Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Cboe BZX Exchange, Inc.; Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX Exchange, Inc.; Cboe Exchange, Inc.; NASDAQ BX, Inc.; Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; NASDAQ PHLX LLC and The NASDAQ Stock Market LLC; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Changes To Adopt a Fee Schedule To Establish Fees for Industry Members Related to the National Market System Plan Governing the Consolidated Audit Trail, 33448-33454 [2021-13247]
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Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13283 Filed 6–23–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92207; File Nos. SR–BX–
2021–018; SR–C2–2021–008; SR–CBOE–
2021–030; SR-CboeBYX–2021–011; SRCboeBZX–2021–034; SR-CboeEDGA–2021–
010; SR-CboeEDGX–2021–024; SR–GEMX–
2021–03; SR–ISE–2021–08; SR–MRX–2021–
05; SR–NASDAQ–2021–029; SR–PHLX–
2021–25]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Cboe BZX
Exchange, Inc.; Cboe C2 Exchange,
Inc.; Cboe EDGA Exchange, Inc.; Cboe
EDGX Exchange, Inc.; Cboe Exchange,
Inc.; NASDAQ BX, Inc.; Nasdaq GEMX,
LLC; Nasdaq ISE, LLC; Nasdaq MRX,
LLC; NASDAQ PHLX LLC and The
NASDAQ Stock Market LLC;
Suspension of and Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule
Changes To Adopt a Fee Schedule To
Establish Fees for Industry Members
Related to the National Market System
Plan Governing the Consolidated Audit
Trail
June 17, 2021.
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I. Introduction
On April 21, 2021, Cboe BYX
Exchange, Inc. (‘‘CboeBYX’’), Cboe BZX
Exchange, Inc. (‘‘CboeBZX’’), Cboe C2
Exchange, Inc. (‘‘C2’’), Cboe EDGA
Exchange, Inc. (‘‘Cboe EDGA’’), Cboe
EDGX Exchange, Inc. (‘‘Cboe EDGX’’),
Cboe Exchange, Inc. (‘‘Cboe’’), NASDAQ
BX, Inc. (‘‘BX’’), Nasdaq GEMX, LLC
(‘‘GEMX’’), Nasdaq ISE, LLC (‘‘ISE’’),
Nasdaq MRX, LLC (‘‘MRX’’), NASDAQ
PHLX LLC (‘‘Phlx’’), The NASDAQ
Stock Market LLC (‘‘Nasdaq’’)
(collectively, the ‘‘Nasdaq and Cboe
Participants’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 proposed rule changes 3 to
15 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release Nos. 91750
(May 4, 2021), 86 FR 25045 (May 10, 2021) (SR–
BX–2021–018) (‘‘Notice’’); 91751 (May 4, 2021), 86
FR 24941 (May 10, 2021) (SR–PHLX–2021–25);
91752 (May 4, 2021), 86 FR 24921 (May 10, 2021)
(SR–NASDAQ–2021–029); 91753 (May 4, 2021), 86
FR 24994 (May 10, 2021) (SR–MRX–2021–05);
1 15
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adopt a fee schedule to establish fees for
Industry Members 4 related to the
National Market System Plan Governing
the Consolidated Audit Trail (‘‘CAT
NMS Plan’’ or ‘‘Plan’’).5 The proposed
rule changes were immediately effective
upon filing with the Commission
pursuant to Section 19(b)(3)(A) of the
Act.6 The proposed rule changes were
published for comment in the Federal
Register on May 10, 2021.7 The
Commission has received no comments
on the proposed rule changes.
Pursuant to Section 19(b)(3)(C) of the
Act, the Commission is hereby: (1)
Temporarily suspending the proposed
rule changes; and (2) instituting
proceedings to determine whether to
approve or disapprove the proposals.
II. Summary of the Proposed Rule
Changes 8
In July 2012, the Commission adopted
Rule 613 of Regulation NMS, which
required national securities exchanges
and national securities associations
(‘‘Participants’’) 9 to jointly develop and
91755 (May 4, 2021), 86 FR 25035 (May 10, 2021)
(SR–ISE–2021–08); 91756 (May 4, 2021), 86 FR
24979 (May 10, 2021) (SR–GEMX–2021–03); 91757
(May 4, 2021), 86 FR 24911 (May 10, 2021) (SR–
C2–2021–008); 91758 (May 4, 2021), 86 FR 25004
(May 10, 2021) (SR-CboeEDGX–2021–024); 91759
(May 4, 2021), 86 FR 24956 (May 10, 2021) (SRCboeEDGA–2021–010); 91760 (May 4, 2021), 86 FR
24966 (May 10, 2021) (SR–CBOE–2021–030); 91761
(May 4, 2021), 86 FR 25016 (May 10, 2021) (SRCboeBYX–2021–011); and 91762 (May 4, 2021), 86
FR 24931 (May 10, 2021) (SR-CboeBZX–2021–034).
4 The CAT NMS Plan defines ‘‘Industry Member’’
as ‘‘a member of a national securities exchange or
a member of a national securities association.’’ See
CAT NMS Plan, infra note 5, at Section 1.1.
5 The CAT NMS Plan is a national market system
plan approved by the Commission pursuant to
Section 11A of the Act and the rules and
regulations thereunder. See Securities Exchange Act
Release No. 79318 (November 15, 2016), 81 FR
84696 (November 23, 2016). The CAT NMS Plan
functions as the limited liability company
agreement of the jointly owned limited liability
company formed under Delaware state law through
which the Participants conduct the activities of the
CAT (‘‘Company’’). On August 29, 2019, the
Participants replaced the CAT NMS Plan in its
entirety with the limited liability company
agreement of a new limited liability company
named Consolidated Audit Trail, LLC, which
became the Company. See Securities Exchange Act
Release No. 87149 (September 27, 2019), 84 FR
52905 (October 3, 2019).
6 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
7 See supra note 3.
8 For a more detailed description of the proposed
rule changes, see Notice, supra note 3.
9 The Participants include BOX Exchange LLC,
Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
Cboe C2 Exchange, Inc., Cboe EDGA Exchange, Inc.,
Cboe EDGX Exchange, Inc., Cboe Exchange, Inc.,
Financial Industry Regulatory Authority, Inc.,
Investors’ Exchange LLC, Long-Term Stock
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submit to the Commission a national
market system plan (‘‘NMS plan’’) to
create, implement, and maintain a
consolidated audit trail (‘‘CAT’’) 10 that
would capture customer and order event
information for orders in NMS
securities. On November 15, 2016, the
Commission approved the CAT NMS
Plan required by Rule 613.11 Under the
CAT NMS Plan, the Operating
Committee of a newly formed
company—CAT NMS, LLC, of which
each Participant is a member—has the
discretion (subject to the funding
principles set forth in the CAT NMS
Plan) to establish funding for the
Company to operate the CAT, including
establishing fees to be paid by the
Participants and Industry Members.12
The Plan specified that, in
establishing the funding of the
Company, the Operating Committee
shall establish ‘‘a tiered fee structure in
which the fees charged to: (i) CAT
Reporters that are Execution Venues,
including ATSs, are based upon the
level of market share; (ii) Industry
Members’ non-ATS activities are based
upon message traffic; 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).’’ 13 Under
the Plan, such fees are to be
implemented in accordance with
various funding principles, including an
‘‘allocation of the Company’s related
costs among Participants and Industry
Members that is consistent with the
Exchange Act taking into account . . .
distinctions in the securities trading
operations of Participants and Industry
Members and their relative impact upon
the Company resources and operations’’
and the ‘‘avoid[ance of] any
disincentives such as placing an
inappropriate burden on competition
and reduction in market quality.’’ 14
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.
10 See Securities Exchange Act Release No. 67457
(July 18, 2012), 77 FR 45722 (August 1, 2012).
11 See supra note 5.
12 See CAT NMS Plan, supra note 5, at Section
11.1(b).
13 Id. at Section 11.2(c). See Article XI of the CAT
NMS Plan for additional detail. Id. at Article XI.
14 Id. at Section 11.2(b) and (e).
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Federal Register / Vol. 86, No. 119 / Thursday, June 24, 2021 / Notices
On May 15, 2020, the Commission
adopted amendments to the CAT NMS
Plan designed to increase the
Participants’ financial accountability for
the timely completion of the CAT
(‘‘Financial Accountability
Amendments’’).15 The Financial
Accountability Amendments added
Section 11.6 to the CAT NMS Plan to
govern the recovery from Industry
Members of any fees, costs, and
expenses (including legal and
consulting fees, costs and expenses)
incurred by or for the Company in
connection with the development,
implementation and operation of the
CAT from June 22, 2020 until such time
that the Participants have completed
Full Implementation of CAT NMS Plan
Requirements 16 (‘‘Post-Amendment
Expenses’’). Section 11.6 establishes
target deadlines for four critical
implementation milestones (Periods 1,
2, 3 and 4) 17 and reduces the amount
of fee recovery available to the
Participants if these deadlines are
missed.18
The Participants filed an amendment
to the CAT NMS Plan on March 31,
2021 (‘‘Proposed CAT Fee Plan
Amendment’’) to implement a revised
funding model (‘‘Proposed Funding
Model’’) and to establish the CAT fees
to be charged to themselves.19 On April
21, 2021, the Proposed CAT Fee Plan
Amendment was published for
comment in the Federal Register.20 The
Commission has not acted on the
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15 See Securities Exchange Act Release No. 88890,
85 FR 31322 (May 22, 2020).
16 See CAT NMS Plan, supra note 5, at Section
1.1.
17 Id. at Section 11.6(a)(i).
18 Id. at Section 11.6(a)(ii) and (iii).
19 See Securities Exchange Act Release No. 91555
(April 14, 2021), 86 FR 21050 (April 21, 2021).
20 Id.
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Proposed CAT Fee Plan Amendment. In
the meantime, the Nasdaq and Cboe
Participants submitted the proposed
rule changes that are the subject of this
Order 21 to adopt a fee schedule to
establish CAT fees applicable to their
Industry Members in accordance with
the Proposed CAT Fee Plan
Amendment.22 In their filings, the
Nasdaq and Cboe Participants stated
that the fee schedule provisions will
become operative upon the
Commission’s approval of the Proposed
CAT Fee Plan Amendment.23
A. Allocation of Total CAT Costs
Under the Proposed Funding Model,
‘‘Total CAT Costs’’ would include costs
associated with developing,
implementing and operating the CAT
for the relevant period.24 The Nasdaq
and Cboe Participants propose to
recover 75% of the Total CAT Costs
from Industry Members (‘‘Industry
Member Allocation’’).25 As detailed
below, the proposed rule changes would
recover the Total CAT Costs from
Industry Members on a quarterly basis
through four categories of CAT fees: A
Historical CAT Assessment,26 a Period 3
CAT Fee,27 a Period 4 CAT Fee 28 and
a Quarterly CAT Fee.29 The Historical
CAT Assessment would be designed to
21 Section 11.1(b) of the CAT NMS Plan requires
the Participants to file with the Commission under
Section 19(b) of the Act any CAT fees applicable to
Industry Members that the Operating Committee
approves. See CAT NMS Plan, supra note 5, at
Section 11.1(b).
22 For additional details regarding these fees, see,
e.g., Notice, supra note 3.
23 Id. at 25045.
24 Id. at 25045–6.
25 Id. at 25046.
26 See infra Section II.D.a.
27 See infra Section II.D.b.
28 See infra Section II.D.c.
29 See infra Section II.D.d.
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33449
recover certain CAT costs incurred prior
to January 1, 2021 (‘‘Historical CAT
Assessment Costs’’).30 Excluding certain
costs,31 the Total CAT Costs for this
period are $193,273,342.32 Under the
proposed rule changes, the Historical
CAT Assessment would recover 75% of
these costs from Industry Members
($144,955,006).33 As proposed, the
Period 3 CAT Fee would recover from
Industry Members 75% of the Total
CAT Costs incurred from January 1,
2021 through December 31, 2021.34 The
Period 4 CAT Fee would recover 75%
of Total CAT Costs incurred from
January 1, 2022 through December 30,
2022.35 Beginning in the second quarter
of 2023, Industry Members would be
assessed a Quarterly CAT Fee on an
ongoing basis of 75% of the budgeted
Total CAT Costs for the relevant year.36
The proposed rule changes state that the
budgeted Total CAT Costs would be set
forth in the annual operating budget
approved by the Operating Committee
for the relevant year pursuant to Section
11.1(a) of the CAT NMS Plan.37 The
Total CAT Costs applicable to the
Period 3 and 4 CAT Fees would be set
forth in the year-end financial
statements of the Company for 2021 and
2022, respectively.38
30 See,
e.g., Notice, supra note 3, at 25049.
CAT Fee Plan Amendment, supra
note 19, at 21064.
32 See, e.g., Notice, supra note 3, at 25049.
33 Id.
34 Id. at 25050.
35 Id. at 25051.
36 Id. at 25052.
37 The proposed rule changes state that the
budgeted Total CAT Costs may be adjusted on a
quarterly basis, and if the Operating Committee
adjusts such costs within a year, the adjusted costs
would be used in calculating the remaining CAT
fees for that year. Id. at 25052.
38 See, e.g., Notice, supra note 3, at 25050, 25051.
31 Proposed
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B. Message Traffic
Under the proposed rule changes,
each Industry Member would pay a CAT
fee calculated by multiplying its
message traffic percentage of total
Industry Member message traffic per
quarter 39 by the Industry Member
Allocation, subject to market maker
discounts for message traffic, as
applicable, as well as a minimum fee
and a maximum fee.40 Under the
proposed rule changes, when
calculating the message traffic of an
Industry Member that is an Options
Market Maker,41 its market making
message traffic would be discounted by
multiplying its Listed Options 42 market
making message traffic by the Listed
Options trade-to-quote ratio.43 The
trade-to-quote ratio would be calculated
each quarter based on the prior quarter’s
SIP Data 44 that is included in CAT
Data.45 The proposed discount would be
calculated by dividing the adjusted
trade count 46 by the total number of
quotes received by the SIPs.47
Under the proposed rule changes,
when calculating the message traffic of
an Industry Member that is an equity
market maker in NMS Stocks (‘‘Equity
Market Maker’’), its market making
39 The proposed rule changes state that message
traffic would be calculated based on Industry
Members’ Reportable Events reported to the CAT,
as defined in the CAT Reporting Technical
Specifications for Industry Members. Reportable
Events that would be counted as message traffic
would include the New Order Event, the Order
Route Event and the Trade Event. Message traffic
would not include reporting activity related to
Customer information as set forth in the CAT
Reporting Customer and Account Technical
Specifications for Industry Members. Id. at 25047.
40 See infra Section II.C.
41 The CAT NMS Plan defines ‘‘Options Market
Maker’’ as ‘‘a broker-dealer registered with an
exchange for the purpose of making markets in
options contracts traded on the exchange.’’ See CAT
NMS Plan, supra note 5, at Section 1.1.
42 The CAT NMS Plan states that ‘‘Listed Option’’
has the meaning set forth in Regulation NMS. Id.
Rule 600(b)(43) of Regulation NMS defines ‘‘Listed
Option’’ as ‘‘any option traded on a registered
national securities exchange or automated facility of
a national securities association.’’ See 17 CFR
242.600(b)(43).
43 See, e.g., BX Proposed Rule General 7A(g)(1).
44 See, e.g., Notice, supra note 3, at 25047. See
also CAT NMS Plan, supra note 5, at Section 1.1.,
Section 6.5(a)(ii).
45 See, e.g., Notice, supra note 3, at 25047. See
also CAT NMS Plan, supra note 5, at Section 1.1.
46 The proposed rule changes describe the
adjusted trade count as ‘‘the total number of trades
for the quarter minus the total number of trade
busts.’’ See, e.g., Notice, supra note 3, at 25047.
47 For each Options Market Maker, the discount
would apply 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 . . . 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.’’ Id.
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message traffic would be discounted by
multiplying its market making message
traffic in NMS Stocks by the NMS Stock
trade-to-quote ratio.48 The trade-toquote ratio would be calculated each
quarter based on the prior quarter’s SIP
Data that is included in CAT Data.49 The
proposed discount would be calculated
by dividing the adjusted trade count by
the total number of quotes received by
the SIPs.50 The discounted message
traffic of Options Market Makers and
Equity Market Makers would be counted
as part of total Industry Member
message traffic.51
C. Minimum and Maximum Industry
Member CAT Fee
Under the proposed rule changes,
each Industry Member would be subject
to a minimum Industry Member CAT
fee of $125 per quarter (‘‘Minimum
Industry Member CAT Fee’’).52 If an
Industry Member’s CAT fee would be
less than $125 per quarter, it would pay
the Minimum Industry Member CAT
Fee, even if it has not yet begun to
report to the CAT.53 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 (‘‘Minimum
Industry Member CAT Fee ReAllocation’’).54
Under the proposed rule changes,
each Industry Member’s CAT fee would
also be subject to a maximum Industry
Member CAT fee, which would be the
fee calculated based on 8% of the total
Industry Member message traffic for the
relevant quarter (‘‘Maximum Industry
Member CAT Fee’’).55 If any Industry
Member’s fee is subject to the Maximum
Industry Member CAT Fee, any excess
48 See,
e.g., BX Proposed Rule General 7A(g)(2).
e.g., Notice, supra note 3, at 25048.
50 Id. See also supra note 46.
51 See, e.g., Notice, supra note 3, at 25047.
52 Id. at 25048; see, e.g., BX Proposed Rule
General 7A(h)(1).
53 See, e.g., Notice, supra note 3, at 25048.
54 See, e.g., BX Proposed Rule General 7A(h)(2).
Options Market Makers and Equity Market Makers
would be required to pay the Minimum Industry
Member CAT Fee if their quarterly CAT fee
calculated with the market maker discounts is less
than $125 per quarter. See, e.g., Notice, supra note
3, at 25048, n.32.
55 Id. at 25048. The Commission notes that the
proposed rule text states ‘‘[t]he Maximum Industry
Member CAT Fee for each quarter is 8% of the total
CAT costs for the relevant quarter’’ (emphasis
added). See, e.g., BX Proposed Rule General
7A(f)(1).
49 See,
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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 their percentage of
total message traffic (‘‘Maximum
Industry Member CAT Fee ReAllocation’’).56
D. Amount and Timing of Proposed
CAT Fees
As discussed above, the proposed rule
changes would recover the Total CAT
Costs from Industry Members through
the assessment of four categories of CAT
fees on a quarterly basis: A Historical
CAT Assessment, a Period 3 CAT Fee,
a Period 4 CAT Fee and a Quarterly
CAT Fee.
a. Historical CAT Assessment
The proposed rule changes state that,
for four calendar quarters commencing
‘‘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,’’ 57 each
Industry Member would pay a Historical
CAT Assessment which would be the
greater of: (1) The Minimum Industry
Member CAT Fee (plus any applicable
Maximum Industry Member CAT Fee
Re-Allocation); or (2) the amount
calculated by multiplying the
percentage of the Industry Member’s
message traffic of the total Industry
Member message traffic based on the
prior quarter’s message traffic by
$36,238,752 58 (subject to the proposed
market maker discounts for message
traffic, as applicable, as well as the
Maximum Industry Member CAT Fee,
Maximum Industry Member CAT Fee
Re-Allocation and Minimum Industry
Member CAT Fee Re-Allocation).59
As discussed above, the proposed
Historical CAT Assessment is intended
to recover the Historical CAT
Assessment Costs, which comprise
certain CAT costs incurred prior to
January 1, 2021.60 These costs would
include costs incurred through June 22,
2020, the effective date of Section 11.6
of the CAT NMS Plan, and costs related
to Post-Amendment Expenses incurred
during Period 1 (June 22, 2020 through
July 31, 2020, the date of Initial Industry
56 See,
e.g., BX Proposed Rule General 7A(f)(2).
e.g., Notice, supra note 3, at 25049.
58 The Commission notes that $36,238,752 is onequarter of the $144,955,006 Historical CAT
Assessment Costs. See supra Section II.A.
59 See, e.g., BX Proposed Rule General 7A(b).
60 See supra Section II.A.
57 See,
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Member Core Equity and Options
Reporting 61) and during Period 2
(August 1, 2020 through December 31,
2020, the date of the Full
Implementation of Core Equity
Reporting 62).63 The Historical CAT
Assessment Costs would include fees,
costs and expenses incurred by or for
the Company in connection with the
development, implementation and
operation of the CAT during Periods 1
and 2.64
b. Period 3 CAT Fee
Under the proposed rule changes, for
four quarters commencing in the second
quarter of 2022, each Industry Member
would pay a Period 3 CAT Fee which
would be the greater of: (1) The
Minimum Industry Member CAT Fee
(plus any applicable Maximum Industry
Member CAT Fee Re-Allocation); or (2)
the amount calculated by multiplying
the percentage of the Industry Member’s
message traffic of the total Industry
Member message traffic based on the
prior quarter’s message traffic by 1⁄4 of
75% of the Period 3 Total CAT Costs 65
(subject to the proposed market maker
message traffic discounts, as applicable,
as well as the Maximum Industry
Member CAT Fee, Maximum Industry
Member CAT Fee Re-Allocation and
Minimum Industry Member CAT Fee
Re-Allocation).66
According to the Nasdaq and Cboe
Participants, the proposed Period 3 CAT
Fee is intended to recover a percentage
of the Total CAT Costs incurred from
January 1, 2021 through December 31,
2021.67 The Period 3 CAT Costs would
be related to Post-Amendment
Expenses 68 and would include fees,
costs and expenses incurred by or for
the Company in connection with the
development, implementation and
operation of the CAT during Period 3.69
The Period 3 CAT Costs would be
calculated at the end of 2021 and would
be set forth in the 2021 financial
statements for the Company.70 Through
a CAT alert after the end of 2021, the
Operating Committee would announce
the Total CAT Costs for 2021 to be used
to calculate the Period 3 CAT Fees.71
61 See
CAT NMS Plan, supra note 5, at Section
1.1.
62 Id.
63 See,
e.g., Notice, supra note 3, at 25049, 25050.
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64 Id.
65 The Period 3 CAT Costs would be the Total
CAT Costs incurred from January 1, 2021 through
December 31, 2021. Id. at 25050.
66 See, e.g., BX Proposed Rule General 7A(c).
67 See, e.g., Notice, supra note 3, at 25050.
68 Id. at 25051.
69 Id.
70 Id. at 25050. The proposed rule changes state
that the Period 3 CAT Costs will be the total actual
CAT costs incurred for the CAT for 2021 as set forth
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Industry Members would be required to
commence paying the Period 3 CAT Fee
in the second quarter of 2022, based on
CAT Data from the first quarter of
2022.72
The proposed rule changes state that
collection of the full amount of the
Period 3 CAT Fee will depend upon
achievement of Full Availability and
Regulatory Utilization of Transaction
Database Functionality 73 by December
31, 2021.74 If such achievement is not
met, the amount of the Period 3 CAT
Fee that may be recovered from Industry
Members will depend upon the fee
limitations in Section 11.6(a)(ii) of the
CAT NMS Plan, as established by the
Financial Accountability
Amendments.75
c. Period 4 CAT Fee
Under the proposed rule changes, for
four quarters commencing in the second
quarter of 2023, each Industry Member
shall pay a Period 4 CAT Fee which
shall be the greater of: (1) The Minimum
Industry Member CAT Fee (plus any
applicable Maximum Industry Member
CAT Fee Re-Allocation); or (2) the
amount calculated by multiplying the
percentage of the Industry Member’s
message traffic of the total Industry
Member message traffic based on the
prior quarter’s message traffic by 1⁄4 of
75% of the Period 4 Total CAT Costs 76
(subject to the proposed market maker
message traffic discounts, as applicable,
as well as the Maximum Industry
Member CAT Fee, Maximum Industry
Member CAT Fee Re-Allocation and
Minimum Industry Member CAT Fee
Re-Allocation).77
According to the Nasdaq and Cboe
Participants, the proposed Period 4 CAT
Fee is intended to recover a percentage
of the Total CAT Costs incurred from
January 1, 2022 through December 30,
2022 (the date of Full Implementation of
CAT NMS Plan Requirements).78 The
Period 4 CAT Costs would recover costs
related to Post-Amendment Expenses 79
and would include fees, costs and
expenses incurred by or for the
Company in connection with the
development, implementation and
operation of the CAT during Period 4.80
70 Id. at 25050. The proposed rule changes state
that the Period 3 CAT Costs will be the total actual
CAT costs incurred for the CAT for 2021 as set forth
in the year-end financial statements of the Company
for 2021. Id.
71 Id.
72 See, e.g., Notice, supra note 3, at 25050.
73 See CAT NMS Plan, supra note 5, at Section
1.1.
74 See, e.g., Notice, supra note 3, at 25051.
75 Id. See also supra note 15.
76 The Period 4 CAT Costs would be the Total
CAT Costs incurred from January 1, 2022 through
December 30, 2022. See, e.g., Notice, supra note 3,
at 25050.
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The Period 4 CAT Costs would be
calculated at the end of 2022 and will
be set forth in the 2022 financial
statements for the Company.81 Through
a CAT alert after the end of 2022, the
Operating Committee would announce
the Total CAT Costs for 2022 to be used
to calculate the Period 4 CAT Fees.82
The proposed rule changes state that
collection of the full amount of the
Period 4 CAT Fee will depend upon
achievement of Full Implementation of
CAT NMS Plan Requirements by
December 30, 2022.83 If such
achievement is not met, the amount of
the Period 4 CAT Fee that may be
recovered from Industry Members will
depend upon the fee limitations in
Section 11.6(a)(ii) of the CAT NMS Plan,
as established by the Financial
Accountability Amendments.84
d. Quarterly CAT Fee
Under the proposed rule changes, on
an ongoing basis commencing in the
second quarter of 2023, each Industry
Member would pay a Quarterly CAT Fee
which would be the greater of: (1) The
Minimum Industry Member CAT Fee
(plus any applicable Maximum Industry
Member CAT Fee Re-Allocation); or (2)
the amount calculated by multiplying
the percentage of the Industry Member’s
message traffic of the total Industry
Member message traffic based on the
prior quarter’s message traffic by 1⁄4 of
75% of the budgeted Total CAT Costs 85
(subject to the proposed market maker
message traffic discounts, as applicable,
as well as the Maximum Industry
Member CAT Fee, Maximum Industry
Member CAT Fee Re-Allocation and
Minimum Industry Member CAT Fee
Re-Allocation).86
According to the Nasdaq and Cboe
Participants, the proposed Quarterly
CAT Fee is intended to recover
estimated Total CAT Costs budgeted for
an upcoming year.87 The budgeted Total
CAT Costs would include Plan
Processor costs, insurance costs, thirdparty support costs and an operational
81 Id. at 25051. The proposed rule changes state
that the Period 4 CAT Costs will be the total actual
CAT costs incurred for the CAT in 2022 as set forth
in the year-end financial statements of the Company
for 2022. Id.
82 Id.
83 See, e.g., Notice, supra note 3, at 25052.
84 Id. at 25051. See also supra note 15.
85 The proposed rule changes state that the
budgeted Total CAT Costs for the relevant year
would 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 for the relevant year. See, e.g., Notice,
supra note 3, at 25052.
86 See, e.g., BX Proposed Rule General 7A(a).
87 See, e.g., Notice, supra note 3, at 25052.
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reserve.88 The Operating Committee
may adjust the budgeted Total CAT
Costs on a quarterly basis for the
prudent operation of the Company, in
which case, the adjusted budgeted costs
for the CAT would be used to calculate
the remaining CAT fees for that year.89
Through a CAT alert at the beginning of
the relevant year, the Operating
Committee would announce the
budgeted Total CAT Costs to be used to
calculate the Quarterly CAT Fee for the
year.90
e. Multiple Payments
According to the proposed rule
changes, to the extent that any two or
more of the four categories of Industry
Member CAT fees are due during the
same quarter, any Industry Member that
is obligated to pay one or more
categories of fees would be required to
pay each category of fee for that
quarter.91 The proposed rule changes
explain, ‘‘[f]or 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 the
Quarterly CAT Fee during the same
quarter, the Industry Member would be
required to pay two minimum $125 fees
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.’’ 92
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f. Timing and Manner of Payment
Under the proposed rule changes, the
Company would provide one invoice to
each Industry Member per payment
period for the Historical CAT
Assessment, Period 3 CAT Fee, Period
4 CAT Fee and Quarterly CAT Fee.93 An
Industry Member that is a member of
multiple self-regulatory organizations
would only receive one invoice from the
Company per payment period.94
Industry Members would pay their
CAT fees to the Company through a
centralized system.95 Payment of CAT
fees would be due within 30 days after
receipt of an invoice, unless a longer
period is indicated.96 If an Industry
Member’s payment is late, the Industry
Member would pay interest on the
88 Id.
outstanding balance from the 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.97
III. Suspension of the Proposed Rule
Changes
Pursuant to Section 19(b)(3)(C) of the
Act,98 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change in accordance
with Section 19(b)(1) of the Act,99 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) made thereby if it appears to
the Commission that such action is
necessary or appropriate in the public
interest, for the protection of investors,
or otherwise in furtherance of the
purposes of the Act. The Commission
believes a temporary suspension of the
proposed rule changes is warranted
here.
As Participants of the CAT NMS Plan,
the Nasdaq and Cboe Participants are
subject to Rule 608 of Regulation NMS
under the Act,100 which governs the
filing and amendment of NMS plans.
Rule 608(c) of Regulation NMS 101
requires each SRO that is a sponsor or
participant of an effective NMS plan to
comply with the terms of the plan. In
temporarily suspending the proposed
rule changes, the Commission intends to
consider whether, among other things,
the following aspects of the proposed
rule changes are consistent with the
CAT NMS Plan, and, consequently, Rule
608(c) of Regulation NMS:
Alternative Trading Systems: The
proposed rule changes include all
alternative trading system (‘‘ATS’’)
message traffic in calculating Industry
Member CAT fees. The Commission is
considering whether the proposed rule
changes are consistent with Section
11.3(b) of the Plan, which requires the
Operating Committee to establish fixed
fees to be payable by Industry Members,
that include message traffic generated
by: (i) An ATS that does not execute
orders that is sponsored by an Industry
Member; and (ii) routing orders to and
from any ATS sponsored by an Industry
Member.102 In addition, the
Commission is considering whether the
proposed rule changes are consistent
with Section 11.2(c) of the CAT NMS
Plan, which requires the Operating
89 Id.
90 Id.
91 Id.
97 Id.
at n.44.
98 15
92 Id.
93 See,
U.S.C. 78s(b)(3)(C).
U.S.C. 78s(b)(1).
100 17 CFR 242.608.
101 17 CFR 242.608(c).
102 See CAT NMS Plan, supra note 5, at Section
11.3(b).
Committee to establish a tiered fee
structure whereby Industry Members are
charged fees based on message traffic for
non-ATS activities.103
Tiered Fixed Fees: Under the
proposed rule changes, Industry
Member CAT fees would be calculated
based on an Industry Member’s
percentage of total Industry Member
message traffic without any tiering
(subject to the proposed market maker
message traffic discounts, as applicable,
as well as the Maximum Industry
Member CAT Fee, the Maximum
Industry Member CAT Fee ReAllocation and the Minimum Industry
Member CAT Fee Re-Allocation). The
Commission is considering whether the
proposed rule changes are consistent
with Section 11.3(b) of the CAT NMS
Plan, which requires the Operating
Committee to establish at least five, but
no more than nine, tiers of fixed fees to
be payable by Industry Members,104 and
Section 11.1(d) of the Plan, which
requires the Operating Committee to
adopt policies, procedures, and
practices regarding the assignment of
tiers.105
Comparability: The proposed rule
changes do not require that CAT fees for
Industry Members and Participants with
the most CAT-related activity be
generally comparable. The Commission
is considering whether the proposed
rule changes are consistent with Section
11.2(c) of the CAT NMS Plan, which
requires the tiered fee structure to
charge fees whereby ‘‘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).’’ 106
Minimum and Maximum Industry
Member CAT Fees and Market Maker
Discounts: In calculating an Industry
Member’s CAT fee, the proposed rule
changes would require the application
of the Minimum Industry Member CAT
Fee, Minimum Industry Member CAT
Fee Allocation, Maximum Industry
Member CAT Fee, Maximum Industry
Member CAT Fee Allocation, and, as
applicable, discounts on the message
traffic of Options Market Makers and
Equity Market Makers. The Commission
is considering whether the proposed
rule changes are consistent with Section
11.3(b) of the CAT NMS Plan, which
99 15
e.g., Notice, supra note 3, at 25053.
94 Id.
95 Id.
96 Id.
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103 Id.
at Section 11.2(c).
at Section 11.3(b).
105 Id. at Section 11.1(d).
106 Id. at Section 11.2(c).
104 Id.
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requires the Operating Committee to
establish fixed fees to be payable by
Industry Members, based on the
message traffic generated by such
Industry Member, subject to tiering.107
Financial Accountability Milestones:
In describing the costs to be recovered
by the Historical CAT Assessment, the
proposed rule changes refer to ‘‘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).’’ 108 For the Period 3 CAT Fee,
the proposed rule changes refer to
‘‘Total CAT Costs incurred from January
1, 2021 through December 31, 2021.’’ 109
For the Period 4 CAT Fee, the proposed
rule changes refer to ‘‘Total CAT Costs
incurred from January 1, 2022 through
December 30, 2022.’’ 110
Section 11.6 of the CAT NMS Plan
provides that the Participants may
recover from Industry Members PostAmendment Expenses 111 over four
Periods: Period 1, Period 2, Period 3 and
Period 4. Section 11.6(a) sets target
deadlines for each Period and
establishes a fee reduction schedule if
those target deadlines are missed.112
The target dates for Period 1, Period 2,
Period 3 and Period 4 are July 31, 2020,
December 31, 2020, December 31, 2021
and December 30, 2022, respectively.113
To enable the Commission to determine
whether the fee reduction provisions
should be applied to fees associated
with a specific Period,114 Section
11.6(b) further requires that filings
submitted by the Participants to the
Commission under Section 19(b) of the
Act, to establish or implement fees to
recover Post-Amendment Expenses,
must clearly indicate whether such fees
are related to Post-Amendment
Expenses incurred during Period 1,
Period 2, Period 3, or Period 4.115 The
Commission is considering whether the
aspects of the proposed rule changes
107 Id.
at Section 11.3(b).
e.g., Notice, supra note 3, at 25049.
109 Id. at 25050.
110 Id. at 25051.
111 See text accompanying notes 15–16.
112 See CAT NMS Plan, supra note 5, at Section
11.6(a)
113 Id.
114 See Securities Exchange Act Release No.
86901 (September 9, 2019), 84 FR 48458, 48472
(‘‘Requiring the Participants to specify whether any
proposed fees are related to Post-Amendment
Expenses, and the Period to which they are related,
will help the Commission to determine whether it
must consider the provisions of proposed Section
11.6 in evaluating the proposed fees.’’).
115 See CAT NMS Plan, supra note 5, at Section
11.6(b).
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108 See,
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19:19 Jun 23, 2021
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related to the Financial Accountability
Milestones are consistent with Section
11.6 of the CAT NMS Plan.116
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Changes
The Commission also hereby
institutes proceedings pursuant to
Sections 19(b)(3)(C) 117 and 19(b)(2)(B)
of the Act 118 to determine whether the
proposed rule changes should be
approved or disapproved. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, as stated below,
the Commission seeks and encourages
interested persons to provide comment
on the proposed rule change to inform
the Commission’s analysis of whether to
disapprove the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,119 the Commission is hereby
providing notice of the grounds for
disapproval under consideration. The
Commission believes that instituting
proceedings will allow for additional
analysis of, and input from commenters
with respect to, the proposed rule
change’s consistency with Section 11A
of the Act 120 and Rule 608(c) of
Regulation NMS thereunder.121 Section
11A of the Act directs the Commission,
with due regard for the public interest,
the protection of investors, and the
maintenance of fair and orderly markets,
to use its authority to facilitate the
establishment of a national market
system for securities, including by
authorizing or requiring SROs to act
jointly to plan, develop, operate, or
regulate an NMS plan. Rule 608(c)
requires each SRO to comply with the
terms of any effective NMS plan of
which it is a sponsor or a participant. As
discussed above, the Commission is
considering whether the proposed rule
changes are consistent with Section 11A
of the Act 122 and the rules and
116 Id.
at Section 11.6.
U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
118 15 U.S.C. 78s(b)(2)(B).
119 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of
the Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchanges consent to the longer period. See
id.
120 15 U.S.C. 78k–1.
121 17 CFR 242.608(c).
122 See supra note 120.
117 15
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33453
regulations thereunder, including Rule
608(c).123 The Commission also is
considering whether the proposed rule
changes are consistent with Sections
11.1(d), 11.2(c), 11.3(b) and 11.6 of the
CAT NMS Plan.124
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by July
15, 2021. Rebuttal comments should be
submitted by July 29, 2021. The
Commission asks that commenters
address the sufficiency and merit of the
Participants’ statements in support of
the proposal, which are set forth in the
proposed rule changes,125 in addition to
any other comments they may wish to
submit about the proposed rule changes.
Interested persons are invited to
submit written data, views, and
arguments concerning the proposed rule
changes, including whether the
proposed rule changes are consistent
with the 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 any of: File Nos.
SR–BX–2021–018; SR–C2–2021–008;
SR–CBOE–2021–030; SR–CboeBYX–
2021–011; SR–CboeBZX–2021–034; SR–
CboeEDGA–2021–010; SR–CboeEDGX–
2021–024; SR–GEMX–2021–03; SR–
ISE–2021–08; SR–MRX–2021–05; SR–
NASDAQ–2021–029; or SR–PHLX–
2021–25 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to any of:
File Nos. SR–BX–2021–018; SR–C2–
2021–008; SR–CBOE–2021–030; SR–
CboeBYX–2021–011; SR–CboeBZX–
2021–034; SR–CboeEDGA–2021–010;
SR–CboeEDGX–2021–024; SR–GEMX–
2021–03; SR–ISE–2021–08; SR–MRX–
2021–05; SR–NASDAQ–2021–029; or
SR–PHLX–2021–25 on the subject line.
The file numbers should be included on
the subject line if email is used. To help
the Commission process and review
123 See
supra note 121.
CAT NMS Plan, supra note 5, at Sections
11.1(d), 11.2(c), 11.3(b) and 11.6.
125 See, e.g., Notice, supra note 3.
124 See
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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 rule
changes that are filed with the
Commission, and all written
communications relating to the
proposed rule changes 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 principal
office of the Participants. 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 any of: File
Nos. SR–BX–2021–018; SR–C2–2021–
008; SR–CBOE–2021–030; SR–
CboeBYX–2021–011; SR–CboeBZX–
2021–034; SR–CboeEDGA–2021–010;
SR–CboeEDGX–2021–024; SR–GEMX–
2021–03; SR–ISE–2021–08; SR–MRX–
2021–05; SR–NASDAQ–2021–029; or
SR–PHLX–2021–25 and should be
submitted on or before July 15, 2021.
Rebuttal comments should be submitted
by July 29, 2021.
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VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,126 that
File Nos. SR–BX–2021–018; SR–C2–
2021–008; SR–CBOE–2021–030; SR–
CboeBYX–2021–011; SR–CboeBZX–
2021–034; SR–CboeEDGA–2021–010;
SR–CboeEDGX–2021–024; SR–GEMX–
2021–03; SR–ISE–2021–08; SR–MRX–
2021–05; SR–NASDAQ–2021–029; and
SR–PHLX–2021–25 be and hereby are,
temporarily suspended. In addition, the
Commission is instituting proceedings
to determine whether the proposed rule
changes should be approved or
disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.127
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–13247 Filed 6–23–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34301; File No. 812–15151]
First Eagle Alternative Capital BDC,
Inc., et al.
June 15, 2021.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
(‘‘Order’’) under sections 17(d) and 57(i)
of the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act. The Order would
supersede the prior order.1
Summary of Application: Applicants
request an order to permit certain
business development companies
(‘‘BDCs’’) and closed-end management
investment companies to co-invest in
portfolio companies with each other and
with certain affiliated investment funds
and accounts.
Applicants: First Eagle Alternative
Capital BDC, Inc. (‘‘FCRD’’), First Eagle
Credit Opportunities Fund (‘‘FECOF’’),
First Eagle BDC, LLC (‘‘FE BDC’’), First
Eagle Alternative Capital Holdings, Inc.
(‘‘FCRD Subsidiary’’), First Eagle
Investment Management, LLC (‘‘First
Eagle’’), First Eagle Alternative Credit,
LLC (‘‘FEAC’’), First Eagle Alternative
Credit EU, LLC (‘‘FEAC EU,’’ together
with First Eagle and FEAC, the
‘‘Existing Advisers’’), First Eagle Credit
Opportunities Fund SPV, LLC, First
Eagle Direct Lending Fund I, LP, First
Eagle Direct Lending Fund I (EE), LP,
First Eagle Direct Lending Fund I
(Parallel), LP, First Eagle DL Fund I
Aggregator LLC, NewStar Arlington
Senior Loan Program LLC, First Eagle
Berkeley Fund CLO LLC, First Eagle
Commercial Loan Funding 2016–1 LLC,
First Eagle Commercial Loan Originator
I LLC, First Eagle Dartmouth Holding
LLC, NewStar Fairfield Fund CLO Ltd.,
First Eagle Warehouse Funding I LLC,
127 17
CFR 200.30–3(a)(57) and (58).
Credit Inc., et al., Investment Company Act
Rel. No. 33212 (Aug. 24, 2018) (notice) and
Investment Company Act Rel. No. 33239 (Sep. 19,
2018) (order).
1 THL
126 15
U.S.C. 78s(b)(3)(C).
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Lake Shore MM CLO I Ltd., First Eagle
Direct Lending Fund III LLC, First Eagle
Direct Lending Co-Invest III (E) LLC,
First Eagle Direct Lending Co-Invest III
LLC, First Eagle Direct Lending Fund III
(A) LLC, Lake Shore MM CLO II Ltd.,
Lake Shore MM CLO III LLC, First Eagle
Direct Lending Fund IV, LLC, First
Eagle Direct Lending Levered Fund IV,
LLC, First Eagle Direct Lending IV CoInvest, LLC, First Eagle Direct Lending
Levered Fund IV SPV, LLC, First Eagle
Direct Lending V–A, LLC, First Eagle
Direct Lending V–B, LLC, First Eagle
Direct Lending V–C SCSP, South Shore
V LLC, Wind River 2018–1 CLO Ltd.,
Wind River 2018–2 CLO Ltd., Wind
River 2018–3 CLO Ltd., Wind River
2019–1 CLO Ltd., Wind River 2019–2
CLO Ltd., Wind River 2019–3 CLO Ltd.,
Wind River 2020–1 CLO Ltd., Wind
River 2021–1 CLO Ltd., Wind River
2021–2 CLO, Ltd., Bighorn III, Ltd.,
NewStar Commercial Loan Funding
2017–1 LLC, First Eagle Clarendon Fund
CLO LLC, NewStar Exeter Fund CLO
LLC, Arch Street CLO, Ltd., First Eagle
BSL CLO 2019–1 Ltd., Hull Street CLO,
Ltd., Longfellow Place CLO, Ltd.,
Staniford Street CLO, Ltd. and First
Eagle Strategic Funding, LLC.
Filing Dates: The application was
filed on August 13, 2020, and amended
on December 18, 2020, March 31, 2021
and May 27, 2021.
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by emailing the
Commission’s Secretary at SecretarysOffice@sec.gov and serving applicants
with a copy of the request, by email.
Hearing requests should be received by
the Commission by 5:30 p.m. on July 12,
2021, and should be accompanied by
proof of service on the applicants, in the
form of an affidavit, or, for lawyers, a
certificate of service. Pursuant to rule
0–5 under the Act, hearing requests
should state the nature of the writer’s
interest, any facts bearing upon the
desirability of a hearing on the matter,
the reason for the request, and the issues
contested. Persons who wish to be
notified of a hearing may request
notification by emailing the
Commission’s Secretary at SecretarysOffice@sec.gov.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
c/o Sabrina Rusnak-Carlson, 500
Boylston Street, Suite 1200, Boston, MA
02116, and by email to: David.Blass@
stblaw.com; Rajib.Chanda@stblaw.com
and Christopher.Healey@stblaw.com.
FOR FURTHER INFORMATION CONTACT:
Laura L. Solomon, Senior Counsel, at
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]]>Agencies
[Federal Register Volume 86, Number 119 (Thursday, June 24, 2021)]
[Notices]
[Pages 33448-33454]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-13247]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92207; File Nos. SR-BX-2021-018; SR-C2-2021-008; SR-
CBOE-2021-030; SR-CboeBYX-2021-011; SR-CboeBZX-2021-034; SR-CboeEDGA-
2021-010; SR-CboeEDGX-2021-024; SR-GEMX-2021-03; SR-ISE-2021-08; SR-
MRX-2021-05; SR-NASDAQ-2021-029; SR-PHLX-2021-25]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Cboe BZX
Exchange, Inc.; Cboe C2 Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe
EDGX Exchange, Inc.; Cboe Exchange, Inc.; NASDAQ BX, Inc.; Nasdaq GEMX,
LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; NASDAQ PHLX LLC and The NASDAQ
Stock Market LLC; Suspension of and Order Instituting Proceedings To
Determine Whether To Approve or Disapprove Proposed Rule Changes To
Adopt a Fee Schedule To Establish Fees for Industry Members Related to
the National Market System Plan Governing the Consolidated Audit Trail
June 17, 2021.
I. Introduction
On April 21, 2021, Cboe BYX Exchange, Inc. (``CboeBYX''), Cboe BZX
Exchange, Inc. (``CboeBZX''), Cboe C2 Exchange, Inc. (``C2''), Cboe
EDGA Exchange, Inc. (``Cboe EDGA''), Cboe EDGX Exchange, Inc. (``Cboe
EDGX''), Cboe Exchange, Inc. (``Cboe''), NASDAQ BX, Inc. (``BX''),
Nasdaq GEMX, LLC (``GEMX''), Nasdaq ISE, LLC (``ISE''), Nasdaq MRX, LLC
(``MRX''), NASDAQ PHLX LLC (``Phlx''), The NASDAQ Stock Market LLC
(``Nasdaq'') (collectively, the ``Nasdaq and Cboe Participants'') filed
with the Securities and Exchange Commission (``Commission''), pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder,\2\ proposed rule changes \3\ to adopt a
fee schedule to establish fees for Industry Members \4\ related to the
National Market System Plan Governing the Consolidated Audit Trail
(``CAT NMS Plan'' or ``Plan'').\5\ The proposed rule changes were
immediately effective upon filing with the Commission pursuant to
Section 19(b)(3)(A) of the Act.\6\ The proposed rule changes were
published for comment in the Federal Register on May 10, 2021.\7\ The
Commission has received no comments on the proposed rule changes.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release Nos. 91750 (May 4,
2021), 86 FR 25045 (May 10, 2021) (SR-BX-2021-018) (``Notice'');
91751 (May 4, 2021), 86 FR 24941 (May 10, 2021) (SR-PHLX-2021-25);
91752 (May 4, 2021), 86 FR 24921 (May 10, 2021) (SR-NASDAQ-2021-
029); 91753 (May 4, 2021), 86 FR 24994 (May 10, 2021) (SR-MRX-2021-
05); 91755 (May 4, 2021), 86 FR 25035 (May 10, 2021) (SR-ISE-2021-
08); 91756 (May 4, 2021), 86 FR 24979 (May 10, 2021) (SR-GEMX-2021-
03); 91757 (May 4, 2021), 86 FR 24911 (May 10, 2021) (SR-C2-2021-
008); 91758 (May 4, 2021), 86 FR 25004 (May 10, 2021) (SR-CboeEDGX-
2021-024); 91759 (May 4, 2021), 86 FR 24956 (May 10, 2021) (SR-
CboeEDGA-2021-010); 91760 (May 4, 2021), 86 FR 24966 (May 10, 2021)
(SR-CBOE-2021-030); 91761 (May 4, 2021), 86 FR 25016 (May 10, 2021)
(SR-CboeBYX-2021-011); and 91762 (May 4, 2021), 86 FR 24931 (May 10,
2021) (SR-CboeBZX-2021-034).
\4\ The CAT NMS Plan defines ``Industry Member'' as ``a member
of a national securities exchange or a member of a national
securities association.'' See CAT NMS Plan, infra note 5, at Section
1.1.
\5\ The CAT NMS Plan is a national market system plan approved
by the Commission pursuant to Section 11A of the Act and the rules
and regulations thereunder. See Securities Exchange Act Release No.
79318 (November 15, 2016), 81 FR 84696 (November 23, 2016). The CAT
NMS Plan functions as the limited liability company agreement of the
jointly owned limited liability company formed under Delaware state
law through which the Participants conduct the activities of the CAT
(``Company''). On August 29, 2019, the Participants replaced the CAT
NMS Plan in its entirety with the limited liability company
agreement of a new limited liability company named Consolidated
Audit Trail, LLC, which became the Company. See Securities Exchange
Act Release No. 87149 (September 27, 2019), 84 FR 52905 (October 3,
2019).
\6\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
exchange as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\7\ See supra note 3.
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Pursuant to Section 19(b)(3)(C) of the Act, the Commission is
hereby: (1) Temporarily suspending the proposed rule changes; and (2)
instituting proceedings to determine whether to approve or disapprove
the proposals.
II. Summary of the Proposed Rule Changes \8\
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\8\ For a more detailed description of the proposed rule
changes, see Notice, supra note 3.
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In July 2012, the Commission adopted Rule 613 of Regulation NMS,
which required national securities exchanges and national securities
associations (``Participants'') \9\ to jointly develop and submit to
the Commission a national market system plan (``NMS plan'') to create,
implement, and maintain a consolidated audit trail (``CAT'') \10\ that
would capture customer and order event information for orders in NMS
securities. On November 15, 2016, the Commission approved the CAT NMS
Plan required by Rule 613.\11\ Under the CAT NMS Plan, the Operating
Committee of a newly formed company--CAT NMS, LLC, of which each
Participant is a member--has the discretion (subject to the funding
principles set forth in the CAT NMS Plan) to establish funding for the
Company to operate the CAT, including establishing fees to be paid by
the Participants and Industry Members.\12\
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\9\ The Participants include BOX Exchange LLC, Cboe BYX
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc.,
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe Exchange,
Inc., Financial Industry Regulatory Authority, Inc., 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.
\10\ See Securities Exchange Act Release No. 67457 (July 18,
2012), 77 FR 45722 (August 1, 2012).
\11\ See supra note 5.
\12\ See CAT NMS Plan, supra note 5, at Section 11.1(b).
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The Plan specified that, in establishing the funding of the
Company, the Operating Committee shall establish ``a tiered fee
structure in which the fees charged to: (i) CAT Reporters that are
Execution Venues, including ATSs, are based upon the level of market
share; (ii) Industry Members' non-ATS activities are based upon message
traffic; 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).'' \13\ Under the Plan, such fees are to be implemented in
accordance with various funding principles, including an ``allocation
of the Company's related costs among Participants and Industry Members
that is consistent with the Exchange Act taking into account . . .
distinctions in the securities trading operations of Participants and
Industry Members and their relative impact upon the Company resources
and operations'' and the ``avoid[ance of] any disincentives such as
placing an inappropriate burden on competition and reduction in market
quality.'' \14\
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\13\ Id. at Section 11.2(c). See Article XI of the CAT NMS Plan
for additional detail. Id. at Article XI.
\14\ Id. at Section 11.2(b) and (e).
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[[Page 33449]]
On May 15, 2020, the Commission adopted amendments to the CAT NMS
Plan designed to increase the Participants' financial accountability
for the timely completion of the CAT (``Financial Accountability
Amendments'').\15\ The Financial Accountability Amendments added
Section 11.6 to the CAT NMS Plan to govern the recovery from Industry
Members of any fees, costs, and expenses (including legal and
consulting fees, costs and expenses) incurred by or for the Company in
connection with the development, implementation and operation of the
CAT from June 22, 2020 until such time that the Participants have
completed Full Implementation of CAT NMS Plan Requirements \16\
(``Post-Amendment Expenses''). Section 11.6 establishes target
deadlines for four critical implementation milestones (Periods 1, 2, 3
and 4) \17\ and reduces the amount of fee recovery available to the
Participants if these deadlines are missed.\18\
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\15\ See Securities Exchange Act Release No. 88890, 85 FR 31322
(May 22, 2020).
\16\ See CAT NMS Plan, supra note 5, at Section 1.1.
\17\ Id. at Section 11.6(a)(i).
\18\ Id. at Section 11.6(a)(ii) and (iii).
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The Participants filed an amendment to the CAT NMS Plan on March
31, 2021 (``Proposed CAT Fee Plan Amendment'') to implement a revised
funding model (``Proposed Funding Model'') and to establish the CAT
fees to be charged to themselves.\19\ On April 21, 2021, the Proposed
CAT Fee Plan Amendment was published for comment in the Federal
Register.\20\ The Commission has not acted on the Proposed CAT Fee Plan
Amendment. In the meantime, the Nasdaq and Cboe Participants submitted
the proposed rule changes that are the subject of this Order \21\ to
adopt a fee schedule to establish CAT fees applicable to their Industry
Members in accordance with the Proposed CAT Fee Plan Amendment.\22\ In
their filings, the Nasdaq and Cboe Participants stated that the fee
schedule provisions will become operative upon the Commission's
approval of the Proposed CAT Fee Plan Amendment.\23\
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\19\ See Securities Exchange Act Release No. 91555 (April 14,
2021), 86 FR 21050 (April 21, 2021).
\20\ Id.
\21\ Section 11.1(b) of the CAT NMS Plan requires the
Participants to file with the Commission under Section 19(b) of the
Act any CAT fees applicable to Industry Members that the Operating
Committee approves. See CAT NMS Plan, supra note 5, at Section
11.1(b).
\22\ For additional details regarding these fees, see, e.g.,
Notice, supra note 3.
\23\ Id. at 25045.
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A. Allocation of Total CAT Costs
Under the Proposed Funding Model, ``Total CAT Costs'' would include
costs associated with developing, implementing and operating the CAT
for the relevant period.\24\ The Nasdaq and Cboe Participants propose
to recover 75% of the Total CAT Costs from Industry Members (``Industry
Member Allocation'').\25\ As detailed below, the proposed rule changes
would recover the Total CAT Costs from Industry Members on a quarterly
basis through four categories of CAT fees: A Historical CAT
Assessment,\26\ a Period 3 CAT Fee,\27\ a Period 4 CAT Fee \28\ and a
Quarterly CAT Fee.\29\ The Historical CAT Assessment would be designed
to recover certain CAT costs incurred prior to January 1, 2021
(``Historical CAT Assessment Costs'').\30\ Excluding certain costs,\31\
the Total CAT Costs for this period are $193,273,342.\32\ Under the
proposed rule changes, the Historical CAT Assessment would recover 75%
of these costs from Industry Members ($144,955,006).\33\ As proposed,
the Period 3 CAT Fee would recover from Industry Members 75% of the
Total CAT Costs incurred from January 1, 2021 through December 31,
2021.\34\ The Period 4 CAT Fee would recover 75% of Total CAT Costs
incurred from January 1, 2022 through December 30, 2022.\35\ Beginning
in the second quarter of 2023, Industry Members would be assessed a
Quarterly CAT Fee on an ongoing basis of 75% of the budgeted Total CAT
Costs for the relevant year.\36\ The proposed rule changes state that
the budgeted Total CAT Costs would be set forth in the annual operating
budget approved by the Operating Committee for the relevant year
pursuant to Section 11.1(a) of the CAT NMS Plan.\37\ The Total CAT
Costs applicable to the Period 3 and 4 CAT Fees would be set forth in
the year-end financial statements of the Company for 2021 and 2022,
respectively.\38\
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\24\ Id. at 25045-6.
\25\ Id. at 25046.
\26\ See infra Section II.D.a.
\27\ See infra Section II.D.b.
\28\ See infra Section II.D.c.
\29\ See infra Section II.D.d.
\30\ See, e.g., Notice, supra note 3, at 25049.
\31\ Proposed CAT Fee Plan Amendment, supra note 19, at 21064.
\32\ See, e.g., Notice, supra note 3, at 25049.
\33\ Id.
\34\ Id. at 25050.
\35\ Id. at 25051.
\36\ Id. at 25052.
\37\ The proposed rule changes state that the budgeted Total CAT
Costs may be adjusted on a quarterly basis, and if the Operating
Committee adjusts such costs within a year, the adjusted costs would
be used in calculating the remaining CAT fees for that year. Id. at
25052.
\38\ See, e.g., Notice, supra note 3, at 25050, 25051.
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[[Page 33450]]
B. Message Traffic
Under the proposed rule changes, each Industry Member would pay a
CAT fee calculated by multiplying its message traffic percentage of
total Industry Member message traffic per quarter \39\ by the Industry
Member Allocation, subject to market maker discounts for message
traffic, as applicable, as well as a minimum fee and a maximum fee.\40\
Under the proposed rule changes, when calculating the message traffic
of an Industry Member that is an Options Market Maker,\41\ its market
making message traffic would be discounted by multiplying its Listed
Options \42\ market making message traffic by the Listed Options trade-
to-quote ratio.\43\ The trade-to-quote ratio would be calculated each
quarter based on the prior quarter's SIP Data \44\ that is included in
CAT Data.\45\ The proposed discount would be calculated by dividing the
adjusted trade count \46\ by the total number of quotes received by the
SIPs.\47\
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\39\ The proposed rule changes state that message traffic would
be calculated based on Industry Members' Reportable Events reported
to the CAT, as defined in the CAT Reporting Technical Specifications
for Industry Members. Reportable Events that would be counted as
message traffic would include the New Order Event, the Order Route
Event and the Trade Event. Message traffic would not include
reporting activity related to Customer information as set forth in
the CAT Reporting Customer and Account Technical Specifications for
Industry Members. Id. at 25047.
\40\ See infra Section II.C.
\41\ The CAT NMS Plan defines ``Options Market Maker'' as ``a
broker-dealer registered with an exchange for the purpose of making
markets in options contracts traded on the exchange.'' See CAT NMS
Plan, supra note 5, at Section 1.1.
\42\ The CAT NMS Plan states that ``Listed Option'' has the
meaning set forth in Regulation NMS. Id. Rule 600(b)(43) of
Regulation NMS defines ``Listed Option'' as ``any option traded on a
registered national securities exchange or automated facility of a
national securities association.'' See 17 CFR 242.600(b)(43).
\43\ See, e.g., BX Proposed Rule General 7A(g)(1).
\44\ See, e.g., Notice, supra note 3, at 25047. See also CAT NMS
Plan, supra note 5, at Section 1.1., Section 6.5(a)(ii).
\45\ See, e.g., Notice, supra note 3, at 25047. See also CAT NMS
Plan, supra note 5, at Section 1.1.
\46\ The proposed rule changes describe the adjusted trade count
as ``the total number of trades for the quarter minus the total
number of trade busts.'' See, e.g., Notice, supra note 3, at 25047.
\47\ For each Options Market Maker, the discount would apply 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 . . . 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.''
Id.
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Under the proposed rule changes, when calculating the message
traffic of an Industry Member that is an equity market maker in NMS
Stocks (``Equity Market Maker''), its market making message traffic
would be discounted by multiplying its market making message traffic in
NMS Stocks by the NMS Stock trade-to-quote ratio.\48\ The trade-to-
quote ratio would be calculated each quarter based on the prior
quarter's SIP Data that is included in CAT Data.\49\ The proposed
discount would be calculated by dividing the adjusted trade count by
the total number of quotes received by the SIPs.\50\ The discounted
message traffic of Options Market Makers and Equity Market Makers would
be counted as part of total Industry Member message traffic.\51\
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\48\ See, e.g., BX Proposed Rule General 7A(g)(2).
\49\ See, e.g., Notice, supra note 3, at 25048.
\50\ Id. See also supra note 46.
\51\ See, e.g., Notice, supra note 3, at 25047.
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C. Minimum and Maximum Industry Member CAT Fee
Under the proposed rule changes, each Industry Member would be
subject to a minimum Industry Member CAT fee of $125 per quarter
(``Minimum Industry Member CAT Fee'').\52\ If an Industry Member's CAT
fee would be less than $125 per quarter, it would pay the Minimum
Industry Member CAT Fee, even if it has not yet begun to report to the
CAT.\53\ 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 (``Minimum
Industry Member CAT Fee Re-Allocation'').\54\
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\52\ Id. at 25048; see, e.g., BX Proposed Rule General 7A(h)(1).
\53\ See, e.g., Notice, supra note 3, at 25048.
\54\ See, e.g., BX Proposed Rule General 7A(h)(2). Options
Market Makers and Equity Market Makers would be required to pay the
Minimum Industry Member CAT Fee if their quarterly CAT fee
calculated with the market maker discounts is less than $125 per
quarter. See, e.g., Notice, supra note 3, at 25048, n.32.
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Under the proposed rule changes, each Industry Member's CAT fee
would also be subject to a maximum Industry Member CAT fee, which would
be the fee calculated based on 8% of the total Industry Member message
traffic for the relevant quarter (``Maximum Industry Member CAT
Fee'').\55\ If any Industry Member's fee is subject 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 their percentage of total message traffic (``Maximum Industry
Member CAT Fee Re-Allocation'').\56\
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\55\ Id. at 25048. The Commission notes that the proposed rule
text states ``[t]he Maximum Industry Member CAT Fee for each quarter
is 8% of the total CAT costs for the relevant quarter'' (emphasis
added). See, e.g., BX Proposed Rule General 7A(f)(1).
\56\ See, e.g., BX Proposed Rule General 7A(f)(2).
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D. Amount and Timing of Proposed CAT Fees
As discussed above, the proposed rule changes would recover the
Total CAT Costs from Industry Members through the assessment of four
categories of CAT fees on a quarterly basis: A Historical CAT
Assessment, a Period 3 CAT Fee, a Period 4 CAT Fee and a Quarterly CAT
Fee.
a. Historical CAT Assessment
The proposed rule changes state that, for four calendar quarters
commencing ``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,'' \57\ each Industry Member would pay a
Historical CAT Assessment which would be the greater of: (1) The
Minimum Industry Member CAT Fee (plus any applicable Maximum Industry
Member CAT Fee Re-Allocation); or (2) the amount calculated by
multiplying the percentage of the Industry Member's message traffic of
the total Industry Member message traffic based on the prior quarter's
message traffic by $36,238,752 \58\ (subject to the proposed market
maker discounts for message traffic, as applicable, as well as the
Maximum Industry Member CAT Fee, Maximum Industry Member CAT Fee Re-
Allocation and Minimum Industry Member CAT Fee Re-Allocation).\59\
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\57\ See, e.g., Notice, supra note 3, at 25049.
\58\ The Commission notes that $36,238,752 is one-quarter of the
$144,955,006 Historical CAT Assessment Costs. See supra Section
II.A.
\59\ See, e.g., BX Proposed Rule General 7A(b).
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As discussed above, the proposed Historical CAT Assessment is
intended to recover the Historical CAT Assessment Costs, which comprise
certain CAT costs incurred prior to January 1, 2021.\60\ These costs
would include costs incurred through June 22, 2020, the effective date
of Section 11.6 of the CAT NMS Plan, and costs related to Post-
Amendment Expenses incurred during Period 1 (June 22, 2020 through July
31, 2020, the date of Initial Industry
[[Page 33451]]
Member Core Equity and Options Reporting \61\) and during Period 2
(August 1, 2020 through December 31, 2020, the date of the Full
Implementation of Core Equity Reporting \62\).\63\ The Historical CAT
Assessment Costs would include fees, costs and expenses incurred by or
for the Company in connection with the development, implementation and
operation of the CAT during Periods 1 and 2.\64\
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\60\ See supra Section II.A.
\61\ See CAT NMS Plan, supra note 5, at Section 1.1.
\62\ Id.
\63\ See, e.g., Notice, supra note 3, at 25049, 25050.
\64\ Id.
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b. Period 3 CAT Fee
Under the proposed rule changes, for four quarters commencing in
the second quarter of 2022, each Industry Member would pay a Period 3
CAT Fee which would be the greater of: (1) The Minimum Industry Member
CAT Fee (plus any applicable Maximum Industry Member CAT Fee Re-
Allocation); or (2) the amount calculated by multiplying the percentage
of the Industry Member's message traffic of the total Industry Member
message traffic based on the prior quarter's message traffic by \1/4\
of 75% of the Period 3 Total CAT Costs \65\ (subject to the proposed
market maker message traffic discounts, as applicable, as well as the
Maximum Industry Member CAT Fee, Maximum Industry Member CAT Fee Re-
Allocation and Minimum Industry Member CAT Fee Re-Allocation).\66\
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\65\ The Period 3 CAT Costs would be the Total CAT Costs
incurred from January 1, 2021 through December 31, 2021. Id. at
25050.
\66\ See, e.g., BX Proposed Rule General 7A(c).
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According to the Nasdaq and Cboe Participants, the proposed Period
3 CAT Fee is intended to recover a percentage of the Total CAT Costs
incurred from January 1, 2021 through December 31, 2021.\67\ The Period
3 CAT Costs would be related to Post-Amendment Expenses \68\ and would
include fees, costs and expenses incurred by or for the Company in
connection with the development, implementation and operation of the
CAT during Period 3.\69\ The Period 3 CAT Costs would be calculated at
the end of 2021 and would be set forth in the 2021 financial statements
for the Company.\70\ Through a CAT alert after the end of 2021, the
Operating Committee would announce the Total CAT Costs for 2021 to be
used to calculate the Period 3 CAT Fees.\71\ Industry Members would be
required to commence paying the Period 3 CAT Fee in the second quarter
of 2022, based on CAT Data from the first quarter of 2022.\72\
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\67\ See, e.g., Notice, supra note 3, at 25050.
\68\ Id. at 25051.
\69\ Id.
\70\ Id. at 25050. The proposed rule changes state that the
Period 3 CAT Costs will be the total actual CAT costs incurred for
the CAT for 2021 as set forth in the year-end financial statements
of the Company for 2021. Id.
\71\ Id.
\72\ See, e.g., Notice, supra note 3, at 25050.
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The proposed rule changes state that collection of the full amount
of the Period 3 CAT Fee will depend upon achievement of Full
Availability and Regulatory Utilization of Transaction Database
Functionality \73\ by December 31, 2021.\74\ If such achievement is not
met, the amount of the Period 3 CAT Fee that may be recovered from
Industry Members will depend upon the fee limitations in Section
11.6(a)(ii) of the CAT NMS Plan, as established by the Financial
Accountability Amendments.\75\
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\73\ See CAT NMS Plan, supra note 5, at Section 1.1.
\74\ See, e.g., Notice, supra note 3, at 25051.
\75\ Id. See also supra note 15.
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c. Period 4 CAT Fee
Under the proposed rule changes, for four quarters commencing in
the second quarter of 2023, each Industry Member shall pay a Period 4
CAT Fee which shall be the greater of: (1) The Minimum Industry Member
CAT Fee (plus any applicable Maximum Industry Member CAT Fee Re-
Allocation); or (2) the amount calculated by multiplying the percentage
of the Industry Member's message traffic of the total Industry Member
message traffic based on the prior quarter's message traffic by \1/4\
of 75% of the Period 4 Total CAT Costs \76\ (subject to the proposed
market maker message traffic discounts, as applicable, as well as the
Maximum Industry Member CAT Fee, Maximum Industry Member CAT Fee Re-
Allocation and Minimum Industry Member CAT Fee Re-Allocation).\77\
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\76\ The Period 4 CAT Costs would be the Total CAT Costs
incurred from January 1, 2022 through December 30, 2022. See, e.g.,
Notice, supra note 3, at 25050.
\77\ See, e.g., BX Proposed Rule General 7A(d).
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According to the Nasdaq and Cboe Participants, the proposed Period
4 CAT Fee is intended to recover a percentage of the Total CAT Costs
incurred from January 1, 2022 through December 30, 2022 (the date of
Full Implementation of CAT NMS Plan Requirements).\78\ The Period 4 CAT
Costs would recover costs related to Post-Amendment Expenses \79\ and
would include fees, costs and expenses incurred by or for the Company
in connection with the development, implementation and operation of the
CAT during Period 4.\80\ The Period 4 CAT Costs would be calculated at
the end of 2022 and will be set forth in the 2022 financial statements
for the Company.\81\ Through a CAT alert after the end of 2022, the
Operating Committee would announce the Total CAT Costs for 2022 to be
used to calculate the Period 4 CAT Fees.\82\
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\78\ See, e.g., Notice, supra note 3, at 25051.
\79\ Id.
\80\ Id. at 25051-2.
\81\ Id. at 25051. The proposed rule changes state that the
Period 4 CAT Costs will be the total actual CAT costs incurred for
the CAT in 2022 as set forth in the year-end financial statements of
the Company for 2022. Id.
\82\ Id.
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The proposed rule changes state that collection of the full amount
of the Period 4 CAT Fee will depend upon achievement of Full
Implementation of CAT NMS Plan Requirements by December 30, 2022.\83\
If such achievement is not met, the amount of the Period 4 CAT Fee that
may be recovered from Industry Members will depend upon the fee
limitations in Section 11.6(a)(ii) of the CAT NMS Plan, as established
by the Financial Accountability Amendments.\84\
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\83\ See, e.g., Notice, supra note 3, at 25052.
\84\ Id. at 25051. See also supra note 15.
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d. Quarterly CAT Fee
Under the proposed rule changes, on an ongoing basis commencing in
the second quarter of 2023, each Industry Member would pay a Quarterly
CAT Fee which would be the greater of: (1) The Minimum Industry Member
CAT Fee (plus any applicable Maximum Industry Member CAT Fee Re-
Allocation); or (2) the amount calculated by multiplying the percentage
of the Industry Member's message traffic of the total Industry Member
message traffic based on the prior quarter's message traffic by \1/4\
of 75% of the budgeted Total CAT Costs \85\ (subject to the proposed
market maker message traffic discounts, as applicable, as well as the
Maximum Industry Member CAT Fee, Maximum Industry Member CAT Fee Re-
Allocation and Minimum Industry Member CAT Fee Re-Allocation).\86\
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\85\ The proposed rule changes state that the budgeted Total CAT
Costs for the relevant year would 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 for the relevant
year. See, e.g., Notice, supra note 3, at 25052.
\86\ See, e.g., BX Proposed Rule General 7A(a).
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According to the Nasdaq and Cboe Participants, the proposed
Quarterly CAT Fee is intended to recover estimated Total CAT Costs
budgeted for an upcoming year.\87\ The budgeted Total CAT Costs would
include Plan Processor costs, insurance costs, third-party support
costs and an operational
[[Page 33452]]
reserve.\88\ The Operating Committee may adjust the budgeted Total CAT
Costs on a quarterly basis for the prudent operation of the Company, in
which case, the adjusted budgeted costs for the CAT would be used to
calculate the remaining CAT fees for that year.\89\ Through a CAT alert
at the beginning of the relevant year, the Operating Committee would
announce the budgeted Total CAT Costs to be used to calculate the
Quarterly CAT Fee for the year.\90\
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\87\ See, e.g., Notice, supra note 3, at 25052.
\88\ Id.
\89\ Id.
\90\ Id.
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e. Multiple Payments
According to the proposed rule changes, to the extent that any two
or more of the four categories of Industry Member CAT fees are due
during the same quarter, any Industry Member that is obligated to pay
one or more categories of fees would be required to pay each category
of fee for that quarter.\91\ The proposed rule changes explain, ``[f]or
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 the Quarterly CAT Fee during the same quarter, the Industry
Member would be required to pay two minimum $125 fees 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.'' \92\
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\91\ Id. at n.44.
\92\ Id.
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f. Timing and Manner of Payment
Under the proposed rule changes, the Company would provide one
invoice to each Industry Member per payment period for the Historical
CAT Assessment, Period 3 CAT Fee, Period 4 CAT Fee and Quarterly CAT
Fee.\93\ An Industry Member that is a member of multiple self-
regulatory organizations would only receive one invoice from the
Company per payment period.\94\
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\93\ See, e.g., Notice, supra note 3, at 25053.
\94\ Id.
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Industry Members would pay their CAT fees to the Company through a
centralized system.\95\ Payment of CAT fees would be due within 30 days
after receipt of an invoice, unless a longer period is indicated.\96\
If an Industry Member's payment is late, the Industry Member would pay
interest on the outstanding balance from the 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.\97\
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\95\ Id.
\96\ Id.
\97\ Id.
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III. Suspension of the Proposed Rule Changes
Pursuant to Section 19(b)(3)(C) of the Act,\98\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change in accordance with Section 19(b)(1) of the Act,\99\ the
Commission summarily may temporarily suspend the change in the rules of
a self-regulatory organization (``SRO'') made thereby if it appears to
the Commission that such action is necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of the Act. The Commission believes a
temporary suspension of the proposed rule changes is warranted here.
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\98\ 15 U.S.C. 78s(b)(3)(C).
\99\ 15 U.S.C. 78s(b)(1).
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As Participants of the CAT NMS Plan, the Nasdaq and Cboe
Participants are subject to Rule 608 of Regulation NMS under the
Act,\100\ which governs the filing and amendment of NMS plans. Rule
608(c) of Regulation NMS \101\ requires each SRO that is a sponsor or
participant of an effective NMS plan to comply with the terms of the
plan. In temporarily suspending the proposed rule changes, the
Commission intends to consider whether, among other things, the
following aspects of the proposed rule changes are consistent with the
CAT NMS Plan, and, consequently, Rule 608(c) of Regulation NMS:
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\100\ 17 CFR 242.608.
\101\ 17 CFR 242.608(c).
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Alternative Trading Systems: The proposed rule changes include all
alternative trading system (``ATS'') message traffic in calculating
Industry Member CAT fees. The Commission is considering whether the
proposed rule changes are consistent with Section 11.3(b) of the Plan,
which requires the Operating Committee to establish fixed fees to be
payable by Industry Members, that include message traffic generated by:
(i) An ATS that does not execute orders that is sponsored by an
Industry Member; and (ii) routing orders to and from any ATS sponsored
by an Industry Member.\102\ In addition, the Commission is considering
whether the proposed rule changes are consistent with Section 11.2(c)
of the CAT NMS Plan, which requires the Operating Committee to
establish a tiered fee structure whereby Industry Members are charged
fees based on message traffic for non-ATS activities.\103\
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\102\ See CAT NMS Plan, supra note 5, at Section 11.3(b).
\103\ Id. at Section 11.2(c).
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Tiered Fixed Fees: Under the proposed rule changes, Industry Member
CAT fees would be calculated based on an Industry Member's percentage
of total Industry Member message traffic without any tiering (subject
to the proposed market maker message traffic discounts, as applicable,
as well as the Maximum Industry Member CAT Fee, the Maximum Industry
Member CAT Fee Re-Allocation and the Minimum Industry Member CAT Fee
Re-Allocation). The Commission is considering whether the proposed rule
changes are consistent with Section 11.3(b) of the CAT NMS Plan, which
requires the Operating Committee to establish at least five, but no
more than nine, tiers of fixed fees to be payable by Industry
Members,\104\ and Section 11.1(d) of the Plan, which requires the
Operating Committee to adopt policies, procedures, and practices
regarding the assignment of tiers.\105\
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\104\ Id. at Section 11.3(b).
\105\ Id. at Section 11.1(d).
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Comparability: The proposed rule changes do not require that CAT
fees for Industry Members and Participants with the most CAT-related
activity be generally comparable. The Commission is considering whether
the proposed rule changes are consistent with Section 11.2(c) of the
CAT NMS Plan, which requires the tiered fee structure to charge fees
whereby ``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).'' \106\
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\106\ Id. at Section 11.2(c).
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Minimum and Maximum Industry Member CAT Fees and Market Maker
Discounts: In calculating an Industry Member's CAT fee, the proposed
rule changes would require the application of the Minimum Industry
Member CAT Fee, Minimum Industry Member CAT Fee Allocation, Maximum
Industry Member CAT Fee, Maximum Industry Member CAT Fee Allocation,
and, as applicable, discounts on the message traffic of Options Market
Makers and Equity Market Makers. The Commission is considering whether
the proposed rule changes are consistent with Section 11.3(b) of the
CAT NMS Plan, which
[[Page 33453]]
requires the Operating Committee to establish fixed fees to be payable
by Industry Members, based on the message traffic generated by such
Industry Member, subject to tiering.\107\
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\107\ Id. at Section 11.3(b).
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Financial Accountability Milestones: In describing the costs to be
recovered by the Historical CAT Assessment, the proposed rule changes
refer to ``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).'' \108\ For the Period 3 CAT Fee, the proposed rule changes
refer to ``Total CAT Costs incurred from January 1, 2021 through
December 31, 2021.'' \109\ For the Period 4 CAT Fee, the proposed rule
changes refer to ``Total CAT Costs incurred from January 1, 2022
through December 30, 2022.'' \110\
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\108\ See, e.g., Notice, supra note 3, at 25049.
\109\ Id. at 25050.
\110\ Id. at 25051.
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Section 11.6 of the CAT NMS Plan provides that the Participants may
recover from Industry Members Post-Amendment Expenses \111\ over four
Periods: Period 1, Period 2, Period 3 and Period 4. Section 11.6(a)
sets target deadlines for each Period and establishes a fee reduction
schedule if those target deadlines are missed.\112\ The target dates
for Period 1, Period 2, Period 3 and Period 4 are July 31, 2020,
December 31, 2020, December 31, 2021 and December 30, 2022,
respectively.\113\ To enable the Commission to determine whether the
fee reduction provisions should be applied to fees associated with a
specific Period,\114\ Section 11.6(b) further requires that filings
submitted by the Participants to the Commission under Section 19(b) of
the Act, to establish or implement fees to recover Post-Amendment
Expenses, must clearly indicate whether such fees are related to Post-
Amendment Expenses incurred during Period 1, Period 2, Period 3, or
Period 4.\115\ The Commission is considering whether the aspects of the
proposed rule changes related to the Financial Accountability
Milestones are consistent with Section 11.6 of the CAT NMS Plan.\116\
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\111\ See text accompanying notes 15-16.
\112\ See CAT NMS Plan, supra note 5, at Section 11.6(a)
\113\ Id.
\114\ See Securities Exchange Act Release No. 86901 (September
9, 2019), 84 FR 48458, 48472 (``Requiring the Participants to
specify whether any proposed fees are related to Post-Amendment
Expenses, and the Period to which they are related, will help the
Commission to determine whether it must consider the provisions of
proposed Section 11.6 in evaluating the proposed fees.'').
\115\ See CAT NMS Plan, supra note 5, at Section 11.6(b).
\116\ Id. at Section 11.6.
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IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Changes
The Commission also hereby institutes proceedings pursuant to
Sections 19(b)(3)(C) \117\ and 19(b)(2)(B) of the Act \118\ to
determine whether the proposed rule changes should be approved or
disapproved. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as stated below, the Commission seeks and
encourages interested persons to provide comment on the proposed rule
change to inform the Commission's analysis of whether to disapprove the
proposed rule change.
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\117\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\118\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\119\ the Commission is
hereby providing notice of the grounds for disapproval under
consideration. The Commission believes that instituting proceedings
will allow for additional analysis of, and input from commenters with
respect to, the proposed rule change's consistency with Section 11A of
the Act \120\ and Rule 608(c) of Regulation NMS thereunder.\121\
Section 11A of the Act directs the Commission, with due regard for the
public interest, the protection of investors, and the maintenance of
fair and orderly markets, to use its authority to facilitate the
establishment of a national market system for securities, including by
authorizing or requiring SROs to act jointly to plan, develop, operate,
or regulate an NMS plan. Rule 608(c) requires each SRO to comply with
the terms of any effective NMS plan of which it is a sponsor or a
participant. As discussed above, the Commission is considering whether
the proposed rule changes are consistent with Section 11A of the Act
\122\ and the rules and regulations thereunder, including Rule
608(c).\123\ The Commission also is considering whether the proposed
rule changes are consistent with Sections 11.1(d), 11.2(c), 11.3(b) and
11.6 of the CAT NMS Plan.\124\
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\119\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act
also provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchanges consent to the longer period. See id.
\120\ 15 U.S.C. 78k-1.
\121\ 17 CFR 242.608(c).
\122\ See supra note 120.
\123\ See supra note 121.
\124\ See CAT NMS Plan, supra note 5, at Sections 11.1(d),
11.2(c), 11.3(b) and 11.6.
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V. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by July 15, 2021. Rebuttal
comments should be submitted by July 29, 2021. The Commission asks that
commenters address the sufficiency and merit of the Participants'
statements in support of the proposal, which are set forth in the
proposed rule changes,\125\ in addition to any other comments they may
wish to submit about the proposed rule changes.
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\125\ See, e.g., Notice, supra note 3.
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Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule changes, including whether the
proposed rule changes are consistent with the 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 any
of: File Nos. SR-BX-2021-018; SR-C2-2021-008; SR-CBOE-2021-030; SR-
CboeBYX-2021-011; SR-CboeBZX-2021-034; SR-CboeEDGA-2021-010; SR-
CboeEDGX-2021-024; SR-GEMX-2021-03; SR-ISE-2021-08; SR-MRX-2021-05; SR-
NASDAQ-2021-029; or SR-PHLX-2021-25 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to any of: File Nos. SR-BX-2021-018; SR-
C2-2021-008; SR-CBOE-2021-030; SR-CboeBYX-2021-011; SR-CboeBZX-2021-
034; SR-CboeEDGA-2021-010; SR-CboeEDGX-2021-024; SR-GEMX-2021-03; SR-
ISE-2021-08; SR-MRX-2021-05; SR-NASDAQ-2021-029; or SR-PHLX-2021-25 on
the subject line. The file numbers should be included on the subject
line if email is used. To help the Commission process and review
[[Page 33454]]
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 rule changes that are filed with the Commission, and all
written communications relating to the proposed rule changes 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 principal office of the Participants. 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 any of:
File Nos. SR-BX-2021-018; SR-C2-2021-008; SR-CBOE-2021-030; SR-CboeBYX-
2021-011; SR-CboeBZX-2021-034; SR-CboeEDGA-2021-010; SR-CboeEDGX-2021-
024; SR-GEMX-2021-03; SR-ISE-2021-08; SR-MRX-2021-05; SR-NASDAQ-2021-
029; or SR-PHLX-2021-25 and should be submitted on or before July 15,
2021. Rebuttal comments should be submitted by July 29, 2021.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\126\ that File Nos. SR-BX-2021-018; SR-C2-2021-008; SR-CBOE-2021-
030; SR-CboeBYX-2021-011; SR-CboeBZX-2021-034; SR-CboeEDGA-2021-010;
SR-CboeEDGX-2021-024; SR-GEMX-2021-03; SR-ISE-2021-08; SR-MRX-2021-05;
SR-NASDAQ-2021-029; and SR-PHLX-2021-25 be and hereby are, temporarily
suspended. In addition, the Commission is instituting proceedings to
determine whether the proposed rule changes should be approved or
disapproved.
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\126\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\127\
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\127\ 17 CFR 200.30-3(a)(57) and (58).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-13247 Filed 6-23-21; 8:45 am]
BILLING CODE 8011-01-P
