Order Granting a Temporary Conditional Exemption Pursuant to Section 36(a)(1) of the Securities Exchange Act of 1934 (“Exchange Act”) and Rule 608(e) of Regulation NMS Under the Exchange Act, Relating to the Reporting of Responses to Requests for Quotes and Other Solicitation Responses Provided in a Standard Electronic Format, as Required by Section 6.4(d) of the National Market System Plan Governing the Consolidated Audit Trail, 45715-45717 [2024-11360]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 89, Number 101 (Thursday, May 23, 2024)]
[Notices]
[Pages 45715-45717]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11360]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100181]


Order Granting a Temporary Conditional Exemption Pursuant to 
Section 36(a)(1) of the Securities Exchange Act of 1934 (``Exchange 
Act'') and Rule 608(e) of Regulation NMS Under the Exchange Act, 
Relating to the Reporting of Responses to Requests for Quotes and Other 
Solicitation Responses Provided in a Standard Electronic Format, as 
Required by Section 6.4(d) of the National Market System Plan Governing 
the Consolidated Audit Trail

May 20, 2024.

I. Introduction

    By letter dated February 13, 2024,\1\ BOX Exchange LLC; Cboe BYX 
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe 
EDGX Exchange, Inc., Cboe C2 Exchange, Inc., and Cboe Exchange, Inc.; 
Financial Industry Regulatory Authority, Inc.; Investors Exchange LLC; 
Long-Term Stock Exchange, Inc.; MEMX LLC; Miami International 
Securities Exchange LLC, MIAX Emerald, LLC, and MIAX PEARL, LLC; NASDAQ 
BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, NASDAQ 
PHLX LLC, and The NASDAQ Stock Market LLC; and New York Stock Exchange 
LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE 
National, Inc. (collectively, the ``Participants'' or ``SROs'') 
requested that the Securities and Exchange Commission (``Commission'') 
grant temporary exemptive relief to the Participants from the National 
Market System Plan Governing the Consolidated Audit Trail (``CAT NMS 
Plan''),\2\ pursuant to its authority under Section 36(a)(1) of the 
Exchange Act \3\

[[Page 45716]]

and Rule 608(e) of Regulation NMS under the Exchange Act, from certain 
reporting requirements in Section 6.4(d) of the CAT NMS Plan relating 
to the reporting of bids and/or offers made in response to a request 
for quote (``RFQ'') or other form of solicitation response provided in 
standard electronic format (e.g., FIX) that is not ``immediately 
actionable'' (i.e., further action is required by the responder 
providing the quote in order to execute or cause a trade to be 
executed) (``NIA Electronic RFQ Responses'').\4\
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    \1\ See letter from the Participants to Vanessa Countryman, 
Secretary, Commission, dated Feb. 13, 2024 (the ``Exemption 
Request''). Unless otherwise noted, capitalized terms are used as 
defined in the CAT NMS Plan.
    \2\ The CAT NMS Plan was approved by the Commission, as 
modified, on Nov. 15, 2016. See Securities Exchange Act Release No. 
79318 (Nov. 15, 2016), 81 FR 84696 (Nov. 23, 2016) (``CAT NMS Plan 
Approval Order'').
    \3\ 15 U.S.C. 78mm(a)(1).
    \4\ For example, a trading system could offer functionality 
allowing a broker-dealer to send a firm bid and/or offer in response 
to an RFQ, but require the sender of the RFQ to subsequently send a 
follow-up message to the responder in order to consummate the trade.
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    Section 36(a)(1) of the Exchange Act grants the Commission the 
authority, with certain limitations, to ``conditionally or 
unconditionally exempt any person, security, or transaction . . . from 
any provision or provisions of [the Exchange Act] or of any rule or 
regulation thereunder, to the extent that such exemption is necessary 
or appropriate in the public interest, and is consistent with the 
protection of investors.'' \5\ Under Rule 608(e) of Regulation NMS, the 
Commission may ``exempt from [Rule 608], either unconditionally or on 
specified terms and conditions, any self-regulatory organization, 
member thereof, or specified security, if the Commission determines 
that such exemption is consistent with the public interest, the 
protection of investors, the maintenance of fair and orderly markets 
and the removal of impediments to, and perfection of the mechanism of, 
a national market system.'' \6\
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    \5\ 15 U.S.C. 78mm(a)(1).
    \6\ 17 CFR 242.608(e).
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    For the reasons set forth below, the Commission is granting 
temporary conditional exemptive relief relating to the reporting of NIA 
Electronic RFQ Reponses until July 31, 2026, subject to certain 
conditions, as discussed further below.

II. Background and Request for Relief

    In the Exemption Request, the Participants request that the 
Commission temporarily exempt Participants from the requirement in 
Section 6.4(d) of the CAT NMS Plan for each Participant, through its 
Compliance Rule, to require its Industry Members to record and 
electronically report to the Central Repository NIA Electronic RFQ 
Responses until July 31, 2026. In support of their request, the 
Participants state that the deadline would align the expiration of 
exemptive relief with the expiration date of exemptive relief 
previously granted for certain floor and unstructured electronic 
upstairs activity (the ``Verbal and Manual Quotes Exemptive 
Relief'').\7\ In addition, the Participants state that this date would 
provide the Participants and the Plan Processor the time to develop and 
implement any necessary reporting guidance, specifications, and 
technical changes to the CAT and also provide CAT Reporters the time to 
fully consider and implement the necessary technological and process 
changes required to report and capture NIA Electronic RFQ Responses.\8\
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    \7\ Exemption Request, at 3-4. In Nov. 2020, the Commission 
granted the Verbal and Manual Quotes Exemptive Relief, until July 
31, 2023. See Securities Exchange Release No. 90405 (Nov. 12, 2020), 
85 FR 73544 (Nov. 18, 2020). This conditional exemptive relief was 
later extended until July 31, 2026. See Securities Exchange Release 
No. 98023 (July 28, 2023), 88 FR 51369 (Aug. 3, 2023).
    \8\ Exemption Request, at 3-4. As noted by the Participants, 
firm indications of a willingness to buy or sell a security are 
``orders,'' ``bids'' or ``offers'' and have reportable events 
associated with them pursuant to the CAT NMS Plan. Id. at 3.
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    The Participants represent that the NIA Electronic RFQ Responses 
that are subject to the Exemption Request: (1) are those that satisfy 
the definition of an ``order'' as defined in Rule 613(j)(8) and the CAT 
NMS Plan; (2) do not include RFQ responses that were required to be 
reported commencing in Phase 2c and Phase 2d; \9\ and (3) do not 
include activity that is subject to the Commission's Verbal and Manual 
Quotes Exemptive Relief.\10\
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    \9\ Exemption Request, at 3-4. As explained by the Participants, 
in April 2020 the Commission granted conditional exemptive relief to 
allow for the implementation of phased Industry Member reporting to 
the CAT across five phases, and this exemptive relief did not 
specifically address NIA Electronic RFQ Responses. Id.; Securities 
Exchange Release No. 88702 (Apr. 20, 2020), 85 FR 23075 (Apr. 24, 
2020) (``Phased Reporting Exemption''). Pursuant to the Phased 
Reporting Exemption, any bid or offer in response to a request for 
quote or other form of solicitation response provided in standard 
electronic format (e.g., FIX) that required no further action by the 
responder providing the quote in order to execute or cause a trade 
to be executed was reportable in Phase 2c for equities and in Phase 
2d for options. See Phased Reporting Exemption at 23079; see also 
Exemption Request, at 3-4.
    \10\ Exemption Request, at 4-5.
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III. Discussion of Participants' Exemption Request

    The Commission has carefully considered the Exemption Request. The 
Commission has determined that granting temporary conditional exemptive 
relief, pursuant to Section 36(a)(1) of the Exchange Act, is 
appropriate in the public interest and is consistent with the 
protection of investors, and that pursuant to Rule 608(e), this 
exemption is consistent with the public interest, the protection of 
investors, the maintenance of fair and orderly markets and the removal 
of impediments to, and the perfection of the mechanisms of a national 
market system.
    The Commission is granting temporary exemptive relief to provide 
additional time to the Plan Processor, Participants, and Industry 
Members to update and implement applicable reporting frameworks, 
compliance guidance, FAQs, and any specifications for the reporting of 
NIA Electronic RFQ Responses. This additional time would also provide 
CAT Reporters time to fully consider and implement any technological 
and process changes required to capture and report NIA Electronic RFQ 
Responses, while minimizing potential business disruptions and impacts 
to existing workflows.
    Based on the foregoing, pursuant to Section 36(a)(1) of the 
Exchange Act, it is appropriate in the public interest and is 
consistent with the protection of investors, and pursuant to Rule 
608(e), it is consistent with the public interest, the protection of 
investors, the maintenance of fair and orderly markets and the removal 
of impediments to, and the perfection of the mechanisms of a national 
market system to grant temporary conditional exemptive relief until 
July 31, 2026 from the requirement in Section 6.4(d) of the CAT NMS 
Plan for the recording and reporting of NIA Electronic RFQ 
Responses.\11\
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    \11\ To the extent that the Participants are availing themselves 
of exemptive relief from a CAT NMS Plan requirement, such 
requirement shall not be included in the requirements for the 
Financial Accountability Milestones, provided that any conditions of 
the exemption are satisfied. See CAT NMS Plan, supra note 1, at 
Section 1.1 (``Financial Accountability Milestone'' definition).
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IV. Conclusion

    As discussed above, it is appropriate to grant temporary 
conditional exemptive relief that exempts each Participant from the 
requirement in Section 6.4(d) of the CAT NMS Plan for each Participant, 
through its Compliance Rule, to require its Industry Members to record 
and electronically report to the Central Repository NIA Electronic RFQ 
Responses.
    As a condition to this relief, the Participants must provide the 
Commission a written implementation plan on the reporting of NIA 
Electronic RFQ Responses by July 31, 2025 in order to facilitate the 
timely completion of any necessary steps for the reporting of NIA 
Electronic RFQ Responses upon the expiration of the temporary exemptive 
relief on July 31, 2026. This

[[Page 45717]]

implementation plan for the reporting of NIA Electronic RFQ Responses 
must: (1) identify workflows to facilitate the reporting of NIA 
Electronic RFQ Responses; and (2) provide or reference published 
technical specifications to allow for the reporting of NIA Electronic 
RFQ Responses by Industry Members. The purpose of these conditions is 
to help ensure that the Participants establish a framework necessary to 
permit the reporting of NIA Electronic RFQ Responses by Industry 
Members before the expiration of the temporary conditional exemptive 
relief, while providing Industry Members at least one year to implement 
any necessary technological and systems changes to report NIA 
Electronic RFQ Responses.
    Accordingly, it is hereby ordered, pursuant to Section 36(a)(1) of 
the Exchange Act,\12\ and Rule 608(e) of the Exchange Act \13\ that the 
Participants are granted an exemption, until July 31, 2026, from the 
requirement in Section 6.4(d) of the CAT NMS Plan that requires each 
Participant, through its Compliance Rule, to require its Industry 
Members to record and electronically report to the Central Repository 
bids and/or offers made in response to a request for quote or other 
form of solicitation response provided in standard electronic format 
(e.g., FIX) that is not ``immediately actionable'' (i.e., further 
action is required by the responder providing the quote in order to 
execute or cause a trade to be executed), subject to the conditions 
described above.
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    \12\ 15 U.S.C. 78mm(a)(1).
    \13\ 17 CFR 242.608(e).

    By the Commission.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11360 Filed 5-22-24; 8:45 am]
BILLING CODE 8011-01-P