
[Federal Register Volume 82, Number 23 (Monday, February 6, 2017)]
[Notices]
[Pages 9464-9477]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02377]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79909; File No. SR-NYSEARCA-2017-03]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To Adopt the 
Rule 11.6800 Series To Implement the Compliance Rule Regarding the 
National Market System Plan Governing the Consolidated Audit Trail

January 31, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on January 17, 2017, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. On January 30, 2017, the Exchange filed Amendment No. 1 
to the proposed rule change, which amended and replaced the proposed 
rule change in its entirety. The Commission is publishing this notice 
to solicit comments on the proposed rule change, as amended, from 
interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposed rule change to adopt the Rule 11.6800 Series 
to implement the compliance rule (``Compliance Rule'') regarding the 
National Market System Plan Governing the Consolidated Audit Trail (the 
``CAT

[[Page 9465]]

NMS Plan'' or ``Plan'').\4\ The proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.
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    \4\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein or in the CAT NMS Plan.
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II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
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 those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    This Amendment No. 1 amends and replaces in its entirety the 
original proposal filed by the Exchange on January 17, 2017. The 
Exchange submits this Amendment No. 1 in order to clarify certain 
points and add additional details to the Compliance Rule as proposed 
herein.
    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., Financial Industry 
Regulatory Authority, Inc., International Securities Exchange, LLC, 
Investors' Exchange LLC, ISE Gemini, LLC, ISE Mercury, LLC, Miami 
International Securities Exchange LLC, MIAX PEARL, LLC, NASDAQ BX, 
Inc., NASDAQ PHLX LLC, The NASDAQ Stock Market LLC, National Stock 
Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE 
Arca, Inc. (collectively, the ``Participants'') filed with the 
Commission, pursuant to Section 11A of the Exchange Act \5\ and Rule 
608 of Regulation NMS thereunder,\6\ the CAT NMS Plan.\7\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. 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\
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    \5\ 15 U.S.C. 78k-1.
    \6\ 17 CFR 242.608.
    \7\ 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.
    \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) (``Order Approving the 
National Market System Plan Governing the Consolidated Audit Trail) 
(``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 Member, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\10\ As is described more fully below, the proposed Rule 
11.6800 Series sets forth the Compliance Rule to require Industry 
Members to comply with the provisions of the CAT NMS Plan. The proposed 
Rule 11.6800 Series includes twelve proposed 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) testing; (10) recordkeeping; (11) timely, accurate 
and complete data; and (12) compliance dates. Each of these proposed 
rules is discussed in detail below.
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    \10\ See SEC Rule 613(g)(1). The proposed Rule 11.6800 Series 
would be applicable to OTP Holders. Pursuant to Rule 1.1(q), an 
``OTP Holder'' refers to a natural person, in good standing, who has 
been issued an OTP. An OTP Holder must be a registered broker or 
dealer pursuant to Section 15 of the Act. Rule 1.1(p) defines 
``OTP'' as an Options Trading Permit issued by the Exchange for 
effecting approved securities transactions on the Exchange.
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(i) Definitions
    Proposed Rule 11.6810 (Consolidated Audit Trail--Definitions) sets 
forth the definitions for the terms used in the proposed Rule 11.6800 
Series. Each of the defined terms in proposed Rule 11.6810 is discussed 
in detail in this section.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to 
the CAT to ensure there is sufficient information to create the 
lifecycle of an order, and provide regulators with sufficient detail 
about an order to perform their regulatory duties. Certain required 
elements are intended to ensure that the regulators can identify the 
Customer's associated with orders. For example, SEC Rule 
613(c)(7)(i)(A) requires an Industry Member to report the ``Customer-
IDs'' for each Customer for the original receipt or origination of an 
order. ``Customer-ID'' is defined in SEC 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.'' SEC Rule 613(c)(8) requires Industry Members to use the 
same Customer-ID for each Customer. The SEC 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.\11\ The alternative 
approach is called the Customer Information Approach.
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    \11\ 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 at 12 (``Exemptive Request Letter''); and CAT 
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would 
require each Industry Member to assign a unique Firm Designated ID to 
each Customer. As the Firm Designated ID, Industry Members would 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). Prior to their 
commencement of reporting to the CAT, Industry Members would 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 LEI and/or Larger 
Trader ID

[[Page 9466]]

(``LTID'')). This process is referred to as the customer definition 
process.
    In accordance with the Customer Information Approach, Industry 
Members would 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. Within the Central 
Repository, each Customer would 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 would 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 would 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.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry 
Members would be required to report Customer Account Information to the 
Central Repository. ``Customer Account Information'' is defined in SEC 
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).'' Therefore, when reporting Customer 
Account Information, and Industry Member is required to report the date 
an account was opened. The Participants requested and received an 
exemption to allow an ``Account Effective Date'' to be reported in lieu 
of an account open date in certain limited circumstances. The 
definition of ``Account Effective Date'' as set forth in paragraph (a) 
of proposed Rule 11.6810 describes those limited circumstances in which 
an Industry Member may report an ``Account Effective Date'' rather than 
the account open date. 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.
    Specifically, Paragraph (a)(1) defines ``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.
    Paragraph (a)(2) of proposed Rule 11.6810 states 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.
    Paragraph (a)(3) states 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.
    Paragraph (a)(4) states 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.
    Paragraph (a)(5) states 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 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). With regard to paragraphs (a)(2)-(5), the 
Account Effective Date will be no later than the date trading occurs at 
the Industry Member or in the Industry Member's system.
(B) Active Account
    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. This will 
alleviate the need for Industry Members to update such information for 
non-active accounts, but still ensure that the Central Repository will 
collect audit trail data for Customer accounts that have any Reportable 
Events. Accordingly, paragraph (b) of proposed Rule 11.6810 defines an 
``Active Account'' as an account that has had activity in Eligible 
Securities within the last six months. This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) 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).'' The SROs requested and received from the SEC exemptive relief 
from SEC Rule 613 for an alternative to this approach (``Allocation 
Report Approach''). The Allocation Report Approach would permit 
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 SEC Rule 613.\12\ Under SEC 
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.
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    \12\ See Exemptive Request Letter, supra note 11, at 26-27; and 
Exemption Order.
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(II) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, paragraph 
(c) of proposed Rule 11.6810 defines 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

[[Page 9467]]

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. This is the same definition as set 
forth in Section 1.1 of the CAT NMS Plan.
(D) 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, paragraph (d) of proposed Rule 
11.6810 defines the term ``Business Clock'' as a clock used to record 
the date and time of any Reportable Event required to be reported under 
this Rule 11.6800 Series. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan, except the Exchange proposes to 
replace the phrase ``under SEC Rule 613'' at the end of the definition 
in Section 1.1 of the Plan with the phrase ``under this Rule Series.'' 
This change is intended to recognize that the Industry Members' 
obligations with regard to the CAT are set forth in this Rule 11.6800 
Series.
(E) CAT
    Paragraph (e) of proposed Rule 11.6810 defines the term ``CAT'' to 
mean the consolidated audit trail contemplated by SEC Rule 613. This is 
the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(F) CAT NMS Plan
    Paragraph (f) of proposed Rule 11.6810 defines the term ``CAT NMS 
Plan'' to mean the National Market System Plan Governing the 
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link 
and reconstruct the complete lifecycle of each Reportable Event in CAT. 
According to this Approach, Industry Members assign their own 
identifiers to each order event. Within the Central Repository, the 
Plan Processor later replaces 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 is used to links the Reportable Events related to the same 
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, paragraph (g) of proposed 
Rule 11.6810 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-
ID'' is defined 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. This is 
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1 
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule 
613(j)(1).
(H) 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.\13\ Such a third party, referred to 
in this proposed Rule 11.6800 Series as a ``CAT Reporting Agent,'' 
would be one type of a Data Submitter, that is, a party that submit 
data to the Central Repository. Paragraph (h) of proposed Rule 11.6810 
defines the term ``CAT Reporting Agent'' 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 this Rule 11.6800 Series.
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    \13\ See Appendix C, Section A.1(a) of the CAT NMS Plan.
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    This definition is based on FINRA's definition of a ``Reporting 
Agent'' as set forth in FINRA's rule related to its Order Audit Trail 
System (``OATS''). 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 member's reporting obligations under FINRA Rule 7450. The 
Reporting Agent for OATS fulfills a similar role to the CAT Reporting 
Agent.
(I) Central Repository
    Paragraph (i) of proposed Rule 11.6810 defines the term ``Central 
Repository'' to mean the repository responsible for the receipt, 
consolidation, and retention of all information reported to the CAT 
pursuant to SEC Rule 613 and the CAT NMS Plan. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan, except the 
Exchange proposes to use the phrase ``CAT NMS Plan'' in place of the 
phrase ``this Agreement.''
(J) Compliance Threshold
    Paragraph (j) of proposed Rule 11.6810 defines the term 
``Compliance Threshold'' as having the meaning set forth in proposed 
Rule 11.6893(d). This definition has the same substantive meaning as 
the definition set forth in Section 1.1 of the CAT NMS Plan. As 
discussed in detail below with regard to proposed Rule 11.6893(d), 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. This Industry Member-specific rate 
is the ``Compliance Threshold.''
(K) 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, 
paragraph (k) of proposed Rule 11.6810 proposes to define the term 
``Customer.'' Specifically, the term ``Customer'' would be 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). This is the same definition as 
set forth in SEC Rule 613(j)(3), except the Exchange proposes 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 
the proposed Rule 11.6800 Series. The Exchange also notes that Section 
1.1 of the CAT NMS Plan defines ``Customer'' by reference to SEC Rule 
613(j)(3).
(L) 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 Exchange proposes to define the term ``Customer 
Account Information'' to clarify what customer information would need 
to be reported to the Central Repository.
    Paragraph (l) of proposed Rule 11.6810 defines the term ``Customer 
Account Information'' to include, in part, account number, account 
type,

[[Page 9468]]

customer type, date account opened, and large trader identifier (if 
applicable). Proposed Rule 11.6810(l), however, provides 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.'' 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. 
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.
(M) 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, SRO proposes to define the term 
``Customer Account Information'' to clarify what Customer information 
would need to be reported to the Central Repository.
    Paragraph (m) of proposed Rule 11.6810 defines the term ``Customer 
Identifying Information'' to mean information of sufficient detail to 
identify a Customer. With respect to individuals, ``Customer 
Identifying Information'' includes, but is not limited to, name, 
address, date of birth, individual tax payer identification number 
(``ITIN'')/social security number (``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, Employer Identification Number (``EIN'')/Legal Entity 
Identifier (``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. This 
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any 
person that reports data to the Central Repository.\14\ 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 Rule 11.6800 Series, the Exchange proposes to define 
``Data Submitter'' in paragraph (n) of proposed Rule 11.6810. 
Specifically, paragraph (n) of proposed Rule 11.6810 defines a ``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 
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.
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    \14\ See Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of the proposed Rule 11.6800 Series only 
apply to Reportable Events in Eligible Securities. Currently, an 
Eligible Security includes NMS Securities and OTC Equity Securities. 
Accordingly, paragraph (o) of proposed Rule 11.6810 defines the term 
``Eligible Security'' to include: (1) All NMS Securities; and (2) all 
OTC Equity Securities. The terms ``NMS Securities'' and ``OTC Equity 
Securities'' are defined, in turn, below. This is the same definition 
as set forth in Section 1.1 of the CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum 
Error Rate that the Central Repository would tolerate from an Industry 
Member reporting data to the Central Repository.\15\ The Operating 
Committee reviews and resets the maximum Error Rate, at least 
annually.\16\ 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.\17\ As such, the Exchange 
or the SEC ``may take appropriate action against an Industry Member for 
failing to comply with its CAT reporting obligations.\18\ The CAT NMS 
Plan sets the initial Error Rate at 5%.\19\ 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.\20\
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    \15\ See Section 6.5(d)(i) of the CAT NMS Plan.
    \16\ See Appendix C, Section A.3(b) of the CAT NMS Plan.
    \17\ See Appendix C, Section A.3(b) of the CAT NMS Plan; SEC 
Rule 613(g)-(h).
    \18\ See Appendix C, Section A.3(b) of the CAT NMS Plan.
    \19\ See Section 6.5(d)(i) of the CAT NMS Plan.
    \20\ See Appendix C, Section A.3(b) of the CAT NMS Plan.
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    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

[[Page 9469]]

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.\21\
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    \21\ See Approval Order, supra note 9, at 84718.
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(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the 
Error Rate, the Exchange proposes to define the term ``Error Rate'' in 
proposed Rule 11.6810. Paragraph (p) of proposed Rule 11.6810 defines 
the term ``Error Rate'' 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. This is the same definition as set forth in SEC Rule 613(j)(6), 
and Section 1.1 of the CAT NMS Plan defines ``Error Rate'' by reference 
to SEC Rule 613(j)(6).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the 
CAT NMS Plan would require each Industry Member to assign a unique Firm 
Designated ID to each Customer. Industry Members would 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 (i.e., a single firm may not have multiple 
separate customers with the same identifier on any given date). 
Industry members would 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 
Exchange proposes to define the term ``Firm Designated ID'' in proposed 
Rule 11.6810. Specifically, paragraph (q) of proposed Rule 11.6810 
defines the term ``Firm Designated ID'' 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. This is the same definition as set forth in Section 1.1 
of the CAT NMS Plan. Industry Members would 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).
(R) Industry Member
    Paragraph (r) of proposed Rule 11.6810 defines the term ``Industry 
Member'' to mean a member of a national securities exchange or a member 
of a national securities association.'' This is the same definition as 
set forth in Section 1.1 of the CAT NMS Plan.
(S) Industry Member Data
    Paragraph (s) of proposed Rule 11.6810 states that the term 
``Industry Member Data'' has the meaning set forth in Rule 
11.6830(a)(2). This definition has the same substantive meaning as the 
definition set forth in in Section 1.1 of the CAT NMS Plan. The 
definition of ``Industry Member Data'' is discussed more fully in the 
discussion below regarding proposed Rule 11.6830(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of proposed Rule 11.6810 defines the term ``Initial 
Plan Processor'' to mean the first Plan Processor selected by the 
Operating Committee in accordance with SEC 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. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan, although the proposed definition uses 
the full name of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and this proposed Rule 11.6800 Series applies to 
Eligible Securities, which includes NMS Securities, which, in turn, 
includes Listed Options. Certain requirements of the proposed Rule 
11.6800 Series apply specifically to Listed Options. Accordingly, 
paragraph (u) of proposed Rule 11.6810 defines the term ``Listed 
Option'' or ``Option.'' Specifically, paragraph (u) of proposed Rule 
11.6810 states that the term ``Listed Option'' or ``Option'' has the 
meaning set forth in SEC Rule 600(b)(35) of Regulation NMS. SEC Rule 
600(b)(35), in turn, defines a listed option as ``any option traded on 
a registered national securities exchange or automated facility of a 
national securities association.'' The Exchange notes 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.
(V) Manual Order Event
(I) 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.\22\ 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 a synchronization. Each Industry Member is required to 
synchronize their Business Clocks used solely for Manual Order Events, 
however, at a minimum to within one second of the time maintained by 
the NIST.
---------------------------------------------------------------------------

    \22\ See Exemption Order, supra note 11.
---------------------------------------------------------------------------

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock 
synchronization and time stamp purposes, the Exchange proposes to 
define the term ``Manual Order Event'' in proposed Rule 11.6810. 
Specifically, paragraph (v) of proposed Rule 11.6810 defines the term 
``Manual Order Event'' to mean a non-electronic communication of order-
related information for which Industry Members must record and report 
the time of the event. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(W) Material Terms of the Order
    Proposed Rule 11.6830 requires 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

[[Page 9470]]

Exchange proposes to define the term ``Material Terms of the Order'' in 
proposed Rule 11.6810. Specifically, paragraph (w) of proposed Rule 
11.6810 defines 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. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the 
CAT. Therefore, the Exchange proposes to define the term ``NMS 
Security'' in proposed Rule 11.6810. Specifically, paragraph (x) of 
proposed Rule 11.6810 defines 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. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish 
different Trading Days for NMS Stocks (as defined in SEC Rule 
600(b)(47)), Listed Options, OTC Equity Securities, and any other 
securities that are included as Eligible Securities from time to time. 
Accordingly, the Exchange proposes to define the term ``NMS Stock'' in 
Paragraph (y) of Proposed Rule 11.6810 to mean any NMS Security other 
than an option. This is the same definition as set forth in SEC Rule 
600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of proposed Rule 11.6810 defines 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. This is the 
same definition as set forth in Section 1.1 of the CAT NMS Plan, except 
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the 
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) Options Market Maker Quote Exemption
    SEC 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. SEC Rule 
613(j)(8) defines ``order'' to include ``any bid or offer.'' Therefore, 
under SEC 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.
    The Exchange, however, requested and received exemptive relief from 
SEC Rule 613 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 SEC 
Rule 613.\23\ In accordance with the exemptive relief, Options Market 
Makers would 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.
---------------------------------------------------------------------------

    \23\ See Exemptive Request Letter, supra note 11, at 2, and 
Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Options Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in proposed Rule 11.6810. Specifically, paragraph (aa) of 
proposed Rule 11.6810 defines 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. This is the same 
definition as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    The proposed Rule 11.6800 Series requires each Industry Member to 
record and electronically report to the Central Repository certain 
details for each order. Accordingly, the Exchange proposes to define 
the term ``Order'' in proposed Rule 11.6810. Specifically, paragraph 
(bb) of proposed Rule 11.6810 defines 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. This is the same definition 
as set forth in SEC Rule 613(j)(8), except the Exchange proposes to 
replace the phrase ``member of a national securities exchange or 
national securities association'' with the term ``Industry Member.'' 
The Exchange notes that Section 1.1 of the CAT NMS Plan defines 
``Order'' by reference to SEC Rule 613(j)(8).
(CC) OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities 
for the CAT. Therefore, the Exchange proposes to define the term ``OTC 
Equity Security'' in proposed Rule 11.6810. Specifically, paragraph 
(cc) of proposed Rule 11.6810 defines 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 reported to one of such association's equity trade 
reporting facilities. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of proposed Rule 11.6810 defines the term 
``Participant'' 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. This is the same definition in substance 
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of proposed Rule 11.6810 defines 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. This is the same definition as set forth in Section 
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of proposed Rule 11.6810 defines the term ``Plan 
Processor'' to mean the Initial Plan Processor or any other Person 
selected by the Operating Committee pursuant to SEC 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

[[Page 9471]]

Consolidated Audit Trail, to perform the CAT processing functions 
required by SEC Rule 613 and set forth in the CAT NMS Plan.
(GG) Received Industry Member Data
    Paragraph (gg) of proposed Rule 11.6810 states that the term 
``Received Industry Member Data'' has the meaning set forth in Rule 
11.6830(a)(2). This definition has the same substantive meaning as the 
definition set forth in Section 1.1 of the CAT NMS Plan. The definition 
of ``Received Industry Member Data'' is discussed more fully in the 
discussion below regarding proposed Rule 11.6830(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 11.6810 states that the term 
``Recorded Industry Member Data'' has the meaning set forth in Rule 
11.6830(a)(1). This definition has the same substantive meaning as the 
definition set forth in in Section 1.1 of the CAT NMS Plan. The 
definition of ``Recorded Industry Member Data'' is discussed more fully 
in the discussion below regarding proposed Rule 11.6830(a)(1).
(II) Reportable Event
    The proposed Rule 11.6800 Series requires each Industry Member to 
record and electronically report to the Central Repository certain 
details for each Reportable Event. To clarify these requirements, the 
Exchange proposes to define the term ``Reportable Event'' in proposed 
Rule 11.6810. Specifically, paragraph (ii) of proposed Rule 11.6810 
states that the term ``Reportable Event'' includes, but is not limited 
to, the original receipt or origination, modification, cancellation, 
routing, execution (in whole or in part) and allocation of an order, an 
receipt of a routed order. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.
(JJ) SRO
    Paragraph (jj) of proposed Rule 11.6810 defines the term ``SRO'' to 
mean any self-regulatory organization within the meaning of Section 
3(a)(26) of the Exchange Act. This is the same definition as set forth 
in Section 1.1 of the CAT NMS Plan.
(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The Exchange requested and received exemptive relief from SEC Rule 
613 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 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).\24\ 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.
---------------------------------------------------------------------------

    \24\ See Exemptive Request Letter, supra note 11, at 19, and 
Exemption Order.
---------------------------------------------------------------------------

    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, the Exchange 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.
(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange 
proposes to define the term ``SRO-Assigned Market Participant'' in 
proposed Rule 11.6810. Specifically, paragraph (kk) of proposed Rule 
11.6810 defines the term ``SRO-Assigned Market Participant Identifier'' 
to mean an identifier assigned to an Industry Member by the Exchange or 
an identifier used by a Participant. This is the same definition as set 
forth in Section 1.1 of the CAT NMS Plan. 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.
(LL) Small Industry Member
    The requirements of the proposed Rule 11.6800 Series 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 Exchange proposes to define the term 
``Small Industry Member'' in proposed Rule 11.6810. Specifically, 
paragraph (ll) of proposed Rule 11.6810 defines the term ``Small 
Industry Member'' to mean an Industry Member that qualifies as a small 
broker-dealer as defined in Rule 0-10(c) under the Securities Exchange 
Act of 1934, as amended. 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 SEC Rule 613.'' The definition of a 
small broker-dealer under SEC Rule 613, in turn, is a small broker-
dealer as defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 11.6830(b) establishes the deadlines for reporting 
certain data to the Central Repository using the term ``Trading Day.'' 
Accordingly, the Exchange proposes to define the term ``Trading Day'' 
in proposed Rule 11.6810. Specifically, paragraph (mm) of proposed Rule 
11.6810 states that the term ``Trading Day'' shall have the meaning as 
is determined by the Operating Committee. For the avoidance of doubt, 
the Operating Committee may establish different Trading Days for NMS 
Stocks (as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity 
Securities, and any other securities that are included as Eligible 
Securities from time to time.
(ii) Clock Synchronization
    SEC Rule 613(d)(1) under Regulation NMS requires Industry Members 
to synchronize their Business Clocks to the time maintained by NIST, 
consistent with industry standards. To comply with this provision, 
Section 6.8 of the Plan sets forth the clock synchronization 
requirements for Industry Members.\25\ To implement these provisions 
with regard to Industry Members, the Exchange proposes new

[[Page 9472]]

Rule 11.6820 (Consolidated Audit Trail--Clock Synchronization) to 
require Industry Members to comply with the clock synchronization 
requirements of the Plan.
---------------------------------------------------------------------------

    \25\ In addition, Section 6.7(a)(ii) of the Plan sets forth the 
timeline for CAT Reporters to comply with the clock synchronization 
requirements.
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 11.6820 sets forth the manner in 
which Industry Members must synchronize their Business Clocks. 
Paragraph (a)(1) of proposed Rule 11.6820 requires 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. This is the same requirement as set 
forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 11.6820 requires 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 
tolerance of the time maintained by the NIST atomic clock, and maintain 
such synchronization. This is the same requirement as set forth in 
Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
    Paragraph (a)(3) of proposed Rule 11.6820 clarifies that the 
tolerance described in paragraphs (a)(1) and (2) of the proposed Rule 
11.6820 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. This description of the clock 
synchronization tolerance is the same as set forth in paragraph (b) of 
FINRA Rule 4590 (Synchronization of Member Business Clocks).
    Paragraph (a)(4) of proposed Rule 11.6820 requires Industry Members 
to synchronize their Business Clocks every business day before market 
open to ensure that timestamps for Reportable Events are accurate. In 
addition, to maintain clock synchronization, Business Clocks must be 
checked against the NIST atomic clock and re-synchronized, as 
necessary, throughout the day. This description of the required 
frequency of clock synchronization is the same as set forth in 
paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business 
Clocks).
    Paragraph (b) of proposed Rule 11.6820 sets forth documentation 
requirements with regard to clock synchronization. Specifically, 
paragraph (b) requires Industry Members to document and maintain their 
synchronization procedures for their Business Clocks. The proposed Rule 
requires 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 paragraph (a) of the proposed rule. 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. 
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. Moreover, these documentation requirements 
regarding clock synchronization are comparable to those set forth in 
Supplementary Material .01 of FINRA Rule 4590 (Synchronization of 
Member Business Clocks).
    Paragraph (c) of proposed Rule 11.6820 sets forth certification 
requirements with regard to clock synchronization. Specifically, 
paragraph (c) of proposed Rule 11.6820 requires each Industry Member to 
certify to the Exchange that its Business Clocks satisfy the 
synchronization requirements set forth in paragraph (a) of proposed 
Rule 11.6820 periodically in accordance with the certification schedule 
established by the Operating Committee pursuant to the CAT NMS Plan. 
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 Exchange intends 
to announce to its Industry Members the certification schedule 
established by the Operating Committee via Trader Update.
    Paragraph (d) of proposed Rule 11.6820 establishes reporting 
requirements with regard to clock synchronization. Paragraph (d) of 
proposed Rule 11.6820 requires Industry Members to report to the Plan 
Processor and the Exchange violations of paragraph (a) of this Rule 
pursuant to the thresholds set by the Operating Committee pursuant to 
the CAT NMS Plan. 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 
Exchange intends to announce to its Industry Members the relevant 
thresholds established by the Operating Committee via Trader Update.
(iii) Industry Member Data Reporting
    SEC Rule 613(c) under Regulation NMS requires the CAT NMS Plan to 
set forth certain provisions requiring Industry Members to record and 
report data to the CAT. 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 Exchange proposes Rule 11.6830 (Consolidated 
Audit Trail--Industry Member Data Reporting) to require Industry 
Members to comply with the Industry Member Data reporting requirements 
of the Plan. Proposed Rule 11.6830 has six 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) format, (5) the security 
symbology to be used in the recording and reporting, and (6) error 
correction requirements, each of which is described below.
(A) Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 11.6830 describes the recording and 
reporting of Industry Member Data to the Central Repository. Paragraph 
(a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry 
Member Data, Received Industry Member Data and Options Market Maker 
data, respectively. Paragraphs (a)(1)-(a)(3) of proposed Rule 11.6830 
set forth the recording and reporting requirements required in Section 
6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) requires, subject to paragraph (a)(3) 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 
proposed Rule 11.6860); and (6) Material Terms of the Order;
     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 proposed Rule 11.6860); (4) SRO-

[[Page 9473]]

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;
     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 
pursuant to proposed Rule 11.6860); (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;
     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 proposed Rule 11.6860); (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;
     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 proposed Rule 11.6860; (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
     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 11.6830 requires, subject to 
paragraph (a)(3) 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 proposed Rule 11.6830(a)(1) ``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 
proposed Rule 11.6840, Customer Account Information and Customer 
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 11.6830 states 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). This 
paragraph implements the Options Market Maker Quote Exemption, as 
discussed above.
(B) Timing of Recording and Reporting
    Paragraph (b) of proposed Rule 11.6830 describes the requirements 
related to the timing of recording and reporting of Industry Member 
Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 11.6830 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.
    Paragraph (b)(1) of proposed Rule 11.6830 requires each Industry 
Member to record Recorded Industry Member Data contemporaneously with 
the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 
11.6830 requires 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. Paragraph (b)(3) of proposed Rule 11.6830 states 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.
(C) Applicable Securities
    Paragraph (c) of proposed Rule 11.6830 describes the securities to 
which the recording and reporting requirements of proposed Rule 11.6830 
apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 11.6830 set forth 
the description of applicable securities as set forth in Section 
6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph (c)(1) 
of proposed Rule 11.6830 requires each Industry Member to record and 
report to the Central Repository the Industry Member Data as set forth 
in paragraph (a) of proposed Rule 11.6830 for each NMS Security 
registered or listed for trading on such exchange or admitted to 
unlisted trading privileges on such exchange. Paragraph (c)(2) of 
proposed Rule 11.6830 requires each Industry Member to record and 
report to the Central Repository the Industry Member Data as set forth 
in paragraph (a) of this proposed Rule 11.6830 for each Eligible 
Security for which transaction reports are required to be submitted to 
FINRA.
(D) Security Symbology
    Paragraph (d) of proposed Rule 11.6830 describes the security 
symbology that Industry Members are required to use when reporting 
Industry Member Data to the Central Repository. Paragraph (d)(1) of 
proposed Rule 11.6830 requires, 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. 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.
    For each Eligible Security that is not exchange-listed, however, 
there is no listing exchange to provide the symbology format. Moreover, 
to date, the requisite symbology format has not been determined. 
Therefore, paragraph (d)(2) of proposed Rule 11.6830 requires, 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 Exchange intends to announce to its Industry Members 
the relevant symbology formats established by the Operating Committee 
via Trader Update.

[[Page 9474]]

(E) Error Correction
    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 Exchange proposes to adopt paragraph 
(e) of proposed Rule 11.6830, which addresses the correction of 
erroneous data reported to the Central Repository. Paragraph (e) of 
proposed Rule 11.6830 requires, 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, that such Industry 
Member submit corrected Industry Member Data to the Central Repository 
by 8:00 a.m. Eastern Time on T+3. This requirement implements the error 
correction requirement set forth in Section 6 of Appendix D of the CAT 
NMS Plan.
(iv) 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 Exchange proposes new Rule 11.6840 (Consolidated 
Audit Trail--Customer Information Reporting) to implement this 
provision of the CAT NMS Plan with regard to its Industry Members. 
Specifically, paragraph (a) of proposed Rule 11.6840 requires 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 proposed Rule 11.6880. 
Paragraph (b) of proposed Rule 11.6840 requires 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. Paragraph (c) of proposed Rule 11.6840 
requires 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 Exchange intends to announce to its 
Industry Members when such a periodic refresh is required by the Plan 
Processor and the Operating Committee via Trade Update.
    Paragraph (d) of proposed Rule 11.6840 addresses the correction of 
erroneous Customer data reported to the Central Repository to ensure 
and accurate audit trail. Paragraph (d) requires, 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 CAT 
Reporting Member to submit corrected data to the Central Repository by 
5:00 p.m. Eastern Time on T+3. This requirements implements the error 
correction requirement set forth in Appendix C of the CAT NMS Plan.
(v) 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 Exchange proposes Rule 11.6850 (Consolidated Audit 
Trail--Industry Member Information Reporting) to implement this 
provision of the CAT NMS Plan with regard to its Industry Members. 
Specifically, proposed Rule 11.6850 requires 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 proposed Rule 11.6880, and keep such information up to date as 
necessary.
(vi) Time Stamps
    SEC Rule 613(d)(3) under Regulation NMS sets forth requirements for 
time stamps used by CAT Reporters in recording and reporting data to 
the CAT.\26\ 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 Exchange 
proposes new Rule 11.6860 (Consolidated Audit Trail--Time Stamps) to 
require its Industry Members to comply with the time stamp requirements 
of the CAT NMS Plan.
---------------------------------------------------------------------------

    \26\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 11.6860 sets forth the time stamp 
increments to be used by Industry Members in their CAT reporting. 
Paragraph (a)(1) of proposed Rule 11.6860 requires each Industry Member 
to record and report Industry Member Data to the Central Repository 
with time stamps in milliseconds, subject to paragraphs (a)(2) and (b) 
of proposed Rule 11.6860. To the extent that any Industry Member's 
order handling or execution systems utilize time stamps in increments 
finer than milliseconds, paragraph (a)(2) of proposed Rule 11.6860 
requires such Industry Member to record and report Industry Member Data 
to the Central Repository with time stamps in such finer increment, 
subject to paragraph (b) of proposed Rule 11.6860 regarding Manual 
Order Events and Allocation Reports.
    Paragraph (b) of proposed Rule 11.6860 sets forth the permissible 
time stamp increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of proposed Rule 11.6860 permits 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 time when a 
Manual Order Event has been captured electronically in an order 
handling and execution system of such Industry Member (``Electronic 
Capture Time'') in milliseconds. In addition, paragraph (b)(2) of 
proposed Rule 11.6860 permits each Industry Member to record and report 
the time of Allocation Reports in increments up to and including one 
second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 11.6865 (Consolidated Audit Trail--Clock 
Synchronization Rule Violations) describes potential violations of the 
clock synchronization time period requirements set forth in the 
proposed Rule 11.6800 Series. Proposed Rule 11.6865 states that an 
Industry Member that engages in a pattern or practice of reporting 
Reportable Events outside of the required clock synchronization time 
period as set forth in this Rule Series without reasonable 
justification or exceptional circumstances may be considered in 
violation of this Rule. 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

[[Page 9475]]

events outside of the required clock synchronization time period 
without reasonable justification or exceptional circumstances may be 
considered a violation of SEC Rule 613 or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 11.6870 (Consolidated Audit Trail--Connectivity and 
Data Transmission) addresses connectivity and data transmission 
requirements related to the CAT. Paragraph (a) of proposed Rule 11.6870 
describes the format(s) for reporting Industry Member Data to the 
Central Repository, thereby implementing the formatting requirements as 
set forth in Section 6.4(a) of the CAT NMS Plan. Specifically, 
paragraph (a) of proposed Rule 11.6870 requires 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.
    Paragraph (b) of proposed Rule 11.6870 addresses connectivity 
requirements related to the CAT. Paragraph (b) of proposed Rule 11.6870 
requires 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). This provision 
implements the connectivity requirements set forth in Section 4 of 
Appendix D to the CAT NMS Plan.
    Paragraph (c) of proposed Rule 11.6870 permits Industry Members to 
use CAT Reporting Agents to fulfill their data reporting obligations 
related to the CAT. Paragraph (c) is 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. 
Specifically, Paragraph (c)(1) of proposed Rule 11.6870 states that any 
Industry Member may enter into an agreement with a CAT Reporting Agent 
pursuant to which the CAT Reporting Agent agrees to fulfill the 
reporting obligations of such Industry Member under the proposed Rule 
11.6800 Series. 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 Rule 11.6800 Series. The Exchange notes 
that, currently, no standardized form agreement for CAT Reporting Agent 
arrangements has been adopted. Paragraph (c)(2) of proposed Rule 
11.6870 requires that all written documents evidencing an agreement 
with a CAT Reporting Agent be maintained by each party to the 
agreement. Paragraph (c)(3) of proposed Rule 11.6870 states that each 
Industry Member remains primarily responsible for compliance with the 
requirements of the proposed Rule 11.6800 Series, notwithstanding the 
existence of an agreement described in paragraph (c) of proposed Rule 
11.6870.
(ix) Development and Testing
    The Exchange proposed Rule 11.6880 (Consolidated Audit Trail--
Development and Testing) to address requirements for Industry Members 
related to CAT development and testing. Paragraph (a) of proposed Rule 
11.6880 sets forth the testing requirements and deadlines for Industry 
Members to develop and commence reporting to the Central Repository. 
These requirements are set forth in Appendix C to the CAT NMS Plan.
    Paragraph (a)(1) sets 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.
    Paragraph (a)(2) sets forth the deadlines related to reporting 
Customer and Industry Member information. Paragraph (a)(2)(i) requires 
Industry Members (other than Small Industry Members) to begin reporting 
Customer and Industry Member information, as required by Rules 
11.6840(a) and 11.6850, respectively, to the Central Repository for 
processing no later than October 15, 2018. Paragraph (a)(2)(ii) 
requires Small Industry Members to begin reporting Customer and 
Industry Member information, as required by Rules 11.6840(a) and 
11.6850, respectively, to the Central Repository for processing no 
later than October 15, 2019.
    Paragraph (a)(3) sets forth the deadlines related to the submission 
of order data. Under paragraph (a)(3)(i), Industry Members (other than 
Small Industry Members) are permitted, but not required, to submit 
order data for testing purposes 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 
paragraph (a)(3)(ii), 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.
    Paragraph (a)(4) states that Industry Members are permitted, but 
not required to, submit Quote Sent Times on Options Market Maker 
quotes, beginning no later than October 15, 2018.
    Paragraph (b) of proposed Rule 11.6880 implements the requirement 
under the CAT NMS Plan that Industry Members participate in required 
industry testing with the Central Repository.\27\ Specifically, 
proposed Rule 11.6880 requires 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 Exchange intends to announce to its 
Industry Members the schedule established pursuant to the CAT NMS Plan 
via Trader Update.
---------------------------------------------------------------------------

    \27\ See Approval Order, supra note 9, at 84725.
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(x) Recordkeeping
    Proposed Rule 11.6890 (Consolidated Audit Trail--Recordkeeping) 
sets forth the recordkeeping obligations related to the CAT for 
Industry Members. Proposed Rule 11.6890 requires each Industry Member 
to maintain and preserve records of the information required to be 
recorded under the proposed Rule 11.6800 Series for the period of time 
and accessibility specified in SEC Rule 17a-4(b). The records required 
to be maintained and preserved under the proposed Rule 11.6800 Series 
may be immediately produced or reproduced on ``micrographic media'' as 
defined in SEC Rule 17a-4(f)(1)(i) or by means of ``electronic storage 
media'' as defined in SEC Rule 17a-4(f)(1)(ii) that meet the conditions 
set forth in SEC Rule 17a-4(f) and be maintained and preserved for the 
required time in that form. Proposed Rule 11.6890 is based on FINRA 
Rule 7440(a)(5), which sets forth the recordkeeping requirements 
related to OATS.
(xi) Timely, Accurate and Complete Data
    SEC Rule 613 and the CAT NMS Plan emphasize the importance of the 
timeliness, accuracy, completeness and integrity of the data submitted 
to the

[[Page 9476]]

CAT.\28\ Accordingly, proposed Rule 11.6893 (Consolidated Audit Trail--
Timely, Accurate and Complete Data) implements this requirement with 
regard to Industry Members. Paragraph (a) of proposed Rule 11.6893 
requires that Industry Members record and report data to the Central 
Repository as required by the proposed Rule 11.6800 Series in a manner 
that ensures the timeliness, accuracy, integrity and completeness of 
such data.
---------------------------------------------------------------------------

    \28\ See SEC Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the 
CAT NMS Plan.
---------------------------------------------------------------------------

    In addition, without limiting the general requirement as set forth 
in paragraph (a), paragraph (b) of proposed Rule 11.6893 requires 
Industry Members to accurately provide the LEIs in their records as 
required by the proposed Rule 11.6800 Series and states that Industry 
Members may not knowingly submit inaccurate LEIs to the Central 
Repository. Paragraph (b) notes, however, that this requirement does 
not impose any additional due diligence obligations on Industry Members 
with regard to LEIs for CAT purposes. Accordingly, this provision does 
not impose any due diligence obligations beyond those that may exist 
today with respect to information associated with an LEI. Although 
Industry Members will not be required to perform additional 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. Paragraph (b) is consistent with the 
SEC's statements in the Approval Order for the CAT NMS Plan regarding 
an Industry Member's obligations regarding LEIs.\29\
---------------------------------------------------------------------------

    \29\ See Approval Order, supra note 9, at 84745.
---------------------------------------------------------------------------

    Paragraph (c) of proposed Rule 11.6893 states 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 Rule 11.6800 Series. As 
discussed above, the initial maximum Error Rate is 5%, although the 
Error Rate is expected to be reduced over time. The Exchange intends to 
announce to its Industry Members changes to the Error Rate established 
pursuant to the CAT NMS Plan via Trader Update.
    Furthermore, paragraph (d) of proposed Rule 11.6893 addresses 
Compliance Thresholds related to reporting data to the CAT. Paragraph 
(c) of proposed Rule 11.6893 states 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''). 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.\30\ Compliance Thresholds will include compliance 
with the data reporting and clock synchronization requirements. 
Proposed Rule 11.6893 states that an Industry Member's performance with 
respect to its Compliance Threshold will not signify, as a matter of 
law, that such Industry Member has violated this proposed Rule 11.6800 
Series.
---------------------------------------------------------------------------

    \30\ See Appendix C of the CAT NMS Plan.
---------------------------------------------------------------------------

(xii) Compliance Dates
    Proposed Rule 11.6895 (Consolidated Audi Trail--Compliance Dates) 
sets forth the compliance dates for the various provisions of proposed 
Rules 11.6800 through 11.6895. Paragraphs (b) and (c) of this Rule set 
forth the additional details with respect to the compliance date of the 
proposed Rules 11.6800 through 11.6895. Unless otherwise noted, 
proposed Rules 11.6800 through 11.6895 will be fully effective upon 
approval by the Commission and OTP Holders must comply with their 
terms.
    Paragraph (b) of proposed Rule 11.6895 establishes the compliance 
dates for the clock synchronization requirements as set forth in 
proposed Rule 11.6820. Paragraph (b)(1) of proposed Rule 11.6895 states 
that each Industry Member shall comply with Rule 11.6820 with regard to 
Business Clocks that capture time in milliseconds commencing on or 
before March 15, 2017. Paragraph (b)(2) states that each Industry 
Member shall comply with Rule 11.6820 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 paragraph (b)(1) 
reflects the exemptive relief requested by the Participants with regard 
to the clock synchronization requirements related to Business Clocks 
that do not capture time in milliseconds.\31\
---------------------------------------------------------------------------

    \31\ Concurrently with this filing, the Participants submitted a 
request for exemptive relief from SEC Rule 613(a)(3)(ii) of 
Regulation NMS under the Securities Exchange Act of 1934 and Section 
6.7(a)(ii) of the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated January 17, 2017.
---------------------------------------------------------------------------

    Paragraph (c) of proposed Rule 11.6895 establishes the compliance 
dates for the data recording and reporting requirements for Industry 
Members. Paragraph (c)(1) of proposed Rule 11.6895 requires each 
Industry Member (other than a Small Industry Members) to record and 
report the Industry Member Data to the Central Repository by November 
15, 2018. Paragraph (c)(2) of proposed Rule 11.6895 requires 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. Such compliance dates are consistent with the compliance dates 
set forth in SEC Rule 613(a)(3)(v) and (vi), and Section 6.7(a)(v) and 
(vi) of the CAT NMS Plan.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act,\32\ which require, 
among other things, that the Exchange's 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 6(b)(8) of the Act,\33\ 
which requires that the Exchange's rules not impose any burden on 
competition that is not necessary or appropriate.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies the provisions of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of the purposes of the Act.'' \34\ To the extent that this 
proposal implements, interprets or clarifies the Plan and applies 
specific requirements to Industry Members, the Exchange believes that 
this proposal furthers the objectives of the Plan, as identified by the 
SEC, and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \34\ See Approval Order, supra note 9, at 84697.

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[[Page 9477]]

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange notes that the 
proposed rule change implements provisions of the CAT NMS Plan, and is 
designed to assist the Exchange in meeting its regulatory obligations 
pursuant to the Plan. The Exchange also notes that the proposed Rule 
Series implementing provisions of the CAT NMS Plan will apply equally 
to all firms that trade NMS Securities and OTC Equity Securities. In 
addition, all national securities exchanges and FINRA are proposing 
this proposed Rule 11.6800 Series. Therefore, this is not a competitive 
rule filing, and, therefore, it does not impose a burden on 
competition.

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

    No written comments were solicited or received with respect to the 
proposed rule change.

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 up to 90 days (i) as the Commission may designate 
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 the 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-NYSEARCA-2017-03 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-NYSEARCA-2017-03. 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 Web site (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 Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEARCA-2017-03 and should 
be submitted on or before February 27, 2017.
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-02377 Filed 2-3-17; 8:45 am]
 BILLING CODE 8011-01-P


