Document ID: SEC-2023-0322-0001
Agency: sec
Document Type: Notice
Title: Joint Industry Plan: Filing of Amendment to the National Market System Plan Governing the Consolidated Audit Trail
Posted Date: 2023-03-21T04:00Z

[Federal Register Volume 88, Number 54 (Tuesday, March 21, 2023)]
[Notices]
[Pages 17086-17141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05690]

[[Page 17085]]

Vol. 88

Tuesday,

No. 54

March 21, 2023

Part II

 Securities and Exchange Commission

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Joint Industry Plan; Notice of Filing of Amendment to the National 
Market System Plan Governing the Consolidated Audit Trail; Notice

  Federal Register / Vol. 88 , No. 54 / Tuesday, March 21, 2023 / 
Notices  

[[Page 17086]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97151; File No. 4-698]

Joint Industry Plan; Notice of Filing of Amendment to the 
National Market System Plan Governing the Consolidated Audit Trail

I. Introduction

    On March 13, 2023, the 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., MEMX, LLC, Miami International Securities Exchange 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, 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 to implement a revised funding model (the ``Funding 
Proposal'') for the consolidated audit trail (``CAT'') and to establish 
a fee schedule for Participant CAT fees in accordance with the Funding 
Proposal.\4\ Exhibit A, attached hereto, contains proposed revisions to 
Articles I and XI of the CAT NMS Plan as well as proposed Appendix B to 
the Plan containing the fee schedule. Exhibit B, attached hereto, 
contains a comparison of the Funding Proposal to the executed share 
funding proposal filed by CAT LLC on May 13, 2022,\5\ as amended in two 
partial amendments,\6\ and later withdrawn on March 1, 2023.\7\ In 
addition, CAT LLC provided an example of how a Historical CAT 
Assessment would be calculated pursuant to the Funding Proposal, for 
illustrative purposes only, as attached hereto as Exhibit C. The 
Commission is publishing this notice to solicit comments from 
interested persons on the amendment.\8\
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    \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).
    \2\ 15 U.S.C. 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated 
March 13, 2023 (``Transmittal Letter'').
    \5\ See Securities Exchange Act Release No. 94984 (May 25, 
2022), 87 FR 33226 (June 1, 2022). Comments received can be found on 
the Commission's website at https://www.sec.gov/comments/4-698/4-698-a.htm.
    \6\ See Securities Exchange Act Release No. 96394 (Nov. 28, 
2022), 87 FR 74183 (Dec. 2, 2022). Comments received can be found on 
the Commission's website at https://www.sec.gov/comments/4-698/4-698-a.htm. See also Letter from Michael Simon, CAT NMS Plan 
Operating Committee Chair, to Vanessa Countryman, Secretary, 
Commission (Feb. 15, 2023).
    \7\ See Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission (Mar. 
1, 2023).
    \8\ 17 CFR 242.608.
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II. Description of the Plan

    Set forth in this Section II is an executive summary of the Funding 
Proposal, along with information required by Rule 608(a) under the 
Exchange Act,\9\ and a description of the proposed revisions to the CAT 
NMS Plan, substantially as prepared and submitted by the Participants 
to the Commission.\10\
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    \9\ See 17 CFR 242.608(a).
    \10\ See Transmittal Letter, supra note 4. Unless otherwise 
defined herein, capitalized terms used herein are defined as set 
forth in the CAT NMS Plan.
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Executive Summary

    CAT LLC proposes to replace the funding model set forth in Article 
XI of the CAT NMS Plan (the ``Original Funding Model'') with the 
Funding Proposal. The Original Funding Model involves a bifurcated 
approach, where costs associated with building and operating the CAT 
would be borne by (1) Industry Members (other than alternative trading 
systems (``ATSs'') that execute transactions in Eligible Securities 
(``Execution Venue ATSs'')) through fixed tiered fees based on message 
traffic for Eligible Securities, and (2) Participants and Industry 
Members that are Execution Venue ATSs for Eligible Securities through 
fixed tiered fees based on market share. In contrast, the Funding 
Proposal would charge fees based on executed equivalent share volume of 
transactions in Eligible Securities rather than based on market share 
and message traffic.
    Under the Funding Proposal, CAT LLC proposes to establish two 
categories of CAT fees. The first category of CAT fees would be fees 
(``CAT Fees'') payable by Participants and Industry Members that are 
CAT Executing Brokers for the Buyer and for the Seller with regard to 
CAT costs not previously paid by the Participants (``Prospective CAT 
Costs''). The CAT Fee for each transaction would be calculated by 
multiplying the executed equivalent shares in the transaction by one-
third and the applicable ``Fee Rate.'' The Funding Proposal would 
describe in detail each aspect relevant to the CAT Fees, including a 
description of the Prospective CAT Costs, the calculation of the Fee 
Rate, the definition of ``CAT Executing Broker,'' the fee filings made 
pursuant to section 19(b) of the Exchange Act for CAT Fees, and 
information available related to CAT Fees, both publicly and upon 
request.
    The second category of CAT fees would be fees (``Historical CAT 
Assessments'') to be payable by Industry Members that are CAT Executing 
Brokers for the Buyer and for the Seller with regard to CAT costs 
previously paid by the Participants (``Past CAT Costs''). The 
Historical CAT Assessment for each transaction would be calculated by 
multiplying the number of executed equivalent shares in the transaction 
by one-third and the applicable ``Historical Fee Rate.'' Like with the 
CAT Fees related to Prospective CAT Costs, the Funding Proposal would 
describe in detail each aspect relevant to Historical CAT Assessments, 
including a description of Historical CAT Costs, the calculation of the 
Historical Fee Rate, the definition of ``CAT Executing Broker,'' the 
fee filings made pursuant to section 19(b) of the Exchange Act for 
Historical CAT Assessments, and information available related to 
Historical CAT Assessments, both publicly and upon request.
    The Participants separately intend to file rule filings under 
section 19(b) of the Exchange Act and Rule 19b-4(f)(2) thereunder to 
establish the CAT Fees and Historical CAT Assessments to be charged to 
Industry Members based on the Funding Proposal set forth in the CAT NMS 
Plan.
    CAT LLC has gone through an extensive process of evaluating and 
seeking comment on various funding models since the inception of CAT. 
In addition to the variety of alternative models considered by CAT LLC 
(as described in Section A.10 of this filing), the proposed CAT funding 
model has been subject to substantial public review and comment via the 
proposed amendment to the CAT NMS Plan published by the SEC on May 25, 
2022

[[Page 17087]]

(the ``2022 Funding Proposal''),\11\ the subsequent order instituting 
proceedings related to the 2022 Funding Proposal \12\ and two partial 
amendments regarding the 2022 Funding Proposal.\13\ Thirteen comment 
letters were submitted in response to the 2022 Funding Proposal, as 
amended, and CAT LLC submitted three detailed responses to 
comments.\14\ CAT LLC withdrew the 2022 Funding Proposal on March 1, 
2023.\15\ Subject to certain minor revisions, the Funding Proposal set 
forth herein is the same proposal as the 2022 Funding Proposal, as 
amended in the two partial amendments. The minor changes made to the 
2022 Funding Proposal are noted in this filing, and separately 
identified in Exhibit B to this filing.
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    \11\ Securities Exchange Act Rel. No. 94984 (May 25, 2022), 87 
FR 33226 (June 1, 2022) (``2022 Funding Proposal Release'').
    \12\ Securities Exchange Act Rel. No. 95634 (Aug. 30, 2022), 87 
FR 54558 (Sept. 6, 2022).
    \13\ Securities Exchange Act Rel. No. 96394 (Nov. 28, 2022), 87 
FR 74183 (Dec. 2, 2022) (``Partial Amendment I''), and Letter from 
Michael Simon, CAT NMS Plan Operating Committee Chair, to Vanessa 
Countryman, Secretary, Commission (Feb. 15, 2023) (``February 2023 
Proposed Partial Amendment'').
    \14\ Letter from Michael Simon, CAT NMS Plan Operating Committee 
Chair, to Vanessa Countryman, Secretary, Commission (Aug. 16, 2022); 
Letter from Michael Simon, CAT NMS Plan Operating Committee Chair, 
to Vanessa Countryman, Secretary, Commission (Nov. 15, 2022); and 
February 2023 Proposed Partial Amendment.
    \15\ Letter from Brandon Becker, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission (Mar. 
1, 2023).
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    The Funding Proposal would provide reasonable fees that are 
equitably allocated, not unfairly discriminatory, and do not impose an 
undue burden on competition, in that the proposal reflects a reasonable 
effort to allocate costs based on the extent to which different CAT 
Reporters participate in and benefit from the equities and options 
markets. Moreover, the Funding Proposal would be consistent with past 
fee structures that have been approved by the Commission. It also is 
transparent, would be relatively easy to calculate and administer, and 
is designed not to have an impact on market activity because it is 
neutral as to the location and manner of execution. The Exchange Act 
does not require CAT LLC to demonstrate that the Funding Proposal is 
superior to any other potential proposal. Instead, CAT LLC must 
demonstrate that the Funding Proposal is consistent with the Exchange 
Act and the rules and regulations thereunder. CAT LLC believes that the 
Funding Proposal satisfies the requirements of the Exchange Act and 
should be approved by the Commission.

Requirements Pursuant to Rule 608(a)

A. Description of the Proposed Amendments to the CAT NMS Plan
    CAT LLC describes in detail the Funding Proposal in this Section A:
     Definition of CAT Executing Broker: CAT LLC describes the 
definition of a ``CAT Executing Broker'' in Section A.1 of this filing.
     CAT Budget: Budgeted CAT costs are described in Section 
A.2 of this filing.
     CAT Fees related to Prospective CAT Costs: CAT LLC 
discusses CAT Fees related to Prospective CAT Costs in Section A.3 of 
this filing.
     Historical CAT Assessments: CAT LLC discusses Historical 
CAT Assessments related to Historical CAT Costs in Section A.4 of this 
filing.
     CAT Fee Schedule for Participants: To implement the CAT 
fees to be paid by the Participants under the Funding Proposal, CAT LLC 
proposes to add a fee schedule, entitled ``Consolidated Audit Trail 
Funding Fees,'' to Appendix B of the CAT NMS Plan. This fee schedule is 
discussed in Section A.5 of this filing.
     Additional Changes from Original Funding Model: CAT LLC 
discusses additional proposed revisions to Article XI of the CAT NMS 
Plan to implement the change from the Original Funding Model to the 
Funding Proposal in Section A.6 of this filing.
     Billing and Collection of CAT Fees: The billing and 
collection of CAT fees are discussed in Section A.7 of this filing.
     Illustrative Example of Funding Proposal: CAT LLC provides 
an illustrative example of how a Historical CAT Assessment would be 
calculated pursuant to the Funding Proposal in Section A.8 of this 
filing. The illustrative example is set forth in detail in Exhibit C to 
this filing.
     Advantages of and Support for Funding Proposal: CAT LLC 
proposes to adopt the Funding Proposal as it provides a variety of 
advantages over the Original Funding Model. CAT LLC discusses the 
advantages of the Funding Proposal in Section A.9 of this filing.
     Alternative Funding Models Considered: CAT LLC discusses 
the advantages and disadvantages of a variety of alternative funding 
models to the Funding Proposal in Section A.10 of this filing.
     Satisfaction of Exchange Act and CAT NMS Plan 
Requirements: CAT LLC discusses how the Funding Proposal satisfies each 
of the funding principles and other requirements of the CAT NMS Plan, 
as proposed to be revised herein, as well as the applicable 
requirements of the Exchange Act in Section A.11 of this filing.
1. Definition of CAT Executing Broker
    Under the Funding Proposal, each Industry Member that is a CAT 
Executing Broker for the buyer in a transaction in Eligible Securities 
(``CAT Executing Broker for the Buyer'' or ``CEBB'') and each Industry 
Member that is the CAT Executing Broker for the seller in a transaction 
in Eligible Securities (``CAT Executing Broker for the Seller'' or 
``CEBS'') would be required to pay CAT Fees and Historical CAT 
Assessments. Accordingly, CAT LLC proposes to add a definition of the 
term ``CAT Executing Broker'' to Section 1.1 of the CAT NMS Plan. CAT 
LLC would define ``CAT Executing Broker'' to mean:

    (a) with respect to a transaction in an Eligible Security that 
is executed on an exchange, the Industry Member identified as the 
Industry Member responsible for the order on the buy-side of the 
transaction and the Industry Member responsible for the sell-side of 
the transaction in the equity order trade event and option trade 
event in the CAT Data submitted to the CAT by the relevant exchange 
pursuant to the Participant Technical Specifications; and (b) with 
respect to a transaction in an Eligible Security that is executed 
otherwise than on an exchange and required to be reported to an 
equity trade reporting facility of a registered national securities 
association, the Industry Member identified as the executing broker 
and the Industry Member identified as the contra-side executing 
broker in the TRF/ORF/ADF transaction data event in the CAT Data 
submitted to the CAT by FINRA pursuant to the Participant Technical 
Specifications; provided, however, in those circumstances where 
there is a non-Industry Member identified as the contra-side 
executing broker in the TRF/ORF/ADF transaction data event or no 
contra-side executing broker is identified in the TRF/ORF/ADF 
transaction data event, then the Industry Member identified as the 
executing broker in the TRF/ORF/ADF transaction data event would be 
treated as CAT Executing Broker for the Buyer and for the Seller.

    Under the Participant Technical Specifications, for transactions 
occurring on a Participant exchange, there is a field for the exchange 
to report the market participant identifier (``MPID'') of ``the member 
firm that is responsible for the order on this side of the trade.'' 
\16\ The Industry Members

[[Page 17088]]

identified in these fields for the transaction reports would be the CAT 
Executing Brokers for transactions executed on an exchange. 
Specifically, the following fields of the Participant Technical 
Specifications would indicate the CAT Executing Brokers for the 
transactions executed on an exchange.
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    \16\ See Section 4.7 (Order Trade Event) and Section 5.2.5.1 
(Simple Option Trade Event: Side Details) of the CAT Reporting 
Technical Specifications for Plan Participants, Version 4.1.0-r17 
(Feb. 21, 2023), https://www.catnmsplan.com/sites/default/files/2023-02/02.21.2023-CAT-Reporting-Technical-Specifications-for-Participants-4.1.0-r17.pdf.

                                          Equity Order Trade (EOT) \17\
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                                                                                                        Include
             No.                     Field name               Data type              Description          key
----------------------------------------------------------------------------------------------------------------
12.n.8/13.n.8...............  member.................  Member Alias..........  The identifier for the          C
                                                                                member firm that is
                                                                                responsible for the
                                                                                order on this side of
                                                                                the trade.
                                                                               Not required if there
                                                                                is no order for the
                                                                                side as indicated by
                                                                                the NOBUYID/NOSELLID
                                                                                instruction.
                                                                               This must be provided
                                                                                if orderID is
                                                                                provided..
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                                             Option Trade (OT) \18\
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                                                                                                        Include
             No.                     Field name               Data type              Description          key
----------------------------------------------------------------------------------------------------------------
16.n.13/17.n.13.............  member.................  Member Alias..........  The identifier for the         R
                                                                                member firm that is
                                                                                responsible for the
                                                                                order.
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    FINRA is required to report to the CAT transactions in Eligible 
Securities reported to a FINRA trade reporting facility (i.e., the 
FINRA Trade Reporting Facilities (``TRF''), Over-the Counter Reporting 
Facility (``ORF'') and Alternative Display Facility (``ADF'')).\19\ 
Under the Participant Technical Specifications, for such transactions 
reported to a FINRA trade reporting facility, FINRA is required to 
report the MPID of the executing party as well as the MPID of the 
contra-side executing party. The Industry Members identified in these 
two fields for the transaction reports would be the CAT Executing 
Brokers for over-the-counter transactions. Specifically, the following 
fields of the Participant Technical Specifications will indicate the 
CAT Executing Brokers for the transactions executed otherwise than on 
an exchange.
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    \17\ See Table 23, Section 4.7 (Order Trade Event) of the CAT 
Reporting Technical Specifications for Plan Participants, Version 
4.1.0-r17 (Feb. 21, 2023), https://www.catnmsplan.com/sites/default/files/2023-02/02.21.2023-CAT-Reporting-Technical-Specifications-for-Participants-4.1.0-r17.pdf.
    \18\ See Table 51, Section 5.2.5.1 (Simple Option Trade Event) 
of the CAT Reporting Technical Specifications for Plan Participants 
(Feb. 21, 2023).
    \19\ See Section 6.1 of the CAT Reporting Technical 
Specifications for Plan Participants (Feb. 21, 2023).

                                  TRF/ORF/ADF Transaction Data Event (TRF) \20\
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                                                                                                        Include
             No.                     Field name               Data type              Description          key
----------------------------------------------------------------------------------------------------------------
26..........................  reportingExecutingMpid.  Member Alias..........  MPID of the executing          R
                                                                                party.
28..........................  contraExecutingMpid....  Member Alias..........  MPID of the contra-             C
                                                                                side executing party.
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    Note that a CAT Executing Broker in over-the-counter transactions 
identified on the TRF/ORF/ADF Transaction Data Event is determined 
based on the tape or media report, that is, a trade report that is 
submitted to a FINRA trade reporting facility and reported to and 
publicly disseminated by the appropriate exclusive Securities 
Information Processor. A CAT Executing Broker for over-the-counter 
transactions is not determined based on a non-tape report (e.g., a 
regulatory report or a clearing report), which are not publicly 
disseminated.\21\
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    \20\ See Table 61, Section 6.1 (TRF/ORF/ADF Transaction Data 
Event) of the CAT Reporting Technical Specifications for Plan 
Participants (Feb. 21, 2023).
    \21\ There is an exception to this statement for away-from-
market trades. These are non-media trades reported to the TRF with 
an ``SRO Required Modifier Code'' of ``R''.
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    Therefore, with respect to transactions on an exchange and over-
the-counter transactions, CAT LLC would use transaction reports 
reported to the CAT by FINRA or the exchanges to identify the 
transaction for purposes of calculating the CAT fees as well as the CAT 
Executing Broker for each transaction for purposes of calculating the 
CAT fees. Accordingly, all data used to calculate the fees under the 
Funding Proposal would be CAT Data, and, therefore, it would be 
available through the CAT for calculating CAT fees. FINRA CAT would be 
responsible for calculating the CAT fees and submitting invoices to the 
CAT Executing Brokers based on this CAT Data. Moreover, defining a 
``CAT Executing Broker'' in this way is a simpler analytical approach 
than other potential approaches for defining the relevant executing 
broker, such as identifying the originating broker for the order via an 
evaluation of CAT linkages.\22\
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    \22\ Each CAT Executing Broker could determine, but would not be 
required, to pass their CAT fees through to their clients, who, in 
turn, could pass their CAT fees to their clients, until the fee is 
imposed on the ultimate participant in the transaction.
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    CAT LLC proposes to make use of the defined term ``CAT Executing 
Broker'' in Proposed Section 11.3 in describing the Funding Proposal. 
CAT LLC believes the proposed definition of CAT Executing Broker and 
the use of the defined term in Article XI would set forth clearly when 
and in what situations an Industry Member would be considered a CAT 
Executing Broker for purposes of the Funding Proposal.
a. Treatment of ATSs
    The Funding Proposal would describe how CAT fees would be assessed 
with

[[Page 17089]]

regard to transactions executed on ATSs, including clarification as to 
which party to an ATS transaction would be treated as the CAT Executing 
Broker for purposes of the Funding Proposal. The definition of a ``CAT 
Executing Broker'' as proposed above would determine the CAT Executing 
Brokers for transactions executed on an ATS. Specifically, if an ATS is 
identified as the executing party and/or the contra-side executing 
party in the TRF/ORF/ADF Transaction Data Event, then the ATS would be 
a CAT Executing Broker for purposes of the Funding Proposal. If the ATS 
is identified as the executing party for the buyer in such transaction 
reports, then the ATS would be the CAT Executing Broker for the Buyer, 
and if the ATS is identified as the executing party for the seller in 
such transaction reports, then the ATS would be the CAT Executing 
Broker for the Seller. An ATS also could be identified as both the CAT 
Executing Broker for the Buyer and the CAT Executing Broker for the 
Seller. ATSs would determine the executing party and the contra-side 
executing party reported to FINRA's equity trading facilities in 
accordance with the transaction reporting requirements for FINRA's 
equity trading facilities.
b. Treatment of Fractional Shares
    The Funding Proposal also would address how transactions in 
fractional shares would be treated. As described above, CAT fees would 
be charged based on the Equity Order Trade Events, Options Trade Events 
and the ADF/ORF/TRF Transaction Data Events in the Participant 
Technical Specifications. None of these transaction reports provide for 
fractional quantities; the transaction reports must reflect whole 
shares/contracts. Therefore, under the Funding Proposal, CAT fees would 
be calculated without reference to fractional shares or fractional 
share components of executed orders.\23\
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    \23\ To the extent that FINRA's equity transaction reporting 
facilities or the exchanges report transactions in fractional shares 
in the future, then the calculation of CAT fees would reflect 
fractional shares as well.
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c. Non-Industry Members on Transaction Reports
    The Funding Proposal also would address how transactions that 
involve a non-Industry Member would be treated under the Funding 
Proposal (e.g., for internalized trades or trades with a non-FINRA 
member). The FINRA trade reporting requirements state that ``[w]hen 
reporting a trade with a broker-dealer that is not a FINRA member, the 
non-member should not be identified on the trade report as the contra 
party to the trade.'' \24\ Accordingly, when the transaction in these 
cases is reported to CAT via the TRF/ORF/ADF Transaction Data Event, 
the field for the reportingExecutingMpid would be populated with the 
MPID of the executing broker and the field for the contraExecutingMpid 
would be blank or null. As noted above, the reportingExecutingMpid is a 
required field (include key = `R') that must be entered on all CAT 
reports, but the contraExecutingMpid field is conditional; it does not 
need to be populated, specifically to account for cases like those at 
issue here (e.g., transactions with a non-FINRA member). Therefore, in 
those scenarios where the contraExecutingMpid is blank, the FINRA 
member identified in the reportingExecutingMpid field would be treated 
as the CAT Executing Broker for both the buy-side and the sell-side of 
the transaction, that is, as the CEBS and CEBB.
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    \24\ FINRA Trade Reporting FAQ 202.1.
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    In addition, under the FINRA trade reporting requirements, there is 
a limited exception to the general rule about not reporting a non-
member as the contra party to the trade. Specifically, pursuant to 
FINRA Trade Reporting FAQ 202.1, ``[t]here is a limited exception where 
a Canadian non-member firm uses the FINRA/NASDAQ TRF or ORF for 
purposes of comparing trades pursuant to a valid Non-Member Addendum to 
the NASDAQ Services Agreement. In that instance, however, the Canadian 
non-member must appear on the trade report as the contra party to the 
trade and not as the reporting party. For any trade report on which a 
Canadian non-member appears as a party to the trade, the FINRA member 
must appear as the reporting party.'' In this case involving the 
Canadian non-member firm exception, the executing broker identified in 
the reportingExecutingMpid field would be billed for both sides of the 
transaction.
    CAT LLC proposes to include language in the definition of ``CAT 
Executing Broker'' to address these scenarios. Specifically, CAT LLC 
proposes to state the following in the definition of ``CAT Executing 
Broker: ``in those circumstances where there is a non-Industry Member 
identified as the contra-side executing broker in the TRF/ORF/ADF 
transaction data event or no contra-side executing broker is identified 
in the TRF/ORF/ADF transaction data event, then the Industry Member 
identified as the executing broker in the TRF/ORF/ADF transaction data 
event would be treated as CAT Executing Broker for the Buyer and for 
the Seller.''
d. Cancellations and Corrections
    The Funding Proposal also would provide for cancellations and 
corrections. CAT LLC expects to determine CAT fees based on the 
transaction reports for a month as of a particular day. To the extent 
that changes are made to the transaction reports on or before the day 
the CAT fees are determined for the given month, the changes will be 
reflected in the monthly bill. To the extent that changes are made to 
the transaction reports after the day the CAT fees are determined for 
that month, subsequent bills will reflect any changes via debits or 
credits, as applicable. As CAT LLC is required under the CAT NMS Plan 
to adopt policies, procedures, and practices regarding the billing and 
collection of fees,\25\ CAT LLC will establish specific policies and 
procedures regarding the treatment of such adjustments as those related 
to cancellations and corrections. Furthermore, CAT LLC will inform 
Industry Members and other market participants of these policies and 
procedures via FAQs, CAT Alerts and/or other appropriate methods.
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    \25\ Section 11.1(d) of the CAT NMS Plan.
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2. CAT Budget
    Section 11.1(a) of the CAT NMS Plan describes the requirement for 
the Operating Committee to approve an operating budget for CAT LLC on 
an annual basis. It requires the budget to ``include the projected 
costs of the Company, including the costs of developing and operating 
the CAT for the upcoming year, and the sources of all revenues to cover 
such costs, as well as the funding of any reserve that the Operating 
Committee reasonably deems appropriate for prudent operation of the 
Company.'' CAT LLC proposes to provide additional detail regarding the 
CAT LLC operating budget by adding proposed subparagraphs (i) and (ii) 
to Section 11.1(a) of the CAT NMS Plan. Such detailed information would 
provide Participants, Industry Members and other interested parties 
with a clear understanding of the CAT budget, and, in turn, the 
calculation of the CAT Fees.
a. Budgeted CAT Costs
    CAT LLC proposes to add subparagraph (i) to Section 11.1(a) of the 
CAT NMS Plan to provide additional clarity regarding the costs to be 
included in the CAT budget. This proposed provision would list the 
types of CAT costs to be included in the budget. Specifically, Proposed 
Section

[[Page 17090]]

11.1(a)(i) of the CAT NMS Plan would state that ``[w]ithout limiting 
the foregoing, the reasonably budgeted CAT costs shall include 
technology (including cloud hosting services, operating fees, CAIS 
operating fees, change request fees and capitalized developed 
technology costs), legal, consulting, insurance, professional and 
administration, and public relations costs, a reserve, and such other 
categories as reasonably determined by the Operating Committee to be 
included in the budget.''
    Because technology costs account for more than 90% of CAT costs, 
CAT LLC proposes to provide more granular information about such costs. 
Specifically, CAT LLC proposes to require the inclusion of five 
subcategories of technology costs in the budget: (1) cloud hosting 
services, (2) operating fees, (3) Customer and Account Information 
System (``CAIS'') operating fees, (4) change request fees, and (5) 
capitalized developed technology costs. Breaking out technology costs 
in this manner is consistent with how such costs are broken out in the 
CAT budgets available on the CAT website.\26\ CAT LLC currently does 
not propose to require the disclosure of additional subcategories of 
cost information, such as a further breakdown of the category of cloud 
hosting services into production costs, including linker costs and 
storage costs. However, CAT LLC will consider the need to provide 
additional cost disclosure going forward.
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    \26\ The CAT LLC budgets are available on the CAT website at 
https://www.catnmsplan.com/cat-financial-and-operating-budget.
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    Furthermore, CAT LLC has determined not to provide more detailed 
subcategories for the other cost categories (that is, legal, 
consulting, insurance, professional and administration, and public 
relations costs) at this time. Breaking out these costs into further 
subcategories would establish new subcategories that are not set forth 
in the budgets. In addition, these costs in the aggregate represent 
less than seven percent (7%) of total CAT costs, with professional and 
administration costs and public relations costs, in particular, each 
representing less than one percent (1%) of overall CAT costs. 
Therefore, CAT LLC does not believe that these costs warrant additional 
subcategory disclosure. CAT LLC further notes that it is not considered 
a best practice to publicly disclose detailed legal or insurance 
information, which is particularly sensitive. Nevertheless, CAT LLC 
notes that the CAT NMS Plan requires that detailed cost information be 
made available to the Commission upon request, and detailed information 
on CAT costs and operations is regularly made available to the 
Commission staff and the Advisory Committee on a confidential basis.
    CAT LLC also intends to determine costs for the operating budget 
for the CAT in a reasonable manner. Accordingly, CAT LLC proposes to 
amend Section 11.1(a) of the CAT NMS Plan to refer to a ``reasonable'' 
operating budget for CAT LLC.\27\ Specifically, the first sentence of 
Section 11.1(a) of the CAT NMS Plan would be revised to read: ``On an 
annual basis the Operating Committee shall approve a reasonable 
operating budget for the Company.'' In addition, CAT LLC proposes to 
include the term ``reasonably'' in proposed paragraph (a)(i) of Section 
11.1 of the CAT NMS Plan. Specifically, CAT proposes to introduce the 
term ``reasonably'' to the following proposed provision of the CAT NMS 
Plan: ``Without limiting the foregoing, the reasonably budgeted CAT 
costs shall include technology (including cloud hosting services, 
operating fees, CAIS operating fees, change request fees, and 
capitalized developed technology costs), legal, consulting, insurance, 
professional and administration, and public relations costs, a reserve 
and such other cost categories as reasonably determined by the 
Operating Committee to be included in the budget.''
---------------------------------------------------------------------------

    \27\ As highlighted in Exhibit B, this proposed revision of 
Section 11.1(a) of the CAT NMS Plan was not included in the proposed 
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    Finally, CAT LLC proposes to amend Section 11.1(b) of the CAT NMS 
Plan. Currently, Section 11.1(b) of the CAT NMS Plan states that:
    Subject to Section 11.2, the Operating Committee shall have 
discretion to establish funding for the Company, including: (i) 
establishing fees that the Participants shall pay; and (ii) 
establishing fees for Industry Members that shall be implemented by 
Participants. The Participants shall file with the SEC under Section 
19(b) of the Exchange Act any such fees on Industry Members that the 
Operating Committee approves, and such fees shall be labeled as 
``Consolidated Audit Trail Funding Fees.''
    CAT LLC proposes to amend Section 11.1(b) to include a reference to 
Section 11.1 as well as Section 11.2 in the ``subject to'' clause at 
the beginning of the provision.\28\ CAT LLC believes this reference is 
relevant because Section 11.1 sets forth requirements related to the 
budget, and the budget is used in calculating CAT Fees.
---------------------------------------------------------------------------

    \28\ As highlighted in Exhibit B, this proposed revision to 
Section 11.1(b) of the CAT NMS Plan was not included in the proposed 
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

b. Reserve
    Section 11.1(a) of the CAT NMS Plan states that the budget shall 
include ``the funding of any reserve that the Operating Committee 
reasonably deems appropriate for prudent operation of the Company.'' In 
addition, Proposed Section 11.1(a)(i) of the CAT NMS Plan would state 
that the budgeted CAT costs shall include a reserve. Section 11.1(c) of 
the CAT NMS Plan states that ``[a]ny surplus of the Company's revenues 
over its expenses shall be treated as an operational reserve to offset 
future fees.'' CAT LLC proposes to add subparagraph (ii) to Section 
11.1(a) of the CAT NMS Plan to provide additional details regarding the 
size and use of the reserve.
    To provide additional clarity regarding the size of the reserve, 
CAT LLC proposes to add proposed paragraph (ii) to Section 11.1(a) of 
the CAT NMS Plan to set forth the parameters for the size of the 
reserve. An analysis of budgeted CAT costs and actual CAT costs for 
2020, 2021 and the first nine months of 2022 demonstrates that actual 
CAT costs were approximately 20% higher than budgeted amounts over this 
period on a cumulative average basis. Based on the magnitude of 
historical budget to actual variances as well as the difficulty in 
accurately predicting various variable CAT costs, CAT LLC believes that 
a 25% reserve would appear to be reasonable. Accordingly, Proposed 
Section 11.1(a)(ii) of the CAT NMS Plan would state that ``[f]or the 
reserve referenced in paragraph (a)(i) of this Section, the budget will 
include an amount reasonably necessary to allow the Company to maintain 
a reserve of not more than 25% of the annual budget.'' CAT LLC also 
intends to include a reserve in the CAT budget that is reasonably 
necessary to allow the CAT LLC to maintain a reserve of not more than 
25% of the annual budget. Accordingly, CAT LLC proposes to include the 
term ``reasonably'' in this sentence. Moreover, CAT LLC would calculate 
the reserve based on the amount of the budget other than the reserve, 
as the reserve is intended to provide funds for CAT LLC to pay its 
bills if necessary. Accordingly, Proposed Section 11.1(a)(ii) of the 
CAT NMS Plan would state that ``[f]or the avoidance of doubt, the 
calculation of the amount of the reserve would

[[Page 17091]]

exclude the amount of the reserve from the budget.'' \29\
---------------------------------------------------------------------------

    \29\ As highlighted in Exhibit B, this proposed revision to 
Section 11.1(a)(ii) of the CAT NMS Plan was not included in the 
proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    CAT LLC also believes that it is reasonable to base the reserve on 
a percentage of the budget. First, CAT LLC believes that setting the 
reserve at 25% of the budget is appropriate in light of the timeline 
for the collection of CAT fees.\30\ Many of CAT LLC's bills must be 
paid on a monthly basis. However, CAT fees will be collected 
approximately three months after the activity on which a CAT fee is 
based--that is, 25% of the year. For example, activity in January would 
be subject to a bill in February, which would be required to be paid 
within 30 days,\31\ which would be in March. Accordingly, the reserve 
would be available to address the funding needs related to the delay in 
CAT LLC's receipt of the CAT fees.
---------------------------------------------------------------------------

    \30\ For a discussion of the billing and collection of CAT fees, 
see Section A.7 of this filing.
    \31\ See Sections 3.7(b) and 11.4 of the CAT NMS Plan.
---------------------------------------------------------------------------

    Second, CAT LLC has established a number of measures for 
establishing a reasonable budget for the CAT, thereby providing a 
reasonable starting point for the reserve calculation. For example, the 
CAT NMS Plan would require the budget to be ``reasonable.'' \32\ The 
Fee Rate established at the beginning of the year would be adjusted 
mid-year to address changes in the actual or budgeted costs or changes 
in the actual or projected executed equivalent share volume. CAT LLC 
has established a variety of cost management measures, as discussed in 
detail in Section A.9.bb of this filing, and has and would provide 
substantial cost transparency as discussed in detail in Section A.9.l 
of this filing. The CAT fee filings pursuant to section 19(b) of the 
Exchange Act would provide a description how the budget is reconciled 
to the collected fees.
---------------------------------------------------------------------------

    \32\ See Proposed Section 11.1(a) of the CAT NMS Plan.
---------------------------------------------------------------------------

    CAT LLC proposes to provide additional clarification regarding the 
collection of the reserve by providing additional information as to how 
budget surpluses would be treated for purposes of the reserve. CAT LLC 
proposes to clarify how CAT fees collected in excess of CAT costs, 
including the reserve, would be used. Specifically, proposed 
subparagraph (ii) of Section 11.1(a) of the CAT NMS Plan would state 
that ``[t]o the extent collected CAT fees exceed CAT costs, including 
the reserve of 25% of the annual budget, such surplus will be used to 
offset future fees.'' In addition, CAT LLC further proposes to state in 
Proposed Section 11.1(a)(ii) of the CAT NMS Plan that ``[f]or the 
avoidance of doubt, the Company will only include an amount for the 
reserve in the annual budget if the Company does not have a sufficient 
reserve (which shall be up to but not more than 25% of the annual 
budget).''
    The following examples explain the circumstances under which a 
reserve would be included in the budget:
    (1) Suppose that the Operating Committee had approved a budget of 
$100 million for CAT costs for Year X, and a reserve of $25 million, 
for a total budget of $125 million for Year X. Suppose that CAT Fees of 
$125 million were collected during Year X, and that actual CAT costs 
for Year X were $100 million. Therefore, CAT ended Year X with $25 
million in reserve. Suppose further that the Operating Committee had 
approved a budget of $100 million for CAT costs and a reserve of $25 
million, for a total budget of $125 million for Year X+1. Because CAT 
LLC had collected $25 million in excess of costs for the reserve in 
Year X, and the excess was not necessary to cover additional costs in 
Year X, CAT LLC would not include any additional amount in the budget 
for a reserve for Year X+1. CAT LLC would use the excess fees collected 
for the reserve.
    (2) Suppose that the Operating Committee had approved a budget of 
$100 million for CAT costs for Year Y, and a reserve of $25 million, 
for a total budget of $125 million for Year Y. Suppose that CAT Fees of 
$110 million were collected during Year Y, and that actual CAT costs 
for Year Y were $100 million. Therefore, CAT ended Year Y with $10 
million in reserve. Suppose further that the Operating Committee had 
approved a budget of $100 million for CAT costs, and a reserve of $25 
million, for a total budget of $125 million for Year Y+1. Because CAT 
LLC had collected $10 million in excess of costs for the reserve in 
Year Y, and the entire reserve was not necessary to cover additional 
costs in Year Y, CAT LLC would only need to collect an additional $15 
million for the reserve in Year Y+1, not $25 million.
c. Publicly Available Budgets
    CAT LLC publicly provides the annual operating budget for the 
Company as well as updates to the budget that occur during the 
year.\33\ This publicly available budget information describes in 
detail the budget for the Company. For example, among other things, the 
budget provides specific budgeted technology costs (including cloud 
hosting services, operating fees, CAIS operating fees and change 
request fees) and general and administrative costs (including legal, 
consulting, insurance, professional and administration, and public 
relations). The Company provides such budget information on a dedicated 
web page on the CAT NMS Plan website to make it readily accessible to 
CAT Reporters and others.
---------------------------------------------------------------------------

    \33\ To address potential changes related to the CAT during the 
year, the Operating Committee may adjust the budgeted CAT costs for 
the year as it reasonably deems appropriate for the prudent 
operation of the Company. For example, the Operating Committee may 
determine that an adjustment to the budget is necessary if actual 
costs during the year are more or less than the budget, or if 
unanticipated expenditures are necessary. To the extent that the 
Operating Committee adjusts the budgeted CAT costs during the year 
and determines to adjust the Fee Rate, the adjusted budgeted CAT 
costs would be used in calculating the new Fee Rate for the 
remaining months of the year.
---------------------------------------------------------------------------

3. CAT Fees Related to Prospective CAT Costs
    CAT LLC proposes to describe CAT Fees related to Prospective CAT 
Costs in Section 11.3(a) of the CAT NMS Plan. Proposed Section 11.3(a) 
of the CAT NMS Plan would describe that the CAT Fees related to 
Prospective CAT Costs apply to both Participants and Industry Members, 
the manner of calculating the Fee Rate for CAT Fees, the description of 
the calculation of the Participant CAT Fees, a description of the 
calculation of the Industry Member CAT Fees, a description of the fee 
filings under section 19(b) of the Exchange Act for Industry Member CAT 
Fees, and details regarding the calculation of the CAT Fees that are 
available upon request or publicly available. The following describes 
Proposed Section 11.3(a) of the CAT NMS Plan in detail.
a. Introductory Statement
    CAT LLC proposes to revise Section 11.3(a) of the CAT NMS Plan to 
address CAT Fees related to Prospective CAT Costs for both Participants 
and Industry Members. Accordingly, CAT LLC proposes to revise the 
introductory statement in Proposed Section 11.3(a) of the CAT NMS Plan 
to state that ``[t]he Operating Committee will establish fees (``CAT 
Fees) to be payable by Participants and Industry Members with regard to 
CAT costs not previously paid by the Participants (``Prospective CAT 
Costs'') as follows:''.
b. Fee Rate for CAT Fees
    CAT LLC proposes to describe the timing and method for calculating 
the Fee Rate for the CAT Fees related to Prospective CAT Costs in 
Proposed

[[Page 17092]]

Section 11.3(a)(i) of the CAT NMS Plan, and to provide additional 
detail regarding the Fee Rate in that provision. Proposed Section 
11.3(a)(i) of the CAT NMS Plan would state that CAT Fees related to 
Prospective CAT Costs would be calculated twice a year. Specifically, 
this proposed provision would state that ``[t]he Operating Committee 
will calculate the Fee Rate for the CAT Fee twice per year, once at the 
beginning of the year and once during the year as follows.'' CAT LLC 
recognizes the need to align CAT Fees with CAT costs. Requiring the 
adjustment of the Fee Rate both at the beginning of the year and once 
mid-year in response to changes in the budgeted or actual costs or 
projected or actual total executed equivalent share volume during the 
year would likely lead to the greater alignment of CAT Fees and CAT 
costs, thereby potentially avoiding the collection of CAT Fees in 
excess of CAT costs or CAT Fees that are insufficient to cover CAT 
costs. Accordingly, CAT LLC proposes to require both an annual and a 
mid-year adjustment of the Fee Rate for the CAT Fee.
i. General
    CAT LLC proposes to provide details regarding the calculation of 
the Fee Rate for the CAT Fees in Proposed Section 11.3(a)(i) of the CAT 
NMS Plan. The detail provided in Proposed Section 11.3(a)(i) of the CAT 
NMS Plan would include a description of the calculation of the Fee Rate 
at the beginning of the year and during the year, the counting method 
for executed equivalent shares, the budgeted CAT costs, and the 
projected total executed equivalent share volume of transactions in 
Eligible Securities for the relevant period. Each of these aspects of 
the CAT Fees are discussed in more detail below.
A. Annual Calculation of Fee Rate
    Proposed Section 11.3(a)(i)(A)(I) of the CAT NMS Plan would 
describe the annual calculation of the Fee Rate and the requirement for 
Participants to file a fee filing for CAT Fees to be charged Industry 
Members calculated using the Fee Rate. This proposed provision also 
would state that Participants and Industry Members would be required to 
pay such CAT Fees once the CAT Fees are in effect with regard to 
Industry Members. Specifically, this proposed provision would state:

    For the beginning of each year, the Operating Committee will 
calculate the Fee Rate by dividing the reasonably budgeted CAT costs 
for the year by the reasonably projected total executed equivalent 
share volume of all transactions in Eligible Securities for the 
year. Once the Operating Committee has approved such Fee Rate, the 
Participants shall be required to file with the SEC pursuant to 
section 19(b) of the Exchange Act CAT Fees to be charged to Industry 
Members calculated using such Fee Rate. Participants and Industry 
Members will be required to pay CAT Fees calculated using this Fee 
Rate once such CAT Fees are in effect with regard to Industry 
Members in accordance with section 19(b) of the Exchange Act.

    CAT LLC proposes to clarify that the annual calculation of CAT Fees 
would be performed using reasonably budgeted CAT costs and reasonably 
projected total executed equivalent share volume.\34\ Accordingly, CAT 
LLC proposes to use the term ``reasonably'' twice in the following 
sentence: ``For the beginning of each year, the Operating Committee 
will calculate the Fee Rate by dividing the reasonably budgeted CAT 
costs for the year by the reasonably projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the year.''
---------------------------------------------------------------------------

    \34\ As highlighted in Exhibit B, this proposed revision to add 
the term ``reasonably'' before ``projected total executed equivalent 
share volume'' in Proposed Section 11.3(a)(i)(A)(I) of the CAT NMS 
Plan was not included in the proposed revisions related to the 2022 
Funding Proposal.
---------------------------------------------------------------------------

B. Mid-Year Calculation of Fee Rate
    Proposed Section 11.3(a)(i)(A)(II) of the CAT NMS Plan describes 
the mandatory mid-year calculation of a new Fee Rate. This proposed 
provision would describe the mid-year calculation of the Fee Rate and 
the requirement for Participants to file a fee filing for CAT Fees to 
be charged Industry Members calculated using the Fee Rate. This 
proposed provision also would state that Participants and Industry 
Members would be required to pay such CAT Fees once the CAT Fees are in 
effect with regard to Industry Members. Specifically, this proposed 
provision would state:

    During each year, the Operating Committee will calculate a new 
Fee Rate by dividing the reasonably budgeted CAT costs for the 
remainder of the year by the reasonably projected total executed 
equivalent share volume of all transactions in Eligible Securities 
for the remainder of the year. Once the Operating Committee has 
approved the new Fee Rate, the Participants shall be required to 
file with the SEC pursuant to section 19(b) of the Exchange Act CAT 
Fees to be charged to Industry Members calculated using the new Fee 
Rate. Participants and Industry Members will be required to pay CAT 
Fees calculated using this new Fee Rate once such CAT Fees are in 
effect with regard to Industry Members in accordance with section 
19(b) of the Exchange Act.

    CAT LLC proposes to clarify that CAT Fees would be calculated 
during the year using reasonably budgeted CAT costs and reasonably 
projected total executed equivalent share volume.\35\ Accordingly, CAT 
LLC proposes to use the term ``reasonably'' twice in the following 
sentence: ``During each year, the Operating Committee will calculate a 
new Fee Rate by dividing the reasonably budgeted CAT costs for the 
remainder of the year by the reasonably projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the remainder of the year.''
---------------------------------------------------------------------------

    \35\ As highlighted in Exhibit B, this proposed revision to add 
the term ``reasonably'' before ``projected total executed equivalent 
share volume'' in Proposed Section 11.3(a)(i)(A)(II) of the CAT NMS 
Plan was not included in the proposed revisions related to the 2022 
Funding Proposal.
---------------------------------------------------------------------------

C. Continuing CAT Fee
    CAT LLC also proposes to add Section 11.3(a)(i)(A)(III) to the CAT 
NMS Plan to clarify that CAT Fees related to Prospective CAT Costs do 
not sunset automatically; such CAT Fees would remain in place until new 
CAT Fees are in place with a new Fee Rate. The Funding Proposal is 
designed to collect CAT fees continuously so as to provide 
uninterrupted revenue to pay CAT bills. Specifically, this proposed 
provision would state:

    For the avoidance of doubt, CAT Fees with a Fee Rate calculated 
as set forth in this paragraph (a)(i) shall remain in effect until 
the Operating Committee approves a new Fee Rate as described in this 
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect 
with regard to Industry Members in accordance with section 19(b) of 
the Exchange Act.
D. Commencement of CAT Fee
    CAT LLC believes that it would be appropriate to commence the first 
CAT Fee either at the beginning of the year or during the year (due to, 
for example, mid-year approval of the CAT Fee by the SEC), whichever is 
closest to the time that such a CAT Fee could become effective, so as 
to seek prompt recovery of CAT costs. If the CAT Fee were to commence 
during the year, the first CAT Fee would be calculated in the same way 
that a mid-year CAT Fee would be calculated. To clarify this approach, 
CAT LLC proposes to add Proposed Section 11.3(a)(i)(A)(IV) to the CAT 
NMS Plan. This provision would state that ``[f]or the avoidance of 
doubt, the first CAT Fee may commence at the beginning of the year or 
during the year. If it were to commence during the year, the CAT Fee 
would be calculated as described in paragraph (II) of this Section.''

[[Page 17093]]

ii. Executed Equivalent Shares
    CAT LLC proposes to describe in Proposed Section 11.3(a)(i)(B) of 
the CAT NMS Plan how executed equivalent shares would be counted for 
purposes of calculating CAT Fees. Under the Funding Proposal, a CAT Fee 
would be charged with regard to each transaction in Eligible Securities 
as reported in CAT Data. As set forth in Section 1.1 of the CAT NMS 
Plan, ``Eligible Securities'' are defined to include all NMS Securities 
and all OTC Equity Securities. Section 1.1 of the CAT NMS Plan, in 
turn, defines an ``NMS Security'' as ``any security or class of 
securities for which transaction reports are collected, processed, and 
made available pursuant to an effective transaction reporting plan, or 
an effective national market system plan for reporting transactions in 
Listed Options.'' In addition, Section 1.1 of the CAT NMS Plan defines 
an ``OTC Equity Security'' as ``any equity security, other than an NMS 
Security, subject to prompt last sale reporting rules of a registered 
national securities association and reported to one of such 
association's equity trade reporting facilities.'' A CAT Fee would be 
imposed with regard to transactions in Eligible Securities in the CAT 
Data regardless of whether the trade is executed on an exchange or 
otherwise than on an exchange.
    The Funding Proposal uses the concept of executed equivalent shares 
as the transactions subject to a CAT Fee involve NMS Stocks, Listed 
Options and OTC Equity Securities, each of which have different trading 
characteristics.
    NMS Stocks. Under the Funding Proposal, each executed share for a 
transaction in NMS Stocks would be counted as one executed equivalent 
share. Accordingly, Proposed Section 11.3(a)(i)(B)(I) of the CAT NMS 
Plan would state that ``[f]or purposes of calculating CAT Fees, 
executed equivalent shares in a transaction in Eligible Securities will 
be reasonably counted as follows: (I) each executed share for a 
transaction in NMS Stocks will be counted as one executed equivalent 
share.''
    Listed Options. Recognizing that Listed Options trade in contracts 
rather than shares, each executed contract for a transaction in Listed 
Options will be counted using the contract multiplier applicable to the 
specific Listed Option in the relevant transaction. Typically, a Listed 
Option contract represents 100 shares; however, it may also represent 
another designated number of shares. Accordingly, Proposed Section 
11.3(a)(i)(B)(II) of the CAT NMS Plan would state that ``[f]or purposes 
of calculating CAT Fees, executed equivalent shares in a transaction in 
Eligible Securities will be reasonably counted as follows: . . . (II) 
each executed contract for a transaction in Listed Options will be 
counted based on the multiplier applicable to the specific Listed 
Option (i.e., 100 executed equivalent shares or such other applicable 
multiplier).''
    OTC Equity Securities. Similarly, in recognition of the different 
trading characteristics of OTC Equity Securities as compared to NMS 
Stocks, the Funding Proposal would discount the share volume of OTC 
Equity Securities when calculating CAT Fees. Many OTC Equity Securities 
are priced at less than one dollar--and a significant number are priced 
at less than one penny--per share and low-priced shares tend to trade 
in larger quantities. Accordingly, a disproportionately large number of 
shares are involved in transactions involving OTC Equity Securities 
versus NMS Stocks.\36\ Because the Funding Proposal would calculate CAT 
Fees based on executed share volume, CAT Reporters trading OTC Equity 
Securities would likely be subject to higher fees than their market 
activity may warrant. To address this potential concern, the Funding 
Proposal would count each executed share for a transaction in OTC 
Equity Securities as 0.01 executed equivalent shares. Accordingly, 
Proposed Section 11.3(a)(i)(B)(III) of the CAT NMS Plan would state 
that ``[f]or purposes of calculating CAT Fees, executed equivalent 
shares in a transaction in Eligible Securities will be reasonably 
counted as follows: . . . (III) each executed share for a transaction 
in OTC Equity Securities shall be counted as 0.01 executed equivalent 
share.''
---------------------------------------------------------------------------

    \36\ For example, based on data from 2021, (1) the average price 
per executed share of OTC Equity Securities was $0.072 and the 
average price per executed share for NMS Stocks was $49.51; and (2) 
the average trade size for OTC Equity Securities was 63,474 and the 
average trade size for NMS Stocks was 166 shares. Trades in OTC 
Equity Securities accounted for 77% of the number of all equity 
shares traded, but only 0.51% of the notional value of all equity 
shares traded.
---------------------------------------------------------------------------

    The discount to 1% was selected based on a reasoned analysis of a 
variety of different metrics for comparing the markets for OTC Equity 
Securities and NMS Stocks, rather than a simple calculation. For 
example, using 2021 data, the Operating Committee calculated the 
following metrics: (1) the ratio of total notional dollar value traded 
for OTC Equity Securities to OTC Equity Securities and NMS Stocks was 
0.051%; (2) the ratio of total trades in OTC Equity Securities to total 
trades in OTC Equity Securities and NMS Stocks was 0.90%; and (3) the 
ratio of average share price per trade of OTC Equity Securities to 
average share price per trade for OTC Equity Securities and NMS Stocks 
was 0.065%. In recognition of the fact that these calculations involve 
averages and for ease of application, the Operating Committee 
determined to round these metrics to 1%.
    In calculating CAT Fees, CAT LLC intends for executed equivalent 
shares in a transaction in Eligible Securities to be reasonably 
counted. Accordingly, CAT LLC proposes to include the term 
``reasonably'' in the following sentence in Proposed Section 
11.3(a)(i)(B) of the CAT NMS Plan: ``For purposes of calculating CAT 
Fees, executed equivalent shares in a transaction in Eligible 
Securities will be reasonably counted as follows:''.
iii. Budgeted CAT Costs
    The calculation of the Fee Rate for CAT Fees related to Prospective 
CAT Costs requires the determination of the budgeted CAT costs for the 
year or other relevant period. Proposed Section 11.3(a)(i)(C) of the 
CAT NMS Plan would describe the budgeted CAT costs for calculating CAT 
Fees. It would state the following:

    The budgeted CAT costs for the year shall be comprised of all 
reasonable fees, costs and expenses reasonably budgeted to be 
incurred by or for the Company in connection with the development, 
implementation and operation of the CAT as set forth in the annual 
operating budget approved by the Operating Committee pursuant to 
Section 11.1(a) of the CAT NMS Plan, or as adjusted during the year 
by the Operating Committee.

    As discussed above, CAT LLC also proposes to provide additional 
details regarding what is included in the annual operating budget 
approved by the Operating Committee pursuant to Section 11.1(a) of the 
CAT NMS Plan in proposed paragraphs (i) and (ii) of Section 11.1(a) of 
the CAT NMS Plan.
    Moreover, CAT LLC proposes to clarify that CAT Fees must be 
calculated using reasonably budgeted CAT costs.\37\ Accordingly, CAT 
proposes to include the terms ``reasonably'' and ``reasonable'' the 
following sentence: ``The budgeted CAT costs for the year shall be 
comprised of all reasonable fees, costs and expenses reasonably 
budgeted to be incurred by or for the Company in connection with the 
development, implementation and

[[Page 17094]]

operation of the CAT as set forth in the annual operating budget 
approved by the Operating Committee pursuant to Section 11.1(a) of the 
CAT NMS Plan, or as adjusted during the year by the Operating 
Committee.''
---------------------------------------------------------------------------

    \37\ As highlighted in Exhibit B, this proposed revision to add 
the term ``reasonable'' before ``fees, cost and expenses'' in 
Proposed Section 11.3(a)(i)(C) of the CAT NMS Plan was not included 
in the proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

iv. Projected Total Executed Equivalent Share Volume
    The calculation of the Fee Rate for CAT Fees also requires the 
determination of the projected total executed equivalent share volume 
of transactions in Eligible Securities for each relevant period. Each 
year, the Operating Committee would determine this projection based on 
the total executed equivalent share volume of transactions in Eligible 
Securities from the prior twelve months. Therefore, Proposed Section 
11.3(a)(i)(D) of the CAT NMS Plan would state that ``[t]he Operating 
Committee shall reasonably determine the projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
each relevant period based on the executed equivalent share volume of 
all transactions in Eligible Securities for the prior twelve months.'' 
CAT LLC determined that the use of the data from the prior twelve 
months provides an appropriate balance between using data from a period 
that is sufficiently long to avoid short term fluctuations while 
providing data close in time to the upcoming relevant period. In 
addition, CAT LLC proposes to allow the Operating Committee to base its 
projection on the prior twelve months, but to use it discretion to 
analyze the likely volume for the upcoming year. As set forth in 
Proposed Section 11.3(a)(iii)(B), Participants will be required to 
provide a description of the calculation of the projection in their fee 
filings pursuant to section 19(b) of the Exchange Act. Furthermore, CAT 
LLC intends to calculate the CAT Fees based on a reasonable 
determination of the projected total executed equivalent share volume 
of transactions in Eligible Securities. Accordingly, CAT LLC propose to 
include the term ``reasonably'' in the Proposed Section 11.3(a)(i)(D) 
of the CAT NMS Plan to indicate that the Operating Committee will 
``reasonably determine the projected total executed equivalent share 
volume.''
c. Participant CAT Fees for Prospective CAT Costs
    CAT LLC proposes to describe the Participant CAT Fees related to 
Prospective CAT Costs in Proposed Section 11.3(a)(ii) of the CAT NMS 
Plan. Proposed Section 11.3(a)(ii) of the CAT NMS Plan would have two 
paragraphs (A) and (B), where paragraph (A) would describe the CAT Fee 
obligation for Participants and paragraph (B) would clarify that 
Participants would only be required to pay CAT Fees when Industry 
Members are required to pay CAT Fees.
i. CAT Fee Obligation of the Participants
    CAT LLC proposes to add paragraph (A) to Proposed Section 
11.3(a)(ii) of the CAT NMS Plan to describe the CAT Fee obligation of 
the Participants. Specifically, proposed paragraph (A) of Proposed 
Section 11.3(a)(ii) of the CAT NMS Plan would state the following:

    Each Participant that is a national securities exchange will be 
required to pay the CAT Fee for each transaction in Eligible 
Securities executed on the exchange in the prior month based on CAT 
Data. Each Participant that is a national securities association 
will be required to pay the CAT Fee for each transaction in Eligible 
Securities executed otherwise than on an exchange in the prior month 
based on CAT Data. The CAT Fee for each transaction in Eligible 
Securities will be calculated by multiplying the number of executed 
equivalent shares in the transaction by one-third and by the Fee 
Rate determined pursuant to paragraph (a)(i) of this Section 11.3.

    CAT LLC intends for the Participant CAT Fee to be calculated using 
the Fee Rate reasonably determined pursuant to Proposed Section 
11.3(a)(i) of the CAT NMS Plan. Accordingly, CAT LLC proposes to 
include the term ``reasonably'' in the following sentence: ``[t]he CAT 
Fee for each transaction in Eligible Securities will be calculated by 
multiplying the number of executed equivalent shares in the transaction 
by one-third and by the Fee Rate reasonably determined pursuant to 
paragraph (a)(i) of this Section 11.3.''
ii. Effectiveness of Participant CAT Fees
    CAT LLC also proposes to include proposed paragraph (B) of Proposed 
Section 11.3(a)(ii) of the CAT NMS Plan to clarify that Participants 
would only be required to pay CAT Fees when Industry Members are 
required to pay CAT Fees. Under the Funding Proposal, CAT Fees are 
designed to cover 100% of CAT costs by allocating costs between and 
among Participants and Industry Members. However, the CAT Fees charged 
to Participants are implemented via a different process than CAT Fees 
charged to Industry Members. CAT Fees charged to Participants are 
implemented via an approval of the CAT Fees by the Operating Committee 
in accordance with the requirements of the CAT NMS Plan. In contrast, 
CAT Fees charged to Industry Members may only become effective in 
accordance with the requirements of section 19(b) of the Exchange Act. 
Accordingly, proposed paragraph (B) of Proposed Section 11.3(a)(ii) of 
the CAT NMS Plan would state that ``[e]ach Participant will be required 
to pay the CAT Fee calculated using the Fee Rate reasonably determined 
pursuant to paragraph (a)(i) of this Section 11.3 and approved by the 
Operating Committee only if such CAT Fees are in effect with regard to 
Industry Members in accordance with section 19(b) of the Exchange 
Act.'' CAT LLC intends for the Participant CAT Fee to be calculated 
using the Fee Rate reasonably determined pursuant to Proposed Section 
11.3(a)(i) of the CAT NMS Plan. Accordingly, CAT LLC proposes to 
include the term ``reasonably'' in the phrase ``the Fee Rate reasonably 
determined'' in this provision.
d. Industry Member CAT Fees for Prospective CAT Costs
    CAT LLC proposes to describe the Industry Member CAT Fees related 
to Prospective CAT Costs in Proposed Section 11.3(a)(iii) of the CAT 
NMS Plan. Proposed Section 11.3(a)(iii) of the CAT NMS Plan would have 
three paragraphs, (A), (B) and (C), where paragraph (A) would describe 
the CAT Fee obligation for Industry Members, paragraph (B) would 
described the required content of the fee filings required to be filed 
pursuant to section 19(b) of the Exchange Act regarding the CAT Fees 
for Industry Members, and paragraph (C) would clarify that Participants 
would not make CAT fee filings regarding CAT Fees until the Financial 
Accountability Milestone related to Period 4 as described in Section 
11.6 of the CAT NMS Plan has been satisfied.
i. Industry Member CAT Fee Obligation
    CAT LLC proposes to describe the CAT Fees related to Prospective 
CAT Costs that would be charged to Industry Members in Proposed Section 
11.3(a)(iii)(A) of the CAT NMS Plan. Accordingly, Proposed Section 
11.3(a)(iii)(A) of the CAT NMS Plan would state the following:

    Each Industry Member that is the CAT Executing broker for the 
buyer in a transaction in Eligible Securities (``CAT Executing 
Broker for the Buyer'' or ``CEBB'') and each Industry Member that is 
the CAT Executing Broker for the seller in a transaction in Eligible 
Securities (``CAT Executing Broker for the Seller'' or ``CEBS'') 
will be required to pay a CAT Fee for each such transaction in 
Eligible Securities in the prior month based on CAT Data. The CEBB's 
CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in 
Eligible Securities will be calculated by multiplying the number of 
executed equivalent shares in the transaction

[[Page 17095]]

by one-third and by the Fee Rate reasonably determined pursuant to 
paragraph (a)(i) of this Section 11.3.

    CAT LLC intends for the Participant CAT Fee to be calculated using 
the Fee Rate reasonably determined pursuant to Proposed Section 
11.3(a)(i) of the CAT NMS Plan. Accordingly, CAT LLC proposes to 
include the phrase ``the Fee Rate reasonably determined pursuant to 
paragraph (a)(i) of this Section 11.3'' in this provision.
ii. Fee Filings Under Section 19(b) of the Exchange Act for Industry 
Member CAT Fees
    CAT LLC proposes to describe the information that Participants 
would be required to include in their fee filings to be made pursuant 
to section 19(b) of the Exchange and Rule 19b-4 thereunder for Industry 
Member CAT Fees in proposed paragraph (B) of Proposed Section 
11.3(a)(iii) of the CAT NMS Plan.\38\ Specifically, such filings would 
be required to include with regard to the CAT Fee: (A) the Fee Rate; 
(B) the budget for the upcoming year (or remainder of the year, as 
applicable), including a brief description of each line item in the 
budget, including (1) technology line items of cloud hosting services, 
operating fees, CAIS operating fees, change request fees and 
capitalized developed technology costs, (2) legal, (3) consulting, (4) 
insurance, (5) professional and administration, and (6) public 
relations costs, a reserve and/or such other categories as reasonably 
determined by the Operating Committee to be included in the budget and 
the reason for changes in each such line item from the prior CAT Fee 
filing; \39\ (C) a discussion of how the budget is reconciled to the 
collected fees; and (D) the projected total executed equivalent share 
volume of all transactions in Eligible Securities for the year (or 
remainder of the year, as applicable), and a description of the 
calculation of the projection. This detail would describe how the Fee 
Rate is calculated, and explain how the budget used in the calculation 
is reconciled to the collected fees. Such detailed information would 
provide Industry Members and other interested parties with a clear 
understanding of the calculation of the CAT Fees and their relationship 
to CAT costs.\40\
---------------------------------------------------------------------------

    \38\ CAT LLC expects the fee filings required to be made by the 
Participants pursuant to Section 19(b) of the Exchange Act with 
regard to CAT Fees to be filed pursuant to Section 19(b)(3)(A) of 
the Exchange Act and Rule 19b-(f)(2) thereunder. In accordance with 
Section 19(b)(3)(A) of the Exchange Act and Rule 19b-4(f)(2) 
thereunder, such fee filings would be effective upon filing.
    \39\ CAT LLC intends to include any other categories as 
reasonably determined by the Operation Committee. Accordingly, this 
provision refers to ``such other categories as reasonably determined 
by the Operating Committee to be included in the budget.''
    \40\ As a practical matter, the fee filing would provide the 
exact fee per executed equivalent share to be paid for the CAT Fees, 
by multiplying the Fee Rate by one-third and describing the relevant 
number of decimal places for the fee.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to clarify that the budgeted CAT 
costs described in the fee filings must provide sufficient detail to 
demonstrate that the CAT budget used in calculating the CAT Fees is 
reasonable and appropriate. Therefore, CAT LLC proposes to add the 
following sentence to Proposed Section 11.3(a)(iii)(B) of the CAT NMS 
Plan: ``The information provided in this Section would be provided with 
sufficient detail to demonstrate that the budget for the upcoming year, 
or part of year, as applicable, is reasonable and appropriate.''
iii. Financial Accountability Milestone
    CAT LLC recognizes that the collection of CAT Fees from Industry 
Members is subject to Section 11.6 of the CAT NMS Plan regarding the 
Financial Accountability Milestones. Accordingly, CAT LLC proposes to 
clarify that Participants will not make fee filings pursuant to Section 
19(b) of the Exchange Act regarding CAT Fees until the Financial 
Accountability Milestone related to Period 4 described in Section 11.6 
of the CAT NMS Plan has been satisfied. Specifically, CAT LLC proposes 
to add proposed paragraph (C) to Proposed Section 11.3(a)(iii) to the 
CAT NMS Plan to address the Financial Accountability Milestone. This 
provision would state that ``[n]o Participant will make a filing with 
the SEC pursuant to section 19(b) of the Exchange Act regarding any CAT 
Fee related to Prospective CAT Costs until the Financial Accountability 
Milestone related to Period 4 described in Section 11.6 has been 
satisfied.''
e. CAT Fee Details
    CAT LLC proposes to provide Participants and CAT Executing Brokers 
with details regarding the calculation of their CAT Fees upon request. 
Specifically, CAT LLC proposes to add Proposed Section 11.3(a)(iv)(A) 
to the CAT NMS Plan to describe this disclosure. This provision would 
state that ``[d]etails regarding the calculation of a Participant or 
CAT Executing Brokers' CAT Fees will be provided upon request to such 
Participant or CAT Executing Broker. At a minimum, such details would 
include each Participant or CAT Executing Broker's executed equivalent 
share volume and corresponding fee by (1) Listed Options, NMS Stocks 
and OTC Equity Securities, (2) by transactions executed on each 
exchange and transactions executed otherwise than on an exchange, and 
(3) by buy-side transactions and sell-side transactions.'' \41\ Such 
information would provide Participants and CAT Executing Brokers with 
the ability to understand the details regarding the calculation of 
their CAT Fees.
---------------------------------------------------------------------------

    \41\ As highlighted in Exhibit B, this second sentence in 
Proposed Section 11.3(a)(iv)(A) of the CAT NMS Plan was not included 
in the proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to make certain aggregate statistics 
regarding the CAT Fees publicly available. Specifically, CAT LLC 
proposes to add Proposed Section 11.3(a)(iv)(B) to the CAT NMS Plan to 
describe this public disclosure. This provision would state that 
``[f]or each CAT Fee, at a minimum, CAT LLC will make publicly 
available the aggregate executed equivalent share volume and 
corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC 
Equity Securities, (2) by transactions executed on each exchange and 
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions.'' \42\
---------------------------------------------------------------------------

    \42\ As highlighted in Exhibit B, Proposed Section 
11.3(a)(iv)(B) of the CAT NMS Plan was not included in the proposed 
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

4. Historical CAT Assessment
    CAT LLC proposes to describe Historical CAT Assessments related to 
Historical CAT Costs in Proposed Section 11.3(b) of the CAT NMS Plan. 
Proposed Section 11.3(b) of the CAT NMS Plan would describe that 
Historical CAT Assessments apply only to Industry Members (not to 
Participants), the manner of calculating the Historical Fee Rate for 
the Historical CAT Assessment, a description of the calculation of the 
Industry Member CAT Fees, a description of the fee filings under 
section 19(b) of the Exchange Act for Historical CAT Assessments, and 
details regarding the calculation of the Historical CAT Assessments 
that are available upon request or publicly available. The following 
describes in detail Section 11.3(b) of the CAT NMS Plan.
a. Introductory Statement
    CAT LLC proposes to revise Section 11.3(b) of the CAT NMS Plan to 
address Historical CAT Assessments related to Historical CAT Costs to 
be charged to Industry Members. Accordingly, CAT LLC proposes to revise 
the introductory

[[Page 17096]]

statement in Proposed Section 11.3(b) of the CAT NMS Plan to state that 
``[t]he Operating Committee will establish one or more fees (each a 
``Historical CAT Assessment'') to be payable by Industry Members with 
regard to CAT costs previously paid by the Participants (``Past CAT 
Costs'') as follows:''.\43\ With the reference to ``one or more'' 
Historical CAT Fees, this provision also clarifies that there may be 
one or more Historical CAT Assessments.
---------------------------------------------------------------------------

    \43\ Note that there may be one or more Historical CAT 
Assessments, depending upon the timing of any approval of the 
amendment to the CAT NMS Plan and the completion of the Financial 
Accountability Milestones. For a discussion of the Financial 
Accountability Milestones, see Section 11.6 of the CAT NMS Plan.
---------------------------------------------------------------------------

b. Calculation of Historical Fee Rate
    CAT LLC proposes to provide details regarding the calculation of 
the Historical CAT Assessment in Proposed Section 11.3(b)(i) of the CAT 
NMS Plan. These details would include a description of the calculation 
of the Historical Fee Rate, the counting method for executed equivalent 
shares, the Historical CAT Costs, the Historical Recovery Period, and 
the projected total executed equivalent share volume of transactions in 
Eligible Securities for the Historical Recovery Period.
i. General
    Proposed paragraph (a) of Proposed Section 11.3(b)(i) of the CAT 
NMS Plan would describe the calculation of the Historical Fee Rate for 
each Historical CAT Assessment and the requirement for Participants to 
file a fee filing for each Historical CAT Assessment. This proposed 
provision also would state that Industry Members would be required to 
pay each Historical CAT Assessment once such Historical CAT Assessment 
is in effect in accordance with section 19(b) of the Exchange Act. 
Specifically, this proposed provision would state that:

    The Operating Committee will calculate the Historical Fee Rate 
for each Historical CAT Assessment by dividing the Historical CAT 
Costs for each Historical CAT Assessment by the reasonably projected 
total executed equivalent share volume of all transactions in 
Eligible Securities for the Historical Recovery Period for each 
Historical CAT Assessment. Once the Operating Committee has approved 
such Historical Fee Rate, the Participants shall be required to file 
with the SEC pursuant to section 19(b) of the Exchange Act such 
Historical CAT Assessment to be charged Industry Members calculated 
using such Historical Fee Rate. Industry Members will be required to 
pay such Historical CAT Assessment calculated using such Historical 
Fee Rate once such Historical CAT Assessment is in effect in 
accordance with section 19(b) of the Exchange Act.

    CAT LLC proposes to clarify that the calculation of each Historical 
Fee Rate would be performed using reasonably projected total executed 
equivalent share volume.\44\ Accordingly, CAT LLC proposes to use the 
term ``reasonably'' to the describe ``projected total executed 
equivalent share volume'' in this provision.
---------------------------------------------------------------------------

    \44\ As highlighted in Exhibit B, this proposed revision to add 
the term ``reasonably'' before ``projected total executed equivalent 
share volume'' in Proposed Section 11.3(b)(i)(A) of the CAT NMS Plan 
was not included in the proposed revisions related to the 2022 
Funding Proposal.
---------------------------------------------------------------------------

ii. Executed Equivalent Shares
    The Historical CAT Assessment would be calculated based on the same 
executed equivalent share calculation as CAT Fees related to 
Prospective CAT Costs. Accordingly, Proposed Section 11.3(b)(i)(B) of 
the CAT NMS Plan would make it clear that the calculation is the same 
for both types of fees. Specifically, Proposed Section 11.3(b)(i)(B) of 
the CAT NMS Plan would state that ``[f]or purposes of calculating each 
Historical CAT Assessment, executed equivalent shares in a transaction 
in Eligible Securities will be reasonably counted in the same manner as 
set forth in paragraph (a)(i)(B) of this Section 11.3.''
iii. Historical CAT Costs
    The calculation of the Historical CAT Assessment depends upon the 
determination of the Historical CAT Costs. Proposed Section 
11.3(b)(i)(C) of the CAT NMS Plan would describe the Historical CAT 
Costs for calculating Historical CAT Assessments. The Operating 
Committee will reasonably determine the Past CAT Costs sought to be 
recovered through the Historical CAT Assessment. CAT LLC proposes to 
make this approach clear in the language of the CAT NMS Plan by adding 
Proposed Section 11.3(b)(i)(C) of the CAT NMS Plan, which would state 
that ``[t]he Operating Committee will reasonably determine the 
Historical CAT Costs sought to be recovered by each Historical CAT 
Assessment, where the Historical CAT Costs will be Past CAT Costs minus 
Past CAT Costs reasonably excluded from Historical CAT Costs by the 
Operating Committee.'' \45\
---------------------------------------------------------------------------

    \45\ As highlighted in Exhibit B, this proposed revision to add 
the term ``reasonably'' before ``excluded'' in Proposed Section 
11.3(b)(i)(C) of the CAT NMS Plan was not included in the proposed 
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    CAT LLC proposes to further clarify the amount to be collected via 
the Historical CAT Assessments in Proposed Section 11.3(b)(i)(C) of the 
CAT NMS Plan. Specifically, CAT LLC proposes to add the clarifying 
statement that ``[e]ach Historical CAT Assessment will seek to recover 
from CAT Executing Brokers two-thirds of Historical CAT Costs incurred 
during the period covered by the Historical CAT Assessment.'' This 
statement reiterates the requirement set forth in Proposed Section 
11.3(b)(iii)(A) of the CAT NMS Plan regarding the calculation of the 
Historical CAT Assessment, which requires the multiplication of the 
number of executed equivalent shares in the transaction by one-third 
and by the Historical Fee Rate. Each CEBS and CEBB pays one-third, and, 
therefore, two-thirds of the Historical CAT Costs would be collected 
from CAT Executing Brokers.
    CAT LLC also proposes to add the term ``reasonably'' to the 
following sentence in Section 11.1(c) of the CAT NMS Plan before the 
word ``incurred'': ``In determining fees on Participants and Industry 
Members the Operating Committee shall take into account fees, costs and 
expenses (including legal and consulting fees) reasonably incurred by 
the Participants on behalf of the Company prior to the Effective Date 
in connection with the creation and implementation of the CAT.'' \46\ 
The addition of the term ``reasonably'' would require such fees, costs 
and expenses to be reasonable.
---------------------------------------------------------------------------

    \46\ As highlighted in Exhibit B, this proposed revision to 
Section 11.1(c) of the CAT NMS Plan was not included in the proposed 
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

iv. Historical Recovery Period
    The calculation of the Historical CAT Assessment also depends upon 
the determination of the Historical Recovery Period. As the total 
amount of the Historical CAT Costs have not yet been determined because 
the CAT fee model has not yet been approved and CAT LLC continues to 
incur costs, CAT LLC has not determined the specific recovery period 
for any particular Historical CAT Assessment. Based on CAT costs 
incurred to date, however, CAT LLC believes that the Historical 
Recovery Period should not be less than 24 months or more than five 
years. In analyzing the potential Historical Recovery Periods, CAT LLC 
sought to weigh the need for a reasonable Historical Fee Rate that 
spreads the Historical CAT Costs over an appropriate amount of time and 
the need to repay the loan notes to the Participants in a timely 
fashion. CAT LLC analyzed potential recovery periods using the 
Historical CAT Costs through 2022 and the total executed equivalent

[[Page 17097]]

share volume of transactions in Eligible Securities for 2021 to 
calculate the projected total executed equivalent share volume of 
transactions. Based on the variables in this analysis, CAT LLC 
determined that the Historical Fee Rate calculated using a Historical 
Recovery Period of two to five years would establish a reasonable 
Historical Fee Rate even if Industry Members were required to pay a 
Historical CAT Assessment and the ongoing CAT Fee at the same time. CAT 
LLC notes, however, that the actual Historical CAT Assessment would be 
calculated using up-to-date Historical CAT Costs and executed 
equivalent share volume.
    Proposed Section 11.3(b)(i)(D)(I) of the CAT NMS Plan would 
describe the Historical Recovery Period used in calculating the 
Historical Fee Rate. This proposed provision would state that ``[t]he 
length of the Historical Recovery Period used in calculating each 
Historical Fee Rate will be reasonably established by the Operating 
Committee based upon the amount of the Historical CAT Costs to be 
recovered by the Historical CAT Assessment.'' \47\ This proposed 
provision, however, would state that ``no Historical Recovery Period 
used in calculating the Historical Fee Rate shall be less than 24 
months or more than five years.'' As discussed below, the Historical 
Recovery Period is used to calculate the Historical Fee Rate. The 
actual recovery period may be longer or shorter than the Historical 
Recovery Period depending on the actual executed equivalent share 
volumes during the time that the Historical CAT Assessment is in 
effect. Any Historical CAT Assessment would remain in effect until the 
relevant Historical CAT Costs are recovered, whether that time is 
shorter or longer than the Historical Recovery Period used in 
calculating the Historical Fee Rate.
---------------------------------------------------------------------------

    \47\ This provision would require that the Historical Recovery 
Period be ``reasonably'' established by the Operating Committee.
---------------------------------------------------------------------------

    Proposed Section 11.3(b)(i)(D)(II) of the CAT NMS Plan would 
describe the length of the time that the Historical CAT Assessment 
would be in effect, which may be greater than or less than the 
Historical Recovery Period, depending on the amount of the Historical 
CAT Assessments collected based on the actual volume during the time 
that the Historical Assessment is in effect. Any Historical CAT 
Assessment would remain in effect until the relevant Historical CAT 
Costs are collected, whether that time is shorter or longer than the 
Historical Recovery Period used in calculating the Historical Fee Rate. 
Accordingly, this provision states that ``[n]otwithstanding the length 
of the Historical Recovery Period used in calculating the Historical 
Fee Rate, each Historical CAT Assessment calculated using the 
Historical Fee Rate will remain in effect until all Historical CAT 
Costs for the Historical CAT Assessment are collected.''
v. Projected Total Executed Equivalent Share Volume
    The Historical Fee Rate for a Historical CAT Assessment would be 
calculated by using the projected total executed equivalent share 
volume of all transactions in Eligible Securities for the Historical 
Recovery Period for such Historical CAT Assessment. CAT LLC proposes to 
clarify the manner of calculating the projected total executed 
equivalent share volume for each Historical CAT Assessment in Proposed 
Section 11.3(b)(i)(E) to the CAT NMS Plan. CAT LLC proposes to state in 
this provision that the projection will be determined based on 
transactions in Eligible Securities for the prior twelve months. 
Accordingly, Proposed Section 11.3(b)(i)(E) of the CAT NMS Plan would 
state that ``[t]he Operating Committee shall reasonably determine the 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for each Historical Recovery Period based on the 
executed equivalent share volume of all transactions in Eligible 
Securities for the prior twelve months.'' As with the calculation of 
the projections for CAT Fees, CAT LLC determined that the use of the 
data from the prior twelve months provides an appropriate balance 
between using data from a period that is sufficiently long to avoid 
short term fluctuations while providing data close in time to the 
upcoming relevant period. In addition, CAT LLC proposes to allow the 
Operating Committee to base its projection on the prior twelve months, 
but to use its discretion to analyze the likely volume for the upcoming 
year. As set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT 
NMS Plan, Participants will be required to provide a description of the 
calculation of the projection in their fee filings pursuant to section 
19(b) of the Exchange Act for Historical CAT Assessments. As noted, 
this provision would require the Operating Committee to ``reasonably'' 
determine the projected total executed equivalent share volume.
c. Past CAT Costs and Participants
    Proposed Section 11.3(b)(ii) of the CAT NMS Plan would clarify that 
the Participants would not be required to pay the Historical CAT 
Assessment as the Participants previously have paid all Past CAT Costs. 
It would state that, ``[b]ecause Participants previously have paid Past 
CAT Costs via loans to the Company, Participants would not be required 
to pay any Historical CAT Assessment.'' In addition, Proposed Section 
11.3(b)(ii) of the CAT NMS Plan would clarify that the Historical CAT 
fees collected from Industry Members would be allocated to Participants 
for repayment of the outstanding loan notes of the Participants to the 
Company on a pro rata basis; such fees would not be allocated to 
Participants based on the executed equivalent share volume of 
transactions in Eligible Securities. Specifically, Proposed Section 
11.3(b)(ii) of the CAT NMS Plan would state that ``[i]n lieu of a 
Historical CAT Assessment, the Participants' one-third share of 
Historical CAT Costs and such other additional Past CAT Costs as 
reasonably determined by the Operating Committee will be paid by the 
cancellation of loans made to the Company on a pro rata basis based on 
the outstanding loan amounts due under the loans.'' Furthermore, 
Proposed Section 11.3(b)(ii) of the CAT NMS Plan would emphasize that 
``[t]he Historical CAT Assessment is designed to recover two-thirds of 
the Historical CAT Costs.'' \48\
---------------------------------------------------------------------------

    \48\ As highlighted in Exhibit B, the sentence ``In lieu of a 
Historical CAT Assessment, the Participants' one-third share of 
Historical CAT Costs and such other additional Past CAT Costs as 
reasonably determined by the Operating Committee will be paid by the 
cancellation of loans made to the Company on a pro rata basis based 
on the outstanding loan amounts due under the loans'' has been 
revised from the 2022 Funding Proposal. CAT LLC proposes to revise 
the phrase ``cancellation of the loans made by the Company'' to 
``cancellation of the loans made to the Company'' as the loans were 
made to the Company, not by the Company. In addition, CAT LLC 
proposes to revise the sentence to clarify that Participants will 
remain responsible via the loan cancellations for one-third of 
Historical CAT Costs as well as 100% of certain other Past CAT Costs 
(e.g., the Excluded Costs discussed below).
---------------------------------------------------------------------------

d. Historical CAT Assessment for Industry Members
    CAT LLC proposes to describe the Historical CAT Assessment for 
Industry Members in Proposed Section 11.3(b)(iii) of the CAT NMS Plan. 
Proposed Section 11.3(b)(iii) of the CAT NMS Plan would have two 
paragraphs, (A) and (B), where paragraph (A) would describe the 
Historical CAT Assessment for Industry Member, and paragraph (B) would 
describe the fee filings required to be filed pursuant to section 19(b) 
of the Exchange Act regarding the Historical CAT Assessments.

[[Page 17098]]

i. Industry Member Obligation for Historical CAT Assessment
    CAT LLC proposes to describe the Historical CAT Assessment charged 
to Industry Members in Proposed Section 11.3(b)(iii)(A) of the CAT NMS 
Plan. Specifically, this proposed paragraph would state that:

    Each month in which a Historical CAT Assessment is in effect, 
each CEBB and each CEBS shall pay a fee for each transaction in 
Eligible Securities executed by the CEBB or CEBS from the prior 
month as set forth in CAT Data, where the Historical CAT Assessment 
for each transaction will be calculated by multiplying the number of 
executed equivalent shares in the transaction by one-third and by 
the Historical Fee Rate reasonably determined pursuant to paragraph 
(b)(i) of this Section 11.3.

    As noted, this provision would require the Operating Committee to 
``reasonably'' determine the Historical Fee Rate pursuant to Proposed 
Section 11.3(b)(i) of the CAT NMS Plan.
ii. Historical CAT Assessment Fee Filings
    CAT LLC proposes to provide additional details regarding the fee 
filings to be filed by the Participants regarding each Historical CAT 
Assessment pursuant to section 19(b) of the Exchange Act in Proposed 
Section 11.3(b)(iii)(B) of the CAT NMS Plan.\49\ Specifically, this 
provision would describe that fee filings would be required for each 
Historical CAT Assessment, the content of such fee filings, and the 
effect of the Financial Accountability Milestones described in Section 
11.6 of the CAT NMS Plan on the fee filings.
---------------------------------------------------------------------------

    \49\ CAT LLC expects the fee filings required to be made by the 
Participants pursuant to Section 19(b) of the Exchange Act with 
regard to Historical CAT Assessments to be filed pursuant to Section 
19(b)(3)(A) of the Exchange Act. In accordance with Section 
19(b)(3)(A) of the Exchange Act, fee filings made pursuant to 
Section 19(b)(3)(A) of the Exchange Act would be effective upon 
filing.
---------------------------------------------------------------------------

A. Number of Fee Filings for Historical CAT Assessments
    CAT LLC proposes to clarify how many fee filings pursuant to 
section 19(b) of the Exchange Act Participants would be required to 
make with regard to Historical CAT Assessments. CAT LLC proposes to 
clarify that each Participant will be required to file a fee filing 
pursuant to section 19(b) of the Exchange Act to describe each 
Historical CAT Assessment. Accordingly, CAT LLC proposes to describe 
this requirement in Proposed Section 11.3(b)(iii)(B)(I) of the CAT NMS 
Plan, which would state that ``Participants will be required to file 
with the SEC pursuant to section 19(b) of the Exchange Act a filing for 
each Historical CAT Assessment.''
B. Content of Fee Filings for Historical CAT Assessments
    CAT LLC proposes to provide additional detail as to the information 
that Participants would be required to include in their fee filings to 
be made pursuant to section 19(b) of the Exchange and Rule 19b-4(f)(2) 
for Historical CAT Assessments in proposed paragraph (b)(iii)(B)(II) of 
Proposed Section 11.3 of the CAT NMS Plan. The proposed paragraph sets 
forth the information about the Historical CAT Assessments that should 
be included in the fee filings required to be made by the Participants 
pursuant to section 19(b) of the Exchange Act. Specifically, such 
filings would be required to include: (A) the Historical Fee Rate; (B) 
a brief description of the amount and type of Historical CAT Costs, 
including (1) the technology line items of cloud hosting services, 
operating fees, CAIS operating fees, change request fees and 
capitalized developed technology costs, (2) legal, (3) consulting, (4) 
insurance, (5) professional and administration, and (6) public 
relations costs; (C) the Historical Recovery Period and the reasons for 
its length; and (D) the projected total executed equivalent share 
volume of all transactions in Eligible Securities for the Historical 
Recovery Period, and a description of the calculation of the 
projection. Such detailed information would provide Industry Members 
and other interested parties with a clear understanding of the 
calculation of each Historical CAT Assessment and its relationship to 
Historical CAT Costs.\50\
---------------------------------------------------------------------------

    \50\ As a practical matter, the fee filing would provide the 
exact fee per executed equivalent share to be paid for the 
Historical CAT Assessment, by multiplying the Historical Fee Rate by 
one-third and describing the relevant number of decimal places for 
the fee.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to clarify that the Historical CAT 
Costs described in the fee filings must provide sufficient detail to 
demonstrate that such costs are reasonable and appropriate. Therefore, 
CAT LLC proposes to add the following sentence to Proposed Section 
11.3(b)(iii)(B)(II) of the CAT NMS Plan: ``The information provided in 
this Section would be provided with sufficient detail to demonstrate 
that the Historical CAT Costs are reasonable and appropriate.''
C. Financial Accountability Milestones
    CAT LLC recognizes that the collection of Historical CAT 
Assessments from Industry Members is subject to Section 11.6 of the CAT 
NMS Plan regarding the Financial Accountability Milestones. 
Accordingly, CAT LLC proposes to clarify that Participants will not 
make CAT fee filings pursuant to section 19(b) of the Exchange Act 
regarding a Historical CAT Assessment until any applicable Financial 
Accountability Milestone has been satisfied. Specifically, CAT LLC 
proposes to add Proposed Section 11.3(b)(iii)(B)(III) to the CAT NMS 
Plan. This provision would state that ``[n]o Participant will make a 
filing with the SEC pursuant to section 19(b) of the Exchange Act 
regarding any Historical CAT Assessment until any applicable Financial 
Accountability Milestone described in Section 11.6 has been 
satisfied.''
e. Historical CAT Assessment Details
    CAT LLC proposes to provide CAT Executing Brokers with details 
regarding the calculation of their Historical CAT Assessments upon 
request. Specifically, CAT LLC proposes to add Proposed Section 
11.3(b)(iv)(A) to the CAT NMS Plan, which would state that ``[d]etails 
regarding the calculation of a CAT Executing Broker's Historical CAT 
Assessment will be provided upon request to such CAT Executing Broker. 
At a minimum, such details would include each CAT Executing Broker's 
executed equivalent share volume and corresponding fee by (1) Listed 
Options, NMS Stocks and OTC Equity Securities, (2) by transactions 
executed on each exchange and transactions executed otherwise than on 
an exchange, and (3) by buy-side transactions and sell-side 
transactions.'' \51\ Such information would provide CAT Executing 
Brokers with the ability to understand the details regarding the 
calculation of their Historical CAT Assessments.
---------------------------------------------------------------------------

    \51\ As highlighted in Exhibit B, the second sentence of 
Proposed Section 11.3(b)(iv)(A) of the CAT NMS Plan was not included 
in the proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to make certain aggregate statistics 
regarding Historical CAT Assessments publicly available. Specifically, 
CAT LLC proposes to add Proposed Section 11.3(b)(iv)(B) to the CAT NMS 
Plan. This provision would state that ``[f]or each Historical CAT 
Assessment, at a minimum, CAT LLC will make publicly available the 
aggregate executed equivalent share volume and corresponding aggregate 
fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by 
transactions executed on each exchange and transactions executed 
otherwise than on an exchange, and (3) by buy-side

[[Page 17099]]

transactions and sell-side transactions.'' \52\
---------------------------------------------------------------------------

    \52\ As highlighted in Exhibit B, Section 11.3(b)(iv)(B) of the 
CAT NMS Plan was not included in the proposed revisions related to 
the 2022 Funding Proposal.
---------------------------------------------------------------------------

5. CAT Fee Schedule for Participants
    To implement the Participant CAT fees, CAT LLC proposes to add a 
fee schedule, entitled ``Consolidated Audit Trail Funding Fees,'' to 
Appendix B of the CAT NMS Plan. Proposed paragraph (a) of the fee 
schedule would describe the CAT Fees to be paid by the Participants 
under the Funding Proposal. Specifically, paragraph (a) of the 
Participant fee schedule would state that ``[e]ach Participant shall 
pay the CAT Fee set forth in Section 11.3(a) of the CAT NMS Plan to 
Consolidated Audit Trail, LLC in the manner prescribed by Consolidated 
Audit Trail, LLC on a monthly basis based on the Participant's 
transactions in Eligible Securities in the prior month.''
6. Additional Changes From Original Funding Model
    CAT LLC proposes certain revisions to Article XI of the CAT NMS 
Plan to implement the Funding Proposal. CAT LLC proposes to make the 
following changes to the CAT NMS Plan in addition to the proposed 
changes to the CAT NMS Plan discussed above.
a. Elimination of Definition of ``Execution Venue''
    Section 1.1 of the CAT NMS Plan defines the term ``Execution 
Venue'' to mean ``a Participant or an alternative trading system 
(`ATS') (as defined in Rule 300 of Regulation ATS) that operates 
pursuant to Rule 301 of Regulation ATS (excluding any such ATS that 
does not execute orders).'' Currently, the term ``Execution Venue'' is 
used in Sections 11.2 and 11.3 of the CAT NMS Plan to describe how CAT 
costs would be allocated among CAT Reporters under the Original Funding 
Model. The Original Funding Model would have imposed fees based on 
market share to CAT Reporters that are Execution Venues, including 
ATSs, and fees based on message traffic for Industry Members' non-ATS 
activities. In contrast, the Funding Proposal would impose fees based 
on the executed equivalent shares of transactions in Eligible 
Securities for three categories of CAT Reporters: Participants, CEBBs 
and CEBSs. Accordingly, as the concept for an ``Execution Venue'' would 
not be relevant for the Funding Proposal, CAT LLC proposes to delete 
this term and its definition from Section 1.1 of the CAT NMS Plan.
b. Use of Executed Equivalent Share Volume Under Funding Proposal
    The Original Funding Model set forth in the CAT NMS Plan requires 
Participants and Execution Venue ATSs to pay CAT fees based on market 
share and Industry Members (other than Execution Venue ATSs) to pay CAT 
fees based on message traffic. The CAT NMS Plan also describes how the 
market share-based fee would be calculated for Participants and other 
Execution Venue ATSs and how the message traffic-based fee would be 
calculated for Industry Members (other than Execution Venue ATSs). CAT 
LLC proposes to amend the CAT NMS Plan to require Participants, CEBBs 
and CEBSs to pay CAT fees based on the number of executed equivalent 
shares in a transaction in Eligible Securities, rather than based on 
market share and message traffic. Accordingly, the Operating Committee 
proposes to amend Section 11.2(b) and (c) and Section 11.3(a) and (b) 
of the CAT NMS Plan to reflect the proposed use of the number of 
executed equivalent shares in transactions in Eligible Securities in 
calculating CAT fees.
    Section 11.2(b) of the CAT NMS Plan states that ``[i]n establishing 
the funding of the Company, the Operating Committee shall seek . . . 
(b) to establish an allocation of the Company's related costs among 
Participants and Industry Members that is consistent with the Exchange 
Act, taking into account the timeline for implementation of the CAT and 
distinctions in the securities trading operations of Participants and 
Industry Members and their relative impact upon Company resources and 
operations.'' CAT LLC proposes to delete the requirement to take into 
account ``distinctions in the securities trading operations of 
Participants and Industry Members and their relative impact upon 
Company resources and operations.'' This requirement related to using 
message traffic and market share in the calculation of CAT fees, as 
message traffic and market share were metrics related to the impact of 
a CAT Reporter on the Company's resources and operations. With the 
proposed move to the use of the executed equivalent shares metric 
instead of message traffic and market share, the requirement is no 
longer relevant.
    Section 11.2(c) of the CAT NMS Plan states that ``[i]n establishing 
the funding of the Company, the Operating Committee shall seek . . . 
(c) to establish a tiered fee structure in which the fees charged to: 
(i) CAT Reporters that are Execution Venues, including ATSs, are based 
upon the level of market share; (ii) Industry Members' non-ATS 
activities are based upon message traffic.'' CAT LLC proposes to delete 
subparagraphs (i) and (ii) and replace these subparagraphs with the 
requirement that the fee structure in which the fees charged to 
``Participants and Industry Members are based upon the executed 
equivalent share volume of transactions in Eligible Securities.'' \53\
---------------------------------------------------------------------------

    \53\ As discussed in the next section, the Operating Committee 
also proposes to delete the reference to a ``tiered'' fee structure.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to amend the CAT funding principles 
to clarify that CAT Fees and the Historical CAT Assessments are 
intended to be cost-based fees--that is, the fees are designed to 
recover the cost of the creation, implementation and operation of the 
CAT. CAT LLC proposes to amend the funding principle set forth in 
Section 11.2(c) by making a specific reference to the costs of the CAT. 
With this proposed change, Proposed Section 11.2(c) would state that 
``[i]n establishing the funding of the Company, the Operating Committee 
shall seek: . . . to establish a fee structure in which the fees 
charged to Participants and Industry Members are based upon the 
executed equivalent share volume of transactions in Eligible 
Securities, and the costs of the CAT.''
    Section 11.3(a) of the CAT NMS Plan provides additional detail 
regarding the market share-based fees to be paid by Participants and 
Execution Venue ATSs under the Original Funding Model. Specifically, 
Section 11.3(a) of the CAT NMS Plan states:

    (a) The Operating Committee will establish fixed fees to be 
payable by Execution Venues as provided in this Section 11.3(a):
    (i) Each Execution Venue that: (A) executes transactions; or (B) 
in the case of a national securities association, has trades 
reported by its members to its trade reporting facility or 
facilities for reporting transactions effected otherwise than on an 
exchange, in NMS Stocks or OTC Equity Securities will pay a fixed 
fee depending on the market share of that Execution Venue in NMS 
Stocks and OTC Equity Securities, with the Operating Committee 
establishing at least two and no more than five tiers of fixed fees, 
based on an Execution Venue's NMS Stocks and OTC Equity Securities 
market share. For these purposes, market share for Execution Venues 
that execute transactions will be calculated by share volume, and 
market share for a national securities association that has trades 
reported by its members to its trade reporting facility or 
facilities for reporting transactions effected otherwise than on an 
exchange in NMS Stocks or OTC Equity Securities will be calculated 
based on share volume of trades reported, provided, however, that 
the share volume reported to such national securities association by 
an Execution Venue shall not

[[Page 17100]]

be included in the calculation of such national security 
association's market share.
    (ii) Each Execution Venue that executes transactions in Listed 
Options will pay a fixed fee depending on the Listed Options market 
share of that Execution Venue, with the Operating Committee 
establishing at least two and no more than five tiers of fixed fees, 
based on an Execution Venue's Listed Options market share. For these 
purposes, market share will be calculated by contract volume.

    CAT LLC proposes to delete Section 11.3(a) of the CAT NMS Plan and 
replace this paragraph with a description of the CAT Fees related to 
Prospective CAT Costs, as described above.
    Section 11.3(b) of the CAT NMS Plan provides additional detail 
regarding the message traffic-based CAT fees to be paid by Industry 
Members (other than Execution Venue ATSs) under the Original Funding 
Model. Specifically, Section 11.3(b) of the CAT NMS Plan states:

    The Operating Committee will establish fixed fees to be payable 
by Industry Members, based on the message traffic generated by such 
Industry Member, with the Operating Committee establishing at least 
five and no more than nine tiers of fixed fees, based on message 
traffic. For the avoidance of doubt, the fixed fees payable by 
Industry Members pursuant to this paragraph shall, in addition to 
any other applicable message traffic, include message traffic 
generated by: (i) an ATS that does not execute orders that is 
sponsored by such Industry Member; and (ii) routing orders to and 
from any ATS sponsored by such Industry Member.

    CAT LLC proposes to delete Section 11.3(b) of the CAT NMS Plan and 
replace this paragraph with a description of the Historical CAT 
Assessments, as described above.
c. Elimination of Tiered Fees
    CAT LLC proposes to eliminate the use of tiered fees that were 
included in the Original Funding Model. Instead, under the Funding 
Proposal, each Participant, CEBB or CEBS would pay a fee based solely 
on its transactions in Eligible Securities. The Operating Committee 
therefore proposes to amend Sections 11.1(d), 11.2(c), 11.3(a) and 
11.3(b) of the CAT NMS Plan to eliminate tiered fees and related 
concepts.
    Utilizing a tiered fee structure, by its nature, would create 
certain inequities among the CAT fees paid by CAT Reporters. For 
example, two CAT Reporters with comparable executed equivalent share 
volume may pay notably different fees if one falls in a higher tier and 
the other falls within a lower tier. Correspondingly, a tiered fee 
structure generally would reduce fees for CAT Reporters with higher 
executed share volume in one tier, while increasing fees for Industry 
Members with lower executed share volume in the same tier, as compared 
to a non-tiered fee. Furthermore, CAT Reporters in lower tiers 
potentially pay more than they would without the use of tiers. While 
tiering appropriately exists in various other self-regulatory fee 
programs, CAT LLC proposes to eliminate the tiering concept for the 
Funding Proposal.
    By charging each Participant, CEBB and CEBS a CAT fee directly 
based on its own executed equivalent share volume, rather than charging 
a tiered fee, the Funding Proposal would result in a CAT fee being tied 
more directly to the CAT Reporter's executed share volume. In contrast, 
with a tiered fee, CAT Reporters with different levels of executed 
equivalent share volume that are placed in the same tier would all pay 
the same CAT fee, thereby limiting the correlation between a CAT 
Reporter's activity and its CAT fee.
    The proposed non-tiering approach is simpler and more objective to 
administer than the tiering approach. With a tiering approach, the 
number of tiers for Participants, CEBBs and CEBSs, the boundaries for 
each tier and the fees assigned to each tier must be established. In 
the absence of clear groupings of CAT Reporters, selecting the number 
of, boundaries for, and the fees associated with each tier would be 
subject to some level of subjectivity. Furthermore, the establishment 
of tiers would need to be continually reassessed based on changes in 
the executed equivalent share volume of transactions in Eligible 
Securities, thereby requiring regular subjective assessments. 
Accordingly, the removal of tiering from the Funding Proposal 
eliminates a variety of subjective analyses and judgments from the 
model and simplifies the determination of CAT fees.
    Section 11.1(d) of the CAT NMS Plan states that ``[c]onsistent with 
this Article XI, the Operating Committee shall adopt policies, 
procedures, and practices regarding the budget and budgeting process, 
assignment of tiers, resolution of disputes, billing and collection of 
fees, and other related matters.'' With the elimination of tiered fees, 
the reference to the ``assignment of tiers'' would no longer be 
relevant for the Funding Proposal. Therefore, CAT LLC proposes to 
delete the reference to ``assignment of tiers'' from Section 11.1(d).
    Section 11.1(d) of the CAT NMS Plan also states that:

    For the avoidance of doubt, as part of its regular review of 
fees for the CAT, the Operating Committee shall have the right to 
change the tier assigned to any particular Person in accordance with 
fee schedules previously filed with the Commission that are 
reasonable, equitable and not unfairly discriminatory and subject to 
public notice and comment, pursuant to this Article XI. Any such 
changes will be effective upon reasonable notice to such Person.

    As noted above, unlike the Original Funding Model, the Funding 
Proposal would not utilize tiered fees. Accordingly, these two 
sentences would not be applicable to the Funding Proposal. Therefore, 
CAT LLC proposes to delete these two sentences from Section 11.1(d) of 
the CAT NMS Plan.
    CAT LLC proposes to delete the reference to ``tiered'' fees from 
Section 11.2(c) of the CAT NMS Plan. Section 11.2(c) of the CAT NMS 
Plan states that ``[i]n establishing the funding of the Company, the 
Operating Committee shall seek: . . . (c) to establish a tiered fee 
structure . . .'' CAT LLC propose to delete the word ``tiered'' from 
this provision as the CAT fees would not be tiered under the Funding 
Proposal.
    CAT LLC also proposes to delete paragraph (iii) of Section 11.2(c) 
of the CAT NMS Plan. Paragraph (iii) of Section 11.2(c) of the CAT NMS 
Plan states that the Operating Committee shall seek to establish a 
tiered fee structure in which fees charged to:

the CAT Reporters with the most CAT-related activity (measured by 
market share and/or message traffic, as applicable) be generally 
comparable (where for these comparability purposes, the tiered fee 
structure takes into consideration affiliations between or among CAT 
Reporters, whether Execution Venues and/or Industry Members).

    Under the Original Funding Model, the comparability provision was 
an important factor in determining the tiers for Industry Members and 
Execution Venues. In determining the tiers, the Operating Committee 
sought to establish comparable fees among the CAT Reporters with the 
most Reportable Events.\54\ Under the Funding Proposal, however, the 
comparability provision is no longer necessary, as a tiered fee 
structure would not be used for Industry Members or Participants.
---------------------------------------------------------------------------

    \54\ See, e.g., Securities Exchange Act Rel. No. 82451 (Jan. 5, 
2018), 83 FR 1399, 1406-07 (Jan. 11, 2018) (``2018 Fee Proposal 
Release'').
---------------------------------------------------------------------------

    As discussed above, the Operating Committee proposes to replace the 
language in Sections 11.3(a) and (b) of the CAT NMS Plan with language 
implementing the Funding Proposal. These proposed changes would remove 
the references to tiers in Sections 11.3(a)(i) and (ii) and 11.3(b) of 
the CAT

[[Page 17101]]

NMS Plan, along with the other proposed changes. Specifically, Section 
11.3(a)(i) of the CAT NMS Plan states that the Operating Committee, 
when establishing fees for Execution Venues for NMS Stocks and OTC 
Equity Securities, will establish ``at least two and no more than five 
tiers of fixed fees, based on an Execution Venue's NMS Stocks and OTC 
Equity Securities market share.'' Similarly, Section 11.3(a)(ii) of the 
CAT NMS Plan states that the Operating Committee, when establishing 
fees for Execution Venues that execute transactions in Listed Options, 
will establish ``at least two and no more than five tiers of fixed 
fees, based on an Execution Venue's Listed Options market share.'' 
Section 11.3(b) of the CAT NMS Plan states that the Operating 
Committee, when establishing fees to be payable by Industry Members, 
will establish ``at least five and no more than nine tiers of fixed 
fees, based on message traffic.'' CAT LLC proposes to delete each of 
these references to tiers from the CAT NMS Plan.
d. No Fixed Fees
    As discussed above, CAT LLC proposes to replace the language in 
Sections 11.3(a) and (b) of the CAT NMS Plan with language implementing 
the Funding Proposal. These proposed changes also would remove the 
references to ``fixed fees'' in Sections 11.3(a), 11.3(a)(i), 
11.3(a)(ii) and 11.3(b) and replaced them with references to ``fees.'' 
Under the Funding Proposal, the CAT fees to be paid by Participants, 
CEBBs and CEBSs will vary in accordance with their executed equivalent 
share volume of transactions in Eligible Securities, although the Fee 
Rate will be fixed for a relevant period. Therefore, the concept of a 
fixed fee--that is, a fee that does not vary depending on 
circumstances--is not relevant under the Funding Proposal.
7. Billing and Collection of CAT Fees
    Consistent with Section 11.1(d) of the CAT NMS Plan, CAT LLC will 
adopt policies, procedures and practices regarding the billing and 
collection of fees. In addition, pursuant to Section 11.4 of the CAT 
NMS Plan, CAT LLC will establish a system for the collection of CAT 
fees from Participants and Industry Members. As set forth in Section 
11.4 of the CAT NMS Plan, each Participant would be required to pay its 
CAT fees authorized under the CAT NMS Plan as required by Section 
3.7(b) of the CAT NMS Plan.\55\ Section 3.7(b) of the CAT NMS Plan 
provides the following:
---------------------------------------------------------------------------

    \55\ Participants and CAT Executing Brokers would be responsible 
for a fee each month in which they are a CAT Reporter. If a 
Participant or CAT Executing Broker ceases to the meet the 
definition of a CAT Reporter during a month, the Participant or CAT 
Executing Broker would still be responsible for CAT fees associated 
with its transactions during that month.

    Each Participant shall pay all fees or other amounts required to 
be paid under this Agreement within thirty (30) days after receipt 
of an invoice or other notice indicating payment is due (unless a 
longer payment period is otherwise indicated) (the ``Payment 
Date''). The Participant shall pay interest on the outstanding 
balance from the Payment Date until such fee or amount is paid at a 
per annum rate equal to the lesser of: (i) the Prime Rate plus 300 
basis points; or (ii) the maximum rate permitted by applicable law. 
If any such remaining outstanding balance is not paid within thirty 
(30) days after the Payment Date, the Participants shall file an 
amendment to this Agreement requesting the termination of the 
participation in the Company of such Participant, and its right to 
any Company Interest, with the SEC. Such amendment shall be 
effective only when it is approved by the SEC in accordance with SEC 
---------------------------------------------------------------------------
Rule 608 or otherwise becomes effective pursuant to SEC Rule 608.

    Section 11.4 of the CAT NMS Plan also addresses the payment of CAT 
fees by Industry Members. Section 11.4 of the CAT NMS Plan states:

    Participants shall require each Industry Member to pay all 
applicable fees authorized under this Article XI within thirty (30) 
days after receipt of an invoice or other notice indicating payment 
is due (unless a longer payment period is otherwise indicated). If 
an Industry Member fails to pay any such fee when due (as determined 
in accordance with the preceding sentence), such Industry Member 
shall pay interest on the outstanding balance from such due date 
until such fee is paid at a per annum rate equal to the lesser of: 
(a) the Prime Rate plus 300 basis points; or (b) the maximum rate 
permitted by applicable law.

8. Illustrative Example of the Funding Proposal
    CAT LLC has prepared an example of how a Historical CAT Assessment 
would be calculated pursuant to the Funding Proposal for illustrative 
purposes only. The illustrative example is set forth in Exhibit C to 
this filing. Note that the calculation of any actual Historical CAT 
Assessment for Historical CAT Costs would differ from this example in 
various ways, as described in more detail in Exhibit C.
9. Advantages of and Support for the Funding Proposal
    CAT LLC proposes to adopt the Funding Proposal as it provides a 
variety of advantages over the Original Funding Model. CAT LLC 
discusses these advantages in this section of the filing.
a. Comparable to Existing Fee Precedent
    The Funding Proposal would operate in a manner similar to other 
funding models employed by the SEC and the Participants, including the 
SEC's Section 31 fees, FINRA's trading activity fee (``FINRA TAF'') and 
the options regulatory fee (``ORF'') utilized by options exchanges. The 
SEC previously has determined that the Participants' sales value fees 
related to Section 31, the FINRA TAF and the ORF are consistent with 
the Exchange Act.
i. Section 31 Fees
    Pursuant to section 31 of the Exchange Act, a national securities 
exchange must pay the Commission a fee based on the aggregate dollar 
amount of sales of securities transacted on the exchange, and a 
national securities association must pay the Commission a fee based on 
the aggregate dollar amount of sales of securities transacted by or 
through any member of the association otherwise than on a national 
securities exchange (collectively, ``covered sales''). The SEC 
calculates the amount of section 31 fees due from each exchange or 
FINRA by multiplying the aggregate dollar amount of its covered sales 
by the fee rate set by the Commission in a procedure set forth in 
section 31(j) of the Exchange Act. These fees are designed to recover 
the costs related to the government's supervision and regulation of the 
securities markets and securities professionals. Section 31 requires 
the SEC to make annual and, in some cases, mid-year adjustments to the 
fee rate. These adjustments are necessary to make the SEC's total 
collection of transaction fees in a given year as close as possible to 
the amount of the regular appropriation to the Commission by Congress 
for that fiscal year.
    To recover the costs of their section 31 fee obligations, each of 
the national securities exchanges and FINRA have adopted, and the SEC 
has approved, rules assessing a regulatory transaction fee on their 
members, the amount of which is set in accordance with section 31 of 
the Exchange Act.\56\ Broker-dealers, in turn, often impose fees on 
their customers that provide the funds to pay the fees owed to the 
exchanges and FINRA.
---------------------------------------------------------------------------

    \56\ See, e.g., Section 3 of Schedule A of FINRA's By-Laws.
---------------------------------------------------------------------------

    Like the well-known, longstanding and accepted section 31-related 
fee model, the Funding Proposal would use

[[Page 17102]]

a predetermined fee rate for the calculation of the fees, seek to 
recover designated regulatory costs (as CAT provides a solely 
regulatory function), and allow for the adjustment of the fee rate 
during the year to seek to match regulatory costs with fees collected. 
The Funding Proposal, however, would impose fees based on executed 
equivalent share volume rather than the sales values of certain 
transactions. Despite the different calculation metric, the Funding 
Proposal is similar to a model well known, long accepted and justified 
under the Exchange Act the purpose of which is also to cover costs 
associated with the regulation of securities markets and securities 
professionals.
ii. FINRA Trading Activity Fee
    The transaction-based fees charged under the Funding Proposal also 
would be similar to FINRA's transaction-based trading activity fee,\57\ 
which was modeled on the Commission's section 31 fee.\58\ Although the 
FINRA TAF is designed to cover a subset of the costs of FINRA services 
(e.g., costs to FINRA of the supervision and regulation of members, 
including performing examinations, financial monitoring, and policy, 
rulemaking, interpretive, and enforcement activities) rather than all 
of FINRA's costs like the CAT, the transaction-based calculation of the 
FINRA TAF and the proposed CAT fees are similar. With the FINRA TAF, 
FINRA members on the sell-side of a transaction are required to pay a 
per share fee for each sale of covered securities, which includes 
exchange registered securities, equity securities traded otherwise than 
on an exchange, security futures, TRACE-Eligible Securities and 
municipal securities, subject to certain exceptions. In approving the 
FINRA TAF, the SEC stated that the implementation of the FINRA TAF ``is 
consistent with section 15A(b)(5) of the Act, in that the proposal is 
reasonably designed to recover NASD costs related to regulation and 
oversight of its members.'' \59\ The SEC further stated that ``[t]he 
Commission recognizes the difficulties inherent in restructuring the 
NASD's regulatory fees, and believes that the NASD has done so in a 
manner that is fair and reasonable.'' \60\ The CAT fees calculated 
under the Funding Proposal would be similar to the FINRA TAF in that 
they would be transaction-based fees intended to provide funding for 
regulatory costs.
---------------------------------------------------------------------------

    \57\ Section 1 of Schedule A of FINRA's By-Laws.
    \58\ See Securities Exchange Act Rel. No. 46416 (Aug. 23, 2002), 
67 FR 55901 (Aug. 30, 2002).
    \59\ Securities Exchange Act Rel. No. 47946 (May 30, 2003), 68 
FR 34021, 34023 (June 6, 2003) (``TAF Release'').
    \60\ Id.
---------------------------------------------------------------------------

iii. Options Regulatory Fee
    The fees charged under the Funding Proposal also would be similar 
to the ORF charged by the options exchanges.\61\ The ORF is a per 
contract fee charged by an options exchange for certain options 
transactions to options members of the relevant exchange. The ORF is 
collected indirectly from exchange members through their clearing firms 
by the Options Clearing Corporation on behalf of the Exchange. Revenue 
generated from the ORF is designed to recover a material portion of an 
options exchange's regulatory costs related to the supervision and 
regulation of its members' options business, including performing 
routine surveillance, investigations, examinations and financial 
monitoring as well as policy, rulemaking, interpretive, and enforcement 
activities. Exchange members generally pass-through the ORF to their 
customers in the same manner that firms pass-through to their customers 
the fees charged by self-regulatory organizations (``SROs'') to help 
the SROs meet their obligations under section 31 of the Exchange 
Act.\62\ The CAT fees calculated under the Funding Proposal would be 
similar to the ORF in that they would be transaction-based fees 
intended to provide funding for regulatory costs.
---------------------------------------------------------------------------

    \61\ See, e.g., Cboe Fee Schedule, MIAX Fee Schedule, and NYSE 
Arca Fee Schedule.
    \62\ See, e.g., Securities Exchange Act Rel. No. 58817 (Oct. 20, 
2008), 73 FR 63744, 63745 (Oct. 27, 2008).
---------------------------------------------------------------------------

b. Fee Metric: Executed Equivalent Share Volume
    CAT LLC proposes to use the executed equivalent share volume of 
transactions in Eligible Securities as the means for allocating CAT 
costs among Participants and Industry Members. The use of executed 
equivalent share volume would replace the use of message traffic for 
allocating costs among Industry Members and the use of market share for 
allocating costs among Participants as set forth in the Original 
Funding Model. The use of executed equivalent share volume is a 
reasonable and equitable method for allocating costs for a variety of 
reasons, and CAT LLC believes it improves upon the use of message 
traffic.
    The proposed use of CAT-reported message traffic as set forth in 
the Original Funding Model raised a variety of issues for allocating 
CAT costs. First, based on a subsequent study of cost drivers for the 
CAT, it was determined that message traffic may be a factor in the CAT 
costs, but it is not the primary factor. CAT costs are dominated by 
technology costs, and the predominant technology costs are data 
processing (e.g., linker) and storage costs.\63\ The data processing 
and storage costs are related to the level of message traffic, but such 
costs also relate to other factors. The data processing and storage 
costs also are directly related to the complexity of the reporting 
requirements for the market activity. For example, in light of the 
complexity of market activity, the CAT's order reporting and linkage 
scenarios document for Industry Members is over 800 pages in length, 
addressing nearly 200 scenarios.\64\ The processing and storage of such 
a large number of complex reporting scenarios requires very complex 
algorithms, which, in turn, lead to significant data processing and 
storage costs. The data processing and storage costs also are driven by 
the stringent performance, timelines and operational requirements for 
processing CAT Data. For example, the CAT NMS Plan requires that CAT 
order events be processed within established timeframes to ensure data 
can be made available to Participants' regulatory staff and the SEC in 
a timely manner. Accordingly, a CAT Reporter's message traffic may be a 
factor, but not a primary factor, in terms of the costs of the CAT.
---------------------------------------------------------------------------

    \63\ For a detailed discussion of cost drivers of the CAT, see 
CAT LLC Webinar, CAT Costs (Sept. 21, 2021), https://www.catnmsplan.com/events/cat-costs-september-21-2021.
    \64\ CAT Industry Member Reporting Scenarios, Version 4.10 (Oct. 
21, 2022), https://www.catnmsplan.com/sites/default/files/2022-10/10.21.22_Industry_Member_Tech_Specs_Reporting_Scenarios_v4.10_CLEAN.pdf.
---------------------------------------------------------------------------

    Second, in general, Industry Member revenue, including revenue 
derived from fees Industry Members charge their clients, is often 
driven by transactions. Because message traffic is separate from 
whether or not a transaction occurs, fees based on message traffic may 
not correlate with common revenue or fee models. As a result, CAT fees 
based on message traffic could impose an outsized adverse financial 
impact on certain Industry Members.
    Third, imposing CAT fees on each CAT Reporter based on its message 
traffic may have an adverse effect on competition, liquidity or other 
aspects of market structure, and may increase model complexity. For 
example, the number of messages for any given order, whether or not 
ultimately executed, could vary depending on how a given order is 
processed, leading to a lack of predictability on the applicable cost 
to

[[Page 17103]]

process any given order or executions for broker-dealers or non-broker-
dealer customers.\65\ As one example, discussed in the context of the 
previously proposed funding models,\66\ market makers in Eligible 
Securities may have very high levels of message traffic due to their 
quoting obligations. Such high levels of message traffic may lead to 
outsized fees for market makers in comparison to their transaction 
activity, thereby placing an excessive financial burden on market 
makers. This, in turn, may lead to a decrease in the number of market 
makers, resulting in a decrease in liquidity and a reduction in market 
quality. To address this effect on market makers, CAT LLC proposed to 
discount the fees that market makers would need to pay. However, such a 
discount adds complexity to the message traffic approach, as the model 
must determine when a discount is necessary and how much the discount 
should be.
---------------------------------------------------------------------------

    \65\ The predictability of fees is discussed further below in 
Section A.9.u of this filing.
    \66\ See 2018 Fee Proposal Release.
---------------------------------------------------------------------------

    The use of executed equivalent share volume to allocate CAT costs 
addresses each of these concerns. The fees are not divorced from 
transactions, the traditional source of revenue for Industry Members; 
fees based on executed equivalent share volume would not adversely 
impact certain market participants to the detriment of the markets, and 
the model is simple to understand and implement. Moreover, in addition 
to these benefits, the executed equivalent share volume is related to, 
but not precisely linked to, the CAT Reporter's burden on the CAT. In 
light of the many inter-related cost drivers of the CAT (e.g., storage, 
message traffic, processing), determining the precise cost burden 
imposed by each individual CAT Reporter on the CAT is not feasible. 
Accordingly, CAT LLC has determined that trading activity provides a 
reasonable proxy for cost burden on the CAT, and therefore is an 
appropriate metric for allocating CAT costs among CAT Reporters. This 
conclusion is consistent with the SEC's prior recognition of the use of 
transaction volume in setting regulatory fees. For example, in 
approving the FINRA TAF, the SEC recognized that transaction volume was 
closely enough connected to FINRA's regulatory responsibilities to 
satisfy the statutory standard in the Exchange Act.\67\
---------------------------------------------------------------------------

    \67\ TAF Release at 34024.
---------------------------------------------------------------------------

c. CAT Executing Brokers
i. Charging CAT Executing Brokers
    CAT LLC proposes to charge CAT fees to CAT Executing Brokers. CAT 
LLC believes that such an approach is consistent with the requirements 
of the Exchange Act for a variety of reasons, including the following 
reasons.
    First, the proposal to charge executing brokers is broadly 
supported by the industry.\68\ For example, SIFMA has supported 
charging executing brokers, and continues to support charging executing 
brokers, rather than clearing brokers.\69\ In one of its comment 
letters on the 2022 Funding Proposal, SIFMA stated that ``we support 
the Participants' decision to allocate CAT costs to executing brokers 
rather than clearing brokers.'' \70\
---------------------------------------------------------------------------

    \68\ See Partial Amendment I at 74185; February 2023 Proposed 
Partial Amendment at 5.
    \69\ See Letter from Ellen Greene, Managing Director, Equities 
and Options Market Structure, SIFMA, to Vanessa Countryman, 
Secretary, SEC (Dec. 14, 2022) (``December 2022 SIFMA Letter'') at 
2; Letter from Ellen Greene, Managing Director, Equities and Options 
Market Structure, SIFMA, to Vanessa Countryman, Secretary, SEC (Oct. 
7, 2022) at 4-5.
    \70\ Letter from Ellen Greene, Managing Director, Equities and 
Options Market Structure, and Joseph Corcoran, Managing Director, 
Associate General Counsel, SIFMA, to Vanessa Countryman, Secretary, 
SEC (Jan. 12, 2023) at 7. See also December 2022 SIFMA Letter at 2 
(``[W]e support changing the payment obligation to executing 
brokers.'').
---------------------------------------------------------------------------

    Second, the proposal to rely on executing brokers, rather than 
clearing brokers, was proposed in direct response to comments raised by 
SIFMA and other commenters on the 2022 Funding Proposal regarding the 
cost burden that clearing firms may experience if clearing brokers were 
charged CAT fees.\71\ As noted by commenters, imposing the fee payment 
obligation on clearing brokers, rather than on executing brokers more 
generally, potentially may impose a significant financial burden on 
clearing firms if the fees imposed on clearing firms are not passed 
through to their clients.
---------------------------------------------------------------------------

    \71\ See Partial Amendment I at 74185; February 2023 Proposed 
Partial Amendment at 5.
---------------------------------------------------------------------------

    Third, charging the CEBBs and CEBSs would reflect the executing 
role the CEBB and CEBS have in each transaction. Such a fee model is 
currently used and well-known in the securities markets. For example, 
SRO members regularly pay transaction-based fees. As a result, the CAT 
fees could be paid by Industry Members without requiring significant 
and potentially costly changes.
    Fourth, charging CEBBs and CEBSs is in line with the use of 
transaction reports from the exchanges and FINRA's equity trading 
reporting facilities for calculating the CAT fees. The CEBBs and CEBSs 
are identified on the transaction reports, thereby streamlining the CAT 
collection process.
    Fifth, CAT LLC does not believe that the proposal would burden CAT 
Executing Brokers. The CEBBs and CEBSs could determine, but would not 
be required, to pass their CAT fees through to their clients, who, in 
turn, could pass their CAT fees to their clients, until the fee is 
imposed on the ultimate participant in the transaction. With such a 
pass-through, the CEBBs and CEBSs would not ultimately incur the cost 
of all CAT fees related to their transactions. It is common practice in 
the industry for broker-dealers to pass transaction-based fees through 
to their clients, and CAT fees would introduce no unique issues for 
passing the CAT fee on to clients.
    Finally, the proposal to charge CAT Executing Brokers CAT fees as 
set forth in the Funding Proposal only addresses the party responsible 
for the payment of the CAT fee. As an administrative matter regarding 
the method of payment, each CAT Executing Broker may seek to enter into 
a bilateral arrangement with its clearing broker for the clearing 
broker to collect and pass-through the CAT fees as it does in other 
contexts.
ii. Effect on Net Capital of CAT Executing Brokers
    CAT fees do not raise new or different issues for CAT Executing 
Brokers with respect to net capital requirements than other 
transaction-based fees charged to executing brokers. CAT fees will be 
billed on a monthly basis, and Section 11.4 of the CAT NMS Plan states 
that ``Participants shall require each Industry Member to pay all 
applicable fees authorized under this Article XI within thirty (30) 
days after receipt of an invoice or other notice indicating payment is 
due (unless a longer payment period is otherwise indicated).'' With 
respect to net capital requirements, CAT Executing Brokers may 
determine whether to establish arrangements with their brokerage 
clients to account for costs incurred by the CAT Executing Broker on 
the client's behalf, including setting the terms under which they must 
be repaid by their broker-dealer clients such that receivables need not 
extend beyond 30 days.

[[Page 17104]]

d. Cost Allocation
i. One-Third/One-Third/One-Third Allocation of Prospective CAT Costs 
Between CEBS, CEBB and Participant
    When calculating the CAT Fees related to Prospective CAT Costs 
under the Funding Proposal, CAT LLC proposes to allocate one-third of 
Prospective CAT Costs to Participants, one-third of Prospective CAT 
Costs to CEBSs and one-third of Prospective CAT Costs to CEBBs. CAT LLC 
believes that this proposed allocation satisfies the requirements of 
the Exchange Act and Rule 608 of Regulation NMS under the Exchange Act.
    The proposed \1/3\, \1/3\, \1/3\ allocation of Prospective CAT 
Costs recognizes the three primary roles in each transaction: the 
buyer, the seller and the market regulator, and assigns an equal one-
third share of the fee per transaction to each of these three roles. 
The Exchange Act itself recognizes the importance of these three roles 
in a transaction by imposing registration and other regulatory 
obligations on the broker-dealers and regulator involved in a 
transaction. This allocation is similar to the approach taken with the 
FINRA TAF, ORF and section 31 sales value fees, and also recognizes the 
role of the market regulator and the buyer in the transaction as well 
as the seller.
    Furthermore, the allocation of two-thirds of the CAT costs to 
Industry Members and only one-third to Participants recognizes that a 
substantial portion of CAT costs originates from Industry Members. CAT 
costs are dominated by technology costs, and the predominant technology 
costs are data processing (e.g., linker) and storage costs. The data 
processing and storage costs are related to message traffic and the 
complexity of the reporting requirements for CAT, which, in turn, are 
determined by market activity. Industry Members are responsible for 
originating trading activity that necessitates message traffic to the 
CAT, and the complexity of Industry Members' chosen business models 
contributes substantially to the costs of the CAT.
    One of the factors driving CAT costs is the complexity of the 
Industry Members' CAT reporting requirements, which are driven by the 
inherent complexity of Industry Members' chosen business models. For 
example, in light of the complexity of market activity, the CAT's 
reporting scenarios document for Industry Members is over 800 pages in 
length, addressing almost 200 scenarios, including, for example, 
scenarios related to representative orders, internal routing, order 
modification, order cancellation, ATS scenarios, OTC scenarios, foreign 
scenarios, child orders, proprietary orders, fractional shares, stop 
and conditional orders, RFQs, floor activity and more.\72\ The 
processing and storage of such a large number of complex reporting 
scenarios requires very complex algorithms, which, in turn, lead to 
significant data processing and storage costs. In contrast, the 
Participants do not originate market activity or orders or otherwise 
bring this level of complexity to the markets. As a result, the 
technical specifications for the Participants are far less complex than 
for Industry Members. For example, the technical specifications for 
Participants have 13 reporting events for stock exchanges compared to 
36 equity reporting events in the technical specifications for Industry 
Members, and the technical specifications for Participants have 14 
reporting events for options exchanges compared to 43 reporting options 
events in the technical specifications for Industry Members.\73\ Since 
the complexity of Industry Members' chosen business models contribute 
substantially to the costs of the CAT, it is reasonable and equitable 
to require that Industry Members pay a substantial portion of those 
costs.
---------------------------------------------------------------------------

    \72\ CAT Industry Member Reporting Scenarios, Version 4.10 (Oct. 
21, 2022), https://www.catnmsplan.com/sites/default/files/2022-10/10.21.22_Industry_Member_Tech_Specs_Reporting_Scenarios_v4.10_CLEAN.pdf.
    \73\ Compare CAT Reporting Technical Specifications for Plan 
Participants, Version 4.1.0-r17 (Feb. 21, 2023), https://www.catnmsplan.com/sites/default/files/2023-02/02.21.2023-CAT-Reporting-Technical-Specifications-for-Participants-4.1.0-r17.pdf, 
with CAT Reporting Technical Specifications for Industry Members, 
Version 4.0.0 r18 (Dec. 16, 2022), https://www.catnmsplan.com/sites/default/files/2022-12/12.16.2022_CAT_Reporting_Technical_Specifications_for_Industry_Members_v4.0.0r18_CLEAN.pdf.
---------------------------------------------------------------------------

    Participant activity does not impact CAT costs in the same way that 
Industry Member activity impacts CAT costs. The analysis regarding the 
complexity of Industry Member activity is based on the effects of the 
business models on the costs of the CAT, not on the complexity of the 
market generally. The complexity of Industry Member activity adds 
significantly to the cost of the CAT in a way that Participant activity 
does not.
    Moreover, allocating a greater percentage of the CAT costs to 
Participants would raise fairness issues in light of the greater 
financial resources of Industry Members. There are only 25 Participants 
and approximately 1,100 Industry Members.\74\ Moreover, based upon an 
analysis of available CAT Reporter revenue, Participants only 
represented approximately 4% of the total CAT Reporter revenue while 
Industry Members represented 96% of the total CAT Reporter revenue.\75\ 
In addition, various individual Industry Members have revenue in excess 
of some or all of the Participants. Accordingly, CAT LLC determined 
that allocating a higher percentage of the total CAT costs to the 
Participants was not a fair and equitable approach.
---------------------------------------------------------------------------

    \74\ An average of 1,124 unique CAT Reporters sent transaction 
data to the CAT from July 1, 2022 to August 8, 2022.
    \75\ See Securities Exchange Act Rel. No. 91555 (Apr. 14, 2021), 
86 FR 21050, 20155 (Apr. 21, 2021) (``2021 Fee Proposal Release''). 
Industry Member revenue was calculated based on the total revenue 
reported in the Industry Member's FOCUS reports. Participant revenue 
was calculated based on revenue information provided in Form 1 
amendments and/or publicly reported figures. Participants are not 
required to file uniform FOCUS-type reports regarding revenue like 
Industry Members. Accordingly, the revenue calculation for 
Participants is not as straightforward as for Industry Members.
---------------------------------------------------------------------------

    Finally, CAT LLC analyzed a variety of alternative allocations of 
CAT costs and continues to support the proposed one-third, one-third, 
one-third allocation as consistent with the requirements of the 
Exchange Act and the CAT NMS Plan. Alternative allocations considered 
by CAT LLC are discussed in detail below in Section A.10 of this 
filing.
ii. \1/3\, \1/3\ Allocation for Historical CAT Assessment
    Under the Funding Proposal, the CEBS and the CEBB would each pay 
one-third of the fee obligation for each transaction related to 
Historical CAT Costs. Because the Participants have already paid for 
Past CAT Costs via loans to CAT LLC, the Participants would not be 
required to pay any Historical CAT Assessment. As stated in Proposed 
Section 11.3(b)(ii) of the CAT NMS Plan, ``[i]n lieu of a Historical 
CAT Assessment, the Participants' one-third share of Historical CAT 
Costs and such other additional Past CAT Costs as reasonably determined 
by the Operating Committee will be paid by the cancellation of loans 
made to the Company on a pro rata basis based on the outstanding loan 
amounts due under the loans.'' Furthermore, Proposed Section 
11.3(b)(ii) of the CAT NMS Plan would emphasize that ``[t]he Historical 
CAT Assessment is designed to recover two-thirds of the Historical CAT 
Costs.'' Like with the allocation of Prospective CAT Costs discussed 
above, CAT LLC believes that the proposed allocation of the Historical 
CAT Costs is consistent with the requirements of the Exchange Act and 
the CAT NMS Plan,

[[Page 17105]]

iii. Internal Cost of Compliance by Industry Members
    CAT LLC does not propose to take into consideration the internal 
costs incurred by Industry Members in complying with CAT requirements 
in determining how to allocate costs between Industry Members and 
Participants. There is no precedent for regulatory fees to be 
determined based on the cost of compliance of the regulated entity. 
Regulatory fees are intended to cover the regulatory costs of the 
entity providing the regulation. In the case of the CAT, the Funding 
Proposal is intended to charge fees to pay for the direct costs of the 
CAT, not for ancillary compliance costs of Industry Members.\76\ 
Moreover, as a practical matter, accurately determining an Industry 
Member's compliance costs, without recordkeeping requirements and 
appropriate standards to determine expenses accurately, would be 
infeasible.
---------------------------------------------------------------------------

    \76\ See CAT NMS Plan Approval Order at 84795, n.1749 (``The 
Participants stated that the funding model provides a framework for 
the recovery of the costs to create, develop and maintain the CAT, 
and is not meant to address the cost of compliance for Industry 
Members and Participants with the reporting requirements of Rule 
613.'').
---------------------------------------------------------------------------

    Likewise, the substantial internal compliance costs of the 
Participants are not taken into consideration in the Funding Proposal. 
Each Participant incurs its own internal costs to comply with the 
requirements of the CAT NMS Plan, including, among other things, 
updating its systems for CAT reporting. Additionally, Participants have 
expended countless internal hours on the creation, implementation and 
operation of the CAT. These costs are not included in the cost 
allocation under the Funding Proposal.
iv. Alternative Approach Based on Individualized CAT Reporter Cost to 
CAT
    CAT LLC has determined not to propose a funding approach for the 
CAT in which a CAT Reporter's fees would be based on each CAT 
Reporter's exact cost burden on the CAT. In light of the many inter-
related cost drivers of the CAT (e.g., storage, message traffic, 
processing), determining the precise cost burden imposed by each 
individual CAT Reporter on the CAT is not feasible. Moreover, trading 
activity provides a reasonable proxy for cost burden on the CAT, and 
therefore is an appropriate metric for allocating CAT costs among CAT 
Reporters. CAT LLC emphasizes that the Exchange Act requires CAT fees 
to be fair, reasonable and equitably allocated, and CAT LLC believes 
that the use of executed equivalent share volume satisfies these 
requirements. The Exchange Act does not require each CAT Reporter's 
fees to be a proxy for that CAT Reporter's cost burden on the CAT, let 
alone an exact proxy.
A. Difficulty in Determining Individual CAT Reporter Costs Due to 
Inter-Related Cost Drivers
    CAT LLC has analyzed the cost drivers for the CAT, and has 
concluded that determining the precise cost burden imposed by each 
individual CAT Reporter on the CAT is not feasible. The computation of 
a specific CAT Reporter's burden on the CAT is complicated by the many 
inter-related factors that contribute to CAT costs, including message 
traffic, data processing, storage, the complexity of reporting 
requirements, reporting timelines, infrastructure, connectivity and 
more. The use of executed equivalent share volume as the metric for the 
funding model is an improvement over the message traffic model. CAT LLC 
analyzed the cost drivers of CAT and determined that, although message 
traffic is one factor in CAT costs, it is not the primary factor. CAT 
costs are dominated by technology costs, and the predominant technology 
costs are data processing (e.g., linker) and storage costs. Compute 
costs represent more than half of all technology costs. While such 
costs are related in part to message traffic, they are driven by the 
stringent performance timelines, data complexity and operational 
requirements in the CAT NMS Plan. The Plan requires that order events 
be processed, corrected, and made available to regulatory users within 
established timeframes, including a four-hour window for initial 
linkage processing. For this reason, among other issues with the 
message traffic model and other considerations discussed herein, CAT 
LLC determined to shift its focus to the new metric of executed 
equivalent share volume from the message traffic and market share 
metrics set forth in the CAT NMS Plan as approved.
B. Trading Activity as Reasonable Proxy for Cost Burden
    CAT LLC determined that trading activity provides a reasonable 
proxy for cost burden on the CAT, and therefore is an appropriate 
metric for allocating CAT costs among CAT Reporters. CAT LLC analyzed 
reasonable metrics for determining CAT fees, and determined that, 
although executed equivalent share volume is not an exact proxy for the 
cost burden (nor need it be), trading activity provides a reasonable 
proxy for cost burden on the CAT. Increased trading activity impacts 
message traffic, data processing, storage and other factors, and thus 
necessarily correlates with increased cost burden on the CAT. Moreover, 
Industry Member activity in the market generally is engaged in for the 
purpose of effecting transactions, and, as a result, it is common for 
Participants to use transaction-based fees. Therefore, executed share 
volume is an appropriate metric for allocating CAT costs among CAT 
Reporters.
    This conclusion is consistent with the SEC's prior recognition of 
the use of transaction volume in setting regulatory fees. For example, 
in approving FINRA's TAF, the SEC recognized that transaction volume 
was closely enough connected to FINRA's broad regulatory 
responsibilities to satisfy the statutory standard in the Exchange 
Act.\77\ FINRA proposed a transaction-based TAF to fund its member 
regulatory activities in a variety of areas such as ``sales practices, 
routine examinations, financial and operational reviews, new member 
applications, enforcement * * * . . . wherever such member activity 
occurs.'' \78\ The SEC noted that ``[a]ssessing fees in relation to 
transactions correlates to heightened NASD responsibilities regarding 
firms that engage in the trading,'' but the fees were not an exact 
proxy for the costs of such regulatory responsibilities.\79\ The SEC 
noted this lack of a precise correlation:
---------------------------------------------------------------------------

    \77\ TAF Release at 34023.
    \78\ Id.
    \79\ Id.

    In most cases, the NASD has direct responsibility to oversee the 
firm's dealing with the public in effecting the transactions; the 
NASD may also have responsibility to oversee the impact of the 
trading on the firm's financial condition. In most cases, where 
responsibility for certain member activities has been allocated to 
other SROs, the NASD retains responsibility for other member 
functions.\80\
---------------------------------------------------------------------------

    \80\ Id.

    Nevertheless, the SEC concluded that ``while trading activity is 
not wholly correlated to the full range of NASD responsibility for 
members in all instances, the Commission believes that they are closely 
enough connected to satisfy the statutory standard.'' \81\ CAT LLC 
believes that this same logic is applicable to the Funding Proposal.
---------------------------------------------------------------------------

    \81\ Id. at 34024.
---------------------------------------------------------------------------

v. Alternative Approach: 50-50 Allocation Between Industry Members and 
Participant Exchanges
    CAT LLC has considered and rejected allocating 50% of CAT costs to 
the

[[Page 17106]]

Participants and 50% to Industry Members under the Funding Proposal. 
Although a 50-50 allocation between Industry Members and Participants 
would provide a mathematically equal split between two groups, it would 
not provide an equitable allocation between and among Industry Members 
and Participants. Such an allocation raises fairness issues as Industry 
Members have far greater financial resources than the Participants, and 
the complexity of Industry Members' chosen business models contribute 
substantially to the costs of the CAT.
e. Fee Pass-Throughs
i. General
    CAT LLC acknowledges that CAT Executing Brokers may choose to pass 
the CAT fees through to their clients, who, in turn, may pass their CAT 
fees through to their clients, until the fees are imposed on the 
account that executed the transaction. Although the Funding Proposal 
does not require such fee pass-throughs, CAT LLC continues to support 
the concept of the potential pass-through of fees for various reasons.
    First, the SEC specifically contemplated and accepted the concept 
of cost pass-throughs from Participants to their members when it 
adopted Rule 613:

    There also would be costs associated with establishing and 
operating the central repository that will be jointly owned by the 
plan sponsors. The Commission believes it is important to understand 
how the plan sponsors plan to allocate such costs among themselves 
to help inform the Commission's decision regarding the possible 
economic or competitive impact of the NMS plan amongst the SROs. In 
addition, although the plan sponsors likely would initially incur 
the costs to establish and fund the central repository directly, 
they may seek to recover some or all of these costs from their 
members. If the plan sponsors seek to recover costs from their 
members, the Commission believes that it is important to understand 
the plan sponsors' plans to allocate costs between themselves and 
their members, to help inform the Commission's decision regarding 
the possible economic or competitive impact of the NMS plan.\82\
---------------------------------------------------------------------------

    \82\ See generally Securities Exchange Act Rel. No. 67457 (Jul. 
18, 2012), 77 FR 45722, 45795 (Aug. 1, 2012) (``Rule 613 Adopting 
Release'') (emphasis added).

    Second, CAT LLC does not take a position on whether Industry 
Members, in turn, should pass CAT fees on to their clients. However, in 
adopting the CAT NMS Plan, the Commission specifically contemplated and 
accepted that ``broker-dealers may seek to pass on to investors their 
costs to build and maintain the CAT, which may include their own costs 
and any costs passed on to them by Participants,'' noting that the 
``extent to which these costs are passed on to investors depends on the 
materiality of the costs and the ease with which investors can 
substitute away from any given broker-dealer.'' \83\
---------------------------------------------------------------------------

    \83\ CAT NMS Plan Approval Order at 84992.
---------------------------------------------------------------------------

    Third, CAT LLC notes that the use of pass-through fees is a 
commonly accepted practice that has been approved by the SEC in the 
securities markets in some cases. For example, the practice of passing 
through fees to broker-dealers and their customers is used in the 
context of section 31 fees. Section 31 of the Exchange Act places 
obligations only on national securities exchanges, national securities 
associations, and the Commission. National securities exchanges and 
national securities associations must pay certain fees and assessments 
to the Commission. The Commission is required by section 31 of the 
Exchange Act to collect such fees and assessments. Section 31 of the 
Exchange Act, however, does not address the manner or extent to which 
covered SROs may seek to recover the costs of their section 31 
obligations from their members. Nor does section 31 of the Exchange Act 
address the manner or extent to which members of covered SROs may seek 
to pass any such charges on to their customers. However, as the SEC 
noted, ``[i]n practice, the covered SROs obtain the funds for these 
fees and assessments by assessing charges on their members, and the 
members in turn pass these charges to their customers.'' \84\ Likewise, 
in adopting the CAT NMS Plan, the Commission explained that under 
section 31, ``Participants are required to pay transaction fees and 
assessments to the Commission,'' that ``Participants, in turn, may 
collect their section 31 fees and assessments from their broker-dealer 
members,'' and, that ``broker-dealers may pass on regulatory charges 
that support Participant supervision, such as with respect to section 
31 fees.'' \85\
---------------------------------------------------------------------------

    \84\ Securities Exchange Act Rel. No. 49928 (June 28, 2004), 69 
FR 41060, 41072 (July 7, 2004). See also SEC, Section 31 Transaction 
Fees, Fast Answers, https://www.sec.gov/fast-answers/answerssec31htm.html (noting that the ``[t]he SROs have adopted 
rules that require their broker-dealer members to pay a share of 
these fees. Broker-dealers, in turn, impose fees on their customers 
that provide the funds to pay the fees owed to their SROs.)''
    \85\ CAT NMS Plan Approval Order at 84992.
---------------------------------------------------------------------------

    Indeed, the language of certain exchange rules regarding section 31 
specifically describe the pass-through process related to section 31 
fees.\86\ For example, NYSE Arca Rule 2.18.01 states the following:
---------------------------------------------------------------------------

    \86\ See, e.g., NYSE American Rule 393.01; and NYSE Rule 
440H.03.

    Pursuant to Rule 2.18, the Exchange makes an assessment on ETP 
Holders that the Exchange uses to pay fees owing to the SEC in 
accordance with section 31 of the Exchange Act (``the Rule 2.18 
assessment''). The section 31 fees payable by the Exchange to the 
SEC is determined based on the aggregate dollar amount of ``covered 
sales,'' as defined by SEC Rule 31, effected on the Exchange by or 
through any ETP Holder. ETP Holders, in some cases, have passed 
along the Rule 2.18 assessment on a trade-by-trade basis to their 
---------------------------------------------------------------------------
customers or correspondent firms.''

    The pass-through concept also is applied in the context of other 
SRO regulatory fees applicable to the SROs' members. For example, ``it 
is regular practice among some clearing and trading firms to `pass 
through' the TAF to the underlying firm executing the trade. Further, 
FINRA understands that the executing firms commonly pass the TAF 
directly on to their customers. Typically, TAF fees are reflected on 
the confirmation statement received by customers.'' \87\ Similarly, the 
pass-through process is used for ORFs as well. ORFs are collected 
indirectly from members through their clearing firms by OCC on behalf 
of the respective options exchange. As noted in rule filings related to 
ORFs, ``[t]he Exchange expects that [members] will pass through the ORF 
to their customers in the same manner that firms pass-through to their 
customers the fees charged by Self-Regulatory Organizations (`SROs') to 
help the SROs meet their obligations under section 31 of the Exchange 
Act.'' \88\
---------------------------------------------------------------------------

    \87\ Securities Exchange Act Rel. No. 90176 (Oct. 14, 2020), 85 
FR 66592, 66603 (Oct. 20, 2020).
    \88\ Securities Exchange Act Rel. No. 67596 (Aug. 6, 2012), 77 
FR 47902, 47903 (Aug. 10, 2012). See also Securities Exchange Act 
Rel. No. 61133 (Dec. 9, 2009), 74 FR 66715, 66716 (Dec. 16, 2009) 
(noting that ``[t]he Exchange expects that member firms will pass-
through the ORF to their customers in the same manner that firms 
pass-through to their customers the fees charged by SROs to help the 
SROs meet their obligation under Section 31 of the Exchange Act''); 
Securities Exchange Act Rel. No. 83878 (Aug. 17, 2018), 83 FR 42715, 
42717 (Aug. 23, 2018) (noting that ``by collecting the ORF in this 
manner Members and non-Members could more easily pass-through the 
ORF to their customers'').
---------------------------------------------------------------------------

    Fourth, commenters on prior CAT funding proposals have commented in 
favor of a model similar to the section 31 fees in which the fee could 
be passed through to Industry Members and ultimate customers.\89\ For 
example, one commenter noted the benefits of a

[[Page 17107]]

model similar to the section 31 fees, arguing that ``[i]t would also 
provide transparency into the fees which seek to recoup costs and a 
vehicle to pass-thru fees to the ultimate beneficiary of each trade.'' 
\90\ Another commenter similarly advocated for a section 31-type model, 
noting that ``SROs already have a well-established model for recouping 
their section 31 fees by passing them through to their members.'' \91\
---------------------------------------------------------------------------

    \89\ See, e.g., Letter from Michael Blaugrund, Chief Operating 
Officer, NYSE, to Vanessa Countryman, Secretary, SEC (May 10, 2021) 
at 3; Letter from Andrew Stevens, General Counsel, IMC Chicago, LLC, 
to Vanessa Countryman, Secretary, SEC (May 20, 2021) at 3.
    \90\ Letter from James Toes, President and CEO, and Andre 
D'Amore, Chairman of the Board, Securities Trader Association, to 
Vanessa Countryman, Secretary, SEC (June 10, 2021) at 4.
    \91\ Letter from Joanna Mallers, Secretary, FIA Principal 
Traders Group, to Vanessa Countryman, Secretary, SEC (May 12, 2021) 
at 4.
---------------------------------------------------------------------------

    Finally, the proposed pass-through process for CAT fees, like the 
pass-through process for other regulatory fees, recognizes the reality 
that regulatory costs incurred to maintain and enhance the quality of 
the markets will necessarily increase costs for all market 
participants, including the ultimate investor. Even if such pass-
throughs were limited or prohibited, CAT costs would be distributed in 
other ways. A member of the Advisory Committee for the CAT and the 
former Chief Economist of the Commission, emphasized that ``[b]ecause 
the markets for exchange, dealing, and brokerage services are all 
highly competitive in the long run, any fees imposed on any of these 
groups will ultimately pass through to the retail and institutional 
traders who use the markets.'' \92\ This commenter reasoned that:
---------------------------------------------------------------------------

    \92\ Letter from Larry Harris, Fred V. Keenan Chair in Finance, 
USC Marshal School of Business, to Vanessa Countryman, Secretary, 
SEC (June 21, 2022) (``Harris Letter'') at 2.

    In highly competitive markets, prices reflect the costs of doing 
business in the long run. If those costs rise, they ultimately pass 
through to the customers. For example, if the Participants 
(primarily exchanges) were required to fund CAT NMS fully, they will 
raise their fees (or fail to lower them when costs are falling) to 
recover their funding costs. And if brokers' business models require 
that they pay exchange fees on behalf of their clients, the brokers 
will raise their commission rates to the customers. And if their 
business models require zero commissions, brokers will provide fewer 
services or charge more for non-transaction services to cover their 
increased costs.\93\
---------------------------------------------------------------------------

    \93\ Id.
---------------------------------------------------------------------------

ii. Effect of Allocation on Fee Pass-Throughs
    CAT LLC determined not to allocate all CAT costs to Participants 
under the Funding Proposal. Under the Funding Proposal, CEBBs would be 
allocated one-third of the CAT costs, CEBSs would be allocated one-
third of the CAT costs and Participants would be allocated one-third of 
the CAT costs. Under the Funding Proposal, Industry Members may 
determine to pass their CAT fees on to their clients at their 
discretion. Participants also may determine to pass their CAT fees on 
to their members, or to pay the CAT fees charged to the Participant 
through other means. If Participants were to determine to pass CAT fees 
on to their members, they may choose to adopt a CAT-specific fee that 
directly passes the CAT fee through to their members, in whole or in 
part, or they may choose to increase other fees charged to members 
(e.g., transaction fees). Participants would need to file any such fee 
proposals with the SEC in accordance with section 19(b) of the Exchange 
Act.
    If all CAT costs were allocated to Participants, however, 
Participants would have the same options for covering the costs of the 
CAT fees. They may choose to adopt a CAT-specific fee that directly 
passes through the CAT fee through to their members, in whole or in 
part, or they may choose to increase other fees charged to members 
(e.g., transaction fees). Participants would need to file any such fee 
proposals with the SEC in accordance with section 19(b) of the Exchange 
Act. For any fee charged to Industry Members, Industry Members may 
determine to pass their CAT fees on to their clients at their 
discretion, as with the CAT fees under the Funding Proposal.
f. FINRA Fee
    Under the Funding Proposal, for each transaction in Eligible 
Securities based on CAT Data, the CEBS, the CEBB and the applicable 
Participant for the transaction each would pay a CAT Fee calculated by 
multiplying the number of executed equivalent shares in the transaction 
and the applicable Fee Rate and dividing the product by three. The 
applicable Participant for the transaction would be the national 
securities exchange on which the transaction was executed, or FINRA for 
each transaction executed otherwise than on an exchange. CAT LLC 
believes that the proposed CAT fees for FINRA are consistent with the 
Exchange Act and the CAT NMS Plan. CAT LLC does not believe that the 
assessment of a CAT fee on FINRA in the same manner as other 
Participants would result in a burden on competition for FINRA or for 
Industry Members engaging in activity otherwise than on an exchange.
    The Funding Proposal is designed to be neutral as to the manner of 
execution and place of execution. The CAT fees would be the same 
regardless of whether the transaction is executed on an exchange or in 
the over-the-counter market. All Participants are self-regulatory 
organizations that have the same regulatory obligations under the 
Exchange Act, regardless of whether they operate as a for-profit or 
not-for-profit entity. Their usage of CAT Data, either directly or 
indirectly through regulatory services agreements, would be for the 
same regulatory purposes in accordance with those obligations. By 
treating each Participant the same, the CAT fees would not become a 
competitive issue by and among the Participants.
    In addition, the size of FINRA's fee is calculated based on the 
activity in the over-the-counter market, which is substantial. For 
example, the executed equivalent share volume for over-the-counter 
trades in Eligible Securities in 2021 was 1,361,484,729,008 out of a 
total volume of 3,963,697,612,395 executed equivalent shares for trades 
in Eligible Securities.\94\ Accordingly, approximately 34% of the 
executed equivalent share volume in Eligible Securities took place in 
the over-the-counter market.
---------------------------------------------------------------------------

    \94\ These figures for executed equivalent share volume for 2021 
are set forth in the illustrative example in the notice of the 2022 
Funding Proposal. See 2022 Funding Proposal Release at 33246.
---------------------------------------------------------------------------

    Moreover, FINRA and the exchanges should not be evaluated 
differently based upon the potential for any particular Participant to 
pass its CAT fees onto its members through regulatory, trading or other 
fees. Each Participant will need to determine for itself how it will 
obtain the funds to pay for its CAT fees. Because each Participant, not 
just FINRA, is using CAT Data to satisfy the same self-regulatory 
obligations, each Participant may determine to charge their members 
fees to fund their share of the CAT fees, and the Exchange Act 
specifically permits self-regulatory organizations to do so, provided 
the fee filing requirements of the Exchange Act are satisfied. Indeed, 
in approving the CAT NMS Plan, the SEC stated that ``the Exchange Act 
specifically permits the Participants to charge members fees to fund 
their self-regulatory obligations.'' \95\
---------------------------------------------------------------------------

    \95\ CAT NMS Plan Approval Order at 84794.
---------------------------------------------------------------------------

    Furthermore, FINRA and the exchanges should not be evaluated 
differently based upon the potential for a particular Participant to 
recoup its fees through revenue-generating activity other than fees 
imposed on its members. FINRA, just like the exchange Participants, has 
revenue sources other than membership fees. For example, FINRA 
generates significant revenues via regulatory services agreements with

[[Page 17108]]

the exchanges, among other sources.\96\ These sources, too, may be used 
to pay CAT fees, and, if they are used, it would not lead to an 
increase in fees for Industry Members, but rather the exchange 
Participants. Any review of how the Participants obtain their funds to 
pay CAT fees is beyond the scope of the CAT fee filing.
---------------------------------------------------------------------------

    \96\ See 2021 FINRA Annual Financial Report at 43.
---------------------------------------------------------------------------

    The issues raised regarding the possibility of passing FINRA's 
allocation to Industry Members also fail to recognize the basic fact 
that Industry Members themselves face the same issue that they raise 
with regard to FINRA. Industry Members may determine to pass their CAT 
fees through to their customers, just as they may do with section 31-
related fees and other fees. Accordingly, the two-thirds allocation of 
CAT costs to Industry Members may be entirely passed through to 
investors, thereby alleviating Industry Members of any burden of 
funding the CAT. As one commenter on the 2022 Funding Proposal, a 
former member of the Advisory Committee for the CAT and the former 
Chief Economist of the Commission, noted, ``[b]ecause the markets for 
exchange, dealing, and brokerage services are all highly competitive in 
the long run, any fees imposed on any of these groups will ultimately 
pass through to the retail and institutional traders who use the 
markets.'' \97\
---------------------------------------------------------------------------

    \97\ Harris Letter at 2.
---------------------------------------------------------------------------

    Finally, CAT LLC does not believe that FINRA should not be treated 
as a market center for CAT funding purposes merely because FINRA is not 
treated as a market center for governance purposes under the National 
Market System Plan Regarding Consolidated Equity Market Data (``CT 
Plan''). Although the CT Plan and the CAT Plan are both national market 
system plans, their purpose and implementation are different. The CAT 
NMS Plan, as approved by the Commission, explicitly contemplates 
charging fees to all Participants, including FINRA. For example, 
Section 11.1(b) of the CAT NMS Plan states that ``[s]ubject to Section 
11.2, the Operating Committee shall have discretion to establish 
funding for the Company, including: (i) establishing fees that the 
Participants shall pay.'' \98\ In addition, the purpose of the CAT is 
solely for regulatory purposes; it provides a regulatory system to 
facilitate the performance of the self-regulatory obligations of all 
the Participants, including the exchanges and FINRA. In contrast, the 
CT Plan governs the public dissemination of real-time consolidated 
equity market data for NMS stocks.
---------------------------------------------------------------------------

    \98\ See also Sections 11.2 and 11.3 of the CAT NMS Plan.
---------------------------------------------------------------------------

g. Impact on Options Versus Equities
    CAT LLC believes that the Funding Proposal provides for a fair, 
reasonable and equitable treatment of the equities and options markets. 
CAT LLC does not believe that the Funding Proposal would burden 
inappropriately efficiency, competition or capital formation in how it 
treats equities and options. As a preliminary matter, unlike other 
previously proposed fee models,\99\ the Funding Proposal does not 
allocate costs between the equities and options markets; instead, the 
fee attributable to a transaction in an equity or option security 
depends on equivalent executed share volume. In addition, the use of 
equivalent executed share volume is designed to normalize options and 
equities in the calculation of fees, and to recognize and address the 
different trading characteristics of different types of securities. 
Recognizing that Listed Options trade in contracts rather than shares, 
the Funding Proposal would count executed equivalent share volume 
differently for Listed Options. Specifically, each executed contract 
for a transaction in Listed Options would be counted based on the 
multiplier applicable to the specific Listed Option contract in the 
relevant transaction (e.g., 100 executed equivalent shares or such 
other applicable equivalency).
---------------------------------------------------------------------------

    \99\ See, e.g., 2018 Fee Proposal Release at 1400.
---------------------------------------------------------------------------

h. Sell-Side and Buy-Side
    CAT LLC proposes to charge both the buy-side and sell-side of a 
transaction in Eligible Securities a CAT fee. The proposal to charge 
both the buy-side and the sell-side of a transaction is consistent with 
other types of fees charged to both the buyer and the seller that are 
common in the industry. As such, CAT LLC believes that the proposal 
would comply with the requirements of the Exchange Act. For example, 
the ORF, a fee common to the options exchanges, is one example of a 
regulatory fee charged to both the buy-side and sell-side of the 
transaction. For example, the MIAX fee schedule lists the options 
regulatory fee as applying ``per executed contract side.'' \100\ 
Similarly, under its pricing schedule, Nasdaq PHLX charges an options 
regulatory fee ``per contract side.'' \101\ As set forth in its fee 
schedule, CBOE EDGX also charges an options regulatory fee to each side 
of the contract.\102\ In addition, the industry is familiar with 
transaction-based fees charged to both the buyer and the seller by the 
exchanges and FINRA.\103\
---------------------------------------------------------------------------

    \100\ MIAX Options Exchange, Fee Schedule, as of Mar. 3, 2023.
    \101\ Nasdaq PHLX Rules, Options 7, Section 6(D).
    \102\ Cboe EDGX Fee Schedule, effective Mar. 1, 2023.
    \103\ See, e.g., NYSE Price List 2023 for fees charged to both 
sides.
---------------------------------------------------------------------------

i. Fee Rate Changes Twice per Year for CAT Fees Related to Prospective 
CAT Costs
    CAT LLC proposes to require the calculation of the Fee Rate for CAT 
Fees related to Prospective CAT Costs twice a year. CAT LLC believes 
that the proposal to adjust the Fee Rate twice a year, once at the 
beginning of the year and once during the year, appropriately balances 
the need to coordinate the Fee Rate with potential changes in the costs 
and projections with the cost and effort to the industry related to 
more frequent fee changes.
    CAT LLC believes its proposal is in keeping with views expressed by 
the industry in other contexts regarding the appropriate frequency of 
regulatory rate changes. For example, in the ORF context, the industry 
requested that rate changes be limited to twice per year. SIFMA stated 
in a comment letter on one of the ORF fee proposals that ``[r]ates 
should only be changed two times per year to reduce operational 
complexity and reduce risk.'' \104\ The exchanges with ORF fees noted 
that the possibility for fee rate changes only twice per year would 
also ``better enable [their members] to properly account for ORF 
charges among their customers.'' \105\ In light of these views on the 
frequency of the rate changes, exchanges with an ORF have limited the 
fee rate changes to twice a year.\106\
---------------------------------------------------------------------------

    \104\ See, e.g., Letter from Ellen Greene, Managing Director, 
SIFMA to Vanessa Countryman, Secretary, SEC, re: SIFMA Comment 
Letter on the Options Regulatory Fee Filings by SR-EMERALD-2019-01 
(Apr. 10, 2019) at 5, https://www.sifma.org/wp-content/uploads/2019/04/MIAX-Emerald-ORF.pdf.
    \105\ See, e.g., Securities Exchange Act Rel. 93667 (Oct. 15, 
2021).
    \106\ See, e.g., Cboe BZX Fee Schedule (``The Exchange may only 
increase or decrease the ORF semi-annually''); MIAX Fee Schedule 
(The Exchange may only increase or decrease the ORF semi-annually); 
and BOX Fee Schedule (``The Exchange may only increase or decrease 
the ORF semi-annually'').
---------------------------------------------------------------------------

j. Plan Amendment Process for Fee Rate Changes
    Under the Funding Proposal, once any Fee Rate has been established 
by a majority vote of the Operating Committee in accordance with the 
Funding Proposal set forth in the CAT NMS Plan,\107\ each Participant 
would be required to pay the applicable CAT Fee

[[Page 17109]]

calculated in accordance with the requirements set forth in the CAT NMS 
Plan (subject to the requirement for the Industry Member CAT Fee to be 
in effect). CAT LLC does not plan to submit an amendment to the CAT NMS 
Plan each time that the Fee Rate for the CAT Fee is established or 
adjusted because of the length of time and burden required to amend the 
CAT NMS Plan for each adjustment to the Fee Rate. Moreover, CAT LLC 
believes that it is unnecessary to file a new separate amendment for 
the Participant CAT Fees each time a new Fee Rate is approved because 
the CAT NMS Plan would set forth in detail the manner in which the CAT 
fees are established and the inputs for calculating the specific CAT 
Fees would be published on the CAT website and included in the 
Participant fee filings under section 19(b) of the Exchange Act for 
Industry Member CAT fees. Therefore, the amendments to the Plan for a 
fee rate change would be redundant and impractical in terms of timing.
---------------------------------------------------------------------------

    \107\ Participants would be required to pay the CAT Fee once the 
CAT Fee is in effect with regard to Industry Members in accordance 
with Section 19(b) of the Exchange Act.
---------------------------------------------------------------------------

    CAT LLC proposes to amend the CAT NMS Plan to describe in detail 
how CAT Fees would be calculated, including the formula for the 
calculation and the methods for determining the inputs for the 
calculation (i.e., the budget, projected executed equivalent share 
volume, executed equivalent shares per transaction). As such, the 
Participants would be required to calculate the Fee Rate and the 
related CAT Fees using the proposed formula; this process would be 
mandatory, including the mid-year Fee Rate change. Moreover, the 
budgetary and projection inputs to the calculation would be public, 
including in public fee filings pursuant to section 19(b) of the 
Exchange. Accordingly, CAT LLC does not believe that a Plan amendment 
would be necessary each time a new Fee Rate is calculated in accordance 
with the Plan.
    The CAT NMS Plan would require each Participant to pay the proposed 
CAT Fees determined in accordance with the Funding Proposal. Proposed 
Section 11.3(a)(ii)(A) sets forth the requirement for Participants to 
pay the CAT fees. It states that ``[e]ach Participant that is a 
national securities exchange will be required to pay the CAT Fee for 
each transaction in Eligible Securities executed on the exchange in the 
prior month based on CAT Data,'' and that ``[e]ach Participant that is 
a national securities association will be required to pay the CAT Fee 
for each transaction in Eligible Securities executed otherwise than on 
an exchange in the prior month based on CAT Data.'' It further states 
that ``[t]he CAT Fee for each transaction in Eligible Securities will 
be calculated by multiplying the number of executed equivalent shares 
in the transaction by one-third and by the Fee Rate reasonably 
determined pursuant to paragraph (a)(i) of this Section 11.3.'' In 
addition, proposed paragraph (a) of the Participant fee schedule would 
state that ``[e]ach Participant shall pay the CAT Fee set forth in 
Section 11.3(a) of the CAT NMS Plan to Consolidated Audit Trail, LLC in 
the manner prescribed by Consolidated Audit Trail, LLC on a monthly 
basis based on the Participant's transactions in the prior month.''
    The Participants would be required to follow the requirements set 
forth in the CAT NMS Plan for establishing and calculating CAT Fees and 
requiring the payment of the CAT Fees as both a regulatory and 
contractual matter. Rule 613(h)(1) of Regulation NMS under the Exchange 
Act states that ``[e]ach national securities exchange and national 
securities association shall comply with the provisions of the national 
market system plan approved by the Commission,'' that is, the CAT NMS 
Plan. Rule 613(h)(2) of Regulation NMS under the Exchange Act states 
that ``[a]ny failure by a national securities exchange or national 
securities association to comply with the provisions of the national 
market system plan approved by the Commission shall be considered a 
violation of this section.'' Similarly, Rule 608(c) of Regulation NMS 
under the Exchange Act states that ``[e]ach self-regulatory 
organization shall comply with the terms of any effective national 
market system plan of which it is a sponsor or a participant.'' Section 
3.11 of the CAT NMS Plan reiterates this requirement, stating that 
``[e]ach Participant shall comply with . . . the provisions of SEC Rule 
613 and of this Agreement, as applicable, to the Participant.'' In 
addition, each Participant is a signatory to the CAT NMS Plan as a 
member of the limited liability company. Accordingly, a failure to 
comply with the requirements of the CAT NMS Plan related to the CAT 
fees would be a violation of the regulatory obligation to comply with 
the CAT NMS Plan and a breach of contractual requirements of the CAT 
NMS Plan.
k. Executed Equivalent Shares for NMS Stocks, Listed Options and OTC 
Equity Securities
    The Funding Proposal uses the concept of executed equivalent shares 
as the metric for calculating CAT fees for transactions in NMS Stocks, 
Listed Options and OTC Equity Securities, each of which have different 
trading characteristics. Under the Funding Proposal, each executed 
share for a transaction in NMS Stocks would be counted as one executed 
equivalent share, each executed contract for a transaction in Listed 
Options would be counted using the contract multiplier applicable to 
the specific Listed Option in the relevant transaction, and each 
executed share for a transaction in OTC Equity Securities would be 
counted as 0.01 executed equivalent shares. CAT LLC believes that the 
proposed counting methods for each category of security are 
appropriate, as discussed in detail above in Section A.3.b.ii of this 
filing.
l. Cost Transparency
i. Cost Transparency and Level of Detail of CAT Costs
    CAT LLC provides substantial cost transparency for Past CAT Costs 
and Prospective CAT Costs, including transparency above and beyond what 
is required under the CAT NMS Plan, and more than other national market 
system plans. Such transparency would include cost descriptions in the 
fee filings made pursuant to section 19(b) of the Exchange Act and Rule 
19b-4(f)(2) thereunder, as well as the public availability of CAT 
financial and budget information.
    CAT LLC proposes to require substantial transparency for CAT costs 
in the fee filings to be made pursuant to section 19(b) of the Exchange 
Act. For example, Proposed Section 11.3(a)(iii)(B) of the CAT NMS Plan 
would require such filings for CAT Fees to include, among other things, 
the budget for the upcoming year (or remainder of the year, as 
applicable), including a brief description of each line item in the 
budget, including (1) technology line items of cloud hosting services, 
operating fees, CAIS operating fees, change request fees and 
capitalized developed technology costs, (2) legal, (3) consulting, (4) 
insurance, (5) professional and administration, and (6) public 
relations costs, a reserve and/or such other categories as reasonably 
determined by the Operating Committee to be included in the budget and 
the reason for changes in each such line item from the prior CAT Fee 
filing; and a discussion of how the budget is reconciled to the 
collected fees. Similarly, Proposed Section 11.3(b)(iii)(B)(II) of the 
CAT NMS Plan would require such filings for Historical CAT Assessments 
to include, among other things, a brief description of the amount and 
type of Historical CAT Costs, including (1) technology line items of 
cloud hosting services, operating fees, CAIS operating fees,

[[Page 17110]]

change request fees and capitalized developed technology costs, (2) 
legal, (3) consulting, (4) insurance, (5) professional and 
administration, and (6) public relations costs.
    CAT LLC provides substantial additional financial information 
regarding the operation of the CAT as required by the CAT NMS Plan. For 
example, CAT LLC currently makes detailed financial information about 
the CAT publicly available. Section 9.2(a) of the CAT NMS Plan requires 
CAT LLC to maintain a system of accounting established and administered 
in accordance with GAAP and requires ``all financial statements or 
information that may be supplied to the Participants shall be prepared 
in accordance with GAAP (except that unaudited statements shall be 
subject to year-end adjustments and need not include footnotes).'' 
Section 9.2(a) of the CAT NMS Plan also requires the Company to prepare 
and provide to each Participant ``as soon as practicable after the end 
of each Fiscal Year, a balance sheet, income statement, statement of 
cash flows and statement of changes in equity for, or as of the end of, 
such year, audited by an independent public accounting firm.'' The CAT 
NMS Plan requires that this audited balance sheet, income statement, 
statement of cash flows and statement of changes in equity be made 
publicly available. Among other things, these financial statements 
provide operating expenses, including technology, legal, consulting, 
insurance, professional and administration and public relations costs. 
CAT LLC also maintains a dedicated web page on the CAT NMS Plan website 
that consolidates its annual financial statements in a public and 
readily accessible place.\108\ The Company's annual financial 
statements from inception in 2017 through 2021 are currently available 
on the CAT website.
---------------------------------------------------------------------------

    \108\ See CAT Audited Financial Statements, https://www.catnmsplan.com/audited-financialstatements.
---------------------------------------------------------------------------

    In addition to providing financial information required under the 
CAT NMS Plan and otherwise, CAT LLC also has voluntarily determined to 
provide more financial transparency to the public regarding its costs. 
For example, CAT LLC publicly provides its annual operating budget as 
well as periodically provides updates to the budget that occur during 
the year. CAT LLC includes such budget information on a dedicated web 
page on the CAT NMS Plan website to make it readily accessible to the 
public, like the CAT financial statements. CAT LLC also has held 
webinars providing additional detail about CAT costs and about 
potential alternative funding models for the CAT, and commenters 
submitted questions and comments on the webinars.\109\
---------------------------------------------------------------------------

    \109\ See, e.g., CAT LLC Webinar, CAT Costs (Sept. 21, 2021), 
https://www.catnmsplan.com/events/catcostsseptember-21-2021; CAT LLC 
Webinar, CAT Funding (Sept. 22, 2021), https://www.catnmsplan.com/events/catfundingseptember-22-2021; and CAT LLC Webinar, CAT Funding 
(Apr. 6, 2022), https://www.catnmsplan.com/events/cat-funding.
---------------------------------------------------------------------------

ii. Composition and Transparency of Past CAT Costs
    CAT LLC also provides detailed disclosures regarding Past CAT 
Costs. The Historical Fee Rate for the Historical CAT Assessment would 
be calculated based on actual past costs incurred by the CAT (except 
for certain costs that CAT LLC has determined to exclude from the 
calculation), rather than budgeted costs. The actual costs for prior to 
2022 are set forth in detail in the audited financial statements for 
the Company and its predecessor CAT NMS, LLC, which are available on 
the CAT website.\110\ In addition, the following describes in detail 
the Historical CAT Costs for prior to 2022. These Historical CAT Costs 
figures are being provided in this filing for transparency purposes 
only. The Participants expect to describe these costs in the relevant 
fee filings that the Participants submit pursuant to section 19(b) 
under the Exchange Act and Rule 19b-4(f)(2) thereunder regarding 
Historical CAT Assessments.
---------------------------------------------------------------------------

    \110\ The audited financial statements for CAT NMS, LLC and 
Consolidated Audit Trail, LLC are available at https://www.catnmsplan.com/audited-financial-statements.
---------------------------------------------------------------------------

A. Historical CAT Costs Incurred Prior to June 22, 2020 (i.e., Pre-FAM 
Costs)
    The Participants expect to propose that Historical CAT Costs would 
include costs incurred by CAT prior to June 22, 2020 and already funded 
by the Participants, excluding Excluded Costs (described further 
below). The Participants expect to propose that the Historical CAT 
Costs would include costs for the period prior to June 22, 2020 of 
$143,919,521. The Participants expect to propose that Participants 
would remain responsible for one-third of this cost (which they have 
previously paid), and Industry Members would be responsible for the 
remaining two-thirds, with CEBBs paying one-third ($47,973,174) and 
CEBSs paying one-third ($47,973,174). The following table breaks down 
the Historical CAT Costs for the period prior to June 22, 2020 into the 
categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT 
NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                                                       costs for period
                  Operating expense                    prior to June 22,
                                                             2020
------------------------------------------------------------------------
Capitalized Developed Technology Costs and                   $71,475,941
 Transition Fee *...................................
Technology Costs:                                              33,568,579
  Cloud Hosting Services............................           10,268,840
  Operating Fees....................................           21,085,485
  CAIS Operating Fees...............................            2,072,908
  Change Request Fees...............................              141,346
Legal...............................................          19,674,463
Consulting..........................................          17,013,414
Insurance...........................................             880,419
Professional and administration.....................           1,082,036
Public relations....................................             224,669
                                                     -------------------
  Total Operating Expenses..........................         143,919,521
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $2,115,545 incurred during the period prior to June 22, 2020
  have been appropriately excluded from the above table.

B. CAT Costs Incurred in Period 1
    The Participants expect to propose that Historical CAT Costs would 
include costs incurred by CAT and already funded by Participants during 
FAM Period 1, which covers the period from June 22, 2020-July 31, 2020. 
The Participants expect to propose that the Historical CAT Costs for 
Period 1 are $6,377,343. The Participants expect to propose that 
Participants would remain responsible for one-third of this cost (which 
they have previously paid) ($2,125,781), and Industry Members would be 
responsible for the remaining two-thirds, with CEBBs paying one-third 
($2,125,781) and CEBSs paying one-third ($2,125,781). The following 
table breaks down the Historical CAT Costs for Period 1 into the 
categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT 
NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                  Operating expense                   costs for period 1
------------------------------------------------------------------------
Capitalized Developed Technology Costs *............          $1,684,870
Technology Costs:                                               3,996,800
  Cloud Hosting Services............................            2,642,122
  Operating Fees....................................            1,099,680
  CAIS Operating Fees...............................              254,998
  Change Request Fees...............................  ..................
Legal...............................................             481,687
Consulting..........................................             137,209
Insurance...........................................  ..................
Professional and administration.....................              69,077

[[Page 17111]]

 
Public relations....................................               7,700
                                                     -------------------
  Total Operating Expenses..........................           6,377,343
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $362,121 incurred during Period 1 have been appropriately
  excluded from the above table.

C. CAT Costs Incurred in Period 2
    The Participants expect to propose that Historical CAT Costs would 
include costs incurred by CAT and already funded by Participants during 
FAM Period 2, which covers the period from August 1, 2020-December 31, 
2020. The Participants expect to propose that the Historical CAT Costs 
for Period 2 are $42,976,478. The Participants expect to propose that 
Participants would remain responsible for one-third of this cost (which 
they have previously paid) ($14,325,493), and Industry Members would be 
responsible for the remaining two-thirds, with CEBBs paying one-third 
($14,325,492.70) and CEBSs paying one-third ($14,325,492.70). The 
following table breaks down the Historical CAT Costs for Period 2 into 
the categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the 
CAT NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                  Operating expense                   costs for period 2
------------------------------------------------------------------------
Capitalized Developed Technology Costs *............          $6,761,094
Technology Costs:                                              31,460,033
  Cloud Hosting Services............................           20,709,212
  Operating Fees....................................            9,108,700
  CAIS Operating Fees...............................            1,590,298
  Change Request Fees...............................               51,823
Legal...............................................           2,766,644
Consulting..........................................             532,146
Insurance...........................................             976,098
Professional and administration.....................             438,523
Public relations....................................              41,940
                                                     -------------------
  Total Operating Expenses..........................          42,976,478
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $1,892,505 incurred during Period 2 have been appropriately
  excluded from the above table.

D. CAT Costs Incurred in Period 3
    The Participants expect to propose that Historical CAT Costs would 
include costs incurred by CAT and already funded by Participants during 
FAM Period 3, which covers the period from January 1, 2021-December 31, 
2021. The Participants expect to propose that the Historical CAT Costs 
for Period 3 are $144,415,268. The Participants expect to propose that 
Participants would remain responsible for one-third of this cost (which 
they have previously paid) ($48,238,423), and Industry Members would be 
responsible for the remaining two-thirds, with CEBBs paying one-third 
($48,238,423) and CEBSs paying one-third ($48,238,423). The following 
table breaks down the Historical CAT Costs for Period 3 into the 
categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT 
NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                  Operating expense                   costs for period 3
------------------------------------------------------------------------
Capitalized Developed Technology Costs *............         $10,763,372
Technology Costs:                                             123,639,402
  Cloud Hosting Services............................           94,574,759
  Operating Fees....................................           23,106,091
  CAIS Operating Fees...............................            5,562,383
  Change Request Fees...............................              396,169
Legal...............................................           6,333,248
Consulting..........................................           1,408,209
Insurance...........................................           1,582,714
Professional and administration.....................             595,923
Public relations....................................              92,400
                                                     -------------------
  Total Operating Expenses..........................         144,415,268
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $5,108,044 incurred during Period 3 have been appropriately
  excluded from the above table.

E. Excluded Costs
    The Participants expect to propose that Historical CAT Costs would 
not include two categories of CAT costs (``Excluded Costs''): (1) 
$48,874,937, which are all CAT costs incurred from November 15, 2017 
through November 15, 2018, and (2) $14,749,362 of costs related to the 
termination of the relationship with the Initial Plan Processor. The 
Participants expect to propose that the Participants would remain 
responsible for 100% of these costs, which total $63,624,299. CAT LLC 
believes that the exclusions of these costs addresses concerns 
previously expressed by commenters about costs incurred related to the 
period of the operation of the Initial Plan Processor.
    First, the Participants expect to propose that Historical CAT Costs 
would exclude all CAT costs incurred from November 15, 2017 through 
November 15, 2018. CAT LLC determined to exclude all costs during this 
one-year period from fees charged to Industry Members due to the delay 
in the start of reporting to the CAT. The Participants expect to 
propose that these costs are $48,874,937. The Participants expect to 
propose that the Participants would remain responsible for 100% of this 
$48,874,937 in costs. The following table breaks down these costs into 
the categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the 
CAT NMS Plan.

------------------------------------------------------------------------
                                                      Excluded costs for
                                                      November 15, 2017-
                  Operating expense                    November 15, 2018
 
------------------------------------------------------------------------
Capitalized Developed Technology Costs..............         $37,852,083
Technology Costs:
  Cloud Hosting Services............................
  Operating Fees....................................
  CAIS Operating Fees...............................
  Change Request Fees...............................
Legal...............................................           6,143,278
Consulting..........................................           4,452,106
Insurance...........................................
Professional and administration.....................             340,145
Public relations....................................              87,325
                                                     -------------------
  Total Operating Expenses..........................          48,874,937
------------------------------------------------------------------------

    Second, the Participants expect to propose that Historical CAT 
Costs would not include $14,749,362 of costs related to the conclusion 
of the relationship with the Initial Plan Processor. The Participants 
expect to propose that Participants would remain responsible for 100% 
of the $14,749,362 of these costs.
    Accordingly, the Participants expect to propose that Historical CAT 
Costs would exclude a total of $63,624,299 of prior CAT costs, and the 
Participants would remain responsible for 100% of these costs.
iii. Alternative Transparency Proposals
    CAT LLC believes that its proposed methods of cost transparency 
will provide Industry Members and other interested parties with 
detailed information about the CAT and the CAT fees. CAT LLC does not 
believe that additional transparency measures, such as a mechanism to 
allow for the review of budget information prior to a fee filing, or an 
independent cost review mechanism, are necessary or appropriate.
A. Budget Disclosure Prior to Fee Filings
    CAT LLC does not believe that it is necessary to add a requirement 
to the CAT NMS Plan to provide Industry Members and other members of 
the public with an opportunity to review the budget that would be 
included in

[[Page 17112]]

the SRO fee filings prior to such filings. CAT LLC is currently 
providing CAT budget information to the public on a continuing basis. 
CAT LLC publicly provides the annual operating budget for the CAT LLC 
as well as regular updates to the budget that occur during the year. 
This budget information is readily accessible to the public on a 
dedicated web page on the CAT NMS Plan. CAT LLC does not just provide 
the annual budget, or the mid-year budget, the two budgets that would 
be necessary for the fee filings; it also provides other updates each 
year. Accordingly, Industry Members and other members of the public 
will have the opportunity to review regular updates of the budget more 
often than is necessary for the fee filings. Such transparency would 
allow Industry Members and other members of the public to understand 
the budget and changes thereto throughout the year. Moreover, the fee 
filing process under section 19(b) of the Exchange Act provides the 
public with the opportunity to review the budgeted CAT costs that CAT 
LLC would seek to recover via the CAT Fees.
B. Independent Cost Review Mechanism
    CAT LLC also does not believe that it would be necessary or 
appropriate to include an independent review mechanism for the cost of 
proposed CAT expenditures. First, as a preliminary matter, unlike the 
Commission, CAT LLC is not a governmental entity, with a responsibility 
to the taxpaying public. It is a private entity subject to the 
regulatory requirements of the Exchange Act. Second, such a budget 
review process is unnecessary as any CAT fees proposed to be 
established pursuant to the CAT NMS Plan are already subject to the 
existing, well-established review practices under Rule 608 of 
Regulation NMS under the Exchange Act and section 19(b) of the Exchange 
Act and Rule 19b-4 thereunder. Under those provisions, CAT fees must be 
filed with the SEC, thereby providing transparency and an opportunity 
for comment by the public, and may only be implemented if they satisfy 
the requirements of the Exchange Act. Third, the SEC has the ability to 
request budget and financial information from CAT LLC to the extent 
that it believes that such additional information is necessary for it 
to evaluate any CAT fee proposals.
m. Allocation of Past CAT Costs to Participants: Pro Rata Versus Use of 
Funding Proposal
    The Participants have been responsible for all costs related to the 
CAT to date, and Industry Members have not paid any of the costs to 
date. Accordingly, under the Funding Proposal, the Participants would 
not be required to pay a CAT fee related to Past CAT Costs in addition 
to prior payments. The two-thirds of the Historical CAT Costs collected 
from Industry Members would be allocated to the Participants pro rata, 
based on the outstanding amounts due under the notes to the 
Participants for repayment of outstanding loan notes to the Company. 
The one-third of Historical CAT Costs that are not allocated to 
Industry Members would not be allocated to the Participants pursuant to 
the Funding Proposal based on executed equivalent shares. Instead, such 
Historical CAT Costs would be allocated to the Participants pro rata 
based on the outstanding amounts due under the notes (as discussed 
further below in Section A.9.n of this filing). CAT LLC entered into 
the loans with the Participants pursuant to its authority under the CAT 
NMS Plan as approved by the SEC to pay for CAT costs, and, as such, the 
loans and their repayment terms are consistent with the Exchange Act 
and Rule 608 of Regulation NMS. The terms of the loans do not need to 
satisfy the requirements of the funding model set forth in Article XI 
of the CAT NMS Plan.
    Section 3.9 of the CAT NMS Plan states that ``[i]f the Company 
requires additional funds to carry out its purposes, to conduct its 
business, to meet its obligations, or to make any expenditure 
authorized by this Agreement, the Company may borrow funds from such 
one or more of the Participants, or from such third party lender(s), 
and on such terms and conditions, as may be approved by a Supermajority 
Vote of the Operating Committee.'' As the Company--CAT LLC--did not 
have a source of revenue to fund its activities without a funding model 
approved by the SEC, CAT LLC determined to borrow funds from the 
Participants on terms approved by a Supermajority Vote of the Operating 
Committee. After this vote, CAT LLC entered into loan agreements with 
the Participants to cover CAT costs. The terms of the loan agreements 
dictate that repayment of the notes will be pro rata, based on the 
outstanding amounts loaned to CAT LLC. Accordingly, CAT LLC is 
obligated by contract, approved in accordance with the terms of the CAT 
NMS Plan, to repay the notes pro rata, not by another method.
    Moreover, Section 3.8 of the CAT NMS Plan states that ``[e]xcept as 
may be determined by the unanimous vote of all the Participants or as 
may be required by applicable law, no Participant shall be obligated to 
contribute capital or make loans to the Company.'' The Participants 
voluntarily have agreed to provide loans to CAT LLC under the agreed 
upon terms to fund the CAT until a funding model is approved. Without a 
unanimous vote of the Participants, however, CAT LLC cannot require the 
Participants to make a new loan to CAT LLC. Accordingly, without the 
agreement of the Participants, the loans must be repaid in accordance 
with their terms.
n. Sufficient Detail Regarding Pro Rata Allocation of Past CAT Costs to 
Participants
    Further with regard to the pro rata allocation of Past CAT Costs, 
the manner in which the loans are repaid are governed by the loan 
agreements between CAT LLC and the Participants, as approved by CAT 
LLC. The following provides additional detail as to the allocation of 
Past CAT Costs to Participants in accordance with the loans to CAT LLC.
    Pending SEC approval of CAT fees to fund the CAT, the Participants 
voluntarily determined to fund the development and operation of the CAT 
through quarterly loans to CAT LLC. The Participants determined to use 
the market share, tier-based funding model applicable to Execution 
Venues described in the proposed amendment to the CAT NMS Plan 
submitted to the SEC on December 11, 2017 (without including ATSs as 
Equity Execution Venues) to allocate loan amounts among Participants 
(``Tiered Market Share Proposal'').\111\ As described in that proposal, 
each Equity Execution Venue is placed in one of four tiers of fixed 
fees based on market share, and each Options Execution Venue is placed 
in one of two tiers of fixed fees based on market share. Equity 
Execution Venue market share is determined by calculating each Equity 
Execution Venue's proportion of the total volume of NMS Stock and OTC 
Equity shares reported by all Equity Execution Venues during the 
relevant time period. For purposes of calculating market share, the OTC 
Equity Securities market share of Execution Venue ATSs trading OTC 
Equity Securities as well as the market share of the FINRA OTC 
reporting facility are discounted. Similarly, market share for Options 
Execution Venues is determined by calculating each Options Execution 
Venue's proportion of the total volume of Listed Options contracts 
reported by all Options Execution Venues during the relevant time 
period. The tiers are

[[Page 17113]]

refreshed on a quarterly basis in accordance with the Tiered Market 
Share Proposal.
---------------------------------------------------------------------------

    \111\ See 2018 Fee Proposal Release.
---------------------------------------------------------------------------

    Each of the Participants voluntarily have loaned CAT LLC funds in 
amounts in accordance with the Tiered Market Share Proposal to cover 
Past CAT Costs. Accordingly, under the Funding Proposal, the 
Participants propose to be reimbursed for two-thirds of the Historical 
CAT Costs pro rata based on the outstanding amounts loaned to CAT LLC 
pursuant to the Tiered Market Share Proposal, as this is what is 
required under the loan contract between CAT LLC and the Participants. 
Correspondingly, for the remaining one-third of the Historical CAT 
Costs that are not reimbursed via the Historical CAT Assessment, the 
Participants propose to remain responsible for the amounts loaned to 
CAT LLC pursuant to the Tiered Market Share Proposal. The Participants' 
one-third share of the Historical CAT Costs would be paid by the 
cancellation of the loans on a pro rata basis. In addition, for any 
Past CAT Costs that are excluded from Historical CAT Costs, the 
Participants propose to remain responsible for the amounts loaned to 
CAT LLC pursuant to the Tiered Market Share Proposal as well. These 
excluded costs also would be paid by cancellation of the loans on a pro 
rata basis.
o. Past CAT Costs: Collected From Current Versus Past Industry Members 
and Use of Prior Month's Transactions
    CAT LLC believes that Historical CAT Assessments are appropriately 
assessed to current Industry Members based on current market activity. 
CAT LLC does not believe that Historical CAT Assessments should be 
charged to Industry Members that were active at the time when the Past 
CAT Costs were incurred and based on trading activity from the time 
when the Past CAT Costs were incurred.
    CAT LLC believes that it is appropriate to collect the Historical 
CAT Assessments from current Industry Members based on current market 
activity because current market participants are the beneficiaries of 
the regulatory value provided by the CAT to the securities markets. The 
SEC has emphasized that the CAT provides a benefit to all market 
participants,\112\ and, therefore, current Industry Members are 
benefitting from the efforts to create and operate the CAT.
---------------------------------------------------------------------------

    \112\ See generally Rule 613 Adopting Release.
---------------------------------------------------------------------------

    In addition, the approach recognizes the many practical 
difficulties of imposing fees retroactively on Industry Members' market 
activity from the past, sometimes years in the past as the relevant 
recovery period extends to 2012. For example, one of the practical 
difficulties may include the fact that some Industry Members that would 
be subject to such a retroactive fee may no longer be in business or no 
longer registered as a broker-dealer that is subject to the 
jurisdiction of the Participants or SEC. Indeed, this is likely to be a 
substantial issue. For example, in the SEC's approval order of the CAT 
NMS Plan, the SEC used an estimate of 1,800 broker-dealers subject to 
CAT reporting for its cost estimates.\113\ However, the number of 
current Industry Members has greatly diminished from these early 
estimates to approximately 1,100.\114\ Therefore, at least 
approximately 40% of the broker-dealers that may have been subject to 
CAT reporting in 2012 are no longer CAT Reporters.
---------------------------------------------------------------------------

    \113\ CAT NMS Plan Approval Order at 84862.
    \114\ An average of 1,124 unique CAT Reporters sent transaction 
data to the CAT from July 1, 2022 to August 8, 2022.
---------------------------------------------------------------------------

    Another practical issue involves the difficulty of accurately 
determining the transactions in Eligible Securities of the Industry 
Member for the past decade that would be subject to CAT fees. Because 
the recovery period for Past CAT Costs spans a period in which the CAT 
was not in existence yet, as well as periods in which CAT reporting was 
being phased in, the CAT may not have any record of relevant 
transactions from earlier periods, and it may not have a complete 
record of the relevant transactions for later periods. The SEC 
anticipated the recovery of CAT fees after such costs were incurred, as 
it contemplated the recovery of CAT costs for the creation of the CAT 
as well as its implementation and maintenance.\115\
---------------------------------------------------------------------------

    \115\ See, e.g., Rule 613(a)(1)(vii)(D) of Regulation NMS under 
the Exchange Act.
---------------------------------------------------------------------------

    Moreover, imposing retroactive fees for past market activity could 
raise fairness issues. For example, because the fee would be 
retroactive, market participants could not have taken into 
consideration the CAT fee when they decided to enter into the 
transactions in the past. In addition, given the passage of time, past 
CAT Reporters, particularly small CAT Reporters, may not be in a 
position to pay a fee related to earlier market activity.\116\
---------------------------------------------------------------------------

    \116\ CAT LLC notes, however, that there has been substantial 
continuity in the largest Industry Members over time. For the 
illustrative example, the top 10 firms in terms of equivalent 
executed shares in December 2022 are allocated more than half (52%) 
of the total Industry Member CAT costs; eight of those 10 firms were 
also ranked in the top 10 throughout 2021. The remaining two were 
ranked 14th and 15th, respectively. Similarly, of the top 30 firms 
in December 2022 (representing an allocation of 82% of the total 
Industry Member CAT costs), all but three ranked in the top 30 
throughout 2021. The three exceptions were ranked at 31, 33 and 40 
in 2021. Furthermore, of the top 10 firms by CAT record volume year 
to date in 2023, 7 were also top 10 reporters by message volume in 
2020. The other three rose from ranks 17, 18, and 35. Of the top 30 
firms by CAT record volume year to date in 2023, 25 were in the top 
30 reporters of 2020.
---------------------------------------------------------------------------

    In addition, CAT LLC notes that the SEC has approved similar 
funding practices with regard to new Participants for the CAT as well 
as new participants for other national market system plans. In each 
case, the new participant is required to pay a fee to join the plan, 
and the fee is based on past costs for creating, implementing and 
maintaining the plan at issue.\117\ As a result, a new participant 
would be required to pay a fee for costs incurred in the past by the 
relevant plan. For example, Section 3.3 of the CAT NMS Plan states 
that, to become a new Participant to the CAT NMS Plan, the applicant 
must:
---------------------------------------------------------------------------

    \117\ See, e.g., Section III(b) of the CTA Plan; Section VIII of 
the UTP Plan.

pay a fee to the Company in an amount determined by a Majority Vote 
of the Operating Committee as fairly and reasonably compensating the 
Company and the Participants for costs incurred in creating, 
implementing, and maintaining the CAT, including such costs incurred 
in evaluating and selecting the Initial Plan Processor and any 
subsequent Plan Processor and for costs the Company incurs in 
providing for the prospective Participant's participants in the 
Company, including after consideration of the factors identified in 
---------------------------------------------------------------------------
Section 3.3(b) (the ``Participation Fee'').

    As this provision indicates, new CAT Participants are required to 
contribute to paying for costs incurred since the inception of the CAT. 
Indeed, the costs related to evaluating and selecting the Initial Plan 
Processor were incurred in 2017 and before.\118\ For example, a CAT 
Participant applicant in 2023 may be required to pay a fee that 
reflects CAT costs incurred years ago. Similarly, the Funding Proposal 
would require current Industry Members to pay a share of CAT costs from 
years ago.
---------------------------------------------------------------------------

    \118\ Letter from Participants, to Brent J. Fields, Secretary, 
SEC re: Selection of Plan Processor for the National Market System 
Plan Governing Consolidated Audit Trail (Jan. 18, 2017).
---------------------------------------------------------------------------

p. Budgeted Versus Incurred Costs
    Under the Funding Proposal, the budgeted CAT costs set forth in the 
annual operating budget would be used to determine the Fee Rate for CAT 
Fees related to Prospective CAT Costs. The budgeted CAT costs would 
comprise estimated fees, costs and expenses to be reasonably incurred 
by the Company for the development, implementation and operation of the 
CAT during the year,

[[Page 17114]]

which would include costs for the Plan Processor, insurance, and third-
party support, as well as an operational reserve. CAT LLC does not 
propose to use costs already incurred in calculating the CAT Fees.
    CAT LLC believes that using budgeted CAT costs, rather than CAT 
costs already incurred, is critical to ``build[ing] financial stability 
to support the Company as a going concern.'' \119\ Using budgeted CAT 
costs to determine the Fee Rate would allow CAT LLC to collect fees 
before bills become payable. If, however, CAT Fees are only collected 
after bills become payable, then the Participants would be required to 
continue to fund 100% of CAT costs to pay the bills as they come due. 
Making the Participants responsible for all of the CAT costs upfront, 
rather than one-third of the CAT costs, would change the proposed model 
in a significant manner.
---------------------------------------------------------------------------

    \119\ Section 11.2(f) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Requiring the calculation of the Fee Rate based on incurred CAT 
costs, rather than budgeted CAT costs would only be necessary if 
budgeted and incurred CAT costs were likely to diverge. However, the 
Funding Proposal has been designed to address this concern. As 
proposed, CAT LLC would be required to calculate the Fee Rate each year 
based upon the budget for the upcoming year, and to adjust the fee rate 
mid-year to reflect changes in the budgeted or actual CAT costs or the 
projected or actual executed equivalent share volume. Accordingly, CAT 
LLC would be required to adjust CAT Fees twice a year to ensure that 
they are closely aligned with CAT costs. Moreover, when establishing 
the annual budget or its mid-year adjustment, CAT LLC would adjust the 
budget to reflect any surplus or deficit in CAT Fees collected during 
the prior period.
    In addition, the CAT NMS Plan requires that the Company operate on 
a ``break-even'' basis, with fees imposed to cover costs and an 
appropriate reserve. Any surpluses would be treated as an operational 
reserve to offset future fees and would not be distributed to the 
Participants as profits. To ensure that the Participants' operation of 
the CAT will not contribute to the funding of their other operations, 
Section 11.1(c) of the CAT NMS Plan specifically states that ``[a]ny 
surplus of the Company's revenues over its expenses shall be treated as 
an operational reserve to offset future fees.'' In addition, CAT LLC 
proposes to limit the size of the reserve to not more than 25% of the 
annual budget. To the extent that collected CAT fees exceed CAT costs, 
including the reserve of 25% of the annual budget, such surplus shall 
be used to offset future fees.\120\ Furthermore, CAT LLC is set up as a 
business league to mitigate concerns that CAT LLC's earnings could be 
used to benefit individual Participants.\121\
---------------------------------------------------------------------------

    \120\ See Proposed 11.1(a)(ii) of the CAT NMS Plan.
    \121\ To qualify as a business league under Section 501(c)(6) of 
the Internal Revenue Code, an organization must ``not [be] organized 
for profit and no part of the net earnings of [the organization can] 
inure[ ] to the benefit of any private shareholder or individual.'' 
As the SEC stated when approving the CAT NMS Plan, ``the Commission 
believes that the Company's application for Section 501(c)(6) 
business league status addresses issues raised by commenters about 
the Plan's proposed allocation of profit and loss by mitigating 
concerns that the Company's earnings could be used to benefit 
individual Participants.'' CAT NMS Plan Approval Order at 84793.
---------------------------------------------------------------------------

q. Continuous Fees Versus Sunsetting Fees
    CAT LLC does not propose to require the proposed CAT Fees related 
to Prospective CAT Costs to sunset automatically; instead, a CAT Fee 
would continue until a new CAT Fee is in place in accordance with the 
requirements of the CAT NMS Plan and section 19(b) of the Exchange Act. 
CAT LLC believes that it is critical that a CAT Fee remain in place at 
all times. Accordingly, CAT LLC proposes to add Section 
11.3(a)(i)(A)(III) of the CAT NMS Plan to clarify that CAT Fees related 
to Prospective CAT Costs do not sunset automatically; such CAT Fees 
would remain in place until new CAT Fees with a new Fee Rate is in 
effect.
    The financial viability of the CAT would be put at risk without a 
constant source of revenue. CAT LLC pays various bills, including 
technology bills, on a monthly basis. Accordingly, even short delays in 
the implementation of new CAT Fees after the sunsetting of a prior CAT 
Fee may have a deleterious effect on the operation of the CAT. Indeed, 
adopting sunsetting fees would contradict the funding principle of 
seeking to ``build financial stability to support the Company as a 
going concern.'' \122\
---------------------------------------------------------------------------

    \122\ Section 11.2(f) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Moreover, CAT LLC does not believe that a sunsetting requirement is 
necessary to ensure that the CAT Fees are closely coordinated with 
Prospective CAT costs. CAT LLC has proposed a comprehensive, multi-
pronged approach to ensure that the CAT Fees are closely tied to CAT 
costs. First, CAT LLC will be required to calculate the Fee Rates for 
the CAT Fees based on budgeted CAT costs. In addition, CAT LLC will be 
required to calculate the Fee Rate twice a year to determine whether 
the Fee Rate has changed due to changes in the budgeted or actual costs 
or actual or projected executed equivalent share volume, and to make a 
fee filing twice a year to reflect this calculation. Accordingly, the 
Fee Rate would be required to be updated twice a year, thereby ensuring 
the CAT Fees are closely tied to CAT costs.
    Second, the CAT NMS Plan requires that the Company operate on a 
``break-even'' basis, with fees imposed to cover costs and an 
appropriate reserve. Any surpluses would be treated as an operational 
reserve to offset future fees and would not be distributed to the 
Participants as profits. To ensure that the Participants' operation of 
the CAT will not contribute to the funding of their other operations, 
Section 11.1(c) of the CAT NMS Plan specifically states that ``[a]ny 
surplus of the Company's revenues over its expenses shall be treated as 
an operational reserve to offset future fees.'' Moreover, CAT LLC 
proposes to amend the CAT NMS Plan to limit the reserve to no more than 
25% of the annual budget and to clarify that CAT fees collected in 
excess of the CAT costs, including the reserve, will be used to offset 
future fees.\123\
---------------------------------------------------------------------------

    \123\ See Proposed Section 11.1(a)(i) and (ii) of the CAT NMS 
Plan.
---------------------------------------------------------------------------

    Third, CAT LLC proposes to amend the CAT NMS Plan to require 
Participants to provide significant details in their fee filings 
regarding Industry Member CAT Fees. Proposed paragraph (a)(iii)(B) of 
Section 11.3 of the CAT NMS Plan would state that, ``[w]hen the 
Participants file with the SEC pursuant to section 19(b) of the 
Exchange Act CAT Fees to be charged to Industry Members calculated 
using the Fee Rate that the Operating Committee approved in accordance 
with paragraph (a) of this Section 11.3,'' such filings would be 
required to include (A) the Fee Rate; (B) the budget for the upcoming 
year (or remainder of the year, as applicable), including a brief 
description of each line item in the budget, including (1) technology 
line items of cloud hosting services, operating fees, CAIS operating 
fees, change request fees and capitalized developed technology costs, 
(2) legal, (3) consulting, (4) insurance, (5) professional and 
administration, and (6) public relations costs, a reserve and/or such 
other categories as reasonably determined by the Operating Committee to 
be included in the budget, and the reason for changes in each such line 
item from the prior CAT Fee filing; (C) a discussion of how the budget 
is reconciled to the collected fees; and (D) the projected total 
executed equivalent share volume of all transactions in Eligible 
Securities for the year (or

[[Page 17115]]

remainder of the year, as applicable), and a description of the 
calculation of the projection. This detail would describe how the Fee 
Rate was calculated and explain how the budget used in the calculation 
is reconciled to the collected fees. Such detailed information would 
provide Industry Members and other interested parties with a clear 
understanding of the calculation of the CAT fees and their relationship 
to CAT costs.
r. Conflicts of Interest
    CAT LLC believes that the current process for developing the CAT 
funding model appropriately addresses potential conflicts of interest 
related to CAT fees. The CAT NMS Plan, as approved by the SEC, adopts 
various measures to protect against potential conflicts issues raised 
by the Participants' fee-setting authority, including, but not limited 
to, the fee filing requirements under the Exchange Act and operating 
the CAT on a break-even basis. CAT LLC believes that these and other 
measures address potential conflicts of interest related to CAT fees.
s. Effect on Efficiency, Competition or Capital Formation
    CAT LLC believes that the Funding Proposal would have a positive 
impact on efficiency, competition and capital formation. The Funding 
Proposal is designed to provide a predictable revenue stream sufficient 
to cover CAT costs each year. In doing so, the Funding Proposal would 
be designed to maintain the CAT as a going concern financially. By 
providing for the financial viability of the CAT, the Funding Proposal 
would allow the CAT to provide its intended benefits. For example, the 
CAT is intended to provide significant improvements in efficiency 
related to how regulatory data is collected and used. In addition, by 
providing enhanced regulatory oversight and surveillance, the CAT could 
result in improvements in market efficiency by deterring violative 
activity. Similarly, the CAT is intended improve capital formation by 
improving investor confidence in the market due to enhancements in 
surveillance.
    In addition, the Funding Proposal would not impose an inappropriate 
burden on competition. The Funding Proposal would operate in a manner 
similar to the funding models employed by the SEC and the Participants 
related to section 31 of the Exchange Act, the FINRA TAF and the ORF. 
These fees are long-standing and have been approved by the Commission 
as satisfying the requirements under the Exchange Act, including not 
imposing a burden on the competition that is not necessary or 
appropriate under the Exchange Act. In addition, the Funding Proposal 
avoids potentially burdensome fees for market makers or other market 
participants based on message traffic. Furthermore, the Funding 
Proposal addresses the specific trading characteristics of Listed 
Options and OTC Equity Securities to avoid adverse effects of the 
trading of those instruments. For example, the Funding Proposal 
includes the discounting of transactions involving OTC Equity Shares 
which, given the volume of shares typically involved in such securities 
transactions, otherwise may result in disproportionate fees to market 
participants engaging in transaction in these securities.
    The Funding Proposal also would not unfairly burden FINRA or any of 
the exchanges. The Funding Proposal is designed to be neutral as to the 
manner of execution and place of execution. The CAT fees would be the 
same regardless of whether the transaction is executed on an exchange 
or in the over-the-counter market. All Participants are self-regulatory 
organizations that have the same regulatory responsibilities under the 
Exchange Act. Their usage of CAT Data will be for the same regulatory 
purposes. By treating each Participant the same, the CAT fees would not 
become a competitive issue by and among the Participants.
    CAT LLC does not believe that this proposal would unfairly burden 
CEBBs and CEBSs. Such a transaction-based fee is a type of fee that is 
currently used and well-known in the securities markets. For example, 
SRO members regularly pay transaction-based fees. As a result, the CAT 
fees could be paid by Industry Members without requiring significant 
and potentially costly changes. Moreover, the CEBBs and CEBSs could 
determine, but would not be required, to pass their CAT fees through to 
their customers, who, in turn, could pass their CAT fees to their 
customers, until the fee is imposed on the ultimate participant in the 
transaction. With such a pass through, the CEBBs and CEBSs would not 
ultimately incur the cost of all CAT fees related to their 
transactions.
t. Straightforward Approach
    One advantage of the Funding Proposal is that the approach is 
simple, straightforward and easy to understand. Using the predetermined 
Fee Rate or Historical Fee Rate, CAT LLC would calculate CAT fees by 
multiplying the number of executed equivalent shares in each 
Participant, CEBB or CEBS's transactions in Eligible Securities by the 
Fee Rate or Historical Fee Rate (as applicable) and one-third. The 
values necessary for the calculation are readily available. The Fee 
Rates and Historical Fee Rates would be publicly available, and 
Participants, CEBBs and CEBSs have easy access to their transaction 
data. Moreover, the two adjustments--one for Listed Options and one for 
OTC Equity Securities--are similarly straightforward calculations. The 
Funding Proposal does not include other complexities, such as tiered 
fees, minimum or maximum fees, excluded types of Eligible Securities or 
excluded transactions in Eligible Securities.
u. Predictable Fees
    The Funding Proposal also provides CAT Reporters with predictable 
CAT fees. Because the fee rates would be established in advance, 
Participants, CEBBs and CEBSs can calculate the CAT fee that applies to 
each transaction when it occurs. Accordingly, CAT Reporters with a CAT 
fee obligation may easily estimate and validate their applicable fees 
based on their own trading data. In addition, to the extent any CAT 
fees are passed on to customers, such customers also can calculate the 
applicable CAT fee for each transaction.
    The predictability of CAT fees under the Funding Proposal improves 
upon the lack of fee predictability in the Original Funding Model and 
other message traffic-based models.\124\ For example, with potential 
message traffic models,\125\ CAT Reporters would not know the actual 
per message rate until after the end of the relevant reporting period 
for which they were assessed the fee and also could not determine in 
advance the number of messages that may be associated with a given 
order or the total number of messages, thereby making it difficult for 
a CAT Reporter to predict a CAT fee related to its market activity. In 
addition, this lack of predictability related to message-based fees 
also could complicate efforts by Industry Members to estimate, explain 
and directly pass message-based fees back to customers, particularly if 
no trade has occurred.
---------------------------------------------------------------------------

    \124\ See Securities Exchange Act Rel. No. 92451 (July 20, 
2021), 86 FR 40114, 40122 (July 26, 2021) (``2021 Fee Proposal 
OIP'').
    \125\ Potential message traffic models, including the 2018 Fee 
Proposal and 2021 Fee Proposal, and the message traffic only model, 
are discussed further below in Section A.10 of this filing.
---------------------------------------------------------------------------

v. Administrative Ease
    The Funding Proposal also would allow for ``ease of billing and 
other administrative functions.'' \126\ As discussed above, the Funding 
Proposal relies upon a basic calculation using

[[Page 17116]]

predetermined fee rate, thereby making the fee determination a 
straightforward process. In addition, the CAT fees will be collected in 
a manner similar to the collection process that Industry Members are 
already accustomed, thereby further reducing the administrative burden 
on the industry.
---------------------------------------------------------------------------

    \126\ Section 11.2(d) of the CAT NMS Plan.
---------------------------------------------------------------------------

w. Equal Treatment of Trading Venues
    The Funding Proposal also has the benefit of treating transactions 
in Eligible Securities equally regardless of the trading venue. The Fee 
Rate or Historical Fee Rate would be the same regardless of whether a 
trade was executed on an exchange or in the OTC market, or how the 
trade ultimately occurred more generally (e.g., in a manner that 
generated more message traffic). As a result, it would not favor or 
unfairly burden any one type of trading venue or method.
x. Equitable Treatment of Different Eligible Securities
    The Funding Proposal also recognizes and addresses the different 
trading characteristics of different types of securities. Recognizing 
that Listed Options trade in contracts rather than shares, the Funding 
Proposal would count executed equivalent share volume differently for 
Listed Options. Specifically, each executed contract for a transaction 
in Listed Options would be counted based on the multiplier applicable 
to the specific Listed Option contract in the relevant transaction 
(e.g., 100 executed equivalent shares or such other applicable 
equivalency). Similarly, in recognition of the different trading 
characteristics of OTC Equity Securities as compared to NMS Stocks, the 
Funding Proposal would discount the share volume of OTC Equity 
Securities when calculating the CAT fees. Specifically, each executed 
share for a transaction in OTC Equity Securities would be counted as 
0.01 executed equivalent shares. As a result, the Funding Proposal 
would not favor or unfairly burden any one type of product or product 
type.
y. Contributions by Both Industry Members and Participants
    The Funding Proposal would require both Participants and Industry 
Members to contribute to the funding of the CAT. To date, the 
Participants have paid the full cost of the creation, implementation 
and maintenance of the CAT since 2012, pending Commission approval of a 
fee model. The continued funding of the CAT solely by the Participants 
was and is not contemplated by the CAT NMS Plan, nor is it a 
financially sustainable approach. As noted by the SEC, the CAT 
``substantially enhance[s] the ability of the SROs and the Commission 
to oversee today's securities markets,'' \127\ thereby benefiting all 
market participants. The Funding Proposal would require both 
Participants and Industry Members to contribute to the cost of the CAT, 
as contemplated by Rule 613 and the CAT NMS Plan.
---------------------------------------------------------------------------

    \127\ Rule 613 Adopting Release at 45726.
---------------------------------------------------------------------------

    Rule 613(a)(1)(vii)(D) specifically contemplates Industry Members 
contributing to the payment of CAT costs. Specifically, this provision 
requires the CAT NMS Plan to address ``[h]ow the plan sponsors propose 
to fund the creation, implementation, and maintenance of the 
consolidated audit trail, including the proposed allocation of such 
estimated costs among the plan sponsors, and between the plan sponsors 
and members of the plan sponsors.'' In approving Rule 613, the SEC 
noted that ``although the plan sponsors likely would initially incur 
the costs to establish and fund the central repository directly, they 
may seek to recover some or all of these costs from their members.'' 
\128\
---------------------------------------------------------------------------

    \128\ Id. at 45795.
---------------------------------------------------------------------------

    In addition, as approved by the SEC, the CAT NMS Plan specifically 
contemplates CAT fees to be paid by both Industry Members and 
Participants. Section 11.1(b) of the CAT NMS Plan states that ``the 
Operating Committee shall have discretion to establish funding for the 
Company, including: (i) establishing fees that the Participants shall 
pay; and (ii) establishing fees for Industry Members that shall be 
implemented by the Participants.'' \129\ The Commission stated in 
approving the CAT NMS Plan the following:
---------------------------------------------------------------------------

    \129\ See also Sections 11.1(c), 11.2(c), and 11.3(a) and (b) of 
the CAT NMS Plan.

    The Commission believes that the proposed funding model reflects 
a reasonable exercise of the Participants' funding authority to 
recover the Participants' costs related to the CAT. The CAT is a 
regulatory facility jointly owned by the Participants and, as noted 
above, the Exchange Act specifically permits the Participants to 
charge members fees to fund their self-regulatory obligations. The 
Commission further believes that the proposed funding model is 
designed to impose fees reasonably related to the Participants' 
self-regulatory obligations because the fees would be directly 
associated with the costs of establishing and maintaining the CAT, 
and not unrelated SRO services.\130\
---------------------------------------------------------------------------

    \130\ CAT NMS Plan Approval Order at 84794.

    Likewise, the Commission stated that ``the Participants are 
permitted to recoup their regulatory costs under the Exchange Act 
through the collection of fees from their members, as long as such fees 
are reasonable, equitably allocated and not unfairly discriminatory, 
and otherwise are consistent with Exchange Act standards,'' \131\ and 
noted that ``Rule 613(a)(1)(vii)(D) requires the Participants to 
discuss in the CAT NMS Plan how they propose to fund the creation, 
implementation and maintenance of the CAT, including the proposed 
allocation of estimated costs among the Participants, and between the 
Participants and Industry Members.'' \132\
---------------------------------------------------------------------------

    \131\ Id. at 84795.
    \132\ Id. at 84797 (emphasis added).
---------------------------------------------------------------------------

    In its amendments to the CAT NMS Plan regarding financial 
accountability, the SEC reaffirmed the ability for the Participants to 
charge Industry Members a CAT fee. Specifically, the SEC noted that the 
amendments were not intended to change the basic funding structure for 
the CAT, which may include fees established by the Operating Committee, 
and implemented by the Participants, to recover from Industry Members 
the costs and expenses incurred by the Participants in connection with 
the development and implementation of the CAT.\133\
---------------------------------------------------------------------------

    \133\ Securities Exchange Act Rel. No. 88890 (May 15, 2020), 85 
FR 31322, 31329 (May 22, 2020).
---------------------------------------------------------------------------

z. Use of CAT Data
    CAT Data would be used to calculate the CAT fees under the Funding 
Proposal. CAT Data would be used to identify each transaction in 
Eligible Securities for which a CAT fee would be collected. 
Specifically, CAT fees will be charged with regard to trades reported 
to CAT by FINRA via the ADF/ORF/TRF and by the exchanges. In addition, 
the same transaction data in the CAT Data would be used in the 
calculation of the projected total executed equivalent share volume for 
the Fee Rate. Furthermore, the transaction data in the CAT Data 
provides the identity of the relevant CAT Executing Brokers for each 
transaction for purposes of the CAT fees. Using CAT Data for the CAT 
fee calculations provides administrative efficiency, as the data will 
be accessible via the CAT.
aa. Twelve Month Look Back for Projected Volume
    The calculation of the Fee Rate and the Historical Fee Rate 
requires the determination of the projected total executed equivalent 
share volume of transactions in Eligible Securities for the year. CAT 
LLC proposes to determine this projection based on the total executed 
equivalent share volume of transactions in Eligible Securities from the 
prior twelve months. CAT LLC

[[Page 17117]]

determined that the use of the data from the prior twelve months 
provides an appropriate balance between using data from a period that 
is sufficiently long to avoid short term fluctuations while providing 
data close in time to the calculation of the Fee Rate or Historical Fee 
Rate. In addition, using twelve months, rather a period less than a 
year, would address the issue of potential seasonality. For example, if 
the projection were based on a period shorter than one year, the 
projection could be based on a period that typically has lighter 
trading volume than the other half of the year, thereby causing the 
projection to be too low.
bb. Cost Discipline Mechanisms
    The reasonableness of the Funding Proposal and the fees calculated 
under the Funding Proposal are supported by key cost discipline 
mechanisms for the CAT--a cost-based funding structure, cost 
transparency, cost management efforts and oversight. Together, these 
mechanisms help ensure the ongoing reasonableness of the CAT's costs 
and the level of fees assessed to support those costs.
    First, the CAT NMS Plan requires that the Company operate on a 
``break-even'' basis, with fees imposed to cover costs and an 
appropriate reserve. Any surpluses would be treated as an operational 
reserve to offset future fees and would not be distributed to the 
Participants as profits.\134\ To ensure that the Participants' 
operation of the CAT will not contribute to the funding of their other 
operations, Section 11.1(c) of the CAT NMS Plan specifically states 
that ``[a]ny surplus of the Company's revenues over its expenses shall 
be treated as an operational reserve to offset future fees.'' In 
addition, as set forth in Article VIII of the CAT NMS Plan, the Company 
``intends to operate in a manner such that it qualifies as a `business 
league' within the meaning of section 501(c)(6) of the [Internal 
Revenue] Code.'' To qualify as a business league, an organization must 
``not [be] organized for profit and no part of the net earnings of [the 
organization can] inure[ ] to the benefit of any private shareholder or 
individual.'' \135\ As the SEC stated when approving the CAT NMS Plan, 
``the Commission believes that the Company's application for section 
501(c)(6) business league status addresses issues raised by commenters 
about the Plan's proposed allocation of profit and loss by mitigating 
concerns that the Company's earnings could be used to benefit 
individual Participants.'' \136\ The Internal Revenue Service has 
determined that the Company is exempt from federal income tax under 
section 501(c)(6) of the Internal Revenue Code.
---------------------------------------------------------------------------

    \134\ CAT NMS Plan Approval Order at 84792.
    \135\ 26 U.S.C. 501(c)(6).
    \136\ CAT NMS Plan Approval Order at 84793.
---------------------------------------------------------------------------

    Second, the CAT's commitment to reasonable funding in support of 
its regulatory obligations is further reinforced by the transparency it 
has committed to provide on an ongoing basis regarding its financial 
performance. The Company currently makes detailed financial information 
about the CAT publicly available. Section 9.2(a) of the CAT NMS Plan 
requires the Operating Committee to maintain a system of accounting 
established and administered in accordance with GAAP and requires ``all 
financial statements or information that may be supplied to the 
Participants shall be prepared in accordance with GAAP (except that 
unaudited statements shall be subject to year-end adjustments and need 
not include footnotes).'' Section 9.2(a) of the CAT NMS Plan also 
requires the Company to prepare and provide to each Participant ``as 
soon as practicable after the end of each Fiscal Year, a balance sheet, 
income statement, statement of cash flows and statement of changes in 
equity for, or as of the end of, such year, audited by an independent 
public accounting firm.'' The CAT NMS Plan requires that this audited 
balance sheet, income statement, statement of cash flows and statement 
of changes in equity be made publicly available. Among other things, 
these financial statements provide operating expenses, including 
technology, legal, consulting, insurance, professional and 
administration and public relations costs. The Company also maintains a 
dedicated web page on the CAT NMS Plan website that consolidates its 
annual financial statements in a public and readily accessible 
place.\137\
---------------------------------------------------------------------------

    \137\ See CAT Audited Financial Statements, https://www.catnmsplan.com/audited-financial-statements.
---------------------------------------------------------------------------

    In addition, the Company publicly provides the annual operating 
budget for the Company as well as periodically provides updates to the 
budget that occur during the year. The Company includes such budget 
information on a dedicated web page on the CAT NMS Plan website to make 
it readily accessible, like the CAT financial statements.
    CAT LLC also has held webinars providing additional detail about 
CAT costs and about potential alternative funding models for the 
CAT.\138\ In addition, CAT LLC plans to offer additional webinars on 
cost and funding for the industry as appropriate going forward. 
Collectively, these reports and other efforts provide extensive and 
comprehensive information regarding the CAT's operations with respect 
to its budgets, revenues, costs, and financial reserves, among other 
information.
---------------------------------------------------------------------------

    \138\ See, e.g., CAT LLC Webinar CAT Costs (Sept. 21, 2021), 
https://www.catnmsplan.com/events/cat-costs-september-21-2021; CAT 
LLC Webinar, CAT Funding (Sept. 22, 2021), https://www.catnmsplan.com/events/cat-funding-september-22-2021; and CAT LLC 
Webinar, CAT Funding (Apr. 6, 2022), https://www.catnmsplan.com/events/cat-funding.
---------------------------------------------------------------------------

    Third, CAT LLC regularly engages in and oversees efforts to reduce 
CAT costs responsibly while appropriately funding its regulatory 
obligations. CAT LLC's efforts to manage its expenses responsibly 
include oversight of the CAT's annual budget, including technology and 
other expenditures and initiatives. This oversight is informed by key 
CAT working groups, such as the Technology Working Group, Regulatory 
Working Group and Interpretive Working Group, each of which brings 
varied expertise to issues of responsible cost management. In 
particular, the Operating Committee currently utilizes a Cost 
Management Working Group to analyze opportunities to manage CAT costs 
responsibly. In addition, the Plan Processor regularly reviews options 
to lower compute and storage needs and works with CAT technology 
providers to provide services in a cost-effective manner. These 
collective efforts have led to a variety of technological changes to 
reduce costs.
    Fourth, the CAT's funding and operations are subject to the 
oversight of the Commission. The CAT is extensively supervised by the 
Commission, including regular and continuous attendance at Operating 
Committee, Subcommittee and working group meetings. In addition, CAT 
fees as well as cost management efforts that require an amendment of 
the CAT NMS Plan are subject to review by the Commission's Division of 
Trading and Markets, as well as public comment.
10. Alternative Models Considered
    CAT LLC has determined to propose the Funding Proposal to fund the 
CAT for the reasons discussed above. In reaching this conclusion, CAT 
LLC considered the advantages and disadvantages of a variety of 
possible alternative funding and cost allocation models for the CAT in 
detail. After analyzing the various alternatives and considering 
comments on the

[[Page 17118]]

previously proposed models, CAT LLC determined that, although various 
funding models may be reasonable and appropriate, the Funding Proposal 
provides a variety of advantages in comparison to the alternatives, and 
satisfies the requirements of the Exchange Act, including providing for 
an equitable allocation of reasonable fees among CAT Reporters, not 
being designed to permit unfair discrimination among CAT Reporters and 
not imposing any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Exchange Act.
a. 2018 Fee Proposal
    CAT LLC previously filed a fee proposal in line with the CAT NMS 
Plan--the 2018 Fee Proposal.\139\ Under that model, CAT LLC, among 
other things, proposed a 75%-25% allocation of CAT costs between 
Execution Venues (which included Participants and Execution Venue ATSs) 
and Industry Members (other than Execution Venue ATSs), and required 
Execution Venues to pay fees based on market share, and Industry 
Members (other than Execution Venue ATSs) to pay fees based on CAT 
message traffic.\140\
---------------------------------------------------------------------------

    \139\ For a description of the 2018 Fee Proposal, see 2018 Fee 
Proposal Release. CAT LLC later withdrew this proposed amendment. 
Securities Exchange Act Rel. No. 82892 (Mar. 16, 2018), 83 FR 12633 
(Mar. 22, 2018).
    \140\ In developing the 2018 Fee Proposal, CAT LLC considered 
many variations of different aspects of that model. For example, CAT 
LLC evaluated different cost allocations between Industry Members 
(other than Execution Venue ATSs) and Execution Venues, including 
80%-20%, 75%-25%, 70%-30% and 65%-35% allocations, and different 
cost allocations between Equity and Options Execution Venues. CAT 
LLC also considered different discounts for equities and options 
market makers, different numbers of tiers of Industry Members and 
Execution Venues, different fee levels for each tier, and other 
aspects of the model.
---------------------------------------------------------------------------

    Each Industry Member (other than Execution Venue ATSs) would be 
placed into one of seven tiers of fixed fees, based on CAT message 
traffic in Eligible Securities. Options Market Maker and equity market 
maker quotes would be discounted when calculating message traffic.
    CAT LLC determined to allocate 67% of Execution Venue costs 
recovered to Equity Execution Venues and 33% to Options Execution 
Venues. Each Equity Execution Venue would be placed in one of four 
tiers of fixed fees based on market share, and each Options Execution 
Venue would be placed in one of two tiers of fixed fees based on market 
share. Equity Execution Venue market share would be determined by 
calculating each Equity Execution Venue's proportion of the total 
volume of NMS Stock and OTC Equity shares reported by all Equity 
Execution Venues during the relevant time period. For purposes of 
calculating market share, the OTC Equity Securities market share of 
Execution Venue ATSs trading OTC Equity Securities as well as the 
market share of the FINRA OTC reporting facility would be discounted. 
Similarly, market share for Options Execution Venues would be 
determined by calculating each Options Execution Venue's proportion of 
the total volume of Listed Options contracts reported by all Options 
Execution Venues during the relevant time period.
    The 2018 Fee Proposal was a very complex model with many 
interrelated parts, including allocation percentages, discounts for 
certain market behavior, and multiple tiered fees, and the complexity 
raised concerns from the Commission regarding its use as the CAT 
funding model. In addition, in response to the proposal, the industry 
provided a number of other comments related to the proposal, including 
comments regarding the proposed allocation of CAT costs between 
Participants and Industry Members, and the ability of certain market 
segments to afford the proposed CAT fee.\141\
---------------------------------------------------------------------------

    \141\ For a discussion of comments made regarding the Original 
Funding Model and the 2018 Fee Proposal, see generally 2018 Fee 
Proposal Release.
---------------------------------------------------------------------------

b. 2021 Fee Proposal
    In response to the comments on the 2018 Fee Proposal, CAT LLC 
determined to revise various aspects of the proposed model, thereby 
developing the 2021 Fee Proposal.\142\ The 2021 Fee Proposal would have 
continued to require many of the same elements as the 2018 model, 
including the bifurcated funding approach, and the use of market share 
and message traffic for allocating costs, as required by the current 
CAT NMS Plan. The 2021 Fee Proposal, however, proposed to revise the 
model in certain ways, including (1) dividing the CAT costs between 
Participants and Industry Members, rather than between Execution Venues 
and Industry Members (other than Execution Venue ATSs); (2) eliminating 
the use of tiers in calculating CAT fees for Participants and Industry 
Members; (3) adopting certain minimum and maximum CAT fees for Industry 
Members and Participants; (4) revising the allocation between Equity 
Execution Venues and Options to be 60%-40%; and (5) excluding, rather 
than discounting, market share in OTC Equity Shares from the 
calculation of market share for FINRA.
---------------------------------------------------------------------------

    \142\ See 2021 Fee Proposal Release.
---------------------------------------------------------------------------

    Although the revisions of the 2021 Fee Proposal addressed certain 
comments on the prior 2018 Fee Proposal, commenters continued to raise 
issues regarding the proposal. For example, commenters provided 
feedback regarding the 75%-25% cost allocation between Industry Members 
and Participants, the 60%-40% cost allocation between Equity 
Participants and Options Participants, the use of market share and 
message traffic for allocating costs among Participants and Industry 
Members, respectively, and the proposed minimum and maximum fees. 
Noting these and other issues, the SEC determined to institute 
proceedings to determine whether to disapprove the 2021 Fee Proposal or 
to approve the proposal with any changes or subject to any conditions 
the SEC deemed necessary or appropriate after considering public 
comment.\143\ Ultimately, the Operating Committee determined to 
withdraw the 2021 Fee Proposal.\144\
---------------------------------------------------------------------------

    \143\ See 2021 Fee Proposal OIP. See also Securities Exchange 
Act Rel. No. 93227 (Oct. 1, 2021), 86 FR 55900 (Oct. 7, 2021).
    \144\ Letter from Mike Simon, Chair, CAT NMS Plan Operating 
Committee, to Vanessa Countryman, Secretary, SEC (Dec. 8, 2021).
---------------------------------------------------------------------------

c. Revenue Funding Model
    CAT LLC also considered a model in which all CAT Reporters, 
including both Industry Members and Participants, would pay fees based 
solely on revenue. The concept underlying this proposal is that CAT 
costs would be borne by CAT Reporters based on their ability to pay. 
Under this model, Industry Member revenue would be calculated based on 
revenue reported in FOCUS reports, and Participant revenue would be 
calculated based on revenue information in Form 1 amendments and other 
publicly reported figures.
    CAT LLC did not select this model for various reasons. Under this 
approach, Participants as a group would only pay approximately 4% of 
the total CAT costs. Given their role as SROs and their use of the CAT, 
CAT LLC did not believe that such a small allocation of the CAT costs 
to the Participants was appropriate. Using revenue also raised a 
variety of practical issues. For example, questions were raised as to 
what revenue was appropriate to include in the calculation of revenue 
for Industry Members. The gross revenue set forth on FOCUS reports was 
proposed, as it was similar to an existing FINRA regulatory

[[Page 17119]]

fee.\145\ However, questions were raised as to whether revenue 
unrelated to NMS Securities or OTC Equity Securities, or otherwise 
unrelated to the CAT, should be included for calculation of the CAT 
fee. Eliminating revenue unrelated to CAT-related activity would have 
been difficult or impossible. In addition, the lack of a uniform 
approach to calculating revenue for the Participants could raise 
inequities in the collection of a CAT fee.
---------------------------------------------------------------------------

    \145\ See paragraphs (c) and (d) of Section 1 of Schedule A of 
FINRA's By-Laws regarding FINRA's annual Gross Income Assessment.
---------------------------------------------------------------------------

    To address the issues regarding the 96%-4% allocation and the 
calculation of the Participant revenue in the straight revenue model 
described above, CAT LLC considered an alternative version of the 
revenue model in which the CAT costs would be allocated between 
Industry Members and Participants based on a set percentage (e.g., 75%-
25%) and the Industry Member allocation would be allocated among 
Industry Members based on revenue and the Participant allocation would 
be allocated among Participants based on market share. However, this 
alternative revenue model failed to address the issues regarding the 
appropriate revenue calculations for Industry Members.
d. Message Traffic Only Model
    CAT LLC considered a funding model in which CAT costs were 
allocated across all CAT Reporters--both Industry Members and 
Participants--based on message traffic in the CAT. Specifically, CAT 
LLC considered eliminating the concepts of a Participant allocation and 
an Industry Member allocation entirely, and treating Participants and 
Industry Members the same under the model. The use of message traffic, 
however, raised issues regarding the predictability of fees. It also 
introduced complexity to the model, as discounts were necessary for 
certain types of activity to avoid fees that may adversely impact 
market making activity and other market activity.
e. Alternative Allocation for the Funding Proposal
    The Operating Committee also discussed an alternative funding model 
that would calculate fees in a manner similar to the Funding Proposal, 
but would allocate the fee to one Industry Member, the CEBS, rather 
than allocating one-third of the fees each to the CEBS, the CEBB and 
the applicable Participant. This allocation would more closely parallel 
the existing section 31 fee allocation structure that is already in 
place. This alternative allocation would eliminate complexity from the 
fee process, including the process of allocating fees among Industry 
Members and Participants that are likely to be passed through to the 
ultimate investors, and would provide for a more transparent funding 
process for investors. Instead of using this approach, CAT LLC 
determined to allocate costs among the main participants in a 
transaction and allow those participants to determine whether and how 
to recover the costs.
f. Sales Value Model
    CAT LLC also considered a funding model in which fees would be 
calculated based on transaction sales values, similar to the method 
used in the section 31/sales value fee programs. Under this model, the 
per sales value fee rate would be calculated by dividing the annual CAT 
budget by the projected annual total industry transaction sales values. 
The fee would be calculated by multiplying the sales value fee rate by 
a given trade's sales value. The CEBB, the CEBS and the relevant 
Participant would each be assessed one-third of the fee, or, in the 
alternative, the CEBS would be assessed two-thirds of the fee and the 
relevant Participants would be assessed one-third of the fee. The same 
rate would apply to all transactions equally, regardless of the type of 
product in the trade (i.e., NMS Stocks, Listed Options or OTC Equity 
Securities). Based on an analysis of 2021 data, CAT LLC observed that 
the sales value model could potentially impose a disproportionate share 
of the CAT costs on Participants and Industry Members trading NMS 
Stocks versus Listed Options. In comparison, also based on an analysis 
of 2021 data, CAT LLC observed that the Funding Proposal would impose 
an equitable allocation of fees among Participants and Industry Members 
trading NMS Stocks and Listed Options, as well as OTC Equity 
Securities.
g. Other Models
    CAT LLC also considered other possible funding models. For example, 
CAT LLC considered allocating the CAT costs equally among each of the 
Participants, and then permitting each Participant to charge its own 
members as it deems appropriate. CAT LLC determined that such an 
approach raised a variety of issues, including the likely inconsistency 
of the ensuing charges, potential for lack of transparency, and the 
impracticality of multiple SROs submitting invoices for CAT charges. 
CAT LLC also discussed the advantages and disadvantages of various 
alternative models during the development of the CAT NMS Plan, such as 
a cost allocation based on a strict pro-rata distribution, regardless 
of the type or size of the CAT Reporters.\146\
---------------------------------------------------------------------------

    \146\ For a discussion of alternatives considered in the 
drafting of the CAT NMS Plan, see Appendix C of the CAT NMS Plan at 
C-88-C-89.
---------------------------------------------------------------------------

11. Satisfaction of Exchange Act and CAT NMS Plan Requirements
    The Funding Proposal offers a variety of benefits over the Original 
Funding Model and satisfies each of the funding principles and other 
requirements of the CAT NMS Plan, as proposed to be revised herein, as 
well as the applicable requirements of the Exchange Act for the reasons 
discussed below and for the reasons discussed in more detail above.
a. Funding Principle: Section 11.2(a) of the CAT NMS Plan
    The Funding Proposal satisfies the funding principles set forth in 
Section 11.2(a) of the CAT NMS Plan. Section 11.2(a) of the CAT NMS 
Plan requires the Operating Committee, in establishing the funding of 
the Company, to seek ``to create transparent, predictable revenue 
streams for the Company that are aligned with the anticipated costs to 
build, operate and administer the CAT and the other costs of the 
Company.''
    First, by adopting a CAT-specific fee tied directly to CAT costs, 
CAT LLC would be fully transparent regarding the costs of the CAT and 
how those costs would be allocated among CAT Reporters. The CAT fees 
would be designed solely to cover CAT costs, and no other regulatory 
costs. In contrast, charging a general regulatory fee, which might 
otherwise be used to cover CAT costs as well as other regulatory costs, 
would be less transparent than the selected approach of charging a fee 
designated to cover CAT-related costs only. Such a general regulatory 
fee could cover a variety of regulatory costs without differentiating 
those costs related to the CAT.
    Second, the Funding Proposal would provide a predictable revenue 
stream for the Company. The Funding Proposal is designed to collect the 
annual CAT costs each year, thereby providing for a predictable revenue 
stream. In addition, to address the possibility of some variability in 
the collected CAT fees, an unexpected increase in costs or variations 
from the budgeted costs or projected executed equivalent share volume 
of transactions in Eligible Securities, the CAT costs covered by the 
Funding Proposal would include an operational reserve. The operational 
reserve could be used in the event that

[[Page 17120]]

the total CAT fees collected differ from the actual CAT costs. 
Moreover, the Funding Proposal includes a method for adjusting the 
calculation of the Fee Rate during the year if there are changes in the 
projected total volume of transactions in Eligible Securities or the 
CAT costs.
    Third, the Funding Proposal provides for a revenue stream for the 
Company that is aligned with the anticipated costs to build, operate 
and administer the CAT and the other costs of the Company. The total 
CAT fees to be collected from CAT Reporters are designed to cover the 
CAT costs. Any surpluses collected would be treated as an operational 
reserve to offset future fees and would not be distributed to the 
Participants as profits.\147\
---------------------------------------------------------------------------

    \147\ CAT NMS Plan Approval Order at 84792.
---------------------------------------------------------------------------

b. Funding Principle: Section 11.2(b) of the CAT NMS Plan
    The Funding Proposal satisfies the funding principle set forth in 
Section 11.2(b) of the CAT NMS Plan, as proposed to be amended herein, 
which would require the Operating Committee to seek ``to establish an 
allocation of the Company's related costs among Participants and 
Industry Members that is consistent with the Exchange Act, taking into 
account the timeline for implementation of the CAT.'' As discussed in 
detail above, the Funding Proposal establishes an allocation of CAT 
costs among Participants and Industry Members that is consistent with 
the Exchange Act. In addition, the Funding Proposal provides for an 
equitable allocation of reasonable dues, is not unfairly discriminatory 
and does not impose a burden on competition that is not necessary or 
appropriate in furtherance of the Exchange Act. In addition, the 
Funding Proposal takes into account the timeline for implementation of 
the CAT. The CAT fees are designed to cover the CAT costs for each 
relevant period.
c. Funding Principle: Section 11.2(c) of the CAT NMS Plan
    The Funding Proposal satisfies the funding principle set forth in 
Section 11.2(c) of the CAT NMS Plan, as proposed to be modified herein. 
Section 11.2(c), as proposed to be modified herein, requires the 
Operating Committee to seek ``to establish a fee structure in which the 
fees charged to Participants and Industry Members are based upon the 
executed equivalent share volume of transactions in Eligible 
Securities, and the costs of the CAT.'' The Funding Proposal requires 
Participants and Industry Members to pay fees based upon the executed 
equivalent share volume of transactions in Eligible Securities, and the 
costs of the CAT, as described above.
d. Funding Principle: Section 11.2(d) of the CAT NMS Plan
    The Funding Proposal satisfies the funding principle set forth in 
Section 11.2(d) of the CAT NMS Plan, which requires the Operating 
Committee to seek ``to provide for ease of billing and other 
administrative functions.'' The Funding Proposal satisfies this 
principle in several ways. The Funding Proposal is modeled after the 
existing section 31-related fee programs, with which the Participants 
and Industry Members have a longstanding familiarity. The Funding 
Proposal relies upon a basic calculation using a predetermined fee rate 
along with an Industry Member or Participant's executed equivalent 
share volume, thereby making the fee determination a straightforward 
process.
    Furthermore, the Funding Proposal provides CAT Reporters with 
predictable CAT fees. Because the Fee Rate is established in advance 
for a relevant time period, Participants, CEBBs and CEBSs know the CAT 
fee that applies to each transaction when it occurs. Accordingly, 
Participants, CEBBs and CEBSs are able to easily estimate and validate 
their applicable fees based on their own trading data. In addition, to 
the extent any CAT fees are passed on to customers, the customers, too, 
can calculate the applicable CAT fee for each transaction.
e. Funding Principle: Section 11.2(e) of the CAT NMS Plan
    The Funding Proposal satisfies the funding principle set forth in 
Section 11.2(e) of the CAT NMS Plan, which requires the Operating 
Committee to seek ``to avoid any disincentives such as placing an 
inappropriate burden on competition and a reduction in market 
quality.'' The Funding Proposal would operate in a manner similar to 
the funding models employed by the SEC and the Participants related to 
section 31 of the Exchange Act, the FINRA TAF and the ORF. These fees 
are long-standing, and have been approved by the Commission as 
satisfying the requirements under the Exchange Act, including not 
imposing a burden on competition that is not necessary or appropriate 
under the Exchange Act. In addition, the Funding Proposal avoids 
potentially burdensome fees for market makers or other market 
participants based on message traffic. Furthermore, the Funding 
Proposal addresses the specific trading characteristics of Listed 
Options and OTC Equity Securities to avoid adverse effects of the 
trading of those instruments. For example, the Funding Proposal 
includes the discounting of transactions involving OTC Equity Shares 
which, given the volume of shares typically involved in such securities 
transactions, otherwise may result in disproportionate fees to market 
participants transaction these securities.
    The Funding Proposal also would not unfairly burden FINRA or any of 
the exchanges. The Funding Proposal is designed to be neutral as to the 
manner of execution and place of execution. The CAT fees would be the 
same regardless of whether the transaction is executed on an exchange 
or in the over-the-counter market. All Participants are SROs that have 
the same regulatory responsibilities under the Exchange Act. Their 
usage of CAT Data will be for the same regulatory purposes. By treating 
each Participant the same, the CAT fees would not become a competitive 
issue by and among the Participants.
    The Funding Proposal also would not unfairly burden CAT Executing 
Brokers. CAT LLC determined to charge CEBBs and CEBSs because such a 
fee collection model is currently used and well-known in the securities 
markets. As a result, the CAT fees could be paid by Industry Members 
without requiring significant and potentially costly changes. Moreover, 
the CEBBs and CEBSs would be permitted, but not required, to pass their 
CAT fees through to their customers, who, in turn, could pass their CAT 
fees to their customers, until the fee is imposed on the ultimate 
participant in the transaction. With such a pass through, the CEBBs and 
CEBSs would not ultimately incur the cost of all CAT fees related to 
the transactions that they clear.
f. Funding Principle: Section 11.2(f) of the CAT NMS Plan
    The Funding Proposal satisfies the funding principle set forth in 
Section 11.2(f) of the CAT NMS Plan, which requires the Operating 
Committee to seek ``to build financial stability to support the Company 
as a going concern.'' CAT LLC believes that the Funding Proposal is 
structured to collect sufficient funds to pay for the cost of the CAT 
going forward. In addition, the Funding Proposal would collect an 
operational reserve for the CAT. This operational reserve is intended 
to address potential shortfalls in collected CAT fees versus actual CAT 
costs. Moreover, the Funding Proposal includes a requirement to adjust 
the Fee Rate during the year in order to address any changes in the 
projected or actual total volume of transactions in Eligible

[[Page 17121]]

Securities or the budgeted or actual CAT costs. Furthermore, the 
Funding Proposal is designed to collect CAT fees continuously so as to 
provide uninterrupted revenue to pay CAT bills; the CAT Fees related to 
Prospective CAT Costs are not designed to sunset.
g. Section 11.1(c) of the CAT NMS Plan
    The Funding Proposal would satisfy the requirements in Section 
11.1(c) of the CAT NMS Plan, as proposed to be modified herein. Section 
11.1(c) of the CAT NMS Plan states that ``[t]o fund the development and 
implementation of the CAT, the Company shall time the imposition and 
collection of all fees on Participants and Industry Members in a manner 
reasonably related to the timing when the Company expects to incur such 
development and implementation costs.'' The CAT fees are designed to 
cover the CAT costs for a relevant period. As such, on a going forward 
basis, they are designed to be imposed close in time to when costs are 
incurred. In addition, the Historical CAT Assessments are designed to 
``take into account fees, costs and expenses (including legal and 
consulting fees and expenses) reasonably incurred by the Participants 
on behalf of the Company prior to the Effective Date in connection with 
the creation and implementation of the CAT, and such fees, costs and 
expenses shall be fairly and reasonably shared among the Participants 
and Industry Members.''
    Section 11.1(c) of the CAT NMS Plan also requires that ``[a]ny 
surplus of the Company's resources over its expenses shall be treated 
as an operational reserve to offset future fees.'' The Company would 
operate on a ``break-even'' basis, with fees imposed to cover costs and 
an appropriate reserve. Any surpluses would not be distributed to the 
Participants as profits. In addition, as set forth in Article VIII of 
the CAT NMS Plan, the Company ``intends to operate in a manner such 
that it qualifies as a `business league' within the meaning of section 
501(c)(6) of the [Internal Revenue] Code.'' To qualify as a business 
league, an organization must ``not [be] organized for profit and no 
part of the net earnings of [the organization can] inure[ ] to the 
benefit of any private shareholder or individual.'' \148\ As the SEC 
stated when approving the CAT NMS Plan, ``the Commission believes that 
the Company's application for section 501(c)(6) business league status 
addresses issues raised by commenters about the Plan's proposed 
allocation of profit and loss by mitigating concerns that the Company's 
earnings could be used to benefit individual Participants.'' \149\ The 
Internal Revenue Service has determined that the Company is exempt from 
federal income tax under section 501(c)(6) of the Internal Revenue 
Code.
---------------------------------------------------------------------------

    \148\ 26 U.S.C. 501(c)(6).
    \149\ CAT NMS Plan Approval Order at 84793.
---------------------------------------------------------------------------

h. Equitable Allocation of Reasonable Fees
    The proposed CAT fees provide for the ``equitable allocation of 
reasonable dues, fees, and other charges among its members and issuers 
and other persons using its facilities necessary or appropriate in 
furtherance of the purposes of this chapter,'' \150\ as required by the 
Exchange Act. CAT LLC believes that the CAT fees equitably allocate CAT 
costs between and among Participants and Industry Members. For the 
reasons discussed above, CAT LLC believes that the allocation of one-
third of the CAT costs each to Participants, CEBBs and CEBSs in the 
Funding Proposal as well as the use of the total equivalent share 
volume of transactions in Eligible Securities for allocating costs 
provide for an equitable allocation of CAT costs among CAT Reporters.
---------------------------------------------------------------------------

    \150\ Sections 6(b)(4) and 15A(b)(5) of the Exchange Act.
---------------------------------------------------------------------------

    CAT LLC also believes that the Funding Proposal would provide for 
reasonable fees. The transaction-based fees contemplated by the Funding 
Proposal are a reasonable fee structure. The SROs have a long history 
of charging transaction-based fees, as transactions are the intended 
economic goal of the securities markets. In addition to the 
transaction-based regulatory fees discussed above (e.g., the SROs' 
section 31-related fees, the FINRA TAF and the ORF), the SROs charge a 
variety of other types of transaction fees to fund their 
operations.\151\ Indeed, each of the SROs collect transaction-based 
fees from their members.\152\ In each case, the transaction-based fees 
charged by SROs have been subject to the fee filing process and found 
to satisfy the requirements of the Exchange Act. Not only is the type 
of fee reasonable, but the level of the fee is reasonable as well. 
Although the exact Fee Rate or Historical Fee Rate to be paid for any 
particular period will be determined at a later date, the illustrative 
example provides a per-transaction fee rate that is not excessive in 
comparison to existing transaction fee rates.
---------------------------------------------------------------------------

    \151\ The SEC has noted that SRO transaction fees account for a 
significant portion of SRO revenue. Securities Exchange Act Rel. No. 
50700 (Nov. 18, 2004), 69 FR 71256, 71271 (Dec. 8, 2004).
    \152\ See, e.g., NYSE Price List; Nasdaq Price List.
---------------------------------------------------------------------------

i. No Unfair Discrimination
    The Funding Proposal is ``not designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers,'' \153\ 
as required by the Exchange Act. In addition, the Funding Proposal does 
not unfairly discriminate between Industry Members and Participants, 
among Industry Members or among Participants. Both Participants and 
Industry Members would contribute to the cost of the CAT; Participants 
alone would no longer be required to shoulder the cost burden of the 
CAT without the contribution of Industry Members. In addition, both 
Participants and Industry Members would pay a fee based on the executed 
equivalent share volume of their transactions in Eligible Securities; 
the type of metric would not vary based on whether the CAT Reporter is 
an Industry Member or Participant.
---------------------------------------------------------------------------

    \153\ Sections 6(b)(5) and 15A(b)(6) of the Exchange Act.
---------------------------------------------------------------------------

    Furthermore, the Fee Rate or Historical Fee Rate would be the same 
regardless of the type of venue a trade was executed on, or how the 
trade ultimately occurred more generally (e.g., in a manner that 
generated more message traffic). In addition, the Funding Proposal 
recognizes the different trading characteristics of Listed Options and 
OTC Equity Securities as compared to NMS Stocks. The Funding Proposal 
recognizes that Listed Options trade in contracts rather than shares, 
and, therefore, counts the executed equivalent shares for Listed 
Options accordingly. Similarly, in recognition of the different trading 
characteristics of OTC Equity Securities as compared to NMS Stocks, the 
Funding Proposal would discount the share volume of OTC Equity 
Securities when calculating the CAT fees. As a result, the Funding 
Proposal would not favor or unfairly burden any one type of trading 
venue, product or product type.
    With the elimination of tiers, fees for Industry Members and 
Participants are directly related to their executed equivalent share 
volume of their transactions. With tiers, the relationship between a 
CAT Reporter's share volume and the CAT fee would not have been as 
direct.
j. No Burden on Competition
    The Funding Proposal does ``not impose any burden on competition 
not necessary or appropriate in furtherance

[[Page 17122]]

of the purposes of this chapter,'' \154\ as required by the Exchange 
Act, and it fairly and equitably allocates costs among CAT Reporters. 
The Funding Proposal would operate in a manner similar to the funding 
model employed by the SEC and the Participants related to section 31 of 
the Exchange Act as well as the FINRA TAF \155\ and the ORF rules, and 
these long-standing fees to cover regulatory costs have been approved 
by the Commission as satisfying the requirements under the Exchange 
Act, including not imposing a burden on the competition that is not 
necessary or appropriate under the Exchange Act. Furthermore, the 
Funding Proposal does not impose a burden on competition for the 
reasons set forth above, including in Sections A.9.s and A.11.e of this 
filing above.
---------------------------------------------------------------------------

    \154\ Sections 6(b)(8) and 15A(b)(9) of the Exchange Act.
    \155\ Although the FINRA TAF is designed to cover a subset of 
the costs of FINRA services (e.g., costs to FINRA of the supervision 
and regulation of members, including performing examinations, 
financial monitoring, and policy, rulemaking, interpretive, and 
enforcement activities) rather than all of FINRA's costs like the 
CAT, the transaction-based calculation of the FINRA TAF and the 
proposed CAT fees are similar.
---------------------------------------------------------------------------

B. Governing or Constituent Documents
    Not applicable.
C. Implementation of Amendment
    CAT LLC is filing this proposed amendment pursuant to Rule 
608(b)(1) of Regulation NMS under the Exchange Act.\156\
---------------------------------------------------------------------------

    \156\ 17 CFR 242.608(b)(1).
---------------------------------------------------------------------------

D. Development and Implementation Phases
    The Participants expect to implement the proposed CAT fees upon 
approval by the SEC, subject to applicable requirements for the 
implementation of the CAT fees, including the requirements of section 
19(b) of the Exchange Act with regard to Industry Member CAT Fees, the 
satisfaction of applicable Financial Accountability Milestones as set 
forth in Section 11.6 of the CAT NMS Plan, and the implementation of 
the billing and collection system for the CAT fees.
E. Analysis of Impact on Competition
    CAT LLC does not believe that the proposed amendment would result 
in any burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Exchange Act. CAT LLC notes that the 
proposed amendment implements provisions of the CAT NMS Plan approved 
by the Commission, subject to proposed revisions to the CAT NMS Plan 
described above, and is designed to assist the Participants in meeting 
their regulatory obligations pursuant to the CAT NMS Plan. Because all 
Participants are subject to the Funding Proposal set forth in the 
proposed amendment, this is not a competitive filing that raises 
competition issues between and among the Participants. Furthermore, for 
the reasons discussed above, including in Sections A.11.e and A.11.j of 
this filing above, CAT LLC does not believe that the Funding Proposal 
would result in any burden on competition that is not necessary or 
appropriate in furtherance of the purpose of the Exchange Act.
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 CAT NMS 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 of Regulation NMS under the Exchange Act or 
has otherwise become effective under Rule 608 of Regulation NMS under 
the Exchange Act. In addition, Section 4.3(a)(vi) of the Plan requires 
the Operating Committee, by Majority Vote, to authorize action to 
determine the appropriate funding-related policies, procedures and 
practices-consistent with Article XI. The Operating Committee has 
satisfied both of these requirements. In addition, the Funding Proposal 
was discussed and voted on during the Operating Committee meetings.
H. Description of Operation of Facility Contemplated by the Proposed 
Amendment
    Not applicable.
I. Terms and Conditions of Access
    Not applicable.
J. Method of Determination and Imposition, and Amount of, Fees and 
Charges
    Section A of this filing describes in detail how CAT LLC developed 
the Funding Proposal for the CAT.
K. Method and Frequency of Processor Evaluation
    Not applicable.
L. Dispute Resolution
    Section 11.5 of the CAT NMS Plan addresses the resolution of 
disputes regarding CAT fees charged to Participants and Industry 
Members. Specifically, Section 11.5 of the CAT NMS Plan states that:

[d]isputes with respect to fees the Company charges Participants 
pursuant to Article XI of the CAT NMS Plan shall be determined by 
the Operating Committee or a Subcommittee designated by the 
Operating Committee. Decisions by the Operating Committee or such 
designated Subcommittee on such matters shall be binding on 
Participants, without prejudice to the rights of any Participant to 
seek redress from the SEC pursuant to Rule 608 of Regulation NMS 
under the Exchange Act or in any other appropriate forum.

    In addition, the Participants adopted rules to establish the 
procedures for resolving potential disputes related to CAT fees charged 
to Industry Members.\157\
---------------------------------------------------------------------------

    \157\ See Securities Exchange Act Rel. No. 81500 (Aug. 30, 
2017), 82 FR 42143 (Sept. 6, 2017).
---------------------------------------------------------------------------

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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number 4-698 on the subject line.

Paper Comments

     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,

[[Page 17123]]

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 April 11, 2023.
---------------------------------------------------------------------------

    \158\ 17 CFR 200.30-3(a)(85).

    For the Commission, by the Division of Trading and Markets, 
---------------------------------------------------------------------------
pursuant to delegated authority.\158\

    Dated: March 15, 2023.
Sherry R. Haywood,
Assistant Secretary.

EXHIBIT A

Proposed Revisions to CAT NMS Plan

Additions italicized; deletions [bracketed]
* * * * *

Article I

Definitions

* * * * *
    ``CAT Executing Broker'' means (a) with respect to a transaction in 
an Eligible Security that is executed on an exchange, the Industry 
Member identified as the Industry Member responsible for the order on 
the buy-side of the transaction and the Industry Member responsible for 
the sell-side of the transaction in the equity order trade event and 
option trade event in the CAT Data submitted to the CAT by the relevant 
exchange pursuant to the Participant Technical Specifications; and (b) 
with respect to a transaction in an Eligible Security that is executed 
otherwise than on an exchange and required to be reported to an equity 
trade reporting facility of a registered national securities 
association, the Industry Member identified as the executing broker and 
the Industry Member identified as the contra-side executing broker in 
the TRF/ORF/ADF transaction data event in the CAT Data submitted to the 
CAT by FINRA pursuant to the Participant Technical Specifications; 
provided, however, in those circumstances where there is a non-Industry 
Member identified as the contra-side executing broker in the TRF/ORF/
ADF transaction data event or no contra-side executing broker is 
identified in the TRF/ORF/ADF transaction data event, then the Industry 
Member identified as the executing broker in the TRF/ORF/ADF 
transaction data event would be treated as CAT Executing Broker for the 
Buyer and for the Seller.
* * * * *
    [``Execution Venue'' means a Participant or an alternative trading 
system (``ATS'') (as defined in Rule 300 of Regulation ATS) that 
operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS 
that does not execute orders).]
* * * * *

Article XI

Funding of the Company

    Section 11.1. Funding Authority.
    (a) On an annual basis the Operating Committee shall approve [an] a 
reasonable operating budget for the Company. The budget shall include 
the projected costs of the Company, including the costs of developing 
and operating the CAT for the upcoming year, and the sources of all 
revenues to cover such costs, as well as the funding of any reserve 
that the Operating Committee reasonably deems appropriate for prudent 
operation of the Company.
    (i) Without limiting the foregoing, the reasonably budgeted CAT 
costs shall include technology (including cloud hosting services, 
operating fees, CAIS operating fees, change request fees and 
capitalized developed technology costs), legal, consulting, insurance, 
professional and administration, and public relations costs, a reserve 
and such other cost categories as reasonably determined by the 
Operating Committee to be included in the budget.
    (ii) For the reserve referenced in paragraph (a)(i) of this 
Section, the budget will include an amount reasonably necessary to 
allow the Company to maintain a reserve of not more than 25% of the 
annual budget. To the extent collected CAT fees exceed CAT costs, 
including the reserve of 25% of the annual budget, such surplus shall 
be used to offset future fees. For the avoidance of doubt, the Company 
will only include an amount for the reserve in the annual budget if the 
Company does not have a sufficient reserve (which shall be up to but 
not more than 25% of the annual budget). For the avoidance of doubt, 
the calculation of the amount of the reserve would exclude the amount 
of the reserve from the budget.
    (b) Subject to Section 11.1 and Section 11.2, the Operating 
Committee shall have discretion to establish funding for the Company, 
including: (i) establishing fees that the Participants shall pay; and 
(ii) establishing fees for Industry Members that shall be implemented 
by Participants. The Participants shall file with the SEC under Section 
19(b) of the Exchange Act any such fees on Industry Members that the 
Operating Committee approves, and such fees shall be labeled as 
``Consolidated Audit Trail Funding Fees.''
    (c) To fund the development and implementation of the CAT, the 
Company shall time the imposition and collection of all fees on 
Participants and Industry Members in a manner reasonably related to the 
timing when the Company expects to incur such development and 
implementation costs. In determining fees on Participants and Industry 
Members the Operating Committee shall take into account fees, costs and 
expenses (including legal and consulting fees and expenses) reasonably 
incurred by the Participants on behalf of the Company prior to the 
Effective Date in connection with the creation and implementation of 
the CAT, and such fees, costs and expenses shall be fairly and 
reasonably shared among the Participants and Industry Members. Any 
surplus of the Company's revenues over its expenses shall be treated as 
an operational reserve to offset future fees.
    (d) Consistent with this Article XI, the Operating Committee shall 
adopt policies, procedures, and practices regarding the budget and 
budgeting process, [assignment of tiers,] resolution of disputes, 
billing and collection of fees, and other related matters. [For the 
avoidance of doubt, as part of its regular review of fees for the CAT, 
the Operating Committee shall have the right to change the tier 
assigned to any particular Person in accordance with fee schedules 
previously filed with the Commission that are reasonable, equitable and 
not unfairly discriminatory and subject to public notice and comment, 
pursuant to this Article XI. Any such changes will be effective upon 
reasonable notice to such Person.]
    Section 11.2. Funding Principles. In establishing the funding of 
the Company, the Operating Committee shall seek:
    (a) to create transparent, predictable revenue streams for the 
Company that are aligned with the anticipated costs to build, operate 
and administer the CAT and the other costs of the Company;
    (b) to establish an allocation of the Company's related costs among 
Participants and Industry Members that is consistent with the Exchange 
Act, taking into account the timeline for implementation of the CAT 
[and

[[Page 17124]]

distinctions in the securities trading operations of Participants and 
Industry Members and their relative impact upon Company resources and 
operations];
    (c) to establish a [tiered] fee structure in which the fees charged 
to [: (i)] Participants and [CAT Reporters that are Execution Venues, 
including ATSs, are based upon the level of market share; (ii)] 
Industry Members[' non-ATS activities] are based upon the executed 
equivalent share volume of transactions in Eligible Securities, and the 
costs of the CAT [message traffic; and (iii) the CAT Reporters with the 
most CAT-related activity (measured by market share and/or message 
traffic, as applicable) are generally comparable (where, for these 
comparability purposes, the tiered fee structure takes into 
consideration affiliations between or among CAT Reporters, whether 
Execution Venues and/or Industry Members)].
    (d) to provide for ease of billing and other administrative 
functions;
    (e) to avoid any disincentives such as placing an inappropriate 
burden on competition and a reduction in market quality; and
    (f) to build financial stability to support the Company as a going 
concern.
    Section 11.3. Recovery.
    (a) Prospective CAT Costs. The Operating Committee will establish 
[fixed] fees (``CAT Fees'') to be payable by [Execution Venues] 
Participants and Industry Members with regard to CAT costs not 
previously paid by the Participants (``Prospective CAT Costs'') as 
follows [provided in this Section 11.3(a)]:
    (i) Fee Rate. The Operating Committee will calculate the Fee Rate 
for the CAT Fee twice per year, once at the beginning of the year and 
once during the year as follows.
    (A) General.
    (I) For the beginning of each year, the Operating Committee will 
calculate the Fee Rate by dividing the reasonably budgeted CAT costs 
for the year by the reasonably projected total executed equivalent 
share volume of all transactions in Eligible Securities for the year. 
Once the Operating Committee has approved such Fee Rate, the 
Participants shall be required to file with the SEC pursuant to Section 
19(b) of the Exchange Act CAT Fees to be charged to Industry Members 
calculated using such Fee Rate. Participants and Industry Members will 
be required to pay CAT Fees calculated using this Fee Rate once such 
CAT Fees are in effect with regard to Industry Members in accordance 
with Section 19(b) of the Exchange Act.
    (II) During each year, the Operating Committee will calculate a new 
Fee Rate by dividing the reasonably budgeted CAT costs for the 
remainder of the year by the reasonably projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the remainder of the year. Once the Operating Committee has approved 
the new Fee Rate, the Participants shall be required to file with the 
SEC pursuant to Section 19(b) of the Exchange Act CAT Fees to be 
charged to Industry Members calculated using the new Fee Rate. 
Participants and Industry Members will be required to pay CAT Fees 
calculated using this new Fee Rate once such CAT Fees are in effect 
with regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (III) For the avoidance of doubt, CAT Fees with a Fee Rate 
calculated as set forth in this paragraph (a)(i) shall remain in effect 
until the Operating Committee approves a new Fee Rate as described in 
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect with 
regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (IV) For the avoidance of doubt, the first CAT Fee may commence at 
the beginning of the year or during the year. If it were to commence 
during the year, the first CAT Fee would be calculated as described in 
paragraph (II) of this Section.
    (B) Executed Equivalent Shares. For purposes of calculating CAT 
Fees, executed equivalent shares in a transaction in Eligible 
Securities will be reasonably counted as follows:
    (I) each executed share for a transaction in NMS Stocks will be 
counted as one executed equivalent share;
    (II) each executed contract for a transaction in Listed Options 
will be counted based on the multiplier applicable to the specific 
Listed Option (i.e., 100 executed equivalent shares or such other 
applicable multiplier); and
    (III) each executed share for a transaction in OTC Equity 
Securities shall be counted as 0.01 executed equivalent share.
    (C) Budgeted CAT Costs. The budgeted CAT costs for the year shall 
be comprised of all reasonable fees, costs and expenses reasonably 
budgeted to be incurred by or for the Company in connection with the 
development, implementation and operation of the CAT as set forth in 
the annual operating budget approved by the Operating Committee 
pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during 
the year by the Operating Committee.
    (D) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities. The Operating Committee shall 
reasonably determine the projected total executed equivalent share 
volume of all transactions in Eligible Securities for each relevant 
period based on the executed equivalent share volume of all 
transactions in Eligible Securities for the prior twelve months.
    (ii) Participant CAT Fees.
    (A) CAT Fee Obligation. Each Participant that is a national 
securities exchange will be required to pay the CAT Fee for each 
transaction in Eligible Securities executed on the exchange in the 
prior month based on CAT Data. Each Participant that is a national 
securities association will be required to pay the CAT Fee for each 
transaction in Eligible Securities executed otherwise than on an 
exchange in the prior month based on CAT Data. The CAT Fee for each 
transaction in Eligible Securities will be calculated by multiplying 
the number of executed equivalent shares in the transaction by one-
third and by the Fee Rate reasonably determined pursuant to paragraph 
(a)(i) of this Section 11.3.
    (B) Effectiveness. Each Participant will be required to pay the CAT 
Fee calculated using the Fee Rate reasonably determined pursuant to 
paragraph (a)(i) of this Section 11.3 and approved by the Operating 
Committee only if such CAT Fees are in effect with regard to Industry 
Members in accordance with Section 19(b) of the Exchange Act.
    (iii) Industry Member CAT Fees.
    (A) CAT Fee Obligation. Each Industry Member that is the CAT 
Executing Broker for the buyer in a transaction in Eligible Securities 
(``CAT Executing Broker for the Buyer'' or ``CEBB'') and each Industry 
Member that is the CAT Executing Broker for the seller in a transaction 
in Eligible Securities (``CAT Executing Broker for the Seller'' or 
``CEBS'') will be required to pay a CAT Fee for each such transaction 
in Eligible Securities in the prior month based on CAT Data. The CEBB's 
CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in 
Eligible Securities will be calculated by multiplying the number of 
executed equivalent shares in the transaction by one-third and by the 
Fee Rate reasonably determined pursuant to paragraph (a)(i) of this 
Section 11.3.
    (B) Content of Fee Filings. When the Participants file with the SEC 
pursuant to Section 19(b) of the Exchange Act CAT Fees to be charged to 
Industry

[[Page 17125]]

Members calculated using the Fee Rate that the Operating Committee 
approved in accordance with paragraph (a) of this Section 11.3, such 
filings shall set forth (A) the Fee Rate; (B) the budget for the 
upcoming year (or remainder of the year, as applicable), including a 
brief description of each line item in the budget, including (1) 
technology line items of cloud hosting services, operating fees, CAIS 
operating fees, change request fees and capitalized developed 
technology costs, (2) legal, (3) consulting, (4) insurance, (5) 
professional and administration, and (6) public relations costs, a 
reserve and/or such other categories as reasonably determined by the 
Operating Committee to be included in the budget, and the reason for 
changes in each such line item from the prior CAT Fee filing; (C) a 
discussion of how the budget is reconciled to the collected fees; and 
(D) the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the year (or remainder of the 
year, as applicable), and a description of the calculation of the 
projection. The information provided in this Section would be provided 
with sufficient detail to demonstrate that the budget for the upcoming 
year, or part of year, as applicable, is reasonable and appropriate.
    (C) No Participant will make a filing with the SEC pursuant to 
Section 19(b) of the Exchange Act regarding any CAT Fee related to 
Prospective CAT Costs until the Financial Accountability Milestone 
related to Period 4 described in Section 11.6 has been satisfied.
    (iv) CAT Fee Details.
    (A) Details regarding the calculation of a Participant or CAT 
Executing Brokers' CAT Fees will be provided upon request to such 
Participant or CAT Executing Broker. At a minimum, such details would 
include each Participant or CAT Executing Broker's executed equivalent 
share volume and corresponding fee by (1) Listed Options, NMS Stocks 
and OTC Equity Securities, (2) by transactions executed on each 
exchange and transactions executed otherwise than on an exchange, and 
(3) by buy-side transactions and sell-side transactions.
    (B) For each CAT Fee, at a minimum, CAT LLC will make publicly 
available the aggregate executed equivalent share volume and 
corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC 
Equity Securities, (2) by transactions executed on each exchange and 
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions.
    [(i) Each Execution Venue that: (A) executes transactions; or (B) 
in the case of a national securities association, has trades reported 
by its members to its trade reporting facility or facilities for 
reporting transactions effected otherwise than on an exchange, in NMS 
Stocks or OTC Equity Securities will pay a fixed fee depending on the 
market share of that Execution Venue in NMS Stocks and OTC Equity 
Securities, with the Operating Committee establishing at least two and 
no more than five tiers of fixed fees, based on an Execution Venue's 
NMS Stocks and OTC Equity Securities market share. For these purposes, 
market share for Execution Venues that execute transactions will be 
calculated by share volume, and market share for a national securities 
association that has trades reported by its members to its trade 
reporting facility or facilities for reporting transactions effected 
otherwise than on an exchange in NMS Stocks or OTC Equity Securities 
will be calculated based on share volume of trades reported, provided, 
however, that the share volume reported to such national securities 
association by an Execution Venue shall not be included in the 
calculation of such national security association's market share.]
    [(ii) Each Execution Venue that executes transactions in Listed 
Options will pay a fixed fee depending on the Listed Options market 
share of that Execution Venue, with the Operating Committee 
establishing at least two and no more than five tiers of fixed fees, 
based on an Execution Venue's Listed Options market share. For these 
purposes, market share will be calculated by contract volume.]
    (b) Past CAT Costs. The Operating Committee will establish [fixed] 
one or more fees (each a ``Historical CAT Assessment'') to be payable 
by Industry Members with regard to CAT costs previously paid by the 
Participants (``Past CAT Costs'') as follows: [, based on the message 
traffic generated by such Industry Member, with the Operating Committee 
establishing at least five and no more than nine tiers of fixed fees, 
based on message traffic. For the avoidance of doubt, the fixed fees 
payable by Industry Members pursuant to this paragraph shall, in 
addition to any other applicable message traffic, include message 
traffic generated by: (i) an ATS that does not execute orders that is 
sponsored by such Industry Member; and (ii) routing orders to and from 
any ATS sponsored by such Industry Member.]
    (i) Calculation of Historical Fee Rates.
    (A) General. The Operating Committee will calculate the Historical 
Fee Rate for each Historical CAT Assessment by dividing the Historical 
CAT Costs for each Historical CAT Assessment by the reasonably 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for the Historical Recovery Period for each 
Historical CAT Assessment. Once the Operating Committee has approved 
such Historical Fee Rate, the Participants shall be required to file 
with the SEC pursuant to Section 19(b) of the Exchange Act such 
Historical CAT Assessment to be charged to Industry Members calculated 
using such Historical Fee Rate. Industry Members will be required to 
pay such Historical CAT Assessment calculated using such Historical Fee 
Rate once such Historical CAT Assessment is in effect in accordance 
with Section 19(b) of the Exchange Act.
    (B) Executed Equivalent Shares. For purposes of calculating each 
Historical CAT Assessment, executed equivalent shares in a transaction 
in Eligible Securities will be reasonably counted in the same manner as 
set forth in paragraph (a)(i)(B) of this Section 11.3.
    (C) Historical CAT Costs. The Operating Committee will reasonably 
determine the Historical CAT Costs sought to be recovered by each 
Historical CAT Assessment, where the Historical CAT Costs will be Past 
CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT 
Costs by the Operating Committee. Each Historical CAT Assessment will 
seek to recover from CAT Executing Brokers two-thirds of Historical CAT 
Costs incurred during the period covered by the Historical CAT 
Assessment.
    (D) Historical Recovery Period.
    (I) The length of the Historical Recovery Period used in 
calculating each Historical Fee Rate will be reasonably established by 
the Operating Committee based upon the amount of the Historical CAT 
Costs to be recovered by the Historical CAT Assessment; provided, 
however, no Historical Recovery Period used in calculating the 
Historical Fee Rate shall be less than 24 months or more than five 
years.
    (II) Notwithstanding the length of the Historical Recovery Period 
used in calculating the Historical Fee Rate, each Historical CAT 
Assessment calculated using the Historical Fee Rate will remain in 
effect until all Historical CAT Costs for the Historical CAT Assessment 
are collected.
    (E) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities for Historical Recovery Period. The 
Operating Committee shall reasonably determine the projected total 
executed

[[Page 17126]]

equivalent share volume of all transactions in Eligible Securities for 
each Historical Recovery Period based on the executed equivalent share 
volume of all transactions in Eligible Securities for the prior twelve 
months.
    (ii) Past CAT Costs and Participants. Because Participants 
previously have paid Past CAT Costs via loans to the Company, 
Participants would not be required to pay any Historical CAT 
Assessment. In lieu of a Historical CAT Assessment, the Participants' 
one-third share of Historical CAT Costs and such other additional Past 
CAT Costs as reasonably determined by the Operating Committee will be 
paid by the cancellation of loans made to the Company on a pro rata 
basis based on the outstanding loan amounts due under the loans. 
Historical CAT Assessments are designed to recover two-thirds of the 
Historical CAT Costs.
    (iii) Historical CAT Assessment for Industry Members.
    (A) Each month in which a Historical CAT Assessment is in effect, 
each CEBB and each CEBS shall pay a fee for each transaction in 
Eligible Securities executed by the CEBB or CEBS from the prior month 
as set forth in CAT Data, where the Historical CAT Assessment for each 
transaction will be calculated by multiplying the number of executed 
equivalent shares in the transaction by one-third and by the Historical 
Fee Rate reasonably determined pursuant to paragraph (b)(i) of this 
Section 11.3.
    (B) Historical CAT Assessment Fee Filings.
    (I) Participants will be required to file with the SEC pursuant to 
Section 19(b) of the Exchange Act a filing for each Historical CAT 
Assessment.
    (II) When the Participants file with the SEC pursuant to Section 
19(b) of the Exchange Act a Historical CAT Assessment calculated using 
the Historical Fee Rate that the Operating Committee approved in 
accordance with paragraph (b) of this Section 11.3, such filing shall 
set forth (A) the Historical Fee Rate; (B) a brief description of the 
amount and type of the Historical CAT Costs, including (1) the 
technology line items of cloud hosting services, operating fees, CAIS 
operating fees, change request fees, and capitalized developed 
technology costs, (2) legal, (3) consulting, (4) insurance, (5) 
professional and administration and (6) public relations costs; (C) the 
Historical Recovery Period and the reasons for its length; and (D) the 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for the Historical Recovery Period, and a 
description of the calculation of the projection. The information 
provided in this Section would be provided with sufficient detail to 
demonstrate that the Historical CAT Costs are reasonable and 
appropriate.
    (III) No Participant will make a filing with the SEC pursuant to 
Section 19(b) of the Exchange Act regarding any Historical CAT 
Assessment until any applicable Financial Accountability Milestone 
described in Section 11.6 has been satisfied.
    (iv) Historical CAT Assessment Details.
    (A) Details regarding the calculation of a CAT Executing Broker's 
Historical CAT Assessment will be provided upon request to such CAT 
Executing Broker. At a minimum, such details would include each CAT 
Executing Broker's executed equivalent share volume and corresponding 
fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by 
transactions executed on each exchange and transactions executed 
otherwise than on an exchange, and (3) by buy-side transactions and 
sell-side transactions.
    (B) For each Historical CAT Assessment, at a minimum, CAT LLC will 
make publicly available the aggregate executed equivalent share volume 
and corresponding aggregate fee by (1) Listed Options, NMS Stocks and 
OTC Equity Securities, (2) by transactions executed on each exchange 
and transactions executed otherwise than on an exchange, and (3) by 
buy-side transactions and sell-side transactions.
    (c) The Operating Committee may establish any other fees ancillary 
to the operation of the CAT that it reasonably determines appropriate, 
including fees: (i) for the late or inaccurate reporting of information 
to the CAT; (ii) for correcting submitted information; and (iii) based 
on access and use of the CAT for regulatory and oversight purposes (and 
not including any reporting obligations).
    (d) The Company shall make publicly available a schedule of 
effective fees and charges adopted pursuant to this Agreement as in 
effect from time to time. The Operating Committee shall review such fee 
schedule on at least an annual basis and shall make any changes to such 
fee schedule that it deems appropriate. The Operating Committee is 
authorized to review such fee schedule on a more regular basis, but 
shall not make any changes on more than a semiannual basis unless, 
pursuant to a Supermajority Vote, the Operating Committee concludes 
that such change is necessary for the adequate funding of the Company.
* * * * *

APPENDIX B

Fee Schedule

Consolidated Audit Trail Funding Fees for Participants

    (a) CAT Fee. Each Participant shall pay the CAT Fee set forth in 
Section 11.3(a) of the CAT NMS Plan to Consolidated Audit Trail, LLC in 
the manner prescribed by Consolidated Audit Trail, LLC on a monthly 
basis based on the Participant's transactions in Eligible Securities in 
the prior month.
* * * * *

EXHIBIT B

Proposed Revisions to CAT NMS Plan as Proposed To Be Revised in the 
February 2023 Proposed Partial Amendment

Additions italicized; deletions [bracketed]
* * * * *

Article I

Definitions

* * * * *
    ``CAT Executing Broker'' means (a) with respect to a transaction in 
an Eligible Security that is executed on an exchange, the Industry 
Member identified as the Industry Member responsible for the order on 
the buy-side of the transaction and the Industry Member responsible for 
the sell-side of the transaction in the equity order trade event and 
option trade event in the CAT Data submitted to the CAT by the relevant 
exchange pursuant to the Participant Technical Specifications; and (b) 
with respect to a transaction in an Eligible Security that is executed 
otherwise than on an exchange and required to be reported to an equity 
trade reporting facility of a registered national securities 
association, the Industry Member identified as the executing broker and 
the Industry Member identified as the contra-side executing broker in 
the TRF/ORF/ADF transaction data event in the CAT Data submitted to the 
CAT by FINRA pursuant to the Participant Technical Specifications; 
provided, however, in those circumstances where there is a non-Industry 
Member identified as the contra-side executing broker in the TRF/ORF/
ADF transaction data event or no contra-side executing broker is 
identified in the TRF/ORF/ADF transaction data event, then the Industry 
Member identified as the executing broker in the TRF/ORF/ADF 
transaction data event would be treated as CAT Executing Broker for the 
Buyer and for the Seller.
* * * * *

[[Page 17127]]

Article XI

Funding of the Company

    Section 11.1. Funding Authority.
    (a) On an annual basis the Operating Committee shall approve [an] a 
reasonable operating budget for the Company. The budget shall include 
the projected costs of the Company, including the costs of developing 
and operating the CAT for the upcoming year, and the sources of all 
revenues to cover such costs, as well as the funding of any reserve 
that the Operating Committee reasonably deems appropriate for prudent 
operation of the Company.
    (i) Without limiting the foregoing, the reasonably budgeted CAT 
costs shall include technology (including cloud hosting services, 
operating fees, CAIS operating fees, change request fees and 
capitalized developed technology costs), legal, consulting, insurance, 
professional and administration, and public relations costs, a reserve 
and such other cost categories as reasonably determined by the 
Operating Committee to be included in the budget.
    (ii) For the reserve referenced in paragraph (a)(i) of this 
Section, the budget will include an amount reasonably necessary to 
allow the Company to maintain a reserve of not more than 25% of the 
annual budget. To the extent collected CAT fees exceed CAT costs, 
including the reserve of 25% of the annual budget, such surplus shall 
be used to offset future fees. For the avoidance of doubt, the Company 
will only include an amount for the reserve in the annual budget if the 
Company does not have a sufficient reserve (which shall be up to but 
not more than 25% of the annual budget). For the avoidance of doubt, 
the calculation of the amount of the reserve would exclude the amount 
of the reserve from the budget.
    (b) Subject to Section 11.1 and Section 11.2, the Operating 
Committee shall have discretion to establish funding for the Company, 
including: (i) establishing fees that the Participants shall pay; and 
(ii) establishing fees for Industry Members that shall be implemented 
by Participants. The Participants shall file with the SEC under Section 
19(b) of the Exchange Act any such fees on Industry Members that the 
Operating Committee approves, and such fees shall be labeled as 
``Consolidated Audit Trail Funding Fees.''
    (c) To fund the development and implementation of the CAT, the 
Company shall time the imposition and collection of all fees on 
Participants and Industry Members in a manner reasonably related to the 
timing when the Company expects to incur such development and 
implementation costs. In determining fees on Participants and Industry 
Members the Operating Committee shall take into account fees, costs and 
expenses (including legal and consulting fees and expenses) reasonably 
incurred by the Participants on behalf of the Company prior to the 
Effective Date in connection with the creation and implementation of 
the CAT, and such fees, costs and expenses shall be fairly and 
reasonably shared among the Participants and Industry Members. Any 
surplus of the Company's revenues over its expenses shall be treated as 
an operational reserve to offset future fees.
    (d) Consistent with this Article XI, the Operating Committee shall 
adopt policies, procedures, and practices regarding the budget and 
budgeting process, resolution of disputes, billing and collection of 
fees, and other related matters.
    Section 11.2. Funding Principles. In establishing the funding of 
the Company, the Operating Committee shall seek:
    (a) to create transparent, predictable revenue streams for the 
Company that are aligned with the anticipated costs to build, operate 
and administer the CAT and the other costs of the Company;
    (b) to establish an allocation of the Company's related costs among 
Participants and Industry Members that is consistent with the Exchange 
Act, taking into account the timeline for implementation of the CAT;
    (c) to establish a fee structure in which the fees charged to 
Participants and Industry Members are based upon the executed 
equivalent share volume of transactions in Eligible Securities, and the 
costs of the CAT.
    (d) to provide for ease of billing and other administrative 
functions;
    (e) to avoid any disincentives such as placing an inappropriate 
burden on competition and a reduction in market quality; and
    (f) to build financial stability to support the Company as a going 
concern.
    Section 11.3. Recovery.
    (a) Prospective CAT Costs. The Operating Committee will establish 
fees (``CAT Fees'') to be payable by Participants and Industry Members 
with regard to CAT costs not previously paid by the Participants 
(``Prospective CAT Costs'') as follows:
    (i) Fee Rate. The Operating Committee will calculate the Fee Rate 
for the CAT Fee twice per year, once at the beginning of the year and 
once during the year as follows.
    (A) General.
    (I) For the beginning of each year, the Operating Committee will 
calculate the Fee Rate by dividing the reasonably budgeted CAT costs 
for the year by the reasonably projected total executed equivalent 
share volume of all transactions in Eligible Securities for the year. 
Once the Operating Committee has approved such Fee Rate, the 
Participants shall be required to file with the SEC pursuant to Section 
19(b) of the Exchange Act CAT Fees to be charged to Industry Members 
calculated using such Fee Rate. Participants and Industry Members will 
be required to pay CAT Fees calculated using this Fee Rate once such 
CAT Fees are in effect with regard to Industry Members in accordance 
with Section 19(b) of the Exchange Act.
    (II) During each year, the Operating Committee will calculate a new 
Fee Rate by dividing the reasonably budgeted CAT costs for the 
remainder of the year by the reasonably projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the remainder of the year. Once the Operating Committee has approved 
the new Fee Rate, the Participants shall be required to file with the 
SEC pursuant to Section 19(b) of the Exchange Act CAT Fees to be 
charged to Industry Members calculated using the new Fee Rate. 
Participants and Industry Members will be required to pay CAT Fees 
calculated using this new Fee Rate once such CAT Fees are in effect 
with regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (III) For the avoidance of doubt, CAT Fees with a Fee Rate 
calculated as set forth in this paragraph (a)(i) shall remain in effect 
until the Operating Committee approves a new Fee Rate as described in 
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect with 
regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (IV) For the avoidance of doubt, the first CAT Fee may commence at 
the beginning of the year or during the year. If it were to commence 
during the year, the first CAT Fee would be calculated as described in 
paragraph (II) of this Section.
    (B) Executed Equivalent Shares. For purposes of calculating CAT 
Fees, executed equivalent shares in a transaction in Eligible 
Securities will be reasonably counted as follows:
    (I) each executed share for a transaction in NMS Stocks will be 
counted as one executed equivalent share;

[[Page 17128]]

    (II) each executed contract for a transaction in Listed Options 
will be counted based on the multiplier applicable to the specific 
Listed Option (i.e., 100 executed equivalent shares or such other 
applicable multiplier); and
    (III) each executed share for a transaction in OTC Equity 
Securities shall be counted as 0.01 executed equivalent share.
    (C) Budgeted CAT Costs. The budgeted CAT costs for the year shall 
be comprised of all reasonable fees, costs and expenses reasonably 
budgeted to be incurred by or for the Company in connection with the 
development, implementation and operation of the CAT as set forth in 
the annual operating budget approved by the Operating Committee 
pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during 
the year by the Operating Committee.
    (D) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities. The Operating Committee shall 
reasonably determine the projected total executed equivalent share 
volume of all transactions in Eligible Securities for each relevant 
period based on the executed equivalent share volume of all 
transactions in Eligible Securities for the prior twelve months.
    (ii) Participant CAT Fees.
    (A) CAT Fee Obligation. Each Participant that is a national 
securities exchange will be required to pay the CAT Fee for each 
transaction in Eligible Securities executed on the exchange in the 
prior month based on CAT Data. Each Participant that is a national 
securities association will be required to pay the CAT Fee for each 
transaction in Eligible Securities executed otherwise than on an 
exchange in the prior month based on CAT Data. The CAT Fee for each 
transaction in Eligible Securities will be calculated by multiplying 
the number of executed equivalent shares in the transaction by one-
third and by the Fee Rate reasonably determined pursuant to paragraph 
(a)(i) of this Section 11.3.
    (B) Effectiveness. Each Participant will be required to pay the CAT 
Fee calculated using the Fee Rate reasonably determined pursuant to 
paragraph (a)(i) of this Section 11.3 and approved by the Operating 
Committee only if such CAT Fees are in effect with regard to Industry 
Members in accordance with Section 19(b) of the Exchange Act.
    (iii) Industry Member CAT Fees.
    (A) CAT Fee Obligation. Each Industry Member that is the CAT 
Executing Broker for the buyer in a transaction in Eligible Securities 
(``CAT Executing Broker for the Buyer'' or ``CEBB'') and each Industry 
Member that is the CAT Executing Broker for the seller in a transaction 
in Eligible Securities (``CAT Executing Broker for the Seller'' or 
``CEBS'') will be required to pay a CAT Fee for each such transaction 
in Eligible Securities in the prior month based on CAT Data. The CEBB's 
CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in 
Eligible Securities will be calculated by multiplying the number of 
executed equivalent shares in the transaction by one-third and by the 
Fee Rate reasonably determined pursuant to paragraph (a)(i) of this 
Section 11.3.
    (B) Content of Fee Filings. When the Participants file with the SEC 
pursuant to Section 19(b) of the Exchange Act CAT Fees to be charged to 
Industry Members calculated using the Fee Rate that the Operating 
Committee approved in accordance with paragraph (a) of this Section 
11.3, such filings shall set forth (A) the Fee Rate; (B) the budget for 
the upcoming year (or remainder of the year, as applicable), including 
a brief description of each line item in the budget, including (1) 
technology line items of cloud hosting services, operating fees, CAIS 
operating fees, change request fees and capitalized developed 
technology costs, (2) legal, (3) consulting, (4) insurance, (5) 
professional and administration, and (6) public relations costs, a 
reserve and/or such other categories as reasonably determined by the 
Operating Committee to be included in the budget, and the reason for 
changes in each such line item from the prior CAT Fee filing; (C) a 
discussion of how the budget is reconciled to the collected fees; and 
(D) the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the year (or remainder of the 
year, as applicable), and a description of the calculation of the 
projection. The information provided in this Section would be provided 
with sufficient detail to demonstrate that the budget for the upcoming 
year, or part of year, as applicable, is reasonable and appropriate.
    (C) No Participant will make a filing with the SEC pursuant to 
Section 19(b) of the Exchange Act regarding any CAT Fee related to 
Prospective CAT Costs until the Financial Accountability Milestone 
related to Period 4 described in Section 11.6 has been satisfied.
    (iv) CAT Fee Details.
    (A) Details regarding the calculation of a Participant or CAT 
Executing Brokers' CAT Fees will be provided upon request to such 
Participant or CAT Executing Broker. At a minimum, such details would 
include each Participant or CAT Executing Broker's executed equivalent 
share volume and corresponding fee by (1) Listed Options, NMS Stocks 
and OTC Equity Securities, (2) by transactions executed on each 
exchange and transactions executed otherwise than on an exchange, and 
(3) by buy-side transactions and sell-side transactions.
    (B) For each CAT Fee, at a minimum, CAT LLC will make publicly 
available the aggregate executed equivalent share volume and 
corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC 
Equity Securities, (2) by transactions executed on each exchange and 
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions.
    (b) Past CAT Costs. The Operating Committee will establish one or 
more fees (each a ``Historical CAT Assessment'') to be payable by 
Industry Members with regard to CAT costs previously paid by the 
Participants (``Past CAT Costs'') as follows:
    (i) Calculation of Historical Fee Rates.
    (A) General. The Operating Committee will calculate the Historical 
Fee Rate for each Historical CAT Assessment by dividing the Historical 
CAT Costs for each Historical CAT Assessment by the reasonably 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for the Historical Recovery Period for each 
Historical CAT Assessment. Once the Operating Committee has approved 
such Historical Fee Rate, the Participants shall be required to file 
with the SEC pursuant to Section 19(b) of the Exchange Act such 
Historical CAT Assessment to be charged to Industry Members calculated 
using such Historical Fee Rate. Industry Members will be required to 
pay such Historical CAT Assessment calculated using such Historical Fee 
Rate once such Historical CAT Assessment is in effect in accordance 
with Section 19(b) of the Exchange Act.
    (B) Executed Equivalent Shares. For purposes of calculating each 
Historical CAT Assessment, executed equivalent shares in a transaction 
in Eligible Securities will be reasonably counted in the same manner as 
set forth in paragraph (a)(i)(B) of this Section 11.3.
    (C) Historical CAT Costs. The Operating Committee will reasonably 
determine the Historical CAT Costs sought to be recovered by each 
Historical CAT Assessment, where the Historical CAT Costs will be Past 
CAT Costs minus Past CAT Costs reasonably excluded from Historical CAT 
Costs by the Operating Committee. Each Historical CAT Assessment will 
seek to

[[Page 17129]]

recover from CAT Executing Brokers two-thirds of Historical CAT Costs 
incurred during the period covered by the Historical CAT Assessment.
    (D) Historical Recovery Period.
    (I) The length of the Historical Recovery Period used in 
calculating each Historical Fee Rate will be reasonably established by 
the Operating Committee based upon the amount of the Historical CAT 
Costs to be recovered by the Historical CAT Assessment; provided, 
however, no Historical Recovery Period used in calculating the 
Historical Fee Rate shall be less than 24 months or more than five 
years.
    (II) Notwithstanding the length of the Historical Recovery Period 
used in calculating the Historical Fee Rate, each Historical CAT 
Assessment calculated using the Historical Fee Rate will remain in 
effect until all Historical CAT Costs for the Historical CAT Assessment 
are collected.
    (E) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities for Historical Recovery Period. The 
Operating Committee shall reasonably determine the projected total 
executed equivalent share volume of all transactions in Eligible 
Securities for each Historical Recovery Period based on the executed 
equivalent share volume of all transactions in Eligible Securities for 
the prior twelve months.
    (ii) Past CAT Costs and Participants. Because Participants 
previously have paid Past CAT Costs via loans to the Company, 
Participants would not be required to pay any Historical CAT 
Assessment. In lieu of a Historical CAT Assessment, the Participants' 
one-third share of [Past] Historical CAT Costs and such other 
additional Past CAT Costs as reasonably determined by the Operating 
Committee will be paid by the cancellation of loans made to [by] the 
Company on a pro rata basis based on the outstanding loan amounts due 
under the loans. Historical CAT Assessments are designed to recover 
two-thirds of the Historical CAT Costs.
    (iii) Historical CAT Assessment for Industry Members.
    (A) Each month in which a Historical CAT Assessment is in effect, 
each CEBB and each CEBS shall pay a fee for each transaction in 
Eligible Securities executed by the CEBB or CEBS from the prior month 
as set forth in CAT Data, where the Historical CAT Assessment for each 
transaction will be calculated by multiplying the number of executed 
equivalent shares in the transaction by one-third and by the Historical 
Fee Rate reasonably determined pursuant to paragraph (b)(i) of this 
Section 11.3.
    (B) Historical CAT Assessment Fee Filings.
    (I) Participants will be required to file with the SEC pursuant to 
Section 19(b) of the Exchange Act a filing for each Historical CAT 
Assessment.
    (II) When the Participants file with the SEC pursuant to Section 
19(b) of the Exchange Act a Historical CAT Assessment calculated using 
the Historical Fee Rate that the Operating Committee approved in 
accordance with paragraph (b) of this Section 11.3, such filing shall 
set forth (A) the Historical Fee Rate; (B) a brief description of the 
amount and type of the Historical CAT Costs, including (1) the 
technology line items of cloud hosting services, operating fees, CAIS 
operating fees, change request fees, and capitalized developed 
technology costs, (2) legal, (3) consulting, (4) insurance, (5) 
professional and administration and (6) public relations costs; (C) the 
Historical Recovery Period and the reasons for its length; and (D) the 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for the Historical Recovery Period, and a 
description of the calculation of the projection. The information 
provided in this Section would be provided with sufficient detail to 
demonstrate that the Historical CAT Costs are reasonable and 
appropriate.
    (III) No Participant will make a filing with the SEC pursuant to 
Section 19(b) of the Exchange Act regarding any Historical CAT 
Assessment until any applicable Financial Accountability Milestone 
described in Section 11.6 has been satisfied.
    (iv) Historical CAT Assessment Details.
    (A) Details regarding the calculation of a CAT Executing Broker's 
Historical CAT Assessment will be provided upon request to such CAT 
Executing Broker. At a minimum, such details would include each CAT 
Executing Broker's executed equivalent share volume and corresponding 
fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by 
transactions executed on each exchange and transactions executed 
otherwise than on an exchange, and (3) by buy-side transactions and 
sell-side transactions.
    (B) For each Historical CAT Assessment, at a minimum, CAT LLC will 
make publicly available the aggregate executed equivalent share volume 
and corresponding aggregate fee by (1) Listed Options, NMS Stocks and 
OTC Equity Securities, (2) by transactions executed on each exchange 
and transactions executed otherwise than on an exchange, and (3) by 
buy-side transactions and sell-side transactions.
    (c) The Operating Committee may establish any other fees ancillary 
to the operation of the CAT that it reasonably determines appropriate, 
including fees: (i) for the late or inaccurate reporting of information 
to the CAT; (ii) for correcting submitted information; and (iii) based 
on access and use of the CAT for regulatory and oversight purposes (and 
not including any reporting obligations).
    (d) The Company shall make publicly available a schedule of 
effective fees and charges adopted pursuant to this Agreement as in 
effect from time to time. The Operating Committee shall review such fee 
schedule on at least an annual basis and shall make any changes to such 
fee schedule that it deems appropriate. The Operating Committee is 
authorized to review such fee schedule on a more regular basis, but 
shall not make any changes on more than a semiannual basis unless, 
pursuant to a Supermajority Vote, the Operating Committee concludes 
that such change is necessary for the adequate funding of the Company.
* * * * *
APPENDIX B
Fee Schedule
Consolidated Audit Trail Funding Fees for Participants
    (a) CAT Fee. Each Participant shall pay the CAT Fee set forth in 
Section 11.3(a) of the CAT NMS Plan to Consolidated Audit Trail, LLC in 
the manner prescribed by Consolidated Audit Trail, LLC on a monthly 
basis based on the Participant's transactions in Eligible Securities in 
the prior month.
* * * * *

EXHIBIT C

CAT Fee Example for Illustrative Purposes Only

    The following sets forth an example of a Historical CAT Assessment 
calculated under the Funding Proposal for illustrative purposes only. 
The example sets forth the Historical CAT Assessment that each CAT 
Executing Broker would pay related to CAT costs from prior to 2022 
based on each CAT Executing Broker's transactions in December 2022. The 
first chart, entitled ``Calculation of Historical CAT Assessment,'' 
describes how the example fees are calculated. The second chart, 
entitled ``Aggregate Executed Equivalent Share Volume and Corresponding 
Aggregate Fee for December 2022 for Certain Categories,'' sets forth 
the aggregated amounts of

[[Page 17130]]

executed equivalent share volume and corresponding fee for December 
2022 for the categories set forth in Proposed Section 11.3(b)(iv) of 
the CAT NMS Plan, which include (1) Listed Options, NMS Stocks and OTC 
Equity Securities, (2) by transactions executed on each exchange and 
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions. The third chart, entitled 
``Historical CAT Assessment for Each CAT Executing Broker,'' sets forth 
the example fees each CAT Executing Broker would pay based on its 
transactions in Eligible Securities in December 2022 in accordance with 
the parameters of the example.
    Note that Exhibit C only provides an illustrative example of how 
the Funding Proposal would operate for informational purposes; the 
calculation of the actual Historical CAT Assessment for CAT costs from 
prior to 2022 would differ from this example in various ways. For 
example, the illustrative example calculates the Historical Fee Rate 
using the projected total executed equivalent share transactions in 
Eligible Securities for 2023-2024, rather than the projected executed 
equivalent share volume for the actual Historical Recovery Period, the 
dates of which will be determined upon approval of the Funding 
Proposal. In addition, the illustrative example calculates the 
Historical CAT Assessment based on a CEBB and CEBS's trading activity 
from December 2022, rather than trading activity during a relevant 
month in which the Historical CAT Assessment would be in effect. 
Moreover, the illustrative example, among other things, calculates the 
executed equivalent shares for each executed contract for a transaction 
in Listed Options using a 100 executed equivalent share multiplier, 
instead of the specific multiplier applicable to each Listed Option; it 
uses a simple projection calculation of doubling the total executed 
equivalent share volume for 2022 (rather than a projection that 
considers volume growth and other relevant factors); and it may include 
cancelled trades or trades that were later corrected.\159\
---------------------------------------------------------------------------

    \159\ Section A.1.d of this filing discusses how cancellations 
and corrections would be addressed under the Funding Proposal.

                                    Calculation of Historical CAT Assessment
----------------------------------------------------------------------------------------------------------------
                 Item                           Value                 Calculation        Proposed plan provision
----------------------------------------------------------------------------------------------------------------
Actual Total Executed Equivalent       4,039,821,841,560.31     Calculated using actual  Proposed Sections
 Share Volume of Transactions in        Executed Equivalent      transactions in          11.3(a)(i)(B) and
 Eligible Securities for 2022.          Shares.                  Eligible Securities      11.3(b)(i)(B).
                                                                 for 2022.
Historical Recovery Period...........  2 years................  Length between 2 and 5   Proposed Section
                                                                 years as determined by   11.3(b)(i)(D)(I).
                                                                 Operating Committee.
Projected Total Executed Equivalent    8,079,643,683,120.62     2*4,039,821,841,560.31   Proposed Section
 Share Volume of Transactions in        Executed Equivalent      Executed Equivalent      11.3(b)(i)(E).
 Eligible Securities for 2023-2024.     Shares.                  Shares (Actual
                                                                 Executed Equivalent
                                                                 Share Volume of
                                                                 Transactions in
                                                                 Eligible Securities
                                                                 for 2022 multiplied by
                                                                 two).
Historical CAT Costs for Pre-2022....  $337,688,610...........  $401,312,909-$63,624,29  Proposed Section
                                                                 9 (Past CAT Costs for    11.3(b)(i)(C).
                                                                 pre-2022 minus CAT
                                                                 Costs excluded from
                                                                 Past CAT Costs for pre-
                                                                 2022).
Historical Fee Rate..................  $0.0000417950 per        $337,688,610/            Proposed Section
                                        Executed Equivalent      8,079,643,683,120.62     11.3(b)(i)(A).
                                        Share.                   (Historical CAT Costs
                                                                 for pre-2022 divided
                                                                 by Projected Total
                                                                 Executed Equivalent
                                                                 Share Volume of
                                                                 Transactions in
                                                                 Eligible Securities
                                                                 for 2023-2024).
Historical CAT Assessment for CAT      See ``Historical Fee     Executed Equivalent      Proposed Section
 Executing Brokers for pre-2022         Assessment for Each      Share Volume of          11.3(b)(iii)(A).
 Historical CAT Costs for December      CAT Executing Broker''   Transactions in
 2022.                                  chart below.             Eligible Securities
                                                                 for December 2022 for
                                                                 each CAT Executing
                                                                 Broker multiplied by
                                                                 Historical Fee Rate
                                                                 multiplied by one-
                                                                 third.\160\
Total Amount to be Collected via       $225,125,740...........  2/3 * $337,688,610 (Two- Proposed Sections
 Historical CAT Assessment for pre-                              thirds of Historical     11.3(b)(i)(C) and
 2022 Historical CAT Costs.                                      CAT Costs).              11.3(b)(iii)(A).
----------------------------------------------------------------------------------------------------------------

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

    \160\ Because the Historical Fee Rate is multiplied by one-third 
in calculating the Historical CAT Assessment for the example, CAT 
Executing Brokers would pay $0.00001393167 per executed equivalent 
share (that is, $0.0000417950 per executed equivalent share 
multiplied by one-third).

    Aggregate Executed Equivalent Share Volume and Corresponding Aggregate Fee for December 2022 for Certain
                                                   Categories
----------------------------------------------------------------------------------------------------------------
                                                                                           Aggregate historical
                                                                   Aggregate executed       CAT assessment for
                    Category of transaction                     equivalent share volume     December 2022 (in
                                                                   for December 2022             dollars)
----------------------------------------------------------------------------------------------------------------
Listed Options................................................       171,596,408,600.00             2,390,623.27
NMS Stocks....................................................       455,096,327,128.00             6,340,248.50
OTC Equity Securities.........................................         2,835,446,929.62                39,502.49
----------------------------------------------------------------------------------------------------------------
Buy-Side Transactions.........................................       314,765,626,228.81             4,385,208.51
Sell-Side Transactions........................................       314,762,556,428.81             4,385,165.75
----------------------------------------------------------------------------------------------------------------

[[Page 17131]]

 
Executed on BOX...............................................           11,476,557,600               159,887.53
Executed on Cboe BYX..........................................            5,010,889,784                69,810.03
Executed on Cboe BZX..........................................           28,387,794,900               395,489.18
Executed on Cboe EDGA.........................................            5,987,423,230                83,414.76
Executed on Cboe EDGX.........................................           35,456,933,206               493,974.03
Executed on Cboe C2...........................................            7,093,009,200                98,817.41
Executed on Cboe..............................................           31,832,709,200               443,482.57
Executed on IEX...............................................           10,534,111,236               146,757.68
Executed on LTSE..............................................               14,709,130                   204.92
Executed on MEMX..............................................           13,471,198,984               187,676.20
Executed on MIAX..............................................            9,473,736,600               131,984.90
Executed on MIAX Emerald......................................            4,451,989,200                62,023.61
Executed on MIAX PEARL........................................           13,382,643,690               186,442.48
Executed on Nasdaq BX.........................................            7,033,829,520                97,992.94
Executed on Nasdaq GEMX.......................................            2,750,988,600                38,325.85
Executed on Nasdaq ISE........................................            8,771,296,800               122,198.75
Executed on Nasdaq MRX........................................            2,373,050,600                33,060.54
Executed on Nasdaq PHLX.......................................           22,234,997,366               309,770.48
Executed on Nasdaq............................................           84,953,835,448             1,183,548.17
Executed on NYSE..............................................           46,589,923,124               649,075.09
Executed on NYSE American.....................................           12,939,380,646               180,267.09
Executed on NYSE Arca.........................................           57,732,682,568               804,312.26
Executed on NYSE Chicago......................................            1,851,452,536                25,793.81
Executed on NYSE National.....................................            2,482,827,634                34,589.92
Executed Otherwise than on an Exchange........................          203,240,211,856             2,831,474.07
----------------------------------------------------------------------------------------------------------------

                          Historical Fee Assessment for Each Cat Executing Broker \161\
----------------------------------------------------------------------------------------------------------------
                                                                  Executed equivalent
                                                                    share volume of           Historical CAT
                     CAT executing broker                           transactions in      assessment for December
                                                                eligible securities for     2022 (in dollars)
                                                                     December 2022
----------------------------------------------------------------------------------------------------------------
1.............................................................        86,112,198,133.20             1,199,686.09
2.............................................................        38,481,541,952.55               536,111.86
3.............................................................        38,393,700,002.03               534,888.08
4.............................................................        38,459,064,211.23               535,798.71
5.............................................................        27,384,672,407.15               381,514.02
6.............................................................        23,625,876,388.24               329,147.74
7.............................................................        22,953,981,909.23               319,787.13
8.............................................................        17,620,665,100.45               245,485.16
9.............................................................        17,628,940,532.54               245,600.45
10............................................................        20,031,215,101.53               279,068.13
11............................................................        16,301,270,280.00               227,103.80
12............................................................        19,404,461,254.15               270,336.41
13............................................................        11,441,178,404.00               159,394.64
14............................................................        12,179,858,717.98               169,685.68
15............................................................        12,076,770,928.00               168,249.50
16............................................................        11,623,298,048.64               161,931.87
17............................................................         9,955,221,266.53               138,692.78
18............................................................        10,285,573,046.70               143,295.13
19............................................................        10,481,313,179.31               146,022.12
20............................................................         9,456,042,067.81               131,738.39
21............................................................         7,969,275,763.65               111,025.26
22............................................................         5,853,036,941.30                81,542.54
23............................................................         9,044,202,748.00               126,000.78
24............................................................         8,129,937,025.67               113,263.54
25............................................................         9,466,559,704.00               131,884.92
26............................................................         8,098,701,385.00               112,828.38
27............................................................         6,220,173,476.92                86,657.36
28............................................................         4,940,607,300.00                68,830.87
29............................................................         5,496,193,202.99                76,571.11
30............................................................         4,183,004,192.80                58,276.20
31............................................................         3,748,760,073.00                52,226.46
32............................................................         3,930,225,757.70                54,754.58
33............................................................         2,926,196,700.00                40,766.79
34............................................................         4,040,159,976.45                56,286.15

[[Page 17132]]

 
35............................................................         2,462,962,342.00                34,313.16
36............................................................         3,255,347,005.69                45,352.40
37............................................................         1,795,144,783.11                25,009.35
38............................................................         1,533,939,983.00                21,370.33
39............................................................         2,462,084,862.71                34,300.94
40............................................................         2,226,415,053.41                31,017.66
41............................................................         1,847,364,910.34                25,736.86
42............................................................         2,416,691,618.00                33,668.53
43............................................................         1,232,981,799.00                17,177.49
44............................................................         2,181,268,648.12                30,388.70
45............................................................         2,131,136,467.07                29,690.27
46............................................................         1,099,857,600.00                15,322.85
47............................................................         1,469,689,428.23                20,475.22
48............................................................         2,168,992,900.00                30,217.68
49............................................................         1,496,908,444.00                20,854.42
50............................................................         1,534,294,028.00                21,375.27
51............................................................            65,606,592.00                   914.01
52............................................................         1,735,293,007.06                24,175.52
53............................................................         1,307,878,500.00                18,220.92
54............................................................         1,178,185,898.26                16,414.09
55............................................................         1,430,077,857.02                19,923.36
56............................................................         1,151,205,287.63                16,038.20
57............................................................         1,409,986,241.50                19,643.45
58............................................................         1,103,808,027.33                15,377.88
59............................................................         1,029,656,664.02                14,344.83
60............................................................           857,333,700.00                11,944.08
61............................................................           961,305,300.00                13,392.58
62............................................................         1,867,947,700.00                26,023.62
63............................................................         1,039,246,045.38                14,478.43
64............................................................         1,101,469,802.00                15,345.31
65............................................................           562,430,300.00                 7,835.59
66............................................................           733,501,357.00                10,218.89
67............................................................           877,224,476.00                12,221.20
68............................................................
69............................................................           829,161,852.00                11,551.60
70............................................................           966,607,368.00                13,466.45
71............................................................           821,501,400.00                11,444.88
72............................................................           677,405,637.00                 9,437.39
73............................................................         1,015,740,702.00                14,150.96
74............................................................           522,418,991.27                 7,278.17
75............................................................           989,301,187.72                13,782.61
76............................................................           773,642,309.00                10,778.12
77............................................................
78............................................................           590,057,809.16                 8,220.49
79............................................................           737,007,679.37                10,267.74
80............................................................           536,705,303.00                 7,477.20
81............................................................           767,854,826.21                10,697.49
82............................................................           635,942,409.58                 8,859.74
83............................................................           864,089,556.95                12,038.20
84............................................................           620,860,189.00                 8,649.61
85............................................................           700,713,844.00                 9,762.11
86............................................................           727,102,431.00                10,129.75
87............................................................           556,678,644.00                 7,755.46
88............................................................           581,059,177.09                 8,095.12
89............................................................           559,881,462.22                 7,800.08
90............................................................           483,502,237.48                 6,735.99
91............................................................           413,725,788.00                 5,763.89
92............................................................           610,245,108.09                 8,501.73
93............................................................           405,594,302.00                 5,650.60
94............................................................           353,080,033.04                 4,918.99
95............................................................           550,986,110.00                 7,676.15
96............................................................           522,200,254.96                 7,275.12
97............................................................           452,909,875.00                 6,309.79
98............................................................           314,934,600.00                 4,387.56
99............................................................         1,172,981,298.00                16,341.58
100...........................................................           418,591,392.71                 5,831.67
101...........................................................            56,226,707.15                   783.33
102...........................................................           444,528,797.00                 6,193.03

[[Page 17133]]

 
103...........................................................           243,033,674.00                 3,385.86
104...........................................................           826,825,093.31                11,519.05
105...........................................................           363,355,742.00                 5,062.15
106...........................................................           319,206,742.76                 4,447.08
107...........................................................           234,606,209.64                 3,268.45
108...........................................................           714,493,322.00                 9,954.08
109...........................................................           313,455,910.25                 4,366.96
110...........................................................         1,031,910,466.00                14,376.23
111...........................................................           258,090,705.06                 3,595.63
112...........................................................           472,580,692.79                 6,583.83
113...........................................................           431,793,880.31                 6,015.61
114...........................................................           337,914,803.56                 4,707.72
115...........................................................           339,736,815.43                 4,733.10
116...........................................................           909,158,616.00                12,666.09
117...........................................................           290,642,115.00                 4,049.13
118...........................................................           347,421,063.79                 4,840.15
119...........................................................           350,667,538.15                 4,885.38
120...........................................................           318,322,800.00                 4,434.77
121...........................................................           263,757,425.20                 3,674.58
122...........................................................
123...........................................................           375,530,471.00                 5,231.76
124...........................................................            53,557,200.00                   746.14
125...........................................................
126...........................................................           283,825,411.16                 3,954.16
127...........................................................           143,392,400.00                 1,997.69
128...........................................................           217,718,090.88                 3,033.17
129...........................................................           165,915,140.89                 2,311.47
130...........................................................           457,613,070.46                 6,375.31
131...........................................................           251,132,793.81                 3,498.70
132...........................................................           219,112,442.00                 3,052.60
133...........................................................            43,938,745.15                   612.14
134...........................................................           330,967,497.01                 4,610.93
135...........................................................           188,838,809.00                 2,630.84
136...........................................................           227,575,404.47                 3,170.50
137...........................................................           206,478,844.94                 2,876.59
138...........................................................
139...........................................................           292,467,800.00                 4,074.56
140...........................................................           165,645,008.32                 2,307.71
141...........................................................           214,739,622.63                 2,991.68
142...........................................................           185,617,991.19                 2,585.97
143...........................................................           165,469,188.00                 2,305.26
144...........................................................             5,019,600.00                    69.93
145...........................................................           956,355,049.08                13,323.62
146...........................................................            64,960,719.00                   905.01
147...........................................................           289,141,549.00                 4,028.22
148...........................................................           147,498,787.28                 2,054.90
149...........................................................           158,995,017.79                 2,215.06
150...........................................................           122,676,294.48                 1,709.08
151...........................................................           136,312,675.96                 1,899.06
152...........................................................            27,284,757.00                   380.12
153...........................................................           352,462,000.00                 4,910.38
154...........................................................           126,212,114.45                 1,758.34
155...........................................................
156...........................................................           128,125,560.32                 1,785.00
157...........................................................            60,988,464.36                   849.67
158...........................................................           131,730,011.56                 1,835.22
159...........................................................            74,526,683.59                 1,038.28
160...........................................................           147,853,117.00                 2,059.84
161...........................................................           113,883,427.93                 1,586.59
162...........................................................
163...........................................................           116,699,318.87                 1,625.82
164...........................................................           129,812,902.58                 1,808.51
165...........................................................           106,768,335.00                 1,487.46
166...........................................................           140,139,530.00                 1,952.38
167...........................................................            82,905,120.00                 1,155.01
168...........................................................            99,813,775.33                 1,390.57
169...........................................................            61,257,698.00                   853.42
170...........................................................           265,568,648.00                 3,699.81

[[Page 17134]]

 
171...........................................................            98,014,634.68                 1,365.51
172...........................................................            95,296,632.53                 1,327.64
173...........................................................            52,272,295.77                   728.24
174...........................................................            38,307,460.47                   533.69
175...........................................................            84,787,219.45                 1,181.23
176...........................................................            79,498,966.79                 1,107.55
177...........................................................            55,374,006.21                   771.45
178...........................................................           156,404,961.23                 2,178.98
179...........................................................            60,642,356.86                   844.85
180...........................................................           118,133,629.00                 1,645.80
181...........................................................            76,062,700.00                 1,059.68
182...........................................................           248,176,128.68                 3,457.51
183...........................................................            79,008,100.00                 1,100.71
184...........................................................            85,278,937.00                 1,188.08
185...........................................................            70,228,707.00                   978.40
186...........................................................            62,833,390.18                   875.37
187...........................................................            41,480,726.45                   577.90
188...........................................................           176,929,414.00                 2,464.92
189...........................................................            29,253,925.81                   407.56
190...........................................................           105,263,657.06                 1,466.50
191...........................................................            77,787,800.00                 1,083.71
192...........................................................            68,984,712.00                   961.07
193...........................................................            61,335,825.68                   854.51
194...........................................................            67,297,274.77                   937.56
195...........................................................            51,129,783.08                   712.32
196...........................................................
197...........................................................            68,089,568.19                   948.60
198...........................................................            40,730,576.79                   567.44
199...........................................................            39,525,291.39                   550.65
200...........................................................            91,093,000.00                 1,269.08
201...........................................................            57,676,030.00                   803.52
202...........................................................             6,831,789.24                    95.18
203...........................................................           316,923,604.92                 4,415.27
204...........................................................            56,604,000.00                   788.59
205...........................................................            33,836,692.76                   471.40
206...........................................................             3,686,360.00                    51.36
207...........................................................            87,223,619.59                 1,215.17
208...........................................................            22,659,425.86                   315.68
209...........................................................            36,155,445.78                   503.71
210...........................................................            27,633,449.00                   384.98
211...........................................................             3,789,049.10                    52.79
212...........................................................
213...........................................................
214...........................................................            11,802,608.52                   164.43
215...........................................................            39,707,587.00                   553.19
216...........................................................            69,601,570.00                   969.67
217...........................................................            26,765,942.82                   372.89
218...........................................................            32,246,115.00                   449.24
219...........................................................             5,604,885.00                    78.09
220...........................................................            15,282,378.75                   212.91
221...........................................................            21,777,071.28                   303.39
222...........................................................            19,782,551.00                   275.60
223...........................................................            25,665,436.26                   357.56
224...........................................................            24,403,825.19                   339.99
225...........................................................            69,596,229.05                   969.59
226...........................................................            15,677,771.93                   218.42
227...........................................................            25,267,934.00                   352.02
228...........................................................            22,258,692.00                   310.10
229...........................................................            10,262,505.79                   142.97
230...........................................................
231...........................................................            18,989,070.64                   264.55
232...........................................................            14,408,226.00                   200.73
233...........................................................            18,945,600.00                   263.94
234...........................................................            13,376,162.82                   186.35
235...........................................................            20,807,919.37                   289.89
236...........................................................            17,593,056.07                   245.10
237...........................................................            15,126,721.74                   210.74
238...........................................................            13,674,994.00                   190.52

[[Page 17135]]

 
239...........................................................             6,144,297.00                    85.60
240...........................................................            14,525,850.31                   202.37
241...........................................................            38,208,766.82                   532.31
242...........................................................            14,895,098.80                   207.51
243...........................................................            11,078,635.00                   154.34
244...........................................................            10,226,692.01                   142.47
245...........................................................            11,521,371.11                   160.51
246...........................................................            11,162,808.43                   155.52
247...........................................................            18,083,706.64                   251.94
248...........................................................            15,739,833.71                   219.28
249...........................................................             9,587,210.86                   133.57
250...........................................................            18,980,980.00                   264.44
251...........................................................             5,974,342.18                    83.23
252...........................................................            18,009,063.00                   250.90
253...........................................................            12,371,171.00                   172.35
254...........................................................            16,961,858.62                   236.31
255...........................................................            12,751,377.12                   177.65
256...........................................................             7,665,867.62                   106.80
257...........................................................            14,798,978.38                   206.17
258...........................................................            11,422,776.00                   159.14
259...........................................................             9,486,103.23                   132.16
260...........................................................            18,142,315.00                   252.75
261...........................................................            13,643,800.00                   190.08
262...........................................................
263...........................................................            21,333,324.60                   297.21
264...........................................................            14,024,523.06                   195.38
265...........................................................             9,609,378.96                   133.87
266...........................................................             3,764,664.51                    52.45
267...........................................................             9,263,917.20                   129.06
268...........................................................            13,514,542.97                   188.28
269...........................................................             7,063,688.49                    98.41
270...........................................................             9,204,383.57                   128.23
271...........................................................
272...........................................................             4,165,675.24                    58.03
273...........................................................             8,795,482.50                   122.54
274...........................................................
275...........................................................             7,151,874.00                    99.64
276...........................................................             2,656,709.93                    37.01
277...........................................................
278...........................................................            11,041,371.25                   153.82
279...........................................................             9,618,241.51                   134.00
280...........................................................            10,409,870.33                   145.03
281...........................................................             2,381,247.97                    33.17
282...........................................................            79,562,536.00                 1,108.44
283...........................................................             5,028,862.00                    70.06
284...........................................................             3,583,471.00                    49.92
285...........................................................             6,047,686.70                    84.25
286...........................................................            10,121,031.10                   141.00
287...........................................................
288...........................................................             4,562,944.01                    63.57
289...........................................................             1,995,032.12                    27.79
290...........................................................             3,603,016.17                    50.20
291...........................................................            49,058,772.00                   683.47
292...........................................................             5,326,788.04                    74.21
293...........................................................             5,199,894.30                    72.44
294...........................................................
295...........................................................             7,396,224.93                   103.04
296...........................................................             8,377,144.03                   116.71
297...........................................................            10,426,990.00                   145.27
298...........................................................             4,328,332.63                    60.30
299...........................................................
300...........................................................            22,059,594.00                   307.33
301...........................................................             2,719,871.36                    37.89
302...........................................................
303...........................................................             9,336,370.70                   130.07
304...........................................................             8,250,582.32                   114.94
305...........................................................            11,309,704.54                   157.56
306...........................................................             2,825,954.04                    39.37

[[Page 17136]]

 
307...........................................................             3,015,453.22                    42.01
308...........................................................             2,985,881.79                    41.60
309...........................................................             3,550,440.79                    49.46
310...........................................................             3,796,542.00                    52.89
311...........................................................               681,600.00                     9.50
312...........................................................             6,701,908.00                    93.37
313...........................................................             7,515,141.47                   104.70
314...........................................................             1,813,867.00                    25.27
315...........................................................            25,693,200.00                   357.95
316...........................................................             8,571,418.81                   119.41
317...........................................................             4,618,323.00                    64.34
318...........................................................             2,871,231.32                    40.00
319...........................................................             1,312,921.00                    18.29
320...........................................................             3,167,425.85                    44.13
321...........................................................               101,019.48                     1.41
322...........................................................             3,859,688.00                    53.77
323...........................................................             4,632,446.85                    64.54
324...........................................................
325...........................................................             2,755,282.00                    38.39
326...........................................................             3,449,977.69                    48.06
327...........................................................             2,682,536.34                    37.37
328...........................................................             6,303,034.00                    87.81
329...........................................................             1,464,170.44                    20.40
330...........................................................             2,405,671.00                    33.51
331...........................................................             3,837,456.05                    53.46
332...........................................................             2,098,139.00                    29.23
333...........................................................               927,380.00                    12.92
334...........................................................
335...........................................................               453,254.09                     6.31
336...........................................................             8,591,832.75                   119.70
337...........................................................             3,385,354.11                    47.16
338...........................................................
339...........................................................             1,634,758.00                    22.77
340...........................................................               935,226.00                    13.03
341...........................................................               823,172.38                    11.47
342...........................................................             7,230,086.55                   100.73
343...........................................................             2,994,432.00                    41.72
344...........................................................             5,133,362.77                    71.52
345...........................................................
346...........................................................             1,744,000.00                    24.30
347...........................................................
348...........................................................             5,993,119.17                    83.49
349...........................................................
350...........................................................               652,857.00                     9.10
351...........................................................               424,927.00                     5.92
352...........................................................               953,388.28                    13.28
353...........................................................
354...........................................................             2,291,065.00                    31.92
355...........................................................             3,155,865.00                    43.97
356...........................................................               374,015.00                     5.21
357...........................................................             1,665,732.44                    23.21
358...........................................................               128,500.00                     1.79
359...........................................................               401,400.00                     5.59
360...........................................................               830,021.00                    11.56
361...........................................................               910,747.00                    12.69
362...........................................................             1,232,435.70                    17.17
363...........................................................            14,888,100.00                   207.42
364...........................................................             1,702,250.00                    23.72
365...........................................................             3,676,612.12                    51.22
366...........................................................               919,741.00                    12.81
367...........................................................             3,712,051.51                    51.72
368...........................................................               635,368.00                     8.85
369...........................................................               447,894.00                     6.24
370...........................................................             2,272,345.00                    31.66
371...........................................................             1,374,837.10                    19.15
372...........................................................             1,552,729.36                    21.63
373...........................................................             2,180,116.97                    30.37
374...........................................................

[[Page 17137]]

 
375...........................................................               798,527.92                    11.12
376...........................................................
377...........................................................             1,399,199.54                    19.49
378...........................................................             4,536,762.00                    63.20
379...........................................................             1,061,788.00                    14.79
380...........................................................             2,827,862.97                    39.40
381...........................................................             1,053,097.00                    14.67
382...........................................................               939,300.00                    13.09
383...........................................................                   254.00                     0.00
384...........................................................             1,088,114.00                    15.16
385...........................................................               773,060.00                    10.77
386...........................................................               387,116.56                     5.39
387...........................................................               873,812.55                    12.17
388...........................................................               665,749.00                     9.27
389...........................................................               795,558.50                    11.08
390...........................................................             2,597,253.00                    36.18
391...........................................................               948,046.00                    13.21
392...........................................................             1,107,547.00                    15.43
393...........................................................             3,654,035.00                    50.91
394...........................................................               521,279.00                     7.26
395...........................................................               410,769.00                     5.72
396...........................................................             2,622,813.00                    36.54
397...........................................................               554,541.44                     7.73
398...........................................................               179,200.00                     2.50
399...........................................................               841,840.24                    11.73
400...........................................................               523,709.00                     7.30
401...........................................................
402...........................................................
403...........................................................               462,520.50                     6.44
404...........................................................               379,314.02                     5.28
405...........................................................               217,857.00                     3.04
406...........................................................               513,184.27                     7.15
407...........................................................               130,200.00                     1.81
408...........................................................               480,937.70                     6.70
409...........................................................               658,680.86                     9.18
410...........................................................             1,230,112.99                    17.14
411...........................................................             5,625,111.00                    78.37
412...........................................................               620,200.00                     8.64
413...........................................................             3,879,491.00                    54.05
414...........................................................               852,915.67                    11.88
415...........................................................               468,524.00                     6.53
416...........................................................               338,139.73                     4.71
417...........................................................                86,853.84                     1.21
418...........................................................               382,210.00                     5.32
419...........................................................
420...........................................................               183,173.25                     2.55
421...........................................................               655,954.75                     9.14
422...........................................................               165,639.00                     2.31
423...........................................................
424...........................................................                84,016.00                     1.17
425...........................................................
426...........................................................               220,899.00                     3.08
427...........................................................
428...........................................................
429...........................................................                38,100.00                     0.53
430...........................................................                78,640.00                     1.10
431...........................................................               212,985.00                     2.97
432...........................................................                79,334.00                     1.11
433...........................................................
434...........................................................                22,991.02                     0.32
435...........................................................                 8,120.00                     0.11
436...........................................................                44,988.45                     0.63
437...........................................................                81,718.00                     1.14
438...........................................................                91,513.00                     1.27
439...........................................................               234,239.00                     3.26
440...........................................................               509,039.50                     7.09
441...........................................................
442...........................................................                28,633.00                     0.40

[[Page 17138]]

 
443...........................................................
444...........................................................                 7,497.00                     0.10
445...........................................................                69,548.86                     0.97
446...........................................................             1,243,936.05                    17.33
447...........................................................               111,283.00                     1.55
448...........................................................
449...........................................................               435,740.00                     6.07
450...........................................................
451...........................................................             1,907,630.00                    26.58
452...........................................................
453...........................................................                94,505.19                     1.32
454...........................................................               500,187.00                     6.97
455...........................................................               189,004.00                     2.63
456...........................................................
457...........................................................                 5,154.00                     0.07
458...........................................................
459...........................................................
460...........................................................
461...........................................................                   426.90                     0.01
462...........................................................                 1,065.00                     0.01
463...........................................................               150,058.61                     2.09
464...........................................................               282,990.00                     3.94
465...........................................................                16,625.00                     0.23
466...........................................................
467...........................................................
468...........................................................               139,267.00                     1.94
469...........................................................                49,367.91                     0.69
470...........................................................               330,964.00                     4.61
471...........................................................                 6,532.00                     0.09
472...........................................................
473...........................................................
474...........................................................                     9.00                     0.00
475...........................................................                34,000.00                     0.47
476...........................................................                15,708.00                     0.22
477...........................................................                14,355.00                     0.20
478...........................................................               151,323.00                     2.11
479...........................................................                 6,090.28                     0.08
480...........................................................                67,340.20                     0.94
481...........................................................                16,356.00                     0.23
482...........................................................                    37.00                     0.00
483...........................................................                94,762.08                     1.32
484...........................................................                16,191.00                     0.23
485...........................................................                30,000.00                     0.42
486...........................................................                17,679.82                     0.25
487...........................................................                 3,762.52                     0.05
488...........................................................
489...........................................................               111,812.00                     1.56
490...........................................................
491...........................................................                30,513.00                     0.43
492...........................................................                86,676.00                     1.21
493...........................................................
494...........................................................                   500.00                     0.01
495...........................................................                98,319.74                     1.37
496...........................................................                36,465.84                     0.51
497...........................................................                20,653.01                     0.29
498...........................................................                29,603.84                     0.41
499...........................................................
500...........................................................                 4,165.29                     0.06
501...........................................................                 7,100.00                     0.10
502...........................................................
503...........................................................
504...........................................................                 5,582.00                     0.08
505...........................................................
506...........................................................                38,770.00                     0.54
507...........................................................                18,855.43                     0.26
508...........................................................
509...........................................................                 9,817.02                     0.14
510...........................................................                   900.00                     0.01

[[Page 17139]]

 
511...........................................................                 4,472.75                     0.06
512...........................................................                   266.00                     0.00
513...........................................................                 5,298.16                     0.07
514...........................................................
515...........................................................                   169.00                     0.00
516...........................................................
517...........................................................                 4,646.78                     0.06
518...........................................................                 4,646.78                     0.06
519...........................................................                 6,417.00                     0.09
520...........................................................                   257.00                     0.00
521...........................................................                13,387.78                     0.19
522...........................................................                 1,313.00                     0.02
523...........................................................
524...........................................................                23,714.00                     0.33
525...........................................................                 4,488.00                     0.06
526...........................................................                 2,787.00                     0.04
527...........................................................                 1,200.00                     0.02
528...........................................................
529...........................................................                 1,947.72                     0.03
530...........................................................                 2,360.20                     0.03
531...........................................................                   200.00                     0.00
532...........................................................                15,261.00                     0.21
533...........................................................                   267.00                     0.00
534...........................................................
535...........................................................                     2.00                     0.00
536...........................................................
537...........................................................                 1,895.46                     0.03
538...........................................................                 1,369.04                     0.02
539...........................................................                 1,047.00                     0.01
540...........................................................                 1,507.00                     0.02
541...........................................................
542...........................................................                 2,183.01                     0.03
543...........................................................                   973.00                     0.01
544...........................................................
545...........................................................                   760.01                     0.01
546...........................................................                 2,774.00                     0.04
547...........................................................                    45.00                     0.00
548...........................................................                   747.00                     0.01
549...........................................................
550...........................................................                   799.00                     0.01
551...........................................................                   257.00                     0.00
552...........................................................                   207.00                     0.00
553...........................................................
554...........................................................                     6.00                     0.00
555...........................................................
556...........................................................                   402.00                     0.01
557...........................................................
558...........................................................
559...........................................................                   164.00                     0.00
560...........................................................
561...........................................................
562...........................................................
563...........................................................
564...........................................................
565...........................................................                   118.00                     0.00
566...........................................................                     5.00                     0.00
567...........................................................
568...........................................................                    68.00                     0.00
569...........................................................                    75.00                     0.00
570...........................................................                    15.00                     0.00
571...........................................................                    34.00                     0.00
572...........................................................
573...........................................................                     9.00                     0.00
574...........................................................
575...........................................................                    85.00                     0.00
576...........................................................                    75.00                     0.00
577...........................................................
578...........................................................

[[Page 17140]]

 
579...........................................................                    54.00                     0.00
580...........................................................                    26.00                     0.00
581...........................................................                    34.00                     0.00
582...........................................................                   423.55                     0.01
583...........................................................                     6.00                     0.00
584...........................................................
585...........................................................                    91.00                     0.00
586...........................................................                    43.00                     0.00
587...........................................................
588...........................................................                    25.00                     0.00
589...........................................................
590...........................................................                    16.00                     0.00
591...........................................................                    20.00                     0.00
592...........................................................                    31.00                     0.00
593...........................................................
594...........................................................                    25.00                     0.00
595...........................................................
596...........................................................                    29.00                     0.00
597...........................................................                    22.00                     0.00
598...........................................................
599...........................................................
600...........................................................                     3.00                     0.00
601...........................................................                    26.00                     0.00
602...........................................................
603...........................................................
604...........................................................                    55.02                     0.00
605...........................................................                    20.00                     0.00
606...........................................................
607...........................................................                    18.00                     0.00
608...........................................................
609...........................................................
610...........................................................                    18.00                     0.00
611...........................................................
612...........................................................                    27.00                     0.00
613...........................................................
614...........................................................
615...........................................................                    14.00                     0.00
616...........................................................                     8.00                     0.00
617...........................................................                    18.00                     0.00
618...........................................................
619...........................................................
620...........................................................
621...........................................................
622...........................................................                    16.00                     0.00
623...........................................................                     3.00                     0.00
624...........................................................                     1.00                     0.00
625...........................................................                     7.00                     0.00
626...........................................................
627...........................................................                     6.00                     0.00
628...........................................................
629...........................................................                     8.00                     0.00
630...........................................................                    11.00                     0.00
631...........................................................                     9.00                     0.00
632...........................................................
633...........................................................                     2.26                     0.00
634...........................................................                    10.00                     0.00
635...........................................................
636...........................................................                     8.00                     0.00
637...........................................................                     2.00                     0.00
638...........................................................
639...........................................................                     4.00                     0.00
640...........................................................                    15.00                     0.00
641...........................................................
642...........................................................
643...........................................................                     6.00                     0.00
644...........................................................                     1.00                     0.00
645...........................................................
646...........................................................                     2.00                     0.00

[[Page 17141]]

 
647...........................................................                     1.00                     0.00
648...........................................................                     2.00                     0.00
649...........................................................                     3.00                     0.00
650...........................................................
651...........................................................
652...........................................................
653...........................................................
654...........................................................
655...........................................................                     4.00                     0.00
656...........................................................                     5.00                     0.00
657...........................................................
658...........................................................
659...........................................................                     1.00                     0.00
660...........................................................
661...........................................................                     3.00                     0.00
662...........................................................                     8.00                     0.00
663...........................................................
664...........................................................
665...........................................................
666...........................................................
667...........................................................
668...........................................................
669...........................................................
670...........................................................
671...........................................................
672...........................................................                     1.00                     0.00
673...........................................................
674...........................................................
675...........................................................
676...........................................................
677...........................................................
678...........................................................
679...........................................................                     1.00                     0.00
680...........................................................
681...........................................................
682...........................................................
683...........................................................
----------------------------------------------------------------------------------------------------------------

     
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    \161\ CAT LLC recognizes that an Industry Member's knowledge of 
its own fees in the illustrative example would be helpful in 
analyzing the Funding Proposal. Accordingly, if a CAT Executing 
Broker is interested in learning which anonymized CAT Executing 
Broker in the illustrative example represents its volume and fees, 
the CAT Executing Broker may contact the FINRA CAT Helpdesk by email 
at [email protected]. Accordingly, subject to verification of the 
identity of the requesting party as an authorized representative of 
the relevant Industry Member, the Helpdesk will provide the 
authorized representative of the CAT Executing Broker with the 
number of the applicable anonymized CAT Executing Broker in Exhibit 
C. In addition, upon request, the Helpdesk also will provide the CAT 
Executing Broker with a breakdown of its executed equivalent share 
volume and corresponding fee by (1) Listed Options, NMS Stocks and 
OTC Equity Securities, (2) by transactions executed on each exchange 
and transactions executed otherwise than on an exchange, and (3) by 
buy-side transactions and sell-side transactions. CAT LLC notes that 
the calculations provided in the table may reflect minor variations 
due to rounding.
---------------------------------------------------------------------------

[FR Doc. 2023-05690 Filed 3-20-23; 8:45 am]
BILLING CODE 8011-01-P