Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail Regarding Cost Savings Measures, 26983-26998 [2024-07967]

Download as PDF Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 22 and paragraph (f) of Rule 19b–4 23 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: khammond on DSKJM1Z7X2PROD with NOTICES Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number SR– CboeBYX–2024–010 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR–CboeBYX–2024–010. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written 22 15 23 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number SR–CboeBYX–2024–010 and should be submitted on or before May 7, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–07964 Filed 4–15–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–99938; File No. 4–698] Joint Industry Plan; Notice of Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail Regarding Cost Savings Measures April 10, 2024. 24 17 CFR 200.30–3(a)(12). CAT NMS Plan is a national market system plan approved by the Commission pursuant to Section 11A of the Exchange Act and the rules and regulations thereunder. See Securities Exchange Act Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 2016). The full text of the CAT NMS Plan is available at www.catnmsplan.com. 1 The Frm 00128 Fmt 4703 Exchange, Inc., MEMX, LLC, Miami International Securities Exchange LLC, MIAX Emerald, LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc. (collectively, the ‘‘Participants,’’ ‘‘self-regulatory organizations,’’ or ‘‘SROs’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’),2 and Rule 608 thereunder,3 a proposed amendment to the CAT NMS Plan to amend existing requirements for the consolidated audit trail (‘‘CAT’’) regarding costs saving measures for operating the CAT (the ‘‘Cost Savings Amendments’’).4 Set forth in Section II is the statement of purpose and summary of the amendment, along with information required by Rules 608(a)(4) and 608(a)(5) under the Exchange Act,5 and Exhibit A, which contains the proposed revisions to the CAT NMS Plan, all substantially as prepared and submitted by the Participants to the Commission.6 The Commission is publishing this notice to solicit comments from interested persons on the amendment.7 II. Description of the Plan As described further below, the Cost Savings Amendments are expected to result in approximately $23.0 million in new annual cost savings in the first year with limited impact on the regulatory function of the CAT.8 Specifically, the Cost Savings Amendment would: 2 15 I. Introduction On March 27, 2024, the Consolidated Audit Trail, LLC (‘‘CAT LLC’’), on behalf of the following parties to the National Market System Plan Governing the Consolidated Audit Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’):1 BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock PO 00000 26983 Sfmt 4703 U.S.C 78k–1(a)(3). CFR 242.608. 4 See Letter from Brandon Becker, CAT NMS Plan Operating Committee Chair, to Vanessa Countryman, Secretary, Commission, dated March 27, 2024 (the ‘‘Transmittal Letter’’). 5 See 17 CFR 242.608(a)(4) and 17 CFR 242.608(a)(5). 6 See Transmittal Letter, supra note 4. Unless otherwise defined herein, capitalized terms used herein are defined as set forth in the CAT NMS Plan. 7 17 CFR 242.608. 8 All cost and savings projections are estimates only and reflect the current state and costs of CAT operations, including the current number of exchanges. Cost savings estimates are based on, among other factors: current CAT NMS Plan requirements; reporting by Participants, Industry Members and market data providers; observed data rates and volumes; current discounts, reservations and cost savings plans; and associated cloud fees. Actual future savings could be more or less than estimated due to changes in any of these variables. S3 Intelligent Tier storage fees in production are allocated at a ratio of 1 (S3 Frequent Access): 1 (S3 Infrequent Access): 8 (S3 Archive Instant Access) based on current operations and regulatory usage. 3 17 E:\FR\FM\16APN1.SGM Continued 16APN1 26984 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES (1) optimize processing and storage requirements for Options Market Maker 9 quotes in Listed Options 10 (‘‘Options Market Maker Quotes’’), without eliminating them entirely from the CAT; (2) permit the Plan Processor to move raw unprocessed data and interim operational copies of CAT Data older than 15 days to a more cost-effective storage tier; and (3) permit the Plan Processor to provide an interim CAT-Order-ID on an ‘‘as requested’’ basis rather than each day. In addition, the Cost Savings Amendments would incorporate into the CAT NMS Plan the Commission’s recent exemptive order providing that data from industry testing for both Industry Members and Participants may be deleted after three months, which is estimated to result in additional cost savings of approximately $1 million per year, and would extend such relief to include test data related to the customer account and information system.11 The proposed changes to the CAT NMS Plan to implement the Cost Savings Amendments are set forth in Exhibit A to this filing.12 CAT LLC continues to explore further changes to the CAT NMS Plan and expects to file future amendments that would result in additional cost savings without compromising the regulatory goals of the CAT. Savings projections are primarily based on production environments, which represent approximately two-thirds of all cloud fees. For additional information on the cost savings estimates relevant to each proposal, see infra notes 20, 24, 29 and 30. 9 Section 1.1 of the CAT NMS Plan defines an ‘‘Options Market Maker’’ as ‘‘a broker-dealer registered with an exchange for the purpose of making markets in options contracts on the exchange.’’ 10 Section 1.1 of the CAT NMS Plan defines a ‘‘Listed Option’’ as having ‘‘the meaning set forth in Rule 600(b)(35) of Regulation NMS.’’ Rule 600(b)(35) has since been redesignated as Rule 600(b)(43), which defines a ‘‘Listed Option’’ as ‘‘any option traded on a registered national securities exchange or automated facility of a national securities association.’’ 11 Exchange Act Release No. 99023 (Nov. 27, 2023), 88 FR 84026 (Dec. 1, 2023). 12 Because the Commission has acknowledged that Appendix C was not intended to be continually updated once the CAT NMS Plan was approved, CAT LLC is not proposing to update Appendix C to reflect the proposed amendments. See Exchange Act Release No. 89632 (Aug. 21, 2020), 85 FR 65990 (Oct. 16, 2020). VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 with these savings, the costs related to Options Market Maker Quotes continue A. Description of the Proposed to far outweigh the regulatory benefit. Amendments to the CAT NMS Plan Under the proposed amendments, Options Market Maker Quotes in Listed 1. Optimize Processing and Storage Requirements for Options Market Maker Options and related Reportable Events will be subject to ingestion only and Quotes will not be subject to any linkage (a) Overview requirements. These changes would Options Market Maker Quotes are the result in approximately $20.0 million in single largest data source for the CAT, additional annual savings, without comprising approximately 98% of all eliminating Options Market Maker options exchange events and Quotes entirely from the CAT. Options approximately 75% of all transaction Exchanges will continue to report volume stored in the CAT.13 Under the Options Market Maker Quotes in the CAT NMS Plan, Options Exchanges are same manner they do today, but the required to report Options Market Plan Processor will only ingest and store Maker Quotes to the CAT, and such them. Options Market Maker Quotes quotes must be processed and will no longer be subject to validation, feedback, linkage and lifecycle assembled to create a complete order processing, or Plan Processor lifecycle. The number of quotes that enrichments (e.g., next event timestamp, result in an execution is extremely low; lifecycle sequence number, CATas a result, the vast majority of Options Lifecycle-ID). The elimination of linkage Market Maker Quote lifecycles consist and feedback processes will remove of just two events—the quote and its Options Market Maker Quotes from subsequent cancellation. The costs associated with processing Options Market Replay, OLA Viewer, and storing Options Market Maker and All-Related Lifecycle Event queries. Quotes under the CAT NMS Plan are Executions that result from Options significant—approximately $30 million Market Maker Quotes will identify the in 2023.14 CAT LLC has been focused on quoteId of the quote that resulted in an reducing these costs. In November 2023, execution, but will appear as orphaned the Commission granted exemptive lifecycle events. Options Market Maker relief that would allow the Plan Quotes will no longer be accessible via Processor to create options quote DIVER, but will remain accessible lifecycles only once; this options quotes through BDSQL and Direct Read ‘‘single pass’’ proposal is expected to interfaces. These changes would significantly result in annual savings of reduce the costs of the CAT with limited approximately $5.4 million upon impact on the regulatory function of the implementation in April 2024.15 Even CAT. As noted, the vast majority of 13 Under Section 1.1 of the CAT NMS Plan, a Options Market Maker Quote lifecycles ‘‘Reportable Event’’ ‘‘includes, but is not limited to, do not involve any execution or the original receipt or origination, modification, allocation and usage data demonstrates cancellation, routing, execution (in whole or in that such data is very rarely accessed by part) and allocation of an order, and receipt of a routed order.’’ Section 1.1 of the CAT NMS Plan regulators. Under the proposed states that an ‘‘order’’ ‘‘has, with respect to Eligible amendments, regulators will still have Securities, the meaning set forth in SEC Rule access to unlinked Options Market 613(j)(8).’’ SEC Rule 613(j)(8), in turn, states that Maker Quotes data by T+1 at 12:00 p.m. ‘‘[t]he term order shall include: (i) Any order received by a member of a national securities ET. All necessary information for the exchange or national securities association from any eliminated enrichments would be person; (ii) Any order originated by a member of a available to regulators, but regulators national securities exchange or national securities would need to derive the enrichments association; or (iii) Any bid or offer.’’ Accordingly, the definition of an ‘‘order’’ includes Options themselves; upon request, the Plan Market Maker Quotes, and Reportable Events Processor would provide regulators with include events related to Options Market Maker the code required in order to do so. As Quotes. a result of these changes, the cost 14 Although Options Market Maker Quotes are the impact of Options Market Maker Quotes single largest data source for the CAT, there is not a linear relationship between volume and costs; on the CAT would be reduced from rather, a combination of volume and processing approximately $24.4 million (inclusive complexity drive costs. While Options Market of anticipated savings resulting from the Maker Quotes represent a significant percentage of Requirements Pursuant to Rule 608(a) data volume, life-cycling this data is less compute intensive because the vast majority of quotes have just two events and involve only a single venue. Despite this relatively limited processing complexity, the cost impact of storing and processing Options Market Maker Quotes remains a significant percentage of overall CAT costs. 15 Exchange Act Release No. 98848 (Nov. 2, 2023); 88 FR 77128 (Nov. 8, 2023). The exemption order PO 00000 Frm 00129 Fmt 4703 Sfmt 4703 allows the Plan Processor to create lifecycle linkages for Options Market Maker Quotes only once by T+2 at 8 a.m. ET (as opposed to requiring both an interim lifecycle by T+1 at 9 p.m. ET and a final lifecycle by T+5 at 8 a.m. ET). To the extent the proposed amendments are approved, the Plan Processor would no longer be required to create any lifecycle linkages for Options Market Maker Quotes. E:\FR\FM\16APN1.SGM 16APN1 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices implementation of the options quotes ‘‘single pass’’ proposal referenced above) to approximately $4.0 million annually. The Participants believe that the anticipated savings associated with this proposal substantially outweigh the limited regulatory impact on the CAT.16 (b) Current CAT NMS Plan Requirements khammond on DSKJM1Z7X2PROD with NOTICES The CAT NMS Plan contains broad requirements relating to the current reporting of, linkage and lifecycle processing of, and regulator access to Options Market Maker Quotes and related Reportable Events. First, Section 6.3(d) of the CAT NMS Plan requires each Participant to record and electronically report to the Central Repository details for each order and each Reportable Event, including all Options Market Maker Quotes and related Reportable Events.17 Under Section 6.4(d)(iii) of the CAT NMS Plan, ‘‘[w]ith respect to the reporting obligations of an Options Market Maker with regard to its quotes in Listed Options, Reportable Events required pursuant to Section 6.3(d)(ii) and (iv) shall be reported to the Central Repository by an Options Exchange in lieu of the reporting of such information by the Options Market Maker.’’ Section 6.4(d)(iii) also requires that, pursuant to the Compliance Rules of the Options Exchanges, Options Market Makers are required to report to the Options Exchange the time at which a quote in a Listed Option is sent to the Options Exchange (and, if applicable, any subsequent quote modifications and/or cancellation time when such modification or cancellation is originated by the Options Market Maker). Such time information shall be reported to the Central Repository by the Options Exchange in lieu of reporting by the Options Market Maker. Second, CAT NMS Plan broadly requires all CAT Data reported to the Central Repository to be processed and assembled to create the complete lifecycle of each Reportable Event. The Plan Processor uses a ‘‘daisy chain approach’’ to link all Reportable Events and create a complete lifecycle of each order. Under this approach, ‘‘a series of unique order identifiers assigned to all order events handled by CAT Reporters 16 The Participants continue to evaluate additional cost savings measures and alternatives, which may include in the future continuing to evaluate eliminating Options Market Maker Quotes entirely from the CAT. Any such changes would require the submission of a proposed Plan amendment or exemption request to the SEC for consideration and approval. 17 See supra note 13. VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 are linked together by the Central Repository and assigned a single CATgenerated CAT-Order-ID that is associated with each individual order event and used to create the complete lifecycle of an order.’’ 18 Data processing timelines are described in Section 6.1 and Section 6.2 of Appendix D of the CAT NMS Plan. Finally, the CAT NMS Plan provides that regulators will have access to processed CAT Data through an onlinetargeted query tool and user-defined direct queries and bulk extracts. These requirements are described in Section 8.1 and Section 8.2 of Appendix D of the CAT NMS Plan. (c) Estimated Cost Savings As described above, the proposed changes would result in approximately $20.0 million in annual cost savings in the first year with limited impact on the regulatory function of the CAT.19 Given that the vast majority of Options Market Maker Quotes do not involve any execution or allocation and are used for limited regulatory purposes, the current cost associated with processing and storing such quotes—approximately $30 million in 2023—far outweighs the regulatory value. Although they will no longer be subject to validation, feedback, linkage and lifecycle processing, or Plan Processor enrichments (e.g., next event timestamp, lifecycle sequence number, CATLifecycle-ID), Options Market Maker Quotes will continue to be reported and ingested in the same manner they are today, and unlinked data will remain accessible to regulators by T+1 at 12:00 p.m. through BDSQL and Direct Read interfaces. (d) Proposed Revisions to CAT NMS Plan Given the scope of requirements relating directly or indirectly to the current reporting of, linkage and lifecycle processing of, and regulator access to Options Market Maker Quotes and related Reportable Events that currently appear throughout the CAT NMS Plan, CAT LLC proposes to add a general provision to Appendix D that would expressly override any 18 Appendix D, Section 3 of the CAT NMS Plan at D–8. 19 For a discussion of how cost savings estimates are calculated, see supra note 8. This estimate represents additional savings to be achieved following the implementation of the options quotes ‘‘single pass’’ proposal targeted for the end of April 2024. This estimate assumes an approximate 65% reduction in compute runtime associated with options exchange events, and an approximate 80% reduction in storage footprint through the elimination of versioned options quote data (e.g., interim, final, DIVER-optimized, OLA copies). PO 00000 Frm 00130 Fmt 4703 Sfmt 4703 26985 inconsistency with respect to Options Market Maker Quotes. The effect of this provision will be to override any requirements that generally apply to Reportable Events in the specific circumstance of Options Market Maker Quotes. New Section 3.4 of Appendix D would be entitled ‘‘Requirements for Options Market Maker Quotes in Listed Options’’ and would state the following: ‘‘3.4 Requirements for Options Market Maker Quotes in Listed Options The provisions of this section shall govern the processing and storage of Options Market Maker Quotes in Listed Options and related Reportable Events and shall override any conflicting provisions in the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a–1. Options Market Maker Quotes in Listed Options must be reported to the Central Repository as provided under Section 6.4(d)(iii) of the CAT NMS Plan. This data will undergo ingestion only and such unlinked data will be made available to regulators by T+1 at 12:00 p.m. Eastern Time. Options Market Maker Quotes in Listed Options will not be subject to any requirement to link and create an order lifecycle, and will not undergo any validation, feedback, linkage, or enrichment processing. Options Market Maker Quotes in Listed Options will be accessible through BDSQL and Direct Read interfaces only and will not be accessible through the online targeted query tool.’’ In addition, CAT LLC proposes to amend certain provisions of Appendix D to include cross-references to new Section 3.4. First, CAT LLC proposes to amend Section 3 of Appendix D of the CAT NMS Plan to add the following statement: ‘‘As described in Section 3.4 of Appendix D, Options Market Maker Quotes in Listed Options and related Reportable Events will be subject to ingestion only and will not be subject to any linkage requirements.’’ Second, CAT LLC proposes to amend Section 6.1 of Appendix D of the CAT NMS Plan to add the following statement: ‘‘For the avoidance of doubt, processing and storage of Options Market Maker Quotes in Listed Options and related Reportable Events shall be governed by Section 3.4 of Appendix D.’’ Finally, CAT LLC proposes to amend Section 8.1.1 of Appendix D of the CAT NMS Plan to add the following statement: ‘‘As described in Section 3.4 of Appendix D, Options Market Maker Quotes in Listed Options and related Reportable Events will be accessible through BDSQL and Direct Read interfaces only and will not be accessible through the online targeted query tool.’’ E:\FR\FM\16APN1.SGM 16APN1 26986 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 2. Move Raw Unprocessed Data and Interim Operational Copies of CAT Data Older Than 15 Days to a More CostEffective Storage Tier (a) Overview Under the current CAT NMS Plan, CAT Data must be ‘‘directly available and searchable electronically without manual intervention for at least six years,’’ and within certain query tool response times.20 This requirement applies not only to the final corrected data version that is delivered to regulators by T+5 at 8 a.m. ET, but also to raw unprocessed data and the various types of interim operational data that do not provide any value to CAT Reporters or to regulators after T+5, as well as copies of all submission and feedback files provided to CAT Reporters as part of the correction process (collectively, ‘‘Operational Data’’). Specifically, interim operational data includes all processed, validated and unlinked data made available to regulators by T+1 at 12:00 p.m. ET, and all iterations of processed data made available to regulators between T+1 and T+5 (i.e., the interim data version available at T+1 at 9:00 p.m. ET). Under the CAT NMS Plan, the Plan Processor is required to make such data directly available and searchable electronically by regulators without any manual intervention. When a regulator queries CAT data, the CAT provides the latest, most current version to the user. Interim operational data is supplanted in all CAT query tools by the final version of corrected data that is made available at T+5 at 8:00 a.m. ET, but remains available to regulators after T+5 ‘‘without manual intervention’’ in accordance with the CAT NMS Plan via the use of CAT data management APIs. Regulators generally access the latest, corrected version of CAT data; accordingly, interim operational data generally does not provide any regulatory value after the final corrected data version is delivered by T+5 at 8 a.m. ET. After four years of operation, the Plan Processor has not seen any regulatory usage of this interim operational data. Subject to the Commission’s approval, significant cost savings could be achieved by archiving Operational Data older than 15 days to a more costeffective storage tier that is optimized for infrequent access. Operational Data not older than 15 days, as well as all final, corrected data, would remain accessible ‘‘without manual 20 CAT Data is available to the Participants’ regulatory staff and to the SEC for regulatory purposes only. VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 intervention’’ within required query tool response times. In each case, it would require some ‘‘manual intervention’’ by the Plan Processor to obtain such archived data for regulators. Under Section 10.3 of Appendix D of the CAT NMS Plan, the Plan Processor maintains a CAT Help Desk to, among other things, assist Participants’ regulatory staff and the SEC with questions and issues regarding obtaining and using CAT Data for regulatory purposes. Upon request by the SEC or one of the Participants to the CAT Help Desk, archived data would be restored by the Plan Processor to an accessible storage tier, at which point it would be available and searchable electronically by regulatory users in the same manner it is today. The Plan Processor will develop policies and procedures to ensure the confidentiality of any regulator requests to obtain Operational Data. Archived data will be restored generally within several hours or business days of a request, depending on the volume and size of the date range of the requested data restore. For example, a request to restore a single day of data may take less than 24 hours, whereas a request to restore a year’s worth of data may take several days. To put this in context, when the Commission adopted the CAT NMS Plan, it noted that ‘‘[m]ost current data sources do not provide direct access to most regulators, and data requests can take as long as weeks or even months to process.’’ 21 Accordingly, the Participants believe that the anticipated savings associated with optimizing storage costs as described herein substantially outweigh the minimal impact on regulatory access to CAT Data. (b) Current CAT NMS Plan Requirements Generally, Section 1.4 of Appendix D of the CAT NMS Plan provides that the Plan Processor must ‘‘[m]ake data directly available and searchable electronically without manual intervention for at least six years.’’ Section 6.5(b)(i) of the CAT NMS Plan provides that, ‘‘[c]onsistent with Appendix D, Data Retention Requirements, the Central Repository 21 Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 84696, 84833 (Nov. 23, 2016) (emphasis added). See also Exchange Act Release No. 67457, 77 FR 45722, 45729 (Aug. 1, 2012) (noting that obtaining audit trail data ‘‘can take days or weeks, depending on the scope of the information requested,’’ and that the Commission ‘‘must commit a significant amount of time and resources to process and cross-link the data from the various formats used by different SROs before it can be analyzed and used for regulatory purposes’’). PO 00000 Frm 00131 Fmt 4703 Sfmt 4703 shall retain the information collected pursuant to paragraphs (c)(7) and (e)(7) of SEC Rule 613 in a convenient and usable standard electronic data format that is directly available and searchable electronically without any manual intervention by the Plan Processor for a period of not less than six (6) years.’’ In addition, with respect to raw unprocessed data and interim operational copies of data created between T+1 and T+5, Section 6.2 of Appendix D of the CAT NMS Plan provides that, ‘‘[p]rior to 12:00 p.m. Eastern Time on T+1, raw unprocessed data that has been ingested by the Plan Processor must be available to Participants’ regulatory staff and the SEC,’’ and ‘‘[b]etween 12:00 p.m. Eastern Time on T+1 and T+5, access to all iterations of processed data must be available to Participants’ regulatory staff and the SEC.’’ Under the current CAT NMS Plan, CAT Data must be accessible to regulatory users without ‘‘manual intervention.’’ Obtaining data from archive storage initially would require some manual intervention by the Plan Processor (i.e., via request to the FINRA CAT Help Desk). Upon request, data would be restored by the Plan Processor to an accessible storage tier, at which point it would be available and searchable electronically by regulatory users in the same manner it is today. In addition, Section 8.1.2 of Appendix D of the CAT NMS Plan sets forth certain performance requirements for the OTQT, including timeframes in which results must be returned for various types of queries.22 (c) Estimated Cost Savings Based on current data volumes, archiving Operational Data older than 15 days is expected to result in approximate annual cost savings of approximately $1.0 million.23 CAT LLC believes that these cost savings substantially outweigh the minimal impact on regulatory access to CAT Data. (d) Proposed Revisions to CAT NMS Plan CAT LLC proposes to amend the CAT NMS Plan to permit the Plan Processor 22 See also Exchange Act Release No. 98848 (Nov. 2, 2023), 88 FR 77128 (Nov. 8, 2023) (granting conditional exemptive relief from certain performance requirements related to the online targeted query tool). 23 For a discussion of how cost savings estimates are calculated, see supra note 8. This estimate represents additional savings to be achieved following the implementation of the options quotes ‘‘single pass’’ proposal targeted for the end of April 2024, which eliminates interim operational copies of options quotes. E:\FR\FM\16APN1.SGM 16APN1 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices to move Operational Data older than 15 days to a more cost-effective storage tier. Specifically, CAT LLC proposes to add new Section 6.3 to Appendix D of the CAT NMS Plan. New Section 6.3 would be entitled ‘‘Exceptions to Data Availability Requirements’’ and would state the following: ‘‘6.3 Exceptions to Data Availability Requirements Notwithstanding any other provision of the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a–1, the following types of data may be retained in an archive storage tier, in which case they will be made available upon request by Participant regulatory staff or the SEC to the CAT Help Desk. Archived data is not directly available and searchable electronically without manual intervention and will not be subject to any query tool performance requirements until it is restored to an accessible storage tier. • All raw unprocessed data (i.e., as submitted data) and interim operational data older than 15 days. Interim operational data includes all processed, validated and unlinked data made available to regulators by T+1 at 12:00 p.m. ET, and all iterations of processed data made available to regulators between T+1 and T+5, but excludes the final version of corrected data that is made available at T+5 at 8:00 a.m. ET. • All submission and feedback files older than 15 days. In addition, CAT LLC proposes to add references to new Section 6.3 of Appendix D throughout the CAT NMS Plan. Specifically, CAT LLC proposes to add the phrase ‘‘subject to the exceptions in Section 6.3 of Appendix D’’ to Section 6.5(d)(i) and Section 1.4 of Appendix D. khammond on DSKJM1Z7X2PROD with NOTICES 3. Provide an Interim CAT-Order-ID on an ‘‘As Requested’’ Basis (a) Overview CAT LLC proposes to amend the CAT NMS Plan to provide for delivery of an interim CAT-Order-ID on an ‘‘as requested’’ basis, rather than on a regular ongoing basis. Specifically, where there is an immediate regulatory need (for example, in the case of a major market event), upon request of a senior officer of the Division of Trading and Markets, the Division of Enforcement, or the Division of Examinations to CAT LLC, the Plan Processor would be directed create an interim CAT-Order-ID and make it available to regulators by T+1 at 9 p.m. ET if the request is received prior to T+1 at 8 a.m. ET, or generally within 14 hours of receiving the request if such request was received after T+1 at 8 a.m. ET. This would preserve the SEC’s ability to obtain an interim CAT-Order-ID on an as needed basis, while avoiding the substantial cost of delivering an interim CATOrder-ID on a regular ongoing basis. VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 Subject to the proposals described above with respect to Options Market Maker Quotes, there would be no change to any other aspect of the CAT NMS Plan requirements for the processing of data, error feedback, and final delivery of data to regulators by T+5 at 8 a.m. ET, and no impact to Industry Members. Consistent with current CAT NMS Plan requirements, prior to 12:00 p.m. ET on T+1, regulators will continue to have access to raw unprocessed data that has been ingested by the Plan Processor, and between 12:00 p.m. on T+1 and T+5, regulators will continue to have access to all iterations of unlinked, processed data. This change is estimated to result in approximately $2 million in annual compute savings, with minimal regulatory impact. Based on current data volumes, the estimated cost of an ad hoc interim CAT-Order-ID delivery is approximately $10,000 to $12,000 per request.24 CAT LLC would add a separate line item to its budget to reflect costs related to any SEC requests to generate an interim CAT-Order-ID. The Participants believe that the anticipated savings associated with this change substantially outweigh the minimal regulatory impact. (b) Current CAT NMS Plan Requirements Appendix D, Section 6.1 of the CAT NMS Plan states that ‘‘Noon Eastern Time T+1 (transaction date + one day)’’ is the deadline for ‘‘initial data validation, lifecycle linkages and communication of errors to CAT Reporters.’’ The CAT NMS Plan further explains that the Plan Processor must ‘‘link and create the order lifecycle’’ using a ‘‘daisy chain approach,’’ in which, ‘‘a series of unique order identifiers assigned to all order events handled by CAT Reporters are linked together by the Central Repository and assigned a single CAT-generated CATOrder-ID that is associated with each individual order event and used to create the complete lifecycle of an order.’’ 25 Pursuant to a Commission exemptive order, the Plan Processor assigns an interim CAT-Order-ID by T+1 at 9 p.m. ET, rather than by the T+1 at noon Eastern Time deadline set forth in the 24 This cost savings estimate has been calculated assuming the Plan Processor’s implementation of functionality to provide a final CAT-Order-ID and lifecycle linkage for options quotes by T+2 at 8 a.m. ET (in lieu of T+5 at 8 a.m. ET), which is expected in April 2024. 25 Appendix D, Section 3 of the CAT NMS Plan at D–8. PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 26987 CAT NMS Plan.26 The Plan Processor subsequently provides a final CATOrder-ID at T+5 at 8 a.m. ET, pursuant to the following timeline: T+1 @8 a.m. ET: Initial submissions due T+1 @12 p.m. ET: Initial data validation, communication of errors to CAT Reporters; unlinked data available to regulators T+1 @9 p.m. ET: Interim CAT-Order-ID available 27 T+3 @8 a.m. ET: Resubmission of corrected data T+4 @8 a.m. ET: Final lifecycle assembly begins, reprocessing of late submissions and corrections T+5 @8 a.m. ET: Corrected data available to Participant regulatory staff and the SEC CAT LLC proposes to clarify that the Plan does not require assignment of interim CAT-Order-IDs on a regular ongoing basis; rather, interim CATOrder-IDs shall be provided on an ‘‘as requested’’ basis. Specifically, upon request of a senior officer of the Division of Trading and Markets, the Division of Enforcement, or the Division of Examinations to CAT LLC, the Plan Processor would be directed create an interim CAT-Order-ID and make it available to regulators by T+1 at 9 p.m. ET if the request is received prior to T+1 at 8 a.m. ET, or generally within 14 hours of receiving the request if such request was received after T+1 at 8 a.m. ET. There would be no change to any other aspect of the processing timeline. (c) Estimated Cost Savings Based on current data volumes, providing for delivery of an interim CAT-Order-ID on an ‘‘as requested’’ basis, rather than on a regular ongoing basis, is estimated to result in approximately $2 million in annual 26 Exchange Act Release No. 98848 (Nov. 2, 2023), 88 FR 77128 (Nov. 8, 2023). See also Exchange Act Release No. 97530 (May 18, 2023), 88 FR 33655 (May 24, 2023); Exchange Act Release No. 95234 (July 8, 2022), 87 FR 42247 (July 14, 2022); Exchange Act Release No. 90688 (Dec. 16, 2020), 85 FR 83634 (Dec. 22, 2020). 27 The Commission’s exemptive order provides that the Plan Processor will no longer be required to provide an interim CAT-Order-ID for Options Quotes once it has developed and implemented the functionality to provide a final CAT-Order-ID and lifecycle linkage for Options Quotes by T+2 at 8 a.m. ET, including all enrichments currently provided for such order events at T+5 at 8 a.m. ET. When late or corrected data is received for Options Quotes between T+1 at 8 a.m. ET and T+4 at 8 a.m. ET, 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. ET. See Exchange Act Release No. 98848 (Nov. 2, 2023), 88 FR 77128, 77130 (Nov. 8, 2023). To the extent the proposed amendments are approved, the Plan Processor would no longer be required to create any lifecycle linkages for Options Market Maker Quotes. E:\FR\FM\16APN1.SGM 16APN1 26988 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices savings.28 CAT LLC believes that these cost savings are readily justified given the minimal impact on regulatory access to CAT Data. Based on current data volumes, the estimated cost of an ad hoc interim CAT-Order-ID delivery is approximately $10,000 to $12,000 per request.29 CAT LLC would add a separate line item to its budget to reflect costs related to any SEC requests to generate an interim CAT-Order-ID. While CAT LLC believes it would be reasonable and appropriate to incur such cost to address a pressing regulatory need on an as needed basis, such as in the event of a market event, the substantial cost of delivering an interim CAT-Order-ID on a continuous basis outweighs any regulatory benefit. khammond on DSKJM1Z7X2PROD with NOTICES (d) Proposed Revisions to CAT NMS Plan CAT LLC proposes to amend the CAT NMS Plan to eliminate the requirement to provide an interim CAT-Order-ID on a regular ongoing basis. Specifically, CAT LLC proposes to delete the phrase ‘‘lifecycle linkages’’ from the following bullet in Section 6.1 of Appendix D of the CAT NMS Plan: ‘‘Noon Eastern Time T+1 (transaction date + one day)— Initial data validation, lifecycle linkages and communication of errors to CAT Reporters.’’ Similarly, CAT LLC proposes to delete the phrase ‘‘Life Cycle Linkage’’ from the second box in Figure A in Section 6.1 of Appendix D of the CAT NMS Plan. The box currently states the following: ‘‘12:00 p.m. ET T+1 Initial Validation, Life Cycle Linkage, Communication of Errors.’’ With the change, this box would state ‘‘12:00 p.m. ET T+1 Initial Validation, Communication of Errors.’’ CAT LLC also proposes to amend the CAT NMS Plan to require CAT LLC to provide an interim CAT-Order-ID on an 28 For a discussion of how cost savings estimates are calculated, see supra note 8. This estimate represents additional savings to be achieved following the implementation of the options quotes ‘‘single pass’’ proposal targeted for the end of April 2024, which eliminates options quotes from the interim lifecycle processing. The average typical daily compute costs for interim lifecycle processing (Linker and ETL data processing) is estimated to be approximately $8,000/day to $10,000/day for a typical day based on current data volumes (including savings attributable to the daily ODCR and Compute Savings Plans), which totals approximately $2 million per year based on 252 trading days per year. 29 This estimate includes compute and storage costs for a daily ad hoc interim lifecycle processing, assuming the implementation of the options quotes ‘‘single pass’’ proposal, and is based on on demand rates for a typical day with average data volumes, less options quotes data volumes and their associated storage needs. The estimated number of authorized ad hoc runs per year that would be requested by the SEC cannot be predicted by CAT LLC or the Plan Processor. VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 ‘‘as requested’’ basis. Specifically, CAT LLC proposes to add the following provision to Section 6.1 of Appendix D of the CAT NMS Plan: ‘‘Where there is an immediate regulatory need (for example, in the case of a major market event), upon request of a senior officer of the Division of Trading and Markets, the Division of Enforcement, or the Division of Examinations to CAT LLC, the Plan Processor shall be directed to create an interim CAT-Order-ID and make it available to regulators by T+1 at 9 p.m. ET if the request is received prior to T+1 at 8 a.m. ET, or generally within 14 hours of receiving the request if such request was received after T+1 at 8 a.m. ET.’’ 4. Incorporate Exemptive Relief Permitting Deletion of Industry Test Data Older Than Three Months and Include CAIS Data (a) Overview; Prior Commission Exemptive Order CAT Reporters engage in testing related to the reporting of order and transaction data to the CAT, both pursuant to required testing and on a voluntary basis. In connection with this testing, CAT LLC, through the Plan 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, referred to herein as ‘‘Industry Test Data’’.30 On June 2, 2023, CAT LLC requested exemptive relief from Rule 17a–1 under the Exchange Act and certain provisions of the CAT NMS Plan relating to the retention of Industry Test Data beyond three months.31 On November 27, 2023, the Commission granted the requested 30 Separately, CAT LLC, through the Plan Processor, also retains operational metrics associated with industry testing for six years in accordance with the Plan. 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.’’ The proposed amendments do not affect such operational metrics. 31 See Letter from Brandon Becker, CAT NMS Plan Operating Committee Chair, to Vanessa Countryman, Secretary, Commission, dated June 2, 2023, https://catnmsplan.com/sites/default/files/ 2023-06/06.02.23-Exemptive-Request-Test-DataRetention.pdf. As noted in the exemptive request, CAT LLC does not believe that Industry Test Data constitutes documents covered by Rule 17a–1 under the Exchange Act and adheres to its view that the specific three-month period for Industry Test Data supersedes the more general, longer retention periods in the CAT NMS Plan, but submitted the exemptive request to obtain regulatory clarity in light of the SEC staff’s comments that the longer retention periods set forth in Rule 17a–1 under the Exchange Act and the CAT NMS Plan may apply to Industry Test Data. PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 relief.32 The exemptive request and the Commission’s order apply only to Industry Test Data related to the CAT order and transaction system, not to the customer account and information system (‘‘CAIS’’). CAT LLC is now proposing to incorporate the exemptive relief into the CAT NMS Plan to clarify that data from industry testing for both Industry Members and Participants may be deleted after three months. In addition, the amendments would apply to Industry Test Data related to both transaction system and CAIS data. (b) Current CAT NMS Plan Requirements; Exchange Act Rule 17a–1 Appendix D of the CAT NMS Plan specifically requires the retention of Industry Test Data for three months only.33 Specifically, Appendix D of the CAT NMS Plan states that ‘‘[d]ata from industry testing must be saved for three months.’’ 34 Separate from this specific three-month retention requirement in Appendix D of the CAT NMS Plan, Rule 17a–1 under the Exchange Act and other more general recordkeeping provisions of the CAT NMS Plan set forth lengthier record retention periods of five and six years, respectively. Rule 17a–1 under the Exchange Act 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,’’ 35 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.’’ 36 The CAT is a facility of each of the Participants to the CAT NMS Plan. In addition, Section 9.1 of the CAT NMS Plan, the general recordkeeping provision for the CAT NMS Plan, incorporates by reference the requirements of Rule 17a–1 under the Exchange Act. Specifically, Section 9.1 of the CAT NMS Plan states, in relevant part, that ‘‘[t]he Company shall maintain 32 Exchange Act Release No. 99023 (Nov. 27, 2023), 88 FR 84026 (Dec. 1, 2023). 33 Ordinarily, specific provisions in a statute or regulation prevail over general provisions which might appear to the contrary. See, e.g., RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012) (citing Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992)). 34 Appendix D, Section 1.2 of the CAT NMS Plan at D–4. 35 Rule 17a–1(a) under the Exchange Act. 36 Rule 17a–1(b) under the Exchange Act. E:\FR\FM\16APN1.SGM 16APN1 26989 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices complete and accurate books and records of the Company in accordance with SEC Rule 17a–1.’’ (c) Estimated Cost Savings Prior to the Commission’s exemptive order, the Plan Processor had been retaining Industry Test Data beyond the three-month period prescribed by Appendix D of the CAT NMS Plan; eliminating Industry Test Data older than three months as permitted by the exemptive order is expected to achieve approximately $1 million per year in savings. The proposed amendments would not generate additional cost savings beyond those achievable pursuant to the exemptive order, but would incorporate the exemptive relief into the CAT NMS Plan itself. Proposed Revisions to CAT NMS Plan khammond on DSKJM1Z7X2PROD with NOTICES CAT LLC proposes to amend the CAT NMS Plan to clarify that Industry Test Data related to both the CAT order and transaction system and to CAIS may be deleted after three months. Specifically, CAT LLC proposes to revise the following bullet in Section 1.2 of Appendix D of the CAT NMS Plan: ‘‘Data from industry testing must be saved for three months. Operational 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.’’ CAT LLC proposes to add the following as the second sentence of the bullet: ‘‘Notwithstanding any other provision of the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a–1, such test data (whether related to the CAT order and transaction system or the customer account and information system) may be deleted by the Plan Processor after three months.’’ With this phrase, the bullet would state: ‘‘Data from industry testing must be saved for three months. Notwithstanding any other provision of VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a–1, such test data (whether related to the CAT order and transaction system or the customer account and information system) may be deleted by the Plan Processor after three months. Operational 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.’’ B. Governing or Constituent Documents Not applicable. C. Implementation of Amendment The Participants propose to implement the proposal upon approval of the proposed amendment to the CAT NMS Plan. D. Development and Implementation Phases Not applicable. G. Approval by Plan Sponsors in Accordance With Plan Section 12.3 of the CAT NMS Plan states that, subject to certain exceptions, the CAT NMS Plan may be amended from time to time only by a written amendment, authorized by the affirmative vote of not less than twothirds of all of the Participants, that has been approved by the SEC pursuant to Rule 608 of Regulation NMS under the Exchange Act or has otherwise become effective under Rule 608 of Regulation NMS under the Exchange Act. In addition, the proposed amendment was discussed during Operating Committee meetings. The Participants, by a vote of the Operating Committee taken on March 26, 2024, have authorized the filing of this proposed amendment with the SEC in accordance with the CAT NMS Plan. H. Description of Operation of Facility Contemplated by the Proposed Amendment E. Analysis of Impact on Competition CAT LLC does not believe that the proposed amendment would result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. Indeed, CAT LLC believes that the proposed amendments will have a positive impact on competition, efficiency and capital formation. The proposed amendments will provide substantial savings in CAT costs while providing minimal impact on the regulatory use of CAT Data. Such substantial savings would inure to the benefit of all participants in the markets for NMS Securities and OTC Equity Securities, including Participants, Industry Members, and most importantly, the investors. F. Written Understanding or Agreements Relating To Interpretation of, or Participation in Plan PO 00000 Not applicable. Frm 00134 Fmt 4703 Not applicable. I. Terms and Conditions of Access Not applicable. J. Method of Determination and Imposition, and Amount of, Fees and Charges Not applicable. K. Method and Frequency of Processor Evaluation Not applicable. L. Dispute Resolution * Not applicable. * * * Exhibit A Proposed Revisions to CAT NMS Plan Additions underlined; deletions [bracketed] * * * * * BILLING CODE 8011–01–P Sfmt 4703 * E:\FR\FM\16APN1.SGM 16APN1 26990 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices ARTICLE VI FUNCTIONS AND ACTIVITIES OF CAT SYSTEM Section 6.5. (b) Central Repository. Retention of Data. (i) Consistent with Appendix D, Data Retention Requirements, the Central Repository shall retain the information collected pursuant to paragraphs (c)(7) and (e)(7) of SEC Rule 613 in a convenient and usable standard electronic data format that is directly available and searchable electronically without any manual intervention by the Plan Processor for a period of not less than six (6) years, subiect to the exceptions in Section 6.3 of Appendix D. Such data when available to the Participant regulatory staff and the SEC shall be linked. (ii) The Plan Processor shall implement and comply with the records retention policy contemplated by Section 6.l(d)(i) (as such policy is reviewed and updated periodically in accordance with Section 6.l(d)(i)). ***** APPENDIXD 1.2 Technical Environments The architecture must include environments for production, development, quality assurance testing, disaster recovery, industry-wide coordinated testing, and individual on-going CAT Reporter testing. The building and introduction of environments available to CAT Reporters may be phased in to align with the following agreed upon implementation milestones: The architecture must include environments for production, development, quality assurance testing, disaster recovery, industry-wide coordinated testing, and individual on-going CAT Reporter testing. The building and introduction of environments available to CAT Reporters may be phased in to align with the following agreed upon implementation milestones: VerDate Sep<11>2014 Development environment - the development environment must be created to build, develop, and maintain enhancements and new requirements. This environment must be separate from those listed below. 19:09 Apr 15, 2024 Jkt 262001 PO 00000 Frm 00135 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.050</GPH> khammond on DSKJM1Z7X2PROD with NOTICES • Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices Quality assurance environment - a quality assurance (QA) environment must be created to allow simulation and testing of all applications, interfaces, and data integration points contained in the CAT System. o o The QA environment shall be able to simulate end-to-end production functionality and perform with the same operational characteristics, including processing speed, as the production environment. The QA environment shall support varied types of changes, such as, but not limited to, the following: • • • • • • • • • o Application patches; Bug fixes; Operating system upgrades; Introduction of new hardware or software components; New functionality; Network changes; Regression testing of existing functionality; Stress or load testing (simulation of production-level usage); and Recovery and failover. A comprehensive test plan for each build and subsequent releases must be documented. • Production environment - fully operational environment that supports receipt, ingestion, processing and storage of CAT Data. Backup/disaster recovery components must be included as part of the production environment. • Industry test environment o The Plan Processor must provide an environment supporting industry testing (test environment) that is functionally equivalent to the production environment, including: • • • khammond on DSKJM1Z7X2PROD with NOTICES o The industry test environment must also contain functionality to support industry testing, including: • • • • VerDate Sep<11>2014 End-to-end functionality (e.g., data validation, processing, linkage, error identification, correction and reporting mechanism) from ingestion to output, sized to meet the standards of the production SLA; Performance metrics that mirror the production environment; and Management with the same information security policies applicable to the production environment. 19:09 Apr 15, 2024 Minimum availability of 24x6; Replica of production data when needed for testing; Data storage sized to meet varying needs, dependent upon scope and test scenarios; and Support of two versions of code (current and pending). Jkt 262001 PO 00000 Frm 00136 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.051</GPH> • 26991 26992 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices The industry test environment must support the following types of industry testing: o • • • • • • o o o o o 1.4 Technical upgrades made by the Plan Processor; CAT code releases that impact CAT Reporters; Changes to industry data feeds (e.g., SIP, OPRA, etc.); Industry-wide disaster recovery testing; Individual CAT Reporter and Data Submitter testing of their upgrades against CAT interfaces and functionality; and Multiple, simultaneous CAT Reporter testing. The industry test environment must be a discrete environment separate from the production environment. The Plan Processor must provide the linkage processing of data submitted during coordinated, scheduled, industry-wide testing. Results of the linkage processes must be communicated back to Participants as well as to the Operating Committee. Data from industry testing must be saved for three months. Notwithstanding any other provision of the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-1, such test data (whether related to the CAT order and transaction system or the customer account and information system) may be deleted by the Plan Processor after three months. Operational 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. The Plan Processor must provide support for industry testing, including testing procedures, coordination of industry testing, publish notifications, and provide help desk support during industry testing. The Participants and the SEC must have access to industry test data. Data Retention Requirements VerDate Sep<11>2014 • Contain requirements associated with data retention, maintenance, destruction, and holds; • Comply with applicable SEC record-keeping requirements; • Have a record hold program where specific CAT Data can be archived offline for as long as necessary; • Store and retain both raw data submitted by CAT Reporters and processed data; and • Make data directly available and searchable electronically without manual intervention for at least six years, subject to the exceptions in Section 6.3 of Appendix 0. 19:09 Apr 15, 2024 Jkt 262001 PO 00000 Frm 00137 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.052</GPH> khammond on DSKJM1Z7X2PROD with NOTICES The Plan Processor must develop a formal record retention policy and program for the CAT, to be approved by the Operating Committee, which will, at a minimum: Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices 3. 26993 Reporting and Linkage Requirements All CAT Data reported to the Central Repository must be processed and assembled to create the complete lifecycle of each Reportable Event. Reportable Events must contain data elements sufficient to ensure the same regulatory coverage currently provided by existing regulatory reporting systems that have been identified as candidates for retirement. Additionally, the Central Repository must be able to: • Assign a unique CAT-Reporter-ID to all reports submitted to the system based on sub-identifiers, (e.g., MPIDs, ETPID, trading mnemonic) currently used by CAT Reporters in their order handling and trading processes. • Handle duplicate sub-identifiers used by members of different Participants to be properly associated with each Participant. • Generate and associate one or more Customer-IDs with all Reportable Events representing new orders received from a Customer(s) of a CAT Reporter. The Customer-ID(s) will be generated from a Firm Designated ID provided by the CAT Reporter for each such event, which will be included on all new order events. • Accept time stamps on order events handled electronically to the finest level of granularity captured by CAT Reporters. Additionally, the CAT must be able to expand the time stamp field to accept time stamps to an even finer granularity as trading systems expand to capture time stamps in ever finer granularity. The Plan Processor must normalize all processed date/time CAT Data into a standard time zone/format. In addition, the data required from CAT Reporters will include all events and data elements required by the Plan Processor in the Technical Specifications to build the: • Life cycle of an order for defined events within a CAT Reporter; • Life cycle of an order for defined events intra-CAT Reporter; and • State of all orders across all CAT Reporters at any point in time. The Plan Processor must use the "daisy chain approach" to link and create the order lifecycle. In the daisy chain approach, a series of unique order identifiers, assigned to all order events handled by CAT Reporters are linked together by the Central Repository and assigned a single CAT-generated CAT-Order-ID that is associated with each individual order event and used to create the complete lifecycle of an order. • VerDate Sep<11>2014 All order events handled within an individual CAT Reporter, including orders routed to internal desks or departments with different functions (e.g., an internal ATS); 19:09 Apr 15, 2024 Jkt 262001 PO 00000 Frm 00138 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.053</GPH> khammond on DSKJM1Z7X2PROD with NOTICES By using the daisy chain approach the Plan Processor must be able to link all related order events from all CAT Reporters involved in the lifecycle of an order. At a minimum, the Central Repository must be able to create the lifecycle between: 26994 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices • Customer orders to "representative" orders created in firm accounts for the purpose of facilitating a customer order (e.g., linking a customer order handled on a riskless principal basis to the street-side proprietary order); • Orders routed between broker-dealers; • Orders routed from broker-dealers to exchanges; • Orders sent from an exchange to its routing broker-dealer; • Executed orders and trade reports; • Various legs of option/equity complex orders; and • Order events for all equity and option order handling scenarios that are currently or may potentially be used by CAT Reporters, including: o o o o o o o o o o o o Agency route to another broker-dealer or exchange; Risk.less principal route to another broker-dealer or exchange capturing within the lifecycle both the customer leg and street side principal leg; Orders routed from one exchange through a routing broker-dealer to a second exchange; Orders worked through an average price account capturing both the individual street side execution(s) and the average price fill to the Customer; Orders aggregated with other orders for further routing and execution capturing both the street side executions for the aggregated order and the fills to each customer order; Complex orders involving one or more options legs and an equity leg, with a linkage between the option and equity legs; Complex orders containing more legs than an exchange's order management system can accept, causing the original order to be broken into multiple orders; Orders negotiated over the telephone or via a negotiation system; Orders routed on an agency basis to a foreign exchange; Execution of customer order via allocation of shares from a pre-existing principal order; Market maker quotes; and Complex orders involving two or more options legs. VerDate Sep<11>2014 • Link each order lifecycle back to the originating Customer; • Integrate and appropriately link reports representing repairs of original submissions that are rejected by the CAT due to a failure to meet a particular data validation; • Integrate into the CAT and appropriately link reports representing records that are corrected by a CAT Reporter for the purposes of correcting data errors not identified in the data validation process; 19:09 Apr 15, 2024 Jkt 262001 PO 00000 Frm 00139 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.054</GPH> khammond on DSKJM1Z7X2PROD with NOTICES Additionally, the Central Repository must be able to: Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices • Assign a single CAT-Order-ID to all events contained within the lifecycle of an order so that regulators can readily identify all events contained therein; and • Process and link Manual Order Events with the remainder of the associated order lifecycle. 26995 As described in Section 3.4 of Appendix D, Options Market Maker Quotes in Listed Options and related Reportable Events will be subiect to ingestion only and will not be subiect to any linkage requirements. 3.4 Requirements for Options Market Maker Quotes in Listed Options The provisions of this section shall govern the processing and storage of Options Market Maker Quotes in Listed Options and related Reportable Events and shall override any conflicting provisions in the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-t. Options Market Maker Quotes in Listed Options must be reported to the Central Repository as provided under Section 6.4(d)(iii) of the CAT NMS Plan. This data will undergo ingestion only and such unlinked data will be made available to regulators by T+l at 12:00 p.m. Eastern Time. Options Market Maker Quotes in Listed Options will not be subiect to any requirement to link and create an order lifecycle, and will not undergo any validation, feedback, linkage, or enrichment processing. Options Market Maker Quotes in Listed Options will be accessible through BDSQL and Direct Read interfaces only and will not be accessible through the online targeted query tool. 6.1 Data Processing CAT order events must be processed within established timeframes to ensure data can be made available to Participants' regulatory staff and the SEC in a timely manner. The processing timelines start on the day the order event is received by the Central Repository for processing. Most events must be reported to the CAT by 8:00 a.m. Eastern Time the Trading Day after the order event occurred (referred to as transaction date). The processing timeframes below are presented in this context. All events submitted after T+l (either reported late or submitted later because not all of the information was available) must be processed within these timeframes based on the date they were received. VerDate Sep<11>2014 • Noon Eastern Time T+ I (transaction date+ one day)- Initial data validation[, lifecycle linkages] and communication of errors to CAT Reporters; • 8:00 a.m. Eastern Time T+3 (transaction date+ three days)-Resubmission of corrected data; and 19:09 Apr 15, 2024 Jkt 262001 PO 00000 Frm 00140 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.055</GPH> khammond on DSKJM1Z7X2PROD with NOTICES The Participants require the following timeframes (Figure A) for the identification, communication and correction of errors from the time an order event is received by the processor: 26996 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices • 8:00 a.m. Eastern Time T+S (transaction date+ five days)-Corrected data available to Participant regulatory staff and the SEC. Late submissions or re-submissions (after 8:00 a.m.) may be considered to be processed that day if it falls within a given time period after the cutoff. This threshold will be determined by the Plan Processor and approved by the Operating Committee. In the event that a significant portion of the data has not been received as monitored by the Plan Processor, the Plan Processor may decide to halt processing pending submission of that data. Figure A: CAT Central Repository Data Processing Timelines 12:0IJPMET TH l.11MMET T+3 T+4 {changes to second box in chart: 12:00 PM ET T+ 1 Initial Validation, [Life Cycle Linkage,] Communication of Errors} Where there is an immediate regulatory need (for example, in the case of a maior market event), upon request of a senior officer of the Division of Trading and Markets, the Division of Enforcement, or the Division of Examinations to CAT LLC, the Plan Processor shall be directed to create an interim CAT-Order-ID and make it available to regulators by T+ 1 at 9 p.m. ET if the request is received prior to T+1 at 8 a.m. ET, or generally within 14 hours of receiving the request if such request was received after T+ 1 at 8 a.m. ET. For the avoidance of doubt, processing and storage of Options Market Maker Quotes in Listed Options and related Reportable Events shall be governed by Section 3.4 of Appendix D. 6.3 Exceptions to Data Availability Requirements Notwithstanding any other provision of the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-1, the following types of data may be retained in an archive storage tier, in which case they will be made available upon request by Participant regulatory staff or the SEC to the CAT Help Desk. Archived data is not directly available and searchable electronically without manual intervention and will not be subiect to any query tool performance requirements until it is restored to an accessible storage tier. VerDate Sep<11>2014 All interim raw unprocessed data (i.e., as submitted data) and operational data older than 15. Interim operational data includes all processed, validated and unlinked data and made available to regulators by T+ 1 at 12:00 p.m. ET, and all iterations of processed data made available to regulators between T +1 and T +5, but excludes the final version of corrected data that is made available at T+5 at 8:00 a.m. ET. 19:09 Apr 15, 2024 Jkt 262001 PO 00000 Frm 00141 Fmt 4703 Sfmt 4725 E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.056</GPH> khammond on DSKJM1Z7X2PROD with NOTICES • Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices • 26997 All submission and feedback files older than 15 days. Regulator Access 8.1 The Plan Processor must provide Participants' regulatory staff and the SEC with access to all CAT Data for regulatory purposes only. Participants' regulatory staff and the SEC will access CAT Data to perform functions, including economic analyses, market structure analyses, market surveillance, investigations, and examinations. The CAT must be able to support, at a minimum, 3,000 regulatory users within the system. It is estimated that approximately 20% of all users will use the system on a daily or weekly basis while approximately 10% of all users will require advanced regulator-user access, as described below. Furthermore, it is estimated that there may be approximately 600 concurrent users accessing the CAT at any given point in time. These users must be able to access and use the system without an unacceptable decline in system performance. 37 As stated in Appendix D, Data Security, the Plan Processor must be able to support an arbitrary number of user roles. Defined roles must include, at a minimum: • Basic regulator users - Individuals with approved access who plan to use the Central Repository to run basic queries (e.g., pulling all trades in a single stock by a specific party). • Advanced regulator users - Individuals with approved access who plan to use the Central Repository to construct and run their own complex queries. Regulators will have access to processed CAT Data through two different methods, an online-targeted query tool and user-defined direct queries and bulk extracts. BILLING CODE 8011–01–C * * * * Electronic Comments * khammond on DSKJM1Z7X2PROD with NOTICES III. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the amendment is consistent with the Exchange Act. Comments may be submitted by any of the following methods: 37 Specific performance requirements will be included in the SLA. VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include file number 4– 698 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number 4–698. This file number should PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/rules/ sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed amendment that are filed with the Commission, and all written communications relating to the proposed amendment between the Commission and any person, other than those that may be withheld from the E:\FR\FM\16APN1.SGM 16APN1 EN16AP24.057</GPH> As described in Section 3.4 of Appendix D, Options Market Maker Quotes in Listed Options and related Reportable Events will be accessible through BDSOL and Direct Read interfaces only and will not be accessible through the online targeted query tool. 26998 Federal Register / Vol. 89, No. 74 / Tuesday, April 16, 2024 / Notices public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal offices of the Participants. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to file number 4–698 and should be submitted on or before May 7, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.38 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–07967 Filed 4–15–24; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION Privacy Act of 1974; System of Records U.S. Small Business Administration. ACTION: Notice of a modified system of records. AGENCY: The U.S. Small Business Administration (SBA) proposes to modify its system of records titled, Small Business Investment Company Information System (SBICIS) (SBA 40), to update its inventory of records systems subject to the Privacy Act of 1974, as amended. Publication of this notice complies with the Privacy Act and the Office of Management and Budget (OMB) Circular A–108 and Circular A–130. System of Records Notice (SORN) titled, Small Business Investment Company Information System (SBA 40), serves as a centralized and automated framework for the organization, retrieval, and analysis of SBIC information which supports the SBA’s oversight and risk management roles for the SBIC program. DATES: Submit comments on or before May 16, 2024. This revised system will be effective upon publication. Routine uses will become effective on the date following the end of the comment period unless comments are received khammond on DSKJM1Z7X2PROD with NOTICES SUMMARY: 38 17 CFR 200.30–3(a)(85). VerDate Sep<11>2014 19:09 Apr 15, 2024 Jkt 262001 which result in a contrary determination. ADDRESSES: You may submit comments on this notice, identified by [DOCKET NUMBER SBA–2023–0014], by any of the following methods: Federal e-Rulemaking Portal: https:// www.regulations.gov: Follow the instructions for submitting comments. Mail/Hand Delivery/Courier: Submit written comments to: Kerry Vance, Director, Information Technology and Data Strategy, Office of Investment and Innovation, U.S. Small Business Administration, 409 3rd Street SW, Washington, DC 20416. FOR FURTHER INFORMATION CONTACT: General questions, please contact Kerry Vance, Director, Information Technology and Data Strategy, Office of Investment and Innovation, U.S. Small Business Administration, 409 3rd Street SW, Washington, DC 20416 or via email, Kerry.Vance@sba.gov, telephone 202– 205–6160 or Kelvin L. Moore, Chief Information Security Officer, Office of the Chief Information Officer, U.S. Small Business Administration, 409 3rd Street SW, Suite 4000, Washington, DC 20416, email address: Kelvin.Moore@ sba.gov, telephone 202–921–6273. For Privacy related matters, please contact LaWanda Burnette, Chief Privacy Officer, Office of the Chief Information Officer, or via email to Privacyofficer@ sba.gov. SUPPLEMENTARY INFORMATION: The Privacy Act of 1974 (5 U.S.C. 552a), as amended, embodies fair information practice principles in a statutory framework governing how federal agencies collect, maintain, use, and disseminate individuals’ personal information. The Privacy Act applies to records about individuals that are maintained in a ‘‘system of records.’’ A system of records is any group of records under the control of a federal agency from which information is retrieved by the name of an individual or by a number, symbol or any other identifier assigned to the individual. The Privacy Act requires each federal agency to publish in the Federal Register a System of Records Notice (SORN) identifying and describing each system of records the agency maintains, the purpose for which the agency uses the Personally Identifiable Information (PII) in the system, the routine uses for which the agency discloses such information outside the agency, and how individuals can exercise their rights related to their PII information. The modified Privacy Act system of records titled Small Business Investment Company Information System (SBICIS) (SBA 40) will be used PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 to provide notice to current and former (i) prospective Small Business Investment Company license applicants, (ii) SBIC applicants, (iii) SBICs (solely for the purpose of this SORN, the term ‘‘SBIC’’ refers to each of (i), (ii), and (iii). This includes managers, executives, members, and employees associated or affiliated with an SBIC, and personal and professional references for certain of the foregoing. It also includes SBIC investors, SBIC portfolio companies, certain SBIC portfolio company employees, SBIC service providers, and certain other individuals associated, affiliated or involved with an SBIC. Additionally, this modification to the system of records Small Business Investment Company Information System (SBICIS) (SBA 40) also includes changing the short name to SBA SBICIS 40 to easily identify the system short name with its numeric value. Lastly, this modification adds three new routine uses: (H), (I) and (J), respectively. This system of records is comprised of electronic records managed by the Office of Investment and Innovation (OII). SBA SBICIS 40 will not have any undue impact on the privacy of individuals and its use is compatible with collection. SYSTEM NAME AND NUMBER: Small Business Investment Company Information System (SBA SBICIS 40). SECURITY CLASSIFICATION: Controlled Unclassified Information SYSTEM LOCATION: SBA Headquarters, 409 3rd Street SW, Washington, DC 20416 and vendor cloud platform. SYSTEM MANAGER(S): Kerry Vance, Director, Information Technology and Data Strategy, Office of Investment and Innovation, U.S. Small Business Administration, 409 3rd Street SW, Washington, DC 20416 or via email Kerry.Vance@sba.gov, telephone 202– 205–6160. AUTHORITY FOR MAINTENANCE OF THE SYSTEM: The Small Business Investment Act of 1958, as amended, 15 U.S.C. 661, et seq. CATEGORIES OF RECORDS IN THE SYSTEM: Personal and commercial information (including name, address, telephone number, credit history, background information, business information, employer identification number, SBIC License number, financial information, investor commitments, identifying number or other personal identifiers, regulatory compliance information) on individuals and portfolio companies named in SBIC files. E:\FR\FM\16APN1.SGM 16APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Notices]
[Pages 26983-26998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07967]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99938; File No. 4-698]


Joint Industry Plan; Notice of Filing of Amendment to the 
National Market System Plan Governing the Consolidated Audit Trail 
Regarding Cost Savings Measures

April 10, 2024.

I. Introduction

    On March 27, 2024, the Consolidated Audit Trail, LLC (``CAT LLC''), 
on behalf of the following parties to the National Market System Plan 
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or 
``Plan''):\1\ BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX 
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., 
Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial Industry 
Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock 
Exchange, Inc., MEMX, LLC, Miami International Securities Exchange LLC, 
MIAX Emerald, LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC, 
Nasdaq ISE, LLC, Nasdaq MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock 
Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, 
Inc., NYSE Chicago, Inc., and NYSE National, Inc. (collectively, the 
``Participants,'' ``self-regulatory organizations,'' or ``SROs'') filed 
with the Securities and Exchange Commission (``SEC'' or ``Commission'') 
pursuant to Section 11A(a)(3) of the Securities Exchange Act of 1934 
(``Exchange Act''),\2\ and Rule 608 thereunder,\3\ a proposed amendment 
to the CAT NMS Plan to amend existing requirements for the consolidated 
audit trail (``CAT'') regarding costs saving measures for operating the 
CAT (the ``Cost Savings Amendments'').\4\ Set forth in Section II is 
the statement of purpose and summary of the amendment, along with 
information required by Rules 608(a)(4) and 608(a)(5) under the 
Exchange Act,\5\ and Exhibit A, which contains the proposed revisions 
to the CAT NMS Plan, all substantially as prepared and submitted by the 
Participants to the Commission.\6\ The Commission is publishing this 
notice to solicit comments from interested persons on the amendment.\7\
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    \1\ The CAT NMS Plan is a national market system plan approved 
by the Commission pursuant to Section 11A of the Exchange Act and 
the rules and regulations thereunder. See Securities Exchange Act 
Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 
2016). The full text of the CAT NMS Plan is available at 
www.catnmsplan.com.
    \2\ 15 U.S.C 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated 
March 27, 2024 (the ``Transmittal Letter'').
    \5\ See 17 CFR 242.608(a)(4) and 17 CFR 242.608(a)(5).
    \6\ See Transmittal Letter, supra note 4. Unless otherwise 
defined herein, capitalized terms used herein are defined as set 
forth in the CAT NMS Plan.
    \7\ 17 CFR 242.608.
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II. Description of the Plan

    As described further below, the Cost Savings Amendments are 
expected to result in approximately $23.0 million in new annual cost 
savings in the first year with limited impact on the regulatory 
function of the CAT.\8\ Specifically, the Cost Savings Amendment would:
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    \8\ All cost and savings projections are estimates only and 
reflect the current state and costs of CAT operations, including the 
current number of exchanges. Cost savings estimates are based on, 
among other factors: current CAT NMS Plan requirements; reporting by 
Participants, Industry Members and market data providers; observed 
data rates and volumes; current discounts, reservations and cost 
savings plans; and associated cloud fees. Actual future savings 
could be more or less than estimated due to changes in any of these 
variables. S3 Intelligent Tier storage fees in production are 
allocated at a ratio of 1 (S3 Frequent Access): 1 (S3 Infrequent 
Access): 8 (S3 Archive Instant Access) based on current operations 
and regulatory usage. Savings projections are primarily based on 
production environments, which represent approximately two-thirds of 
all cloud fees. For additional information on the cost savings 
estimates relevant to each proposal, see infra notes 20, 24, 29 and 
30.

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[[Page 26984]]

    (1) optimize processing and storage requirements for Options Market 
Maker \9\ quotes in Listed Options \10\ (``Options Market Maker 
Quotes''), without eliminating them entirely from the CAT;
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    \9\ Section 1.1 of the CAT NMS Plan defines an ``Options Market 
Maker'' as ``a broker-dealer registered with an exchange for the 
purpose of making markets in options contracts on the exchange.''
    \10\ Section 1.1 of the CAT NMS Plan defines a ``Listed Option'' 
as having ``the meaning set forth in Rule 600(b)(35) of Regulation 
NMS.'' Rule 600(b)(35) has since been redesignated as Rule 
600(b)(43), which defines a ``Listed Option'' as ``any option traded 
on a registered national securities exchange or automated facility 
of a national securities association.''
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    (2) permit the Plan Processor to move raw unprocessed data and 
interim operational copies of CAT Data older than 15 days to a more 
cost-effective storage tier; and
    (3) permit the Plan Processor to provide an interim CAT-Order-ID on 
an ``as requested'' basis rather than each day.
    In addition, the Cost Savings Amendments would incorporate into the 
CAT NMS Plan the Commission's recent exemptive order providing that 
data from industry testing for both Industry Members and Participants 
may be deleted after three months, which is estimated to result in 
additional cost savings of approximately $1 million per year, and would 
extend such relief to include test data related to the customer account 
and information system.\11\
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    \11\ Exchange Act Release No. 99023 (Nov. 27, 2023), 88 FR 84026 
(Dec. 1, 2023).
---------------------------------------------------------------------------

    The proposed changes to the CAT NMS Plan to implement the Cost 
Savings Amendments are set forth in Exhibit A to this filing.\12\ CAT 
LLC continues to explore further changes to the CAT NMS Plan and 
expects to file future amendments that would result in additional cost 
savings without compromising the regulatory goals of the CAT.
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    \12\ Because the Commission has acknowledged that Appendix C was 
not intended to be continually updated once the CAT NMS Plan was 
approved, CAT LLC is not proposing to update Appendix C to reflect 
the proposed amendments. See Exchange Act Release No. 89632 (Aug. 
21, 2020), 85 FR 65990 (Oct. 16, 2020).
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Requirements Pursuant to Rule 608(a)

A. Description of the Proposed Amendments to the CAT NMS Plan

1. Optimize Processing and Storage Requirements for Options Market 
Maker Quotes
(a) Overview
    Options Market Maker Quotes are the single largest data source for 
the CAT, comprising approximately 98% of all options exchange events 
and approximately 75% of all transaction volume stored in the CAT.\13\ 
Under the CAT NMS Plan, Options Exchanges are required to report 
Options Market Maker Quotes to the CAT, and such quotes must be 
processed and assembled to create a complete order lifecycle. The 
number of quotes that result in an execution is extremely low; as a 
result, the vast majority of Options Market Maker Quote lifecycles 
consist of just two events--the quote and its subsequent cancellation.
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    \13\ Under Section 1.1 of the CAT NMS Plan, a ``Reportable 
Event'' ``includes, but is not limited to, the original receipt or 
origination, modification, cancellation, routing, execution (in 
whole or in part) and allocation of an order, and receipt of a 
routed order.'' Section 1.1 of the CAT NMS Plan states that an 
``order'' ``has, with respect to Eligible Securities, the meaning 
set forth in SEC Rule 613(j)(8).'' SEC Rule 613(j)(8), in turn, 
states that ``[t]he term order shall include: (i) Any order received 
by a member of a national securities exchange or national securities 
association from any person; (ii) Any order originated by a member 
of a national securities exchange or national securities 
association; or (iii) Any bid or offer.'' Accordingly, the 
definition of an ``order'' includes Options Market Maker Quotes, and 
Reportable Events include events related to Options Market Maker 
Quotes.
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    The costs associated with processing and storing Options Market 
Maker Quotes under the CAT NMS Plan are significant--approximately $30 
million in 2023.\14\ CAT LLC has been focused on reducing these costs. 
In November 2023, the Commission granted exemptive relief that would 
allow the Plan Processor to create options quote lifecycles only once; 
this options quotes ``single pass'' proposal is expected to result in 
annual savings of approximately $5.4 million upon implementation in 
April 2024.\15\ Even with these savings, the costs related to Options 
Market Maker Quotes continue to far outweigh the regulatory benefit.
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    \14\ Although Options Market Maker Quotes are the single largest 
data source for the CAT, there is not a linear relationship between 
volume and costs; rather, a combination of volume and processing 
complexity drive costs. While Options Market Maker Quotes represent 
a significant percentage of data volume, life-cycling this data is 
less compute intensive because the vast majority of quotes have just 
two events and involve only a single venue. Despite this relatively 
limited processing complexity, the cost impact of storing and 
processing Options Market Maker Quotes remains a significant 
percentage of overall CAT costs.
    \15\ Exchange Act Release No. 98848 (Nov. 2, 2023); 88 FR 77128 
(Nov. 8, 2023). The exemption order allows the Plan Processor to 
create lifecycle linkages for Options Market Maker Quotes only once 
by T+2 at 8 a.m. ET (as opposed to requiring both an interim 
lifecycle by T+1 at 9 p.m. ET and a final lifecycle by T+5 at 8 a.m. 
ET). To the extent the proposed amendments are approved, the Plan 
Processor would no longer be required to create any lifecycle 
linkages for Options Market Maker Quotes.
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    Under the proposed amendments, Options Market Maker Quotes in 
Listed Options and related Reportable Events will be subject to 
ingestion only and will not be subject to any linkage requirements. 
These changes would result in approximately $20.0 million in additional 
annual savings, without eliminating Options Market Maker Quotes 
entirely from the CAT. Options Exchanges will continue to report 
Options Market Maker Quotes in the same manner they do today, but the 
Plan Processor will only ingest and store them. Options Market Maker 
Quotes will no longer be subject to validation, feedback, linkage and 
lifecycle processing, or Plan Processor enrichments (e.g., next event 
timestamp, lifecycle sequence number, CAT-Lifecycle-ID). The 
elimination of linkage and feedback processes will remove Options 
Market Maker Quotes from Options Market Replay, OLA Viewer, and All-
Related Lifecycle Event queries. Executions that result from Options 
Market Maker Quotes will identify the quoteId of the quote that 
resulted in an execution, but will appear as orphaned lifecycle events. 
Options Market Maker Quotes will no longer be accessible via DIVER, but 
will remain accessible through BDSQL and Direct Read interfaces.
    These changes would significantly reduce the costs of the CAT with 
limited impact on the regulatory function of the CAT. As noted, the 
vast majority of Options Market Maker Quote lifecycles do not involve 
any execution or allocation and usage data demonstrates that such data 
is very rarely accessed by regulators. Under the proposed amendments, 
regulators will still have access to unlinked Options Market Maker 
Quotes data by T+1 at 12:00 p.m. ET. All necessary information for the 
eliminated enrichments would be available to regulators, but regulators 
would need to derive the enrichments themselves; upon request, the Plan 
Processor would provide regulators with the code required in order to 
do so. As a result of these changes, the cost impact of Options Market 
Maker Quotes on the CAT would be reduced from approximately $24.4 
million (inclusive of anticipated savings resulting from the

[[Page 26985]]

implementation of the options quotes ``single pass'' proposal 
referenced above) to approximately $4.0 million annually.
    The Participants believe that the anticipated savings associated 
with this proposal substantially outweigh the limited regulatory impact 
on the CAT.\16\
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    \16\ The Participants continue to evaluate additional cost 
savings measures and alternatives, which may include in the future 
continuing to evaluate eliminating Options Market Maker Quotes 
entirely from the CAT. Any such changes would require the submission 
of a proposed Plan amendment or exemption request to the SEC for 
consideration and approval.
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(b) Current CAT NMS Plan Requirements
    The CAT NMS Plan contains broad requirements relating to the 
current reporting of, linkage and lifecycle processing of, and 
regulator access to Options Market Maker Quotes and related Reportable 
Events.
    First, Section 6.3(d) of the CAT NMS Plan requires each Participant 
to record and electronically report to the Central Repository details 
for each order and each Reportable Event, including all Options Market 
Maker Quotes and related Reportable Events.\17\ Under Section 
6.4(d)(iii) of the CAT NMS Plan, ``[w]ith respect to the reporting 
obligations of an Options Market Maker with regard to its quotes in 
Listed Options, Reportable Events required pursuant to Section 
6.3(d)(ii) and (iv) shall be reported to the Central Repository by an 
Options Exchange in lieu of the reporting of such information by the 
Options Market Maker.'' Section 6.4(d)(iii) also requires that, 
pursuant to the Compliance Rules of the Options Exchanges, Options 
Market Makers are required to report to the Options Exchange the time 
at which a quote in a Listed Option is sent to the Options Exchange 
(and, if applicable, any subsequent quote modifications and/or 
cancellation time when such modification or cancellation is originated 
by the Options Market Maker). Such time information shall be reported 
to the Central Repository by the Options Exchange in lieu of reporting 
by the Options Market Maker.
---------------------------------------------------------------------------

    \17\ See supra note 13.
---------------------------------------------------------------------------

    Second, CAT NMS Plan broadly requires all CAT Data reported to the 
Central Repository to be processed and assembled to create the complete 
lifecycle of each Reportable Event. The Plan Processor uses a ``daisy 
chain approach'' to link all Reportable Events and create a complete 
lifecycle of each order. Under this approach, ``a series of unique 
order identifiers assigned to all order events handled by CAT Reporters 
are linked together by the Central Repository and assigned a single 
CAT-generated CAT-Order-ID that is associated with each individual 
order event and used to create the complete lifecycle of an order.'' 
\18\ Data processing timelines are described in Section 6.1 and Section 
6.2 of Appendix D of the CAT NMS Plan.
---------------------------------------------------------------------------

    \18\ Appendix D, Section 3 of the CAT NMS Plan at D-8.
---------------------------------------------------------------------------

    Finally, the CAT NMS Plan provides that regulators will have access 
to processed CAT Data through an online-targeted query tool and user-
defined direct queries and bulk extracts. These requirements are 
described in Section 8.1 and Section 8.2 of Appendix D of the CAT NMS 
Plan.
(c) Estimated Cost Savings
    As described above, the proposed changes would result in 
approximately $20.0 million in annual cost savings in the first year 
with limited impact on the regulatory function of the CAT.\19\ Given 
that the vast majority of Options Market Maker Quotes do not involve 
any execution or allocation and are used for limited regulatory 
purposes, the current cost associated with processing and storing such 
quotes--approximately $30 million in 2023--far outweighs the regulatory 
value. Although they will no longer be subject to validation, feedback, 
linkage and lifecycle processing, or Plan Processor enrichments (e.g., 
next event timestamp, lifecycle sequence number, CAT-Lifecycle-ID), 
Options Market Maker Quotes will continue to be reported and ingested 
in the same manner they are today, and unlinked data will remain 
accessible to regulators by T+1 at 12:00 p.m. through BDSQL and Direct 
Read interfaces.
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    \19\ For a discussion of how cost savings estimates are 
calculated, see supra note 8. This estimate represents additional 
savings to be achieved following the implementation of the options 
quotes ``single pass'' proposal targeted for the end of April 2024. 
This estimate assumes an approximate 65% reduction in compute 
runtime associated with options exchange events, and an approximate 
80% reduction in storage footprint through the elimination of 
versioned options quote data (e.g., interim, final, DIVER-optimized, 
OLA copies).
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(d) Proposed Revisions to CAT NMS Plan
    Given the scope of requirements relating directly or indirectly to 
the current reporting of, linkage and lifecycle processing of, and 
regulator access to Options Market Maker Quotes and related Reportable 
Events that currently appear throughout the CAT NMS Plan, CAT LLC 
proposes to add a general provision to Appendix D that would expressly 
override any inconsistency with respect to Options Market Maker Quotes. 
The effect of this provision will be to override any requirements that 
generally apply to Reportable Events in the specific circumstance of 
Options Market Maker Quotes.
New Section 3.4 of Appendix D would be entitled ``Requirements for 
Options Market Maker Quotes in Listed Options'' and would state the 
following:

    ``3.4 Requirements for Options Market Maker Quotes in Listed 
Options
    The provisions of this section shall govern the processing and 
storage of Options Market Maker Quotes in Listed Options and related 
Reportable Events and shall override any conflicting provisions in 
the CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-1.
    Options Market Maker Quotes in Listed Options must be reported 
to the Central Repository as provided under Section 6.4(d)(iii) of 
the CAT NMS Plan. This data will undergo ingestion only and such 
unlinked data will be made available to regulators by T+1 at 12:00 
p.m. Eastern Time. Options Market Maker Quotes in Listed Options 
will not be subject to any requirement to link and create an order 
lifecycle, and will not undergo any validation, feedback, linkage, 
or enrichment processing. Options Market Maker Quotes in Listed 
Options will be accessible through BDSQL and Direct Read interfaces 
only and will not be accessible through the online targeted query 
tool.''

    In addition, CAT LLC proposes to amend certain provisions of 
Appendix D to include cross-references to new Section 3.4. First, CAT 
LLC proposes to amend Section 3 of Appendix D of the CAT NMS Plan to 
add the following statement: ``As described in Section 3.4 of Appendix 
D, Options Market Maker Quotes in Listed Options and related Reportable 
Events will be subject to ingestion only and will not be subject to any 
linkage requirements.'' Second, CAT LLC proposes to amend Section 6.1 
of Appendix D of the CAT NMS Plan to add the following statement: ``For 
the avoidance of doubt, processing and storage of Options Market Maker 
Quotes in Listed Options and related Reportable Events shall be 
governed by Section 3.4 of Appendix D.'' Finally, CAT LLC proposes to 
amend Section 8.1.1 of Appendix D of the CAT NMS Plan to add the 
following statement: ``As described in Section 3.4 of Appendix D, 
Options Market Maker Quotes in Listed Options and related Reportable 
Events will be accessible through BDSQL and Direct Read interfaces only 
and will not be accessible through the online targeted query tool.''

[[Page 26986]]

2. Move Raw Unprocessed Data and Interim Operational Copies of CAT Data 
Older Than 15 Days to a More Cost-Effective Storage Tier
(a) Overview
    Under the current CAT NMS Plan, CAT Data must be ``directly 
available and searchable electronically without manual intervention for 
at least six years,'' and within certain query tool response times.\20\ 
This requirement applies not only to the final corrected data version 
that is delivered to regulators by T+5 at 8 a.m. ET, but also to raw 
unprocessed data and the various types of interim operational data that 
do not provide any value to CAT Reporters or to regulators after T+5, 
as well as copies of all submission and feedback files provided to CAT 
Reporters as part of the correction process (collectively, 
``Operational Data'').
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    \20\ CAT Data is available to the Participants' regulatory staff 
and to the SEC for regulatory purposes only.
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    Specifically, interim operational data includes all processed, 
validated and unlinked data made available to regulators by T+1 at 
12:00 p.m. ET, and all iterations of processed data made available to 
regulators between T+1 and T+5 (i.e., the interim data version 
available at T+1 at 9:00 p.m. ET). Under the CAT NMS Plan, the Plan 
Processor is required to make such data directly available and 
searchable electronically by regulators without any manual 
intervention. When a regulator queries CAT data, the CAT provides the 
latest, most current version to the user. Interim operational data is 
supplanted in all CAT query tools by the final version of corrected 
data that is made available at T+5 at 8:00 a.m. ET, but remains 
available to regulators after T+5 ``without manual intervention'' in 
accordance with the CAT NMS Plan via the use of CAT data management 
APIs. Regulators generally access the latest, corrected version of CAT 
data; accordingly, interim operational data generally does not provide 
any regulatory value after the final corrected data version is 
delivered by T+5 at 8 a.m. ET. After four years of operation, the Plan 
Processor has not seen any regulatory usage of this interim operational 
data.
    Subject to the Commission's approval, significant cost savings 
could be achieved by archiving Operational Data older than 15 days to a 
more cost-effective storage tier that is optimized for infrequent 
access. Operational Data not older than 15 days, as well as all final, 
corrected data, would remain accessible ``without manual intervention'' 
within required query tool response times.
    In each case, it would require some ``manual intervention'' by the 
Plan Processor to obtain such archived data for regulators. Under 
Section 10.3 of Appendix D of the CAT NMS Plan, the Plan Processor 
maintains a CAT Help Desk to, among other things, assist Participants' 
regulatory staff and the SEC with questions and issues regarding 
obtaining and using CAT Data for regulatory purposes. Upon request by 
the SEC or one of the Participants to the CAT Help Desk, archived data 
would be restored by the Plan Processor to an accessible storage tier, 
at which point it would be available and searchable electronically by 
regulatory users in the same manner it is today. The Plan Processor 
will develop policies and procedures to ensure the confidentiality of 
any regulator requests to obtain Operational Data. Archived data will 
be restored generally within several hours or business days of a 
request, depending on the volume and size of the date range of the 
requested data restore. For example, a request to restore a single day 
of data may take less than 24 hours, whereas a request to restore a 
year's worth of data may take several days. To put this in context, 
when the Commission adopted the CAT NMS Plan, it noted that ``[m]ost 
current data sources do not provide direct access to most regulators, 
and data requests can take as long as weeks or even months to 
process.'' \21\
---------------------------------------------------------------------------

    \21\ Exchange Act Release No. 79318 (Nov. 15, 2016), 81 FR 
84696, 84833 (Nov. 23, 2016) (emphasis added). See also Exchange Act 
Release No. 67457, 77 FR 45722, 45729 (Aug. 1, 2012) (noting that 
obtaining audit trail data ``can take days or weeks, depending on 
the scope of the information requested,'' and that the Commission 
``must commit a significant amount of time and resources to process 
and cross-link the data from the various formats used by different 
SROs before it can be analyzed and used for regulatory purposes'').
---------------------------------------------------------------------------

    Accordingly, the Participants believe that the anticipated savings 
associated with optimizing storage costs as described herein 
substantially outweigh the minimal impact on regulatory access to CAT 
Data.
(b) Current CAT NMS Plan Requirements
    Generally, Section 1.4 of Appendix D of the CAT NMS Plan provides 
that the Plan Processor must ``[m]ake data directly available and 
searchable electronically without manual intervention for at least six 
years.'' Section 6.5(b)(i) of the CAT NMS Plan provides that, 
``[c]onsistent with Appendix D, Data Retention Requirements, the 
Central Repository shall retain the information collected pursuant to 
paragraphs (c)(7) and (e)(7) of SEC Rule 613 in a convenient and usable 
standard electronic data format that is directly available and 
searchable electronically without any manual intervention by the Plan 
Processor for a period of not less than six (6) years.''
    In addition, with respect to raw unprocessed data and interim 
operational copies of data created between T+1 and T+5, Section 6.2 of 
Appendix D of the CAT NMS Plan provides that, ``[p]rior to 12:00 p.m. 
Eastern Time on T+1, raw unprocessed data that has been ingested by the 
Plan Processor must be available to Participants' regulatory staff and 
the SEC,'' and ``[b]etween 12:00 p.m. Eastern Time on T+1 and T+5, 
access to all iterations of processed data must be available to 
Participants' regulatory staff and the SEC.''
    Under the current CAT NMS Plan, CAT Data must be accessible to 
regulatory users without ``manual intervention.'' Obtaining data from 
archive storage initially would require some manual intervention by the 
Plan Processor (i.e., via request to the FINRA CAT Help Desk). Upon 
request, data would be restored by the Plan Processor to an accessible 
storage tier, at which point it would be available and searchable 
electronically by regulatory users in the same manner it is today.
    In addition, Section 8.1.2 of Appendix D of the CAT NMS Plan sets 
forth certain performance requirements for the OTQT, including 
timeframes in which results must be returned for various types of 
queries.\22\
---------------------------------------------------------------------------

    \22\ See also Exchange Act Release No. 98848 (Nov. 2, 2023), 88 
FR 77128 (Nov. 8, 2023) (granting conditional exemptive relief from 
certain performance requirements related to the online targeted 
query tool).
---------------------------------------------------------------------------

(c) Estimated Cost Savings
    Based on current data volumes, archiving Operational Data older 
than 15 days is expected to result in approximate annual cost savings 
of approximately $1.0 million.\23\ CAT LLC believes that these cost 
savings substantially outweigh the minimal impact on regulatory access 
to CAT Data.
---------------------------------------------------------------------------

    \23\ For a discussion of how cost savings estimates are 
calculated, see supra note 8. This estimate represents additional 
savings to be achieved following the implementation of the options 
quotes ``single pass'' proposal targeted for the end of April 2024, 
which eliminates interim operational copies of options quotes.
---------------------------------------------------------------------------

(d) Proposed Revisions to CAT NMS Plan
    CAT LLC proposes to amend the CAT NMS Plan to permit the Plan 
Processor

[[Page 26987]]

to move Operational Data older than 15 days to a more cost-effective 
storage tier. Specifically, CAT LLC proposes to add new Section 6.3 to 
Appendix D of the CAT NMS Plan. New Section 6.3 would be entitled 
``Exceptions to Data Availability Requirements'' and would state the 
following:

``6.3 Exceptions to Data Availability Requirements

    Notwithstanding any other provision of the CAT NMS Plan, this 
Appendix D, or Exchange Act Rule 17a-1, the following types of data 
may be retained in an archive storage tier, in which case they will 
be made available upon request by Participant regulatory staff or 
the SEC to the CAT Help Desk. Archived data is not directly 
available and searchable electronically without manual intervention 
and will not be subject to any query tool performance requirements 
until it is restored to an accessible storage tier.
     All raw unprocessed data (i.e., as submitted data) and 
interim operational data older than 15 days. Interim operational 
data includes all processed, validated and unlinked data made 
available to regulators by T+1 at 12:00 p.m. ET, and all iterations 
of processed data made available to regulators between T+1 and T+5, 
but excludes the final version of corrected data that is made 
available at T+5 at 8:00 a.m. ET.
     All submission and feedback files older than 15 days.

    In addition, CAT LLC proposes to add references to new Section 6.3 
of Appendix D throughout the CAT NMS Plan. Specifically, CAT LLC 
proposes to add the phrase ``subject to the exceptions in Section 6.3 
of Appendix D'' to Section 6.5(d)(i) and Section 1.4 of Appendix D.
3. Provide an Interim CAT-Order-ID on an ``As Requested'' Basis
(a) Overview
    CAT LLC proposes to amend the CAT NMS Plan to provide for delivery 
of an interim CAT-Order-ID on an ``as requested'' basis, rather than on 
a regular ongoing basis. Specifically, where there is an immediate 
regulatory need (for example, in the case of a major market event), 
upon request of a senior officer of the Division of Trading and 
Markets, the Division of Enforcement, or the Division of Examinations 
to CAT LLC, the Plan Processor would be directed create an interim CAT-
Order-ID and make it available to regulators by T+1 at 9 p.m. ET if the 
request is received prior to T+1 at 8 a.m. ET, or generally within 14 
hours of receiving the request if such request was received after T+1 
at 8 a.m. ET. This would preserve the SEC's ability to obtain an 
interim CAT-Order-ID on an as needed basis, while avoiding the 
substantial cost of delivering an interim CAT-Order-ID on a regular 
ongoing basis.
    Subject to the proposals described above with respect to Options 
Market Maker Quotes, there would be no change to any other aspect of 
the CAT NMS Plan requirements for the processing of data, error 
feedback, and final delivery of data to regulators by T+5 at 8 a.m. ET, 
and no impact to Industry Members. Consistent with current CAT NMS Plan 
requirements, prior to 12:00 p.m. ET on T+1, regulators will continue 
to have access to raw unprocessed data that has been ingested by the 
Plan Processor, and between 12:00 p.m. on T+1 and T+5, regulators will 
continue to have access to all iterations of unlinked, processed data.
    This change is estimated to result in approximately $2 million in 
annual compute savings, with minimal regulatory impact. Based on 
current data volumes, the estimated cost of an ad hoc interim CAT-
Order-ID delivery is approximately $10,000 to $12,000 per request.\24\ 
CAT LLC would add a separate line item to its budget to reflect costs 
related to any SEC requests to generate an interim CAT-Order-ID.
---------------------------------------------------------------------------

    \24\ This cost savings estimate has been calculated assuming the 
Plan Processor's implementation of functionality to provide a final 
CAT-Order-ID and lifecycle linkage for options quotes by T+2 at 8 
a.m. ET (in lieu of T+5 at 8 a.m. ET), which is expected in April 
2024.
---------------------------------------------------------------------------

    The Participants believe that the anticipated savings associated 
with this change substantially outweigh the minimal regulatory impact.
(b) Current CAT NMS Plan Requirements
    Appendix D, Section 6.1 of the CAT NMS Plan states that ``Noon 
Eastern Time T+1 (transaction date + one day)'' is the deadline for 
``initial data validation, lifecycle linkages and communication of 
errors to CAT Reporters.'' The CAT NMS Plan further explains that the 
Plan Processor must ``link and create the order lifecycle'' using a 
``daisy chain approach,'' in which, ``a series of unique order 
identifiers assigned to all order events handled by CAT Reporters are 
linked together by the Central Repository and assigned a single CAT-
generated CAT-Order-ID that is associated with each individual order 
event and used to create the complete lifecycle of an order.'' \25\
---------------------------------------------------------------------------

    \25\ Appendix D, Section 3 of the CAT NMS Plan at D-8.
---------------------------------------------------------------------------

    Pursuant to a Commission exemptive order, the Plan Processor 
assigns an interim CAT-Order-ID by T+1 at 9 p.m. ET, rather than by the 
T+1 at noon Eastern Time deadline set forth in the CAT NMS Plan.\26\ 
The Plan Processor subsequently provides a final CAT-Order-ID at T+5 at 
8 a.m. ET, pursuant to the following timeline:
---------------------------------------------------------------------------

    \26\ Exchange Act Release No. 98848 (Nov. 2, 2023), 88 FR 77128 
(Nov. 8, 2023). See also Exchange Act Release No. 97530 (May 18, 
2023), 88 FR 33655 (May 24, 2023); Exchange Act Release No. 95234 
(July 8, 2022), 87 FR 42247 (July 14, 2022); Exchange Act Release 
No. 90688 (Dec. 16, 2020), 85 FR 83634 (Dec. 22, 2020).

T+1 @8 a.m. ET: Initial submissions due
T+1 @12 p.m. ET: Initial data validation, communication of errors to 
CAT Reporters; unlinked data available to regulators
T+1 @9 p.m. ET: Interim CAT-Order-ID available \27\
---------------------------------------------------------------------------

    \27\ The Commission's exemptive order provides that the Plan 
Processor will no longer be required to provide an interim CAT-
Order-ID for Options Quotes once it has developed and implemented 
the functionality to provide a final CAT-Order-ID and lifecycle 
linkage for Options Quotes by T+2 at 8 a.m. ET, including all 
enrichments currently provided for such order events at T+5 at 8 
a.m. ET. When late or corrected data is received for Options Quotes 
between T+1 at 8 a.m. ET and T+4 at 8 a.m. ET, 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. ET. See Exchange Act 
Release No. 98848 (Nov. 2, 2023), 88 FR 77128, 77130 (Nov. 8, 2023). 
To the extent the proposed amendments are approved, the Plan 
Processor would no longer be required to create any lifecycle 
linkages for Options Market Maker Quotes.
---------------------------------------------------------------------------

T+3 @8 a.m. ET: Resubmission of corrected data
T+4 @8 a.m. ET: Final lifecycle assembly begins, reprocessing of late 
submissions and corrections
T+5 @8 a.m. ET: Corrected data available to Participant regulatory 
staff and the SEC

    CAT LLC proposes to clarify that the Plan does not require 
assignment of interim CAT-Order-IDs on a regular ongoing basis; rather, 
interim CAT-Order-IDs shall be provided on an ``as requested'' basis. 
Specifically, upon request of a senior officer of the Division of 
Trading and Markets, the Division of Enforcement, or the Division of 
Examinations to CAT LLC, the Plan Processor would be directed create an 
interim CAT-Order-ID and make it available to regulators by T+1 at 9 
p.m. ET if the request is received prior to T+1 at 8 a.m. ET, or 
generally within 14 hours of receiving the request if such request was 
received after T+1 at 8 a.m. ET. There would be no change to any other 
aspect of the processing timeline.
(c) Estimated Cost Savings
    Based on current data volumes, providing for delivery of an interim 
CAT-Order-ID on an ``as requested'' basis, rather than on a regular 
ongoing basis, is estimated to result in approximately $2 million in 
annual

[[Page 26988]]

savings.\28\ CAT LLC believes that these cost savings are readily 
justified given the minimal impact on regulatory access to CAT Data.
---------------------------------------------------------------------------

    \28\ For a discussion of how cost savings estimates are 
calculated, see supra note 8. This estimate represents additional 
savings to be achieved following the implementation of the options 
quotes ``single pass'' proposal targeted for the end of April 2024, 
which eliminates options quotes from the interim lifecycle 
processing. The average typical daily compute costs for interim 
lifecycle processing (Linker and ETL data processing) is estimated 
to be approximately $8,000/day to $10,000/day for a typical day 
based on current data volumes (including savings attributable to the 
daily ODCR and Compute Savings Plans), which totals approximately $2 
million per year based on 252 trading days per year.
---------------------------------------------------------------------------

    Based on current data volumes, the estimated cost of an ad hoc 
interim CAT-Order-ID delivery is approximately $10,000 to $12,000 per 
request.\29\ CAT LLC would add a separate line item to its budget to 
reflect costs related to any SEC requests to generate an interim CAT-
Order-ID.
---------------------------------------------------------------------------

    \29\ This estimate includes compute and storage costs for a 
daily ad hoc interim lifecycle processing, assuming the 
implementation of the options quotes ``single pass'' proposal, and 
is based on on demand rates for a typical day with average data 
volumes, less options quotes data volumes and their associated 
storage needs. The estimated number of authorized ad hoc runs per 
year that would be requested by the SEC cannot be predicted by CAT 
LLC or the Plan Processor.
---------------------------------------------------------------------------

    While CAT LLC believes it would be reasonable and appropriate to 
incur such cost to address a pressing regulatory need on an as needed 
basis, such as in the event of a market event, the substantial cost of 
delivering an interim CAT-Order-ID on a continuous basis outweighs any 
regulatory benefit.
(d) Proposed Revisions to CAT NMS Plan
    CAT LLC proposes to amend the CAT NMS Plan to eliminate the 
requirement to provide an interim CAT-Order-ID on a regular ongoing 
basis. Specifically, CAT LLC proposes to delete the phrase ``lifecycle 
linkages'' from the following bullet in Section 6.1 of Appendix D of 
the CAT NMS Plan: ``Noon Eastern Time T+1 (transaction date + one 
day)--Initial data validation, lifecycle linkages and communication of 
errors to CAT Reporters.'' Similarly, CAT LLC proposes to delete the 
phrase ``Life Cycle Linkage'' from the second box in Figure A in 
Section 6.1 of Appendix D of the CAT NMS Plan. The box currently states 
the following: ``12:00 p.m. ET T+1 Initial Validation, Life Cycle 
Linkage, Communication of Errors.'' With the change, this box would 
state ``12:00 p.m. ET T+1 Initial Validation, Communication of 
Errors.''
    CAT LLC also proposes to amend the CAT NMS Plan to require CAT LLC 
to provide an interim CAT-Order-ID on an ``as requested'' basis. 
Specifically, CAT LLC proposes to add the following provision to 
Section 6.1 of Appendix D of the CAT NMS Plan: ``Where there is an 
immediate regulatory need (for example, in the case of a major market 
event), upon request of a senior officer of the Division of Trading and 
Markets, the Division of Enforcement, or the Division of Examinations 
to CAT LLC, the Plan Processor shall be directed to create an interim 
CAT-Order-ID and make it available to regulators by T+1 at 9 p.m. ET if 
the request is received prior to T+1 at 8 a.m. ET, or generally within 
14 hours of receiving the request if such request was received after 
T+1 at 8 a.m. ET.''
4. Incorporate Exemptive Relief Permitting Deletion of Industry Test 
Data Older Than Three Months and Include CAIS Data
(a) Overview; Prior Commission Exemptive Order
    CAT Reporters engage in testing related to the reporting of order 
and transaction data to the CAT, both pursuant to required testing and 
on a voluntary basis. In connection with this testing, CAT LLC, through 
the Plan 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, referred to herein as ``Industry 
Test Data''.\30\
---------------------------------------------------------------------------

    \30\ Separately, CAT LLC, through the Plan Processor, also 
retains operational metrics associated with industry testing for six 
years in accordance with the Plan. 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.'' The proposed amendments do not affect such 
operational metrics.
---------------------------------------------------------------------------

    On June 2, 2023, CAT LLC requested exemptive relief from Rule 17a-1 
under the Exchange Act and certain provisions of the CAT NMS Plan 
relating to the retention of Industry Test Data beyond three 
months.\31\ On November 27, 2023, the Commission granted the requested 
relief.\32\ The exemptive request and the Commission's order apply only 
to Industry Test Data related to the CAT order and transaction system, 
not to the customer account and information system (``CAIS'').
---------------------------------------------------------------------------

    \31\ See Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated 
June 2, 2023, https://catnmsplan.com/sites/default/files/2023-06/06.02.23-Exemptive-Request-Test-Data-Retention.pdf. As noted in the 
exemptive request, CAT LLC does not believe that Industry Test Data 
constitutes documents covered by Rule 17a-1 under the Exchange Act 
and adheres to its view that the specific three-month period for 
Industry Test Data supersedes the more general, longer retention 
periods in the CAT NMS Plan, but submitted the exemptive request to 
obtain regulatory clarity in light of the SEC staff's comments that 
the longer retention periods set forth in Rule 17a-1 under the 
Exchange Act and the CAT NMS Plan may apply to Industry Test Data.
    \32\ Exchange Act Release No. 99023 (Nov. 27, 2023), 88 FR 84026 
(Dec. 1, 2023).
---------------------------------------------------------------------------

    CAT LLC is now proposing to incorporate the exemptive relief into 
the CAT NMS Plan to clarify that data from industry testing for both 
Industry Members and Participants may be deleted after three months. In 
addition, the amendments would apply to Industry Test Data related to 
both transaction system and CAIS data.
(b) Current CAT NMS Plan Requirements; Exchange Act Rule 17a-1
    Appendix D of the CAT NMS Plan specifically requires the retention 
of Industry Test Data for three months only.\33\ Specifically, Appendix 
D of the CAT NMS Plan states that ``[d]ata from industry testing must 
be saved for three months.'' \34\ Separate from this specific three-
month retention requirement in Appendix D of the CAT NMS Plan, Rule 
17a-1 under the Exchange Act and other more general recordkeeping 
provisions of the CAT NMS Plan set forth lengthier record retention 
periods of five and six years, respectively. Rule 17a-1 under the 
Exchange Act 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,'' \35\ 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.'' \36\ The CAT is a facility of each of the Participants 
to the CAT NMS Plan. In addition, Section 9.1 of the CAT NMS Plan, the 
general recordkeeping provision for the CAT NMS Plan, incorporates by 
reference the requirements of Rule 17a-1 under the Exchange Act. 
Specifically, Section 9.1 of the CAT NMS Plan states, in relevant part, 
that ``[t]he Company shall maintain

[[Page 26989]]

complete and accurate books and records of the Company in accordance 
with SEC Rule 17a-1.''
---------------------------------------------------------------------------

    \33\ Ordinarily, specific provisions in a statute or regulation 
prevail over general provisions which might appear to the contrary. 
See, e.g., RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 
639, 645 (2012) (citing Morales v. Trans World Airlines, Inc., 504 
U.S. 374, 384 (1992)).
    \34\ Appendix D, Section 1.2 of the CAT NMS Plan at D-4.
    \35\ Rule 17a-1(a) under the Exchange Act.
    \36\ Rule 17a-1(b) under the Exchange Act.
---------------------------------------------------------------------------

(c) Estimated Cost Savings
    Prior to the Commission's exemptive order, the Plan Processor had 
been retaining Industry Test Data beyond the three-month period 
prescribed by Appendix D of the CAT NMS Plan; eliminating Industry Test 
Data older than three months as permitted by the exemptive order is 
expected to achieve approximately $1 million per year in savings. The 
proposed amendments would not generate additional cost savings beyond 
those achievable pursuant to the exemptive order, but would incorporate 
the exemptive relief into the CAT NMS Plan itself.
Proposed Revisions to CAT NMS Plan
    CAT LLC proposes to amend the CAT NMS Plan to clarify that Industry 
Test Data related to both the CAT order and transaction system and to 
CAIS may be deleted after three months. Specifically, CAT LLC proposes 
to revise the following bullet in Section 1.2 of Appendix D of the CAT 
NMS Plan: ``Data from industry testing must be saved for three months. 
Operational 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.'' CAT LLC proposes to add the following as the second 
sentence of the bullet: ``Notwithstanding any other provision of the 
CAT NMS Plan, this Appendix D, or Exchange Act Rule 17a-1, such test 
data (whether related to the CAT order and transaction system or the 
customer account and information system) may be deleted by the Plan 
Processor after three months.'' With this phrase, the bullet would 
state: ``Data from industry testing must be saved for three months. 
Notwithstanding any other provision of the CAT NMS Plan, this Appendix 
D, or Exchange Act Rule 17a-1, such test data (whether related to the 
CAT order and transaction system or the customer account and 
information system) may be deleted by the Plan Processor after three 
months. Operational 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.''

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Amendment

    The Participants propose to implement the proposal upon approval of 
the proposed amendment to the CAT NMS Plan.

D. Development and Implementation Phases

    Not applicable.

E. Analysis of Impact on Competition

    CAT LLC does not believe that the proposed amendment would result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. Indeed, CAT LLC 
believes that the proposed amendments will have a positive impact on 
competition, efficiency and capital formation. The proposed amendments 
will provide substantial savings in CAT costs while providing minimal 
impact on the regulatory use of CAT Data. Such substantial savings 
would inure to the benefit of all participants in the markets for NMS 
Securities and OTC Equity Securities, including Participants, Industry 
Members, and most importantly, the investors.

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

    Not applicable.

G. Approval by Plan Sponsors in Accordance With Plan

    Section 12.3 of the CAT NMS Plan states that, subject to certain 
exceptions, the CAT NMS Plan may be amended from time to time only by a 
written amendment, authorized by the affirmative vote of not less than 
two-thirds of all of the Participants, that has been approved by the 
SEC pursuant to Rule 608 of Regulation NMS under the Exchange Act or 
has otherwise become effective under Rule 608 of Regulation NMS under 
the Exchange Act. In addition, the proposed amendment was discussed 
during Operating Committee meetings. The Participants, by a vote of the 
Operating Committee taken on March 26, 2024, have authorized the filing 
of this proposed amendment with the SEC in accordance with the CAT NMS 
Plan.

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

    Not applicable.

I. Terms and Conditions of Access

Not applicable.

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

    Not applicable.

K. Method and Frequency of Processor Evaluation

    Not applicable.

L. Dispute Resolution

    Not applicable.
* * * * *

Exhibit A

Proposed Revisions to CAT NMS Plan

    Additions underlined; deletions [bracketed]
* * * * *
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BILLING CODE 8011-01-C
* * * * *

III. Solicitation of Comments
---------------------------------------------------------------------------

    \37\ Specific performance requirements will be included in the 
SLA.
---------------------------------------------------------------------------

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

Electronic Comments

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

Paper Comments

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

All submissions should refer to file number 4-698. This file number 
should be included on the subject line if email is used. To help the 
Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed amendment that are filed with 
the Commission, and all written communications relating to the proposed 
amendment between the Commission and any person, other than those that 
may be withheld from the

[[Page 26998]]

public in accordance with the provisions of 5 U.S.C. 552, will be 
available for website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal offices of the Participants. Do not include personal 
identifiable information in submissions; you should submit only 
information that you wish to make available publicly. We may redact in 
part or withhold entirely from publication submitted material that is 
obscene or subject to copyright protection. All submissions should 
refer to file number 4-698 and should be submitted on or before May 7, 
2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\38\
---------------------------------------------------------------------------

    \38\ 17 CFR 200.30-3(a)(85).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07967 Filed 4-15-24; 8:45 am]
BILLING CODE 8011-01-P

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