Order Granting Conditional Exemptive Relief, Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, From Certain Requirements of the National Market System Plan Governing the Consolidated Audit Trail, 77128-77134 [2023-24624]
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or personally or by mail, if a physical
address is listed for the relevant
Applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on November 27, 2023, and
should be accompanied by proof of
service on 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
Secretarys-Office@sec.gov.
The Commission:
Secretarys-Office@sec.gov. Applicants:
Joshua B. Deringer, Esq., Faegre Drinker
Biddle & Reath LLP, at joshua.deringer@
faegredrinker.com; with a copy to
Robert Stark, Nomura Private Capital
LLC, Worldwide Plaza, 309 W 49th
Street, New York, NY 10019.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Kieran G. Brown, Senior Counsel, or
Terri Jordan, Branch Chief, at (202) 551–
6825 (Division of Investment
Management, Chief Counsel’s Office).
For
Applicants’ representations, legal
analysis, and conditions, please refer to
Applicants’ second amended and
restated application, dated September
28, 2023, which may be obtained via the
Commission’s website by searching for
the file number at the top of this
document, or for an Applicant using the
Company name search field, on the
SEC’s EDGAR system.
The SEC’s EDGAR system may be
searched at, https://www.sec.gov/edgar/
searchedgar/legacy/companysearch.
html. You may also call the SEC’s Public
Reference Room at (202) 551–8090.
SUPPLEMENTARY INFORMATION:
For the Commission, by the Division of
Investment Management, under delegated
authority.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–24663 Filed 11–7–23; 8:45 am]
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–98848]
Order Granting Conditional Exemptive
Relief, Pursuant to Section 36(a)(1) of
the Securities Exchange Act of 1934
(‘‘Exchange Act’’) and Rule 608(e) of
Regulation NMS Under the Exchange
Act, From Certain Requirements of the
National Market System Plan
Governing the Consolidated Audit Trail
November 2, 2023.
I. Introduction
In July 2012, the Securities and
Exchange Commission (the
‘‘Commission’’ or the ‘‘SEC’’) adopted
Rule 613 of Regulation NMS, which
required national securities exchanges
and national securities associations (the
‘‘Participants’’) 1 to jointly develop and
submit to the Commission a national
market system plan to create,
implement, and maintain a consolidated
audit trail (the ‘‘CAT’’).2 The goal of
Rule 613 was to create a modernized
audit trail system that would provide
regulators with timely access to a
comprehensive set of trading data, thus
enabling regulators to more efficiently
and effectively analyze and reconstruct
market events, monitor market behavior,
conduct market analysis to support
regulatory decisions, and perform
surveillance, investigation, and
enforcement activities. On November
15, 2016, the Commission approved the
national market system plan required by
Rule 613 (the ‘‘CAT NMS Plan’’).3
1 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.
2 See Securities Exchange Act Release No. 67457
(July 18, 2012), 77 FR 45722 (Aug. 1, 2012) (‘‘Rule
613 Adopting Release’’).
3 Securities Exchange Act Release No. 78318
(Nov. 15, 2016), 81 FR 84696, (Nov. 23, 2016)
(‘‘CAT NMS Plan Approval Order’’). The CAT NMS
Plan is Exhibit A to the CAT NMS Plan Approval
Order. See CAT NMS Plan Approval Order, at
84943–85034. 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 (the ‘‘Company’’).
Each Participant is a member of the Company and
jointly owns the Company on an equal basis. The
Participants submitted to the Commission a
proposed amendment to the CAT NMS Plan on
Aug. 29, 2019, which they designated as effective
on filing. Under the amendment, the limited
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On December 16, 2020, the
Commission issued two exemptive
orders regarding the implementation of
the CAT NMS Plan (collectively, the
‘‘2020 Orders’’). The first order, in
response to a request from the
Participants, granted temporary
conditional relief from certain
performance requirements related to the
online targeted query tool (‘‘OTQT’’).4
The second order granted temporary
conditional relief from the following
requirements: (1) requirements for
lifecycle linkages timeframes; (2)
requirements for re-processing of
corrected data received after T+5; (3)
linkage requirements for Securities
Information Processor data (‘‘SIP Data’’);
(4) reporting requirements for port-level
settings; (5) requirements for lifecycle
linkages between customer orders and
‘‘representative’’ orders; and (6)
requirements for Participant reporting of
rejected orders.5
On February 14, 2021, several of the
Participants filed motions requesting
that the Commission stay the 2020
Orders, based on their concern that
portions of the orders ‘‘interpret and
apply the Plan in ways that will
produce unintended adverse
consequences, present implementation
challenges, or both.’’ 6 That same day,
several of those same Participants filed
corresponding petitions for judicial
review with the U.S. Court of Appeals
for the District of Columbia Circuit (the
‘‘D.C. Circuit’’) seeking review of the
2020 Orders.7
On July 8, 2022, the Commission
issued a new order granting temporary
exemptive relief (the ‘‘2022 Order’’).8
The 2022 Order, which superseded the
liability company agreement of a new limited
liability company named Consolidated Audit Trail,
LLC serves as the CAT NMS Plan, replacing in its
entirety the CAT NMS Plan. See Securities
Exchange Act Release No. 87149 (Sept. 27, 2019),
84 FR 52905 (Oct. 3, 2019).
4 See Securities Exchange Act Release No. 90689
(Dec. 16, 2020), 85 FR 83667 (Dec. 22, 2020); see
also Letter from Michael Simon, CAT NMS Plan
Operating Committee Chair, to Vanessa
Countryman, Secretary, Commission, dated Dec. 1,
2020, available at https://catnmsplan.com/sites/
default/files/2020-12/12.01.20-CAT-ExemptionRequest-OTQT.pdf.
5 See Securities Exchange Act Release No. 90688
(Dec. 16, 2020), 85 FR 83634 (Dec. 22, 2020).
6 See Motion for Partial Stay of Order 34–90689,
at 2; Motion for Partial Stay of Order 34–90688, at
2. Financial Industry Regulatory Authority, Inc. and
Long-Term Stock Exchange, Inc. did not join these
motions.
7 See Petition for Review, USCA Case No. 21–
1065; Petition for Review, USCA Case No. 21–1066.
Financial Industry Regulatory Authority, Inc.,
Investors Exchange LLC, Long-Term Stock
Exchange, Inc., MEMX LLC, Miami International
Securities Exchange LLC, MIAX Emerald, LLC, and
MIAX PEARL, LLC did not join these petitions.
8 See Securities Exchange Act Release No. 95234
(July 8, 2022), 87 FR 42247 (July 14, 2022).
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2020 Orders, modified and/or clarified
certain aspects of the 2020 Orders and
gave the Participants until July 31, 2024
to either implement the functionality
the Commission required for
compliance with the relevant provisions
of the CAT NMS Plan or to obtain
Commission approval of alternative
solutions that achieve the relevant
regulatory objectives of Rule 613 and
the CAT NMS Plan in a more costeffective manner, including CAT NMS
Plan amendments or exemptive relief. In
addition, the Commission issued an
order denying the Participants’ stay
motions, concluding that the
administrative petitions to stay the 2020
Orders were ‘‘moot’’ because those
orders were ‘‘no longer in force.’’ 9 On
August 3, 2022, the Commission and the
Participants submitted a stipulation of
voluntary dismissal to the D.C. Circuit,
and, on August 5, 2022, the D.C. Circuit
issued an order formally dismissing the
lawsuits.10
On September 6, 2022, in order to
reserve their rights, a subset of the
Participants filed a petition for review
with the D.C. Circuit seeking review of
the 2022 Order.11 The Commission
understood that the Participants’
concerns remained generally the same
as expressed with respect to the 2020
Orders. The Commission subsequently
issued an order, on May 18, 2023,
extending the exemptive relief provided
by the 2022 Order (the ‘‘2023 Order’’)
from July 31, 2024 to January 31, 2025,
subject to the same conditions set forth
in the 2022 Order.12 Since 2021, the
Participants and Commission staff
engaged in discussions with the goal of
resolving their differences with respect
to the issues raised by the 2020 Orders,
the 2022 Order, and the 2023 Order (the
‘‘prior Orders’’).
In light of further developments
throughout this period and in
connection with the parties’ settlement
of the pending litigation, the
Commission has determined to issue a
new order granting the Participants
conditional exemptive relief from
certain requirements of the CAT NMS
Plan, which are described in more detail
below.13 If and when it takes effect, the
9 See Securities Exchange Act Release No. 95235
(July 8, 2022), 87 FR 42242 (July 14, 2022).
10 See Order of Dismissal, USCA Case No. 21–
1065 (consolidated with USCA Case No. 21–1066).
11 See Petition for Review, USCA Case No. 22–
1234. Financial Industry Regulatory Authority, Inc.
and Investors’ Exchange LLC did not join this
petition.
12 See Securities Exchange Act Release No. 97530
(May 18, 2023), 88 FR 33655 (May 24, 2023).
13 In May 2020, the Commission adopted
amendments to the CAT NMS Plan that establish
four Financial Accountability Milestones and set
target deadlines by which these milestones must be
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relief granted in this Order will
supersede the relief granted in the 2022
Order and the 2023 Order. This relief is
to take effect upon issuance of an order
by the D.C. Circuit dismissing with
prejudice the Participants’ petition for
review of the 2022 Order. Unless and
until that occurs, the 2022 Order and
the 2023 Order shall continue to govern.
Should the Participants file a petition
for review of this Order, the relief
granted herein will be rescinded by its
own terms and the 2022 Order and the
2023 Order will resume governing.
II. Discussion and Exemptive Relief
Section 36(a)(1) of the Exchange Act
grants the Commission the authority to
‘‘conditionally or unconditionally
exempt any person, security, or
transaction . . . from any provision or
provisions of [the Exchange Act] or of
any rule or regulation thereunder, to the
extent that such exemption is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors.’’ 14 Rule 608(e) of Regulation
NMS similarly grants the Commission
the authority to ‘‘exempt from [Rule
achieved. These amendments also reduce the
amount of any fees, costs, and expenses that the
Participants may recover from Industry Members if
the Participants fail to meet the target deadlines.
See Securities Exchange Act Release No. 88890
(May 15, 2020), 85 FR 31322 (May 22, 2020). The
Commission has stated that, to the extent that the
Participants are availing themselves of exemptive
relief from a CAT NMS Plan requirement, such
requirement shall not be included in the
requirements for a Financial Accountability
Milestone, provided that the conditions of the
exemption are satisfied. See, e.g., Securities
Exchange Act Release No. 89051 (June 11, 2020), 85
FR 36631 (June 17, 2020). In connection with
issuing this Order, the Commission has determined
that the Participants have sufficiently complied
with the conditions set forth in the prior Orders and
with the technical requirements for Quarterly
Progress Reports set forth in section 6.6(c) of the
CAT NMS Plan, including for purposes of
determining compliance with any applicable
Financial Accountability Milestones. The
Commission makes no determination as to the
veracity of the factual assertions made in Quarterly
Progress Reports submitted pursuant to section
6.6(c) or as to whether the Participants have
complied with the applicable Financial
Accountability Milestones in all other respects.
Moreover, the Commission makes no
determinations with respect to the Full
Implementation of CAT NMS Plan Requirements
milestone described in section 1.1 of the CAT NMS
Plan or the potential application of fee reduction
provisions set forth in section 11.6 of the CAT NMS
Plan with respect to that milestone. Rather, the
Commission will consider the Participants’
compliance with the CAT NMS Plan requirements,
and/or compliance with the conditions set forth in
the prior Orders and the impact of that compliance,
in the context of fee proposals related to that
milestone. Moreover, the Commission makes no
determinations regarding the Participants’
compliance or non-compliance with other
provisions or requirements of the CAT NMS Plan
that are not discussed in the prior Orders or in this
Order.
14 15 U.S.C. 78mm(a)(1).
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77129
608], either unconditionally or on
specified terms and conditions, any selfregulatory organization, member
thereof, or specified security, if the
Commission determines that such
exemption is consistent with the public
interest, the protection of investors, the
maintenance of fair and orderly markets
and the removal of impediments to, and
perfection of the mechanisms of, a
national market system.’’ 15
The Commission recognizes that the
Participants have expended, and
continue to expend, substantial
resources and effort towards the
development and implementation of the
CAT. However, in the 2022 Order, the
Commission stated that the current
functionality of the CAT does not yet
comply with CAT NMS Plan
requirements for the above-described
areas.16 The Participants have
disagreed, and have further stated that,
in many of these areas, strict
compliance with the relevant CAT NMS
Plan provisions would not be practical
from a cost-benefit perspective.17 In
light of that disagreement, the
Commission stressed in the 2022 Order
its willingness to consider alternative
solutions that achieve the regulatory
goals of Rule 613 and the CAT NMS
Plan in a more cost-effective manner.18
The Commission has determined that
the exemptive relief granted herein—
which is the product of multiple years
of settlement discussions—is
appropriate in the public interest and
consistent with the protection of
investors under section 36(a)(1) of the
Exchange Act, as well as consistent with
the public interest, the protection of
investors, the maintenance of fair and
orderly markets, and the perfection of
the mechanisms of a national market
system under Rule 608(e) of Regulation
NMS. The Commission approved the
CAT NMS Plan to help to protect
investors and maintain fair and orderly
markets by providing a sophisticated
audit trail that improves regulators’
ability to investigate potential
misconduct, to reconstruct and to
analyze market events, and to support
regulatory decisions with detailed and
accurate data, among other benefits. The
conditional exemptive relief in this
Order allows for the implementation of
alternative regulatory solutions that
continue to advance the regulatory goals
that Rule 613 and the CAT NMS Plan
were intended to promote, while
reducing the implementation and
operational costs, burdens, and/or
15 17
CFR 242.608(e).
2022 Order, supra note 8.
17 See, e.g., id. at 42248.
18 Id.
16 See
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difficulties that would otherwise be
incurred by the Participants and
Industry Members 19 that must fund the
CAT. It also resolves the continued
impasse over implementation of these
aspects of the CAT, which impeded and
distracted from these regulatory goals.
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A. OTQT Performance Requirements
The Commission grants conditional
exemptive relief from the OTQT
performance requirements related to
query response times and parallel
processing of queries set forth in
appendix D, section 8.1.2 of the CAT
NMS Plan.20 Such relief is subject to the
following conditions:
• The OTQT must maintain or
improve current functionality that
enables requests for ‘‘all related
lifecycles’’ to be made either prior to or
after the generation of a parent query.
• The OTQT must further satisfy the
performance parameters set forth in
Exhibit A.
• The Plan Processor must continue
to test the OTQT’s performance with
benchmark queries and evaluate the
response times for actual queries on a
monthly basis. Such tests and
evaluations should contain at least the
same content that is currently provided
to Commission staff and should be
provided to Commission staff and the
Operating Committee within 30 days
from the end of each month.
• The Plan Processor must conduct
an annual concurrency test by
launching 300 simultaneous query
requests across the different query
categories and measuring the response
times against the applicable
performance standards. The
concurrency test shall be based on
historical actual queries, and the mix of
queries shall be based on the percentage
of actual queries by category. The
concurrency test attributes shall be
provided in writing and reviewed in
advance with Commission staff and the
Operating Committee. The Participants
must also provide the results of the
annual concurrency testing performed
by the Plan Processor on the OTQT to
Commission staff within 30 days from
the date of such testing. If the
concurrency test response times do not
satisfy the performance standards set
forth in Exhibit A (i.e., measured against
19 ‘‘Industry Member’’ is defined in section 1.1 of
the CAT NMS Plan as ‘‘a member of a national
securities exchange or a member of a national
securities association.’’
20 The OTQT performance requirements set forth
in appendix D, section 8.1.2 of the CAT NMS Plan
are described in the 2022 Order. See 2022 Order,
supra note 8, at 42248–50. The Commission
understands that the Participants challenge the
feasibility of strict compliance with these
requirements.
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a 90% compliance rate for each
category, based on historical actual
queries, with the mix of queries based
on the percentage of actual queries by
category), the Plan Processor shall
promptly investigate and make
recommendations to the Operating
Committee for how to ensure adequate
concurrency performance.
• The Plan Processor must establish
policies and/or procedures requiring
review of the OTQT’s performance on a
regular and ongoing basis and
evaluation of opportunities for potential
improvements to the OTQT’s
performance. The Participants must
provide to Commission staff, on an
annual basis, a written status update
including information regarding any
potential and actual implementation by
the Plan Processor of improvements to
the OTQT performance. The written
status update shall also include an
evaluation of (1) volume trends and
projections; (2) usage patterns and types
of queries performed; (3) response time
statistics and trends; (4) outlier queries;
(5) costs and benefits; and (6) regulatory
need.
The Commission believes that this
conditional exemptive relief reflects a
reasonable compromise approach. The
standards set forth in Exhibit A
preserve, as a baseline, the OTQT
functionality that is already in place,
which should provide a measure of
certainty for regulatory users regarding
this query tool’s expected performance.
The other conditions set forth above
enable better oversight of the OTQT’s
performance by the Participants and the
Commission, which the Commission
believes is in the public interest.
B. Requirements for Lifecycle Linkages
Timeframes
The Commission grants conditional
exemptive relief from the requirement
set forth in appendix D, section 6.1 of
the CAT NMS Plan that lifecycle
linkages be created by T+1 at noon
Eastern Time.21 Such relief is subject to
the following conditions:
• The Plan Processor must maintain
or improve the existing performance of
functionality currently providing
lifecycle linkages for all order events by
T+1 at 9 p.m. Eastern Time, except an
interim CAT Order ID will not be
required for Options Quotes once the
functionality described below is
implemented.
21 The lifecycle linkage performance requirements
set forth in appendix D, section 6.1 of the CAT NMS
Plan are described in the 2022 Order. See 2022
Order, supra note 8, at 42250–52. The Commission
understands that the Participants challenge the
feasibility of strict compliance with these
requirements.
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• The Plan Processor must develop
and implement the functionality to
provide a final CAT Order ID and
lifecycle linkage for Options Quotes by
T+2 at 8 a.m. Eastern Time, including
all enrichments currently provided for
such order events at T+5 at 8 a.m.
Eastern Time. The Plan Processor will
no longer be required to provide an
interim CAT Order ID for Options
Quotes once this functionality has been
implemented. When late or corrected
data is received for Options Quotes
between T+1 at 8 a.m. Eastern Time and
T+4 at 8 a.m. Eastern Time, the Plan
Processor must run, on an ad hoc basis,
a second processing cycle such that
lifecycle linkage and all enrichments
currently provided for such order events
are performed by T+5 at 8 a.m. Eastern
Time.
The Commission believes that this
conditional exemptive relief facilitates
settlement of the issues raised in the
Participants’ challenge to the 2022 order
while preserving existing functionality
for most types of order events.
C. Requirements for Re-Processing of
Corrected Data Received After T+5 22
The Commission grants conditional
exemptive relief from the re-processing
requirements for corrected data received
after T+5 that are set forth in appendix
D, section 3 and section 6.2 of the CAT
NMS Plan.23 Such relief is subject to the
following conditions:
• The Plan Processor must maintain
its implementation of functionality
related to late data lifecycle association
that was approved by the Operating
Committee on January 14, 2022 (the
‘‘Late to the Lifecycle process’’) and on
September 20, 2022 (the ‘‘Targeted
Replay process’’) (collectively, the
‘‘Enhanced Late to the Lifecycle
process’’). Prior to the implementation
of this functionality, in the limited
circumstances in which there was a
missing link between two disjoined
segments of an order lifecycle, new or
corrected data would join only one of
the pre-existing segments and would be
assigned to only one of the relevant
22 For the purposes of this document, references
to data received ‘‘after T+5,’’ or to post-T+5 data,
submissions, or reports, are to data received ‘‘after
T+4 at 8 a.m. Eastern Time.’’
23 The T+5 re-processing requirements set forth in
appendix D, section 3 and section 6.2 of the CAT
NMS Plan are described in the 2022 Order. See
2022 Order, supra note 8, at 42252–53. The
requirements concern how the CAT Order ID and
other data elements (e.g., sequence numbers, CAT
Customer ID) are created for post-T+5 data, as well
as any applicable impacts to those data elements for
on-time data within the same lifecycle that were
previously delivered to regulatory users on T+5.
The Commission understands that the Participants
challenge the feasibility of strict compliance with
these requirements.
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lifecycle CAT Order IDs for the
disjoined segment and evaluated for
further re-processing. Under the
Enhanced Late to the Lifecycle process,
all late records (i.e., records received
after T+5) include the date of the
correction and, if applicable, the record
identifier of the record being corrected
as part of normal re-processing. In
addition, the late record is now
associated with all relevant lifecycles as
part of normal re-processing, such that
order event lifecycles may now be
associated with more than one CAT
Order ID.
• The Participants must approve a
change order to adopt the belowdescribed functionality no later than 30
days following the effective date of this
Order:
Æ Functionality that creates a
lifecycle mapping which indicates all
lifecycle associations made during the
Enhanced Late to the Lifecycle process;
Æ Functionality that presents to
regulatory users post-T+5 data in a
manner substantially similar to how
such data would have been represented
if it had been reported prior to T+5,
including by replicating and replaying
records with enrichments impacted by
post-T+5 submissions, creating updated
enrichments, and persisting the
replicated records within the underlying
data (the ‘‘Full Replay process’’); and
Æ Functionality that enhances the
OTQT, including the ability to include
or exclude any records that were created
or replaced as a result of the Full Replay
process.
Such functionality must be fully
implemented and made available to
regulatory users within twelve months
of the change order’s approval by the
Participants.
• The Plan Processor must schedule
the Enhanced Late to the Lifecycle
process and the Full Replay process to
run weekly, such that late reported data
received through Friday of the prior
week are available for regulatory users
on the following business day at 8 a.m.
Eastern Time, absent extraordinary
circumstances, for data within the prior
18 months. For data outside of this 18month window, the Participants must
schedule the Enhanced Late to the
Lifecycle process and the Full Replay
process to run no less frequently than
quarterly.
The Commission understands that
this alternative technological solution,
when fully implemented, will
meaningfully advance the regulatory
goals of Rule 613 and the CAT NMS
Plan by enabling regulatory users to
view corrected data that is submitted
after T+5 as part of an order event
lifecycle (which may be represented by
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more than one CAT Order ID) and in a
manner that does not require such
regulatory users to know whether late
records were submitted and/or to
perform additional query steps to obtain
the most up-to-date records. The
Commission believes this alternative
technological solution will help
regulatory users to better understand the
impact of post-T+5 reports.
77131
ATT Attributable. Order is routed to an exchange or ATS with instructions that the
order is attributable.
DNI Do Not Increase.
DNR Do Not Reduce.
DNRT Do Not Route.
RLO Retail Liquidity Order.
STP Self Trade Prevention.
Under the conditional exemptive
relief granted herein, the Participants
will not be required to obligate Industry
Members to report these six special
handling instructions when an Industry
Member routes an order to a national
securities exchange over an exchange
port that is configured for one of these
special handling instructions.27
This conditional exemptive relief
applies only when the Exempted PortLevel Settings are set at the port-level at
a national securities exchange. Aside
from the Exempted Port-Level Settings,
this Order does not provide exemptive
relief from the reporting requirements
set forth in the CAT NMS Plan for any
existing and/or new special handling
instructions that may be set at the portlevel at a national securities exchange
and that may constitute Material Terms
of the Order; likewise, this Order does
not provide exemptive relief for any
Material Terms of the Order that are set
at the port-level on Industry Member
E. Reporting Requirements for Port-Level
alternative trading systems or brokerSettings
dealer port-level settings. To the extent
The Commission grants conditional
that the Participants and/or Industry
exemptive relief from the requirements
Members wish to receive similar
as applied to port-level settings that are
exemptive relief related to other
set forth in Rule 613(c)(7) and sections
Material Terms of the Order set at the
6.3(d)(i)(F), 6.3(d)(ii)(G), 6.3(d)(iii)(F),
6.3(d)(iv)(E), and 6.4(d)(i) of the CAT
at 42254–55. The Commission understands that,
NMS Plan for the following special
notwithstanding this Order, the Participants
continue to disagree with its interpretation of these
handling instructions described in the
requirements and challenge the feasibility of strict
current CAT Industry Member
with these requirements, other than
Technical Specifications that may be set compliance
with respect to the Exempted Port-Level Settings.
by Industry Members at the various
This Order does not resolve (or have any bearing
on) the parties’ remaining interpretive disagreement
Participant exchanges via exchange
on this issue, but instead provides exemptive relief
ports (the ‘‘Exempted Port-Level
that renders resolution of the issue unnecessary as
Settings’’): 26
to all port-level settings other than the Exempted
D. Requirements for SIP Data Linkage
The Commission grants conditional
exemptive relief from the SIP Data
linkage requirements that are set forth in
section 6.5(b)(i) and appendix D, section
3 of the CAT NMS Plan.24 Such relief
is subject to the following conditions:
• The Plan Processor must continue
to provide regulatory users with the
side-by-side view of SIP Data and other
transactional data in the same format
and manner that is currently available
in the OTQT.25
This functionality requires regulatory
users to manually match SIP Data with
other transactional data reported to the
CAT. However, the Commission
believes this is an acceptable alternative
solution that will continue to make
available SIP Data to regulatory users
while facilitating settlement of the
issues raised in the Participants’
challenge to the 2022 Order.
24 The
SIP Data linkage requirements set forth in
section 6.5(b)(i) and appendix D, section 3 of the
CAT NMS Plan is described in the 2022 Order. See
2022 Order, supra note 8, at 42253–54. The
Commission understands that the Participants
challenge the feasibility of strict compliance with
these requirements.
25 This ‘‘side-by-side’’ functionality refers to the
ability for users of the OTQT to include SIP Data
in multi-object searches that include transactional
data from Industry Member and Plan Participant
CAT Reporters. For example, a regulatory user may
elect to query Exchange Equity Events and SIP
Trades simultaneously for trades in a given
security; the results will be returned interweaved
within a single result set, in a logical sequence.
26 The requirements as applied to port-level
settings set forth in in Rule 613(c)(7) and sections
6.3(d)(i)(F), 6.3(d)(ii)(G), 6.3(d)(iii)(F), 6.3(d)(iv)(E),
and 6.4(d)(i) of the CAT NMS Plan are described
in the 2022 Order. See 2022 Order, supra note 8,
PO 00000
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Fmt 4703
Sfmt 4703
Port-Level Settings.
27 As explained in the 2022 Order, the CAT NMS
Plan does not require all port-level settings to be
reported to the CAT. Rule 613 and the CAT NMS
Plan only require Participants and Industry
Members to report port-level settings that are used
by a sender or a receiver of an order to
communicate the Material Terms of the Order,
including ‘‘any special handling instructions.’’
Furthermore, Rule 613 and the CAT NMS Plan only
obligate the sender of an order to report the Material
Terms of the Order that it communicated to and/
or agreed upon with the receiver of the order,
including default or implicit special handling
instructions communicated through a port-level
setting. If the receiver of an order subsequently
attaches ‘‘any special handling instructions’’ to an
order without informing the sender, including
special handling instructions communicated
through a port-level setting, only the receiver would
be obligated to report those Material Terms of the
Order.
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Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Notices
port-level, they must submit an
exemptive relief request to the
Commission for its consideration.
Such relief is subject to the following
conditions:
• The Participants must report the
Exempted Port-Level Settings in the
order receipt record, regardless of
whether such Exempted Port-Level
Settings are ‘‘triggered’’ or ‘‘applied.’’ 28
• The Participants must maintain and
communicate to Industry Members via a
CAT Alert a mapping of each exchangespecific port-level setting related to the
Exempted Port-Level Settings,
substantially in the form of the draft
mapping the Participants have provided
to the Commission.29
The Commission believes that this
alternative technological solution, when
fully implemented, reflects a reasonable
compromise approach with respect to a
limited set of data.30
F. Requirements for Lifecycle Linkages
Between Customer Orders and
‘‘Representative’’ Orders
lotter on DSK11XQN23PROD with NOTICES1
The Commission grants temporary
conditional exemptive relief from the
requirements set forth in appendix D,
section 3 of the CAT NMS Plan related
to lifecycle linkages between customer
orders and representative orders until
January 31, 2025.31 Such relief is
intended to mirror the exemptive relief
provided by the 2023 Order and is
subject to the following condition:
• The Participants must require
Industry Members to report
‘‘representative’’ orders as currently
described in FAQs F5–F7 and as
described in other exemptive relief
28 The Commission understands that the
Participants disagree with its interpretation that
special handling instructions that are never
‘‘triggered’’ or ‘‘applied’’ to an order qualify as
Material Terms of the Order with respect to any
other existing and/or new special handling
instructions that may be set at the port-level at a
national securities exchange.
29 There are differences between the technical
specifications utilized by Industry Members and
Participants, as well as differences in reporting
among the Participants. While the Participants may
update this mapping for the Exempted Port-Level
Settings as needed, new Material Terms of the
Order that are set at the port-level and that are not
specifically addressed this Order may not be added
to this mapping without additional exemptive relief
from the Commission.
30 The Commission notes that its analysis is
specific to the Exempted Port-Level Settings and
reserves judgment as to whether the abovedescribed alternative technological solution would
be appropriate for any other Material Terms of the
Order that are communicated via a port-level
setting.
31 The requirements related to lifecycle linkages
between customer orders and representative orders
set forth in appendix D, section 3 of the CAT NMS
Plan are described in the 2022 Order. See 2022
Order, supra note 8, at 42255–56.
VerDate Sep<11>2014
17:34 Nov 07, 2023
Jkt 262001
issued by the Commission by January
31, 2025.32
The Commission believes that the
relief provided in the 2023 Order gives
Industry Members sufficient time to
make any necessary systems changes to
implement the required functionality,
especially because the technical
specifications and/or scenarios
documents relating to the reporting and
linkage of all ‘‘representative’’ orders
have already been promulgated by the
Participants. Therefore, the Commission
does not believe it is necessary to issue
any additional extension of exemptive
relief in connection with these
requirements.
G. Requirements for Participant
Reporting of Rejected Orders
The Commission grants conditional
exemptive relief from the requirements
set forth in Rule 613(c)(7) and section
6.3(d)(i) and appendix D, section 3 of
the CAT NMS Plan relating to
Participant reporting of rejected orders
and subsequent linkage of such orders.33
Such relief is subject to the following
conditions:
• The Participants must maintain or
improve their existing reporting of
orders that are received and
subsequently rejected, including
maintenance by Participants of any
existing reporting or linkage of the keys
necessary for the linkage processing
specified below. The Plan Processor
must maintain its existing validations of
such orders.
• The Participants must approve a
change order to adopt the belowdescribed functionality no later than 60
days following the effective date of this
Order:
Æ Functionality that will attempt
‘‘forward lifecycle linkage’’ processing,
including all enrichments currently
provided for other order events, of
Industry Member MEOR, MOOR, and
MEMR Order Route events containing a
routeRejectedFlag populated as ‘‘true’’
with their corresponding Participant
32 See, e.g., Securities Exchange Act Release No.
88702 (Apr. 20, 2020), 85 FR 23075 (Apr. 24, 2020);
2022 Order, supra note 8, at 42255–56. See also
FAQ F5–F7, available at https://catnmsplan.com/
faq.
33 The requirements related to Participant
reporting of rejected orders set forth in Rule
613(c)(7) and section 6.3(d)(i) and appendix D,
section 3 of the CAT NMS Plan are described in the
2022 Order. See 2022 Order, supra note 8, at
42256–57. The Commission understands that,
notwithstanding this Order, the Participants
continue to disagree with its interpretation of these
requirements and challenge the feasibility of strict
compliance with that interpretation. This Order
does not resolve the parties’ interpretive
disagreement on this issue, but instead provides
exemptive relief that renders resolution of the issue
unnecessary.
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Frm 00061
Fmt 4703
Sfmt 4703
Reject Message events described in the
Participant Technical Specifications in
instances where the keys necessary for
such linkage are available (i.e., Symbol
(or Option ID), RoutingParty,
RoutedOrderID, Session).34
Such functionality must be fully
implemented and made available to
regulatory users within twelve months
of the change order’s approval by the
Participants.
The Commission understands that
this alternative technological solution,
when fully implemented, will
meaningfully advance the regulatory
goals of Rule 613 and the CAT NMS
Plan by providing regulatory users with
additional information about rejected
orders.
III. Conclusion
Accordingly, it is hereby ordered,
pursuant to section 36(a)(1) of the
Exchange Act 35 and Rule 608(e) under
the Exchange Act,36 that the abovedescribed conditional exemptive relief
be granted, effective immediately upon
the date of issuance of an order by the
D.C. Circuit dismissing the Participants’
petition for review of the 2022 Order.
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
Exhibit A
Online Targeted Query Tool Performance
Parameters
1. General: Subject to the specific
conditions described in this Exhibit A, OTQT
performance must satisfy both (i) an
operational completion rate (measuring the
successful completion of all attempted
queries), and (ii) a query compliance rate
(measuring the response time performance of
all successfully completed queries).
2. Operational Completion Rate: Queries
will be subject to a 95% operational
completion rate measured quarterly against
34 The ‘‘forward lifecycle linkage’’ processing
referred to above is intended to capture
functionality that the Participants believe may be
feasible in light of a study of recent data. Based on
that study and based on current trading volume
market share among the various Participant
exchanges, the Plan Processor currently estimates
that approximately 90% of Industry Member
MEOR, MOOR, and MEMR Order Route events
containing a routeRejectedFlag populated as ‘‘true’’
may be programmatically linked with their
corresponding Participant Reject Message events.
For the avoidance of doubt, for purposes of
satisfying the conditions of this Order, the
Participants will not be required to modify their
existing architectures or reporting and will not be
required to provide ‘‘reverse linkage’’ of Participant
Reject Message events to Industry Member Order
Route events. Moreover, this Order does not impose
any required minimum linkage rate as a condition
to exemptive relief. Linkage errors relating to
rejected orders will not be required to be included
in compliance error rates.
35 15 U.S.C. 78mm(a)(1).
36 17 CFR 242.608(e).
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Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Notices
all attempted queries in the aggregate. The
operational completion rate will measure the
successful completion of all attempted
queries, excluding failed queries resulting
from a service interruption experienced by
the Plan Processor’s cloud service provider.
3. Query Compliance Rate. Queries will be
subject to a 90% query compliance rate
measured monthly against all actual query
results based on the categories and response
times set forth below. The query compliance
rate will measure the response time
performance of all successfully completed
queries for each category. Response times
shall be measured from the time of query
submission by the regulatory user to the time
that the results are available to the regulatory
user (i.e., including the time required to
formulate a data mart).
Response time
(minutes)
Category
OLA Viewer ................................................................................
Standard Queries
Small ............................................................................
Medium .........................................................................
Large ............................................................................
Complex .......................................................................
10
30
60
240
All Related Lifecycles 37
Simple ..........................................................................
20
Complex .......................................................................
720
77133
Description
2
See data objects below.
See data objects below.
See data objects below.
• More than one trade date or object, or
• Returns more than 1M rows.
•
•
•
•
Fewer than 10,000 lifecycles, and
Single-day lifecycle count.
Fewer than 50,000 lifecycles, and
Fewer than 60 lifecycle dates.
STANDARD QUERY DATA OBJECTS 38
Small
(10 minutes)
Medium
(30 minutes)
Corporate Actions ...............................................................................
Equity Member Dictionary ..................................................................
Equity Off Exchange Events ...............................................................
Equity Symbol Master .........................................................................
Equity Trade Events ...........................................................................
FDID CCID Map .................................................................................
IDQS BBO
Market Maker Dictionary
OCC Options Product
OCC Options Series
Off Exchange Trade Events
Off Exchange Trades
Options Dictionary
Options Member Dictionary
Options Trade Events
OTC Halt Events
Self Help Declaration Events
SIP Admin
SIP CTA Admin Messages
SIP CTS Trade Summary
SIP CTS Trades
SIP Issue Status
SIP MWCB Status
SIP OTC Halts
SIP Quote Events
SIP Summary
SIP Trades
SIP UTP Admin Messages
SIP UTP LULD Price Band
SIP UTP Trade Prior Day As-Of
SIP UTP Trade Summary
SIP UTP Trades
Equity Exchange Events ..................
Exchange Orders .............................
IM Options Events ...........................
Market Participant Quotes ...............
Options Quotes ................................
SIP Quotes.
lotter on DSK11XQN23PROD with NOTICES1
4. Reporting Requirements. The Plan
Processor shall provide a monthly report
37 For an all related lifecycles request made prior
to the generation of a parent query, the time of
query submission will not commence until
completion of the parent query.
38 If a new data object is created in the future, the
Plan Processor will undertake a six-month
assessment period (commencing once the data
object is populated with actual data) to understand
volumes and regulatory usage and, based on these
VerDate Sep<11>2014
16:54 Nov 07, 2023
Jkt 262001
noting (i) the operational completion rate for
all attempted queries in the aggregate, and (ii)
the query compliance rate for each category
described above, to Commission staff within
30 days from the end of each month.
5. Reasonable Adjustment Period. In order
to permit the Plan Processor to promptly
scale up the OTQT to ensure adequate system
Large
(60 minutes)
IM Equity Events.
Options Exchange Events.
Options NBBO.
Options Orders/Trades.
OPRA RAW.
capacity in the event of significant,
unanticipated, or rapid changes in data
volumes and/or user behavior that require
application coding changes and/or changes to
how historical data is stored, response times
shall be subject to a reasonable adjustment
period, (i) not to exceed 60 days for items
observations, will slot the new data object into one
of these existing categories.
PO 00000
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Federal Register / Vol. 88, No. 215 / Wednesday, November 8, 2023 / Notices
requiring application coding changes,39 and
(ii) not to exceed 120 days for items requiring
changes to how a data object is stored and
that may include changes impacting
historical data in the object. These 60-day
and 120-day periods shall be measured from
the date on which the monthly compliance
report is provided to Commission staff. For
purposes of this condition:
• A significant, unanticipated, or rapid
change in data volume shall be deemed to
have occurred in the event of an average
daily data volume increase of 30% in the
applicable data object(s) from the lesser of: (i)
the peak daily data volume observed in the
prior month, or (ii) the peak daily data
volume observed in the same month in the
prior year.
• A significant, unanticipated, or rapid
change in user behavior shall be deemed to
have occurred in the event of an average
daily OTQT query count increase of 30%
from the lesser of: (i) the peak daily OTQT
query count observed in the prior month, or
(ii) the peak daily OTQT query count
observed in the same month in the prior year.
Written notification of these
determinations will be provided to and
reviewed with Commission staff.
[FR Doc. 2023–24624 Filed 11–7–23; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #20018 and #20019;
ILLINOIS Disaster Number IL–20001]
Administrative Disaster Declaration of
a Rural Area for the State of Illinois
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a notice of an
Administrative disaster declaration of a
rural area for the State of Illinois dated
11/02/2023.
Incident: Severe Storms and Flooding.
Incident Period: 06/29/2023 through
07/02/2023.
DATES: Issued on 11/02/2023.
Physical Loan Application Deadline
Date: 01/02/2024.
Economic Injury (EIDL) Loan
Application Deadline Date: 08/02/2024.
ADDRESSES: Visit the MySBA Loan
Portal at https://lending.sba.gov to
apply for a disaster assistance loan.
FOR FURTHER INFORMATION CONTACT:
Alan Escobar, Office of Disaster
Recovery & Resilience, U.S. Small
Business Administration, 409 3rd Street
lotter on DSK11XQN23PROD with NOTICES1
SUMMARY:
39 Application
coding changes are changes
requiring a software release and deployment. For
the avoidance of doubt, adding/removing system
capacity or the incremental size of capacity changes
(e.g., autoscaling compute node step size) within
the limits of the OTQT system are configuration
changes and are not considered application coding
changes.
VerDate Sep<11>2014
16:54 Nov 07, 2023
Jkt 262001
SW, Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration of a
rural area, applications for disaster
loans may be submitted online using the
MySBA Loan Portal https://
lending.sba.gov or other locally
announced locations. Please contact the
SBA disaster assistance customer
service center by email at
disastercustomerservice@sba.gov or by
phone at 1–800–659–2955 for further
assistance.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Hancock, Sangamon,
Vermilion, Washington
The Interest Rates are:
Percent
For Physical Damage:
Homeowners with Credit Available Elsewhere ......................
Homeowners without Credit
Available Elsewhere ..............
Businesses with Credit Available Elsewhere ......................
Businesses without Credit
Available Elsewhere ..............
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Business and Small Agricultural
Cooperatives without Credit
Available Elsewhere ..............
Non-Profit Organizations without Credit Available Elsewhere .....................................
5.000
2.500
8.000
4.000
2.375
2.375
4.000
2.375
The number assigned to this disaster
for physical damage is 200186 and for
economic injury is 200190.
The State which received an EIDL
Declaration is Illinois.
(Catalog of Federal Domestic Assistance
Number 59008)
Isabella Guzman,
Administrator.
[FR Doc. 2023–24682 Filed 11–7–23; 8:45 am]
BILLING CODE 8026–09–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #20060 and #20061;
TENNESSEE Disaster Number TN–20002]
Administrative Declaration of a
Disaster for the State of Tennessee
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
PO 00000
Frm 00063
Fmt 4703
Sfmt 4703
This is a notice of an
Administrative declaration of a disaster
for the State of Tennessee dated 11/02/
2023.
Incident: Severe Storms, Straight-line
Winds and Tornadoes.
Incident Period: 08/07/2023.
DATES: Issued on 11/02/2023.
Physical Loan Application Deadline
Date: 01/02/2024.
Economic Injury (EIDL) Loan
Application Deadline Date: 08/02/2024.
ADDRESSES: Visit the MySBA Loan
Portal at https://lending.sba.gov to
apply for a disaster assistance loan.
FOR FURTHER INFORMATION CONTACT:
Alan Escobar, Office of Disaster
Recovery & Resilience, U.S. Small
Business Administration, 409 3rd Street
SW, Suite 6050, Washington, DC 20416,
(202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
Administrator’s disaster declaration,
applications for disaster loans may be
submitted online using the MySBA
Loan Portal https://lending.sba.gov or
other locally announced locations.
Please contact the SBA disaster
assistance customer service center by
email at disastercustomerservice@
sba.gov or by phone at 1–800–659–2955
for further assistance.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Knox.
Contiguous Counties:
Tennessee: Anderson, Blount,
Grainger, Jefferson, Loudon, Roane,
Sevier, Union
The Interest Rates are:
SUMMARY:
Percent
For Physical Damage:
Homeowners with Credit Available Elsewhere ......................
Homeowners without Credit
Available Elsewhere ..............
Businesses with Credit Available Elsewhere ......................
Businesses without Credit
Available Elsewhere ..............
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Business and Small Agricultural
Cooperatives without Credit
Available Elsewhere ..............
Non-Profit Organizations without Credit Available Elsewhere .....................................
5.000
2.500
8.000
4.000
2.375
2.375
4.000
2.375
The number assigned to this disaster
for physical damage is 20060C and for
economic injury is 200610.
E:\FR\FM\08NON1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 215 (Wednesday, November 8, 2023)]
[Notices]
[Pages 77128-77134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24624]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98848]
Order Granting Conditional Exemptive Relief, Pursuant to Section
36(a)(1) of the Securities Exchange Act of 1934 (``Exchange Act'') and
Rule 608(e) of Regulation NMS Under the Exchange Act, From Certain
Requirements of the National Market System Plan Governing the
Consolidated Audit Trail
November 2, 2023.
I. Introduction
In July 2012, the Securities and Exchange Commission (the
``Commission'' or the ``SEC'') adopted Rule 613 of Regulation NMS,
which required national securities exchanges and national securities
associations (the ``Participants'') \1\ to jointly develop and submit
to the Commission a national market system plan to create, implement,
and maintain a consolidated audit trail (the ``CAT'').\2\ The goal of
Rule 613 was to create a modernized audit trail system that would
provide regulators with timely access to a comprehensive set of trading
data, thus enabling regulators to more efficiently and effectively
analyze and reconstruct market events, monitor market behavior, conduct
market analysis to support regulatory decisions, and perform
surveillance, investigation, and enforcement activities. On November
15, 2016, the Commission approved the national market system plan
required by Rule 613 (the ``CAT NMS Plan'').\3\
---------------------------------------------------------------------------
\1\ 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.
\2\ See Securities Exchange Act Release No. 67457 (July 18,
2012), 77 FR 45722 (Aug. 1, 2012) (``Rule 613 Adopting Release'').
\3\ Securities Exchange Act Release No. 78318 (Nov. 15, 2016),
81 FR 84696, (Nov. 23, 2016) (``CAT NMS Plan Approval Order''). The
CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval Order. See
CAT NMS Plan Approval Order, at 84943-85034. 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
(the ``Company''). Each Participant is a member of the Company and
jointly owns the Company on an equal basis. The Participants
submitted to the Commission a proposed amendment to the CAT NMS Plan
on Aug. 29, 2019, which they designated as effective on filing.
Under the amendment, the limited liability company agreement of a
new limited liability company named Consolidated Audit Trail, LLC
serves as the CAT NMS Plan, replacing in its entirety the CAT NMS
Plan. See Securities Exchange Act Release No. 87149 (Sept. 27,
2019), 84 FR 52905 (Oct. 3, 2019).
---------------------------------------------------------------------------
On December 16, 2020, the Commission issued two exemptive orders
regarding the implementation of the CAT NMS Plan (collectively, the
``2020 Orders''). The first order, in response to a request from the
Participants, granted temporary conditional relief from certain
performance requirements related to the online targeted query tool
(``OTQT'').\4\ The second order granted temporary conditional relief
from the following requirements: (1) requirements for lifecycle
linkages timeframes; (2) requirements for re-processing of corrected
data received after T+5; (3) linkage requirements for Securities
Information Processor data (``SIP Data''); (4) reporting requirements
for port-level settings; (5) requirements for lifecycle linkages
between customer orders and ``representative'' orders; and (6)
requirements for Participant reporting of rejected orders.\5\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 90689 (Dec. 16,
2020), 85 FR 83667 (Dec. 22, 2020); see also Letter from Michael
Simon, CAT NMS Plan Operating Committee Chair, to Vanessa
Countryman, Secretary, Commission, dated Dec. 1, 2020, available at
https://catnmsplan.com/sites/default/files/2020-12/12.01.20-CAT-Exemption-Request-OTQT.pdf.
\5\ See Securities Exchange Act Release No. 90688 (Dec. 16,
2020), 85 FR 83634 (Dec. 22, 2020).
---------------------------------------------------------------------------
On February 14, 2021, several of the Participants filed motions
requesting that the Commission stay the 2020 Orders, based on their
concern that portions of the orders ``interpret and apply the Plan in
ways that will produce unintended adverse consequences, present
implementation challenges, or both.'' \6\ That same day, several of
those same Participants filed corresponding petitions for judicial
review with the U.S. Court of Appeals for the District of Columbia
Circuit (the ``D.C. Circuit'') seeking review of the 2020 Orders.\7\
---------------------------------------------------------------------------
\6\ See Motion for Partial Stay of Order 34-90689, at 2; Motion
for Partial Stay of Order 34-90688, at 2. Financial Industry
Regulatory Authority, Inc. and Long-Term Stock Exchange, Inc. did
not join these motions.
\7\ See Petition for Review, USCA Case No. 21-1065; Petition for
Review, USCA Case No. 21-1066. Financial Industry Regulatory
Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange,
Inc., MEMX LLC, Miami International Securities Exchange LLC, MIAX
Emerald, LLC, and MIAX PEARL, LLC did not join these petitions.
---------------------------------------------------------------------------
On July 8, 2022, the Commission issued a new order granting
temporary exemptive relief (the ``2022 Order'').\8\ The 2022 Order,
which superseded the
[[Page 77129]]
2020 Orders, modified and/or clarified certain aspects of the 2020
Orders and gave the Participants until July 31, 2024 to either
implement the functionality the Commission required for compliance with
the relevant provisions of the CAT NMS Plan or to obtain Commission
approval of alternative solutions that achieve the relevant regulatory
objectives of Rule 613 and the CAT NMS Plan in a more cost-effective
manner, including CAT NMS Plan amendments or exemptive relief. In
addition, the Commission issued an order denying the Participants' stay
motions, concluding that the administrative petitions to stay the 2020
Orders were ``moot'' because those orders were ``no longer in force.''
\9\ On August 3, 2022, the Commission and the Participants submitted a
stipulation of voluntary dismissal to the D.C. Circuit, and, on August
5, 2022, the D.C. Circuit issued an order formally dismissing the
lawsuits.\10\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 95234 (July 8,
2022), 87 FR 42247 (July 14, 2022).
\9\ See Securities Exchange Act Release No. 95235 (July 8,
2022), 87 FR 42242 (July 14, 2022).
\10\ See Order of Dismissal, USCA Case No. 21-1065 (consolidated
with USCA Case No. 21-1066).
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On September 6, 2022, in order to reserve their rights, a subset of
the Participants filed a petition for review with the D.C. Circuit
seeking review of the 2022 Order.\11\ The Commission understood that
the Participants' concerns remained generally the same as expressed
with respect to the 2020 Orders. The Commission subsequently issued an
order, on May 18, 2023, extending the exemptive relief provided by the
2022 Order (the ``2023 Order'') from July 31, 2024 to January 31, 2025,
subject to the same conditions set forth in the 2022 Order.\12\ Since
2021, the Participants and Commission staff engaged in discussions with
the goal of resolving their differences with respect to the issues
raised by the 2020 Orders, the 2022 Order, and the 2023 Order (the
``prior Orders'').
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\11\ See Petition for Review, USCA Case No. 22-1234. Financial
Industry Regulatory Authority, Inc. and Investors' Exchange LLC did
not join this petition.
\12\ See Securities Exchange Act Release No. 97530 (May 18,
2023), 88 FR 33655 (May 24, 2023).
---------------------------------------------------------------------------
In light of further developments throughout this period and in
connection with the parties' settlement of the pending litigation, the
Commission has determined to issue a new order granting the
Participants conditional exemptive relief from certain requirements of
the CAT NMS Plan, which are described in more detail below.\13\ If and
when it takes effect, the relief granted in this Order will supersede
the relief granted in the 2022 Order and the 2023 Order. This relief is
to take effect upon issuance of an order by the D.C. Circuit dismissing
with prejudice the Participants' petition for review of the 2022 Order.
Unless and until that occurs, the 2022 Order and the 2023 Order shall
continue to govern. Should the Participants file a petition for review
of this Order, the relief granted herein will be rescinded by its own
terms and the 2022 Order and the 2023 Order will resume governing.
---------------------------------------------------------------------------
\13\ In May 2020, the Commission adopted amendments to the CAT
NMS Plan that establish four Financial Accountability Milestones and
set target deadlines by which these milestones must be achieved.
These amendments also reduce the amount of any fees, costs, and
expenses that the Participants may recover from Industry Members if
the Participants fail to meet the target deadlines. See Securities
Exchange Act Release No. 88890 (May 15, 2020), 85 FR 31322 (May 22,
2020). The Commission has stated that, to the extent that the
Participants are availing themselves of exemptive relief from a CAT
NMS Plan requirement, such requirement shall not be included in the
requirements for a Financial Accountability Milestone, provided that
the conditions of the exemption are satisfied. See, e.g., Securities
Exchange Act Release No. 89051 (June 11, 2020), 85 FR 36631 (June
17, 2020). In connection with issuing this Order, the Commission has
determined that the Participants have sufficiently complied with the
conditions set forth in the prior Orders and with the technical
requirements for Quarterly Progress Reports set forth in section
6.6(c) of the CAT NMS Plan, including for purposes of determining
compliance with any applicable Financial Accountability Milestones.
The Commission makes no determination as to the veracity of the
factual assertions made in Quarterly Progress Reports submitted
pursuant to section 6.6(c) or as to whether the Participants have
complied with the applicable Financial Accountability Milestones in
all other respects. Moreover, the Commission makes no determinations
with respect to the Full Implementation of CAT NMS Plan Requirements
milestone described in section 1.1 of the CAT NMS Plan or the
potential application of fee reduction provisions set forth in
section 11.6 of the CAT NMS Plan with respect to that milestone.
Rather, the Commission will consider the Participants' compliance
with the CAT NMS Plan requirements, and/or compliance with the
conditions set forth in the prior Orders and the impact of that
compliance, in the context of fee proposals related to that
milestone. Moreover, the Commission makes no determinations
regarding the Participants' compliance or non-compliance with other
provisions or requirements of the CAT NMS Plan that are not
discussed in the prior Orders or in this Order.
---------------------------------------------------------------------------
II. Discussion and Exemptive Relief
Section 36(a)(1) of the Exchange Act grants the Commission the
authority to ``conditionally or unconditionally exempt any person,
security, or transaction . . . from any provision or provisions of [the
Exchange Act] or of any rule or regulation thereunder, to the extent
that such exemption is necessary or appropriate in the public interest,
and is consistent with the protection of investors.'' \14\ Rule 608(e)
of Regulation NMS similarly grants the Commission the authority to
``exempt from [Rule 608], either unconditionally or on specified terms
and conditions, any self-regulatory organization, member thereof, or
specified security, if the Commission determines that such exemption is
consistent with the public interest, the protection of investors, the
maintenance of fair and orderly markets and the removal of impediments
to, and perfection of the mechanisms of, a national market system.''
\15\
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\14\ 15 U.S.C. 78mm(a)(1).
\15\ 17 CFR 242.608(e).
---------------------------------------------------------------------------
The Commission recognizes that the Participants have expended, and
continue to expend, substantial resources and effort towards the
development and implementation of the CAT. However, in the 2022 Order,
the Commission stated that the current functionality of the CAT does
not yet comply with CAT NMS Plan requirements for the above-described
areas.\16\ The Participants have disagreed, and have further stated
that, in many of these areas, strict compliance with the relevant CAT
NMS Plan provisions would not be practical from a cost-benefit
perspective.\17\ In light of that disagreement, the Commission stressed
in the 2022 Order its willingness to consider alternative solutions
that achieve the regulatory goals of Rule 613 and the CAT NMS Plan in a
more cost-effective manner.\18\
---------------------------------------------------------------------------
\16\ See 2022 Order, supra note 8.
\17\ See, e.g., id. at 42248.
\18\ Id.
---------------------------------------------------------------------------
The Commission has determined that the exemptive relief granted
herein--which is the product of multiple years of settlement
discussions--is appropriate in the public interest and consistent with
the protection of investors under section 36(a)(1) of the Exchange Act,
as well as consistent with the public interest, the protection of
investors, the maintenance of fair and orderly markets, and the
perfection of the mechanisms of a national market system under Rule
608(e) of Regulation NMS. The Commission approved the CAT NMS Plan to
help to protect investors and maintain fair and orderly markets by
providing a sophisticated audit trail that improves regulators' ability
to investigate potential misconduct, to reconstruct and to analyze
market events, and to support regulatory decisions with detailed and
accurate data, among other benefits. The conditional exemptive relief
in this Order allows for the implementation of alternative regulatory
solutions that continue to advance the regulatory goals that Rule 613
and the CAT NMS Plan were intended to promote, while reducing the
implementation and operational costs, burdens, and/or
[[Page 77130]]
difficulties that would otherwise be incurred by the Participants and
Industry Members \19\ that must fund the CAT. It also resolves the
continued impasse over implementation of these aspects of the CAT,
which impeded and distracted from these regulatory goals.
---------------------------------------------------------------------------
\19\ ``Industry Member'' is defined in section 1.1 of the CAT
NMS Plan as ``a member of a national securities exchange or a member
of a national securities association.''
---------------------------------------------------------------------------
A. OTQT Performance Requirements
The Commission grants conditional exemptive relief from the OTQT
performance requirements related to query response times and parallel
processing of queries set forth in appendix D, section 8.1.2 of the CAT
NMS Plan.\20\ Such relief is subject to the following conditions:
---------------------------------------------------------------------------
\20\ The OTQT performance requirements set forth in appendix D,
section 8.1.2 of the CAT NMS Plan are described in the 2022 Order.
See 2022 Order, supra note 8, at 42248-50. The Commission
understands that the Participants challenge the feasibility of
strict compliance with these requirements.
---------------------------------------------------------------------------
The OTQT must maintain or improve current functionality
that enables requests for ``all related lifecycles'' to be made either
prior to or after the generation of a parent query.
The OTQT must further satisfy the performance parameters
set forth in Exhibit A.
The Plan Processor must continue to test the OTQT's
performance with benchmark queries and evaluate the response times for
actual queries on a monthly basis. Such tests and evaluations should
contain at least the same content that is currently provided to
Commission staff and should be provided to Commission staff and the
Operating Committee within 30 days from the end of each month.
The Plan Processor must conduct an annual concurrency test
by launching 300 simultaneous query requests across the different query
categories and measuring the response times against the applicable
performance standards. The concurrency test shall be based on
historical actual queries, and the mix of queries shall be based on the
percentage of actual queries by category. The concurrency test
attributes shall be provided in writing and reviewed in advance with
Commission staff and the Operating Committee. The Participants must
also provide the results of the annual concurrency testing performed by
the Plan Processor on the OTQT to Commission staff within 30 days from
the date of such testing. If the concurrency test response times do not
satisfy the performance standards set forth in Exhibit A (i.e.,
measured against a 90% compliance rate for each category, based on
historical actual queries, with the mix of queries based on the
percentage of actual queries by category), the Plan Processor shall
promptly investigate and make recommendations to the Operating
Committee for how to ensure adequate concurrency performance.
The Plan Processor must establish policies and/or
procedures requiring review of the OTQT's performance on a regular and
ongoing basis and evaluation of opportunities for potential
improvements to the OTQT's performance. The Participants must provide
to Commission staff, on an annual basis, a written status update
including information regarding any potential and actual implementation
by the Plan Processor of improvements to the OTQT performance. The
written status update shall also include an evaluation of (1) volume
trends and projections; (2) usage patterns and types of queries
performed; (3) response time statistics and trends; (4) outlier
queries; (5) costs and benefits; and (6) regulatory need.
The Commission believes that this conditional exemptive relief
reflects a reasonable compromise approach. The standards set forth in
Exhibit A preserve, as a baseline, the OTQT functionality that is
already in place, which should provide a measure of certainty for
regulatory users regarding this query tool's expected performance. The
other conditions set forth above enable better oversight of the OTQT's
performance by the Participants and the Commission, which the
Commission believes is in the public interest.
B. Requirements for Lifecycle Linkages Timeframes
The Commission grants conditional exemptive relief from the
requirement set forth in appendix D, section 6.1 of the CAT NMS Plan
that lifecycle linkages be created by T+1 at noon Eastern Time.\21\
Such relief is subject to the following conditions:
---------------------------------------------------------------------------
\21\ The lifecycle linkage performance requirements set forth in
appendix D, section 6.1 of the CAT NMS Plan are described in the
2022 Order. See 2022 Order, supra note 8, at 42250-52. The
Commission understands that the Participants challenge the
feasibility of strict compliance with these requirements.
---------------------------------------------------------------------------
The Plan Processor must maintain or improve the existing
performance of functionality currently providing lifecycle linkages for
all order events by T+1 at 9 p.m. Eastern Time, except an interim CAT
Order ID will not be required for Options Quotes once the functionality
described below is implemented.
The Plan Processor must develop and implement the
functionality to provide a final CAT Order ID and lifecycle linkage for
Options Quotes by T+2 at 8 a.m. Eastern Time, including all enrichments
currently provided for such order events at T+5 at 8 a.m. Eastern Time.
The Plan Processor will no longer be required to provide an interim CAT
Order ID for Options Quotes once this functionality has been
implemented. When late or corrected data is received for Options Quotes
between T+1 at 8 a.m. Eastern Time and T+4 at 8 a.m. Eastern Time, the
Plan Processor must run, on an ad hoc basis, a second processing cycle
such that lifecycle linkage and all enrichments currently provided for
such order events are performed by T+5 at 8 a.m. Eastern Time.
The Commission believes that this conditional exemptive relief
facilitates settlement of the issues raised in the Participants'
challenge to the 2022 order while preserving existing functionality for
most types of order events.
C. Requirements for Re-Processing of Corrected Data Received After T+5
\22\
---------------------------------------------------------------------------
\22\ For the purposes of this document, references to data
received ``after T+5,'' or to post-T+5 data, submissions, or
reports, are to data received ``after T+4 at 8 a.m. Eastern Time.''
---------------------------------------------------------------------------
The Commission grants conditional exemptive relief from the re-
processing requirements for corrected data received after T+5 that are
set forth in appendix D, section 3 and section 6.2 of the CAT NMS
Plan.\23\ Such relief is subject to the following conditions:
---------------------------------------------------------------------------
\23\ The T+5 re-processing requirements set forth in appendix D,
section 3 and section 6.2 of the CAT NMS Plan are described in the
2022 Order. See 2022 Order, supra note 8, at 42252-53. The
requirements concern how the CAT Order ID and other data elements
(e.g., sequence numbers, CAT Customer ID) are created for post-T+5
data, as well as any applicable impacts to those data elements for
on-time data within the same lifecycle that were previously
delivered to regulatory users on T+5. The Commission understands
that the Participants challenge the feasibility of strict compliance
with these requirements.
---------------------------------------------------------------------------
The Plan Processor must maintain its implementation of
functionality related to late data lifecycle association that was
approved by the Operating Committee on January 14, 2022 (the ``Late to
the Lifecycle process'') and on September 20, 2022 (the ``Targeted
Replay process'') (collectively, the ``Enhanced Late to the Lifecycle
process''). Prior to the implementation of this functionality, in the
limited circumstances in which there was a missing link between two
disjoined segments of an order lifecycle, new or corrected data would
join only one of the pre-existing segments and would be assigned to
only one of the relevant
[[Page 77131]]
lifecycle CAT Order IDs for the disjoined segment and evaluated for
further re-processing. Under the Enhanced Late to the Lifecycle
process, all late records (i.e., records received after T+5) include
the date of the correction and, if applicable, the record identifier of
the record being corrected as part of normal re-processing. In
addition, the late record is now associated with all relevant
lifecycles as part of normal re-processing, such that order event
lifecycles may now be associated with more than one CAT Order ID.
The Participants must approve a change order to adopt the
below-described functionality no later than 30 days following the
effective date of this Order:
[cir] Functionality that creates a lifecycle mapping which
indicates all lifecycle associations made during the Enhanced Late to
the Lifecycle process;
[cir] Functionality that presents to regulatory users post-T+5 data
in a manner substantially similar to how such data would have been
represented if it had been reported prior to T+5, including by
replicating and replaying records with enrichments impacted by post-T+5
submissions, creating updated enrichments, and persisting the
replicated records within the underlying data (the ``Full Replay
process''); and
[cir] Functionality that enhances the OTQT, including the ability
to include or exclude any records that were created or replaced as a
result of the Full Replay process.
Such functionality must be fully implemented and made available to
regulatory users within twelve months of the change order's approval by
the Participants.
The Plan Processor must schedule the Enhanced Late to the
Lifecycle process and the Full Replay process to run weekly, such that
late reported data received through Friday of the prior week are
available for regulatory users on the following business day at 8 a.m.
Eastern Time, absent extraordinary circumstances, for data within the
prior 18 months. For data outside of this 18-month window, the
Participants must schedule the Enhanced Late to the Lifecycle process
and the Full Replay process to run no less frequently than quarterly.
The Commission understands that this alternative technological
solution, when fully implemented, will meaningfully advance the
regulatory goals of Rule 613 and the CAT NMS Plan by enabling
regulatory users to view corrected data that is submitted after T+5 as
part of an order event lifecycle (which may be represented by more than
one CAT Order ID) and in a manner that does not require such regulatory
users to know whether late records were submitted and/or to perform
additional query steps to obtain the most up-to-date records. The
Commission believes this alternative technological solution will help
regulatory users to better understand the impact of post-T+5 reports.
D. Requirements for SIP Data Linkage
The Commission grants conditional exemptive relief from the SIP
Data linkage requirements that are set forth in section 6.5(b)(i) and
appendix D, section 3 of the CAT NMS Plan.\24\ Such relief is subject
to the following conditions:
---------------------------------------------------------------------------
\24\ The SIP Data linkage requirements set forth in section
6.5(b)(i) and appendix D, section 3 of the CAT NMS Plan is described
in the 2022 Order. See 2022 Order, supra note 8, at 42253-54. The
Commission understands that the Participants challenge the
feasibility of strict compliance with these requirements.
---------------------------------------------------------------------------
The Plan Processor must continue to provide regulatory
users with the side-by-side view of SIP Data and other transactional
data in the same format and manner that is currently available in the
OTQT.\25\
---------------------------------------------------------------------------
\25\ This ``side-by-side'' functionality refers to the ability
for users of the OTQT to include SIP Data in multi-object searches
that include transactional data from Industry Member and Plan
Participant CAT Reporters. For example, a regulatory user may elect
to query Exchange Equity Events and SIP Trades simultaneously for
trades in a given security; the results will be returned interweaved
within a single result set, in a logical sequence.
---------------------------------------------------------------------------
This functionality requires regulatory users to manually match SIP
Data with other transactional data reported to the CAT. However, the
Commission believes this is an acceptable alternative solution that
will continue to make available SIP Data to regulatory users while
facilitating settlement of the issues raised in the Participants'
challenge to the 2022 Order.
E. Reporting Requirements for Port-Level Settings
The Commission grants conditional exemptive relief from the
requirements as applied to port-level settings that are set forth in
Rule 613(c)(7) and sections 6.3(d)(i)(F), 6.3(d)(ii)(G),
6.3(d)(iii)(F), 6.3(d)(iv)(E), and 6.4(d)(i) of the CAT NMS Plan for
the following special handling instructions described in the current
CAT Industry Member Technical Specifications that may be set by
Industry Members at the various Participant exchanges via exchange
ports (the ``Exempted Port-Level Settings''): \26\
---------------------------------------------------------------------------
\26\ The requirements as applied to port-level settings set
forth in in Rule 613(c)(7) and sections 6.3(d)(i)(F), 6.3(d)(ii)(G),
6.3(d)(iii)(F), 6.3(d)(iv)(E), and 6.4(d)(i) of the CAT NMS Plan are
described in the 2022 Order. See 2022 Order, supra note 8, at 42254-
55. The Commission understands that, notwithstanding this Order, the
Participants continue to disagree with its interpretation of these
requirements and challenge the feasibility of strict compliance with
these requirements, other than with respect to the Exempted Port-
Level Settings. This Order does not resolve (or have any bearing on)
the parties' remaining interpretive disagreement on this issue, but
instead provides exemptive relief that renders resolution of the
issue unnecessary as to all port-level settings other than the
Exempted Port-Level Settings.
------------------------------------------------------------------------
-------------------------------------------------------------------------
ATT Attributable. Order is routed to an exchange or ATS with
instructions that the order is attributable.
DNI Do Not Increase.
DNR Do Not Reduce.
DNRT Do Not Route.
RLO Retail Liquidity Order.
STP Self Trade Prevention.
------------------------------------------------------------------------
Under the conditional exemptive relief granted herein, the
Participants will not be required to obligate Industry Members to
report these six special handling instructions when an Industry Member
routes an order to a national securities exchange over an exchange port
that is configured for one of these special handling instructions.\27\
---------------------------------------------------------------------------
\27\ As explained in the 2022 Order, the CAT NMS Plan does not
require all port-level settings to be reported to the CAT. Rule 613
and the CAT NMS Plan only require Participants and Industry Members
to report port-level settings that are used by a sender or a
receiver of an order to communicate the Material Terms of the Order,
including ``any special handling instructions.'' Furthermore, Rule
613 and the CAT NMS Plan only obligate the sender of an order to
report the Material Terms of the Order that it communicated to and/
or agreed upon with the receiver of the order, including default or
implicit special handling instructions communicated through a port-
level setting. If the receiver of an order subsequently attaches
``any special handling instructions'' to an order without informing
the sender, including special handling instructions communicated
through a port-level setting, only the receiver would be obligated
to report those Material Terms of the Order.
---------------------------------------------------------------------------
This conditional exemptive relief applies only when the Exempted
Port-Level Settings are set at the port-level at a national securities
exchange. Aside from the Exempted Port-Level Settings, this Order does
not provide exemptive relief from the reporting requirements set forth
in the CAT NMS Plan for any existing and/or new special handling
instructions that may be set at the port-level at a national securities
exchange and that may constitute Material Terms of the Order; likewise,
this Order does not provide exemptive relief for any Material Terms of
the Order that are set at the port-level on Industry Member alternative
trading systems or broker-dealer port-level settings. To the extent
that the Participants and/or Industry Members wish to receive similar
exemptive relief related to other Material Terms of the Order set at
the
[[Page 77132]]
port-level, they must submit an exemptive relief request to the
Commission for its consideration.
Such relief is subject to the following conditions:
The Participants must report the Exempted Port-Level
Settings in the order receipt record, regardless of whether such
Exempted Port-Level Settings are ``triggered'' or ``applied.'' \28\
---------------------------------------------------------------------------
\28\ The Commission understands that the Participants disagree
with its interpretation that special handling instructions that are
never ``triggered'' or ``applied'' to an order qualify as Material
Terms of the Order with respect to any other existing and/or new
special handling instructions that may be set at the port-level at a
national securities exchange.
---------------------------------------------------------------------------
The Participants must maintain and communicate to Industry
Members via a CAT Alert a mapping of each exchange-specific port-level
setting related to the Exempted Port-Level Settings, substantially in
the form of the draft mapping the Participants have provided to the
Commission.\29\
---------------------------------------------------------------------------
\29\ There are differences between the technical specifications
utilized by Industry Members and Participants, as well as
differences in reporting among the Participants. While the
Participants may update this mapping for the Exempted Port-Level
Settings as needed, new Material Terms of the Order that are set at
the port-level and that are not specifically addressed this Order
may not be added to this mapping without additional exemptive relief
from the Commission.
---------------------------------------------------------------------------
The Commission believes that this alternative technological
solution, when fully implemented, reflects a reasonable compromise
approach with respect to a limited set of data.\30\
---------------------------------------------------------------------------
\30\ The Commission notes that its analysis is specific to the
Exempted Port-Level Settings and reserves judgment as to whether the
above-described alternative technological solution would be
appropriate for any other Material Terms of the Order that are
communicated via a port-level setting.
---------------------------------------------------------------------------
F. Requirements for Lifecycle Linkages Between Customer Orders and
``Representative'' Orders
The Commission grants temporary conditional exemptive relief from
the requirements set forth in appendix D, section 3 of the CAT NMS Plan
related to lifecycle linkages between customer orders and
representative orders until January 31, 2025.\31\ Such relief is
intended to mirror the exemptive relief provided by the 2023 Order and
is subject to the following condition:
---------------------------------------------------------------------------
\31\ The requirements related to lifecycle linkages between
customer orders and representative orders set forth in appendix D,
section 3 of the CAT NMS Plan are described in the 2022 Order. See
2022 Order, supra note 8, at 42255-56.
---------------------------------------------------------------------------
The Participants must require Industry Members to report
``representative'' orders as currently described in FAQs F5-F7 and as
described in other exemptive relief issued by the Commission by January
31, 2025.\32\
---------------------------------------------------------------------------
\32\ See, e.g., Securities Exchange Act Release No. 88702 (Apr.
20, 2020), 85 FR 23075 (Apr. 24, 2020); 2022 Order, supra note 8, at
42255-56. See also FAQ F5-F7, available at https://catnmsplan.com/faq.
---------------------------------------------------------------------------
The Commission believes that the relief provided in the 2023 Order
gives Industry Members sufficient time to make any necessary systems
changes to implement the required functionality, especially because the
technical specifications and/or scenarios documents relating to the
reporting and linkage of all ``representative'' orders have already
been promulgated by the Participants. Therefore, the Commission does
not believe it is necessary to issue any additional extension of
exemptive relief in connection with these requirements.
G. Requirements for Participant Reporting of Rejected Orders
The Commission grants conditional exemptive relief from the
requirements set forth in Rule 613(c)(7) and section 6.3(d)(i) and
appendix D, section 3 of the CAT NMS Plan relating to Participant
reporting of rejected orders and subsequent linkage of such orders.\33\
Such relief is subject to the following conditions:
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\33\ The requirements related to Participant reporting of
rejected orders set forth in Rule 613(c)(7) and section 6.3(d)(i)
and appendix D, section 3 of the CAT NMS Plan are described in the
2022 Order. See 2022 Order, supra note 8, at 42256-57. The
Commission understands that, notwithstanding this Order, the
Participants continue to disagree with its interpretation of these
requirements and challenge the feasibility of strict compliance with
that interpretation. This Order does not resolve the parties'
interpretive disagreement on this issue, but instead provides
exemptive relief that renders resolution of the issue unnecessary.
---------------------------------------------------------------------------
The Participants must maintain or improve their existing
reporting of orders that are received and subsequently rejected,
including maintenance by Participants of any existing reporting or
linkage of the keys necessary for the linkage processing specified
below. The Plan Processor must maintain its existing validations of
such orders.
The Participants must approve a change order to adopt the
below-described functionality no later than 60 days following the
effective date of this Order:
[cir] Functionality that will attempt ``forward lifecycle linkage''
processing, including all enrichments currently provided for other
order events, of Industry Member MEOR, MOOR, and MEMR Order Route
events containing a routeRejectedFlag populated as ``true'' with their
corresponding Participant Reject Message events described in the
Participant Technical Specifications in instances where the keys
necessary for such linkage are available (i.e., Symbol (or Option ID),
RoutingParty, RoutedOrderID, Session).\34\
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\34\ The ``forward lifecycle linkage'' processing referred to
above is intended to capture functionality that the Participants
believe may be feasible in light of a study of recent data. Based on
that study and based on current trading volume market share among
the various Participant exchanges, the Plan Processor currently
estimates that approximately 90% of Industry Member MEOR, MOOR, and
MEMR Order Route events containing a routeRejectedFlag populated as
``true'' may be programmatically linked with their corresponding
Participant Reject Message events. For the avoidance of doubt, for
purposes of satisfying the conditions of this Order, the
Participants will not be required to modify their existing
architectures or reporting and will not be required to provide
``reverse linkage'' of Participant Reject Message events to Industry
Member Order Route events. Moreover, this Order does not impose any
required minimum linkage rate as a condition to exemptive relief.
Linkage errors relating to rejected orders will not be required to
be included in compliance error rates.
---------------------------------------------------------------------------
Such functionality must be fully implemented and made available to
regulatory users within twelve months of the change order's approval by
the Participants.
The Commission understands that this alternative technological
solution, when fully implemented, will meaningfully advance the
regulatory goals of Rule 613 and the CAT NMS Plan by providing
regulatory users with additional information about rejected orders.
III. Conclusion
Accordingly, it is hereby ordered, pursuant to section 36(a)(1) of
the Exchange Act \35\ and Rule 608(e) under the Exchange Act,\36\ that
the above-described conditional exemptive relief be granted, effective
immediately upon the date of issuance of an order by the D.C. Circuit
dismissing the Participants' petition for review of the 2022 Order.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78mm(a)(1).
\36\ 17 CFR 242.608(e).
By the Commission.
Sherry R. Haywood,
Assistant Secretary.
Exhibit A
Online Targeted Query Tool Performance Parameters
1. General: Subject to the specific conditions described in this
Exhibit A, OTQT performance must satisfy both (i) an operational
completion rate (measuring the successful completion of all
attempted queries), and (ii) a query compliance rate (measuring the
response time performance of all successfully completed queries).
2. Operational Completion Rate: Queries will be subject to a 95%
operational completion rate measured quarterly against
[[Page 77133]]
all attempted queries in the aggregate. The operational completion
rate will measure the successful completion of all attempted
queries, excluding failed queries resulting from a service
interruption experienced by the Plan Processor's cloud service
provider.
3. Query Compliance Rate. Queries will be subject to a 90% query
compliance rate measured monthly against all actual query results
based on the categories and response times set forth below. The
query compliance rate will measure the response time performance of
all successfully completed queries for each category. Response times
shall be measured from the time of query submission by the
regulatory user to the time that the results are available to the
regulatory user (i.e., including the time required to formulate a
data mart).
------------------------------------------------------------------------
Response time
Category (minutes) Description
------------------------------------------------------------------------
OLA Viewer........................ 2
Standard Queries
Small..................... 10 See data objects
below.
Medium.................... 30 See data objects
below.
Large..................... 60 See data objects
below.
Complex................... 240 More than
one trade date or
object, or
Returns
more than 1M rows.
All Related Lifecycles \37\
Simple.................... 20 Fewer than
10,000 lifecycles,
and
Single-day
lifecycle count.
Complex................... 720 Fewer than
50,000 lifecycles,
and
Fewer than
60 lifecycle dates.
------------------------------------------------------------------------
Standard Query Data Objects \38\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Small (10 minutes) Medium (30 minutes) Large (60 minutes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate Actions....................... Equity Exchange Events................................ IM Equity Events.
Equity Member Dictionary................ Exchange Orders....................................... Options Exchange Events.
Equity Off Exchange Events.............. IM Options Events..................................... Options NBBO.
Equity Symbol Master.................... Market Participant Quotes............................. Options Orders/Trades.
Equity Trade Events..................... Options Quotes........................................ OPRA RAW.
FDID CCID Map........................... SIP Quotes.
IDQS BBO
Market Maker Dictionary
OCC Options Product
OCC Options Series
Off Exchange Trade Events
Off Exchange Trades
Options Dictionary
Options Member Dictionary
Options Trade Events
OTC Halt Events
Self Help Declaration Events
SIP Admin
SIP CTA Admin Messages
SIP CTS Trade Summary
SIP CTS Trades
SIP Issue Status
SIP MWCB Status
SIP OTC Halts
SIP Quote Events
SIP Summary
SIP Trades
SIP UTP Admin Messages
SIP UTP LULD Price Band
SIP UTP Trade Prior Day As-Of
SIP UTP Trade Summary
SIP UTP Trades
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4. Reporting Requirements. The Plan Processor shall provide a
monthly report noting (i) the operational completion rate for all
attempted queries in the aggregate, and (ii) the query compliance
rate for each category described above, to Commission staff within
30 days from the end of each month.
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\37\ For an all related lifecycles request made prior to the
generation of a parent query, the time of query submission will not
commence until completion of the parent query.
\38\ If a new data object is created in the future, the Plan
Processor will undertake a six-month assessment period (commencing
once the data object is populated with actual data) to understand
volumes and regulatory usage and, based on these observations, will
slot the new data object into one of these existing categories.
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5. Reasonable Adjustment Period. In order to permit the Plan
Processor to promptly scale up the OTQT to ensure adequate system
capacity in the event of significant, unanticipated, or rapid
changes in data volumes and/or user behavior that require
application coding changes and/or changes to how historical data is
stored, response times shall be subject to a reasonable adjustment
period, (i) not to exceed 60 days for items
[[Page 77134]]
requiring application coding changes,\39\ and (ii) not to exceed 120
days for items requiring changes to how a data object is stored and
that may include changes impacting historical data in the object.
These 60-day and 120-day periods shall be measured from the date on
which the monthly compliance report is provided to Commission staff.
For purposes of this condition:
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\39\ Application coding changes are changes requiring a software
release and deployment. For the avoidance of doubt, adding/removing
system capacity or the incremental size of capacity changes (e.g.,
autoscaling compute node step size) within the limits of the OTQT
system are configuration changes and are not considered application
coding changes.
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A significant, unanticipated, or rapid change in data
volume shall be deemed to have occurred in the event of an average
daily data volume increase of 30% in the applicable data object(s)
from the lesser of: (i) the peak daily data volume observed in the
prior month, or (ii) the peak daily data volume observed in the same
month in the prior year.
A significant, unanticipated, or rapid change in user
behavior shall be deemed to have occurred in the event of an average
daily OTQT query count increase of 30% from the lesser of: (i) the
peak daily OTQT query count observed in the prior month, or (ii) the
peak daily OTQT query count observed in the same month in the prior
year.
Written notification of these determinations will be provided to
and reviewed with Commission staff.
[FR Doc. 2023-24624 Filed 11-7-23; 8:45 am]
BILLING CODE 8011-01-P
