Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 11153 

197 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 exchange consents to the longer period. See 

id. 

198 15 U.S.C. 78f(b)(4). 

199See CAT Funding Model Approval Order at 

62660. 

200 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 

opportunity for written comments—is appropriate 

for consideration of a particular proposed rule 

change by an exchange. 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). 

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. 

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,197 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 the Exchange 

has sufficiently demonstrated that the 

proposed rule change is consistent with 

Section 6(b)(4) 198 of the Act, and 

consistent with the CAT Funding 

Model. Section 6(b)(4) of the Act, among 

other things, provides that the dues, 

fees, and other charges for an exchange’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.199

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 6(b)(4), 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.200

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– 

PEARL–2024–01 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–PEARL–2024–01. 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 the 

Exchange. Do not include personal 

identifiable information in submissions; 

you should submit only information 

that you wish to make available 

publicly. We may redact in part or 

withhold entirely from publication 

submitted material that is obscene or 

subject to copyright protection. All 

submissions should refer to file number 

SR–PEARL–2024–01 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,201 that 

File No. SR–PEARL–2024–01 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. 2024–01203 Filed 2–12–24; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–99372; File No. SR–FINRA– 

2024–003] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of a 

Proposed Rule Change To Adopt 

FINRA Rule 6897(b) (CAT Cost 

Recovery Fees) To Implement a 

Historical Consolidated Audit Trail 

Recovery Assessment; 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 


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11154 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

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

4 17 CFR 240.19b–4(f)(2). 

5Pursuant to Section 11.3(b) of the CAT NMS 

Plan, FINRA filed a separate proposed rule change 

to establish fees assessed to Industry Members, 

payable to Consolidated Audit Trail, LLC, related to 

recoverable historical CAT costs incurred prior to 

January 1, 2022. See File No. SR–FINRA–2024–002. 

Unless otherwise specified, capitalized terms used 

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

NMS Plan and FINRA Rule 6800 Series 

(Consolidated Audit Trail Compliance Rule). 

6See Securities Exchange Act Release No. 67457 

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

7See Securities Exchange Act Release No. 79318 

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

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

8See Section 11.1(b) of the CAT NMS Plan. 

9See Securities Exchange Act Release No. 98290 

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

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

10See Section 11.3(b) of the CAT NMS Plan. 

11See Section 11.3(a) of the CAT NMS Plan. 

12See File No. SR–FINRA–2024–002. 

13CAT Funding Model Approval Order, 88 FR 

62628, 62636–37. 

14FINRA has consistently made clear its intention 

to file a rule change to implement member CAT fees 

simultaneous with the filing of any proposed rule 

change to effectuate the CAT Funding Model. See 

Letter from Marcia E. Asquith, Corporate Secretary, 

EVP, Board and External Relations, FINRA, to 

Vanessa Countryman, Secretary, Commission, dated 

April 11, 2023 (‘‘FINRA April 2023 Letter’’) at 7 (‘‘If 

the Funding Model is approved by the Commission, 

FINRA intends to file a rule change to increase 

member fees simultaneous with the filing of any 

proposed rule change to effectuate the Funding 

Model.’’); see also Letter from Marcia E. Asquith, 

Corporate Secretary, EVP, Board and External 

Relations, FINRA, to Vanessa Countryman, 

Secretary, Commission, dated June 22, 2022 

(‘‘FINRA June 2022 Letter’’) at 6 (‘‘[G]iven FINRA’s 

unique nature, FINRA necessarily must seek 

recovery in turn for the costs it is allocated.’’). 

FINRA also requested that if the Commission were 

to approve the CAT Funding Model, that it 

acknowledge ‘‘FINRA’s need and ability to cover 

CAT costs that are not recovered through 

contractual arrangements through member fee 

increases, so as not to jeopardize FINRA’s ability to 

carry out its critical regulatory mission.’’ See CAT 

Funding Model Approval Order, 88 FR 62628, 

62645. 

15See File No. SR–FINRA–2024–002. 

16The 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.’’ See Section 11.3(b)(iii)(B)(III) of 

the CAT NMS Plan. 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 Post-Amendment 

Expenses incurred during Period 1, Period 2, Period 

3, or Period 4.’’ See Section 11.6(b) of the CAT NMS 

Plan. As discussed in File No. SR–FINRA–2024– 

002, all applicable Financial Accountability 

Milestones for Historical CAT Assessment 1 and, by 

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(b) (CAT Cost Recovery Fees) 

to implement a historical Consolidated 

Audit Trail (‘‘CAT’’) recovery 

assessment through which FINRA 

would recoup its contributions to 

recoverable historical CAT costs 

incurred prior to January 1, 2022.5

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 

Background 

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.6 On November 15, 2016, the 

Commission approved the CAT NMS 

Plan (‘‘Plan’’ or ‘‘CAT NMS Plan’’).7

Under the CAT NMS Plan, the 

Operating Committee has the discretion 

to establish funding for Consolidated 

Audit Trail, LLC (‘‘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.8 The Operating Committee 

adopted a revised funding model to 

fund the CAT (‘‘CAT Funding Model’’) 

and, 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.9

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); 10 and (2) CAT fees 

assessed by CAT LLC and payable by 

Participants and Industry Members to 

fund prospective CAT costs.11 With 

respect to Historical CAT Assessment 

fees, to date, the CAT Operating 

Committee has established Historical 

CAT Assessment 1 with regard to 

historical CAT costs incurred prior to 

January 1, 2022 (‘‘Historical CAT Costs 

1’’).12

In light of the approval of the CAT 

Funding Model and the filing of File No. 

SR–FINRA–2024–002, FINRA is 

similarly filing the instant proposed rule 

change to establish a fee to allow FINRA 

to recoup its contributions to the 

Participants’ assessed share of Historical 

CAT Costs 1 (‘‘Historical CAT Cost 

Recovery Assessment 1’’). Historical 

CAT Cost Recovery Assessment 1 is 

designed to allow FINRA to recover its 

designated portion of Historical CAT 

Costs 1—amounting to $4,613,250—in a 

manner consistent with the Exchange 

Act and the CAT Funding Model 

Approval Order. In the Approval Order, 

the Commission acknowledged that ‘‘the 

Exchange Act expressly contemplates 

the ability of the Participants to recoup 

their costs to fulfill their statutory 

obligations under the Exchange Act.’’ 13

The Commission also noted FINRA’s 

statement ‘‘that it would file a rule 

change to increase its member fees with 

the filing of any proposed rule change 

to effectuate the Funding Model.’’ 14

Given the approval of the CAT Funding 

Model and FINRA’s proposed rule 

change to establish Historical CAT 

Assessment 1 to effectuate the CAT 

Funding Model,15 FINRA is submitting 

this filing to implement Historical CAT 

Cost Recovery Assessment 1.16


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Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 11155 

extension, Historical CAT Cost Recovery 

Assessment 1—that is, Period 1, Period 2, and 

Period 3 of the Financial Accountability 

Milestones—have been satisfied. Furthermore, the 

costs sought to be recovered via both Historical 

CAT Assessment 1 and Historical CAT Cost 

Recovery Assessment 1 relate to Post-Amendment 

Expenses incurred during Periods 1, 2 and 3 of the 

Financial Accountability Milestones. 

17Historical CAT Assessment 1 seeks to recover 

from CAT Executing Brokers two-thirds of 

Historical CAT Costs 1—the $337,688,610 in 

recoverable costs incurred by CAT LLC prior to 

January 1, 2022. Participants collectively will 

remain responsible for one-third of Historical CAT 

Costs 1 or $112,562,870. 

18FINRA notes that, as is the case with respect 

to Historical CAT Assessment 1 discussed in File 

No. SR–FINRA–2024–002, FINRA’s recovery under 

the instant proposed rule change also would not 

include any portion of Excluded Costs, i.e., 

$48,874,937 of costs incurred from November 15, 

2017 through November 15, 2018, and $14,749,362 

of costs related to the termination of the 

relationship with the Initial Plan Processor. See 

CAT Funding Model Approval Order, 88 FR 62628, 

62660 n704. 

19A detailed description (including the amounts) 

of all costs incurred by the Participants during the 

pre-FAM period (prior to June 22, 2020) and during 

each relevant FAM period, i.e., FAM Period 1, FAM 

Period 2, and FAM Period 3, is provided in File No. 

SR–FINRA–2024–002. 

20See FINRA April 2023 Letter, supra note 14, at 

3 (noting that, under the CAT Funding Model, 

FINRA ‘‘would be assessed an estimated 34% of the 

total CAT costs to be borne amongst the 25 SRO 

Plan Participants (based on 2021 data).’’). 

21 In approving the CAT Funding Model, the 

Commission noted that it ‘‘believe[d] that FINRA’s 

allocation of CAT fees likely will be passed through 

to Industry Members.’’ See CAT Funding Model 

Approval Order, 88 FR 62628, 62684. 

22As per Section 1.1 of the Plan, for a transaction 

in an Eligible Security executed otherwise than on 

an exchange and required to be reported to an 

equity trade reporting facility of a registered 

national securities association, i.e., one of FINRA’s 

Trade Reporting Facilities (each a ‘‘TRF’’), OTC 

Reporting Facility (‘‘ORF’’) or Alternative Display 

Facility (‘‘ADF’’), the CEBB and CEBS are the 

Industry Members identified as the executing 

broker and the contra-side executing broker in the 

TRF/ORF/ADF transaction data event in CAT Data. 

In those circumstances where there is a nonIndustry 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 

Continued 

FINRA’s Portion of Historical CAT Costs 

1 

As discussed in File No. SR–FINRA– 

2024–002, which seeks to implement 

Historical CAT Assessment 1,17 to date, 

FINRA and the other Participants have 

agreed to pay all Past CAT Costs via 

loans to CAT LLC. Specifically, in the 

absence of an SEC-approved model 

establishing how the Participants were 

to fund the creation, implementation, 

and maintenance of the CAT, in 2017, 

FINRA and the other Participants 

unanimously agreed to apportion all 

CAT operational costs amongst the 

group and to fund the CAT through a 

series of interest-free loans. Through 

these loans, FINRA contributed 

$13,839,748 or roughly 4.1% toward the 

$337,688,610 in operating expenses 

composing Historical CAT Costs 1. Of 

that approximately $13.8 million 

expenditure, FINRA expects to recover 

$9,226,499 in loan repayments from 

CAT LLC following implementation of 

Historical CAT Assessment 1, and, 

under the CAT Funding Model, will 

forgive the remaining $4,613,250, which 

FINRA now seeks to recover through the 

implementation of Historical CAT Cost 

Recovery Assessment 1.18

The following table illustrates 

FINRA’s approximate contributions to 

the Plan Participants’ collective onethird share of Historical CAT Costs 1 

during each of the relevant periods.19

FINRA’s recovery of these 

approximately $4.6 million in CAT 

costs is reasonable and consistent with 

the Exchange Act. As discussed herein 

and in File No. SR–FINRA–2024–002, 

these costs incurred by FINRA were 

necessary to fund the design, 

implementation, and maintenance of the 

CAT. The approximately 4.1% of the 

Participants’ share of Historical CAT 

Costs 1 borne by FINRA is significantly 

smaller than the approximately 34% of 

the Participants’ share of Prospective 

CAT costs to be borne by FINRA under 

the SEC-approved CAT funding 

model.20 As stated by FINRA and 

permitted under the Exchange Act, 

FINRA will seek to recover its portion 

of the Participants’ share of CAT costs 

to ensure that FINRA can fulfill its 

regulatory mandate and responsibilities. 

Historical CAT Cost Recovery 

Assessment 1 

FINRA is proposing to adopt Rule 

6897(b) (CAT Cost Recovery Fees) to 

implement Historical CAT Cost 

Recovery Assessment 1 at this time to 

allow FINRA to recover its contributions 

to the Participants’ one-third share of 

Historical CAT Costs 1.21 FINRA 

intends that the fee framework for, and 

the commencement of payment of, the 

Historical CAT Cost Recovery 

Assessment 1 would correspond to the 

framework put in place under the SECapproved CAT Funding Model and the 

timing for the commencement of 

Historical CAT Assessment 1, as 

provided for in File No. SR–FINRA– 

2024–002. Thus, as with Historical CAT 

Assessment 1, FINRA proposes that 

each member CAT Executing Broker 

shall receive its first invoice for 

Historical CAT Cost Recovery 

Assessment 1 in April 2024, setting 

forth fees calculated based on March 

2024 transactions in Eligible Securities 

executed otherwise than on an 

exchange, as reflected in CAT Data. 

Consistent with the approach taken 

under the CAT Funding Model, FINRA 

proposes to equally apportion one-third 

of Historical Fee Rate 1 between the 

member CAT Executing Broker for the 

Buyer (‘‘CEBB’’) and the member CAT 

Executing Broker for the Seller 

(‘‘CEBS’’) for each transaction in Eligible 

Securities executed otherwise than on 

an exchange.22 The following fields of 


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Pre-FAM Period 

rior to June 22, 2020 

FAM Period 1 

FAMPeriod2 

FAM Period 3 

Total 

throu 1, 2022 

$47,973,174 $1,966,120 

$2,125,781 $87,123 

$14,325,493 $587,113 

$48 138 423 $1 972 894 

$112,562,870 $4,613,250 
11156 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

event, then the Industry Member identified as the 

executing broker in the TRF/ORF/ADF transaction 

data event would be treated as, and be required to 

pay the fee assessed to, both the CEBB and CEBS. 

23See Table 61, Section 6.1 (TRF/ORF/ADF 

Transaction Data Event) of the CAT Reporting 

Technical Specifications for Plan Participants. 

24 Dividing $0.0000439371316687066 by three 

equals $0.00001464571055623553. 

25 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. Under the CAT NMS Plan, executed 

equivalent shares in a transaction in Eligible 

Securities are 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. See 

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

NMS Plan. 

26 Dividing $0.00001464571055623553 by two 

and rounding to six decimal places equals 

$0.000007. As with Historical CAT Assessment 1, 

FINRA determined to use six decimal places for 

Historical CAT Cost Recovery Fee Rate 1 to balance 

the accuracy of the calculation with the potential 

systems and other impracticalities of using 

additional decimal places in the calculation. 

27From December 1, 2022 through November 30, 

2023, the average monthly executed equivalent 

share volume in Eligible Securities where FINRA is 

the relevant SRO was approximately 100 billion 

shares. Assuming similar 2024 trading volumes, 

FINRA would recover its approximately $4.6 

million portion of the Participants’ assessed share 

of Historical CAT Costs 1 within four months. 

Given the fee rate and total amount to be recovered, 

the proposed four-month recovery period is both 

reasonable and unlikely to significantly overlap 

with any future CAT assessments under the CAT 

Funding Model or any future CAT cost recovery 

assessment passed through by FINRA, which would 

be the subject of a separate proposed rule change. 

28A similar approach will be taken by CAT LLC 

with respect to any excess money collected 

pursuant to Historical CAT Assessment 1 during its 

final month. See File No. SR–FINRA–2024–002. 

the Participant Technical Specifications 

indicate the CAT Executing Brokers for 

transactions executed otherwise than on 

an exchange. 

As discussed in File No. SR–FINRA– 

2024–002, the Operating Committee has 

determined that Historical Fee Rate 1 is 

$0.0000439371316687066 per executed 

equivalent share, and, under the CAT 

Funding Model, each of the CEBB, CEBS 

and relevant Participant for a given 

transaction in an Eligible Security 

would be responsible for one-third of 

that rate, or $0.00001464571055623553 

per executed equivalent share.24 In line 

with this approach, with respect to 

FINRA’s portion of the Participants’ 

one-third share, FINRA is proposing 

that, for Historical CAT Cost Recovery 

Assessment 1, the Participants’ assessed 

fee rate would be split evenly between 

the CEBB and CEBS to establish a 

Historical CAT Cost Recovery Fee Rate 

1 of $0.000007 per executed equivalent 

share 25 for transactions where FINRA is 

the relevant Participant.26

To implement Historical CAT Cost 

Recovery Assessment 1, FINRA 

proposes to adopt Rule 6897(b)(1)(A)(i) 

to provide that each member CAT 

Executing Broker shall receive its first 

invoice in April 2024, setting forth the 

Historical CAT Cost Recovery 

Assessment 1 fees calculated based on 

transactions in March 2024, and shall 

receive similar invoices for each month 

thereafter in which Historical CAT Cost 

Recovery Assessment 1 is in effect. As 

provided in proposed Rule 

6897(b)(1)(A)(ii), each monthly invoice 

shall set forth fees for each transaction 

in an Eligible Security executed by the 

CAT Executing Broker in its capacity as 

the CEBB and/or the CEBS (as 

applicable) otherwise than on an 

exchange as set forth in CAT Data. The 

Historical CAT Cost Recovery 

Assessment 1 fee assessed to each CEBB 

and CEBS for each such transaction will 

be calculated by multiplying the 

number of executed equivalent shares in 

the transaction by the Historical CAT 

Cost Recovery Fee Rate 1 of $0.000007 

per executed equivalent share. 

Further, as provided in proposed Rule 

6897(b)(1)(A)(iii), Historical CAT Cost 

Recovery Assessment 1 will remain in 

effect until FINRA’s approximately $4.6 

million contribution to the one-third 

share of Historical CAT Costs 1 assessed 

to the Plan Participants is collected from 

member CAT Executing Brokers 

collectively, which is estimated to be 

four months, but could be for a longer 

or shorter period of time.27 Proposed 

Rule 6897(b)(1)(A)(iv) confirms that 

each member CAT Executing broker 

shall be required to pay each invoice for 

Historical CAT Cost Recovery 

Assessment 1. 

Historical CAT Cost Recovery 

Assessment 1 will be assessed for all 

transactions in Eligible Securities 

executed otherwise than on an exchange 

in each month through the end of the 

month in which FINRA’s approximately 

$4.6 million contribution to the 

Participants’ one-third share of 

Historical CAT Costs 1 is assessed, and 

then FINRA will provide notice that 

Historical CAT Cost Recovery 

Assessment 1 is no longer in effect. As 

with Historical CAT Assessment 1, 

since Historical CAT Cost Recovery 

Assessment 1 is a monthly fee based on 

transaction volume from the prior 

month, Historical CAT Cost Recovery 

Assessment 1 may result in the 

collection of more than FINRA’s 

approximately $4.6 million contribution 

to Historical CAT Costs 1. To the extent 

that occurs, any excess money collected 

during the final month in which 

Historical CAT Cost Recovery 

Assessment 1 is in effect will be used to 

offset future member fees assessed by 

FINRA to recover its contributions, as a 

Plan Participant, to CAT costs.28

FINRA also proposes to adopt Rule 

6897(b)(2) to further describe the timing 

and manner of payment of Historical 

CAT Cost Recovery Assessment 1. The 

proposed provision requires member 

CAT Executing Brokers to pay Historical 

CAT Cost Recovery Assessment 1 on a 

monthly basis in the manner prescribed 


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TRF/ORF/ADF Transaction Data Event23 

# Field Name Data Type Description Include 

Kev 

26 reportingExecutingMpid Member MPID of the executing party R 

Alias 

28 contraExecutingMpid Member MPID of the contra-side C 

Alias executing party. 
Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 11157 

29See File No. SR–FINRA–2024–002. 

30 15 U.S.C. 78o–3(b)(6). 

31 15 U.S.C. 78o–3(b)(5). 

32 15 U.S.C. 78o–3(b)(9). 

33See 15 U.S.C. 78o–3(b)(2). 

34CAT NMS Plan Approval Order, 81 FR 84696, 

84697. 

by FINRA. In addition, each CAT 

Executing Broker would be required to 

pay the Historical CAT Cost Recovery 

Assessment 1 within 30 days after 

receipt of an invoice or other notice 

indicating payment is due (unless a 

longer payment period is otherwise 

indicated). 

FINRA also notes that, to assist 

Industry Members in complying with 

Historical CAT Assessment 1, each CAT 

Executing Broker will have access to 

mock invoices, made available by CAT 

LLC, with details for any fee liable 

transactions, including those executed 

otherwise than on an exchange for the 

months of November 2023, December 

2023, January 2024 and February 

2024.29 Since Historical CAT Cost 

Recovery Assessment 1 will allocate 

fees to each member CAT Executing 

Broker based on the same transactions 

used by CAT LLC to assess the offexchange portion of Historical CAT 

Assessment 1 each month, member CAT 

Executing Brokers may also use the offexchange transaction data provided by 

CAT LLC in the mock invoices to 

prepare for compliance with Historical 

CAT Cost Recovery Assessment 1. To 

further assist, beginning with the initial 

invoice in April 2024, FINRA also 

intends to make available to each 

member CAT Executing Broker a 

separate copy of the relevant details for 

fee liable transactions executed each 

month otherwise than on an exchange. 

Furthermore, FINRA will also make 

publicly available on its website: (i) the 

total amount invoiced each month that 

Historical CAT Cost Recovery 

Assessment 1 is in effect, (ii) the total 

amount invoiced for Historical CAT 

Cost Recovery Assessment 1 for all 

months since its commencement, and 

(iii) the total costs remaining to be 

collected from members in aggregate for 

Historical CAT Cost Recovery 

Assessment 1. By reviewing statistics 

regarding how much has been invoiced 

and how much remains to be invoiced 

for Historical CAT Cost Recovery 

Assessment 1, members would have 

sufficient information to reasonably 

track how much longer Historical CAT 

Cost Recovery Assessment 1 is likely to 

be in place. 

FINRA has filed the proposed rule 

change for immediate effectiveness. The 

effective date and the implementation 

date will be the date of filing. 

2. Statutory Basis 

FINRA believes that the proposed rule 

change is consistent with the provisions 

of Section 15A(b)(6) of the Act,30 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 must not be 

designed to permit unfair 

discrimination between customers, 

issuers, brokers or dealers. FINRA also 

believes that the proposed rule change 

is consistent with the provisions of 

Section 15A(b)(5) of the Act,31 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, which 

requires that FINRA rules not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Exchange Act.32

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.33

FINRA believes that this proposed 

rule change is consistent with the Act 

because it 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.’’ 34 To the extent that this proposed 

rule change implements a requirement 

that facilitates FINRA’s achievement of 

its regulatory obligations under the Plan 

and applies specific requirements to 

FINRA members in this regard, FINRA 

believes that this proposed rule change 

furthers the objectives of the Plan, as 

identified by the SEC, and is therefore 

consistent with the Act. 

As discussed in detail in File No. SR– 

FINRA–2024–002, FINRA believes that 

the proposed fees paid by the CEBBs 

and CEBSs in connection with 

Historical CAT Assessment 1 are 

reasonable, equitably allocated and not 

unfairly discriminatory. Historical CAT 

Cost Recovery Assessment 1 would 

similarly allow FINRA to recover its 

costs from member CAT Executing 

Brokers in a fair and reasonable manner, 

as contemplated by the Exchange Act 

and consistent with the CAT Funding 

Model Approval Order. 

Proposed Historical CAT Cost 

Recovery Assessment 1 would be 

charged to member CAT Executing 

Brokers 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, and any 

surplus would be used as a reserve to 

offset future member fees assessed by 

FINRA to recover its contributions, as a 

Plan Participant, to CAT costs. 

Accordingly, FINRA believes that the 

proposed fees are reasonable, equitable 

and not unfairly discriminatory. 

The reasonableness of Historical CAT 

Cost Recovery Assessment 1 and its 

consistency with the Exchange Act 

likewise is grounded in the facts 

described above and detailed in File No. 

SR–FINRA–2024–002. Specifically, the 

expenses that compose the portion of 

Past CAT Costs sought to be recovered 

through Historical CAT Cost Recovery 

Assessment 1 were recognized by the 

SEC as appropriate for recovery 

pursuant to the formula approved in the 

CAT Funding Model (i.e., technology, 

legal, consulting, insurance, 

professional administration, and public 

relations costs). FINRA has determined 

that these costs, which are described in 

detail in File No. SR–FINRA–2024–002, 

are reasonable and it is appropriate that 

FINRA recover its Participant 

contribution to such costs through 

Historical CAT Cost Recovery 

Assessment 1. FINRA also has 

determined that Historical CAT Cost 

Recovery Assessment 1 provides for the 

equitable allocation of fees among 

FINRA members and is not unfairly 

discriminatory, as discussed herein. 

Historical CAT Cost Recovery 

Assessment 1 is designed to allow 

FINRA to recover its designated portion 

of Historical CAT Costs 1, consistent 

with the Exchange Act and the CAT 

Funding Model Approval Order. In 

approving the CAT Funding Model, the 

Commission noted FINRA’s request that 

it acknowledge ‘‘FINRA’s need and 

ability to cover CAT costs that are not 

recovered through contractual 

arrangements through member fee 

increases, so as not to jeopardize 

FINRA’s ability to carry out its critical 


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11158 Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 

35See CAT Funding Model Approval Order, 88 

FR 62628, 62645. 

36See supra note 35 at 62636–37. 

37See supra note 35. 

38See FINRA’s Financial Guiding Principles, 

https://www.finra.org/sites/default/files/finra_

financial_guiding_principles_0.pdf. 

39See Securities Exchange Act Release No. 90176 

(October 14, 2020), 85 FR 66592, 66602–03 (October 

20, 2020) (Notice of Filing and Immediate 

Effectiveness of File No. SR–FINRA–2020–032). As 

FINRA explained: ‘‘In addition to costs associated 

with its CAT reporting compliance program, FINRA 

must account for significant costs to integrate CAT 

data into its regulatory systems. . . . Importantly, 

these costs are separate from and in addition to 

FINRA’s obligation to contribute funding for the 

development, maintenance, and operation of the 

CAT system incurred by the CAT Plan Processor.’’ 

40 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 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. 

41See supra note 40. 

42See supra note 27. 

43 15 U.S.C. 78o–3(b)(9). 

44See CAT Funding Model Approval Order, 88 

FR 62628, 62678–86. 

45See supra note 44. 

regulatory mission.’’ 35 The Commission 

also recognized that ‘‘the Exchange Act 

expressly contemplates the ability of the 

Participants to recoup their costs to 

fulfill their statutory obligations under 

the Exchange Act.’’ 36 The Commission 

further noted FINRA’s statement ‘‘that it 

would file a rule change to increase its 

member fees with the filing of any 

proposed rule change to effectuate the 

Funding Model.’’ 37 The instant 

proposed rule change to adopt 

Historical CAT Cost Recovery 

Assessment 1 represents such a fee with 

respect to Historical CAT Costs 1. 

Without a mechanism to recover its 

CAT costs, FINRA, a not-for-profit, 

national securities association, would 

not be able to effectively sustain its 

regulatory mission. Thus, consistent 

with the cost allocation framework put 

in place by the SEC-approved CAT 

Funding Model, whereby CEBBs and 

CEBSs share equal responsibility for the 

costs assessed directly to Industry 

Members based on their transactions in 

Eligible Securities, FINRA is seeking to 

recoup these historical CAT costs in a 

like manner that is fair, reasonable, and 

equitably allocated among FINRA’s 

member firms in their capacity as CAT 

Executing Brokers. 

Historical CAT Cost Recovery 

Assessment 1 will also allow FINRA to 

align its operating expenses with its 

operating revenues, target break-even 

cash flows, and continue to responsibly 

manage expenses driven by mandatory 

initiatives, like the CAT NMS Plan, in 

a manner consistent with FINRA’s 

public Financial Guiding Principles.38

FINRA periodically increases its 

regulatory fees to cover increased costs 

and scope of address of its member 

regulatory program; however, those fee 

increases are not designed to recover the 

separate costs associated with the 

development, maintenance, and 

operation of the CAT system under the 

CAT NMS Plan.39

FINRA’s approach in determining 

Historical CAT Cost Recovery Fee Rate 

1, which is consistent with the approach 

provided for under the SEC-approved 

Funding Model, is also reasonable and 

consistent with the Exchange Act. 

Specifically, similar to the CAT cost 

assessment methodology approved by 

the Commission, FINRA proposes to 

allocate equally among member CEBBs 

and CEBSs the portion of Participants’ 

one-third share of Historical CAT Costs 

1 previously paid by FINRA.40 FINRA 

proposes to determine Historical CAT 

Cost Recovery Fee Rate 1 by multiplying 

the portion of Historical Fee Rate 1 

assessed to the Participants under the 

CAT Funding Model, i.e., 

$0.00001464571055623553 per executed 

equivalent share, by one-half such that 

member CEBBs and CEBSs would each 

be subject to an equal fee, i.e., 

$0.000007 per executed equivalent 

share, for each transaction in Eligible 

Securities executed otherwise than on 

an exchange. Therefore, each month that 

Historical CAT Cost Recovery 

Assessment 1 is in effect, member 

CEBBs and CEBSs will pay a fee to 

FINRA based on the same transactions 

used to determine fees payable by 

CEBBs and CEBSs to CAT LLC under 

Historical CAT Assessment 1 for offexchange transactions. FINRA believes 

that this approach is reasonable in that, 

as is the case with the SEC-approved 

funding model, it apportions the 

assessed fee for members equally 

between the CAT Executing Brokers for 

the buyer and the seller.41

From December 1, 2022 through 

November 30, 2023, the average 

monthly executed equivalent share 

volume in Eligible Securities where 

FINRA is the relevant SRO was 

approximately 100 billion shares.42

Assuming similar 2024 trading volumes, 

under Historical CAT Cost Recovery 

Assessment 1, FINRA would recover its 

portion of the Participants’ assessed 

share of Historical CAT Costs 1 within 

approximately four months. Given the 

relatively modest fee rate and amount to 

be recovered, the expected four-month 

recovery period is fair, reasonable, and 

equitable, and will allow FINRA to 

recover its costs in a relatively short 

timeframe without imposing significant 

additional financial or compliance 

burdens on members. Given the 

expected duration of four months, 

Historic CAT Cost Recovery Assessment 

1 is also unlikely to significantly 

overlap with any future CAT 

assessments under the CAT Funding 

Model or any future CAT cost recovery 

assessment passed through by FINRA 

(which would be subject to separate 

proposed rule changes with the 

Commission). 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

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. Section 

15A(b)(9) of the Act 43 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 

notes that Historical CAT Cost Recovery 

Assessment 1 is designed to assist 

FINRA in meeting its regulatory 

obligations pursuant to the Plan. 

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.44 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.45 Based on 

this analysis, the SEC approved the CAT 

Funding Model as compliant with the 

Exchange Act. The Historical CAT Cost 

Recovery Assessment 1 fee framework is 

consistent with the fee framework of the 

CAT Funding Model, as approved by 

the SEC. 

As discussed in File No. SR–FINRA– 

2024–002, each of the inputs into the 

calculation of Historical CAT 

Assessment 1 is reasonable and the 

resulting fee rate for Historical CAT 


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Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 11159 

46See CAT Funding Model Approval Order. 

47The CAT Funding Model establishes two 

categories of fees: (1) prospective fees (which 

includes fees for costs not previously paid by the 

SROs); and (2) past fees (which includes fees 

payable by industry members regarding CAT costs 

previously paid by the Participants). With respect 

to the industry portion, the Plan provides that each 

executing broker for the buyer and executing broker 

for the seller would be required to pay a fee for each 

transaction in an eligible security that is determined 

by multiplying the number of executed equivalent 

shares in the transaction by one-third, and by the 

fee rate established by the Operating Committee. 

48See supra note 14. 

49As discussed above, Historical CAT Costs 1 

include technology (cloud hosting services and 

operating, CAIS operating, and change request fees), 

legal, consulting, insurance, professional and 

administration, and public relations costs. 

50For the twelve months from December 1, 2022 

through November 30,2023, 1,208,689,888,387 

shares of NMS stocks were reported to the TRF, and 

1,209,157,925,786 shares of OTC Equity Securities 

were reported to ORF. Given that each executed 

share for a transaction in an OTC Equity Security 

is counted as 0.01 equivalent share, FINRA 

estimates that the executed equivalent share volume 

for NMS stocks and OTC Equity Securities reported 

to any FINRA trade reporting facility in that oneyear period is 1,220,781,467,645 shares. 

51See CAT Funding Model Approval Order. 

52See File No. SR–FINRA–2024–002. 

Assessment 1 is reasonable. Therefore, 

Historical CAT Cost Recovery 

Assessment 1, for these same reasons, is 

reasonable and would not impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Exchange Act. 

Economic Impact Assessment 

Based on the regulatory need 

discussed above and summarized 

below, FINRA has undertaken an 

economic impact assessment, as set 

forth below, to analyze the potential 

economic impacts of the proposed rule 

change, including potential costs, 

benefits, and distributional and 

competitive effects, relative to the 

current baseline. 

Regulatory Need 

On September 6, 2023, the 

Commission approved an amendment to 

the CAT NMS Plan that implements a 

revised funding model for CAT, the 

CAT Funding Model.46 This CAT 

Funding Model provides a framework 

for recovering past and future CAT 

costs, including a method for allocating 

these costs among Participants and 

Industry Members (with two-thirds of 

costs to be assessed directly on the 

industry and one-third to be assessed on 

the Participants).47

The SEC’s approval order for the CAT 

Funding Model also recognized that 

Participants may choose to pass-through 

their one-third portion of CAT Costs to 

their members. FINRA intends to 

recover from its members FINRA’s 

portion of the Participants’ share of 

Historical CAT Costs 1. As stated in 

FINRA’s comment letters, as a not-forprofit national securities association 

that relies primarily on regulatory fees 

from members for funding, FINRA must 

increase member fees to fund CAT costs 

so as not to jeopardize FINRA’s ability 

to meet its regulatory mission.48

Economic Baseline 

Participants have paid Historical CAT 

Costs 1, incurred prior to January 1, 

2022, in the amount of $337,688,610.49

Applying the SEC-approved CAT 

Funding Model, Industry Members are 

responsible for two-thirds of these costs, 

which amounts to $225,125,740, and 

one-third of these costs is allocated to 

Participants, which amounts to 

$112,562,870. FINRA’s share of 

Historical CAT Costs 1 is $4,613,250 (or 

approximately 4.1% of the Participants’ 

one-third portion of Historical CAT 

Costs 1). 

The Operating Committee determined 

the Historical Fee Rate to be used in 

calculating Historical CAT Assessment 

1 by dividing Historical CAT Costs 1 

($337,688,610) by the projected total 

executed share volume of all 

transactions in Eligible Securities over 

24 months (7,685,722,694,558.88 

shares). Based on this calculation, the 

Operating Committee determined that 

Historical Fee Rate 1 would be 

$0.0000439371316687066 per executed 

equivalent share. Under the CAT 

Funding Model, each CEBB, CEBS and 

relevant Participant for a given 

transaction in an Eligible Security is 

responsible for one-third of that rate, or 

$0.00001464571055623553 per executed 

equivalent share. 

To recover FINRA’s contribution to 

the Participants’ one-third share of 

Historical CAT Costs 1, consistent with 

the approach taken in the CAT Funding 

Model, FINRA is proposing to equally 

apportion the fee rate between the 

member firm CEBB and CEBS for each 

relevant transaction, such that each 

would pay $0.000007 (i.e., 0.5 × 

$0.00001464571055623553) per 

executed equivalent share, for each 

transaction in Eligible Securities 

executed otherwise than on an 

exchange. 

Historical CAT Cost Recovery 

Assessment 1 will remain in effect 

through the month in which FINRA 

recovers from FINRA member CEBBs 

and CEBSs collectively its contribution 

to the one-third share of Historical CAT 

Costs 1. For the purposes of estimating 

the recovery period for the Historical 

CAT Cost Recovery Assessment 1, 

FINRA computed an executed 

equivalent share volume for OTC 

transactions in NMS stocks and OTC 

equity securities for the twelve months 

from December 1, 2022 through 

November 30, 2023. Assuming similar 

2024 trading volume, given an estimated 

executed equivalent share volume of 

1,220,781,467,645 shares 50 and a fee 

rate of $0.000007 per executed 

equivalent share for each CEBB and 

CEBS, FINRA estimates that it would 

recover its one-third share of Historical 

CAT Costs 1 in four months. The actual 

recovery period could be a longer or 

shorter period of time depending on 

actual trade volume. 

For the twelve months from December 

1, 2022 through November 30, 2023, 

based on transactions reported to a 

FINRA TRF or to the ORF, there were 

883 firm MPIDs that executed at least 

one purchase or sale of an equivalent 

share of an Eligible Security. The top 50 

MPIDs by reported executed equivalent 

share volume bought and/or sold 

2,077,385,279,612 equivalent shares, or 

85.08% of total shares bought and/or 

sold. 

Potential Economic Benefits, Costs and 

Competitive Impact 

FINRA’s proposal to recover its 

portion of the Participants’ one-third 

share of Historical CAT Costs applies an 

approach consistent with the CAT 

Funding Model as approved by the 

SEC.51 With regard to off-exchange 

transactions in Eligible Securities, 

generally the same members that will be 

assessed Historical CAT Cost Recovery 

Assessment 1 will also be assessed 

Historical CAT Assessment 1. Therefore, 

FINRA’s proposed approach in 

recovering its portion of Historical CAT 

Costs 1, which is consistent with the 

framework of the CAT Funding Model, 

should serve to mitigate costs for 

member firms with respect to the 

structure of the fee model, whereas a 

different proposed fee structure may 

involve additional costs or complexity. 

The recovery period for FINRA’s 

portion of the one-third share of 

Historical CAT Costs 1 is expected to be 

four months, which is shorter than the 

Historical Recovery Period for the twothirds portion of Historical CAT Costs 1 

assessed to Industry Members.52 Given 

the expected duration, Historic CAT 

Cost Recovery Assessment 1 is unlikely 

to overlap with any future CAT 

assessments under the CAT Funding 

Model or any future CAT cost recovery 

assessment passed through by FINRA, 

which would be subject to separate 

proposed rule changes with the 

Commission. 


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53See CAT Funding Model Approval Order, 88 

FR 62628, 62684. 

54 15 U.S.C. 78s(b)(3)(C). 

55 15 U.S.C. 78s(b)(1). 

56See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose 

of, and Statutory Basis for, the Proposed Rule 

Change’’). 

57See id. 

58See 15 U.S.C. 78o–3(b)(5). 

59See 15 U.S.C. 78o–3(b)(6). 

60See 15 U.S.C. 78o–3(b)(9). 

61See 15 U.S.C. 78o–3(b)(2). 

62See 15 U.S.C. 78o–3(b)(5). 

63For 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). 

64 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. 

65 15 U.S.C. 78s(b)(2)(B). 

66 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. 

Where CEBB and CEBS choose to pass 

Historical CAT Cost Recovery 

Assessment 1 on to customers, some 

customers could attempt to avoid 

incurring this temporary cost by 

delaying trades until after the FINRA’s 

contribution to the Participants’ onethird share of Historical CAT Costs 1 is 

paid. FINRA believes this is an unlikely 

event because this fee is only one part 

of a trader’s decision to not trade and 

potentially miss a trading opportunity. 

In addition, as the Historical CAT Cost 

Recovery Assessment 1 recovery period 

is dependent on the level of trading 

activity, delaying trading may only 

serve to lengthen the recovery period. 

However, traders that do trade during 

the recovery period may incur relatively 

more fees than those that trade after the 

recovery period has ended. 

As the SEC noted in approving the 

revised CAT Funding Model, if FINRA 

passes on its portion of the CAT fee 

allocation to its member firms and 

exchanges choose not to pass-through 

their CAT fee allocations to their 

members, the cost to transact off 

exchange may increase relative to 

executing on an exchange, potentially 

giving exchanges a competitive 

advantage.53 However, we do not know 

whether or to what extent (or how) the 

exchanges may seek to recover their 

portion of the Historical CAT Costs, and 

we do not know whether or to what 

extent member firms will choose to pass 

through exchange-incurred CAT fees to 

customers. We also note that FINRA 

members remain subject to regulatory 

obligations, such as best execution 

obligations, with respect to their order 

routing decisions. 

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,54 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,55 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.56 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.’’ 57

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 

controls; 58 (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; 59 and (3) 

not impose any burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the Act.60

Further, FINRA also is subject to 

Section 15A(b)(2) of the Act, which 

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 Act.61

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. 

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.62

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.63

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) 64 and 

19(b)(2)(B) 65 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,66 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 


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Federal Register / Vol. 89, No. 30 / Tuesday, February 13, 2024 / Notices 11161 

67 15 U.S.C. 78o–3(b)(5). 

68 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 

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). 

69 15 U.S.C. 78s(b)(3)(C). 

70 17 CFR 200.30–3(a)(12), (57) and (58). 

sufficiently demonstrated that the 

proposed rule change is consistent with 

Section 15A(b)(5) 67 of the Act, which, 

among other things, provides that the 

dues, fees, and other charges for an 

association’s members be reasonable. 

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.68

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–2024–003 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–2024–003. 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–2024–003 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,69 that File 

No. SR–FINRA–2024–003 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.70

Sherry R. Haywood, 

Assistant Secretary. 

[FR Doc. 2024–01251 Filed 2–12–24; 8:45 am] 

BILLING CODE 8011–01–P 


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