[Federal Register Volume 87, Number 111 (Thursday, June 9, 2022)]
[Notices]
[Pages 35273-35280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-12398]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95031; File No. 4-698]


Joint Industry Plan; Notice of Filing of Amendment to the 
National Market System Plan Governing the Consolidated Audit Trail by 
BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., 
Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, 
Inc. and Cboe Exchange, Inc., Financial Industry Regulatory Authority, 
Inc., Investors Exchange LLC, Long-Term Stock Exchange, Inc., Miami 
International Securities Exchange LLC, MEMX, LLC, MIAX Emerald, LLC, 
MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, 
Nasdaq MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock Market LLC; and New 
York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE 
Chicago, Inc., and NYSE National, Inc.

June 3, 2022.

I. Introduction

    On May 20, 2022, the Operating Committee for Consolidated Audit 
Trail, LLC (``CAT LLC''), on behalf of the following parties to the 
National Market System Plan Governing the Consolidated Audit Trail (the 
``CAT NMS Plan'' or ``Plan''): \1\ BOX Exchange LLC, Cboe BYX Exchange, 
Inc., Cboe BZX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX 
Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial 
Industry Regulatory Authority, Inc., Investors Exchange LLC, Long-Term 
Stock Exchange, Inc., Miami International Securities Exchange LLC, 
MEMX, LLC, MIAX Emerald, LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq 
GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC, Nasdaq PHLX LLC, The 
NASDAQ Stock Market LLC; and New York Stock Exchange LLC, NYSE American 
LLC, NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc. 
(collectively, the ``Participants,'' ``self-regulatory organizations,'' 
or ``SROs'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') pursuant to Section 11A(a)(3) of the Securities 
Exchange Act of 1934 (``Exchange Act''),\2\ and Rule 608 thereunder,\3\ 
a proposed amendment to the CAT NMS Plan that would authorize CAT LLC 
to revise the Consolidated Audit Trail Reporter Agreement (the 
``Reporter Agreement'') and the Consolidated Audit Trail Reporting 
Agent Agreement (the ``Reporting Agent Agreement'') as contained in 
Appendix A, attached hereto by: (1) removing the arbitration provision 
from each agreement and replacing it with a forum selection provision 
(the ``Forum Section Provision'') which would require that any dispute 
regarding CAT reporting be filed in a United States District Court for 
the Southern District of New York (the ``SDNY''), or, in the absence of 
federal subject matter jurisdiction, a New York State Supreme Court 
within the First Judicial Department; (2) adding a jury waiver 
provision; (3) adding a disclaimer of warranties clause; and (4) and 
revising the existing choice of law clause to provide that any dispute 
will be governed by federal law (in addition to New York law).\4\ The 
Commission is publishing this notice to solicit comments from 
interested persons on the amendment.\5\
---------------------------------------------------------------------------

    \1\ The CAT NMS Plan is a national market system plan approved 
by the Commission pursuant to Section 11A of the Exchange Act and 
the rules and regulations thereunder. See Securities Exchange Act 
Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 
2016) (``Order Approving CAT NMS Plan'').
    \2\ 15 U.S.C 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Michael Simon, Chair, CAT NMS Plan Operating 
Committee, to Vanessa Countryman, Secretary, Commission, dated May 
20, 2022.
    \5\ 17 CFR 242.608.
---------------------------------------------------------------------------

II. Description of the Plan

    Set forth in this Section II is the statement of the purpose and 
summary of the amendment, along with information required by Rule 
608(a)(4) and (5) under the Exchange Act,\6\ substantially as prepared 
and submitted by the Participants to the Commission.\7\
---------------------------------------------------------------------------

    \6\ See 17 CFR 242.608(a)(4) and (a)(5).
    \7\ See supra note 4. Unless otherwise defined herein, 
capitalized terms used herein are defined as set forth in the CAT 
NMS Plan.

---------------------------------------------------------------------------

[[Page 35274]]

A. Statement of Purpose of the Amendment to the CAT NMS Plan

    The Proposed Amendment would ensure that a dispute arising out of 
CAT reporting would be addressed by either the SDNY or the New York 
State Supreme Court. Designating an Article III court and a 
sophisticated state court as potential forums for dispute resolution is 
plainly consistent with the Exchange Act.
    Courts offer important substantive expertise and procedural 
mechanisms that would facilitate the fair and efficient resolution of 
claims in relation to CAT reporting. As an example, because a CAT 
technical issue, system failure, or data breach may impact thousands of 
potential parties, the ability of courts to consolidate and join claims 
and certify class actions would minimize costs of litigation for all 
potential parties (including Industry Members), which, in turn, 
furthers the market efficiency and fair competition objectives of the 
Exchange Act.
    The importance of a court resolving claims regarding CAT reporting 
is underscored by the regulatory nature of the CAT. The Participants 
are implementing the requirements of Rule 613 and the CAT NMS Plan in 
their regulatory capacities. While cyber litigation frequently presents 
complex questions, the CAT's regulatory nature adds a further layer of 
complexity to any potential dispute. Among other issues, a tribunal 
would have to evaluate the relationships between the Commission, the 
Participants, and Industry Members and determine the applicability of 
any immunity claims. In connection with the Participants' limitation of 
liability proposal, both the Commission and the Securities Industry and 
Financial Markets Association (``SIFMA'') recognized that regulatory 
immunity may be at issue in a dispute regarding CAT reporting. 
Utilizing courts to resolve such disputes will ensure that bedrock 
principles of the self-regulatory framework are adjudicated based on 
decades of binding precedent (often developed through the Commission's 
feedback via amicus briefs) and afford the parties critical appellate 
rights.\8\
---------------------------------------------------------------------------

    \8\ In light of the complex factual and legal issues likely to 
be presented by any dispute concerning CAT Reporting, the Proposed 
Amendment also adds a jury waiver provision to the Reporter 
Agreement and the Reporting Agent Agreement. See infra at Appendices 
E & F.
---------------------------------------------------------------------------

    Notwithstanding the benefits of litigation, an arbitration 
provision was included in the original Reporter Agreement because the 
agreement disclaimed all direct and indirect damages and capped the 
Participants' liability to $500 per Industry Member or Participant that 
entered into the Reporter Agreement (``CAT Reporter''). Indeed, 
arbitrators routinely interpret--and enforce--liability limitations and 
damages exclusions, and the broad nature of those provisions would have 
deterred meritless claims. But considering the complex legal and 
factual issues likely implicated by a dispute concerning CAT reporting, 
in the absence of a robust limitation on liability, all parties should 
be able to rely on the protections available in litigation.
    The Participants' proposed federal forum and alternative state 
forum are well equipped to handle any dispute relating to CAT 
reporting. The United States Court of Appeals for the Second Circuit, 
and the SDNY, have significant experience resolving securities matters 
and cyber claims. Likewise, the New York State Supreme Court in the 
First Judicial Department, and in particular its Commercial Division in 
New York County (Manhattan), is comprised of experienced judges who 
regularly preside over complex disputes. Both forums routinely 
adjudicate matters involving the Participants, Industry Members, and 
the Commission, and given the locations of potential parties to a CAT 
Data breach, New York would likely constitute a convenient forum for 
dispute resolution.\9\
---------------------------------------------------------------------------

    \9\ The Proposed Amendment also contains a disclaimer of 
warranties, whereby CAT LLC, FINRA CAT, and the Participants 
disclaim all warranties in relation to the Reporter Agreement (or 
the Reporting Agent Agreement) and the CAT System. See infra Sec.  
8.
---------------------------------------------------------------------------

(1) Background
    On July 11, 2012, the Commission adopted Rule 613 of Regulation NMS 
to enhance regulatory oversight of the U.S. securities markets. The 
rule directed the Participants to create a ``Consolidated Audit Trail'' 
(also referred to herein as the ``CAT'') that would strengthen the 
ability of regulators--including the Commission and the self-regulatory 
organizations--to surveil the securities markets.\10\ Following the 
adoption of Rule 613, the Participants prepared and proposed the CAT 
NMS Plan and then implemented--and continue to implement--the Plan's 
extensive requirements.
---------------------------------------------------------------------------

    \10\ See 17 CFR 242.613 (2012).
---------------------------------------------------------------------------

    In preparation for CAT reporting, the Operating Committee of CAT 
LLC approved a Reporter Agreement and Reporting Agent Agreement by 
unanimous written consent on August 29, 2019. Those agreements 
contained industry standard limitation of liability provisions that 
disclaimed all damages and capped the liability of CAT LLC, the 
Participants, and FINRA CAT to any CAT Reporter at $500 per calendar 
year. The agreements also contained a mandatory arbitration provision 
with respect to any disputes in connection with CAT reporting and 
authorized an arbitrator to grant remedies that ``the arbitrator deems 
just and equitable within the scope of [the] Agreement.'' \11\
---------------------------------------------------------------------------

    \11\ See Consol. Audit Trail Rep. Agreement (``Reporter 
Agreement'') and Consol. Audit Trail Reporting Agent Agreement 
(``Reporting Agent Agreement''), Sec.  7.9, available at https://www.catnmsplan.com/sites/default/files/2020-02/Consolidated-Audit-Trail-Reporter-Agreement%2808-29-19%20FINAL%29.pdf and https://www.catnmsplan.com/sites/default/files/2020-05/Consolidated-Audit-Trail-Reporting-Agent-Agreement-amended_0.pdf.
---------------------------------------------------------------------------

    On April 22, 2020, SIFMA challenged the Reporter Agreement's 
limitation of liability and indemnification provisions by filing an 
application for review of actions taken by CAT LLC and the Participants 
pursuant to Sections 19(d) and 19(f) of the Exchange Act (the 
``Administrative Proceeding''). On May 13, 2020, SIFMA and the 
Participants reached a settlement of the Administrative Proceeding that 
permitted Industry Members to report data to the CAT pursuant to a 
revised Reporter Agreement that did not contain a limitation of 
liability provision, while the Participants prepared a filing with the 
Commission to resolve the parties' underlying disagreement regarding 
the proper allocation of liability.\12\
---------------------------------------------------------------------------

    \12\ As part of the settlement of the Administrative Proceeding, 
SIFMA agreed to abandon its challenge to the industry standard 
indemnification provisions that were included in the original 
Reporter Agreement and Reporting Agent Agreement. See SIFMA 
Statement on Settlement on CAT Reporter Agreement, available at 
https://www.sifma.org/resources/news/sifma-statement-on-settlement-on-cat-reporter-agreement/. All CAT Reporters and CAT Reporting 
Agents eventually signed an agreement that contained those 
indemnification provisions.
---------------------------------------------------------------------------

    On December 18, 2020, the Participants proposed to amend the CAT 
NMS Plan to authorize CAT LLC to revise the Reporter Agreement and the 
Reporting Agent Agreement to insert limitation of liability provisions 
(the ``Limitation of Liability Proposal'').\13\ SIFMA and various 
Industry Members submitted comment letters in response to the 
Limitation of Liability Proposal and in response to the Commission's 
April 6, 2021 Order Instituting Proceedings.\14\ Multiple comment

[[Page 35275]]

letters--including from SIFMA--discussed the applicability of 
regulatory immunity to a CAT Data breach, and demonstrated an 
assumption and understanding that assessments of immunity claims would 
be conducted by courts.\15\
---------------------------------------------------------------------------

    \13\ See Letter from Michael Simon, CAT NMS Plan Operating Comm. 
Chair to Vanessa Countryman, Sec'y, SEC (Dec. 18, 2020), available 
at https://catnmsplan.com/sites/default/files/2020-12/12.18.2020-Proposed-Amendment-to-the-CAT-NMS-Plan.pdf.
    \14\ See SEC, Joint Indus. Plan; Order Instituting Proceedings 
to Determine Whether to Approve or Disapprove an Amend. to the Nat'l 
Mkt. Sys. Plan Governing the Consol. Audit Trail, Release No. 34-
391487; File No. 4-698 (Apr. 6, 2021), available at https://www.sec.gov/rules/sro/nms/2021/34-91487.pdf, 86 FR 19054 (Apr. 12, 
2021), available at https://www.govinfo.gov/content/pkg/FR-2021-04-12/pdf/2021-07390.pdf; 17 CFR 242.608(b)(2)(i).
    \15\ See e.g., Letter from Ellen Greene, SIFMA to Vanessa 
Countryman, Sec'y, SEC, at 7 (May 3, 2021) (the ``SIFMA Letter''), 
available at https://www.sec.gov/comments/4-698/4698-8751243-237404.pdf (discussing an indication that ``courts are likely to 
view any regulatory activity the SROs conduct through CAT LLC as 
being subject to this judicial immunity''); Letter from Stephen John 
Berger, Citadel Sec. to Vanessa Countryman, Sec'y, SEC, at 5 (Feb. 
23, 2021) (the ``Citadel Letter''), available at https://www.sec.gov/comments/4-698/4698-8411798-229501.pdf (``[C]ourts must 
be `careful not to extend the scope of the protection further than 
its purposes require.' '') (citations omitted); Letter from Kelvin 
To, Data Boiler Techs., LLC to Vanessa Countryman, Sec'y, SEC, at 4 
(May 3, 2021) (the ``Data Boiler Letter''), available at https://www.sec.gov/comments/4-698/4698-8749987-237362.pdf (``How courts 
apply a `functional test' to determine whether an SRO is entitled to 
immunity from burdens of litigation or civil damages suits may be a 
controversy here.'').
---------------------------------------------------------------------------

    On October 29, 2021, the Commission issued an order disapproving 
the Limitation of Liability Proposal (the ``Disapproval Order'').\16\ 
The Commission noted that the Participants may have limited liability 
through ``court-established'' regulatory immunity, and that the impact 
of the Limitation of Liability Proposal depended on assumptions about 
the applicability of regulatory immunity to a CAT Data breach.\17\ 
Throughout the Disapproval Order, the Commission indicated that the 
applicability of regulatory immunity is appropriately decided by 
courts.\18\
---------------------------------------------------------------------------

    \16\ SEC, Joint Industry Plan; Order Disapproving an Amend. to 
the Nat'l Mkt. Sys. Plan Governing the Consol. Audit Trail, Release 
No. 34-93484; File No. 4-698 (Oct. 29, 2021), available at https://www.sec.gov/rules/sro/nms/2021/34-93484.pdf, 86 FR 60,933 (Nov. 4, 
2021), available at https://www.govinfo.gov/content/pkg/FR-2021-11-04/pdf/2021-24015.pdf.
    \17\ See Disapproval Order at 29 (``Even in the absence of the 
proposed Limitation of Liability Provisions, the Participants may 
have limited liability to Industry Members through court-established 
regulatory immunity.'') (citation omitted); see also id. at 42 
(``The Commission believes that uncertainty regarding liability in 
case of a CAT Data breach thus serves as an incentive for the 
Participants to invest in data security to the extent that 
Participants believe a court might not uphold their regulatory 
immunity or it would be judged not to apply in a given case that was 
before the courts.''); id. at 35 (``Participants can assert 
regulatory immunity to the extent that the doctrine applies if there 
is a security breach that exposes CAT Data and Industry Members seek 
damages from the responsible Participants.'').
    \18\ See, e.g., supra n.17.
---------------------------------------------------------------------------

(2) The Forum Selection Provision
    The Forum Selection Provision is contained in Appendix A to this 
Proposed Amendment.\19\ In sum, the Forum Selection Provision provides 
that any dispute concerning CAT reporting must be filed in the SDNY if 
there is any basis for federal subject matter jurisdiction.\20\ The 
clause also provides that if federal courts lack jurisdiction over a 
dispute, plaintiffs must file suit in the New York State Supreme Court 
in New York County (Manhattan) within the First Judicial Department. 
The Proposed Amendment would require that the parties to any action 
filed in the New York State Supreme Court seek assignment to the 
court's Commercial Division if permitted by the Uniform Civil Rules for 
the Supreme and County Courts.\21\
---------------------------------------------------------------------------

    \19\ In advance of filing this Proposed Amendment, the 
Participants attempted to confer with SIFMA to determine whether 
Industry Members would agree to revise the Reporter Agreement as 
described herein. SIFMA declined to engage in a discussion with the 
Participants.
    \20\ Section 11.5 of the CAT NMS Plan authorizes Industry 
Members to ``seek redress from the SEC pursuant to SEC Rule 608 or 
in any other appropriate forum'' with respect to any dispute 
regarding CAT fees. The Forum Selection Provision would not impact 
the ability of Industry Members to petition the Commission directly 
with respect to such disputes. CAT NMS Plan, supra n.1, Sec.  11.5.
    \21\ The Commercial Division has two jurisdictional 
requirements: (1) a monetary threshold, which is $500,000 in 
Manhattan, and, provided that the monetary threshold is met (or 
equitable or declaratory relief is sought), (2) the principal claim 
must fall within an enumerated list of types of claims, which 
include, among others, claims for breach of contract. 22 N.Y.C.R.R. 
Sec. Sec.  202.70(a), 202.70(b)(1)-(12). In addition, any party 
seeking assignment of a case to the Commercial Division must file a 
Commercial Division Request for Judicial Intervention Addendum 
certifying that the case meets those two jurisdictional 
requirements. 22 N.Y.C.R.R. Sec.  202.70(d)(1).
---------------------------------------------------------------------------

    The Forum Selection Provision also provides that the parties to any 
litigation agree to accept service of a complaint by U.S. registered 
mail and waive any objections based on venue. The Proposed Amendment 
would apply to any litigation commenced by any signatory to the CAT 
Reporter Agreement (or Reporting Agent Agreement).
(3) The Nature of Potential Claims
    The Participants believe that a court is the proper forum to 
resolve claims regarding CAT reporting, including claims in relation to 
potential technical issues, system failures, and data breaches. 
Although the specific claims asserted likely will depend on the nature 
of the incident, in the aftermath of high-profile data breaches (i.e., 
one category of potential claims), plaintiffs have brought common law 
claims of breach of contract and negligence as well as claims based on 
various federal statutes including the Stored Communications Act, the 
Federal Wiretap Act, and the Computer Fraud and Abuse Act.\22\ In those 
matters, plaintiffs sought substantial monetary relief including 
compensatory, punitive, and statutory damages.
---------------------------------------------------------------------------

    \22\ See, e.g., In re Google Assistant Privacy Litig., No. 19-
cv-04286-BLF, 2021 WL 2711747, at *2 (N.D. Cal. July 1, 2021); Cal-
Cleve, Ltd. v. Wrag-Time Air Freight, Inc., No. 04-cv-10543 SJO 
(JTLx), 2005 WL 8157876, at *1 (C.D. Cal. June 1, 2005).
---------------------------------------------------------------------------

    In any dispute regarding CAT reporting, CAT LLC will likely have 
strong defenses because of the CAT's robust--and SEC-approved--
cybersecurity, and the Participants' regulatory role in implementing 
the CAT NMS Plan.\23\ Additionally, such disputes are likely to present 
complex legal and factual issues inherent in cyber litigation 
generally. As discussed infra at Section A(4), the Participants believe 
that a court is well-equipped to address and mitigate any challenges of 
adjudicating claims resulting from CAT reporting.
---------------------------------------------------------------------------

    \23\ FINRA CAT has implemented robust controls to protect the 
security and confidentiality of CAT Data and the Commission has 
repeatedly concluded that the CAT NMS Plan incorporates ``robust 
security requirements'' that ``provide appropriate, adequate 
protection for the CAT Data.'' See Order Approving CAT NMS Plan, 
supra n.1, at 715; see also SEC, Proposed Amends. to the Nat'l Mkt. 
Sys. Plan Governing the Consol. Audit Trail to Enhance Data Sec., 
Release No. 34-89632; File No. S7-10-20, at 10 (Aug. 21, 2020) (the 
``Data Security Proposal''), available at https://www.sec.gov/rules/proposed/2020/34-89632.pdf, 85 FR 65990 at 65991 (Oct. 16, 2020), 
available at https://www.govinfo.gov/content/pkg/FR-2020-10-16/pdf/2020-18801.pdf (``CAT Data reported to and retained in the Central 
Repository is thus subject to what the Commission believes are 
stringent security policies, procedures, standards, and 
controls.'').
---------------------------------------------------------------------------

(4) Litigation Would Promote the Fair, Expeditious, and Efficient 
Resolution of Any Claims Regarding CAT Reporting
    The Proposed Amendment would lead to the fair and efficient 
resolution of potential disputes, ensure that issues implicating 
foundational principles of the self-regulatory framework are decided 
based on longstanding precedent, and provide the parties with important 
appellate rights. Litigating claims in an Article III court, or 
sophisticated state court, is plainly consistent with the Exchange 
Act.\24\
---------------------------------------------------------------------------

    \24\ The Participants recognize that certain individuals who 
serve as arbitrators may have experience with cybersecurity and 
securities matters. However, even if the parties to a CAT Data 
breach were able to ensure that such arbitrators presided over a 
potential dispute, litigation remains more suitable to resolve 
claims regarding CAT reporting for the reasons discussed in this 
submission, including (among other reasons) courts' mechanisms to 
consolidate claims, the presence of meaningful appellate rights, the 
role of legal precedent, the nature of the parties to a potential 
dispute, and the relevance of regulatory immunity to resolving 
claims.

---------------------------------------------------------------------------

[[Page 35276]]

a. Consolidation, Joinder of Claims, and Class Actions
    Because certain potential claims arising out of CAT reporting--
including technical issues, system failures, and data breaches--are 
likely to impact multiple parties, one important consideration is the 
extent to which a particular dispute resolution mechanism allows for 
consolidation of claims. Indeed, consolidating such claims would reduce 
costs of dispute resolution, enable CAT LLC to focus on its regulatory 
mandate, and decrease the risk of disparate outcomes in similar cases, 
all of which promote the efficiency and fair competition objectives of 
the Exchange Act.
    In court, litigants can rely on the applicability of the rules of 
consolidation and joinder to increase the likelihood that all cases 
arising out of one incident are heard together. Both federal and New 
York State rules of civil procedure provide mechanisms to consolidate 
cases and join parties to actions.\25\ Relatedly, both federal and 
state courts permit the use of class actions for certain disputes.\26\ 
These rules promote consistency of outcomes and the efficient 
resolution of claims.
---------------------------------------------------------------------------

    \25\ See Fed. R. Civ. P. 19, 20, 42(a)(2); N.Y. C.P.L.R. 
Sec. Sec.  602, 1001, 1002.
    \26\ See Fed. R. Civ. P. 23; 28 U.S.C. 1332(d)(2); N.Y. C.P.L.R. 
Sec.  901(a).
---------------------------------------------------------------------------

    By contrast, under the AAA Commercial Arbitration Rules (the ``AAA 
Rules''), which govern arbitration under the current Reporter Agreement 
and Reporting Agent Agreement, consolidation is a ``suggest[ion] . . . 
that the parties and the arbitrator should address at the preliminary 
hearing,'' and the ultimate decision regarding whether consolidation is 
appropriate is ``subject to the discretion of the arbitrator.'' \27\ 
The AAA Rules are also silent on joinder. While parties to an 
arbitration agreement may agree that signatories will be required to 
join claims,\28\ parties frequently face complications in joining non-
signatories to an arbitration. This is particularly significant in the 
context of a potential claim arising out of CAT reporting because 
certain types of incidents may impact both Industry Members and other 
market participants (e.g., retail investors).
---------------------------------------------------------------------------

    \27\ See AAA Rules P-2(a)(vi)(c).
    \28\ See, e.g., 9 U.S.C. 2 (``A written provision in . . . a 
contract evidencing a transaction involving commerce to settle by 
arbitration a controversy thereafter arising out of such contract or 
transaction, or the refusal to perform the whole or any part 
thereof, or an agreement in writing to submit to arbitration an 
existing controversy arising out of such a contract, transaction, or 
refusal, shall be valid, irrevocable, and enforceable, save upon 
such grounds as exist at law or in equity for the revocation of any 
contract.''); see also AAA Rules R-1(a) (providing that the AAA 
Rules are deemed a part of parties' agreement to arbitrate where the 
parties provide for AAA commercial arbitration).
---------------------------------------------------------------------------

    For those reasons, if the arbitration provision remains in the 
Reporter Agreement and Reporting Agent Agreement, actions involving the 
same common questions of law or fact or arising out of the same 
``transaction or occurrence'' may be brought piecemeal, with 
signatories to the agreements arbitrating their claims or defenses and 
non-signatories litigating those claims or defenses in court. This can 
lead to illogical or unworkable outcomes; \29\ indeed, cases arising 
out of the same facts or involving the same legal issues or even the 
same parties may result in entirely different outcomes, creating 
inconsistent rules, rendering inconsistent damages awards, or both.
---------------------------------------------------------------------------

    \29\ See Rick Fleming, Investor Advocate, SEC, Mandatory 
Arbitration: An Illusory Remedy for Public Company Shareholders 
(Feb. 24, 2018), https://www.sec.gov/news/speech/fleming-sec-speaks-mandatory-arbitration (``[I]t seems terribly inefficient to require 
multiple plaintiffs to prove up the same claims in separate 
proceedings.'').
---------------------------------------------------------------------------

b. Reliance on Precedent and the Expertise of Courts
    A dispute regarding CAT reporting is likely to present complex 
legal and factual issues inherent in cyber litigation generally as well 
as in relation to the Participants' regulatory roles in overseeing the 
CAT. Allowing the parties to litigate in court would ensure that the 
forum charged with resolving disputes is bound by the substantial body 
of precedent that has been developed to address these issues.
    Relatedly, the doctrine of regulatory immunity may play an 
important role in any dispute concerning CAT reporting. In connection 
with the Limitation of Liability Proposal, multiple comment letters 
discussed the applicability of regulatory immunity to a CAT Data breach 
and demonstrated an assumption and understanding that such a 
determination was the province of courts.\30\ The Commission, likewise, 
recognized the importance of regulatory immunity claims and its 
Disapproval Order also indicated an expectation that such claims would 
be decided by courts.\31\ Indeed, courts have developed a robust body 
of case law on the immunity doctrine, which provides parameters to 
courts as they analyze the applicability of regulatory immunity to the 
specific facts presented by a given case.
---------------------------------------------------------------------------

    \30\ See, e.g., supra n.15.
    \31\ Disapproval Order, supra n.16, 17.
---------------------------------------------------------------------------

    The ability to rely on binding precedent is even more critical in 
the event of a claim arising out of CAT reporting. As discussed supra 
at Section 3, certain incidents may lead to claims in which impacted 
parties seek substantial damages from CAT LLC. In light of the 
potential amount in controversy, coupled with the likely legal and 
factual issues presented by a dispute--including the applicability of 
immunity claims--all parties should be able to rely on the certainty of 
knowing that their conduct will be evaluated by developed legal 
standards. In addition to affording all parties the opportunity to rely 
on precedent, litigating disputes in court will also promote the 
development of precedent to guide the conduct of the Participants and 
Industry Members.
c. Appellate Review
    Adjudicating claims in relation to CAT reporting in court provides 
all parties with critical appellate rights. While important for any 
high stakes dispute, appellate rights are particularly important in the 
event of a CAT system failure, technical issue, or data breach, 
considering the complicated legal and factual issues, the nature of the 
parties, and the potentially large amount in controversy. Regulatory 
immunity claims, for example, are often the subject of appellate 
review.\32\
---------------------------------------------------------------------------

    \32\ See, e.g., D'Alessio v. N.Y. Stock Exchange, Inc., 258 F.3d 
93 (2d Cir. 2001); In re NYSE Specialists Sec. Litig., 503 F.3d 89 
(2d Cir. 2007).
---------------------------------------------------------------------------

    Direct appellate review is largely absent in arbitration.\33\ 
Moreover, even if the parties to the Reporter Agreement or Reporting 
Agent Agreement were able to avail themselves of appellate rights, an 
appellate arbitration tribunal would be similarly unbound by precedent 
as the lower arbitration forum that rendered a potentially erroneous 
award.\34\ With respect to judicial review of an arbitration award, the 
Federal Arbitration Act (the ``FAA'') provides limited grounds for 
federal courts to vacate, modify, or correct final arbitration 
decisions.\35\ In the absence of

[[Page 35277]]

unusual circumstances, however, meaningful appellate review is 
generally unavailable: none of the grounds provided by the FAA would 
authorize a court to vacate an arbitration award that was premised on 
an error of law.\36\
---------------------------------------------------------------------------

    \33\ AAA Rules only authorize appellate review of arbitration 
awards if the parties consent to appellate rights. See AAA Rules A-
1.
    \34\ As the Supreme Court has explained, ``[t]he arbitrator's 
construction holds, however good, bad, or ugly.'' Oxford Health 
Plans LLC v. Sutter, 569 U.S. 564, 573 (2013).
    \35\ See 9 U.S.C. 9 (providing that if the parties have 
contractually agreed that a specific federal court will enter 
judgment upon an arbitration award, then at any time within one year 
after the award is made, any party may apply to that court for an 
order confirming the award; if no court is specified, then the 
application may be made to the U.S. district court for the district 
within which the award was made); 9 U.S.C. 10 (providing that the 
U.S. district court where the arbitration award was made may vacate 
the award upon an application of any party to the arbitration, where 
the award was ``procured by corruption, fraud, or undue means,'' 
where there ``was evident partiality or corruption in the 
arbitrators,'' where the arbitrators ``were guilty of misconduct,'' 
or where the arbitrators ``exceeded their powers'' or ``so 
imperfectly executed them that a mutual, final, and definite award'' 
was not made); 9 U.S.C. 11 (providing the following grounds for 
which a U.S. district court may upon the application of any party to 
an arbitration modify or correct an arbitration award: ``an evident 
material miscalculation'' or mistake in the award; an award upon a 
matter ``not submitted'' to the arbitrators; or ``where the award is 
imperfect in matter of form not affecting the merits of the 
controversy'').
    \36\ See 9 U.S.C. 11.
---------------------------------------------------------------------------

d. Rules Governing Discovery and Evidence
    Considering the magnitude of data transmitted to the CAT, a dispute 
is likely to involve a substantial volume of documents and information. 
Additionally, many documents that might be the subject of discovery 
requests are likely to be either commercially sensitive for Industry 
Members or involve nonpublic, sensitive information regarding the CAT's 
security.
    Parties to litigation are afforded the benefits of rules governing 
the discovery process and admissibility of evidence. These rules 
promote predictability of litigation, efficiency of resolutions, and 
fairness of results,\37\ and provide mechanisms for facilitating 
discovery as well as the admission of evidence.\38\ For example, 
litigants in court must comply with clear discovery rules, which govern 
the scope of discovery and the timing and content of disclosures, and 
facilitate communication among the parties and the court regarding 
these matters.\39\ Litigants in court also have the benefit of a 
uniform set of rules governing the admissibility of evidence.\40\ These 
protections do not exist under the AAA Rules,\41\ which provide a more 
limited set of procedures pertaining to discovery and evidence.\42\ 
Given the breadth and depth of the discovery and evidence rules in 
federal and state court, and the fact that courts are bound by 
precedent and subject to appellate review, see supra Sec.  A(4)(b)-(c), 
courts are better suited to handle disputes regarding CAT reporting.
---------------------------------------------------------------------------

    \37\ See, e.g., Fed. R. Civ. P. 1 (noting that the purpose of 
the rules is to ``secure the just, speedy, and inexpensive 
determination of every action and proceeding'').
    \38\ See generally Fed. R. Civ. P. 26-28, 30-31, 33-34, 36; Fed. 
R. Evid. 101-02; N.Y. C.P.L.R. Sec. Sec.  3101-02, 3122; 22 
N.Y.C.R.R. Sec. Sec.  202.11-12; Guide to N.Y. Evid. rule 1.03. 
Courts also have subpoena power over witnesses. See Fed. R. Civ. P. 
30(a)(1), 45(a)(1)(B), 45(c)(1); N.Y. C.P.L.R. Sec. Sec.  2301, 
3106(b); 22 N.Y.C.R.R. Sec.  202.20-d; see also 28 U.S.C. 1783; 
Convention on the Taking of Evidence Abroad in Civil or Commercial 
Matters (the Hague Convention); Uniform Interstate Depositions and 
Discovery Act (the ``UIDDA'') (providing mechanism for New York 
State courts to serve out-of-state subpoenas; in the absence of the 
UIDDA, the provisions for service applicable in the out-of-state 
jurisdiction apply).
    \39\ See, e.g., Fed. R. Civ. P. 26; N.Y. C.P.L.R. Sec.  3101; 22 
N.Y.C.R.R. Sec. Sec.  202.11-12.
    \40\ See Fed. R. Evid. 101, 102. New York State does not have a 
statutory code of evidence; instead, its rules of evidence reside in 
judicial precedent, the State constitution, and State statutes. The 
New York Unified Court System has compiled a guide setting forth 
current practice in New York State courts regarding the application 
of the rules of evidence. See generally Guide to N.Y. Evid. Rule 
1.03, Note. New York evidence law is generally in accord with the 
Federal Rules of Evidence, including rules on relevance, prejudice, 
privilege, and hearsay. See, e.g., id. rules 4.01, 4.07, 5.01-09, 
and 8.00-01.
    \41\ AAA Rules P-1(b) (instructing parties to carefully ``avoid 
importing procedures from court systems'').
    \42\ See, e.g., id. (disclaiming procedures from court systems), 
R-22 (providing for pre-hearing exchange and production of 
information), L-3(f) (noting that depositions are available only in 
``exceptional'' circumstances), R-34 (governing the admissibility of 
evidence and noting conformity to the legal rules of evidence is not 
necessary); see also 9 U.S.C. 7 (allowing arbitrator to subpoena 
witnesses to testify, but only in hearings, as opposed to 
depositions); CVS Health Corp. v. Vividus, LLC, 878 F.3d 703, 706, 
708 (9th Cir. 2017) (holding that ``section 7 of the FAA does not 
grant arbitrators the power to order third parties to produce 
documents prior to an arbitration hearing''); Life Receivables Tr. 
v. Syndicate 102 at Lloyd's of London, 549 F.3d 210, 217 (2d Cir. 
2008); Hay Grp., Inc. v. E.B.S. Acquisition Corp., 360 F.3d 404, 407 
(3d Cir. 2004) (Alito, J.).
---------------------------------------------------------------------------

(5) Designating the SDNY and New York State Courts in a Forum Selection 
Provision is Consistent With the Exchange Act
    The Proposed Amendment's Forum Selection Provision designates the 
SDNY, or, in the absence of federal subject matter jurisdiction, a New 
York State Supreme Court in New York County within the First Judicial 
Department as the venue for any dispute concerning CAT reporting. Both 
forums would provide the parties with a sophisticated tribunal that has 
experience adjudicating matters involving the federal securities laws, 
market structure, and cybersecurity.
    As an initial mater, based on the potential parties to any lawsuit 
arising out of CAT reporting, New York is likely to be a convenient 
venue. As the reputed financial capital of the world, New York is home 
to the two largest securities exchanges and several other Participants. 
Additionally, many of the most prominent Industry Members by trading 
volume are located in New York.\43\
---------------------------------------------------------------------------

    \43\ Those Industry Members include, for example, Citigroup 
Global Markets, Inc., Goldman Sachs & Co. LLC, Morgan Stanley & Co. 
LLC, J.P. Morgan Securities, LLC, Deutsche Bank Securities, Inc., 
UBS Securities LLC, and Credit Suisse Securities USA, LLC.
---------------------------------------------------------------------------

    The existing Reporter Agreement and Reporting Agent Agreement both 
provide that any claim must be commenced in New York (i.e., in the 
current arbitration provision) and that the Reporter Agreement and 
Reporting Agent Agreement are governed by New York law.\44\ Relatedly, 
all dates and times referenced in the agreements are set to New York 
time.\45\
---------------------------------------------------------------------------

    \44\ Reporter Agreement Sec.  7.11; Reporting Agent Agreement 
Sec.  7.11.
    \45\ Reporter Agreement Sec.  7.8; Reporting Agent Agreement 
Sec.  7.8.
---------------------------------------------------------------------------

    In addition to being a convenient venue for potential parties, the 
Participants' proposed forum--and backup forum--have the requisite 
subject matter expertise to resolve claims in relation to CAT reporting 
fairly and efficiently. The Second Circuit has extensive experience 
with securities and financial regulation matters.\46\ Moreover, 
applying the precedent set by the Second Circuit, the SDNY routinely 
handles complicated securities matters with broad implications for the 
national financial markets.
---------------------------------------------------------------------------

    \46\ The Supreme Court has referred to the Second Circuit as the 
``Mother Court'' regarding securities matters. See, e.g., Morrison 
v. Nat'l Austl. Bank, 561 U.S. 247, 275-76 (2010) (Stevens, J., 
concurring in judgment) (quoting Blue Chip Stamps v. Manor Drug 
Stores, 421 U.S. 723, 737 (1975)).
---------------------------------------------------------------------------

    The Second Circuit--and the SDNY in particular--also has 
significant experience determining the rights and remedies of parties 
following data breaches, including in relation to critical issues such 
as standing and damages,\47\ and balancing the competing interests 
involved in adjudicating sensitive and costly cybersecurity 
incidents.\48\ In light of its extensive

[[Page 35278]]

experience with securities, financial regulation, market structure, and 
cyber matters, it is beyond reasonable dispute that the Second Circuit 
and the SDNY have the appropriate expertise to resolve a dispute 
regarding CAT reporting.
---------------------------------------------------------------------------

    \47\ See, e.g., McMorris v. Carlos Lopez & Assocs., LLC, 995 
F.3d 295, 300-03 (2d Cir. 2021) (standing); In re GE/CBPS Data 
Breach Litig., No. 20-cv-2903 (KPF), 2021 WL 3406374, at *5-7 
(S.D.N.Y. Aug. 4, 2021) (standing); Sackin v. TransPerfect Glob., 
Inc., 278 F. Supp. 3d 739, 745 (S.D.N.Y. 2017) (damages); Hammond v. 
Bank of New York Mellon Corp., No. 08-cv-6060 (RMB) (RLE), 2010 WL 
2643307, at *4 (S.D.N.Y. June 25, 2010) (damages); see also Smahaj 
v. Retrieval-Masters Creditors Bureau, Inc., 69 Misc.3d 597, 599-
600, 604 (Sup. Ct. Westchester Cnty. 2020) (damages).
    \48\ See, e.g., McMorris, 995 F.3d at 302 (weighing relative 
sensitivity of certain types of data); Wallace v. Health Quest Sys., 
Inc., No. 20-cv-545 (VB), 2021 WL 1109727, at *1 n.1 (S.D.N.Y. Mar. 
23, 2021) (addressing claims for negligence, breach of implied 
contract, breach of contract, unjust enrichment, breach of 
confidence, bailment, and violations of New York's General Business 
Law); see also Pena v. British Airways, PLC (UK), No. 18-cv-6278 
(LDH) (RML), 2020 WL 38989055, at *2 n.2, *3-4, *6 (E.D.N.Y. Mar. 
30, 2020) (granting motion to dismiss for lack of standing, 
preemption, and failure to state a claim); see also Keach v. BST & 
Co. CPAs, LLP, 71 Misc.3d 1204(A), at *7 (Sup. Ct. Albany Cnty. 
2021) (citations omitted).
---------------------------------------------------------------------------

    As the Commission noted in its Disapproval Order, in the absence of 
a limitation on liability, the Participants can assert regulatory 
immunity in response to a claim for damages. The Second Circuit has 
authored several seminal opinions regarding the scope of regulatory 
immunity,\49\ and courts in other jurisdictions often cite to and rely 
on the Second Circuit's analyses to apply the regulatory immunity 
doctrine to cases pending before them.\50\
---------------------------------------------------------------------------

    \49\ See Standard Inv. Chartered, Inc. v. Nat'l Ass'n of Sec. 
Dealers, Inc., 637 F.3d 112, 116 (2d Cir. 2011) (noting Second 
Circuit decisions on regulatory immunity in the context of ``(1) 
disciplinary proceedings against exchange members, [Barbara v. NYSE, 
99 F.3d 49, 59 (2d Cir. 1996)]; (2) the enforcement of security 
rules and regulations and general regulatory oversight over exchange 
members, [D'Alessio, 258 F.3d at 106]; (3) the interpretation of the 
securities laws and regulations as applied to the exchange or its 
members, id.; (4) the referral of exchange members to the SEC and 
other government agencies for civil enforcement or criminal 
prosecution under the securities laws, id.; and (5) the public 
announcement of regulatory decisions, [DL Cap. Grp., LLC v. Nasdaq 
Stock Mkt., Inc., 409 F.3d 93, 98 (2d Cir. 2005)].'').
    \50\ See, e.g., In re Series 7 Broker Qualification Exam Scoring 
Litig., 548 F.3d 110, 113-15 (D.C. Cir. 2008) (citing Barbara, 99 
F.3d 49; Desiderio v. NASD, 191 F.3d 198 (2d Cir. 1999); DL Cap. 
Grp., 409 F.3d 93; Feins v. Am. Stock Exch., Inc., 81 F.3d 1215 (2d 
Cir. 1996)).
---------------------------------------------------------------------------

    New York State courts--particularly those within the Commercial 
Division of the First Judicial Department--are likewise well suited to 
address the complex issues that might arise during litigation regarding 
a CAT Data breach. The court's judges focus primarily on complex cases 
and have developed sophisticated procedural rules designed to foster 
the efficient and fair resolution of disputes.\51\ Relying in part on 
the Second Circuit's developed body of case law, the New York state 
courts within the First Judicial Department are one of only a few state 
courts that have addressed the scope of regulatory immunity.\52\
---------------------------------------------------------------------------

    \51\ See generally 22 N.Y.C.R.R. Sec.  202.70 (Rules of the 
Commercial Division of the Supreme Court). The Commercial Division 
``is an efficient, sophisticated, up-to-date court dealing with 
challenging commercial cases'' and ``its primary goal [is] the cost-
effective, predictable and fair adjudication of complex commercial 
cases.'' 22 N.Y.C.R.R. Sec.  202.70(g) (Preamble to the Rules of 
practice for the Commercial Division).
    \52\ See Wey v. Nasdaq, Inc., 188 A.D.3d 587 (1st Dep't 2020).
---------------------------------------------------------------------------

(6) Governing Law Provision
    The Proposed Amendment modifies the governing law provision 
contained in the existing Reporter Agreement and Reporting Agent 
Agreement to provide that the agreements, and any matters between CAT 
LLC and either a CAT Reporter or a CAT Reporting Agent, will be 
governed by federal law and the laws of the State of New York. The 
existing governing law provision refers only to New York state law and, 
because CAT LLC was created pursuant to federal law and is subject to a 
federal regulatory regime, claims by or against CAT LLC could involve 
issues of federal law. Therefore, the Proposed Amendment modifies the 
existing governing law provision to clarify that any disputes arising 
out of or related to the agreements will be governed by both federal 
law and by New York state law.
(7) Waiver of Jury Trial Provision
    In conjunction with the Forum Selection Provision, the Proposed 
Amendment provides that the parties agree to waive the right to a jury 
trial of any claim arising out of the Reporter Agreement (or the 
Reporting Agent Agreement) or CAT reporting. As discussed above, a CAT 
Data breach is likely to present several complicated factual and legal 
issues. The Participants believe that the issues likely to be in 
dispute would be most effectively and efficiently resolved by judges, 
who have the requisite experience and expertise. In addition, utilizing 
a bench trial should reduce costs involved with litigation.
(8) Disclaimer of Warranties Clause
    The Proposed Amendment adds a disclaimer of warranties, which 
provides that the Participants, CAT LLC, and FINRA CAT do not make any 
representations or warranties with respect to the CAT System or the 
Reporter Agreement (or the Reporting Agent Agreement). Such disclaimers 
are common in agreements, and CAT LLC is entitled to control the 
contractual representations and warranties that it makes.
    The proposed disclaimer of warranties clause was included (in sum 
and substance) in the original Reporter Agreement but was removed in 
connection with the settlement of the Administrative Proceeding along 
with the Limitation of Liability Provisions. Notably, although the 
Participants included a disclaimer of warranties clause in the 
Limitation of Liability Proposal, no commenter (including SIFMA) 
objected to the inclusion of that provision in the Reporter Agreement. 
Notwithstanding the lack of any objection, when the Commission issued 
the Disapproval Order--which focused in substance on the Limitation of 
Liability Provision--the Commission incidentally also disapproved the 
proposed disclaimer of warranties clause without commenting on whether 
the clause was consistent with the Exchange Act.
    Although substantively unrelated to the Forum Selection Provision, 
the Participants are including the disclaimer of warranties clause in 
this Proposed Amendment to enable the Commission to approve this 
proposed modification to the Reporter Agreement that did not generate 
any opposition among Industry Members or any commenter. As discussed 
above, the Participants are implementing the requirements of Rule 613 
and the CAT NMS Plan for regulatory purposes at the behest of the 
Commission. Under those circumstances, the Participants should not be 
held liable for damages based on warranties or representations that 
they did not explicitly make.

B. Governing or Constituent Documents

    Not applicable.

C. Implementation of Amendment

    The Participants propose to implement the Proposed Amendment by 
making the revised agreements effective upon Commission approval of 
this Proposed Amendment, without requiring CAT Reporters and CAT 
Reporting Agents to re-sign the agreements.

D. Development and Implementation Phases

    The Participants propose the revised agreements be effective upon 
Commission approval of this Proposed Amendment, without requiring CAT 
Reporters and CAT Reporting Agents to re-sign the agreements.

E. Analysis of Impact on Competition

    The Participants do not believe the Proposed Amendment will have 
any impact on competition. The Proposed Amendment would mandate that 
all CAT Reporters and CAT Reporting Agents are bound by revised 
agreements that contain the amended provisions. Moreover, the Forum 
Selection Provision would apply equally to all Industry Members, the 
Participants, and CAT LLC, and would not impact the relative 
competitive positions among

[[Page 35279]]

different Industry Members. Additionally, as discussed above, 
adjudication of disputes relating to CAT reporting in courts promotes 
consistency of outcomes, which thereby promotes fair competition. 
Conversely, arbitration could lead to disparate and inconsistent 
outcomes of similar disputes, which would unfairly advantage certain 
parties over others.

F. Written Understanding or Agreements Relating to Interpretation of, 
or Participation in, Plan

    Not applicable.

G. Approval by Plan Sponsors in Accordance With Plan

    Section 12.3 of the CAT NMS Plan states that, subject to certain 
exceptions, the Plan may be amended from time to time only by a written 
amendment, authorized by the affirmative vote of not less than two-
thirds of all of the Participants, that has been approved by the SEC 
pursuant to Rule 608 or has otherwise become effective under Rule 608. 
The Participants, by a vote of the Operating Committee taken on May 17, 
2022, have authorized the filing of this Proposed Amendment with the 
SEC in accordance with the Plan.

H. Description of Operation of Facility Contemplated by the Proposed 
Amendment and Any Fees or Charges in Connection Thereto

    Not applicable.

I. Terms and Conditions of Access

    Not applicable.

J. Method and Frequency of Processor Evaluation

    Not applicable.

K. Dispute Resolution

    Not applicable.

III. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the amendment is 
consistent with the Exchange Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6c1e190009410f0301010902181f2c1f090f420b031a"><span class="__cf_email__" data-cfemail="f88a8d949dd59b9795959d968c8bb88b9d9bd69f978e">[email protected]</span></a>. Please include 
File Number 4-698 on the subject line.

Paper Comments

    <bullet> Send paper comments to Secretary, Securities and Exchange 
Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number 4-698. 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 plan amendment that are filed 
with the Commission, and all written communications relating to the 
amendment 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 Participants' offices. 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 4-698 
and should be submitted on or before June 30, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\53\
---------------------------------------------------------------------------

    \53\ 17 CFR 200.30-3(a)(85).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.

APPENDIX A

LIMITED LIABILITY COMPANY AGREEMENT OF CONSOLIDATED AUDIT TRAIL, LLC

* * * * *

ARTICLE XII

[proposed additions]

* * * * *
    Section 12.15. Forum Selection; Governing Law; Waiver of Jury 
Trial; Disclaimer of Warranties. Each CAT Reporter shall be bound by 
an amended Consolidated Audit Trail Reporter Agreement containing, 
in substance, the forum selection provision, governing law 
provision, jury waiver provision, and disclaimer of warranties 
clause in Appendix E to this Agreement. Each Person engaged by a CAT 
Reporter to report CAT Data to the Central Repository on behalf of 
such CAT Reporter shall be bound by an amended Consolidated Audit 
Trail Reporting Agent Agreement containing, in substance, the forum 
selection provision, governing law provision, jury waiver provision, 
and disclaimer of warranties clause in Appendix F to this Agreement. 
The Operating Committee shall have authority in its sole discretion 
to make non-substantive amendments to the forum selection provision, 
governing law provision, jury waiver provision, and disclaimer of 
warranties clause in the Consolidated Audit Trail Reporter Agreement 
and the Consolidated Audit Trail Reporting Agent Agreement.
* * * * *

APPENDIX E

[proposed additions]

* * * * *

Forum Selection Provision in the CAT Reporter Agreement

    7.9. Forum Selection. EXCEPT AS OTHERWISE PROHIBITED BY FEDERAL 
LAW OR OTHERWISE PROVIDED BY SECTION 11.5 OF THE CAT NMS PLAN, FOR 
ANY DISPUTE, CONTROVERSY, OR CLAIM IN CONNECTION WITH, RELATING TO, 
OR ASSOCIATED IN ANY WAY WITH THIS AGREEMENT, CAT REPORTING, OR THE 
CAT SYSTEM, THE PARTIES IRREVOCABLY SUBMIT TO THE EXCLUSIVE 
JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE 
SOUTHERN DISTRICT OF NEW YORK AND THE NEW YORK STATE SUPREME COURT 
FOR NEW YORK COUNTY IN THE BOROUGH OF MANHATTAN, INCLUDING THE 
COMMERCIAL DIVISION. Each Party hereby agrees to commence any such 
action, suit, or other proceeding in (i) the United States District 
Court for the Southern District of New York, or (ii) if such action, 
suit, or other proceeding cannot be brought in such court for 
jurisdictional reasons, to commence such suit, action, or other 
proceeding in the New York State Supreme Court for New York County, 
borough of Manhattan, and seek assignment to the New York County 
Commercial Division whenever the jurisdictional requirements for 
Commercial Division assignment are met. Service of any process, 
summons, notice, or document by U.S. registered mail to such Party's 
respective address shall be effective service of process for any 
action, suit, or other proceeding in New York with respect to any 
matters to which it has submitted to jurisdiction in this Agreement. 
Each Party irrevocably and unconditionally waives any objection to 
the laying of venue of any action, suit, or other proceeding 
connected to, related to, or associated in any way with this 
Agreement, CAT Reporting, or the CAT System in the courts identified 
in items (i)-(ii) above, and hereby and thereby further irrevocably 
and unconditionally waives and agrees not to plead or claim in any 
such court that any such action, suit, or other proceeding brought 
in any such court has been brought in an inconvenient forum. The 
provisions of this paragraph shall apply to any action, suit, or 
other proceeding commenced by any Party against any other Party to 
this Agreement,

[[Page 35280]]

including those in which one or more Participants or the Plan 
Processor (or any Representatives of one or more Participants or the 
Plan Processor) are named as parties, regardless of whether CATLLC 
is also named as a party.

Governing Law Clause in the CAT Reporter Agreement

    7.11. Governing Law. THIS AGREEMENT, AND ALL MATTERS BETWEEN 
CATLLC AND CAT REPORTER ARISING OUT OF OR RELATING TO THIS 
AGREEMENT, SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE 
FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF NEW 
YORK WITHOUT GIVING EFFECT TO ANY LAWS, RULES OR PROVISIONS THAT 
WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN 
THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF 
NEW YORK.

Jury Waiver Provision in the CAT Reporter Agreement

    7.13. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ITS RIGHTS 
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION FOR ANY DISPUTE, 
CONTROVERSY, OR CLAIM IN CONNECTION WITH, RELATING TO, OR ASSOCIATED 
IN ANY WAY WITH THIS AGREEMENT, CAT REPORTING, OR THE CAT SYSTEM. 
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY 
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO 
THE SUBJECT MATTER OF THIS AGREEMENT, CAT REPORTING, OR THE CAT 
SYSTEM, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS 
(INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON 
LAW AND STATUTORY CLAIMS. THESE PROVISIONS WILL NOT BE SUBJECT TO 
ANY EXCEPTIONS.

Disclaimer of Warranties Clause in the CAT Reporter Agreement

    5.5. Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS 
AGREEMENT, CATLLC, THE PLAN PROCESSOR, AND THE PARTICIPANTS DISCLAIM 
ANY, AND MAKE NO, REPRESENTATIONS OR WARRANTIES, WHETHER ORAL OR 
WRITTEN, EXPRESS OR IMPLIED, ARISING BY STATUTE OR OTHERWISE IN LAW, 
OR FROM A COURSE OF DEALING OR USAGE OF TRADE, REGARDING THE CAT 
SYSTEM OR ANY OTHER MATTER PERTAINING TO THIS AGREEMENT. THIS 
DISCLAIMER INCLUDES, WITHOUT LIMITATION, ANY REPRESENTATION OR 
WARRANTY OF OR RELATING TO: MERCHANTABILITY; QUALITY; FITNESS FOR A 
PARTICULAR PURPOSE: COMPLIANCE WITH APPLICABLE LAWS; NON-
INFRINGEMENT; TITLE; AND SEQUENCING, TIMELINESS, ACCURACY OR 
COMPLETENESS OF INFORMATION.
* * * * *

APPENDIX F

[proposed additions]

* * * * *

Forum Selection Provision in the CAT Reporting Agent Agreement

    7.9. Forum Selection. EXCEPT AS OTHERWISE PROHIBITED BY FEDERAL 
LAW OR OTHERWISE PROVIDED BY SECTION 11.5 OF THE CAT NMS PLAN, FOR 
ANY DISPUTE, CONTROVERSY, OR CLAIM IN CONNECTION WITH, RELATING TO, 
OR ASSOCIATED IN ANY WAY WITH THIS AGREEMENT, CAT REPORTING, OR THE 
CAT SYSTEM, THE PARTIES IRREVOCABLY SUBMIT TO THE EXCLUSIVE 
JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE 
SOUTHERN DISTRICT OF NEW YORK AND THE NEW YORK STATE SUPREME COURT 
FOR NEW YORK COUNTY IN THE BOROUGH OF MANHATTAN, INCLUDING THE 
COMMERCIAL DIVISION. Each Party hereby agrees to commence any such 
action, suit, or other proceeding in (i) the United States District 
Court for the Southern District of New York, or (ii) if such action, 
suit, or other proceeding cannot be brought in such court for 
jurisdictional reasons, to commence such suit, action, or other 
proceeding in the New York State Supreme Court for New York County, 
borough of Manhattan, and seek assignment to the New York County 
Commercial Division whenever the jurisdictional requirements for 
Commercial Division assignment are met. Service of any process, 
summons, notice, or document by U.S. registered mail to such Party's 
respective address shall be effective service of process for any 
action, suit, or other proceeding in New York with respect to any 
matters to which it has submitted to jurisdiction in this Agreement. 
Each Party irrevocably and unconditionally waives any objection to 
the laying of venue of any action, suit, or other proceeding 
connected to, related to, or associated in any way with this 
Agreement, CAT Reporting, or the CAT System in the courts identified 
in items (i)-(ii) above, and hereby and thereby further irrevocably 
and unconditionally waives and agrees not to plead or claim in any 
such court that any such action, suit, or other proceeding brought 
in any such court has been brought in an inconvenient forum. The 
provisions of this paragraph shall apply to any action, suit, or 
other proceeding commenced by any Party against any other Party to 
this Agreement, including those in which one or more Participants or 
the Plan Processor (or any Representatives of one or more 
Participants or the Plan Processor) are named as parties, regardless 
of whether CATLLC is also named as a party.

Governing Law Clause in the CAT Reporting Agent Agreement

    7.11. Governing Law. THIS AGREEMENT, AND ALL MATTERS BETWEEN 
CATLLC AND CAT REPORTING AGENT ARISING OUT OF OR RELATING TO THIS 
AGREEMENT, SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE 
FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF NEW 
YORK WITHOUT GIVING EFFECT TO ANY LAWS, RULES OR PROVISIONS THAT 
WOULD CAUSE THE APPLICATION OF LAWS OF ANY JURISDICTION OTHER THAN 
THE FEDERAL LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF 
NEW YORK.

Jury Waiver Provision in the CAT Reporting Agent Agreement

    7.13. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ITS RIGHTS 
TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION FOR ANY DISPUTE, 
CONTROVERSY, OR CLAIM IN CONNECTION WITH, RELATING TO, OR ASSOCIATED 
IN ANY WAY WITH THIS AGREEMENT, CAT REPORTING, OR THE CAT SYSTEM. 
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY 
AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO 
THE SUBJECT MATTER OF THIS AGREEMENT, CAT REPORTING, OR THE CAT 
SYSTEM, INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS 
(INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON 
LAW AND STATUTORY CLAIMS. THESE PROVISIONS WILL NOT BE SUBJECT TO 
ANY EXCEPTIONS.

Disclaimer of Warranties Clause in the CAT Reporting Agent Agreement

    5.5. Disclaimer. EXCEPT AS EXPRESSLY SET FORTH IN THIS 
AGREEMENT, CATLLC, THE PLAN PROCESSOR, AND THE PARTICIPANTS DISCLAIM 
ANY, AND MAKE NO, REPRESENTATIONS OR WARRANTIES, WHETHER ORAL OR 
WRITTEN, EXPRESS OR IMPLIED, ARISING BY STATUTE OR OTHERWISE IN LAW, 
OR FROM A COURSE OF DEALING OR USAGE OF TRADE, REGARDING THE CAT 
SYSTEM OR ANY OTHER MATTER PERTAINING TO THIS AGREEMENT. THIS 
DISCLAIMER INCLUDES, WITHOUT LIMITATION, ANY REPRESENTATION OR 
WARRANTY OF OR RELATING TO: MERCHANTABILITY; QUALITY; FITNESS FOR A 
PARTICULAR PURPOSE: COMPLIANCE WITH APPLICABLE LAWS; NON-
INFRINGEMENT; TITLE; AND SEQUENCING, TIMELINESS, ACCURACY OR 
COMPLETENESS OF INFORMATION.
* * * * *
[FR Doc. 2022-12398 Filed 6-8-22; 8:45 am]
BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>