34290 Federal Register / Vol. 86, No. 122 / Tuesday, June 29, 2021 / Notices 

10 15 U.S.C. 78s(b)(3)(A). 

11 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

give the Commission written notice of its intent to 

file the proposed rule change, along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied this requirement. 12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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

4 17 CFR 240.19b–4(f)(2). 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed amendments do not impose an 

undue burden on competition as the 

proposal will align the Exchange’s 

General 9, Section 18 to FINRA Rule 

5250 and ensure consistent regulation of 

joint members of the Exchange and 

FINRA. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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 10 and Rule 19b– 

4(f)(6) thereunder.11

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 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

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– 

BX–2021–029 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–BX–2021–029. 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 the Exchange. 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–BX–2021–029 and should 

be submitted on or before July 20, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–13786 Filed 6–28–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92238; File No. SR–BOX– 

2021–15] 

Self-Regulatory Organizations; BOX 

Exchange LLC; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change To Amend the Fee 

Schedule on the BOX Options Market 

LLC Facility 

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 10, 

2021, BOX Exchange LLC (‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Exchange filed the proposed rule 

change pursuant to Section 

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

19b–4(f)(2) thereunder,4 which renders 

the proposal effective upon filing with 

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 the Substance 

of the Proposed Rule Change 

The Exchange is filing with the 

Securities and Exchange Commission 

(‘‘Commission’’) a proposed rule change 

to amend the Fee Schedule on the BOX 

Options Market LLC (‘‘BOX’’) facility. 

The text of the proposed rule change is 

available from the principal office of the 

Exchange, at the Commission’s Public 

Reference Room and also on the 

Exchange’s internet website at http://

boxexchange.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

Exchange has prepared summaries, set 

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

the most significant aspects of such 

statements. 


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5See e.g., Nasdaq PHLX LLC (‘‘Phlx’’) Pricing 

Schedule, available at: https://

listingcenter.nasdaq.com/rulebook/phlx/rules/ 

Phlx%20Options%207 (providing $0.35 per 

contract rate for manual transactions by market 

makers); Cboe Exchange, Inc. (‘‘Cboe’’) Fee 

Schedule, available at: https://cdn.cboe.com/ 

resources/membership/Cboe_FeeSchedule.pdf 

(providing $0.35 per contract rate for manual 

transactions by market makers). The Exchange notes 

that Cboe filed to increase the Market Maker 

manual transaction fee—thereby increasing the fee 

disparity between Floor Market Makers and all 

other Floor Participants—in October 2020. See 

Securities Exchange Act Release No. 90232 (October 

20, 2020), 85 FR 67782 (SR–CBOE–2020–097).The 

Exchange also notes that NYSE Arca LLC (‘‘NYSE 

Arca’’) recently filed a proposed change for 

immediate effectiveness that increased their manual 

transaction fees for Market Makers to $0.35. In their 

filing, NYSE Arca stated that the purpose of the 

change was to better align their fees with other 

markets in the industry. BOX notes that the purpose 

of this filing is the same—to align its fees with other 

exchanges with trading floors. See SR–NYSEArca– 

2021–042 available at https://www.nyse.com/ 

publicdocs/nyse/markets/nyse-arca/rule-filings/ 

filings/2021/SR-NYSEArca-2021-42.pdf. 

6Currently, BOX Floor Brokers are charged $0.25 

per contract for manual transactions on the BOX 

Trading Floor. At Phlx, Cboe, and NYSE American, 

Floor Brokers are charged $0.25 per contract for 

manual transactions. As discussed above, Floor 

Market Makers at Phlx, Cboe, and NYSE American 

are charged $0.35 per contract for manual 

transactions. The Exchange also notes that BOX 

charges Professional Customers $0.10 for manual 

transactions. The Exchange believes that the 

disparity between the Professional Customers and 

the proposed Floor Market Maker fee is reasonable 

as a similar disparity currently exists at another 

options exchange with a trading floor. See Cboe Fee 

Schedule. At Cboe, Professional Customers are 

charged $0.12 for manual transactions and Floor 

Market Makers are charged $0.35 for manual 

transactions. Lastly, BOX notes that Public 

Customers are not charged for manual transactions 

on the BOX Trading Floor while Floor Market 

Makers are charged $0.35 for manual transactions. 

This is consistent with the fee disparities currently 

in place at the other exchanges with physical 

trading floors. 

7 15 U.S.C. 78f(b)(4) and (5). 

8See supra note 5. 

9See supra note 6. 

10See BOX Fee Schedule Section II.A (Strategy 

QOO Order Fee Cap and Rebate). While the fee cap 

on Strategy transactions is available to all 

Participants, the Exchange notes that Floor Market 

Makers have a time and place advantage by virtue 

of their presence on the Trading Floor to participate 

in such transactions and therefore benefit from the 

fee cap. 

11See supra note 6. 

12See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(S7–10–04) (‘‘Reg NMS Adopting Release’’). 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend 

Section II (Manual Transaction Fees) on 

the BOX Fee Schedule. Specifically, the 

Exchange proposes to amend QOO 

Order Fees for Market Makers in Section 

II.A of the Fee Schedule. Currently, 

Floor Market Makers are charged $0.25 

per contract for QOO Orders for Penny 

and Non-Penny Interval Classes. The 

Exchange proposes to modify the rates 

charged for QOO Orders to $0.35 for 

Market Makers in Penny and Non-Penny 

Interval Classes. The proposed changes 

are intended to provide consistency 

between the Exchange’s fees for manual 

transactions by Floor Market Makers 

and those charged by other markets.5

The Exchange notes that the disparity in 

fees between Floor Market Makers and 

other Floor Participants on the BOX 

Trading Floor are similar to disparities 

that currently exist at other trading 

floors in the industry.6

2. Statutory Basis 

The Exchange believes that the 

proposal is consistent with the 

requirements of Section 6(b) of the Act, 

in general, and Section 6(b)(4) and 

6(b)(5)of the Act,7 in particular, in that 

it provides for the equitable allocation 

of reasonable dues, fees, and other 

charges among BOX Participants and 

other persons using its facilities and 

does not unfairly discriminate between 

customers, issuers, brokers or dealers. 

The Exchange believes that the 

proposed rule change is designed to 

bring the Exchange’s fees for Market 

Maker manual transactions into 

alignment with those charged on other 

markets with trading floors. The 

Exchange believes it is reasonable to 

increase certain fees, consistent with 

fees offered by competing options 

exchanges for similar transactions.8

Further, the Exchange believes that the 

proposed increased charge for manual 

transactions for Market Makers but not 

for other market participants is 

reasonable because the resulting 

disparity would align the Exchange’s 

fees for manual transactions with the 

fees charged on other exchanges.9 In 

addition, the Exchange believes that 

other pricing incentives offered by the 

Exchange would continue to encourage 

Market Makers to conduct manual 

transactions on the Exchange.10 The 

Exchange thus believes the proposed 

changes, even though they are increased 

fees, would not discourage Market 

Makers from continuing to conduct 

manual transactions on the Exchange 

and would continue to attract volume 

and liquidity to the Exchange generally 

and would therefore benefit all market 

participants (including those that do not 

participate in manual transactions) 

through increased opportunities to 

trade. 

Further, the Exchange believes the 

proposed rule change is reasonable and 

equitable as the proposal is based on the 

type of business transacted on the 

Exchange, and Market Makers can opt to 

participate in manual transactions or 

not. Finally, to the extent the proposed 

fees continue to encourage Market 

Makers to participate in manual 

transactions on the Exchange, the 

Exchange believes the proposed changes 

would continue to improve the 

Exchange’s overall competitiveness and 

strengthen its market quality for all 

market participants. In the backdrop of 

the competitive environment in which 

the Exchange operates, the proposed 

rule change is a reasonable attempt by 

the Exchange to maintain its market 

share relative to its competitors. 

Further, the Exchange believes the 

proposed change is equitable and not 

unfairly discriminatory as the proposed 

modifications would apply to all Floor 

Market Makers who execute manual 

transactions on an equal and nondiscriminatory basis. The Exchange also 

believes that increasing fees for manual 

transactions by Market Makers, but not 

for other market participants, is not 

unfairly discriminatory given that the 

proposed rates (and resulting 

disparities) are a competitive response 

to rates charged on options exchanges 

for manual transactions by Market 

Makers and because these Participants 

may avail themselves of other incentives 

offered by the Exchange. Further, the 

Exchange believes the proposed change 

is reasonable, equitable, and not 

unfairly discriminatory because it is 

consistent with the manner in which 

other options exchanges with trading 

floors currently assess fees for Market 

Maker manual transactions. As 

discussed above, the Exchange notes 

that the disparity in fees between the 

Floor Market Makers and other Floor 

Participants on the BOX Trading Floor 

are similar to disparities that currently 

exist at other trading floors in the 

industry.11

The Exchange notes that it operates in 

a highly competitive market. The 

Commission has repeatedly expressed 

its preference for competition over 

regulatory intervention in determining 

prices, products, and services in the 

securities markets. In Regulation NMS, 

the Commission highlighted the 

importance of market forces in 

determining prices and SRO revenues 

and, also, recognized that current 

regulation of the market system ‘‘has 

been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 12

There are currently 16 registered 

options exchanges competing for order 

flow. Based on publicly available 

information, and excluding index-based 


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34292 Federal Register / Vol. 86, No. 122 / Tuesday, June 29, 2021 / Notices 

13The OCC publishes options and futures volume 

in a variety of formats, including daily and monthly 

volume by exchange, available here: https://

www.theocc.com/Market-Data/Market-DataReports/Volume-and-OpenInterest/MonthlyWeekly-Volume-Statistics. 

14Based on a compilation of OCC data for 

monthly volume of equity-based options and 

monthly volume of ETF-based options, see id. 

15See Reg NMS Adopting Release, supra note 12, 

at 37499. 

16See supra notes 5, 6, and 10. 

17See supra note 5. 

18 15 U.S.C. 78s(b)(3)(A)(ii). 

19 17 CFR 240.19b–4(f)(2). 20 17 CFR 200.30–3(a)(12). 

options, no single exchange has more 

than 16% of the market share of 

executed volume of multiply-listed 

equity and ETF options trades.13

Therefore, currently no exchange 

possesses significant pricing power in 

the execution of multiply-listed equity & 

ETF options order flow. More 

specifically, in April 2021, the Exchange 

had less than 6% market share of 

executed volume of multiply-listed 

equity and ETF options trades.14

The Exchange believes that the evershifting market share among the 

exchanges from month to month 

demonstrates that market participants 

can shift order flow or discontinue or 

reduce use of certain categories of 

products, in response to fee changes. 

Accordingly, competitive forces 

constrain options exchange transaction 

fees. Stated otherwise, changes to 

exchange transaction fees and rebates 

can have a direct effect on the ability of 

an exchange to compete for order flow. 

As such, the Exchange believes that the 

proposed change is reasonable, 

equitable, and not unfairly 

discriminatory as discussed above. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. Instead, as 

discussed above, the Exchange believes 

that the proposed changes would be 

consistent with fees for similar 

transactions at other markets. As a 

result, the Exchange believes that the 

proposed changes further the 

Commission’s goal in adopting 

Regulation NMS of fostering integrated 

competition among orders, which 

promotes ‘‘more efficient pricing of 

individual stocks for all types of orders, 

large and small.’’ 15

The Exchange does not believe that 

the proposed change will impose any 

burden on intramarket competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

Particularly, the proposed change will 

apply uniformly to all Market Makers on 

the BOX Trading Floor. That is, all 

Market Makers transacting orders on the 

BOX Trading Floor will be assessed the 

proposed fees. The Exchange believes 

that the proposed increased fees for 

manual transactions by Market Makers, 

but not for other market participants, 

would not impose any burden on 

intermarket competition that is not 

necessary or appropriate because the 

proposed fees (and resulting disparities) 

are consistent with fees charged for 

manual transactions by Market Makers 

on other exchanges and because these 

Participants may avail themselves to 

other incentives offered by the 

Exchange.16 Further, the Exchange does 

not believe the proposed rule change 

will impose any burden on intermarket 

competition that is not necessary or 

appropriate in furtherance of the 

purposes of the Act because, as noted 

above, competing options exchanges 

with trading floors have similar fees for 

identical transactions on their 

respective trading floors.17

Finally, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily favor competing venues. In such 

an environment, the Exchange must 

continually review, and consider 

adjusting, its fees and credits to remain 

competitive with other exchanges. For 

the reasons described above, the 

Exchange believes that the proposed 

rule change reflects this competitive 

environment. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Exchange Act 18

and Rule 19b–4(f)(2) thereunder,19

because it establishes or changes a due, 

or fee. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend the rule change if 

it appears to the Commission that the 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or would otherwise further 

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– 

BOX–2021–15 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–BOX–2021–15. 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 such 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. 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–BOX–2021–15, and should 

be submitted on or before July 20, 2021. 


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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 


lotter on DSK11XQN23PROD with NOTICES1