Federal Register / Vol. 86, No. 122 / Tuesday, June 29, 2021 / Notices 34293 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4See Securities Exchange Act Release No. 89679 

(August 26, 2020), 85 FR 54461 (September 1, 2020) 

(Notice of Filing of File No. SR–FINRA–2020–024). 

5See Letter from Lisa C. Horrigan, Associate 

General Counsel, FINRA, to Vanessa Countryman, 

Secretary, Commission, dated October 29, 2020. 

6See Securities Exchange Act Release No. 90535 

(November 30, 2020), 85 FR 78395 (December 4, 

2020) (Notice of Filing of Amendment No. 1 and 

Order Granting Accelerated Approval of SR– 

FINRA–2020–024). 

7Unless otherwise specified, capitalized terms 

used in this rule filing are defined as set forth in 

the CAT Compliance Rule Series or in the National 

Market System Plan Governing the Consolidated 

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

FINRA and the national securities exchanges 

(collectively, the ‘‘Participants’’) filed with the 

Commission, pursuant to Section 11A of the 

Exchange Act and Rule 608 of Regulation NMS 

thereunder. See Securities Exchange Act Release 

No. 79318 (November 15, 2016), 81 FR 84696 

(November 23, 2016) (‘‘Approval Order’’). 

8As clarified in the OATS Retirement Filing, 

although FINRA does not believe that postcorrection errors need to be de minimis before 

OATS can be retired, FINRA was not suggesting, 

with the proposal, that 2% would meet the ultimate 

objective of de minimis error rates for CAT. See 

CAT NMS Plan, Appendix C, note 102 (error rates 

after reprocessing of error corrections are ultimately 

expected to be de minimis for the CAT). 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13783 Filed 6–28–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92239; File No. SR–FINRA– 

2021–017] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to the 

Retirement of FINRA’s Order Audit 

Trail System 

June 23, 2021. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 17, 

2021, the Financial Industry Regulatory 

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

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by FINRA. FINRA has filed the 

proposal under paragraph (f)(6) of Rule 

19b–4 under the Act,3 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is filing a proposed rule 

change setting forth the basis for its 

determination that the accuracy and 

reliability of the Consolidated Audit 

Trail (‘‘CAT’’) meet the standards 

approved by the Commission in SR– 

FINRA–2020–024 for purposes of 

eliminating the Order Audit Trail 

System (‘‘OATS’’) rules in the FINRA 

Rule 7400 Series and FINRA Rule 4554 

(Alternative Trading Systems— 

Recording and Reporting Requirements 

of Order and Execution Information for 

NMS Stocks) (collectively referred to 

herein as the ‘‘OATS Rules’’). The 

proposed rule change also updates 

cross-references within FINRA rules to 

reflect the elimination of the OATS 

Rules. 

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 IV 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 August 14, 2020, FINRA filed with 

the Commission a proposed rule change 

to delete the OATS Rules once members 

are effectively reporting to the CAT (the 

‘‘OATS Retirement Filing’’).4 On 

October 29, 2020, FINRA filed 

Amendment No. 1 to the proposed rule 

change (‘‘Amendment No. 1’’) and a 

response to the comments that were 

submitted on the original filing 

(‘‘Response to Comments’’).5 On 

November 30, 2020, the Commission 

approved the proposed rule change, as 

modified by Amendment No. 1, on an 

accelerated basis.6

In the OATS Retirement Filing, 

FINRA proposed to eliminate the OATS 

Rules once members are effectively 

reporting to the CAT and the CAT’s 

accuracy and reliability meet certain 

standards. Specifically, FINRA 

proposed that before OATS could be 

retired, the CAT generally must achieve 

a sustained error rate for Industry 

Member 7 reporting in five categories for 

a period of at least 180 days of 5% or 

lower on a pre-correction basis, and 2% 

or lower on a post-correction basis 

(measured at T+5). In addition to the 

maximum error rates and matching 

thresholds, FINRA’s use of CAT Data 

must confirm that (i) there are no 

material issues that have not been 

corrected, (ii) the CAT includes all data 

necessary to allow FINRA to continue to 

meet its surveillance obligations, and 

(iii) the Plan Processor is sufficiently 

meeting its obligations under the CAT 

NMS Plan relating to the reporting and 

linkage of Phase 2a Industry Member 

Data. 

In the OATS Retirement Filing, 

FINRA explained that its review of CAT 

Data and error rates would be based on 

data and linkages in the initial phase of 

reporting (or ‘‘Phase 2a’’), which 

replicate the data in OATS today and 

thus are most relevant for OATS 

retirement purposes. Phase 2a Data 

includes all events and scenarios 

covered by OATS and applies only to 

equities. FINRA will not consider 

options order events or Phase 2c data 

and validations, which are not in OATS 

today, for purposes of OATS retirement. 

As described below, FINRA has 

determined that the CAT meets the 

accuracy and reliability standards 

approved by the Commission in the 

OATS Retirement Filing. 

(A) Maximum Error Rates 

As discussed in the OATS Retirement 

Filing, FINRA believes that relevant 

error rates are the primary, but not the 

sole, metric by which to determine the 

CAT’s accuracy and reliability and will 

serve as the baseline requirement 

needed before OATS can be retired. 

FINRA proposed that, before OATS 

could be retired, the CAT would 

generally need to achieve a sustained 

error rate for Industry Member reporting 

in five categories for a period of at least 

180 days of 5% or lower, measured on 

a pre-correction or as-submitted basis, 

and 2% or lower on a post-correction 

basis (measured at T+5).8 FINRA 

proposed to average the error rates 

across the period, rather than require a 

5% pre-correction and 2% postcorrection maximum each day for 180 


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9See FINRA’s Response to Comments, supra note 

5. 

10Appendix D of the CAT NMS Plan, Section 7.2, 

for example, requires that certain file validations 

(e.g., file transmission and receipt are in the correct 

formats, confirmation of a valid SRO-Assigned 

Market Participant Identifier, etc.), and syntax and 

context checks (e.g., format checks, data type 

checks, consistency checks, etc.) be performed on 

all submitted records. 

11See FINRA’s Response to Comments, supra 

note 5. 

12FINRA notes that in Phase 2a, linkage is 

required between the representative street side 

order and the order being represented when the 

representative order was originated specifically to 

represent a single order (received either from a 

customer or another broker-dealer) and there is: (1) 

An existing direct electronic link in the firm’s 

system between the order being represented and the 

representative order, and (2) any resulting 

executions are immediately and automatically 

applied to the represented order in the firm’s 

system. As set forth in the OATS Retirement Filing, 

while such linkages are not required in OATS, 

FINRA believes that it is appropriate to evaluate 

them for purposes of retiring OATS because they 

represent a significant enhancement to the data 

currently available in OATS and will enhance the 

quality of the equity audit trail. However, FINRA 

also explained in the Response to Comments that 

if all other proposed criteria have been met, FINRA 

would not anticipate delaying OATS retirement 

based on Phase 2a representative order linkage error 

rates alone. 

In evaluating whether the standards for OATS 

retirement have been met, FINRA has determined 

that the error rates for the Phase 2a representative 

order linkages did not have a significant negative 

impact on the overall error rates for order linkages. 

Accordingly, FINRA did not need to separately 

evaluate or exclude Phase 2a representative order 

linkage rates in measuring the error rates over the 

applicable period. For example, if the intra-firm 

linkage error rate had been above 5% over the 

applicable period, FINRA would have evaluated 

whether the error rate was the result of unlinked 

representative orders to create an apples-to-apples 

comparison to OATS. 

13See Amendment No. 1. 

consecutive days. FINRA also proposed 

to measure the error rates in the 

aggregate, rather than on a firm-by-firm 

basis. Finally, FINRA proposed to 

measure the error rates separately for 

each of the five categories, rather than 

evaluate all categories in the aggregate. 

As noted above, FINRA’s assessment of 

the error rates for Industry Member 

reporting is based solely on Phase 2a 

CAT reporting for equity events since 

options orders are not included in 

OATS today. 

FINRA measured the error rates in 

each of the five categories discussed 

below during the period from October 

26, 2020 through April 26, 2021 (the 

‘‘applicable period’’). FINRA 

commenced this period on October 26, 

2020, which was the date that Industry 

Members were required to begin 

correcting all errors for inter-firm 

linkages and exchange/TRF/ORF match 

validations. As discussed in the 

Response to Comments, although the 

production environment for inter-firm 

linkage and exchange/TRF/ORF match 

validations was open for testing as of 

September 28, 2020, FINRA does not 

believe it would be appropriate for the 

180-day period to commence prior to 

the October 26, 2020 compliance date.9

Rejection Rates and Data Validations. 

As described in the OATS Retirement 

Filing, the Plan Processor must perform 

certain basic data validations,10 and if a 

record does not pass these basic data 

validations, it must be rejected and 

returned to the CAT Reporter to be 

corrected and resubmitted. FINRA 

proposed that over the 180-day period, 

aggregate rejection rates must be no 

more than 5% pre-correction or 2% 

post-correction across all Industry 

Member Reporters. FINRA has 

determined that, over the applicable 

period, aggregate rejection rates across 

all Industry Member Reporters were 

0.03% pre-correction and 0.01% postcorrection. 

Intra-Firm Linkages. As described in 

the OATS Retirement Filing, the Plan 

Processor must be able to link all related 

order events from all CAT Reporters 

involved in the lifecycle of an order. At 

a minimum, this requirement includes 

the creation of an order lifecycle 

between all order events handled within 

an individual CAT Reporter, including 

orders routed to internal desks or 

departments with different functions 

(e.g., an internal ATS). FINRA proposed 

that aggregate intra-firm linkage rates 

across all Industry Member Reporters 

must be at least 95% pre-correction and 

98% post-correction. FINRA has 

determined that, over the applicable 

period, aggregate intra-firm linkage rates 

across all Industry Member Reporters 

were 99.97% pre-correction and 99.99% 

post-correction. 

Inter-Firm Linkages. As described in 

the OATS Retirement Filing, the Plan 

Processor must be able to create the 

lifecycle between orders routed between 

broker-dealers. FINRA proposed that at 

least a 95% pre-correction and 98% 

post-correction aggregate match rate be 

achieved for orders routed between two 

Industry Member Reporters. FINRA has 

determined that during the applicable 

period there was a 99.08% precorrection and 99.84% post-correction 

aggregate match rate for orders routed 

between two Industry Member 

Reporters. 

Order Linkage Rates. As described in 

the OATS Retirement Filing, in addition 

to creating linkages within and between 

broker-dealers, the Plan Processor must 

be able to create lifecycles to link 

various pieces of related orders. For 

example, the Plan requires linkages of 

order information to create an order 

lifecycle from origination or receipt to 

cancellation or execution. This category 

essentially combines all of the orderrelated linkages to capture an overall 

snapshot of order linkages in the CAT.11

FINRA proposed that there be at least a 

95% pre-correction and 98% postcorrection rate for order linkages that 

are required in Phase 2a. FINRA has 

determined that during the applicable 

period there was a 99.66% precorrection and 99.93% post-correction 

rate for order linkages required in Phase 

2a.12

Exchange and TRF/ORF Match Rates. 

As described in the OATS Retirement 

Filing, an order lifecycle must be 

created to link orders routed from 

broker-dealers to exchanges and 

executed orders and trade reports. 

FINRA proposed at least a 95% precorrection and 98% post-correction 

aggregate match rate across all equity 

exchanges 13 for orders routed from 

Industry Members to an exchange and, 

for over-the-counter executions, the 

same match rate for orders linked to 

trade reports. FINRA has determined 

that, during the applicable period, there 

was a 99.51% pre-correction and 

99.87% post-correction aggregate match 

rate across all equity exchanges for 

orders routed from Industry Members to 

an exchange and, for over-the-counter 

executions, there was a 99.34% precorrection and 99.53% post-correction 

rate for orders linked to trade reports 

submitted to the FINRA Trade Reporting 

Facilities and OTC Reporting Facility. 

As set forth above, the error rates for 

Industry Member reporting over the 

applicable period were well below the 

maximum rates established in the OATS 

Retirement Filing. FINRA also notes that 

the overall post-correction error rate for 

Phase 2a Industry Member reporting of 

1.01% is comparable to the current 

overall OATS post-correction error rate, 

which generally is at or slightly below 

1%. Therefore, FINRA has determined 

that, based on the error rates for 

Industry Member reporting, the CAT 

Data meets the accuracy and reliability 

baseline standards required for OATS 

retirement. 

(B) FINRA’s Use of CAT Data 

In the OATS Retirement Filing, 

FINRA stated that while error rates are 

a key standardized measure in 

determining whether OATS retirement 

is appropriate, FINRA’s use of the data 

in the CAT also must confirm that (i) 

there are no material issues that have 

not been corrected (e.g., delays in the 

processing of data, issues with query 

functions, etc.), (ii) the CAT includes all 

data necessary to allow FINRA to 


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14FINRA’s Response to Comments noted this 

dependency, stating that the process of 

transitioning FINRA’s surveillance patterns to CAT 

Data necessarily includes, among other things, 

ingestion of all Industry Member and Plan 

Participant data and linkages in CAT format. See 

Response to Comments, supra note 5, at 4. The 

Response to Comments further noted that the Plan 

Participants would be reporting to CAT via another 

mechanism until April 2021. 

15For example, according to the CAT Reporting 

Technical Specification for Plan Participants 

(version 4.0.0–r4 dated April 20, 2021), additional 

linkage error feedback for off-exchange trade reports 

was effective as of June 1, 2021. The Technical 

Specifications can be found on the CAT NMS Plan 

website at www.catnmsplan.com/sites/default/files/ 

2021-04/04.20.2021-CAT-Reporting-TechnicalSpecifications-for-Participants-4.0.0-r4.pdf. 

16FINRA notes that additional POD releases are 

scheduled; however, these releases introduce minor 

enhancements to POD, as opposed to significant 

changes that would impact the way data is ingested 

or processed in POD. 

17FINRA notes that user acceptance testing is the 

final stage of any software development life cycle 

and enables actual users to test the system to 

confirm that it is able to carry out the required tasks 

it was designed to address in real-world situations. 

18See, e.g., CAT Q1 2021 Quarterly Progress 

Report dated April 30, 2021, available at 

www.catnmsplan.com/sites/default/files/2021-05/ 

CAT-Q1-2021-QPR.pdf. 

19FINRA notes that the CAT uses the same code 

in both the test and production environments. 

Thus, FINRA believes that linkages in the test 

environment are reliable indicators of linkages in 

the production environment. 

continue to meet its surveillance 

obligations, and (iii) the Plan Processor 

is sufficiently meeting its obligations 

under the CAT NMS Plan relating to the 

reporting and linkage of Phase 2a Data. 

FINRA has been planning for OATS 

retirement for several years and the 

necessary development work has been 

underway for some time. FINRA also 

has been analyzing and testing 

production CAT Data for purposes of 

transitioning its automated equity 

surveillance patterns since the 

commencement of Phase 2a Industry 

Member reporting in June 2020 and 

through subsequent CAT milestone 

releases. For example, in addition to 

quantitative reviews, such as the error 

rate statistics discussed above, FINRA 

has conducted a series of qualitative 

reviews of Industry Member CAT Data. 

Such reviews include, among other 

things, comparing the count and 

distribution of Industry Member event 

reporting through CAT versus OATS 

(e.g., new order and execution events, 

and data elements such as buy/sell/sell 

short codes), and reviewing results of 

examinations, alert reviews, and 

investigations relating to the timeliness 

and accuracy of Industry Member 

reporting. Based on such qualitative 

data reviews, FINRA has concluded that 

Industry Member CAT Data, in the 

aggregate, is a sufficient replacement for 

OATS for purposes of FINRA’s 

surveillance program. 

Today, FINRA’s surveillance patterns 

rely on the cross-market data model 

(‘‘CMDM’’), which comprises linked 

OATS data, equity exchange data feeds 

from each of the exchanges with which 

FINRA has entered into a regulatory 

service agreement (‘‘RSA’’), and 

transactions reported to FINRA’s equity 

trade reporting facilities. The CMDM 

will be retired and replaced by a newly 

created surveillance data mart, the 

Pattern Optimized Datamart (‘‘POD’’), 

which incorporates both equities and 

options data. At that point, FINRA’s 

patterns will rely on CAT Data in POD, 

i.e., Plan Participant and Industry 

Member data reported in CAT format 

and linked by CAT.14 FINRA notes that 

the Plan Participants transitioned to 

reporting via the CAT technical 

specification as of April 26, 2021, and 

full Plan Participant equities reporting 

and linkage validations in accordance 

with the CAT specification commenced 

on June 1, 2021.15 Successful 

completion of the transition to the CAT 

specification for Plan Participants is a 

prerequisite for FINRA to retire the 

CMDM and leverage CAT Data and 

linkages in POD for its surveillance 

patterns. As of the date of this filing, 

FINRA has completed all planned 

activities on schedule, including 

substantially completing the process of 

integrating CAT Data into POD and 

successfully running large amounts of 

production CAT Data for the month of 

May through POD.16 FINRA anticipates 

completing additional activities before 

the proposed OATS retirement date of 

September 1, 2021, including, e.g., 

planned user acceptance testing.17

FINRA has performed broad analysis 

of its equity surveillance patterns and 

has determined that all of the data 

required to support the transition is 

available in CAT. By mapping OATS 

data to Industry Member CAT Data in 

POD, FINRA has confirmed that CAT 

Data has equivalent analogs to all data 

elements in OATS. In that regard, 

FINRA notes that, as a Plan Participant, 

FINRA has been involved in CAT 

development efforts to ensure that the 

scope and features of Industry Member 

data and processed output are sufficient 

for FINRA’s surveillance program. 

These efforts include, for example, 

developing and updating the Industry 

Member Technical Specifications and 

Reporting Scenarios, conducting OATS– 

CAT gap analyses and validating that all 

such gaps have been properly 

addressed, and performing OATS-toCAT field-level mappings. 

With respect to Plan Participant data, 

FINRA notes that the test environment 

for Plan Participant reporting in 

accordance with the CAT specification 

opened on February 15, 2021.18 Plan 

Participant equity reporting in 

accordance with the CAT specification 

in the test environment had a very high 

compliance rate for data ingestion and 

validation, and compliance in the 

production environment is comparable. 

In addition, starting on April 26, 2021, 

CAT began linking copies of Industry 

Member and Plan Participant data 

reported via the CAT specification in a 

test environment, and at that point, 

FINRA began its evaluation of the 

quality of these linkages. Based on this 

review and evaluation, FINRA believes 

that the linkages between Plan 

Participant data and Industry Member 

data in CAT are comparable to the 

linkages between RSA exchange data 

and OATS data in the CMDM today.19

FINRA CAT and the Plan Participants 

have now met the necessary criteria for 

a full cutover from the RSA 

specification to the CAT specification, 

including, e.g., achieving comparable 

data ingestion validation and intervenue linkage rates (within a variance of 

under one percent) between RSA and 

CAT specification submissions. 

Accordingly, the Operating Committee 

approved the cutover from the RSA 

specification to the CAT specification as 

the official source of Plan Participant 

data as of June 1, 2021, and today, all 

Industry Member and Plan Participant 

equities data reported via the CAT 

specification is linked in the CAT 

production environment. 

FINRA continues to evaluate CAT 

Data quality, and in particular, linkages 

between Industy Member and Plan 

Participant data, and to test its 

surveillance patterns to run on CAT 

Data in POD. In that regard, FINRA 

notes that it has followed established 

and time-tested processes and protocols 

throughout the development process to 

ensure that its patterns will perform as 

expected and produce the necessary 

output using CAT Data following the 

retirement of OATS. For example, 

FINRA’s Software Development 

Lifecycle (‘‘SDLC’’) procedures govern 

systems design, changes, testing and 

controls. The SDLC procedures are an 

essential component of FINRA’s 

operations and have been developed to 

serve FINRA’s unique regulatory needs 

and structure. Additionally, consistent 

with SEC Regulation SCI, FINRA 

procedures include a plan of 

coordination and communication with 

regulatory staff. By relying on these 

established processes and protocols, 

FINRA has confidence that the CAT 

Data and linkages are reliable and 


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20FINRA notes that FINRA CAT tracks known 

issues relating to Industry Member and Plan 

Participant reporting. See, e.g., catnmsplan.com/ 

CAT-Transaction-Known-Issues-List. FINRA 

regularly reviews and analyzes FINRA CAT’s list of 

current and resolved issues and does not believe 

that any of these issues would impact its ability to 

incorporate and use CAT Data in its surveillance 

program. 

21See CAT NMS Plan, Appendix D, Section 6.2. 

22See CAT NMS Plan, Appendix C, Section 

A.2(a). 

23See CAT NMS Plan, Appendix C, Section 

A.1(b). 

24See CAT NMS Plan, Section 6.10(c). 

25As discussed in the OATS Retirement Filing, 

OATS was originally proposed to fulfill one of the 

undertakings contained in an order issued by the 

Commission relating to the settlement of an 

enforcement action against FINRA (f/k/a National 

Association of Securities Dealers, Inc. (‘‘NASD’’)) 

for failure to adequately enforce its rules. See 

Securities Exchange Act Release No. 39729 (March 

6, 1998), 63 FR 12559 (March 13, 1998) (Order 

Approving File No SR–NASD–97–56) (‘‘OATS 

Approval Order’’); see also Securities Exchange Act 

Release No. 37538 (August 8, 1996); Administrative 

Proceeding File No. 3–9056 (‘‘SEC Order’’). In the 

OATS Approval Order, the Commission concluded 

that OATS satisfied the conditions of the SEC Order 

and was consistent with the Exchange Act. See 63 

FR 12559, 12566–67. FINRA believes that it will 

continue to be in compliance with the requirements 

of the SEC Order once the OATS Rules are deleted. 

sufficient to run FINRA’s surveillance 

patterns. 

As an added measure, FINRA ran a 

sample of its pattern portfolio using 

both OATS and production CAT Data 

for a short period following 

implementation of additional Plan 

Participant linkage validations and 

compared the pattern outputs. 

Specifically, FINRA ran several 

surveillance patterns and processes 

against legacy-sourced data (OATS/ 

RSA) and against CAT-sourced data. 

The patterns processed end-to-end with 

significant alignment and no 

unexplained anomalous results. Any 

differences in output between a pattern 

run with legacy data versus CAT Data 

were appropriate, given differences in 

pattern logic as well as enhanced data 

available through CAT, e.g., 

representative order linkages. FINRA 

believes that this sample has provided 

sufficient evidence that FINRA will be 

able to integrate all surveillance patterns 

to run on CAT Data. Based on these 

results, as well as the results of its 

quantitative and qualitative reviews of 

CAT Data and successful efforts 

integrating CAT Data into POD, FINRA 

believes that the complete portfolio of 

equity surveillance patterns will be 

capable of consuming CAT Data and 

achieving comparable (or better) output 

results. 

Thus, FINRA proposes to retire OATS 

in accordance with the schedule set 

forth herein. FINRA will run its 

surveillance patterns for review periods 

through the end of the second quarter of 

2021 using OATS data and begin 

using—and be fully reliant on—CAT 

Data for its surveillance patterns for 

review periods beginning in the third 

quarter of 2021. Following the 

retirement of OATS, FINRA expects to 

maintain the current established 

cadence of its monthly, quarterly and 

semi-annual surveillance patterns. In 

addition, FINRA’s analytics platforms 

will have access to CAT Data as soon as 

such data is made available to 

regulators. Thus, outside of regularly 

scheduled surveillance pattern runs, 

FINRA can perform expedited analytics, 

as required by market events. 

FINRA is finalizing the development 

and certification of its surveillance 

patterns to run on CAT Data on a rolling 

basis and, in accordance with its 

existing SDLC procedures, will run a 

month’s worth of data and compare the 

output before certifying each pattern. 

For those equity patterns that will be 

subject to certification after OATS 

retirement, FINRA anticipates that there 

would be sufficient time to identify and 

remediate any issues prior to running 

the patterns in accordance with the 

current established cadence. FINRA 

does not anticipate significant issues 

arising from additional scheduled POD 

releases or in the final stages of its 

pattern development and certification 

efforts. FINRA bases this belief on years 

of experience with other large 

technology rollouts that have been 

executed in accordance with FINRA’s 

SDLC procedures. In such instances, 

recourse to the legacy system was 

neither available nor required. 

On an ongoing basis following the 

retirement of OATS, FINRA will 

conduct regular reviews to ensure 

confidence in the completeness and 

accuracy of Industry Member reporting, 

along with the ability to remediate any 

issues in a timely manner. Among other 

things, FINRA has a robust mechanism 

for detecting data issues, determining 

which issues are material for purposes 

of its surveillance program, and 

requesting resubmission and/or 

reprocessing of data, as necessary. 

FINRA also (1) performs a suite of data 

quality checks against data sourced from 

CAT to POD and against data processed 

by POD for use in surveillance patterns; 

(2) oversees a robust surveillance and 

examination compliance program that 

evaluates Industry Member reporting 

timeliness, data quality, and other 

issues and trends; (3) reviews CAT 

compliance program alerts using a rapid 

remediation process and formal reviews, 

as necessary; and (4) reviews Industry 

Member self-reporting and error 

correction trends. FINRA believes that 

these practices are sufficient for 

identification and timely resolution of 

Industry Member reporting and data 

issues after OATS has been retired. 

Specifically with regard to the 

additional standards approved in the 

OATS Retirement Filing, through its use 

of CAT Data to date, as described above, 

FINRA believes that these standards 

have been satisfied. With respect to the 

first factor, FINRA does not believe that 

there are any material issues that have 

not been corrected (or could not be 

corrected in the course of operation of 

CAT, as approved by the Operating 

Committee) 20 that would impact 

FINRA’s ability to incorporate and use 

CAT Data in FINRA’s surveillance 

program. For example, the Plan requires 

that raw unprocessed data that has been 

ingested by the Plan Processor must be 

available to Participant regulatory staff 

and the SEC prior to 12:00 p.m. Eastern 

Time on T+1, and access to all iterations 

of processed data must be available to 

Participant regulatory staff and the SEC 

between 12:00 p.m. Eastern Time on 

T+1 and T+5.21 The Plan Processor also 

must ensure that regulators have access 

to corrected and linked order data by 

8:00 a.m. Eastern Time on T+5.22

Additionally, after ingestion by the 

Central Repository, the raw unprocessed 

data must be transformed into a format 

appropriate for data querying and 

regulatory output.23 The user-defined 

direct queries and bulk extracts must 

provide authorized users with the 

ability to retrieve CAT Data via a query 

tool or language that allows users to 

query all available attributes and data 

sources.24 FINRA’s use of the CAT Data 

has not uncovered any processing 

delays or other material issues 

impacting the availability of, and 

FINRA’s access to, the data. 

With respect to the second factor, 

FINRA believes that the CAT includes 

all data necessary for FINRA to meet its 

surveillance obligations after the 

retirement of OATS. FINRA must ensure 

that the CAT, as the single source of 

order and trade data, can enable FINRA 

to conduct accurate and effective market 

surveillance in accordance with its 

regulatory obligations.25 As noted 

above, Phase 2a Data includes all events 

and scenarios covered by OATS and is 

the most relevant for OATS retirement 

purposes. FINRA Rule 7440 describes 

the OATS requirements for recording 

information, which includes 

information related to the receipt or 

origination of orders, order transmittal, 

and order modifications, cancellations 

and executions. Large Industry Members 

and Small Industry Members that 

currently are reporting to OATS were 


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Federal Register / Vol. 86, No. 122 / Tuesday, June 29, 2021 / Notices 34297 

26The Implementation Plan and Quarterly 

Progress Reports are available at 

www.catnmsplan.com/implementation-plan. 

27Pursuant to the OATS Retirement Filing, the 

Commission approved the deletion of the OATS 

Rules and the adoption of new introductory 

language in Rule 4554 and the Rule 7400 Series to 

help alert members of the status of the OATS Rules. 

The Exhibit 5 attached to this filing is marked to 

show the deletion of this introductory language (but 

is not marked to show the previously approved 

deletion of the OATS Rules). 

In addition, there are multiple rules throughout 

the FINRA rulebook that cross-reference or 

otherwise incorporate some or all of the OATS 

Rules. In this filing, FINRA also is proposing nonsubstantive technical changes to delete or amend, 

as applicable, such references to the OATS Rules. 

28On March 18, 2021, FINRA conducted an 

industry webinar addressing OATS retirement 

issues and informed the industry that although a 

formal OATS retirement date had not yet been 

established, it would be no earlier than the end of 

June 2021. Additional monthly updates were held 

on April 15, 2021 and May 20, 2021. 

29See www.catnmsplan.com/events. FINRA CAT 

also provides regular updates to Industry Members 

regarding CAT implementation and compliance 

during FINRA CAT’s Weekly Industry Checkpoint 

and Monthly Implementation calls. The statistics 

provided by FINRA CAT have also served as a good 

proxy for progress toward achieving the requisite 

error rates for purposes of OATS retirement. 

30 15 U.S.C. 78o–3(b)(6). 

31 15 U.S.C. 78o–3(b)(9). 

required to submit data to the CAT for 

these same events and scenarios 

commencing in Phase 2a. FINRA’s 

testing, analysis and use of the CAT 

Data (including integration into POD), 

as described above, has confirmed that 

the CAT includes all data necessary for 

FINRA to meet its surveillance 

obligations and that CAT is a reliable 

substitute for OATS. In addition, based 

on its qualitative data reviews, FINRA 

has concluded that Industry Member 

CAT Data, in the aggregate, is a 

sufficient replacement for OATS for 

purposes of FINRA’s surveillance 

program. 

With respect to the third factor, 

FINRA believes that the Plan Processor 

is sufficiently meeting its obligations 

under the CAT NMS Plan relating to the 

reporting and linkage of Phase 2a Data. 

As detailed in the Implementation Plan 

and Quarterly Progress Reports 

submitted by the Plan Participants, the 

Plan Processor has met its targeted 

completion dates for the milestones for 

Phase 2a, including, for example, 

production Go-Live for Equities 2a file 

submission and data integrity validation 

(Large Industry Members and Small 

OATS Reporters) on June 22, 2020; 

Production Go-Live for Equities 2a 

Intrafirm Linkage validations on July 27, 

2020; and production go-live for firm-tofirm linkage validations for equities 

(Large Industry Members and Small 

OATS Reporters) and exchange and 

TRF/ORF linkage validations for 

equities (Large Industry Members and 

Small OATS Reporters) on October 26, 

2020.26

Based on the foregoing, FINRA has 

determined that the CAT meets the 

accuracy and reliability standards 

approved by the Commission in the 

OATS Retirement Filing for purposes of 

eliminating the OATS Rules. FINRA has 

determined to retire OATS effective 

September 1, 2021. Firms must continue 

to report to OATS all order events that 

occur on or prior to August 31, 2021. 

Reports submitted to OATS for order 

events that occur after August 31, 2021 

will be rejected. In other words, August 

31, 2021 will be the last ‘‘OATS 

Business Day,’’ as defined under Rule 

7450(b)(3), for which OATS will accept 

order events and perform routine 

processing (including incorporation of 

corrections and repairs of rejections) 

occurring within the normal OATS 

timeframe for such activities. OATS will 

continue to accept reports for order 

events that occur on or prior to August 

31, 2021 (including, but not limited to, 

late and corrected reports for such order 

events) through September 16, 2021. 

Firms must ensure that their OATS 

reporting is accurate and complete for 

all order events that occur on or prior 

to August 31, 2021. The OATS Rules 

will be deleted from the FINRA 

rulebook effective September 1, 2021.27

Finally, FINRA notes that as 

requested by the industry, FINRA has 

provided transparency into the process 

of retiring OATS. For example, FINRA 

has provided the industry with monthly 

status updates 28 on (1) the error rates in 

the categories discussed above, (2) 

FINRA’s evaluation of the non-error rate 

factors, (3) a general timeframe for 

OATS retirement, and (4) steps for 

Industry Members to consider in 

preparation for the retirement of OATS. 

Materials for these events are available 

on the CAT NMS Plan website.29

In light of the foregoing, FINRA 

believes that retiring OATS as of 

September 1, 2021 is appropriate, 

particularly given the potential risks of 

continuing to run OATS and CAT in 

parallel for an additional period of time. 

Such potential risks may include, for 

example, on an industry-wide basis: (1) 

Processing and storage capacity issues 

from operating two systems (particularly 

in the event of extraordinary market 

volume); (2) cybersecurity risks from 

having data flow through two separate 

systems for a longer time period; (3) 

systems issues from reporting 

infrastructure that is near end-of-life; 

and (4) the expense and burden on CAT 

Reporters of dual reporting, particularly 

in the event of systems issues requiring 

correction and/or resubmission of data 

and competing resource priorities 

between OATS and CAT reporting and 

repair activities. 

FINRA has filed the proposed rule 

change for immediate effectiveness and 

has determined to retire OATS effective 

September 1, 2021. The implementation 

date of SR–FINRA–2020–024, pursuant 

to which the Commission approved the 

deletion of the OATS Rules, and of this 

proposed rule change will be September 

1, 2021. FINRA will publish a 

Regulatory Notice announcing this 

implementation date. 

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 Section 15A(b)(9) of 

the Act,31 which requires that FINRA 

rules not impose any burden on 

competition that is not necessary or 

appropriate. 

FINRA has determined that the CAT 

accuracy and reliability standards 

approved by the Commission in SR– 

FINRA–2020–024 have been satisfied 

and it is appropriate to retire OATS, 

which is duplicative in light of the 

implementation of CAT. Based on its 

testing, analysis and use of CAT Data 

(including integration of CAT Data into 

POD), as described above, FINRA has 

determined that its surveillance of 

market activity will remain accurate and 

effective and FINRA will be able to 

continue to fulfill its statutory 

obligation to protect investors and the 

public interest after the retirement of 

OATS. Among other things, FINRA has 

performed broad analysis of its equity 

surveillance patterns and has 

determined that all of the data required 

to support the transition is available in 

CAT. In addition, based on its 

qualitative data reviews, FINRA has 

concluded that Industry Member CAT 

Data, in the aggregate, is a sufficient 

replacement for OATS for purposes of 

FINRA’s surveillance program. FINRA 

also ran a sample of its pattern portfolio 

using both OATS and production CAT 

Data and compared the pattern outputs. 

Based on these results, as well as the 

results of its quantitative and qualitative 

reviews of CAT Data and efforts to 

integrate CAT Data into POD, FINRA 

believes that the complete portfolio of 

equity surveillance patterns will be 

capable of consuming CAT Data and 


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34298 Federal Register / Vol. 86, No. 122 / Tuesday, June 29, 2021 / Notices 

32See supra note 4. 

33See Letters from Howard Meyerson, Managing 

Director, Financial Information Forum, to Vanessa 

Countryman, Secretary, Commission, dated 

September 22, 2020; William J. Leahey, Head of 

Regulatory Compliance, Refinitiv Wealth 

Management, to Vanessa Countryman, Secretary, 

Commission, dated September 22, 2020; and Ellen 

Greene, Managing Director, Securities Industry and 

Financial Markets Association, to Vanessa 

Countryman, Secretary, Commission, dated 

September 24, 2020 (‘‘SIFMA’’). 

34See supra note 5. 

35 15 U.S.C. 78s(b)(3)(A). 

36 17 CFR 240.19b–4(f)(6). 37 17 CFR 200.30–3(a)(12). 

achieving comparable (or better) output 

results. 

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. As set forth 

in the OATS Retirement Filing, FINRA 

undertook an economic impact 

assessment to analyze the regulatory 

need for the proposed rule change, its 

potential economic impacts, including 

anticipated costs and benefits, and the 

alternatives considered in assessing how 

to best meet regulatory objectives. The 

economic impact assessment discussed 

the potential costs and benefits 

associated with OATS retirement 

assuming that the accuracy and 

reliability standards delineated in the 

filing were met. As FINRA has 

determined that CAT meets or exceeds 

these standards, FINRA does not 

anticipate any additional impacts from 

retiring OATS. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

The OATS Retirement Filing, 

pursuant to which FINRA proposed the 

above-discussed accuracy and reliability 

standards the CAT would need to 

achieve before FINRA could retire 

OATS, was published for comment on 

September 1, 2020.32 Three comment 

letters were submitted in response,33

and on October 29, 2020, FINRA 

responded to the comment letters.34 The 

comment letters, as well as FINRA’s 

response to comments, are available on 

the Commission’s website. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, it has 

become effective pursuant to Section 

19(b)(3)(A) of the Act 35 and Rule 19b– 

4(f)(6) thereunder.36

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

FINRA–2021–017 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–2021–017. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of FINRA. All comments received 

will be posted without change. Persons 

submitting comments are cautioned that 

we do not redact or edit personal 

identifying information from comment 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–FINRA– 

2021–017, and should be submitted on 

or before July 20, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.37

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13784 Filed 6–28–21; 8:45 am] 

BILLING CODE 8011–01–P 

SMALL BUSINESS ADMINISTRATION 

[Disaster Declaration #16972 and #16973; 

TENNESSEE Disaster Number TN–00128] 

Presidential Declaration Amendment of 

a Major Disaster for Public Assistance 

Only for the State of Tennessee 

AGENCY: U.S. Small Business 

Administration. 

ACTION: Amendment 1. 

SUMMARY: This is an amendment of the 

Presidential declaration of a major 

disaster for Public Assistance Only for 

the State of Tennessee (FEMA—4601— 

DR), dated 05/08/2021. 

Incident: Severe Storms, Tornadoes, 

and Flooding. 

Incident Period: 03/25/2021 through 

04/03/2021. 

DATES: Issued on 06/22/2021. 

Physical Loan Application Deadline 

Date: 07/07/2021. 

Economic Injury (EIDL) Loan 

Application Deadline Date: 02/08/2022. 

ADDRESSES: Submit completed loan 

applications to: U.S. Small Business 

Administration, Processing and 

Disbursement Center, 14925 Kingsport 

Road, Fort Worth, TX 76155. 

FOR FURTHER INFORMATION CONTACT: A. 

Escobar, Office of Disaster Assistance, 

U.S. Small Business Administration, 

409 3rd Street SW, Suite 6050, 

Washington, DC 20416, (202) 205–6734. 

SUPPLEMENTARY INFORMATION: The notice 

of the President’s major disaster 

declaration for Private Non-Profit 

organizations in the State of Tennessee, 

dated 05/08/2021, is hereby amended to 

include the following areas as adversely 

affected by the disaster. 


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