Document ID: SEC-2020-1399-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Financial Industry Regulatory Authority, Inc.
Posted Date: 2020-09-01T04:00Z

[Federal Register Volume 85, Number 170 (Tuesday, September 1, 2020)]
[Notices]
[Pages 54461-54468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-19192]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89679; File No. SR-FINRA-2020-024]

Self-Regulatory Organizations; Financial Industry Regulatory 
Authority, Inc.; Notice of Filing of a Proposed Rule Change To Delete 
the FINRA Order Audit Trail System (OATS) Rules

August 26, 2020.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on August 14, 2020, Financial Industry Regulatory Authority, Inc. 
(``FINRA'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by FINRA. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    FINRA is proposing to eliminate the Order Audit Trail System 
(``OATS'') rules in the FINRA Rule 7400 Series and FINRA Rule 4554 
(Alternative Trading Systems--Recording and Reporting Requirements of 
Order and Execution Information for NMS Stocks) once members are 
effectively reporting to the consolidated audit trail (``CAT'') and the 
CAT's accuracy and reliability meet certain standards, as described 
below. The Rule 7400 Series and Rule 4554 are collectively referred to 
herein as the ``OATS Rules.''
    The text of the proposed rule change is available on FINRA's 
website at http://www.finra.org, at the principal office of FINRA and 
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, FINRA included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. FINRA has prepared summaries, set forth in sections A, 
B, and C below, of the most significant aspects of such statements.

[[Page 54462]]

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
(a) Background
    FINRA and the national securities exchanges (collectively, the 
``Participants'') \3\ filed with the Commission, pursuant to Section 
11A of the Exchange Act \4\ and Rule 608 of Regulation NMS 
thereunder,\5\ the National Market System Plan Governing the 
Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'').\6\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act.\7\ The Plan was published for comment in the 
Federal Register on May 17, 2016,\8\ and approved by the Commission, as 
modified, on November 15, 2016.\9\ On March 15, 2017, the Commission 
approved the FINRA Rule 6800 Series to implement provisions of the CAT 
NMS Plan that are applicable to FINRA members.\10\
---------------------------------------------------------------------------

    \3\ For a complete list of Participants, see Exhibit A to the 
Limited Liability Company Agreement of Consolidated Audit Trail, 
LLC, available at www.catnmsplan.com/sites/default/files/2020-07/LLC-Agreement-of-Consolidated-Audit-Trail-LLC-as-of-7.24.20.pdf.
    \4\ 15 U.S.C. 78k-1.
    \5\ 17 CFR 242.608.
    \6\ 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.
     Unless otherwise specified, capitalized terms used in this rule 
filing are defined as set forth in the CAT Compliance Rule Series or 
in the CAT NMS Plan.
    \7\ 17 CFR 242.613.
    \8\ See Securities Exchange Act Release No. 77724 (April 27, 
2016), 81 FR 30614 (May 17, 2016).
    \9\ See Securities Exchange Act Release No. 79318 (November 15, 
2016), 81 FR 84696 (November 23, 2016) (``Approval Order'').
    \10\ See Securities Exchange Act Release No. 80255 (March 15, 
2017), 82 FR 14563 (March 21, 2017) (Order Approving File No. SR-
FINRA-2017-003). See also Securities Exchange Act Release No. 89119 
(June 22, 2020), 85 FR 38468 (June 26, 2020) (Notice of Filing and 
Immediate Effectiveness of File No. SR-FINRA-2020-018).
---------------------------------------------------------------------------

    The CAT NMS Plan is intended to create, implement and maintain a 
consolidated audit trail that will capture in a single consolidated 
data source 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.\11\ Among other things, Section C.9. of Appendix C to the 
Plan, as modified by the Commission, requires each Participant to 
``file with the SEC the relevant rule change filing to eliminate or 
modify its duplicative rules within six (6) months of the SEC's 
approval of the CAT NMS Plan.'' \12\ The Plan notes that ``the 
elimination of such rules and the retirement of such [sic] systems 
[will] be effective at such time as CAT Data meets minimum standards of 
accuracy and reliability.'' \13\ Finally, the Plan requires the rule 
filing to discuss the following:
---------------------------------------------------------------------------

    \11\ See, e.g., Securities Exchange Act Release No. 67457 (July 
18, 2012), 77 FR 45722, 45723 (August 1, 2012).
    \12\ In compliance with this requirement, in May 2017, FINRA 
filed a proposed rule change to eliminate the OATS Rules and amend 
FINRA's electronic blue sheet (``EBS'') rules, Rules 8211 and 8213 
(``original proposal''). See Securities Exchange Act Release No. 
80783 (May 26, 2017), 82 FR 25423 (June 1, 2017) (Notice of Filing 
of File No. SR-FINRA-2017-013). FINRA filed an amendment to the 
original proposal on August 25, 2017. See Securities Exchange Act 
Release No. 81499 (August 30, 2017), 82 FR 42168 (September 6, 
2017). The original proposal was subsequently withdrawn but provided 
similar views and mechanisms for eliminating the OATS Rules as this 
proposed rule change does and, as noted above, also proposed to 
amend the EBS rules. See Securities Exchange Act Release No. 82524 
(January 17, 2018), 83 FR 3239 (January 23, 2018) (Notice of 
Withdrawal of File No. SR-FINRA-2017-013).
     FINRA notes that the current filing addresses only the 
elimination of the OATS Rules. Proposed amendments to the EBS rules 
would be subject to a separate FINRA rule filing made in conjunction 
with SEC rulemaking to amend Rule 17a-25 under the Exchange Act. 17 
CFR 240.17a-25.
    \13\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

    (i) Specific accuracy and reliability standards that will determine 
when duplicative systems will be retired, including, but not limited 
to, whether the attainment of a certain Error Rate should determine 
when a system duplicative of the CAT can be retired;
    (ii) whether the availability of certain data from Small Industry 
Members \14\ two years after the Effective Date would facilitate a more 
expeditious retirement of duplicative systems; and
---------------------------------------------------------------------------

    \14\ As noted in footnote 6, unless otherwise specified, 
capitalized terms used in this rule filing are defined as set forth 
in the CAT Compliance Rule Series or in the CAT NMS Plan. ``Small 
Industry Member'' is defined in FINRA Rule 6810(nn) as an Industry 
Member that qualifies as a small broker-dealer as defined in SEA 
Rule 0-10(c). On April 20, 2020, the Commission granted exemptive 
relief from certain provisions of the CAT NMS Plan related to 
broker-dealers that do not qualify as Small Industry Members solely 
because such broker-dealers satisfy Rule 0-10(i)(2) under the 
Exchange Act in that they introduce transactions on a fully 
disclosed basis to clearing firms that are not small businesses or 
small organizations (referred to as ``Introducing Industry 
Members''). Specifically, the Commission provided exemptive relief 
from requiring Introducing Industry Members to comply with the 
requirements of the CAT NMS Plan that apply to Industry Members 
other than Small Industry Members (``Large Industry Members''), 
provided that the Participants require such Introducing Industry 
Members to comply with the requirements of the CAT NMS Plan that 
apply to Small Industry Members. See Securities Exchange Act Release 
No. 88703 (April 20, 2020), 85 FR 23115 (April 24, 2020) (Order 
Granting Limited Exemptive Relief Related to Certain Introducing 
Brokers From the Requirements of the CAT NMS Plan) (the 
``Introducing Brokers Exemptive Order'').
     As used herein, the term ``Small Industry Member'' includes 
Introducing Industry Members in accordance with the Introducing 
Brokers Exemptive Order.
---------------------------------------------------------------------------

    (iii) whether individual Industry Members can be exempted from 
reporting to duplicative systems once their CAT reporting meets 
specified accuracy and reliability standards, including, but not 
limited to, ways in which establishing cross-system regulatory 
functionality or integrating data from existing systems and the CAT 
would facilitate such Individual Industry Member exemptions.\15\
---------------------------------------------------------------------------

    \15\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

    In response to these requirements, the proposed rule change deletes 
the OATS Rules from the FINRA rulebook.\16\ The proposed rule change 
will be implemented once the CAT achieves the specific accuracy and 
reliability standards described below and FINRA has determined that its 
usage of the CAT Data has not revealed material issues that have not 
been corrected, confirmed that the CAT includes all data necessary to 
allow FINRA to continue to meet its surveillance obligations and 
confirmed that the Plan Processor is sufficiently meeting its 
obligations under the CAT NMS Plan relating to the reporting and 
linkage of Phase 2a Industry Member Data, which as discussed further 
below, will replicate what is in OATS today.\17\
---------------------------------------------------------------------------

    \16\ FINRA is considering whether there are additional FINRA 
rules that can be deleted or amended, as necessary, upon the 
implementation of CAT, e.g., trade reporting rules requiring the 
submission of ``non-tape'' regulatory reports relating to riskless 
principal and agency transactions (Rules 6282, 6380A, 6380B and 
6622), Rule 6431 (Recording of Quotation Information) and Rule 4590 
(Synchronization of Member Business Clocks). Such proposed changes 
would be subject to a separate rule filing with the SEC.
     In addition, FINRA notes that there are multiple rules 
throughout the FINRA rulebook that cross-reference or otherwise 
incorporate some or all of the OATS Rules. If the Commission 
approves the proposed rule change, FINRA would file a proposed rule 
change to delete or amend, as applicable, the references to the OATS 
Rules before the amendments in the current proposed rule change are 
implemented.
    \17\ FINRA notes that OATS was originally proposed to fulfill 
one of the undertakings contained in an order issued by the 
Commission relating to the settlement of an enforcement action 
against FINRA (f/k/a National Association of Securities Dealers, 
Inc. (``NASD'')) for failure to adequately enforce its rules. See 
Securities Exchange Act Release No. 39729 (March 6, 1998), 63 FR 
12559 (March 13, 1998) (Order Approving File No SR-NASD-97-56) 
(``OATS Approval Order''); see also Securities Exchange Act Release 
No. 37538 (August 8, 1996); Administrative Proceeding File No. 3-
9056 (``SEC Order''). In the OATS Approval Order, the Commission 
concluded that OATS satisfied the conditions of the SEC Order and 
was consistent with the Exchange Act. See 63 FR at 12566-67. As 
noted, the Plan is designed to create, implement and maintain a 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. 
FINRA has already adopted rules to enforce compliance by its 
Industry Members, as applicable, with the provisions of the Plan. 
See Rule 6800 Series.
     Once the CAT can replace OATS, FINRA believes it will be 
appropriate to delete the OATS Rules that were implemented to comply 
with the SEC Order. FINRA will not transition from OATS to CAT until 
its surveillance program is fully prepared for such transition. 
Accordingly, FINRA believes that it would continue to be in 
compliance with the requirements of the SEC Order once the OATS 
Rules are deleted.

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

[[Page 54463]]

(b) Specific Accuracy and Reliability Standards
    The first issue the Plan requires the proposed rule change to 
discuss is ``specific accuracy and reliability standards that will 
determine when duplicative systems will be retired, including, but not 
limited to, whether the attainment of a certain Error Rate should 
determine when a system duplicative of the CAT can be retired.'' \18\ 
FINRA believes that relevant error rates are the primary, but not the 
sole, metric by which to determine the CAT's accuracy and reliability 
and will serve as the baseline requirement needed before OATS can be 
retired.
---------------------------------------------------------------------------

    \18\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

    As discussed in Section A.3(b) of Appendix C to the CAT NMS Plan, 
the Participants established an initial Error Rate, as defined in the 
Plan, of 5% on initially submitted data (i.e., data as submitted by a 
CAT Reporter before any required corrections are performed). The 
Participants noted in the Plan that their expectation was that ``error 
rates after reprocessing of error corrections will be de minimis.'' 
\19\ The Participants based this Error Rate on their consideration of 
``current and historical OATS Error Rates, the magnitude of new 
reporting requirements on the CAT Reporters and the fact that many CAT 
Reporters may have never been obligated to report data to an audit 
trail.'' \20\
---------------------------------------------------------------------------

    \19\ See CAT NMS Plan, Appendix C, Section A.3(b), at note 102.
    \20\ See CAT NMS Plan, Appendix C, Section A.3(b).
---------------------------------------------------------------------------

    FINRA agrees with the Participants' conclusion that a 5% pre-
correction threshold ``strikes the balance of adapting to a new 
reporting regime, while ensuring that the data provided to regulators 
will be capable of being used to conduct surveillance and market 
reconstruction, as well as having a sufficient level of accuracy to 
facilitate the retirement of existing regulatory reports and systems 
where possible.'' \21\ However, FINRA does not believe that a 5% error 
rate alone would ensure a sufficient level of data accuracy and 
reliability for purposes of surveillance and investigations, and as 
noted above, the expectation is that error rates after reprocessing of 
error corrections also must be de minimis. Accordingly, FINRA believes 
that, when assessing the accuracy and reliability of the data for the 
purposes of retiring OATS, the error thresholds should be measured in 
more granular ways and should also include maximum error rates of post-
correction data, which represents the data most likely to be used by 
FINRA to conduct surveillance. Although FINRA is proposing to measure 
the appropriate error rates in the aggregate, rather than firm-by-firm, 
FINRA believes that the error rates should be measured solely for 
equity securities since options orders are not currently reported 
regularly or included in OATS.
---------------------------------------------------------------------------

    \21\ See supra note 20.
---------------------------------------------------------------------------

    To ensure the CAT's accuracy and reliability, FINRA is proposing 
that, before OATS could be retired, the CAT would generally need to 
achieve a sustained error rate for Industry Member reporting in each of 
the categories below for a period of at least 180 days of 5% or lower, 
measured on a pre-correction or as-submitted basis, and 2% or lower on 
a post-correction basis (measured at T+5).\22\ FINRA is proposing to 
measure the 5% pre-correction and 2% post-correction thresholds by 
averaging the error rate across the period, not require a 5% pre-
correction and 2% post-correction maximum each day for 180 consecutive 
days. FINRA believes that measuring each of the thresholds over the 
course of 180 days will ensure that the CAT consistently meets minimum 
accuracy and reliability thresholds for Industry Member reporting while 
also ensuring that single-day measurements do not unduly affect the 
overall measurements.
---------------------------------------------------------------------------

    \22\ The Plan requires that the Plan Processor must ensure that 
regulators have access to corrected and linked order and Customer 
data by 8:00 a.m. Eastern Time on T+5. See CAT NMS Plan, Appendix C, 
Section A.2(a).
---------------------------------------------------------------------------

    Based on prior experience with OATS, FINRA believes that a 2% post-
correction error rate is the appropriate maximum standard for purposes 
of retiring OATS. Currently, OATS non-compliance rates are lower than 
2%--generally at or slightly below 1%. However, compliance rates have 
not always been at this level, particularly with the implementation of 
new OATS reporting requirements.\23\ These higher non-compliance rates 
following major releases have been temporary and did not result in a 
degradation of FINRA's surveillance capabilities. With experience over 
time, the OATS compliance rates have dramatically improved and, as 
noted above, the post-correction error rate is generally at or below 1% 
today. FINRA anticipates that this will be the case with respect to CAT 
reporting, which is anticipated to be more complex and new to some 
firms and therefore more likely to contain errors when initially 
reported. Thus, FINRA believes that a 2% post-correction error rate 
strikes a reasonable balance between the potential costs of retaining 
OATS and requiring duplicative reporting by firms for a longer period 
in order to achieve a lower error rate and any potential impact on 
FINRA's surveillance capabilities, which FINRA anticipates would be 
temporary. Importantly and as further discussed below, while error 
rates are a key standardized measure in determining whether OATS 
retirement is appropriate, FINRA's use of the data in the CAT also must 
confirm that there are no material issues that have not been corrected, 
the CAT includes all data necessary to allow FINRA to continue to meet 
its surveillance obligations and the Plan Processor is sufficiently 
meeting its obligations under the CAT NMS Plan relating to the 
reporting and linkage of Phase 2a Industry Member Data. As such, even 
if maximum error rates are met, FINRA must evaluate and confirm

[[Page 54464]]

that overall, there are no material issues and the data is accurate and 
reliable.\24\
---------------------------------------------------------------------------

    \23\ As discussed in the CAT NMS Plan, the Participants 
considered industry experience with OATS for purposes of determining 
the applicable Error Rate for the CAT, noting that there have been 
three major industry impacting releases: (1) OATS Phase III, which 
required manual orders to be reported to OATS; (2) OATS for OTC 
Securities which required OTC equity securities to be reported to 
OATS; and (3) OATS for NMS which required all NMS stocks to be 
reported to OATS. Each of these releases was accompanied by 
significant updates to the required formats which required OATS 
reporters to update and test their reporting systems and 
infrastructure. The CAT NMS Plan also cites the combined average 
error rates for the time periods immediately following release 
across five significant categories for these three releases: The 
average rejection percentage rate, representing order events that 
did not pass systemic validations, was 2.42%. The average late 
percentage rate, representing order events not submitted in a timely 
manner, was 0.36%. The average order/trade matching error rate, 
representing OATS Execution Reports unsuccessfully matched to a 
FINRA Facility trade report was 0.86%. The average Exchange/Route 
matching error rate, representing OATS Route Reports unsuccessfully 
matched to an exchange order was 3.12%. Finally, the average 
Interfirm Route matching error rate, representing OATS Route Reports 
unsuccessfully matched to a report representing the receipt of the 
route by another reporting entity was 2.44%. The Plan further notes 
that the error rates for the 1999 initial OATS implementation were 
significantly higher (e.g., the initial rejection rates for OATS 
were 23% and the late reporting rate was 2.79%). See CAT NMS Plan, 
Appendix C, Section A.3(b).
    \24\ FINRA notes that while error rates after reprocessing of 
error corrections are ultimately expected to be de minimis for the 
CAT (see CAT NMS Plan, Appendix C, note 102), FINRA does not believe 
that post-correction errors need to be de minimis before OATS can be 
retired and is not suggesting, with this proposal, that 2% would 
meet the ultimate objective of de minimis error rates for CAT.
---------------------------------------------------------------------------

    FINRA is proposing to use error rates in each of the following 
categories, measured solely for equities, to assess whether the 
threshold pre- and post-correction error rates are being met:
     Rejection Rates and Data Validations. FINRA has reviewed 
the data validations for the CAT, which are set forth in the Industry 
Member Technical Specifications published by the Plan Processor,\25\ 
and confirmed that they are substantially similar to OATS. While not 
required to be designed the same as OATS, data validations must be 
functionally equivalent to OATS in accordance with the CAT NMS Plan 
(i.e., the same types of basic data validations must be performed by 
the Plan Processor to comply with the CAT NMS Plan requirements). 
Appendix D of the Plan, for example, requires that certain file 
validations \26\ and syntax and context checks be performed on all 
submitted records.\27\ If a record does not pass these basic data 
validations, it must be rejected and returned to the CAT Reporter to be 
corrected and resubmitted.\28\ The Plan also requires the Plan 
Processor to provide daily statistics on rejection rates after the data 
has been processed, including the number of files rejected and 
accepted, the number of order events accepted and rejected, and the 
number of each type of report rejected.\29\ FINRA is proposing that, 
over the 180-day period, aggregate rejection rates (measured solely for 
equities) must be no more than 5% pre-correction or 2% post-correction 
across all CAT Reporters.
---------------------------------------------------------------------------

    \25\ See, e.g., Industry Member Technical Specifications (2a/2b) 
version 2.2.1 r6, dated June 22, 2020, available at 
www.catnmsplan.com/sites/default/files/2020-06/CAT_Reporting_Technical_Specifications_for_Industry%20Members_v2.2.1r6_CLEAN.pdf.
    \26\ See CAT NMS Plan, Appendix D, Section 7.2. The Plan 
requires the Plan Processor to confirm that file transmission and 
receipt are in the correct formats, including validation of header 
and trailers on the submitted report, confirmation of a valid SRO-
Assigned Market Participant Identifier, and verification of the 
number of records in the file.
    \27\ See supra note 26. The Plan notes that syntax and context 
checks would include format checks (i.e., that data is entered in 
the specified format); data type checks (i.e., that the data type of 
each attribute conforms to the specifications); consistency checks 
(i.e., that all attributes for a record of a specified type are 
consistent); range/logic checks (i.e., that each attribute for every 
record has a value within specified limits and the values provided 
are associated with the event type they represent); data validity 
checks (i.e., that each attribute for every record has an acceptable 
value); completeness checks (i.e., that each mandatory attribute for 
every record is not null); and timeliness checks (i.e., that the 
records were submitted within the submission timelines).
    \28\ See supra note 26.
    \29\ See supra note 26.
---------------------------------------------------------------------------

     Intra-Firm Linkages. The Plan requires that ``the Plan 
Processor must be able to link all related order events from all CAT 
Reporters involved in the lifecycle of an order.'' \30\ At a minimum, 
this requirement includes the creation of an order lifecycle between 
``[a]ll order events handled within an individual CAT Reporter, 
including orders routed to internal desks or departments with different 
functions (e.g., an internal ATS).'' \31\ FINRA is proposing that 
aggregate intra-firm linkage rates across all Industry Member Reporters 
must be at least 95% pre-correction and 98% post-correction.
---------------------------------------------------------------------------

    \30\ See CAT NMS Plan, Appendix D, Section 3.
    \31\ See supra note 30.
---------------------------------------------------------------------------

     Inter-Firm Linkages. The order linkage requirements in the 
Plan also require that the Plan Processor be able to create the 
lifecycle between orders routed between broker-dealers.\32\ FINRA is 
proposing that at least a 95% pre-correction and 98% post-correction 
aggregate match rate be achieved for orders routed between two Industry 
Member Reporters.\33\
---------------------------------------------------------------------------

    \32\ See supra note 30.
    \33\ This assumes linkage statistics will include both unlinked 
route reports and new orders where no related route report could be 
found.
---------------------------------------------------------------------------

     Order Linkage Rates. In addition to creating linkages 
within and between broker-dealers, the Plan also includes requirements 
that the Plan Processor be able to create lifecycles to link various 
pieces of related orders.\34\ For example, the Plan requires linkages 
of order information to create an order lifecycle from origination or 
receipt to cancellation or execution. In addition, the Plan requires 
linkages between customer orders and ``representative'' orders created 
in firm accounts for the purpose of facilitating a customer order, 
riskless principal orders, and orders worked through average price 
accounts.\35\ Pursuant to the phased approach for Industry Member 
reporting, certain of these order linkages will not be required in the 
initial phase of reporting (or ``phase 2a''), which commenced on June 
22, 2020.\36\ For example, linkages for representative order scenarios 
involving agency average price trades, net trades and aggregated orders 
will not be required until the third phase of reporting (or ``phase 
2c'') is implemented in April 2021; such linkages are not required in 
OATS today. FINRA is proposing that there be at least a 95% pre-
correction and 98% post-correction rate for order linkages that are 
required in phase 2a.
---------------------------------------------------------------------------

    \34\ See CAT NMS Plan, Appendix D, Section 3.
    \35\ See supra note 34.
    \36\ See CAT Reporting Timelines at www.catnmsplan.com/timelines/. See also Securities Exchange Act Release No. 88702 
(April 20, 2020), 85 FR 23075 (April 24, 2020) (Order Granting 
Conditional Exemptive Relief from Sections 6.4, 6.7(a)(v) and 
6.7(a)(vi) of the CAT NMS Plan) (``Phased Industry Member Reporting 
Exemptive Order'') and FINRA Rule 6895.
---------------------------------------------------------------------------

    FINRA notes that in phase 2a, linkage is required between the 
representative street side order and the order being represented when 
the representative order was originated specifically to represent a 
single order (received either from a customer or another broker-dealer) 
and there is: (1) An existing direct electronic link in the firm's 
system between the order being represented and the representative 
order, and (2) any resulting executions are immediately and 
automatically applied to the represented order in the firm's 
system.\37\ While such linkages are not required in OATS today, FINRA 
believes that it is appropriate to evaluate them for purposes of 
retiring OATS. These linkages represent a significant enhancement to 
the data currently available in OATS and will enhance the quality of 
the equity audit trail. FINRA further notes that linkages for more 
complex representative order scenarios, such as those involving agency 
average price trades, net trades and aggregated orders, will not be 
required until phase 2c. Accordingly, FINRA does not anticipate that 
the error rates for the phase 2a representative order linkages in CAT 
would be significantly higher than the order linkages available in OATS 
today. Nonetheless, in evaluating whether the standards for OATS 
retirement have been met, FINRA will take into consideration if the 
error rates for the phase 2a representative order linkages have a 
significant negative impact on the overall error rates for order 
linkages.
---------------------------------------------------------------------------

    \37\ See Industry Member Technical Specifications (2a/2b) 
version 2.2.1 r6, dated June 22, 2020, available at 
www.catnmsplan.com/sites/default/files/2020-06/CAT_Reporting_Technical_Specifications_for_Industry%20Members_v2.2.1r6_CLEAN.pdf.
---------------------------------------------------------------------------

     Exchange and TRF/ORF Match Rates. The Plan requires that 
an order lifecycle be created to link ``[o]rders routed from broker-
dealers to exchanges'' and ``[e]xecuted orders and trade reports.'' 
\38\ FINRA is proposing at least a 95% pre-correction and 98% post-
correction aggregate match rate to each equity exchange for orders 
routed

[[Page 54465]]

from Industry Members to an exchange and, for over-the-counter 
executions, the same match rate for orders linked to trade reports.
---------------------------------------------------------------------------

    \38\ See CAT NMS Plan, Appendix D, Section 3.
---------------------------------------------------------------------------

    FINRA intends to commence its review of CAT data and error rates 
based on phase 2a data and linkages, which would replicate the data in 
OATS today, and will not wait for implementation of phase 2c reporting 
(and the attendant linkages) to do so. As discussed in the Phased 
Industry Member Reporting Exemptive Order,\39\ Phase 2a Industry Member 
Data includes all events and scenarios covered by OATS. FINRA Rule 7440 
describes the OATS requirements for recording information, which 
includes information related to the receipt or origination of orders, 
order transmittal, and order modifications, cancellations and 
executions. Large Industry Members and Small Industry Members that 
currently are reporting to OATS (``Small Industry OATS Reporters'') are 
required to submit data to the CAT for these same events and scenarios 
during phase 2a. Accordingly, Phase 2a Industry Member Data is the most 
relevant for OATS retirement purposes.
---------------------------------------------------------------------------

    \39\ See supra note 36.
---------------------------------------------------------------------------

    FINRA anticipates retiring OATS based solely on phase 2a reporting, 
assuming the threshold pre- and post-correction error rates are 
achieved and FINRA's use of the data confirms that the data is accurate 
and reliable, as discussed below. This is because, as noted above, 
phase 2a data and linkages will replicate what is in OATS today; the 
data and linkages that are not required to be reported until phase 2c 
are not in OATS today. OATS will not be retired prior to commencement 
of phase 2c reporting by Large Industry Members in April 2021, and 
there may be an initial increase in error rates immediately following 
implementation of the new phase 2c reporting requirements. FINRA does 
not believe that such increase would impact FINRA's ability to assess 
the accuracy and reliability of phase 2a data for purposes of 
determining OATS retirement. In addition, FINRA believes that Industry 
Members would gain experience with the new 2c reporting requirements 
over time, such that the expected increase in the error rate would 
dissipate. Such short-lived increase is not expected to have an impact 
on FINRA's ability to meet its surveillance obligations.
    Even if these error rate thresholds are met, FINRA must evaluate 
and confirm through incorporation of CAT Data into its automated 
surveillance program that the data is accurate and reliable.\40\ Thus, 
in addition to the maximum error rates and matching thresholds proposed 
above, FINRA's use of CAT Data must confirm that (i) there are no 
material issues that have not been corrected (e.g., delays in the 
processing of data, issues with query functions, etc.), (ii) the CAT 
includes all data necessary to allow FINRA to continue to meet its 
surveillance obligations and (iii) the Plan Processor is sufficiently 
meeting its obligations under the CAT NMS Plan relating to the 
reporting and linkage of Phase 2a Industry Member Data. FINRA notes 
that any errors in the CAT Data may manifest themselves only after 
surveillance patterns and other queries have been run. Thus, while the 
error rate thresholds may be met over a 180-day period, additional time 
may be required to reliably establish that usage of the CAT has not 
revealed material issues that have not been corrected and allow 
contextual analysis of the data to take place to uncover errors in 
reporting or processing that may not be apparent from more standardized 
data validation processes.\41\
---------------------------------------------------------------------------

    \40\ For example, FINRA will need to transition all or 
substantially all of its automated surveillance patterns to CAT Data 
in order to evaluate the accuracy and reliability of the data.
    \41\ FINRA notes that the proposed criteria and anticipated 
timing of OATS retirement outlined in this filing are premised on 
and assume there are no material changes to the current CAT 
implementation plan, including availability and FINRA's access to 
CAT Data. Pursuant to amendments to the CAT NMS Plan adopted by the 
SEC, OATS must be retired by December 31, 2021 for the Plan 
Participants to meet the Period 3 Financial Accountability Milestone 
(Full Availability and Regulatory Utilization of Transactional 
Database Functionality). See CAT NMS Plan, Sections 1.1 and 11.6.
---------------------------------------------------------------------------

    Based on the proposed accuracy and reliability standards described 
above, FINRA anticipates that the time period for implementation for 
the deletion of the OATS Rules could be significant. Thus, in order to 
help alert members of the status of the OATS Rules, if the Commission 
approves the proposed rule change, FINRA is proposing to add 
introductory language to Rule 4554 and the Rule 7400 Series clarifying 
that the SEC has approved a proposed rule change (SR-FINRA-2020-024) to 
remove Rule 4554 and the Rule 7400 Series from the FINRA rulebook; 
however, by its terms, SR-FINRA-2020-024 will not be implemented until 
FINRA has determined that the CAT has achieved a level of accuracy and 
reliability sufficient to replace OATS. Once FINRA has determined that 
such standards have been met, FINRA will file for immediate 
effectiveness a rule filing setting forth the basis for its 
determination and will publish a Regulatory Notice announcing the 
implementation date of SR-FINRA-2020-024. FINRA is proposing that this 
language be added to Rule 4554 and the Rule 7400 Series upon approval 
of the proposed rule change by the SEC.
(c) Small Industry Member Data Availability
    The second issue the Plan requires the proposed rule change to 
address is ``whether the availability of certain data from Small 
Industry Members two years after the Effective Date would facilitate a 
more expeditious retirement of duplicative systems.'' \42\
---------------------------------------------------------------------------

    \42\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

    As discussed in the original proposal, FINRA believes that there is 
no effective way to retire OATS until all current OATS reporters are 
reporting to the CAT. Pursuant to the phased reporting approach, Small 
Industry OATS Reporters and Large Industry Members were required to 
begin reporting to the CAT on the same date, June 22, 2020.\43\ Thus, 
at this time, all current OATS reporters are required to report to the 
CAT.\44\ Small Industry Members that are not currently required to 
record and report information to OATS are required to begin reporting 
to the CAT in December 2021.\45\
---------------------------------------------------------------------------

    \43\ See supra note 36.
    \44\ The 180-day timeframes discussed above with respect to 
usage of the data and calculation of error rates will apply to data 
reported to the CAT by Small Industry OATS Reporters.
    \45\ See supra note 36.
---------------------------------------------------------------------------

    FINRA believes that the requirement that all current OATS reporters 
begin reporting to the CAT on June 22, 2020 will expedite the 
retirement of OATS, providing a significant cost savings for the 
industry.
(d) Individual Industry Member Exemptions
    The final issue the Plan requires the proposed rule change to 
address is ``whether individual Industry Members can be exempted from 
reporting to duplicative systems once their CAT reporting meets 
specified accuracy and reliability standards, including, but not 
limited to, ways in which establishing cross-system regulatory 
functionality or integrating data from existing systems and the CAT 
would facilitate such Individual Industry Member exemptions.'' \46\
---------------------------------------------------------------------------

    \46\ See CAT NMS Plan, Appendix C, Section C.9.
---------------------------------------------------------------------------

    FINRA believes that a single cut-over from OATS to CAT is highly 
preferable to a firm-by-firm approach and is not proposing to exempt 
members from the OATS requirements on a firm-by-firm basis. The primary 
benefit to a firm-by-firm exemptive approach would be to

[[Page 54466]]

reduce the amount of time an individual firm is required to report to a 
legacy system (e.g., OATS) if it is also accurately and reliably 
reporting to the CAT. FINRA believes that the overall accuracy and 
reliability thresholds for the CAT described above would need to be met 
under any conditions before firms could stop reporting to OATS. In 
addition, a firm-by-firm approach would require that OATS and CAT data 
be combined and integrated in order for FINRA to conduct surveillance 
in accordance with SEC rules and SRO obligations. This process would be 
technologically costly and complex and could potentially compromise the 
quality of the data and FINRA's surveillance. Moreover, as discussed 
above, Small Industry OATS Reporters are required to report to the CAT 
on the same timeframe as all other OATS Reporters (i.e., Large Industry 
Members). Thus, there is no need to exempt members from OATS 
requirements on a firm-by-firm basis.
    If the Commission approves the proposed rule change, the rule text 
will be effective upon approval; however, the amendments will not be 
implemented until FINRA has determined the accuracy and reliability 
standards set forth in the proposed rule change have been met. Once 
FINRA has determined that such standards have been met, FINRA will file 
for immediate effectiveness a separate rule filing setting forth the 
basis for its determination and will publish a Regulatory Notice 
announcing the implementation date of the amendments proposed herein.
2. Statutory Basis
    FINRA believes that the proposed rule change is consistent with the 
provisions of Section 15A(b)(6) of the Act,\47\ which requires, among 
other things, that FINRA rules must be designed to prevent fraudulent 
and manipulative acts and practices, to promote just and equitable 
principles of trade, and, in general, to protect investors and the 
public interest, and Section 15A(b)(9) of the Act,\48\ which requires 
that FINRA rules not impose any burden on competition that is not 
necessary or appropriate.
---------------------------------------------------------------------------

    \47\ 15 U.S.C. 78o-3(b)(6).
    \48\ 15 U.S.C. 78o-3(b)(9).
---------------------------------------------------------------------------

    FINRA believes that the proposed rule change fulfills FINRA's 
obligation under the CAT NMS Plan to submit a proposed rule change to 
eliminate or modify duplicative rules. FINRA believes that the approach 
set forth in the proposed rule change strikes the appropriate balance 
between ensuring that FINRA is able to continue to fulfill its 
statutory obligation to protect investors and the public interest by 
ensuring its surveillance of market activity remains accurate and 
effective while also establishing a reasonable timeframe for 
elimination the OATS Rules, which will be rendered duplicative after 
implementation of the CAT.

B. Self-Regulatory Organization's Statement on Burden on Competition 
Economic Impact Assessment

    FINRA has undertaken an economic impact assessment to analyze the 
regulatory need for the proposed rule change, its potential economic 
impacts, including anticipated costs and benefits, and the alternatives 
considered in assessing how to best meet regulatory objectives. FINRA 
does not believe that the proposed rule change will result in any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
Regulatory Need
    As mentioned above, once members are effectively reporting to the 
CAT and the CAT's accuracy and reliability meet certain standards, OATS 
reporting will be a duplicate effort. Accordingly, FINRA is proposing 
to add introductory language to Rule 7400 that facilitates the deletion 
of the Rule 7400 Series, upon announcement by FINRA that CAT has 
achieved the accuracy and reliability targets.
Economic Baseline
    Currently all FINRA members that do business in equity securities 
are required to report equity audit trail information to OATS. As noted 
above, Small Industry OATS Reporters and Large Industry Members were 
required to begin reporting to CAT on the same date, June 22, 2020, as 
part of the broader plan to implement the CAT and retire other systems. 
The proposed rule change lays out a plan by which FINRA will retire 
OATS to eventually eliminate the need for duplicative reporting and 
records maintenance.
    Costs and benefits associated with establishing the CAT, including 
the economic impacts associated with retiring existing systems, have 
been established as a part of the Plan approved by the SEC. The 
proposed framework in Appendix C, Section C.9. serves as the baseline 
to evaluate the economic impacts of the proposed rule change. 
Accordingly, the next section addresses the potential impacts stemming 
from:
    (1) Revising the reporting timeline to require that Small Industry 
Members that currently report to OATS begin reporting to the CAT on the 
same date as Large Industry Members (June 22, 2020);
    (2) implementing a single cut-over from OATS to CAT for all firms 
provided that average error rate thresholds over a 180-day period are 
met and FINRA has determined that its usage of the CAT Data has not 
revealed material issues; and
    (3) imposing a 2% post-correction error rate, in addition to the 5% 
initial Error Rate as defined in the Plan, as a condition for retiring 
of OATS.
Economic Impacts
    In creating the proposal to retire OATS, FINRA is seeking to 
carefully balance the additional costs incurred by member firms 
associated with continuing to maintain duplicate systems and records 
created by the CAT NMS Plan and existing rules with the risks to 
effective and efficient surveillance that could arise from eliminating 
access to existing data systems before a high-quality alternative has 
been tested and verified. The costs of maintaining duplicate systems 
and records include, among other things, system maintenance, quality 
control oversight and staff to maintain the systems and records. 
Because the CAT NMS Plan created the need to have duplicate systems and 
required a plan for the retirement of duplicate systems and processes, 
the Economic Impact Assessment will focus on the proposed choices made 
by FINRA in implementing the retirement plan.
    The proposed rule change will impact all OATS-reporting firms. As 
of June 30, 2019, 616 (of 936) large FINRA member broker-dealers and 
221 (of 476) small FINRA member broker-dealers report to OATS. Of the 
221 Small Industry Members that report to OATS, all but nine of them 
currently report through other firms or service providers.\49\ Of the 
nine that self-report, eight of them report very few orders to 
OATS.\50\ The approximately 575 FINRA member

[[Page 54467]]

broker-dealers that are currently exempt or excluded from OATS 
reporting are not impacted by this proposed rule change because they 
currently incur no costs in maintaining directly or indirectly systems 
for OATS compliance. Accordingly, the analysis here focuses on the 
impact of the proposed plan for retiring OATS on OATS-reporting firms 
only.
---------------------------------------------------------------------------

    \49\ All of the clearing firms that report to OATS on behalf of 
Small Industry Members were required to begin reporting to CAT on 
June 22, 2020. In addition, the service providers that report to 
OATS on behalf of Small Industry Members have a mix of small and 
large clients for whom they provide this service and, therefore, 
began CAT reporting on behalf of their clients on June 22, 2020.
    \50\ As noted above, FINRA has identified approximately 221 
member firms that currently report to OATS and meet the definition 
of ``Small Industry Member;'' however, only nine of these firms 
submit information to OATS on their own behalf, and five of the nine 
firms report very few orders to OATS. For example, in one recent 
month, five of the nine firms submitted fewer than 25 reports during 
the month, with four firms submitting fewer than 10.
---------------------------------------------------------------------------

    First, FINRA's proposal recommends a requirement that there be a 
single cut-over from OATS to CAT rather than a firm-by-firm cut-over. 
The primary beneficiary of this proposal will be the investing public. 
This approach eliminates the need to merge OATS and CAT data in order 
to execute surveillance in accordance with SEC rules and SRO 
obligations. The integration process would be technologically costly 
and difficult and could introduce errors into the data being surveilled 
that did not exist prior to integration. Conducting market surveillance 
from a single audit trail system increases the efficiency and 
effectiveness of the process and improves the integrity of the markets. 
In addition, there are direct benefits of this approach to firms. 
Specifically, other than during the time period during which the 
accuracy and reliability of CAT data is validated, a single cut-over 
approach would eliminate the need for firms that report on other firms' 
behalf to create a technological solution for receiving and reporting 
on data structured for both OATS and CAT simultaneously. Such a 
practice would increase costs to ensure compliance with the proper 
reporting mechanism. These costs would likely be incorporated into the 
fees for the service charged to introducing firms and could eventually 
be borne by customers through higher fees based on the price elasticity 
for brokerage services.
    The potential costs associated with the single cut-over approach 
will be borne by firms that could meet the maximum error thresholds for 
reporting to CAT earlier than the single cut-over approach would allow. 
These firms would bear the technology and compliance costs associated 
with dual reporting for a longer period than they might otherwise.
    Another potential cost of the single cut-over method is that there 
will likely be firms reporting to CAT that do not meet the maximum 
error rate thresholds, leading to lower quality data available for 
surveillance. If firms were individually permitted to end OATS 
reporting only when meeting a maximum error rate, every firm's 
reporting would meet the minimum criterion. Requiring an aggregate 
error rate may permit individual firms to end OATS reporting even while 
their CAT reporting does not meet the specified error rate as long as 
the error rate is low enough for the industry. Thus, surveillance of 
market activity for those firms may not be as efficient or effective 
due to the higher error rates. Taken further, it is possible that a 
single cut-over may reduce the incentives for any one firm to put 
significant effort and costs into meeting or beating the threshold 
error rates because the benefits are shared among all firms while 
greater cost is borne by the firms whose compliance rates satisfy the 
minimum error rate thresholds. This disincentive is likely to be small 
for firms with significant reporting obligations, who would seek to end 
duplicative reporting as quickly as possible and who represent the vast 
majority of OATS reports, but may, at the margin, extend the time 
necessary to meet the error reporting threshold. However, significant 
error rates could constitute a rule violation and subject firms to 
possible disciplinary action.\51\ Thus, firms that delay reducing error 
rates to threshold levels would over time incur higher costs through 
enforcement actions and be incentivized to improve their compliance 
rates.
---------------------------------------------------------------------------

    \51\ See CAT NMS Plan, Appendix C, Section 3(b) (discussing 
firm-specific compliance thresholds).
---------------------------------------------------------------------------

    With respect to the revised timeline requiring that all firms that 
report to OATS begin CAT reporting on June 22, 2020, this requirement 
means that 221 Small Industry Members were required to begin reporting 
to the CAT on the same timeframe as Large Industry Members. The primary 
benefit of this approach is that it allows the OATS system to be 
retired up to a year earlier, saving firms the costs of maintaining 
duplicate reporting systems. Of the estimated 221 firms that would be 
impacted by this proposal, 212 report to OATS through clearing firms or 
other third party providers, all of whom were required to begin CAT 
reporting on June 22, 2020 either by the requirement in the Plan or on 
behalf of clients who are required to in the Plan. Thus, there should 
be limited additional technical requirements or costs to facilitate 
reporting for these firms. In fact, requiring Small Industry OATS 
Reporters to report to the CAT on the same timeframe as Large Industry 
Members will likely allow the introducing and clearing firms to avoid 
the costs associated with maintaining two systems for reporting during 
the additional transition year. The other nine small firms will be 
required to incur costs associated with the changeover to CAT a year 
earlier. The magnitude of these costs is dependent on several factors, 
including the volume of trades expected to be reported to CAT as well 
as the technological differences between the OATS system specifications 
and CAT system specifications.
    Third, FINRA proposes that the official retirement of OATS occurs 
only once CAT has met minimum accuracy and reliability standards 
defined as a maximum error rate of 5% on a pre-correction basis and 2% 
on a post-correction basis for all CAT submissions averaged over a 180-
day period in applicable categories, and FINRA has determined that its 
usage of the CAT Data has not revealed material issues that have not 
been corrected, confirmed that the CAT includes all data necessary to 
allow FINRA to continue to meet its surveillance obligations and 
confirmed that the Plan Processor is sufficiently meeting its 
obligations under the CAT NMS Plan relating to the reporting and 
linkage of Phase 2a Industry Member Data. FINRA believes that a minimum 
of 180 days is required to provide sufficient time to ensure that 
future error rates below the maximum thresholds are able to be 
maintained and that the CAT data can otherwise be relied upon for 
conducting effective market surveillance. The trade-offs of lengthening 
or shortening the phase-in period and raising or lowering error rate 
thresholds are increased costs to member firms for maintaining 
duplicate reporting systems and records versus reliable surveillance 
and effective investigations of market activity, whose benefits 
eventually accrues to investors. Note that the current OATS error rates 
are significantly lower than 2%; however, OATS reporting errors have 
decreased over time with additional experience by firms, and CAT 
reporting is anticipated to be more complex and new to some firms and 
therefore more likely to contain errors when initially reported.
Alternatives Considered
    In considering how to best meet its regulatory objectives, FINRA 
considered several alternatives in the design of the proposed rule 
changes. Among these alternatives, FINRA assessed whether Small 
Industry Members should be subject to a different effective date for 
CAT reporting. It was determined that Small Industry OATS Reporters 
should begin reporting to CAT on the same date that Large Industry 
Members begin reporting, to enable linkages across order lifecycle 
events, enhancing surveillance and potentially permitting OATS to be 
retired more quickly.

[[Page 54468]]

    FINRA also considered a firm-by-firm approach, for exempting 
members from the OATS reporting requirements, as an alternative to 
single cut-over from OATS to CAT. FINRA determined that this approach 
represented a higher threshold for the industry to meet, likely 
increasing costs and the period where both CAT and OATS would be 
required simultaneously. Further, such an approach would also 
potentially reduce the efficacy of the audit trail, creating no 
substantial benefit to investor protection. Therefore, FINRA is 
proposing to implement a single cut-over approach for retirement of 
OATS.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    As discussed above, FINRA provided similar views and mechanisms for 
eliminating the OATS Rules in the original proposal.\52\ Four comment 
letters were submitted in response,\53\ and FINRA subsequently filed an 
amendment to the original proposal, which summarized and responded to 
the comments received.\54\ Three of the four commenters filed 
additional comment letters in response to the amendment,\55\ and FINRA 
filed a response to comments.\56\ In addition, prior to the original 
proposal, FIF and SIFMA submitted letters to the Participants regarding 
the retirement of systems related to the CAT.\57\ The comment letters, 
as well as FINRA's partial amendment and subsequent response to 
comments (which were filed with the Commission as comment letters), are 
available on the Commission's website.
---------------------------------------------------------------------------

    \52\ See supra note 12.
    \53\ See Letters from Marc R. Bryant, Senior Vice President and 
Deputy General Counsel, Fidelity Investments, to Robert W. Errett, 
Deputy Secretary, SEC, dated June 22, 2017 (``Fidelity''); William 
H. Hebert, Managing Director, Financial Information Forum, to Robert 
W. Errett, Deputy Secretary, SEC, dated June 22, 2017 (``FIF''); 
Manisha Kimmel, Chief Regulatory Officer, Wealth Management, Thomson 
Reuters, to Brent J. Fields, Secretary, SEC, dated June 22, 2017 
(``Thomson Reuters''); and Ellen Greene, Managing Director & 
Theodore R. Lazo, Managing Director and Associate General Counsel, 
Securities Industry and Financial Markets Association, to Brent J. 
Fields, Secretary, SEC, dated June 23, 2017 (``SIFMA'').
    \54\ See Securities Exchange Act Release No. 81499 (August 30, 
2017), 82 FR 42168 (September 6, 2017); see also Letter from Brant 
K. Brown, Associate General Counsel, FINRA, to Brent J. Fields, 
Secretary, SEC, dated August 28, 2017.
    \55\ See Letters from Manisha Kimmel, Chief Regulatory Officer, 
Wealth Management, Thomson Reuters, to Brent J. Fields, Secretary, 
SEC, dated September 27, 2017; William H. Hebert, Managing Director, 
FIF, to Heather Seidel, Acting Director, Division of Trading and 
Markets, SEC, dated September 29, 2017; and Ellen Greene, Managing 
Director & Theodore R. Lazo, Managing Director and Associate General 
Counsel, SIFMA, to Brent J. Fields, Secretary, SEC, dated September 
29, 2017.
    \56\ See Letter from Brant K. Brown, Associate General Counsel, 
FINRA, to Brent J. Fields, Secretary, SEC, dated October 11, 2017.
    \57\ See Letter from Kenneth E. Bentsen, Jr., SIFMA, to 
Participants re: Selection of Thesys as CAT Processor, dated April 
4, 2017, at 2; Letter from William H. Hebert, FIF, to Participants 
re: Milestone for Participants' rule change filings to eliminate/
modify duplicative rules, dated April 12, 2017.
---------------------------------------------------------------------------

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-FINRA-2020-024 on the subject line.

Paper Comments

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

    All submissions should refer to File Number SR-FINRA-2020-024. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10 a.m. and 3 
p.m. Copies of such filing also will be available for inspection and 
copying at the principal office of FINRA. All comments received will be 
posted without change. Persons submitting comments are cautioned that 
we do not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
FINRA-2020-024 and should be submitted on or before September 22, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\58\
---------------------------------------------------------------------------

    \58\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-19192 Filed 8-31-20; 8:45 am]
BILLING CODE 8011-01-P