 ............................ 23 ............................ 24 ............................ 25 ............................ 26 ............................ 27 ............................ 28 ............................ 29 ............................ 30 ............................ 31 ............................ 32 ............................ 33 ............................ 34 ............................ 35 ............................ 36 ............................ 37 ............................ 38 ............................ 39 ............................ 40 ............................ 41 ............................ 42 ............................ 43 ............................ 44 ............................ 45 ............................ 46 ............................ 47 ............................ 48 ............................ 49 ............................ 50 ............................ 51 ............................ 52 ............................ 15.942715 12.3469 8.5412389 8.4307566 8.1484697 6.881969 3.33 3.07 2.87 2.7555 2.66620 2.635884 2.4252220 2.131963 1.4843 1.3483314 1.335250 1.18 1.1051530 1.05683181 1.0187078 0.8705377 0.65176922 0.603158 0.596133 0.487318 0.44 0.308189 0.2935546 0.2874546 0.284763 0.2556 0.253008 0.24849056 0.1988107 0.1869246 0.163770 0.1572621 0.1417 0.1408842 0.1297568 0.1270 0.121951 0.11747991 0.1144613 0.1057779 0.105 0.1021931 0.0978121 0.096430 0.0928221 0.0859471 $2,508,235.23 2,390,859.99 2,266,635.37 2,263,028.99 2,253,814.54 1,925,916.13 931,352.41 859,935.74 803,898.93 771,124.66 746,134.09 737,650.94 678,697.33 596,628.96 415,367.88 377,329.97 373,669.04 329,495.95 309,276.58 295,753.93 285,084.95 243,619.61 182,397.33 168,793.42 166,827.49 136,375.85 123,953.82 86,246.66 82,151.14 80,444.05 79,690.93 71,535.07 70,804.09 69,539.98 55,637.08 52,310.76 45,831.09 44,009.72 39,645.51 39,426.37 36,312.38 35,540.69 34,127.81 32,876.70 32,031.93 29,601.89 29,271.83 28,598.71 27,372.66 26,985.90 25,976.22 24,052.25 106 These fees reflect the Minimum Participant Fee. VerDate Sep<11>2014 20:06 Apr 20, 2021 Jkt 253001 Industry member % of total message traffic 107 53 ............................ 54 ............................ 55 ............................ 56 ............................ 57 ............................ 58 ............................ 59 ............................ 60 ............................ 61 ............................ 62 ............................ 63 ............................ 64 ............................ 65 ............................ 66 ............................ 67 ............................ 68 ............................ 69 ............................ 70 ............................ 71 ............................ 72 ............................ 73 ............................ 74 ............................ 75 ............................ 76 ............................ 77 ............................ 78 ............................ 79 ............................ 80 ............................ 81 ............................ 82 ............................ 83 ............................ 84 ............................ 85 ............................ 86 ............................ 87 ............................ 88 ............................ 89 ............................ 90 ............................ 91 ............................ 92 ............................ 93 ............................ 94 ............................ 95 ............................ 96 ............................ 97 ............................ 98 ............................ 99 ............................ 100 .......................... 101 .......................... 102 .......................... 103 .......................... 104 .......................... 105 .......................... 106 .......................... 107 .......................... 108 .......................... 109 .......................... 110 .......................... 111 .......................... 112 .......................... 113 .......................... 114 .......................... 115 .......................... 116 .......................... 117 .......................... 118 .......................... 119 .......................... 120 .......................... 121 .......................... 122 .......................... 123 .......................... 124 .......................... 125 .......................... 126 .......................... 127 .......................... 128 .......................... 129 .......................... 130 .......................... 131 .......................... 132 .......................... 133 .......................... 134 .......................... 0.084735 0.081 0.0759906 0.0738346 0.066684 0.065941 0.063723 0.05392 0.0483078 0.043817 0.0384240 0.0370 0.031046 0.029490 0.03 0.0269 0.02450 0.02444676 0.02095646 0.0191560 0.0175190 0.0164131 0.015561 0.0148 0.014 0.01402 0.0136249 0.01284773 0.0127 0.011465 0.0112806 0.0108896 0.010741 0.01029 0.010275 0.0092574 0.008569 0.0085212 0.01 0.01 0.00758 0.007202 0.007065 0.0068586 0.00651944 0.0064808 0.006361 0.005749 0.005305 0.0048870 0.00 0.0047449 0.00469 0.004674 0.0046547 0.0045685 0.0044112 0.00 0.004164 0.004 0.0041 0.00 0.004090 0.0040070 0.0039591 0.003438 0.0033477 0.003321 0.0031118 0.00310 0.003082 0.00302 0.0029780 0.0027976 0.002709 0.00269 0.0025567 0.0024297 0.0024 0.00210 0.002030 0.001970 PO 00000 Frm 00027 Fmt 4701 Sfmt 4703 Quarterly CAT fee 108 23,713.00 22,774.83 21,265.93 20,662.59 18,661.49 18,453.43 17,832.74 15,090.39 13,518.91 12,262.25 10,752.94 10,361.23 8,688.22 8,252.77 8,112.33 7,514.14 6,855.05 6,841.42 5,864.66 5,360.79 4,902.68 4,593.20 4,354.73 4,140.50 3,978.17 3,924.60 3,812.92 3,595.43 3,544.27 3,208.47 3,156.88 3,047.45 3,005.74 2,879.17 2,875.50 2,590.67 2,398.10 2,384.65 2,347.27 2,178.96 2,120.87 2,015.48 1,977.19 1,919.37 1,824.46 1,813.64 1,780.09 1,608.74 1,484.62 1,367.64 1,332.74 1,327.84 1,311.81 1,308.08 1,302.63 1,278.49 1,234.47 1,194.19 1,165.41 1,156.57 1,154.93 1,150.64 1,144.70 1,121.35 1,107.96 962.16 936.85 929.46 870.83 867.51 862.46 845.50 833.40 782.91 758.12 752.67 715.50 679.96 671.83 586.75 568.06 551.19 Industry member 135 136 137 138 139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188 189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... E:\FR\FM\21APN3.SGM 21APN3 % of total message traffic 107 0.0018979 0.001826 0.0018040 0.0017908 0.001777 0.0017672 0.0015795 0.0014790 0.00 0.0014253 0.0014101 0.001353 0.0013274 0.0013061 0.0013 0.0012558 0.0012482 0.001206 0.0011434 0.0011142 0.0011093 0.001090 0.00108 0.001 0.001 0.001 0.0010354 0.0010202 0.000943 0.001 0.000860 0.0008519 0.0008308 0.0008213 0.0006737 0.00067 0.0006423 0.00 0.00063 0.0006153 0.0006146 0.000544 0.0005437 0.000540 0.00053041 0.0005058 0.000505 0.00 0.00 0.00 0.000 0.000414 0.0003662 0.00036 0.0003474 0.00034 0.00 0.000312 0.00 0.000285 0.00 0.0002626 0.0002624 0.0002623 0.00 0.0002550 0.00025 0.000244 0.0002442 0.000 0.0002311 0.0002145 0.0002 0.00021241 0.00020 0.0002 0.000193 0.00019 0.0001839 0.000179 0.00017 0.000172 Quarterly CAT fee 108 531.14 510.99 504.85 501.14 497.38 494.54 442.02 413.90 411.74 398.86 394.62 378.77 371.48 365.52 359.89 351.44 349.31 337.46 319.97 311.81 310.45 305.14 301.72 299.87 294.94 292.03 289.75 285.52 263.95 257.53 240.72 238.39 232.51 229.84 188.53 187.07 179.74 178.92 176.72 172.18 171.99 152.35 152.15 151.07 148.44 141.55 141.40 140.96 140.81 139.48 139.15 138.52 136.95 136.85 136.34 136.20 135.29 135.19 134.40 134.32 134.11 133.57 133.56 133.56 133.51 133.33 133.12 132.98 132.97 132.78 132.54 132.00 131.99 131.93 131.57 131.55 131.30 131.07 131.00 130.84 130.63 130.62 21076 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 Industry member 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263 264 265 266 267 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... VerDate Sep<11>2014 % of total message traffic 107 0.00017 0.000167 0.000164 0.0002 0.00015 0.0001459 0.00015 0.00 0.0001399 0.0001348 0.0001338 0.00 0.00 0.000 0.0001229 0.0001 0.0001 0.0001194 0.0001174 0.0001166 0.00 0.0001156 0.0001 0.00 0.0000969 0.0000959 0.0000949 0.0000938 0.00009 0.000091 0.0000904 0.000090 0.0001 0.00009 0.00008765 0.000087 0.000083 0.00008 0.0000768 0.00 0.0001 0.00 0.0001 0.0000685 0.00006850 0.0001 0.0001 0.000067 0.000066 0.000063 0.000062 0.000061 0.0001 0.000060 0.000060 0.000 0.000057 0.000057 0.0001 0.0000560 0.0000539 0.0000525 0.000051 0.0001 0.000048 0.00 0.00 0.0000 0.000044 0.0000438 0.000044 0.0000437 0.00 0.000042 0.00004 0.00 0.000041 0.0000403 0.0000 0.000040 0.00004 0.000037 20:06 Apr 20, 2021 Quarterly CAT fee 108 130.50 130.44 130.35 130.20 129.86 129.76 129.74 129.57 129.57 129.40 129.37 129.31 129.25 129.23 129.01 128.97 128.95 128.90 128.83 128.81 128.81 128.77 128.65 128.60 128.16 128.13 128.10 128.06 128.04 127.97 127.95 127.93 127.92 127.90 127.86 127.86 127.70 127.52 127.51 127.39 127.33 127.28 127.24 127.24 127.24 127.20 127.20 127.18 127.16 127.05 127.02 126.98 126.96 126.96 126.95 126.92 126.86 126.85 126.83 126.83 126.76 126.71 126.66 126.64 126.56 126.54 126.53 126.51 126.45 126.43 126.43 126.43 126.43 126.38 126.36 126.35 126.33 126.32 126.31 126.31 126.28 126.22 Jkt 253001 Industry member 299 300 301 302 303 304 305 306 307 308 309 310 311 312 313 314 315 316 317 318 319 320 321 322 323 324 325 326 327 328 329 330 331 332 333 334 335 336 337 338 339 340 341 342 343 344 345 346 347 348 349 350 351 352 353 354 355 356 357 358 359 360 361 362 363 364 365 366 367 368 369 370 371 372 373 374 375 376 377 378 379 380 PO 00000 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... Frm 00028 % of total message traffic 107 0.00 0.000037 0.0000363 0.000035 0.00 0.0000331 0.00003294 0.00 0.000033 0.00003 0.00003 0.0000306 0.00003 0.0000302 0.000030 0.00003 0.00 0.0000276 0.00 0.0000 0.0000270 0.000 0.000 0.0000 0.000025 0.0000250 0.0000245 0.000024 0.000024 0.00002295 0.00002 0.00002 0.0000212 0.00 0.00001998 0.00001941 0.00 0.0000194 0.00 0.00 0.0000189 0.00 0.00 0.00 0.00002 0.0000176 0.0000174 0.0000172 0.0000164 0.000016 0.00002 0.00 0.000015 0.000 0.00001 0.00001 0.00001 0.000015 0.00 0.00001 0.00 0.0000137 0.00 0.000014 0.000014 0.000014 0.00001 0.000013 0.00001 0.000 0.0000127 0.0000 0.0000119 0.000011 0.0000113 0.000011 0.000011 0.0000107 0.00 0.0000103 0.000010 0.00001 Fmt 4701 Sfmt 4703 Quarterly CAT fee 108 126.22 126.21 126.18 126.13 126.10 126.08 126.08 126.07 126.07 126.01 126.01 126.00 125.99 125.99 125.98 125.98 125.94 125.90 125.90 125.90 125.88 125.88 125.83 125.82 125.82 125.81 125.80 125.80 125.79 125.75 125.72 125.71 125.69 125.66 125.65 125.63 125.63 125.63 125.63 125.63 125.62 125.60 125.60 125.60 125.58 125.57 125.57 125.56 125.54 125.53 125.52 125.51 125.49 125.49 125.49 125.49 125.48 125.47 125.47 125.47 125.45 125.45 125.45 125.44 125.44 125.44 125.44 125.44 125.43 125.43 125.41 125.39 125.39 125.37 125.37 125.37 125.36 125.35 125.34 125.34 125.33 125.33 Industry member 381 382 383 384 385 386 387 388 389 390 391 392 393 394 395 396 397 398 399 400 401 402 403 404 405 406 407 408 409 410 411 412 413 414 415 416 417 418 419 420 421 422 423 424 425 426 427 428 429 430 431 432 433 434 435 436 437 438 439 440 441 442 443 444 445 446 447 448 449 450 451 452 453 454 455 456 457 458 459 460 461 462 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... E:\FR\FM\21APN3.SGM 21APN3 % of total message traffic 107 0.00001 0.0000 0.000010 0.000010 0.0000 0.00 0.000009 0.000009 0.00001 0.00001 0.000 0.0000087 0.00 0.0000086 0.00 0.00001 0.00001 0.000008 0.0000 0.0000084 0.0000083 0.0000 0.00001 0.000 0.0000079 0.000008 0.0000 0.000008 0.00001 0.000007 0.00001 0.000007 0.00001 0.0000073 0.000 0.000 0.0000069 0.00001 0.0000068 0.000007 0.0000068 0.00 0.000007 0.000007 0.00001 0.00001 0.000007 0.000 0.000006 0.0000 0.00001 0.000006 0.00001 0.0000061 0.0000 0.00001 0.0000060 0.00 0.0000060 0.0000060 0.00001 0.0000 0.000006 0.000006 0.0000057 0.0000057 0.00001 0.00001 0.000 0.000006 0.0000 0.000006 0.00 0.00 0.0000053 0.0000 0.000005 0.00 0.000005 0.00 0.000005 0.000005 Quarterly CAT fee 108 125.33 125.32 125.32 125.32 125.31 125.31 125.31 125.30 125.29 125.29 125.28 125.28 125.28 125.28 125.28 125.28 125.28 125.28 125.27 125.27 125.27 125.27 125.26 125.26 125.26 125.25 125.25 125.25 125.25 125.24 125.24 125.24 125.24 125.24 125.24 125.23 125.23 125.22 125.22 125.22 125.22 125.22 125.22 125.22 125.22 125.22 125.22 125.22 125.21 125.21 125.21 125.21 125.20 125.20 125.20 125.20 125.20 125.20 125.20 125.19 125.19 125.19 125.19 125.19 125.19 125.19 125.19 125.18 125.18 125.18 125.18 125.18 125.18 125.18 125.17 125.17 125.17 125.17 125.17 125.17 125.16 125.16 21077 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 Industry member 463 464 465 466 467 468 469 470 471 472 473 474 475 476 477 478 479 480 481 482 483 484 485 486 487 488 489 490 491 492 493 494 495 496 497 498 499 500 501 502 503 504 505 506 507 508 509 510 511 512 513 514 515 516 517 518 519 520 521 522 523 524 525 526 527 528 529 530 531 532 533 534 535 536 537 538 539 540 541 542 543 544 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... VerDate Sep<11>2014 % of total message traffic 107 0.0000048 0.00000 0.00000 0.00000 0.000005 0.0000047 0.0000046 0.000005 0.000004 0.0000044 0.00000 0.0000044 0.00000 0.0000043 0.00000 0.000004 0.000004 0.000004 0.00 0.000004 0.0000041 0.0000041 0.00 0.000004 0.00000 0.0000039 0.000004 0.0000038 0.0000038 0.000004 0.000004 0.000004 0.00000 0.000003 0.000003 0.000003 0.00000 0.000003 0.0000033 0.0000032 0.0000 0.000 0.000003 0.000003 0.000003 0.00000 0.00000 0.000003 0.0000031 0.0000031 0.00000 0.000003 0.000003 0.000003 0.00000 0.00000 0.000003 0.00000 0.000003 0.000003 0.000003 0.0000 0.0000029 0.0000028 0.00 0.00000 0.00000 0.00 0.0000027 0.000003 0.00000 0.00000 0.0000027 0.000003 0.000003 0.0000027 0.0000027 0.00000 0.0000 0.000003 0.000003 0.0000026 20:06 Apr 20, 2021 Quarterly CAT fee 108 125.16 125.16 125.16 125.15 125.15 125.15 125.15 125.15 125.15 125.15 125.14 125.14 125.14 125.14 125.14 125.14 125.14 125.14 125.14 125.14 125.14 125.13 125.13 125.13 125.13 125.13 125.12 125.12 125.12 125.12 125.12 125.12 125.11 125.11 125.11 125.11 125.11 125.11 125.11 125.11 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.10 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 125.09 Jkt 253001 Industry member 545 546 547 548 549 550 551 552 553 554 555 556 557 558 559 560 561 562 563 564 565 566 567 568 569 570 571 572 573 574 575 576 577 578 579 580 581 582 583 584 585 586 587 588 589 590 591 592 593 594 595 596 597 598 599 600 601 602 603 604 605 606 607 608 609 610 611 612 613 614 615 616 617 618 619 620 621 622 623 624 625 626 PO 00000 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... Frm 00029 % of total message traffic 107 0.0000026 0.0000026 0.00000258 0.000003 0.00000 0.0000025 0.00 0.000002 0.00 0.000 0.00000 0.000002 0.00 0.000002 0.00000 0.000002 0.000002 0.00000 0.00000 0.00000 0.00 0.0000022 0.0000022 0.00 0.0000022 0.0000022 0.000002 0.000002 0.0000022 0.00 0.00000 0.000 0.000002 0.000002 0.0000021 0.000002 0.000002 0.00000 0.000002 0.00 0.0000020 0.0000020 0.000002 0.00000 0.000002 0.000002 0.000002 0.0000 0.000002 0.00000 0.0000 0.000002 0.0000 0.000002 0.00000185 0.000002 0.0000018 0.000002 0.0000018 0.00 0.00000 0.0000018 0.000002 0.000002 0.0000017 0.000 0.0000017 0.0000017 0.0000017 0.00 0.00 0.000 0.0000017 0.0000017 0.0000017 0.000002 0.000002 0.0000016 0.000 0.0000 0.0000016 0.000002 Fmt 4701 Sfmt 4703 Quarterly CAT fee 108 125.09 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.08 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.07 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.06 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 Industry member 627 628 629 630 631 632 633 634 635 636 637 638 639 640 641 642 643 644 645 646 647 648 649 650 651 652 653 654 655 656 657 658 659 660 661 662 663 664 665 666 667 668 669 670 671 672 673 674 675 676 677 678 679 680 681 682 683 684 685 686 687 688 689 690 691 692 693 694 695 696 697 698 699 700 701 702 703 704 705 706 707 708 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... E:\FR\FM\21APN3.SGM 21APN3 % of total message traffic 107 0.00000 0.0000016 0.00000 0.000002 0.00 0.000002 0.0000015 0.0000015 0.0000015 0.0000015 0.000001 0.00 0.00000 0.00 0.0000 0.000001 0.000001 0.000001 0.000001 0.00000 0.0000014 0.000001 0.0000014 0.0000 0.0000 0.000001 0.00000 0.0000 0.0000013 0.000001 0.00000 0.000001 0.000001 0.0000013 0.0000013 0.000001 0.00000 0.0000013 0.000001 0.000001 0.0000013 0.000001 0.00 0.000 0.00 0.0000012 0.00 0.000001 0.000001 0.000001 0.0000012 0.0000012 0.00000 0.000001 0.000001 0.000001 0.0000012 0.00000 0.0000011 0.00000 0.000001 0.0000011 0.000001 0.0000011 0.000001 0.00000 0.000001 0.0000011 0.0000011 0.0000011 0.00 0.000001 0.000001 0.00 0.000001 0.00 0.00000104 0.00000 0.00000101 0.000001 0.00000 0.000 Quarterly CAT fee 108 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.05 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.04 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 21078 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES3 Industry member 709 710 711 712 713 714 715 716 717 718 719 720 721 722 723 724 725 726 727 728 729 730 731 732 733 734 735 736 737 738 739 740 741 742 743 744 745 746 747 748 749 750 751 752 753 754 755 756 757 758 759 760 761 762 763 764 765 766 767 768 769 770 771 772 773 774 775 776 777 778 779 780 781 782 783 784 785 786 787 788 789 790 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... VerDate Sep<11>2014 % of total message traffic 107 0.000001 0.0000010 0.000001 0.000001 0.000001 0.0000010 0.000001 0.00 0.00 0.000001 0.000001 0.0000009 0.000001 0.00 0.00 0.0000 0.00 0.00000 0.000001 0.0000 0.000001 0.00 0.0000009 0.00 0.000001 0.0000009 0.000001 0.0000 0.000001 0.000001 0.0000008 0.0000008 0.000001 0.0000008 0.000001 0.00000 0.00000 0.00 0.00 0.00000 0.000001 0.000001 0.000001 0.0000008 0.0000008 0.00 0.0000 0.0000008 0.00000 0.000001 0.0000 0.000 0.00000 0.00 0.00000 0.0000008 0.000 0.0000007 0.00 0.00000 0.0000007 0.0000007 0.0000 0.0000007 0.000001 0.000001 0.0000007 0.0000007 0.000001 0.000001 0.000001 0.00 0.000001 0.0000 0.000001 0.000001 0.0000007 0.0000007 0.0000007 0.0000007 0.0000007 0.0000 20:06 Apr 20, 2021 Quarterly CAT fee 108 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.03 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 Jkt 253001 Industry member 791 792 793 794 795 796 797 798 799 800 801 802 803 804 805 806 807 808 809 810 811 812 813 814 815 816 817 818 819 820 821 822 823 824 825 826 827 828 829 830 831 832 833 834 835 836 837 838 839 840 841 842 843 844 845 846 847 848 849 850 851 852 853 854 855 856 857 858 859 860 861 862 863 864 865 866 867 868 869 870 871 872 PO 00000 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... Frm 00030 % of total message traffic 107 0.000001 0.0000006 0.000001 0.00000 0.000 0.000001 0.0000006 0.0000 0.00000 0.0000006 0.0000006 0.00000 0.00 0.000 0.0000006 0.00000 0.0000 0.00000058 0.000001 0.00000057 0.000001 0.00000 0.00000 0.00 0.00000 0.0000005 0.0000 0.0000005 0.000 0.000001 0.00000 0.000001 0.000001 0.00 0.00000 0.0000 0.00000 0.000000 0.0000005 0.00000 0.000 0.000000 0.00 0.0000005 0.00 0.000000 0.00000047 0.0000005 0.00000 0.0000005 0.000000 0.0000005 0.00000 0.0000004 0.000000 0.000000 0.00000 0.000000 0.0000 0.000000 0.000000 0.000000 0.00000 0.000000 0.00 0.000000 0.0000004 0.000000 0.0000004 0.00 0.00000 0.000000 0.0000 0.000 0.0000004 0.0000004 0.00 0.0000 0.00000037 0.000000 0.000000 0.000000 Fmt 4701 Sfmt 4703 Quarterly CAT fee 108 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.02 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 Industry member 873 874 875 876 877 878 879 880 881 882 883 884 885 886 887 888 889 890 891 892 893 894 895 896 897 898 899 900 901 902 903 904 905 906 907 908 909 910 911 912 913 914 915 916 917 918 919 920 921 922 923 924 925 926 927 928 929 930 931 932 933 934 935 936 937 938 939 940 941 942 943 944 945 946 947 948 949 950 951 952 953 954 .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... .......................... E:\FR\FM\21APN3.SGM 21APN3 % of total message traffic 107 0.000 0.0000004 0.000000 0.0000 0.000000 0.000000 0.00000034 0.00000034 0.000000 0.00000 0.000000 0.000000 0.0000003 0.00000 0.000000 0.0000003 0.000000 0.000000 0.000000 0.000000 0.000 0.00000 0.0000 0.000 0.00 0.000000 0.000000 0.000000 0.0000003 0.000 0.00000 0.0000003 0.000 0.000000 0.000000 0.0000003 0.0000003 0.00000029 0.0000003 0.0000 0.000000 0.000000 0.00 0.00 0.000000 0.00000028 0.000000 0.000000 0.000000 0.0000003 0.0000003 0.00000 0.000000 0.0000003 0.00000 0.000 0.0000003 0.0000003 0.000000 0.0000003 0.0000 0.00 0.0000002 0.0000002 0.0000002 0.0000002 0.000000 0.00 0.00000 0.00 0.000000 0.00000 0.000000 0.000000 0.0000002 0.0000002 0.000000 0.0000002 0.0000002 0.00000 0.000000 0.0000 Quarterly CAT fee 108 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 21079 khammond on DSKJM1Z7X2PROD with NOTICES3 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices Industry member % of total message traffic 107 955 .......................... 956 .......................... 957 .......................... 958 .......................... 959 .......................... 960 .......................... 961 .......................... 962 .......................... 963 .......................... 964 .......................... 965 .......................... 966 .......................... 967 .......................... 968 .......................... 969 .......................... 970 .......................... 971 .......................... 972 .......................... 973 .......................... 974 .......................... 975 .......................... 976 .......................... 977 .......................... 978 .......................... 979 .......................... 980 .......................... 981 .......................... 982 .......................... 983 .......................... 984 .......................... 985 .......................... 986 .......................... 987 .......................... 988 .......................... 989 .......................... 990 .......................... 991 .......................... 992 .......................... 993 .......................... 994 .......................... 995 .......................... 996 .......................... 997 .......................... 998 .......................... 999 .......................... 1000 ........................ 1001 ........................ 1002 ........................ 1003 ........................ 1004 ........................ 1005 ........................ 1006 ........................ 1007 ........................ 1008 ........................ 1009 ........................ 1010 ........................ 1011 ........................ 1012 ........................ 1013 ........................ 1014 ........................ 1015 ........................ 1016 ........................ 1017 ........................ 1018 ........................ 1019 ........................ 1020 ........................ 1021 ........................ 1022 ........................ 1023 ........................ 1024 ........................ 1025 ........................ 1026 ........................ 1027 ........................ 1028 ........................ 1029 ........................ 1030 ........................ 1031 ........................ 1032 ........................ 1033 ........................ 1034 ........................ 1035 ........................ 1036 ........................ 0.0000002 0.0000 0.000000 0.00 0.00000 0.0000002 0.000 0.0000002 0.0000 0.00000 0.0000002 0.000000 0.0000 0.0000002 0.00 0.0000 0.000000 0.000000 0.0000002 0.0000002 0.000000 0.000000 0.000000 0.0000002 0.000000 0.00000018 0.000 0.000000 0.0000002 0.0000002 0.0000002 0.0000002 0.000000 0.00 0.000000 0.00000018 0.0000002 0.00000017 0.000000 0.000000 0.00000017 0.000000 0.000000 0.0000002 0.00000 0.00 0.0000002 0.0000002 0.000000 0.0000002 0.00 0.000 0.000000 0.0000 0.000000 0.0000002 0.00000 0.00000 0.00000 0.000000 0.000000 0.0000001 0.00000015 0.0000 0.000000 0.00000 0.0000001 0.0000001 0.0000 0.000000 0.000000 0.000000 0.0000001 0.0000001 0.000000 0.000000 0.00000 0.000000 0.0000 0.0000001 0.00000 0.00000 VerDate Sep<11>2014 20:06 Apr 20, 2021 Quarterly CAT fee 108 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.01 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 Jkt 253001 Industry member 1037 1038 1039 1040 1041 1042 1043 1044 1045 1046 1047 1048 1049 1050 1051 1052 1053 1054 1055 1056 1057 1058 1059 1060 1061 1062 1063 1064 1065 1066 1067 1068 1069 1070 1071 1072 1073 1074 1075 1076 1077 1078 1079 1080 1081 1082 1083 1084 1085 1086 1087 1088 1089 1090 1091 1092 1093 1094 1095 1096 1097 1098 1099 1100 1101 1102 1103 1104 1105 1106 1107 1108 1109 1110 1111 1112 1113 1114 1115 1116 1117 1118 PO 00000 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ Frm 00031 % of total message traffic 107 0.00 0.000000 0.0000001 0.00000 0.0000001 0.0000001 0.000000 0.000 0.00000 0.00000 0.000000 0.000000 0.000000 0.00 0.0000001 0.000000 0.00000 0.00000 0.00000 0.000000 0.000000 0.000000 0.000 0.00 0.000000 0.0000001 0.000000 0.000000 0.000000 0.000000 0.0000001 0.000000 0.00000 0.0000001 0.0000001 0.0000001 0.00 0.00000 0.000000 0.00000 0.000000 0.00000 0.000000 0.0000001 0.00000 0.00000009 0.0000 0.00000 0.00 0.00000 0.000000 0.000000 0.000000 0.0000001 0.00000008 0.0000 0.000 0.00000 0.0000001 0.000 0.00000 0.00 0.00 0.0000 0.00000 0.0000 0.00000006 0.000000 0.000000 0.00000 0.00000006 0.000000 0.00000 0.00 0.00000 0.0000001 0.0000001 0.0000 0.00000 0.0000001 0.0000 0.000000 Fmt 4701 Sfmt 4703 Quarterly CAT fee 108 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 Industry member 1119 1120 1121 1122 1123 1124 1125 1126 1127 1128 1129 1130 1131 1132 1133 1134 1135 1136 1137 1138 1139 1140 1141 1142 1143 1144 1145 1146 1147 1148 1149 1150 1151 1152 1153 1154 1155 1156 1157 1158 1159 1160 1161 1162 1163 1164 1165 1166 1167 1168 1169 1170 1171 1172 1173 1174 1175 1176 1177 1178 1179 1180 1181 1182 1183 1184 1185 1186 1187 1188 1189 1190 1191 1192 1193 1194 1195 1196 1197 1198 1199 1200 E:\FR\FM\21APN3.SGM ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ 21APN3 % of total message traffic 107 0.000000 0.0000000 0.000 0.00000 0.000000 0.00000 0.00 0.00000 0.00000004 0.000 0.00 0.00000 0.00 0.0000000 0.00000 0.0000 0.00000 0.0000 0.0000 0.0000 0.00000003 0.00000 0.00000 0.000000 0.0000 0.00 0.00 0.00000 0.0000 0.00000 0.0000 0.00000 0.000000 0.00000 0.000000 0.00000 0.000 0.00 0.00000 0.0000000 0.0000 0.00000 0.000000 0.00000 0.0000000 0.000000 0.000000 0.000 0.0000000 0.000000 0.0000 0.00 0.0000000 0.0000000 0.000000 0.000000 0.0000 0.000000 0.0000000 0.0000 0.0000000 0.00000001 0.0000000 0.000000 0.00000 0.0000000 0.000000 0.0000 0.00000 0.00000 0.0000000 0.000000 0.00000 0.00000 0.00000 0.0000000 0.000000 0.000000 0.000000 0.000000 0.000 0.000000 Quarterly CAT fee 108 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 21080 Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 / Notices Industry member khammond on DSKJM1Z7X2PROD with NOTICES3 1201 1202 1203 1204 1205 1206 1207 1208 1209 1210 1211 1212 1213 1214 1215 1216 1217 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ VerDate Sep<11>2014 % of total message traffic 107 0.000 0.000000 0.000000 0.0000000 0.00000 0.000000 0.000000 0.000000 0.0000000 0.0000000 0.000000 0.0000000 0.00 0.0000000 0.0000000 0.0000000 0.00000000 20:06 Apr 20, 2021 Quarterly CAT fee 108 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 Jkt 253001 Industry member 1218 1219 1220 1221 1222 1223 1224 1225 1226 1227 1228 1229 1230 1231 1232 1233 1234 PO 00000 ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ ........................ Frm 00032 % of total message traffic 107 0.0000000 0.0000000 0.0000000 0.0000 0.000000 0.000000 0.0000000 0.0000000 0.0000000 0.00 0.0000 0.000000 0.0000000 0.0000000 0.00000000 0.0000 0.000000 Fmt 4701 Sfmt 9990 Quarterly CAT fee 108 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 125.00 % of total message traffic 107 Industry member 1235 ........................ 1236 ........................ 1237 ........................ I 0.000000 0.0000000 0.0000000 Quarterly CAT fee 108 I 125.00 125.00 125.00 [FR Doc. 2021–08049 Filed 4–20–21; 8:45 am] BILLING CODE 8011–01–P 107 These percentages reflect the market maker discounts. 108 These fees reflect the Maximum Industry Member CAT Fee, the Minimum Industry CAT Fee, and re-allocations related to the applications of the Minimum Industry Member CAT Fee and the Maximum Industry Member CAT Fee. E:\FR\FM\21APN3.SGM 21APN3

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 75 (Wednesday, April 21, 2021)]
[Notices]
[Pages 21050-21080]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08049]

[[Page 21049]]

Vol. 86

Wednesday,

No. 75

April 21, 2021

Part IV

Securities and Exchange Commission

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Joint Industry Plan; Notice of Filing of Amendment to the National
Market System Plan Governing the Consolidated Audit Trail by BOX
Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe
EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc.
and Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc.,
Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami
International Securities Exchange LLC, MEMX, 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; and New
York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE
Chicago, Inc., and NYSE National, Inc.; Notice

Federal Register / Vol. 86, No. 75 / Wednesday, April 21, 2021 /
Notices

[[Page 21050]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91555; File No. 4-698]

Joint Industry Plan; Notice of Filing of Amendment to the
National Market System Plan Governing the Consolidated Audit Trail by
BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange,
Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority,
Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami
International Securities Exchange LLC, MEMX, 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; and New
York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE
Chicago, Inc., and NYSE National, Inc.

April 14, 2021.

I. Introduction

On March 31, 2021, the Operating Committee for Consolidated Audit
Trail, LLC (``CAT LLC''), on behalf of the following parties to the
National Market System Plan Governing the Consolidated Audit Trail (the
``CAT NMS Plan'' or ``Plan''): \1\ BOX Exchange LLC; Cboe BYX Exchange,
Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX
Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial
Industry Regulatory Authority, Inc., 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,'' ``self-regulatory organizations,''
or ``SROs'') filed with the Securities and Exchange Commission (``SEC''
or ``Commission'') pursuant to Section 11A(a)(3) of the Securities
Exchange Act of 1934 (``Exchange Act''),\2\ and Rule 608 thereunder,\3\
a proposed amendment to the CAT NMS Plan to implement a revised funding
model (``Proposed Funding Model'') for the consolidated audit trail
(``CAT'') and to establish a fee schedule for Participant CAT fees in
accordance with the Proposed Funding Model.\4\ Exhibit A, attached
hereto, contains proposed revisions to Articles I and XI of the CAT NMS
Plan as well as proposed Appendix B to the Plan containing the fee
schedule setting forth the CAT fees to be paid by the Participants. In
addition, the Operating Committee provided an example of how the
Proposed Funding Model would operate for illustrative purposes only, as
attached hereto as Exhibit B. The example is provided in three charts
setting forth illustrative CAT fees for each Participant and Industry
Member CAT Reporter. The Commission is publishing this notice to
solicit comments from interested persons on the amendment.\5\
---------------------------------------------------------------------------

\1\ The CAT NMS Plan is a national market system plan approved
by the Commission pursuant to Section 11A of the Exchange Act and
the rules and regulations thereunder. See Securities Exchange Act
Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23,
2016).
\2\ 15 U.S.C 78k-1(a)(3).
\3\ 17 CFR 242.608.
\4\ See Letter from Michael Simon, CAT NMS Plan Operating
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated
March 31, 2021 (``Transmittal Letter'').
\5\ 17 CFR 242.608.
---------------------------------------------------------------------------

II. Description of the Plan

Set forth in this Section II is the statement of the purpose and
summary of the amendment, along with information required by Rule
608(a) under the Exchange Act,\6\ substantially as prepared and
submitted by the Participants to the Commission.\7\
---------------------------------------------------------------------------

\6\ See 17 CFR 242.608(a).
\7\ See Transmittal Letter, supra note 4. Unless otherwise
defined herein, capitalized terms used herein are defined as set
forth in the CAT NMS Plan.
---------------------------------------------------------------------------

A. Description of the Amendments to the CAT NMS Plan

The Operating Committee proposes to revise certain aspects of the
funding model set forth in Article XI of the CAT NMS Plan (the
``Original Funding Model''). The Original Funding Model requires a
bifurcated funding model, where costs associated with building and
operating the CAT would be borne by (1) Industry Members (other than
alternative trading systems (``ATSs'') that execute transactions in
Eligible Securities (``Execution Venue ATSs'')) through fixed tiered
fees based on message traffic for Eligible Securities, and (2)
Participants and Industry Members that are Execution Venue ATSs for
Eligible Securities through fixed tiered fees based on market share.
The Operating Committee proposes to amend the CAT NMS Plan to adopt the
Proposed Funding Model. The Proposed Funding Model would continue to
require many of the same elements as the Original Funding Model,
including the bifurcated funding approach, and the use of market share
and message traffic for allocating costs. The Proposed Funding Model,
however, would revise the Original Funding Model in certain ways,
including (1) dividing the CAT costs between Participants and Industry
Members, rather than between Execution Venues and Industry Members
(other than Execution Venue ATSs); (2) eliminating the use of tiers in
calculating CAT fees for Participants and Industry Members; (3)
adopting certain minimum and maximum CAT fees for Industry Members and
Participants; and (4) imposing certain discounts for market making
activity when calculating Industry Member CAT fees. The Operating
Committee also proposes to adopt a fee schedule to establish the CAT
fees applicable to Participants based on the Proposed Funding Model.
The fee schedule would establish the allocation percentages and other
variables for calculating the CAT fees under the Proposed Funding
Model.
1. Executive Summary of the Proposed Funding Model
Under the Proposed Funding Model, the CAT fees for the relevant
period would be designed to cover the total CAT costs associated with
developing, implementing and operating the CAT for the relevant period
(``Total CAT Costs'').\8\ The Proposed Funding Model would implement a
bifurcated funding model, where these costs would be borne by both
Participants and Industry Members. Industry Members as a group would
pay 75% of the Total CAT Costs (the ``Industry Member Allocation''),
and Participants as a group would pay 25% of the Total CAT Costs (the
``Participant Allocation'').\9\
---------------------------------------------------------------------------

\8\ Note that certain costs would be excluded from the
Historical CAT Assessment Costs, as discussed in more detail below.
\9\ Each Industry Member and Participant CAT Reporter would be
required to pay CAT fees as established via the Proposed Funding
Model. CAT Reporting Agents acting in their role as such would not
have an obligation to pay CAT fees.
---------------------------------------------------------------------------

The Industry Member Allocation would be allocated to each Industry
Member based on message traffic. This is similar to the Original
Funding Model, which allocated the Industry Member Allocation among
Industry Members (other than Execution Venue ATSs) based on message
traffic. The Proposed Funding Model would differ from the Original
Funding Model because it would eliminate tiering, and it would include
certain market maker discounts and a minimum and

[[Page 21051]]

maximum CAT fee for Industry Members. Under the Proposed Funding Model,
each Industry Member would pay a CAT fee that is calculated by
multiplying each Industry Member's percentage of the total message
traffic of all Industry Members each quarter by the Industry Member
Allocation, subject to certain market making discounts, a minimum fee
and a maximum fee. Each Industry Member that is an Options Market Maker
\10\ would have a discount based on the options trade-to-quote ratio
applied to its options market making message traffic when calculating
that Industry Member's message traffic to prevent a potentially
disproportionate effect on options market making due to such message
traffic. Similarly, to prevent a potentially disproportionate effect on
market making in NMS Stocks, each Industry Member that is an equity
market maker in NMS Stocks (``Equity Market Maker'') would have a
discount based on the NMS Stock trade-to-quote ratio applied to its
market making message traffic in NMS Stocks when calculating that
Industry Member's message traffic.\11\ In addition, each Industry
Member CAT Reporter would pay a minimum CAT fee (``Minimum Industry
Member CAT Fee'') of $125 per quarter if its CAT fee would be less than
$125 per quarter when calculated based on message traffic. Furthermore,
an Industry Member's CAT fee would be subject to a maximum fee
(``Maximum Industry Member CAT Fee''). The Maximum Industry Member CAT
Fee would be the fee calculated based on 8% of the total message
traffic for all Industry Members. If an Industry Member's fee is
limited to the Maximum Industry Member CAT Fee, any excess amount which
the Industry Member would have paid as a fee above such Maximum
Industry Member CAT Fee will be re-allocated among all Industry Members
(including any Industry Members subject to the Maximum Industry Member
CAT Fee and any Industry Members subject to the Minimum Industry Member
CAT Fee) in accordance with each Industry Member's percentage of total
message traffic.
---------------------------------------------------------------------------

\10\ Section 1.1 of the CAT NMS Plan defines an ``Options Market
Maker'' as ``a broker-dealer registered with an exchange for the
purpose of making markets in options contracts traded on the
exchange.''
\11\ The proposed market making discounts are consistent with a
prior CAT fee proposal filed with the SEC (``Prior Fee Proposal'').
For a description of the Prior Fee Proposal, see Securities Exchange
Act Rel. No. 82451 (Jan. 5, 2018), 83 FR 1399 (Jan. 11, 2018)
(``Prior Fee Proposal Release''). The Participants later withdrew
this proposed amendment. Securities Exchange Act Rel. No. 82892
(Mar. 16, 2018), 83 FR 12633 (Mar. 22, 2018) (``Withdrawal
Release'').
---------------------------------------------------------------------------

As for the Participant Allocation, each Participant would pay a
minimum CAT fee of 0.75% of the Participant Allocation (the ``Minimum
Participant Fee''). The Participant Allocation minus the total Minimum
Participant Fees required to be paid by all Participants (the
``Adjusted Participant Allocation'') would be divided between
Participants that execute transactions in, or in the case of a national
securities association, has trades reported by its members to its trade
reporting facility or facilities for reporting transactions effected
otherwise than on an exchange, in Eligible Securities that are NMS
Stocks (``Equities Participants'') and Participants that execute
transactions in Listed Options (``Options Participants''). Equities
Participants as a group would pay 60% of the Adjusted Participant
Allocation (``Equities Participant Allocation'') and Options
Participants as a group would pay 40% of the Adjusted Participant
Allocation (``Options Participant Allocation'').\12\
---------------------------------------------------------------------------

\12\ For the avoidance of doubt, the Equities Participant
Allocation would be divided among Equities Participants based only
on each Participant's market share in NMS Stocks. Unlike the
Original Funding Model, the allocation of the Equities Participant
Allocation among Equities Participants under the Proposed Funding
Model will not take into consideration market share associated with
OTC Equity Securities for which FINRA facilitates trade reporting.
---------------------------------------------------------------------------

The Equities Participant Allocation would be divided among Equities
Participants based on each Equities Participant's market share in NMS
Stocks. Each Equities Participant would pay a CAT fee that is
calculated by multiplying its percentage of the total market share of
NMS Stock for all Equities Participants during the relevant time period
by the Equities Participant Allocation, subject to a maximum Equities
Participant fee. Total market share in NMS Stocks would be determined
by calculating the total volume in NMS Stocks reported by all Equities
Participants during the relevant time period. A national securities
association (currently, only FINRA) would pay its respective share of
the Equities Participant Allocation calculated based on market share,
provided that the national securities association would not pay more
than a maximum Equities Participant fee, which would be the greater of
(x) 20% of the Equities Participant Allocation or (y) the highest CAT
fee required to be paid by any other Equities Participant plus 5% of
such highest CAT fee (``Maximum Equities Participant Fee''), plus any
additional fee required by the re-allocation of any excess amount which
such Participant otherwise would have paid if not subject to the
Maximum Equities Participant Fee. Specifically, if any Participant's
fee is limited to the Maximum Equities Participant Fee, any excess
amount which such Participant otherwise would have paid as a fee above
such Maximum Equities Participant Fee will be re-allocated among all
Equities Participants (including any Equities Participant subject to
the Maximum Equities Participant Fee) in accordance with their market
share.
The Options Participant Allocation would be divided among Options
Participants based on each Options Participant's market share in Listed
Options. Each Options Participant would pay a CAT fee that is
calculated by multiplying its percentage of the total market share in
Listed Options during the relevant time period by the Options
Participant Allocation. Total market share in Listed Options would be
determined by calculating the total volume of Listed Options contracts
reported by all Options Participants during the relevant time period.
The following chart summarizes certain similarities and differences
between the Original Funding Model \13\ (as well as certain aspects
that were proposed in the Prior Fee Proposal \14\) and the Proposed
Funding Model:
---------------------------------------------------------------------------

\13\ The Original Funding Model is set forth in the CAT NMS
Plan, which was approved in 2016. See CAT NMS Plan Approval Order at
84793-84798.
\14\ See generally Prior Fee Proposal Release.

------------------------------------------------------------------------
Original funding model (as proposed in
prior fee proposal) Proposed funding model
------------------------------------------------------------------------
Bifurcated Cost Allocation:
75% Industry Member Allocation..... 75% Industry Member Allocation.
25% Execution Venue Allocation..... 25% Participant Allocation.
Execution Venues include All ATSs would be included as
Participants and Execution Venue Industry Members.
ATSs.

[[Page 21052]]

Note that the bifurcated model to
allocate costs among Industry
Members (other than Execution
Venue ATSs) and Execution Venues
is part of the Original Funding
Model; the 75%-25% allocation had
been proposed in the Prior Fee
Proposal.
75% Industry Member Allocation:
Message Traffic Approach with Message Traffic Approach:
Tiering:
Count each Industry Member's Count each Industry Member's
messages so the Industry Member messages so the Industry
can be assigned to a tier and Member can be allocated a
allocated a proportionate share of proportionate share of cost
cost for that tier. compared to total Industry
Note that the discounts for market Member messages, subject to
making had been proposed in the certain discounts for market
Prior Fee Proposal.. making, a minimum fee, and a
maximum fee.
25% Participant Allocation:
Market Share Approach with Tiering: Market Share Approach:
No Minimum Participant Fee. Minimum Participant Fee: 0.75%
of the Participant Allocation
allocated to each Participant.
Market Group Split: Market Group Split:
67% of costs 60% of costs
allocated to NMS Stock and allocated to NMS Stock
OTC Equities Execution Participants.
Venues.
33% of costs 40% of costs
allocated to Listed allocated Listed Options
Options Execution Venues. Participants.
Note that the split between NMS Note OTC Equity Security market
Stock and OTC Equities Execution share would not be considered.
Venues and Listed Options
Execution Venues is part of the
Original Funding Model; the 67%-
33% allocation had been proposed
in the Prior Fee Proposal.
Market Share-Based Tier Allocation: Market Share-Based Allocation:
Within NMS Stock and Within NMS Stock
OTC Equities market group, market group, determine
determine each Execution each Participant's market
Venue's market share so the share, subject to a FINRA-
Execution Venue can be related cap allocation/
assigned to a tier and reallocation, so the
allocated a proportionate Participant can be
share of cost for that tier. allocated a proportionate
share of cost.
Within Listed Options Within Listed
market group, determine each Options market group,
Execution Venue's market share determine each
so the Execution Venue can be Participant's market share
assigned to a tier and so it can be allocated a
allocated a proportionate proportionate share of
share of cost for that tier. cost.
------------------------------------------------------------------------

As discussed in detail below, the Operating Committee believes that
the Proposed Funding Model satisfies the applicable requirements of the
Exchange Act as well as the funding principles and other requirements
of the CAT NMS Plan, as proposed to be revised herein. For example, the
Operating Committee believes that the Proposed Funding Model provides
for the ``equitable allocation of reasonable dues, fees, and other
charges among its members and issuers and other persons using its
facilities necessary or appropriate in furtherance of the purposes of
this chapter.'' \15\ The Operating Committee also believes that the
Proposed Funding Model is ``not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.'' \16\
Furthermore, the Operating Committee believes that the Proposed Funding
Model does ``not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of this chapter.'' \17\
Accordingly, the Operating Committee believes that the Proposed Funding
Model satisfies the requirements of the Exchange Act. The Participants
also believe that the Proposed Funding Model satisfies the funding
principles set forth in Section 11.2 of the CAT NMS Plan, as proposed
to be modified herein, as well as the requirements in Section 11.1(c)
of the CAT NMS Plan. The Operating Committee therefore believes that
the Commission should approve the Proposed Funding Model as it ``is
necessary or appropriate in the public interest, for the protection of
investors and the maintenance of fair and orderly markets, to remove
impediments to, and perfect the mechanisms of, a national market
system, or otherwise in furtherance of the purposes of the Act.'' \18\
---------------------------------------------------------------------------

\15\ Sections 6(b)(4) and 15A(b)(5) of the Exchange Act.
\16\ Sections 6(b)(5) and 15A(b)(6) of the Exchange Act.
\17\ Sections 6(b)(8) and 15A(b)(9) of the Exchange Act.
\18\ Rule 608(b)(2) of Regulation NMS under the Exchange Act.
---------------------------------------------------------------------------

2. Allocation of CAT Costs Between Industry Members and Participants
a. CAT Fees for Both Industry Members and Participants
Under the Proposed Funding Model, both Participants and Industry
Members would contribute to the funding of the CAT by paying a CAT fee.
As permitted by Rule 613, the CAT NMS Plan requires Industry Members to
pay a CAT fee. Nevertheless, the Participants have paid the full cost
of the creation, implementation and maintenance of the CAT since 2012,
pending Commission approval of a fee program. The continued funding of
the CAT solely by the Participants was and is not contemplated by the
CAT NMS Plan, nor is it a financially sustainable approach.
Rule 613(a)(1)(vii)(D) contemplates Industry Members contributing
to the payment of CAT costs. Specifically, this provision requires the
CAT NMS Plan to address ``[h]ow the plan sponsors propose to fund the
creation, implementation, and maintenance of the consolidated audit
trail, including the proposed allocation of such estimated costs among
the plan sponsors, and between the plan sponsors and members of the
plan sponsors.''
In addition, as approved by the SEC, the CAT NMS Plan specifically
contemplates CAT fees to be paid by both Industry Members and
Participants. Section 11.1(b) states that ``the Operating Committee
shall have discretion to establish funding for the Company,\19\
including: (i) Establishing

[[Page 21053]]

fees that the Participants shall pay; and (ii) establishing fees for
Industry Members that shall be implemented by the Participants.'' \20\
The Commission stated in approving the CAT NMS Plan the following:
---------------------------------------------------------------------------

\19\ As defined in the CAT NMS Plan, the Company is the
Consolidated Audit Trail, LLC.
\20\ See also Sections 11.1(c), 11.2(c), and 11.3(a) and (b) of
the CAT NMS Plan.
---------------------------------------------------------------------------

The Commission believes that the proposed funding model reflects a
reasonable exercise of the Participants' funding authority to recover
the Participants' costs related to the CAT. The CAT is a regulatory
facility jointly owned by the Participants and, as noted above, the
Exchange Act specifically permits the Participants to charge members
fees to fund their self-regulatory obligations. The Commission further
believes that the proposed funding model is designed to impose fees
reasonably related to the Participants' self-regulatory obligations
because the fees would be directly associated with the costs of
establishing and maintaining the CAT, and not unrelated SRO
services.\21\
---------------------------------------------------------------------------

\21\ CAT NMS Plan Approval Order at 84794.
---------------------------------------------------------------------------

In its recent amendments to the CAT NMS Plan, the SEC reaffirmed
the ability for the Participants to charge Industry Members a CAT fee.
Specifically, the SEC noted that the amendments were not intended to
change the basic funding structure for the CAT, which may include fees
established by the Operating Committee, and implemented by the
Participants, to recover from Industry Members the costs and expenses
incurred by the Participants in connection with the development and
implementation of the CAT.\22\
---------------------------------------------------------------------------

\22\ Securities Exchange Act Rel. No. 88890 (May 15, 2020), 85
FR 31322, 31329 (May 22, 2020) (``Financial Accountability Milestone
Release'').
---------------------------------------------------------------------------

Finally, as noted by the SEC, the CAT ``substantially enhance[s]
the ability of the SROs and the Commission to oversee today's
securities markets,'' \23\ thereby benefitting all market participants.
As such, both Participants and Industry Members should contribute to
covering the cost of the CAT.
---------------------------------------------------------------------------

\23\ Securities Exchange Act Rel. No. 67457 (Jul. 18, 2012), 77
FR 45722, 45726 (Aug. 1, 2012) (``Rule 613 Adopting Release'').
---------------------------------------------------------------------------

b. Categorization of Alternative Trading Systems
The Original Funding Model employs a bifurcated approach in which
costs associated with building and operating the CAT would be borne by
(1) Participants and Industry Members that are Execution Venue ATSs for
Eligible Securities, and (2) Industry Members (other than Execution
Venue ATSs). Under the Proposed Funding Model, the concept of an
Execution Venue would be eliminated, and CAT costs would be divided
between Participants as a group and Industry Members as a group;
Execution Venue ATSs would be treated like other Industry Members, not
Participants. Accordingly, the Operating Committee proposes to delete
the definition of the term ``Execution Venue'' and related provisions
from the CAT NMS Plan.
The Operating Committee believes that this change would address
prior comments regarding the inclusion of ATSs in the Execution Venue
category with Participants. First, this proposed change would simplify
the model by requiring all Industry Members to pay a fee based on
message traffic, rather than treating certain Industry Members--
Execution Venue ATSs--in the same manner as Participants, which would
pay a fee based on market share. Second, this proposed change would
address comments that treating Execution Venue ATSs like Participants
would act as a barrier to entry for smaller ATSs.\24\ Whether or not
such a potential would exist, under the Proposed Funding Model, smaller
ATSs would be treated like any other smaller Industry Member when
calculating their CAT fee, thereby rendering comments regarding
potential barriers to entry for smaller ATSs moot.
---------------------------------------------------------------------------

\24\ See, e.g., Securities Exchange Act Rel. No. 81067 (June 30,
2017), 82 FR 31656, 31664 (July 7, 2017) (``Suspension Order'').
---------------------------------------------------------------------------

Section 1.1 of the CAT NMS Plan defines the term ``Execution
Venue'' to mean ``a Participant or an alternative trading system
(`ATS') (as defined in Rule 300 of Regulation ATS) that operates
pursuant to Rule 301 of Regulation ATS (excluding any such ATS that
does not execute orders).'' The Operating Committee proposes to delete
this term and its definition from Section 1.1 of the CAT NMS Plan as
the concept will no longer be necessary for the Proposed Funding Model.
The Operating Committee also proposes to amend Section 11.2(c)(i)
and (ii) of the CAT NMS Plan to reflect the new approach of the
Proposed Funding Model. Section 11.2(c)(i) of the CAT NMS Plan states
that the fees charged to ``CAT Reporters that are Execution Venues,
including ATSs, are based upon the level of market share.'' Under the
Proposed Funding Model, fees charged to Participants only would be
based on market share; fees charged to all Industry Members, including
ATSs, will be based on message traffic. Accordingly, the Operating
Committee proposes to replace the phrase ``CAT Reporters that are
Execution Venues, including ATSs'' with the term ``Participants.''
Section 11.2(c)(ii) of the CAT NMS Plan states that the fees
charged to ``Industry Members' non-ATS activities are based upon
message traffic.'' Under the Proposed Funding Model, both the ATS and
non-ATS activity of Industry Members will be used as the basis for the
fees charged to Industry Members. Accordingly, the Operating Committee
proposes to delete the phrase ``non-ATS activities'' from Section
11.2(c)(ii) of the CAT NMS Plan.
Section 11.3(a) describes the CAT fees to be paid by Execution
Venues. Because these fees would be limited to Participants, not to
Execution Venues more broadly, the Operating Committee proposes to
replace the references to ``Execution Venues'' with ``Participants'' in
Section 11.3(a) of the CAT NMS Plan. The Operating Committee proposes
to replace the reference to ``Execution Venues'' with ``Participants''
in Section 11.3(a) of the CAT NMS Plan, which currently states that
``[t]he Operating Committee will establish fixed fees to be payable by
Execution Venues as provided in this Section 11.3(a).''
The Operating Committee also proposes to replace the references to
``Execution Venue'' with ``Participants'' in Section 11.3(a)(i) of the
CAT NMS Plan,\25\ which currently states:
---------------------------------------------------------------------------

\25\ Note that, as discussed below, references to tiers and OTC
Equity Securities in this provision will be deleted as well.
---------------------------------------------------------------------------

(i) Each Execution Venue that: (A) Executes transactions; or (B) in
the case of a national securities association, has trades reported by
its members to its trade reporting facility or facilities for reporting
transactions effected otherwise than on an exchange, in NMS Stocks or
OTC Equity Securities will pay a fixed fee depending on the market
share of that Execution Venue in NMS Stocks and OTC Equity Securities,
with the Operating Committee establishing at least two and no more than
five tiers of fixed fees, based on an Execution Venue's NMS Stocks and
OTC Equity Securities market share. For these purposes, market share
for Execution Venues that execute transactions will be calculated by
share volume, and market share for a national securities association
that has trades reported by its members to its trade reporting facility
or facilities for reporting transactions effected otherwise than on an
exchange in NMS Stocks or OTC Equity Securities will be calculated
based on share volume of trades reported, provided, however, that the
share volume reported to such national

[[Page 21054]]

securities association by an Execution Venue shall not be included in
the calculation of such national security association's market share.
In addition, the Operating Committee proposes to delete the final
clause in Section 11.3(a)(i), which states ``provided, however, that
the share volume reported to such national securities association by an
Execution Venue shall not be included in the calculation of the such
national security association's market share.'' This proviso was
included to clarify how the share volume of an Execution Venue ATS was
treated in the context of calculating a national security association's
market share when Execution Venue ATSs and Participants were in the
same fee category. As Execution Venue ATSs would be treated as Industry
Members under the Proposed Funding Model, the Operating Committee
proposes to delete this proviso from Section 11.3(a)(i) of the CAT NMS
Plan.
Similarly, Section 11.3(a)(ii) of the CAT NMS Plan states that
``[e]ach Execution Venue that executes transactions in Listed Options
will pay a fixed fee depending on the Listed Options market share of
that Execution Venue.'' The Operating Committee proposes to replace
both references to ``Execution Venue'' with ``Participant.''
Section 11.3(b) of the CAT NMS Plan provides guidance as to how the
message traffic for certain ATS activity would be included in the
Industry Member message traffic calculations. Specifically, Section
11.3(b) of the CAT NMS Plan, in part, states, the following:
For the avoidance of doubt, the fixed fees payable by Industry
Members pursuant to this paragraph shall, in addition to any other
applicable message traffic, include message traffic generated by: (i)
An ATS that does not execute orders that is sponsored by such Industry
Member; and (ii) routing orders to and from any ATS sponsored by such
Industry Member.
Under the Original Funding Model, Execution Venue ATSs were treated
as Execution Venues, but other ATSs were treated as Industry Members.
Accordingly, this statement clarified how message traffic would be
counted for ATSs that were not Execution Venue ATSs and for routing to
and from ATSs. Under the Proposed Funding Model, however, all ATS
activity would be treated as Industry Member activity for purposes of
calculating the Industry Member CAT fees. Therefore, because this
clarifying statement is unnecessary under the Proposed Funding Model,
the Operating Committee proposes to delete this sentence from Section
11.3(b) of the CAT NMS Plan.
c. 75%-25% Allocation Between Industry Members and Participants
As discussed above, the CAT NMS Plan as approved by the Commission
provides the Operating Committee with discretion to establish CAT fees
to be paid by Participants and Industry Members. The Proposed Funding
Model contemplates allocating CAT costs between Participants and
Industry Members to permit the calculation of CAT fees based on market
share for Participants and based on message traffic for Industry
Members.\26\ The Operating Committee proposes to implement this
allocation through a 75%-25% allocation between Industry Members and
Participants. Specifically, in calculating CAT fees for the relevant
period under the Proposed Funding Model, Industry Members as a group
would pay 75% of the Total CAT Costs for the relevant period
(``Industry Member Allocation''), and Participants as a group would pay
25% of the Total CAT Costs for the relevant period (``Participant
Allocation'').
---------------------------------------------------------------------------

\26\ See, e.g., Sections 11.2(b)-(c) and 11.3(a)-(b) of the CAT
NMS Plan. In the Original Funding Model, costs were allocated
between Execution Venues and certain Industry Members, whereas the
Proposed Funding Model proposes to allocate costs between
Participants and Industry Members.
---------------------------------------------------------------------------

In proposing a 75%-25% allocation between Industry Members and
Participants, Participants considered a variety of different potential
allocations between Industry Members and Participants. After analyzing
the various alternatives, the Participants determined that the 75%-25%
allocation continues to be an equitable allocation of reasonable CAT
fees between Industry Members and Participants that balances the costs
paid by each CAT Reporter and the regulatory benefits each receives.
The Operating Committee notes that the 75%-25% allocation would
have the effect of increasing the cost allocation to Participants by
approximately 8% of the total CAT costs in comparison to the Prior Fee
Proposal.\27\ The Prior Fee Proposal also relied upon a 75%-25%
allocation between CAT Reporters, but the allocation was structured
differently than in the Proposed Funding Model. In the Prior Fee
Proposal, Industry Members (other than Execution Venue ATSs) would have
paid 75% of the total CAT costs, and Participants and Execution Venue
ATSs would have paid 25% of the total CAT costs.\28\ Most ATSs were
included in the 25% allocation for Execution Venues. ATSs accounted for
approximately 8% of the total CAT costs in the Prior Fee Proposal, and
approximately 32% of the Execution Venue allocation. By moving ATSs to
the Industry Member Allocation, Participants would pay the full 25% of
the total CAT costs allocated to Participants rather than approximately
68% of the 25% of Total CAT costs allocated to Execution Venues under
the Prior Fee Proposal. Using total CAT cost data for 2020, 8% of total
CAT costs would be approximately $6.8 million for 2020. The Operating
Committee believes that this substantial increase in the Participant
share of the total CAT costs addresses comments suggesting that
Execution Venue ATSs should be treated like other Industry Members
(rather than as Execution Venues) and indicating that the size of the
percentage of total CAT costs to be paid by Industry Members as a group
was too large.\29\ Correspondingly, the 75% Industry Member Allocation
would be shared among more Industry Members under the Proposed Funding
Model as all ATSs will be Industry Members for purposes of CAT fees,
not just ATSs other than Execution Venue ATSs.
---------------------------------------------------------------------------

\27\ For a description of the Prior Fee Proposal, see generally
Prior Fee Proposal Release. The Participants later withdrew this
amendment. See Withdrawal Release.
\28\ Prior Fee Proposal Release at 1408.
\29\ See Suspension Order at 31662-3.
---------------------------------------------------------------------------

The Operating Committee also considered alternatives to the
Participant contribution besides the proposed 25% in which Participants
paid larger contributions than 25% of the total CAT costs (e.g., a 50%-
50% allocation between Industry Members and Participants) and
Participants paid smaller contributions than 25% of the total CAT
costs.\30\ In considering these alternative allocations with
percentages greater than 25% of total CAT costs allocated to
Participants, the Participants noted that there are far more Industry
Members than Participants. There are only 25 Participants and
approximately 1237 Industry Members, as of December 2020. Moreover,
based upon an analysis of available CAT Reporter revenue, Participants
only represented

[[Page 21055]]

approximately 4% of the total CAT Reporter revenue; Industry Members
represented 96% of the total CAT Reporter revenue.\31\ In addition,
various Industry Members have revenue in excess of some or all of the
Participants. Accordingly, the Operating Committee determined that
allocating more than 25% of the total CAT costs to the Participants was
not a fair and equitable approach. Furthermore, with this allocation,
the Industry Members with the most message traffic and the Participant
complexes with the most market share would pay comparable CAT fees. For
example, based on the data from the fourth quarter of 2020, the three
Industry Members with the most message traffic would be subject to an
annual CAT fee in the range of $5 to $6 million, and the Participant
complexes with the highest CAT fees would pay an annual CAT fee in a
similar range.
---------------------------------------------------------------------------

\30\ In the development of the Prior Fee Proposal and the
Proposed Funding Model, the Participants explored a variety of other
possible allocations. For example, in determining the cost
allocation between Industry Members (other than Execution Venue
ATSs) and Execution Venues for the Prior Fee Proposal, the
Participants analyzed a range of possible splits for revenue
recovery from such Industry Members and Execution Venues, including
80%-20%, 75%-25%, 70%-30% and 65%-35% allocations between Industry
Members and Execution Venues. See, e.g., Prior Fee Proposal Release
at 1408.
\31\ Industry Member revenue was calculated based on the total
revenue reported in the Industry Member's FOCUS reports. Participant
revenue was calculated based on revenue information provided in Form
1 amendments and/or publicly reported figures. Participants are not
required to file uniform FOCUS-type reports regarding revenue like
Industry Members. Accordingly, the revenue calculation for
Participants is not as straightforward as for Industry Members.
---------------------------------------------------------------------------

The Operating Committee also analyzed the possibility of allocating
CAT costs among CAT Reporters--both Participants and Industry Members--
based on revenue. Such a revenue-based allocation would impose a more
significant portion of the CAT costs on Industry Members. Industry
Members would pay approximately 96% of the CAT costs and Participants
would pay approximately 4% of the CAT costs. Because the revenue-based
allocation would impose such a significant percentage of CAT costs on
Industry Members, the Operating Committee determined not to pursue that
approach. The Operating Committee also recognized the practical
difficulties with determining the appropriate revenue figures for all
CAT Reporters.
The Industry Member Allocation of 75% of Total CAT Costs and the
Participant Allocation of 25% of Total CAT Costs would be included in
the fee schedule for the Consolidated Audit Trail Funding Fees in the
CAT NMS Plan. Because the Participant CAT fees would be charged on a
quarterly basis, this provision would indicate that the Industry Member
Allocation and the Participant Allocation would be calculated based on
1/4th of the Total CAT Costs for the relevant year. Specifically,
proposed paragraph (b)(1) of Appendix B of the CAT NMS Plan would state
that ``The Industry Member Allocation for each quarter shall be 75% of
1/4th of the Total CAT Costs for the relevant year. The Participant
Allocation for each quarter shall be 25% of 1/4th of the Total CAT
Costs for the relevant year.''
3. Industry Member CAT Fee
Under the Proposed Funding Model, each Industry Member will pay a
CAT fee that is calculated by multiplying each Industry Member's
message traffic percentage of the total message traffic of all Industry
Members during the relevant time period by the Industry Member
Allocation, subject to certain market maker message traffic discounts,
a Minimum Industry Member CAT Fee and a Maximum Industry Member CAT
Fee. Each Industry Member that is an Options Market Maker will have a
discount based on the options trade-to-quote ratio applied to its
Options Market Maker message traffic when calculating that Industry
Member's message traffic, and each Industry Member that is an Equity
Market Maker will have a discount based on the NMS Stock trade-to-quote
ratio applied to its Equity Market Maker message traffic when
calculating that Industry Member's message traffic. In addition, each
Industry Member CAT Reporter will pay a Minimum Industry Member CAT Fee
of $125 per quarter if its CAT fee would be less than $125 per quarter
when calculated based on message traffic. Furthermore, an Industry
Member's CAT fee would be subject to the Maximum Industry Member CAT
Fee. The Maximum Industry Member CAT Fee would be the fee calculated
based on 8% of the total message traffic for all Industry Members. If
an Industry Member's CAT fee is limited to the Maximum Industry Member
CAT Fee, any excess amount which the Industry Member would have paid as
a fee above such Maximum Industry Member CAT Fee will be re-allocated
among all Industry Members (including any Industry Members subject to
the Maximum Industry Member CAT Fee and any Industry Members subject to
the Minimum Industry Member CAT Fee) in accordance with each Industry
Member's percentage of total message traffic. Each of these aspects of
the Industry Member CAT fee are discussed in more detail below.
a. Use of Message Traffic
Consistent with the Original Funding Model, the Industry Member
Allocation would be allocated among Industry Members based on message
traffic. The CAT NMS Plan, as approved by the SEC, contemplates the use
of message traffic to apportion the Industry Member Allocation among
Industry Members.\32\ Although the Operating Committee analyzed various
alternative methods for allocating costs among Industry Members, the
Operating Committee continued to conclude that using message traffic
would equitably allocate CAT fees among Industry Members. This approach
is consistent with the approach set forth in Section 11.3(b) of the CAT
NMS Plan, which states that ``[t]he Operating Committee will establish
fixed fees to be payable by Industry Members, based on the message
traffic generated by such Industry Member.'' \33\ Accordingly, the use
of message traffic for allocating CAT costs among Industry Members is
consistent with the CAT NMS Plan as approved by the Commission.
---------------------------------------------------------------------------

\32\ See, e.g., Sections 11.2(c) and 11.3(b) of the CAT NMS
Plan.
\33\ See also Section 11.2(c) of the CAT NMS Plan.
---------------------------------------------------------------------------

The Operating Committee also analyzed the possibility of allocating
the Industry Member Allocation among Industry Members based on revenue
related to activities in Eligible Securities, which would have been
derived from Industry Member revenue reported on FOCUS reports.\34\ The
Operating Committee concluded that it may be difficult to determine
which types of Industry Member revenue should be included in the
calculation for a CAT fee under such an approach.
---------------------------------------------------------------------------

\34\ This approach would have been similar to FINRA's imposition
of the Gross Income Assessment, which is based on FOCUS report
revenue. See Section 1(c) and (d) of Schedule A of FINRA By-Laws.
---------------------------------------------------------------------------

b. Calculating Industry Member CAT Fees
i. No Tiered Fees for Industry Members
While continuing to utilize a message traffic-based model for
Industry Members, the Operating Committee proposes to eliminate the use
of tiered fees for Industry Members in the Proposed Funding Model.
Instead, under the Proposed Funding Model, each Industry Member would
pay a fee based solely on its percentage of total Industry Member
message traffic (subject to the market maker message traffic discounts,
the Minimum Industry Member CAT Fee and the Maximum Industry Member CAT
Fee).\35\ The Operating Committee therefore proposes to amend Sections
11.1(d), 11.2(c), 11.3(a) and 11.3(b) to eliminate the

[[Page 21056]]

concept of tiered fees from the CAT NMS Plan.
---------------------------------------------------------------------------

\35\ Similarly, as discussed further below, the Operating
Committee proposes to allocate the Participant Allocation among
Participants based on the Participant's market share, consistent
with the Original Funding Model, except it too would be calculated
without relying on tiered fees.
---------------------------------------------------------------------------

(a) Advantages of No Tiered Fees
By removing the concept of fee tiering for both Industry Members
and Participant Allocations, the Proposed Funding Model addresses
various comments regarding the use of tiering.\36\ Utilizing a tiered
fee structure, by its nature, would create certain inequities among the
CAT fees paid by Industry Members. For example, two Industry Members
with similar levels of message traffic may pay notably different fees
if one falls in a higher tier and the other falls within a lower tier.
Correspondingly, a tiered fee structure generally reduces fees for
Industry Members with higher message traffic in one tier, while
increasing fees for Industry Members with lower levels of message
traffic in the same tier, as compared to a non-tiered fee. Furthermore,
Industry Members in lower tiers potentially pay more than they would
without the use of tiers. While tiering exists in various other fee
programs and generally itself may not be an unfairly discriminatory
practice, in response to feedback on the Prior Fee Proposal, the
Participants are proposing to eliminate the tiering concept, rendering
past comments about potential inequities that may exist using a tiering
model moot.
---------------------------------------------------------------------------

\36\ See, e.g., Suspension Order at 31667.
---------------------------------------------------------------------------

By charging each Industry Member a CAT fee directly based on its
own message traffic, rather than charging a tiered fee, the Proposed
Funding Model will result in an Industry Member's CAT fee being tied
more directly to the Industry Member's message traffic in the CAT. In
contrast, with a tiered fee, Industry Members with different levels of
message traffic that are placed in the same tier would all pay the same
CAT fee, thereby limiting the correlation between an Industry Member's
message traffic in the CAT and its CAT fee.
The proposed non-tiering approach is, arguably, more simplistic and
objective to administer than the tiering approach. With a tiering
approach, the number of tiers for Industry Members, the boundaries for
each tier and the fees assigned to each tier must be established. In
the absence of clear groupings of Industry Members by message traffic,
selecting the number of, boundaries, and the fees associated with each
tier would be subject to some level of subjectivity. Furthermore, the
establishment of tiers would need to be continually reassessed based on
changes in message traffic, thereby requiring regular subjective
assessments. Accordingly, the removal of tiering from the funding model
eliminates a variety of subjective analyses and judgments from the
model, and simplifies the determination of Industry Member CAT fees.
(2) Proposed Amendments to the CAT NMS Plan
The Operating Committee proposes to amend Sections 11.1(d),
11.2(c), 11.3(a) and 11.3(b) of the CAT NMS Plan to eliminate
references to the use of tiered fees and related concepts.
Section 11.1(d) of the CAT NMS Plan states that ``[c]onsistent with
this Article XI, the Operating Committee shall adopt policies,
procedures, and practices regarding the budget and budgeting process,
assignment of tiers, resolution of disputes, billing and collection of
fees, and other related matters.'' With the elimination of tiered fees,
the reference to the ``assignment of tiers'' would no longer be
applicable for the Proposed Funding Model. Therefore, the Operating
Committee proposes to delete the reference to ``assignment of tiers''
from Section 11.1(d).
Section 11.1(d) of the CAT NMS Plan also states that:

For the avoidance of doubt, as part of its regular review of
fees for the CAT, the Operating Committee shall have the right to
change the tier assigned to any particular Person in accordance with
fee schedules previously filed with the Commission that are
reasonable, equitable and not unfairly discriminatory and subject to
public notice and comment, pursuant to this Article XI. Any such
changes will be effective upon reasonable notice to such Person.

As noted above, unlike the Original Funding Model, the Proposed
Funding Model would not utilize tiered fees. Accordingly, these two
sentences would no longer be applicable to the Proposed Funding Model.
Therefore, the Operating Committee proposes to delete these two
sentences from Section 11.1(d) of the CAT NMS Plan.
The Operating Committee proposes to delete the reference to
``tiered'' fees from Section 11.2(c) of the CAT NMS Plan. Section
11.2(c) of the CAT NMS Plan states that ``[i]n establishing the funding
of the Company, the Operating Committee shall seek: . . . (c) to
establish a tiered fee structure . . .'' The Participants propose to
delete the word ``tiered'' from this provision as the CAT fees would
not be tiered under the Proposed Funding Model.
The Operating Committee also proposes to delete paragraph (iii) of
Section 11.2(c) of the CAT NMS Plan. Paragraph (iii) of Section 11.2(c)
of the CAT NMS Plan states that the Operating Committee shall seek to
establish a tiered fee structure in which fees charged to:

the CAT Reporters with the most CAT-related activity (measured by
market share and/or message traffic, as applicable) be generally
comparable (where for these comparability purposes, the tiered fee
structures takes into consideration affiliations between or among
CAT Reporters, whether Execution Venues and/or Industry Members).

Under the Original Funding Model, the comparability provision was
an important factor in determining the tiers for Industry Members and
Execution Venues. Under the Proposed Funding Model, however, the
comparability provision is no longer relevant, as a tiered fee
structure would not be used for Industry Members or Participants.\37\
---------------------------------------------------------------------------

\37\ This change also would address the comments regarding the
use of comparability in the Original Funding Model. See Suspension
Order at 31662-3.
---------------------------------------------------------------------------

The Operating Committee further proposes to delete the references
to tiers in Sections 11.3(a)(i) and (ii) and 11.3(b) of the CAT NMS
Plan. Specifically, Section 11.3(a)(i) of the CAT NMS Plan states that
the Operating Committee, when establishing fees for Execution Venues
for NMS Stocks and OTC Equity Securities, will establish ``at least two
and no more than five tiers of fixed fees, based on an Execution
Venue's NMS Stocks and OTC Equity Securities market share.'' \38\
Similarly, Section 11.3(a)(ii) of the CAT NMS Plan states that the
Operating Committee, when establishing fees for Execution Venues that
execute transactions in Listed Options, will establish ``at least two
and no more than five tiers of fixed fees, based on an Execution
Venue's Listed Options market share.'' Section 11.3(b) of the CAT NMS
Plan states that the Operating Committee, when establishing fees to be
payable by Industry Members, will establish ``at least five and no more
than nine tiers of fixed fees, based on message traffic.'' The
Operating Committee proposes to delete each of these references to
tiers from the CAT NMS Plan.
---------------------------------------------------------------------------

\38\ Note that, as discussed below, the Operating Committee also
proposes to delete the reference to OTC Equity Securities.
---------------------------------------------------------------------------

ii Definition of Message Traffic
Message traffic will be calculated based on Industry Members'
Reportable Events reported to the CAT as defined in the CAT Reporting
Technical Specifications for Industry Members (``IM Reporting Tech
Specs'') as amended from time to time.\39\ The Reportable Events may
vary over time if the IM Reporting Tech Specs are

[[Page 21057]]

amended.\40\ However, Reportable Events in the current IM Reporting
Tech Specs that will be counted as message traffic include, but are not
limited to, such events as the New Order Event, the Order Route Event
and Trade Event. In addition, under the Proposed Funding Model, message
traffic will not include reporting activity related to Customer
information as set forth in the CAT Reporting Customer and Account
Technical Specifications for Industry Members.\41\
---------------------------------------------------------------------------

\39\ The CAT Reporting Technical Specifications for Industry
Members are available at www.catnmsplan.com.
\40\ The Operating Committee recognizes that, due to the Phased
Reporting approach, all Reportable Events will not be reported until
all Industry Members are reporting all Reportable Events to the CAT.
For example, Phase 2d CAT reporting is scheduled for December 2021,
and Small Industry Non-OATS Reporters are not required to report
until December 2021. In addition, certain Reportable Events, such as
simple options manual orders and OTC link messages, are not required
to be reported until later in the Phased Reporting. For a detailed
description of such Reportable Events, see CAT Reporting Technical
Specifications for Industry Members (available at
www.catnmsplan.com). For the Industry Member CAT reporting timeline,
see, e.g., FINRA Rule 6895(c). The Operating Committee proposes to
allocate costs based on the Reportable Events reported to the CAT in
any relevant quarter, regardless of whether all Industry Members are
reporting to the CAT or all Reportable Events are required to be
reported to the CAT for the relevant quarter.
\41\ The CAT Reporting Customer and Account Technical
Specifications for Industry Members are available at
www.catnmsplan.com.
---------------------------------------------------------------------------

iii. Market Maker Discounts
In the Original Funding Model, Options Market Maker message traffic
and Equity Market Maker message traffic would have been treated the
same as other message traffic for purposes of calculating Industry
Member CAT fees.\42\ The Commission and commenters raised questions as
to whether this treatment of market maker quotes may result in an undue
or inappropriate burden on competition or may lead to a reduction in
market quality.\43\ For example, commenters noted that charging
Industry Members on the basis of message traffic would impact market
makers disproportionately because of their continuous quoting
obligations. Moreover, in the context of Options Market Makers, message
traffic would include bids and offers for every Listed Options strikes
and series.\44\ To address these issues, the Operating Committee
proposes to discount Options Market Maker message traffic by the trade-
to-quote ratio for Listed Options when calculating message traffic for
Options Market Makers, and to discount Equity Market Maker message
traffic by the trade-to-quote ratio for NMS Stocks when calculating
message traffic for Equity Market Makers. The message traffic of
Options Market Makers and Equity Market Makers, as discounted, would be
counted as part of the total message traffic for all Industry Members.
The practical effect of applying such discounts for market making
activity would be to lower the CAT fees for Options Market Makers and
Equity Market Makers.
---------------------------------------------------------------------------

\42\ Note, however, that market maker discounts were included in
the Prior Fee Proposal. See Prior Fee Proposal Release at 1418-9.
\43\ See Suspension Order at 31663-4.
\44\ Id. at 31664.
---------------------------------------------------------------------------

By imposing a discount on Options Market Makers and Equity Market
Makers' message traffic for the calculation of message traffic, the
Operating Committee believes that the proposed CAT fees for market
makers would satisfy the requirements of the funding principles set
forth in Section 11.2 of the CAT NMS Plan as well as the requirements
of the Exchange Act. First, the proposed market maker discounts are
designed to address comments that the Original Funding Model could
disproportionately affect market makers, thereby leading to a reduction
in liquidity and market quality. Commenters noted that charging
Industry Members on the basis of message traffic will impact market
makers disproportionately because of their continuous quoting
obligations. With their continuous quoting obligations, market makers
would have higher levels of message traffic, and the type of message
traffic (bids and offers rather than transactions) are not necessarily
related to higher revenue. The SEC repeatedly has recognized the value
of protecting the provision of market liquidity, and afforded market
makers favorable regulatory treatment by virtue of their role as
liquidity providers. For example, market makers receive favorable
treatment under short sale rules,\45\ margin rules,\46\ pursuant to
exchange fee schedules,\47\ and under the Volcker Rule.\48\ The
proposed discounts are designed to put market makers and other market
participants on a level playing field in the Proposed Funding Model,
thereby preserving and incentivizing the ability of market makers to
provide liquidity to the market, which liquidity ultimately benefits
all market participants. Market makers' primary role is to provide the
markets with competitive prices and quotes against which others may
execute their orders. Market makers update their quotes continuously
throughout each trading day to reflect changes in the market, and each
update is additional message traffic that will be reported to CAT. If
CAT fees made it unduly costly for market makers to provide this
competitive liquidity, it could reduce the available liquidity against
which customers could execute orders and create worse pricing for
customers that do receive executions.
---------------------------------------------------------------------------

\45\ See, e.g., Rule 203(b)(2)(iii) of Regulation SHO under the
Exchange Act (market maker exception for short sale locate
requirement).
\46\ See, e.g., Section 7(c)(3) of the Exchange Act (market
maker exception regarding margin requirements).
\47\ See, e.g., NYSE Arca Rule 8.800-E and Market Maker Fees and
Credits, NYSE Arca Fees and Charges (incentive programs for market
makers).
\48\ See Section __.4(b) (market making exemption from the
proprietary trading prohibition).
---------------------------------------------------------------------------

Second, although the proposed discounts would provide market makers
with a benefit not provided to other market participants, such
discounts would not amount to unfair discrimination or an unnecessary
or inappropriate burden on competition. As discussed above, the SEC has
recognized repeatedly that such favorable treatment for market makers
in other contexts was not unfairly discriminatory or a burden on
competition in light of its positive effects on market quality, nor was
it considered to involve an inequitable allocation of fees among
members.
Third, the Operating Committee believes that the proposed fees
appropriately take into account the distinctions in the securities
trading operations of different Industry Members, and avoid
disincentives, such as a reduction in market quality, as required under
the funding principles of the CAT NMS Plan.\49\ The proposed discounts
recognize the different types of trading operations presented by
Options Market Makers and Equity Market Makers, as well as the value of
the market makers' quoting activity to the markets as a whole.
Accordingly, the Operating Committee believes that the proposed
discounts will not impact the ability of Options Market Makers or
Equity Market Makers to provide liquidity.
---------------------------------------------------------------------------

\49\ Section 11.2(b) of the CAT NMS Plan.
---------------------------------------------------------------------------

Finally, the Operating Committee believes that the trade-to-quote
ratio is an appropriate method for discounting market maker message
traffic, including because of the relatively few quotes that ultimately
execute. As discussed above, the vast majority of quotes market makers
submit are intended to price the market and provide liquidity against
which orders may execute. The Operating Committee proposes to use the
trade-to-quote ratio for calculating the discount because it directly
relates to the issue regarding the quoting requirement (i.e., fewer
trades per quote

[[Page 21058]]

for market makers due to their quoting activity) and it is an objective
discounting method.
(a) Options Market Maker Discount
To address issues regarding the potential burdens on competition
and market quality of including Options Market Maker message traffic in
the calculation of message traffic, the Operating Committee proposes to
discount Options Market Maker message traffic based on the trade-to-
quote ratio for options when calculating the message traffic for
Options Market Makers.\50\ Specifically, for each Options Market Maker,
a discount would be applied to (1) all message traffic reported to the
CAT by the Options Market Maker related to an order originated by a
market maker in its market making account for a security in which it is
registered, regardless of where the order is ultimately routed or
executed; \51\ and (2) all message traffic for which a ``quote sent
time'' is reported by an Options Exchange on behalf of the given
Options Market Maker.
---------------------------------------------------------------------------

\50\ The SEC approved exemptive relief permitting Options Market
Maker quotes to be reported to the Central Repository by the
relevant Options Exchange in lieu of requiring that such reporting
be done by both the Options Exchange and the Options Market Maker,
as required by Rule 613 of Regulation NMS. See Securities Exchange
Act Rel. No. 77265 (Mar. 1, 2016), 81 FR 11856 (Mar. 7, 2016). This
exemption applies to Options Market Maker quotes for CAT reporting
purposes only. Therefore, notwithstanding the reporting exemption
provided for Options Market Maker quotes, Options Market Maker quote
messages that are reported to the CAT by Options Exchanges will be
included in the calculation of total message traffic and for the
calculation of individual Options Market Makers message traffic,
subject to the proposed discounts.
\51\ Under the current version of the IM Reporting Tech Specs,
the discount would apply to new order messages and all related
messages reported to the CAT by an Options Market Maker with an
accountHolderType = O. See CAT FAQ C5 (available at
www.catnmsplan.com). The discount would not apply to messages by an
Industry Member that are associated with any other
accountHolderType. The IM Reporting Tech Specs may be amended from
time to time and this designation could be changed.
---------------------------------------------------------------------------

The relevant trade-to-quote ratio for the Options Market Maker
discount would be calculated each quarter based on the prior quarter's
CAT data. The discount is calculated by dividing the adjusted trade
count (that is, the total number of trades for the quarter minus the
total number of trade busts) by the total number of quotes received by
the securities information processors (``SIP'') from an exchange. As an
example, the trade-to-quote ratio for Listed Options for the fourth
quarter of 2020 was 0.01%.
Accordingly, each Options Market Maker's discounted message traffic
count would be calculated by multiplying its message traffic by the
options trade-to-quote ratio. The Options Market Maker's CAT fee then
would be calculated by multiplying its discounted percentage of the
total message traffic of all Industry Members during the relevant time
\52\ period by the Industry Member Allocation, subject to the Minimum
Industry Member CAT Fee and the Maximum Industry Member CAT Fee.
---------------------------------------------------------------------------

\52\ Note that the total message traffic of all Industry Members
during the relevant time period will be calculated using the
discounted total for all Options Market Makers.
---------------------------------------------------------------------------

(b) Equity Market Maker Discount
Similar to the treatment of Options Market Maker message traffic,
the Operating Committee proposes to discount Equity Market Maker
message traffic based on the trade-to-quote ratio for NMS Stocks when
calculating the message traffic for Equity Market Makers. Specifically,
for each Equities Market Maker, a discount would be applied to all
message traffic reported to the CAT by the Equities Market Maker
related to an order originated by a market maker in its market making
account for a security in which it is registered,\53\ regardless of
where the order is ultimately routed or executed.\54\
---------------------------------------------------------------------------

\53\ Note that Equity Market Makers do not have a quote sent
time exemption comparable to the Options Market Maker quote sent
time exemption, as discussed above.
\54\ Under the current version of the IM Reporting Tech Specs,
the discount would apply to new order messages and all related
messages reported to the CAT by an Equities Market Maker with an
accountHolderType = O. See CAT FAQ C5 (available at
www.catnmsplan.com). The discount would not apply to messages by the
Industry Member that are associated with any other
accountHolderType. The IM Reporting Tech Specs may be amended from
time to time and this designation could be changed.
---------------------------------------------------------------------------

The relevant trade-to-quote ratio for the Equity Market Maker
discount would be calculated each quarter based on the prior quarter's
CAT data. The discount is calculated by dividing the adjusted trade
count (that is, the total number of trades for the quarter minus the
total number of trade busts) by the total number of quotes received by
the SIP from an exchange. As an example, the trade-to-quote ratio for
NMS Stocks for the fourth quarter of 2020 was 4.77%.
The Equity Market Maker CAT fee would be calculated in the same
manner as the Options Market Maker CAT fee. Each Equity Market Maker's
discounted message traffic count would be calculated by multiplying its
message traffic by the NMS Stock trade-to-quote ratio. The Equity
Market Maker CAT fee then would be calculated by multiplying its
discounted percentage of the total message traffic of all Industry
Members during the relevant time period \55\ by the Industry Member
Allocation, subject to the Minimum Industry Member CAT Fee and the
Maximum Industry Member CAT Fee.
---------------------------------------------------------------------------

\55\ Note that the total message traffic of all Industry Members
during the relevant time period will be calculated using the
discounted total for all Equity Market Makers.
---------------------------------------------------------------------------

(c) Proposed Amendments
To implement the proposed market maker discounts, the Operating
Committee proposes to revise Section 11.3(b) of the CAT NMS Plan to
reflect the application of such discounts. Specifically, the Operating
Committee proposes to amend the statement in Section 11.3(b) that
``[t]he Operating Committee will establish fixed fees to be payable by
Industry Members, based on the message traffic generated by such
Industry Members'' to add the concept of the market maker discounts.
Specifically, the Operating Committee proposes to qualify this
statement by the phrase ``subject to . . . discounts for market maker
message traffic.''
iv. Minimum Industry Member CAT Fee
The Operating Committee proposes to require all Industry Members to
pay at least a minimum fee for each relevant period. Specifically, the
Operating Committee proposes to impose a Minimum Industry Member CAT
Fee of $125 per quarter on an Industry Member if its CAT fee would be
less than $125 per quarter when calculated based on message traffic.
All Industry Members required to report to the CAT, including those
that have not yet begun to report to the CAT due to the phased
implementation schedule for the CAT, would be subject to the Minimum
Industry Member CAT Fee. If any Industry Member is required to pay the
Minimum Industry Member CAT Fee, the total additional amount paid by
all such Industry Members over the amount they otherwise would have
paid as a result of their message traffic calculation would be
discounted from all Industry Members other than those that were subject
to a Minimum Industry Member CAT Fee in accordance with their message
traffic percentage.\56\ Such a minimum fee satisfies the purposes of
the CAT as well as the funding principles of the CAT NMS Plan.
---------------------------------------------------------------------------

\56\ Options Market Makers and Equity Market Makers will be
required to pay the Minimum Industry CAT Member Fee if their
quarterly CAT fee calculated with the market maker discounts is less
than $125 per quarter.
---------------------------------------------------------------------------

A minimum fee of $125 per quarter ensures that all Industry Members

[[Page 21059]]

provide a meaningful contribution to the funding of the CAT, as the CAT
is intended to assist all market participants by creating enhanced
oversight of the markets, and thus benefits all Industry Members,
including those with small levels of message traffic.\57\ Because some
Industry Members may have very small levels of message traffic, their
proposed CAT fee may be commensurately very small (e.g., they could pay
a CAT fee of pennies). However, the size of the $125 minimum quarterly
fee is not so large as to be overly burdensome to Industry Members with
small levels of message traffic. Accordingly, the minimum fee would be
in keeping with the funding principle requiring the funding model to
``avoid disincentives such as placing an inappropriate burden on
competition and a reduction in market quality.'' \58\
---------------------------------------------------------------------------

\57\ See, e.g., CAT NMS Plan Approval Order at 84698.
\58\ Section 11.2(e) of the CAT NMS Plan.
---------------------------------------------------------------------------

Such a minimum fee also would contribute to the ease of billing and
other administrative functions, in accordance with the funding
principle set forth in Section 11.2(d) of the CAT NMS Plan.\59\ Without
such a minimum fee, the Participants would be required to oversee the
payment of fees as little as pennies for certain Industry Members given
their limited message traffic.
---------------------------------------------------------------------------

\59\ Section 11.2(d) of the CAT NMS Plan.
---------------------------------------------------------------------------

To implement the Minimum Industry Member CAT Fee, the Operating
Committee proposes to revise Section 11.3(b) of the CAT NMS Plan to
reflect the imposition of a minimum fee. Specifically, the Operating
Committee proposes to amend the statement in Section 11.3(b) that
``[t]he Operating Committee will establish fixed fees \60\ to be
payable by Industry Members, based on the message traffic generated by
such Industry Members'' to add the concept of the minimum fee.
Specifically, the Operating Committee proposes to qualify this
statement with the phrase ``subject to a base minimum fee.''
---------------------------------------------------------------------------

\60\ As noted below, the Operating Committee also proposes to
delete the term ``fixed'' from this provision.
---------------------------------------------------------------------------

v. Maximum Industry Member CAT Fee
The Operating Committee proposes to establish a maximum fee to be
paid by Industry Members. Under the Proposed Funding Model, Industry
Members would pay a CAT fee based on their proportionate message
traffic in NMS Stocks, subject to a maximum fee. The maximum fee for
Industry Members would be the fee calculated based on 8% of the total
message traffic for Industry Members. If an Industry Member's fee is
limited to the Maximum Industry Member CAT Fee, any excess amount which
the Industry Member otherwise would have paid as a fee above such
Maximum Industry Member CAT Fee would be re-allocated among all
Industry Members including any Industry Members subject to the Maximum
Industry Member CAT Fee and any Industry Members subject to the Minimum
Industry Member CAT Fee in accordance with its message traffic.
The imposition of the Maximum Industry Member CAT Fee serves as a
method to institute a cap on fees in order to fairly allocate costs to
Industry Members as using message traffic alone potentially may result
in certain Industry Members paying a significant allocation of Total
CAT Costs. In this way, the proposed Maximum Industry Member CAT Fee
would address the potential for outsized fees that were previously
addressed via the tiering and comparability provisions set forth in the
Original Funding Model and the Prior Fee Proposal. These provisions
sought to impose similar levels of fees on comparable CAT
Reporters.\61\ Specifically, the Operating Committee proposes to limit
the Industry Member CAT fee to 8% of the total message traffic as 8%
would limit Industry Members to paying a fee comparable to the highest
fee for Participant complexes. For example, using the CAT Data from the
fourth quarter of 2020, the top three Industry Members would be subject
to the Maximum Industry Member CAT Fee, as their message traffic
exceeds 8% of the total Industry Member message traffic. These three
Industry Members would be subject to annual CAT fees in the range of $5
to 6 million. Similarly, the Participant complexes with the highest CAT
fees would pay an annual CAT fee in a similar range. Without the
imposition of the Maximum Industry Member CAT Fee, the Industry Member
with the highest CAT fee would pay almost $10 million for its annual
CAT fee.
---------------------------------------------------------------------------

\61\ The proposed deletion of the tiering and comparability
provisions are discussed above.
---------------------------------------------------------------------------

The Operating Committee proposes to revise Section 11.3(b) of the
CAT NMS Plan to implement the proposed Maximum Industry Member CAT Fee.
Specifically, the Operating Committee proposes to amend Section 11.3(b)
of the CAT NMS Plan to state that

any Industry Member shall pay a maximum fee established by the
Operating Committee instead of the higher fee calculated based on
such Industry Member's message traffic. If an Industry Member's fee
is limited to such maximum fee, any excess amount which the Industry
Member otherwise would have paid as a fee above such maximum fee
will be re-allocated among all Industry Members, including any
Industry Member that is subject to the maximum fee or subject to the
base minimum fee, in accordance with their message traffic.
vi. No Fixed Fees
The Operating Committee proposes to eliminate references in the CAT
NMS Plan to ``fixed fees'' used with regard to the CAT fees to be paid
by Industry Members. The CAT fees to be paid by Industry Members may
vary from time to time in accordance with their message traffic.
Accordingly, the Operating Committee proposes to replace the reference
to ``fixed fees'' for Industry Members in Section 11.3(b) with
references to ``fees.''
4. Participant CAT Fee
Like Industry Members, Participants would also be required to pay a
CAT fee. The total CAT fees to be paid by Participants as a group would
be designed to cover the Participant Allocation. Each Participant would
pay a minimum CAT fee of 0.75% of the Participant Allocation, referred
to as the ``Minimum Participant Fee.'' The Participant Allocation minus
the total Minimum Participant Fees required to be paid by each
Participant (the ``Adjusted Participant Allocation'') would be divided
between Equities Participants and Options Participants. Equities
Participants as a group would pay 60% of the Adjusted Participant
Allocation (``Equities Participant Allocation'') and Options
Participants as a group would pay 40% of the Adjusted Participant
Allocation (the ``Options Participant Allocation''). The Equities
Participant Allocation would be divided among Equities Participants
based on market share of NMS Stocks, although FINRA would not pay more
than the Maximum Equities Participant Fee (plus any additional re-
allocation of costs above the fee cap). The Options Participant
Allocation would be divided among Options Participants based on market
share in Listed Options.
The Operating Committee notes that allocating the Participant
Allocation among the Participants is different from allocating the
Industry Member Allocation among Industry Members. Unlike Industry
Members, the Participants are each parties to the CAT NMS Plan and,
therefore, have been engaged in negotiations among themselves regarding
the allocation of CAT costs among Participants and the amendment of the
CAT NMS Plan to address the CAT funding model. Accordingly, the
Participants believe that the proposed method for allocating

[[Page 21060]]

the costs among Participants should be afforded some deference,
provided the proposed fees satisfy the requirements of the Exchange Act
and the CAT NMS Plan, which are discussed in detail in Section A.8
below.
a. Minimum Participant Fee
The Operating Committee proposes to require each Participant to pay
at least a minimum CAT fee, regardless of its market share.
Specifically, the Operating Committee proposes to require each
Participant to pay a minimum CAT fee of 0.75% of the Participant
Allocation, referred to as the Minimum Participant Fee. The Minimum
Participant Fee will be paid by each registered national securities
exchange that is a Participant and each registered national securities
association that is a Participant, not by each market operated by the
Participants. This Minimum Participant Fee is intended to ensure that
all Participants provide a meaningful contribution to the funding of
the CAT, as the CAT is intended to assist all market participants by
creating enhanced oversight of the markets.\62\ All Participants,
regardless of their market share, are required to regulate their
markets and members, and they may do so using the CAT. Therefore, all
Participants receive benefits from the CAT and should pay a meaningful
portion of the CAT costs. However, the size of the minimum fee is not
so large as to be overly burdensome to Participants with a smaller
market share.
---------------------------------------------------------------------------

\62\ CAT NMS Plan Approval Order at 84698.
---------------------------------------------------------------------------

The Operating Committee proposes to revise Section 11.3(a) of the
CAT NMS Plan to reflect the imposition of the Minimum Participant Fee.
Specifically, the Operating Committee proposes to amend Section 11.3(a)
of the CAT NMS Plan to state that ``[t]he Operating Committee will
establish a minimum fee to be payable by each Participant'' in addition
to fees based on market share.
In addition, as discussed below, the Minimum Participant Fee would
be included in the fee schedule for the Consolidated Audit Trail
Funding Fees set forth in Appendix B of the CAT NMS Plan. Proposed
paragraph (a)(1)(A) of Appendix B of the CAT NMS Plan would state that
each Participant would pay a CAT fee that includes the Minimum
Participant Fee. Paragraph (b)(2) of Appendix B would state that
``[t]he Minimum Participant Fee is 0.75% of the Participant
Allocation.'' Paragraph (b)(2) of Appendix B would further clarify how
the Minimum Participant Fee would be imposed by stating that ``[f]or
avoidance of doubt, the Minimum Participant Fee will be paid by each
registered national securities exchange that is a Participant and each
registered national securities association that is a Participant.''
b. Allocation of Adjusted Participant Allocation Among Participants
The Participant Allocation minus the total Minimum Participant Fees
required to be paid by each Participant, referred to as the ``Adjusted
Participant Allocation,'' will be divided among the Participants as
described below. The Operating Committee proposes to include this
definition of ``Adjusted Participant Allocation'' in proposed paragraph
(b)(3) of the Appendix B. Specifically, proposed paragraph (b)(3) of
Appendix B would state that ``[t]he Adjusted Participant Allocation is
the Participant Allocation minus the sum of all Minimum Participant
Fees required to be paid by each Participant.''
i. Use of Market Share
Under the Proposed Funding Model, the Adjusted Participant
Allocation would be allocated among Participants based on market share.
The use of market share for this purpose is in accordance with the CAT
NMS Plan as adopted by the SEC. Specifically, the CAT NMS Plan
contemplates Participants paying a CAT fee based upon market share.\63\
The Operating Committee analyzed various alternative methods for
allocating costs among Participants other than market share and
continued to determine that using market share would equitably allocate
CAT fees among Participants. In contrast to Industry Members, which
determine the degree to which they produce message traffic that
constitutes Reportable Events, the Reportable Events of Participants
are largely derivative of quotations and orders received from Industry
Members that they are required to display. The business models for
Participants, however, generally are focused on executions and/or trade
reporting in their marketplaces. As a result, the Operating Committee
believes that it is more equitable to charge Participants based on
their market share rather than their message traffic. Moreover, relying
on market share would provide the Participants with a straightforward
calculation using readily available market data. Such a basic
calculation would be consistent with the CAT funding principle, which
requires the model to ``provide for ease of billing and other
administrative functions.'' \64\ Finally, the Participants have been
voluntarily allocating CAT costs based on market share for the past
eight years and are comfortable that allocating CAT cost based on
market share is an appropriate way to allocate CAT costs, as it is
consistent with the CAT NMS Plan.
---------------------------------------------------------------------------

\63\ See Sections 11.2(c), 11.3(a)(i) and 11.3(a)(ii) of the CAT
NMS Plan.
\64\ Section 11.2(d) of the CAT NMS Plan.
---------------------------------------------------------------------------

The Operating Committee proposes to amend Section 11.3(a) of the
CAT NMS Plan to clarify that the Participants will pay a fee based on
market share. Specifically, the Operating Committee proposes to add the
phrase ``based on market share'' to Section 11.3(a) of the CAT NMS
Plan. With this change and the changes discussed above, Section 11.3(a)
of the CAT NMS Plan would state that ``[t]he Operating Committee will
establish a minimum fee to be payable by each Participant in addition
to fees based on market share to be payable by Participants as provided
in this Section 11.3(a).''
ii. No Tiered Fees for Participants
The Operating Committee proposes to eliminate the use of tiered
fees for Participants in the Proposed Funding Model. The Operating
Committee proposes to allocate the Adjusted Participant Allocation
among Participants based on the Participant's market share without
relying on tiered fees for the reasons discussed above with regard to
Industry Members. As discussed above, the Operating Committee proposes
to amend Sections 11.1(d), 11.2(c), 11.3(a) and 11.3(b) to eliminate
the concept of tiered fees from the CAT NMS Plan.
iii. 60%-40% Allocation Between Equities Participants and Options
Participants
The Operating Committee proposes to divide the Adjusted Participant
Allocation between Equities Participants and Options Participants
because it is difficult to compare market share between asset classes
(i.e., equity shares versus options contracts). This bifurcated
approach to allocating costs among Equities Participants and Options
Participants is consistent with the CAT NMS Plan, which specifically
contemplates allocating Participant CAT fees based on options and
equity activity.\65\ Note that, unlike the Original Funding Model, the
Operating Committee has determined not to allocate any portion of the
Adjusted Participant Allocation based on OTC Equity Securities market
share.
---------------------------------------------------------------------------

\65\ See Section 11.3(a) of the CAT NMS Plan.

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

[[Page 21061]]

Under the Proposed Funding Model, the Equities Participant
Allocation would be 60% of the Adjusted Participant Allocation and,
correspondingly, the Options Participants Allocation would be 40% of
the Adjusted Participant Allocation. If a Participant has both options
and equities market share, then such Participant will be treated as
both an Equities Participant and an Options Participant.\66\
---------------------------------------------------------------------------

\66\ The Operating Committee proposes to clarify this point in
the CAT NMS Plan by including the following statement in proposed
paragraph (a)(1) of Appendix B of the CAT NMS Plan: ``For the
avoidance of doubt, Participants with both options and equities
market share shall be considered both Equities Participants and
Options Participants.''
---------------------------------------------------------------------------

The Operating Committee believes that the proposed 60%-40%
allocation between Equities Participants and Options Participants is an
appropriate allocation among Participants. The allocation among the
Equities and Options Participants has been the subject of negotiations
among the Participants. In addition, in the Prior Fee Proposal, the
Operating Committee proposed a 67%/33% allocation between Equity
Execution Venues and Options Execution Venues based on the
comparability concept.\67\
---------------------------------------------------------------------------

\67\ See Prior Fee Proposal at 1408.
---------------------------------------------------------------------------

As discussed below, the 60%-40% allocation of the Adjusted
Participant Allocation between Equities Participants and Options
Participants would be included in the fee schedule for the Consolidated
Audit Trail Funding Fees in the CAT NMS Plan. Proposed paragraph (b)(4)
of Appendix B of the CAT NMS Plan would state that ``[t]he Equities
Participant Allocation is 60% of the Adjusted Participant Allocation,''
and proposed paragraph (b)(5) of Appendix B of the CAT NMS Plan would
state that ``[t]he Options Participant Allocation is 40% of the
Adjusted Participant Allocation.''
iv. Equities Participant Allocation
The Equities Participant Allocation would be divided among Equities
Participants based on market share of NMS Stocks in accordance with
Section 11.3(a)(i) of the CAT NMS Plan. An Equities Participant's
market share in NMS Stocks would be determined by calculating each
Equities Participant's proportion of the total volume of NMS Stock
shares reported by all Equities Participants during the relevant time
period. Accordingly, in addition to the Minimum Participant Fee, each
Equities Participant will pay a CAT fee that is calculated by
multiplying (x) each Equities Participant's percentage of the total
volume of NMS Stock shares during the relevant time period by (y) the
Equities Participant Allocation, subject to the Maximum Equities
Participant Fee.
As discussed below, the Operating Committee proposes to include the
allocation of the Equities Participant Allocation in the fee schedule
for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan.
Proposed paragraph (a)(1)(B) of Appendix B of the CAT NMS Plan would
state that Equities Participants would pay a CAT fee calculated by
adding the sum of the Minimum Participant Fee and the lesser of ``the
product of multiplying the Equities Participant's percentage of total
market share of NMS Stocks for all Equities Participants against the
Equities Participant Allocation; or (ii) the Maximum Equities
Participant Fee, if applicable.''
(a) Treatment of OTC Equity Securities
Under the Original Funding Model, market share for a national
securities association was calculated based on the share volume of
trades reported by its members to its trade reporting facility or
facilities for reporting transactions effected otherwise than on an
exchange in NMS Stocks or OTC Equity Securities. Under the Proposed
Funding Model, the Operating Committee proposes to calculate market
share for national securities associations solely based on share volume
of trades reported in NMS Stocks. Correspondingly. [sic] the
calculation of total market share and market share for each Equities
Participant would not include reported share volume in OTC Equity
Securities.
The Operating Committee proposes to calculate market share for
national securities associations without reference to trades reported
in OTC Equity Securities. 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 large number of shares are involved in transactions
involving OTC Equity Securities versus NMS Stocks. Because the proposed
CAT fees for Equities Participants are based on market share calculated
by share volume, FINRA would likely be subject to higher fees if OTC
Equity Securities were included in the calculation of market share.
The Operating Committee proposes to exclude OTC Equity Securities
share volume in the calculation of market share, rather than to use a
discounting approach proposed in the Prior Fee Proposal. In the Prior
Fee Proposal, the Operating Committee proposed to discount the share
volume of trades reported in OTC Equity Securities when calculating the
market share for national securities associations and Execution Venue
ATSs.\68\ At this time, the Operating Committee has determined that
excluding OTC Equity Share volume entirely would be a more simple and
straightforward approach from an administrative perspective. The
Operating Committee believes that this approach to OTC Equity Share
volume addresses comments about prior fee proposals regarding the
different trading characteristics of NMS Stocks and OTC Equity
Securities.\69\
---------------------------------------------------------------------------

\68\ Prior Fee Proposal at 1406.
\69\ Suspension Order at 31664-5.
---------------------------------------------------------------------------

To implement this proposed change, the Operating Committee proposes
to delete the references to OTC Equity Securities from Section
11.3(a)(i) of the CAT NMS Plan. Specifically, the Operating Committee
proposes to delete the phrase ``or OTC Equity Securities'' from Section
11.3(a)(i)(B) of the CAT NMS Plan, which states in relevant part ``in
the case of a national securities association, has trades reported by
its members to its trade reporting facility or facilities for reporting
transactions effected otherwise than on an exchange, in NMS Stocks or
OTC Equity Securities.'' Similarly, the Operating Committee proposes to
delete the phrase to ``or OTC Equity Securities'' in the statement in
Section 11.3(a)(i) of the CAT NMS Plan that ``market share for a
national securities association that has trades reported by its members
to its trade reporting facility or facilities for reporting
transactions effected otherwise than on an exchange in NMS Stocks or
OTC Equity Securities will be calculated based on share volume of
trades reported.''
(b) Maximum Equities Participant Fee
The Operating Committee proposes to establish a maximum fee to be
paid by a national securities association that is a Participant.
Currently, FINRA is the only national securities association that is a
Participant in the CAT NMS Plan. Under the Proposed Funding Model,
FINRA would pay a CAT fee based on its proportionate market share in
NMS Stocks, subject to a maximum fee. The maximum fee allocated to
FINRA would be the greater of (x) 20% of the Equities Participant
Allocation or (y) the highest CAT fee required to be paid by any other
Equities Participant plus 5% of such highest CAT fee (the ``Maximum
Equities Participant Fee''). If FINRA's fee is limited to the Maximum
Equities Participant Fee, any excess amount which FINRA otherwise would
have

[[Page 21062]]

paid as a fee above such Maximum Equities Participant Fee would be re-
allocated among all Equities Participants including FINRA in accordance
with their market share.
The imposition of the Maximum Equities Participant Fee serves as a
method to institute a cap on fees in order to fairly allocate costs to
FINRA given that a market share approach potentially may result in
FINRA having a significant allocation given the large volume of NMS
Stock activity that is subject to trading reporting on FINRA
facilities, and potentially may not accurately reflect a fair
allocation of costs to FINRA. In this way, the proposed Maximum
Equities Participant Fee would address the potential for outsized fees
that were previously addressed via the tiering and comparability
provisions set forth in the Original Funding Model and the Prior Fee
Proposal. These provisions sought to impose similar levels of fees on
comparable CAT Reporters.\70\ Finally, along with the other components
of the calculation of the Participant CAT fee, the Operating Committee
believes the use of market share is a fair and reasonable basis for
assessing regulatory usage, expense and burden among the Participants.
FINRA is expected to be one of the largest regulatory users of the CAT
and it would be fair and reasonable for the FINRA to pay a
proportionate percentage of the CAT fees commensurate with FINRA's
comparable market share, which is subject to the Maximum Equities
Participant Fee and also not subject to any fee for OTC Equity Security
market share.
---------------------------------------------------------------------------

\70\ The proposed deletion of the tiering and comparability
provisions are discussed above.
---------------------------------------------------------------------------

The Operating Committee proposes to revise Section 11.3(a)(i) of
the CAT NMS Plan to implement the proposed Maximum Equities Participant
Fee. Specifically, the Operating Committee proposes to amend Section
11.3(a)(i) of the CAT NMS Plan to state that

any Participant that is a national securities association shall pay
a maximum fee established by the Operating Committee instead of the
higher fee calculated based on such Participant's market share. If a
Participant's fee is limited to such maximum fee, any excess amount
which the Participant otherwise would have paid as a fee above such
maximum fee will be re-allocated among all Equities Participants
(including any Equities Participant subject to the maximum fee) in
accordance with their market share.

In addition, as discussed below, the Operating Committee proposes
to include the Maximum Equities Participant Fee in the fee schedule for
the Consolidated Audit Trail Funding Fees in the CAT NMS Plan. Proposed
paragraph (a)(1)(B)(ii) of Appendix B of the CAT NMS Plan would
describe the application of the Maximum Equities Participant Fee.
Specifically, proposed paragraph (a)(1)(B) would state that Equities
Participants would pay a CAT fee calculated by adding the sum of the
Minimum Participant Fee and the following:

(B) For Equities Participants, the lesser of:
(i) the product of multiplying the Equities Participant's
percentage of total market share of NMS Stocks for all Equities
Participants against the Equities Participant Allocation; or
(ii) the Maximum Equities Participant Fee, if applicable; and
If any Participant's fee is limited to the Maximum Equities
Participant Fee, any excess amount which such Participant otherwise
would have paid as a fee above such Maximum Equities Participant Fee
will be re-allocated among all Equities Participants (including any
Equities Participant subject to the Maximum Equities Participant
Fee) in accordance with their market share.

Furthermore, proposed paragraph (b)(6) of Appendix B of the CAT NMS
Plan would state:

The Maximum Equities Participant Fee is the greater of (x) 20%
of the Equities Participant Allocation or (y) the highest CAT fee
required to be paid by any other Equities Participant plus 5% of
such highest CAT fee. The Maximum Equities Participant Fee only
applies to a Participant that is a national securities association.
v. Options Participant Allocation
The Options Participant Allocation would be divided among Options
Participants based on market share in Listed Options in accordance with
Section 11.3(a)(ii) of the CAT NMS Plan. An Options Participant's
market share in Listed Options would be determined by calculating the
total volume of Listed Options contracts reported by all Options
Participants during the relevant time period. Accordingly, each Options
Participant would pay a CAT fee that is calculated by multiplying (x)
each Options Participant's percentage of the total market share in
Listed Options during the relevant time period by (y) the Options
Participant Allocation.
As discussed below, the Operating Committee proposes to include the
allocation of the Options Participant Allocation in the fee schedule
for the Consolidated Audit Trail Funding Fees in the CAT NMS Plan.
Proposed paragraph (a)(1)(C) of Appendix B of the CAT NMS Plan would
state that Options Participants would pay a CAT fee calculated by
adding the sum of the Minimum Participant Fee and ``the product of
multiplying the Participant's percentage of total market share of
Listed Options contracts for all Options Participants against the
Options Participant Allocation.''
vi. No Fixed Fees
The Operating Committee proposes to eliminate references to ``fixed
fees'' used with regard to the CAT fees to be paid by Participants. As
discussed above with regard to Industry Member CAT fees, the CAT fees
to be paid by Participants may vary from time to time in accordance
with their market share. Accordingly, the Operating Committee proposes
to replace the references to ``fixed fees'' for Participants in
Sections 11.3(a), 11.3(a)(i) and 11.3(a)(ii) with references to
``fees.''
5. Proposed CAT Fees
a. Participant CAT Fee
To recover the costs of the CAT going forward, the Operating
Committee proposes to charge Participants a quarterly CAT fee
calculated based on the allocation of Total CAT Costs pursuant to the
Proposed Funding Model. The Operating Committee will use the costs set
forth in the annual operating budget as the Total CAT Costs in the
calculation of the Participant CAT Fee.\71\ Specifically, the Total CAT
Costs budgeted for the upcoming year will be the costs set forth in the
annual operating budget for the Company required pursuant to Section
11.1(a) of the CAT NMS Plan. Section 11.1(a) states that ``[o]n an
annual basis the Operating Committee shall approve an operating budget
for the Company. The budget shall include the projected costs of the
Company, including the costs of developing and operating the CAT for
the upcoming year, and the sources of all revenue to cover such costs,
as well as the funding of any reserve that the Operating Committee
reasonably deems appropriate for prudent operation of the Company.'' In
addition, to address potential changes in the budget during the year,
the total budgeted costs for the CAT for the relevant year may be
adjusted on a quarterly basis as the Operating Committee reasonably
deems appropriate for the prudent operation of the Company. To the
extent that the Operating Committee adjusts the total

[[Page 21063]]

budgeted costs for the CAT for the relevant year during its quarterly
budget review, the adjusted total budgeted costs for the CAT will be
used in calculating the remaining quarterly CAT fees for that year.
Using budgeted CAT costs, rather than CAT costs already incurred,
allows the Consolidated Audit Trail, LLC to collect fees prior to when
bills become payable.
---------------------------------------------------------------------------

\71\ Note that all Participant CAT fees would be paid
prospectively based on budgeted Total CAT Costs. This contrasts with
the Historical CAT Assessment, the Period 3 CAT Fee and the Period 4
CAT Fee for the Industry Members which would be paid based on actual
past costs incurred due to the application of the Financial
Accountability Milestones. The Quarterly CAT Fee for Industry
Members also would be paid prospectively based on budgeted Total CAT
Costs.
---------------------------------------------------------------------------

The Total CAT Costs budgeted for the year would be comprised of all
fees, costs and expenses estimated to be incurred by or for the Company
in connection with the development, implementation and operation of the
CAT during this period. These CAT costs would include, but not be
limited to, Plan Processor costs, insurance costs, third-party support
costs and an operational reserve. The Plan Processor costs would
consist of the Plan Processor's ongoing costs, including development
costs. This amount would be based upon the fees due to the Plan
Processor pursuant to the Company's agreement with the Plan Processor.
Insurance costs would include cyber insurance and director liability
insurance. The third-party support costs would include legal fees,
consulting fees, vendor fees and audit fees. In addition, the Operating
Committee aims to accumulate the necessary funds to establish an
operating reserve for the Company through the CAT fees charged to CAT
Reporters. As set forth in Section 11.1(a) of the CAT NMS Plan, the
Operating Committee may include in the budget ``funding of any reserve
that the Operating Committee reasonably deems appropriate for prudent
operation of the Company.'' \72\ As required by Section 11.1(c) of the
CAT NMS Plan, any surpluses collected will be treated as an operational
reserve to offset future fees and will not be distributed to the
Participants as profits.\73\ Using these budgeted Total CAT Costs, the
Operating Committee will calculate the quarterly CAT fee owed by each
Participant in accordance with the Proposed Funding Model.
---------------------------------------------------------------------------

\72\ Although the Operating Committee may determine at its
discretion that a different level of reserves is appropriate in the
future, the Operating Committee proposes to include in the budget an
operational reserve comprised of three months of ongoing CAT costs,
such as Plan Processor costs, third party support costs and
insurance costs.
\73\ CAT NMS Plan Approval Order at 84792.
---------------------------------------------------------------------------

To implement the Participant CAT fees, the Exchange proposes to add
a fee schedule, entitled ``Consolidated Audit Trail Funding Fees,'' to
Exhibit [sic] B of the CAT NMS Plan. As discussed above, proposed
paragraph (a) states the following:

Each Participant shall pay to Consolidated Audit Trail, LLC in
the manner prescribed by the Consolidated Audit Trail, LLC a CAT fee
calculated as follows:
(1) Commencing upon SEC approval of the CAT fee, each
Participant shall pay a quarterly CAT fee based on market share from
the prior quarter calculated by adding the sum of the following:
(A) For all Participants, the Minimum Participant Fee;
(B) For Equities Participants, the lesser of:
(i) the product of multiplying the Equities Participant's
percentage of total market share of NMS Stocks for all Equities
Participants against the Equities Participant Allocation; or
(ii) the Maximum Equities Participant Fee, if applicable; and
If any Participant's fee is limited to the Maximum Equities
Participant Fee, any excess amount which such Participant otherwise
would have paid as a fee above such Maximum Equities Participant Fee
will be re-allocated among all Equities Participants (including any
Equities Participant that is subject to the Maximum Equities
Participant Fee) in accordance with their market share.
(C) For Options Participants, the product of multiplying the
Participant's percentage of total market share of Listed Options
contracts for all Options Participants against the Options
Participant Allocation;
For the avoidance of doubt, Participants with both options and
equities market share shall be considered both Equities Participants
and Options Participants.

As described above, proposed paragraph (b) of Appendix B of the CAT
NMS Plan would provide the variables necessary to calculate Participant
CAT fees in accordance with paragraph (a). Specifically, paragraph (b)
would state that ``[t]he CAT fees set forth in paragraph (a) will be
calculated based on the following.'' Proposed paragraph (b)(1) of the
fee schedule would state that ``[t]he Industry Member Allocation for
each quarter shall be 75% of 1/4th of the Total CAT Costs for the
relevant year. The Participant Allocation for each quarter shall be 25%
of 1/4th of the Total CAT Costs for the relevant year.'' Proposed
paragraph (b)(2) of the fee schedule would state that ``[t]he Minimum
Participant Fee is 0.75% of the Participant Allocation. For avoidance
of doubt, the Minimum Participant Fee will be paid by each registered
national securities exchange that is a Participant and each registered
national securities association that is a Participant.'' Proposed
paragraph (b)(3) of the fee schedule would state that ``[t]he Adjusted
Participant Allocation is the Participant Allocation minus the sum of
all Minimum Participant Fees required to be paid by each Participant.''
Proposed paragraph (b)(4) of the fee schedule would state that ``[t]he
Equities Participant Allocation is 60% of the Adjusted Participant
Allocation.'' Proposed paragraph (b)(5) of the fee schedule would state
that ``[t]he Options Participant Allocation is 40% of the Adjusted
Participant Allocation.'' Proposed paragraph (b)(6) of the fee schedule
would state that the ``[t]he Maximum Equities Participant Fee is the
greater of (x) 20% of the Equities Participant Allocation or (y) the
highest CAT fee required to be paid by any other Equities Participant
plus 5% of such second highest CAT fee. The Maximum Equities
Participant Fee only applies to a Participant that is a national
securities association.''
Finally, proposed paragraph (b)(7) of the fee schedule would state
that ``[t]he Total CAT Costs shall be the total annual budgeted costs
for the CAT for the relevant year.'' Proposed paragraph (b)(7) of the
fee schedule would further state that ``[t]he total budgeted costs for
the CAT for the relevant year may be adjusted on a quarterly basis as
the Operating Committee reasonably deems appropriate for the prudent
operation of the Company. To the extent that the Operating Committee
adjusts the total budgeted costs for the CAT for the relevant year
during its quarterly budget review, the adjusted total budgeted costs
for the CAT will be used in calculating the remaining quarterly CAT
fees for that year.''
The following chart summarizes the imposition of the Quarterly CAT
Fee for Participants each year commencing upon approval by the SEC and
continuing each year thereafter.

----------------------------------------------------------------------------------------------------------------
CAT data used for
Quarterly CAT fee Quarterly participant market share Payment due
allocation calculation
----------------------------------------------------------------------------------------------------------------
Quarterly CAT Fee #1.................... 1/4th of 25% of the CAT Data from first 2nd quarter of the
budgeted annual CAT quarter of the relevant year.
costs for the relevant year.
relevant year.
Quarterly CAT Fee #2.................... 1/4th of 25% of the CAT Data from second 3rd quarter of the
budgeted annual CAT quarter of the relevant year.
costs for the relevant year.
relevant year.
Quarterly CAT Fee #3.................... 1/4th of 25% of the CAT Data from third 4th quarter of the
budgeted annual CAT quarter of the relevant year.
costs for the relevant year.
relevant year.

[[Page 21064]]

Quarterly CAT Fee #4.................... 1/4th of 25% of the CAT Data from fourth 1st quarter of year
budgeted annual CAT quarter of the following the
costs for the relevant year. relevant year.
relevant year.
----------------------------------------------------------------------------------------------------------------

Note that, if the SEC approves the proposed CAT fees mid-year, the
Operating Committee proposes to require Participants to commence
payment of the Participant CAT Fee in the first quarter after the
quarter in which the SEC approves the fee. Participants will be
required to pay a quarterly fee for the remaining quarter(s) of the
year based on CAT Data from the prior quarter, using the portion of the
annual budget for those remaining quarter(s) of the year. For example,
if the SEC approves the CAT fees in the third quarter of 2021, then the
Participants would be required to pay their first quarterly CAT fee
during the fourth quarter of 2021 based on the market share calculation
using CAT Data from the third quarter of 2021 and one quarter of the
budgeted annual CAT costs for 2021.
b. Industry Member CAT Fees
The Operating Committee has determined to charge Industry Members
fees related to CAT costs in accordance with the Proposed Funding
Model. To implement these CAT fees, each Participant would submit a fee
filing pursuant to Section 19(b) of the Exchange Act to propose to add
a section entitled ``Consolidated Audit Trail Funding Fees'' to its fee
schedule, and to describe the following CAT fees in that section.
Because the Participants have funded the CAT to date and CAT fees
imposed on Industry Members are guided by the Financial Accountability
Milestones, the Operating Committee proposes four categories of CAT
fees: the Historical CAT Assessment (for pre-Period 1, Period 1 and
Period 2), Period 3 CAT Fee, Period 4 CAT Fee, and the Quarterly CAT
Fee.
i. Historical CAT Assessment (for Pre-Period 1, Period 1 and Period 2)
The Operating Committee determined to charge Industry Members a
historical assessment (``Historical CAT Assessment'') to recover
certain CAT costs incurred prior to January 1, 2021 (``Historical CAT
Assessment Costs''). Specifically, the Historical CAT Assessment is
intended to collect from Industry Members 75% of certain costs incurred
through June 22, 2020, the effective date for the Financial
Accountability Milestones,\74\ certain costs from Period 1 of the
Financial Accountability Milestones (which covered the period from June
22, 2020-July 31, 2020) and certain costs from Period 2 of the
Financial Accountability Milestones (which covered the period from
August 1, 2020-December 31, 2020). The Total CAT Costs for these
periods, excluding Excluded Costs (as defined below) and certain costs
related to the conclusion of the relationship with Thesys CAT, LLC is
$193,273,342. The Historical CAT Assessment is designed to recover 75%
of these CAT costs. Accordingly, the Historical CAT Assessment Costs
would be $144,955,006.
---------------------------------------------------------------------------

\74\ See generally Financial Accountability Milestone Release.
---------------------------------------------------------------------------

The Participants have already funded all CAT costs incurred prior
to January 1, 2021. Accordingly, only Industry Members would be
required to pay the Historical CAT Assessment. To implement the
Historical CAT Assessment, each Participant would submit a fee filing
pursuant to Section 19(b) of the Exchange Act describing the Historical
CAT Assessment.
The following describes the Historical CAT Assessment Costs for the
period prior to June 22, 2020 and the period from June 22, 2020 through
December 31, 2020 in more detail. The Total CAT Costs incurred prior to
June 22, 2020 (other than Excluded Costs and certain costs related to
the conclusion of the relationship with Thesys CAT, LLC) is
$153,268,597. The Historical CAT Assessment to be paid by Industry
Members would be designed to recover 75% of these total costs, which is
$114,951,448. These cost figures are further described below.
In accordance with Section 11.1(c) of the CAT NMS Plan,
the Historical CAT Assessment Costs would include ``fees, costs and
expenses (including legal and consulting fees and expenses) incurred by
the Participants on behalf of the Company prior to the Effective Date
in connection with the creation and implementation of the CAT.''
Specifically, the Historical CAT Assessment Costs include costs
incurred from 2012 through November 20, 2016 related to the development
of the National Market System Plan Governing the Process of Selecting a
Plan Processor and Developing a Plan for the Consolidated Audit Trail
\75\ (``Selection Plan'') and the CAT NMS Plan as well as the Plan
Processor selection process pursuant to the Selection Plan. The Total
CAT Costs incurred during this period are $13,842,881. The Historical
CAT Assessment would be designed to recover 75% of these total costs,
which is $10,382,161.
---------------------------------------------------------------------------

\75\ See, e.g., Securities Exchange Act Rel. No. 71596, 79 FR
11152 (Feb. 27, 2014).
---------------------------------------------------------------------------

The Historical CAT Assessment Costs would include costs
incurred after the formation of the CAT NMS Plan and prior to the
selection of Thesys CAT, LLC as the Plan Processor for the CAT, which
covers the period from November 21, 2016 through April 5, 2017. The
total cost for this period is $2,933,869. The Historical CAT Assessment
would be designed to recover 75% of these total costs, which is
$2,200,402.
The Historical CAT Assessment Costs would include costs
incurred during the period in which Thesys CAT, LLC was the Plan
Processor for the CAT, which was April 6, 2017 through March 28, 2019.
The total costs for this period are $106,256,258. The Participants,
however, have determined to exclude from the Historical CAT Assessment
Costs all costs incurred from November 15, 2017 through November 15,
2018 (``Excluded Costs'') due to the delay in the reporting to the CAT.
The Excluded Costs are $48,874,937. Accordingly, the total costs for
this period are $57,381,321. The Historical CAT Assessment would be
designed to recover 75% of these total costs, which is $43,035,991.
The Historical CAT Assessment Costs would include the
Total CAT Costs from the date of FINRA CAT's selection as the Plan
Processor on March 29, 2019 through June 21, 2020. The total costs for
this period are $79,110,525.\76\ The Historical CAT Assessment would be
designed to recover 75% of these total costs, which is $59,332,894.
---------------------------------------------------------------------------

\76\ These costs do not include costs incurred in relation to
the conclusion of the relationship with Thesys CAT, LLC.
---------------------------------------------------------------------------

The Historical CAT Assessment Costs also would include the certain
CAT costs incurred from June 22, 2020 through July 31, 2020, which is
Period 1 of the Financial Accountability Milestones, as well as the
Total CAT Costs incurred from August 1, 2020 through December 31, 2020,
which is Period 2 of the Financial Accountability Milestones, subject
to certain

[[Page 21065]]

exceptions.\77\ The total costs incurred from June 22, 2020 through
December 31, 2020 are $40,004,745. The Historical CAT Assessment to be
paid by the Industry Members would be designed to recover 75% of these
total costs, which is $30,003,559.
---------------------------------------------------------------------------

\77\ These costs do not include costs incurred in relation to
the conclusion of the relationship with Thesys CAT, LLC.
---------------------------------------------------------------------------

Using the Historical CAT Assessment Costs, the Operating Committee
would calculate the Historical CAT Assessment owed by each Industry
Member in accordance with the Proposed Funding Model. The Operating
Committee proposes to seek to recover the Historical CAT Assessment
Costs over a period of four calendar quarters, commencing upon the
SEC's approval of the Historical CAT Assessment. Each quarter, each
Industry Member would pay the greater of the minimum fee of $125 or the
Industry Member's fee calculated based on message traffic (subject to
the market making discounts and the maximum fee). The message traffic
fee would be calculated by multiplying the percentage of the Industry
Member's message traffic of the total Industry Member message traffic
(subject to applicable discounts for Options and Equity Market Maker
message traffic and the Maximum Industry Member CAT Fee) by
$36,238,752, which is 1/4th of the Historical CAT Assessment Costs.
Each Industry Member's message traffic would be calculated using CAT
Data from the prior quarter. The Operating Committee proposes to
commence charging the Historical CAT Assessment in the first quarter
after SEC approval of the Historical CAT Assessment, based on CAT Data
from the quarter in which the SEC approved the CAT fees. The following
chart summarizes the imposition of the Historical CAT Assessment:

----------------------------------------------------------------------------------------------------------------
Quarterly CAT data used for
Quarterly CAT fee industry member message traffic Payment due
allocation calculation
----------------------------------------------------------------------------------------------------------------
Quarterly CAT Fee #1...................... $36,238,752 Quarter of SEC approval 1st quarter after SEC
of Historical CAT approval of Industry
Assessment. Member CAT Fees set
forth in this Proposed
Plan Amendment.
Quarterly CAT Fee #2...................... 36,238,752 1st quarter after SEC 2nd quarter after SEC
approval of Historical approval of Industry
CAT Assessment. Member CAT Fees set
forth in this Proposed
Plan Amendment.
Quarterly CAT Fee #3...................... 36,238,752 2nd quarter after SEC 3rd quarter after SEC
approval of Historical approval of Industry
CAT Assessment. Member CAT Fees set
forth in this Proposed
Plan Amendment.
Quarterly CAT Fee #4...................... 36,238,752 3rd quarter after SEC 4th quarter after SEC
approval of Historical approval of Industry
CAT Assessment. Member CAT Fees set
forth in this Proposed
Plan Amendment.
----------------------------------------------------------------------------------------------------------------

In accordance with Section 11.6(b) of the CAT NMS Plan, the
Operating Committee indicates that the proposed Historical CAT
Assessment seeks to recover costs that are related to Post-Amendment
Expenses incurred during Period 1. Period 1 began on June 22, 2020, the
effective date of Section 11.6 of the CAT NMS Plan, and concluded on
July 31, 2020, the date of Initial Industry Member Core Equity and
Options Reporting. As indicated by the Participants' Quarterly Progress
Report,\78\ Initial Industry Member Core Equity and Option Reporting
was completed on schedule by July 31, 2020. As discussed above, the
Historical CAT Assessment Costs to be recovered via the Historical CAT
Assessment would include fees, costs and expenses incurred by or for
the Company in connection with the development, implementation and
operation of the CAT during the period from June 22, 2020 through July
31, 2020.
---------------------------------------------------------------------------

\78\ Q3 2020 Quarterly Progress Report (Oct. 30, 2020)
(available at www.catnmsplan.com).
---------------------------------------------------------------------------

The Operating Committee also indicates that the proposed Historical
CAT Assessment seeks to recover costs that are related to Post-
Amendment Expenses incurred during Period 2. Period 2 began on August
1, 2020, and concluded on December 31, 2020, the date of the Full
Implementation of Core Equity Reporting. As indicated by the
Participants' Quarterly Progress Report,\79\ Full Implementation of
Core Equity Reporting was completed on schedule by December 31, 2020.
As discussed above, the Historical CAT Assessment Costs to be recovered
via the Historical CAT Assessment would include fees, costs and
expenses incurred by or for the Company in connection with the
development, implementation and operation of the CAT during the period
from August 1, 2020 through December 31, 2020.
---------------------------------------------------------------------------

\79\ Q4 2020 Quarterly Progress Report (Jan. 29, 2021)
(available at www.catnmsplan.com).
---------------------------------------------------------------------------

ii. Period 3 CAT Fee
The Operating Committee also determined to charge Industry Members
a quarterly fee to recover the Total CAT Costs incurred from January 1,
2021 through December 31, 2021, referred to as the Period 3 CAT Fee.
The Total CAT Costs incurred from January 1, 2021 through December 31,
2021 (``Period 3 CAT Costs'') will be calculated at the completion of
2021. Specifically, the Period 3 CAT Costs will be the total actual
costs incurred for the CAT for 2021 as set forth in the 2021 financial
statements for the Company. Using the Period 3 CAT Costs, the Operating
Committee will calculate the Period 3 CAT Fee owed by each Industry
Member in accordance with the Proposed Funding Model. The Operating
Committee proposes to seek to recover Period 3 CAT Costs over a period
of four calendar quarters, commencing in 2022.\80\ Each quarter, each
Industry Member will pay the greater of the minimum fee of $125 or the
Industry Member's fee calculated based on message traffic. The message
traffic fee would be calculated by multiplying the percentage of the
Industry Member's message traffic of the total Industry Member message
traffic (subject to applicable discounts for Options Market Maker
message traffic and Equity Market Maker message traffic, and the
Maximum Industry Member CAT Fee) by 1/4th of 75% of the Period 3 CAT
Costs. Each Industry Member's message traffic would be calculated using
CAT Data from the prior quarter. The Operating Committee proposes to
commence charging the Period 3 CAT Fee in the second quarter of 2022,
based on CAT Data from the first quarter of 2022. The following chart
summarizes the imposition of the Period 3 CAT Fee:
---------------------------------------------------------------------------

\80\ Because the Period 3 CAT Fee is subject to the requirements
of the Financial Accountability Milestones, the Period 3 CAT Fee
will be imposed at the end of this time period. In contrast, because
the Participant CAT fee for this time period is not subject to the
requirements of the Financial Accountability Milestones, the
Participant CAT fee for this period will be imposed prospectively.

[[Page 21066]]

----------------------------------------------------------------------------------------------------------------
CAT data used for
Quarterly CAT fee Quarterly industry message traffic Payment due
member allocation calculation
----------------------------------------------------------------------------------------------------------------
Quarterly CAT Fee #1.................... 1/4th of 75% of the CAT Data from first 2nd quarter of 2022.
Period 3 CAT Costs quarter of 2022.
\81\.
Quarterly CAT Fee #2.................... 1/4th of 75% of the CAT Data from second 3rd quarter of 2022.
Period 3 CAT Costs. quarter of 2022.
Quarterly CAT Fee #3.................... 1/4th of 75% of the CAT Data from third 4th quarter of 2022.
Period 3 CAT Costs. quarter of 2022.
Quarterly CAT Fee #4.................... 1/4th of 75% of the CAT Data from fourth 1st quarter of 2023.
Period 3 CAT Costs. quarter of 2022.
----------------------------------------------------------------------------------------------------------------

To implement the Period 3 CAT Fee, each Participant would submit a
fee filing pursuant to Section 19(b) of the Exchange Act describing the
Period 3 CAT Fee. The Operating Committee will announce via a CAT alert
after the end of 2021 the Total CAT Costs for 2021 to be used in
calculating the quarterly Period 3 CAT Fees.\82\ Such Total CAT Costs
will be set forth in the year-end financial statements of the
Consolidated Audit Trail, LLC. Such financial statements are required
to be prepared in accordance Section 9.2 of the CAT NMS Plan, including
requirements related to compliance with GAAP, auditing by an
independent public accounting firm and making the statements publicly
available.
---------------------------------------------------------------------------

\81\ The Period 3 CAT Costs will be the total actual costs
incurred for the CAT for 2021 as set forth in the 2021 financial
statements for the Company.
\82\ The Participants intend to file a fee filing under Section
19(b) of the Exchange Act describing the calculation method for the
Period 3 CAT Fee, and then announce via CAT alert the Total CAT
Costs to be used in calculating the CAT fees via the method
described in the fee filing. The Participants do not intend to file
a separate fee filing setting forth the Total CAT Costs relevant for
the Period 3 CAT Fee.
---------------------------------------------------------------------------

The Operating Committee indicates that the proposed Period 3 CAT
Fee seeks to recover costs that will be related to Post-Amendment
Expenses incurred during Period 3. Period 3 began on January 1, 2021
and is expected to conclude on December 31, 2021, the date of Full
Availability and Regulatory Utilization of Transactional Database
Functionality. As discussed above, the Period 3 CAT Costs to be
recovered via the Period 3 CAT Fee would include fees, costs and
expenses incurred by or for the Company in connection with the
development, implementation and operation of the CAT during the period
from January 1, 2020 through December 31, 2021. The Participants'
collection of the full amount of the Period 3 CAT Fee will depend upon
the achievement of Full Availability and Regulatory Utilization of
Transaction Database Functionality by December 31, 2021; if not, the
amount of the Period 3 CAT Fee that may be collected from the Industry
Members will depend upon the fee limitations set forth in Section 11.6
of the CAT NMS Plan.
iii. Period 4 CAT Fee
The Operating Committee also determined to charge Industry Members
a quarterly fee to recover the Total CAT Costs incurred from January 1,
2022 through December 31, 2022, referred to as the Period 4 CAT Fee.
The Total CAT Costs incurred from January 1, 2022 through December 31,
2022 (``Period 4 CAT Costs'') will be calculated at the completion of
2022. Specifically, the Period 4 CAT Costs will be the total actual
costs incurred for the CAT for 2022 as set forth in the 2022 financial
statements for the Company. Using the Period 4 CAT Costs, the Operating
Committee will calculate the Period 4 CAT Fee owed by each Industry
Member in accordance with the Proposed Funding Model. The Operating
Committee proposes to seek to recover Period 4 CAT Costs over a period
of four calendar quarters, commencing in 2023.\83\ Each quarter, each
Industry Member will pay the greater of the minimum fee of $125 or the
Industry Member's fee calculated based on message traffic. The message
traffic fee would be calculated by multiplying the percentage of the
Industry Member's message traffic of the total Industry Member message
traffic (subject to applicable discounts for Options Market Maker
message traffic and Equity Market Maker message traffic, and the
Maximum Industry Member CAT Fee) by 1/4th of 75% of the Period 4 CAT
Costs. Each Industry Member's message traffic would be calculated using
CAT Data from the prior quarter. The Operating Committee proposes to
commence charging the Period 4 CAT fee in the second quarter of 2023,
based on data from the first quarter of 2023. The following chart
summarizes the imposition of the Period 4 CAT Fee:
---------------------------------------------------------------------------

\83\ Because the Period 4 CAT Fee is subject to the requirements
of the Financial Accountability Milestones, the Period 4 CAT Fee
will be imposed at the end of this time period. In contrast, because
the Participant CAT Fee for this time period is not subject to the
requirements of the Financial Accountability Milestones, the
Participant CAT Fee for this period will be imposed prospectively.

----------------------------------------------------------------------------------------------------------------
CAT data used for
Quarterly CAT fee Quarterly industry message traffic Payment due
member allocation calculation
----------------------------------------------------------------------------------------------------------------
Quarterly CAT Fee #1.................... 1/4th of 75% of the CAT Data from first 2nd quarter of 2023.
Period 4 CAT Costs quarter of 2023.
\84\.
Quarterly CAT Fee #2.................... 1/4th of 75% of the CAT Data from second 3rd quarter of 2023.
Period 4 CAT Costs. quarter of 2023.
Quarterly CAT Fee #3.................... 1/4th of 75% of the CAT Data from third 4th quarter of 2023.
Period 4 CAT Costs. quarter of 2023.
Quarterly CAT Fee #4.................... 1/4th of 75% of the CAT Data from fourth 1st quarter of 2024.
Period 4 CAT Costs. quarter of 2023.
----------------------------------------------------------------------------------------------------------------

To implement the Period 4 CAT Fee, each Participant would submit a
fee filing pursuant to Section 19(b) of the Exchange Act describing the
method for calculating the Period 4 CAT Fee. The Operating Committee
will announce via a CAT alert after the end of 2022 the Total CAT Costs
for 2022 to be used in calculating the quarterly Period 4 CAT Fees.\85\
Such Total CAT Costs will be set forth in the year-end financial
statements of the Consolidated Audit Trail, LLC. As noted above, such
financial statements are required to be prepared in accordance with the
requirements set forth in Section 9.2 of the CAT NMS Plan.
---------------------------------------------------------------------------

\84\ The Period 4 CAT Costs will be the total actual costs
incurred for the CAT for 2022 as set forth in the 2022 financial
statements for the Company.
\85\ The Participants intend to file one fee filing under
Section 19(b) of the Exchange describing the calculation method for
the Period 4 CAT Fee, and announce via CAT alert the Total CAT Costs
to be used in calculating the CAT fees via the method described in
the fee filing. The Participants do not intend to file a separate
fee filing setting forth the Total CAT Costs relevant for the Period
4 CAT Fee.
---------------------------------------------------------------------------

The Operating Committee indicates that the proposed Period 4 CAT
Fee seeks to recover costs that will be related to Post-Amendment
Expenses incurred during Period 4. Period 4 is expected to begin on
January 1, 2022

[[Page 21067]]

and conclude on December 31, 2022, the date of Full Implementation of
CAT NMS Plan Requirements. As discussed above, the Period 4 CAT Costs
to be recovered via the Period 4 CAT Fee would include fees, costs and
expenses incurred by or for the Company in connection with the
development, implementation and operation of the CAT during the period
from January 1, 2022 through December 31, 2022. The Participants'
collection of the full amount of the Period 4 CAT Fee will depend upon
the achievement of Full Implementation of CAT NMS Plan Requirements by
December 31, 2022; if not, the amount of the Period 4 CAT Fee that may
be collected from the Industry Members will depend upon the fee
limitations set forth in Section 11.6 of the CAT NMS Plan.
iv. Quarterly CAT Fee--Beginning 2023
To recover the costs of the CAT going forward beginning in 2023,
the Operating Committee determined to charge Industry Members an
ongoing quarterly CAT fee calculated based on the allocation of Total
CAT Costs pursuant to the Proposed Funding Model (``Quarterly CAT
Fee''). The Operating Committee will use the costs set forth in the
annual operating budget as the Total CAT Costs in the calculation of
the Quarterly CAT Fee. Specifically, the Total CAT Costs budgeted for
the upcoming year will be the costs set forth in the annual operating
budget for the Company required pursuant to Section 11.1(a) of the CAT
NMS Plan. As discussed above with regard to the Participant CAT fee,
CAT costs would include, but not be limited to, Plan Processor costs,
insurance costs, third-party support costs and an operational
reserve.\86\ As required by Section 11.1(c) of the CAT NMS Plan, any
surpluses collected will be treated as an operational reserve to offset
future fees and will not be distributed to the Participants as
profits.\87\ In addition, to address potential changes in the budget
during the year, the total budgeted costs for the CAT for the relevant
year may be adjusted on a quarterly basis as the Operating Committee
reasonably deems appropriate for the prudent operation of the Company.
To the extent that the Operating Committee adjusts the total budgeted
costs for the CAT for the relevant year during its quarterly budget
review, the adjusted total budgeted costs for the CAT will be used in
calculating the remaining quarterly CAT fees for that year. Using these
budgeted Total CAT Costs, the Operating Committee will calculate the
Quarterly CAT Fee owed by each Industry Member in accordance with the
Proposed Funding Model.
---------------------------------------------------------------------------

\86\ As set forth in Section 11.1(a) of the CAT NMS Plan, the
Operating Committee may include in the budget ``the funding of any
reserve that the Operating Committee reasonably deems appropriate
for prudent operation of the Company.'' Although the Operating
Committee may determine at its discretion that a different level of
reserves is appropriate in the future, the Operating Committee
proposes to include in the budget an operational reserve comprised
of three months of ongoing CAT costs, such as Plan Processor costs,
third party support costs and insurance costs.
\87\ CAT NMS Plan Approval Order at 84792.
---------------------------------------------------------------------------

The Operating Committee proposes to seek to recover the budgeted
Total CAT Costs over the course of the year. Each quarter, each
Industry Member will pay the greater of the minimum fee of $125 or the
Industry Member's fee calculated based on message traffic.\88\ The
message traffic fee would be calculated by multiplying the percentage
of the Industry Member's message traffic of the total Industry Member
message traffic (subject to applicable discounts for Options Market
Maker message traffic and Equity Market Maker message traffic, and the
Maximum Industry Member CAT Fee) by 1/4th of 75% of the budgeted Total
CAT Costs for the year. Each Industry Member's message traffic would be
calculated using data from the prior calendar quarter. The Operating
Committee proposes to commence charging this CAT fee in the second
quarter of 2023, based on CAT Data from the first quarter of 2023. The
following chart summarizes the imposition of the Quarterly CAT Fee for
Industry Members each year commencing in 2023 and continuing each year
thereafter:
---------------------------------------------------------------------------

\88\ To the extent that any two or more of the four categories
of Industry Member CAT fees (i.e., the Historical CAT Assessment,
Period 3 CAT Fee, Period 4 CAT Fee and the Quarterly CAT Fee) are
due during the same quarter, any Industry Member obligated to pay
one or more categories of fees is required to pay each category of
fee for that quarter. For example, if an Industry Member would be
subject to the Minimum Industry Member CAT Fee for the Period 4 CAT
Fee and the Minimum Industry Member CAT Fee for Quarterly CAT Fee
during the same quarter, the Industry Member would be required to
pay two minimum $125 fee that quarter for a total of $250. As
another example, suppose that an Industry Member owed a CAT fee
(other than the minimum fee of $125) for both the Historical CAT
Assessment and the Period 3 CAT Fee, the Industry Member would be
required to pay both fees that quarter.

----------------------------------------------------------------------------------------------------------------
CAT data used for
Quarterly CAT fee Quarterly industry message traffic Payment due
member allocation calculation
----------------------------------------------------------------------------------------------------------------
Quarterly CAT Fee #1.................... 1/4th of 75% of the CAT Data from first 2nd quarter of the
budgeted annual CAT quarter of the relevant year.
costs for the relevant year.
relevant year.
Quarterly CAT Fee #2.................... 1/4th of 75% of the CAT Data from second 3rd quarter of the
budgeted annual CAT quarter of the relevant year.
costs for the relevant year.
relevant year.
Quarterly CAT Fee #3.................... 1/4th of 75% of the CAT Data from third 4th quarter of the
budgeted annual CAT quarter of the relevant year.
costs for the relevant year.
relevant year.
Quarterly CAT Fee #4.................... 1/4th of 75% of the CAT Data from fourth 1st quarter of year
budgeted annual CAT quarter of the following the
costs for the relevant year. relevant year.
relevant year.
----------------------------------------------------------------------------------------------------------------

To implement the Quarterly CAT Fee, each Participant would submit a
fee filing pursuant to Section 19(b) of the Exchange Act describing the
method for calculating the Quarterly CAT Fee. The Operating Committee
will announce at the beginning of the relevant year via a CAT alert the
budgeted Total CAT Costs to be used in calculating the Quarterly CAT
Fees for that year.\89\ The budgeted Total CAT Costs will be the costs
set forth in the annual operating budget for the Company required
pursuant to Section 11.1(a) of the CAT NMS Plan. Section 11.1(a) states
that ``[o]n an annual basis the Operating Committee shall approve an
operating budget for the Company. The budget shall include the
projected costs of the Company, including the costs of developing and
operating the CAT for the upcoming year, and the sources of all
revenues to cover such costs, as well as the funding of any reserve
that the Operating Committee reasonably deems appropriate for prudent
operation of the Company.'' To the extent that the Operating Committee
adjusts the budgeted Total CAT Costs for the year during its quarterly
budget review, the

[[Page 21068]]

Operating Committee will announce any such quarterly budget adjustments
to be used in calculating the remaining Quarterly CAT Fees for that
year via a CAT alert.
---------------------------------------------------------------------------

\89\ The Participants intend to file one fee filing under
Section 19(b) of the Exchange Act describing the calculation method
for the Quarterly CAT Fee, and then announce via CAT alert the
budgeted Total CAT Costs to be used in calculating the CAT fees each
year via the method described in the fee filing. The Participants do
not intend to file a separate fee filing each year setting forth the
budgeted Total CAT Costs relevant for the Quarterly CAT Fee.
---------------------------------------------------------------------------

6. Collection of Fees
Pursuant to Section 11.4 of the CAT NMS Plan, the Operating
Committee proposes to establish a system for the collection of CAT
fees. The Consolidated Audit Trail, LLC will provide each Participant
with an invoice setting forth the Participants' quarterly CAT fee for
each payment period. Each Participant will pay its CAT fees to the
Consolidated Audit Trail, LLC via the centralized system for the
collection of CAT fees established by the Consolidated Audit Trail, LLC
in the manner prescribed by the Consolidated Audit Trail, LLC. As set
forth in Section 11.4 of the CAT NMS Plan, each Participant shall pay
all its CAT fees authorized under the CAT NMS Plan as required by
Section 3.7(b) of the CAT NMS Plan.
The Operating Committee also determined the time and manner in
which Industry Member CAT fees will be paid. The Operating Committee
determined that the Consolidated Audit Trail, LLC will provide each
Industry Member with an invoice setting forth the Industry Member's
Historical CAT Assessment, Period 3 CAT Fee, Period 4 CAT Fee and/or
Quarterly CAT Fee (as applicable) for each payment period. Consolidated
Audit Trail, LLC will provide each Industry Member with one invoice
each payment period for its CAT fees, regardless of whether the
Industry Member is a member of multiple self-regulatory organizations.
Each Industry Member will pay its CAT fees to the Consolidated Audit
Trail, LLC via the centralized system for the collection of CAT fees
established by the Consolidated Audit Trail, LLC in the manner
prescribed by the Consolidated Audit Trail, LLC. Finally, as set forth
in Section 11.4 of the CAT NMS Plan, Industry Members would be required
to pay their CAT fees within thirty days after receipt of an invoice or
other notice indicating payment is due (unless a longer payment period
is otherwise indicated). If an Industry Member fails to pay any such
fee when due, such Industry Member shall pay interest on the
outstanding balance from such due date until such fee is paid at a per
annum rate equal to the lesser of (i) the Prime Rate plus 300 basis
points, or (ii) the maximum rate permitted by applicable law.\90\ To
implement the requirements related to the timing and manner of payment
of the CAT fees for Industry Members, each Participant would submit a
fee filing pursuant to Section 19(b) of the Exchange Act describing
such requirements as discussed above.
---------------------------------------------------------------------------

\90\ CAT Reporters will be responsible for each quarterly fee in
which they are a CAT Reporter. If a CAT Reporter ceases to the meet
the definition of a CAT Reporter during a quarter, the CAT Reporter
will still be responsible for CAT fees attributable to its message
traffic (or, the minimum fee in the alternative) during that
quarter.
---------------------------------------------------------------------------

7. Example of Application of Proposed Funding Model
The Operating Committee has prepared an example of how the Proposed
Funding Model would operate for illustrative purposes only.
Specifically, the Operating Committee has prepared an example of CAT
fees calculated under the Proposed Funding Model based on budgeted
Total CAT Costs for 2021 as well as message traffic and market share
data for the fourth quarter of 2020. Set forth in Exhibit B to this
letter are three charts setting forth illustrative CAT fees for each
Equities Participant, Options Participant and Industry Member CAT
Reporter. Note Exhibit B only provides an illustrative example of how
the Proposed Funding Model would operate; the calculation of actual
fees will differ from this example in various ways. For example, the
Participants have paid or will have paid 100% of these costs up to the
time of the SEC approval of the Proposed Funding Model, and, as a
result, Participants would not be obligated to pay CAT fees related to
2021 CAT costs to the extent the Participants have already paid such
costs. Furthermore, Period 3 CAT Fees for Industry Members will be
calculated based on actual Total CAT Costs for 2021, not budgeted CAT
Costs for 2021, and based on CAT Data from 2022, not from 2020.
8. Satisfaction of Exchange Act and CAT NMS Plan Requirements
The Operating Committee believes that the Proposed Funding Model
offers a variety of benefits and satisfies the funding principles and
other requirements of the CAT NMS Plan, as proposed to be revised
herein, as well as the applicable requirements of the Exchange Act.
a. Funding Principle: Section 11.2(a) of the CAT NMS Plan
The Participants believe that the Proposed Funding Model satisfies
the funding principles set forth in Section 11.2(a) of the CAT NMS
Plan, as proposed to be modified herein. Section 11.2(a) requires the
Operating Committee, in establishing the funding of the Company, to
seek ``to create transparent, predictable revenue streams for the
Company that are aligned with the anticipated costs to build, operate
and administer the CAT and the other costs of the Company.''
First, by adopting a CAT-specific fee tied to Total CAT Costs, the
Operating Committee will be fully transparent regarding the costs of
the CAT and how those costs will be allocated among CAT Reporters. In
contrast, charging a general regulatory fee, which might otherwise be
used to cover CAT costs as well as other regulatory costs, would be
less transparent than the selected approach of charging a fee
designated to cover CAT-related costs only.
Second, the Proposed Funding Model would provide a predictable
revenue stream for the Company. The Proposed Funding Model provides for
a predictable revenue stream as the Proposed Funding Model is designed
to divide the Total CAT Costs among the CAT Reporters. In addition, to
address the possibility of some variability in the collected CAT fees
or an unexpected increase in costs, the Total CAT Costs covered by the
Proposed Funding Model include an operational reserve. The operational
reserve could be used in the event that the total fees are not
collected from the CAT Reporters, or costs increase due to outside
events.
Third, the Proposed Funding Model provides for a revenue stream for
the Company that is aligned with the anticipated costs to build,
operate and administer the CAT and the other costs of the Company. The
total fees to be collected from Participants and Industry Members are
designed to cover the Total CAT Costs. Any surpluses collected will be
treated as an operational reserve to offset future fees and will not be
distributed to the Participants as profits.\91\
---------------------------------------------------------------------------

\91\ CAT NMS Plan Approval Order at 84792.
---------------------------------------------------------------------------

b. Funding Principle: Section 11.2(b) of the CAT NMS Plan
The Operating Committee also believes that the Proposed Funding
Model satisfies the funding principle set forth in Section 11.2(b) of
the CAT NMS Plan, which requires the Operating Committee to seek ``to
establish an allocation of the Company's related costs among
Participants and Industry Members that is consistent with the Exchange
Act, taking into account the timeline for implementation of the CAT and
distinctions in the securities trading operations of Participants and
Industry Members and their relative impact upon Company resources and
operations.'' As

[[Page 21069]]

discussed above, the Proposed Funding Model allocation between
Participants and Industry Members takes into account the timeline for
implementation, as the Company has been incurring CAT costs with the
development and implementation of the CAT, and Participants and certain
Industry Members have been reporting to the CAT.
The Proposed Funding Model also recognizes the ``distinctions in
the securities trading operations of Participants and Industry
Members'' in various ways. In light of their different roles,
Participants will pay a fee based on market share and Industry Members
will pay a fee based on message traffic, as approved by the Commission
in the CAT NMS Plan. The Proposed Funding Model also recognizes the
different trading characteristics of the equities and options markets
by allocating the Adjusted Participant Allocation to Equities
Participants and Options Participants separately. Furthermore, the
Operating Committee proposes to discount Options Market Maker message
traffic and Equity Market Maker message traffic in recognition of their
distinct roles as liquidity providers in the securities markets and to
avoid potentially and inadvertently affecting market quality. The
Proposed Funding Model also recognizes the different trading
characteristics of OTC Equity Securities by not including them in the
market share calculation for Participants. The Proposed Funding Model
also is designed to take into account Participants and Industry
Members' relative impact upon Company resources and operations through
the use of message traffic and market share in calculating CAT fees.
c. Funding Principle: Section 11.2(c) of the CAT NMS Plan
The Operating Committee also believes that the Proposed Funding
Model satisfies the funding principle set forth in Section 11.2(c) of
the CAT NMS Plan, as proposed to be modified herein. Section 11.2(c),
as proposed to be modified herein, requires the Operating Committee to
seek ``to establish a fee structure in which the fees charged to: (i)
Participants are based upon the level of market share; and (ii)
Industry Members are based upon message traffic.'' The Proposed Funding
Model requires Participants to pay a fee based on market share, and
Industry Members to pay a fee based on message traffic.
d. Funding Principle: Section 11.2(d) of the CAT NMS Plan
The Operating Committee also believes that the Proposed Funding
Model satisfies the funding principle set forth in Section 11.2(d) of
the CAT NMS Plan, which requires the Operating Committee to seek ``to
provide for ease of billing and other administrative functions.'' The
Operating Committee believes that calculating CAT fees under the
Proposed Funding Model will be manageable as the message traffic and
market share data will be readily available. In addition, the
elimination of tiers simplifies the billing process as it removes the
subjective determination of the tier levels. In addition, the Operating
Committee proposes a Minimum Industry Member CAT Fee to ease the
administrative burden associated with very small payments.
e. Funding Principle: Section 11.2(e) of the CAT NMS Plan
The Operating Committee also believes that the Proposed Funding
Model satisfies the funding principle set forth in Section 11.2(e) of
the CAT NMS Plan, which requires the Operating Committee to seek ``to
avoid any disincentives such as placing an inappropriate burden on
competition and a reduction in market quality.'' As discussed above,
the Operating Committee has proposed various measures to address
potential disincentives, including the market maker message traffic
discounts, the Maximum Industry Member CAT Fee, the Maximum Equities
Participant Fee and the treatment of OTC Equity Securities for the
market share calculation for Participants. The Proposed Funding Model
also is structured to avoid a reduction in market quality because it
discounts Options Market Maker message traffic and Equity Market Maker
message traffic when calculating message traffic for Options Market
Makers and Equity Market Makers, respectively. The proposed discounts
recognize the value of the market making activity to the market as a
whole.
f. Funding Principle: Section 11.2(f) of the CAT NMS Plan
The Operating Committee also believes that the Proposed Funding
Model satisfies the funding principle set forth in Section 11.2(f) of
the CAT NMS Plan, which requires the Operating Committee to seek ``to
build financial stability to support the Company as a going concern.''
The Operating Committee believes that the Proposed Funding Model is
structured to collect sufficient funds to pay the Total CAT Costs. In
addition, the Proposed Funding Model would collect an operational
reserve for the CAT. This operational reserve is intended to address
potential shortfalls in collected CAT fees versus actual CAT costs.
g. Section 11.1(c) of the CAT NMS Plan
The Operating Committee also believes that the Proposed Funding
Model would satisfy the requirements in Section 11.1(c) of the CAT NMS
Plan. Section 11.1(c) of the CAT NMS Plan states that ``[t]o fund the
development and implementation of the CAT, the Company shall time the
imposition and collection of all fees on Participants and Industry
Members in a manner reasonably related to the timing when the Company
expects to incur such development and implementation costs.'' The
Company has been and continues to incur development and implementation
costs for the CAT, and the Operating Committee intends for the fees to
help cover these costs. In addition, the CAT fees going forward are
proposed to be imposed close in time to when costs are incurred.
Section 11.1(c) of the CAT NMS Plan also requires that ``[a]ny
surplus of the Company's resources over its expenses shall be treated
as an operational reserve to offset future fees.'' The Company will
operate on a ``break-even'' basis, with fees imposed to cover costs and
an appropriate reserve. Any surpluses will be treated as an operational
reserve to offset future fees and will not be distributed to the
Participants as profits.\92\ To ensure that the Participants' operation
of the CAT will not contribute to the funding of their other
operations, Section 11.1(c) of the CAT NMS Plan specifically states
that ``[a]ny surplus of the Company's revenues over its expenses shall
be treated as an operational reserve to offset future fees.'' In
addition, as set forth in Article VIII of the CAT NMS Plan, the Company
``intends to operate in a manner such that it qualifies as a `business
league' within the meaning of Section 501(c)(6) of the [Internal
Revenue] Code.'' To qualify as a business league, an organization must
``not [be] organized for profit and no part of the net earnings of [the
organization can] inure[ ] to the benefit of any private shareholder or
individual.'' \93\ As the SEC stated when approving the CAT NMS Plan,
``the Commission believes that the Company's application for Section
501(c)(6) business league status addresses issues raised by commenters
about the Plan's proposed allocation of profit and loss by mitigating
concerns that the Company's earnings could be used to benefit
individual

[[Page 21070]]

Participants.'' \94\ The Internal Revenue Service has determined that
the Company is exempt from federal income tax under Section 501(c)(6)
of the Internal Revenue Code.
---------------------------------------------------------------------------

\92\ CAT NMS Plan Approval Order at 84792.
\93\ 26 U.S.C. 501(c)(6).
\94\ CAT NMS Plan Approval Order at 84793.
---------------------------------------------------------------------------

h. Equitable Allocation of Reasonable Fees
The Operating Committee believes that the proposed CAT fees provide
for the ``equitable allocation of reasonable dues, fees, and other
charges among its members and issuers and other persons using its
facilities necessary or appropriate in furtherance of the purposes of
this chapter,'' \95\ as required by the Exchange Act. The Operating
Committee believes that the CAT fees equitably allocate CAT costs
between and among Participants and Industry Members, as discussed in
detailed above. For the reasons discussed above, the Operating
Committee believes that the allocation percentages in the Proposed
Funding Model as well as the use of message traffic for allocating
costs among Industry Members and the use of market share for allocating
costs among Participants provide for an equitable allocation of CAT
costs among CAT Reporters. In addition, as discussed above, the
Operating Committee believes that the imposition of minimum and maximum
fees and market maker discounts as well as the treatment of OTC Equity
Securities for the market share calculation for Participants would
operate to provide for an equitable allocation of CAT costs among CAT
Reporters.
---------------------------------------------------------------------------

\95\ Sections 6(b)(4) and 15A(b)(5) of the Exchange Act.
---------------------------------------------------------------------------

i. No Unfair Discrimination
The Operating Committee believes that the Proposed Funding Model is
``not designed to permit unfair discrimination between customers,
issuers, brokers, or dealers,'' \96\ as required by the Exchange Act.
In addition, the Proposed Funding Model does not unfairly discriminate
between Industry Members and Participants, among Industry Members or
among Participants. All Industry Members are grouped together for the
purpose of determining CAT fees, and all Participants are grouped
together for the purpose of determining CAT fees. CAT Reporters with
similar levels of activity will pay similar fees. For example, Industry
Members with higher levels of message traffic will pay higher fees, and
those with lower levels of message traffic will pay lower fees.
Similarly, Participants with larger market share will pay higher fees,
and those with lower levels of market share will pay lower fees. With
the elimination of tiers, fees for Industry Members and Participants
are directly related to their message traffic and market share,
respectively. With tiers, the relationship between message traffic or
market share and the CAT fee would not have been as direct.
---------------------------------------------------------------------------

\96\ Sections 6(b)(5) and 15A(b)(6) of the Exchange Act.
---------------------------------------------------------------------------

In addition, where the method of fee calculation may potentially
affect certain groups of CAT Reporters adversely, the Operating
Committee has sought to limit such adverse effects. For example, the
Operating Committee has proposed market maker discounts to address the
high levels of message traffic generally exhibited by market makers. As
discussed above, the SEC has recognized repeatedly that such favorable
treatment for market makers in other contexts was not unfairly
discriminatory or a burden on competition in light of its positive
effects on market quality, nor was it considered to involve an
inequitable allocation of fees among members.
The Operating Committee also has proposed the Maximum Equities
Participant Fee to address the potential for higher market share for
FINRA due to the trade reporting to FINRA. The Maximum Equities
Participant Fee serves as a method to institute a cap on fees to fairly
allocate costs to FINRA given that a market share approach may result
in FINRA having a significant allocation given the large volume of NMS
Stock activity that is subject to trade reporting to FINRA.
Similarly, the Operating Committee also has proposed the Maximum
Industry Member CAT Fee to address the potential for significant fees
based on outsized message traffic for certain Industry Members. The
Maximum Industry Member CAT Fee serves as a method to institute a cap
on fees to fairly allocate costs to Industry Members. Such a fee would
prevent Industry Members from paying significantly larger CAT fees than
Participant complexes.
The Operating Committee also proposes to calculate market share for
national securities associations without reference to trades reported
in OTC Equity Securities in light of the differences in the markets for
NMS Stocks and OTC Equity Securities. Because the proposed CAT fees for
Equities Participants are based on market share calculated by share
volume, FINRA would likely be subject to higher fees if OTC Equity
Securities were included in the calculation of market share.
j. No Burden on Competition
The Operating Committee believes that the Proposed Funding Model
does ``not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of this chapter,'' \97\ as
required by the Exchange Act. Moreover, the Operating Committee
believes that the proposed fee schedule fairly and equitably allocates
costs among CAT Reporters. In particular, as described above, the cost
allocation between Participants and Industry Members recognizes the
greater number of Industry Members as compared to the Participants and
the greater collective revenue of Industry Members as compared to
Participants. In addition, cost allocations among Industry Members
based on message traffic and cost allocations among Participants based
on market share fairly and equitably distributes CAT costs.
Furthermore, the market maker discounts, Maximum Industry Member CAT
Fee and Maximum Equities Participant Fee address the potential for
burdens on market makers, Industry Members with outsized message
traffic and FINRA potentially resulting from the proposed fee
calculations. Moreover, the Operating Committee does not believe that
the Minimum Industry Member CAT Fee or the Minimum Participant Fee
would act as barriers to entry for smaller CAT Reporters.
---------------------------------------------------------------------------

\97\ Sections 6(b)(8) and 15A(b)(9) of the Exchange Act.
---------------------------------------------------------------------------

9. Alternative Models Considered
The Operating Committee has determined to propose the Proposed
Funding Model to fund the CAT for the reasons discussed above. In
reaching this conclusion, the Operating Committee considered the
advantages and disadvantages of a variety of possible alternative
funding and cost allocations models for the CAT in detail. After
analyzing the various alternatives, the Operating Committee determined
that the Proposed Funding Model provides a variety of advantages in
comparison to the alternatives. In addition, although various funding
models may be appropriate, the Proposed Funding Model provides for an
equitable allocation of reasonable fees among CAT Reporters.
The Operating Committee previously filed a fee proposal in line
with the CAT NMS Plan--the Prior Fee Proposal. Under that model, the
Operating Committee, among other things, proposed a 75%-25% allocation
between Execution Venues (which included Participants and Execution
Venue ATSs) and Industry Members

[[Page 21071]]

(other than Execution Venue ATSs), and required Execution Venues to pay
fees based on market share, and Industry Members (other than Execution
Venue ATSs) to pay fees based on message traffic. This Prior Fee
Proposal was a very complex model with many interrelated parts,
including allocation percentages, discounts for certain market
behavior, and multiple tiered fees, and the complexity raised concerns
from the Commission regarding its use as the CAT funding model. In
addition, in response to the proposal, the industry raised a number of
other issues related to the proposal, including issues regarding the
proposed allocation of CAT costs between Participants and Industry
Members, and the ability of certain market segments to afford the
proposed CAT fee.\98\ Accordingly, the Operating Committee determined
to revise various aspects of the Prior Fee Proposal, thereby developing
the Proposed Funding Model.
---------------------------------------------------------------------------

\98\ For a discussion of comments made regarding the Original
Funding Model and the Prior Fee Proposal, see generally Prior Fee
Proposal Release.
---------------------------------------------------------------------------

In developing the Prior Fee Proposal, the Operating Committee
considered many variations of different aspects of that model. For
example, the Operating Committee evaluated different cost allocations
between Industry Members (other than Execution Venue ATSs) and
Execution Venues, including 80%-20%, 75%-25%, 70%-30% and 65%-35%
allocations, and different cost allocations between Equity and Options
Execution Venues.\99\ The Operating Committee also considered different
discounts for equities and options market makers, different numbers of
tiers of Industry Members and Execution Venues, different fee levels
for each tier, and other aspects of the model.
---------------------------------------------------------------------------

\99\ See Prior Fee Proposal Release at 1408.
---------------------------------------------------------------------------

Furthermore, the Operating Committee considered a model in which
all CAT Reporters, including both Industry Members and Participants,
would pay based solely on revenue. The concept underlying this proposal
is that CAT costs would be borne by CAT Reporters based on the ability
to pay. Industry Member revenue would be calculated based on revenue
reported in FOCUS reports, and Participant revenue would have been
calculated based on revenue information in Form 1 amendments and other
publicly reported figures. The Operating Committee did not select this
model for various reasons. As discussed above, under this approach,
Participants as a group would only pay approximately 4% of the total
CAT costs. Given their role as self-regulatory organizations and their
use of the CAT, the Operating Committee did not believe that such a
small allocation of the CAT costs to the Participants was appropriate.
Using revenue also raised a variety of practical issues. For example,
questions were raised as to what revenue was appropriate to include in
the calculation of revenue for Industry Members. The gross revenue set
forth on FOCUS reports was proposed, as it was similar to an existing
FINRA regulatory fee.\100\ However, questions were raised as to whether
revenue unrelated to NMS Securities or OTC Equity Securities, or
otherwise unrelated to the CAT, should be included for calculation of
the CAT fee. Eliminating revenue unrelated to CAT-related activity
would have been difficult or impossible. In addition, the lack of a
uniform approach to calculating revenue for the Participants could
raise inequities in the imposition of a CAT fee.
---------------------------------------------------------------------------

\100\ See paragraph (c) and (d) of Section 1 of Schedule A of
FINRA's Bylaws regarding FINRA's annual Gross Income Assessment.
---------------------------------------------------------------------------

To address the issues regarding the 96%-4% allocation and the
calculation of the Participant revenue in the straight revenue model
described above, the Operating Committee considered an alternative
version of the revenue model in which the CAT costs would be allocated
between Industry Members and Participants based on a set percentage
(e.g., 75%-25%) and the Industry Member allocation would be allocated
among Industry Members based on revenue and the Participant allocation
would be allocated among Participants based on market share. However,
this alternative revenue model failed to address the issues regarding
the appropriate revenue calculations for Industry Members.
The Operating Committee considered a funding model in which CAT
costs were allocated across all CAT Reporters--both Industry Members
and Participants--based on message traffic. Specifically, the Operating
Committee considered eliminating the concepts of the Participant
Allocation and the Industry Member Allocation entirely, and treating
Participants and Industry Members the same under the model. The
Operating Committee, however, determined that the bifurcated approach
set forth in the CAT NMS Plan continued to be a fair and reasonable
approach.
The Operating Committee also considered other possible funding
models. For example, the Participants considered allocating the CAT
costs equally among each of the Participants, and then permitting each
Participant to charge its own members as it deems appropriate. The
Operating Committee determined that such an approach raised a variety
of issues, including the likely inconsistency of the ensuing charges,
potential for lack of transparency, and the impracticality of multiple
SROs submitting invoices for CAT charges. The Operating Committee also
discussed the advantages and disadvantages of various alternative
models during development of the CAT NMS Plan, such as a cost
allocation based on a strict pro-rata distribution, regardless of the
type or size of the CAT Reporters, or a cost allocation based on
trades.\101\ The Operating Committee believes that the Proposed Funding
Model provides advantages over each of these previously considered
models and provides an equitable allocation of reasonable fees among
CAT Reporters.
---------------------------------------------------------------------------

\101\ For a discussion of alternatives considered in the
drafting of the CAT NMS Plan, see Appendix C of the CAT NMS Plan at
C-88--C-89.
---------------------------------------------------------------------------

B. Governing or Constituent Documents

Not applicable.

C. Implementation of Amendment

The Participants are filing this proposed amendment pursuant to
Rule 608(b)(1) of Regulation NMS under the Exchange Act.\102\
---------------------------------------------------------------------------

\102\ 17 CFR 242.608(b)(1).
---------------------------------------------------------------------------

D. Development and Implementation Phases

The Participants expect to implement the proposed Participant CAT
fees upon approval by the SEC.

E. Analysis of Impact on Competition

The Operating Committee does not believe that the proposed
amendment will result in any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Exchange
Act. The Operating Committee notes that the proposed amendment
implements provisions of the CAT NMS Plan approved by the Commission,
subject to proposed revisions to the CAT NMS Plan described above, and
is designed to assist the Participants in meeting their regulatory
obligations pursuant to the Plan. Because all Participants are subject
to the Proposed Funding Model set forth in the proposed amendment, this
is not a competitive filing that raises competition issues between and
among the Participants. Furthermore, for the reasons discussed above,
including in Section A.8 above, the Operating Committee does not
believe that the Proposed Funding Model will result in any burden on
competition that

[[Page 21072]]

is not necessary or appropriate in furtherance of the purpose of the
Exchange Act.

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

Not applicable.

G. Approval by Plan Sponsors in Accordance With Plan

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

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

Not applicable.

I. Terms and Conditions of Access

Not applicable.

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

Section A of this letter describes in detail how the Participants
developed the Proposed Funding Model for the CAT.

J. Method and Frequency of Processor Evaluation

Not applicable.

K. Dispute Resolution

Section 11.5 of the CAT NMS Plan addresses the resolution of
disputes regarding CAT fees charged to Participants and Industry
Members. Specifically, Section 11.5 of the CAT NMS Plan states that
disputes with respect to fees the Company charges Participants pursuant
to Article XI of the CAT NMS Plan shall be determined by the Operating
Committee or a Subcommittee designated by the Operating Committee.
Decisions by the Operating Committee or such designated Subcommittee on
such matters shall be binding on Participants, without prejudice to the
rights of any Participant to seek redress from the SEC pursuant to Rule
608 of Regulation NMS under the Exchange Act or in any other
appropriate forum. In addition, the Participants adopted rules to
establish the procedures for resolving potential disputes related to
CAT fees charged to Industry Members.\103\
---------------------------------------------------------------------------

\103\ See Securities Exchange Act Rel. No. 81500 (Aug. 30,
2017), 82 FR 42143 (Sept. 6, 2017).
---------------------------------------------------------------------------

III. Solicitation of Comments

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

Electronic Comments

Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number 4-698 on the subject line.

Paper Comments

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

All submissions should refer to File Number 4-698. This file number
should be included on the subject line if email is used. To help the
Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed plan amendment that are filed
with the Commission, and all written communications relating to the
amendment between the Commission and any person, other than those that
may be withheld from the public in accordance with the provisions of 5
U.S.C. 552, will be available for 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 such filing also will be available for inspection
and copying at the Participants' offices. 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 4-698
and should be submitted on or before May 12, 2021.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\104\
---------------------------------------------------------------------------

\104\ 17 CFR 200.30-3(a)(85).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.

Exhibit A

Additions italicized; deletions [bracketed]
* * * * *

Article I

Definitions

* * * * *
[``Execution Venue'' means a Participant or an alternative trading
system (``ATS'') (as defined in Rule 300 of Regulation ATS) that
operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS
that does not execute orders).]
* * * * *

Article XI

Funding of the Company

Section 11.1. Funding Authority.
(a) On an annual basis the Operating Committee shall approve an
operating budget for the Company. The budget shall include the
projected costs of the Company, including the costs of developing and
operating the CAT for the upcoming year, and the sources of all
revenues to cover such costs, as well as the funding of any reserve
that the Operating Committee reasonably deems appropriate for prudent
operation of the Company.
(b) Subject to Section 11.2, the Operating Committee shall have
discretion to establish funding for the Company, including: (i)
Establishing fees that the Participants shall pay; and (ii)
establishing fees for Industry Members that shall be implemented by
Participants. The Participants shall file with the SEC under Section
19(b) of the Exchange Act any such fees on Industry Members that the
Operating Committee approves, and such fees shall be labeled as
``Consolidated Audit Trail Funding Fees.''
(c) To fund the development and implementation of the CAT, the
Company shall time the imposition and collection of all fees on
Participants and Industry Members in a manner reasonably related to the
timing when the Company expects to incur such development and
implementation costs.

[[Page 21073]]

In determining fees on Participants and Industry Members the Operating
Committee shall take into account fees, costs and expenses (including
legal and consulting fees and expenses) incurred by the Participants on
behalf of the Company prior to the Effective Date in connection with
the creation and implementation of the CAT, and such fees, costs and
expenses shall be fairly and reasonably shared among the Participants
and Industry Members. Any surplus of the Company's revenues over its
expenses shall be treated as an operational reserve to offset future
fees.
(d) Consistent with this Article XI, the Operating Committee shall
adopt policies, procedures, and practices regarding the budget and
budgeting process, [assignment of tiers,] resolution of disputes,
billing and collection of fees, and other related matters. [For the
avoidance of doubt, as part of its regular review of fees for the CAT,
the Operating Committee shall have the right to change the tier
assigned to any particular Person in accordance with fee schedules
previously filed with the Commission that are reasonable, equitable and
not unfairly discriminatory and subject to public notice and comment,
pursuant to this Article XI. Any such changes will be effective upon
reasonable notice to such Person.]
Section 11.2. Funding Principles. In establishing the funding of
the Company, the Operating Committee shall seek:
(a) To create transparent, predictable revenue streams for the
Company that are aligned with the anticipated costs to build, operate
and administer the CAT and the other costs of the Company;
(b) to establish an allocation of the Company's related costs among
Participants and Industry Members that is consistent with the Exchange
Act, taking into account the timeline for implementation of the CAT and
distinctions in the securities trading operations of Participants and
Industry Members and their relative impact upon Company resources and
operations;
(c) to establish a [tiered] fee structure in which the fees charged
to: (i) Participants [CAT Reporters that are Execution Venues,
including ATSs,] are based upon the level of market share; and (ii)
Industry Members[' non-ATS activities] are based upon message traffic[;
and (iii) the CAT Reporters with the most CAT-related activity
(measured by market share and/or message traffic, as applicable) are
generally comparable (where, for these comparability purposes, the
tiered fee structure takes into consideration affiliations between or
among CAT Reporters, whether Execution Venues and/or Industry
Members)].
(d) to provide for ease of billing and other administrative
functions;
(e) to avoid any disincentives such as placing an inappropriate
burden on competition and a reduction in market quality; and
(f) to build financial stability to support the Company as a going
concern.
Section 11.3. Recovery.
(a) The Operating Committee will establish a minimum fee to be
payable by each Participant in addition to [fixed] fees based on market
share to be payable by Participants [Execution Venues] as provided in
this Section 11.3(a):
(i) Each Participant [Execution Venue] that: (A) Executes
transactions; or (B) in the case of a national securities association,
has trades reported by its members to its trade reporting facility or
facilities for reporting transactions effected otherwise than on an
exchange, in NMS Stocks [or OTC Equity Securities] will pay a [fixed]
fee depending on the market share of that Participant [Execution Venue]
in NMS Stocks (``Equities Participant'') [and OTC Equity Securities,
with the Operating Committee establishing at least two and no more than
five tiers of fixed fees, based on an Execution Venue's NMS Stocks and
OTC Equity Securities market share]. For these purposes, market share
for Participants [Execution Venues] that execute transactions will be
calculated by share volume, and market share for a national securities
association that has trades reported by its members to its trade
reporting facility or facilities for reporting transactions effected
otherwise than on an exchange in NMS Stocks [or OTC Equity Securities]
will be calculated based on share volume of trades reported, provided,
however, that any Participant that is a national securities association
shall pay a maximum fee established by the Operating Committee instead
of the higher fee calculated based on such Participant's market share.
If a Participant's fee is limited to such maximum fee, any excess
amount which the Participant otherwise would have paid as a fee above
such maximum fee will be re4allocated among all Equities Participants,
including any Equities Participant that is subject to the maximum fee,
in accordance with their market share [the share volume reported to
such national securities association by an Execution Venue shall not be
included in the calculation of such national security association's
market share].
(ii) Each Participant [Execution Venue] that executes transactions
in Listed Options (``Options Participant'') will pay a [fixed] fee
depending on the Listed Options market share of that Participant[,
Execution Venue, with the Operating Committee establishing at least two
and no more than five tiers of fixed fees, based on an Execution
Venue's Listed Options market share]. For these purposes, market share
will be calculated by contract volume.
(b) The Operating Committee will establish [fixed] fees to be
payable by Industry Members, based on the message traffic generated by
such Industry Member subject to a base minimum fee and discounts for
market maker message traffic [, with the Operating Committee
establishing at least five and no more than nine tiers of fixed fees,
based on message traffic. For the avoidance of doubt, the fixed fees
payable by Industry Members pursuant to this paragraph shall, in
addition to any other applicable message traffic, include message
traffic generated by: (i) An ATS that does not execute orders that is
sponsored by such Industry Member; and (ii) routing orders to and from
any ATS sponsored by such Industry Member.], provided, however, that
any Industry Member shall pay a maximum fee established by the
Operating Committee instead of the higher fee calculated based on such
Industry Member's message traffic. If an Industry Member's fee is
limited to such maximum fee, any excess amount which the Industry
Member otherwise would have paid as a fee above such maximum fee will
be re-allocated among all Industry Members, including any Industry
Member that is subject to the maximum fee or subject to the base
minimum fee, in accordance with their message traffic.
(c) The Operating Committee may establish any other fees ancillary
to the operation of the CAT that it reasonably determines appropriate,
including fees: (i) For the late or inaccurate reporting of information
to the CAT; (ii) for correcting submitted information; and (iii) based
on access and use of the CAT for regulatory and oversight purposes (and
not including any reporting obligations).
(d) The Company shall make publicly available a schedule of
effective fees and charges adopted pursuant to this Agreement as in
effect from time to time. The Operating Committee shall review such fee
schedule on at least an annual basis and shall make any changes to such
fee schedule that it deems appropriate. The Operating Committee is
authorized to review such fee schedule on a more regular basis, but

[[Page 21074]]

shall not make any changes on more than a semiannual basis unless,
pursuant to a Supermajority Vote, the Operating Committee concludes
that such change is necessary for the adequate funding of the Company.
* * * * *

Appendix B

Fee Schedule

Consolidated Audit Trail Funding Fees

(a) Each Participant shall pay to Consolidated Audit Trail, LLC in
the manner prescribed by the Consolidated Audit Trail, LLC a CAT fee
calculated as follows:
(1) Commencing upon SEC approval of the CAT fee, each Participant
shall pay a quarterly CAT fee calculated based on market share from the
prior quarter by adding the sum of the following:
(A) For all Participants, the Minimum Participant Fee;
(B) For Equities Participants, the lesser of:
(i) The product of multiplying the Equities Participant's
percentage of total market share of NMS Stocks for all Equities
Participants against the Equities Participant Allocation; or
(ii) the Maximum Equities Participant Fee, if applicable; and
If any Participant's fee is limited to the Maximum Equities
Participant Fee, any excess amount which such Participant otherwise
would have paid as a fee above such Maximum Equities Participant Fee
will be re-allocated among all Equities Participants (including any
Equities Participant subject to the Maximum Equities Participant Fee)
in accordance with their market share.
(C) For Options Participants, the product of multiplying the
Participant's percentage of total market share of Listed Options
contracts for all Options Participants against the Options Participant
Allocation;
For the avoidance of doubt, Participants with both options and
equities market share shall be considered both Equities Participants
and Options Participants.
(b) The CAT fees set forth in paragraph (a) will be calculated
based on the following:
(1) Industry Member/Participant Allocation. The Industry Member
Allocation for each quarter shall be 75% of 1/4th of the Total CAT
Costs for the relevant year. The Participant Allocation for each
quarter shall be 25% of 1/4th of the Total CAT Costs for the relevant
year.
(2) Minimum Participant Fee. The Minimum Participant Fee is 0.75%
of the Participant Allocation. For avoidance of doubt, the Minimum
Participant Fee will be paid by each registered national securities
exchange that is a Participant and each registered national securities
association that is a Participant.
(3) Adjusted Participant Allocation. The Adjusted Participant
Allocation is the Participant Allocation minus the sum of all Minimum
Participant Fees required to be paid by each Participant.
(4) Equities Participant Allocation. The Equities Participant
Allocation is 60% of the Adjusted Participant Allocation.
(5) Options Participant Allocations. The Options Participant
Allocation is 40% of the Adjusted Participant Allocation.
(6) Maximum Equities Participant Fee. The Maximum Equities
Participant Fee is the greater of (x) 20% of the Equities Participant
Allocation or (y) the highest CAT fee required to be paid by any other
Equities Participant plus 5% of such highest CAT fee. The Maximum
Equities Participant Fee only applies to a Participant that is a
national securities association.
(7) Total CAT Costs. The Total CAT Costs shall be the total
budgeted costs for the CAT for the relevant year. The total budgeted
costs for the CAT for the relevant year shall be the total CAT costs
set forth in the annual operating budget approved by the Operating
Committee pursuant to Section 11.1(a) of the CAT NMS Plan. The total
budgeted costs for the CAT for the relevant year may be adjusted on a
quarterly basis as the Operating Committee reasonably deems appropriate
for the prudent operation of the Company. To the extent that the
Operating Committee adjusts the total budgeted costs for the CAT for
the relevant year during its quarterly budget review, the adjusted
budgeted costs for the CAT will be used in calculating the remaining
CAT fees for that year.
* * * * *

Exhibit B

The following sets forth an illustrative example of CAT fees
calculated under the Proposed Funding Model based on budgeted Total CAT
Costs for 2021 and message traffic and market share data for the fourth
quarter of 2020. Note Exhibit B only provides an illustrative example
of how the Proposed Funding Model would operate; the calculation of
actual fees will differ from this example in various ways. For example,
the Participants have paid or will have paid 100% of these costs up to
the time of the SEC approval of the Proposed Funding Model, and, as a
result, Participants would not be obligated to pay CAT fees related to
2021 CAT costs to the extent the Participants have already paid such
costs. Furthermore, Period 3 CAT Fees for Industry Members will be
calculated based on actual Total CAT Costs for 2021, not budgeted CAT
Costs for 2021, and based on CAT Data from 2022, not from 2020.

CAT Fee Example for Illustrative Purposes Only

Budgeted Total CAT Costs for 2021: $132,522,082
Budgeted Quarterly Total CAT Costs: $33,130,502.50

Quarterly Participant CAT Fees

Participant Allocation (25% of Total CAT Costs): $8,282,625.62
Minimum Participant Fee (0.75% of Participant Allocation): $62,119.73
Equities Participant Allocation (60% of Adjusted Participant Allocation
with Minimum Participant Fee): $4,845,413.60
Options Participant Allocation (40% of Adjusted Participant Allocation
with Minimum Participant Fee): $3,437,291.50
Maximum Equities Participant Fee (with Minimum Participant Fee):
$904,261.77
---------------------------------------------------------------------------

\105\ These fees reflect the Minimum Participant Fee, the
Maximum Equities Participant Fee and the re-allocation related to
the Maximum Equities Participant Fee.

Equities Participants
------------------------------------------------------------------------
% of total
Equities participant market Quarterly CAT
share fee \105\
------------------------------------------------------------------------
1.......................................... 44.036 $1,316,397.13
2.......................................... 15.857 819,716.78
3.......................................... 10.311 574,962.49
4.......................................... 8.465 452,089.70
5.......................................... 7.276 392,929.38
6.......................................... 4.823 270,943.47
7.......................................... 2.404 181,695.58
8.......................................... 1.572 140,305.36
9.......................................... 1.439 133,707.03
10......................................... 1.105 117,096.53
11......................................... 0.732 67,479.86
12......................................... 0.658 63,773.04
13......................................... 0.562 90,079.89
14......................................... 0.464 54,132.27
15......................................... 0.244 74,252.16
16......................................... 0.052 33,652.74
17......................................... 0.000 62,125.23
------------------------------------------------------------------------

Options Participants
------------------------------------------------------------------------
% of total
Options participant market Quarterly CAT
share fee \106\
------------------------------------------------------------------------
1.......................................... 15.832 $488,295.85
2.......................................... 12.919 378,833.92
3.......................................... 9.424 284,742.41
4.......................................... 8.742 266,385.07
5.......................................... 8.640 263,642.40
6.......................................... 8.586 262,187.01
7.......................................... 7.327 259,360.77

[[Page 21075]]

8.......................................... 6.048 224,933.08
9.......................................... 3.147 115,761.83
10......................................... 4.246 176,402.53
11......................................... 3.873 135,311.97
12......................................... 3.267 150,063.18
13......................................... 3.304 151,047.18
14......................................... 3.404 153,759.91
15......................................... 1.020 89,566.40
16......................................... 0.221 36,997.99
------------------------------------------------------------------------

Quarterly Industry Member CAT Fees
---------------------------------------------------------------------------

\106\ These fees reflect the Minimum Participant Fee.
---------------------------------------------------------------------------

Industry Member Allocation (75% of Total CAT Costs): $24,847,876.90
Minimum Industry Member CAT Fee: $125 per quarter
Maximum Industry Member CAT Fee: 8% of message traffic

------------------------------------------------------------------------
% of total
message Quarterly CAT
Industry member traffic fee \108\
\107\
------------------------------------------------------------------------
1.......................................... 15.942715 $2,508,235.23
2.......................................... 12.3469 2,390,859.99
3.......................................... 8.5412389 2,266,635.37
4.......................................... 8.4307566 2,263,028.99
5.......................................... 8.1484697 2,253,814.54
6.......................................... 6.881969 1,925,916.13
7.......................................... 3.33 931,352.41
8.......................................... 3.07 859,935.74
9.......................................... 2.87 803,898.93
10......................................... 2.7555 771,124.66
11......................................... 2.66620 746,134.09
12......................................... 2.635884 737,650.94
13......................................... 2.4252220 678,697.33
14......................................... 2.131963 596,628.96
15......................................... 1.4843 415,367.88
16......................................... 1.3483314 377,329.97
17......................................... 1.335250 373,669.04
18......................................... 1.18 329,495.95
19......................................... 1.1051530 309,276.58
20......................................... 1.05683181 295,753.93
21......................................... 1.0187078 285,084.95
22......................................... 0.8705377 243,619.61
23......................................... 0.65176922 182,397.33
24......................................... 0.603158 168,793.42
25......................................... 0.596133 166,827.49
26......................................... 0.487318 136,375.85
27......................................... 0.44 123,953.82
28......................................... 0.308189 86,246.66
29......................................... 0.2935546 82,151.14
30......................................... 0.2874546 80,444.05
31......................................... 0.284763 79,690.93
32......................................... 0.2556 71,535.07
33......................................... 0.253008 70,804.09
34......................................... 0.24849056 69,539.98
35......................................... 0.1988107 55,637.08
36......................................... 0.1869246 52,310.76
37......................................... 0.163770 45,831.09
38......................................... 0.1572621 44,009.72
39......................................... 0.1417 39,645.51
40......................................... 0.1408842 39,426.37
41......................................... 0.1297568 36,312.38
42......................................... 0.1270 35,540.69
43......................................... 0.121951 34,127.81
44......................................... 0.11747991 32,876.70
45......................................... 0.1144613 32,031.93
46......................................... 0.1057779 29,601.89
47......................................... 0.105 29,271.83
48......................................... 0.1021931 28,598.71
49......................................... 0.0978121 27,372.66
50......................................... 0.096430 26,985.90
51......................................... 0.0928221 25,976.22
52......................................... 0.0859471 24,052.25
53......................................... 0.084735 23,713.00
54......................................... 0.081 22,774.83
55......................................... 0.0759906 21,265.93
56......................................... 0.0738346 20,662.59
57......................................... 0.066684 18,661.49
58......................................... 0.065941 18,453.43
59......................................... 0.063723 17,832.74
60......................................... 0.05392 15,090.39
61......................................... 0.0483078 13,518.91
62......................................... 0.043817 12,262.25
63......................................... 0.0384240 10,752.94
64......................................... 0.0370 10,361.23
65......................................... 0.031046 8,688.22
66......................................... 0.029490 8,252.77
67......................................... 0.03 8,112.33
68......................................... 0.0269 7,514.14
69......................................... 0.02450 6,855.05
70......................................... 0.02444676 6,841.42
71......................................... 0.02095646 5,864.66
72......................................... 0.0191560 5,360.79
73......................................... 0.0175190 4,902.68
74......................................... 0.0164131 4,593.20
75......................................... 0.015561 4,354.73
76......................................... 0.0148 4,140.50
77......................................... 0.014 3,978.17
78......................................... 0.01402 3,924.60
79......................................... 0.0136249 3,812.92
80......................................... 0.01284773 3,595.43
81......................................... 0.0127 3,544.27
82......................................... 0.011465 3,208.47
83......................................... 0.0112806 3,156.88
84......................................... 0.0108896 3,047.45
85......................................... 0.010741 3,005.74
86......................................... 0.01029 2,879.17
87......................................... 0.010275 2,875.50
88......................................... 0.0092574 2,590.67
89......................................... 0.008569 2,398.10
90......................................... 0.0085212 2,384.65
91......................................... 0.01 2,347.27
92......................................... 0.01 2,178.96
93......................................... 0.00758 2,120.87
94......................................... 0.007202 2,015.48
95......................................... 0.007065 1,977.19
96......................................... 0.0068586 1,919.37
97......................................... 0.00651944 1,824.46
98......................................... 0.0064808 1,813.64
99......................................... 0.006361 1,780.09
100........................................ 0.005749 1,608.74
101........................................ 0.005305 1,484.62
102........................................ 0.0048870 1,367.64
103........................................ 0.00 1,332.74
104........................................ 0.0047449 1,327.84
105........................................ 0.00469 1,311.81
106........................................ 0.004674 1,308.08
107........................................ 0.0046547 1,302.63
108........................................ 0.0045685 1,278.49
109........................................ 0.0044112 1,234.47
110........................................ 0.00 1,194.19
111........................................ 0.004164 1,165.41
112........................................ 0.004 1,156.57
113........................................ 0.0041 1,154.93
114........................................ 0.00 1,150.64
115........................................ 0.004090 1,144.70
116........................................ 0.0040070 1,121.35
117........................................ 0.0039591 1,107.96
118........................................ 0.003438 962.16
119........................................ 0.0033477 936.85
120........................................ 0.003321 929.46
121........................................ 0.0031118 870.83
122........................................ 0.00310 867.51
123........................................ 0.003082 862.46
124........................................ 0.00302 845.50
125........................................ 0.0029780 833.40
126........................................ 0.0027976 782.91
127........................................ 0.002709 758.12
128........................................ 0.00269 752.67
129........................................ 0.0025567 715.50
130........................................ 0.0024297 679.96
131........................................ 0.0024 671.83
132........................................ 0.00210 586.75
133........................................ 0.002030 568.06
134........................................ 0.001970 551.19
135........................................ 0.0018979 531.14
136........................................ 0.001826 510.99
137........................................ 0.0018040 504.85
138........................................ 0.0017908 501.14
139........................................ 0.001777 497.38
140........................................ 0.0017672 494.54
141........................................ 0.0015795 442.02
142........................................ 0.0014790 413.90
143........................................ 0.00 411.74
144........................................ 0.0014253 398.86
145........................................ 0.0014101 394.62
146........................................ 0.001353 378.77
147........................................ 0.0013274 371.48
148........................................ 0.0013061 365.52
149........................................ 0.0013 359.89
150........................................ 0.0012558 351.44
151........................................ 0.0012482 349.31
152........................................ 0.001206 337.46
153........................................ 0.0011434 319.97
154........................................ 0.0011142 311.81
155........................................ 0.0011093 310.45
156........................................ 0.001090 305.14
157........................................ 0.00108 301.72
158........................................ 0.001 299.87
159........................................ 0.001 294.94
160........................................ 0.001 292.03
161........................................ 0.0010354 289.75
162........................................ 0.0010202 285.52
163........................................ 0.000943 263.95
164........................................ 0.001 257.53
165........................................ 0.000860 240.72
166........................................ 0.0008519 238.39
167........................................ 0.0008308 232.51
168........................................ 0.0008213 229.84
169........................................ 0.0006737 188.53
170........................................ 0.00067 187.07
171........................................ 0.0006423 179.74
172........................................ 0.00 178.92
173........................................ 0.00063 176.72
174........................................ 0.0006153 172.18
175........................................ 0.0006146 171.99
176........................................ 0.000544 152.35
177........................................ 0.0005437 152.15
178........................................ 0.000540 151.07
179........................................ 0.00053041 148.44
180........................................ 0.0005058 141.55
181........................................ 0.000505 141.40
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188........................................ 0.00036 136.85
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195........................................ 0.00 134.11
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198........................................ 0.0002623 133.56
199........................................ 0.00 133.51
200........................................ 0.0002550 133.33
201........................................ 0.00025 133.12
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203........................................ 0.0002442 132.97
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205........................................ 0.0002311 132.54
206........................................ 0.0002145 132.00
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212........................................ 0.00019 131.07
213........................................ 0.0001839 131.00
214........................................ 0.000179 130.84
215........................................ 0.00017 130.63
216........................................ 0.000172 130.62

[[Page 21076]]

217........................................ 0.00017 130.50
218........................................ 0.000167 130.44
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459........................................ 0.000005 125.17
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461........................................ 0.000005 125.16
462........................................ 0.000005 125.16

[[Page 21077]]

463........................................ 0.0000048 125.16
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707........................................ 0.00000 125.03
708........................................ 0.000 125.03

[[Page 21078]]

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954........................................ 0.0000 125.01

[[Page 21079]]

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1200....................................... 0.000000 125.00

[[Page 21080]]

1201....................................... 0.000 125.00
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1233....................................... 0.0000 125.00
1234....................................... 0.000000 125.00
1235....................................... 0.000000 125.00
1236....................................... 0.0000000 125.00
1237....................................... 0.0000000 125.00
------------------------------------------------------------------------

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

\107\ These percentages reflect the market maker discounts.
\108\ These fees reflect the Maximum Industry Member CAT Fee,
the Minimum Industry CAT Fee, and re-allocations related to the
applications of the Minimum Industry Member CAT Fee and the Maximum
Industry Member CAT Fee.
---------------------------------------------------------------------------

[FR Doc. 2021-08049 Filed 4-20-21; 8:45 am]
BILLING CODE 8011-01-P

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