Order Granting an Exemption Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934 and Rule 608(e) of Regulation NMS Under the Exchange Act, Relating to the Recordkeeping Requirements for Industry Test Data, as Required by Rule 17a-1 Under the Exchange Act and Certain Provisions of the National Market System Plan Governing the Consolidated Audit Trail, 84026-84028 [2023-26407]
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84026
Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
‘‘Investment Company Act’’) requires a
registered management investment
company (‘‘fund’’) to (1) file a report
with the Commission on Form N–CSR
(17 CFR 249.331 and 274.128) not later
than 10 days after the transmission of
any report required to be transmitted to
shareholders under rule 30e–1 under
the Investment Company Act, and (2)
file with the Commission a copy of
every periodic or interim report or
similar communication containing
financial statements that is transmitted
by or on behalf of such fund to any class
of such fund’s security holders and that
is not required to be filed with the
Commission under (1) above, not later
than 10 days after the transmission to
security holders. The purpose of the
collection of information required by
rule 30b2–1 is to meet the disclosure
requirements of the Investment
Company Act and certification
requirements of the Sarbanes-Oxley Act
of 2002 (Pub. L. 107–204, 116 Stat. 745
(2002)), and to provide investors with
information necessary to evaluate an
interest in the fund.
The Commission estimates that there
are 2,728 funds, with a total of 13,449
portfolios, that are governed by the rule.
For purposes of this analysis, the
burden associated with the
requirements of rule 30b2–1 has been
included in the collection of
information requirements of rule 30e–1
(17 CFR 270.30e–1) and Form N–CSR,
rather than the rule. The rule 30b2–1
information collection, however,
imposes a one hour burden for
administrative purposes and we are
maintaining that one hour burden.
The collection of information under
rule 30b2–1 is mandatory. The
information provided under rule 30b2–
1 is not kept confidential. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it
displays a currently valid OMB control
number.
Written comments are invited on: (a)
whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
estimate of the burden of the collection
of information; (c) ways to enhance the
quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on respondents, including
through the use of automated collection
techniques or other forms of information
technology. Consideration will be given
to comments and suggestions submitted
by January 30, 2024.
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An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
Please direct your written comments
to: David Bottom, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o John
Pezzullo, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
Dated: November 27, 2023.
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–26403 Filed 11–30–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99023; File No. 4–698]
Order Granting an Exemption Pursuant
to Section 36(a)(1) of the Securities
Exchange Act of 1934 and Rule 608(e)
of Regulation NMS Under the
Exchange Act, Relating to the
Recordkeeping Requirements for
Industry Test Data, as Required by
Rule 17a–1 Under the Exchange Act
and Certain Provisions of the National
Market System Plan Governing the
Consolidated Audit Trail
November 27, 2023.
I. Introduction
By letter dated June 2, 2023, BOX
Exchange LLC, Cboe BYX Exchange,
Inc., Cboe BZX Exchange, Inc., Cboe
EDGA Exchange, Inc., Cboe EDGX
Exchange, Inc., Cboe C2 Exchange, Inc.,
Cboe Exchange, Inc., Financial Industry
Regulatory Authority, Inc., Investors
Exchange LLC, Long-Term Stock
Exchange, Inc., MEMX LLC, Miami
International Securities Exchange LLC,
MIAX Emerald, LLC, MIAX PEARL,
LLC, NASDAQ BX, LLC, Nasdaq GEMX,
LLC, Nasdaq ISE, LLC, Nasdaq MRX,
LLC, NASDAQ PHLX LLC, The
NASDAQ Stock Market LLC, New York
Stock Exchange LLC, NYSE American
LLC, NYSE Arca, Inc., NYSE Chicago,
Inc., and NYSE National, Inc.,
(collectively, the ‘‘Participants’’)
requested that the Securities and
Exchange Commission (‘‘Commission’’)
grant exemptive relief to the
Participants,1 pursuant to its authority
under section 36(a)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
1 See letter from the Participants to Vanessa
Countryman, Secretary, Commission, dated June 2,
2023 (the ‘‘Exemption Request’’). Unless otherwise
noted, capitalized terms are used as defined in the
CAT NMS Plan.
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Act’’) 2 and Rule 608(e) of Regulation
NMS 3 under the Exchange Act, from
certain recordkeeping requirements for
retaining data from industry testing, in
Rule 17a–1 4 of the Exchange Act and
certain provisions of the National
Market System Plan Governing the
Consolidated Audit Trail (‘‘CAT NMS
Plan’’).5
Section 36(a)(1) of the Exchange Act
grants the Commission the authority,
with certain limitations, to
‘‘conditionally or unconditionally
exempt any person, security, or
transaction . . . from any provision or
provisions of [the Exchange Act] or of
any rule or regulation thereunder, to the
extent that such exemption is necessary
or appropriate in the public interest,
and is consistent with the protection of
investors.’’ 6 Under Rule 608(e) of
Regulation NMS, the Commission may
‘‘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 mechanism of, a
national market system.’’ 7
For the reasons set forth below, the
Commission believes that it is
consistent with the purposes of the
Exchange Act to grant exemptive relief
relating to the Participants’ recordkeeping and data retention requirements
in Rule 17a–1 of the Exchange Act,
Section 9.1 of the CAT NMS Plan,
Section 1.4 of Appendix D of the CAT
NMS Plan and certain provisions in
Appendix C of the CAT NMS Plan (to
the extent any may apply).
II. Background and Request for Relief
In the Exemption Request, the
Participants state that CAT Reporters,
including both Participants and
Industry Members, engage in testing
related to the reporting of order and
transaction data to the CAT, both
pursuant to required testing and testing
on a voluntary basis.8 The Participants
explain that in connection with this
testing, CAT LLC, through the Plan
2 15
U.S.C. 78mm(a)(1).
CFR 242.608(e).
4 17 CFR 240.17a–1.
5 The CAT NMS Plan was approved by the
Commission, as modified, on Nov. 15, 2016. See
Securities Exchange Act Release No. 79318 (Nov.
15, 2016), 81 FR 84696 (Nov. 23, 2016) (‘‘CAT NMS
Plan Approval Order’’).
6 15 U.S.C. 78mm(a)(1).
7 17 CFR 242.608(e).
8 See Exemptive Request, at 2.
3 17
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Processor, retains the test data
submitted by Industry Members and
Participants, feedback files related to
such data, and output files that hold the
detailed transactions (such test data and
files are referred to herein as ‘‘Industry
Test Data’’).9 The Participants further
state that this exemption request only
involves Industry Test Data related to
the CAT order and transaction system,
not the customer account and
information system.10 The Participants
request that the Commission grant
exemptive relief from the longer data
retention time periods set forth in Rule
17a–1 of the Exchange Act, Section 9.1
of the CAT NMS Plan, Section 1.4 of
Appendix D of the CAT NMS Plan and
certain provisions in Appendix C of the
CAT NMS Plan, only as those retention
requirements pertain to Industry Test
Data.11 The Participants request that in
granting this relief, the Commission will
only require the Participants, acting
through CAT LLC and the Plan
Processor, to retain Industry Test Data
for a period of three months.12
In support of their request, the
Participants state that Appendix D of
the CAT NMS Plan specifically requires
the retention of Industry Test Data for
only three months,13 and that this
specific provision governs the retention
period for Industry Test Data, in spite of
the lengthier general recordkeeping
provisions in the CAT NMS Plan and
the even more general recordkeeping
requirements of Rule 17a–1 under the
Exchange Act.14 The Participants state
that Section 9.1 of the CAT NMS Plan
incorporates by reference Rule 17a–1
under the Exchange Act, which requires
every national securities exchange and
national securities association ‘‘to keep
and preserve at least one copy of all
documents, including all
correspondence, memoranda, papers,
books, notices, accounts, and other such
records as shall be made or received by
it in the course of its business as such
and in the conduct of its self-regulatory
activity,’’ and to keep all such
documents ‘‘for a period of not less than
five years, the first two years in an
easily accessible place, subject to the
destruction and disposition provisions
of Rule 17a–6.’’ 15 The Participants also
state that they do not believe that
Industry Test Data constitutes
documents covered by Rule 17a–1
under the Exchange Act because to
9 Id.
10 Id.
at note 6.
at 4.
12 Id. at 1.
13 Id. at 2.
14 See Exemptive Request, at 3.
15 Id. at 2–3.
11 Id.
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conclude as much would mean that the
specific provision in Appendix D of the
Plan calling for a three month retention
of Industry Test Data would not have
any application and would be rendered
meaningless.16 The Participants further
state that Section 1.4 of Appendix D,
along with certain sections of Appendix
C, of the CAT NMS Plan requires that
the CAT have a record retention policy
that makes ‘‘data directly available and
searchable electronically without
manual intervention for at least six
years.’’ 17 The Participants argue that
this six-year requirement only applies to
CAT data in the production
environment of the Central Repository,
and not to Industry Test Data, which has
a specific provision calling for the data
to be retained for three months only.18
The Participants state that retaining
Industry Test Data for only three months
would achieve approximately $1
million per year in savings.19 In support
of this claim, the Participants note that
the Plan Processor has been
accumulating and retaining Industry
Test Data for years, and thus the current
size of the Industry Test Data is
approximately 20 petabytes, growing at
an average rate of 500 terabytes per
month.20 The Participants state that if
the Plan Processor were to remove
Industry Test Data older than three
months on a rolling monthly basis, then
it estimates that the CAT would reach
a steady state of retaining approximately
two petabytes of Industry Test Data per
year.21
The Participants further state that the
costs of retaining the Industry Test Data
far outweigh any benefits and that there
is little to no regulatory value in
retaining the data,22 and that the
primary purpose for retaining Industry
Test Data for three months is to allow
CAT Reporters access to the data to
16 Id.
17 Id., at 3 (referencing Appendix C of the CAT
NMS Plan at C–13, C–29, C–129).
18 Id. The Participants reiterate their belief that
the more specific three month requirement should
apply by referring to a statement in Appendix C that
‘‘[t]he Central Repository will retain data, including
the Raw Data, linked data, and corrected data, for
at least six years,’’ to support this view. See id.
(referencing Appendix C of the CAT NMS Plan at
C–29 (‘‘All of the data (including both corrected and
uncorrected or rejected data) in the Central
Repository must be kept online for a rolling six year
period, which would create a six year historical
audit trail.’’); Appendix C of the CAT NMS Plan at
C–129 (‘‘The Participants are requiring data for six
years to be kept online in an easily accessible
format to enable regulators to have access to six
years of audit trail materials for purposes of its
regulation.’’)).
19 Id. at 3–4.
20 Id. at 3.
21 Id.
22 Id. at 4.
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84027
facilitate their own testing needs.23
While the Participants have used the
Industry Test Data for user acceptance
testing related to past CAT releases, to
date, the Participants state that there has
been limited use of the Industry Test
Data that adds regulatory value.24 The
Participants state that on many days,
there are no active queries related to
Industry Test Data, and when there have
been limited queries performed in the
industry test environment, these queries
generally were concentrated around
Participant user acceptance test periods
for releases.25 The Participants state that
going forward, such Participant user
acceptance testing would be limited as
the CAT functionality is in the
maintenance, not development, phase.26
The Participants further state that the
substantial price tag of $1 million per
year to retain the Industry Test Data
beyond three months is not warranted
by this limited incidental regulatory
use, as the retention of Industry Test
Data beyond three months provides
little or no regulatory benefit.27 The
Participants also believe that the
Commission’s prior approval of the CAT
NMS Plan with the specific requirement
to retain such data for three months
supports their conclusion that the
retention of Industry Test Data beyond
three months is not warranted.28
III. Discussion of Participants’
Exemption Request
The Commission has carefully
considered the Participants’ exemption
request. The Commission believes, for
the reasons stated below, that granting
exemptive relief from the recordkeeping
and data retention time periods set forth
in Rule 17a–1 of the Exchange Act,
Section 9.1 of the CAT NMS Plan,
Section 1.4 of Appendix D of the CAT
NMS Plan and certain provisions in
Appendix C of the CAT NMS Plan (to
the extent any may apply), for Industry
Test Data, is, pursuant to section
36(a)(1) of the Exchange Act,
appropriate in the public interest and
consistent with the protection of
investors, and that pursuant to Rule
608(e), this 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 the perfection of a
national market system.
In their exemption request, the
Participants state that they retain
23 Id.
24 See
Exemptive Request, at 4.
25 Id.
26 Id.
27 Id.
28 Id.
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Federal Register / Vol. 88, No. 230 / Friday, December 1, 2023 / Notices
Industry Test Data through CAT LLC
and the Plan Processor, and will
continue to retain such data for three
months pursuant to the requirement in
Section 1.2 of Appendix D of the CAT
NMS Plan.29 The Commission believes
that the regulatory value does not justify
the approximately $1 million per year
cost for retaining Industry Test Data
beyond three months. As the
Participants note, the primary purpose
of Industry Test Data is to facilitate CAT
Reporter testing needs. Indeed, the
Participants stated that over the past
fifteen months, queries of Industry Test
Data generally were concentrated
around Participant user acceptance test
periods for releases.30 Additionally,
Section 1.2 of the CAT NMS Plan
requires the operational metrics
associated with industry testing to be
retained for six years.31
Based on the foregoing, pursuant to
section 36(a)(1) of the Exchange Act, it
is appropriate in the public interest and
consistent with the protection of
investors, and pursuant to Rule 608(e),
it is consistent with the public interest,
the protection of investors, the
maintenance of fair and orderly markets
and the removal of impediments to, and
the perfection of a national market
system to grant exemptive relief that
exempts each Participant from the
longer recordkeeping and data retention
requirements for Industry Test Data as
set forth in Rule 17a–1 under the
Exchange Act, Section 9.1 of the CAT
NMS Plan, Section 1.4 of Appendix D
of the CAT NMS Plan and Appendix C
of the CAT NMS Plan (to the extent any
may apply).
IV. Conclusion
The Commission believes it is
appropriate to grant exemptive relief
that exempts each Participant from the
longer recordkeeping and data retention
requirements for Industry Test Data as
set forth in Rule 17a–1 under the
Exchange Act, Section 9.1 of the CAT
NMS Plan, Section 1.4 of Appendix D
of the CAT NMS Plan and Appendix C
of the CAT NMS Plan (to the extent any
may apply).
29 Id.
at 4.
at 4. The Participants state that there have
been 406 queries in the industry test environment,
which is an average of 27 queries per month during
this 15-month period. Id.
31 Id. at 2. Specifically, Section 1.2 of Appendix
D of the CAT NMS Plan requires that ‘‘[o]perational
metrics associated with industry testing (including
but not limited to testing results, firms who
participated, and amount of data reported and
linked) must be stored for the same duration as the
CAT production data.’’ Id. Industry Test Data does
not include such operational metrics associated
with industry testing, and operational metrics will
continue to be retained for six years.
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30 Id.
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18:47 Nov 30, 2023
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Accordingly, it is hereby ordered,
pursuant to section 36(a)(1) of the
Exchange Act,32 and Rule 608(e) of the
Exchange Act 33 that the Participants are
granted an exemption from the longer
recordkeeping and data retention
requirements for Industry Test Data as
set forth in Rule 17a–1 under the
Exchange Act, Section 9.1 of the CAT
NMS Plan, Section 1.4 of Appendix D
of the CAT NMS Plan and Appendix C
of the CAT NMS Plan (to the extent any
may apply).
By the Commission.
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023–26407 Filed 11–30–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99027; File No. SR–
CboeBZX–2023–094]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
November 28, 2023.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
15, 2023, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) proposes to
amend its Fee Schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
32 15
U.S.C. 78mm(a)(1).
CFR 242.608(e).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
33 17
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Frm 00133
Fmt 4703
Sfmt 4703
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to update its
Fee Schedule to provide a 20% discount
on fees assessed to BZX Members and
non-Members that purchase $20,000 or
more of historical Open-Close Data,
effective November 15, 2023 through
December 31, 2023.
By way of background, the Exchange
currently offers End-of-Day (‘‘EOD’’) and
Intraday Open-Close Data (collectively,
‘‘Open-Close Data’’). EOD Open-Close
Data is an end-of-day volume summary
of trading activity on the Exchange at
the option level by origin (customer,
professional customer, broker-dealer,
and market maker), side of the market
(buy or sell), price, and transaction type
(opening or closing). The customer and
professional customer volume is further
broken down into trade size buckets
(less than 100 contracts, 100–199
contracts, greater than 199 contracts).
The EOD Open-Close Data is proprietary
BZX trade data and does not include
trade data from any other exchange. It
is also a historical data product and not
a real-time data feed. The Exchange also
offers Intraday Open-Close Data, which
provides similar information to that of
EOD Open-Close Data but is produced
and updated every 10 minutes during
the trading day. Data is captured in
‘‘snapshots’’ taken every 10 minutes
throughout the trading day and is
available to subscribers within five
minutes of the conclusion of each 10minute period.3 The Intraday Open3 For example, subscribers to the intraday product
will receive the first calculation of intraday data by
approximately 9:42 a.m. ET, which represents data
captured from 9:30 a.m. to 9:40 a.m. Subscribers
will receive the next update at 9:52 a.m.,
representing the data previously provided together
with data captured from 9:40 a.m. through 9:50
a.m., and so forth. Each update will represent the
aggregate data captured from the current
‘‘snapshot’’ and all previous ‘‘snapshots.’’
E:\FR\FM\01DEN1.SGM
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]]>Agencies
[Federal Register Volume 88, Number 230 (Friday, December 1, 2023)]
[Notices]
[Pages 84026-84028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26407]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99023; File No. 4-698]
Order Granting an Exemption Pursuant to Section 36(a)(1) of the
Securities Exchange Act of 1934 and Rule 608(e) of Regulation NMS Under
the Exchange Act, Relating to the Recordkeeping Requirements for
Industry Test Data, as Required by Rule 17a-1 Under the Exchange Act
and Certain Provisions of the National Market System Plan Governing the
Consolidated Audit Trail
November 27, 2023.
I. Introduction
By letter dated June 2, 2023, BOX Exchange LLC, Cboe BYX Exchange,
Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX
Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial
Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term
Stock Exchange, Inc., MEMX LLC, Miami International Securities Exchange
LLC, MIAX Emerald, LLC, MIAX PEARL, LLC, NASDAQ BX, LLC, Nasdaq GEMX,
LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ PHLX LLC, The NASDAQ
Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE
Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc., (collectively,
the ``Participants'') requested that the Securities and Exchange
Commission (``Commission'') grant exemptive relief to the
Participants,\1\ pursuant to its authority under section 36(a)(1) of
the Securities Exchange Act of 1934 (``Exchange Act'') \2\ and Rule
608(e) of Regulation NMS \3\ under the Exchange Act, from certain
recordkeeping requirements for retaining data from industry testing, in
Rule 17a-1 \4\ of the Exchange Act and certain provisions of the
National Market System Plan Governing the Consolidated Audit Trail
(``CAT NMS Plan'').\5\
---------------------------------------------------------------------------
\1\ See letter from the Participants to Vanessa Countryman,
Secretary, Commission, dated June 2, 2023 (the ``Exemption
Request''). Unless otherwise noted, capitalized terms are used as
defined in the CAT NMS Plan.
\2\ 15 U.S.C. 78mm(a)(1).
\3\ 17 CFR 242.608(e).
\4\ 17 CFR 240.17a-1.
\5\ The CAT NMS Plan was approved by the Commission, as
modified, on Nov. 15, 2016. See Securities Exchange Act Release No.
79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (``CAT NMS Plan
Approval Order'').
---------------------------------------------------------------------------
Section 36(a)(1) of the Exchange Act grants the Commission the
authority, with certain limitations, to ``conditionally or
unconditionally exempt any person, security, or transaction . . . from
any provision or provisions of [the Exchange Act] or of any rule or
regulation thereunder, to the extent that such exemption is necessary
or appropriate in the public interest, and is consistent with the
protection of investors.'' \6\ Under Rule 608(e) of Regulation NMS, the
Commission may ``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 mechanism of,
a national market system.'' \7\
---------------------------------------------------------------------------
\6\ 15 U.S.C. 78mm(a)(1).
\7\ 17 CFR 242.608(e).
---------------------------------------------------------------------------
For the reasons set forth below, the Commission believes that it is
consistent with the purposes of the Exchange Act to grant exemptive
relief relating to the Participants' record-keeping and data retention
requirements in Rule 17a-1 of the Exchange Act, Section 9.1 of the CAT
NMS Plan, Section 1.4 of Appendix D of the CAT NMS Plan and certain
provisions in Appendix C of the CAT NMS Plan (to the extent any may
apply).
II. Background and Request for Relief
In the Exemption Request, the Participants state that CAT
Reporters, including both Participants and Industry Members, engage in
testing related to the reporting of order and transaction data to the
CAT, both pursuant to required testing and testing on a voluntary
basis.\8\ The Participants explain that in connection with this
testing, CAT LLC, through the Plan
[[Page 84027]]
Processor, retains the test data submitted by Industry Members and
Participants, feedback files related to such data, and output files
that hold the detailed transactions (such test data and files are
referred to herein as ``Industry Test Data'').\9\ The Participants
further state that this exemption request only involves Industry Test
Data related to the CAT order and transaction system, not the customer
account and information system.\10\ The Participants request that the
Commission grant exemptive relief from the longer data retention time
periods set forth in Rule 17a-1 of the Exchange Act, Section 9.1 of the
CAT NMS Plan, Section 1.4 of Appendix D of the CAT NMS Plan and certain
provisions in Appendix C of the CAT NMS Plan, only as those retention
requirements pertain to Industry Test Data.\11\ The Participants
request that in granting this relief, the Commission will only require
the Participants, acting through CAT LLC and the Plan Processor, to
retain Industry Test Data for a period of three months.\12\
---------------------------------------------------------------------------
\8\ See Exemptive Request, at 2.
\9\ Id.
\10\ Id. at note 6.
\11\ Id. at 4.
\12\ Id. at 1.
---------------------------------------------------------------------------
In support of their request, the Participants state that Appendix D
of the CAT NMS Plan specifically requires the retention of Industry
Test Data for only three months,\13\ and that this specific provision
governs the retention period for Industry Test Data, in spite of the
lengthier general recordkeeping provisions in the CAT NMS Plan and the
even more general recordkeeping requirements of Rule 17a-1 under the
Exchange Act.\14\ The Participants state that Section 9.1 of the CAT
NMS Plan incorporates by reference Rule 17a-1 under the Exchange Act,
which requires every national securities exchange and national
securities association ``to keep and preserve at least one copy of all
documents, including all correspondence, memoranda, papers, books,
notices, accounts, and other such records as shall be made or received
by it in the course of its business as such and in the conduct of its
self-regulatory activity,'' and to keep all such documents ``for a
period of not less than five years, the first two years in an easily
accessible place, subject to the destruction and disposition provisions
of Rule 17a-6.'' \15\ The Participants also state that they do not
believe that Industry Test Data constitutes documents covered by Rule
17a-1 under the Exchange Act because to conclude as much would mean
that the specific provision in Appendix D of the Plan calling for a
three month retention of Industry Test Data would not have any
application and would be rendered meaningless.\16\ The Participants
further state that Section 1.4 of Appendix D, along with certain
sections of Appendix C, of the CAT NMS Plan requires that the CAT have
a record retention policy that makes ``data directly available and
searchable electronically without manual intervention for at least six
years.'' \17\ The Participants argue that this six-year requirement
only applies to CAT data in the production environment of the Central
Repository, and not to Industry Test Data, which has a specific
provision calling for the data to be retained for three months
only.\18\
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\13\ Id. at 2.
\14\ See Exemptive Request, at 3.
\15\ Id. at 2-3.
\16\ Id.
\17\ Id., at 3 (referencing Appendix C of the CAT NMS Plan at C-
13, C-29, C-129).
\18\ Id. The Participants reiterate their belief that the more
specific three month requirement should apply by referring to a
statement in Appendix C that ``[t]he Central Repository will retain
data, including the Raw Data, linked data, and corrected data, for
at least six years,'' to support this view. See id. (referencing
Appendix C of the CAT NMS Plan at C-29 (``All of the data (including
both corrected and uncorrected or rejected data) in the Central
Repository must be kept online for a rolling six year period, which
would create a six year historical audit trail.''); Appendix C of
the CAT NMS Plan at C-129 (``The Participants are requiring data for
six years to be kept online in an easily accessible format to enable
regulators to have access to six years of audit trail materials for
purposes of its regulation.'')).
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The Participants state that retaining Industry Test Data for only
three months would achieve approximately $1 million per year in
savings.\19\ In support of this claim, the Participants note that the
Plan Processor has been accumulating and retaining Industry Test Data
for years, and thus the current size of the Industry Test Data is
approximately 20 petabytes, growing at an average rate of 500 terabytes
per month.\20\ The Participants state that if the Plan Processor were
to remove Industry Test Data older than three months on a rolling
monthly basis, then it estimates that the CAT would reach a steady
state of retaining approximately two petabytes of Industry Test Data
per year.\21\
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\19\ Id. at 3-4.
\20\ Id. at 3.
\21\ Id.
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The Participants further state that the costs of retaining the
Industry Test Data far outweigh any benefits and that there is little
to no regulatory value in retaining the data,\22\ and that the primary
purpose for retaining Industry Test Data for three months is to allow
CAT Reporters access to the data to facilitate their own testing
needs.\23\ While the Participants have used the Industry Test Data for
user acceptance testing related to past CAT releases, to date, the
Participants state that there has been limited use of the Industry Test
Data that adds regulatory value.\24\ The Participants state that on
many days, there are no active queries related to Industry Test Data,
and when there have been limited queries performed in the industry test
environment, these queries generally were concentrated around
Participant user acceptance test periods for releases.\25\ The
Participants state that going forward, such Participant user acceptance
testing would be limited as the CAT functionality is in the
maintenance, not development, phase.\26\ The Participants further state
that the substantial price tag of $1 million per year to retain the
Industry Test Data beyond three months is not warranted by this limited
incidental regulatory use, as the retention of Industry Test Data
beyond three months provides little or no regulatory benefit.\27\ The
Participants also believe that the Commission's prior approval of the
CAT NMS Plan with the specific requirement to retain such data for
three months supports their conclusion that the retention of Industry
Test Data beyond three months is not warranted.\28\
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\22\ Id. at 4.
\23\ Id.
\24\ See Exemptive Request, at 4.
\25\ Id.
\26\ Id.
\27\ Id.
\28\ Id.
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III. Discussion of Participants' Exemption Request
The Commission has carefully considered the Participants' exemption
request. The Commission believes, for the reasons stated below, that
granting exemptive relief from the recordkeeping and data retention
time periods set forth in Rule 17a-1 of the Exchange Act, Section 9.1
of the CAT NMS Plan, Section 1.4 of Appendix D of the CAT NMS Plan and
certain provisions in Appendix C of the CAT NMS Plan (to the extent any
may apply), for Industry Test Data, is, pursuant to section 36(a)(1) of
the Exchange Act, appropriate in the public interest and consistent
with the protection of investors, and that pursuant to Rule 608(e),
this 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 the perfection of a national market
system.
In their exemption request, the Participants state that they retain
[[Page 84028]]
Industry Test Data through CAT LLC and the Plan Processor, and will
continue to retain such data for three months pursuant to the
requirement in Section 1.2 of Appendix D of the CAT NMS Plan.\29\ The
Commission believes that the regulatory value does not justify the
approximately $1 million per year cost for retaining Industry Test Data
beyond three months. As the Participants note, the primary purpose of
Industry Test Data is to facilitate CAT Reporter testing needs. Indeed,
the Participants stated that over the past fifteen months, queries of
Industry Test Data generally were concentrated around Participant user
acceptance test periods for releases.\30\ Additionally, Section 1.2 of
the CAT NMS Plan requires the operational metrics associated with
industry testing to be retained for six years.\31\
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\29\ Id. at 4.
\30\ Id. at 4. The Participants state that there have been 406
queries in the industry test environment, which is an average of 27
queries per month during this 15-month period. Id.
\31\ Id. at 2. Specifically, Section 1.2 of Appendix D of the
CAT NMS Plan requires that ``[o]perational metrics associated with
industry testing (including but not limited to testing results,
firms who participated, and amount of data reported and linked) must
be stored for the same duration as the CAT production data.'' Id.
Industry Test Data does not include such operational metrics
associated with industry testing, and operational metrics will
continue to be retained for six years.
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Based on the foregoing, pursuant to section 36(a)(1) of the
Exchange Act, it is appropriate in the public interest and consistent
with the protection of investors, and pursuant to Rule 608(e), it is
consistent with the public interest, the protection of investors, the
maintenance of fair and orderly markets and the removal of impediments
to, and the perfection of a national market system to grant exemptive
relief that exempts each Participant from the longer recordkeeping and
data retention requirements for Industry Test Data as set forth in Rule
17a-1 under the Exchange Act, Section 9.1 of the CAT NMS Plan, Section
1.4 of Appendix D of the CAT NMS Plan and Appendix C of the CAT NMS
Plan (to the extent any may apply).
IV. Conclusion
The Commission believes it is appropriate to grant exemptive relief
that exempts each Participant from the longer recordkeeping and data
retention requirements for Industry Test Data as set forth in Rule 17a-
1 under the Exchange Act, Section 9.1 of the CAT NMS Plan, Section 1.4
of Appendix D of the CAT NMS Plan and Appendix C of the CAT NMS Plan
(to the extent any may apply).
Accordingly, it is hereby ordered, pursuant to section 36(a)(1) of
the Exchange Act,\32\ and Rule 608(e) of the Exchange Act \33\ that the
Participants are granted an exemption from the longer recordkeeping and
data retention requirements for Industry Test Data as set forth in Rule
17a-1 under the Exchange Act, Section 9.1 of the CAT NMS Plan, Section
1.4 of Appendix D of the CAT NMS Plan and Appendix C of the CAT NMS
Plan (to the extent any may apply).
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\32\ 15 U.S.C. 78mm(a)(1).
\33\ 17 CFR 242.608(e).
By the Commission.
Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26407 Filed 11-30-23; 8:45 am]
BILLING CODE 8011-01-P
