
[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9831-9846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-02540]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79935; File No. SR-NASDAQ-2017-008]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of Proposed Rule Change To Adopt Rules Regarding the 
CAT NMS Plan

February 2, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on January 31, 2017, The NASDAQ Stock Market LLC (``Nasdaq'' or 
``Exchange'') filed with the Securities and Exchange

[[Page 9832]]

Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I, II, and III, below, which Items have been 
prepared by the Exchange.\3\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on 
January 17, 2017 under File No. SR-NASDAQ-2017-006, proposing new 
NASDAQ Equity Rule Series 6800. The Exchange withdrew that filing on 
January 31, 2017 and filed this proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt rules to implement the compliance 
rule (``Compliance Rule'') regarding the National Market System Plan 
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or 
``Plan'').\4\
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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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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    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\ Securities Exchange Act Rel. No. 77724 (Apr. 27, 2016), 81 
FR 30614 (May 17, 2016).
    \9\ Securities Exchange Act Rel. No. 79318 (Nov. 15, 2016), 81 
FR 84696 (Nov. 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement, and maintain a 
consolidated audit trail (``CAT'') that would capture customer and 
order event information for orders in NMS Securities and OTC Equity 
Securities, across all markets, from the time of order inception 
through routing, cancellation, modification, or execution in a single 
consolidated data source. Each Participant is required to enforce 
compliance by its Industry Members, as applicable, with the provisions 
of the Plan, by adopting a Compliance Rule applicable to their Industry 
Members.\10\ As is described more fully below, the proposed Equity Rule 
6800 Series and proposed Options Rule Chapter IX, Section 8 (``Proposed 
Rules'') set forth the Compliance Rule to require Industry Members to 
comply with the provisions of the CAT NMS Plan on both the Nasdaq 
equity and options markets. The Proposed Rules include 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) development and testing; (10) 
recordkeeping; (11) timely, accurate and complete data; and (12) 
compliance dates. Each of these Proposed Rules are discussed in detail 
below.
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    \10\ See SEC Rule 613(g)(1).
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(i) Definitions
    Proposed Rule 6810 and paragraph (a) of Proposed Chapter IX, 
Section 8 (Consolidated Audit Trail--Definitions) set forth the 
definitions for the terms used in the Proposed Rules. Each of the 
defined terms in Proposed Rule 6810 and paragraph (a) of Proposed 
Chapter IX, Section 8 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[sic] 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[sic].'' 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

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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, 
etc.) and LEI and/or Larger Trader ID (``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, an 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 6810 and paragraph (a)(i) of Proposed Chapter IX, 
Section 8 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, the rules define ``Account Effective Date to mean, 
with regard to those circumstances in which an Industry Member has 
established a trading relationship with an institution but has not 
established an account with that institution: (1) When the trading 
relationship was established prior to November 15, 2018 for Industry 
Members other than Small Industry Members, or prior to November 15, 
2019 for Small Industry Members, either (a) the date the relationship 
identifier was established within the Industry Member; (b) the date 
when trading began (i.e., the date the first order was received) using 
the relevant relationship identifier; or (c) if both dates are 
available, the earlier date will be used to the extent that the dates 
differ; or (2) when the trading relationship was established on or 
after November 15, 2018 for Industry Members other than Small Industry 
Members, or on or after November 15, 2019 for Small Industry Members, 
the date the Industry Member established the relationship identifier, 
which would be no later than the date the first order was received.
    Paragraph (a)(2) of Proposed Rule 6810 and paragraph (a)(i)(2) of 
Proposed Chapter IX, Section 8 state that an ``Account Effective Date'' 
means, where an Industry Member changes back office providers or 
clearing firms prior to November 15, 2018 for Industry Members other 
than Small Industry Members, or prior to November 15, 2019 for Small 
Industry Members, the date an account was established at the relevant 
Industry Member, either directly or via transfer.
    Paragraph (a)(3) of Proposed Rule 6810 and paragraph (a)(i)(3) of 
Proposed Chapter IX, Section 8 state that an ``Account Effective Date'' 
means, where an Industry Member acquires another Industry Member prior 
to November 15, 2018 for Industry Members other than Small Industry 
Members, or prior to November 15, 2019 for Small Industry Members, the 
date an account was established at the relevant Industry Member, either 
directly or via transfer.
    Paragraph (a)(4) of Proposed Rule 6810 and paragraph (a)(i)(4) of 
Proposed Chapter IX, Section 8 state that ``Account Effective Date'' 
means, where there are multiple dates associated with an account 
established prior to November 15, 2018 for Industry Members other than 
Small Industry Members, or prior to November 15, 2019 for Small 
Industry Members, the earliest available date.
    Paragraph (a)(5) of Proposed Rule 6810 and paragraph (a)(i)(5) of 
Proposed Chapter IX, Section 8 state that an ``Account Effective Date'' 
means, with regard to Industry Member proprietary accounts established 
prior to November 15, 2018 for Industry Members other than Small 
Industry Members, or prior to November 15, 2019 for Small Industry 
Members: (1) The date established for the account in the Industry 
Member or in a system of the 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) of Proposed Rule 6810 and (a)(i)(2)-(5) of 
Proposed Chapter IX, Section 8, 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 6810 and paragraph 
(a)(ii) of Proposed Chapter IX, Section 8 define 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 Participants 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

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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 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 6810 and paragraph (a)(iii) of Proposed Chapter 
IX, Section 8 define an ``Allocation Report.'' Specifically, an 
``Allocation Report'' means a report made to the Central Repository by 
an Industry Member that identifies the Firm Designated ID for any 
account(s), including subaccount(s), to which executed shares are 
allocated and provides the security that has been allocated, the 
identifier of the firm reporting the allocation, the price per share of 
shares allocated, the side of shares allocated, the number of shares 
allocated to each account, and the time of the allocation; provided, 
for the avoidance of doubt, any such Allocation Report shall not be 
required to be linked to particular orders or executions. 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 6810 
and paragraph (a)(iv) of Proposed Chapter IX, Section 8 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 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 the Proposed Rules.
(E) CAT
    Paragraph (e) of Proposed Rule 6810 and paragraph (a)(v) of 
Proposed Chapter IX, Section 8 define 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 6810 paragraph (a)(vi) of Proposed 
Chapter IX, Section 8 define 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 link 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 6810 and paragraph (a)(vii) of Proposed Chapter IX, Section 8 
define 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 these Proposed Rules as a ``CAT Reporting Agent,'' would be one type 
of a Data Submitter, that is, a party that submits data to the Central 
Repository. Paragraph (h) of Proposed Rule 6810 and paragraph (a)(viii) 
of Proposed Chapter IX, Section 8 define 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 reporting 
obligations under the Proposed Rules.
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    \13\ 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 obligations under Rule 7450. The Reporting Agent for OATS 
fulfills a similar role to the CAT Reporting Agent.
(I) Central Repository
    Paragraph (i) of Proposed Rule 6810 and paragraph (a)(ix) of 
Proposed Chapter IX, Section 8 define the term ``Central Repository'' 
to mean the repository responsible for the receipt, consolidation, and 
retention of all information reported to the CAT pursuant to 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 uses the phrase 
``CAT NMS Plan'' in place of the phrase ``this Agreement.''
(J) Compliance Threshold
    Paragraph (j) of Proposed Rule 6810 and paragraph (a)(x) of 
Proposed Chapter IX, Section 8 define the term ``Compliance Threshold'' 
as having the meaning set forth in Proposed Rule 6893(d) and paragraph 
(k) of Proposed Chapter IX, Section 8. 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 
6893(d) and paragraph (k) of Proposed Chapter IX, Section 8, 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 6810 and paragraph (a)(xi) of Proposed 
Chapter IX, Section 8 propose to define the term ``Customer.'' 
Specifically, the term ``Customer''

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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 6800 Series and Proposed Chapter IX, 
Section 8. 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 6810 and paragraph (a)(xii) of 
Proposed Chapter IX, Section 8 define the term ``Customer Account 
Information'' to include, in part, account number, account type, 
customer type, date account opened, and large trader identifier (if 
applicable). Proposed Rule 6810(l) and paragraph (a)(xii) of Proposed 
Chapter IX, Section 8, however, provide an alternative definition of 
``Customer Account Information'' in two limited circumstances. First, 
in those circumstances in which an Industry Member has established a 
trading relationship with an institution but has not established an 
account with that institution, the Industry Member will: (1) Provide 
the Account Effective Date in lieu of the ``date account opened''; (2) 
provide the relationship identifier in lieu of the ``account number''; 
and (3) identify the ``account type'' as a ``relationship.'' 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, 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 (m) of Proposed Rule 6810 and paragraph (a)(xiii) of 
Proposed Chapter IX, Section 8 define 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 6800 Series and in Proposed Chapter IX, Section 8, 
the Exchange proposes to define ``Data Submitter'' in paragraph (n) of 
Proposed Rule 6810 and paragraph (a)(xiv) of Proposed Chapter IX, 
Section 8. Specifically, paragraph (n) of Proposed Rule 6810 and 
paragraph (a)(xiv) of Proposed Chapter IX, Section 8 define 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\ 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 6800 Series and 
Proposed Chapter IX, Section 8 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 6810 and paragraph (a)(xv) of Proposed Chapter IX, 
Section 8 define 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

[[Page 9836]]

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\ Section 6.5(d)(i) of the CAT NMS Plan.
    \16\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule 
613(g)-(h).
    \18\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \19\ Section 6.5(d)(i) of the CAT NMS Plan.
    \20\ 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 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\ Approval Order at 84718.
---------------------------------------------------------------------------

(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 6810 and paragraph (a)(xvi) of Proposed Chapter IX, 
Section 8. Paragraph (p) of Proposed Rule 6810 and paragraph (a)(xvi) 
of Proposed Chapter IX, Section 8 define 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 6810 and Proposed Chapter IX, Section 8. Specifically, paragraph 
(q) of Proposed Rule 6810 and paragraph (a)(xvii) of Proposed Chapter 
IX, Section 8 define 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 6810 and paragraph (a)(xiii) of 
Proposed Chapter IX, Section 8 define 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 6810 and paragraph (a)(xix) of 
Proposed Chapter IX, Section 8 state that the term ``Industry Member 
Data'' has the meaning set forth in Proposed Rule 6830(a)(2) and 
paragraph (c)(i)(2) of Proposed Chapter IX, Section 8, respectively. 
This definition has the same substantive meaning as the definition set 
forth 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 6830(a)(2) and paragraph (c)(i)(2) of Proposed Chapter 
IX, Section 8, respectively.
(T) Initial Plan Processor
    Paragraph (t) of Proposed Rule 6810 and paragraph (a)(xx) of 
Proposed Chapter IX, Section 8 define 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 6800 Series applies to 
Eligible Securities, which includes NMS Securities, which, in turn, 
includes Listed Options. Certain requirements of the Proposed Rules 
apply specifically to Listed Options. Accordingly, Paragraph (u) of 
Proposed Rule 6810 and paragraph (a)(xxi) of Proposed Chapter IX, 
Section 8 define the term ``Listed Option'' or ``Option.'' 
Specifically, paragraph (u) of Proposed Rule 6810 and paragraph 
(a)(xxi) of Proposed Chapter IX, Section 8 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

[[Page 9837]]

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 Members[sic] uses timestamps in 
increments finer than milliseconds, such finer increments, when 
reporting to the Central Repository to the extent the Industry Member's 
order handling or execution systems use increments finer than 
milliseconds. 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\ Exemption Order.
---------------------------------------------------------------------------

(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 6810 and 
paragraph (a)(xxii) of Proposed Chapter IX, Section 8. Specifically, 
paragraph (v) of Proposed Rule 6810 and paragraph (a)(xxii) of Proposed 
Chapter IX, Section 8 define 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 6830 and paragraph (c) of Proposed Chapter IX, 
Section 8 require Industry Members to record and report to the Central 
Repository Material Terms of the Order with certain Reportable Events 
(e.g., for the original receipt or origination of an order, for the 
routing of an order). Accordingly, the Exchange proposes to define the 
term ``Material Terms of the Order'' in Proposed Rule 6810 and 
paragraph (a)(xxiii) of Proposed Chapter IX, Section 8. Specifically, 
paragraph (w) of Proposed Rule 6810 and paragraph (a)(xxiii) of 
Proposed Chapter IX, Section 8 define the term ``Material Terms of the 
Order'' to include: The NMS Security or OTC Equity Security symbol; 
security type; price (if applicable); size (displayed and non-
displayed); side (buy/sell); order type; if a sell order, whether the 
order is long, short, short exempt; open/close indicator (except on 
transactions in equities); time in force (if applicable); if the order 
is for a Listed Option, option type (put/call), option symbol or root 
symbol, underlying symbol, strike price, expiration date, and open/
close (except on market maker quotations); and any special handling 
instructions. 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 6810 and paragraph (a)(xxiv) of Proposed 
Chapter IX, Section 8. Specifically, paragraph (x) of Proposed Rule 
6810 and paragraph (a)(xxiv) of Proposed Chapter IX, Section 8 define 
the term ``NMS Security'' to mean any security or class of securities 
for which transaction reports are collected, processed, and made 
available pursuant to an effective transaction reporting plan, or an 
effective national market system plan for reporting transactions in 
Listed Options. 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 6810 and paragraph (a)(xxv) of Proposed 
Chapter IX, Section 8 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 6810 and paragraph (a)(xxvi) of 
Proposed Chapter IX, Section 8 define the term ``Operating Committee'' 
to mean the governing body of the CAT NMS, LLC designated as such and 
described in Article IV of the CAT NMS Plan. 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 Participants, 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 at 2, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker 
quotes, the Exchange proposes to define the term ``Options Market 
Maker'' in Proposed Rule 6810 and paragraph (a)(xxvii) of Proposed 
Chapter IX, Section 8. Specifically, paragraph (aa) of Proposed Rule 
6810 and paragraph (a)(xxvii) of Proposed Chapter IX, Section 8 define 
the term ``Options Market Maker'' to mean a broker-dealer registered 
with an exchange for the purpose of making markets in options contracts 
traded on the exchange. This is the same definition as set forth in 
Section 1.1 of the CAT NMS Plan.

[[Page 9838]]

(BB) Order
    The Proposed Rules require 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 6810 and paragraph (a)(xxviii) of Proposed 
Chapter IX, Section 8. Specifically, paragraph (bb) of Proposed Rule 
6810 and paragraph (a)(xxviii) of Proposed Chapter IX, Section 8 define 
the term ``Order'', with respect to Eligible Securities, to include: 
(1) Any order received by an Industry Member from any person; (2) any 
order originated by an Industry Member; or (3) any bid or offer. 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 6810 and paragraph (a)(xxix) of 
Proposed Chapter IX, Section 8. Specifically, paragraph (cc) of 
Proposed Rule 6810 and paragraph (a)(xxix) of Proposed Chapter IX, 
Section 8 define the term ``OTC Equity Security'' to mean any equity 
security, other than an NMS Security, subject to prompt last sale 
reporting rules of a registered national securities association and 
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 6810 and paragraph (a)(xxx) of 
Proposed Chapter IX, Section 8 define 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 6810 and paragraph (a)(xxxi) of 
Proposed Chapter IX, Section 8 define the term ``Person'' to mean any 
individual, partnership, limited liability company, corporation, joint 
venture, trust, business trust, cooperative or association and any 
heirs, executors, administrators, legal representatives, successors and 
assigns of such Person where the context so permits. 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 6810 and paragraph (a)(xxxii) of 
Proposed Chapter IX, Section 8 define 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 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 6810 and paragraph (a)(xxxiii) of 
Proposed Chapter IX, Section 8 state that the term ``Received Industry 
Member Data'' has the meaning set forth in Proposed Rule 6830(a)(2) and 
paragraph (c)(i)(2) of Proposed Chapter IX, Section 8. 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 6830(a)(2) and paragraph (c)(i)(2) of Proposed Chapter 
IX, Section 8.
(HH) Recorded Industry Member Data
    Paragraph (hh) of Proposed Rule 6810 and paragraph (a)(xxxiv) of 
Proposed Chapter IX, Section 8 state that the term ``Recorded Industry 
Member Data'' has the meaning set forth in Proposed Rule 6830(a)(1) and 
paragraph (c)(i)(1) of Proposed Chapter IX, Section 8. 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 6830(a)(1) and paragraph (c)(i)(1) of Proposed Chapter 
IX, Section 8.
(II) Reportable Event
    The Proposed Rules require 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 6810 
and paragraph (a)(xxxv) of Proposed Chapter IX, Section 8. 
Specifically, paragraph (ii) of Proposed Rule 6810 and paragraph 
(a)(xxxv) of Proposed Chapter IX, Section 8 state 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, and 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 6810 and paragraph (a)(xxxvi) of 
Proposed Chapter IX, Section 8 define 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 Participants 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 at 19, and Exemption Order.
---------------------------------------------------------------------------

    For the Central Repository to link the SRO-Assigned Market 
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to 
the Central Repository, on a daily basis, all SRO-Assigned Market 
Participant Identifiers used by its Industry Members, as well as 
information to identify each such Industry Member, including CRD number 
and LEI, if the SRO has collected such LEI of the Industry Member. 
Additionally, each Industry Member is required to submit to the

[[Page 9839]]

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 6810 and paragraph (a)(xxxvii) of Proposed Chapter IX, 
Section 8. Specifically, paragraph (kk) of Proposed Rule 6810 and 
paragraph (a)(xxxvii) of Proposed Chapter IX, Section 8 define the term 
``SRO-Assigned Market Participant Identifier'' to mean an identifier 
assigned to an Industry Member by an SRO, or an identifier used by a 
Participant. 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 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 6810 and paragraph 
(a)(xxxviii) of Proposed Chapter IX, Section 8. Specifically, paragraph 
(ll) of Proposed Rule 6810 and paragraph (a)(xxxviii) of Proposed 
Chapter IX, Section 8 define 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 6830(b) and paragraph (c)(ii) of Proposed Chapter IX, 
Section 8 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 
6810 and paragraph (a)(xxxix) of Proposed Chapter IX, Section 8. 
Specifically, Paragraph (mm) of Proposed Rule 6810 and paragraph 
(a)(xxxix) of Proposed Chapter IX, Section 8 state 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 its Industry Members, the Exchange proposes Rule 6820 
and paragraph (b) of Proposed Chapter IX, Section 8 (Consolidated Audit 
Trail--Clock Synchronization) to require its 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 6820 and paragraph (b)(i) of 
Proposed Chapter IX, Section 8 sets forth the manner in which Industry 
Members must synchronize their Business Clocks. Paragraph (a)(1) of 
Proposed Rule 6820 and paragraph (b)(i)(1) of Proposed Chapter IX, 
Section 8 require each Industry Member to synchronize its Business 
Clocks, other than such Business Clocks used solely for Manual Order 
Events or used solely for the time of allocation on Allocation Reports, 
at a minimum to within a fifty (50) millisecond tolerance of the time 
maintained by the NIST atomic clock, and maintain such synchronization. 
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 6820 and paragraph (b)(i)(2) of 
Proposed Chapter IX, Section 8 require each Industry Member to 
synchronize (1) its Business Clocks used solely for Manual Order Events 
and (2) its Business Clocks used solely for the time of allocation on 
Allocation Reports at a minimum to within a one second 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 6820 and paragraph (b)(i)(3) of 
Proposed Chapter IX, Section 8 clarify that the tolerance described in 
paragraphs (a)(1) and (2) of Proposed Rule 6820 and paragraph (b)(i)(1) 
and (b)(i)(2) of Proposed Chapter IX, Section 8 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 6820 and paragraph (b)(i)(4) of 
Proposed Chapter IX, Section 8 require 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 6820 and paragraph (b)(ii) of 
Proposed Chapter IX, Section 8 set forth documentation requirements 
with regard to clock synchronization. Specifically, those paragraphs 
require 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

[[Page 9840]]

paragraph (a) of the Proposed Rule 6820 and paragraph (b)(i) of 
Proposed Chapter IX, Section 8, respectively. 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 6820 and paragraph (b)(iii) of 
Proposed Chapter IX, Section 8 set forth certification requirements 
with regard to clock synchronization. Specifically, paragraph (c) of 
Proposed Rule 6820 and paragraph (b)(iii) of Proposed Chapter IX, 
Section 8 require each Industry Member to certify to the Exchange that 
its Business Clocks satisfy the synchronization requirements set forth 
in paragraph (a) of Proposed Rule 6820 and paragraph (b)(i) of Proposed 
Chapter IX, Section 8 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 an information circular 
(``Circular'').
    Paragraph (d) of Proposed Rule 6820 and paragraph (b)(iv) of 
Proposed Chapter IX, Section 8 establish reporting requirements with 
regard to clock synchronization. Paragraph (d) of Proposed Rule 6820 
and paragraph (b)(iv) of Proposed Chapter IX, Section 8 require 
Industry Members to report to the Plan Processor and the Exchange 
violations of paragraph (a) of Proposed Rule 6820 and paragraph (b)(i) 
of Proposed Chapter IX, Section 8 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 Circular.
(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 6830 and paragraph (c) of 
Proposed Chapter IX, Section 8 (Consolidated Audit Trail--Industry 
Member Data Reporting) to require its Industry Members to comply with 
the Industry Member Data reporting requirements of the Plan. Proposed 
Rule 6830 has six sections covering: (1) Recording and reporting 
Industry Member Data, (2) timing of the recording and reporting, (3) 
the applicable securities cover[sic] 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 6830 and paragraph (c)(i) of 
Proposed Chapter IX, Section 8 describe the recording and reporting of 
Industry Member Data to the Central Repository. Paragraph (a) of 
Proposed Rule 6830 and paragraph (c)(i) of Proposed Chapter IX, Section 
8 each consist of three paragraphs, which cover Recorded Industry 
Member Data, Received Industry Member Data and Options Market Maker 
data, respectively. Paragraphs (a)(1)-(a)(3) of Proposed Rule 6830 and 
paragraph (c)(i)(1)-(i)(3) of Proposed Chapter IX, Section 8 set forth 
the recording and reporting requirements required in Section 6.4(d)(i)-
(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) of Proposed Rule 6830 and paragraph (c)(i)(1) of 
Proposed Chapter IX, Section 8 require, subject to paragraph (a)(3) and 
paragraph (c)(i)(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 6860 and paragraph (f) of Proposed Chapter IX, Section 
8); 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 6860 and paragraph (f) of Proposed 
Chapter IX, Section 8); (4) SRO-Assigned Market Participant Identifier 
of the Industry Member routing the order; (5) SRO-Assigned Market 
Participant Identifier of the Industry Member or Participant to which 
the order is being routed; (6) if routed internally at the Industry 
Member, the identity and nature of the department or desk to which the 
order is routed; and (7) Material Terms of the Order;
     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 6860 and paragraph (f) of Proposed Chapter 
IX, Section 8); (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 6860 and 
paragraph (f) of Proposed Chapter IX, Section 8); (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 6860 and paragraph (f) of Proposed 
Chapter IX, Section 8; (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

[[Page 9841]]

     other information or additional events as may be 
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of Proposed Rule 6830 and paragraph (c)(i)(2) of 
Proposed Chapter IX, Section 8 require, subject to paragraph (a)(3) and 
paragraph (c)(i)(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 paragraph (c)(i)(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 6840 and paragraph (d) of Proposed Chapter IX, Section 8, 
Customer Account Information and Customer Identifying Information for 
the relevant Customer.
    Paragraph (a)(3) of Proposed Rule 6830 and paragraph (c)(i)(3) of 
Proposed Chapter IX, Section 8 state that each Industry Member that is 
an Options Market Maker is not required to report to the Central 
Repository the Industry Member Data regarding the routing, modification 
or cancellation of its quotes in Listed Options. Each Industry Member 
that is an Options Market Maker, however, is required to report to the 
Exchange the time at which its quote in a Listed Option is sent to the 
Exchange (and, if applicable, any subsequent quote modification time 
and/or cancellation time when such modification or cancellation is 
originated by the Options Market Maker). This paragraph implements the 
Options Market Maker Quote Exemption, as discussed above.
(B) Timing of Recording and Reporting
    Paragraph (b) of Proposed Rule 6830 and paragraph (c)(ii) of 
Proposed Chapter IX, Section 8 describe the requirements related to the 
timing of recording and reporting of Industry Member Data. Paragraphs 
(b)(1)-(b)(3) of Proposed Rule 6830 and paragraph (c)(ii)(1)-(3) of 
Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(ii)(1) of 
Proposed Chapter IX, Section 8 require each Industry Member to record 
Recorded Industry Member Data contemporaneously with the applicable 
Reportable Event. Paragraph (b)(2) of Proposed Rule 6830 and paragraph 
(c)(ii)(2) of Proposed Chapter IX, Section 8 require each Industry 
Member to report: (1) Recorded Industry Member Data to the Central 
Repository by 8:00 a.m., Eastern Time, on the Trading Day following the 
day the Industry Member records such Recorded Industry Member Data; and 
(2) Received Industry Member Data to the Central Repository by 8:00 
a.m., Eastern Time, on the Trading Day following the day the Industry 
Member receives such Received Industry Member Data. Paragraph (b)(3) 
and paragraph (c)(ii)(3) of Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(iii) of 
Proposed Chapter IX, Section 8 describe the securities to which the 
recording and reporting requirements of Proposed Rule 6830 and 
paragraph (c)(iii) of Proposed Chapter IX, Section 8 apply. Paragraphs 
(c)(1) and (c)(2) of Proposed Rule 6830 and paragraph (c)(iii)(1) and 
(2) of Proposed Chapter IX, Section 8 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 6830 and 
paragraph (c)(iii)(1) of Proposed Chapter IX, Section 8 require each 
Industry Member to record and report to the Central Repository the 
Industry Member Data as set forth in paragraph (a) of Proposed Rule 
6830 and paragraph (c)(i) of Proposed Chapter IX, Section 8 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 6830 and paragraph (c)(iii)(2) of Proposed 
Chapter IX, Section 8 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 6830 and paragraph (c)(i) of Proposed 
Chapter IX, Section 8 for each Eligible Security for which transaction 
reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of Proposed Rule 6830 and paragraph (c)(iv) of 
Proposed Chapter IX, Section 8 describe 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 6830 
and paragraph (c)(iv)(1) of Proposed Chapter IX, Section 8 require, for 
each exchange-listed Eligible Security, each Industry Member to report 
Industry Member Data to the Central Repository using the symbology 
format of the exchange listing the security. 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 6830 and paragraph 
(c)(iv)(2) of Proposed Chapter IX, Section 8 require, for each Eligible 
Security that is not exchange-listed, each Industry Member to report 
Industry Member Data to the Central Repository using such symbology 
format as approved by the Operating Committee pursuant to the CAT NMS 
Plan. The Exchange intends to announce to its Industry Members the 
relevant symbology formats established by the Operating Committee via 
Circular.
(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 6830 and paragraph (c)(v) of Proposed Chapter IX, 
Section 8, which addresses the correction of erroneous data reported to 
the Central Repository. Paragraph (e) of Proposed Rule 6830 and 
paragraph (c)(v) of Proposed Chapter IX, Section 8 require, 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.

[[Page 9842]]

(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 Rule 6840 and paragraph (d) of 
Proposed Chapter IX, Section 8 (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 6840 and paragraph (d)(i) of Proposed Chapter IX, Section 
8 require each Industry Member to submit to the Central Repository the 
Firm Designated ID, Customer Account Information and Customer 
Identifying Information for each of its Customers with an Active 
Account prior to such Industry Member's commencement of reporting to 
the Central Repository and in accordance with the deadlines set forth 
in Rule 6880 and paragraph (i) of Proposed Chapter IX, Section 8. 
Paragraph (b) of Proposed Rule 6840 and paragraph (d)(ii) of Proposed 
Chapter IX, Section 8 require each Industry Member to submit to the 
Central Repository any updates, additions or other changes to the Firm 
Designated ID, Customer Account Information and Customer Identifying 
Information for each of its Customers with an Active Account on a daily 
basis. Paragraph (c) of Proposed Rule 6840 and paragraph (d)(iii) of 
Proposed Chapter IX, Section 8 require each Industry Member, on a 
periodic basis as designated by the Plan Processor and approved by the 
Operating Committee, to submit to the Central Repository a complete set 
of Firm Designated IDs, Customer Account Information and Customer 
Identifying Information for each of its Customers with an Active 
Account. This periodic refresh is intended to ensure that the Central 
Repository has the most current information identifying a Customer. The 
Exchange intends to announce to its Industry Members when such a 
periodic refresh is required by the Plan Processor and the Operating 
Committee via Circular.
    Finally, paragraph (d) of Proposed Rule 6840 and paragraph (d)(iv) 
of Proposed Chapter IX, Section 8 address the correction of erroneous 
Customer data reported to the Central Repository to ensure an accurate 
audit trail. Paragraph (d) and paragraph (d)(iv) require, for each 
Industry Member for which errors in Firm Designated ID, Customer 
Account Information and Customer Identifying Information for each of 
its Customers with an Active Account submitted to the Central 
Repository have been identified by the Plan Processor or otherwise, 
such Member to submit corrected data to the Central Repository by 5:00 
p.m. Eastern Time on T+3. This requirement 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 6850 and paragraph (e) of 
Proposed Chapter IX, Section 8 (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 6850 and paragraph (e) of Proposed Chapter IX, Section 8 require 
each Industry Member to submit to the Central Repository information 
sufficient to identify such Industry Member, including CRD number and 
LEI, if such LEI has been obtained, prior to such Industry Member's 
commencement of reporting to the Central Repository and in accordance 
with the deadlines set forth in Rule 6880 and paragraph (i) of Proposed 
Chapter IX, Section 8, 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 6860 and paragraph (f) of Proposed Chapter IX, 
Section 8 (Consolidated Audit Trail--Time Stamps) to require its 
Industry Members to comply with the time stamp requirements of the 
Plan.
---------------------------------------------------------------------------

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

    Paragraph (a) of Proposed Rule 6860 and paragraph (f)(i) of 
Proposed Chapter IX, Section 8 set forth the time stamp increments to 
be used by Industry Members in their CAT reporting. Paragraph (a)(1) of 
Proposed Rule 6860 and paragraph (f)(i)(1) of Proposed Chapter IX, 
Section 8 require 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 6860 and 
subparagraphs (f)(i)(2) and (f)(ii) of Proposed Chapter IX, Section 8. 
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 6860 and paragraph (f)(i)(2) of 
Proposed Chapter IX, Section 8 require 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 6860 and paragraph (f)(ii) of Proposed Chapter IX, Section 8 
regarding Manual Order Events and Allocation Reports.
    Paragraph (b) of Proposed Rule 6860 and paragraph (f)(ii) of 
Proposed Chapter IX, Section 8 set forth the permissible time stamp 
increments for Manual Order Events and Allocation Reports. 
Specifically, paragraph (b)(1) of Proposed Rule 6860 and paragraph 
(f)(ii)(1) of Proposed Chapter IX, Section 8 permit each Industry 
Member to record and report Manual Order Events to the Central 
Repository in increments up to and including one second, provided that 
each Industry Member is required to record and report the time when a 
Manual Order Event has been captured electronically in an order 
handling and execution system of such Member (``Electronic Capture 
Time'') in milliseconds. In addition, paragraph (b)(2) of Proposed Rule 
6860 and paragraph (f)(ii)(2) of Proposed Chapter IX, Section 8 permit 
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 6865 and paragraph (g) of Proposed Chapter IX, 
Section 8 (Consolidated Audit Trail--Clock Synchronization Rule 
Violations) describe potential violations of the clock synchronization 
time period requirements set forth in the Proposed Rule 6800 Series and 
Proposed Chapter IX, Section 8. Proposed Rule 6865 and paragraph (g) of 
Proposed Chapter IX, Section 8 state 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

[[Page 9843]]

requirements of Section 6.8 of the CAT NMS Plan which requires the 
Compliance Rule to provide that a pattern or practice of reporting 
events outside of the required clock synchronization time period 
without reasonable justification or exceptional circumstances may be 
considered a violation of SEC Rule 613 or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 6870 and paragraph (h) of Proposed Chapter IX, 
Section 8 (Consolidated Audit Trail--Connectivity and Data 
Transmission) addresses connectivity and data transmission requirements 
related to the CAT. Paragraph (a) of Proposed Rule 6870 and paragraph 
(h)(i) of Proposed Chapter IX, Section 8 describe 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 6870 
and paragraph (h)(i) of Proposed Chapter IX, Section 8 require each 
Industry Member to transmit data as required under the CAT NMS Plan to 
the Central Repository utilizing such format(s) as may be provided by 
the Plan Processor and approved by the Operating Committee.
    Paragraph (b) of Proposed Rule 6870 and paragraph (h)(ii) of 
Proposed Chapter IX, Section 8 address connectivity requirements 
related to the CAT. Paragraph (b) of Proposed Rule 6870 and paragraph 
(h)(ii) of Proposed Chapter IX, Section 8 require each Industry Member 
to connect to the Central Repository using a secure method(s), 
including, but not limited to, private line(s) and virtual private 
network connection(s). This provision implements the connectivity 
requirements set forth in Section 4 of Appendix D to the CAT NMS Plan.
    Paragraph (c) of Proposed Rule 6870 and paragraph (h)(iii) of 
Proposed Chapter IX, Section 8 permit Industry Members to use CAT 
Reporting Agents to fulfill their data reporting obligations related to 
the CAT. Paragraph (c) of Proposed Rule 6870 and paragraph (h)(iii) of 
Proposed Chapter IX, Section 8 are based on FINRA Rule 7450(c), which 
permits OATS Reporting Members to enter into agreements with Reporting 
Agents to fulfill the OATS obligations of the OATS Reporting Member. 
Specifically, Paragraph (c)(1) of Proposed Rule 6870 and paragraph 
(h)(iii)(1) of Proposed Chapter IX, Section 8 state 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 obligations of 
such Industry Member under the Proposed Rule 6800 Series and Proposed 
Chapter IX, Section 8. 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 6800 Series and Proposed Chapter 
IX, Section 8, as applicable. The Exchange notes that, currently, no 
standardized form agreement for CAT Reporting Agent arrangements has 
been adopted. Paragraph (c)(2) of Proposed Rule 6870 and paragraph 
(h)(iii)(2) of Proposed Chapter IX, Section 8 require 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 6870 and paragraph (h)(iii)(3) of Proposed Chapter IX, Section 8 
state that each Industry Member remains primarily responsible for 
compliance with the requirements of the Proposed Rule 6800 Series and 
Proposed Chapter IX, Section 8, as applicable, notwithstanding the 
existence of an agreement described in paragraph (c) of Proposed Rule 
6870 and paragraph (h)(iii) of Proposed Chapter IX, Section 8.
(ix) Development and Testing
    The Exchange proposes Rule 6880 and paragraph (i) of Proposed 
Chapter IX, Section 8 (Consolidated Audit Trail--Development and 
Testing) to address requirements for Industry Members related to CAT 
development and testing. Paragraph (a) of Proposed Rule 6880 and 
paragraph (i)(i) of Proposed Chapter IX, Section 8 set 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) of Proposed Rule 6880 and paragraph (i)(i)(1) of 
Proposed Chapter IX, Section 8 set forth the deadlines related to 
connectivity and acceptance testing. Industry Members (other than Small 
Industry Members) are required to begin connectivity and acceptance 
testing with the Central Repository no later than August 15, 2018, and 
Small Industry Members are required to begin connectivity and 
acceptance testing with the Central Repository no later than August 15, 
2019.
    Paragraph (a)(2) of Proposed Rule 6880 and paragraph (i)(i)(2) of 
Proposed Chapter IX, Section 8 set forth the deadlines related to 
reporting Customer and Industry Member information. Paragraph (a)(2)(i) 
of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter 
IX, Section 8 requires Industry Members (other than Small Industry 
Members) to begin reporting Customer and Industry Member information, 
as required by Proposed Rules 6840(a) and 6850 and paragraphs (d)(i) 
and (e) of Proposed Chapter IX, Section 8, respectively, to the Central 
Repository for processing no later than October 15, 2018. Paragraph 
(a)(2)(ii) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) of Proposed 
Chapter IX, Section 8 require Small Industry Members to begin reporting 
Customer and Industry Member information, as required by Rules 6840(a) 
and 6850 and paragraphs (d)(i) and (e) of Proposed Chapter IX, Section 
8, respectively, to the Central Repository for processing no later than 
October 15, 2019.
    Paragraph (a)(3) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) 
of Proposed Chapter IX, Section 8 sets forth the deadlines related to 
the submission of order data. Under paragraph (a)(3)(i) of Proposed 
Rule 6880 and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8, 
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) of Proposed Rule 6880 
and paragraph (i)(i)(2)(i) of Proposed Chapter IX, Section 8, 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) of Proposed Rule 6880 and paragraph (i)(i)(2)(i) 
of Proposed Chapter IX, Section 8 state 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 6880 and paragraph (i)(ii) of 
Proposed Chapter IX, Section 8 implement the requirement under the CAT 
NMS Plan that Industry Members participate in required industry testing 
with the

[[Page 9844]]

Central Repository.\27\ Specifically, Proposed Rule 6880 and paragraph 
(i)(ii) of Proposed Chapter IX, Section 8 require that each Industry 
Member participate in testing related to the Central Repository, 
including any industry-wide disaster recovery testing, pursuant to the 
schedule established pursuant to the CAT NMS Plan. The Exchange intends 
to announce to its Industry Members the schedule established pursuant 
to the CAT NMS Plan via Circular.
---------------------------------------------------------------------------

    \27\ Adopting Release at 84725.
---------------------------------------------------------------------------

(x) Recordkeeping
    Proposed Rule 6890 and paragraph (j) of Proposed Chapter IX, 
Section 8 (Consolidated Audit Trail--Recordkeeping) set forth the 
recordkeeping obligations related to the CAT for Industry Members. 
Proposed Rule 6890 and paragraph (j) of Proposed Chapter IX, Section 8 
require each Industry Member to maintain and preserve records of the 
information required to be recorded under the Proposed Rule 6800 Series 
and Proposed Chapter IX, Section 8, as applicable, 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 6800 
Series and Proposed Chapter IX, Section 8, as applicable, 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 6890 and paragraph (j) of 
Proposed Chapter IX, Section 8 are 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 CAT.\28\ Accordingly, Proposed Rule 6893 and paragraph (k) of 
Proposed Chapter IX, Section 8 (Consolidated Audit Trail--Timely, 
Accurate and Complete Data) implement this requirement with regard to 
Industry Members. Paragraph (a) of Proposed Rule 6893 and paragraph 
(k)(i) of Proposed Chapter IX, Section 8 require that Industry Members 
record and report data to the Central Repository as required by the 
Proposed Rule 6800 Series and Proposed Chapter IX, Section 8, as 
applicable, 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) of Proposed Rule 6893 and paragraph (k)(i) of Proposed 
Chapter IX, Section 8, paragraph (b) of Proposed Rule 6893 and 
paragraph (k)(ii) of Proposed Chapter IX, Section 8 require Industry 
Members to accurately provide the LEIs in their records as required by 
the Proposed Rule 6800 Series and Proposed Chapter IX, Section 8, as 
applicable, and state that Industry Members may not knowingly submit 
inaccurate LEIs to the Central Repository. Paragraph (b) of Proposed 
Rule 6893 and paragraph (k)(ii) of Proposed Chapter IX, Section 8 note, 
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 due diligence with regard to the LEIs 
for CAT purposes, Industry Members will be required to accurately 
provide the LEIs in their records and may not knowingly submit 
inaccurate LEIs to the CAT. Paragraph (b) of Proposed Rule 6893 and 
paragraph (k)(ii) of Proposed Chapter IX, Section 8 are 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\ Approval Order at 84745.
---------------------------------------------------------------------------

    Paragraph (c) of Proposed Rule 6893 and paragraph (k)(iii) of 
Proposed Chapter IX, Section 8 state that, if an Industry Member 
reports data to the Central Repository with errors such that its error 
percentage exceeds the maximum Error Rate established by the Operating 
Committee pursuant to the CAT NMS Plan, then such Industry Member would 
not be in compliance with the Rule 6800 Series and Proposed Chapter IX, 
Section 8, as applicable. 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 
Circular.
    Furthermore, paragraph (d) of Proposed Rule 6893 and paragraph 
(k)(iv) of Proposed Chapter IX, Section 8 address Compliance Thresholds 
related to reporting data to the CAT. Proposed Rule 6893(d) and 
paragraph (k)(iv) of Proposed Chapter IX, Section 8 state that each 
Industry Member is required to meet a separate compliance threshold 
which will be an Industry Member-specific rate that may be used as the 
basis for further review or investigation into the Industry Member's 
performance with regard to the CAT (the ``Compliance Thresholds''). 
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 6893(d) and paragraph (k)(iv) of Proposed Chapter IX, 
Section 8 state 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 Series.
---------------------------------------------------------------------------

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

(xii) Compliance Dates
    Proposed Rule 6895 and paragraph (l) of Proposed Chapter IX, 
Section 8 (Consolidated Audi Trail--Compliance Dates) sets forth the 
compliance dates for the various provisions of the Proposed Rule 6800 
Series and Proposed Chapter IX, Section 8, as applicable. Paragraph (a) 
of Proposed Rule 6895 and paragraph (l)(i) of Proposed Chapter IX, 
Section 8 state that, except as set forth in paragraphs (b) and (c) of 
Proposed Rule 6895 and paragraph (l)(ii) and (l)(iii) of Proposed 
Chapter IX, Section 8, as applicable, or otherwise set forth in the 
Proposed Rules, these rules are fully effective and members must comply 
with their terms.
    Paragraph (b) of Proposed Rule 6895 and paragraph (l)(ii) of 
Proposed Chapter IX, Section 8 establish the compliance dates for the 
clock synchronization requirements as set forth in Proposed Rule 6820 
and paragraph (b) of Proposed Chapter IX, Section 8. Paragraph (b)(1) 
of Proposed Rule 6895 and paragraph (l)(ii)(1) of Proposed Chapter IX, 
Section 8 state that each Industry Member shall comply with Proposed 
Rule 6820 and paragraph (b) of Proposed Chapter IX, Section 8, as 
applicable, with regard to Business Clocks that capture time in 
milliseconds commencing on or before March 15,

[[Page 9845]]

2017. Paragraph (b)(2) of Proposed Rule 6895 and paragraph (l)(ii)(2) 
of Proposed Chapter IX, Section 8 state that each Industry Member shall 
comply with Proposed Rule 6820 and paragraph (b) of Proposed Chapter 
IX, Section 8, as applicable, 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) of Proposed 
Rule 6895 and paragraph (l)(ii)(1) of Proposed Chapter IX, Section 8 
reflect 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\
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    \31\ See Letter from Participants to Brent J. Fields, Secretary, 
Commission, dated January 17, 2017.
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    Paragraph (c) of Proposed Rule 6895 and paragraph (l)(iii) of 
Proposed Chapter IX, Section 8 establish the compliance dates for the 
data recording and reporting requirements for Industry Members. 
Paragraph (c)(1) of Proposed Rule 6895 and paragraph (l)(iii)(1) of 
Proposed Chapter IX, Section 8 require each Industry Member (other than 
Small Industry Members) to record and report the Industry Member Data 
to the Central Repository by November 15, 2018. Paragraph (c)(2) of 
Proposed Rule 6895 and paragraph (l)(iii)(2) of Proposed Chapter IX, 
Section 8 require that each Industry Member that is a Small Industry 
Member to record and report the Industry Member Data to the Central 
Repository by November 15, 2019. 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 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 Exchange rules not impose any burden on competition that 
is not necessary or appropriate.
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    \32\ 15 U.S.C. 78f(b)(6).
    \33\ 15 U.S.C. 78f(b)(8).
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    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.
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    \34\ Approval Order at 84697.
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B. Self-Regulatory Organization's Statement on Burden on Competition
    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. 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 the rules reflected in the Proposed Rule 6800 
Series and Proposed Chapter IX, Section 8. 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 either solicited or received.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NASDAQ-2017-008 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NASDAQ-2017-008. 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-NASDAQ-2017-008 and 
should be submitted on or before March 1, 2017.


[[Page 9846]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02540 Filed 2-7-17; 8:45 am]
BILLING CODE 8011-01-P


