10850 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

201 15 U.S.C. 78s(b)(3)(C). 

202 17 CFR 200.30–3(a)(12), (57) and (58). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5An ‘‘Industry Member’’ is defined as ‘‘a member 

of a national securities exchange or a member of a 

national securities association.’’ See FINRA Rule 

6810(u). See also Section 1.1 of the CAT NMS Plan. 

Unless otherwise specified, capitalized terms used 

in this rule filing are defined as set forth in the CAT 

NMS Plan and/or the CAT Compliance Rule. See 

FINRA Rule 6800 Series (Consolidated Audit Trail 

Compliance Rule). 

6The term ‘‘CAT LLC’’ may be used to refer to 

Consolidated Audit Trail, LLC or CAT NMS, LLC, 

depending on the context. 

7See Securities Exchange Act Release. No. 67457 

(July 18, 2012), 77 FR 45721 (August 1, 2012). 

8See Securities Exchange Act Release. No. 79318 

(November 15, 2016), 81 FR 84696 (November 23, 

2016) (‘‘CAT NMS Plan Approval Order’’). 

9Section 11.1(b) of the CAT NMS Plan. 

10See Securities Exchange Act Release No. 98290 

(September 6, 2023), 88 FR 62628 (September 12, 

2023) (‘‘CAT Funding Model Approval Order’’). 

11Under the CAT Funding Model, the Operating 

Committee may establish one or more Historical 

CAT Assessments. See Section 11.3(b) of the CAT 

NMS Plan. This filing only establishes Historical 

CAT Assessment 1 related to certain Historical CAT 

Costs as described herein; it does not address any 

other potential Historical CAT Assessment related 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,201 that 

File No. SR–NASDAQ–2024–001 be, 

and hereby is, temporarily suspended. 

In addition, the Commission is 

instituting proceedings to determine 

whether the proposed rule change 

should be approved or disapproved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.202

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–01193 Filed 2–12–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99363; File No. SR–FINRA– 

2024–002] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Adopt 

FINRA Rule 6897(a) and 

Supplementary Material To Establish 

Fees for Industry Members Related to 

Certain Historical Costs of the National 

Market System Plan Governing the 

Consolidated Audit Trail; Suspension 

of and Order Instituting Proceedings 

To Determine Whether To Approve or 

Disapprove the Proposed Rule Change 

January 17, 2024. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’ or the ‘‘Exchange Act’’),1 and 

Rule 19b–4 thereunder,2 notice is 

hereby given that, on January 2, 2024, 

the Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by FINRA. FINRA has 

designated the proposed rule change as 

‘‘establishing or changing a due, fee or 

other charge’’ under Section 

19(b)(3)(A)(ii) of the Act 3 and Rule 19b– 

4(f)(2) thereunder,4 which renders the 

proposal effective upon receipt of this 

filing by the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons and is, 

pursuant to Section 19(b)(3)(C) of the 

Act, hereby: (i) temporarily suspending 

the rule change; and (ii) instituting 

proceedings to determine whether to 

approve or disapprove the proposed 

rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to adopt FINRA 

Rule 6897 (Consolidated Audit Trail 

Funding Fees) to establish fees for 

Industry Members 5 related to certain 

historical costs of the National Market 

System Plan Governing the 

Consolidated Audit Trail (the ‘‘CAT 

NMS Plan’’ or ‘‘Plan’’) incurred prior to 

January 1, 2022. These fees would be 

payable to Consolidated Audit Trail, 

LLC (‘‘CAT LLC’’ or ‘‘the Company’’) 6

and referred to as Historical CAT 

Assessment 1. 

The fee rate for Historical CAT 

Assessment 1 will be $0.000015 per 

executed equivalent share. CAT 

Executing Brokers will receive their first 

monthly invoice for Historical CAT 

Assessment 1 in April 2024 calculated 

based on their transactions as CAT 

Executing Brokers for the Buyer 

(‘‘CEBB’’) and/or CAT Executing 

Brokers for the Seller (‘‘CEBS’’) in 

March 2024. 

The text of the proposed rule change 

is available on FINRA’s website at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA included statements concerning 

the purpose of and basis for the 

proposed rule change and discussed any 

comments it received on the proposed 

rule change. The text of these statements 

may be examined at the places specified 

in Item V below. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

On July 11, 2012, the Commission 

adopted Rule 613 of Regulation NMS, 

which required the self-regulatory 

organizations (‘‘SROs’’) to submit a 

national market system (‘‘NMS’’) plan to 

create, implement and maintain a 

consolidated audit trail that would 

capture customer and order event 

information for orders in NMS securities 

across all markets, from the time of 

order inception through routing, 

cancellation, modification or 

execution.7 On November 15, 2016, the 

Commission approved the CAT NMS 

Plan.8 Under the CAT NMS Plan, the 

Operating Committee has the discretion 

to establish funding for CAT LLC to 

operate the CAT, including establishing 

fees for Industry Members to be assessed 

by CAT LLC that would be implemented 

on behalf of CAT LLC by the 

Participants.9 The Operating Committee 

adopted a revised funding model to 

fund the CAT (‘‘CAT Funding Model’’). 

On September 6, 2023, the Commission 

approved the CAT Funding Model, after 

concluding that the model was 

reasonable and that it satisfied the 

requirements of Section 11A of the 

Exchange Act and Rule 608 

thereunder.10

The CAT Funding Model provides a 

framework for the recovery of the costs 

to create, develop and maintain the 

CAT, including providing a method for 

allocating costs to fund the CAT among 

Participants and Industry Members. The 

CAT Funding Model establishes two 

categories of fees: (1) CAT fees assessed 

by CAT LLC and payable by certain 

Industry Members to recover a portion 

of historical CAT costs previously paid 

by the Participants (‘‘Historical CAT 

Assessment’’ fees); and (2) CAT fees 

assessed by CAT LLC and payable by 

Participants and Industry Members to 

fund prospective CAT costs 

(‘‘Prospective CAT Costs’’ fees).11


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to other Historical CAT Costs. In addition, under 

the CAT Funding Model, the Operating Committee 

also may establish CAT Fees related to CAT costs 

going forward. See Section 11.3(a) of the CAT NMS 

Plan. This filing does not address any potential 

CAT Fees related to CAT costs going forward. Any 

such other fee for any other Historical CAT 

Assessment or CAT Fee for Prospective CAT Costs 

will be subject to a separate fee filing. 

12Section 11.3(b) of the CAT NMS Plan. 

13 In approving the CAT Funding Model, the 

Commission stated that, ‘‘[i]n the Commission’s 

view, the proposed recovery of the Past CAT Costs 

via the Historical CAT Assessment is reasonable.’’ 

See CAT Funding Model Approval Order, 88 FR 

62628, 62662. 

14Section 11.3(b)(ii) of the CAT NMS Plan. 

15FINRA, along with each of the Plan 

Participants, is proposing to implement Historical 

CAT Assessment 1 to enable the Participants to 

collectively recover the Industry Members’ 

designated share of Historical CAT Costs incurred 

prior to January 1, 2022. See Section 11.3(b)(iii) of 

the CAT NMS Plan. 

16Section 11.1(b) of the CAT NMS Plan. 

17Section 11.3(b)(iii)(B)(I) of the CAT NMS Plan. 

18Note that there may be one or more Historical 

CAT Assessments depending on the timing of the 

completion of the Financial Accountability 

Milestones, among other things. Section 11.3(b) of 

the CAT NMS Plan. 

19 In its approval of the CAT Funding Model, the 

Commission determined that charging CAT fees to 

CAT Executing Brokers was reasonable. In reaching 

this conclusion the Commission noted that the use 

of CAT Executing Brokers is appropriate because 

the CAT Funding Model is based upon the 

calculation of executed equivalent shares, and, 

therefore, charging CAT Executing Brokers would 

reflect their executing role in each transaction. 

Furthermore, the Commission noted that, because 

CAT Executing Brokers are already identified in 

transaction reports from the exchanges and FINRA’s 

equity trade reporting facilities recorded in CAT 

Data, charging CAT Executing Brokers could 

streamline the billing process. See CAT Funding 

Model Approval Order, 88 FR 62628, 62629. 

20Section 1.1 of the CAT NMS Plan. Note that 

CEBBs and CEBSs may, but are not required to, 

pass-through their CAT fees to their clients, who 

may, in turn, pass their fees to their clients until 

they are imposed ultimately on the account that 

executed the transaction. See CAT Funding Model 

Approval Order at 62649. 

21See Table 61, Section 6.1 (TRF/ORF/ADF 

Transaction Data Event) of the CAT Reporting 

Technical Specifications for Plan Participants. 

Under the CAT Funding Model, ‘‘[t]he 

Operating Committee will establish one 

or more fees (each a ‘Historical CAT 

Assessment’) to be payable by Industry 

Members with regard to CAT costs 

previously paid by the Participants 

(‘Past CAT Costs’).’’ 12 In establishing a 

Historical CAT Assessment, the 

Operating Committee will determine a 

‘‘Historical Recovery Period’’ and 

calculate a ‘‘Historical Fee Rate’’ for that 

Historical Recovery Period. Then, for 

each month in which a Historical CAT 

Assessment is in effect, each CEBB and 

CEBS would be required to pay the 

fee—the Historical CAT Assessment— 

for each transaction in Eligible 

Securities executed by the CEBB or 

CEBS from the prior month as set forth 

in CAT Data, where the Historical CAT 

Assessment for each transaction will be 

calculated by multiplying the number of 

executed equivalent shares in the 

transaction by one-third and by the 

Historical Fee Rate.13

Each Historical CAT Assessment to be 

paid by CEBBs and CEBSs is designed 

to contribute toward the recovery of 

two-thirds of the Historical CAT Costs. 

Because the Participants previously 

have paid Past CAT Costs via loans to 

the Company, the Participants would 

not be required to pay any Historical 

CAT Assessment. In lieu of a Historical 

CAT Assessment, the Participants’ onethird share of Historical CAT Costs will 

be paid by the cancellation of loans 

made by the Participants to the 

Company on a pro rata basis based on 

the outstanding loan amounts due under 

the loans, instead of through the 

payment of a CAT fee.14 In addition, 

Participants also will be 100% 

responsible for certain Excluded Costs 

(as discussed below). 

CAT LLC proposes to charge CEBBs 

and CEBSs (as described in more detail 

below) Historical CAT Assessment 1 to 

recover certain historical CAT costs 

incurred prior to January 1, 2022, in 

accordance with the CAT Funding 

Model.15 To implement this fee on 

behalf of CAT LLC, the CAT NMS Plan 

requires the Participants to ‘‘file with 

the SEC under Section 19(b) of the 

Exchange Act any such fees on Industry 

Members that the Operating Committee 

approves, and such fees shall be labeled 

as ‘Consolidated Audit Trail Funding 

Fees.’ ’’ 16 The Plan further states that 

‘‘Participants will be required to file 

with the SEC pursuant to Section 19(b) 

of the Exchange Act a filing for each 

Historical CAT Assessment.’’ 17

Accordingly, the purpose of this filing is 

to implement a Historical CAT 

Assessment on behalf of CAT LLC for 

Industry Members, referred to as 

Historical CAT Assessment 1, in 

accordance with the CAT NMS Plan.18

(1) CAT Executing Brokers 

Historical CAT Assessment 1 will be 

charged to each CEBB and CEBS for 

each applicable transaction in Eligible 

Securities.19 The CAT NMS Plan defines 

a ‘‘CAT Executing Broker’’ to mean: 

(a) with respect to a transaction in an 

Eligible Security that is executed on an 

exchange, the Industry Member identified as 

the Industry Member responsible for the 

order on the buy-side of the transaction and 

the Industry Member responsible for the sellside of the transaction in the equity order 

trade event and option trade event in the 

CAT Data submitted to the CAT by the 

relevant exchange pursuant to the Participant 

Technical Specifications; and (b) with 

respect to a transaction in an Eligible 

Security that is executed otherwise than on 

an exchange and required to be reported to 

an equity trade reporting facility of a 

registered national securities association, the 

Industry Member identified as the executing 

broker and the Industry Member identified as 

the contra-side executing broker in the TRF/ 

ORF/ADF transaction data event in the CAT 

Data submitted to the CAT by FINRA 

pursuant to the Participant Technical 

Specifications; provided, however, in those 

circumstances where there is a non-Industry 

Member identified as the contra-side 

executing broker in the TRF/ORF/ADF 

transaction data event or no contra-side 

executing broker is identified in the TRF/ 

ORF/ADF transaction data event, then the 

Industry Member identified as the executing 

broker in the TRF/ORF/ADF transaction data 

event would be treated as CAT Executing 

Broker for the Buyer and for the Seller.20

Fields Nos. 26 and 28 of the 

Participant Technical Specifications, 

listed below, indicate the CAT 

Executing Brokers for transactions 

executed otherwise than on an 

exchange. 


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TRF/ORF/ADF Transaction Data Event (TRF)* 

# Field Name Data Type Description Include 

Key 

26 reportingExecutingMpid Member MPID of the executing party R 

Alias 

28 contraExecutingMpid Member MPID of the contra-side C 

Alias executing party. 

* See footnote 21. 21 
10852 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

22Section 11.3(a)(i)(B) and 11.3(b)(i)(B) of the 

CAT NMS Plan. In approving the CAT Funding 

Model, the Commission concluded that ‘‘the use of 

executed equivalent share volume as the basis of 

the proposed cost allocation methodology is 

reasonable and consistent with the approach taken 

by the funding principles of the CAT NMS Plan.’’ 

See CAT Funding Model Approval Order, 88 FR 

62628, 62640. 

23Section 11.3(b)(i)(C) of the CAT NMS Plan. 

24Section 11.3(b)(iii)(B)(II)(B) of the CAT NMS 

Plan. 

(2) Calculation of Historical Fee Rate 1 

The Operating Committee determined 

the Historical Fee Rate to be used in 

calculating Historical CAT Assessment 

1 (‘‘Historical Fee Rate 1’’) by dividing 

the Historical CAT Costs for Historical 

CAT Assessment 1 (‘‘Historical CAT 

Costs 1’’) by the projected total executed 

share volume of all transactions in 

Eligible Securities for the Historical 

Recovery Period for Historical CAT 

Assessment 1 (‘‘Historical Recovery 

Period 1’’), as discussed in detail below. 

Based on this calculation, the Operating 

Committee has determined that 

Historical Fee Rate 1 would be 

$0.0000439371316687066 per executed 

equivalent share. This rate is then 

divided by three and rounded to 

determine the fee rate of $0.000015 per 

executed equivalent share that will be 

assessed to CEBBs and CEBSs, as also 

discussed in detail below. 

(A) Executed Equivalent Shares for 

Transactions in Eligible Securities 

Under the CAT NMS Plan, for 

purposes of calculating each Historical 

CAT Assessment, executed equivalent 

shares in a transaction in Eligible 

Securities will be reasonably counted as 

follows: (1) each executed share for a 

transaction in NMS Stocks will be 

counted as one executed equivalent 

share; (2) each executed contract for a 

transaction in Listed Options will be 

counted based on the multiplier 

applicable to the specific Listed Options 

(i.e., 100 executed equivalent shares or 

such other applicable multiplier); and 

(3) each executed share for a transaction 

in OTC Equity Securities shall be 

counted as 0.01 executed equivalent 

share.22

(B) Historical CAT Costs 1 

The CAT NMS Plan states that ‘‘[t]he 

Operating Committee will reasonably 

determine the Historical CAT Costs 

sought to be recovered by each 

Historical CAT Assessment, where the 

Historical CAT Costs will be Past CAT 

Costs minus Past CAT Costs reasonably 

excluded from Historical CAT Costs by 

the Operating Committee. Each 

Historical CAT Assessment will seek to 

recover from CAT Executing Brokers 

two-thirds of Historical CAT Costs 

incurred during the period covered by 

the Historical CAT Assessment.’’ 23 As 

described in detail below, Historical 

CAT Costs 1 would be $337,688,610. 

This figure includes Past CAT Costs of 

$401,312,909 minus certain Excluded 

Costs of $63,624,299. Participants 

collectively will remain responsible for 

one-third of Historical CAT Costs 1 

(which is $112,562,870), plus the 

Excluded Costs of $63,624,299. CEBBs 

collectively will be responsible for onethird of Historical CAT Costs 1 (which 

is $112,562,870), and CEBSs collectively 

will be responsible for one-third of 

Historical CAT Costs 1 (which is 

$112,562,870). 

The following describes in detail 

Historical CAT Costs 1 with regard to 

four separate historical time periods as 

well as Past CAT Costs excluded from 

Historical CAT Costs 1 (‘‘Excluded 

Costs’’). The following cost details are 

provided in accordance with the 

requirement in the CAT NMS Plan to 

provide in the fee filing ‘‘a brief 

description of the amount and type of 

Historical CAT Costs, including (1) the 

technology line items of cloud hosting 

services, operating fees, CAIS operating 

fees, change request fees, and 

capitalized developed technology costs, 

(2) legal, (3) consulting, (4) insurance, 

(5) professional and administration and 

(6) public relations costs.’’ 24 Each of the 

costs described below are reasonable, 

appropriate and necessary for the 

creation, implementation and 

maintenance of CAT. 

(i) Historical CAT Costs Incurred Prior 

to June 22, 2020 (Pre-FAM Costs) 

Historical CAT Costs 1 would include 

costs incurred by CAT prior to June 22, 

2020 (‘‘Pre-FAM Period’’) and already 

funded by the Participants, excluding 

Excluded Costs (described further 

below). Historical CAT Costs 1 would 

include costs for the Pre-FAM Period of 

$143,919,521. The Participants would 

remain responsible for one-third of this 

cost (which they have previously paid) 

($47,973,174), and Industry Members 

would be responsible for the remaining 

two-thirds, with CEBBs paying onethird ($47,973,174) and CEBSs paying 

one-third ($47,973,174). These costs do 

not include Excluded Costs, as 

discussed further below. The following 

table breaks down Historical CAT Costs 

1 for the Pre-FAM Period into the 

categories set forth in Section 

11.3(b)(iii)(B)(II) of the CAT NMS Plan. 


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25With respect to certain costs that were 

‘‘appropriately excluded,’’ such excluded costs 

relate to the amortization of capitalized technology 

costs, which are amortized over the life of the Plan 

Processor Agreement. As such costs have already 

been otherwise reflected in the filing, their 

inclusion would double count the capitalized 

technology costs. In addition, amortization is a noncash expense. 

26The costs described in this table of costs for the 

Pre-FAM Period were calculated based upon CAT 

LLC’s review of applicable bills and invoices and 

related financial statements. CAT LLC financial 

statements are available on the CAT website. In 

addition, in accordance with Section 6.6(a)(i) of the 

CAT NMS Plan, in 2018 CAT LLC provided the SEC 

with ‘‘an independent audit of fees, costs, and 

expenses incurred by the Participants on behalf of 

the Company prior to the Effective Date of the Plan 

that will be publicly available.’’ The audit is 

available on the CAT website. 

27CAT NMS, LLC was formed by FINRA and the 

U.S. national securities exchanges to implement the 

requirements of SEC Rule 613 under the Exchange 

Act. SEC Rule 613 required the SROs to jointly 

submit to the SEC the CAT NMS Plan to create, 

implement and maintain the CAT. The SEC 

approved the CAT NMS Plan on November 15, 

2016. See CAT NMS Plan Approval Order, supra 

note 8. 

28On August 29, 2019, the Participants formed a 

new Delaware limited liability company named 

Consolidated Audit Trail, LLC for the purpose of 

conducting activities related to the CAT from and 

after the effectiveness of the proposed amendment 

of the CAT NMS Plan to replace CAT NMS, LLC. 

See Securities Exchange Act Release No. 87149 

(September 27, 2019), 84 FR 52905 (October 3, 

2019). 

29For each of the costs paid by CAT NMS, LLC 

and Consolidated Audit Trail, LLC as discussed 

Continued 

The Pre-FAM Period includes a broad 

range of CAT-related activity from 2012 

through June 22, 2020, including the 

evaluation of the requirements of SEC 

Rule 613, the development of the CAT 

NMS Plan, the evaluation and selection 

of the initial and successor Plan 

Processors, the commencement of the 

creation and implementation of the CAT 

to comply with Rule 613 and the CAT 

NMS Plan, including technical 

specifications for transaction reporting 

and regulatory access, and related 

technology and the commencement of 

reporting to the CAT. The following 

describes the costs for each of the 

categories for the Pre-FAM Period. 

(a) Technology Costs—Cloud Hosting 

Services 

The $10,268,840 in technology costs 

for cloud hosting services represent 

costs incurred for services provided by 

the cloud services provider for the CAT, 

Amazon Web Services, Inc. (‘‘AWS’’), 

during the Pre-FAM Period. 

As part of its proposal for acting as 

the successor Plan Processor for the 

CAT, FINRA CAT, LLC (‘‘FCAT’’) 

selected AWS as a subcontractor to 

provide cloud hosting services. In 2019, 

after reviewing the capabilities of other 

cloud services providers, FCAT 

determined that AWS was the only 

cloud services provider at that time 

sufficiently mature and capable of 

providing the full suite of necessary 

cloud services for the CAT, including, 

for example, the security, resiliency and 

complexity necessary for the CAT 

computing requirements. The use of 

cloud hosting services is standard for 

this type of high-volume data activity 

and reasonable and necessary for 

implementation of the CAT, particularly 

given the substantial data volumes 

associated with the CAT. 

Under the Plan Processor Agreement 

with FCAT, CAT LLC is required to pay 

FCAT the fees incurred by the Plan 

Processor for cloud hosting services 

provided by AWS as FCAT’s 

subcontrator on a monthly basis for the 

cloud hosting services, and FCAT, in 

turn, pays such fees to AWS. The fees 

for cloud hosting services were 

negotiated by FCAT on an arm’s length 

basis with the goals of managing cost 

and receiving services required to 

comply with the CAT NMS Plan and 

Rule 613, taking into consideration a 

variety of factors, including the 

expected volume of data, the breadth of 

services provided and market rates for 

similar services. The fees for cloud 

hosting services during the Pre-FAM 

Period were paid to FCAT by CAT NMS 

LLC27 and subsequently Consolidated 

Audit Trail, LLC (as previously noted, 

both entities are referred to generally as 

‘‘CAT LLC’’),28 and FCAT, in turn, paid 

AWS. CAT LLC was funded via loan 

contributions by the Participants.29


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Operating Expense Historical CAT Costs 1 for 

Pre-FAM Period (Prior to 

June 22, 2020)** 

Capitalized Developed $71,475,941 

Technology Costs and 

Transition Fee* 

TechnoloJ!V Costs: $33,568,579 

Cloud Hosting Services $10,268,840 

Operating Fees $21,085,485 

CAIS Operating Fees $2,072,908 

Change Request Fees $141,346 

Legal $19,674,463 

Consulting $17,013,414 

Insurance $880,419 

Professional and administration $1,082,036 

Public relations $224,669 

Total Operating Expenses $143,919,521 

* The non-cash amortization of these capitalized developed technology 

costs of $2,115,545 incurred during the period prior to June 22, 2020 have 

been appropriately excluded from the above table.25 

** See footnote 26.26 
10854 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

throughout this filing, CAT NMS, LLC and 

Consolidated Audit Trail, LLC paid these costs via 

loan contributions by the Participants to CAT NMS, 

LLC and Consolidated Audit Trail, LLC, 

respectively. 

30CAT NMS Plan, Appendix D–4 n.262. 

31CAT NMS Plan, Appendix D–5. 

32See Section 6.3(d) of the CAT NMS Plan. 33See Securities Exchange Release No. 88702 

(April 20, 2020), 85 FR 23075 (April 24, 2020) 

(‘‘Phased Reporting Exemptive Relief Order’’) for a 

description of Phase 2a and Phase 2b Industry 

Member Data. 

34See Section 6.5(a)(ii) of the CAT NMS Plan. 

35See CAT NMS Plan, Appendix C–108. 

36Note that the volume data described in this 

table does not include CAIS data. 

37Note that, although there were compute hours 

during this period, data related to such compute 

hours are no longer available in current data. 

AWS was engaged by FCAT to 

provide a broad array of cloud hosting 

services for the CAT, including data 

ingestion, data management, and 

analytic tools. Services provided by 

AWS include storage services, 

databases, compute services and other 

services (such as networking, 

management tools and DevOps tools). 

AWS also was engaged to provide 

various environments for CAT, such as 

development, performance testing, test 

and production environments. 

The cost for AWS services for the 

CAT is a function of the volume of CAT 

Data. The greater the amount of CAT 

Data, the greater the cost of AWS 

services to the CAT. During the PreFAM Period from the engagement of 

AWS in February 2019 through June 

2020, AWS provided cloud hosting 

services for volumes of CAT Data far in 

excess of the volume predictions set 

forth in the CAT NMS Plan. The CAT 

NMS Plan states, when all CAT 

Reporters are submitting their data to 

the CAT, it ‘‘must be sized to receive[,] 

process and load more than 58 billion 

records per day,’’ 30 and that ‘‘[i]t is 

expected that the Central Repository 

will grow to more than 29 petabytes of 

raw, uncompressed data.’’ 31 However, 

the volume of CAT Data for the PreFAM Period was far in excess of these 

predicted levels. By the end of this 

period, data submitted to the CAT 

included options and equities 

Participant Data,32 Phase 2a and Phase 

2b Industry Member Data 33 (including 

certain linkages), as well as SIP Data,34

reference data and other types of Other 

Data.35 The following chart provides 

data regarding the average daily volume, 

cumulative total events, total compute 

hours and storage footprint of the CAT 

during the Pre-FAM Period.36

(b) Technology Costs—Operating Fees 

The $21,085,485 in technology costs 

related to operating fees represent costs 

incurred with regard to activities of 

FCAT as the Plan Processor. Operating 

fees are those fees paid by CAT LLC to 

FCAT as the Plan Processor to operate 

and maintain the CAT and to perform 

business operations related to the 

system, including compliance, security, 

testing, training, communications with 

the industry (e.g., management of the 

FINRA CAT Helpdesk, FAQs, website 

and webinars) and program 

management as required by the CAT 

NMS Plan. 

FCAT was selected to assume the role 

of the successor Plan Processor. Prior to 

this selection, the Participants engaged 


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Partici ant - 0 tions 

Industry Member -

E uities 

Industry Member -

0 tions 

uities 

Average Total Daily 

Volume 

Date Range: 3/29/19 to 

4/12/20* 

80 

64 

149 

* The Participant Equities in RSA format. 

** Start of Industry Member reporting on 4/13/2020. 

*** See footnote 37.37 

Date Range: 4/13/20 to 

6/21/20** 

981 

3 

0.04 

70 

166 
Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 10855 

38The term ‘‘Bidder’’ is defined in Section 1.1 of 

the CAT NMS Plan. 

39See Letter from Michael J. Simon, Chair, CAT 

NMS, LLC Operating Committee, to Brent J. Fields, 

Secretary, SEC, dated April. 9, 2019, https://

www.sec.gov/divisions/marketreg/rule613-infonotice-of-plan-processor-selection-040919.pdf. 

40See supra note 38. 

41The use of Exegy to provide market data, 

including the costs and market data provided, is 

discussed below in Section 3(a)(2)(B)(i)(i). 

42The CAT website is https://

www.catnmsplan.com. 

in discussions with two prior Bidders 38

for the successor Plan Processor role. 

The Operating Committee formed a 

Selection Subcommittee in accordance 

with Section 4.12 of the CAT NMS Plan 

to evaluate and review Bids and to make 

a recommendation to the Operating 

Committee with respect to the selection 

of the successor Plan Processor. In an 

April 9, 2019 letter to the Commission, 

the Participants described the reasons 

for its selection of the successor Plan 

Processor: 

The Selection Subcommittee 

considered factors including, but not 

limited to, the following, in 

recommending FINRA to the Operating 

Committee as the successor Plan 

Processor: 

a. FINRA’s specialized technical expertise 

and capabilities in the area of broker-dealer 

technology; 

b. The need to appoint a successor Plan 

Processor with specialized expertise to 

develop, implement, and maintain the CAT 

System in accordance with the CAT NMS 

Plan and SEC Rule 613; 

c. FINRA’s detailed proposal in response to 

CATLLC’s recent inquiries; and 

d. FINRA’s data query and analytics 

systems demonstration to the Participants. 

Based on these and other factors, the 

Selection Subcommittee determined that 

FINRA was the most appropriate Bidder to 

become the successor Plan Processor.39

On February 26, 2019, the Operating 

Committee (with FINRA recusing itself) 

voted to select FINRA as the successor 

Plan Processor pursuant to Section 6.1(t) 

of the CAT NMS Plan.40 On March 29, 

2019, CAT LLC and FCAT (a wholly 

owned subsidiary of FINRA) entered 

into a Plan Processor Agreement 

pursuant to which FCAT would perform 

the functions and duties of the Plan 

Processor contemplated by the CAT 

NMS Plan, including the management 

and operation of the CAT. 

Under the Plan Processor Agreement 

with FCAT, CAT LLC is required to pay 

FCAT a negotiated monthly fixed price 

for the operation of the CAT. This fixed 

price contract was negotiated on an 

arm’s length basis with the goals of 

managing costs and receiving services 

required to comply with the CAT NMS 

Plan and Rule 613, taking into 

consideration a variety of factors, 

including the breadth of services 

provided and market rates for similar 

types of activity. The operating fees 

during the Pre-FAM Period were paid to 

FCAT by CAT LLC. 

From March 29, 2019 (the 

commencement of the Plan Processor 

Agreement with FCAT) through June 22, 

2020 (the end of the Pre-FAM Period), 

the Plan Processor’s activities with 

respect to the CAT included the 

following: 

• Commenced user acceptance testing 

with market data provided by Exegy 

Incorporated (‘‘Exegy’’), a market data 

provider; 41

• Published Technical Specifications 

and related reporting scenarios 

documents for Phase 2a, 2b, and 2c 

reporting for Industry Members, after 

substantial engagement with SEC staff, 

Industry Members and Participants on 

the Technical Specifications; 

• Facilitated testing for Phase 2a and 

2b reporting for Industry Members; 

• Began developing Technical 

Specifications and related reporting 

scenarios documents for Phase 2d 

reporting for Industry Members, after 

substantial engagement with SEC staff, 

Industry Members and Participants on 

the Technical Specifications; 

• Published Central Repository 

Access Technical Specifications, and 

provided regulator access to test data 

from Industry Members; 

• Facilitated Participant exchanges 

that support options market makers 

sending Quote Sent Time to the CAT; 

• Facilitated the introduction of 

OPRA and Options NBBO Other Data to 

CAT; 

• Addressed compliance items, 

including drafting CAT policies and 

procedures, and addressing 

requirements under Regulation SCI; 

• Provided support to the Operating 

Committee, the Compliance 

Subcommittee and CAT working 

groups; 

• Assisted with interpretive efforts 

and exemptive requests regarding the 

CAT NMS Plan; 

• Oversaw the security of the CAT; 

• Monitored the operation of the 

CAT, including with regard to 

Participant and Industry Member 

reporting; 

• Provided support to subcontractors 

under the Plan Processor Agreement; 

• Provided support in discussions 

with Participants, SEC and its staff; 

• Operated the FINRA CAT Helpdesk, 

which is the primary source for answers 

to questions about CAT, including 

questions regarding: clock 

synchronization, firm reporting 

responsibilities, interpretive questions, 

technical specifications for reporting to 

CAT and more; 

• Facilitated communications with 

the industry, including via FAQs, CAT 

Alerts, meetings, presentations and 

webinars; 

• Administered the CAT website and 

all of its content; 42 and 

• Provided technical support and 

assistance with connectivity, data 

access, and user support, including the 

use of CAT Data and query tools, for 

Participants and the SEC staff. 

(c) Technology Costs—CAIS Operating 

Fees 

The $2,072,908 in technology costs 

related to CAIS operating fees represent 

the fees paid for FCAT’s subcontractor 

charged with the development and 

operation of CAT’s Customer and 

Account Information System (‘‘CAIS’’). 

The CAT is required under the CAT 

NMS Plan to capture and store 

Customer Identifying Information and 

Customer Account Information in a 

database separate from the transactional 

database and to create a CAT-CustomerID for each Customer. 

During the Pre-FAM Period, the CAISrelated services were provided by the 

Plan Processor through the Plan 

Processor’s subcontractor, Kingland 

Systems Incorporation (‘‘Kingland’’). 

Kingland had experience operating in 

the securities regulatory technology 

space, and as a part of its proposal for 

acting as the Plan Processor for the CAT, 

FCAT selected Kingland as a 

subcontractor to provide certain CAISrelated services. 

Under the Plan Processor Agreement 

with FCAT, CAT LLC is required to pay 

to the Plan Processor the fees incurred 

by FCAT for CAIS-related services 

provided by FCAT through Kingland on 

a monthly basis. FCAT negotiated the 

fees for Kingland’s CAIS-related services 

on an arm’s length basis with the goals 

of managing costs and receiving services 

required to comply with the CAT NMS 

Plan, taking into consideration a variety 

of factors, including the services to be 

provided and market rates for similar 

types of activity. The fees for CAISrelated services during the Pre-FAM 

Period were paid by CAT LLC to FCAT. 

FCAT, in turn, paid Kingland. During 

the Pre-FAM Period, Kingland began 

development of the CAIS Technical 

Specifications and the building of CAIS. 

In addition, Kingland also worked on 

the build related to the CCID 

Alternative, an alternative approach to 

customer information that was not 

included in the CAT NMS Plan as 


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43For a discussion of the CCID Alternative, see 

Securities Exchange Act Release No. 88393 (March 

17, 2020), 85 FR 16152 (March 20, 2020). 

44See Phased Reporting Exemptive Relief Order, 

85 FR 23075, 23079–80. 

45Note that CAT LLC also has incurred costs 

related to specific Industry Members (e.g., 

reprocessing costs related to Industry Member 

reporting errors). 

46Letter from the Participants to Brent J. Fields, 

Secretary, SEC, dated January 18, 2017, https://

www.sec.gov/divisions/marketreg/rule613-infonotice-of-plan-processor-selection.pdf. 

originally adopted.43 Furthermore, 

Kingland also worked on the 

acceleration of the reporting of large 

trader identifiers (‘‘LTID’’) earlier than 

originally contemplated during this 

period, in accordance with exemptive 

relief granted by the SEC.44

(d) Technology Costs—Change Request 

Fees 

The technology costs related to 

change request fees include costs related 

to certain modifications, upgrades or 

other changes to the CAT. Change 

requests are standard practice and 

necessary to reflect operational changes, 

including changes related to new market 

developments, such as new market 

participants. In general, if CAT LLC 

determines that a modification, upgrade 

or other changes to the functionality or 

service is necessary and appropriate, 

CAT LLC will submit a request for such 

a change to the Plan Processor. The Plan 

Processor will then respond to the 

request with a proposal for 

implementing the change, including the 

cost (if any) of such a change. CAT LLC 

then determines whether to approve the 

proposed change. The change request 

costs were paid by CAT LLC to FCAT. 

During the Pre-FAM Period, CAT LLC 

incurred costs of $141,346 related to 

change requests implemented by FCAT. 

Such change requests related to a 

development fee regarding the OPRA 

and SIP data feeds, and the reprocessing 

of certain exchange data.45

(e) Technology Costs—Capitalized 

Developed Technology Costs 

This category of costs includes 

capitalizable application development 

costs incurred in the development of the 

CAT. The capitalized developed 

technology costs for the Pre-FAM Period 

of $71,475,941 relate to technology 

provided by the Initial Plan Processor 

and the successor Plan Processor. 

Initial Plan Processor: Thesys CAT, 

LLC. The capitalized developed 

technology costs related to the Initial 

Plan Processor include costs incurred 

with regard to testing for Participant 

reporting, Participant reporting to the 

CAT, a security assessment of the CAT, 

the development of the billing function 

for the CAT, and a Plan Processor 

transition fee. 

On January 17, 2017, the Selection 

Committee of the CAT NMS Plan 

selected the Initial Plan Processor, 

Thesys Technologies, LLC, for the CAT 

NMS Plan pursuant to Article V of the 

CAT NMS Plan.46 The Participants 

utilized a request for proposal (‘‘RFP’’) 

to seek proposals to build and operate 

the CAT, receiving a number of 

proposals in response to the RFP. The 

Participants carefully reviewed and 

considered each of the proposals, 

including holding in-person meetings 

with each of the Bidders. After several 

rounds of review, the Participants 

selected the Initial Plan Processor in 

accordance with the CAT NMS Plan, 

taking into consideration that the Initial 

Plan Processor had experience operating 

in the securities regulatory technology 

space, among other considerations. On 

April 6, 2017, CAT LLC entered into an 

agreement with Thesys CAT LLC 

(‘‘Thesys CAT’’), a Thesys affiliate, to 

perform the functions and duties of the 

Plan Processor contemplated by the 

CAT NMS Plan, including the 

management and operation of the CAT. 

Under the agreement, CAT LLC would 

pay Thesys CAT a negotiated, fixed 

price fee for its role as the Initial Plan 

Processor. Effective January 30, 2019, 

the Plan Processor Agreement with 

Thesys CAT was terminated, and FCAT 

was subsequently selected as the 

successor Plan Processor. 

From January 17, 2017 through 

January 30, 2019, the time in which the 

Thesys CAT was engaged for the CAT, 

but excluding the period from 

November 15, 2017 through November 

15, 2018, the Initial Plan Processor 

engaged in various activities with 

respect to the CAT, including preparing 

iterative drafts of Participant Technical 

Specifications, Industry Member 

Technical Specifications and the Central 

Repository Access Technical 

Specifications. Thesys CAT initiated 

and maintained the Participant 

reporting per the Participant Technical 

Specifications. In addition, Thesys CAT 

also developed CAT technology, 

addressed compliance items, including 

drafting CAT policies and procedures, 

addressing Regulation SCI requirements, 

establishing a CAT Compliance Officer 

and a Chief Information Security 

Officer, and addressed security-related 

matters for the CAT. Furthermore, 

Thesys CAT performed transition 

services related to the transition from 

Thesys CAT to FCAT as the successor 

Plan Processor from January 30, 2019 

through April 15, 2019. 

Successor Plan Processor: FCAT. The 

capitalized developed technology costs 

related to FCAT include: (1) 

development costs incurred during the 

application development stage to meet 

various agreed-upon milestones 

regarding the CAT, including the 

completion of go-live functionality 

related to options ingestion and 

validation, equities regulatory services 

agreement query tool updates and 

unlinked options data query, options 

linkages release, Industry Member Phase 

2a file submission and data integrity 

(including error corrections), and 

Industry Member testing, including 

reporting relationships, ATS order type 

management, basic reporting statistics, 

SFTP data integrity feedback and error 

correction; (2) costs related to certain 

modifications, upgrades, or other 

changes to the CAT that were not 

contemplated by the agreement between 

CAT LLC and the Plan Processor, 

including a one-time development fee 

for a secure analytics workspace, a onetime development fee of an Industry 

Member connectivity solution, and a 

one-time development fee for the 

acceleration of multi-factor 

authentication; (3) CAIS 

implementation fees; and (4) license 

fees. 

(f) Legal Costs 

The legal costs of $19,674,463 

represent the fees paid for legal services 

provided by two law firms, Wilmer 

Cutler Pickering Hale and Dorr LLP 

(‘‘WilmerHale’’) and Pillsbury Winthrop 

Shaw Pittman LLP (‘‘Pillsbury’’), during 

the Pre-FAM Period. The legal costs 

exclude those costs incurred from 

November 15, 2017 through November 

15, 2018. 

Law Firm: WilmerHale. Following the 

adoption of Rule 613, the Participants 

determined it was necessary to engage 

external legal counsel to advise the 

Participants with respect to corporate 

and regulatory legal matters related to 

the CAT, including drafting and 

developing the CAT NMS Plan. The 

Participants considered a variety of 

factors in their analysis of prospective 

law firms, including (1) the firm’s 

qualifications, resources and expertise, 

(2) the firm’s relevant experience and 

understanding of the regulatory matters 

raised by the CAT and in advising on 

matters of similar scope, (3) the 

composition of the legal team, and (4) 

professional fees. Following a series of 

interviews, the Participants acting as a 

consortium determined that WilmerHale 

was well qualified given the balance of 


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these considerations and engaged 

WilmerHale in February 2013. 

WilmerHale’s billing rates are 

negotiated on an annual basis and are 

determined with reference to the rates 

charged by other leading law firms for 

similar work. The Participants assess 

WilmerHale’s performance and review 

prospective budgets and staffing plans 

submitted by WilmerHale on an annual 

basis. WilmerHale’s compensation 

arrangements are reasonable and 

appropriate, and in line with the rates 

charged by other leading law firms for 

similar work. 

The legal costs for WilmerHale during 

the Pre-FAM Period included costs 

incurred from 2013 until June 22, 2020 

to address corporate and regulatory legal 

matters related to the CAT. The legal 

fees for this law firm during the period 

from February 2013 until the formation 

of the CAT NMS, LLC on November 15, 

2016 were paid directly by the 

exchanges and FINRA to WilmerHale. 

After the formation of CAT NMS LLC, 

the legal fees were paid by CAT LLC to 

WilmerHale. 

After WilmerHale was engaged in 

2013 through the end of the Pre-FAM 

Period on June 22, 2020 (excluding the 

legal costs from November 15, 2017 

through November 15, 2018), 

WilmerHale provided legal assistance to 

the CAT on a variety of matters, 

including with regard to the following: 

• Analyzed various legal matters 

associated with the Selection Plan, and 

drafted an amendment to Selection 

Plan; 

• Assisted with the RFP and bidding 

process for the CAT Plan Processor; 

• Analyzed legal matters related to 

the Development Advisory Group 

(‘‘DAG’’); 

• Drafted the CAT NMS Plan, 

analyzed various items related to the 

CAT NMS Plan, and responded to 

comment letters on CAT NMS Plan; 

• Provided legal support for the 

formation of the legal entity, the 

governance of the CAT, including 

governance support prior to the 

adoption of the CAT NMS Plan, which 

involved support for the full committee 

of exchanges and FINRA as well as 

subcommittees of this group (e.g., Joint 

Subcommittee Group, Technical, 

Industry Outreach, Cost and Funding 

and Other Products) and the DAG, 

governance support during the 

transition to the new governance 

structure under the CAT NMS Plan; and 

governance support after the adoption of 

the CAT NMS Plan, which involved 

support for the Operating Committee, 

Advisory Committee, Compliance 

Subcommittee and CAT working 

groups; 

• Assisted with the development of 

the CAT funding model and drafted 

related amendments of the CAT NMS 

Plan and related filings; 

• Negotiated and drafted the plan 

processor agreements with the Initial 

Plan Processor and the successor Plan 

Processor; 

• Provided assistance with 

compliance with Regulation SCI; 

• Assisted with clock 

synchronization study; 

• Provided assistance with respect to 

the establishment of CAT security; 

• Drafted exemptive requests from 

CAT NMS Plan requirements, including 

with regard to options market maker 

quotes, Customer IDs, CAT Reporter IDs, 

linking allocations to executions, CAT 

reporting timeline, FDIDs, customer and 

account information, timestamp 

granularity, small industry members, 

data facility reporting and linkage, 

allocation reports, SRO-assigned market 

participant identifiers and cancelled 

trade indicators, thereby seeking to 

implement changes that would be cost 

effective and benefit of [sic] Industry 

Members and Participants; 

• Assisted with the Implementation 

Plan required pursuant to Section 

6.6(c)(i) of the CAT NMS Plan; 

• Provided advice regarding CAT 

policies and procedures; 

• Analyzed the SEC’s amendment of 

the CAT NMS Plan regarding financial 

accountability; 

• Provided interpretations of and 

related to the CAT NMS Plan; 

• Provided support with regard to 

discussions with the SEC and its staff, 

including with respect to addressing 

interpretive and implementation issues; 

and 

• Assisted with third party vendor 

agreements. 

Law Firm: Pillsbury. The legal costs 

for CAT during the Pre-FAM Period 

include costs related to the legal 

services performed by Pillsbury. The 

Participants interviewed this law firm as 

well as other potential law firms to 

provide legal assistance regarding 

certain liability matters. After 

considering a variety of factors in its 

analysis, including the relevant 

expertise and fees of the firm, CAT LLC 

determined to hire Pillsbury in April 

2019. The hourly fee rates for this law 

firm were in line with market rates for 

specialized legal expertise. The legal 

fees were paid by CAT LLC to Pillsbury. 

The legal costs for Pillsbury during the 

Pre-FAM Period included costs incurred 

from April 2019 until June 22, 2020 to 

address legal matters regarding the 

agreements between CAT Reporters and 

CAT LLC concerning certain terms 

associated with CAT Reporting (the 

‘‘Reporter Agreement’’). During that 

period, Pillsbury advised CAT LLC 

regarding applicable legal matters, 

participated in negotiations between the 

Participants and Industry Members, 

participated in meetings with senior 

SEC staff, the Chairman, and 

Commissioners, represented CAT LLC 

and the Participants in an SEC 

administrative proceeding, and drafted a 

proposed amendment to the CAT NMS 

Plan regarding liability matters. Liability 

issues related to the CAT are important 

matters that needed to be resolved and 

clarified. CAT LLC’s efforts to seek such 

resolution and clarity work to the 

benefit of Participants, Industry 

Members and other market participants. 

Moreover, litigation involving CAT LLC 

is an expense of operating the CAT, and, 

therefore, is appropriately an obligation 

of both Participants and Industry 

Members under the CAT Funding 

Model. 

(g) Consulting Costs 

The consulting costs of $17,013,414 

represent the fees paid to the consulting 

firm Deloitte & Touche LLP (‘‘Deloitte’’) 

as project manager during the Pre-FAM 

Period, from October 2012 until June 22, 

2020. These consulting costs include 

costs for advisory services related to the 

operation of the CAT, and meeting 

facilitation and communications 

coordination, vendor support and 

financial analyses. 

To help facilitate project management 

given the unprecedented complexity 

and scope of the CAT project, the 

Participants determined it was 

necessary to engage a consulting firm to 

assist with the CAT project in 2012, 

following the adoption of Rule 613. A 

variety of factors were considered in the 

analysis of prospective consulting firms, 

including (1) the firm’s qualifications, 

resources, and expertise, (2) the firm’s 

relevant experience and understanding 

of the regulatory issues raised by the 

CAT and in coordinating matters of 

similar scope, (3) the composition of the 

consulting team, and (4) professional 

fees. Following a series of interviews, 

the exchanges and FINRA as a 

consortium determined that Deloitte 

was well qualified given the balance of 

these considerations and engaged 

Deloitte on October 1, 2012. 

Deloitte’s fee rates are negotiated on 

an annual basis and are in line with 

market rates for this type of specialized 

consulting work. CAT LLC assesses 

Deloitte’s performance and reviews 

prospective budgets and staffing plans 

submitted by Deloitte on an annual 

basis. Deloitte’s compensation 

arrangements are reasonable and 

appropriate, and in line with the rates 


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47Section 9.2 of the CAT NMS Plan. 

charged by other leading consulting 

firms for similar work. 

The consulting costs for CAT during 

the period from 2012 until the formation 

of the CAT NMS, LLC were paid 

directly by the Participants to Deloitte. 

After the formation of CAT NMS, LLC, 

the consulting fees were paid by CAT 

LLC to Deloitte. CAT LLC reviewed the 

consulting fees each month and 

approved the invoices. 

After Deloitte was hired in 2012 

through the end of the Pre-FAM Period 

on June 22, 2020 (excluding the 

consulting costs from November 15, 

2017 through November 15, 2018), 

Deloitte provided a variety of consulting 

services, including the following: 

• Established and implemented 

program operations for the CAT project, 

including the program managment [sic] 

office and workstream design; 

• Assisted with the Plan Processor 

selection process, including but not 

limited to, the development of the RFP 

and the bidder evaluation process, and 

facilitation and consolidation of the 

Participant’s independent reviews; 

• Assisted with the development and 

drafting of the CAT NMS Plan, 

including conducting cost-benefit 

studies, analyzing OATS and CAT 

requirements, and drafting appendices 

to the Plan; 

• Assisted with cost and fundingrelated activities for the CAT, including 

the development of the CAT funding 

model and assistance with loans and the 

CAT bank account for CAT funding; 

• Provided governance support to the 

CAT, including governance support 

prior to the adoption of the CAT NMS 

Plan, which involved support for the 

full committee of exchanges and FINRA 

as well as subcommittees of this group 

(e.g., Joint Subcommittee Group, 

Technical, Industry Outreach, Cost and 

Funding and Other Products) and the 

DAG, governance support during the 

transition to the new governance 

structure under the CAT NMS Plan and 

governance support after the adoption of 

the CAT NMS Plan, which involved 

support for the Operating Committee, 

Advisory Committee, Compliance 

Subcommittee and CAT working 

groups; 

• Provided support to the Operating 

Committee, the Chair of the Operating 

Committee and the Leadership Team, 

including project management support, 

coordination and planning for meetings 

and communications, and interfacing 

with law firms and the SEC; 

• Assisted with industry outreach 

and communications regarding the CAT, 

including assistance with industry 

outreach events, the development of the 

CAT website, frequently asked 

questions, and coordinating with the 

CAT LLC’s public relations firm; 

• Provided support for updating the 

SEC on the progress of the development 

of the CAT; 

• Provided active planning and 

coordination with and support for the 

Initial Plan Processor with regard to the 

development of the CAT, and reported 

to the Participants on the progress; 

• Coordinated efforts regarding the 

selection of the successor Plan 

Processor; 

• Assisted with the transition from 

the Initial Plan Processor to the 

successor Plan Processor, including 

support for the Operating Committee 

and successor Plan Processor for the 

new role; and 

• Provided support for third party 

vendors for the CAT, including FCAT, 

Anchin and the law firms engaged by 

CAT LLC. 

(h) Insurance 

The insurance costs of $880,419 

represent the cost incurred for insurance 

for CAT during the Pre-FAM Period. 

Commencing in 2020, CAT LLC 

performed an evaluation of various 

potential alternatives for CAT insurance 

policies, which included engaging in 

discussions with different insurance 

companies and conducting cost 

comparisons of various alternative 

approaches to insurance. Based on an 

analysis of a variety of factors, including 

coverage and premiums, CAT LLC 

determined to purchase cyber security 

liability insurance, directors’ and 

officers’ liability insurance, and errors 

and omissions liability insurance from 

USI Insurance Services LLC (‘‘USI’’). 

Such policies are standard for corporate 

entities, and cyber security liability 

insurance is important for the CAT 

System. The annual premiums for these 

policies were competitive for the 

coverage provided. The annual 

premiums were paid by CAT LLC to 

USI. 

(i) Professional and Administration 

Costs 

In adopting the CAT NMS Plan, the 

Commission amended the Plan to add a 

requirement that CAT LLC’s financial 

statements be prepared in compliance 

with GAAP, audited by an independent 

public accounting firm, and made 

publicly available.47 The professional 

and administration costs include costs 

related to accounting and accounting 

advisory services to support the 

operating and financial functions of 

CAT, financial statement audit services 

by an independent accounting firm, 

preparation of tax returns, and various 

cash management and treasury 

functions. In addition, professional and 

administration costs for the Pre-FAM 

Period include costs related to the 

receipt of market data and a security 

assessment. The costs for these 

professional and administration services 

were $1,082,036 for the Pre-FAM 

Period. 

Financial Advisory Firm: Anchin 

Accountants & Advisors (‘‘Anchin’’). 

CAT LLC determined to hire a financial 

advisory firm, Anchin, to assist with 

financial matters for the CAT in April 

2018. CAT LLC interviewed Anchin as 

well as other potential financial 

advisory firms to assist with the CAT 

project, considering a variety of factors 

in its analysis, including the firm’s 

relevant expertise and fees. The hourly 

fee rates for this firm were in line with 

market rates for these financial advisory 

services. The fees for these services 

were paid by CAT LLC to Anchin. 

After Anchin was hired in April 2018 

through the end of the Pre-FAM Period 

on June 22, 2020 (excluding the period 

from April 2018 through November 15, 

2018), Anchin provided a variety of 

services, including the following: 

• Developed, updated and 

maintained internal controls; 

• Provided cash management and 

treasury functions; 

• Facilitated bill payments; 

• Provided monthly bookkeeping; 

• Reviewed vendor invoices and 

documentation in support of cash 

disbursements; 

• Provided accounting research and 

consultations on various accounting, 

financial reporting and tax matters; 

• Addressed not-for-profit tax and 

accounting considerations; 

• Prepared tax returns; 

• Addressed various accounting, 

financial and operating inquiries from 

Participants; 

• Developed and maintained 

quarterly and annual operating and 

financial budgets, including budget to 

actual fluctuation analyses; 

• Addressed accounting and financial 

reporting matters relating to the 

transition from CAT NMS, LLC to 

Consolidated Audit Trail, LLC, 

including supporting the dissolution of 

CAT NMS, LLC; 

• Supported compliance with the 

CAT NMS Plan; 

• Worked with and provided support 

to the Operating Committee and various 

CAT working groups; 

• Prepared monthly, quarterly and 

annual financial statements; 

• Supported the annual financial 

statement audits by an independent 

auditor; 


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48See Section 6.5(a)(ii) of the CAT NMS Plan. 49Section 11.6(a)(i)(A) of the CAT NMS Plan. 

• Reviewed historical costs from 

inception; and 

• Provided accounting and financial 

information in support of SEC filings. 

Accounting Firm: Grant Thornton LLP 

(‘‘Grant Thornton’’). In February 2020, 

CAT LLC determined to engage an 

independent accounting firm, Grant 

Thornton, to complete the audit of CAT 

LLC’s financial statements, in 

accordance with the requirements of the 

CAT NMS Plan. CAT LLC interviewed 

this firm as well as another potential 

accounting firm to audit CAT LLC’s 

financial statements, considering a 

variety of factors in its analysis, 

including the relevant expertise and fees 

of each of the firms. CAT LLC 

determined that Grant Thornton was 

well-qualified for the proposed role 

given the balance of these 

considerations. Grant Thornton’s fixed 

fee rate compensation arrangement was 

reasonable and appropriate, and in line 

with the market rates charged for these 

types of accounting services. The fees 

for these services were paid by CAT LLC 

to Grant Thornton. 

Market Data Provider: Exegy. The 

professional and administrative costs for 

the Pre-FAM Period included costs 

related to the receipt of certain market 

data for the CAT pursuant to an 

agreement with the CAT LLC, and then 

with FCAT. Exegy provided SIP Data 

required by the CAT NMS Plan. 

After performing an analysis of the 

available market data vendors to 

confirm that the data provided met the 

SIP Data requirements of the CAT NMS 

Plan and comparing the costs of the 

vendors providing the required SIP 

Data, CAT LLC determined to purchase 

market data from Exegy from July 2018 

through March 2019. CAT LLC 

determined that, unlike certain other 

vendors, Exegy provided market data 

that included all data elements required 

by the CAT NMS Plan.48 In addition, the 

fees were reasonable and in line with 

market rates for the market data 

received. Accordingly, the professional 

and administrative costs for the PreFAM Period include the Exegy costs 

from November 2018 through March 

2019. The cost of the market data was 

reasonable for the market data received. 

The fees for the market data were paid 

directly by CAT LLC to Exegy. 

Upon the termination of the contract 

between CAT LLC and Exegy, FCAT 

entered into a contract with Exegy to 

purchase the required market data from 

Exegy in July 2019. All costs under the 

contract were treated as a direct pass 

through cost to CAT LLC. Therefore, the 

fees for the market data were paid by 

CAT LLC to FCAT, who, in turn, paid 

Exegy for the market data. 

Security Assessment: RSM US LLP 

(‘‘RSM’’). The operating costs for the 

Pre-FAM Period include costs related to 

a third party security assessment of the 

CAT performed by RSM. The 

assessment was designed to verify and 

validate the effective design, 

implementation, and operation of the 

controls specified by NIST Special 

Publication 800–53, Revision 4 and 

related standards and guidelines. Such 

a security assessment is in line with 

industry practice and important given 

the data included in the CAT. CAT LLC 

determined to engage RSM to perform 

the security assessment, after 

considering a variety of factors in its 

analysis, including the firm’s relevant 

expertise and fees. The fees were 

reasonable and in line with market rates 

for such an assessment. RSM performed 

the assessment from October 2018 

through December 2018. Accordingly, 

the costs for the Pre-FAM Period 

include the costs incurred in November 

and December 2018. The cost for the 

security assessment were paid directly 

to RSM by CAT LLC. 

(j) Public Relations Costs 

The public relations costs of $224,669 

represent the fees paid to public 

relations firms during the Pre-FAM 

Period for professional communications 

services to CAT, including media 

relations consulting, strategy and 

execution. By engaging a public 

relations firm, CAT LLC was better 

positioned to understand and address 

CAT matters to the benefit of all market 

participants. Specifically, the public 

relations firms provided services related 

to communications with the public 

regarding the CAT, including 

monitoring developments related to the 

CAT (e.g., congressional efforts, public 

comments and reaction to proposals, 

press coverage of the CAT), reporting 

such developments to CAT LLC, and 

drafting and disseminating 

communications to the public regarding 

such developments as well as reporting 

on developments related to the CAT 

(e.g., amendments to the CAT NMS 

Plan). Public relations services were 

important for various reasons, including 

monitoring comments made by market 

participants about CAT and 

understanding issues related to the CAT 

discussed on the public record. 

The services performed by each of the 

public relations firms were comparable. 

The fees for such services were 

reasonable and in line with market 

rates. Only one public relations firm 

was engaged at a time; the three firms 

were engaged sequentially as the 

primary public relations contact moved 

among the three firms during this time 

period. 

Public Relations Firm: Peppercomm, 

Inc. (‘‘Peppercomm’’). The national 

securities exchanges and FINRA, acting 

as a consortium, determined to hire the 

public relations firm Peppercomm in 

October 2014 and continued to engage 

this firm through September 2017. The 

exchanges and FINRA made this 

engagement decision after considering a 

variety of factors in its analysis, 

including the firm’s relevant expertise 

and fees. The fee rates for this public 

relations firm were negotiated on an 

arm’s length basis and were in line with 

market rates for these types of services. 

The public relations costs during the 

period from October 2014 until the 

formation of the CAT NMS LLC were 

paid directly by the exchanges and 

FINRA to the public relations firm. After 

the formation of CAT NMS, LLC, the 

consulting fees were paid by CAT LLC. 

Public Relations Firm: Sloane & 

Company (‘‘Sloane’’). CAT LLC 

determined to hire a new public 

relations firm, Sloane, in March 2018, 

based on, among other things, their 

expertise and the primary contact’s 

history with the project. The fee rates 

for this public relations firm were in 

line with market rates for these types of 

services. The fees during the Pre-FAM 

Period were paid by CAT LLC to Sloane. 

CAT LLC continued the engagement 

with Sloane until February 2020. 

Public Relations Firm: Peak 

Strategies. CAT LLC determined to hire 

a new public relations firm, Peak 

Strategies, in March 2020, based on, 

among other things, their expertise and 

the primary contact’s history with the 

project. The fee rates for this public 

relations firm were in line with market 

rates for these types of services. The fees 

during the Pre-FAM Period were paid 

by CAT LLC to Peak Strategies. 

(ii) Historical CAT Costs Incurred in 

Financial Accountability Milestone 

Period 1 

Historical CAT Costs 1 would include 

costs incurred by CAT and already 

funded by the Participants during 

Period 1 of the Financial Accountability 

Milestones (‘‘FAM Period 1’’),49 which 

covers the period from June 22, 2020– 

July 31, 2020. Historical CAT Costs 1 

would include costs for FAM Period 1 

of $6,377,343. The Participants would 

remain responsible for one-third of this 

cost (which they have previously paid) 

($2,125,781), and Industry Members 

would be responsible for the remaining 

two-thirds, with CEBBs paying oneVerDate Sep<11>2014 00:35 Feb 13, 2024 Jkt 262001 PO 00000 Frm 00697 Fmt 4701 Sfmt 4703 E:\FR\FM\13FEN2.SGM 13FEN2

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10860 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

50As discussed above, with respect to certain 

costs that were ‘‘appropriately excluded,’’ such 

excluded costs relate to the amortization of 

capitalized technology costs, which are amortized 

over the life of the Plan Processor Agreement. As 

such costs have already been otherwise reflected in 

the filing, their inclusion would double count the 

capitalized technology costs. In addition, 

amortization is a non-cash expense. 

51The costs described in this table of costs for 

FAM Period 1 were calculated based upon CAT 

LLC’s review of applicable bills and invoices and 

related financial statements. CAT LLC financial 

statements are available on the CAT website. 

52See definition of ‘‘Initial Industry Member Core 

Equity and Options Reporting’’ in Section 1.1 of the 

CAT NMS Plan. 

53Note that the volume data described in this 

table does not include CAIS data. 

third ($2,125,781) and CEBSs paying 

one-third ($2,125,781). The following 

table breaks down Historical CAT Costs 

1 for FAM Period 1 into the categories 

set forth in Section 11.3(b)(iii)(B)(II) of 

the CAT NMS Plan. 

By the completion of FAM Period 1, 

CAT LLC was required to implement the 

reporting by Industry Members 

(excluding Small Industry Members that 

are not OATS reporters) of equities 

transaction data and options transaction 

data, excluding Customer Account 

Information, Customer-ID and Customer 

Identifying Information.52 CAT LLC 

completed the requirements of FAM 

Period 1 by July 31, 2020. The following 

describes the costs for each of the 

categories for FAM Period 1. 

(a) Technology Costs—Cloud Hosting 

Services 

CAT LLC continued to utilize AWS in 

FAM Period 1 to provide a broad array 

of cloud hosting services for the CAT, 

including data ingestion, data 

management, and analytic tools. AWS 

continued to provide storage services, 

databases, compute services and other 

services (such as networking, 

management tools and DevOps tools), as 

well as various environments for CAT, 

such as development, performance 

testing, test, and production 

environments, during the FAM 1 Period. 

Accordingly, the $2,642,122 in 

technology costs for cloud hosting 

services represent costs incurred for 

services provided by AWS, as the cloud 

services provider, during FAM Period 1. 

The fee arrangement for AWS described 

above with regard to the Pre-FAM 

Period continued in place during FAM 

Period 1 pursuant to the Plan Processor 

Agreement. Moreover, CAT LLC 

continued to believe that AWS’s 

maturity in the cloud services space as 

well as the significant cost and time 

necessary to move the CAT to a different 

cloud services provider supported the 

continued engagement of AWS. 

The cost for AWS cloud services for 

the CAT continued to be a function of 

the volume of CAT Data. During the 

FAM 1 Period, the volume of CAT Data 

continued to far exceed the original 

predictions for the CAT as set forth in 

the CAT NMS Plan. During this period, 

data submitted to the CAT included 

options and equities Participant Data, 

Phase 2a and Phase 2b Industry Member 

Data (including certain linkages) as well 

as SIP Data, reference data and other 

types of Other Data. The following chart 

provides data regarding the average 

daily volume, cumulative total events, 

total compute hours and storage 

footprint of the CAT during FAM Period 

1.53


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Operating Expense Historical CAT Costs for 

FAM Period 1 ** 

Capitalized Developed $1,684,870 

Technolog:y Costs* 

Technolol!V Costs: $3,996 800 

Cloud Hosting Services $2,642,122 

Operating Fees $1,099,680 

CAIS Operating Fees $254,998 

Change Request Fees - Legal $481,687 

Consulting $137,209 

Insurance - Professional and administration $69,077 

Public relations $7,700 

Total Operatine; Expenses $6,377,343 

* The non-cash amortization of these capitalized developed technology 

costs of $362,121 incurred during FAM Period 1 have been appropriately 

excluded from the above table. 50 

** See footnote 51.51 
Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 10861 

(b) Technology Costs—Operating Fees 

Pursuant to the Plan Processor 

Agreement discussed above, FCAT 

continued in its role as the Plan 

Processor for the CAT during FAM 

Period 1. Accordingly, the $1,099,680 in 

technology costs for operating fees 

represent costs incurred for the services 

provided by FCAT under the Plan 

Processor Agreement during FAM 

Period 1. The fee arrangement for FCAT 

described above with regard to the PreFAM Period continued in place during 

FAM Period 1 pursuant to the Plan 

Processor Agreement. During FAM 

Period 1, FCAT’s activities with respect 

to the CAT included the following: 

• Published iterative drafts of 

Technical Specifications for Phase 2d, 

after substantial engagement with SEC 

staff, Industry Members and Participants 

on the Technical Specifications; 

• Published iterative drafts of CAIS 

Technical Specifications, after 

substantial engagement with SEC staff, 

Industry Members and Participants on 

the Technical Specifications; 

• Facilitated Industry Member 

reporting of Quote Sent Time on 

Options Market Maker quotes; 

• Addressed compliance items, 

including drafting CAT policies and 

procedures, and addressing Regulation 

SCI requirements; 

• Provided support to the Operating 

Committee, the Compliance 

Subcommittee and CAT working 

groups; 

• Assisted with interpretive efforts 

and exemptive requests regarding the 

CAT NMS Plan; 

• Oversaw the security of the CAT; 

• Monitored the operation of the 

CAT, including with regard to 

Participant and Industry Member 

reporting; 

• Provided support to subcontractors 

under the Plan Processor Agreement; 

• Provided support in discussions 

with Participants and the SEC and its 

staff; 

• Operated the FINRA CAT Helpdesk; 

• Facilitated communications with 

the industry, including via FAQs, CAT 

Alerts, meetings, presentations and 

webinars; 

• Administered the CAT website and 

all of its content; and 

• Provided technical support and 

assistance with connectivity, data 

access, and user support, including the 

use of CAT Data and query tools, for 

Participants and the SEC staff. 

(c) Technology Costs—CAIS Operating 

Fees 

Pursuant to the Plan Processor 

Agreement discussed above, Kingland 

continued in its role as a subcontractor 

for the development and 

implementation of CAIS during FAM 

Period 1. Accordingly, the $254,998 in 

technology costs for CAIS operating fees 

represent costs incurred for services 

provided by Kingland during FAM 

Period 1. The fee arrangement for 

Kingland described above with regard to 

the Pre-FAM Period continued in place 

during FAM Period 1 pursuant to the 

Plan Processor Agreement. During FAM 

Period 1, Kingland continued the 

development of the CAIS Technical 

Specifications and building of CAIS. In 

addition, Kingland continued to work 

on the CAIS Technical Specifications 

and build related to CCID Alternative, as 

well as the acceleration of the reporting 

of LTIDs. 

(d) Technology Costs—Change Request 

Fees 

CAT LLC did not incur costs related 

to change requests during FAM Period 

1. 

(e) Technology Costs—Capitalized 

Developed Technology Costs 

Capitalized developed technology 

costs for FAM Period 1 of $1,684,870 

include capitalizable application 

development costs incurred in the 

development of the CAT by FCAT. Such 

costs include: (1) costs related to certain 

modifications, upgrades, or other 

changes to the CAT that were not 

contemplated by the agreement between 

CAT LLC and the Plan Processor, 

including separate production and 

industry test entitlements, and 

reprocessing of exchange event 


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Industry Member -

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Average Total Daily 

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7 

0.31 

74 

185 
10862 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

timestamps; (2) implementation fees; 

and (3) license fees. 

(f) Legal Costs 

The legal costs of $481,687 represent 

the fees paid for legal services provided 

by two law firms, WilmerHale and 

Pillsbury during FAM Period 1. 

Law Firm: WilmerHale. CAT LLC 

continued to employ WilmerHale 

during FAM Period 1 based on, among 

other things, their expertise and long 

history with the project. The hourly fee 

rates for this law firm were in line with 

market rates for specialized legal 

expertise. The legal fees during FAM 

Period 1 were paid by CAT LLC to 

WilmerHale. During FAM Period 1, 

WilmerHale provided legal assistance to 

the CAT including with regard to the 

following: 

• Assisted with the development of 

the CAT funding model and drafted 

related amendments and fee filings; 

• Drafted exemptive requests from 

CAT NMS Plan requirements regarding, 

for example, verbal activity, options 

market maker quote sent time, TRF 

linkages, and allocations; 

• Provided interpretations related to 

CAT NMS Plan requirements, including 

the Financial Accountability Milestone 

amendment; 

• Assisted with compliance with 

Regulation SCI; 

• Provided support for the Operating 

Committee, Compliance Subcommittee, 

working groups and Leadership Team, 

including with regard to meetings with 

the SEC staff; 

• Assisted with the drafting of the 

Implementation Plan required pursuant 

to Section 6.6(c)(i) of the CAT NMS 

Plan; 

• Assisted with communications and 

presentations for the industry regarding 

CAIS; 

• Drafted SRO rule filings related to 

the CAT Compliance Rule; 

• Provided support for Compliance 

Subcommittee, including with regard to 

response to OCIE examinations and the 

annual assessment; 

• Provided guidance regarding CAT 

technical specifications; 

• Assisted with third party vendor 

agreements; and 

• Provided support with regard to 

discussions with the SEC and its staff, 

including with respect to addressing 

interpretive and implementation issues. 

Law Firm: Pillsbury. CAT LLC 

continued to employ Pillsbury during 

FAM Period 1 based on, among other 

things, their expertise and history with 

the project. The hourly fee rates for this 

law firm were in line with market rates 

for specialized legal expertise. The legal 

fees during FAM Period 1 were paid by 

CAT LLC to Pillsbury. During FAM 

Period 1, Pillsbury provided legal 

assistance to the CAT regarding the CAT 

Reporter Agreement. During that period, 

Pillsbury advised CAT LLC regarding 

applicable legal matters and drafted a 

proposed amendment to the CAT NMS 

Plan regarding liability matters. Liability 

issues related to the CAT are important 

matters that needed to be resolved and 

clarified. CAT LLC’s efforts to seek such 

resolution and clarity work to the 

benefit of Participants, Industry 

Members and other market participants. 

(g) Consulting Costs 

The consulting costs of $137,209 

represent the fees paid to Deloitte as 

project manager during FAM Period 1. 

CAT LLC continued to employ Deloitte 

during FAM Period 1 based on, among 

other things, their expertise and 

cumulative experience with the CAT. 

The fee rates for Deloitte during FAM 

Period 1 were negotiated and in line 

with market rates for this type of 

specialized consulting work. The 

consulting fees during FAM Period 1 

were paid by CAT LLC to the consulting 

firm. CAT LLC reviewed the consulting 

fees each month and approved the 

invoices. During FAM Period 1, 

Deloitte’s CAT-related activities 

included the following: 

• Implemented program operations 

for the CAT project; 

• Provided support to the Operating 

Committee, the Chair of the Operating 

Committee and the Leadership Team, 

including project management support, 

coordination and planning for meetings 

and communications, and interfacing 

with law firms and the SEC; 

• Assisted with cost and funding 

matters for the CAT, including the 

development of the CAT funding model 

and assistance with loans and the CAT 

bank account for CAT funding; 

• Provided support for updating the 

SEC on the progress of the development 

of the CAT; 

• Assisted with the transition from 

the Initial Plan Processor to the 

successor Plan Processor; and 

• Provided support for third party 

vendors for the CAT, including FCAT, 

Anchin and the law firms engaged by 

CAT LLC. 

(h) Insurance 

Although insurance was in effect 

during FAM Period 1, CAT LLC did not 

incur costs related to insurance during 

FAM Period 1. 

(i) Professional and Administration 

Costs 

Financial Advisory Firm: Anchin. The 

professional and administration costs of 

$69,077 represent the fees paid to 

Anchin during FAM Period 1. CAT LLC 

continued to employ Anchin during 

FAM Period 1 based on, among other 

things, their expertise and history with 

the project. The hourly fee rates for this 

firm were in line with market rates for 

these type of financial advisory services. 

The fees for these services during FAM 

Period 1 were paid by CAT LLC to 

Anchin. During FAM Period 1, Anchin 

provided a variety of services, including 

the following: 

• Maintained of [sic] internal 

controls; 

• Provided cash management and 

treasury functions; 

• Facilitated bill payments; 

• Provided monthly bookkeeping; 

• Reviewed vendor invoices and 

documentation in support of cash 

disbursements; 

• Provided accounting research and 

consultations on various accounting, 

financial reporting and tax matters; 

• Addressed various accounting, 

financial reporting and operating 

inquiries from Participants; 

• Developed and maintained 

quarterly and annual operating and 

financial budgets, including budget to 

actual fluctuation analyses; 

• Supported compliance with the 

CAT NMS Plan; 

• Worked with and provided support 

to the Operating Committee and various 

CAT working groups; and 

• Prepared monthly and quarterly 

financial statements. 

(j) Public Relations Costs 

The public relations costs of $7,700 

represent the fees paid to Peak 

Strategies during FAM Period 1. CAT 

LLC continued to employ Peak 

Strategies during FAM Period 1 based 

on, among other things, their expertise 

and history with the project. The fee 

rates for this firm were reasonable and 

in line with market rates for these types 

of services. The fees for these services 

during FAM Period 1 were paid by CAT 

LLC to Peak Strategies. During FAM 

Period 1, Peak Strategies continued to 

provide professional communications 

services to CAT LLC, including media 

relations consulting, strategy and 

execution. Specifically, the public 

relations firm provided services related 

to communications with the public 

regarding the CAT, including 

monitoring developments related to the 

CAT (e.g., congressional efforts, public 

comments and reaction to proposals, 

press coverage of the CAT), reporting 

such developments to CAT LLC, and 

drafting and disseminating 

communications to the public regarding 

such developments as well as reporting 


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54Section 11.6(a)(i)(B) of the CAT NMS Plan. 

55As discussed above, with respect to certain 

costs that were ‘‘appropriately excluded,’’ such 

excluded costs relate to the amortization of 

capitalized technology costs, which are amortized 

over the life of the Plan Processor Agreement. As 

such costs have already been otherwise reflected in 

the filing, their inclusion would double count the 

capitalized technology costs. In addition, 

amortization is a non-cash expense. 

56The costs described in this table of costs for 

FAM Period 2 were calculated based upon CAT 

LLC’s review of applicable bills and invoices and 

related financial statements. CAT LLC financial 

statements are available on the CAT website. 

57See definition of ‘‘Full Implementation of Core 

Equity Reporting Requirements’’ in Section 1.1 of 

the CAT NMS Plan. 

on developments related to the CAT 

(e.g., amendments to the CAT NMS 

Plan). As discussed above, such public 

relations services were important for 

various reasons, including monitoring 

comments made by market participants 

about the CAT and understanding issues 

related to the CAT discussed on the 

public record. By engaging a public 

relations firm, CAT LLC was better 

positioned to understand and address 

CAT matters to the benefit of all market 

participants. 

(iii) Historical CAT Costs Incurred in 

Financial Accountability Milestone 

Period 2 

Historical CAT Costs 1 would include 

costs incurred by CAT LLC and already 

funded by Participants during Period 2 

of the Financial Accountability 

Milestones (‘‘FAM Period 2’’),54 which 

covers the period from August 1, 2020– 

December 31, 2020. Historical CAT 

Costs 1 would include costs for FAM 

Period 2 of $42,976,478. The 

Participants would remain responsible 

for one-third of this cost (which they 

have previously paid) ($14,325,493), 

and Industry Members would be 

responsible for the remaining twothirds, with CEBBs paying one-third 

($14,325,493) and CEBSs paying onethird ($14,325,493). The following table 

breaks down Historical CAT Costs 1 for 

FAM Period 2 into the categories set 

forth in Section 11.3(b)(iii)(B)(II) of the 

CAT NMS Plan. 

By the completion of FAM Period 2, 

CAT LLC was required to implement the 

following with regard to the CAT: 

(a) Industry Member reporting (excluding 

reporting by Small Industry Members that are 

not OATS reporters) for equities transactions, 

excluding Customer Account Information, 

CustomerID, and Customer Identifying 

Information, is developed, tested, and 

implemented at a 5% Error Rate or less and 

with sufficient intra-firm linkage, inter-firm 

linkage, national securities exchange linkage, 

and trade reporting facilities linkage to 

permit the Participants and the Commission 

to analyze the full lifecycle of an order across 

the national market system, excluding 

linkage of representative orders, from order 

origination through order execution or order 

cancellation; and (b) the query tool 

functionality required by Section 

6.10(c)(i)(A) and Appendix D, Sections 8.1.1– 

8.1.3 and Section 8.2.1 incorporates the 

Industry Member equities transaction data 

described in condition (a) and is available to 

the Participants and to the Commission.57

CAT LLC completed the requirements of 

FAM Period 2 by December 31, 2020. 

The following describes the costs for 

each of the categories for FAM Period 2. 

(a) Technology Costs—Cloud Hosting 

Services 

CAT LLC continued to utilize AWS in 

FAM Period 2 to provide a broad array 

of cloud hosting services for the CAT, 

including data ingestion, data 

management, and analytic tools. AWS 

continued to provide storage services, 

databases, compute services and other 

services (such as networking, 

management tools and DevOps tools), as 

well as various environments for CAT, 

such as development, performance 

testing, test, and production 

environments, during the FAM 2 Period. 

Accordingly, the $20,709,212 in 

technology costs for cloud hosting 

services represent costs incurred for 

services provided by AWS, as the cloud 

services provider, during FAM Period 2. 

The fee arrangement for AWS described 

above with regard to the Pre-FAM 

Period and FAM Period 1 continued in 

place during FAM Period 2 pursuant to 

the Plan Processor Agreement. 


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Operating Expense Historical CAT Costs for 

FAM Period 2** 

Capitalized Developed $6,761,094 

Technology Costs* 

Technolo!!V Costs: $31 460 033 

Cloud Hosting Services $20,709,212 

Operating Fees $9,108,700 

CAIS Operating Fees $1,590,298 

Change Request Fees $51,823 

Legal $2,766,644 

Consulting $532,146 

Insurance $976,098 

Professional and administration $438,523 

Public relations $41 940 

Total Operating Expenses $42,976,478 

* The non-cash amortization of these capitalized developed technology 

costs of $1,892,505 incurred during FAM Period 2 have been appropriately 

excluded from the above table. 55 

** See footnote 56.56 
10864 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

58Note that the volume data described in this 

table does not include CAIS data. 

The cost for AWS cloud services for 

the CAT continued to be a function of 

the volume of CAT Data. During the 

FAM 2 Period, the volume of CAT Data 

continued to far exceed the original 

predictions for the CAT as set forth in 

the CAT NMS Plan. During this period, 

data submitted to the CAT included 

options and equities Participant Data, 

Phase 2a and Phase 2b Industry Member 

Data (including certain linkages) as well 

as SIP Data, and Other Data, including 

reference data. In addition, Industry 

Members began reporting LTID account 

information. The following chart 

provides data regarding the average 

daily volume, cumulative total events, 

total compute hours and storage 

footprint of the CAT during FAM Period 

2.58

(b) Technology Costs—Operating Fees 

Pursuant to the Plan Processor 

Agreement discussed above, FCAT 

continued in its role as the Plan 

Processor for the CAT during FAM 

Period 2. Accordingly, the $9,108,700 in 

technology costs for operating fees 

represent costs incurred for the services 

provided by FCAT under the Plan 

Processor Agreement during FAM 

Period 2. The fee arrangement for FCAT 

described above with regard to the PreFAM Period and FAM Period 1 

continued in place during FAM Period 

2 pursuant to the Plan Processor 

Agreement. During FAM Period 2, 

FCAT’s activities with respect to the 

CAT included publishing the Technical 

Specifications for Phase 2d and 

overseeing the reporting of firm to firm 

and intrafirm linkages by Industry 

Members. In addition, FCAT also 

continued to engage in the following 

activities during FAM Period 2: 

• Addressed compliance items, 

including drafting CAT policies and 

procedures, and addressing Regulation 

SCI requirements; 

• Provided support to the Operating 

Committee, Compliance Subcommittee 

and CAT working groups; 

• Assisted with interpretive efforts 

and exemptive requests regarding the 

CAT NMS Plan; 

• Oversaw the development and 

implementation of the security of the 

CAT; 

• Monitored the operation of the 

CAT, including with regard to 

Participant and Industry Member 

reporting; 

• Provided support to subcontractors 

under the Plan Processor Agreement; 

• Provided support in discussions 

with the Participants and the SEC and 

its staff; 

• Operated the FINRA CAT Helpdesk; 

• Facilitated communications with 

the industry, including via FAQs, CAT 

Alerts, meetings, presentations and 

webinars; 

• Administered the CAT website and 

all of its content; and 

• Provided technical support and 

assistance with connectivity, data 

access, and user support, including the 

use of CAT Data and query tools, for 

Participants and the SEC staff. 

(c) Technology Costs—CAIS Operating 

Fees 

Pursuant to the Plan Processor 

Agreement discussed above, Kingland 

continued in its role as a subcontractor 

for the development and 

implementation of CAIS during FAM 


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Industry Member -

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Date Range: 8/1/20 -

12/31/20 

11 

0.98 

80 

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Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 10865 

Period 2. Accordingly, the $1,590,298 in 

technology costs for CAIS operating fees 

represent costs incurred for services 

provided by Kingland during FAM 

Period 2. The fee arrangement for 

Kingland described above with regard to 

the Pre-FAM Period and FAM Period 1 

continued in place during FAM Period 

2 pursuant to the Plan Processor 

Agreement. During FAM Period 2, 

Kingland continued the development of 

the CAIS Technical Specifications and 

building of CAIS. In addition, Kingland 

continued to work on the CAIS 

Technical Specifications and build 

related to the CCID Alternative, as well 

as the acceleration of the reporting of 

LTIDs. 

(d) Technology Costs—Change Request 

Fees 

During FAM Period 2, CAT LLC 

engaged FCAT to pursue certain change 

requests in accordance with the Plan 

Processor Agreement. The change 

request costs were paid by CAT LLC to 

FCAT. Specifically, during FAM Period 

2, CAT incurred costs of $51,823 related 

to a change request regarding the 

addition of functionality for exchange 

Participants to report rejected messages 

to the CAT. 

(e) Technology Costs—Capitalized 

Developed Technology Costs 

Capitalized developed technology 

costs for FAM Period 2 of $6,761,094 

include capitalizable application 

development costs incurred in the 

development of the CAT by FCAT. Such 

costs include (1) development costs 

incurred during the application 

development stage to meet various 

agreed-upon milestones regarding the 

CAT, as defined in the agreement 

between CAT LLC and the Plan 

Processor; (2) costs related to certain 

modifications, upgrades, or other 

changes to the CAT that were not 

contemplated by the agreement between 

CAT LLC and the Plan Processor, 

including costs related to separate 

production and industry test 

entitlements, market maker reference 

data, and back-processing of exchange 

exception logic; (3) implementation 

fees; and (4) license fees. 

(f) Legal Costs 

The legal costs of $2,766,644 

represent the fees paid for legal services 

provided by two law firms, WilmerHale 

and Pillsbury during FAM Period 2. 

Law Firm: WilmerHale. CAT LLC 

continued to employ WilmerHale 

during FAM Period 2 based on, among 

other things, their expertise and long 

history with the project. The hourly fee 

rates for this law firm were in line with 

market rates for specialized legal 

expertise. The legal fees during FAM 

Period 2 were paid by CAT LLC to 

WilmerHale. During FAM Period 2, the 

legal assistance provided by 

WilmerHale included providing legal 

advice regarding the following: 

• Assisted with the development of 

the CAT funding model and drafting 

related amendments and rule filings; 

• Drafted exemptive requests from 

CAT NMS Plan requirements regarding, 

for example, allocations, exchange 

activity, OTQT, initial data validation, 

error corrections and recordkeeping; 

• Provided interpretations related to 

CAT NMS Plan requirements, including 

with regard to the Financial 

Accountability Milestone amendment, 

FAQs and technical specifications; 

• Provided support for the Operating 

Committee, Compliance Subcommittees, 

working groups and Leadership Team, 

including with regard to meetings with 

the SEC staff; 

• Assisted with the Implementation 

Plan and Quarterly Progress Reports 

required pursuant to Section 6.6 of the 

CAT NMS Plan; 

• Drafted SRO rule filings related to 

the CAT Compliance Rule; 

• Provided support for the 

Compliance Subcommittee, including 

with regard to responses to OCIE 

examinations and the annual 

assessment; 

• Provided guidance regarding the 

SEC’s proposed security amendments to 

the CAT NMS Plan; 

• Provided guidance regarding SRO 

rule filings for the retirement of systems; 

• Provided legal support for 

Operating Committee meetings, 

including drafting resolutions and other 

materials and voting advice; 

• Assisted with third party vendor 

agreements (e.g., with regard to Anchin, 

and Grant Thornton and insurance 

policies); 

• Assisted with change requests; and 

• Provided support with regard to 

discussions with the SEC and its staff, 

including with respect to addressing 

interpretive and implementation issues. 

Law Firm: Pillsbury. CAT LLC 

continued to employ Pillsbury during 

FAM Period 2 based on, among other 

things, their expertise and history with 

the project. The hourly fee rates for this 

law firm were in line with market rates 

for specialized legal expertise. The legal 

fees during FAM Period 2 were paid by 

CAT LLC to Pillsbury. During FAM 

Period 2, Pillsbury provided legal 

assistance to the CAT regarding the CAT 

Reporter Agreement. During that period, 

Pillsbury advised CAT LLC regarding 

applicable legal matters and drafted and 

filed a proposed amendment to the CAT 

NMS plan regarding liability matters. As 

discussed above, liability issues related 

to the CAT are important matters that 

needed to be resolved and clarified. 

CAT LLC’s efforts to seek such 

resolution and clarity work to the 

benefit of Participants, Industry 

Members and other market participants. 

(g) Consulting Costs 

The consulting costs of $532,146 

represent the fees paid to Deloitte as 

project manager during FAM Period 2. 

CAT LLC continued to employ Deloitte 

during FAM Period 2 based on, among 

other things, their expertise and long 

history with the project. The fee rates 

for Deloitte during FAM Period 2 were 

negotiated and in line with market rates 

for this type of specialized consulting 

work. The consulting fees during FAM 

Period 2 were paid to Deloitte by CAT 

LLC. CAT LLC reviewed the consulting 

fees each month and approved the 

invoices. During FAM Period 2, 

Deloitte’s CAT-related activities 

included the following: 

• Implemented program operations 

for the CAT project; 

• Provided support to the Operating 

Committee, the Chair of the Operating 

Committee and the Leadership Team, 

including project management support, 

coordination and planning for meetings 

and communications, and interfacing 

with law firms and the SEC; 

• Assisted with cost and funding 

matters for the CAT, including the 

development of the CAT funding model 

and assistance with loans and the CAT 

bank account for CAT funding; 

• Provided support for updating the 

SEC on the progress of the development 

of the CAT; and 

• Provided support for third party 

vendors for the CAT, including FCAT, 

Anchin and the law firms engaged by 

CAT LLC. 

(h) Insurance 

The insurance costs of $976,098 

represent the fees paid for insurance 

during FAM Period 2. CAT LLC 

continued to maintain cyber security 

liability insurance, directors’ and 

officers’ liability insurance, and errors 

and omissions liability insurance 

offered by USI. After engaging in a 

process for renewing the coverage, CAT 

LLC determined to purchase these 

insurance policies from USI. The annual 

premiums for these policies were 

competitive for the coverage provided. 

The annual premiums were paid by 

CAT LLC to USI. 


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10866 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

59Section 11.6(a)(i)(C) of the CAT NMS Plan. 

(i) Professional and Administration 

Costs 

The professional and administration 

costs of $438,523 represent the fees paid 

to Anchin and Grant Thornton for 

financial services provided during FAM 

Period 2. 

Financial Advisory Firm: Anchin. 

CAT LLC continued to engage Anchin 

during FAM Period 2 based on, among 

other things, their expertise and history 

with the project. The hourly fee rates for 

this firm were in line with market rates 

for these types of financial advisory 

services. The fees for these services 

during FAM Period 2 were paid by CAT 

LLC to Anchin. During FAM Period 2, 

Anchin provided a variety of services, 

including the following: 

• Updated and maintained internal 

controls; 

• Provided cash management and 

treasury functions; 

• Facilitated bill payments; 

• Provided monthly bookkeeping; 

• Reviewed vendor invoices and 

documentation in support of cash 

disbursements; 

• Provided accounting research and 

consultations on various accounting, 

financial reporting and tax matters; 

• Addressed not-for-profit tax and 

accounting considerations; 

• Prepared tax returns; 

• Addressed various accounting, 

financial reporting and operating 

inquiries from the Participants; 

• Developed and maintained 

quarterly and annual operating and 

financial budgets, including budget to 

actual fluctuation analyses; 

• Supported compliance with the 

CAT NMS Plan; 

• Worked with and provided support 

to the Operating Committee and various 

CAT working groups; 

• Prepared monthly, quarterly and 

annual financial statements; 

• Supported the annual financial 

statement audit by an independent 

auditor; and 

• Reviewed historical costs from 

inception. 

Accounting Firm: Grant Thornton. 

CAT LLC continued to employ the 

accounting firm Grant Thornton during 

FAM Period 2 based on, among other 

things, its expertise and cumulative 

knowledge of CAT LLC. CAT LLC 

continued to believe that Grant 

Thornton was well qualified for its role 

and its fee rates were in line with with 

market rates for these accounting 

services. The fees for these services 

during FAM Period 2 were paid by CAT 

LLC to Grant Thornton. During FAM 

Period 2, Grant Thornton performed a 

financial statement audit for CAT LLC 

as an independent accounting firm. 

(j) Public Relations Costs 

The public relations costs of $41,940 

represent the fees paid to Peak 

Strategies during FAM Period 2. CAT 

LLC continued to employ Peak 

Strategies during FAM Period 2 based 

on, among other things, their expertise 

and history with the project. The fee 

rates for this firm were in line with 

market rates for these types of services. 

The fees for these services during FAM 

Period 2 were paid by CAT LLC to Peak 

Strategies. During FAM Period 2, Peak 

Strategies continued to provide 

professional communications services to 

CAT, including media relations 

consulting, strategy and execution. 

Specifically, the public relations firm 

provided services related to 

communications with the public 

regarding the CAT, including 

monitoring developments related to the 

CAT (e.g., congressional efforts, public 

comments and reaction to proposals, 

press coverage of the CAT), reporting 

such developments to CAT LLC, and 

drafting and disseminating 

communications to the public regarding 

such developments as well as reporting 

on developments related to the CAT 

(e.g., amendments to the CAT NMS 

Plan). As discussed above, such public 

relations services were important for 

various reasons, including monitoring 

comments made by market participants 

about the CAT and understanding issues 

related to the CAT discussed on the 

public record. By engaging a public 

relations firm, CAT LLC was better 

positioned to understand and address 

CAT matters to the benefit of all market 

participants. 

(iv) Historical CAT Costs Incurred in 

Financial Accountability Milestone 

Period 3 

Historical CAT Costs 1 would include 

costs incurred by CAT and already 

funded by the Participants during 

Period 3 of the Financial Accountability 

Milestones (‘‘FAM Period 3’’),59 which 

covers the period from January 1, 2021– 

December 31, 2021. Historical CAT 

Costs 1 would include costs for FAM 

Period 3 of $144,415,268. The 

Participants would remain responsible 

for one-third of this cost (which they 

have previously paid) ($48,138,423), 

and Industry Members would be 

responsible for the remaining twothirds, with CEBBs paying one-third 

($48,138,423) and CEBSs paying onethird ($48,138,423). The following table 

breaks down Historical CAT Costs 1 for 

FAM Period 3 into the categories set 

forth in Section 11.3(b)(iii)(B)(II) of the 

CAT NMS Plan. 


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Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 10867 

60As discussed above, with respect to certain 

costs that were ‘‘appropriately excluded,’’ such 

excluded costs relate to the amortization of 

capitalized technology costs, which are amortized 

over the life of the Plan Processor Agreement. As 

such costs have already been otherwise reflected in 

the filing, their inclusion would double count the 

capitalized technology costs. In addition, 

amortization is a non-cash expense. 61The costs described in this table of costs for 

FAM Period 3 were calculated based upon CAT 

LLC’s review of applicable bills and invoices and 

related financial statements. CAT LLC financial 

statements are available on the CAT website. 

62See definition of ‘‘Full Availability and 

Regulatory Utilization of Transactional Database 

Functionality’’ in Section 1.1 of the CAT NMS Plan. 

63Note that the volume data described in this 

table does not include CAIS data. 

By the completion of FAM Period 3, 

CAT LLC was required to implement the 

following requirements with regard the 

CAT: 

(a) reporting to the Order Audit Trail 

System (‘‘OATS’’) is no longer required for 

new orders; (b) Industry Member reporting 

for equities transactions and simple 

electronic options transactions, excluding 

Customer Account Information, Customer-ID, 

and Customer Identifying Information, with 

sufficient intra-firm linkage, inter-firm 

linkage, national securities exchange linkage, 

trade reporting facilities linkage, and 

representative order linkages (including any 

equities allocation information provided in 

an Allocation Report) to permit the 

Participants and the Commission to analyze 

the full lifecycle of an order across the 

national market system, from order 

origination through order execution or order 

cancellation, is developed, tested, and 

implemented at a 5% Error Rate or less; (c) 

Industry Member reporting for manual 

options transactions and complex options 

transactions, excluding Customer Account 

Information, Customer-ID, and Customer 

Identifying Information, with all required 

linkages to permit the Participants and the 

Commission to analyze the full lifecycle of an 

order across the national market system, from 

order origination through order execution or 

order cancellation, including any options 

allocation information provided in an 

Allocation Report, is developed, tested, and 

fully implemented; (d) the query tool 

functionality required by Section 

6.10(c)(i)(A) and Appendix D, Sections 8.1.1– 

8.1.3, Section 8.2.1, and Section 8.5 

incorporates the data described in conditions 

(b)–(c) and is available to the Participants 

and to the Commission; and (e) the 

requirements of Section 6.10(a) are met.62

CAT LLC completed the requirements 

of FAM Period 3 by December 31, 2021. 

The following describes the costs for 

each of the categories for FAM Period 3. 

(a) Technology Costs—Cloud Hosting 

Services 

CAT LLC continued to utilize AWS in 

FAM Period 3 to provide a broad array 

of cloud hosting services for the CAT, 

including data ingestion, data 

management, and analytic tools. AWS 

continued to provide storage services, 

databases, compute services and other 

services (such as networking, 

management tools and DevOps tools), as 

well as various environments for CAT, 

such as development, performance 

testing, test, and production 

environments, during the FAM 3 Period. 

Accordingly, the $94,574,759 in 

technology costs for cloud hosting 

services represents costs incurred for 

services provided by AWS, as the cloud 

services provider, during FAM Period 3. 

The fee arrangement for AWS described 

above for the earlier periods continued 

in place during FAM Period 3 pursuant 

to the Plan Processor Agreement. 

The cost for AWS cloud services for 

the CAT continued to be a function of 

the volume of CAT Data. During FAM 

Period 3, the volume of CAT Data 

continued to far exceed the original 

predictions for the CAT as set forth in 

the CAT NMS Plan. During this period, 

data submitted to the CAT included 

options and equities Participant Data, 

Phase 2a, Phase 2b, Phase 2c and Phase 

2d Industry Member Data (including 

certain linkages), SIP Data, Other Data, 

including reference data, and LTID 

account information. The following 

chart provides data regarding the 

average daily volume, cumulative total 

events, total compute hours and storage 

footprint of the CAT during FAM Period 

3.63


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Operating Expense Historical CAT Costs for 

FAM Period 3** 

Capitalized Developed $10,763,372 

Technology Costs* 

Technolo!!V Costs: $123 639.402 

Cloud Hosting Services $94.574 759 

Operating Fees $23,106 091 

CAIS Operating Fees $5 562,383 

Change Request Fees $396,169 

Legal $6,333,248 

Consulting $1,408,209 

Insurance $1,582,714 

Professional and administration $595,923 

Public relations $92.400 

Total Operatin2 Expenses $144,415,268 

* The non-cash amortization of these capitalized developed technology 

costs of $5,108,044 incurred during FAM Period 3 have been appropriately 

excluded from the above table.60 

** See footnote 61.61 
10868 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

(b) Technology Costs—Operating Fees 

Pursuant to the Plan Processor 

Agreement discussed above, FCAT 

continued in its role as the Plan 

Processor for the CAT during FAM 

Period 3. Accordingly, the $23,106,091 

in technology costs for operating fees 

represent costs incurred for the services 

provided by FCAT under the Plan 

Processor Agreement during FAM 

Period 3. The fee arrangement for FCAT 

described above with regard to the prior 

Periods continued in place during FAM 

Period 3 pursuant to the Plan Processor 

Agreement. During FAM Period 3, 

FCAT’s activities with respect to the 

CAT included the following: 

• Facilitated Phase 2c and Phase 2d 

testing for Industry Members; 

• Oversaw creation of linkages of the 

lifecycle of order events based on the 

received data through Phase 2d; 

• Addressed compliance items, 

including drafting CAT policies and 

procedures, and addressing Regulation 

SCI requirements; 

• Provided support to the Operating 

Committee, the Compliance 

Subcommittee and CAT working 

groups; 

• Assisted with interpretive efforts 

and exemptive requests regarding the 

CAT NMS Plan; 

• Oversaw the security of the CAT; 

• Monitored the operation of the 

CAT, including with regard to 

Participant and Industry Member 

reporting; 

• Provided support to subcontractors 

under the Plan Processor Agreement; 

• Provided support in discussions 

with the Participants and the SEC and 

its staff; 

• Operated the FINRA CAT Helpdesk; 

• Facilitated communications with 

the industry, including via FAQs, CAT 

Alerts, meetings, presentations and 

webinars; 

• Administered the CAT website and 

all of its content; and 

• Provided technical support and 

assistance with connectivity, data 

access, and user support, including the 

use of CAT Data and query tools, for 

Participants and the SEC staff. 

(c) Technology Costs—CAIS Operating 

Fees 

Pursuant to the Plan Processor 

Agreement with FCAT discussed above, 

Kingland continued in its role as a 

subcontractor for the development and 

implementation of CAIS during FAM 

Period 3. Accordingly, the $5,562,383 in 

technology costs for CAIS operating fees 

represents costs incurred for services 

provided by Kingland during FAM 

Period 3. The fee arrangement for 

Kingland described above with regard to 

the prior Periods continued in place 

during FAM Period 3 pursuant to the 

Plan Processor Agreement. During FAM 

Period 3, Kingland continued the 

development of the CAIS Technical 

Specifications and building of CAIS. In 

addition, Kingland continued to work 

on the CAIS Technical Specifications 

and build related to the CCID 

Alternative, as well as the acceleration 

of the reporting of LTIDs. The full CAIS 

Technical Specifications were 

published during FAM Period 3. 

(d) Technology Costs—Change Request 

Fees 

During FAM Period 3, CAT LLC 

engaged FCAT to pursue certain change 

requests in accordance with the Plan 

Processor Agreement. The change 

request costs were paid by CAT LLC to 

FCAT. Specifically, during FAM Period 

3, CAT incurred costs of $396,169 

related to change requests, including the 

following: (1) the addition of 

functionality for exchange Participants 

to report rejected messages to the CAT; 

(2) the migration of MIRS query engine 

to AWS to reduce operational costs and 

increase resiliency; and (3) updating the 

Participant Technical Specifications to 

allow for two-sided Participant option 

quote reporting. 


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Date Range: 1/1/21 to 4/25/21 Date Range: 4/26/21/ to 

12/31/21 * 

Parti ns 135 136 

Industry Member - 20 19 

E uities 

Industry Member - 2 2 

0 

uities 129 137 

Average Total Daily 297 304 

Volume 

* Start of Participant Equities in CAT format and SIP Equities on 4/26/21 
Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 10869 

64Securities Exchange Act Release. No. 91487 

(April 6, 2021), 86 FR 19054 (April 12, 2021). 

65Securities Exchange Act Release. No. 93484 

(October 29, 2021), 86 FR 60933 (November 4, 

2021). 

66See Securities Exchange Act Release No. 90688 

(December 16, 2020), 85 FR 83634 (December 22, 

2020); and Securities Exchange Act Release No. 

90689 (December 16, 2020), 85 FR 83667 (December 

22, 2020) (collectively, the ‘‘2020 Orders’’). 

67As discussed above with regard to Pillsbury’s 

work on liability matters, liability issues related to 

the CAT are important matters that needed to be 

resolved and clarified. CAT LLC’s efforts to seek 

such resolution and clarity work to the benefit of 

Participants, Industry Members and other market 

participants. Moreover, such activity is a necessary 

part of the operation of the CAT. 

(e) Technology Costs—Capitalized 

Developed Technology Costs 

Capitalized developed technology 

costs for FAM Period 3 of $10,763,372 

include capitalizable application 

development costs incurred in the 

development of the CAT by FCAT. Such 

costs include (1) development costs 

incurred during the application 

development stage to meet various 

agreed-upon milestones regarding the 

CAT, as defined in the agreement 

between CAT LLC and the Plan 

Processor, including the transition from 

equity data received by FINRA pursuant 

to various regulatory services 

agreements between FINRA and 

Participant exchanges to the equity CAT 

Data, and the completion of the Industry 

Member Phase 2d options manual and 

complex orders go-live requirements; (2) 

costs related to certain modifications, 

upgrades, or other changes to the CAT 

that were not contemplated by the 

agreement between CAT LLC and the 

Plan Processor, including costs related 

to off-exchange volume concentration, 

Participant 24-hour trading and an 

external metastore; (3) implementation 

fees; and (4) license fees. 

(f) Legal Costs 

The legal costs of $6,333,248 

represent the fees paid for legal services 

provided by three law firms, 

WilmerHale, Pillsbury and Covington & 

Burling LLP (‘‘Covington’’) during FAM 

Period 3. 

Law Firm: WilmerHale. CAT LLC 

continued to employ WilmerHale 

during FAM Period 3 based on, among 

other things, their expertise and long 

history with the project. The hourly fee 

rates for this law firm were in line with 

market rates for specialized legal 

expertise. The legal fees during FAM 

Period 3 were paid by CAT LLC to 

WilmerHale. During FAM Period 3, the 

legal assistance provided by 

WilmerHale included providing legal 

advice regarding the following: 

• Assisted with the development of 

the CAT funding model and drafting 

related amendments and rule filings; 

• Drafted exemptive requests from 

CAT NMS Plan requirements, including, 

for example, verbal activity regarding 

Phase 2c cutover, error reports, error 

corrections, Phase 2d Reporting, unique 

Order-ID on internal route events, 

reporting addresses, recordkeeping, and 

unique CCID for foreign customers; 

• Provided interpretations related to 

CAT NMS Plan requirements, including 

with regard to the Financial 

Accountability Milestone amendment, 

FAQs, CAIS requirements, ADF, and 

technical specifications; 

• Provided support for the Operating 

Committee, Compliance Subcommittee, 

working groups and Leadership Team, 

including with regard to meetings with 

the SEC staff; 

• Assisted with the Implementation 

Plan and Quarterly Progress Reports 

required pursuant to Section 6.6(c) of 

the CAT NMS Plan; 

• Drafted SRO rule filings related to 

the CAT Compliance Rule; 

• Provided support for Compliance 

Subcommittee, including with regard to 

response to OCIE examinations and the 

annual assessment; 

• Provided guidance regarding SEC’s 

proposed security amendments to CAT 

NMS Plan; 

• Provided guidance regarding SRO 

rule filings for the retirement of systems; 

• Provided legal support for 

Operating Committee meetings, 

including drafting resolutions and other 

materials and voting advice; 

• Provided assistance with change 

requests; 

• Provided guidance and regulatory 

support for litigation regarding the 

response to SEC’s exemptive orders; 

• Assisted with communications with 

the industry, includng CAT Alerts and 

presentations; 

• Provided guidance regarding the 

confidentiality of CAT Data, including 

third-party information requests; 

• Assisted with cost management 

analysis and proposals; and 

• Provided support with regard to 

discussions with the SEC and its staff, 

including with respect to addressing 

interpretive and implementation issues. 

Law Firm: Pillsbury. CAT LLC 

continued to employ Pillsbury during 

FAM Period 3 based on, among other 

things, their expertise and history with 

the project. The hourly fee rates for this 

law firm were in line with market rates 

for specialized legal expertise. The legal 

fees during FAM Period 3 were paid by 

CAT LLC to Pillsbury. During FAM 

Period 3, Pillsbury provided legal 

assistance to the CAT regarding the CAT 

Reporter Agreement. During this period, 

Pillsbury advised CAT LLC regarding 

applicable legal matters, reviewed and 

responded to comment letters regarding 

the proposed Plan amendment, 

participated in meetings with senior 

SEC staff, responded to comments 

submitted following the SEC’s April 6, 

2021 order instituting proceedings,64

and assessed legal matters regarding the 

SEC’s October 29, 2021 order denying 

the proposed Plan amendment.65

Law Firm: Covington. CAT LLC hired 

Covington for litigation with the SEC 

regarding certain exemptive orders 

related to the CAT, including orders 

issued in December 2020.66 CAT LLC 

interviewed this law firm as well as 

other potential law firms, considering a 

variety of factors in its analysis for 

choosing legal assistance, including the 

relevant expertise and fees of the 

potential lawyers. CAT LLC approved 

the engagement of Covington in January 

2021. The fee rates for this law firm, 

which were calculated based on hourly 

rates, were in line with market rates for 

specialized services. The legal fees for 

FAM Period 3 for this firm were paid by 

CAT LLC to Covington. 

After Covington was hired in 2021 

through the end of 2021, the firm 

provided legal assistance regarding the 

litigation with the SEC regarding the 

2020 Orders. These services included 

researching, drafting, and filing motions 

to stay the 2020 Orders and related 

materials in proceedings before the SEC, 

as well as researching, drafting, and 

filing petitions for judicial review of the 

2020 Orders in proceedings before the 

U.S. Court of Appeals for the D.C. 

Circuit. Covington oversaw ongoing 

litigation proceedings on these matters, 

and also supported WilmerHale with 

respect to settlement negotiations with 

the SEC staff regarding the 2020 Orders. 

In addition to these services, CAT 

LLC engaged Covington in November 

2021 to provide assistance with respect 

to the SEC’s disapproval of CAT NMS 

Plan amendments concerning a 

proposed limitation on liability in the 

event of a data breach or similar event. 

Covington provided advice concerning 

CAT’s response to the SEC’s disapproval 

order. This work accounted for a 

minority of Covington’s fees in 2021.67

(g) Consulting Costs 

The consulting costs of $1,408,209 

represent the fees paid to Deloitte as 

project manager during FAM Period 3. 

CAT LLC continued to employ Deloitte 

during FAM Period 3 based on, among 

other things, their expertise and long 

history with the project. The fee rates 

for Deloitte during FAM Period 3 were 

negotiated and in line with market rates 


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10870 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

68 In approving the CAT Funding Model, the 

Commission states that ‘‘the proposed exclusion of 

the ‘Excluded Costs’ from Past CAT Costs is 

reasonable in the Commission’s view because it 

would not require all costs incurred by the 

Participants to be recovered from Industry Members 

through the Historical CAT Assessment, specifically 

excluding those costs related to the delay in the 

start of reporting to the CAT and costs related to 

the conclusion of the relationship with the Initial 

Plan Processor.’’ See CAT Funding Model Approval 

Order, 88 FR 62628, 62663. 

for this type of specialized consulting 

work. The consulting fees during FAM 

Period 3 were paid to Deloitte by CAT 

LLC. CAT LLC reviewed the consulting 

fees each month and approved the 

invoices. During FAM Period 3, 

Deloitte’s CAT-related activities 

included the following: 

• Implemented program operations 

for the CAT project; 

• Provided support to the Operating 

Committee, the Chair of the Operating 

Committee and the Leadership Team, 

including project management support, 

coordination and planning for meetings 

and communications, and interfacing 

with law firms and the SEC; 

• Assisted with cost and funding 

matters for the CAT, including the 

development of the CAT funding model 

and assistance with loans and the CAT 

bank account for CAT funding; 

• Provided support for updating the 

SEC on the progress of the development 

of the CAT; and 

• Provided support for third party 

vendors for the CAT, including FCAT, 

Anchin and the law firms engaged by 

CAT LLC. 

(h) Insurance 

The insurance costs of $1,582,714 

represent the fees paid for insurance 

FAM Period 3. CAT LLC continued to 

maintain cyber security liability 

insurance, directors’ and officers’ 

liability insurance, and errors and 

omissions liability insurance offered by 

USI. After engaging in a process for 

renewing the coverage, CAT LLC 

determined to purchase these insurance 

policies from USI. The annual 

premiums for these policies were 

competitive for the coverage provided. 

The annual premiums were paid by 

CAT LLC to USI. 

(i) Professional and Administration 

Costs 

The professional and administration 

costs of $595,923 represent the fees paid 

to Anchin and Grant Thornton for 

financial services during FAM Period 3. 

Financial Advisory Firm: Anchin. 

CAT LLC continued to employ Anchin 

during FAM Period 3 based on, among 

other things, their expertise and history 

with the project. The hourly fee rates for 

this firm were in line with market rates 

for these financial advisory services. 

The fees for these services during FAM 

Period 3 were paid by CAT LLC to 

Anchin. During FAM Period 3, Anchin 

provided a variety of services, including 

the following: 

• Updated and maintained internal 

controls; 

• Provided cash management and 

treasury functions; 

• Facilitated bill payments; 

• Provided monthly bookkeeping; 

• Reviewed vendor invoices and 

documentation in support of cash 

disbursements; 

• Provided accounting research and 

consultations on various accounting, 

financial reporting and tax matters; 

• Addressed not-for-profit tax and 

accounting considerations; 

• Prepared tax returns; 

• Addressed various accounting, 

financial reporting and operating 

inquiries from Participants; 

• Developed and maintained 

quarterly and annual operating and 

financial budgets, including budget to 

actual fluctuation analyses; 

• Supported compliance with the 

CAT NMS Plan; 

• Worked with and provided support 

to the Operating Committee and various 

CAT working groups; 

• Prepared monthly, quarterly and 

annual financial statements; 

• Supported the annual financial 

statement audits by an independent 

auditor; 

• Reviewed historical costs from 

inception; and 

• Provided accounting and financial 

information in support of SEC filings. 

Accounting Firm: Grant Thornton. 

CAT LLC continued to employ the 

accounting firm Grant Thornton during 

FAM Period 3 based on, among other 

things, their expertise and cumulative 

knowledge of CAT LLC. CAT LLC 

determined that Grant Thornton was 

well qualified for its role and that its 

fixed fee rates were in line with market 

rates for these accountant services. The 

fees for these services during FAM 

Period 3 were paid by CAT LLC to Grant 

Thornton. During FAM Period 3, Grant 

Thornton provided audited financial 

statements for CAT LLC. 

(j) Public Relations Costs 

The public relations costs of $92,400 

represent the fees paid to Peak 

Strategies during FAM Period 3. CAT 

LLC continued to employ Peak 

Strategies during FAM Period 3 based 

on, among other things, their expertise 

and history with the project. The fee 

rates for this firm were in line with 

market rates for these types of services. 

The fees for these services during FAM 

Period 3 were paid by CAT LLC to Peak 

Strategies. During FAM Period 3, Peak 

Strategies continued to provide 

professional communications services to 

CAT, including media relations 

consulting, strategy and execution. 

Specifically, the public relations firm 

provided services related to 

communications with the public 

regarding the CAT, including 

monitoring developments related to the 

CAT (e.g., congressional efforts, public 

comments and reaction to proposals, 

press coverage of the CAT), reporting 

such developments to CAT LLC, and 

drafting and disseminating 

communications to the public regarding 

such developments as well as reporting 

on developments related to the CAT 

(e.g., amendments to the CAT NMS 

Plan). As discussed above, such public 

relations services were important for 

various reasons, including monitoring 

comments made by market participants 

about the CAT and understanding issues 

related to the CAT discussed on the 

public record. By engaging a public 

relations firm, CAT LLC was better 

positioned to understand and address 

CAT matters to the benefit of all market 

participants. 

(v) Excluded Costs 

Historical CAT Costs 1 would not 

include two categories of CAT costs 

(‘‘Excluded Costs’’): (1) $48,874,937, 

which are all CAT costs incurred from 

November 15, 2017 through November 

15, 2018; and (2) $14,749,362 of costs 

related to the termination of the 

relationship with the Initial Plan 

Processor. The Participants would 

remain responsible for 100% of these 

costs, which total $63,624,299. CAT 

LLC determined that it was reasonable 

to exclude these Excluded Costs from 

Historical CAT Costs 1 because the 

excluded costs relate to the delay in the 

start of reporting to the CAT and the 

conclusion of the relationship with the 

Initial Plan Processor.68

First, Historical CAT Costs 1 would 

not include $14,749,362 of costs related 

to the conclusion of the relationship 

with the Initial Plan Processor. Such 

costs include costs related to the 

American Arbitration Association, the 

legal assistance of Pillsbury with regard 

to the arbitration with Thesys CAT, and 

the settlement costs related to the 

arbitration with Thesys CAT. The 

Participants would remain responsible 

for 100% of these $14,749,362 in costs. 

Second, the Historical CAT Costs 

would exclude all CAT costs incurred 

from November 15, 2017 through 

November 15, 2018. CAT LLC 

determined to exclude all costs during 


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69The costs described in this table of Excluded 

Costs were calculated based upon CAT LLC’s 

review of applicable bills and invoices and related 

financial statements. CAT LLC financial statements 

are available on the CAT website. 

this one-year period of $48,874,937 from 

fees charged to Industry Members due to 

the delay in the start of reporting to the 

CAT. The Participants would remain 

responsible for 100% of these 

$48,874,937 in costs. The following 

table breaks down these costs into the 

categories set forth in Section 

11.3(b)(iii)(B)(II) of the CAT NMS Plan. 

The following provides additional 

detail regarding the Excluded Costs. 

(a) Technology Costs—Cloud Hosting 

Services, Operating Fees, CAIS 

Operating Fees and Change Request 

Fees 

CAT LLC did not incur technology 

costs related to the categories of cloud 

hosting services, operating fees, CAIS 

operating fees or change requests during 

the period from November 15, 2017 

through November 15, 2018. 

(b) Technology Costs—Capitalized 

Developed Technology Costs 

Capitalized developed technology 

costs for the period from November 15, 

2017 through November 15, 2018 

include capitalizable application 

development costs of $37,852,083 

incurred in the development of the CAT 

by the Initial Plan Processor. Such costs 

include development costs incurred 

during the application development 

stage to meet various agreed-upon 

milestones regarding the CAT, as 

defined in the agreement between CAT 

LLC and the Initial Plan Processor. Such 

costs include costs related to Industry 

Member technical specifications for 

orders and transactions, the system 

security plan, testing and production for 

Participant CAT reporting, third-party 

security assessment and response, query 

portal, onboarding of the Chief 

Information Security Officer, and 

ingestion of FINRA TRF data and 

FINRA data related to halts and 

corporate actions. 

(c) Legal Costs 

The legal costs of $6,143,278 

represent the fees paid to WilmerHale 

for legal services from November 15, 

2017 through November 15, 2018. 

During this period, WilmerHale 

provided legal assistance to the CAT 

including with regard to the following: 

• Provided legal support for the 

governance of the CAT, including 

governance support for the Operating 

Committee, Advisory Committee, 

Compliance Subcommittee, and CAT 

working groups; 

• Assisted with the development of 

the CAT funding model and drafted 

related amendments of the CAT NMS 

Plan; 

• Provided assistance related to CAT 

security; 

• Drafted exemptive requests, 

including requests related to PII; 

• Assisted with the Implementation 

Plan required pursuant to Section 

6.6(c)(i) of the CAT NMS Plan; 

• Provided interpretations of and 

related to the CAT NMS Plan; 

• Provided advice with regard to 

regulator access to the CAT; 

• Assisted with the Plan Processor 

transition; 

• Provided assistance regarding 

communications with the industry 

regarding the CAT; 

• Provided advice regarding 

Customer Account Information and PII; 

• Provided support for litigation 

related to SEC exemptive orders; and 

• Provided support with regard to 

discussions with the SEC and its staff, 

including with respect to addressing 

interpretative and implementation 

issues. 

(d) Consulting Costs 

The consulting costs of $4,452,106 

represent the fees paid to Deloitte for 

their role as project manager for the 

CAT from November 15, 2017 through 

November 15, 2018. During this period, 

Deloitte engaged in the following 

activities with respect to the CAT: 

• Implemented program operations 

for the CAT project; 

• Provided governance support to the 

Operating Committee, including support 

for Subcommittees and working groups 

of the Operating Committee (e.g., 

Compliance Subcommittee, Cost and 

Funding Working Group, Technical 

Working Group, Industry Outreach 

Working Group, Security Working 

Group and Steering Committee); 

• Assisted with cost and funding 

issue for the CAT, including the 

development of the CAT funding model 


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Operating Expense Excluded Costs for 

November 15, 2017 -

November 15, 2018* 

Capitalized Developed $37,852,083 

Technology Costs 

Technolo!!V Costs: - Cloud Hosting Services - Operating Fees - CAIS Operating Fees - Change Request Fees - Legal $6,143,278 

Consulting $4,452,106 

Insurance - Professional and administration $340,145 

Public relations $87,325 

Total Operatine: Expenses $48,874,937 

* See footnote 69. 69 
10872 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

70Section 11.3(b)(i)(D)(I) and Section 

11.3(b)(iii)(B)(II) of the CAT NMS Plan. 

71Section 11.3(b)(i)(D)(I) of the CAT NMS Plan. 

In the CAT Funding Model Approval Order, the 

SEC stated that ‘‘[i]n the Commission’s view, it is 

reasonable for the Operating Committee to establish 

the length of the Historical Recovery Period to be 

no less than 24 months and no more than five 

years.’’ CAT Funding Model Approval Order, 88 FR 

62628, 62664. 

72As the SEC noted in the CAT Funding Model 

Approval Order, recent Section 31 fees ranged from 

$0.00009 per share to $0.0004 per share. CAT 

Funding Model Approval Order, 88 FR 62628, 

62682. 

73The total CAT costs for 2022 were 

approximately $186 million and the total CAT costs 

for 2023 are estimated to be approximately $233 

million. 

74Section 11.3(b)(iii)(B)(II)(C) of the CAT NMS 

Plan. 

75Section 11.3(b)(i)(E) of the CAT NMS Plan. 

and assistance with loans and the CAT 

bank account for CAT funding; 

• Provided support for updating the 

SEC on the progress of the development 

of the CAT; and 

• Provided active planning and 

coordination with and support for the 

Initial Plan Processor with regard to the 

development of the CAT, and reported 

to the Participants on the progress. 

(e) Insurance 

CAT LLC did not incur costs related 

to insurance during the period from 

November 15, 2017 through November 

15, 2018. 

(f) Professional and Administration 

Costs 

The professional and administration 

costs of $340,145 represent the fees paid 

to Anchin, Exegy and RSM from 

November 15, 2017 through November 

15, 2018. 

Financial Advisory Firm: Anchin. 

From the commencement of its 

engagement in April 2018 through 

November 15, 2018, Anchin engaged in 

the following activities with respect to 

the CAT: 

• Developed, updated and 

maintained internal controls; 

• Provided cash management and 

treasury functions; 

• Facilitated bill payments; 

• Provided monthly bookkeeping; 

• Reviewed vendor invoices and 

documentation in support of cash 

disbursements; 

• Provided accounting research and 

consultations on various accounting, 

financial reporting and tax matters; 

• Addressed not-for-profit tax and 

accounting considerations; 

• Prepared tax returns; 

• Addressed various accounting, 

financial reporting and operating 

inquiries from Participants; 

• Developed and maintained 

quarterly and annual operating and 

financial budgets, including budget to 

actual fluctuation analyses; 

• Addressed accounting and financial 

matters relating to the transition from 

CAT NMS, LLC to Consolidated Audit 

Trail, LLC, including supporting the 

dissolution of CAT NMS, LLC; 

• Supported compliance with the 

CAT NMS Plan; 

• Worked with and provided support 

to the Operating Committee and various 

CAT working groups; 

• Prepared monthly, quarterly and 

annual financial statements; 

• Supported the annual financial 

statement audits by an independent 

auditor; 

• Reviewed historical costs from 

inception; and 

• Provided accounting and financial 

information in support of SEC filings. 

Market Data Provider: Exegy. From 

July 2018 through November 15, 2018, 

CAT LLC purchased market data from 

Exegy (as described in more detail 

above). 

Security Assessment: RSM. From 

October 2018 through November 15, 

2018, CAT LLC incurred costs for RSM’s 

performance of a security assessment (as 

described in more detail above). 

(g) Public Relations Costs 

The public relations costs of $87,325 

represent the fees paid to Sloane from 

November 15, 2017 through November 

15, 2018. From the commencement of 

its engagement in March 2018 through 

November 15, 2018, Sloane provided 

professional communications services to 

CAT, including media relations 

consulting, strategy and execution. 

Specifically, Sloane provided services 

related to communications with the 

public regarding the CAT, including 

monitoring developments related to the 

CAT (e.g., congressional efforts, public 

comments and reaction to proposals, 

press coverage of the CAT), reporting 

such developments to CAT LLC, and 

drafting and disseminating 

communications to the public regarding 

such developments as well as reporting 

on developments related to the CAT 

(e.g., amendments to the CAT NMS 

Plan). 

(C) Historical Recovery Period 1 

Under the CAT NMS Plan, the 

Operating Committee is required to 

reasonably establish the length of the 

Historical Recovery Period used in 

calculating each Historical Fee Rate 

based upon the amount of the Historical 

CAT Costs to be recovered by the 

Historical CAT Assessment, and to 

describe the reasons for its length.70 The 

Historical Recovery Period used in 

calculating the Historical Fee Rate may 

not be less than 24 months or more than 

five years.71 The Operating Committee 

has determined to establish a Historical 

Recovery Period 1 of 24 months for 

Historical CAT Assessment 1. 

The Operating Committee determined 

that the length of Historical Recovery 

Period 1 appropriately weighs the need 

for a reasonable Historical Fee Rate 1 

that spreads the Historical CAT Costs 

over an appropriate amount of time and 

the need to repay the loans to the 

Participants in a timely fashion. The 

Operating Committee determined that 

24 months for Historical Recovery 

Period 1 would establish a fee rate that 

is lower than other transaction-based 

fees, including fees assessed pursuant to 

Section 31.72 In addition, in establishing 

a Historical Recovery Period of 24 

months, the Operating Committee 

recognized that the total costs for 

Historical CAT Assessment 1 were less 

than the total costs for 2022 and 2023,73

and therefore it would be reasonable 

and appropriate to recover costs subject 

to this filing over an approximate twoyear period. Furthermore, the Operating 

Committee notes that 24 months is 

appropriate because it is not currently 

proposing that Industry Members be 

required to pay additional CAT fees 

with regard to another Historical CAT 

Assessment or CAT Fees with regard to 

Prospective CAT Costs at the same time. 

The length of the Historical Recovery 

Period 1 and the reasons for its length 

are provided in this filing in accordance 

with the requirement in the CAT NMS 

Plan to provide such information in a 

fee filing for a Historical CAT 

Assessment.74

(D) Projected Total Executed Equivalent 

Share Volume 

The calculation of Historical Fee Rate 

1 also requires the determination of the 

projected total executed equivalent 

share volume of transactions in Eligible 

Securities for Historical Recovery Period 

1. Under the CAT NMS Plan, the 

Operating Committee is required to 

‘‘reasonably determine the projected 

total executed equivalent share volume 

of all transactions in Eligible Securities 

for each Historical Recovery Period 

based on the executed equivalent share 

volume of all transactions in Eligible 

Securities for the prior twelve 

months.’’ 75 The Operating Committee is 

required to base its projection on the 

prior twelve months, but it may use its 

discretion to analyze the likely volume 

for the upcoming year. Such discretion 

would allow the Operating Committee 

to use its judgment when estimating 

projected total executed equivalent 

share volume if the volume over the 


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76See CAT Funding Model Approval Order, 88 

FR 62628, 62664. 

77This projection was calculated by multiplying 

3,842,861,347,279.44 executed equivalent shares by 

two. 

78Section 11.3(b)(iii)(B)(II)(D) of the CAT NMS 

Plan. 

79 In approving the CAT Funding Model, the 

Commission stated that ‘‘[t]he calculation of the 

Historical Fee Rate by dividing the Historical CAT 

Costs by the projected total executed equivalent 

share volume of all transactions in Eligible 

Securities for the Historical Recovery Period is 

reasonable.’’ See CAT Funding Model Approval 

Order, 88 FR 62628, 62664. 

80Section 11.3(b)(iii)(B)(II)(A) of the CAT NMS 

Plan. 

81Section 11.3(b)(ii) of the CAT NMS Plan. 

82See supra note 80. In approving the CAT 

Funding Model, the Commission stated that ‘‘[t]he 

proposed allocation of the Historical CAT 

Assessment solely to CEBSs and CEBBs, and 

ultimately Industry Members, is reasonable. The 

Historical CAT Assessment will still be divided into 

thirds,’’ as the Participants’ one-third share of 

Historical CAT Costs will be paid by the 

cancellation of loans made to the Company. CAT 

Funding Model Approval Order, 88 FR 62628, 

62666. 

83See Section 11.3(b)(iii)(A) of the CAT NMS 

Plan. 

84See proposed paragraph (a)(1)(A)(ii) of 

proposed Rule 6897. 

85Section 11.3(b)(i)(D)(II) of the CAT NMS Plan. 

86 In approving the CAT Funding Model, the 

Commission stated that ‘‘[i]n the Commission’s 

view, it is reasonable for Industry Members to be 

charged a Historical CAT Assessment until all 

Historical CAT Costs for the Historical CAT 

Assessment are collected.’’ See CAT Funding Model 

Approval Order, 88 FR 62628, 62665. 

87Section 11.3(b)(iii)(A) of the CAT NMS Plan. 

prior twelve months was unusual or 

otherwise unfit to serve as the basis of 

a future volume estimate.76

The total executed equivalent share 

volume of transactions in Eligible 

Securities for the period from December 

2022 through November 2023 was 

3,842,861,347,279.44 executed 

equivalent shares. The Operating 

Committee has determined to calculate 

the projected total executed equivalent 

share volume for the 24 months of 

Historical Recovery Period 1 by 

doubling the executed equivalent share 

volume for the prior 12 months. The 

Operating Committee determined that 

such an approach was reasonable as the 

CAT’s annual executed equivalent share 

volume has remained relatively 

constant. For example, the executed 

equivalent share volume for 2021 was 

3,963,697,612,395 executed equivalent 

shares, and the executed equivalent 

share volume for 2022 was 

4,039,821,841,560.31 executed 

equivalent shares. Accordingly, the 

projected total executed equivalent 

share volume for Historical Recovery 

Period 1 is projected to be 

7,685,722,694,558.88 executed 

equivalent shares.77

The projected total executed 

equivalent share volume of all 

transactions in Eligible Securities for 

Historical Recovery Period 1 and a 

description of the calculation of the 

projection is provided in this filing in 

accordance with the requirement in the 

CAT NMS Plan to provide such 

information in a fee filing for a 

Historical CAT Assessment.78

(E) Historical Fee Rate 1 

Historical Fee Rate 1 would be 

calculated by dividing Historical CAT 

Costs 1 by the reasonably projected total 

executed equivalent share volume of all 

transactions in Eligible Securities for 

Historical Recovery Period 1, as 

described in detail above.79 Specifically, 

Historical Fee Rate 1 would be 

calculated by dividing $337,688,610 by 

7,685,722,694,558.88. As a result, the 

Historical Fee Rate 1 would be 

$0.0000439371316687066 per executed 

equivalent share. Historical Fee Rate 1 

is provided in this filing in accordance 

with the requirement in the CAT NMS 

Plan to provide the Historical Fee Rate 

in a fee filing for a Historical CAT 

Assessment.80

(3) Past CAT Costs and Participants 

Participants would not be required to 

pay any fees associated with Historical 

CAT Assessment 1 as the Participants 

previously have paid all Past CAT Costs. 

The CAT NMS Plan explains that: 

Because Participants previously have paid 

Past CAT Costs via loans to the Company, 

Participants would not be required to pay 

any Historical CAT Assessment. In lieu of a 

Historical CAT Assessment, the Participants’ 

one-third share of Historical CAT Costs and 

such other additional Past CAT Costs as 

reasonably determined by the Operating 

Committee will be paid by the cancellation 

of loans made to the Company on a pro rata 

basis based on the outstanding loan amounts 

due under the loans.81

The CAT NMS Plan further states that 

‘‘Historical CAT Assessments are 

designed to recover two-thirds of the 

Historical CAT Costs.’’ 82

(4) Monthly Fees 

CEBBs and CEBSs would be required 

to pay fees for Historical CAT 

Assessment 1 on a monthly basis for the 

period in which Historical CAT 

Assessment 1 is in effect.83 A CEBB or 

CEBS’s fee for each month would be 

calculated based on the transactions in 

Eligible Securities executed by the 

CEBB or CEBS from the prior month.84

Proposed paragraph (a)(1)(A)(i) of Rule 

6897 would state that each CAT 

Executing Broker would receive its first 

invoice in April 2024, and ‘‘would 

receive an invoice each month thereafter 

in which Historical CAT Assessment 1 

is in effect.’’ Proposed paragraph 

(a)(1)(A)(ii) would state that 

‘‘Consolidated Audited Trail, LLC shall 

provide each CAT Executing Broker 

with an invoice for Historical CAT 

Assessment 1 on a monthly basis.’’ In 

addition, proposed paragraph (a)(2)(A) 

states that each CEBB and CEBS is 

required to pay its CAT fees ‘‘each 

month.’’ 

(5) Actual Recovery Period for Historical 

CAT Assessment 1 

The CAT NMS Plan states that, 

‘‘[n]otwithstanding the length of the 

Historical Recovery Period used in 

calculating the Historical Fee Rate, each 

Historical CAT Assessment calculated 

using the Historical Fee Rate will 

remain in effect until all Historical CAT 

Costs for the Historical CAT Assessment 

are collected.’’ 85 Accordingly, 

Historical CAT Assessment 1 will 

remain in effect until all Historical CAT 

Costs 1 have been collected. The actual 

recovery period for Historical CAT 

Assessment 1 may be shorter or longer 

than Historical Recovery Period 1 

depending on the actual executed 

equivalent share volumes during the 

time that Historical CAT Assessment 1 

is in effect.86

(6) Consolidated Audit Trail Funding 

Fees 

To implement Historical CAT 

Assessment 1, FINRA proposes to adopt 

FINRA Rule 6897 (Consolidated Audit 

Trail Funding Fees), including the 

proposed paragraphs described below. 

(A) Historical CAT Assessment 1 

The CAT NMS Plan states that: 

Each month in which a Historical CAT 

Assessment is in effect, each CEBB and each 

CEBS shall pay a fee for each transaction in 

Eligible Securities executed by the CEBB or 

CEBS from the prior month as set forth in 

CAT Data, where the Historical CAT 

Assessment for each transaction will be 

calculated by multiplying the number of 

executed equivalent shares in the transaction 

by one-third and by the Historical Fee Rate 

reasonably determined pursuant to paragraph 

(b)(i) of this Section 11.3.87

Accordingly, based on the factors 

discussed above, FINRA proposes to 

adopt paragraph (a)(1)(A) of FINRA Rule 

6897, which would state that: 

(i) Each CAT Executing Broker shall 

receive its first invoice for Historical CAT 

Assessment 1 in April 2024, which shall set 

forth the Historical CAT Assessment 1 fees 

calculated based on transactions in March 

2024, and shall receive an invoice for 

Historical CAT Assessment 1 for each month 

thereafter in which Historical CAT 

Assessment 1 is in effect. 


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88CAT Funding Model Approval Order at 62658, 

n.658. 

89 Dividing $0.0000439371316687066 by three 

equals $0.00001464571055623553. Rounding 

$$0.00001464571055623553 to six decimal places 

equals $0.000015. 

90Section 11.4 of the CAT NMS Plan. 

91The billing process and system are described in 

CAT Alert 2023–02 as well as the CAT FAQs 

related to the billing of CAT fees, the Industry 

Member CAT Reporter Portal User Guide, the FCAT 

Industry Member Onboarding Guide, the FCAT 

Connectivity Supplement for Industry Members and 

the CAT Billing Webinars (dated September 28, 

2023 and November 7, 2023), each available on the 

CAT website. 

92Section 11.4 of the CAT NMS Plan. 

(ii) Consolidated Audit Trail, LLC shall 

provide each CAT Executing Broker with an 

invoice for Historical CAT Assessment 1 on 

a monthly basis. Each month, such invoices 

shall set forth a fee for each transaction in 

Eligible Securities executed by the CAT 

Executing Broker in its capacity as a CAT 

Executing Broker for the Buyer (‘‘CEBB’’) 

and/or the CAT Executing Broker for the 

Seller (‘‘CEBS’’) (as applicable) from the prior 

month as set forth in CAT Data. The fee for 

each such transaction will be calculated by 

multiplying the number of executed 

equivalent shares in the transaction by the 

fee rate of $0.000015 per executed equivalent 

share. 

(iii) Historical CAT Assessment 1 will 

remain in effect until $225,125,740 (twothirds of Historical CAT Costs 1) are 

collected from CAT Executing Brokers 

collectively, which is estimated to be 

approximately two years, but could be for a 

longer or shorter period of time. Consolidated 

Audit Trail, LLC will provide notice when 

Historical CAT Assessment 1 will no longer 

be in effect. 

(iv) Each CAT Executing Broker shall be 

required to pay each invoice for Historical 

CAT Assessment 1 in accordance with 

paragraph (a)(2) of this Rule. 

As noted in the Plan amendment for 

the CAT Funding Model, ‘‘as a practical 

matter, the fee filing for a Historical 

CAT Assessment would provide the 

exact fee per executed equivalent share 

to be paid for each Historical CAT 

Assessment, by multiplying the 

Historical Fee Rate by one-third and 

describing the relevant number of 

decimal places for the fee rate.88

Accordingly, proposed paragraph 

(a)(1)(A)(ii) of Rule 6897 would set forth 

a fee rate of $0.000015 per executed 

equivalent share. This fee rate is 

calculated by multiplying Historical Fee 

Rate 1 of $0.0000439371316687066 by 

one-third, and rounding the result to 6 

decimal places.89 The Operating 

Committee determined to use six 

decimal places to balance the accuracy 

of the calculation with the potential 

systems and other impracticalities of 

using additional decimal places in the 

calculation. 

The proposed language in paragraph 

(a)(1)(A)(i) would describe when CAT 

Executing Brokers would receive their 

first monthly invoice for Historical CAT 

Assessment 1. Specifically, CAT 

Executing Brokers would receive their 

first monthly invoice for Historical CAT 

Assessment 1 in April 2024 and the fees 

set forth in that invoice would be 

calculated based on transactions 

executed in the prior month, that is, 

transactions executed in March 2024. 

The payment for the first invoice would 

be required within 30 days after the 

receipt of the first invoice (unless a 

longer period is indicated), as described 

in proposed paragraph (a)(2)(B) of 

proposed Rule 6897. 

Proposed paragraph (a)(1)(A)(i) also 

would describe the monthly cadence of 

the invoices for Historical CAT 

Assessment 1. Specifically, after the first 

invoices are provided to CAT Executing 

Brokers in April 2024, invoices will be 

sent to CAT Executing Brokers each 

month thereafter while Historical CAT 

Assessment 1 is in effect. 

Proposed paragraph (a)(1)(A)(ii) 

would describe the invoices for 

Historical CAT Assessment 1. Proposed 

paragraph (a)(1)(A)(ii) would state that 

‘‘Consolidated Audit Trail, LLC shall 

provide each CAT Executing Broker 

with an invoice for Historical CAT 

Assessment 1 on a monthly basis.’’ 

Proposed paragraph (a)(1)(A)(ii) also 

would describe the fees to be set forth 

in the invoices for Historical CAT 

Assessment 1. Specifically, it would 

state that ‘‘[e]ach month, such invoices 

shall set forth a fee for each transaction 

in Eligible Securities executed by the 

CAT Executing Broker in its capacity as 

a CAT Executing Broker for the Buyer 

(‘‘CEBB’’) and/or the CAT Executing 

Broker for the Seller (‘‘CEBS’’) (as 

applicable) from the prior month as set 

forth in CAT Data. The fee for each such 

transaction will be calculated by 

multiplying the number of executed 

equivalent shares in the transaction by 

the fee rate of $0.000015 per executed 

equivalent share.’’ 

Furthermore, proposed paragraph 

(a)(1)(A)(iii) would describe how long 

Historical CAT Assessment 1 would 

remain in effect. It would state that 

‘‘Historical CAT Assessment 1 will 

remain in effect until $225,125,740 

(two-thirds of Historical CAT Costs 1) 

are collected from CAT Executing 

Brokers collectively, which is estimated 

to be approximately two years, but 

could be for a longer or shorter period 

of time.’’ This proposed paragraph 

would further state that ‘‘Consolidated 

Audit Trail, LLC will be [sic] provide 

notice when Historical CAT Assessment 

1 will no longer be in effect.’’ 

Historical CAT Assessment 1 will be 

assessed for all transactions executed in 

each month through the end of the 

month in which two-thirds of Historical 

CAT Costs 1 are assessed, and then CAT 

LLC will provide notice that Historical 

CAT Assessment 1 is no longer in effect. 

Since Historical CAT Assessment 1 is a 

monthly fee based on transaction 

volume from the prior month, Historical 

CAT Assessment 1 may collect more 

than two-thirds of Historical CAT Costs 

1. To the extent that occurs, any excess 

money collected during the final month 

in which Historical CAT Assessment 1 

is in effect will be used to offset future 

fees and/or to fund the reserve for the 

CAT. 

Finally, proposed paragraph 

(a)(1)(A)(iv) sets forth the requirement 

for the CAT Executing Brokers to pay 

the invoices for Historical CAT 

Assessment 1. It would state that 

‘‘[e]ach CAT Executing Broker shall be 

required to pay each invoice for 

Historical CAT Assessment 1 in 

accordance with paragraph (a)(2) of this 

Rule.’’ 

(B) Manner of Payment 

FINRA proposes to adopt paragraph 

(a)(2) of the proposed Rule 6897 

(Consolidated Audit Trail Funding Fees) 

to describe the manner of payment of 

Industry Member CAT fees. The CAT 

NMS Plan requires the Operating 

Committee to establish a system for the 

collection of CAT fees.90 The Plan 

Processor has established a billing 

system for CAT fees.91 Therefore, 

FINRA proposes to require CAT 

Executing Brokers to pay Historical CAT 

Assessment 1 in accordance with such 

system. Accordingly, proposed 

paragraph (a)(2)(A) would state that 

‘‘[e]ach CAT Executing Broker shall pay 

its CAT fees as required pursuant to 

paragraph (a)(1) of this Rule each month 

to the Consolidated Audit Trail, LLC in 

the manner prescribed by the 

Consolidated Audit Trail, LLC.’’ 

(C) Failure To Pay CAT Fees 

The CAT NMS Plan further states 

that: 

Participants shall require each Industry 

Member to pay all applicable fees authorized 

under this Article XI within thirty (30) days 

after receipt of an invoice or other notice 

indicating payment is due (unless a longer 

payment period is otherwise indicated). If an 

Industry Member fails to pay any such fee 

when due (as determined in accordance with 

the preceding sentence), such Industry 

Member shall pay interest on the outstanding 

balance from such due date until such fee is 

paid at a per annum rate equal to the lesser 

of: (a) the Prime Rate plus 300 basis points; 

or (b) the maximum rate permitted by 

applicable law.92


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93Section 11.3(a)(iv)(A) of the CAT NMS Plan. 

94 In approving the CAT Funding Model, the 

Commission stated that, ‘‘[i]n the Commission’s 

view, providing CAT Execut[ing] Brokers 

information regarding the calculation of their CAT 

Fees will aid in transparency and permit CAT 

Execut[ing] Brokers to confirm the accuracy of their 

invoices for CAT Fees.’’ See CAT Funding Model 

Approval Order, 88 FR 62628, 62667. 

95Section 11.3(a)(iv)(B) of the CAT NMS Plan. In 

approving the CAT Funding Model, the 

Commission stated that ‘‘[t]he publication of the 

aggregate executed equivalent share volume and 

aggregate fee is appropriate because it would allow 

Participants and CAT Executing Brokers a highlevel validation of executed volume and fees.’’ See 

CAT Funding Model Approval Order, 88 FR 62628, 

62667. 

96Section 11.3(b)(iii)(B)(III) of the CAT NMS 

Plan. 

97Section 11.6(b) of the CAT NMS Plan. 

98Section 11.6 of the CAT NMS Plan. 

99The Quarterly Progress Reports are available at 

https://www.catnmsplan.com/implementationplan. 

Accordingly, FINRA proposes to add 

this requirement to Rule 6897. Proposed 

paragraph (a)(2)(B) of Rule 6897 would 

state: 

Each CAT Executing Broker shall pay the 

CAT fees required pursuant to paragraph 

(a)(1) of this Rule within 30 days after receipt 

of an invoice or other notice indicating 

payment is due (unless a longer payment 

period is otherwise indicated). If a CAT 

Executing Broker fails to pay any such CAT 

fee when due, such CAT Executing Broker 

shall pay interest on the outstanding balance 

from such due date until such fee is paid at 

a per annum rate equal to the lesser of (i) the 

Prime Rate plus 300 basis points, or (ii) the 

maximum rate permitted by applicable law. 

(7) Historical CAT Assessment Details 

The CAT NMS Plan states that: 

Details regarding the calculation of a CAT 

Executing Broker’s Historical CAT 

Assessment will be provided upon request to 

such CAT Executing Broker. At a minimum, 

such details would include each CAT 

Executing Broker’s executed equivalent share 

volume and corresponding fee by (1) Listed 

Options, NMS Stocks and OTC Equity 

Securities, (2) by transactions executed on 

each exchange and transactions executed 

otherwise than on an exchange, and (3) by 

buy-side transactions and sell-side 

transactions.93

Such information would provide 

CEBBs and CEBSs with the ability to 

understand the details regarding the 

calculation of their Historical CAT 

Assessment.94 CAT LLC will provide 

CAT Executing Brokers with these 

details regarding the calculation of their 

Historical CAT Assessments on their 

monthly invoice for the Historical CAT 

Assessment. 

In addition, CAT LLC will make 

certain aggregate statistics regarding 

Historical CAT Assessments publicly 

available. Specifically, the CAT NMS 

Plan states that, ‘‘[f]or each Historical 

CAT Assessment, at a minimum, CAT 

LLC will make publicly available the 

aggregate executed equivalent share 

volume and corresponding aggregate fee 

by (1) Listed Options, NMS Stocks and 

OTC Equity Securities, (2) by 

transactions executed on each exchange 

and transactions executed otherwise on 

an exchange, and (3) by buy-side 

transactions and sell-side 

transactions.’’ 95 Such aggregate 

statistics will be available on the CAT 

website. Furthermore, CAT LLC will 

make publicly available on the CAT 

website the total amount invoiced each 

month that Historical CAT Assessment 

1 is in effect as well as the total amount 

invoiced for Historical CAT Assessment 

1 for all months since its 

commencement. CAT LLC also will 

make publicly available on the CAT 

website the total costs to be collected 

from Industry Members for Historical 

CAT Assessment 1. By reviewing 

statistics regarding how much has been 

invoiced and how much remains to be 

invoiced for Historical CAT Assessment 

1, Industry Members would have 

sufficient information to reasonably 

track how much longer Historical CAT 

Assessment 1 is likely to be in place. 

(8) Implementation Assistance 

To assist Industry Members with 

compliance with the commencement of 

Historical CAT Assessment 1, CAT LLC 

will make available to CAT Executing 

Brokers four months of mock invoices 

prior to the commencement of Historical 

CAT Assessment 1. Specifically, CAT 

Executing Brokers will receive mock 

invoices based on transaction data from 

November 2023, December 2023, 

January 2024 and February 2024. The 

mock invoices will be in the same form 

as the actual, payable invoices, 

including both the relevant transaction 

data and the corresponding fee. 

However, no payments will be required 

in response to such mock invoices; they 

are to be used solely to assist CAT 

Executing Brokers with the 

development of their processes for 

paying the CAT fees. Such data will 

provide CAT Executing Brokers with a 

preview of the transaction data used in 

creating the invoices for Historical CAT 

Assessment 1 fees, as the data will be 

the same as data provided in actual 

invoices. Such data preview is intended 

to facilitate the payment of Historical 

CAT Assessment 1. 

(9) Financial Accountability Milestones 

The CAT NMS Plan states that ‘‘[n]o 

Participant will make a filing with the 

SEC pursuant to Section 19(b) of the 

Exchange Act regarding any Historical 

CAT Assessment until any applicable 

Financial Accountability Milestone 

described in Section 11.6 has been 

satisfied.’’ 96 The CAT NMS Plan further 

states that ‘‘in all filings submitted by 

the Participants to the Commission 

under Section 19(b) of the Exchange 

Act, to establish or implement PostAmendment Industry Member Fees 

pursuant to this Article, . . . the 

Participants shall clearly indicate 

whether such fees are related to PostAmendment Expenses incurred during 

Period 1, Period 2, Period 3, or Period 

4.’’ 97 As discussed in detail below, all 

applicable Financial Accountability 

Milestones for Historical CAT 

Assessment 1—that is, Period 1, Period 

2 and Period 3 of the Financial 

Accountability Milestones—have been 

satisfied. Furthermore, as discussed 

below, this filing clearly indicates that 

Historical CAT Assessment 1 relates to 

Post-Amendment Expenses incurred 

during Periods 1, 2 and 3 of the 

Financial Accountability Milestones. 

(A) Period 1 of the Financial 

Accountability Milestones 

In accordance with Section 11.6(b) of 

the CAT NMS Plan, Historical CAT 

Assessment 1 seeks to recover costs that 

are related to ‘‘all fees, costs, and 

expenses (including legal and 

consulting fees, costs, and expenses) 

incurred by or for the Company in 

connection with the development, 

implementation and operation of the 

CAT from the effective date of [Section 

11.6 of the CAT NMS Plan] until such 

time as Full Implementation of CAT 

NMS Plan Requirements has been 

achieved’’ 98 (‘‘Post-Amendment 

Expenses’’) incurred during FAM Period 

1. FAM Period 1 began on June 22, 

2020, the effective date of Section 11.6 

of the CAT NMS Plan, and concluded 

on July 31, 2020, the date of Initial 

Industry Member Core Equity and 

Options Reporting. Section 1.1 of the 

CAT NMS Plan defines ‘‘Initial Industry 

Member Core Equity and Options 

Reporting’’ as: 

The reporting by Industry Members 

(excluding Small Industry Members that are 

not OATS reporters) of both: (a) equities 

transaction data, excluding Customer 

Account Information, Customer-ID, and 

Customer Identifying Information; and (b) 

options transaction data, excluding Customer 

Account Information, Customer-ID and 

Customer Identifying Information. 

Under Section 1.1 of the CAT NMS 

Plan, this Financial Accountability 

Milestone is considered complete as of 

the date identified in the Participants’ 

Quarterly Progress Reports.99 As 


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100See CAT Q3 2020 Quarterly Progress Report 

(October 30, 2020), https://catnmsplan.com/sites/ 

default/files/2020-10/CAT-Q3-2020-QPR.pdf and 

Updated CAT Q3 2020 Quarterly Progress Report 

(January 29, 2021), https://catnmsplan.com/sites/ 

default/files/2021-02/CAT-Q3-2020-QPRUpdated.pdf. 

101See Phased Reporting Exemptive Relief Order, 

supra, note 33. Under the CAT NMS Plan as 

adopted, the Participants were required, through 

their Compliance Rules, to require their Large 

Industry Members to commence reporting Industry 

Member Data to the Central Repository by 

November 15, 2018, and to require their Small 

Industry Members to commence reporting Industry 

Member Data to the Central Repository by 

November 15, 2019. See Sections 6.7(a)(v) and (vi) 

of the CAT NMS Plan. The SEC granted exemptive 

relief from these provisions of the CAT NMS Plan 

to allow for the phased implementation of Industry 

Member reporting via five phases addressing the 

reporting requirements for Phase 2a Industry 

Member Data, Phase 2b Industry Member Data, 

Phase 2c Industry Member Data, Phase 2d Industry 

Member Data and Phase 2e Industry Member Data. 

102Securities Exchange Act Rel. No. 88890, 85 FR 

31322, 31330 n.97 (‘‘FAM Adopting Release’’). 

103See Phased Reporting Exemptive Relief Order, 

85 FR 23075, 23076–78. 

104See FAM Adopting Release, 85 FR 31322, 

31330 n.98. 

indicated by the Participants’ Quarterly 

Progress Report for the third quarter of 

2020,100 Initial Industry Member Core 

Equity and Option Reporting was 

completed on schedule on July 22, 2020, 

which is prior to the July 31, 2020 

deadline. 

Under the FAM Period 1 requirement 

of Initial Industry Member Core Equity 

and Options Reporting, Industry 

Members—excluding Small Industry 

Members that are not OATS reporters— 

were required to report two categories of 

data to the CAT: equities transaction 

data and options transaction data (both 

excluding Customer Account 

Information, Customer-ID, and 

Customer Identifying Information) by 

July 31, 2020. Pursuant to exemptive 

relief provided by the Commission, the 

Commission authorized the 

Participants’ Compliance Rules to allow 

core equity reporting for Industry 

Members (Phase 2a) to begin on June 22, 

2020 and core options reporting for 

Industry Members (Phase 2b) to begin 

on July 20, 2020.101

In adopting the FAMs, the 

Commission stated that the equities 

transaction reporting required for FAM 

Period 1 ‘‘is consistent with the 

functionality that the Participants 

describe on the CAT NMS Plan website 

as ‘Production Go-Live for Equities 2a 

file submission and data integrity 

validations.’ ’’ 102 The Phase 2a Industry 

Member Data is described in detail in 

the SEC’s Phased Reporting Exemptive 

Relief Order, and includes the following 

data related to Eligible Securities that 

are equities: 

• All events and scenarios covered by 

OATS, which includes information 

related to the receipt or origination of 

orders, order transmittal, and order 

modifications, cancellations and 

executions; 

• Reportable Events for: (1) 

proprietary orders, including market 

maker orders, for Eligible Securities that 

are equities; (2) electronic quotes in 

listed equity Eligible Securities (i.e., 

NMS stocks) sent to a national securities 

exchange or FINRA’s Alternative 

Display Facility (‘‘ADF’’); (3) electronic 

quotes in unlisted Eligible Securities 

(i.e., OTC Equity Securities) received by 

an Industry Member operating an 

interdealer quotation system (‘‘IDQS’’); 

and (4) electronic quotes in unlisted 

Eligible Securities sent to an IDQS or 

other quotation system not operated by 

a Participant or Industry Member; 

• Firm Designated IDs (‘‘FDIDs’’), 

which Industry Members must report to 

the CAT as required by Sections 

6.3(d)(i)(A) and 6.4(d)(ii)(C) of the CAT 

NMS Plan. 

• Industry Members would be 

required to report all street side 

representative orders, including both 

agency and proprietary orders and mark 

such orders as representative orders, 

except in certain limited exceptions as 

described in the Industry Member 

Technical Specifications; 

• The link between the street side 

representative order and the order being 

represented when: (1) the representative 

order was originated specifically to 

represent a single order received either 

from a customer or another brokerdealer; and (2) there is (a) an existing 

direct electronic link in the Industry 

Member’s system between the order 

being represented and the representative 

order and (b) any resulting executions 

are immediately and automatically 

applied to the represented order in the 

Industry Member’s system; 

• Manual and Electronic Capture 

Time for Manual Order Events; 

• Special handling instructions for 

the original receipt or origination of an 

order during Phase 2a; and 

• When routing an order, whether the 

order was routed as an intermarket 

sweep order (‘‘ISO’’). 

In Phase 2a, Industry Members were 

not required to report modifications of 

a previously routed order in certain 

limited instances, nor were they 

required to report a cancellation of an 

order received from a Customer after the 

order has been executed.103

The Quarterly Progress Report for the 

third quarter of 2020 states that ‘‘Interim 

Step: Production Go-Live for Equities 2a 

file submission and data integrity 

validation (Large Industry Members and 

Small OATS Reporters)’’ was completed 

on June 22, 2020. Accordingly, the FAM 

Period 1 requirement of reporting by 

Industry Members (excluding Small 

Industry Members that are not OATS 

reporters) of ‘‘equities transaction data, 

excluding Customer Account 

Information, Customer-ID, and 

Customer Identifying Information’’ was 

completed on June 22, 2020. 

In adopting the FAMs, the 

Commission stated that the options 

transaction reporting required for FAM 

Period 1 is ‘‘consistent with the 

functionality that the Participants 

describe on the CAT NMS Plan website 

as ‘Production Go-Live for Options 2b 

file submission and data integrity 

validations.’ ’’ 104 The Phase 2b Industry 

Member Data is described in detail in 

the SEC’s Phased Reporting Exemptive 

Relief Order, and includes the Industry 

Member Data related to Eligible 

Securities that are options and related to 

simple electronic option orders, 

excluding electronic paired option 

orders. A simple electronic option order 

is an order to buy or sell a single option 

that is not related to or dependent on 

any other transaction for pricing and 

timing of execution that is either 

received or routed electronically by an 

Industry Member. Electronic receipt of 

an order is defined as the initial receipt 

of an order by an Industry Member in 

electronic form in standard format 

directly into an order handling or 

execution system. Electronic routing of 

an order is the routing of an order via 

electronic medium in standard format 

from one Industry Member’s order 

handling or execution system to an 

exchange or another Industry Member. 

An electronic paired option order is an 

electronic option order that contains 

both the buy and sell side that is routed 

to another Industry Member or exchange 

for crossing and/or price improvement 

as a single transaction on an exchange. 

Responses to auctions of simple orders 

and paired simple orders would be 

reportable in Phase 2b. Furthermore, 

combined orders in options would be 

treated in Phase 2b in the same way as 

equity representative orders are treated 

in Phase 2a. A combined order would 

mean, as permitted by SRO rules, a 

single, simple order in Listed Options 

created by combining individual, simple 

orders in Listed Options from a 

customer with the same exchange origin 

code before routing to an exchange. 

During Phase 2b, the single combined 

order sent to an exchange must be 

reported and marked as a combined 

order, but the linkage to the underlying 


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105See Phased Reporting Exemptive Relief Order, 

85 FR 23075, 23078. 

106See CAT Q4 2020 Quarterly Progress Report 

(January 29, 2021), https://catnmsplan.com/sites/ 

default/files/2021-02/CAT-Q4-2020-QPR.pdf. 

107F For a description of the requirements of 

Phases 2a, see Phased Reporting Exemptive Relief 

Order, supra note 33. 

108See CAT Q3 2020 Quarterly Progress Report 

(October 30, 2021), https://catnmsplan.com/sites/ 

default/files/2020-10/CAT-Q3-2020-QPR.pdf. 

109Section 6.10(c)(i)(A) of the CAT NMS Plan 

requires the Plan Processor to ‘‘provide Participants 

and the SEC with access to all CAT Data stored in 

the Central Repository’’ via an ‘‘online targeted 

query tool.’’ Appendix D, Sections 8.1.1–8.1.3 of the 

CAT NMS Plan describes the required functionality 

associated with this regulatory tool. Appendix D, 

Section 8.2.1 describes the required functionality 

associated with a user-defined direct query tool that 

will ‘‘deliver large sets of data that can then be used 

in internal surveillance or market analysis 

applications.’’ 

110See Q3 2020 Quarterly Progress Report 

(October 30, 2020); Updated Q3 2020 Quarterly 

Progress Report (January 29, 2021); and Q4 2020 

Quarterly Progress Report (January 29, 2021). 

111See Securities Exchange Act Release No. 

98848 (November 2, 2023), 88 FR 77128, 77129 n.13 

(November 8, 2023) (‘‘Settlement Exemptive 

Order’’). 

orders is not required to be reported 

until Phase 2d.105

The Quarterly Progress Report for the 

third quarter of 2020 states that ‘‘Interim 

Step: Production Go-Live for Options 2b 

file submission and data integrity 

validations’’ was completed on July 20, 

2020. Accordingly, the FAM Period 1 

requirement of reporting by Industry 

Members (excluding Small Industry 

Members that are not OATS reporters) 

of ‘‘options transaction data, excluding 

Customer Account Information, 

Customer-ID and Customer Identifying 

Information’’ was completed on July 20, 

2020. 

As discussed above, the Historical 

CAT Costs 1 to be recovered via 

Historical CAT Assessment 1 would 

include fees, costs and expenses 

incurred by or for the Company in 

connection with the development, 

implementation and operation of the 

CAT during the period from June 22, 

2020 through July 31, 2020. The total 

costs for this period, as discussed above, 

are $6,377,343. Participants would 

remain responsible for one-third of this 

cost (which they have previously paid), 

and Industry Members would be 

responsible for the remaining twothirds, with CEBBs paying one-third 

($2,125,781) and CEBSs paying onethird ($2,125,781). 

(B) Period 2 of the Financial 

Accountability Milestones 

Historical CAT Assessment 1 seeks to 

recover costs that are related to PostAmendment Expenses incurred during 

FAM Period 2. FAM Period 2 began on 

August 1, 2020, and concluded on 

December 31, 2020, the date of the Full 

Implementation of Core Equity 

Reporting. Section 1.1 of the CAT NMS 

Plan defines ‘‘Full Implementation of 

Core Equity Reporting’’ as: 

the point at which: (a) Industry Member 

reporting (excluding reporting by Small 

Industry Members that are not OATS 

reporters) for equities transactions, excluding 

Customer Account Information, Customer-ID, 

and Customer Identifying Information, is 

developed, tested, and implemented at a 5% 

Error Rate or less and with sufficient intrafirm linkage, inter-firm linkage, national 

securities exchange linkage, and trade 

reporting facilities linkage to permit the 

Participants and the Commission to analyze 

the full lifecycle of an order across the 

national market system, excluding linkage of 

representative orders, from order origination 

through order execution or order 

cancellation; and (b) the query tool 

functionality required by Section 

6.10(c)(i)(A) and Appendix D, Sections 8.1.1– 

8.1.3 and Section 8.2.1 incorporates the 

Industry Member equities transaction data 

described in condition (a) and is available to 

the Participants and to the Commission. This 

Financial Accountability Milestone shall be 

considered complete as of the date identified 

in a Quarterly Progress Report meeting the 

requirements of Section 6.6(c). 

Under Section 1.1 of the CAT NMS 

Plan, this Financial Accountability 

Milestone is considered complete as of 

the date identified in the Participants’ 

Quarterly Progress Reports. As indicated 

by the Participants’ Quarterly Progress 

Report for the fourth quarter of 2020,106

Full Implementation of Core Equity 

Reporting was completed on schedule 

by December 31, 2020. 

Specifically, the Full Implementation 

of Core Equity Reporting requires the 

satisfaction of two prongs. The first 

prong requires Participants to have fully 

implemented the first phase of equities 

transaction reporting for Industry 

Members (excluding Small Industry 

Members that are not OATS reporters) at 

an Error Rate of less than 5%. In 

addition, equities transaction data 

produced by the CAT at this stage must 

also be sufficiently interlinked so as to 

permit full analysis of an order’s 

lifecycle across the national market, 

excluding full linkage of representative 

orders. As CAT LLC reported on its 

Quarterly Progress Reports, Phase 2a 

was fully implemented as of October 26, 

2020, including intra-firm, inter-firm, 

national securities exchange, and trade 

reporting facilities linkages.107 In 

addition to the reporting of Phase 2a 

Industry Member Data as described 

above with regard to FAM Period 1, the 

following linkage data was added to the 

CAT as described in the Quarterly 

Progress Reports for the third and fourth 

quarter of 2020: 

• ‘‘Production Go-Live for Equities 2a 

Intrafirm Linkage validations’’ was 

completed on 7/27/2020; 108

• ‘‘Production Go-Live for Firm to 

Firm Linkage validations for Equities 2a 

(Large Industry Members and Small 

OATS Reporters)’’ was completed on 

October 26, 2020; and 

• ‘‘Production Go-Live for Equities 2a 

Exchange and TRF Linkage validations 

(Large Industry Members and Small 

OATS Reporters)’’ was completed on 

October 26, 2020. 

Furthermore, as CAT LLC reported on 

its Quarterly Progress Report for the 

fourth quarter of 2020, the average 

overall error rate for Phase 2a Industry 

Member Data was less than 5% as of 

December 31, 2020. The average overall 

error rate was calculated by dividing the 

compliance errors by processed records. 

The second prong of this FAM 

requires that the equities transaction 

data collected by the CAT at this stage 

be made available to regulators through 

two basic query tools required by the 

CAT NMS Plan—a targeted query tool 

that will enable regulators to retrieve 

data via an online query screen with a 

variety of predefined selection criteria, 

and a user-defined direct query tool that 

will provide regulators with the ability 

to query data using all available 

attributes and data sources.109 As CAT 

LLC reported on its Quarterly Progress 

Reports, the query tool functionality 

incorporating the data from Phase 2a 

was available to the Participants and the 

Commission as of December 31, 2020.110

The Commission has determined that 

the Participants have sufficiently 

complied with the conditions set forth 

in the 2020 Orders and with the 

technical requirements for Quarterly 

Progress Reports set forth in Section 

6.6(c) of the CAT NMS Plan for 

purposes of determining compliance 

with this FAM.111

As discussed above, Historical CAT 

Costs 1 to be recovered via Historical 

CAT Assessment 1 would include fees, 

costs and expenses incurred by or for 

the Company in connection with the 

development, implementation and 

operation of the CAT during the period 

from August 1, 2020 through December 

31, 2020. The total costs for this period, 

as discussed above, are $42,976,478. 

Participants would remain responsible 

for one-third of this cost (which they 

have previously paid), and Industry 

Members would be responsible for the 

remaining two-thirds, with CEBBs 

paying one-third ($14,325,492.70) and 

CEBSs paying one-third 

($14,325,492.70). 


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112Q4 2021 Quarterly Progress Report (Jan. 17, 

2022). 

113See supra note 111. 

114See Securities Exchange Act Release No. 

92239 (June 23, 2021), 86 FR 34293 (June 29, 2021) 

(Notice of Filing and Immediate Effectiveness of 

File No. SR–FINRA–2021–017). 

115See Phase Reporting Exemptive Relief Order, 

85 FR 23075, 23078–79. 

116See supra note 114, at 23079. 

(C) Period 3 of the Financial 

Accountability Milestones 

Historical CAT Assessment 1 seeks to 

recover costs that are related to PostAmendment Expenses incurred during 

FAM Period 3. FAM Period 3 began on 

January 1, 2021, and concluded on 

December 31, 2021, the date of the Full 

Availability and Regulatory Utilization 

of Transactional Database Functionality. 

Section 1.1 of the CAT NMS Plan 

defines ‘‘Full Availability and 

Regulatory Utilization of Transactional 

Database Functionality’’ as: 

the point at which: (a) reporting to the Order 

Audit Trail System (‘‘OATS’’) is no longer 

required for new orders; (b) Industry Member 

reporting for equities transactions and simple 

electronic options transactions, excluding 

Customer Account Information, Customer-ID, 

and Customer Identifying Information, with 

sufficient intra-firm linkage, inter-firm 

linkage, national securities exchange linkage, 

trade reporting facilities linkage, and 

representative order linkages (including any 

equities allocation information provided in 

an Allocation Report) to permit the 

Participants and the Commission to analyze 

the full lifecycle of an order across the 

national market system, from order 

origination through order execution or order 

cancellation, is developed, tested, and 

implemented at a 5% Error Rate or less; (c) 

Industry Member reporting for manual 

options transactions and complex options 

transactions, excluding Customer Account 

Information, Customer-ID, and Customer 

Identifying Information, with all required 

linkages to permit the Participants and the 

Commission to analyze the full lifecycle of an 

order across the national market system, from 

order origination through order execution or 

order cancellation, including any options 

allocation information provided in an 

Allocation Report, is developed, tested, and 

fully implemented; (d) the query tool 

functionality required by Section 

6.10(c)(i)(A) and Appendix D, Sections 8.1.1– 

8.1.3, Section 8.2.1, and Section 8.5 

incorporates the data described in conditions 

(b)–(c) and is available to the Participants 

and to the Commission; and (e) the 

requirements of Section 6.10(a) are met. This 

Financial Accountability Milestone shall be 

considered complete as of the date identified 

in a Quarterly Progress Report meeting the 

requirements of Section 6.6(c). 

Under Section 1.1 of the CAT NMS 

Plan, this Financial Accountability 

Milestone is considered complete as of 

the date identified in the Participants’ 

Quarterly Progress Reports. As indicated 

by the Participants’ Quarterly Progress 

Report for the fourth quarter of 2021,112

Full Availability and Regulatory 

Utilization of Transactional Database 

Functionality was completed on 

schedule by December 31, 2021. 

Specifically, the ‘‘Full Availability 

and Regulatory Utilization of 

Transactional Database Functionality’’ 

requires the satisfaction of five prongs. 

The first prong requires that reporting to 

the Order Audit Trail System (‘‘OATS’’) 

is no longer required for new orders. As 

CAT LLC reported on its Quarterly 

Progress Report for the fourth quarter of 

2021,113 FINRA retired OATS effective 

September 1, 2021.114 Accordingly, after 

the retirement of OATS, reporting to 

OATS was no longer required. 

In addition to Phase 2a and Phase 2b 

Industry Member Data, the second and 

third prongs of ‘‘Full Availability and 

Regulatory Utilization of Transactional 

Database Functionality’’ require 

Industry Member reporting of Phase 2c 

Industry Member Data and Phase 2d 

Industry Member Data. The Phase 2c 

Industry Member Data is described in 

detail in the SEC’s Phased Reporting 

Exemptive Relief Order. That Order 

states that ‘‘Phase 2c Industry Member 

Data’’ is Industry Member Data related 

to Eligible Securities that are equities 

other than Phase 2a Industry Member 

Data, Phase 2d Industry Member Data, 

or Phase 2e Industry Member Data. 

Specifically, the Phase 2c Industry 

Member Data includes Industry Member 

Data that is related to Eligible Securities 

that are equities and that is related to: 

(1) Allocation Reports as required to be 

recorded and reported to the Central 

Repository pursuant to Section 

6.4(d)(ii)(A)(1) of the CAT NMS Plan; (2) 

quotes in unlisted Eligible Securities 

sent to an IDQS operated by a CAT 

Reporter (reportable by the Industry 

Member sending the quotes) (except for 

quotes reportable in Phase 2d, as 

discussed below); (3) electronic quotes 

in listed equity Eligible Securities (i.e., 

NMS stocks) that are not sent to a 

national securities exchange or FINRA’s 

Alternative Display Facility; (4) 

reporting changes to client instructions 

regarding modifications to algorithms; 

(5) marking as a representative order 

any order originated to work a customer 

order in price guarantee scenarios, such 

as a guaranteed VWAP; (6) flagging 

rejected external routes to indicate a 

route was not accepted by the receiving 

destination; (7) linkage of duplicate 

electronic messages related to a Manual 

Order Event between the electronic 

event and the original manual route; (8) 

special handling instructions on order 

route reports (other than the ISO, which 

is required to be reported in Phase 2a); 

(9) quote identifier on trade events; (10) 

reporting of LTIDs (if applicable) for 

accounts with Reportable Events that 

are reportable to CAT as of and 

including Phase 2c; (11) reporting of 

date account opened or Account 

Effective Date17 (as applicable) for 

accounts and reporting of a flag 

indicating the Firm Designated ID type 

as account or relationship; (12) order 

effective time for orders that are 

received by an Industry Member and do 

not become effective until a later time; 

(13) the modification or cancellation of 

an internal route of an order; and (14) 

linkages to the customer orders(s) being 

represented for representative order 

scenarios, including agency average 

price trades, net trades, aggregated 

orders, and disconnected Order 

Management System (‘‘OMS’’)— 

Execution Management System (‘‘EMS’’) 

scenarios, as required in the Industry 

Member Technical Specifications.115

Phase 2c Industry Member Data also 

includes electronic quotes that are 

provided by or received in a CAT 

Reporter’s order/quote handling or 

execution systems in Eligible Securities 

that are equities and are provided by an 

Industry Member to other market 

participants off a national securities 

exchange under the following 

conditions: (1) an equity bid or offer is 

displayed publicly or has been 

communicated (a) for listed securities to 

the Alternative Display Facility (ADF) 

operated by FINRA; or (b) for unlisted 

equity securities to an ‘‘interdealer 

quotation system,’’ as defined in FINRA 

Rule 6420(c); or (2) an equity bid or 

offer which is accessible electronically 

by customers or other market 

participants and is immediately 

actionable for execution or routing; i.e., 

no further manual or electronic action is 

required by the responder providing the 

quote in order to execute or cause a 

trade to be executed). With respect to 

OTC Equity Securities, OTC Equity 

Securities quotes sent by an Industry 

Member to an IDQS operated by an 

Industry Member CAT Reporter (other 

than such an IDQS that does not match 

and execute orders) are reportable by 

the Industry Member sending them in 

Phase 2c. Accordingly, any response to 

a request for quote or other form of 

solicitation response provided in a 

standard electronic format (e.g., FIX) 

that meets this quote definition (i.e., an 

equity bid or offer which is accessible 

electronically by customers or other 

market participants and is immediately 

actionable for execution or routing) 

would be reportable in Phase 2c.116


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117See supra note 114. 

118See supra note 114, at 23079–80. 

119See CAT Q4 2021 Quarterly Progress Report 

(January 27, 2022), https://catnmsplan.com/sites/ 

default/files/2022-01/CAT-Q4-2021-QPR.pdf. 

120See CAT Q2 2021 Quarterly Progress Report 

(July 27, 2021), https://catnmsplan.com/sites/ 

default/files/2021-07/CAT-Q2-2021-QPR.pdf; and 

CAT Q4 2021 Quarterly Progress Report (Jan. 27, 

2022), https://catnmsplan.com/sites/default/files/ 

2022-01/CAT-Q4-2021-QPR.pdf. 

121See CAT Q4 2021 Quarterly Progress Report 

(Jan. 27, 2022), https://catnmsplan.com/sites/ 

default/files/2022-01/CAT-Q4-2021-QPR.pdf. 

122See Q1 2021 Quarterly Progress Report (April 

30, 2021); Q2 2021 Quarterly Progress Report (July 

27, 2021); Q3 2021 Quarterly Progress Report 

(November 1, 2021); Q4 2021 Quarterly Progress 

Report (January 27, 2022). 

The Phase 2d Industry Member Data 

is described in detail in the SEC’s 

Phased Reporting Exemptive Relief 

Order. ‘‘Phase 2d Industry Member 

Data’’ is Industry Member Data that is 

related to Eligible Securities that are 

options other than Phase 2b Industry 

Member Data, Industry Member Data 

that is related to Eligible Securities that 

are equities other than Phase 2a 

Industry Member Data or Phase 2c 

Industry Member Data, and Industry 

Member Data other than Phase 2e 

Industry Member Data. Phase 2d 

Industry Member Data includes with 

respect to the Eligible Securities that are 

options: (1) simple manual orders; (2) 

electronic and manual paired orders; (3) 

all complex orders with linkages to all 

CAT-reportable legs; (4) LTIDs (if 

applicable) for accounts with Reportable 

Events for Phase 2d; (5) date account 

opened or Account Effective Date (as 

applicable) for accounts with an LTID 

and flag indicating the Firm Designated 

ID type as account or relationship for 

such accounts; (6) Allocation Reports as 

required to be recorded and reported to 

the Central Repository pursuant to 

Section 6.4(d)(ii)(A)(1) of the CAT NMS 

Plan; (7) the modification or 

cancellation of an internal route of an 

order; and (8) linkage between a 

combined order and the original 

customer orders. Phase 2d Industry 

Member Data also would include 

electronic quotes that are provided by or 

received in a CAT Reporter’s order/ 

quote handling or execution systems in 

Eligible Securities that are options and 

are provided by an Industry Member to 

other market participants off a national 

securities exchange under the following 

conditions: a listed option bid or offer 

which is accessible electronically by 

customers or other market participants 

and is immediately actionable (i.e., no 

further action is required by the 

responder providing the quote in order 

to execute or cause a trade to be 

executed). Accordingly, any response to 

a request for quote or other form of 

solicitation response provided in 

standard electronic format (e.g., FIX) 

that meets this definition is reportable 

in Phase 2d for options.117

Phase 2d Industry Member Data also 

includes with respect to Eligible 

Securities that are options or equities (1) 

receipt time of cancellation and 

modification instructions through Order 

Cancel Request and Order Modification 

Request events; (2) modifications of 

previously routed orders in certain 

instances; and (3) OTC Equity Securities 

quotes sent by an Industry Member to 

an IDQS operated by an Industry 

Member CAT Reporter that does not 

match and execute orders. In addition, 

subject to any exemptive or other relief, 

Phase 2d Industry Member Data will 

include verbal or manual quotes on an 

exchange floor or in the over-thecounter market, where verbal quotes 

and manual quotes are defined as bids 

or offers in Eligible Securities provided 

verbally or that are provided or received 

other than via a CAT Reporter’s order 

handling and execution system (e.g., 

quotations provided via email or instant 

messaging).118

The Quarterly Progress Report for the 

fourth quarter of 2021 states that ‘‘Phase 

2a was fully implemented as of October 

26, 2020;’’ ‘‘Phase 2b was fully 

implemented as of January 4, 2021;’’ 

‘‘Phase 2c was implemented as of April 

26, 2021;’’ and ‘‘Phase 2d was fully 

implemented as of December 13, 

2021.’’ 119 The Quarterly Progress 

Reports for 2021 provide additional 

detail regarding the implementation of 

these steps including the following: 

• ‘‘Production Go-Live for Equities 2c 

reporting requirements (Large Industry 

Members)’’ was completed on April 26, 

2021; 

• ‘‘LTID Account Information 

Reporting Go-Live for Phases 2a, 2b and 

2c (Large Industry Members)’’ was 

completed on April 26, 2021; 

• ‘‘FCAT Plan Processor creates 

linkages of the lifecycle of order events 

based on the received data through 

Phase 2d Production Go-Live for 

Options 2d reporting requirements 

(Large Industry Members)’’ was 

completed on December 13, 2021; 

• ‘‘Production Go-Live for Options 2d 

reporting requirements (Large Industry 

Members)’’ was completed on December 

13, 2021; 

• ‘‘Production Go-Live for Options 2b 

reporting requirements (Small OATS 

Reporters and Small Non-OATS 

Reporters)’’ was completed on 

December 13, 2021; 

• ‘‘Production Go-Live for Equities 2c 

reporting requirements (Small OATS 

Reporters and Small Non-OATS 

Reporters)’’ was completed on 

December 13, 2021; 

• ‘‘Production Go-Live for Options 2d 

reporting requirements (Small OATS 

Reporters and Small Non-OATS 

Reporters)’’ was completed on 

December 13, 2021; 

• ‘‘LTID Account Information 

Reporting Go-Live for Phases 2d (Large 

Industry Members)’’ was completed on 

December 13, 2021; and 

• ‘‘‘‘LTID Account Information 

Reporting Go-Live for Phases 2a, 2b, 2c 

and 2d (Small Industry Members)’’ was 

completed on December 13, 2021.120

The third prong of ‘‘Full Availability 

and Regulatory Utilization of 

Transactional Database Functionality’’ 

also imposes an Error Rate requirement 

of 5% or less. The Quarterly Progress 

Report for the fourth quarter of 2021 

states the average overall error rate was 

less than 5% as of December 31, 2021. 

The average overall error rate was 

calculated by dividing the compliance 

errors by processed records. 

The fourth prong of ‘‘Full Availability 

and Regulatory Utilization of 

Transactional Database Functionality’’ 

requires that the data collected by the 

CAT at this stage be made available to 

regulators through an online targeted 

query tool, and a user-defined direct 

query tool. As CAT LLC reported on its 

Quarterly Progress Report for the fourth 

quarter of 2021, the query tool 

functionality incorporating the data 

from Phases 2a, 2b, 2c and 2d was 

available to the Participants and to the 

Commission as of December 31, 2021.121

The fifth prong requires the 

requirements of Section 6.10(a) of the 

CAT NMS Plan to have been met. 

Section 6.10(a) of the CAT NMS Plan 

requires the Participants to use the tools 

described in Appendix D to ‘‘develop 

and implement a surveillance system, or 

enhance existing surveillance systems, 

reasonably designed to make use of the 

consolidated information contained in 

the Central Repository.’’ FINRA 

implemented a surveillance system, or 

enhanced existing surveillance systems, 

reasonably designed to make use of the 

consolidated information contained in 

the Central Repository as of December 

31, 2021 in accordance with Section 

6.10(a) of the CAT NMS Plan.122

The Commission has determined that 

the Participants have sufficiently 

complied with the conditions set forth 

in the 2020 Orders and with the 

technical requirements for Quarterly 

Progress Reports set forth in Section 

6.6(c) of the CAT NMS Plan for 


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123See Settlement Exemptive Order, 88 FR 77128, 

77129 n.13. 

124 15 U.S.C. 78o–3(b)(6). 

125 15 U.S.C. 78o–3(b)(5). 

126 15 U.S.C. 78o–3(b)(9). 

127See 15 U.S.C. 78o–3(b)(2). 

128See CAT NMS Plan Approval Order, 81 FR 

84696, 84697. 

129See supra note 127. 

130See CAT Funding Model Approval Order, 88 

FR 62628, 62686. 

131See CAT Funding Model Approval Order, 88 

FR 62628, 62662–63. 

purposes of determining compliance 

with this FAM.123

As discussed above, Historical CAT 

Costs 1 to be recovered via Historical 

CAT Assessment 1 would include fees, 

costs and expenses incurred by or for 

the Company in connection with the 

development, implementation and 

operation of the CAT during the period 

from January 1, 2021 through December 

31, 2021. The total costs for this period, 

as discussed above, are $144,415,268. 

Participants would remain responsible 

for one-third of this cost (which they 

have previously paid), and Industry 

Members would be responsible for the 

remaining two-thirds, with CEBBs 

paying one-third ($48,138,422.70) and 

CBSs paying one-third ($48,138,422.70). 

FINRA has filed the proposed rule 

change for immediate effectiveness. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,124

which requires, among other things, that 

FINRA rules must be designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, and, in 

general, to protect investors and the 

public interest, and not designed to 

permit unfair discrimination between 

customers, issuers, brokers and dealers. 

FINRA also believes that the proposed 

rule change is consistent with the 

provisions of Section 15A(b)(5) of the 

Act,125 which requires, among other 

things, that FINRA rules provide for the 

equitable allocation of reasonable dues, 

fees and other charges among members 

and issuers and other persons using any 

facility or system that FINRA operates 

or controls. FINRA further believes that 

the proposed rule change is consistent 

with Section 15A(b)(9) of the Act,126

which requires that FINRA rules not 

impose any burden on competition that 

is not necessary or appropriate. Section 

15A(b)(2) of the Act also requires that 

FINRA be ‘‘so organized and [have] the 

capacity to be able to carry out the 

purposes’’ of the Act and ‘‘to comply, 

and . . . to enforce compliance by its 

members, and persons associated with 

its members,’’ with the provisions of the 

Exchange Act.127

FINRA believes that this proposal is 

consistent with the Act because it 

implements provisions of the Plan and 

is designed to assist FINRA in meeting 

regulatory obligations pursuant to the 

Plan. In approving the Plan, the SEC 

noted that the Plan ‘‘is necessary and 

appropriate in the public interest, for 

the protection of investors and the 

maintenance of fair and orderly markets, 

to remove impediments to, and perfect 

the mechanism of a national market 

system, or is otherwise in furtherance of 

the purposes of the Act.’’ 128 To the 

extent that this proposal implements the 

Plan and applies specific requirements 

to Industry Members, FINRA believes 

that this proposal furthers the objectives 

of the Plan, as identified by the SEC, 

and is therefore consistent with the Act. 

FINRA believes that the proposed fees 

paid by the CEBBs and CEBSs are 

reasonable, equitably allocated and not 

unfairly discriminatory. FINRA has 

already incurred development and 

implementation costs and the proposed 

Historical CAT Assessment 1 fees, 

therefore, would allow FINRA to collect 

certain of such costs in a fair and 

reasonable manner from Industry 

Members, as contemplated by the CAT 

NMS Plan. 

The proposed Historical CAT 

Assessment 1 fees would be charged to 

Industry Members in support of the 

maintenance of a consolidated audit 

trail for regulatory purposes. The 

proposed fees, therefore, are consistent 

with the Commission’s view that 

regulatory fees be used for regulatory 

purposes. The proposed fees would not 

cover FINRA services unrelated to the 

CAT. In addition, any surplus would be 

used as a reserve to offset future fees. 

As further discussed below, the SEC 

approved the CAT Funding Model, 

finding it was reasonable and that it 

equitably allocates fees among 

Participants and Industry Members. 

Thus, FINRA believes that the proposed 

fees adopted pursuant to the CAT 

Funding Model approved by the SEC are 

reasonable, equitably allocated and not 

unfairly discriminatory. 

(1) Implementation of CAT Funding 

Model in CAT NMS Plan 

Section 11.1(b) of the CAT NMS Plan 

states that ‘‘[t]he Participants shall file 

with the SEC under Section 19(b) of the 

Exchange Act any such fees on Industry 

Members that the Operating Committee 

approves.’’ Per Section 11.1(b) of the 

CAT NMS Plan, FINRA has filed this fee 

filing to implement the Industry 

Member CAT fees included in the CAT 

Funding Model. FINRA believes that 

this proposal is consistent with the 

Exchange Act because it is consistent 

with, and implements, the CAT Funding 

Model in the CAT NMS Plan, and is 

designed to assist FINRA and its 

Industry Members in meeting regulatory 

obligations pursuant to the CAT NMS 

Plan. In approving the CAT NMS Plan, 

the SEC noted that the Plan ‘‘is 

necessary and appropriate in the public 

interest, for the protection of investors 

and the maintenance of fair and orderly 

markets, to remove impediments to, and 

perfect the mechanism of a national 

market system, or is otherwise in 

furtherance of the purposes of the 

Act.’’ 129 Similarly, in approving the 

CAT Funding Model, the SEC 

concluded that the CAT Funding Model 

met this standard.130 As this proposal 

implements the Plan and the CAT 

Funding Model described therein, and 

applies specific requirements to 

Industry Members in compliance with 

the Plan, FINRA believes that this 

proposal furthers the objectives of the 

Plan, as identified by the SEC, and is 

therefore consistent with the Exchange 

Act. 

(2) Calculation of Fee Rate for Historical 

CAT Assessment 1 Is Reasonable 

The SEC has determined that the CAT 

Funding Model is reasonable and 

satisfies the requirements of the 

Exchange Act. Specifically, the SEC has 

concluded that the method for 

determining Historical CAT 

Assessments as set forth in Section 11.3 

of the CAT NMS Plan, including the 

formula for calculating the Historical 

Fee Rate, the identification of the parties 

responsible for payment and the 

transactions subject to the fee rate for 

the Historical CAT Assessment, is 

reasonable and satisfies the Exchange 

Act.131 In each respect, as discussed 

above, Historical CAT Assessment 1 is 

calculated, and would be applied, in 

accordance with the requirements 

applicable to Historical CAT 

Assessments as set forth in the CAT 

NMS Plan and, therefore, is reasonable 

and consistent with the Exchange Act. 

Calculation of the Historical Fee Rate for 

Historical CAT Assessment 1 requires 

the figures for the Historical CAT Costs 

1, the executed equivalent share volume 

for the prior twelve months, the 

determination of Historical Recovery 

Period 1, and the projection of the 

executed equivalent share volume for 

Historical Recovery Period 1. Each of 

these variables is reasonable and 

satisfies the Exchange Act, as discussed 

throughout this filing. 


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132Section 11.3(b)(iii)(B)(II)(B)(1) of the CAT 

NMS Plan. 

133For a discussion of the amount and type of 

cloud hosting services fees, see Items 

II.A.1.(2)(B)(i)(a), II.A.1.(2)(B)(ii)(a), 

II.A.1.(2)(B)(iii)(a) and II.A.1.(2)(B)(iv)(A) above. 

134See CAT NMS Plan, Appendix D–4 n.262. 

135See CAT NMS Plan Approval Order, 81 FR 

84696, 84801. 

136See Items II.A.1.(2)(B)(i)(a), II.A.1.(2)(B)(ii)(a), 

II.A.1.(2)(B)(iii)(a) and II.A.1.(2)(B)(iv)(A) above. 

137See Securities Exchange Act Release No. 

97151 (March 15, 2023), 88 FR 17086, 17117 (March 

21, 2023) (describing key cost discipline 

mechanisms for the CAT). 

138Section 11.3(b)(iii)(B)(II)(1) of the CAT NMS 

Plan. 

(A) Historical CAT Costs 1 

The formula for calculating a 

Historical Fee Rate requires the amount 

of Historical CAT Costs to be recovered. 

Specifically, Section 11.3(b)(iii)(B)(II) of 

the CAT NMS Plan requires a fee filing 

to provide: 

a brief description of the amount and type of 

the Historical CAT Costs, including (1) the 

technology line items of cloud hosting 

services, operating fees, CAIS operating fees, 

change request fees, and capitalized 

developed technology costs, (2) legal, (3) 

consulting, (4) insurance, (5) professional 

and administration and (6) public relations 

costs. 

In accordance with this requirement, 

FINRA has set forth the amount and 

type of Historical CAT Costs 1 for each 

of these categories of costs above. 

Section 11.3(b)(iii)(B)(II) of the CAT 

NMS Plan also requires that the fee 

filing provide ‘‘sufficient detail to 

demonstrate that the Historical CAT 

Costs are reasonable and appropriate.’’ 

As discussed below, FINRA believes 

that the amounts set forth in this filing 

for each of these cost categories is 

‘‘reasonable and appropriate.’’ Each of 

the costs included in Historical CAT 

Costs 1 are reasonable and appropriate 

because the costs are consistent with 

standard industry practice, based on the 

need to comply with the requirements 

of the CAT NMS Plan, incurred subject 

to negotiations performed on an arm’s 

length basis, and/or are consistent with 

the needs of any legal entity, 

particularly one with no employees. 

(i) Technology: Cloud Hosting Services 

In approving the CAT Funding Model, 

the Commission recognized that it is 

appropriate to recover costs related to 

cloud hosting services as a part of 

Historical CAT Assessments.132 CAT 

LLC determined that the costs related to 

cloud hosting services described in this 

filing are reasonable and should be 

included as a part of Historical CAT 

Costs 1. As described above, the cloud 

hosting services costs reflect, among 

other things, the breadth of the CAT 

cloud activities, data volume far in 

excess of the original volume estimates, 

the need for specialized cloud services 

given the volume and unique nature of 

the CAT, the processing time 

requirements of the Plan, and regular 

efforts to seek to minimize costs where 

permissible under the Plan. CAT LLC 

determined that use of cloud hosting 

services is necessary for implementation 

of the CAT, particularly given the 

substantial data volumes associated 

with the CAT, and that the fees for 

cloud hosting services negotiated by 

FCAT were reasonable, taking into 

consideration a variety of factors, 

including the expected volume of data 

and the breadth of services provided 

and market rates for similar services.133

Indeed, the actual costs of the CAT are 

far in excess of the original estimated 

costs of the CAT due to various factors, 

including the higher volumes and 

greater complexity of the CAT than 

anticipated when Rule 613 was 

originally adopted. 

To comply with the requirements of 

the Plan, the breadth of the cloud 

activities related to the CAT is 

substantial. The cloud services not only 

include the production environment for 

the CAT, but they also include two 

industry testing environments, support 

environments for quality assurance and 

stress testing and disaster recovery 

capabilities. Moreover, the cloud storage 

costs are driven by the requirements of 

the Plan, which requires the storage of 

multiple versions of the data, from the 

original submitted version of the data 

through various processing steps, to the 

final version of the data. 

Data volume is a significant driver of 

costs for cloud hosting services. When 

the Commission adopted the CAT NMS 

Plan in 2016, it estimated that the CAT 

would need to receive 58 billion records 

per day 134 and that annual operating 

costs for the CAT would range from 

$36.5 million to $55 million.135

Through 2021, the actual data volumes 

have been five times that original 

estimate. The data volumes for each 

period are set forth in detail above.136

In addition to the effect of the data 

volume on the cloud hosting costs, the 

processing timelines set forth in the 

Plan contribute to the cloud hosting 

costs. Although CAT LLC has 

proactively sought to manage cloud 

hosting costs while complying with the 

Plan, including through requests to the 

Commission for exemptive relief and an 

amendment to the CAT NMS Plan, 

stringent CAT NMS Plan requirements 

do not allow for any material flexibility 

in cloud architecture design choices, 

processing timelines (e.g., the use of 

non-peak processing windows), or 

lower-cost storage tiers. As a result, the 

required CAT processing timelines 

contribute to the cloud hosting costs of 

the CAT. 

The costs for cloud hosting services 

also reflect the need for specialized 

cloud hosting services given the data 

volume and unique processing needs of 

the CAT. The data volume as well as the 

data processing needs of the CAT 

necessitate the use of cloud hosting 

services. The equipment, power and 

services required for an on-premises 

data model, the alternative to cloud 

hosting services, would be cost 

prohibitive. Moreover, as CAT was 

being developed, there were limited 

cloud hosting providers that could 

satisfy all the necessary CAT 

requirements, including the operational 

and security criteria. Over time more 

providers offering cloud hosting 

services that would satisfy these criteria 

have entered the market. CAT LLC will 

continue to evaluate alternative cloud 

hosting services, recognizing that the 

time and cost to move to an alternative 

cloud provider would be substantial. 

The reasonableness of the cloud 

hosting services costs is further 

supported by key cost discipline 

mechanisms for the CAT—a cost-based 

funding structure, cost transparency, 

cost management efforts (including 

regular efforts to lower compute and 

storage costs where permitted by the 

Plan) and oversight. Together, these 

mechanisms help ensure the ongoing 

reasonableness of the CAT’s costs and 

the level of fees assessed to support 

those costs.137

(ii) Technology: Operating Fees 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover costs related to operating fees 

as a part of Historical CAT 

Assessments.138 CAT LLC determined 

that the costs related to operating fees 

described in this filing are reasonable 

and should be included as a part of 

Historical CAT Costs 1. The operating 

fees include the negotiated fees paid by 

CAT LLC to the Plan Processor to 

operate and maintain the system for 

order-related information and to 

perform business operations related to 

the system, including compliance, 

security, testing, training, 

communications with the industry (e.g., 

management of the FINRA CAT 

Helpdesk, FAQs, website and webinars) 

and program management. CAT LLC 

determined that the selection of FCAT 

as the Plan Processor was reasonable 

and appropriate given its expertise with 

securities regulatory reporting, after a 


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139See Item II.A.1.(2)(B)(i)(b) above. 

140See Items II.A.1.(2)(B)(i)(b), II.A.1.(2)(B)(ii)(b), 

II.A.1.(2)(B)(iii)(b) and II.A.1.(2)(B)(iv)(b) above. 

141See supra note 139. 

142Section 11.3(b)(iii)(B)(II)(B)(1) of the CAT 

NMS Plan. 

143See Items II.A.1.(2)(B)(i)(c), II.A.1.(2)(B)(ii)(c), 

II.A.1(2)(B)(iii)(c) and II.A.1(2)(B)(iv)(c) above. 

144See supra note 142. 

145Section 11.3(b)(iii)(B)(II)(B)(1) of the CAT 

NMS Plan. 

146See Items II.A.1(2)(B)(i)(d), II.A.1.(2)(B)(ii)(d), 

II.A.1(2)(B)(iii)(d) and II.A.1.(2)(B)(iv)(d) above. 

147Section 11.3(b)(iii)(B)(II)(B)(1) of the CAT 

NMS Plan. 

148See Items II.A.1.(2)(B)(i)(e), II.A.1.(2)(B)(ii)(e), 

II.A.1(2)(B)(iii)(e) and II.A.1.(2)(B)(iv)(e) above. 

149See supra note 147. 

150See Item II.A.1.(2)(B)(i)(e) above. 

151See Item II.A.1.(2)(B)(i)(b) above. 

152Section 11.3(b)(iii)(B)(II)(B)(2) of the CAT 

NMS Plan. 

153See Items II.A.1.(2)(B)(i)(f), II.A.1.(2)(B)(ii)(f), 

II.A.1.(2)(B)(iii)(f) and II.A.1.(2)(B)(iv)(f) above. 

154Section 11.3(b)(iii)(B)(II)(B)(3) of the CAT 

NMS Plan. 

process of considering other potential 

candidates.139 CAT LLC also 

determined that the fixed price contract, 

negotiated on an arm’s length basis with 

the goals of managing costs and 

receiving services required to comply 

with the CAT NMS Plan and Rule 613, 

was reasonable and appropriate, taking 

into consideration a variety of factors, 

including the breadth of services 

provided and market rates for similar 

types of activity.140 The services 

performed by FCAT for each period and 

the costs related to such services are 

described above.141

(iii) Technology: CAIS Operating Fees 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover costs related to CAIS 

operating fees as a part of Historical 

CAT Assessments.142 CAT LLC 

determined that the costs related to 

CAIS operating fees described in this 

filing are reasonable and should be 

included as a part of Historical CAT 

Costs 1. The CAIS operating fees 

include the fees paid to the Plan 

Processor to operate and maintain CAIS 

and to perform the business operations 

related to the system, including 

compliance, security, testing, training, 

communications with the industry (e.g., 

management of the FINRA CAT 

Helpdesk, FAQs, website and webinars) 

and program management. CAT LLC 

determined that the FCAT-negotiated 

fees for Kingland’s CAIS-related 

services, negotiated on an arm’s length 

basis with the goals of managing costs 

and receiving services required to 

comply with the CAT NMS Plan, taking 

into consideration a variety of factors, 

including the services to be provided 

and market rates for similar types of 

activity, were reasonable and 

appropriate.143 The services performed 

by Kingland for each period and the 

costs for each period are described 

above.144

(iv) Technology: Change Request Fees 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover costs related to change 

request fees as a part of Historical CAT 

Assessments.145 CAT LLC determined 

that the costs related to change request 

fees described in this filing are 

reasonable and should be included as a 

part of Historical CAT Costs 1. It is 

common practice to utilize a change 

request process to address evolving 

needs in technology projects. This is 

particularly true for a project like CAT 

that is the first of its kind, both in 

substance and in scale. The substance 

and costs of each of the change requests 

are evaluated by the Operating 

Committee, and approved in accordance 

with the requirements for Operating 

Committee meetings. In each case, CAT 

LLC determined that the change 

requests were necessary to implement 

the CAT. As described above, the 

change requests cover various 

technology changes, including, for 

example, changes related to CAT 

reporting, data feeds and exchange 

functionality. CAT LLC also determined 

that the costs for each change request 

were appropriate for the relevant 

technology change. A description of the 

change requests for each FAM Period 

and their total costs are described 

above.146 As noted above, the total costs 

for change requests through FAM Period 

3 represent a small percentage of 

Historical CAT Costs 1—that is, 0.25% 

of Historical CAT Costs 1. 

(v) Capitalized Developed Technology 

Costs 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover costs related to capitalized 

developed technology costs as a part of 

Historical CAT Assessments.147

Capitalized developed technology costs 

include costs related to certain 

development costs, costs related to 

certain modifications, upgrades and 

other changes to the CAT, CAIS 

implementation fees and license fees. 

The amount and type of costs for each 

period are described in more detail 

above.148 CAT LLC determined that 

these costs are reasonable and should be 

included as a part of Historical CAT 

Costs 1. 

These costs involve the activity of 

both the Initial Plan Processor and 

FCAT, as the successor Plan 

Processor.149 With regard to the Initial 

Plan Processor, the Participants utilized 

an RFP to seek proposals to build and 

operate the CAT, receiving a number of 

proposals in response to the RFP. The 

Participants carefully reviewed and 

considered each of the proposals, 

including holding in-person meetings 

with each of the Bidders. After several 

rounds of review, the Participants 

selected the Initial Plan Processor in 

accordance with the CAT NMS Plan. 

CAT LLC entered into an agreement 

with the Initial Plan Processor in which 

CAT LLC would pay the Initial Plan 

Processor a negotiated, fixed price 

fee.150 In addition, as described above, 

CAT LLC determined that is [sic] was 

appropriate to enter into an agreement 

with FCAT as the successor Plan 

Processor.151

(vi) Legal 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover costs related to legal fees as 

a part of Historical CAT Assessments.152

CAT LLC determined that the legal costs 

described in this filing are reasonable 

and should be included as a part of 

Historical CAT Costs 1. Given the 

unique nature of the CAT, the number 

of parties involved with the CAT 

(including, for example, the SEC, 

Participants, Industry Members, and 

vendors) and the many regulatory issues 

associated with the CAT, the scope of 

the necessary legal services are 

substantial. CAT LLC determined that 

the scope of the legal services is 

necessary to implement and maintain 

the CAT and that the legal rates reflect 

the specialized services necessary for 

such a project. When hiring each law 

firm for a CAT project, CAT LLC 

interviewed multiple firms, and 

determined to hire each firm based on 

a variety of factors, including the 

relevant expertise and fees. In each case, 

CAT LLC determined that the hourly fee 

rates were in line with market rates for 

the specialized legal expertise. In 

addition, CAT LLC determined that the 

total costs incurred for each CAT project 

were appropriate given the breadth of 

services provided. The services 

performed by each law firm for each 

period and the costs related to such 

services are described above.153

(vii) Consulting 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover consulting costs as a part of 

Historical CAT Assessments.154 CAT 

LLC determined that the consulting 

costs described in this filing are 

reasonable and should be included as a 


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155As stated in the filing of the proposed CAT 

NMS Plan, ‘‘[i]t is the intent of the Participants that 

the Company have no employees.’’ See Securities 

Exchange Act Release No. 77724 (April 27, 2016), 

81 FR 30614, 30621 (May 17, 2016). 

156CAT LLC uses certain third parties to perform 

tasks that may be performed by administrators for 

other NMS Plans. See, e.g., CTA Plan and CQ Plan. 

157See Item II.A.1.(2)(B)(i)(g) above. 

158See Items II.A.1(2)(B)(i)(g), II.A.1.(2)(B)(ii)(g), 

II.A.1.(2)(B)(iii)(g) and II.A.1(2)(B)(iv)(g) above. 

159See supra note 157. 

160Section 11.3(b)(iii)(B)(II)(B)(4) of the CAT 

NMS Plan. 

161Section 4.1.5 of Appendix D of the CAT NMS 

Plan. 

162See Items II.A.1.(2)(B)(i)(h), II.A.1(2)(B)(ii)(h), 

II.A.1.(2)(B)(iii)(h) and II.A.1(2)(B)(iv)(h) above. 

163See supra note 161. 

164Section 11.3(b)(iii)(B)(II)(B)(5) of the CAT 

NMS Plan. 

165See Item II.A.1.(2)(B)(i)(i) above. 

166See Items II.A.1(2)(B)(i)(i), II.A.1(2)(B)(ii)(i), 

II.A.1.(2)(B)(iii)(i) and II.A.1.(2)(B)(iv)(i) above. 

167See supra note 165. 

168See Item II.A.1(2)(B)(i)(i) above. 

169See Items II.A.1(2)(B)(i)(i), II.A.1.(2)(B)(ii)(i), 

II.A.1(2)(B)(iii)(i) and II.A.1(2)(B)(iv)(i) above. 

170See supra note 168. 

171See Item II.A.1.(2)(B)(i)(i) above. 

172See supra note 170. 

173Section 11.3(b)(iii)(B)(II)(B)(6) of the CAT 

NMS Plan. 

part of Historical CAT Costs 1. Because 

there are no CAT employees 155 and 

because of the significant number of 

issues associated with the CAT, the 

consultants provided assistance in the 

management of various CAT matters 

and the processes related to such 

matters.156 CAT LLC considered a 

variety of factors in choosing a 

consulting firm and determined to select 

Deloitte after an interview process.157

CAT LLC also determined that the 

consulting services were provided at 

reasonable market rates, as the fees were 

negotiated annually and comparable to 

the rates charged by other consulting 

firms for similar work.158 Moreover, the 

total costs for such consulting services 

were appropriate in light of the breadth 

of services provided by Deloitte. The 

services performed by Deloitte and the 

costs related to such services are 

described above.159

(viii) Insurance 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover insurance costs as a part of 

Historical CAT Assessments.160 CAT 

LLC determined that the insurance costs 

described in this filing are reasonable 

and should be included as a part of 

Historical CAT Costs 1. CAT LLC 

determined that it is common practice 

to have directors’ and officers’ liability 

insurance, and errors and omissions 

liability insurance. CAT LLC further 

determined that it was important to 

have cyber security insurance given the 

nature of the CAT, and such a decision 

is consistent with the CAT NMS Plan, 

which states that the cyber incident 

response plan may include ‘‘[i]nsurance 

against security breaches.’’ 161 In 

selecting the insurance providers for 

these policies, CAT LLC engaged in an 

evaluation of alternative insurers, 

including a comparison of the pricing 

offered by the alternative insurers.162

Based on this analysis, CAT LLC 

determined that the selected insurance 

policies provided appropriate coverage 

at reasonable market rates.163

(ix) Professional and Administration 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover professional and 

administration costs as a part of 

Historical CAT Assessments.164 CAT 

LLC determined that the professional 

and administration costs described in 

this filing are reasonable and should be 

included as a part of Historical CAT 

Costs 1. Because there are no CAT 

employees, all required accounting, 

financial, tax, cash management and 

treasury functions for CAT LLC have 

been outsourced at market rates. In 

addition, the required annual financial 

statement audit of CAT LLC is included 

in professional and administration 

costs, which costs are also at market 

rates. 

CAT LLC determined to hire a 

financial advisory firm, Anchin, to 

assist with financial matters for the 

CAT. CAT LLC interviewed Anchin as 

well as other potential financial 

advisory firms to assist with the CAT 

project, considering a variety of factors 

in its analysis, including the firm’s 

relevant expertise and fees.165 The 

hourly fee rates for this firm were in line 

with market rates for the financial 

advisory services provided.166

Moreover, the total costs for such 

financial advisory services was 

appropriate in light of the breadth of 

services provided by Anchin. The 

services performed by Anchin and the 

costs related to such services are 

described above.167

CAT LLC also determined to engage 

an independent accounting firm, Grant 

Thornton, to complete the audit of CAT 

LLC’s financial statements, in 

accordance with the requirements of the 

CAT NMS Plan. CAT LLC interviewed 

this firm as well as another potential 

accounting firm to audit CAT LLC’s 

financial statements, considering a 

variety of factors in its analysis, 

including the relevant expertise and fees 

of each of the firms. CAT LLC 

determined that Grant Thornton was 

well-qualified for the role given the 

balance of these considerations.168

Grant Thornton’s fixed fee rate 

compensation arrangement was 

reasonable and appropriate, and in line 

with the market rates charged for these 

types of accounting services.169

Moreover, the total costs for such 

financial advisory services was 

appropriate in light of the breadth of 

services provided by Grant Thornton. 

The services performed by Grant 

Thornton and the costs related to such 

services are described above.170

The professional and administrative 

costs also include costs related to the 

receipt of certain market data from 

Exegy. After performing an analysis of 

the available market data vendors to 

confirm that the data provided met the 

SIP Data requirements of the CAT NMS 

Plan and comparing the costs of the 

vendors providing the required SIP 

Data, CAT LLC determined to purchase 

market data from Exegy. Exegy provided 

the data elements required by the CAT 

NMS Plan, and the fees were reasonable 

and in line with market rates for the 

market data received.171

The professional and administrative 

costs also include costs related to a third 

party security assessment of the CAT 

performed by RSM. The assessment was 

designed to verify and validate the 

effective design, implementation, and 

operation of the controls specified by 

NIST Special Publication 800–53, 

Revision 4 and related standards and 

guidelines. Such a security assessment 

is in line with industry practice and 

important given the data included in the 

CAT. CAT LLC determined to engage 

RSM to perform the security assessment, 

after considering a variety of factors in 

its analysis, including the firm’s 

relevant expertise and fees. The fees 

were reasonable and in line with market 

rates for such an assessment.172

(x) Public Relations Costs 

In approving the CAT Funding Model, 

the SEC recognized that it is appropriate 

to recover public relations costs as a 

part of Historical CAT Assessments.173

CAT LLC determined that the public 

relations costs described in this filing 

are reasonable and should be included 

as a part of Historical CAT Costs 1. CAT 

LLC determined that the types of public 

relations services utilized were 

beneficial to the CAT and market 

participants more generally. Public 

relations services were important for 

various reasons, including monitoring 

comments made by market participants 

about CAT and understanding issues 

related to the CAT discussed on the 


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174See Item II.A.1(2)(B)(i)(j) above. 

175See Items II.A.1.(2)(B)(i)(j), II.A.1.(2)(B)(ii)(j), 

II.A.1.(2)(B)(iii)(j) and II.A.1.(2)(B)(iv)(j) above. 

176See supra note 174. 

177As the SEC noted in the CAT Funding Model 

Approval Order, recent Section 31 fees ranged from 

$0.00009 per share to $0.0004 per share. CAT 

Funding Model Approval Order, 88 FR 62628, 

62682. 

178This projection was calculated by multiplying 

3,842,861,347,279.44 executed equivalent shares by 

two. 

179See CAT Funding Model Approval Order, 88 

FR 62628, 62658 n.658. 

180See CAT Funding Model Approval Order, 88 

FR 62628, 62663, 62682. 181See supra note 179. 182See Section 11.3(b) of the CAT NMS Plan. 183CAT Funding Model Approval Order, 88 FR 

62628, 62629. 

public record.174 By engaging a public 

relations firm, CAT LLC was better 

positioned to understand and address 

CAT issues to the benefit of all market 

participants.175 Moreover, CAT LLC 

determined that the rates charged for 

such services were in line with market 

rates.176 As noted above, the total public 

relations costs through FAM Period 3 

represent a small percentage of 

Historical CAT Costs 1—that is, 0.1% of 

Historical CAT Costs 1. 

(B) Total Executed Equivalent Share 

Volume for the Prior 12 Months 

The total executed equivalent share 

volume of transactions in Eligible 

Securities for the period from December 

2022 through November 2023 was 

3,842,861,347,279.44 executed 

equivalent shares. CAT LLC determined 

the total executed equivalent share 

volume for the prior twelve months by 

counting executed equivalent shares in 

the same manner as it will count 

executed equivalent shares for CAT 

billing purposes. 

(C) Historical Recovery Period 1 

CAT LLC has determined to establish 

a Historical Recovery Period of 24 

months for Historical CAT Assessment 

1 and that such length is reasonable. 

CAT LLC determined that the length of 

Historical Recovery Period 1 

appropriately weighs the need for a 

reasonable Historical Fee Rate 1 that 

spreads the Historical CAT Costs over 

an appropriate amount of time and the 

need to repay the loans notes to the 

Participants in a timely fashion. CAT 

LLC determined that 24 months for 

Historical Recovery Period 1 would 

establish a fee rate that is lower than 

other transaction-based fees, including 

fees assessed pursuant to Section 31.177

In addition, in establishing a Historical 

Recovery Period of 24 months, CAT LLC 

recognized that the total costs for 

Historical CAT Assessment 1 was less 

than the total costs for 2022 and 2023, 

and therefore it would be appropriate to 

recover those costs in two years. 

Furthermore, CAT LLC notes 24 months 

is appropriate because it is not currently 

proposing that Industry Members be 

required to pay another Historical CAT 

Assessment or CAT Fee with regard to 

Prospective CAT Costs at the same time. 

(D) Projected Executed Equivalent Share 

Volume for Historical Recovery Period 1 

CAT LLC has determined to calculate 

the projected total executed equivalent 

share volume for the 24 months of 

Historical Recovery Period 1 by 

doubling the executed equivalent share 

volume for the prior 12 months. CAT 

LLC determined that such an approach 

was reasonable as the CAT’s annual 

executed equivalent share volume has 

remained relatively constant in recent 

years. For example, the executed 

equivalent share volume for 2021 was 

3,963,697,612,395 executed equivalent 

shares, and the executed equivalent 

share volume for 2022 was 

4,039,821,841,560.31 executed 

equivalent shares. Accordingly, the 

projected total executed equivalent 

share volume for Historical Recovery 

Period 1 is 7,685,722,694,558.88 

executed equivalent shares.178

(E) Actual Fee Rate for Historical CAT 

Assessment 1 

(i) Decimal Places 

As noted in the Plan amendment for 

the CAT Funding Model, as a practical 

matter, the fee filing for a Historical 

CAT Assessment would provide the 

exact fee per executed equivalent share 

to be paid for each Historical CAT 

Assessment, by multiplying the 

Historical Fee Rate by one-third and 

describing the relevant number of 

decimal places for the fee rate.179

Accordingly, proposed paragraph 

(a)(1)(A)(ii) of Rule 6897 would set forth 

a fee rate of $0.000015 per executed 

equivalent share. This fee rate is 

calculated by multiplying Historical Fee 

Rate 1 by one-third, and rounding the 

result to 6 decimal places. CAT LLC 

determined that the use of six decimal 

places is reasonable as it balances the 

accuracy of the calculation with the 

potential systems and other 

impracticalities of using additional 

decimal places in the calculation. 

(ii) Reasonable Fee Level 

FINRA believes that imposing 

Historical CAT Assessment 1 with a fee 

rate of $0.000015 per executed 

equivalent share is reasonable because it 

provides for a revenue stream for the 

Company that is aligned with Historical 

CAT Costs 1 and such costs would be 

spread out over an appropriate recovery 

period, as discussed above. Moreover, 

FINRA believes that the level of the fee 

rate is reasonable, as it is comparable to 

other transaction-based fees. Indeed, 

Historical CAT Assessment 1 is 

significantly lower than fees assessed 

pursuant to Section 31 (e.g., $0.0009 per 

share to 0.0004 per share),180 and, as a 

result, the magnitude of Historical CAT 

Assessment 1 is small, and therefore 

will mitigate any potential adverse 

economic effects or inefficiencies.181

Furthermore, the reasonable fee rate for 

Historical CAT Assessment 1 further 

supports CAT LLC’s decision to seek to 

recover all Historical CAT Costs prior to 

2022, rather than establishing separate 

Historical CAT Assessments for preFAM, FAM 1, FAM 2 and FAM 3 costs. 

(3) Historical CAT Assessment 1 

Provides for an Equitable Allocation of 

Fees 

Historical CAT Assessment 1 provides 

for an equitable allocation of fees, as it 

equitably allocates CAT costs between 

and among the Participants and 

Industry Members. The SEC approved 

the CAT Funding Model, finding that 

each aspect of the CAT Funding Model 

satisfied the requirements of the 

Exchange Act, including the formula for 

calculating Historical CAT Assessments 

as well as the Industry Members to be 

charged the Historical CAT 

Assessments.182 In approving the CAT 

Funding Model, the SEC stated that 

‘‘[t]he Participants have sufficiently 

demonstrated that the proposed 

allocation of fees is reasonable.’’ 183

Accordingly, the CAT Funding Model 

sets forth the requirements for allocating 

fees related to Historical CAT Costs 

among Participants and Industry 

Members, and the fee filings for 

Historical CAT Assessments must 

comply with those requirements. 

Historical CAT Assessment 1 provides 

for an equitable allocation of fees as it 

complies with the requirements 

regarding the calculation of Historical 

CAT Assessments as set forth in the 

CAT NMS Plan. For example, as 

described above, the calculation of 

Historical CAT Assessment 1 complies 

with the formula set forth in Section 

11.3(b) of the CAT NMS Plan. In 

addition, Historical CAT Assessment 1 

would be charged to CEBBs and CEBSs 

in accordance with Section 11.3(b) of 

the CAT NMS Plan. Furthermore, the 

Participants would continue to remain 

responsible for their designated share of 

Past CAT Costs through the cancellation 

of loans made by the Participants to 

CAT LLC. 


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184 15 U.S.C. 78o–3(b)(9). 

185See CAT Funding Model Approval Order, 88 

FR 62628, 62676–86. 

186 15 U.S.C. 78s(b)(3)(C). 

187 15 U.S.C. 78s(b)(1). 

188See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

189See id. 

In addition, as discussed above, each 

of the inputs into the calculation of 

Historical CAT Assessment 1— 

Historical CAT Costs 1 (including 

Excluded Costs), the count for the 

executed equivalent share volume for 

the prior 12 months, the length of the 

Historical Recovery Period, and the 

projected executed equivalent share 

volume for the Historical Recovery 

Period—are reasonable. Moreover, these 

inputs lead to a reasonable fee rate for 

Historical CAT Assessment 1 that is 

lower than other fee rates for 

transaction-based fees. A reasonable fee 

rate allocated in accordance with the 

requirements of the CAT Funding 

Model provides for an equitable 

allocation of fees. 

(4) Historical CAT Assessment 1 Is Not 

Unfairly Discriminatory 

Historical CAT Assessment 1 is not an 

unfairly discriminatory fee. The SEC 

approved the CAT Funding Model, 

finding that each aspect of the CAT 

Funding Model satisfied the 

requirements of the Exchange Act. In 

reaching this conclusion, the SEC 

analyzed the potential effect of 

Historical CAT Assessments calculated 

pursuant to the CAT Funding Model on 

affected categories of market 

participants, including Participants 

(including exchanges and FINRA), 

Industry Members (including 

subcategories of Industry Members, 

such as alternative trading systems, CAT 

Executing Brokers and market makers), 

and investors generally, and considered 

market effects related to equities and 

options, among other things. Historical 

CAT Assessment 1 complies with the 

requirements regarding the calculation 

of Historical CAT Assessments as set 

forth in the CAT NMS Plan. In addition, 

as discussed above, each of the inputs 

into the calculation of Historical CAT 

Assessment 1 and the resulting fee rate 

for Historical CAT Assessment 1 is 

reasonable. Therefore, Historical CAT 

Assessment 1 does not impose an 

unfairly discriminatory fee on Industry 

Members. 

Finally, FINRA believes the proposed 

fees established pursuant to the CAT 

Funding Model promote just and 

equitable principles of trade, and, in 

general, protect investors and the public 

interest, and are provided in a 

transparent manner and specificity in 

Rule 6897. FINRA also believes that the 

proposed fees are reasonable because 

they would provide ease of calculation, 

ease of billing and other administrative 

functions, and predictability of a fee 

based on fixed rate per executed 

equivalent share. Such factors are 

crucial to estimating a reliable revenue 

stream for CAT LLC and for permitting 

Industry members to reasonably predict 

their payment obligations for budgeting 

purposes. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

Section 15A(b)(9) of the Act 184

requires that FINRA’s rules not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Exchange Act. 

FINRA does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. FINRA notes 

that Historical CAT Assessment 1 

implements provisions of the CAT NMS 

Plan that were approved by the 

Commission and is designed to assist 

FINRA in meeting its regulatory 

obligations pursuant to the Plan. 

In addition, all Participants (including 

exchanges and FINRA) are proposing to 

introduce Historical CAT Assessment 1 

on behalf of CAT LLC to implement the 

requirements of the CAT NMS Plan. 

Therefore, this is not a competitive fee 

filing, and, therefore, it does not raise 

competition issues between and among 

the Participants. 

Furthermore, in approving the CAT 

Funding Model, the SEC analyzed the 

potential competitive impact of the CAT 

Funding Model, including competitive 

issues related to market services, trading 

services and regulatory services, 

efficiency concerns, and capital 

formation.185 The SEC also analyzed the 

potential effect of CAT fees calculated 

pursuant to the CAT Funding Model on 

affected categories of market 

participants, including Participants 

(including exchanges and FINRA), 

Industry Members (including 

subcategories of Industry Members, 

such as alternative trading systems, CAT 

Executing Brokers and market makers), 

and investors generally, and considered 

market effects related to equities and 

options, among other things. Based on 

this analysis, the SEC approved the CAT 

Funding Model as compliant with the 

Exchange Act. Historical CAT 

Assessment 1 is calculated and 

implemented in accordance with the 

CAT Funding Model as approved by the 

SEC. 

As discussed above, each of the 

inputs into the calculation of Historical 

CAT Assessment 1 is reasonable and the 

resulting fee rate for Historical CAT 

Assessment 1 calculated in accordance 

with the CAT Funding Model is 

reasonable. Therefore, Historical CAT 

Assessment 1 would not impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Exchange Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Written comments were neither 

solicited nor received. 

III. Suspension of the Proposed Rule 

Change 

Pursuant to Section 19(b)(3)(C) of the 

Act,186 at any time within 60 days of the 

date of filing of a proposed rule change 

pursuant to Section 19(b)(1) of the 

Act,187 the Commission summarily may 

temporarily suspend the change in the 

rules of an SRO 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. As discussed 

below, a temporary suspension of the 

proposed rule change is necessary or 

appropriate to allow for additional 

analysis of the proposed rule change’s 

consistency with the Act and the rules 

thereunder. 

When SROs file their proposed rule 

changes with the Commission, 

including fee filings like FINRA’s 

present proposed rule change, they are 

required to provide a statement 

supporting the proposed rule change’s 

basis under the Act and the rules and 

regulations thereunder applicable to the 

SRO.188 The instructions to Form 19b– 

4, on which SROs file their proposed 

rule changes, specify that such 

statement ‘‘should be sufficiently 

detailed and specific to support a 

finding that the proposed rule change is 

consistent with [those] 

requirements.’’ 189

Among other things, FINRA’s 

proposed rule change is subject to 

Section 15A of the Act, including 

Sections 15A(b)(5), (6), and (9), which 

require the rules of a national securities 

association (‘‘association’’) to: (1) 

provide for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility or system 

which the association operates or 


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190 15 U.S.C. 78o–3(b)(5). 

191 15 U.S.C. 78o–3(b)(6). 

192 15 U.S.C. 78o–3(b)(9). 

193See 15 U.S.C. 78o–3(b)(5). 194See CAT Funding Model Approval Order at 

62660. 195For purposes of temporarily suspending the 

proposed rule change, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

196 15 U.S.C. 78s(b)(3)(C). Once the Commission 

temporarily suspends a proposed rule change, 

Section 19(b)(3)(C) of the Act requires that the 

Commission institute proceedings under Section 

19(b)(2)(B) to determine whether a proposed rule 

change should be approved or disapproved. 

197 15 U.S.C. 78s(b)(2)(B). 

198 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of 

the Act also provides that proceedings to determine 

whether to disapprove a proposed rule change must 

be concluded within 180 days of the date of 

publication of notice of the filing of the proposed 

rule change. See id. The time for conclusion of the 

proceedings may be extended for up to 60 days if 

the Commission finds good cause for such 

extension and publishes its reasons for so finding, 

or if the SRO consents to the longer period. See id. 

199 15 U.S.C. 78o–3(b)(5). 

200See CAT Funding Model Approval Order at 

62660. 

201 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act 

grants the Commission flexibility to determine what 

type of proceeding—either oral or notice and 

controls; 190 (2) be designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to 

and perfect the mechanism of a free and 

open market and a national market 

system, and, in general, to protect 

investors and the public interest, and 

not be designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers; 191 and (3) 

not impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the 

Act.192

The proposed rule change is also 

subject to the CAT Funding Model set 

forth in the CAT NMS Plan. For 

example, Section 11.3(b)(iii)(B)(II) of the 

CAT NMS Plan requires that the fee 

filing provide ‘‘sufficient detail to 

demonstrate that the Historical CAT 

Costs are reasonable and appropriate.’’ 

In addition, Section 11.3(b)(i)(C) of the 

CAT NMS Plan provides that the 

‘‘Operating Committee will reasonably 

determine the Historical CAT Costs 

sought to be recovered by each 

Historical CAT Assessment, where the 

Historical CAT Costs will be Past CAT 

Costs minus Past CAT Costs reasonably 

excluded from Historical CAT Costs by 

the Operating Committee’’ and Section 

11.3(b)(i)(D) of the CAT NMS Plan 

provides that ‘‘[t]he length of the 

Historical Recovery Period used in 

calculating each Historical Fee Rate will 

be reasonably established by the 

Operating Committee based upon the 

amount of the Historical CAT Costs to 

be recovered by the Historical CAT 

Assessment . . .’’ Further, Section 

11.3(b)(iii)(B)(III) of the CAT NMS Plan 

provides that ‘‘[n]o Participant will 

make a filing with the SEC pursuant to 

Section 19(b) of the Exchange Act 

regarding any Historical CAT 

Assessment until any applicable 

Financial Accountability Milestone 

described in Section 11.6 has been 

satisfied.’’ 

In temporarily suspending FINRA’s 

fee change, the Commission intends to 

further consider whether the proposed 

fees are consistent with the statutory 

requirements applicable to a national 

securities association under the Act and 

with the requirements set forth in the 

CAT Funding Model. Among other 

things, the Commission will consider 

whether the proposed rule change 

provides for reasonable fees that satisfy 

the standards under the Act and the 

rules thereunder.193 Further, and among 

other things, the Commission will 

consider whether the proposed rule 

change, as required by the CAT Funding 

Model, provides ‘‘sufficient detail to 

demonstrate that the Historical CAT 

Costs are reasonable and appropriate,’’ 

including, but not limited to, whether 

the Operating Committee has 

‘‘reasonably determine[d] the Historical 

CAT Costs sought to be recovered by 

each Historical CAT Assessment, where 

the Historical CAT Costs will be Past 

CAT Costs minus Past CAT Costs 

reasonably excluded from Historical 

CAT Costs by the Operating Committee’’ 

and whether the ‘‘length of the 

Historical Recovery Period used in 

calculating each Historical Fee Rate 

[was] reasonably established by the 

Operating Committee.’’ 194

Therefore, the Commission finds that 

it is necessary or appropriate in the 

public interest, for the protection of 

investors, and otherwise in furtherance 

of the purposes of the Act, to 

temporarily suspend the proposed rule 

change.195

IV. Proceedings To Determine Whether 

To Approve or Disapprove the 

Proposed Rule Change 

In addition to temporarily suspending 

the proposed rule change, the 

Commission is instituting proceedings 

pursuant to Sections 19(b)(3)(C) 196 and 

19(b)(2)(B) 197 of the Act to determine 

whether the proposed rule change 

should be approved or disapproved. 

Institution of proceedings does not 

indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved. Rather, as 

described below, the Commission seeks 

and encourages interested persons to 

provide comments on the proposed rule 

change to inform the Commission’s 

analysis of whether to approve or 

disapprove the proposed rule change. 

Pursuant to Section 19(b)(2)(B) of the 

Act,198 the Commission is providing 

notice of the grounds for possible 

disapproval under consideration. The 

Commission is instituting proceedings 

to allow for additional consideration 

and comment on whether FINRA has 

sufficiently demonstrated that the 

proposed rule change is consistent with 

Section 15A(b)(5) 199 of the Act, and 

consistent with the CAT Funding 

Model. Section 15A(b)(5) of the Act, 

among other things, provides that the 

dues, fees, and other charges for an 

association’s members be reasonable. 

And the CAT Funding Model, as noted 

above, requires, among other things, that 

the proposed rule change provide 

‘‘sufficient detail to demonstrate that the 

Historical CAT Costs are reasonable and 

appropriate,’’ including whether the 

Operating Committee has reasonably 

determined the Historical CAT Costs 

sought to be recovered by each 

Historical CAT Assessment, where the 

Historical CAT Costs will be Past CAT 

Costs minus Past CAT Costs reasonably 

excluded from Historical CAT Costs by 

the Operating Committee and whether 

the length of the Historical Recovery 

Period used in calculating each 

Historical Fee Rate was reasonably 

established by the Operating 

Committee.200

V. Commission’s Solicitation of 

Comments 

The Commission requests that 

interested persons provide written 

submission of their views, data, and 

arguments with respect to the issues 

identified above, as well as any other 

concerns they have with the proposed 

rule change. In particular, the 

Commission invites the written views of 

interested persons concerning whether 

the proposed rule change is consistent 

with Section 15A(b)(5), or any other 

provision of the Act, or the rules and 

regulations thereunder. Although there 

do not appear to be any issues relevant 

to approval or disapproval that would 

be facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.201


lotter on DSK11XQN23PROD with NOTICES2
Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 10887 

opportunity for written comments—is appropriate 

for consideration of a particular proposed rule 

change by an SRO. See Securities Acts 

Amendments of 1975, Report of the Senate 

Committee on Banking, Housing and Urban Affairs 

to Accompany S. 249, S. Rep. No. 75, 94th Cong., 

1st Sess. 30 (1975). 

202 15 U.S.C. 78s(b)(3)(C). 

203 17 CFR 200.30–3(a)(12), (57) and (58). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3An ‘‘Industry Member’’ is defined as ‘‘a member 

of a national securities exchange or a member of a 

national securities association.’’ See Exchange Rule 

7.20(u). Unless otherwise specified, capitalized 

terms used in this rule filing are defined as set forth 

in the CAT Compliance Rule. See Chapter 7, 

Section B of the Exchange’s Rulebook. 

4The term ‘‘CAT LLC’’ may be used to refer to 

Consolidated Audit Trail, LLC or CAT NMS, LLC, 

depending on the context. 

5The Exchange and each of its affiliated 

exchanges (Cboe BYX Exchange, Inc., Cboe BZX 

Exchange, Inc., Cboe C2 Exchange, Inc., Cboe EDGA 

Exchange, Inc., and Cboe EDGX Exchange, Inc.) are 

filing to adopt the CAT Fee Schedule. 

Interested persons are invited to 

submit written data, views, and 

arguments regarding whether the 

proposed rule changes should be 

approved or disapproved by March 5, 

2024. Any person who wishes to file a 

rebuttal to any other person’s 

submission must file that rebuttal by 

March 19, 2024. 

Comments may be submitted by any 

of the following methods: 

Electronic Comments 

• Use the Commission’s internet 

comment form (https://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include file number SR– 

FINRA–2024–002 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–FINRA–2024–002. 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 

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 

FINRA. 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–FINRA–2024–002 and should be 

submitted on or before March 5, 2024. 

Rebuttal comments should be submitted 

by March 19, 2024. 

VI. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(3)(C) of the Act,202 that 

File No. SR–FINRA–2024–002 be, and 

hereby is, temporarily suspended. In 

addition, the Commission is instituting 

proceedings to determine whether the 

proposed rule change should be 

approved or disapproved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.203

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–01194 Filed 2–12–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99364; File No. SR–CBOE– 

2024–003] 

Self-Regulatory Organizations; Cboe 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Establish Fees for 

Industry Members Related to Certain 

Historical Costs of the National Market 

System Plan Governing the 

Consolidated Audit Trail; Suspension 

of and Order Instituting Proceedings 

To Determine Whether To Approve or 

Disapprove the Proposed Rule Change 

January 17, 2024. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’ or the ‘‘Exchange Act’’),1 and 

Rule 19b–4 thereunder,2 notice is 

hereby given that, on January 2, 2024, 

Cboe Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘Cboe Options’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons and is, pursuant 

to Section 19(b)(3)(C) of the Act, hereby: 

(i) temporarily suspending the rule 

change; and (ii) instituting proceedings 

to determine whether to approve or 

disapprove the proposed rule change. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to adopt a fee 

schedule to establish fees for Industry 

Members 3 related to certain historical 

costs of the National Market System 

Plan Governing the Consolidated Audit 

Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’) 

incurred prior to January 1, 2022. These 

fees will be payable to Consolidated 

Audit Trail, LLC (‘‘CAT LLC’’ or ‘‘the 

Company’’) 4 and referred to as 

Historical CAT Assessment 1 and would 

be described in an Exchange fee 

schedule entitled ‘‘Consolidated Audit 

Trail Funding Fees’’ (‘‘CAT Fee 

Schedule’’).5 The fee rate for Historical 

CAT Assessment 1 will be $0.000015 

per executed equivalent share. CAT 

Executing Brokers will receive their first 

monthly invoice for Historical CAT 

Assessment 1 in April 2024 calculated 

based on their transactions as CAT 

Executing Brokers for the Buyer 

(‘‘CEBB’’) and/or CAT Executing 

Brokers for the Seller (‘‘CEBS’’) in 

March 2024. 

The text of the proposed rule change 

is available on the Exchange’s website 

(http://www.cboe.com/AboutCBOE/ 

CBOELegalRegulatoryHome.aspx), at 

the Exchange’s Office of the Secretary, 

and at the Commission’s Public 

Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item V below. The 

Exchange has prepared summaries, set 

forth in sections A, B, and C below, of 

the most significant aspects of such 

statements. 


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