Document ID: SEC-2017-0472-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Bats BYX Exchange, Inc.; Bats BZX Exchange, Inc.; Bats EDGA Exchange, Inc.; et al.
Posted Date: 2017-03-21T04:00Z

[Federal Register Volume 82, Number 53 (Tuesday, March 21, 2017)]
[Notices]
[Pages 14526-14547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05505]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80256; File Nos. SR-BatsBYX-2017-02; SR-BatsBZX-2017-
08; SR-BatsEDGA-2017-03; SR-BatsEDGX-2017-08; SR-BOX-2017-07; SR-C2-
2017-007; SR-CBOE-2017-012; SR-CHX-2017-03; SR-ISE-2017-08; SR-IEX-
2017-04; SR-ISEGemini-2017-04; SR-ISEMercury-2017-03; SR-MIAX-2017-03; 
SR-PEARL-2017-04; SR-NASDAQ-2017-008; SR-BX-2017-007; SR-PHLX-2017-07; 
SR-NYSE-2017-01; SR-NYSEArca-2017-03; SR-NYSEArca-2017-04; SR-NYSEMKT-
2017-02; SR-NSX-2017-03]

Self-Regulatory Organizations; Bats BYX Exchange Inc.; Bats BZX 
Exchange, Inc.; Bats EDGA Exchange, Inc.; Bats EDGX Exchange, Inc.; BOX 
Options Exchange LLC; C2 Options Exchange, Incorporated; Chicago Board 
Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; 
International Securities Exchange, LLC; Investors Exchange LLC; ISE 
Gemini, LLC; ISE Mercury, LLC; Miami International Securities Exchange 
LLC; MIAX PEARL, LLC; The NASDAQ Stock Market LLC; NASDAQ BX, Inc.; 
NASDAQ PHLX, Inc.; New York Stock Exchange LLC; NYSE Arca, Inc.; NYSE 
MKT LLC; NYSE National, Inc.; Order Approving Proposed Rule Changes To 
Adopt Consolidated Audit Trail Compliance Rules

March 15, 2017.

I. Introduction

    On January 17, 2017,\1\ January 30, 2017,\2\ January 31, 2017,\3\ 
February 1, 2017,\4\ and February 2, 2017,\5\ Bats BYX Exchange, Inc. 
(``Bats BYX''), Bats BZX Exchange, Inc. (``Bats BZX''), Bats EDGA 
Exchange, Inc. (``Bats EDGA''), Bats EDGX Exchange, Inc. (``Bats 
EDGX''), BOX Options Exchange LLC (``BOX''), C2 Options Exchange, 
Incorporated (``C2''), Chicago Board Options Exchange, Incorporated 
(``CBOE''), Chicago Stock Exchange, Inc. (``CHX''), International 
Securities Exchange, LLC (``ISE''), ISE Gemini, LLC (``ISE Gemini''), 
ISE Mercury, LLC (``ISE Mercury''), Investors Exchange LLC (``IEX''), 
Miami International Securities Exchange LLC (``MIAX''), MIAX PEARL, LLC 
(``MIAX PEARL''), NASDAQ BX, Inc. (``BX''), NASDAQ PHLX LLC (``Phlx''), 
The NASDAQ Stock Market LLC (``NASDAQ''), the New York Stock Exchange 
LLC (``NYSE''), NYSE Arca, Inc. (``NYSE Arca''), NYSE MKT LLC (``NYSE 
MKT''), and NYSE National, Inc. (``NYSE National'') (f/k/a National 
Stock Exchange, Inc.) \6\ (collectively, ``the Exchanges'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \7\ 
and Rule 19b-4 thereunder,\8\ proposed rule changes to implement the 
compliance rules regarding the National Market System Plan Governing 
the Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'')(``CAT 
Compliance Rules'' or ``Rules'').\9\ On January 30, 2017, NYSE, NYSE 
Arca, and NYSE MKT each submitted amendments to their respective 
proposed rule filings.\10\ Those proposed rule changes were published 
for comment in the Federal Register on February 6, 2017.\11\ The 
proposed rule changes submitted by Bats BYX, Bats BZX, Bats EDGX, BOX, 
CBOE, CHX, IEX, MIAX, MIAX PEARL, NYSE National, NASDAQ, and NASDAQ 
PHLX were published for comment in the Federal Register on February 8, 
2017.\12\ The proposed rule

[[Page 14527]]

changes submitted by BX, C2, Bats EDGA, ISE, ISE Gemini, and ISE 
Mercury were published for comment in the Federal Register on February 
9, 2017.\13\ On March 7, 2017, BX, ISE, ISE Gemini, ISE Mercury, NASDAQ 
and PHLX each filed an amendment to its respective proposed rule 
change.\14\ The Commission received 3 comments in response to the 
proposed rule changes.\15\ On March 15, the Participants \16\ submitted 
a response to the comment letters.\17\ This order approves the proposed 
rule changes.\18\
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    \1\ The New York Stock Exchange LLC, NYSE Arca, Inc., and NYSE 
MKT LLC filed their proposed rule changes on January 17, 2017.
    \2\ Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., C2 Options Exchange, 
Incorporated, Chicago Board Options Exchange, Incorporated, 
International Securities Exchange, LLC, Miami International 
Securities Exchange LLC, NASDAQ PHLX LLC and NYSE National Inc. 
filed their proposed rule changes on January 30, 2017.
    \3\ BOX Options Exchange LLC and The NASDAQ Stock Market LLC 
filed their proposed rule changes on January 31, 2017.
    \4\ Chicago Stock Exchange, Inc. and MIAX PEARL, LLC filed their 
proposed rule changes on February 1, 2017.
    \5\ International Securities Exchange, LLC, ISE Gemini, LLC, ISE 
Mercury, LLC and NASDAQ BX, Inc. filed their proposed rule changes 
on February 2, 2017.
    \6\ NYSE National filed SR-NSX-2017-03 as the National Stock 
Exchange, Inc.
    \7\ 15 U.S.C. 78s(b)(1).
    \8\ 17 CFR 240.19b-4.
    \9\ The proposed CAT Compliance Rules of C2 and MIAX PEARL 
incorporate by reference the proposed CAT Compliance Rules of CBOE 
and MIAX, respectively. C2 and MIAX PEARL have requested exemptions 
from the rule filing requirements of Section 19(b) of the Exchange 
Act for changes to their proposed CAT Compliance Rules that are 
effected solely by virtue of changes to the proposed CBOE and MIAX 
CAT Compliance Rules. See Letter from Laura G. Dickman, Lead 
Counsel, CBOE, to Brent J. Fields, Secretary, Commission, dated 
January 30, 2017; Letter from Deborah L. Carroll, Associate General 
Counsel, MIAX PEARL, to Brent J. Fields, Secretary, Commission, 
dated February 17, 2017.
    \10\ These amendments replaced the original proposed rule 
changes in their entirety prior to publication of these proposed 
rule changes for notice and comment.
    \11\ See Securities Exchange Act Release Nos. 79907 (January 31, 
2017), 82 FR 9413 (``NYSE Notice''); 79911 (January 31, 2017), 82 FR 
9435 (``NYSE MKT Notice''); 79909 (January 31, 2017) 82 FR 9464 
(``NYSE Arca Notice 1''); 79908 (January 31, 2017), 82 FR 9450 
(``NYSE Arca Notice 2'').
    \12\ See Securities Exchange Act Release Nos. 79944 (February 2, 
2017), 82 FR 9846 (``Bats BYX Notice''); 79927 (February 2, 2017), 
82 FR 9874 (February 8, 2017) (``Bats BZX Notice''); 79962 (February 
3, 2017), 82 FR 10047 (``Bats EDGA Notice''); 79949 (February 2, 
2017), 82 FR 9765 (``Bats EDGX Notice''); 79932 (February 2, 2017), 
82 FR 9819 (``BOX Notice''); 79950 (February 2, 2017), 82 FR 9916 
(``CBOE Notice''); 79948 (February 2, 2017), 82 FR 9904 (``CHX 
Notice''); 79934 (February 2, 2107), 82 FR 9891 (``IEX Notice''); 
79937 (February 2, 2017), 82 FR 9790 (``MIAX Notice''); 79938 
(February 2, 2017), 82 FR 9929 (``MIAX PEARL Notice''); 79933 
(February 2, 2017), 82 FR 9942 (``NYSE National''); 79935 (February 
2, 2017), 82 FR 9831 (``NASDAQ Notice''); 79945 (February 2, 2017), 
82 FR 9778 (``Phlx Notice'').
    \13\ See Securities Exchange Act Release Nos. 79960 (February 3, 
2017), 82 FR 10159 (``BX Notice''); 79953 (February 3, 2017), 82 FR 
9819 (``C2 Notice''); 79967 (February 3, 2017), 82 FR 10105 (``ISE 
Notice''); 79965 (February 3, 2017), 82 FR 10147 (``ISE Gemini 
Notice''); 79963 (February 3, 2017), 82 FR 10130 (``ISE Mercury 
Notice'').
    \14\ These amendments modified Section 2 of the Form 19b-4s 
submitted by BX, ISE, ISE Gemini, ISE Mercury, NASDAQ, and Phlx to 
state that on February 24, 2017, the exchanges obtained the 
necessary approval from their Board of Directors for the proposed 
rule changes. These amendments do not affect the substance of the 
filings and therefore are not subject to notice and comment.
    \15\ See letters from William H. Herbert, Managing Director, 
Financial Information Forum, dated March 1, 2017 (``FIF Letter''); 
Bonnie Wachtel, Wachtel & Co Inc., dated March 2, 2017 (``Wachtel 
Letter''); and Manisha Kimmel, Chief Regulatory Officer, Wealth 
Management, Thomson Reuters, dated March 2, 2017 (``Thomson Reuters 
Letter''). These comment letters were submitted in response in to 
SR-FINRA-2017-003, however the comments therein are applicable to 
all the CAT Compliance Rules, and therefore are discussed in this 
Order.
    \16\ See infra Section II.
    \17\ See Letter from Participants to Brent J. Fields, Secretary, 
Commission, dated March 15, 2017 (``Participants' Response 
Letter'').
    \18\ The Commission notes that for purposes of this Order, 
unless otherwise specified, capitalized terms used in this Order are 
defined as set forth in the Notices or in the CAT NMS Plan.
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II. Background

    On September 30, 2014, Bats BYX, Bats BZX, Bats EDGA, Bats EDGX, 
BOX, C2, CBOE, CHX, Financial Industry Regulatory Authority, Inc. 
(``FINRA''), ISE, IEX, ISE Gemini, ISE Mercury, MIAX, MIAX PEARL, BX, 
PHLX, NASDAQ, NYSE, NYSE MKT, NYSE Arca, and NYSE National 
(collectively, the ``Participants'') filed with the Commission, 
pursuant to Section 11A of the Exchange Act \19\ and Rule 608 of 
Regulation NMS thereunder,\20\ the CAT NMS Plan.\21\ The Participants 
filed the Plan to comply with Rule 613 of Regulation NMS under the 
Exchange Act.\22\ The Plan was published for comment in the Federal 
Register on May 17, 2016,\23\ and approved by the Commission, as 
modified, on November 15, 2016.\24\
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    \19\ 15 U.S.C. 78k-1.
    \20\ 17 CFR 242.608.
    \21\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015. The 
CAT NMS Plan was approved by the Commission, with limited changes 
made by the Commission, on November 15, 2016. See infra note 24.
    \22\ 17 CFR 242.613.
    \23\ Securities Exchange Act Release No. 77724 (April 27, 2016), 
81 FR 30614 (May 17, 2016).
    \24\ Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\25\ The Exchanges' proposed rules set forth Compliance Rules 
implementing provisions of the CAT NMS Plan that are applicable to 
their members.\26\
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    \25\ See 17 CFR 242.613(g)(1).
    \26\ The Commission notes that the CAT NMS Plan defines an 
``Industry Member'' as a member of a national securities exchange or 
a member of a national securities association. CAT NMS Plan, supra 
note 21, at Section 1.1. Because the Exchanges' proposed CAT 
Compliance Rules implement the CAT NMS Plan, the term ``Industry 
Member'' is used throughout these Rules, and the term ``Industry 
Member'' means a member of the Exchange. The Commission notes that 
the individual Exchanges use different terms in their rulebooks to 
refer to an ``Industry Member.''
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III. Description of the Proposed Rule Changes

    The proposed CAT Compliance Rules include twelve rules covering the 
following areas: (1) Definitions; (2) clock synchronization; (3) 
Industry Member Data reporting; (4) Customer information reporting; (5) 
Industry Member information reporting; (6) time stamps; (7) clock 
synchronization rule violations; (8) connectivity and data 
transmission; (9) development and testing; (10) recordkeeping; (11) 
timely, accurate and complete data; and (12) compliance dates.

A. Definitions

    The proposed CAT Compliance Rules set forth the definitions for the 
terms used in each Exchange's proposed CAT Compliance Rule.\27\ Each of 
the defined terms in the proposed CAT Compliance Rules is discussed 
below.
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    \27\ See proposed Bats BYX Rule 4.5; Bats BZX Rule 4.5; Bats 
EDGA Rule 4.5; Bats EDGX Rule 4.5; BX Rule 900 and Chapter IX, 
Section 8, paragraph (a); BOX Rule 16010; C2 Chapter 6, Section F; 
CBOE Rule 6.85; CHX Article 23, Rule 1; IEX Rule 11.610; ISE Rule 
900; ISE Gemini Rule 900; ISE Mercury Rule 900; MIAX Rule 1701; MIAX 
PEARL Chapter XVII; Nasdaq Rules 6810 and Chapter IX, Section 8, 
paragraph (a); NYSE Rule 6810; NYSE Arca Equities Rule 6.6810; NYSE 
Arca Options Rule 11.6810; NYSE MKT Rule 6810; NYSE National Rule 
14.1; Phlx Rule 910A.
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1. Account Effective Date
(a) Customer Information Approach
    Rule 613 of Regulation NMS requires that certain data elements be 
reported to the CAT to enable regulators to identify Customers 
associated with orders. The Exchanges note that Rule 613(c)(7)(i)(A) 
requires an Industry Member to report the ``Customer-ID'' for each 
Customer for the original receipt or origination of an order,\28\ and 
that ``Customer-ID'' is defined in Rule 613(j)(5) to mean ``with 
respect to a customer, a code that uniquely and consistently identifies 
such customer for purposes of providing data to the Central 
Repository.'' \29\ Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer.\30\ The Exchanges note that the 
Commission granted the Participants exemptive relief to permit the use 
of an alternative approach to the requirement that an Industry Member 
report a Customer-ID for every Customer upon original receipt or 
origination.\31\ The alternative approach is called the ``Customer 
Information Approach.''
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    \28\ 17 CFR 242.613(c)(7)(i)(A).
    \29\ 17 CFR 242.613(j)(5).
    \30\ 17 CFR 242.613(c)(8).
    \31\ See Securities Exchange Act Release No. 77265 (March 1, 
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also 
Letter from Participants to Brent J. Fields, Secretary, Commission, 
dated January 30, 2015 (``Exemptive Request Letter'').
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    The Exchanges state that under the Customer Information Approach, 
the CAT NMS Plan requires each Industry Member to assign a unique Firm 
Designated ID to each Customer, and that for the Firm Designated ID, 
Industry Members are permitted to use an account number or any other 
identifier defined by the firm, provided each identifier is unique 
across the firm for each business date (i.e., a single firm may not 
have multiple separate customers with the same identifier on

[[Page 14528]]

any given date).\32\ Prior to their commencement of reporting to the 
CAT, Industry Members must submit an initial set of Customer 
information to the Central Repository, including the Firm Designated 
ID, Customer Identifying Information and Customer Account Information 
(which may include, as applicable, the Customer's name, address, date 
of birth, individual tax payer identifier number (``ITIN'')/social 
security number (``SSN''), individual's role in the account (e.g., 
primary holder, joint holder, guardian, trustee, person with power of 
attorney) and Legal Entity Identifier (``LEI'') and/or Large Trader ID 
(``LTID'')). This process is referred to as the ``customer definition 
process.''
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    \32\ See infra Section III.A.17 for a discussion of the 
application of the term ``Firm Designated ID.''
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    The Exchanges note that in accordance with the Customer Information 
Approach, Industry Members are required to report only the Firm 
Designated ID for each new order submitted to the Central Repository, 
rather than the ``Customer-ID'' with individual order events. Within 
the Central Repository, each Customer will be uniquely identified by 
identifiers or a combination of identifiers such as ITIN/SSN, date of 
birth, and as applicable, LEI and LTID. The Plan Processor will be 
required to use these unique identifiers to map orders to specific 
Customers across all Industry Members and Participants. To ensure 
information identifying a Customer is up to date, Industry Members will 
be required to submit to the Central Repository daily and periodic 
updates for reactivated accounts, newly established accounts, and 
revised Firm Designated IDs or associated reportable Customer 
information.
(b) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members will be required to report ``Customer Account Information'' to 
the Central Repository. ``Customer Account Information'' is defined in 
Rule 613(j)(4) to ``include, but not be limited to, account number, 
account type, customer type, date account opened, and large trader 
identifier (if applicable).'' \33\ Therefore, when reporting Customer 
Account Information, an Industry Member is required to report the date 
an account was opened. The Exchanges note that the Participants 
requested and received from the Commission an exemption to allow an 
``Account Effective Date'' to be reported in lieu of an account open 
date in certain limited circumstances.\34\ The definition of ``Account 
Effective Date'' as set forth in the proposed CAT Compliance Rules 
describes those limited circumstances in which an Industry Member may 
report an ``Account Effective Date'' rather than the account open date. 
The Exchanges state that the proposed definition is the same as the 
definition of ``Account Effective Date'' set forth in Section 1.1 of 
the CAT NMS Plan, provided, however, that specific dates have replaced 
the descriptions of those dates set forth in Section 1.1 of the Plan.
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    \33\ 17 CFR 242.613(j)(4).
    \34\ On September 2, 2015, the Participants filed a supplement 
to the Exemptive Request Letter. See Letter from the Participants to 
Brent J. Fields, Secretary, Commission, dated September 2, 2015. 
This supplement to the Exemptive Request Letter further addressed 
the use of an ``effective date'' in lieu of a ``date account 
opened.''
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    Specifically, the proposed CAT Compliance Rules define ``Account 
Effective Date'' to mean, with regard to those circumstances in which 
an Industry Member has established a trading relationship with an 
institution but has not established an account with that institution: 
(1) When the trading relationship was established prior to November 15, 
2018 for Industry Members other than Small Industry Members, or prior 
to November 15, 2019 for Small Industry Members, either (a) the date 
the relationship identifier was established within the Industry Member; 
(b) the date when trading began (i.e., the date the first order was 
received) using the relevant relationship identifier; or (c) if both 
dates are available, the earlier date will be used to the extent that 
the dates differ; or (2) when the trading relationship was established 
on or after November 15, 2018 for Industry Members other than Small 
Industry Members, or on or after November 15, 2019 for Small Industry 
Members, the date the Industry Member established the relationship 
identifier, which would be no later than the date the first order was 
received.\35\
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    \35\ See proposed Bats BYX Rule 4.5(a)(1); Bats BZX Rule 
4.5(a)(1); Bats EDGA Rule 4.5(a)(1); Bats EDGX Rule 4.5(a)(1); BX 
Rules 6810(a)(1) and Chapter IX, Section 8, paragraph (a)(i)(1); BOX 
Rule 16010(a)(1); C2 Chapter 6, Section F ; CBOE Rule 6.85(a)(i); 
CHX Article 23, Rule 1(a)(1); IEX Rule 11.610(a)(1); ISE Rule 
900(a)(1); ISE Gemini Rule 900(a)(1); ISE Mercury 900(a)(1); MIAX 
Rule 1701(a)(1); MIAX PEARL Chapter XVII; NASDAQ Rule 6810(a)(1) and 
Chapter IX Section 8, paragraph (a)(i)(1); NYSE Rule 6810(a)(1); 
NYSE Arca Equities Rule 6.6810(a)(1); NYSE Arca Options Rule 
11.6810(a)(1); NYSE MKT Rule 6810(a)(1); NYSE National Rule 
14.1(a)(1); Phlx Rule 910A(a)(1).
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    The proposed CAT Compliance Rules state that an ``Account Effective 
Date'' means, where an Industry Member changes back office providers or 
clearing firms prior to November 15, 2018 for Industry Members other 
than Small Industry Members, or prior to November 15, 2019 for Small 
Industry Members, the date an account was established at the relevant 
Industry Member, either directly or via transfer.\36\
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    \36\ See proposed Bats BYX Rule 4.5(a)(2); Bats BZX Rule 
4.5(a)(2); Bats EDGA Rule 4.5(a)(2); Bats EDGX Rule 4.5(a)(2); BX 
Rules 6810(a)(2) and Chapter IX, Section 8, paragraph (a)(i)(2); BOX 
Rule 16010(a)(2); C2 Chapter 6, Section F ; CBOE Rule 6.85(a)(ii); 
CHX Article 23, Rule 1(a)(2); IEX Rule 11.610(a)(2); ISE Rule 
900(a)(1); ISE Gemini Rule 900(a)(1); ISE Mercury 900(a)(1); MIAX 
Rule 1701(a)(2); MIAX PEARL Chapter XVII; NASDAQ Rules 6810(a)(2) 
and Chapter IX, Section 8, paragraph (a)(i)(2); NYSE Rule 
6810(a)(2); NYSE Arca Equities Rule 6.6810(a)(2); NYSE Arca Options 
Rule 11.6810(a)(2); NYSE MKT Rule 6810(a)(2); NYSE National Rule 
14.1(a)(2); Phlx Rule 910(a)(2).
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    The proposed CAT Compliance Rules state that an ``Account Effective 
Date'' means, where an Industry Member acquires another Industry Member 
prior to November 15, 2018 for Industry Members other than Small 
Industry Members, or prior to November 15, 2019 for Small Industry 
Members, the date an account was established at the relevant Industry 
Member, either directly or via transfer.\37\
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    \37\ See proposed Bats BYX Rule 4.5(a)(3); Bats BZX Rule 
4.5(a)(3); Bats EDGA Rule 4.5(a)(3); Bats EDGX Rule 4.5(a)(3); BX 
Rules 6810(a)(3) and Chapter IX, Section 8, paragraph (a)(i)(3); BOX 
Rule 16010(a)(3); C2 Chapter 6, Section F; CBOE Rule 6.85(a)(iii); 
CHX Article 23, Rule 1(a)(3); IEX Rule 11.610(a)(3); ISE Rule 
900(a)(3); ISE Gemini Rule 900(a)(3); ISE Mercury 900(a)(3);MIAX 
Rule 1701(a)(3); MIAX PEARL Chapter XVII; NASDAQ Rule 6810(a)(3) and 
Chapter IX Section 8, paragraph (a)(i)(3); NYSE Rule 6810(a)(3); 
NYSE Arca Equities Rule 6.6810(a)(3); NYSE Arca Options Rule 
11.6810(a)(3); NYSE MKT Rule 6810(a)(3); NYSE National Rule 
14.1(a)(3); Phlx Rule 910A(a)(3).
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    The proposed CAT Compliance Rules state that ``Account Effective 
Date'' means, where there are multiple dates associated with an account 
established prior to November 15, 2018 for Industry Members other than 
Small Industry Members, or prior to November 15, 2019 for Small 
Industry Members, the earliest available date.\38\
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    \38\ See proposed Bats BYX Rule 4.5(a)(4); Bats BZX Rule 
4.5(a)(4); Bats EDGA Rule 4.5(a)(4); Bats EDGX Rule 4.5(a)(4); BX 
Rules 6810(a)(4) and Chapter IX, Section 8, paragraph (a)(i)(4); BOX 
Rule 16010(a)(4); C2 Chapter 6, Section F; CBOE Rule 6.85(a)(iv); 
CHX Article 23, Rule 1(a)(4); IEX Rule 11.610(a)(4); ISE Rule 
900(a)(4); ISE Gemini Rule 900(a)(4); ISE Mercury 900(a)(4); MIAX 
Rule 1701(a)(4); MIAX PEARL Chapter XVII; NASDAQ Rule 6810(a)(4) and 
Chapter IX Section 8, paragraph (a)(i)(4); NYSE Rule 6810(a)(4); 
NYSE Arca Equities Rule 6.6810(a)(4); NYSE Arca Options Rule 
11.6810(a)(4); NYSE MKT Rule 6810(a)(4); NYSE National Rule 
14.1(a)(4); Phlx Rule 910A(a)(4).
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    The proposed CAT Compliance Rules state that an ``Account Effective 
Date'' means, with regard to Industry Member proprietary accounts 
established prior to November 15, 2018 for Industry Members other than 
Small Industry Members, or prior to November 15, 2019 for Small 
Industry Members: (1) The date established for the account in the 
Industry Member or in a system of the

[[Page 14529]]

Industry Member or (2) the date when proprietary trading began in the 
account (i.e., the date on which the first orders were submitted from 
the account).\39\
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    \39\ See proposed Bats BYX Rule 4.5(a)(5); Bats BZX Rule 
4.5(a)(5); Bats EDGA Rule 4.5(a)(5); Bats EDGX Rule 4.5(a)(5); BX 
Rules 6810(a)(5) and Chapter IX, Section 8, paragraph (a)(i)(5); BOX 
Rule 16010(a)(5); C2 Chapter 6, Section F; CBOE Rule 6.85(a)(v); CHX 
Article 23, Rule 1(a)(5); IEX Rule 11.610(a)(5); ISE Rule 900(a)(5); 
ISE Gemini Rule 900(a)(5); ISE Mercury 900(a)(5); MIAX Rule 
1701(a)(5); MIAX PEARL Chapter XVII; NASDAQ Rule 6810(a)(5) and 
Chapter IX Section 8, paragraph (a)(i)(5); NYSE Rule 6810(a)(5); 
NYSE Arca Equities Rule 6.6810(a)(5); NYSE Arca Options Rule 
11.6810(a)(5); NYSE MKT Rule 6810(a)(5); NYSE National Rule 
14.1(a)(5); Phlx Rule 910A(a)(5).
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    In addition, with regard to the provisions defining ``Account 
Effective Date'' as: (1) Where an Industry Member changes back office 
providers or clearing firms prior to November 15, 2018 for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019 for Small Industry Members, the date an account was established at 
the relevant Industry Member, either directly or via transfer; \40\ (2) 
where an Industry Member acquires another Industry Member prior to 
November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer; \41\ (3) where there are multiple dates 
associated with an account established prior to November 15, 2018 for 
Industry Members other than Small Industry Members, or prior to 
November 15, 2019 for Small Industry Members, the earliest available 
date; \42\ and (4) with regard to Industry Member proprietary accounts 
established prior to November 15, 2018 for Industry Members other than 
Small Industry Members, or prior to November 15, 2019 for Small 
Industry Members: (i) The date established for the account in the 
Industry Member or in a system of the Industry Member or (ii) the date 
when proprietary trading began in the account (i.e., the date on which 
the first orders were submitted from the account); \43\ the proposed 
CAT Compliance Rules state that the Account Effective Date will be no 
later than the date trading occurs at the Industry Member or in the 
Industry Member's system.\44\
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    \40\ See supra note 36.
    \41\ See supra note 37.
    \42\ See supra note 38.
    \43\ See supra note 39.
    \44\ Id.
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2. Active Accounts
    Under the Customer Information Approach, Industry Members are 
required to report Customer Identifying Information and Customer 
Account Information for only those accounts that are active. 
Accordingly, the proposed CAT Compliance Rules define ``Active 
Accounts'' as an account that has had activity in Eligible Securities 
within the last six months.\45\ The Exchanges state that this is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan.
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    \45\ See proposed Bats BYX Rule 4.5(b); Bats BZX Rule 4.5(b); 
Bats EDGA Rule 4.5(b); Bats EDGX Rule 4.5(b); BX Rules 6810(b) and 
Chapter IX, Section 8, paragraph (a)(ii); BOX Rule 16010(b); C2 
Chapter 6, Section F; CBOE Rule 6.85(b); CHX Article 23, Rule 1(b); 
IEX Rule 11.610(b); ISE Rule 900(b), ISE Gemini Rule 900(b); ISE 
Mercury 900(b); MIAX Rule 1701(b); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(b) and Chapter IX Section 8, paragraph (a)(ii); NYSE Rule 
6810(b); NYSE Arca Equities Rule 6.6810(b); NYSE Arca Options Rule 
11.6810(b); NYSE MKT Rule 6810(b); NYSE National Rule 14.1(b); and 
Phlx Rule 910A(b).
---------------------------------------------------------------------------

3. Allocation Report
(a) Allocation Report Approach
    Rule 613(c)(7)(vi)(A) of Regulation NMS requires each Industry 
Member to record and report to the Central Repository ``the account 
number for any subaccounts to which the execution is allocated (in 
whole or in part).'' \46\ The Exchanges note that the Participants 
requested and received from the Commission exemptive relief from Rule 
613 for an alternative to this approach (``Allocation Report 
Approach'').\47\ The Allocation Report Approach permits Industry 
Members to record and report to the Central Repository an Allocation 
Report that includes, among other things, the Firm Designated ID for 
any account(s) to which executed shares are allocated when an execution 
is allocated in whole or part in lieu of requiring the reporting of the 
account number for any subaccount to which an execution is allocated, 
as is required by Rule 613.\48\ Under Rule 613, regulators would be 
able to link the subaccount to which an allocation was made to a 
specific order. In contrast, under the Allocation Report Approach, 
regulators would only be able to link an allocation to the account to 
which it was made, and not to a specific order.
---------------------------------------------------------------------------

    \46\ 17 CFR 242.613(c)(7)(vi)(A).
    \47\ On April 3, 2015, the Participants filed a supplement 
related to their Exemptive Request Letter. See Letter from Robert 
Colby, FINRA, on behalf of the Participants, to Brent J. Fields, 
Secretary, Commission, dated April 3, 2015. This supplement provided 
examples of how the proposed relief related to allocations would 
operate.
    \48\ See Exemptive Request Letter, supra note 31, at 26-27; 
Exemption Order, supra note 31.
---------------------------------------------------------------------------

(b) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, the 
proposed CAT Compliance Rules define an ``Allocation Report.'' 
Specifically, an ``Allocation Report'' means a report made to the 
Central Repository by an Industry Member that identifies the Firm 
Designated ID for any account(s), including subaccount(s), to which 
executed shares are allocated and provides the security that has been 
allocated, the identifier of the firm reporting the allocation, the 
price per share of shares allocated, the side of shares allocated, the 
number of shares allocated to each account, and the time of the 
allocation; provided, for the avoidance of doubt, any such Allocation 
Report shall not be required to be linked to particular orders or 
executions.\49\ The Exchanges state that this is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \49\ See proposed Bats BYX Rule 4.5(c); Bats BZX Rule 4.5(c); 
Bats EDGA Rule 4.5(c); Bats EDGX Rule 4.5(c); BX Rules 6810(c) and 
Chapter IX, Section 8, paragraph (a)(iii); BOX Rule 16010(c); C2 
Chapter 6, Section F; CBOE Rule 6.85(c); CHX Article 23, Rule 1(c); 
IEX Rule 11.610(c); ISE Rule 900(c); ISE Gemini Rule 900(c); ISE 
Mercury 900(c); MIAX Rule 1701(c); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(c) and Chapter IX Section 8, paragraph (a)(iii); NYSE 
Rule 6810(c); NYSE Arca Equities Rule 6.6810(c); NYSE Arca Options 
Rule 11.6810(c); NYSE MKT Rule 6810(c); NYSE National Rule 14.1(c); 
Phlx Rule 910A(c).
---------------------------------------------------------------------------

4. Business Clock
    To create the required audit trail, Industry Members are required 
to record the date and time of various Reportable Events to the Central 
Repository. Industry Members will use ``Business Clocks'' to record 
such dates and times. Accordingly, the proposed CAT Compliance Rules 
define the term ``Business Clock'' as a clock used to record the date 
and time of any Reportable Event required to be reported under each 
Exchange's proposed CAT Compliance Rule.\50\ The Exchanges state that 
this is the same definition as set forth in Section 1.1 of the CAT NMS 
Plan, except a reference to Rule 613 at the end of the definition in 
Section 1.1 of the Plan is replaced with a reference to each Exchange's 
proposed CAT Compliance Rule. The Exchanges state that this change is 
intended to recognize that the Industry Members' obligations with 
regard to the CAT are set forth in

[[Page 14530]]

each Exchange's proposed CAT Compliance Rule.
---------------------------------------------------------------------------

    \50\ See proposed Bats BYX Rule 4.5(d); Bats BZX Rule 4.5(d); 
Bats EDGA Rule 4.5(d); Bats EDGX Rule 4.5(d); BX Rules 6810(d) and 
Chapter IX, Section 8, paragraph (a)(iv); BOX Rule 16010(d); C2 
Chapter 6, Section F; CBOE Rule 6.85(d); CHX Article 23, Rule 1(d); 
IEX Rule 11.610(d); ISE Rule 900(d); ISE Gemini Rule 900(d); ISE 
Mercury 900(d); MIAX Rule 1701(d); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(d) and Chapter IX Section 8, paragraph (a)(iv); NYSE Rule 
6810(d); NYSE Arca Equities Rule 6.6810(d); NYSE Arca Options Rule 
11.6810(d); NYSE MKT Rule 6810(d); NYSE National Rule 14.1(d); and 
Phlx Rule 910A(d).
---------------------------------------------------------------------------

5. CAT
    The proposed CAT Compliance Rules define the term ``CAT'' to mean 
the consolidated audit trail contemplated by Rule 613.\51\ The 
Exchanges state that this is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \51\ See proposed Bats BYX Rule 4.5(e); Bats BZX Rule 4.5(e); 
Bats EDGA Rule 4.5(e); Bats EDGX Rule 4.5(e); BX Rules 6810(e) and 
Chapter IX, Section 8, paragraph (a)(v); BOX Rule 16010(e); C2 
Chapter 6, Section F; CBOE Rule 6.85(e); CHX Article 23, Rule 1(e); 
IEX Rule 11.610(e); ISE Rule 900(e); ISE Gemini Rule 900(e); ISE 
Mercury 900(e); MIAX Rule 1701(e); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(e) and Chapter IX Section 8, paragraph (a)(iv); NYSE Rule 
6810(e); NYSE Arca Equities Rule 6.6810(e); NYSE Arca Options Rule 
11.6810(e); NYSE MKT Rule 6810(e); NYSE National Rule 14.1(e); and 
Phlx Rule 910A(e).
---------------------------------------------------------------------------

6. CAT NMS Plan
    The proposed CAT Compliance Rules define the term ``CAT NMS Plan'' 
to mean the National Market System Plan Governing the Consolidated 
Audit Trail, as amended from time to time.\52\
---------------------------------------------------------------------------

    \52\ See proposed Bats BYX Rule 4.5(f); Bats BZX Rule 4.5(f); 
Bats EDGA Rule 4.5(f); Bats EDGX Rule 4.5(f); BX Rules 6810(f) and 
Chapter IX, Section 8, paragraph (a)(vi); BOX Rule 16010(f); C2 
Chapter 6, Section F; CBOE Rule 6.85(f); CHX Article 23, Rule 1(f); 
IEX Rule 11.610(f); ISE Rule 900(f), ISE Gemini Rule 900(f); ISE 
Mercury 900(f); MIAX Rule 1701(f); MIAX PEARL Chapter XVII; NYSE 
Rule 6810(f); NYSE Arca Equities Rule 6.6810(f); NYSE Arca Options 
Rule 11.6810(f); NYSE MKT Rule 6810(f); NYSE National Rule 14.1(f); 
and Phlx Rule 910A(f).
---------------------------------------------------------------------------

7. CAT-Order-ID
(a) Daisy Chain Approach
    The Exchanges state that under the CAT NMS Plan, a ``daisy chain 
approach'' would be used to link and reconstruct the complete lifecycle 
of each Reportable Event in CAT. According to this approach, Industry 
Members would assign their own identifiers to each order event. Within 
the Central Repository, the Plan Processor would replace the identifier 
provided by the Industry Member for each Reportable Event with a single 
identifier, called the CAT Order-ID, for all order events pertaining to 
the same order. This CAT Order-ID would be used to link the Reportable 
Events related to the same order.
(b) Definition of CAT-Order-ID
    To implement a daisy chain approach, the Exchanges propose to 
define in the proposed CAT Compliance Rules the term ``CAT-Order-ID'' 
to mean a unique order identifier or series of unique order identifiers 
that allows the Central Repository to efficiently and accurately link 
all Reportable Events for an order, and all orders that result from the 
aggregation or disaggregation of such order.\53\ The Exchanges state 
that this is the same definition as set forth in Rule 613(j)(1), and 
Section 1.1 of the CAT NMS Plan defines ``CAT-Order-ID'' by reference 
to Rule 613(j)(1).\54\
---------------------------------------------------------------------------

    \53\ See proposed Bats BYX Rule 4.5(g); Bats BZX Rule 4.5(g); 
Bats EDGA Rule 4.5(g); Bats EDGX Rule 4.5(g); BX Rules 6810(g) and 
Chapter IX, Section 8, paragraph (a)(vii); BOX Rule 16010(g); C2 
Chapter 6, Section F; CBOE Rule 6.85(g); CHX Article 23, Rule 1(g); 
IEX Rule 11.610(g); ISE Rule 900(g); ISE Gemini Rule 900(g); ISE 
Mercury 900(g); MIAX Rule 1701(g); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(g) and Chapter IX Section 8, paragraph (a)(vii); NYSE 
Rule 6810(g); NYSE Arca Equities Rule 6.6810(g); NYSE Arca Options 
Rule 11.6810(g); NYSE MKT Rule 6810(g); NYSE National Rule 14.1(g); 
and Phlx Rule 910A(g).
    \54\ See 17 CFR 242.613(j)(1).
---------------------------------------------------------------------------

8. CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party, 
such as a vendor, to report the required data to the Central Repository 
on behalf of the Industry Member.\55\ The Exchanges state that such a 
third party, referred to in the proposed CAT Compliance Rules as a 
``CAT Reporting Agent,'' would be one type of a Data Submitter,\56\ as 
that term is used in the CAT NMS Plan. Therefore, the proposed CAT 
Compliance Rules define the term ``CAT Reporting Agent'' \57\ to mean a 
Data Submitter that is a third party that enters into an agreement with 
an Industry Member pursuant to which the CAT Reporting Agent agrees to 
fulfill such Industry Member's obligations under each Exchange's 
proposed CAT Compliance Rule.\58\
---------------------------------------------------------------------------

    \55\ See CAT NMS Plan, supra note 21, at Appendix C, Section 
A.1(a).
    \56\ See infra Section III.A.14 defining ``Data Submitter.''
    \57\ The Exchanges also note that this definition is based on 
FINRA's definition of a ``Reporting Agent'' as set forth in FINRA's 
Order Audit Trail System (``OATS'') rules. Specifically, FINRA Rule 
7410(n) defines a ``Reporting Agent'' as a third party that enters 
into any agreement with a member pursuant to which the Reporting 
Agent agrees to fulfill such FINRA member's reporting obligations 
under FINRA Rule 7450. The Exchanges represent that the Reporting 
Agent for OATS fulfills a similar role to the CAT Reporting Agent.
    \58\ See proposed Bats BYX Rule 4.5(h); Bats BZX Rule 4.5(h); 
Bats EDGA Rule 4.5(h); Bats EDGX Rule 4.5(h); BX Rules 6810(h) and 
Chapter IX, Section 8, paragraph (a)(viii); BOX Rule 16010(h); C2 
Chapter 6, Section F; CBOE Rule 6.85(h); CHX Article 23, Rule 1(h); 
IEX Rule 11.610(h); ISE Rule 900(h); ISE Gemini Rule 900(h); ISE 
Mercury 900(h); MIAX Rule 1701(h); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(h) and Chapter IX, Section 8, paragraph (a)(viii); NYSE 
Rule 6810(h); NYSE Arca Equities Rule 6.6810(h); NYSE Arca Options 
Rule 11.6810(h); NYSE MKT Rule 6810(h); NYSE National Rule 14.1(h); 
and Phlx Rule 910A(h).
---------------------------------------------------------------------------

9. Central Repository
    The proposed CAT Compliance Rules define the term ``Central 
Repository'' to mean the repository responsible for the receipt, 
consolidation, and retention of all information reported to the CAT 
pursuant to Rule 613 of Regulation NMS and the CAT NMS Plan.\59\ The 
Exchanges state that this is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan, except they use the phrase ``CAT NMS 
Plan'' in place of the phrase ``this Agreement.''
---------------------------------------------------------------------------

    \59\ See proposed Bats BYX Rule 4.5(i); Bats BZX Rule 4.5(i); 
Bats EDGA Rule 4.5(i); Bats EDGX Rule 4.5(i); BX Rules 6810(i) and 
Chapter IX, Section 8, paragraph (a)(ix); BOX Rule 16010(i); C2 
Chapter 6, Section F; CBOE Rule 6.85(i); CHX Article 23, Rule 1(i); 
IEX Rule 11.610(i); ISE Rule 900(i); ISE Gemini Rule 900(i); ISE 
Mercury 900(i); MIAX Rule 1701(i); MIAX PEARL Chapter XVII; NYSE 
Rule 6810(i); NYSE Arca Equities Rule 6.6810(i); NYSE Arca Options 
Rule 11.6810(i); NYSE MKT Rule 6810(i); NYSE National Rule 14.1(i) ; 
and Phlx Rule 910A(i).
---------------------------------------------------------------------------

10. Compliance Threshold
    The proposed CAT Compliance Rules state that each Industry Member 
shall be required to meet a separate compliance threshold which will be 
an Industry Member-specific rate that may be used as the basis for 
further review or investigation into the Industry Member's performance 
with regard to the CAT.\60\ The proposed CAT Compliance Rules define 
the Industry Member-specific rate noted as the term ``Compliance 
Threshold.'' \61\ The Exchanges state that this definition has the same 
substantive meaning as the definition set forth in Section 1.1 of the 
CAT NMS Plan.
---------------------------------------------------------------------------

    \60\ See proposed Bats BYX Rule 4.15(d); Bats BZX Rule 4.15(d); 
Bats EDGA Rule 4.15(d); Bats EDGX Rule 4.15(d); BX Rules 6893(d) and 
Chapter IX, Section 8, subparagraph (k)(iv); BOX Rule 16093(d); C2 
Chapter 6, Section F; CBOE Rule 6.95(d); CHX Article 23, Rule 11(d); 
IEX Rule 11.693(d); MIAX Rule 1711(d); MIAX PEARL Chapter XVII; ISE 
Rule 910(d); ISE Gemini Rule 910(d); ISE Mercury Rule 910(d); NASDAQ 
Rules 6893(d) and Chapter IX, Section 8, subparagraph (k)(iv); NYSE 
Rule 6893(d); NYSE Arca Equities Rule 6.6893(d); NYSE Arca Options 
Rule 11.6893(d); NYSE MKT Rule 6893(d); NYSE National Rule 14.11(d); 
and Phlx Rule 993A(d).
    \61\ See proposed Bats BYX Rule 4.5(j); Bats BZX Rule 4.5(j); 
Bats EDGA Rule 4.5(j); Bats EDGX Rule 4.5(j); BX Rules 6810(j) and 
Chapter IX, Section 8, paragraph (a)(x); BOX Rule 16010(j); C2 
Chapter 6, Section F; CBOE Rule 6.85(j); CHX Article 23, Rule 1(j); 
IEX Rule 11.610(j); ISE Rule 900(j), ISE Gemini Rule 900(j); ISE 
Mercury 900(j); MIAX Rule 1701(j); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(j) and Chapter IX, Section 8, paragraph (a)(x); NYSE Rule 
6810(j); NYSE Arca Equities Rule 6.6810(j); NYSE Arca Options Rule 
11.6810(j); NYSE MKT Rule 6810(j); NYSE National Rule 14.1(j); and 
Phlx Rule 910A(j).
---------------------------------------------------------------------------

11. Customer
    Industry Members are required to submit to the Central Repository 
certain information related to their Customers, including Customer 
Identifying Information and Customer Account Information, as well as 
data related to their Customer's Reportable Events. Accordingly, the 
proposed CAT Compliance Rules define the term

[[Page 14531]]

``Customer.'' Specifically, the term ``Customer'' is defined to mean: 
(1) The account holder(s) of the account at an Industry Member 
originating the order; and (2) any person from whom the Industry Member 
is authorized to accept trading instructions for such account, if 
different from the account holder(s).\62\ The Exchanges state that this 
is the same definition as set forth in Rule 613(j)(3), except the 
Exchanges propose to replace the references to a registered broker-
dealer or broker-dealer with a reference to an Industry Member for 
consistency of terms used in each Exchange's proposed CAT Compliance 
Rule.\63\ The Exchanges also note that Section 1.1 of the CAT NMS Plan 
defines ``Customer'' by reference to Rule 613(j)(3).
---------------------------------------------------------------------------

    \62\ See proposed Bats BYX Rule 4.5(k); Bats BZX Rule 4.5(k); 
Bats EDGA Rule 4.5(k); Bats EDGX Rule 4.5(k); BX Rules 6810(k) and 
Chapter IX, Section 8, paragraph (a)(xi); BOX Rule 16010(k); C2 
Chapter 6, Section F; CBOE Rule 6.85(k); CHX Article 23, Rule 1(k); 
IEX Rule 11.610(k); ISE Rule 900(k); ISE Gemini Rule 900(k); ISE 
Mercury 900(k); MIAX Rule 1701(k); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(k) and Chapter IX, Section 8, paragraph (a)(xi); NYSE 
Rule 6810(k); NYSE Arca Equities Rule 6.6810(k); NYSE Arca Options 
Rule 11.6810(k); NYSE MKT Rule 6810(k); NYSE National Rule 14.1(k); 
and Phlx Rule 910A(k).
    \63\ 17 CFR 242.613(j)(3).
---------------------------------------------------------------------------

12. Customer Account Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Account Information to 
the Central Repository as part of the customer definition process. 
Accordingly, the Exchanges propose to define the term ``Customer 
Account Information'' to clarify what customer information would need 
to be reported to the Central Repository.
    The proposed CAT Compliance Rules define the term ``Customer 
Account Information'' to include, in part, account number, account 
type, customer type, date account opened, and large trader identifier 
(if applicable).\64\ The proposed CAT Compliance Rules, however, 
provide an alternative definition of ``Customer Account Information'' 
in two limited circumstances. First, in those circumstances in which an 
Industry Member has established a trading relationship with an 
institution but has not established an account with that institution, 
the Industry Member will: (1) Provide the Account Effective Date in 
lieu of the ``date account opened''; (2) provide the relationship 
identifier in lieu of the ``account number''; and (3) identify the 
``account type'' as a ``relationship.'' \65\ Second, in those 
circumstances in which the relevant account was established prior to 
November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members, and 
no ``date account opened'' is available for the account, the Industry 
Member will provide the Account Effective Date in the following 
circumstances: (1) Where an Industry Member changes back office 
providers or clearing firms and the date account opened is changed to 
the date the account was opened on the new back office/clearing firm 
system; (2) where an Industry Member acquires another Industry Member 
and the date account opened is changed to the date the account was 
opened on the post-merger back office/clearing firm system; (3) where 
there are multiple dates associated with an account in an Industry 
Member's system, and the parameters of each date are determined by the 
individual Industry Member; and (4) where the relevant account is an 
Industry Member proprietary account.\66\ The proposed definition is the 
same as the definition of ``Customer Account Information'' set forth in 
Section 1.1 of the CAT NMS Plan; provided, however, that specific dates 
have replaced the descriptions of those dates set forth in Section 1.1 
of the Plan.
---------------------------------------------------------------------------

    \64\ See proposed Bats BYX Rule 4.5(l); Bats BZX Rule 4.5(l); 
Bats EDGA Rule 4.5(l); Bats EDGX Rule 4.5(l); BX Rules 6810(l) and 
Chapter IX, Section 8, paragraph (a)(xii); BOX Rule 16010(l); C2 
Chapter 6, Section F; CBOE Rule 6.85(l); CHX Article 23, Rule 1(l); 
ISE Rule 900(l); ISE Gemini Rule 900(l); ISE Mercury 900(l); IEX 
Rule 11.610(l); MIAX Rule 1701(l); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(l) and Chapter IX, Section 8, paragraph (a)(xii); NYSE 
Rule 6810(l); NYSE Arca Equities Rule 6.6810(l); NYSE Arca Options 
Rule 11.6810(l); NYSE MKT Rule 6810(l); NYSE National Rule 14.1(l)); 
and Phlx Rule 910A(l).
    \65\ See proposed Bats BYX Rule 4.5(l)(1); Bats BZX Rule 
4.5(l)(1); Bats EDGA Rule 4.5(l)(1); Bats EDGX Rule 4.5(l)(1); C2 
Chapter 6, Section F; CBOE Rule 6.85(l)(i); BX Rules 6810(l)(1) and 
Chapter IX, Section 8, paragraph (a)(xii)(1); BOX Rule 16010(l)(1); 
CHX Article 23, Rule 1(l)(1); IEX Rule 11.610(l)(1); ISE Rule 
900(l)(1); ISE Gemini Rule 900(l)(1); ISE Mercury 900(l)(1); MIAX 
Rule 1701(l)(1); MIAX PEARL Chapter XVII; NASDAQ Rules 6810(l)(1) 
and Chapter IX, Section 8, paragraph (a)(xii)(1); NYSE Rule 
6810(l)(1); NYSE Arca Equities Rule 6.6810(l)(1); NYSE Arca Options 
Rule 11.6810(l)(1); NYSE MKT Rule 6810(l)(1); NYSE National Rule 
14.1(l)(1); and Phlx Rule 910A(l)(1).
    \66\ See proposed Bats BYX Rule 4.5(l)(2); Bats BZX Rule 
4.5(l)(2); Bats EDGA Rule 4.5(l)(2); Bats EDGX Rule 4.5(l)(2); BX 
Rules 6810(l)(2) and Chapter IX, Section 8, paragraph (a)(xii)(2); 
BOX Rule 16010(l)(2); C2 Chapter 6, Section F; CBOE Rule 
6.85(l)(ii); CHX Article 23, Rule 1(l)(2); IEX Rule 11.610(l)(2); 
ISE Rule 900(l)(2); ISE Gemini Rule 900(l)(2); ISE Mercury 
900(l)(2); MIAX Rule 1701(l)(2); MIAX PEARL Chapter XVII; Nasdaq 
Rules 6810(l)(2) and Chapter IX, Section 8, paragraph (a)(xii)(2); 
NYSE Rule 6810(l)(2); NYSE Arca Equities Rule 6.6810(l)(2); NYSE 
Arca Options Rule 11.6810(l)(2); NYSE MKT Rule 6810(l)(2); NYSE 
National Rule 14.1(l)(2); and Phlx Rule 910A(l)(2).
---------------------------------------------------------------------------

13. Customer Identifying Information
    As discussed above, under the Customer Information Approach, 
Industry Members are required to report Customer Identifying 
Information to the Central Repository as part of the customer 
definition process. Accordingly, the Exchanges propose to define the 
term ``Customer Account Information'' in the proposed CAT Compliance 
Rules to include, but not be limited to: name, address, date of birth, 
ITIN/SSN, individual's role in the account (e.g., primary holder, joint 
holder, guardian, trustee, person with the power of attorney). With 
respect to legal entities, ``Customer Identifying Information'' 
includes, but is not limited to, name, address, EIN/LEI or other 
comparable common entity identifier, if applicable. The definition 
further notes that an Industry Member that has an LEI for a Customer 
must submit the Customer's LEI in addition to other information of 
sufficient detail to identify the Customer.\67\ The Exchanges state 
that this is the same definition as set forth in Section 1.1 of the CAT 
NMS Plan.
---------------------------------------------------------------------------

    \67\ See proposed Bats BYX Rule 4.5(m); Bats BZX Rule 4.5(m); 
Bats EDGA Rule 4.5(m); Bats EDGX Rule 4.5(m); BX Rules 6810(m) and 
Chapter IX, Section 8, paragraph (a)(xiii); BOX Rule 16010(m); C2 
Chapter 6, Section F; CBOE Rule 6.85(m); CHX Article 23, Rule 1(m); 
IEX Rule 11.610(m); ISE Rule 900(m); ISE Gemini Rule 900(m); ISE 
Mercury 900(m); MIAX Rule 1701(m); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(m) and Chapter IX, Section 8, paragraph (a)(xiii); NYSE 
Rule 6810(m); NYSE Arca Equities Rule 6.6810(m); NYSE Arca Options 
Rule 11.6810(m); NYSE MKT Rule 6810(m); NYSE National Rule 14.1(m); 
and Phlx Rule 910A(m).
---------------------------------------------------------------------------

14. Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\68\ Such Data 
Submitters may include those entities that are required to submit data 
to the Central Repository (e.g., national securities exchanges, 
national securities associations and Industry Members), third-parties 
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT 
Reporting Agents), and outside parties that are not required to submit 
data to the CAT but from which the CAT may receive data (e.g., 
securities information processors (``SIPs'')). To include this term in 
the proposed CAT Compliance Rules, the Exchanges propose to define 
``Data Submitter'' to mean any person that reports data to the Central 
Repository, including national securities exchanges, national 
securities associations, broker-dealers, the SIPs for the CQS, CTA, UTP

[[Page 14532]]

and Plan for Reporting of Consolidated Options Last Sale Reports and 
Quotation Information (``OPRA'') Plans, and certain other vendors or 
third parties that may submit data to the Central Repository on behalf 
of Industry Members.\69\
---------------------------------------------------------------------------

    \68\ See CAT NMS Plan, supra note 21 at Appendix C, Section 
A.1(a).
    \69\ See proposed Bats BYX Rule 4.5(n); Bats BZX Rule 4.5(n); 
Bats EDGA Rule 4.5(n); Bats EDGX Rule 4.5(n); BX Rules 6810(n) and 
Chapter IX, Section 8, paragraph (a)(xiv); BOX Rule 16010(n); C2 
Chapter 6, Section F; CBOE Rule 6.85(n); CHX Article 23, Rule 1(n); 
IEX Rule 11.610(n); ISE Rule 900(n); ISE Gemini Rule 900(n); ISE 
Mercury 900(n); MIAX Rule 1701(n); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(n) and Chapter IX, Section 8, paragraph (a)(xiv); NYSE 
Rule 6810(n); NYSE Arca Equities Rule 6.6810(n); NYSE Arca Options 
Rule 11.6810(n); NYSE MKT Rule 6810(n); NYSE National Rule 14.1(n); 
and Phlx Rule 910A(n).
---------------------------------------------------------------------------

15. Eligible Security
    The reporting requirements of the proposed CAT Compliance Rules 
only apply to Reportable Events in Eligible Securities. Currently, an 
Eligible Security includes NMS Securities and OTC Equity Securities. 
Accordingly, the proposed CAT Compliance Rules define the term 
``Eligible Security'' to include: (1) All NMS Securities; and (2) all 
OTC Equity Securities.\70\ The Exchanges state that this is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \70\ See proposed Bats BYX Rule 4.5(o); Bats BZX Rule 4.5(o); 
Bats EDGA Rule 4.5(o); Bats EDGX Rule 4.5(o); BX Rules 6810(o) and 
Chapter IX, Section 8, paragraph (a)(xv); BOX Rule 16010(o); C2 
Chapter 6, Section F; CBOE Rule 6.85(o); CHX Article 23, Rule 1(o); 
IEX Rule 11.610(o); ISE Rule 900(o); ISE Gemini Rule 900(o); ISE 
Mercury 900(o); MIAX Rule 1701(o); MIAX PEARL Chapter XVII; NYSE 
Rule 6810(o); NYSE Arca Equities Rule 6.6810(o); NYSE Arca Options 
Rule 11.6810(o); NYSE MKT Rule 6810(o); NYSE National Rule 14.1(o)); 
and Phlx Rule 910A(o).
---------------------------------------------------------------------------

16. Error Rate
(a) Generally
    The CAT NMS Plan requires the Plan Processor to: (1) Measure and 
report errors every business day; (2) provide Industry Members daily 
statistics and error reports as they become available, including a 
description of such errors; (3) provide monthly reports to Industry 
Members that detail an Industry Member's performance and comparison 
statistics; (4) define educational and support programs for Industry 
Members to minimize Error Rates; and (5) identify, daily, all Industry 
Members exceeding the maximum allowable Error Rate. To timely correct 
data-submitted errors to the Central Repository, the CAT NMS Plan 
requires that the Central Repository receive and process error 
corrections at all times. Further, the CAT NMS Plan requires that 
Industry Members be able to submit error corrections to the Central 
Repository through a web-interface or via bulk uploads or file 
submissions, and that the Plan Processor, subject to the Operating 
Committee's approval, support the bulk replacement of records and the 
reprocessing of such records. The Participants, furthermore, require 
that the Plan Processor identify Industry Member data submission errors 
based on the Plan Processor's validation processes.\71\
---------------------------------------------------------------------------

    \71\ Approval Order, supra note 24, at 84718.
---------------------------------------------------------------------------

(b) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchanges propose to define the term ``Error Rate'' in 
the proposed CAT Compliance Rules. ``Error Rate'' is defined to mean 
the percentage of Reportable Events collected by the Central Repository 
in which the data reported does not fully and accurately reflect the 
order event that occurred in the market.\72\ The Exchanges state that 
this is the same definition as set forth in Rule 613(j)(6), and Section 
1.1 of the CAT NMS Plan defines ``Error Rate'' by reference to Rule 
613(j)(6).\73\
---------------------------------------------------------------------------

    \72\ See proposed Bats BYX Rule 4.5(p); Bats BZX Rule 4.5(p); 
Bats EDGA Rule 4.5(p); Bats EDGX Rule 4.5(p); BX Rules 6810(p) and 
Chapter IX, Section 8, paragraph (a)(xvii); BOX Rule 16010(p); C2 
Chapter 6, Section F; CBOE Rule 6.85(p); CHX Article 23, Rule 1(p); 
IEX Rule 11.610(p); ISE Rule 900(p); ISE Gemini Rule 900(p); ISE 
Mercury 900(p); MIAX Rule 1701(p); MIAX PEARL Chapter XVII; Nasdaq 
Rules 6810(p) and Chapter IX, Section 8, paragraph (a)(xvi); NYSE 
Rule 6810(p); NYSE Arca Equities Rule 6.6810(p); NYSE Arca Options 
Rule 11.6810(p); NYSE MKT Rule 6810(p); NYSE National Rule 14.1(p); 
and Phlx Rule 910A(p).
    \73\ 17 CFR 242.613(j)(6).
---------------------------------------------------------------------------

(c) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee would set the 
maximum Error Rate that the Central Repository would tolerate from an 
Industry Member reporting data to the Central Repository.\74\ The 
Operating Committee would review and reset the maximum Error Rate, at 
least annually.\75\ If an Industry Member reports CAT data to the 
Central Repository with errors such that their error percentage exceeds 
the maximum Error Rate, then such Industry Member would not be in 
compliance with the CAT NMS Plan or Rule 613.\76\ The Exchanges state 
that, according to the CAT NMS Plan, the Exchanges or the SEC may take 
appropriate action against an Industry Member for failing to comply 
with its CAT reporting obligations.\77\ The CAT NMS Plan sets the 
initial Error Rate at 5%.\78\ The Exchanges state that it is 
anticipated that the maximum Error Rate will be reviewed and lowered by 
the Operating Committee once Industry Members begin to report to the 
Central Repository.\79\
---------------------------------------------------------------------------

    \74\ CAT NMS Plan, supra note 21, at Section 6.5(d)(i).
    \75\ CAT NMS Plan, supra note 21, at Appendix C, Section A.3(b).
    \76\ CAT NMS Plan, supra note 21, at Appendix C, Section A.3(b); 
17 CFR 242.613(g)-(h).
    \77\ CAT NMS Plan, supra note 21, at Appendix C, Section A.3(b).
    \78\ CAT NMS Plan, supra note 21, at Section 6.5(d)(i).
    \79\ CAT NMS Plan, supra note 21, at Appendix C, Section A.3(b).
---------------------------------------------------------------------------

17. Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan requires each Industry Member to utilize a unique Firm 
Designated ID. Industry Members will be permitted to use as the Firm 
Designated ID an account number or any other identifier defined by the 
firm, provided each identifier is unique across the firm for each 
business date. Industry Members will be required to report only the 
Firm Designated ID for each new order submitted to the Central 
Repository, rather than the ``Customer-ID'' with individual order 
events. Accordingly, the Exchanges propose to define the term ``Firm 
Designated ID'' in the proposed CAT Compliance Rules to mean a unique 
identifier for each trading account designated by Industry Members for 
purposes of providing data to the Central Repository, where each such 
identifier is unique among all identifiers from any given Industry 
Member for each business date.\80\ The Exchanges state that this is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan. 
Industry Members will be permitted to use an account number or any 
other identifier defined by the firm, provided each identifier is 
unique across the firm for each business date (i.e., a single firm may 
not have multiple separate customers with the same identifier on any 
given date).
---------------------------------------------------------------------------

    \80\ See proposed Bats BYX Rule 4.5(q); Bats BZX Rule 4.5(q); 
Bats EDGA Rule 4.5(q); Bats EDGX Rule 4.5(q); BX Rules 6810(q) and 
Chapter IX, Section 8, paragraph (a)(xvii); BOX Rule 16010(q); C2 
Chapter 6, Section F; CBOE Rule 6.85(q); CHX Article 23, Rule 1(q); 
IEX Rule 11.610(q); ISE Rule 900(q); ISE Gemini Rule 900(q); ISE 
Mercury 900(q); MIAX Rule 1701(q); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(q) and Chapter IX, Section 8, paragraph (a)(xvii); NYSE 
Rule 6810(q); NYSE Arca Equities Rule 6.6810(q); NYSE Arca Options 
Rule 11.6810(q); NYSE MKT Rule 6810(q) (NYSE MKT proposed adding a 
rule reference, in NYSE MKT Rule 0--Equities, to make clear due to 
the organization of its rulebook that ``the proposed [CAT Compliance 
Rules] would apply to Industry Members of the Exchange's equities 
and options markets.''); NYSE National Rule 14.1(q); and Phlx Rule 
910A(q).

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

[[Page 14533]]

18. Industry Member
    The proposed CAT Compliance Rules define the term ``Industry 
Member'' to mean ``a member of a national securities exchange or a 
member of a national securities association.'' \81\ The Exchanges state 
that this is the same definition as set forth in Section 1.1 of the CAT 
NMS Plan.
---------------------------------------------------------------------------

    \81\ See proposed Bats BYX Rule 4.5(r); Bats BZX Rule 4.5(r); 
Bats EDGA Rule 4.5(r); Bats EDGX Rule 4.5(r); BX Rules 6810(r) and 
Chapter IX, Section 8, paragraph (a)(xviii); BOX Rule 16010(r); C2 
Chapter 6, Section F; CBOE Rule 6.85(r); CHX Article 23, Rule 1(r); 
IEX Rule 11.610(r); ISE Rule 900(r); ISE Gemini Rule 900(r); ISE 
Mercury 900(r); MIAX Rule 1701(r); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(r) and Chapter IX, Section 8, paragraph (a)(xviii); NYSE 
Rule 6810(r); NYSE Arca Equities Rule 6.6810(r); NYSE Arca Options 
Rule 11.6810(r); NYSE MKT Rule 6810(r); NYSE National Rule 14.1(r); 
Phlx Rule 910A(r).
---------------------------------------------------------------------------

19. Industry Member Data
    The proposed CAT Compliance Rules state that the term ``Industry 
Member Data'' has the meaning set forth in each Exchange's proposed CAT 
Compliance Rule.\82\ The Exchanges state that this definition has the 
same substantive meaning as the definition set forth in Section 1.1 of 
the CAT NMS Plan.
---------------------------------------------------------------------------

    \82\ See proposed Bats BYX Rule 4.5(s); Bats BZX Rule 4.5(s); 
Bats EDGA Rule 4.5(s); Bats EDGX Rule 4.5(s); BX Rules 6810(s) and 
Chapter IX, Section 8, paragraph (a)(xix); BOX Rule 16010(s); C2 
Chapter 6, Section F; CBOE Rule 6.85(s); CHX Article 23, Rule 1(s); 
IEX Rule 11.610(s); ISE Rule 900(s); ISE Gemini Rule 900(s); ISE 
Mercury 900(s); MIAX Rule 1701(s); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(s) and Chapter IX, Section 8, paragraph (a)(xix); NYSE 
Rule 6810(s); NYSE Arca Equities Rule 6.6810(s); NYSE Arca Options 
Rule 11.6810(s); NYSE MKT Rule 6810(s); NYSE National Rule 14.1(s); 
and Phlx Rule 910A(s).
---------------------------------------------------------------------------

20. Initial Plan Processor
    The proposed CAT Compliance Rules define the term ``Initial Plan 
Processor'' to mean the first Plan Processor selected by the Operating 
Committee in accordance with Rule 613, Section 6.1 of the CAT NMS Plan 
and the National Market System Plan Governing the Process for Selecting 
a Plan Processor and Developing a Plan for the Consolidated Audit 
Trail.\83\ The Exchanges state that this is the same definition as set 
forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \83\ See proposed Bats BYX Rule 4.5(t); Bats BZX Rule 4.5(t); 
Bats EDGA Rule 4.5(t); Bats EDGX Rule 4.5(t); BX Rules 6810(t) and 
Chapter IX, Section 8, paragraph (a)(xx); BOX Rule 16010(t); C2 
Chapter 6, Section F; CBOE Rule 6.85(t); CHX Article 23, Rule 1(t); 
IEX Rule 11.610(t); ISE Rule 900(t); ISE Gemini Rule 900(t); ISE 
Mercury 900(t); MIAX Rule 1701(t); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(t) and Chapter IX, Section 8, paragraph (a)(xx); NYSE 
Rule 6810(t); NYSE Arca Equities Rule 6.6810(t); NYSE Arca Options 
Rule 11.6810(t); NYSE MKT Rule 6810(t); NYSE National Rule 14.1(t); 
and Phlx Rule 910A(t).
---------------------------------------------------------------------------

21. Listed Option or Option
    The Exchanges represent that the reporting requirements of the CAT 
NMS Plan and the proposed CAT Compliance Rules apply to Eligible 
Securities, which includes NMS Securities, which, in turn, includes 
Listed Options. Certain requirements of the proposed CAT Compliance 
Rules apply specifically to Listed Options. Accordingly, ``Listed 
Option'' or ``Option'' have the meaning set forth in Rule 600(b)(35) of 
Regulation NMS.\84\ Rule 600(b)(35) of Regulation NMS defines a listed 
option as ``any option traded on a registered national securities 
exchange or automated facility of a national securities association.'' 
\85\ The Exchanges state that the proposed definition of ``Listed 
Option'' is the same definition as the definition set forth in Section 
1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \84\ See proposed Bats BYX Rule 4.5(u); Bats BZX Rule 4.5(u); 
Bats EDGA Rule 4.5(u); Bats EDGX Rule 4.5(u); BX Rules 6810(u) and 
Chapter IX, Section 8, paragraph (a)(xxi); BOX Rule 16010(u); C2 
Chapter 6, Section F; CBOE Rule 6.85(u); CHX Article 23, Rule 1(u); 
IEX Rule 11.610(u); ISE Rule 900(u); ISE Gemini Rule 900(u); ISE 
Mercury 900(u); MIAX Rule 1701(u); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(u) and Chapter IX, Section 8, paragraph (a)(xxi); NYSE 
Rule 6810(u); NYSE Arca Equities Rule 6.6810(u); NYSE Arca Options 
Rule 11.6810(u); NYSE MKT Rule 6810(u); NYSE National Rule 14.1(u); 
and Phlx Rule 910A(u).
    \85\ 17 CFR 242.600(b)(35).
---------------------------------------------------------------------------

22. Manual Order Event
(a) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp 
requirements for Industry Members which reflect exemptions for Manual 
Order Events granted by the Commission.\86\ Specifically, the Plan 
requires Industry Members to record and report the time of each 
Reportable Event using timestamps reflecting current industry standards 
(which must be at least to the millisecond) or, if an Industry Member's 
order handling or execution system uses timestamps in increments finer 
than milliseconds, such finer increments, when reporting to the Central 
Repository. For Manual Order Events, however, the Plan provides that 
such events must be recorded in increments up to and including one 
second, provided that Industry Members record and report the time the 
event is captured electronically in an order handling and execution 
system (``Electronic Capture Time'') in milliseconds. In addition, 
Industry Members are required to synchronize their respective Business 
Clocks (other than such Business Clocks used solely for Manual Order 
Events) at a minimum to within 50 milliseconds of the time maintained 
by the National Institute of Standards and Technology (``NIST''), and 
maintain such synchronization. Each Industry Member is required to 
synchronize its Business Clocks used solely for Manual Order Events, 
however, at a minimum to within one second of the time maintained by 
the NIST.
---------------------------------------------------------------------------

    \86\ See Exemption Order, supra note 31.
---------------------------------------------------------------------------

(b) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, the Exchanges propose to 
define the term ``Manual Order Event'' in the proposed CAT Compliance 
Rules.\87\ Specifically, the term ``Manual Order Event'' means a non-
electronic communication of order-related information for which 
Industry Members must record and report the time of the event. The 
Exchanges state that this is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \87\ See proposed Bats BYX Rule 4.5(v); Bats BZX Rule 4.5(v); 
Bats EDGA Rule 4.5(v); Bats EDGX Rule 4.5(v); BX Rules 6810(v) and 
Chapter IX, Section 8, paragraph (a)(xxii); BOX Rule 16010(v); C2 
Chapter 6, Section F; CBOE Rule 6.85(v); CHX Article 23, Rule 1(v); 
IEX Rule 11.610(v); ISE Rule 900(v); ISE Gemini Rule 900(v); ISE 
Mercury 900(v); MIAX Rule 1701(v); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(v) and Chapter IX, Section 8, paragraph (a)(xxii); NYSE 
Rule 6810(v); NYSE Arca Equities Rule 6.6810(v); NYSE Arca Options 
Rule 11.6810(v); NYSE MKT Rule 6810(v); NYSE National Rule 14.1(v); 
and Phlx Rule 910A(v).
---------------------------------------------------------------------------

23. Material Terms of the Order
    The proposed CAT Compliance Rules require Industry Members to 
record and report to the Central Repository Material Terms of the Order 
with certain Reportable Events (e.g., for the original receipt or 
origination of an order, for the routing of an order). Accordingly, the 
Exchanges propose to define the term ``Material Terms of the Order'' to 
include: The NMS Security or OTC Equity Security symbol; security type; 
price (if applicable); size (displayed and non-displayed); side (buy/
sell); order type; if a sell order, whether the order is long, short, 
short exempt; open/close indicator (except on transactions in 
equities); time in force (if applicable); if the order is for a Listed 
Option, option type (put/call), option symbol or root symbol, 
underlying symbol, strike price, expiration date, and open/close 
(except on market maker quotations); and any special handling 
instructions.\88\ The

[[Page 14534]]

Exchanges state that this is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \88\ See proposed Bats BYX Rule 4.5(w); Bats BZX Rule 4.5(w); 
Bats EDGA Rule 4.5(w); Bats EDGX Rule 4.5(w); BX Rules 6810(w) and 
Chapter IX, Section 8, paragraph (a)(xxiii); BOX Rule 16010(w); C2 
Chapter 6, Section F; CBOE Rule 6.85(w); CHX Article 23, Rule 1(w); 
IEX Rule 11.610(w); ISE Rule 900(w); ISE Gemini Rule 900(w); ISE 
Mercury 900(w); MIAX Rule 1701(w); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(w) and Chapter IX, Section 8, paragraph (a)(xxiii); NYSE 
Rule 6810(w); NYSE Arca Equities Rule 6.6810(w); NYSE Arca Options 
Rule 11.6810(w); NYSE MKT Rule 6810(w); NYSE National Rule 14.1(w); 
and Phlx Rule 910A(w).
---------------------------------------------------------------------------

24. NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, the Exchanges propose to define the term ``NMS 
Security'' to mean 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.\89\ The Exchanges state that this is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \89\ See proposed Bats BYX Rule 4.5(x); Bats BZX Rule 4.5(x); 
Bats EDGA Rule 4.5(x); Bats EDGX Rule 4.5(x); BX Rules 6810(x) and 
Chapter IX, Section 8, paragraph (a)(xxiv); BOX Rule 16010(x); C2 
Chapter 6, Section F; CBOE Rule 6.85(x); CHX Article 23, Rule 1(x); 
IEX Rule 11.610(x); ISE Rule 900(x); ISE Gemini Rule 900(x); ISE 
Mercury 900(x); MIAX Rule 1701(x); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(x) and Chapter IX, Section 8, paragraph (a)(xxiv); NYSE 
Rule 6810(x); NYSE Arca Equities Rule 6.6810(x); NYSE Arca Options 
Rule 11.6810(x); NYSE MKT Rule 6810(x); NYSE National Rule 14.1(x); 
and Phlx Rule 910A(x).
---------------------------------------------------------------------------

25. NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks, as defined in Rule 600(b)(47) of 
Regulation NMS,\90\ Listed Options, OTC Equity Securities, and any 
other securities that are included as Eligible Securities from time to 
time.\91\ Accordingly, the Exchanges propose to define the term ``NMS 
Stock'' to mean any NMS Security other than an option.\92\ The 
Exchanges state that this is the same definition as set forth in Rule 
600(b)(47) of Regulation NMS.\93\
---------------------------------------------------------------------------

    \90\ 17 CFR 242.600(b)(47).
    \91\ See CAT NMS Plan, supra note 21, at Section 1.1 (defining 
``Trading Day'').
    \92\ See proposed Bats BYX Rule 4.5(y); Bats BZX Rule 4.5(y); 
Bats EDGA Rule 4.5(y); Bats EDGX Rule 4.5(y); BX Rules 6810(y) and 
Chapter IX, Section 8, paragraph (a)(xxv); BOX Rule 16010(y); C2 
Chapter 6, Section F; CBOE Rule 6.85(y); CHX Article 23, Rule 1(y); 
IEX Rule 11.610(y); ISE Rule 900(y); ISE Gemini Rule 900(y); ISE 
Mercury 900(y); MIAX Rule 1701(y); MIAX PEARL Chapter XVII; NASDAQ 
Rules 6810(y) and Chapter IX, Section 8, paragraph (a)(xxv); NYSE 
Rule 6810(y); NYSE Arca Equities Rule 6.6810(y); NYSE Arca Options 
Rule 11.6810(y); NYSE MKT Rule 6810(y); NYSE National Rule 14.1(y); 
and Phlx Rule 910A(y).
    \93\ 17 CFR 242.600(b)(47).
---------------------------------------------------------------------------

26. Operating Committee
    The proposed CAT Compliance Rules define the term ``Operating 
Committee'' to mean the governing body of the CAT NMS, LLC designated 
as such and described in Article IV of the CAT NMS Plan.\94\ The 
Exchanges state that this is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan, except the Exchanges propose to use 
the phrase ``CAT NMS LLC'' in place of the phrase ``the Company'' for 
clarity.
---------------------------------------------------------------------------

    \94\ See proposed Bats BYX Rule 4.5(z); Bats BZX Rule 4.5(z); 
Bats EDGA Rule 4.5(z); Bats EDGX Rule 4.5(z); BX Rules 6810(z) and 
Chapter IX, Section 8, paragraph (a)(xxvi); BOX Rule 16010(z); C2 
Chapter 6, Section F; CBOE Rule 6.85(z); CHX Article 23, Rule 1(z); 
IEX Rule 11.610(z); ISE Rule 900(z); ISE Gemini Rule 900(z); ISE 
Mercury 900(z); MIAX Rule 1701(z); MIAX PEARL Chapter XVII; NYSE 
Rule 6810(z); NASDAQ Rules 6810(z) and Chapter IX, Section 8, 
paragraph (a)(xxvi); NYSE Arca Equities Rule 6.6810(z); NYSE Arca 
Options Rule 11.6810(z); NYSE MKT Rule 6810(z); NYSE National Rule 
14.1(z); and Phlx Rule 910A(z).
---------------------------------------------------------------------------

27. Options Market Maker
(a) Options Market Maker Quote Exemption
    Rule 613(c)(7) provides that the CAT NMS Plan must require each 
Industry Member to record and electronically report to the Central 
Repository details for each order and each reportable event, including 
the routing and modification or cancellation of an order.\95\ Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' \96\ 
Therefore, under Rule 613, the details for each Options Market Maker 
quotation must be reported to the Central Repository by both the 
Options Market Maker and the options exchange to which it routes its 
quote.
---------------------------------------------------------------------------

    \95\ 17 CFR 242.613(c)(7).
    \96\ 17 CFR 242.613(j)(8).
---------------------------------------------------------------------------

    The Participants, however, requested and received exemptive relief 
from Rule 613 of Regulation NMS so that the CAT NMS Plan may permit 
Options Market Maker quotes to be reported to the Central Repository by 
the relevant options exchange in lieu of requiring that such reporting 
be done by both the options exchange and the Options Market Maker, as 
is required by Rule 613.\97\ In accordance with the exemptive relief, 
Options Market Makers will be required to report to the options 
exchange the time at which a quote in a Listed Option is sent to the 
options exchange. Such time information also will be reported to the 
Central Repository by the options exchange in lieu of reporting by the 
Options Market Maker.
---------------------------------------------------------------------------

    \97\ See Exemptive Request Letter, supra note 31, at 2; 
Exemption Order, supra note 31.
---------------------------------------------------------------------------

(b) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchanges propose to define the term ``Options Market 
Maker'' to mean a broker-dealer registered with an exchange for the 
purpose of making markets in options contracts traded on the 
exchange.\98\ The Exchanges state that this is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \98\ See proposed Bats BYX Rule 4.5(aa); Bats BZX Rule 4.5(aa); 
Bats EDGA Rule 4.5(aa); Bats EDGX Rule 4.5(aa); BX Rules 6810(aa) 
and Chapter IX, Section 8, paragraph (a)(xxvii); BOX Rule 16010(aa); 
C2 Chapter 6, Section F; CBOE Rule 6.85(aa); CHX Article 23, Rule 
1(aa); IEX Rule 11.610(aa); ISE Rule 900(aa); ISE Gemini Rule 
900(aa); ISE Mercury 900(aa); MIAX Rule 1701(aa); MIAX PEARL Chapter 
XVII; BX Rules 6810(aa) and Chapter IX, Section 8, paragraph 
(a)(xxvii); NYSE Rule 6810(aa); NYSE Arca Equities Rule 6.6810(aa); 
NYSE Arca Options Rule 11.6810(aa); NYSE MKT Rule 6810(aa); NYSE 
National Rule 14.1(aa); and Phlx Rule 910A(aa).
---------------------------------------------------------------------------

28. Order
    The proposed CAT Compliance Rules require each Industry Member to 
record and electronically report to the Central Repository certain 
details for each order. Accordingly, the Exchanges propose to define 
the term ``Order'' with respect to Eligible Securities, to include: (1) 
Any order received by an Industry Member from any person; (2) any order 
originated by an Industry Member; or (3) any bid or offer.\99\ The 
Exchanges state that this is the same definition as set forth in Rule 
613(j)(8),\100\ except the Exchanges propose to replace the phrase 
``member of a national securities exchange or national securities 
association'' with the term ``Industry Member.'' The Exchanges also 
note that Section 1.1 of the CAT NMS Plan defines ``Order'' by 
reference to Rule 613(j)(8).
---------------------------------------------------------------------------

    \99\ See proposed Bats BYX Rule 4.5(bb); Bats BZX Rule 4.5(bb); 
Bats EDGA Rule 4.5(bb); Bats EDGX Rule 4.5(bb); BX Rules 6810(bb) 
and Chapter IX, Section 8, paragraph (a)(xxviii); BOX Rule 
16010(bb); C2 Chapter 6, Section F; CBOE Rule 6.85(bb); CHX Article 
23, Rule 1(bb); IEX Rule 11.610(bb); ISE Rule 900(bb); ISE Gemini 
Rule 900(bb); ISE Mercury 900(bb); MIAX Rule 1701(bb); MIAX PEARL 
Chapter XVII; NASDAQ Rules 6810(bb) and Chapter IX, Section 8, 
paragraph (a)(xxviii); NYSE Rule 6810(bb); NYSE Arca Equities Rule 
6.6810(bb); NYSE Arca Options Rule 11.6810(bb); NYSE MKT Rule 
6810(bb); NYSE National Rule 14.1(bb); and Phlx Rule 910A(bb).
    \100\ See 17 CFR 242.613(j)(8).
---------------------------------------------------------------------------

29. OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities 
for the CAT. Therefore, the Exchanges propose to define the term ``OTC 
Equity Security'' to mean any equity security, other than an NMS 
Security, subject to prompt last sale reporting rules of a registered 
national securities association and

[[Page 14535]]

reported to one of such association's equity trade reporting 
facilities.\101\ The Exchanges state that this is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \101\ See proposed Bats BYX Rule 4.5(cc); Bats BZX Rule 4.5(cc); 
Bats EDGA Rule 4.5(cc); Bats EDGX Rule 4.5(cc); BX Rules 6810(cc) 
and Chapter IX, Section 8, paragraph (a)(xxix); BOX Rule 16010(cc); 
C2 Chapter 6, Section F; CBOE Rule 6.85(cc); CHX Article 23, Rule 
1(cc); IEX Rule 11.610(cc); ISE Rule 900(cc); ISE Gemini Rule 
900(cc); ISE Mercury 900(cc); MIAX Rule 1701(cc); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(cc) and Chapter IX, Section 8, paragraph 
(a)(xxix); NYSE Rule 6810(cc); NYSE Arca Equities Rule 6.6810(cc); 
NYSE Arca Options Rule 11.6810(cc); NYSE MKT Rule 6810(cc); NYSE 
National Rule 14.1(cc); and Phlx Rule 910A(cc).
---------------------------------------------------------------------------

30. Participant
    The proposed CAT Compliance Rules define the term ``Participant'' 
\102\ to mean each Person identified as such in Exhibit A of the CAT 
NMS Plan, as amended, in such Person's capacity as a Participant in CAT 
NMS, LLC.\103\ The Exchanges state that this is the same definition in 
substance as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \102\ The Commission notes that the proposed CHX CAT Compliance 
Rules use the term ``Plan Participant'' instead of ``Participant,'' 
but the definitions are the same. See proposed CHX Article 23, Rule 
1(dd).
    \103\ See proposed Bats BYX Rule 4.5(dd); Bats BZX Rule 4.5(dd); 
Bats EDGA Rule 4.5(dd); Bats EDGX Rule 4.5(dd); BX Rules 6810(dd) 
and Chapter IX, Section 8, paragraph (a)(xxx); BOX Rule 16010(dd); 
C2 Chapter 6, Section F; CBOE Rule 6.85(dd); CHX Article 23, Rule 
1(dd); IEX Rule 11.610(dd); ISE Rule 900(dd); ISE Gemini Rule 
900(dd); ISE Mercury 900(dd); MIAX Rule 1701(dd); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(dd) and Chapter IX, Section 8, paragraph 
(a)(xxx); NYSE Rule 6810(dd); NYSE Arca Equities Rule 6.6810(dd); 
NYSE Arca Options Rule 11.6810(dd); NYSE MKT Rule 6810(dd); NYSE 
National Rule 14.1(dd); and Phlx Rule 910A(dd).
---------------------------------------------------------------------------

31. Person
    The proposed CAT Compliance Rules define the term ``Person'' to 
mean any individual, partnership, limited liability company, 
corporation, joint venture, trust, business trust, cooperative or 
association and any heirs, executors, administrators, legal 
representatives, successors and assigns of such Person where the 
context so permits.\104\ The Exchanges state that this is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \104\ See proposed Bats BYX Rule 4.5(ee); Bats BZX Rule 4.5(ee); 
Bats EDGA Rule 4.5(ee); Bats EDGX Rule 4.5(ee); BX Rules 6810(ee) 
and Chapter IX, Section 8, paragraph (a)(xxxi); BOX Rule 16010(ee); 
C2 Chapter 6, Section F; CBOE Rule 6.85(ee); CHX Article 23, Rule 
1(ee); IEX Rule 11.610(ee); ISE Rule 900(ee); ISE Gemini Rule 
900(ee); ISE Mercury 900(ee); MIAX Rule 1701(ee); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(ee) and Chapter IX, Section 8, paragraph 
(a)(xxxi); NYSE Rule 6810(ee); NYSE Arca Equities Rule 6.6810(ee); 
NYSE Arca Options Rule 11.6810(ee); NYSE MKT Rule 6810(ee); NYSE 
National Rule 14.1(ee); and Phlx Rule 910A(ee).
---------------------------------------------------------------------------

32. Plan Processor
    The proposed CAT Compliance Rules define the term ``Plan 
Processor'' to mean the Initial Plan Processor or any other Person 
selected by the Operating Committee pursuant to Rule 613 and Sections 
4.3(b)(i) and 6.1 of the CAT NMS Plan, and with regard to the Initial 
Plan Processor, the National Market System Plan Governing the Process 
for Selecting a Plan Processor and Developing a Plan for the 
Consolidated Audit Trail, to perform the CAT processing functions 
required by Rule 613 of Regulation NMS and set forth in the CAT NMS 
Plan.\105\
---------------------------------------------------------------------------

    \105\ See proposed Bats BYX Rule 4.5(ff); Bats BZX Rule 4.5(ff); 
Bats EDGA Rule 4.5(ff); Bats EDGX Rule 4.5(ff); BX Rules 6810(ff) 
and Chapter IX, Section 8, paragraph (a)(xxxii); BOX Rule 16010(ff); 
C2 Chapter 6, Section F; CBOE Rule 6.85(ff); CHX Article 23, Rule 
1(ff); IEX Rule 11.610(ff); ISE Rule 900(ff); ISE Gemini Rule 
900(ff); ISE Mercury 900(ff); MIAX Rule 1701(ff); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(ee) and Chapter IX, Section 8, paragraph 
(a)(xxxi); NYSE Rule 6810(ff); NYSE Arca Equities Rule 6.6810(ff); 
NYSE Arca Options Rule 11.6810(ff); NYSE MKT Rule 6810(ff); NYSE 
National Rule 14.1(ff); and Phlx Rule 910A(ff).
---------------------------------------------------------------------------

33. Received Industry Member Data
    The proposed CAT Compliance Rules state that the term ``Received 
Industry Member Data'' has the meaning set forth in each Industry 
Member's proposed CAT Compliance Rule.\106\ The Exchanges represent 
that this definition has the same substantive meaning as the definition 
set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \106\ See proposed Bats BYX Rule 4.5(gg); Bats BZX Rule 4.5(gg); 
Bats EDGA Rule 4.5(gg); Bats EDGX Rule 4.5(gg); BX Rules 6810(gg) 
and Chapter IX, Section 8, paragraph (a)(xxxiii); BOX Rule 
16010(gg); C2 Chapter 6, Section F; CBOE Rule 6.85(gg); CHX Article 
23, Rule 1(gg); IEX Rule 11.610(gg); ISE Rule 900(gg); ISE Gemini 
Rule 900(gg); ISE Mercury 900(gg); MIAX Rule 1701(gg); MIAX PEARL 
Chapter XVII; NASDAQ Rules 6810(gg) and Chapter IX, Section 8, 
paragraph (a)(xxxiii); NYSE Rule 6810(gg); NYSE Arca Equities Rule 
6.6810(gg); NYSE Arca Options Rule 11.6810(gg); NYSE MKT Rule 
6810(gg); NYSE National Rule 14.1(gg); and Phlx Rule 910A(gg).
---------------------------------------------------------------------------

34. Recorded Industry Member Data
    The proposed CAT Compliance Rules state that the term ``Recorded 
Industry Member Data'' has the meaning set forth in each Industry 
Member's proposed CAT Compliance Rule.\107\ The Exchanges state that 
this definition has the same substantive meaning as the definition set 
forth in in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \107\ See proposed Bats BYX Rule 4.5(hh); Bats BZX Rule 4.5(hh); 
Bats EDGA Rule 4.5(hh); Bats EDGX Rule 4.5(hh); BX Rules 6810(hh) 
and Chapter IX, Section 8, paragraph (a)(xxxiv); BOX Rule 16010(hh); 
C2 Chapter 6, Section F; CBOE Rule 6.85(hh); CHX Article 23, Rule 
1(hh); IEX Rule 11.610(hh); ISE Rule 900(hh); ISE Gemini Rule 
900(hh); ISE Mercury 900(hh); MIAX Rule 1701(hh); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(hh) and Chapter IX, Section 8, paragraph 
(a)(xxxiii); NYSE Rule 6810(hh); NYSE Arca Equities Rule 6.6810(hh); 
NYSE Arca Options Rule 11.6810(hh); NYSE MKT Rule 6810(hh); NYSE 
National Rule 14.1(hh); and Phlx Rule 910A(hh).
---------------------------------------------------------------------------

35. Reportable Event
    The proposed CAT Compliance Rules require each Industry Member to 
record and electronically report to the Central Repository certain 
details for each Reportable Event. The Exchanges propose to define the 
term ``Reportable Event'' to include, but not be limited to, the 
original receipt or origination, modification, cancellation, routing, 
execution (in whole or in part) and allocation of an order, and receipt 
of a routed order.\108\ The Exchanges state that this is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \108\ See proposed Bats BYX Rule 4.5(ii); Bats BZX Rule 4.5(ii); 
Bats EDGA Rule 4.5(ii); Bats EDGX Rule 4.5(ii); BX Rules 6810(ii) 
and Chapter IX, Section 8, paragraph (a)(xxxv); BOX Rule 16010(ii); 
C2 Chapter 6, Section F; CBOE Rule 6.85(ii); CHX Article 23, Rule 
1(ii); IEX Rule 11.610(ii); ISE Rule 900(ii); ISE Gemini Rule 
900(ii); ISE Mercury 900(ii); MIAX Rule 1701(ii); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(ii) and Chapter IX, Section 8, paragraph 
(a)(xxxv); NYSE Rule 6810(ii); NYSE Arca Equities Rule 6.6810(ii); 
NYSE Arca Options Rule 11.6810(ii); NYSE MKT Rule 6810(ii); NYSE 
National Rule 14.1(ii); and Phlx Rule 910A(ii).
---------------------------------------------------------------------------

36. SRO
    The Exchanges propose to define the term ``SRO'' to mean any self-
regulatory organization within the meaning of Section 3(a)(26) of the 
Exchange Act.\109\ The Exchanges state that this is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \109\ See 15 U.S.C. 78c(a)(26); proposed Bats BYX Rule 4.5(jj); 
Bats BZX Rule 4.5(jj); Bats EDGA Rule 4.5(jj); Bats EDGX Rule 
4.5(jj); BX Rules 6810(jj) and Chapter IX, Section 8, paragraph 
(a)(xxxvi); BOX Rule 16010(jj); C2 Chapter 6, Section F; CBOE Rule 
6.85(jj); CHX Article 23, Rule 1(jj); IEX Rule 11.610(jj);); ISE 
Rule 900(jj); ISE Gemini Rule 900(jj); ISE Mercury 900(jj); MIAX 
Rule 1701(jj); MIAX PEARL Chapter XVII; NASDAQ Rules 6810(jj) and 
Chapter IX, Section 8, paragraph (a)(xxxvi); NYSE Rule 6810(jj); 
NYSE Arca Equities Rule 6.6810(jj); NYSE Arca Options Rule 
11.6810(jj); NYSE MKT Rule 6810(jj); NYSE National Rule 14.1(jj); 
and Phlx Rule 910A(jj).
---------------------------------------------------------------------------

37. SRO-Assigned Market Participant Identifier
(a) Existing Identifier Approach
    The Participants requested and received exemptive relief from Rule 
613 of Regulation NMS so that the CAT NMS Plan may permit the 
``Existing Identifier Approach,'' which would allow an Industry Member 
to report an existing SRO-Assigned Market Participant Identifier in 
lieu of requiring

[[Page 14536]]

the reporting of a universal CAT-Reporter-ID (that is, a code that 
uniquely and consistently identifies an Industry Member for purposes of 
providing data to the Central Repository).\110\ The CAT NMS Plan 
reflects the Existing Identifier Approach for purposes of identifying 
each Industry Member associated with an order or Reportable Event. 
Under the Existing Identifier Approach, Industry Members are required 
to record and report to the Central Repository an SRO-Assigned Market 
Participant Identifier for orders and certain Reportable Events to be 
used by the Central Repository to assign a unique CAT-Reporter-ID to 
identify Industry Members.
---------------------------------------------------------------------------

    \110\ See Exemptive Request Letter, supra note 31, at 19; 
Exemption Order, supra note 31 at 40-41.
---------------------------------------------------------------------------

    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to 
the Central Repository, on a daily basis, all SRO-Assigned Market 
Participant Identifiers used by its Industry Members, as well as 
information to identify each such Industry Member, including CRD number 
and LEI, if the SRO has collected such LEI of the Industry Member. 
Additionally, each Industry Member is required to submit to the Central 
Repository the CRD number of the Industry Member as well as the LEI of 
the Industry Member (if the Industry Member has an LEI). The Plan 
Processor will use this information to assign a CAT-Reporter-ID to each 
Industry Member for internal use within the Central Repository.
(b) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchanges 
propose to define the term ``SRO-Assigned Market Participant 
Identifier'' to mean an identifier assigned to an Industry Member by an 
SRO or an identifier used by a Participant.\111\ The Exchanges state 
that this is the same definition as set forth in Section 1.1 of the CAT 
NMS Plan.
---------------------------------------------------------------------------

    \111\ For example, an Industry Member would be permitted to use 
any existing SRO-Assigned Market Participant Identifier (e.g., FINRA 
MPID, NASDAQ MPID, NYSE Mnemonic, CBOE User Acronym and CHX Acronym) 
when reporting order information to the Central Repository. See 15 
U.S.C. 78c(a)(26); proposed Bats BYX Rule 4.5(kk); Bats BZX Rule 
4.5(kk); Bats EDGA Rule 4.5(kk); Bats EDGX Rule 4.5(kk); BX Rules 
6810(kk) and Chapter IX, Section 8, paragraph (a)(xxxvii); BOX Rule 
16010(kk); C2 Chapter 6, Section F; CBOE Rule 6.85(kk); CHX Article 
23, Rule 1(kk); IEX Rule 11.610(kk); ISE Rule 900(kk); ISE Gemini 
Rule 900(kk); ISE Mercury 900(kk); MIAX Rule 1701(kk); MIAX PEARL 
Chapter XVII; NASDAQ Rules 6810(kk) and Chapter IX, Section 8, 
paragraph (a)(xxxvii); NYSE Rule 6810(kk); NYSE Arca Equities Rule 
6.6810(kk); NYSE Arca Options Rule 11.6810(kk); NYSE MKT Rule 
6810(kk); NYSE National Rule 14.1(kk); and Phlx Rule 910A(kk).
---------------------------------------------------------------------------

38. Small Industry Member
    The Exchanges represent that the requirements of the proposed CAT 
Compliance Rules differ to some extent for Small Industry Members 
versus Industry Members other than Small Industry Members. For example, 
the compliance dates for reporting data to the CAT are different for 
Small Industry Members versus other Industry Members. Accordingly, to 
clarify the requirements that apply to which Industry Members, the 
Exchanges propose to define the term ``Small Industry Member'' to mean 
an Industry Member that qualifies as a small broker-dealer as defined 
in Exchange Act Rule 0-10(c).\112\ The Exchanges state that this is the 
same in substance as the definition of ``Small Industry Member'' as set 
forth in Section 1.1 of the CAT NMS Plan. Specifically, Section 1.1 of 
the CAT NMS Plan defines a ``Small Industry Member'' as ``an Industry 
Member that qualifies as a small broker-dealer as defined in Rule 
613.'' The definition of a small broker-dealer under Rule 613, in turn, 
is a small broker-dealer as defined in Exchange Act Rule 0-10(c).
---------------------------------------------------------------------------

    \112\ 17 CFR 240.0-10(c); proposed Bats BYX Rule 4.5(ll); Bats 
BZX Rule 4.5(ll); Bats EDGA Rule 4.5(ll); Bats EDGX Rule 4.5(ll); BX 
Rules 6810(ll) and Chapter IX, Section 8, paragraph (a)(xxxviii); 
BOX Rule 16010(ll); C2 Chapter 6, Section F; CBOE Rule 6.85(ll); CHX 
Article 23, Rule 1(ll); IEX Rule 11.610(ll); ISE Rule 900(ll); ISE 
Gemini Rule 900(ll); ISE Mercury 900(ll); MIAX Rule 1701(ll); MIAX 
PEARL Chapter XVII; NASDAQ Rules 6810(ll) and Chapter IX, Section 8, 
paragraph (a)(xxxviii); NYSE Rule 6810(ll); NYSE Arca Equities Rule 
6.6810(ll); NYSE Arca Options Rule 11.6810(ll); NYSE MKT Rule 
6810(ll); NYSE National Rule 14.1(ll); and Phlx Rule 910A(ll).
---------------------------------------------------------------------------

39. Trading Day
    The proposed CAT Compliance Rules establish the deadlines for 
reporting certain data to the Central Repository using the term 
``Trading Day.'' Accordingly, the Exchanges propose that the term 
``Trading Day'' shall have the meaning as is determined by the 
Operating Committee.\113\ For the avoidance of doubt, the Exchanges 
represent that the Operating Committee may establish different Trading 
Days for NMS Stocks, Listed Options, OTC Equity Securities, and any 
other securities that are included as Eligible Securities from time to 
time.
---------------------------------------------------------------------------

    \113\ See proposed Bats BYX Rule 4.5(mm); Bats BZX Rule 4.5(mm); 
Bats EDGA Rule 4.5(mm); Bats EDGX Rule 4.5(mm); BX Rules 6810(mm) 
and Chapter IX, Section 8, paragraph (a)(xxxix); BOX Rule 16010(mm); 
C2 Chapter 6, Section F; CBOE Rule 6.85(mm); CHX Article 23, Rule 
1(mm); IEX Rule 11.610(mm); ISE Rule 900(mm); ISE Gemini Rule 
900(mm); ISE Mercury 900(mm); MIAX Rule 1701(mm); MIAX PEARL Chapter 
XVII; NASDAQ Rules 6810(mm) and Chapter IX, Section 8, paragraph 
(a)(xxxix); NYSE Rule 6810(mm); NYSE Arca Equities Rule 6.6810(mm); 
NYSE Arca Options Rule 11.6810(mm); NYSE MKT Rule 6810(mm); NYSE 
National Rule 14.1(mm); and Phlx Rule 910A(mm).
---------------------------------------------------------------------------

B. Clock Synchronization
    Rule 613(d)(1) of Regulation NMS requires Industry Members to 
synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards.\114\ To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\115\ To implement these provisions 
with regard to its Industry Members, the Exchanges propose CAT 
Compliance Rules to require their Industry Members to comply with the 
clock synchronization requirements of the Plan.\116\
---------------------------------------------------------------------------

    \114\ 17 CFR 242.613(d)(1). Related to the clock synchronization 
requirements, the Commission notes that the Participants also filed 
a request for an exemption from the March 15, 2017 filing deadline 
requirement set forth Section 6.7(a)(ii) of the CAT NMS Plan and in 
the proposed CAT Compliance Rules. See infra note 161. The 
Commission granted the Participants' exemption request. See infra 
note 163.
    \115\ In addition, Section 6.7(a)(ii) of the Plan sets forth the 
timeline for CAT Reporters to comply with the clock synchronization 
requirements.
    \116\ See proposed Bats BYX Rule 4.6; Bats BZX Rule 4.6; Bats 
EDGA Rule 4.6; Bats EDGX Rule 4.6; BX Rule 6820 and Section IX, 
Section 8, subparagraph (b); BOX Rule 16020; C2 Chapter 6, Section 
F; CBOE Rule 6.86; CHX Article 23, Rule 2; IEX Rule 11.620; ISE Rule 
901; ISE Gemini Rule 901; ISE Mercury Rule 901; MIAX Rule 1702; MIAX 
PEARL Chapter XVII; Nasdaq Rule 6820 and Section IX, Section 8, 
subparagraph (b); NYSE Rule 6820; NYSE Arca Equities Rule 6.6820; 
NYSE Arca Options Rule 11.6820; NYSE MKT Rule 6820; NYSE National 
Rule 14.2; and Phlx Rule 920A.
---------------------------------------------------------------------------

1. Clock Synchronization
    The proposed CAT Compliance Rules set forth the manner in which 
Industry Members must synchronize their Business Clocks. The Rules 
require each Industry Member to synchronize its Business Clocks, other 
than such Business Clocks used solely for Manual Order Events or used 
solely for the time of allocation on Allocation Reports, at a minimum 
to within a fifty (50) millisecond tolerance of the time maintained by 
the NIST atomic clock, and maintain such synchronization. The Exchanges 
represent that this is the same requirement as set forth in Section 
6.8(a)(ii)(A) of the CAT NMS Plan.
    The proposed CAT Compliance Rules require each Industry Member to 
synchronize (1) its Business Clocks used solely for Manual Order Events 
and (2) its Business Clocks used solely for the time of allocation on 
Allocation Reports at a minimum to within a one second

[[Page 14537]]

tolerance of the time maintained by the NIST atomic clock, and maintain 
such synchronization. The Exchanges state that this is the same 
requirement as set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS 
Plan. The proposed CAT Compliance Rules clarify that the tolerance 
described in paragraphs (a)(1) and (2) of the proposed Rules includes 
all of the following: (1) The time difference between the NIST atomic 
clock and the Industry Member's Business Clock; (2) the transmission 
delay from the source; and (3) the amount of drift of the Industry 
Member's Business Clock.
    The proposed CAT Compliance Rules require Industry Members to 
synchronize their Business Clocks every business day before market open 
to ensure that timestamps for Reportable Events are accurate.\117\ In 
addition, to maintain clock synchronization, Business Clocks must be 
checked against the NIST atomic clock and re-synchronized, as 
necessary, throughout the day.
---------------------------------------------------------------------------

    \117\ The proposed CBOE and C2 CAT Compliance Rules require 
Industry Members to synchronize their business clocks before each 
trading session. See proposed CBOE Rule 6.86(a)(iv); C2 Chapter 6, 
Section F.
---------------------------------------------------------------------------

2. Documentation
    The proposed CAT Compliance Rules set forth documentation 
requirements with regard to clock synchronization. Specifically, the 
proposed Rules require Industry Members to document and maintain their 
synchronization procedures for their Business Clocks. The proposed 
Rules require Industry Members to keep a log of the times when they 
synchronize their Business Clocks and the results of the 
synchronization process. This log is required to include notice of any 
time a Business Clock drifts more than the applicable tolerance 
specified in the Rules. Such logs must include results for a period of 
not less than five years ending on the then current date, or for the 
entire period for which the Industry Member has been required to comply 
with this Rule if less than five years. The Exchanges state that these 
documentation requirements are the same as those set forth in the 
``Sequencing Orders and Clock Synchronization'' section of Appendix C 
of the CAT NMS Plan.
3. Certification
    The proposed CAT Compliance Rules set forth certification 
requirements with regard to clock synchronization. Specifically, the 
Rules require each Industry Member to certify to a Participant that its 
Business Clocks satisfy the synchronization requirements set forth in 
the proposed CAT Compliance Rules periodically in accordance with the 
certification schedule established by the Operating Committee pursuant 
to the CAT NMS Plan. The Exchanges state that this requirement is the 
same requirement as set forth in Section 6.8(a)(ii)(B), (iii) and (iv) 
of the CAT NMS Plan. The Exchanges state that they intend to announce 
to their Industry Members the certification schedule established by the 
Operating Committee.\118\
---------------------------------------------------------------------------

    \118\ The Exchanges will do so via Regulatory Circular, 
Regulatory Information Circular, Information Circular, Circular, 
Information Memorandum or Trader Update, as applicable.
---------------------------------------------------------------------------

4. Violation Reporting
    The proposed CAT Compliance Rules establish reporting requirements 
with regard to clock synchronization. These proposed Rules require 
Industry Members to report to the Plan Processor and FINRA violations 
of the clock synchronization requirements of the proposed Rules 
pursuant to the thresholds set by the Operating Committee pursuant to 
the CAT NMS Plan. The Exchanges represent that this requirement is the 
same requirement as set forth in Section 6.8(a)(ii)(C), (iii) and (iv) 
of the CAT NMS Plan. The Exchanges intend to announce to their Industry 
Members the relevant thresholds established by the Operating 
Committee.\119\
---------------------------------------------------------------------------

    \119\ Id.
---------------------------------------------------------------------------

C. Industry Member Data Reporting

    Rule 613(c) of Regulation NMS requires the CAT NMS Plan to set 
forth certain provisions requiring Industry Members to record and 
report data to the CAT.\120\ To comply with this provision, Section 6.4 
of the CAT NMS Plan sets forth the data reporting requirements for 
Industry Members. To implement these provisions with regard to its 
Industry Members, the Exchanges propose provisions in their CAT 
Compliance Rules addressing Industry Member Data Reporting to require 
their Industry Members to comply with the Industry Member Data 
reporting requirements of the Plan.\121\ The proposed CAT Compliance 
Rules have five sections covering: (1) Recording and reporting Industry 
Member Data, (2) timing of the recording and reporting, (3) the 
applicable securities covered by the recording and reporting 
requirements, (4) the security symbology to be used in the recording 
and reporting, and (5) error correction requirements, each of which is 
described below.
---------------------------------------------------------------------------

    \120\ See 17 CFR 242.613(c).
    \121\ See proposed Bats BYX Rule 4.7; Bats BZX Rule 4.7; Bats 
EDGA Rule 4.7; Bats EDGX Rule 4.7; BX Rule 6830 and Section IX, 
Section 8, subparagraph (c); BOX Rule 16030; C2 Chapter 6, Section 
F; CBOE Rule 6.87(b); CHX Article 23, Rule 3; IEX Rule 11.630; ISE 
Rule 902; ISE Gemini Rule 902; ISE Mercury Rule 902; MIAX Rule 1703; 
MIAX PEARL Chapter XVII; Nasdaq Rule 6830 and Section IX, Section 8, 
subparagraph (c); NYSE Rule 6830; NYSE Arca Equities Rule 6.6830; 
NYSE Arca Options Rule 11.6830; NYSE MKT Rule 6830; NYSE National 
Rule 14.3; Phlx Rule 930A.
---------------------------------------------------------------------------

1. Recording and Reporting Industry Member Data
    The proposed CAT Compliance Rules describe the recording and 
reporting of Industry Member Data to the Central Repository. The 
proposed Rules cover Recorded Industry Member Data, Received Industry 
Member Data and Options Market Maker data. The proposed CAT Compliance 
Rules set forth the recording and reporting requirements required in 
Section 6.4(d)(i)-(iii) of the CAT NMS Plan.
    The proposed CAT Compliance Rules require, subject to provisions 
regarding Options Market Makers, each Industry Member to record and 
electronically report to the Central Repository the following details 
for each order and each Reportable Event, as applicable (``Recorded 
Industry Member Data'') in the manner prescribed by the Operating 
Committee pursuant to the CAT NMS Plan:
     For original receipt or origination of an order: (1) Firm 
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned 
Market Participant Identifier of the Industry Member receiving or 
originating the order; (4) date of order receipt or origination; (5) 
time of order receipt or origination (using timestamps pursuant to the 
proposed Rules \122\); and (6) Material Terms of the Order;
---------------------------------------------------------------------------

    \122\ See infra note 135.
---------------------------------------------------------------------------

     for the routing of an order: (1) CAT-Order-ID; (2) date on 
which the order is routed; (3) time at which the order is routed (using 
timestamps pursuant to the proposed Rules \123\); (4) SRO-Assigned 
Market Participant Identifier of the Industry Member routing the order; 
(5) SRO-Assigned Market Participant Identifier of the Industry Member 
or Participant to which the order is being routed; (6) if routed 
internally at the Industry Member, the identity and nature of the 
department or desk to which the order is routed; and (7) Material Terms 
of the Order;
---------------------------------------------------------------------------

    \123\ Id.
---------------------------------------------------------------------------

     for the receipt of an order that has been routed, the 
following information: (1) CAT-Order-ID; (2) date on which the order is 
received; (3) time at which the order is received (using timestamps

[[Page 14538]]

pursuant to the proposed Rules \124\); (4) SRO-Assigned Market 
Participant Identifier of the Industry Member receiving the order; (5) 
SRO-Assigned Market Participant Identifier of the Industry Member or 
Participant routing the order; and (6) Material Terms of the Order;
---------------------------------------------------------------------------

    \124\ Id.
---------------------------------------------------------------------------

     if the order is modified or cancelled: (1) CAT-Order-ID; 
(2) date the modification or cancellation is received or originated; 
(3) time at which the modification or cancellation is received or 
originated (using timestamps pursuant to the proposed Rules \125\); (4) 
price and remaining size of the order, if modified; (5) other changes 
in the Material Terms of the Order, if modified; and (6) whether the 
modification or cancellation instruction was given by the Customer or 
was initiated by the Industry Member;
---------------------------------------------------------------------------

    \125\ Id.
---------------------------------------------------------------------------

     if the order is executed, in whole or in part: (1) CAT-
Order-ID; (2) date of execution; (3) time of execution (using 
timestamps pursuant to the proposed Rules \126\); (4) execution 
capacity (principal, agency or riskless principal); (5) execution price 
and size; (6) SRO-Assigned Market Participant Identifier of the 
Industry Member executing the order; (7) whether the execution was 
reported pursuant to an effective transaction reporting plan or the 
Plan for Reporting of Consolidated Options Last Sale Reports and 
Quotation Information; and
---------------------------------------------------------------------------

    \126\ Id.
---------------------------------------------------------------------------

     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    The proposed CAT Compliance Rules require, subject to provisions 
regarding Options Market Makers, each Industry Member to record and 
report to the Central Repository the following, as applicable 
(``Received Industry Member Data'') and collectively with the 
information referred to in the proposed Rules governing Industry Member 
Data in the manner prescribed by the Operating Committee pursuant to 
the CAT NMS Plan:
     If the order is executed, in whole or in part: (1) An 
Allocation Report; (2) SRO-Assigned Market Participant Identifier of 
the clearing broker or prime broker, if applicable; and (3) CAT-Order-
ID of any contra-side order(s);
     if the trade is cancelled, a cancelled trade indicator; 
and
     for original receipt or origination of an order, the Firm 
Designated ID for the relevant Customer, and in accordance with the 
proposed CAT Compliance Rules, Customer Account Information and 
Customer Identifying Information for the relevant Customer.
    The proposed CAT Compliance Rules state that each Industry Member 
that is an Options Market Maker is not required to report to the 
Central Repository the Industry Member Data regarding the routing, 
modification or cancellation of its quotes in Listed Options. Each 
Industry Member that is an Options Market Maker, however, is required 
to report to the Exchange the time at which its quote in a Listed 
Option is sent to the Exchange (and, if applicable, any subsequent 
quote modification time and/or cancellation time when such modification 
or cancellation is originated by the Options Market Maker). The 
proposed CAT Compliance Rules implement the Options Market Maker Quote 
Exemption, as discussed above.
2. Timing of Recording and Reporting
    The proposed CAT Compliance Rules describe the requirements related 
to the timing of recording and reporting of Industry Member Data.\127\ 
These Rules set forth the requirements related to the timing of the 
recording and reporting requirements required in Section 6.4(b)(i)-(ii) 
of the CAT NMS Plan.
---------------------------------------------------------------------------

    \127\ See proposed Bats BYX Rule 4.7(b); Bats BZX Rule 4.7(b); 
Bats EDGA Rule 4.7(b); Bats EDGX Rule 4.7(b); BX Rule 6830(b) and 
Section IX, Section 8, subparagraph (c)(ii); BOX Rule 16030(b); C2 
Chapter 6, Section F; CBOE Rule 6.87(b); CHX Article 23, Rule 3(b); 
IEX Rule 11.630(b); ISE Rule 902(b), ISE Gemini Rule 902(b); ISE 
Mercury Rule 902(b); MIAX Rule 1703(b); MIAX PEARL Chapter XVII; 
NASDAQ Rule 6830(b) and Section IX, Section 8, subparagraph (c)(ii); 
NYSE Rule 6830(b); NYSE Arca Equities Rule 6.6830(b); NYSE Arca 
Options Rule 11.6830(b); NYSE MKT Rule 6830(b); NYSE National Rule 
14.3(b); and Phlx Rule 930A(b).
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules require each Industry Member to 
record Recorded Industry Member Data contemporaneously with the 
applicable Reportable Event. The proposed Rules require each Industry 
Member to report: (1) Recorded Industry Member Data to the Central 
Repository by 8:00 a.m. Eastern Time on the Trading Day following the 
day the Industry Member records such Recorded Industry Member Data; and 
(2) Received Industry Member Data to the Central Repository by 8:00 
a.m. Eastern Time on the Trading Day following the day the Industry 
Member receives such Received Industry Member Data. The Rules state 
that Industry Members may, but are not required to, voluntarily report 
Industry Member Data prior to the applicable 8:00 a.m. Eastern Time 
deadline.
3. Applicable Securities
    The proposed CAT Compliance Rules describe the securities to which 
the recording and reporting requirements of the proposed Rules apply. 
The proposed Rules set forth the description of applicable securities 
as set forth in Section 6.4(c)(i) and (ii) of the CAT NMS Plan, 
respectively.\128\ The proposed Rules require each Industry Member to 
record and report to the Central Repository the Industry Member Data as 
set forth in the Rules for each NMS Security registered or listed for 
trading on such exchange or admitted to unlisted trading privileges on 
such exchange. The proposed Rules require each Industry Member to 
record and report to the Central Repository the Industry Member Data as 
set forth in the Rules for each Eligible Security for which transaction 
reports are required to be submitted to FINRA.
---------------------------------------------------------------------------

    \128\ See proposed Bats BYX Rule 4.7(c); Bats BZX Rule 4.7(c); 
Bats EDGA Rule 4.7(c); Bats EDGX Rule 4.7(c); BX Rule 6830(c) and 
Section IX, Section 8, subparagraph (c)(iii); BOX Rule 16030(c); C2 
Chapter 6, Section F; CBOE Rule 6.87(c); CHX Article 23, Rule 3(c); 
IEX Rule 11.630(c); ISE Rule 902(c); ISE Gemini Rule 902(c); ISE 
Mercury Rule 902(c); MIAX Rule 1703(c); MIAX PEARL Chapter XVII; 
Nasdaq Rule 6830(c) and Section IX, Section 8, subparagraph (c); 
NYSE Rule 6830(c)(iii); NYSE Rule 6830(c); NYSE Arca Equities Rule 
6.6830(c); NYSE Arca Options Rule 11.6830(c); NYSE MKT Rule 6830(c); 
NYSE National Rule 14.3(c); and Phlx Rule 930A(c).
---------------------------------------------------------------------------

4. Security Symbology
    The proposed CAT Compliance Rules describe the security symbology 
that Industry Members are required to use when reporting Industry 
Member Data to the Central Repository. The proposed Rules require, for 
each exchange-listed Eligible Security, each Industry Member to report 
Industry Member Data to the Central Repository using the symbology 
format of the exchange listing the security.\129\ The Exchanges state 
that this requirement implements the requirement set forth in Section 2 
of Appendix D of the CAT NMS Plan to use the listing exchange symbology 
when reporting data to the Central Repository for exchange-listed 
Eligible Securities.
---------------------------------------------------------------------------

    \129\ See proposed Bats BYX Rule 4.7(d); Bats BZX Rule 4.7(d); 
Bats EDGA Rule 4.7(d); Bats EDGX Rule 4.7(d); BX Rule 6830(d) and 
Section IX, Section 8, subparagraph (c)(iv); BOX Rule 16030(d); C2 
Chapter 6, Section F; CBOE Rule 6.87(d); CHX Article 23, Rule 3(d); 
IEX Rule 11.630(d); ISE Rule 902(d); ISE Gemini Rule 902(d); ISE 
Mercury Rule 902(d); MIAX Rule 1703(d); MIAX PEARL Chapter XVII; 
NASDAQ Rule 6830(d) and Section IX, Section 8, subparagraph (c)(iv); 
NYSE Rule 6830(d); NYSE Arca Equities Rule 6.6830(d); NYSE Arca 
Options Rule 11.6830(d); NYSE MKT Rule 6830(d); NYSE National Rule 
14.3(d); and Phlx Rule 930A(d).
---------------------------------------------------------------------------

    For each Eligible Security that is not exchange-listed, however, 
the Exchanges represent that there is no listing exchange to provide 
the symbology format. Moreover, to date,

[[Page 14539]]

the requisite symbology format has not been determined. Therefore, the 
proposed CAT Compliance Rules require, for each Eligible Security that 
is not exchange-listed, each Industry Member to report Industry Member 
Data to the Central Repository using such symbology format as approved 
by the Operating Committee pursuant to the CAT NMS Plan. The Exchanges 
state that they intend to announce to their Industry Members the 
relevant symbology formats established by the Operating Committee.\130\
---------------------------------------------------------------------------

    \130\ See supra note 118.
---------------------------------------------------------------------------

5. Error Correction Timeline
    To ensure that the CAT contains accurate data, the CAT NMS Plan 
requires Industry Members to correct erroneous data submitted to the 
Central Repository. Therefore, the proposed CAT Compliance Rules 
require that for each Industry Member for which errors in Industry 
Member Data submitted to the Central Repository have been identified by 
the Plan Processor or otherwise, such Industry Member submit corrected 
Industry Member Data to the Central Repository by 8:00 a.m. Eastern 
Time on T+3. The Exchanges represent that this requirement implements 
the error correction requirement set forth in Section 6 of Appendix D 
of the CAT NMS Plan.

D. Customer Information Reporting

    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository certain information related to their 
Customers in accordance with the Customer Information Approach 
discussed above. The Exchanges propose CAT Compliance Rules regarding 
Customer information reporting to implement this provision of the CAT 
NMS Plan with regard to their Industry Members.\131\
---------------------------------------------------------------------------

    \131\ See proposed Bats BYX Rule 4.8; Bats BZX Rule 4.8; Bats 
EDGA Rule 4.8; Bats EDGX Rule 4.8; BX Rule 6840 and Chapter IX, 
Section 8, subparagraph (d); BOX Rule 16040; C2 Chapter 6, Section 
F; CBOE Rule 6.88; CHX Article 23, Rule 4; IEX Rule 11.640; ISE Rule 
903; ISE Gemini Rule 903; ISE Mercury Rule 903; MIAX Rule 1704; MIAX 
PEARL Chapter XVII; NASDAQ Rule 6840 and Chapter IX, Section 8, 
subparagraph (d); NYSE Rule 6840; NYSE Arca Equities Rule 6.6840; 
NYSE Arca Options Rule 11.6840; NYSE MKT Rule 6840; NYSE National 
Rule 14.4; and Phlx Rule 940A.
---------------------------------------------------------------------------

1. Initial Set of Customer Information
    The proposed CAT Compliance Rules require each Industry Member to 
submit to the Central Repository the Firm Designated ID, Customer 
Account Information and Customer Identifying Information for each of 
its Customers with an Active Account prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in the CAT Compliance Rules.
2. Daily Updates to Customer Information
    The proposed CAT Compliance Rules require each Industry Member to 
submit to the Central Repository any updates, additions or other 
changes to the Firm Designated ID, Customer Account Information and 
Customer Identifying Information for each of its Customers with an 
Active Account on a daily basis.
3. Periodic Updates to Complete Set of Customer Information
    The proposed CAT Compliance Rules also require each Industry 
Member, on a periodic basis as designated by the Plan Processor and 
approved by the Operating Committee, to submit to the Central 
Repository a complete set of Firm Designated IDs, Customer Account 
Information and Customer Identifying Information for each of its 
Customers with an Active Account. This periodic refresh is intended to 
ensure that the Central Repository has the most current information 
identifying a Customer. The Exchanges represented that they intend to 
announce to their Industry Members when such a periodic refresh is 
required by the Plan Processor and the Operating Committee.\132\
---------------------------------------------------------------------------

    \132\ See supra note 118.
---------------------------------------------------------------------------

4. Error Correction Timeline
    Finally, the proposed CAT Compliance Rules address the correction 
of erroneous Customer data reported to the Central Repository to ensure 
an accurate audit trail. The Rules require, for each Industry Member 
for which errors in Firm Designated ID, Customer Account Information 
and Customer Identifying Information for each of its Customers with an 
Active Account submitted to the Central Repository have been identified 
by the Plan Processor or otherwise, such Member to submit corrected 
data to the Central Repository by 5:00 p.m. Eastern Time on T+3. The 
Exchanges state that this requirement implements the error correction 
requirement set forth in Appendix C of the CAT NMS Plan.

E. Industry Member Information Reporting

    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to 
submit to the Central Repository information sufficient to identify 
such Industry Member, including CRD number and LEI, if such LEI has 
been obtained, in accordance with the Existing Identifier Approach 
discussed above. The proposed CAT Compliance Rules require each 
Industry Member to submit to the Central Repository information 
sufficient to identify such Industry Member, including CRD number and 
LEI, if such LEI has been obtained, prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in the proposed Rules, and keep such 
information up to date as necessary.\133\ The Exchanges state that this 
provision implements Section 6.4(d)(vi) of the CAT NMS Plan with regard 
to its Industry Members information reporting.
---------------------------------------------------------------------------

    \133\ See proposed Bats BYX Rule 4.9; Bats BZX Rule 4.9; Bats 
EDGA Rule 4.9; Bats EDGX Rule 4.9; BX Rules 6850 and Chapter IX, 
Section 8, subparagraph (e); BOX Rule 16050; C2 Chapter 6, Section 
F; CBOE Rule 6.89; CHX Article 23, Rule 5; IEX Rule 11.650; ISE Rule 
904; ISE Gemini Rule 904; ISE Mercury Rule 904; MIAX Rule 1705; MIAX 
PEARL Chapter XVII; NASDAQ Rule 6850 and Chapter IX, Section 8, 
subparagraph (e); NYSE Rule 6850; NYSE Arca Equities Rule 6.6850; 
NYSE Arca Options Rule 11.6850; NYSE MKT Rule 6850; NYSE National 
Rule 14.5; and Phlx Rule 950A.
---------------------------------------------------------------------------

F. Time Stamps

    Rule 613(d)(3) of Regulation NMS sets forth requirements for time 
stamps used by CAT Reporters in recording and reporting data to the 
CAT.\134\ To comply with this provision, Section 6.8(b) of the Plan 
sets forth time stamp requirements for Industry Members. To implement 
this provision with regard to its Industry Members, the Exchanges 
propose CAT Compliance Rules to require their Industry Members to 
comply with the time stamp requirements of the Plan.\135\
---------------------------------------------------------------------------

    \134\ 17 CFR 242.613(d)(3).
    \135\ See proposed Bats BYX Rule 4.10; Bats BZX Rule 4.10; Bats 
EDGA Rule 4.10; Bats EDGX Rule 4.10; BX Rules 6850 and Chapter IX, 
Section 8, subparagraph (f); BOX Rule 16060; C2 Chapter 6, Section 
F; CBOE Rule 6.90; CHX Article 23, Rule 6; IEX Rule 11.660; MIAX 
Rule 1706; MIAX PEARL Chapter XVII; NASDAQ Rule 6850 and Chapter IX, 
Section 8, subparagraph (f); NYSE Rule 6860; NYSE Arca Equities Rule 
6.6860; NYSE Arca Options Rule 11.6860; NYSE MKT Rule 6860; NYSE 
National Rule 14.6; and Phlx Rule 960A.
---------------------------------------------------------------------------

1. Millisecond Time Stamps
    The proposed CAT Compliance Rules set forth the time stamp 
increments to be used by Industry Members in their CAT reporting. The 
Rules require each Industry Member to record and report Industry Member 
Data to the Central Repository with time stamps in milliseconds. To the 
extent that any Industry Member's order handling or execution systems 
utilize time stamps in increments finer than milliseconds, the proposed 
Rules require such Industry Member to record and report Industry Member 
Data to the Central Repository with time stamps in such finer

[[Page 14540]]

increment, subject to the proposed Rules regarding Manual Order Events 
and Allocation Reports.
2. One-Second Time Stamps/Electronic Order Capture
    The proposed CAT Compliance Rules set forth the permissible time 
stamp increments for Manual Order Events and Allocation Reports. 
Specifically, the proposed Rules permit each Industry Member to record 
and report Manual Order Events to the Central Repository in increments 
up to and including one second, provided that each Industry Member is 
required to record and report the Electronic Capture Time in 
milliseconds. In addition, the proposed CAT Compliance Rules permit 
each Industry Member to record and report the time of Allocation 
Reports in increments up to and including one second.

G. Clock Synchronization Rule Violations

    The proposed CAT Compliance Rules describe potential violations of 
the clock synchronization time period requirements.\136\ The proposed 
Rules state that an Industry Member that engages in a pattern or 
practice of reporting Reportable Events outside of the required clock 
synchronization time period without reasonable justification or 
exceptional circumstances may be considered in violation of this Rule. 
The Exchanges state that this provision implements the requirements of 
Section 6.8 of the CAT NMS Plan which requires the Compliance Rule to 
provide that a pattern or practice of reporting events outside of the 
required clock synchronization time period without reasonable 
justification or exceptional circumstances may be considered a 
violation of Rule 613 of Regulation NMS or the CAT NMS Plan.
---------------------------------------------------------------------------

    \136\ See proposed Bats BYX Rule 4.11; Bats BZX Rule 4.11; Bats 
EDGA Rule 4.11; Bats EDGX Rule 4.11; BX Rules 6865 and Chapter IX, 
Section 8, subparagraph (g); BOX Rule 16065; C2 Chapter 6, Section 
F; CBOE Rule 6.91; CHX Article 23, Rule 7; IEX Rule 11.665; ISE Rule 
906; ISE Gemini Rule 906; ISE Mercury Rule 906; MIAX Rule 1707; MIAX 
PEARL Chapter XVII; NASDAQ Rules 6865 and Chapter IX, Section 8, 
subparagraph (g); NYSE Rule 6865; NYSE Arca Equities Rule 6.6865; 
NYSE Arca Options Rule 11.6865; NYSE MKT Rule 6865; NYSE National 
Rule 14.7; and Phlx Rule 965A.
---------------------------------------------------------------------------

H. Connectivity and Data Transmission

    The proposed CAT Compliance Rules address connectivity and data 
transmission requirements related to the CAT.\137\
---------------------------------------------------------------------------

    \137\ See proposed Bats BYX Rule 4.12; Bats BZX Rule 4.12; Bats 
EDGA Rule 4.12; Bats EDGX Rule 4.12; BX Rules 6870 and Chapter IX, 
Section 8, subparagraph (h); BOX Rule 16070; C2 Chapter 6, Section 
F; CBOE Rule 6.92; CHX Article 23, Rule 8; IEX Rule 11.670; ISE Rule 
907; ISE Gemini Rule 907; ISE Mercury 907; MIAX Rule 1708; MIAX 
PEARL Chapter XVII; NASDAQ Rules Chapter IX, Section 8, subparagraph 
(h); NYSE Rule 6870; NYSE Arca Equities Rule 6.6870; NYSE Arca 
Options Rule 11.6870; NYSE MKT Rule 6870; NYSE National Rule 14.8; 
and Phlx Rule 970A.
---------------------------------------------------------------------------

1. Data Transmission
    The proposed CAT Compliance Rules describe the format(s) for 
reporting Industry Member Data to the Central Repository. Specifically, 
the proposed Rules require each Industry Member to transmit data as 
required under the CAT NMS Plan to the Central Repository utilizing 
such format(s) as may be provided by the Plan Processor and approved by 
the Operating Committee. The Exchanges state that this provision 
implements the formatting requirements as set forth in Section 6.4(a) 
of the CAT NMS Plan.
2. Connectivity
    The proposed CAT Compliance Rules address connectivity requirements 
related to the CAT. The proposed Rules require each Industry Member to 
connect to the Central Repository using a secure method(s), including, 
but not limited to, private line(s) and virtual private network 
connection(s). The Exchanges state that this provision implements the 
connectivity requirements set forth in Section 4 of Appendix D to the 
CAT NMS Plan.
3. CAT Reporting Agent
    The proposed CAT Compliance Rules permit Industry Members to enter 
into an agreement with CAT Reporting Agents to fulfill their data 
reporting obligations related to the CAT.\138\ Any such agreement must 
be evidenced in writing, which specifies the respective functions and 
responsibilities of each party to the agreement that are required to 
effect full compliance with the requirements of the proposed CAT 
Compliance Rules. The proposed Rules require that all written documents 
evidencing an agreement with a CAT Reporting Agent be maintained by 
each party to the agreement. The proposed Rules further state that each 
Industry Member remains primarily responsible for compliance with the 
requirements of the proposed CAT Compliance Rules, notwithstanding the 
existence of an agreement described otherwise in the proposed Rules.
---------------------------------------------------------------------------

    \138\ The Exchanges represent that the proposed Rules are based 
on FINRA Rule 7450(c), which permits OATS Reporting Members to enter 
into agreements with Reporting Agents to fulfill the OATS 
obligations of the OATS Reporting Member.
---------------------------------------------------------------------------

I. Development and Testing

    The Exchanges propose CAT Compliance Rules to address requirements 
for Industry Members related to CAT development and testing.\139\
---------------------------------------------------------------------------

    \139\ See proposed Bats BYX Rule 4.13; Bats BZX Rule 4.13; Bats 
EDGA Rule 4.13; Bats EDGX Rule 4.13; BX Rules 6880 and Chapter IX, 
Section 8, subparagraph (i); BOX Rule 16080; C2 Chapter 6, Section 
F; CBOE Rule 6.93; CHX Article 23, Rule 9; IEX Rule 11.680; ISE Rule 
908; ISE Gemini Rule 908; ISE Mercury Rule 908; MIAX Rule 1709; MIAX 
PEARL Chapter XVII; NASDAQ Rule 6880 and Chapter IX, Section 8, 
subparagraph (i); NYSE Rule 6880; NYSE Arca Equities Rule 6.6880; 
NYSE Arca Options Rule 11.6880; NYSE MKT Rule 6880; NYSE National 
Rule 14.9; and Phlx Rule 980A.
---------------------------------------------------------------------------

1. Development
    The proposed Rules set forth the testing requirements and deadlines 
for Industry Members to develop and commence reporting to the Central 
Repository. The Exchanges state that these requirements are set forth 
in Appendix C to the CAT NMS Plan.
    The CAT Compliance Rules set forth the deadlines related to 
connectivity and acceptance testing. Industry Members (other than Small 
Industry Members) are required to begin connectivity and acceptance 
testing with the Central Repository no later than August 15, 2018, and 
Small Industry Members are required to begin connectivity and 
acceptance testing with the Central Repository no later than August 15, 
2019.
    The CAT Compliance Rules also set forth the deadlines related to 
reporting Customer and Industry Member information.\140\ The proposed 
Rules require Industry Members (other than Small Industry Members) to 
begin reporting Customer and Industry Member information to the Central 
Repository for processing no later than October 15, 2018. The proposed 
Rules require Small Industry Members to begin reporting Customer and 
Industry Member information to the Central Repository for processing no 
later than October 15, 2019.
---------------------------------------------------------------------------

    \140\ See proposed Bats BYX Rule 4.13(a)(2); Bats BZX Rule 
4.13(a)(2); Bats EDGA Rule 4.13(a)(2); Bats EDGX Rule 4.13(a)(2); BX 
Rules 6880(a)(2) and Chapter IX, Section 8, subparagraph (i)(i)(2); 
BOX Rule 16080(a)(2); C2 Chapter 6, Section F; CBOE Rule 
6.93(a)(ii); CHX Article 23, Rule 9(a)(2); IEX Rule 11.680(a)(2); 
ISE Rule 908(a)(2); ISE Gemini Rule 908(a)(2); ISE Mercury 
908(a)(2); MIAX Rule 1709(a)(2); MIAX PEARL Chapter XVII; NASDAQ 
Rule 6880(a)(2) and Chapter IX, Section 8, subparagraph (i)(i)(2); 
NYSE Rule 6880(a)(2); NYSE Arca Equities Rule 6.6880(a)(2); NYSE 
Arca Options Rule 11.6880(a)(2); NYSE MKT Rule 6880(a)(2); NYSE 
National Rule 14.9(a)(2); and Phlx Rule 980A(a)(2).
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules set forth the deadlines related 
to the submission of order data. Under the proposed Rules, Industry 
Members (other than Small Industry Members) are permitted, but not 
required, to submit order data for testing purposes

[[Page 14541]]

beginning no later than May 15, 2018. In addition, Industry Members 
(other than Small Industry Members) are required to participate in the 
coordinated and structured testing of order submission, which will 
begin no later than August 15, 2018. Under the proposed Rules, Small 
Industry Members are permitted, but not required, to submit order data 
for testing purposes beginning no later than May 15, 2019. In addition, 
Small Industry Members are required to participate in the coordinated 
and structured testing of order submission, which will begin no later 
than August 15, 2019.
    The proposed CAT Compliance Rules state that Industry Members are 
permitted, but not required to, submit Quote Sent Times on Options 
Market Maker quotes to Exchanges, beginning no later than October 15, 
2018 for testing purposes.
2. Testing
    The proposed CAT Compliance Rules implement the requirement under 
the CAT NMS Plan that Industry Members participate in required industry 
testing with the Central Repository. Specifically, the proposed Rules 
require that each Industry Member participate in testing related to the 
Central Repository, including any industry-wide disaster recovery 
testing, pursuant to the schedule established pursuant to the CAT NMS 
Plan. The Exchanges state that they intend to announce to its Industry 
Members the schedule established pursuant to the CAT NMS Plan.\141\
---------------------------------------------------------------------------

    \141\ See supra note 118.
---------------------------------------------------------------------------

J. Recordkeeping

    The proposed CAT Compliance Rules set forth the recordkeeping 
obligations related to the CAT for Industry Members.\142\ The proposed 
Rules require each Industry Member to maintain and preserve records of 
the information required to be recorded under the proposed Rules for 
the period of time and accessibility specified in Exchange Act Rule 
17a-4(b).\143\ The records required to be maintained and preserved 
under the proposed Rules may be immediately produced or reproduced on 
``micrographic media'' as defined in Rule 17a-4(f)(1)(i) \144\ or by 
means of ``electronic storage media'' as defined in Exchange Act Rule 
17a-4(f)(1)(ii) \145\ that meet the conditions set forth in Exchange 
Act Rule 17a-4(f) \146\ and be maintained and preserved for the 
required time in that form. The proposed CAT Compliance Rules are based 
on FINRA Rule 7440(a)(5), which sets forth the recordkeeping 
requirements related to OATS.
---------------------------------------------------------------------------

    \142\ See proposed Bats BYX Rule 4.14; Bats BZX Rule 4.14; Bats 
EDGA Rule 4.14; Bats EDGX Rule 4.14; BX Rules 6890 and Chapter IX, 
Section 8, subparagraph (j); BOX Rule 16090; C2 Chapter 6, Section 
F; CBOE Rule 6.94; CHX Article 23, Rule 10; IEX Rule 11.690; ISE 
Rule 909; ISE Gemini Rule 909; ISE Mercury Rule 909; MIAX Rule 1710; 
MIAX PEARL Chapter XVII; NASDAQ Rule 6890 and Chapter IX, Section 8, 
subparagraph (j); NYSE Rule 6890; NYSE Arca Equities Rule 6.6890; 
NYSE Arca Options Rule 11.6890; NYSE MKT Rule 6890; NYSE National 
Rule 14.10; and Phlx Rule 990A.
    \143\ 17 CFR 240.17a-4(b).
    \144\ 17 CFR 240.17a-4(f)(1)(i).
    \145\ 17 CFR 240.17a-4(f)(1)(ii).
    \146\ 17 CFR 240.17a-4(f).
---------------------------------------------------------------------------

K. Timely, Accurate and Complete Data

1. General
    The Exchanges note that Rule 613 of Regulation NMS and the CAT NMS 
Plan emphasize the importance of the timeliness, accuracy, completeness 
and integrity of the data submitted to the CAT.\147\ Accordingly, the 
proposed CAT Compliance Rules require that Industry Members record and 
report data to the Central Repository as required by the proposed Rules 
in a manner that ensures the timeliness, accuracy, integrity and 
completeness of such data.\148\ The Exchanges state that the proposed 
CAT Compliance Rules implement the Plan's requirement with respect to 
the importance of timely, accurate and complete data with regard to 
Industry Members.
---------------------------------------------------------------------------

    \147\ See 17 CFR 242.613(e)(4)(i)(D)(ii); and CAT NMS Plan, 
supra note 21, at Section 6.5(d).
    \148\ See proposed Bats BYX Rule 4.15; Bats BZX Rule 4.15; Bats 
EDGA Rule 4.15; Bats EDGX Rule 4.15; BX Rule 6893 and Chapter IX, 
Section 8, subparagraph (k); BOX Rule 16093; C2 Chapter 6, Section 
F; CBOE Rule 6.95; CHX Article 23, Rule 11; IEX Rule 11.693; ISE 
Rule 910; ISE Gemini Rule 910; ISE Mercury Rule 910; MIAX Rule 1711; 
MIAX PEARL Chapter XVII; Nasdaq Rule 6893 and Chapter IX, Section 8, 
subparagraph (k) NYSE Rule 6893; NYSE Arca Equities Rule 6.6893; 
NYSE Arca Options Rule 11.6893; NYSE MKT Rule 6893; NYSE National 
Rule 14.11; and Phlx Rule993A.
---------------------------------------------------------------------------

2. LEIs
    In addition, without limiting the general requirement as set forth 
in the proposed Rules, the proposed CAT Compliance Rules require 
Industry Members to accurately provide the LEIs in their records as 
required by the proposed Rules and state that Industry Members may not 
knowingly submit inaccurate LEIs to the Central Repository. The 
Exchanges note, however, that this requirement does not impose any 
additional due diligence obligations on Industry Members with regard to 
LEIs for CAT purposes. Accordingly, the Exchanges state that this 
provision does not impose any due diligence obligations beyond those 
that may exist today with respect to information associated with LEIs. 
Although Industry Members will not be required to perform additional 
due diligence with regard to the LEIs for CAT purposes, Industry 
Members will be required to accurately provide the LEIs in their 
records and may not knowingly submit inaccurate LEIs to the CAT. The 
Exchanges believe that these proposed Rules are consistent with the 
Approval Order for the CAT NMS Plan regarding an Industry Member's 
obligations regarding LEIs.\149\
---------------------------------------------------------------------------

    \149\ See Approval Order, supra note 24, at 84745.
---------------------------------------------------------------------------

3. Compliance With Error Rate
    The proposed CAT Compliance Rules state that, if an Industry Member 
reports data to the Central Repository with errors such that its error 
percentage exceeds the maximum Error Rate established by the Operating 
Committee pursuant to the CAT NMS Plan, then such Industry Member would 
not be in compliance with the Rules. As discussed above, the initial 
maximum Error Rate is 5%, although the Error Rate is expected to be 
reduced over time. The Exchanges state that they intend to announce to 
their Industry Members changes to the Error Rate established pursuant 
to the CAT NMS Plan.\150\
---------------------------------------------------------------------------

    \150\ See supra note 118.
---------------------------------------------------------------------------

4. Compliance Thresholds
    The proposed CAT Compliance Rules also address compliance 
thresholds related to reporting data to the CAT. These proposed Rules 
state that each Industry Member is required to meet a separate 
compliance threshold which will be an Industry Member-specific rate 
that may be used as the basis for further review or investigation into 
the Industry Member's performance with regard to the CAT (the 
``Compliance Thresholds''). The Exchanges note that Compliance 
Thresholds will compare an Industry Member's error rate to the 
aggregate Error Rate over a period of time to be defined by the 
Operating Committee. Compliance Thresholds will be set by the Operating 
Committee, and will be calculated at intervals to be set by the 
Operating Committee.\151\ Compliance Thresholds will include compliance 
with the data reporting and clock synchronization requirements. The 
proposed CAT Compliance Rules state that an Industry Member's 
performance with respect to its Compliance Threshold will not signify, 
as a matter of law, that such Industry

[[Page 14542]]

Member has violated the proposed Rules.
---------------------------------------------------------------------------

    \151\ See CAT NMS Plan, supra note 21, at Appendix C.
---------------------------------------------------------------------------

L. Compliance Dates

1. General
    The proposed CAT Compliance Rules set forth the compliance dates 
for the various provisions of the proposed Rules.\152\ The proposed 
Rules state that, except otherwise set forth in the proposed Rules, the 
compliance date for the proposed CAT Compliance Rules will be the date 
of Commission approval of the proposed rule changes.
---------------------------------------------------------------------------

    \152\ See proposed Bats BYX Rule 4.16; Bats BZX Rule 4.16; Bats 
EDGA Rule 4.16; Bats EDGX Rule 4.16; BOX Rule 16095; BX Rule 6895 
and Chapter IX, Section 8, subparagraph (l); C2 Chapter 6, Section 
F; CBOE Rule 6.96; CHX Article 23, Rule 12; IEX Rule 11.695; ISE 
Rule 911; ISE Gemini Rule 911; ISE Mercury Rule 911; MIAX Rule 1712; 
MIAX PEARL Chapter XVII; NASDAQ Rule 6895 and Chapter IX, Section 8, 
subparagraph (l); NYSE Rule 6895; NYSE Arca Equities Rule 6.6895; 
NYSE Arca Options Rule 11.6895; NYSE MKT Rule 6895; NYSE National 
Rule 14.12; and Phlx Rule 995A.
---------------------------------------------------------------------------

2. Clock Synchronization
    The proposed CAT Compliance Rules establish the compliance dates 
for the clock synchronization requirements. The proposed CAT Compliance 
Rules state that each Industry Member shall comply with the Rules with 
regard to Business Clocks that capture time in milliseconds commencing 
on or before March 15, 2017. The proposed Rules also state that each 
Industry Member shall comply with the Rules with regard to Business 
Clocks that do not capture time in milliseconds commencing on or before 
February 19, 2018. The compliance date set forth in the proposed CAT 
Compliance Rules reflects the exemptive relief granted by the 
Commission with regard to the clock synchronization requirements 
related to Business Clocks that do not capture time in 
milliseconds.\153\
---------------------------------------------------------------------------

    \153\ See infra notes 161 and 163, and accompanying text 
(discussing the Participants' Clock Synchronization Exemption 
Request and Order Granting Limited Exemptive Relief, Pursuant to 
Rule 608(e) of the Securities Exchange Act of 1934, from the Clock 
Synchronization Compliance Deadline Specified in Section 6.7(a)(ii) 
of the National Market System Plan Governing the Consolidated Audit 
Trail).
---------------------------------------------------------------------------

3. CAT Data Reporting
    The proposed CAT Compliance Rules establish the compliance dates 
for the data recording and reporting requirements for Industry Members. 
The proposed Rules require each Industry Member (other than Small 
Industry Members) to record and report the Industry Member Data to the 
Central Repository by November 15, 2018. The proposed Rules require 
that each Industry Member that is a Small Industry Member to record and 
report the Industry Member Data to the Central Repository by November 
15, 2019. The Exchanges state that such compliance dates are consistent 
with the compliance dates set forth in Rule 613(a)(3)(v) and (vi),\154\ 
and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
---------------------------------------------------------------------------

    \154\ 17 CFR 242.613(a)(3)(v), (vi).
---------------------------------------------------------------------------

IV. Summary of Comments

    As noted above, the Commission received three comment letters on 
the proposed rule change and a response letter from the 
Participants.\155\ Two commenters raised concerns about the clock 
synchronization requirements for Allocation Reports.\156\ One commenter 
noted that the CAT NMS Plan states that the Participants have not yet 
determined how the ``time of allocation'' will be defined and that the 
Participants stated they would address this in the Technical 
Specifications.\157\ Given that the time of allocation had not yet been 
defined, this commenter stated that ``it was not possible to ensure 
clock synchronization requirements on Allocation Reports at this 
time.'' \158\ Another commenter asked for clarification whether the 
Clock Synchronization Exemption Request, as discussed below, filed by 
the Participants extends to time stamps required for Allocation 
Reports, and for clarification regarding when time stamps on manual 
orders and electronic capture of manual orders need to be 
captured.\159\
---------------------------------------------------------------------------

    \155\ See supra note 17.
    \156\ Thomson Reuters Letter at 1; FIF Letter at 1.
    \157\ Thomson Reuters Letter at 1.
    \158\ Thomson Reuters Letter at 1-2. See also FIF Letter at 2.
    \159\ FIF Letter at 1, 2.
---------------------------------------------------------------------------

    The Participants noted in their Response Letter that Section 
6.7(a)(ii) of the CAT NMS Plan requires that Industry Members must 
synchronize their Business Clocks and certify that they have satisfied 
applicable Business Clock synchronization requirements by March 15, 
2017.\160\ However, the Participants noted that, on January 17, 2017, 
they filed with the Commission a request for exemptive relief from 
Section 6.7(a)(ii) of the CAT NMS Plan (the ``Clock Synchronization 
Exemption Request'').\161\ The Clock Synchronization Exemption Request 
requested that the Commission permit the Participants to extend the 
Business Clock synchronization compliance date in Section 6.7(a)(ii) of 
the CAT NMS Plan from March 15, 2017 to February 19, 2018 for Industry 
Members' Business Clocks that do not capture time in milliseconds.\162\ 
On March 2, 2017, the Commission granted the Exemption Request.\163\
---------------------------------------------------------------------------

    \160\ Participants' Response Letter at 2.
    \161\ See Letter from Participants to Brent J. Fields, 
Secretary, Commission, dated January 17, 2017 (``Clock 
Synchronization Exemption Request Letter'').
    \162\ Id.
    \163\ See Order Granting Limited Exemptive Relief, Pursuant to 
Rule 608(e) of the Securities Exchange Act of 1934, from the Clock 
Synchronization Compliance Deadline Specified in Section 6.7(a)(ii) 
of the National Market System Plan Governing the Consolidated Audit 
Trail, Securities Exchange Act Release No. 80142 (March 2, 2017), 82 
FR 13034 (March 8, 2017) (``Clock Synchronization Exemption 
Order'').
---------------------------------------------------------------------------

    The Participants also noted that the Operating Committee of the CAT 
NMS Plan recently approved guidance that clarifies that, for purposes 
of the initial March 15, 2017 Business Clock synchronization and 
certification deadlines, ``Business Clocks'' include those clocks that 
currently capture time in milliseconds and that are used to record time 
related to ``Reportable Events,'' as defined under the Plan, including, 
without limitation, the original receipt or origination, modification, 
cancellation, routing, execution (in whole or in part) and allocation 
of an order, and receipt of a routed order, in Eligible Securities 
(i.e., NMS Securities and OTC Equity Securities).\164\ The Participants 
represented that each Participant has, or will, issue this guidance to 
its members. The Participants further stated in their response letter 
that to align the compliance rule with the Exemption Request, Business 
Clocks used solely for the time of allocation on Allocation Reports 
must comply with the March 15, 2017 synchronization deadline to the 
extent that such Business Clocks currently capture time in 
milliseconds.\165\
---------------------------------------------------------------------------

    \164\ Participants' Response Letter at 2.
    \165\ Id. at 3.
---------------------------------------------------------------------------

    With respect to time stamps on manual orders and electronic capture 
of manual orders the Participants acknowledged in their response letter 
that additional information will be provided in Technical 
Specifications prepared by the Plan Processor and approved by the 
Operating Committee.\166\ The Participants noted that the Technical 
Specifications also will define the ``time of the allocation.'' The 
Participants stated that as a result, the Participants cannot issue 
additional information or definitions at this time since the 
development and construction of the CAT System and Central Repository 
are underway. The Participants represented that the Participants intend 
to work with the Plan Processor to define various terms,

[[Page 14543]]

including ``time of the allocation,'' and to provide Technical 
Specifications approved by the Operating Committee before Industry 
Members will be required to report to the Central Repository on 
November 15, 2018 (or November 15, 2019 for Small Industry Members) or 
comply with the February 19, 2018 Business Clock synchronization 
requirement.
---------------------------------------------------------------------------

    \166\ Id.
---------------------------------------------------------------------------

    One commenter discussed several concerns related to the clock 
synchronization requirements of the proposed CAT Compliance Rules.\167\ 
This commenter noted that ``retention of a complete log of clock 
synchronization events is an additional business cost without providing 
compensatory regulatory benefit.'' \168\ This commenter urged FINRA to 
collect clock synchronization data based on the data received as a 
result of the requirements of FINRA Rule 4590 to see if such a log of 
clock synchronization is ``required to effectively surveil for 
compliance with clock synchronization standards'' and requested that 
the Commission require FINRA to assess the effectiveness of the logging 
requirement.\169\ This commenter also noted that there is a two year 
difference in the log retention requirements between FINRA Rule 4590 
and the proposed CAT Compliance Rules and stated that the extra two 
years of log retention represents an additional business cost for 
storage and clock management.\170\
---------------------------------------------------------------------------

    \167\ FIF Letter at 2.
    \168\ FIF Letter at 2.
    \169\ FIF Letter at 2.
    \170\ FIF Letter at 2.
---------------------------------------------------------------------------

    In response, the Participants stated that they believe that it is 
appropriate for Industry Members to maintain a log of all clock 
synchronization events in order to demonstrate the Industry Members' 
compliance with the Proposed Compliance Rule and the CAT NMS Plan and 
to retain such log for five-years.\171\ The Participants noted that the 
Business Clock synchronization log was discussed and considered in the 
CAT NMS Plan Proposing and Adopting Releases, and that the Commission 
considered an alternative where Industry Members would record only 
exceptions to the clock synchronization requirement. Because the CAT 
NMS Plan contains the requirement that logs be created and retained for 
five-years, the Participants stated that the retention period set forth 
in the Participants' Proposed Compliance Rules is consistent with the 
data retention period applicable to the Central Repository as set forth 
in Rule 613(e)(8).
---------------------------------------------------------------------------

    \171\ Participants' Response Letter at 4.
---------------------------------------------------------------------------

    With respect to the clock synchronization procedures in the 
proposed CAT Compliance Rules, one commenter also stated that proposed 
Rules ``[do] not contain any definition of clock synchronization 
certification procedures and schedules, reporting procedures for 
violation notification or any specifics regarding documentation 
requirements.'' \172\ This commenter requested that the date for 
compliance with the clock synchronization procedures be delayed, and 
requested that there be the adoption of ``one set of procedures for 
clock synchronization management and reporting to regulators be adopted 
across FINRA and CAT.'' \173\
---------------------------------------------------------------------------

    \172\ FIF Letter at 3.
    \173\ FIF Letter at 3.
---------------------------------------------------------------------------

    In response, the Participants stated that they agree it would be 
helpful to provide Industry Members with additional guidance regarding 
Industry Members' compliance with the clock synchronization and 
certification requirements set forth in the CAT NMS Plan and the 
Proposed Compliance Rules.\174\ Accordingly, the Participants stated 
that they have issued, or intend to issue, to their members guidance 
approved by the Operating Committee regarding clock synchronization and 
certification procedures and schedules, and documentation requirements 
(i.e., regarding the logging of clock synchronization events). The 
Participants represented that they intend to issue this guidance prior 
to the initial March 15, 2017 compliance deadline. The Participants 
also noted that thereafter they will issue additional guidance approved 
by the Operating Committee regarding the reporting of violations of 
applicable clock synchronization thresholds. Accordingly, the 
Participants stated that they believe that the Proposed Compliance 
Rules need not be amended at this time.
---------------------------------------------------------------------------

    \174\ Participants' Response Letter at 5.
---------------------------------------------------------------------------

    Two commenters also discussed the application of the Firm 
Designated ID requirement in the CAT NMS Plan. Both commenters noted 
that the Proposed Compliance Rules require each Industry Member to 
provide a Firm Designated ID ``for each Customer,'' whereas a ``Firm 
Designated ID,'' in relevant part, is defined as a ``unique identifier 
for each trading account. Both commenters requested that the 
Participants amend the language of the Proposed Compliance Rules to 
reflect the Exemption Order.\175\
---------------------------------------------------------------------------

    \175\ FIF Letter at 3-4; Thomson Reuters Letter at 2-5.
---------------------------------------------------------------------------

    In response, the Participants stated that they recognize that the 
definition of Firm Designated ID and the reporting requirements set 
forth in Section 6.3 of the CAT NMS Plan, as well as the parallel 
provisions in the proposed Participant Compliance Rules are somewhat 
unclear.\176\ The Participants noted that the Customer Information 
Approach is intended to require that each broker-dealer assign a unique 
Firm Designated ID at the account level, rather than the customer 
level. Accordingly, the Participants state that Section 6.3(d)(i)(A) of 
the CAT NMS Plan, which refers to the assignment of a ``Firm Designated 
ID(s) for each Customer,'' should not be interpreted to mean that each 
Customer must have a unique Firm Designated ID, rather, a Firm 
Designated ID must be assigned at the account level, so that multiple 
Customers may have the same Firm Designated ID. The Participants 
further stated that they will consider issuing additional guidance, 
subject to the approval of the Operating Committee of the CAT NMS Plan, 
to Industry Members on this issue and, as necessary, whether to amend 
the CAT NMS Plan to clarify the use of Firm Designated IDs.
---------------------------------------------------------------------------

    \176\ Participants' Response Letter at 5. The Participants noted 
that Bats BZX Exchange, Inc.'s proposed Rule 4.7(a)(1)(A)(i) and 
4.7(a)(2)(C) refers to ``Customer'' rather than ``account.'' See, 
e.g., Bats BZX Exchange, Inc.'s Proposed Compliance Rule Notice of 
Filing of a Proposed Rule Change to Adopt Rules 4.5 Through 4.16 to 
Implement the Compliance Rule Regarding the National Market System 
Plan Governing the Consolidated Audit Trail, Securities Exchange Act 
Release No. 79927 (February 2, 2017), 82 FR 9874 (February 8, 2017).
---------------------------------------------------------------------------

    One commenter suggested that the Participants consider firms that 
are exempt from reporting to OATS as ``Small Industry Members,'' 
stating that ``this should be so easy and so obviously warranted (given 
the huge incremental cost of first-time order reporting for those firms 
that choose to remain independent and comply) that we cannot imagine 
any objection.'' \177\ This commenter also requested that a cost and 
benefit analysis should be performed to review the impact of the CAT on 
firms currently exempt from OATS.\178\
---------------------------------------------------------------------------

    \177\ Wachtel Letter at 1.
    \178\ Wachtel Letter at 1, 3.
---------------------------------------------------------------------------

    In response, the Participants stated they believe that the 
definition of Small Industry Member for purposes of the CAT NMS Plan 
and Participant Compliance Rules is appropriate and need not be 
amended.\179\ The Participants noted that as a threshold matter, this 
definition was created and adopted by the Commission rather than the 
Participants, and that the definition of ``Small Industry Member'' in 
the CAT

[[Page 14544]]

NMS Plan refers to the definition of ``small broker-dealer'' in Rule 
613 of Regulation NMS. Rule 613(a)(3)(v) and (vi) define ``small 
broker-dealer'' by using the definition set forth in Rule 0-10(c) under 
the Exchange Act.\180\ In adopting Rule 613, the Participants noted 
that the Commission explained that defining ``small broker-dealer'' by 
reference to Rule 0-10(c) ``is appropriate because it is an existing 
regulatory standard that is an indication of small entities for which 
regulators should be sensitive when imposing regulatory burden.'' \181\ 
The Participants stated that they cannot modify the definition of 
``Small Industry Member'' because it is based on the definition of 
small broker-dealer in Rule 613 and that the Commission would have to 
effectuate any change to the requirement that broker-dealers (other 
than ``small broker-dealers'') must report to the CAT no later than 
two-years after the Effective Date.\182\ The Participants also noted 
that after the CAT is operational and the Central Repository begins to 
collect data, the Participants will conduct various assessments, as set 
forth in Section 6.6 of the CAT NMS Plan, regarding the operations and 
efficiency of the Plan Processor, CAT and Central Repository. As 
necessary, the Participants will consider whether to amend any 
requirements in the CAT NMS Plan or Proposed Compliance Rules, provided 
that such amendments are necessary or appropriate and comply with Rule 
613 of Regulation NMS.
---------------------------------------------------------------------------

    \179\ Participants' Response Letter at 6.
    \180\ Rule 0-10(c) defines a ``small broker-dealer'' as one that 
has total capital of less than $500,000 on the date in the prior 
fiscal year as of which its audited financial statements were filed 
(or on the last business day of the preceding fiscal year if not 
required to file such statements), and those not affiliated with any 
other person that is not a small business or small organization. See 
Rule 0-10(c).
    \181\ See Approval Order, supra note 24 at 45722, 45804.
    \182\ Participants' Response Letter at 6. The Participants added 
that ``[s]eparately, the Commission explained that the CAT NMS Plan 
``attempts to mitigate its impact on [OATS-exempt or excluded 
broker-dealers or limited purpose broker-dealers] by proposing to 
follow a cost allocation formula that should charge lower fees to 
smaller broker-dealers.'' Accordingly, the Participants stated that 
they do not believe that an additional cost-benefit analysis is 
necessary at this time. Participants' Response Letter at 7.
---------------------------------------------------------------------------

V. Discussion and Commission Findings

    After carefully considering the proposed CAT Compliance Rules, the 
comments submitted, and the Participants' response to the comments, the 
Commission finds that the proposals are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to national securities exchanges.\183\ Specifically, the 
Commission finds that the proposed rule changes are consistent with 
Section 6(b)(5) of the Act,\184\ which requires, among other things, 
that the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest, and are not 
designed to permit unfair discrimination between customers, issuers, 
brokers or dealers. In addition, the Commission finds that the proposed 
rule changes are consistent with Section 6(b)(8) of the Act,\185\ which 
requires that the rules of a national securities exchange not impose 
any burden on competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \183\ In approving these proposed rule changes, the Commission 
has considered the proposed rules' impact on efficiency, 
competition, and capital formation. See 15 U.S.C. 78c(f).
    \184\ 15 U.S.C. 78(f)(b)(5).
    \185\ 15 U.S.C. 78(f)(b)(8).
---------------------------------------------------------------------------

    Rule 613(g) of Regulation NMS provides that each national 
securities exchange and national securities association shall file with 
the Commission pursuant to section 19(b)(2) of the Act and Rule 19b-4 
on or before 60 days from approval of the CAT NMS Plan a proposed rule 
change to require its members to comply with the requirements of this 
section and the national market system plan approved by the Commission. 
In addition, Rule 608(c) of Regulation NMS provides 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 participant. 
Each self-regulatory organization also shall, absent reasonable 
justification or excuse, enforce compliance with any such plan by its 
members and persons associated with its members.'' \186\ The Exchanges, 
as Participants in the Plan, have obligations to comply, and enforce 
compliance by their members, with the terms of the Plan. Accordingly, 
the Exchanges filed these proposed rule changes to adopt their proposed 
CAT Compliance Rules, which would impose compliance obligations on the 
Exchanges' members. As discussed below, the Commission also believes 
the proposals are consistent with the Act because they are designed to 
assist the Exchanges in meeting their regulatory obligations pursuant 
to Rule 608 of Regulation NMS and the Plan.
---------------------------------------------------------------------------

    \186\ 17 CFR 242.608(c).
---------------------------------------------------------------------------

A. Definitions

    The Commission finds that proposed CAT Compliance Rules addressing 
definitions \187\ are consistent with the Act as they implement the CAT 
NMS Plan. With the exception of the term ``CAT Reporting Agent,'' the 
definitions in proposed CAT Compliance Rules are consistent with the 
definitions of Article I, Section 1.1 of the CAT NMS Plan. With respect 
to the inclusion of a definition for ``CAT Reporting Agent,'' the 
Exchanges note that the CAT NMS Plan permits an Industry Member to use 
a third party, such as a vendor, to report the required data to the 
Central Repository on behalf of an Industry Member, and that as 
defined, a ``CAT Reporting Agent'' would be one type of Data Submitter, 
which term is defined in the CAT NMS Plan.
---------------------------------------------------------------------------

    \187\ See supra note 27. The Commission also notes that NYSE 
MKT's proposed change to NYSE MKT Rule 0--Equities, is reasonable to 
clarify that the CAT Compliance Rules would apply to Industry 
Members of the Exchange's equities and options markets.
---------------------------------------------------------------------------

    The Commission notes that two commenters discussed the need for 
further clarification on the application of the term ``Firm Designated 
ID.'' The Participants responded that the Customer Information Approach 
is intended to require that each broker-dealer assign a unique Firm 
Designated ID at the account level, rather than the customer level. 
Accordingly, a Firm Designated ID must be assigned at the account 
level, so multiple Customers may be associated with the same Firm 
Designated ID. The Commission believes that the definition of the term 
Firm Designated ID and its applicability to accounts is consistent with 
the Customer Information Approach and the CAT NMS Plan.

B. Clock Synchronization

    The Commission finds that the proposed CAT Compliance Rules 
addressing clock synchronization \188\ are consistent with the Act as 
they implement the clock synchronization provisions of the CAT NMS 
Plan. The Commission notes that the proposed CAT Compliance Rules set 
out the clock synchronization requirements for the Exchanges' members 
and that these clock synchronization requirements, including the 
synchronization standards, tolerance levels, documentation, 
certification and violation reporting are consistent with and implement 
the clock synchronization requirements of the CAT NMS Plan.\189\
---------------------------------------------------------------------------

    \188\ See supra note 116.
    \189\ See CAT NMS Plan, Section 6.8.

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

[[Page 14545]]

    As noted above, two commenters raised concerns about the clock 
synchronization requirements in proposed Rule 6820, including whether 
the synchronization requirements of the rule apply to Business Clocks 
that capture Manual Order Events; the definition of ``time of 
allocation,'' the necessity of the clock synchronization log; and the 
details concerning the clock synchronization certification. The 
Participants responded by clarifying the applicability of the clock 
synchronization requirements to Allocation Reports, and by stating that 
the Participants intend to work with the Plan Processor to define 
various terms, including ``time of allocation,'' and to provide 
Technical Specifications approved by the Operating Committee--relating 
to time stamps on manual orders and electronic capture of manual 
orders, as well as the ``time of allocation''--before Industry Members 
will be required to report to the Central Repository on November 15, 
2018 (or November 15, 2019 for Small Industry Members) or comply with 
the February 19, 2018 Business Clock synchronization requirement.\190\ 
The Participants also provided further details about the utility of the 
synchronization logs and discussed the clock synchronization 
certification requirements. The Commission believes that the 
Participants' response is reasonable and consistent with the Act.
---------------------------------------------------------------------------

    \190\ Participants' Response Letter at 3. See also Clock 
Synchronization Exemption Request Letter, supra note 161, and Clock 
Synchronization Order, supra note 163.
---------------------------------------------------------------------------

C. Industry Member Data Reporting

    The Commission finds that the provisions of the proposed CAT 
Compliance Rules regarding Industry Member data reporting \191\ are 
consistent with the Act as they implement the data reporting 
requirements for Industry Members that are required by the CAT NMS 
Plan. As noted above, each Exchange's proposed CAT Compliance Rule is 
divided into five sections which address (1) recording and reporting 
Industry Member Data, (2) timing of the recording and reporting, (3) 
the applicable securities covered by the recording and reporting 
requirements, (4) the security symbology to be used in the recording 
and reporting,\192\ and (5) error correction requirements.
---------------------------------------------------------------------------

    \191\ See supra note 121.
    \192\ The Commission notes that, with respect to the security 
symbology that must be reported by an Industry Member for an 
Eligible Security that is not Exchange-listed, the proposed CAT 
Compliance Rules state that an Industry Member should use the 
symbology format approved by the Operating Committee. The Exchanges 
represent that for such securities, there is no listing exchange to 
provide the symbology format and that the requisite symbology format 
has not been determined at this time.
---------------------------------------------------------------------------

D. Customer Information Reporting

    The Commission finds that the provisions of the proposed CAT 
Compliance Rules regarding the data reported to the CAT in order to 
identify Customers \193\ are consistent with the Act as they implement 
the reporting provisions of the CAT NMS Plan relating to the 
identification of Customers.
---------------------------------------------------------------------------

    \193\ See supra note 131.
---------------------------------------------------------------------------

E. Industry Member Information Reporting

    The Commission finds that the provisions of the proposed CAT 
Compliance Rules which set out the requirements for Industry Members 
regarding the data that they must report to identify such Industry 
Member, including the timeframe for reporting such identifying 
information,\194\ are consistent with the Act as they implement the 
Industry Member reporting provisions of the CAT NMS Plan.
---------------------------------------------------------------------------

    \194\ See supra note 133.
---------------------------------------------------------------------------

F. Time Stamps

    The Commission finds that the provisions of the proposed CAT 
Compliance Rules regarding the time stamp increments to be used by 
Industry Members in their CAT Reporting \195\ are consistent with the 
Act as they implement the time stamp provisions of the CAT NMS Plan. In 
general, the proposed CAT Compliance Rules require Industry Members to 
record and report Industry Member Data to the Central Repository in 
milliseconds, but provide that, to the extent any Industry Member's 
order handling or execution systems utilize time stamps in increments 
finer than milliseconds, such Industry Member is to record and report 
Industry Member Data to the Central Repository with time stamps in such 
finer increment. The proposed CAT Compliance Rules address the need for 
Industry Members to capture Manual Order Events in increments up to and 
including one second, provided that each Industry Member is required to 
record and report the Electronic Capture Time in milliseconds.
---------------------------------------------------------------------------

    \195\ See supra note 135.
---------------------------------------------------------------------------

G. Clock Synchronization Rule Violation

    The Commission finds that the proposed CAT Compliance Rules 
addressing clock synchronization rule violations \196\ are consistent 
with the Act as they implement the clock synchronization rule violation 
provisions of the CAT NMS Plan. Specifically, the Commission notes that 
the proposed CAT Compliance Rules describe potential violations of the 
clock synchronization time period requirements, and specifically state 
that an Industry Member that engages in a pattern or practice of 
reporting Reportable Events outside of the required clock 
synchronization time period without reasonable justification or 
exceptional circumstances may be considered in violation of these 
Rules.
---------------------------------------------------------------------------

    \196\ See supra note 136.
---------------------------------------------------------------------------

H. Connectivity and Data Transmission

    The Commission finds that the provisions of the proposed CAT 
Compliance Rules addressing connectivity and data transmission \197\ 
are consistent with the Act as they implement the connectivity and data 
transmission provisions of the CAT NMS Plan. The proposed CAT 
Compliance Rules require each Industry Member to transmit data as 
required under the CAT NMS Plan to the Central Repository utilizing 
such format(s) as may be provided by the Plan Processor and approved by 
the Operating Committee, and require each Industry Member to connect to 
the Central Repository using a secure method(s), including, but not 
limited to, private line(s) and virtual private network connection(s).
---------------------------------------------------------------------------

    \197\ See supra note 137.
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules permit Industry Members to use 
CAT Reporting Agents to fulfill their data reporting obligations 
related to the CAT. The Commission notes that these provisions of the 
proposed CAT Compliance Rules are substantively similar to FINRA Rule 
7450(c), which permits OATS Reporting Members to enter into agreements 
with Reporting Agents to fulfill the OATS obligations of the OATS 
Reporting Member, specifies responsibilities and procedures for 
maintaining such agreements between the OATS Reporting Member and the 
Reporting Members, and clarifies that an OATS Reporting Member remains 
primarily responsible for compliance with the OATS reporting rules.

I. Development and Testing

    The Commission finds that the proposed CAT Compliance Rules 
addressing development and testing \198\ are consistent with the Act as 
they implement the development and testing provisions of the CAT NMS 
Plan. The proposed CAT Compliance Rules address Industry Members' 
connectivity and testing requirements, including

[[Page 14546]]

connectivity and acceptance testing timelines. The proposed CAT 
Compliance Rules address the requirements relating to Industry Members' 
reporting of Customer and Industry Member information, the submission 
of order data, including the Quote Sent time to be reported by Options 
Market Makers. The proposed CAT Compliance Rules also require that each 
Industry Member shall participate in the testing related to the Central 
Repository, including any industry-wide disaster recovery testing.
---------------------------------------------------------------------------

    \198\ See supra note 139.
---------------------------------------------------------------------------

J. Recordkeeping

    The Commission finds that the proposed CAT Compliance Rules 
addressing recordkeeping \199\ are consistent with the Act. The 
Commission notes that the proposed CAT Compliance Rules require each 
Industry Member to maintain and preserve, and specifies the manner in 
which such records must be maintained and preserved, information 
required to be recorded under each Exchange's proposed CAT Compliance 
Rule for the period of time and accessibility specified in Rule 17a-
4(b).\200\ Because the proposed CAT Compliance Rules incorporate Rule 
17a-4(b) and implements the recordkeeping provision of the CAT NMS 
Plan, the Commission finds that the recordkeeping provisions of the 
proposed CAT Compliance Rules are consistent with the Act.
---------------------------------------------------------------------------

    \199\ See supra note 142.
    \200\ 17 CFR 240.17a-4(b). The Exchanges also note that the 
recordkeeping provisions of the proposed CAT Compliance Rules are 
based on FINRA Rule 7440(a)(5), which sets forth the recordkeeping 
requirements related to OATS.
---------------------------------------------------------------------------

K. Timely, Accurate and Complete Data

    The Commission finds that the proposed CAT Compliance Rules 
addressing timely, accurate and complete data \201\ are consistent with 
the Act as they implement the requirements for reporting data to the 
CAT as set forth in the CAT NMS Plan. The Exchanges note that the 
proposed CAT Compliance Rules implement the requirement in Rule 613 and 
the CAT NMS Plan that data reported to the CAT be timely, accurate and 
complete. Specifically, the proposed CAT Compliance Rules require that 
Industry Members record and report data to the Central Repository as 
required by the each Exchange's proposed CAT Compliance Rule in a 
manner that ensures the timeliness, accuracy, integrity and 
completeness of such data.
---------------------------------------------------------------------------

    \201\ See supra note 148.
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules require Industry Members to 
accurately provide the LEIs in their records as required by each 
Exchange's proposed CAT Compliance Rule and states that Industry 
Members may not knowingly submit inaccurate LEIs to the Central 
Repository. The proposed CAT Compliance Rules note, however, that this 
requirement does not impose any additional due diligence obligations on 
Industry Members with regard to LEIs for CAT purposes. The proposed CAT 
Compliance Rules also require Industry Members to be in compliance with 
the Error Rate as set forth in the CAT NMS Plan and the Compliance 
Thresholds as discussed in the CAT NMS Plan and determined by the 
Operating Committee. The proposed CAT Compliance Rules implement the 
CAT NMS Plan's provisions.\202\
---------------------------------------------------------------------------

    \202\ See CAT NMS Plan, Sections 6.4; 6.5(d); Appendix C, 
Section A.3(b).
---------------------------------------------------------------------------

L. Compliance Dates

    The Commission finds that the compliance dates in the proposed CAT 
Compliance Rules \203\ are consistent with the Act, as they implement 
the compliance dates for reporting data to the CAT as set forth in the 
CAT NMS Plan and an exemptive order issued by the Commission. The 
proposed CAT Compliance Rules state that, except as otherwise set forth 
in each Exchange's proposed CAT Compliance Rule, the compliance date 
for the proposed CAT Compliance Rules will be the date of Commission 
approval of the proposed CAT Compliance Rules.
---------------------------------------------------------------------------

    \203\ See supra note 152.
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules state that each Industry Member 
that captures time in milliseconds shall comply with the provisions of 
each Exchange's proposed Rule regarding Business Clock synchronization 
on or before March 15, 2017. Also, the proposed CAT Compliance Rules 
state that each Industry Member that does not capture time in 
milliseconds shall comply with the provisions of each Exchange's 
proposed Rule regarding Business Clock sychronization on or before 
February 19, 2018. The Commission notes that the compliance date for 
Industry Members regarding Business Clocks that do not capture time in 
milliseconds reflects the exemptive relief requested by the 
Participants and granted by the Commission with regard to the clock 
synchronization requirements related to Business Clocks that do not 
capture time in milliseconds.\204\
---------------------------------------------------------------------------

    \204\ See supra note 163.
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules also require each Industry Member 
(other than Small Industry Members) to record and report the Industry 
Member Data to the Central Repository by November 15, 2018, and each 
Industry Member that is a Small Industry Member to record and report 
the Industry Member Data to the Central Repository by November 15, 
2019.\205\
---------------------------------------------------------------------------

    \205\ Such compliance dates are consistent with the compliance 
dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Sections 
6.7(a)(v) and (vi) of the CAT NMS Plan.
---------------------------------------------------------------------------

    The proposed CAT Compliance Rules implement the CAT NMS Plan's 
provisions regarding the reporting of Industry Member data to the 
Central Repository.
    The Commission notes that one commenter also requested that the 
Exchanges classify all firms currently exempt from reporting to OATS to 
be classified as a ``Small Industry Member'' as defined by the CAT NMS 
Plan.\206\ The commenter notes that some OATS exempt firms would be 
classified as Large Industry Members but really should be subject to 
the three year implementation timeframe for Small Industry Members. The 
Participants responded that the definition of ``Small Industry Member'' 
is appropriate because it is an existing regulatory standard. The 
Commission believes that the Exchanges' proposed rule changes' use of 
the ``Small Industry Member'' definition is consistent with the CAT NMS 
Plan.
---------------------------------------------------------------------------

    \206\ Wachtel Letter at 1.
---------------------------------------------------------------------------

    The Commission notes that a commenter suggested that a cost/benefit 
analysis be performed to review the impact of CAT on firms currently 
exempt from reporting to OATS. The Participants responded the 
Commission had already undertaken into account the impact of CAT on 
firms currently exempt from OATS. The Commission likewise notes that it 
took into account the impact of the Plan on firms currently exempt from 
reporting to OATS when it approved the CAT NMS Plan.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the Act, 
that the proposed rule changes (SR-BatsBYX-2017-02; SR-BatsBZX-2017-08; 
SR-BatsEDGA-2017-03; SR-BatsEDGX-2017-08; SR-BOX-2017-07; SR-C2-2017-
007; SR-CBOE-2017-012; SR-CHX-2017-03; SR-ISE-2017-08; SR-IEX-2017-04; 
SR-ISEGemini-2017-04; SR-ISEMercury-2017-03; SR-MIAX-2017-03; SR-PEARL-
2017-04; SR-NASDAQ-2017-008; SR-BX-2017-007; SR-PHLX-2017-07; SR-NYSE-
2017-01; SR-NYSEArca-2017-03; SR-NYSEArca-2017-04; SR-NYSEMKT-2017-02; 
SR-NSX-2017-03) are approved.

[[Page 14547]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\207\
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    \207\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-05505 Filed 3-20-17; 8:45 am]
 BILLING CODE 8011-01-P