[Federal Register Volume 87, Number 231 (Friday, December 2, 2022)]
[Notices]
[Pages 74183-74199]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26235]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96394; File No. 4-698]


Joint Industry Plan; Notice of Filing of Partial Amendment No. 1 
to an Amendment to the National Market System Plan Governing the 
Consolidated Audit Trail

November 28, 2022.
    On May 13, 2022, the Operating Committee for Consolidated Audit 
Trail, LLC (``CAT LLC''), on behalf of the following parties to the 
National Market System Plan Governing the Consolidated Audit Trail (the 
``CAT NMS Plan'' or ``Plan''):\1\ BOX Exchange LLC; Cboe BYX Exchange, 
Inc.; Cboe BZX Exchange, Inc.; Cboe EDGA Exchange, Inc.; Cboe EDGX 
Exchange, Inc.; Cboe C2 Exchange, Inc.; Cboe Exchange, Inc.; Financial 
Industry Regulatory Authority, Inc.; Investors Exchange LLC; Long-Term 
Stock Exchange, Inc.; MEMX, LLC; Miami International Securities 
Exchange LLC; MIAX Emerald, LLC; MIAX PEARL, LLC; Nasdaq BX, Inc.; 
Nasdaq GEMX, LLC; Nasdaq ISE, LLC; Nasdaq MRX, LLC; Nasdaq PHLX LLC; 
The NASDAQ Stock Market LLC, New York Stock Exchange LLC; NYSE American 
LLC; NYSE Arca, Inc.; NYSE Chicago, Inc.; and NYSE National, Inc. 
(collectively, the ``Participants,'' ``self-regulatory organizations,'' 
or ``SROs'') filed with the Securities and Exchange Commission (``SEC'' 
or ``Commission'') pursuant to Section 11A(a)(3) of the Securities 
Exchange Act of 1934 (``Exchange Act''),\2\ and Rule 608 thereunder,\3\ 
a proposed amendment to the CAT NMS Plan (``Proposed Amendment'') to 
implement a revised funding model (``Executed Share Model'') for the 
consolidated audit trail (``CAT'') and to establish a fee schedule for 
Participant CAT fees in accordance with the Executed Share Model 
(``Proposed Participant Fee Schedule'').\4\ The Proposed Amendment was 
published for comment in the Federal Register on June 1, 2022.\5\ On 
August 30, 2022, pursuant to Rule 608(b)(2)(i) of Regulation NMS,\6\ 
the Commission instituted proceedings to determine

[[Page 74184]]

whether to disapprove the Proposed Amendment.\7\
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    \1\ The CAT NMS Plan is a national market system plan approved 
by the Commission pursuant to Section 11A of the Exchange Act and 
the rules and regulations thereunder. See Securities Exchange Act 
Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23, 
2016) (``CAT NMS Plan Approval Order''). The CAT NMS Plan functions 
as the limited liability company agreement of the jointly owned 
limited liability company formed under Delaware state law through 
which the Participants conduct the activities of the CAT 
(``Company''). On August 29, 2019, the Participants replaced the CAT 
NMS Plan in its entirety with the limited liability company 
agreement of a new limited liability company named Consolidated 
Audit Trail, LLC (``CAT LLC''), which became the Company. The latest 
version of the CAT NMS Plan is available at https://catnmsplan.com/about-cat/cat-nms-plan.
    \2\ 15 U.S.C. 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Michael Simon, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission (May 
13, 2022).
    \5\ See Securities Exchange Act Release No. 94984 (May 25, 
2022), 87 FR 33226 (June 1, 2022) (``Notice'' or ``Proposing 
Release''). Comments received in response to the Notice can be found 
on the Commission's website at https://www.sec.gov/comments/4-698/4-698-a.htm.
    \6\ 17 CFR 242.608(b)(2)(i).
    \7\ See Securities Exchange Act Release No. 95634 (Aug. 30, 
2022), 87 FR 54558 (Sept. 6, 2022) (``OIP''). Comments received in 
response to the OIP can be found on the Commission's website at 
https://www.sec.gov/comments/4-698/4-698-a.htm.
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    On November 16, 2022, CAT LLC submitted a letter (the ``CAT LLC 
Letter'') to propose a partial amendment of the Proposed Amendment 
(``Partial Amendment No. 1'') and to respond to the Commission's 
solicitation of comments in the OIP and comments received on the 
OIP.\8\ Sections I and II below contains an executive summary of 
Partial Amendment No. 1 and a description of the proposed revisions to 
the Proposed Amendment, which were substantially prepared by CAT LLC on 
behalf of the Participants.\9\ The Commission is publishing this notice 
to solicit comments on Partial Amendment No. 1 from interested persons.
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    \8\ See Letter from Michael Simon, CAT NMS Plan Operating 
Committee Chair, to Vanessa Countryman, Secretary, Commission (Nov. 
15, 2022) (``Partial Amendment No. 1'').
    \9\ This notice includes only Sections I and II of the CAT LLC 
Letter, which describe the changes proposed by Partial Amendment No. 
1. The full text of the CAT LLC Letter, which includes the 
Participants responses to the OIP in Section III thereof, is 
available on the Commission's website at https://www.sec.gov/comments/4-698/4-698-a.htm.
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I. Executive Summary

    CAT LLC proposes to amend the CAT NMS Plan \10\ to implement a 
revised funding model--Executed Share Model--for the consolidated audit 
trail (``CAT'') and to establish a fee schedule for Participant CAT 
fees in accordance with the Executed Share Model. The SEC published the 
Proposed Amendment for comment on May 25, 2022.\11\ After considering 
the comments provided in response to the Proposed Amendment, the issues 
discussed in the OIP and comments submitted in response to the OIP,\12\ 
CAT LLC continues to believe that the Executed Share Model satisfies 
the applicable requirements of the Exchange Act as well as the funding 
principles and other requirements of the CAT NMS Plan, as proposed to 
be revised.
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    \10\ The twenty-five Participants of the CAT NMS Plan are: BOX 
Exchange LLC, Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc., Cboe 
EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe C2 Exchange, 
Inc., Cboe Exchange, Inc., Financial Industry Regulatory Authority, 
Inc. (``FINRA''), Investors Exchange LLC, Long-Term Stock Exchange, 
Inc., MEMX LLC, Miami International Securities Exchange LLC, MIAX 
Emerald, LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC, 
Nasdaq ISE, LLC, Nasdaq MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock 
Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE 
Arca, Inc., NYSE Chicago, Inc. and NYSE National, Inc.
    \11\ See Notice, supra note 5.
    \12\ Letter from Ellen Greene, Managing Director, Equities and 
Options Market Structure, SIFMA, to Vanessa Countryman, Secretary, 
SEC (Oct. 7, 2022) (``SIFMA Letter'').
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    The Executed Share Model would provide reasonable fees that are 
equitably allocated, not unfairly discriminatory, and do not impose an 
undue burden on competition, in that the model reflects a reasonable 
effort to allocate costs based on the extent to which different CAT 
Reporters participate in and benefit from the equities and options 
markets. Moreover, the Executed Share Model would be consistent with 
past fee structures that have been approved by the Commission. It also 
is transparent, would be relatively easy to calculate and administer, 
and is designed to not have an impact on market activity because it is 
neutral as to the location and manner of execution. CAT LLC has gone 
through an extensive process of evaluating and seeking comment on 
various funding models since the inception of CAT. As the Commission is 
aware, the Exchange Act does not require CAT LLC to demonstrate that 
the Executed Share Model is superior to any other potential proposal. 
Instead, CAT LLC must demonstrate that the Executed Share Model is 
consistent with the Exchange Act and the rules and regulations 
thereunder. CAT LLC believes that the Executed Share Model satisfies 
the requirements of the Exchange Act and should be approved by the 
Commission.
    CAT LLC, however, proposes to amend the Proposed Amendment to 
provide additional detail and clarity on the Executed Share Model in 
response to the OIP. Specifically, CAT LLC proposes to amend the 
Proposed Amendment by making changes summarized below and discussed in 
detail in Section II of this letter. In addition to these proposed 
revisions, CAT LLC responds to each of the other issues raised in the 
SEC's OIP in Section III of the CAT LLC Letter.\13\
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    \13\ See supra note 9.
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    (1) CAT LLC proposes to make the following general changes to the 
description of the Executed Share Model as set forth in the Proposed 
Amendment:
     Restructure the description of the Executed Share Model in 
the CAT NMS Plan to fully describe the process for calculating the 
Historical CAT Assessment and the CAT Fees related to Prospective CAT 
Costs, rather than describing certain aspects of the Executed Share 
Model in the Participant fee schedule or in the Participant fee filings 
related to the Industry Member fees. (Proposed Section 11.3 of the CAT 
NMS Plan)
     Impose the payment obligation on the executing broker for 
the buyer for the transaction (``EBB'') instead of the clearing broker 
for the buyer for the transaction (``CBB''), and impose the payment 
obligation on the executing broker for the seller for the transaction 
(``EBS''), rather than the clearing broker for the seller for the 
transaction (``CBS''). (Proposed Sections 11.3(a)(iii)(A) and 
(b)(iii)(A) of the CAT NMS Plan)
     Provide for the use of a twelve-month lookback, rather 
than a six-month lookback, for the calculation of equivalent executed 
share volume projections. (Proposed Sections 11.3(a)(i)(D) and 
(b)(i)(E) of the CAT NMS Plan)
     Amend the CAT funding principles to clarify that the CAT 
Fees with regard to Prospective CAT Costs and the Historical CAT 
Assessment are intended to be cost-based fees--that is, the fees are 
designed to recover the cost of the creation, implementation and 
operation of the CAT. (Proposed 11.2(c) of the CAT NMS Plan)
    (2) In addition to the above general changes, CAT LLC proposes to 
amend the description of CAT Fees related to Prospective CAT Costs as 
follows:
     Require the calculation of a Fee Rate for the CAT Fee 
twice a year, once at the beginning of the year and once during the 
year, and to require the Participants to file with the SEC pursuant to 
Section 19(b) of the Exchange Act the CAT Fees to be charged to 
Industry Members calculated using the Fee Rates calculated twice a 
year. (Proposed Section 11.3(a)(i)(A)(I) and (II) of the CAT NMS Plan)
     Explain that CAT Fees will remain in effect until the 
Operating Committee approves a new Fee Rate and the CAT Fees with the 
new Fee Rate are in effect with regard to Industry Members in 
accordance with Section 19(b) of the Exchange Act. (Proposed Section 
11.3(a)(i)(A)(III) of the CAT NMS Plan)
     Provide additional detail regarding the categories 
included in the CAT budget: technology, legal, consulting, insurance, 
professional and administration, and public relations costs, a reserve 
and such other categories as determined by the Operating Committee. 
(Proposed Section 11.1(a)(i) of the CAT NMS Plan)
     Describe the size of the reserve as not more than 25% of 
the annual budget, and state that, to the extent collected CAT Fees 
exceed CAT costs, including the reserve of 25% of the annual budget, 
such surplus shall be used to offset future fees. (Proposed Section 
11.1(a)(ii) of the CAT NMS Plan)

[[Page 74185]]

     Clarify that Participants will be required to pay the CAT 
Fees approved by the Operating Committee only if such CAT Fees are in 
effect with regard to Industry Members in accordance with Section 19(b) 
of the Exchange Act. (Proposed Section 11.3(a)(ii)(B) of the CAT NMS 
Plan)
     Require the fee filings pursuant to Section 19(b) of the 
Exchange Act for CAT Fees related to Prospective CAT Costs to provide 
details regarding the calculation of the fee, including the Fee Rate, 
budget, projected volume, and the reconciliation of the budget to the 
fees. (Proposed Section 11.3(a)(iii)(B) of the CAT NMS Plan)
    (3) Furthermore, CAT LLC proposes to describe in detail the 
Historical CAT Assessment in the CAT NMS Plan by making the following 
revisions to the CAT NMS Plan:
     Describe the Historical CAT Assessment as described in the 
Proposed Amendment in the CAT NMS Plan in detail, including that the 
Historical CAT Assessment applies to Industry Members, how it will be 
used to repay the Participants, the manner of calculating the 
Historical Fee Rate, a description of the calculation of the Historical 
CAT Assessment, and a description of the fee filings under Section 
19(b) of the Exchange Act for the Historical CAT Assessment. (Proposed 
Section 11.3(b) of the CAT NMS Plan)
     State that the length of the Historical Recovery Period 
used in calculating the Historical Fee Rate will not be less than 24 
months or more than five years, and that the Historical CAT Assessment 
calculated using the Historical Fee Rate will remain in effect until 
all Historical CAT Costs are collected. (Proposed Section 11.3(b)(i)(D) 
of the CAT NMS Plan)
     Clarify that Participants would not be obligated to pay 
the Historical CAT Assessment as Participants have previously paid Past 
CAT Costs via loans to CAT LLC, and the Historical CAT Assessment paid 
by Industry Members would be used by CAT LLC to repay a portion of the 
loans made to CAT LLC by the Participants on a pro rata basis. 
(Proposed Section 11.3(b)(ii) of the CAT NMS Plan)
     State that the Participants will file fee filings pursuant 
to Section 19(b) of the Exchange Act to charge Industry Members the 
Historical CAT Assessment, and such filings will provide details 
regarding the calculation of the Historical CAT Assessment, including 
the Historical Fee Rate, Historical CAT Costs, and projected volume. 
(Proposed Section 11.3(b)(i)(A) and (iii)(B) of the CAT NMS Plan)

II. Proposed Revisions to Proposed Amendment

    CAT LLC has reviewed the SEC's OIP and the comment letter submitted 
in response to the OIP and it has determined to propose revisions to 
the Proposed Amendment. These proposed revisions are discussed in this 
Section II below. In addition, Exhibit A attached hereto sets forth the 
cumulative changes proposed to be made to the CAT NMS Plan, including 
both those changes set forth in the Proposed Amendment as well as the 
additional revisions proposed in Partial Amendment No. 1. Exhibit B 
attached hereto sets forth the proposed additional revisions to the 
Proposed Amendment as described in Partial Amendment No. 1.

A. Role of Clearing Brokers

    Under the Proposed Amendment, the CBS, the CBB and the Participant 
would each pay a fee equal to the number of executed equivalent shares 
in the transaction multiplied by one-third and a specified fee rate. 
CAT LLC determined to assess fees upon clearing firm Industry Members 
because this is the current practice for other fees, such as the 
options regulatory fee (``ORF''), and thus this approach would reduce 
administrative burdens. CAT LLC acknowledged, however, that this 
approach may impose an excessive financial burden on clearing firms and 
noted that they may pass-through the CAT fees to their clients, who may 
pass-through their CAT fees until the fees are imposed on the account 
that executed the transaction. As described in the OIP, certain 
commenters questioned whether the Proposed Amendment would impose an 
undue burden on clearing firms. In response to this proposal and the 
related comments, the SEC requested in the OIP ``[c]ommenters' views on 
whether the Participants have demonstrated why imposing CAT fees only 
on clearing brokers, instead of on all Industry Members is consistent 
with the Exchange Act and Rule 608 of Regulation NMS, and whether such 
allocation is an unreasonable burden on competition.'' \14\ In its 
comment letter, SIFMA raised concerns regarding the cost burden that 
clearing firms would experience under the Proposed Amendment.\15\
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    \14\ Request for Comment No. 8, OIP at 54578.
    \15\ SIFMA Letter at 4-5. CAT LLC notes, however, that, contrary 
to the description set forth in the SIFMA Letter, the Historical CAT 
Assessment would be assessed based on current market activity, not 
past market activity. Accordingly, the process of passing fees 
through for the Historical CAT Assessment would be the same as with 
CAT Fees related to Prospective CAT Costs.
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    CAT LLC recognizes that imposing the fee payment obligation on 
clearing brokers, rather than Industry Members more generally, 
potentially may impose a significant financial burden on clearing firms 
if the fees imposed on clearing firms are not passed through to their 
clients. Accordingly, CAT LLC proposes to amend the Proposed Amendment 
to assess the payment obligation on the EBB instead of the CBB, and to 
assess the payment obligation on the EBS, rather than the CBS. Charging 
the EBBs and EBSs would reflect the executing role the EBB and EBS have 
in each transaction. Like with CBBs and CBSs, EBBs and EBSs also may 
choose to pass the CAT fee on to their clients.
    To implement this change, CAT LLC proposes to state in proposed 
Sections 11.3(a)(iii)(A) and (b)(iii)(A) that EBBs and EBSs would have 
the obligation to pay the CAT Fee and the Historical CAT Assessment. 
Specifically, proposed Section 11.3(a)(iii)(A) would state that the EBB 
and EBS would be required to pay the CAT Fee:
    Each Industry Member that is the executing broker for the buyer in 
a transaction in Eligible Securities (``Executing Broker for the 
Buyer'' or ``EBB'') and each Industry Member that is the executing 
broker for the seller in a transaction in Eligible Securities 
(``Executing Broker for the Seller'' or ``EBS'') will be required to 
pay a CAT Fee for each such transaction in Eligible Securities in the 
prior month based on CAT Data. The EBB's CAT Fee or EBS's CAT Fee (as 
applicable) for each transaction in Eligible Securities will be 
calculated by multiplying the number of executed equivalent shares in 
the transaction by one-third and by the Fee Rate determined pursuant to 
paragraph (a)(i) of this Section 11.3.
    Similarly, proposed Section 11.3(b)(iii)(A) would state that the 
EBB and EBS would be required to pay the Historical CAT Assessment:
    Each month in which the Historical CAT Assessment is in effect, 
each EBB and each EBS shall pay a fee for each transaction in Eligible 
Securities executed by the EBB or EBS from the prior month as set forth 
in CAT Data, where the Historical CAT Assessment for each transaction 
will be calculated by multiplying the number of executed equivalent 
shares in the transaction by one-third and by the Historical Fee Rate 
determined pursuant to paragraph (b)(i) of this Section 11.3.

B. Mid-Year Fee Adjustment

    Under the Proposed Amendment, the Operating Committee may, but is 
not required to, adjust the Fee Rate once

[[Page 74186]]

during the year either to coordinate the CAT fees with adjustments to 
budgeted or actual CAT costs or actual or projected volume during the 
year. In response to this proposal, the SEC requested in the OIP 
``[c]ommenters' views on whether the Participants should be required to 
change the Fee Rate when the budget or projected executed equivalent 
share volume changes.'' \16\
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    \16\ Request for Comment No. 9, OIP at 54578.
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    CAT LLC recognizes the need to align CAT fees with CAT costs. 
Requiring the adjustment of the Fee Rate mid-year in response to 
changes in the budgeted or actual costs or projected or actual total 
executed equivalent share volume during the year would likely lead to 
the greater alignment of CAT fees and CAT costs, thereby potentially 
avoiding the collection of fees in excess of CAT costs or fees that are 
insufficient to cover CAT costs. Accordingly, CAT LLC proposes to 
require a mid-year adjustment of the Fee Rate for the CAT Fee, rather 
than having discretion to adjust the fee mid-year. Specifically, CAT 
LLC proposes to state in proposed paragraph (a)(i) of Section 11.3 that 
``[t]he Operating Committee will calculate the Fee Rate for the CAT Fee 
twice per year, once at the beginning of the year and once during the 
year.'' In addition, CAT LLC proposes a new paragraph (a)(i)(A)(II) of 
Section 11.3 that would state the following:

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

C. Lookback Period

    As described in the Proposed Amendment, the calculation of the Fee 
Rate requires the determination of the projected total executed 
equivalent share volume of transactions in Eligible Securities for the 
year. In the Proposed Amendment, CAT LLC proposed to determine this 
projection based on the total executed equivalent share volume of 
transactions in Eligible Securities from the prior six months. CAT LLC 
reasoned that the use of the data from the prior six months provides an 
appropriate balance between using data from a period that is 
sufficiently long to avoid short term fluctuations while providing data 
close in time to the upcoming year. In the OIP, however, the SEC asked 
for commenters' views on the ``use of total executed equivalent share 
volume from the prior six months to determine a projected total for the 
year instead of using the past year's total executed equivalent share 
volume.'' \17\
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    \17\ Request for Comment No. 16, OIP at 54578.
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    CAT LLC recognizes that the use of the prior twelve months, rather 
than the prior six months, would address the issue of potential 
seasonality. For example, the projection could be based on a period 
that typically has lighter trading volume than the other half of the 
year, thereby causing the projection to be too low. In addition, like 
the six-month look back, the twelve-month look back would be 
sufficiently long to avoid short term fluctuations in trading while 
providing data close in time to the upcoming year. Accordingly, CAT LLC 
proposes to amend the Proposed Amendment to use a twelve-month lookback 
for the calculation of the projection. With a twelve-month lookback, 
the Operating Committee would determine the projected total executed 
equivalent share volume of transactions in Eligible Securities for an 
upcoming year based on the total executed equivalent share volume from 
the prior twelve months. In addition, CAT LLC proposes to allow the 
Operating Committee to base its projection on the prior twelve months, 
but to use its discretion to analyze the likely volume for the upcoming 
year. As set forth in proposed Section 11.3(a)(iii)(B), Participants 
will be required to provide a description of the calculation of the 
projection in their fee filings pursuant to Section 19(b) of the 
Exchange Act.
    To implement this change, CAT LLC proposes to reference the twelve-
month look back period in proposed paragraphs (a)(i)(D) and (b)(i)(E) 
of Section 11.3 of the CAT NMS Plan. Proposed paragraph (a)(i)(D) of 
Section 11.3 would state that ``[t]he Operating Committee shall 
determine the projected total executed equivalent share volume of all 
transactions in Eligible Securities for each relevant period based on 
the executed equivalent share volume of all transactions in Eligible 
Securities for the prior twelve months.'' Similarly, proposed paragraph 
(b)(i)(E) of Section 11.3 of the CAT NMS Plan would state that ``[t]he 
Operating Committee shall determine the projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the Historical Recovery Period based on the executed equivalent share 
volume of all transactions in Eligible Securities for the prior twelve 
months.''

D. 19b-4 Fee Filing Process for Fee Rate Changes

    The SEC has requested ``[c]ommenters' views on whether the Proposed 
Amendment provides sufficient clarity and detail regarding the content 
and process relating to the fee filing pursuant to Section 19(b) and 
Rule 19b-4 thereunder with regard to Fee Rate changes applicable to 
Industry Members.'' \18\ In its comment letter, SIFMA requests that CAT 
LLC provide additional detail regarding the process for collecting CAT 
fees from Industry Members, including any triggers and/or annual review 
mechanisms that would result in new fee filings in the future as a 
result of Fee Rate changes.\19\
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    \18\ Request for Comment No. 13, OIP at 54578.
    \19\ SIFMA Letter at 5-7.
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    In response, CAT LLC proposes to restructure the proposed changes 
to Section 11.3 of the CAT NMS Plan, make additional changes to add 
clarity and detail regarding the CAT fees under the Executed Share 
Model, and to provide additional detail regarding the fee filing 
process with regard to fee rate changes applicable to Industry Members, 
including the requirement to calculate the Fee Rate twice per year and 
to make fee filings pursuant to Section 19(b) twice a year with regard 
to the CAT Fees for Prospective CAT Costs. Proposed Section 11.3(a) in 
the Proposed Amendment described the fees to be charged Participants 
and proposed Section 11.3(b) in the Proposed Amendment described the 
fees to be charged Industry Members. CAT LLC proposes to revise this 
structure by addressing CAT Fees related to Prospective CAT Costs in 
proposed Section 11.3(a) and the Historical CAT Assessment in proposed 
Section 11.3(b). With these changes, CAT LLC intends to make the fee 
filing process for setting and changing the CAT fees a straightforward 
and easy to implement process.
1. CAT Fees Related to Prospective CAT Costs
    CAT LLC proposes to restructure and revise proposed Section 11.3(a) 
of the CAT NMS Plan to provide greater clarity and detail regarding CAT 
Fees related to Prospective CAT Costs calculated pursuant to the 
Executed Share Model. With the proposed additional revisions, proposed 
Section 11.3(a) of the CAT

[[Page 74187]]

NMS Plan would describe that the CAT Fees related to Prospective CAT 
Costs apply to both Participants and Industry Members, the manner of 
calculating the Fee Rate, the description of the calculation of the 
Participant CAT Fee, a description of the calculation of the Industry 
Member CAT Fee, and a description of the fee filings under Section 
19(b) of the Exchange Act for Industry Member CAT Fees. The following 
describes the proposed revisions to Section 11.3(a) of the CAT NMS 
Plan.
a. Introductory Statement
    In the Proposed Amendment, proposed Section 11.3(a) described the 
fees to be charged Participants pursuant to the Executed Share Model. 
CAT LLC proposes to revise proposed Section 11.3(a) to address CAT Fees 
related to Prospective CAT Costs for both Participants and Industry 
Members. Accordingly, CAT LLC proposes to revise the introductory 
statement in proposed Section 11.3(a), which was originally proposed to 
state that ``[t]he Operating Committee will establish fees to be 
payable by Participants,'' to state that ``[t]he Operating Committee 
will establish fees (``CAT Fees'') to be payable by Participants and 
Industry Members with regard to CAT costs not previously paid by the 
Participants (``Prospective CAT Costs'') as follows.''
b. Calculation of the Fee Rate
    CAT LLC proposes to move the description of the calculation of the 
Fee Rate for CAT Fees related to Prospective CAT Costs from proposed 
paragraph (b) of the Participant fee schedule to proposed Section 
11.3(a) of the CAT NMS Plan. Moving the discussion of the calculation 
of the Fee Rate from the Participant fee schedule to proposed Section 
11.3(a) would clarify in the CAT NMS Plan that the proposed calculation 
of the CAT Fee would apply to both Participants and Industry Members.
i. Fee Rate
    Proposed paragraph (b)(1) of the Participant fee schedule as set 
forth in the Proposed Amendment describes the timing and manner of 
calculating the Fee Rate for CAT Fees related Prospective CAT Costs. 
The proposed paragraph states the following:

    The Operating Committee will calculate the Fee Rate at the 
beginning of each year by dividing the budgeted CAT costs for the 
year by the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the year. After setting the 
Fee Rate at the beginning of each year, the Fee Rate may be adjusted 
once during the year, if necessary, due to changes in the budgeted 
or actual costs or projected or actual total executed equivalent 
share volume during the year.

    CAT LLC proposes to move the description of the timing and method 
for calculating the Fee Rate to proposed Section 11.3(a)(i) of the CAT 
NMS Plan, and to provide additional detail regarding the Fee Rate in 
that provision. In addition, proposed Section 11.3(a)(i) will differ 
from the description in the Proposed Amendment as it will require the 
calculation of the Fee Rate twice per year, and to require the 
Participants to make a fee filing pursuant to Section 19(b) for 
Industry Member CAT Fees twice a year using the calculated Fee Rate.
    Proposed Section 11.3(a)(i) of the CAT NMS Plan would state that 
CAT Fees related to Prospective CAT Costs will be calculated twice a 
year. Specifically, this proposed provision would state that ``[t]he 
Operating Committee will calculate the Fee Rate for the CAT Fee twice 
per year, once at the beginning of the year and once during the year as 
follows.''
    Proposed Section 11.3(a)(i)(A)(I) of the CAT NMS Plan would 
describe the annual calculation of the Fee Rate and the requirement for 
Participants to file a fee filing for CAT Fees to be charged Industry 
Members calculated using the Fee Rate. This proposed provision also 
would state that Participants and Industry Members would be required to 
pay such CAT Fees once the CAT Fees are in effect with regard to 
Industry Members. This proposed provision would not change how the Fee 
Rate would be calculated; such calculation would be the same as 
described in the Proposed Amendment. Specifically, this proposed 
provision would state:

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

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

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

    This proposed provision would not change how the Fee Rate would be 
calculated; such calculation would be the same as described in the 
Proposed Amendment. This proposed provision, however, would make the 
mid-year Fee Rate adjustment mandatory, rather than discretionary.
    CAT LLC also proposes to add Section 11.3(a)(i)(A)(III) of the CAT 
NMS Plan to clarify that CAT Fees related to Prospective CAT Costs do 
not sunset automatically; such CAT Fees would remain in place until new 
CAT Fees are in place with a new Fee Rate. Specifically, this proposed 
provision would state:

    For the avoidance of doubt, CAT Fees with a Fee Rate calculated 
as set forth in this paragraph (a)(i) shall remain in effect until 
the Operating Committee approves a new Fee Rate as described in this 
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect 
with regard to Industry Members in accordance with Section 19(b) of 
the Exchange Act.

    This provision clarifies, but does not change, the substance of the 
Proposed Amendment. This proposed change and the use of continuous fees 
more generally are discussed in more detail in Section II(H) of this 
letter.
ii. Executed Equivalent Shares
    Paragraph (b)(2) of the Participant fee schedule as set forth in 
the Proposed Amendment describes how executed equivalent shares would 
be counted. CAT LLC proposes to move this proposed paragraph (b)(2) of 
the Participant fee schedule as set forth in the Proposed Amendment to 
proposed

[[Page 74188]]

Section 11.3(a)(i)(B) of the CAT NMS Plan. Accordingly, proposed 
Section 11.3(a)(i)(B) of the CAT NMS Plan would state the following:
    For purposes of calculating the fees, executed equivalent shares in 
a transaction in Eligible Securities will be counted as follows:

    (I) each executed share for a transaction in NMS Stocks will be 
counted as one executed equivalent share;
    (II) each executed contract for a transaction in Listed Options 
will be counted based on the multiplier applicable to the specific 
Listed Option (i.e., 100 executed equivalent shares or such other 
applicable multiplier); and
    (III) each executed share for a transaction in OTC Equity 
Securities shall be counted as 0.01 executed equivalent share.
iii. Budgeted CAT Costs
    CAT LLC proposes to move proposed paragraph (b)(3) of the 
Participant fee schedule as set forth in the Proposed Amendment to 
proposed Section 11.3(a)(i)(C). Accordingly, proposed Section 
11.3(a)(i)(C) of the CAT NMS Plan would state the following, which is 
the same as proposed paragraph (b)(3) of the Participant fee schedule 
in the Proposed Amendment:

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

    CAT LLC also proposes to provide additional details regarding what 
is included in the annual operating budget approved by the Operating 
Committee pursuant to Section 11.1(a) of the CAT NMS Plan in new 
proposed paragraphs (a)(i) and (ii) of Section 11.1 of the CAT NMS 
Plan. As discussed in detail below in Section II(I), proposed Section 
11.1(a)(i) would describe the categories of costs to be included in the 
CAT budget: ``technology, legal, consulting, insurance, professional 
and administration, and public relations costs, a reserve, and such 
other cost categories as determined by the Operating Committee to be 
included in the budget.''
    In addition, proposed Section 11.1(a)(ii) of the CAT NMS Plan would 
provide additional details regarding the use and size of the reserve. 
Specifically, proposed Section 11.1(a)(ii) of the CAT NMS Plan would 
state that ``[f]or the reserve referenced in paragraph (a)(i) of this 
Section, the budget will include an amount necessary to allow the 
Company to maintain a reserve of not more than 25% of the annual 
budget,'' and, if the CAT Fees exceed CAT costs, including the reserve, 
then the surplus will be used to offset future fees. An analysis of 
budgeted CAT costs and actual CAT costs for 2020, 2021 and the first 
nine months of 2022 demonstrates that actual CAT costs were 
approximately 20% higher than budgeted amounts over this period on a 
cumulative average basis. Based on the magnitude of historical budget 
to actual variances as well as the difficulty in accurately predicting 
various variable CAT costs, CAT LLC believes that a 25% reserve would 
appear to be reasonable. In addition, this provision would clarify that 
each year CAT LLC would collect sufficient funds to maintain a reserve 
of 25% of the annual budget. For example, if CAT LLC only had a reserve 
of 5% of the annual budget at the end of a year, the budget for the 
next year would include an additional amount for the reserve of not 
more than 20% of the annual budget.
iv. Projected Total Executed Equivalent Share Volume of Transactions in 
Eligible Securities
    CAT LLC proposes to move proposed paragraph (b)(4) of the 
Participant fee schedule as set forth in the Proposed Amendment to 
proposed Section 11.3(a)(i)(D) of the CAT NMS Plan. Accordingly, 
proposed Section 11.3(a)(i)(D) of the CAT NMS Plan would be the same as 
proposed paragraph (b)(4) of the Participant fee schedule in the 
Proposed Amendment except for the change regarding the length of the 
lookback period as discussed above in Section II(C) of this letter. 
Specifically, Section 11.3(a)(i)(D) of the CAT NMS Plan would state 
that ``[t]he Operating Committee shall determine the projected total 
executed equivalent share volume of all transactions in Eligible 
Securities for each relevant period based on the executed equivalent 
share volume of all transactions in Eligible Securities for the prior 
twelve months.''
c. Participant CAT Fee for Prospective CAT Costs
    CAT LLC proposes to describe the Participant CAT Fees related to 
Prospective CAT Costs in proposed Section 11.3(a)(ii) of the CAT NMS 
Plan. Proposed paragraph (a)(ii) of Section 11.3 would be the same as 
proposed Section 11.3(a)(i) and (ii) as set forth in the Proposed 
Amendment, with two minor changes. Instead of referring to ``a fee'' 
generally, the paragraph would refer to the ``CAT Fee.'' The use of the 
term ``CAT Fee'' would clarify that this paragraph applies to the CAT 
Fee related to Prospective CAT Costs, not the Historical CAT 
Assessment. In addition, the general reference to ``the applicable fee 
rate for the relevant period'' would be replaced with the more specific 
reference to the Fee Rate ``determined pursuant to paragraph (a)(i) of 
this Section 11.3.'' As discussed above, proposed Section 11.3(a)(i) 
describes the calculation of the Fee Rate for the CAT Fees related to 
Prospective CAT Costs. Accordingly, proposed Section 11.3(a)(ii)(A) of 
the CAT NMS Plan would state the following:

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

    CAT LLC also proposes to add paragraph (a)(ii)(B) to Section 11.3 
of the CAT NMS Plan to clarify that Participants would only be required 
to pay CAT Fees when Industry Members are required to pay CAT Fees. The 
Executed Share Model is designed to cover 100% of CAT costs by 
allocating costs between and among Participants and Industry Members. 
However, the CAT Fees charged to Participants are implemented via a 
different process than CAT Fees charged to Industry Members. CAT Fees 
charged to Participants are implemented via an approval by the 
Operating Committee in accordance with the requirements of the CAT NMS 
Plan. In contrast, CAT Fees charged to Industry Members may only become 
effective in accordance with the requirements of Section 19(b) of the 
Exchange Act. Accordingly, proposed paragraph (a)(ii)(B) of Section 
11.3 of the CAT NMS Plan would state that ``[e]ach Participant will be 
required to pay the CAT Fee calculated using the Fee Rate determined 
pursuant to paragraph (a)(i) of this Section 11.3 and approved by the 
Operating Committee only if such CAT Fees are in effect with regard to 
Industry Members in accordance with Section 19(b) of the Exchange 
Act.''
d. Industry Member CAT Fees for Prospective CAT Costs
i. Industry Member CAT Fee Obligation
    CAT LLC proposes to describe the CAT Fees related to Prospective 
CAT

[[Page 74189]]

Costs that are charged to Industry Members in proposed Section 
11.3(a)(iii)(A) of the CAT NMS Plan. This proposed paragraph would be 
similar to proposed Section 11.3(b)(i) and (ii) of the CAT NMS Plan as 
set forth in the Proposed Amendment subject to several changes. Instead 
of referring to ``a fee'' generally, the paragraph would refer to the 
``CAT Fee.'' The use of the term ``CAT Fee'' would clarify that this 
paragraph applies to the CAT Fee related to Prospective CAT Costs, not 
the Historical CAT Assessment. In addition, the general reference to 
``the applicable fee rate for the relevant period'' would be replaced 
with the more specific reference to the Fee Rate ``determined pursuant 
to paragraph (a)(i) of this Section 11.3.'' As discussed above, 
proposed Section 11.3(a)(i) of the CAT NMS Plan describes the 
calculation of the Fee Rate for the CAT Fees related to Prospective CAT 
Costs. Furthermore, the proposed language would simplify the provision 
by eliminating repetitive language that was set forth in proposed 
Section 11.3(b)(i) and (ii) of the CAT NMS Plan as set forth in the 
Proposed Amendment. Finally, as discussed above, the provision would 
refer to EBBs and EBSs, rather than CBBs and CBSs. Accordingly, 
proposed Section 11.3(a)(iii)(A) of the CAT NMS Plan would state the 
following:

    Each Industry Member that is the executing broker for the buyer 
in a transaction in Eligible Securities (``Executing Broker for the 
Buyer'' or ``EBB'') and each Industry Member that is the executing 
broker for the seller in a transaction in Eligible Securities 
(``Executing Broker for the Seller'' or ``EBS'') will be required to 
pay a CAT Fee for each such transaction in Eligible Securities in 
the prior month based on CAT Data. The EBB's CAT Fee or EBS's CAT 
Fee (as applicable) for each transaction in Eligible Securities will 
be calculated by multiplying the number of executed equivalent 
shares in the transaction by one-third and by the Fee Rate 
determined pursuant to paragraph (a)(i) of this Section 11.3.
ii. Fee Filings Under Section 19(b) of the Exchange Act
    CAT LLC proposes to provide additional detail as to the information 
that Participants would be required to include in their fee filings for 
CAT Fees in proposed paragraph (a)(iii)(B) of Section 11.3 of the CAT 
NMS Plan. The proposed paragraph sets forth the information about the 
CAT Fees related to Prospective CAT Costs that should be included in 
the fee filings required to be made by the Participants pursuant to 
Section 19(b) of the Exchange Act.\20\ Specifically, such filings would 
be required to include (1) the Fee Rate; (2) the budget for the year 
(or remainder of the year, as applicable), including a brief 
description of each line item in the budget (including technology, 
legal, consulting, insurance, professional and administration, and 
public relations costs, a reserve and such other categories as 
determined by the Operating Committee to be included in the budget) and 
the reason for changes in each such line item from the prior CAT Fee 
filing; (3) a discussion of how the budget is reconciled to the 
collected fees; and (4) the projected total executed equivalent share 
volume of all transactions in Eligible Securities for the year (or 
remainder of the year, as applicable), and a description of the 
calculation of the projection. This detail would describe how the Fee 
Rate is calculated, and explain how the budget used in the calculation 
is reconciled to the collected fees. Such detailed information would 
provide Industry Members and other interested parties with a clear 
understanding of the calculation of the CAT Fees and their relationship 
to CAT costs.\21\
---------------------------------------------------------------------------

    \20\ CAT LLC expects the fee filings required to be made by the 
Participants pursuant to Section 19(b) of the Exchange Act with 
regard to CAT Fees to be filed pursuant to Section 19(b)(3)(A) of 
the Exchange Act. In accordance with Section 19(b)(3)(A) of the 
Exchange Act, fee filings made pursuant to Section 19(b)(3)(A) of 
the Exchange Act would be effective upon filing.
    \21\ As a practical matter, the fee filing would provide the 
exact fee per executed equivalent share to be paid for the CAT Fees, 
by multiplying the Fee Rate by one-third and describing the relevant 
number of decimal places for the fee.
---------------------------------------------------------------------------

2. Historical CAT Assessment
    CAT LLC proposes to restructure and revise proposed Section 11.3(b) 
of the CAT NMS Plan as set forth in the Proposed Amendment to provide 
greater clarity and detail regarding the Historical CAT Assessment. 
With the proposed additional revisions, like with the description of 
the CAT Fee related to Prospective CAT Costs in proposed Section 
11.3(a) of the CAT NMS Plan, proposed Section 11.3(b) of the CAT NMS 
Plan would describe the Historical CAT Assessment, including that the 
Historical CAT Assessment is charged to Industry Members, how it will 
be used to repay the Participants, the manner of calculating the 
Historical Fee Rate, a description of the calculation of the Historical 
CAT Assessment, and description of the fee filings under Section 19(b) 
of the Exchange Act for the Historical CAT Assessment. The following 
describes the proposed revisions to Section 11.3(b) of the CAT NMS 
Plan.
a. Introductory Statement
    In the Proposed Amendment, proposed Section 11.3(b) of the CAT NMS 
Plan describes the fees to be charged Industry Members pursuant to the 
Executed Share Model. CAT LLC proposes to revise proposed Section 
11.3(b) of the CAT NMS Plan to address the Historical CAT Assessment to 
be charged to Industry Members. Accordingly, CAT LLC proposes to revise 
the introductory statement in proposed Section 11.3(b) of the CAT NMS 
Plan, which was originally proposed to state that ``[t]he Operating 
Committee will establish fees to be payable by Industry Members,'' to 
state that ``[t]he Operating Committee will establish fees 
(``Historical CAT Assessment'') to be payable by Industry Members with 
regard to CAT costs previously paid by the Participants (``Past CAT 
Costs'') as follows.'' \22\
---------------------------------------------------------------------------

    \22\ Note that there may be one or more Historical CAT 
Assessments, depending upon the timing of any approval of the 
amendment to the CAT NMS Plan and the completion of the Financial 
Accountability Milestones. For a discussion of the Financial 
Accountability Milestones, see Section 11.6 of the CAT NMS Plan.
---------------------------------------------------------------------------

b. Calculation of Historical Fee Rate
    In the Proposing Release, CAT LLC stated that Industry Member CAT 
fees for Past CAT Costs would be calculated in accordance with the 
Executed Share Model, and that the Fee Rate for the CAT fees related to 
Past CAT Costs would be calculated by dividing the Past CAT Costs for 
the relevant period (as determined by the Operating Committee) by the 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for the relevant period based on CAT Data. CAT LLC 
proposes to provide details regarding the calculation of the Historical 
CAT Assessment in proposed Section 11.3(b) of the CAT NMS Plan. The 
detail would be similar to the detail provided in proposed Section 
11.3(a) of the CAT NMS Plan regarding CAT Fees related to Prospective 
CAT Costs, including a description of the calculation of the Historical 
Fee Rate, the counting method for executed equivalent shares, the 
Historical CAT Costs, the Historical Recovery Period, and the projected 
total executed equivalent share volume of transactions in Eligible 
Securities for the Historical Recovery Period.
i. Historical Fee Rate
    Proposed Section 11.3(b)(i)(A) of the CAT NMS Plan would describe 
the

[[Page 74190]]

calculation of the Historical Fee Rate for the Historical CAT 
Assessment and the requirement for Participants to file a fee filing 
for the Historical CAT Assessment. This proposed provision also would 
state that Industry Members would be required to pay the Historical CAT 
Assessment once such Historical CAT Assessment is in effect in 
accordance with Section 19(b) of the Exchange Act. Specifically, this 
proposed provision also would state that:

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

    This proposed provision would not change how the Historical Fee 
Rate would be calculated; such calculation would be the same as 
described in the Proposed Amendment.
ii. Executed Equivalent Shares
    As described in the Proposing Release, the Historical CAT 
Assessment would be calculated based on the same executed equivalent 
share calculation as CAT Fees related to Prospective CAT Costs. 
Accordingly, proposed Section 11.3(b)(i)(B) of the CAT NMS Plan would 
make it clear that the calculation is the same for both types of fees. 
Specifically, proposed Section 11.3(b)(i)(B) of the CAT NMS Plan would 
state that ``[f]or purposes of calculating the Historical CAT 
Assessment, executed equivalent shares in a transaction in Eligible 
Securities will be counted in the same manner as set forth in paragraph 
(a)(i)(B) of this Section 11.3.''
iii. Historical CAT Costs
    The Proposing Release stated generally that the Operating Committee 
will determine the Past CAT Costs sought to be recovered through the 
Historical CAT Assessment. CAT LLC proposes to make this approach clear 
in the language of the CAT NMS Plan by adding proposed Section 
11.3(b)(i)(C) of the CAT NMS Plan, which would state that ``[t]he 
Operating Committee will determine the Historical CAT Costs sought to 
be recovered by the Historical CAT Assessment, where the Historical CAT 
Costs will be Past CAT Costs minus Past CAT Costs excluded from 
Historical CAT Costs by the Operating Committee.'' As discussed below, 
the Historical CAT Costs, which were discussed in detail in CAT LLC's 
response to comments,\23\ also will be discussed in the fee filings 
regarding the Historical CAT Assessment that are required to be made 
under Section 19(b) of the Exchange Act.
---------------------------------------------------------------------------

    \23\ Letter to Vanessa Countryman, Secretary, SEC, from Mike 
Simon, Chair, Operating Committee, CAT, (Aug. 16, 2022) at 23-28 
(``CAT Response Letter'').
---------------------------------------------------------------------------

iv. Historical Recovery Period
    The Proposing Release did not discuss the length of time during 
which the Historical CAT Assessment would be in effect. As the total 
amount of the Historical CAT Costs have not yet been determined because 
the fee model has not yet been approved and CAT LLC continues to incur 
costs, CAT LLC had not determined the appropriate recovery period. 
Based on CAT costs incurred to date, however, CAT LLC believes that the 
Historical Recovery Period should not be less than 24 months or more 
than five years. In analyzing the potential Historical Recovery 
Periods, CAT LLC sought to weigh the need for a reasonable Historical 
Fee Rate that spreads the Historical CAT Costs over an appropriate 
amount of time and the need to repay the loan notes to the Participants 
in a timely fashion. CAT LLC analyzed potential recovery periods using 
the Historical CAT Costs through 2022 as discussed in the CAT Response 
Letter \24\ and the total executed equivalent share volume of 
transactions in Eligible Securities for 2021 to calculate the projected 
total executed equivalent share volume of transactions.\25\ Based on 
the variables in this analysis, CAT LLC determined that the Historical 
Fee Rate would range from approximately $0.00002-$0.00006 per executed 
equivalent share for a two through five-year period. CAT LLC believes 
that such Historical Fee Rates would be reasonable even if Industry 
Members were required to pay the Historical CAT Assessment and the 
ongoing CAT Fee at the same time. CAT LLC notes, however, that the 
actual Historical CAT Assessment would be calculated using up-to-date 
Historical CAT Costs and executed equivalent share volume.
---------------------------------------------------------------------------

    \24\ Id.
    \25\ Proposing Release at 33246.
---------------------------------------------------------------------------

    Proposed Section 11.3(b)(i)(D)(I) of the CAT NMS Plan would 
describe the Historical Recovery Period used in calculating the 
Historical Fee Rate. This proposed provision would state that ``[t]he 
length of the Historical Recovery Period used in calculating the 
Historical Fee Rate will be established by the Operating Committee 
based upon the amount of the Historical CAT Costs to be recovered by 
the Historical CAT Assessment.'' This proposed provision, however, 
would state that Historical Recovery Period used for calculating the 
Historical Fee Rate would not be less than 24 months or more than five 
years. As discussed below, the Historical Recovery Period is used to 
calculate the Historical Fee Rate. The actual recovery period may be 
longer or shorter than the Historical Recovery Period depending on the 
actual executed equivalent share volumes during the time that the 
Historical CAT Assessment is in effect.
    Proposed Section 11.3(b)(i)(D)(II) of the CAT NMS Plan would 
describe the length of the time that the Historical CAT Assessment 
would be in effect, which may be greater than or less than the 
Historical Recovery Period, depending on the Historical CAT Assessment 
fees collected based on the actual volume. The Historical CAT 
Assessment would remain in effect until all Historical CAT Costs are 
collected. Accordingly, this provision states that ``[n]otwithstanding 
the length of the Historical Recovery Period used in calculating the 
Historical Fee Rate, the Historical CAT Assessment calculated using the 
Historical Fee Rate will remain in effect until all Historical CAT 
Costs are collected.''
v. Projected Total Executed Equivalent Share Volume of Transactions in 
Eligible Securities for Historical Recovery Period
    As described in the Proposing Release, the Historical Fee Rate 
would be calculated by using ``the projected total executed equivalent 
share volume of all transactions in Eligible Securities for the 
relevant period based on CAT Data.'' CAT LLC proposes to clarify the 
manner of calculating the projected total executed equivalent share 
volume for the Historical CAT Assessment by adding proposed Section 
11.3(b)(i)(E) to the CAT NMS Plan. CAT LLC proposes to state in this 
provision that the projection will be determined based on transactions 
in Eligible Securities for the prior twelve months. Accordingly, 
proposed Section 11.3(b)(i)(E) of the CAT NMS Plan would state that 
``[t]he Operating Committee shall determine the projected total 
executed equivalent share volume of all transactions in Eligible 
Securities for the Historical Recovery Period based on the executed 
equivalent share volume of all

[[Page 74191]]

transactions in Eligible Securities for the prior twelve months.''
c. Past CAT Costs and Participants
    As described in the Proposing Release, because the Participants 
have paid all CAT costs to date, the Participants would not pay the 
Historical CAT Assessment; only Industry Members would be required to 
pay the Historical CAT Assessment. Proposed Section 11.3(a)(iv) of the 
CAT NMS Plan as set forth in the Proposed Amendment clarified this 
point by stating that ``[n]otwithstanding anything to contrary, 
Participants will not be required to a pay a CAT fee related to CAT 
costs previously paid by the Participants in a manner determined by the 
Operating Committee (`Past CAT Costs').'' However, the Proposing 
Release provided additional color regarding the Participants 
obligations with regard to certain Past CAT Costs. Specifically, it 
stated that Participants would remain responsible for the one-third of 
Past CAT Costs allocated to Participants under the Executed Share 
Model, as well as 100% of certain other past CAT Costs. The CAT fees 
related to included Past CAT Costs would recoup two-thirds of the 
included Past CAT Costs; the Participants have paid for and would not 
be reimbursed for the remaining one-third of the included Past CAT 
Costs. The CAT fees related to included Past CAT Costs paid by the 
Industry Members would be used to reimburse the Participants for the 
two-thirds of included Past CAT Costs allocated to Industry Members. 
The CAT fees for the included Past CAT Costs collected from Industry 
Members will be allocated to Participants for repayment of the 
outstanding loan notes of the Participants to the Company on a pro rata 
basis; such fees would not be allocated to Participants based on the 
executed equivalent share volume of transactions in Eligible 
Securities. CAT LLC proposes to amend proposed Section 11.3 of the CAT 
NMS Plan to add this detail to the CAT NMS Plan.
    Specifically, CAT LLC proposes to delete proposed Section 
11.3(a)(iv) of the CAT NMS Plan as set forth in the Proposed Amendment 
and replace it with proposed Section 11.3(b)(ii) of the CAT NMS Plan. 
Proposed Section 11.3(b)(ii) would clarify that the Participants would 
not be required to pay the Historical CAT Assessment as the 
Participants previously have paid Past CAT Costs. It would state that, 
``[b]ecause Participants previously have paid Past CAT Costs via loans 
to the Company, Participants would not be required to pay the 
Historical CAT Assessment.'' In addition, proposed Section 11.3(b)(ii) 
of the CAT NMS Plan would clarify that the Historical CAT fees 
collected from Industry Members would be allocated to Participants for 
repayment of the outstanding loan notes of the Participants to the 
Company on a pro rata basis; such fees would not be allocated to 
Participants based on the executed equivalent share volume of 
transactions in Eligible Securities. Specifically, proposed Section 
11.3(b)(ii) of the CAT NMS Plan would state that ``[t]he Historical CAT 
Assessment to be paid by Industry Members and collected by the Company 
will be used by the Company to repay a portion of the loans from the 
Participants to the Company on a pro rata basis.'' Furthermore, 
proposed Section 11.3(b)(ii) of the CAT NMS Plan would emphasize that 
``[t]he Historical CAT Assessment is designed to recover two-thirds of 
the Historical CAT Costs from Industry Members.''
d. Historical CAT Assessment for Industry Members
i. Industry Member Obligation
    CAT LLC proposes to describe the Historical CAT Assessment charged 
to Industry Members in proposed Section 11.3(b)(iii)(A) of the CAT NMS 
Plan. This proposed paragraph (b)(iii)(A) of Section 11.3 of the CAT 
NMS Plan would be similar to proposed Section 11.3(a)(iii)(A) of the 
CAT NMS Plan discussed above, but would provide additional specifics 
regarding the Historical CAT Assessment. In particular, this paragraph 
would refer to the ``Historical CAT Assessment,'' ``Historical Fee 
Rate'' and the ``Historical Recovery Period.'' Specifically, this 
proposed paragraph would state that:

    Each month in which the Historical CAT Assessment is in effect, 
each EBB and each EBS shall pay a fee for each transaction in 
Eligible Securities executed by the EBB for the buyer or EBS for the 
seller from the prior month as set forth in CAT Data, where the 
Historical CAT Assessment for each transaction will be calculated by 
multiplying the number of executed equivalent shares in the 
transaction by one-third and by the Historical Fee Rate determined 
pursuant to paragraph (b)(i) of this Section 11.3.
ii. Fee Filings Under Section 19(b) of the Exchange Act
    CAT LLC proposes to provide additional detail as to when 
Participants would file fee filings for the Historical CAT Assessment 
and what would be required to be included in such filings. Proposed 
Section 11.3(b)(iii)(B) would describe the requirements for filings for 
the Historical CAT Assessment.\26\ The proposed paragraph would state 
that ``[w]hen the Participants file with the SEC under Section 19(b) of 
the Exchange Act the Historical CAT Assessment to be charged to 
Industry Members that the Operating Committee approved in accordance 
with paragraph (b) of this Section 11.3,'' the filing should set forth 
the following information: (1) the Historical Fee Rate; (2) a brief 
description of the amount and type of the Historical CAT Costs; (3) the 
Historical Recovery Period and the reason for its length; and (4) the 
projected total executed equivalent share volume of all transactions in 
Eligible Securities for the Historical Recovery Period, and a 
description of the calculation of the projection.\27\
---------------------------------------------------------------------------

    \26\ CAT LLC expects the fee filings required to be made by the 
Participants pursuant to Section 19(b) of the Exchange Act with 
regard to the Historical CAT Assessment to be filed pursuant to 
Section 19(b)(3)(A) of the Exchange Act. In accordance with Section 
19(b)(3)(A) of the Exchange Act, fee filings made pursuant to 
Section 19(b)(3)(A) of the Exchange Act would be effective upon 
filing.
    \27\ As a practical matter, the fee filing would provide the 
exact fee per executed equivalent share to be paid for the 
Historical CAT Assessment, by multiplying the Historical Fee Rate by 
one-third and describing the relevant number of decimal places for 
the fee.
---------------------------------------------------------------------------

E. Calculation of Past CAT Costs: Relevant Period

    The SEC requested ``[c]ommenters' views on the calculation of the 
Past CAT Costs Fee Rate, including any views on the relevant period to 
be used by the Operating Committee to calculate the Fee Rate for Past 
CAT Costs.'' \28\ As discussed above in Section II(D) of this letter, 
CAT LLC proposes to add substantial detail regarding the calculation of 
the Historical Fee Rate to proposed Section 11.3(b) of the CAT NMS 
Plan. Included in those proposed changes is a provision that addresses 
the Historical Recovery Period used in calculating the Historical Fee 
Rate for the Historical CAT Assessment, and a provision that addresses 
the length of time that the Historical CAT Assessment would be in 
effect.
---------------------------------------------------------------------------

    \28\ Request for Comment No. 17, OIP at 54578.
---------------------------------------------------------------------------

F. Proposed Plan Changes To Describe Executed Share Model

    The SEC requested ``[c]ommenters' views on the proposed changes to 
Section 11.3 of the CAT NMS Plan in order to conform the Plan to the 
Executed Shares Model by revising the manner in which fees to recover 
costs will be assessed on Participants and Industry Members.'' \29\ As 
described in detail above, CAT LLC has restructured proposed Section 
11.3 and added

[[Page 74192]]

additional detail to Section 11.3 to provide a more detailed 
description of the implementation of the Executed Share Model in the 
CAT NMS Plan.
---------------------------------------------------------------------------

    \29\ Request for Comment No. 32, OIP at 54579.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to amend the CAT funding principles 
to clarify that the CAT Fee and the Historical CAT Assessment are 
intended to be cost-based fees--that is, the fees are designed to 
recover the cost of the creation, implementation and operation of the 
CAT. CAT LLC proposes to amend the funding principle set forth in 
Section 11.2(c) by making a specific reference to the costs of the CAT. 
With this proposed change, proposed Section 11.2(c) would state that 
``[i]n establishing the funding of the Company, the Operating Committee 
shall seek: . . . to establish a fee structure in which the fees 
charged to Participants and Industry Members are based upon the 
executed equivalent share volume of transactions in Eligible 
Securities, and the costs of the CAT.''

G. Reconciliation of Budget to Fees

    In the OIP, the SEC requested comment on ``whether the Proposed 
Amendment needs a discussion of how the budget will be reconciled to 
fees.'' \30\ If the CAT LLC collects a surplus of fees above and beyond 
what is required for the CAT costs, including the requisite reserve, 
such surpluses would be used to offset future fees and would not be 
distributed to the Participants as profits.\31\ To provide transparency 
regarding this reconciliation process, CAT LLC proposes to require that 
Participants provide a discussion of how the budget is reconciled to 
the collected fees in their fee filings pursuant Section 19(b) of the 
Exchange Act. CAT LLC proposes to include this requirement in Section 
11.3(a)(iii)(B) of the CAT NMS Plan.
---------------------------------------------------------------------------

    \30\ Request for Comment No. 24, OIP at 54578.
    \31\ Section 11.1(c) of the CAT NMS Plan specifically states 
that ``[a]ny surplus of the Company's revenues over its expenses 
shall be treated as an operational reserve to offset future fees.''
---------------------------------------------------------------------------

H. Continuous Fees Versus Sunsetting Fees

    CAT LLC does not propose to require the proposed CAT Fees to sunset 
automatically; instead, a CAT Fee would continue until a new CAT Fee is 
in place in accordance with the requirements of the CAT NMS Plan and 
Section 19(b) of the Exchange Act. In response to this proposal, the 
SEC requested ``[c]ommenters' views on whether it is necessary or 
appropriate in the public interest for the Proposed Amendment to permit 
the Fee Rate to potentially remain in effect even if the budget or 
projected executed equivalent share volume changes (both would be used 
to calculate the Fee Rate under the Executed Share Model) or if the Fee 
Rate should sunset after a year. For example, if the Commission 
temporarily suspends and institutes proceedings to determine whether to 
approve or to disapprove a Section 19(b) fee filing to institute a new 
Fee Rate, the old Fee Rate could remain in effect during the 
proceedings.'' \32\ In its comment letter, SIFMA advocates for a 
trigger or automatic review to ensure that the fee rate remains aligned 
with the CAT costs.\33\ CAT LLC believes that the Proposed Amendment, 
with the revisions proposed herein, would address the concerns related 
to the alignment of CAT costs and CAT fees.
---------------------------------------------------------------------------

    \32\ Request for Comment No. 11, OIP at 54578.
    \33\ SIFMA Letter at 5-7.
---------------------------------------------------------------------------

    CAT LLC believes that it is critical that a CAT fee remain in place 
at all times. The financial viability of the CAT would be put at risk 
without a constant source of revenue. CAT LLC pays various bills, 
including technology bills, on a monthly basis. Accordingly, even short 
delays in the implementation of new CAT fees after the sunsetting of a 
prior CAT fee may have a deleterious effect on the operation of the 
CAT. Indeed, adopting sunsetting fees would contradict the funding 
principle of seeking to ``build financial stability to support the 
Company as a going concern.'' \34\ CAT LLC proposes to add Section 
11.3(a)(i)(A)(III) of the CAT NMS Plan to clarify that CAT Fees related 
to Prospective CAT Costs do not sunset automatically; such CAT Fees 
would remain in place until new CAT Fees with a new Fee Rate is in 
effect.
---------------------------------------------------------------------------

    \34\ Section 11.2(f) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Moreover, CAT LLC does not believe that a sunsetting requirement is 
necessary to ensure that the CAT Fees are closely coordinated with 
Prospective CAT costs. CAT LLC has proposed a comprehensive, multi-
pronged approach to ensure that the CAT Fees are closely tied to CAT 
costs. First, CAT LLC will be required to calculate the Fee Rates for 
the CAT Fees based on budgeted CAT costs. In addition, CAT LLC will be 
required to calculate the Fee Rate twice a year to determine whether 
the Fee Rate has changed due to changes in the budgeted or actual costs 
or actual or projected executed equivalent share volume, and to make a 
fee filing twice a year to reflect this calculation. Accordingly, the 
Fee Rate will be required to be updated twice a year, thereby ensuring 
the CAT Fees are closely tied to CAT costs.
    Second, the CAT NMS Plan requires that the Company operate on a 
``break-even'' basis, with fees imposed to cover costs and an 
appropriate reserve. Any surpluses would be treated as an operational 
reserve to offset future fees and would not be distributed to the 
Participants as profits. To ensure that the Participants' operation of 
the CAT will not contribute to the funding of their other operations, 
Section 11.1(c) of the CAT NMS Plan specifically states that ``[a]ny 
surplus of the Company's revenues over its expenses shall be treated as 
an operational reserve to offset future fees.'' Moreover, as discussed 
in detail in Section II(I) and (G) of this letter, CAT LLC proposes to 
amend the CAT NMS Plan to limit the reserve to no more than 25% of the 
annual budget and to clarify that CAT fees collected in excess of the 
CAT costs, including the reserve, will be used to offset future 
fees.\35\
---------------------------------------------------------------------------

    \35\ See proposed Section 11.1(a)(i) and (ii) of the CAT NMS 
Plan.
---------------------------------------------------------------------------

    Third, as discussed above in Section II(D) of this letter, CAT LLC 
proposes to amend the CAT NMS Plan to require Participants to provide 
significant details in their fee filings regarding Industry Member CAT 
Fees. Proposed paragraph (a)(iii)(B) of Section 11.3 of the CAT NMS 
Plan would state that ``[w]hen Participants file with the SEC pursuant 
to Section 19(b) of the Exchange Act CAT Fees to be charged to Industry 
Members calculated using the Fee Rate that the Operating Committee 
approved in accordance with paragraph (a) of this Section 11.3'' such 
filings would be required to include (1) the Fee Rate; (2) the budget 
for the upcoming year (or remainder of the year, as applicable), 
including a brief description of each line item in the budget 
(including technology, legal, consulting, insurance, professional and 
administration, and public relations costs, a reserve and/or such other 
categories as determined by the Operating Committee to be included in 
the budget) and the reason for changes in each such line item from the 
prior CAT Fee filing; (3) a discussion of how the budget is reconciled 
to the collected fees; and (4) the projected total executed equivalent 
share volume of all transactions in Eligible Securities for the year 
(or remainder of the year, as applicable), and a description of the 
calculation of the projection. This detail would describe how the Fee 
Rate is calculated and explain how the budget used in the calculation 
is reconciled to the collected fees. Such detailed information would 
provide Industry Members and other interested parties

[[Page 74193]]

with a clear understanding of the calculation of the CAT fees and their 
relationship to CAT costs.

I. Definition of Budgeted CAT Costs

    The Proposed Amendment would state that the budgeted CAT costs for 
the year shall be ``comprised of all fees, costs and expenses budgeted 
to be incurred by or for the Company in connection with the 
development, implementation and operation of the CAT as set forth in 
the annual operating budget approved by the Operating Committee 
pursuant to Section 11.1(a) of the CAT NMS Plan, or as adjusted during 
the year by the Operating Committee.'' The SEC requested 
``[c]ommenters' views on the costs that would be included in the 
proposed definition of Budgeted CAT Costs in the Proposed Participant 
Fee Schedule.'' \36\ CAT LLC believes that budgeted CAT costs 
appropriately include the costs set forth in the approved budget for 
CAT LLC. In addition, CAT LLC believes that using budgeted CAT costs, 
rather than CAT costs already incurred, allows the Company to collect 
fees prior to when bills become payable.
---------------------------------------------------------------------------

    \36\ Request for Comment No. 24, OIP at 54578.
---------------------------------------------------------------------------

    The budgeted CAT costs for the upcoming year would be the costs set 
forth in the annual operating budget for the Company required pursuant 
to Section 11.1(a) of the CAT NMS Plan. Section 11.1(a) states that 
``[o]n an annual basis the Operating Committee shall approve an 
operating budget for the Company. The budget shall include the 
projected costs of the Company, including the costs of developing and 
operating the CAT for the upcoming year, and the sources of all revenue 
to cover such costs, as well as the funding of any reserve that the 
Operating Committee reasonably deems appropriate for prudent operation 
of the Company.''
    The CAT costs budgeted for the year would be comprised of all fees, 
costs and expenses estimated to be incurred by or for the Company in 
connection with the development, implementation and operation of the 
CAT during the year. These CAT costs would include, but not be limited 
to, Plan Processor costs, insurance costs, third-party support costs 
and an operational reserve. Plan Processor costs would consist of the 
Plan Processor's ongoing costs, including development costs. This 
amount would be based upon the fees due to the Plan Processor pursuant 
to the Company's agreement with the Plan Processor. Insurance costs 
would include cyber insurance and director liability insurance. Third-
party support costs would include legal fees, consulting fees, vendor 
fees and audit fees. In addition, the Operating Committee aims to 
accumulate the necessary funds to establish an operating reserve for 
the Company through the CAT fees charged to CAT Reporters. As set forth 
in Section 11.1(a) of the CAT NMS Plan, the Operating Committee may 
include in the budget ``funding of any reserve that the Operating 
Committee reasonably deems appropriate for prudent operation of the 
Company.'' \37\ CAT LLC proposes to add proposed Section 11.1(a)(i) to 
provide additional clarity regarding the costs to be included in the 
CAT budget by listing the types of CAT costs to be included in the 
budget. Specifically, proposed Section 11.1(a)(i) of the CAT NMS Plan 
would state that ``[w]ithout limiting the foregoing, the budgeted CAT 
costs shall include technology, legal, consulting, insurance, 
professional and administration, and public relations costs, a reserve, 
and such other categories as determined by the Operating Committee to 
be included in the budget.''
---------------------------------------------------------------------------

    \37\ Section 11.1(a) of the CAT NMS Plan.
---------------------------------------------------------------------------

    As required by Section 11.1(c) of the CAT NMS Plan, any surpluses 
collected will be treated as an operational reserve to offset future 
fees and will not be distributed to the Participants as profits. In the 
Proposed Amendment, CAT LLC stated that ``[a]lthough the Operating 
Committee may determine at its discretion that a different level of 
reserves is appropriate in the future, the Operating Committee proposes 
to include in the budget for purposes of determining CAT fees an 
operational reserve comprised of three months of ongoing CAT costs.'' 
\38\ To provide additional clarity regarding the size of the reserve, 
CAT LLC proposes to add proposed paragraph (a)(ii) to Section 11.1 of 
the CAT NMS Plan to set forth the parameters for the size of the 
reserve. Specifically, proposed Section 11.1(a)(ii) of the CAT NMS Plan 
would state that ``[t]he budget will include a reserve in the amount of 
not more than 25% of the annual budget.'' In addition, CAT LLC proposes 
to clarify how CAT fees collected in excess of CAT costs, including the 
reserve, would be used. Specifically, proposed paragraph (a)(ii) of 
Section 11.1 of the CAT NMS Plan would state that ``[t]o the extent 
collected CAT fees exceed CAT costs, including the reserve of 25% of 
the annual budget, such surplus will be used to offset future fees.''
---------------------------------------------------------------------------

    \38\ Proposing Release at 33228.
---------------------------------------------------------------------------

    To address potential changes related to the CAT during the year, 
the Operating Committee may adjust the budgeted CAT costs for the year 
as it reasonably deems appropriate for the prudent operation of the 
Company. For example, the Operating Committee may determine that an 
adjustment to the budget is necessary if actual costs during the year 
are more or less than the budget, or if unanticipated expenditures are 
necessary. To the extent that the Operating Committee adjusts the 
budgeted CAT costs during the year and determines to adjust the Fee 
Rate, the adjusted budgeted CAT costs would be used in calculating the 
new Fee Rate for the remaining months of the year.
    The Operating Committee has determined to publicly provide the 
annual operating budget for the Company as well as any updates to the 
budget that occur during the year. This publicly available budget 
information describes in detail the budget for the Company. For 
example, among other things, the budget provides specific budgeted 
technology costs (including cloud hosting services, operating fees, 
Customer and Account Information System (``CAIS'') operating fees and 
change request fees) and general and administrative costs (including 
legal, consulting, insurance, professional and administration, and 
public relations). The Company provides such budget information on a 
dedicated web page on the CAT NMS Plan website to make it readily 
accessible for CAT Reporters and others.

III. Solicitation of Comments

    The Commission seeks comments on the Proposed Amendment, as 
modified by Partial Amendment No. 1. Interested persons are invited to 
submit written data, views, and arguments concerning the foregoing, 
including whether the Proposed Amendment, as modified by Partial 
Amendment No. 1 is consistent with the Exchange Act. Comments may be 
submitted by any of the following methods:

Electronic Comments

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

Paper Comments

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

All submissions should refer to File Number 4-698. This file number 
should be included on the subject line if email is used. To help the 
Commission

[[Page 74194]]

process and review your comments more efficiently, please use only one 
method. The Commission will post all comments on the Commission's 
internet website (http://www.sec.gov/rules/sro.shtml). Copies of the 
submission, all subsequent amendments, all written statements with 
respect to Partial Amendment No. 1 that are filed with the Commission, 
and all written communications relating to Partial Amendment No. 1 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for website viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the Participants' offices. All comments received will be 
posted without change. Persons submitting comments are cautioned that 
we do not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number 4-698 
and should be submitted on or before December 23, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\39\
---------------------------------------------------------------------------

    \39\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.

EXHIBIT A:

Cumulative Proposed Revisions to CAT NMS Plan

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

ARTICLE I

DEFINITIONS

* * * * *
    [``Execution Venue'' means a Participant or an alternative trading 
system (``ATS'') (as defined in Rule 300 of Regulation ATS) that 
operates pursuant to Rule 301 of Regulation ATS (excluding any such ATS 
that does not execute orders).]
* * * * *

ARTICLE XI

FUNDING OF THE COMPANY

    Section 11.1. Funding Authority.
    (a) On an annual basis the Operating Committee shall approve an 
operating budget for the Company. The budget shall include the 
projected costs of the Company, including the costs of developing and 
operating the CAT for the upcoming year, and the sources of all 
revenues to cover such costs, as well as the funding of any reserve 
that the Operating Committee reasonably deems appropriate for prudent 
operation of the Company.
    (i) Without limiting the foregoing, the budgeted CAT costs shall 
include technology, legal, consulting, insurance, professional and 
administration, and public relations costs, a reserve and such other 
cost categories as determined by the Operating Committee to be included 
in the budget.
    (ii) For the reserve referenced in paragraph (a)(i) of this 
Section, the budget will include an amount necessary to allow the 
Company to maintain a reserve of not more than 25% of the annual 
budget. To the extent collected CAT fees exceed CAT costs, including 
the reserve of 25% of the annual budget, such surplus shall be used to 
offset future fees.
    (b) Subject to Section 11.2, the Operating Committee shall have 
discretion to establish funding for the Company, including: (i) 
establishing fees that the Participants shall pay; and (ii) 
establishing fees for Industry Members that shall be implemented by 
Participants. The Participants shall file with the SEC under Section 
19(b) of the Exchange Act any such fees on Industry Members that the 
Operating Committee approves, and such fees shall be labeled as 
``Consolidated Audit Trail Funding Fees.''
    (c) To fund the development and implementation of the CAT, the 
Company shall time the imposition and collection of all fees on 
Participants and Industry Members in a manner reasonably related to the 
timing when the Company expects to incur such development and 
implementation costs. In determining fees on Participants and Industry 
Members the Operating Committee shall take into account fees, costs and 
expenses (including legal and consulting fees and expenses) incurred by 
the Participants on behalf of the Company prior to the Effective Date 
in connection with the creation and implementation of the CAT, and such 
fees, costs and expenses shall be fairly and reasonably shared among 
the Participants and Industry Members. Any surplus of the Company's 
revenues over its expenses shall be treated as an operational reserve 
to offset future fees.
    (d) Consistent with this Article XI, the Operating Committee shall 
adopt policies, procedures, and practices regarding the budget and 
budgeting process, [assignment of tiers,] resolution of disputes, 
billing and collection of fees, and other related matters. [For the 
avoidance of doubt, as part of its regular review of fees for the CAT, 
the Operating Committee shall have the right to change the tier 
assigned to any particular Person in accordance with fee schedules 
previously filed with the Commission that are reasonable, equitable and 
not unfairly discriminatory and subject to public notice and comment, 
pursuant to this Article XI. Any such changes will be effective upon 
reasonable notice to such Person.]
    Section 11.2. Funding Principles. In establishing the funding of 
the Company, the Operating Committee shall seek:
    (a) to create transparent, predictable revenue streams for the 
Company that are aligned with the anticipated costs to build, operate 
and administer the CAT and the other costs of the Company;
    (b) to establish an allocation of the Company's related costs among 
Participants and Industry Members that is consistent with the Exchange 
Act, taking into account the timeline for implementation of the CAT 
[and distinctions in the securities trading operations of Participants 
and Industry Members and their relative impact upon Company resources 
and operations];
    (c) to establish a [tiered] fee structure in which the fees charged 
to [: (i)] Participants and [CAT Reporters that are Execution Venues, 
including ATSs, are based upon the level of market share; (ii)] 
Industry Members[' non-ATS activities] are based upon the executed 
equivalent share volume of transactions in Eligible Securities, and the 
costs of the CAT [message traffic; and (iii) the CAT Reporters with the 
most CAT-related activity (measured by market share and/or message 
traffic, as applicable) are generally comparable (where, for these 
comparability purposes, the tiered fee structure takes into 
consideration affiliations between or among CAT Reporters, whether 
Execution Venues and/or Industry Members)].
    (d) to provide for ease of billing and other administrative 
functions;
    (e) to avoid any disincentives such as placing an inappropriate 
burden on competition and a reduction in market quality; and
    (f) to build financial stability to support the Company as a going 
concern.
    Section 11.3. Recovery.
    (a) The Operating Committee will establish [fixed] fees (``CAT 
Fees'') to be payable by [Execution Venues] Participants and Industry 
Members with

[[Page 74195]]

regard to CAT costs not previously paid by the Participants 
(``Prospective CAT Costs'') as follows [provided in this Section 
11.3(a)]:
    (i) Fee Rate. The Operating Committee will calculate the Fee Rate 
for the CAT Fee twice per year, once at the beginning of the year and 
once during the year.
    (A) General.
    (I) At the beginning of each year, the Operating Committee will 
calculate the Fee Rate by dividing the budgeted CAT costs for the year 
by the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the year. Once the Operating 
Committee has approved such Fee Rate, the Participants shall be 
required to file with the SEC pursuant to Section 19(b) of the Exchange 
Act CAT Fees to be charged to Industry Members calculated using such 
Fee Rate. Participants and Industry Members will be required to pay CAT 
Fees calculated using this Fee Rate once such CAT Fees are in effect 
with regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (II) During each year, the Operating Committee will calculate a new 
Fee Rate by dividing the budgeted CAT costs for the remainder of the 
year by the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the remainder of the year. Once 
the Operating Committee has approved the new Fee Rate, the Participants 
shall be required to file with the SEC pursuant to Section 19(b) of the 
Exchange Act CAT Fees to be charged to Industry Members calculated 
using the new Fee Rate. Participants and Industry Members will be 
required to pay CAT Fees calculated using this new Fee Rate once such 
CAT Fees are in effect with regard to Industry Members in accordance 
with Section 19(b) of the Exchange Act.
    (III) For the avoidance of doubt, CAT Fees with a Fee Rate 
calculated as set forth in this paragraph (a)(i) shall remain in effect 
until the Operating Committee approves a new Fee Rate as described in 
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect with 
regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (B) Executed Equivalent Shares. For purposes of calculating CAT 
Fees, executed equivalent shares in a transaction in Eligible 
Securities will be counted as follows:
    (I) each executed share for a transaction in NMS Stocks will be 
counted as one executed equivalent share;
    (II) each executed contract for a transaction in Listed Options 
will be counted based on the multiplier applicable to the specific 
Listed Option (i.e., 100 executed equivalent shares or such other 
applicable multiplier); and
    (III) each executed share for a transaction in OTC Equity 
Securities shall be counted as 0.01 executed equivalent share.
    (C) Budgeted CAT Costs. The budgeted CAT costs for the year shall 
be comprised of all fees, costs and expenses budgeted to be incurred by 
or for the Company in connection with the development, implementation 
and operation of the CAT as set forth in the annual operating budget 
approved by the Operating Committee pursuant to Section 11.1(a) of the 
CAT NMS Plan, or as adjusted during the year by the Operating 
Committee.
    (D) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities. The Operating Committee shall 
determine the projected total executed equivalent share volume of all 
transactions in Eligible Securities for each relevant period based on 
the executed equivalent share volume of all transactions in Eligible 
Securities for the prior twelve months.
    (ii) Participant CAT Fees.
    (A) CAT Fee Obligation. Each Participant that is a national 
securities exchange will be required to pay the CAT Fee for each 
transaction in Eligible Securities executed on the exchange in the 
prior month based on CAT Data. Each Participant that is a national 
securities association will be required to pay the CAT Fee for each 
transaction in Eligible Securities executed otherwise than on an 
exchange in the prior month based on CAT Data. The CAT Fee for each 
transaction in Eligible Securities will be calculated by multiplying 
the number of executed equivalent shares in the transaction by one-
third and by the Fee Rate determined pursuant to paragraph (a)(i) of 
this Section 11.3.
    (B) Effectiveness. Each Participant will be required to pay the CAT 
Fee calculated using the Fee Rate determined pursuant to paragraph 
(a)(i) of this Section 11.3 and approved by the Operating Committee 
only if such CAT Fees are in effect with regard to Industry Members in 
accordance with Section 19(b) of the Exchange Act.
    (iii) Industry Member CAT Fees.
    (A) CAT Fee Obligation. Each Industry Member that is the executing 
broker for the buyer in a transaction in Eligible Securities 
(``Executing Broker for the Buyer'' or ``EBB'') and each Industry 
Member that is the executing broker for the seller in a transaction in 
Eligible Securities (``Executing Broker for the Seller'' or ``EBS'') 
will be required to pay a CAT Fee for each such transaction in Eligible 
Securities in the prior month based on CAT Data. The EBB's CAT Fee or 
EBS's CAT Fee (as applicable) for each transaction in Eligible 
Securities will be calculated by multiplying the number of executed 
equivalent shares in the transaction by one-third and by the Fee Rate 
determined pursuant to paragraph (a)(i) of this Section 11.3.
    (B) Content of Fee Filings. When Participants file with the SEC 
pursuant to Section 19(b) of the Exchange Act CAT Fees to be charged to 
Industry Members calculated using the Fee Rate that the Operating 
Committee approved in accordance with paragraph (a) of this Section 
11.3, such filings shall set forth (A) the Fee Rate; (B) the budget for 
the upcoming year (or remainder of the year, as applicable), including 
a brief description of each line item in the budget, including 
technology, legal, consulting, insurance, professional and 
administration, and public relations costs, a reserve and/or such other 
categories as determined by the Operating Committee to be included in 
the budget, and the reason for changes in each such line item from the 
prior CAT Fee filing; (C) a discussion of how the budget is reconciled 
to the collected fees; and (D) the projected total executed equivalent 
share volume of all transactions in Eligible Securities for the year 
(or remainder of the year, as applicable), and a description of the 
calculation of the projection.
    [(i) Each Execution Venue that: (A) executes transactions; or (B) 
in the case of a national securities association, has trades reported 
by its members to its trade reporting facility or facilities for 
reporting transactions effected otherwise than on an exchange, in NMS 
Stocks or OTC Equity Securities will pay a fixed fee depending on the 
market share of that Execution Venue in NMS Stocks and OTC Equity 
Securities, with the Operating Committee establishing at least two and 
no more than five tiers of fixed fees, based on an Execution Venue's 
NMS Stocks and OTC Equity Securities market share. For these purposes, 
market share for Execution Venues that execute transactions will be 
calculated by share volume, and market share for a national securities 
association that has trades reported by its members to its trade 
reporting facility or facilities for reporting transactions effected 
otherwise than on an exchange in NMS Stocks or OTC Equity Securities 
will be calculated based on share volume of trades reported, provided, 
however, that the share volume reported to such national securities 
association by an Execution

[[Page 74196]]

Venue shall not be included in the calculation of such national 
security association's market share.]
    [(ii) Each Execution Venue that executes transactions in Listed 
Options will pay a fixed fee depending on the Listed Options market 
share of that Execution Venue, with the Operating Committee 
establishing at least two and no more than five tiers of fixed fees, 
based on an Execution Venue's Listed Options market share. For these 
purposes, market share will be calculated by contract volume.]
    (b) Past CAT Costs. The Operating Committee will establish [fixed] 
fees (``Historical CAT Assessment'') to be payable by Industry Members 
with regard to CAT costs previously paid by the Participants (``Past 
CAT Costs'') as follows: [, based on the message traffic generated by 
such Industry Member, with the Operating Committee establishing at 
least five and no more than nine tiers of fixed fees, based on message 
traffic. For the avoidance of doubt, the fixed fees payable by Industry 
Members pursuant to this paragraph shall, in addition to any other 
applicable message traffic, include message traffic generated by: (i) 
an ATS that does not execute orders that is sponsored by such Industry 
Member; and (ii) routing orders to and from any ATS sponsored by such 
Industry Member.]
    (i) Calculation of Historical Fee Rate.
    (A) General. The Operating Committee will calculate the Historical 
Fee Rate for the Historical CAT Assessment by dividing the Historical 
CAT Costs by the projected total executed equivalent share volume of 
all transactions in Eligible Securities for the Historical Recovery 
Period. Once the Operating Committee has approved such Historical Fee 
Rate, the Participants shall be required to file with the SEC pursuant 
to Section 19(b) of the Exchange Act the Historical CAT Assessment to 
be charged Industry Members calculated using such Historical Fee Rate. 
Industry Members will be required to pay the Historical CAT Assessment 
calculated using this Historical Fee Rate once such Historical CAT 
Assessment is in effect in accordance with Section 19(b) of the 
Exchange Act.
    (B) Executed Equivalent Shares. For purposes of calculating the 
Historical CAT Assessment, executed equivalent shares in a transaction 
in Eligible Securities will be counted in the same manner as set forth 
in paragraph (a)(i)(B) of this Section 11.3.
    (C) Historical CAT Costs. The Operating Committee will determine 
the Historical CAT Costs sought to be recovered by the Historical CAT 
Assessment, where the Historical CAT Costs will be Past CAT Costs minus 
Past CAT Costs excluded from Historical CAT Costs by the Operating 
Committee.
    (D) Historical Recovery Period.
    (I) The length of the Historical Recovery Period used in 
calculating the Historical Fee Rate will be established by the 
Operating Committee based upon the amount of the Historical CAT Costs 
to be recovered by the Historical CAT Assessment; provided, however, no 
Historical Recovery Period used in calculating the Historical Fee Rate 
shall be less than 24 months or more than five years.
    (II) Notwithstanding the length of the Historical Recovery Period 
used in calculating the Historical Fee Rate, the Historical CAT 
Assessment calculated using the Historical Fee Rate will remain in 
effect until all Historical CAT Costs are collected.
    (E) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities for Historical Recovery Period. The 
Operating Committee shall determine the projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the Historical Recovery Period based on the executed equivalent share 
volume of all transactions in Eligible Securities for the prior twelve 
months.
    (ii) Past CAT Costs and Participants. Because Participants 
previously have paid Past CAT Costs via loans to the Company, 
Participants would not be required to pay the Historical CAT 
Assessment. The Historical CAT Assessment to be paid by Industry 
Members and collected by the Company will be used by the Company to 
repay a portion of the loans from the Participants to the Company on a 
pro rata basis. The Historical CAT Assessment is designed to recover 
two-thirds of the Historical CAT Costs.
    (iii) Historical CAT Assessment for Industry Members.
    (A) Each month in which the Historical CAT Assessment is in effect, 
each EBB and each EBS shall pay a fee for each transaction in Eligible 
Securities executed by the EBB or EBS from the prior month as set forth 
in CAT Data, where the Historical CAT Assessment for each transaction 
will be calculated by multiplying the number of executed equivalent 
shares in the transaction by one-third and by the Historical Fee Rate 
determined pursuant to paragraph (b)(i) of this Section 11.3.
    (B) Historical CAT Fee Filing. When the Participants file with the 
SEC pursuant to Section 19(b) of the Exchange Act the Historical CAT 
Assessment calculated using the Historical Fee Rate that the Operating 
Committee approved in accordance with this Section 11.3, such filing 
shall set forth (A) the Historical Fee Rate; (B) a brief description of 
amount and type of the Historical CAT Costs; (C) the Historical 
Recovery Period and the reasons for its length; and (D) the projected 
total executed equivalent share volume of all transactions in Eligible 
Securities for the Historical Recovery Period, and a description of the 
calculation of the projection.
    (c) The Operating Committee may establish any other fees ancillary 
to the operation of the CAT that it reasonably determines appropriate, 
including fees: (i) for the late or inaccurate reporting of information 
to the CAT; (ii) for correcting submitted information; and (iii) based 
on access and use of the CAT for regulatory and oversight purposes (and 
not including any reporting obligations).
    (d) The Company shall make publicly available a schedule of 
effective fees and charges adopted pursuant to this Agreement as in 
effect from time to time. The Operating Committee shall review such fee 
schedule on at least an annual basis and shall make any changes to such 
fee schedule that it deems appropriate. The Operating Committee is 
authorized to review such fee schedule on a more regular basis, but 
shall not make any changes on more than a semiannual basis unless, 
pursuant to a Supermajority Vote, the Operating Committee concludes 
that such change is necessary for the adequate funding of the Company.
* * * * *

APPENDIX B

Fee Schedule

Consolidated Audit Trail Funding Fees for Participants

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

EXHIBIT B:

Proposed Additional Revisions to Proposed Changes in Proposed Amendment

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

[[Page 74197]]

ARTICLE XI

FUNDING OF THE COMPANY

    Section 11.1. Funding Authority.
    (a) On an annual basis the Operating Committee shall approve an 
operating budget for the Company. The budget shall include the 
projected costs of the Company, including the costs of developing and 
operating the CAT for the upcoming year, and the sources of all 
revenues to cover such costs, as well as the funding of any reserve 
that the Operating Committee reasonably deems appropriate for prudent 
operation of the Company.
    (i) Without limiting the foregoing, the budgeted CAT costs shall 
include technology, legal, consulting, insurance, professional and 
administration, and public relations costs, a reserve and such other 
cost categories as determined by the Operating Committee to be included 
in the budget.
    (ii) For the reserve referenced in paragraph (a)(i) of this 
Section, the budget will include an amount necessary to allow the 
Company to maintain a reserve of not more than 25% of the annual 
budget. To the extent collected CAT fees exceed CAT costs, including 
the reserve of 25% of the annual budget, such surplus shall be used to 
offset future fees.
    (b) Subject to Section 11.2, the Operating Committee shall have 
discretion to establish funding for the Company, including: (i) 
establishing fees that the Participants shall pay; and (ii) 
establishing fees for Industry Members that shall be implemented by 
Participants. The Participants shall file with the SEC under Section 
19(b) of the Exchange Act any such fees on Industry Members that the 
Operating Committee approves, and such fees shall be labeled as 
``Consolidated Audit Trail Funding Fees.''
    (c) To fund the development and implementation of the CAT, the 
Company shall time the imposition and collection of all fees on 
Participants and Industry Members in a manner reasonably related to the 
timing when the Company expects to incur such development and 
implementation costs. In determining fees on Participants and Industry 
Members the Operating Committee shall take into account fees, costs and 
expenses (including legal and consulting fees and expenses) incurred by 
the Participants on behalf of the Company prior to the Effective Date 
in connection with the creation and implementation of the CAT, and such 
fees, costs and expenses shall be fairly and reasonably shared among 
the Participants and Industry Members. Any surplus of the Company's 
revenues over its expenses shall be treated as an operational reserve 
to offset future fees.
    (d) Consistent with this Article XI, the Operating Committee shall 
adopt policies, procedures, and practices regarding the budget and 
budgeting process, resolution of disputes, billing and collection of 
fees, and other related matters.
    Section 11.2. Funding Principles. In establishing the funding of 
the Company, the Operating Committee shall seek:
    (a) to create transparent, predictable revenue streams for the 
Company that are aligned with the anticipated costs to build, operate 
and administer the CAT and the other costs of the Company;
    (b) to establish an allocation of the Company's related costs among 
Participants and Industry Members that is consistent with the Exchange 
Act, taking into account the timeline for implementation of the CAT;
    (c) to establish a fee structure in which the fees charged to 
Participants and Industry Members are based upon the executed 
equivalent share volume of transactions in Eligible Securities, and the 
costs of the CAT.
    (d) to provide for ease of billing and other administrative 
functions;
    (e) to avoid any disincentives such as placing an inappropriate 
burden on competition and a reduction in market quality; and
    (f) to build financial stability to support the Company as a going 
concern.
    Section 11.3. Recovery.
    (a) Prospective CAT Costs. The Operating Committee will establish 
fees (``CAT Fees'') to be payable by Participants and Industry Members 
with regard to CAT costs not previously paid by the Participants 
(``Prospective CAT Costs'') as follows:
    (i) Fee Rate. The Operating Committee will calculate the Fee Rate 
for the CAT Fee twice per year, once at the beginning of the year and 
once during the year as follows:
    (A) General.
    (I) At the beginning of each year, the Operating Committee will 
calculate the Fee Rate by dividing the budgeted CAT costs for the year 
by the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the year. Once the Operating 
Committee has approved such Fee Rate, the Participants shall be 
required to file with the SEC pursuant to Section 19(b) of the Exchange 
Act CAT Fees to be charged to Industry Members calculated using such 
Fee Rate. Participants and Industry Members will be required to pay CAT 
Fees calculated using this Fee Rate once such CAT Fees are in effect 
with regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (II) During each year, the Operating Committee will calculate a new 
Fee Rate by dividing the budgeted CAT costs for the remainder of the 
year by the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the remainder of the year. Once 
the Operating Committee has approved the new Fee Rate, the Participants 
shall be required to file with the SEC pursuant to Section 19(b) of the 
Exchange Act CAT Fees to be charged to Industry Members calculated 
using the new Fee Rate. Participants and Industry Members will be 
required to pay CAT Fees calculated using this new Fee Rate once such 
CAT Fees are in effect with regard to Industry Members in accordance 
with Section 19(b) of the Exchange Act.
    (III) For the avoidance of doubt, CAT Fees with a Fee Rate 
calculated as set forth in this paragraph (a)(i) shall remain in effect 
until the Operating Committee approves a new Fee Rate as described in 
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect with 
regard to Industry Members in accordance with Section 19(b) of the 
Exchange Act.
    (B) Executed Equivalent Shares. For purposes of calculating CAT 
Fees, executed equivalent shares in a transaction in Eligible 
Securities will be counted as follows:
    (I) each executed share for a transaction in NMS Stocks will be 
counted as one executed equivalent share;
    (II) each executed contract for a transaction in Listed Options 
will be counted based on the multiplier applicable to the specific 
Listed Option (i.e., 100 executed equivalent shares or such other 
applicable multiplier); and
    (III) each executed share for a transaction in OTC Equity 
Securities shall be counted as 0.01 executed equivalent share.
    (C) Budgeted CAT Costs. The budgeted CAT costs for the year shall 
be comprised of all fees, costs and expenses budgeted to be incurred by 
or for the Company in connection with the development, implementation 
and operation of the CAT as set forth in the annual operating budget 
approved by the Operating Committee pursuant to Section 11.1(a) of the 
CAT NMS Plan, or as adjusted during the year by the Operating 
Committee.
    (D) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities. The Operating Committee shall 
determine the projected total executed equivalent

[[Page 74198]]

share volume of all transactions in Eligible Securities for each 
relevant period based on the executed equivalent share volume of all 
transactions in Eligible Securities for the prior twelve months.
    (ii) Participant CAT Fees.
    (A) CAT Fee Obligation. Each Participant that is a national 
securities exchange will be required to pay [a fee] the CAT Fee for 
each transaction in Eligible Securities executed on the exchange in the 
prior month based on CAT Data. Each Participant that is a national 
securities association will be required to pay [a fee] the CAT Fee for 
each transaction in Eligible Securities executed otherwise than on an 
exchange in the prior month based on CAT Data. [(ii)] The [fee] CAT Fee 
for each transaction in Eligible Securities will be calculated by 
multiplying the number of executed equivalent shares in the transaction 
by one-third and by the [applicable fee rate for the relevant period 
(``] Fee Rate ['')] determined pursuant to paragraph (a)(i) of this 
Section 11.3.
    (B) Effectiveness. Each Participant will be required to pay the CAT 
Fee calculated using the Fee Rate determined pursuant to paragraph 
(a)(i) of this Section 11.3 and approved by the Operating Committee 
only if such CAT Fees are in effect with regard to Industry Members in 
accordance with Section 19(b) of the Exchange Act.
    [(iii) Participants will be required to pay a CAT fee with regard 
to CAT costs not previously paid by the Participants (``Prospective CAT 
Costs''). The Fee Rate for the CAT fee related to Prospective CAT Costs 
will be calculated by dividing the budgeted CAT costs for the relevant 
period (as determined by the Operating Committee) by the projected 
total executed equivalent share volume of all transactions in Eligible 
Securities for the relevant period based on CAT Data.]
    [(iv) Notwithstanding anything to the contrary, Participants will 
not be required to pay a CAT fee related to CAT costs previously paid 
by the Participants in a manner determined by the Operating Committee 
(``Past CAT Costs'').]
    (iii) Industry Member CAT Fees.
    (A) CAT Fee Obligation. Each Industry Member that is the executing 
broker for the buyer in a transaction in Eligible Securities 
(``Executing Broker for the Buyer'' or ``EBB'') and each Industry 
Member that is the executing broker for the seller in a transaction in 
Eligible Securities (``Executing Broker for the Seller'' or ``EBS'') 
will be required to pay a CAT Fee for each such transaction in Eligible 
Securities in the prior month based on CAT Data. The EBB's CAT Fee or 
EBS's CAT Fee (as applicable) for each transaction in Eligible 
Securities will be calculated by multiplying the number of executed 
equivalent shares in the transaction by one-third and by the Fee Rate 
determined pursuant to paragraph (a)(i) of this Section 11.3.
    (B) Content of Fee Filings. When the Participants file with the SEC 
pursuant to Section 19(b) of the Exchange Act CAT Fees to be charged to 
Industry Members calculated using the Fee Rate that the Operating 
Committee approved in accordance with paragraph (a) of this Section 
11.3, such filings shall set forth (A) the Fee Rate; (B) the budget for 
the upcoming year (or remainder of the year, as applicable), including 
a brief description of each line item in the budget, including 
technology, legal, consulting, insurance, professional and 
administration, and public relations costs, a reserve and/or such other 
categories as determined by the Operating Committee to be included in 
the budget, and the reason for changes in each such line item from the 
prior CAT Fee filing; (C) a discussion of how the budget is reconciled 
to the collected fees; and (D) the projected total executed equivalent 
share volume of all transactions in Eligible Securities for the year 
(or remainder of the year, as applicable), and a description of the 
calculation of the projection.
    (b) Past CAT Costs. The Operating Committee will establish fees 
(``Historical CAT Assessment'') to be payable by Industry Members with 
regard to CAT costs previously paid by the Participants (``Past CAT 
Costs'') as follows:
    (i) Calculation of Historical Fee Rate.
    (A) General. The Operating Committee will calculate the Historical 
Fee Rate for the Historical CAT Assessment by dividing the Historical 
CAT Costs by the projected total executed equivalent share volume of 
all transactions in Eligible Securities for the Historical Recovery 
Period. Once the Operating Committee has approved such Fee Rate, the 
Participants shall be required to file with the SEC pursuant to Section 
19(b) of the Exchange Act the Historical CAT Assessment to be charged 
to Industry Members calculated using such Historical Fee Rate. Industry 
Members will be required to pay Historical CAT Assessment calculated 
using this Historical Fee Rate once such Historical CAT Assessment is 
in effect in accordance with Section 19(b) of the Exchange Act.
    (B) Executed Equivalent Shares. For purposes of calculating the 
Historical CAT Assessment, executed equivalent shares in a transaction 
in Eligible Securities will be counted in the same manner as set forth 
in paragraph (a)(i)(B) of this Section 11.3.
    (C) Historical CAT Costs. The Operating Committee will determine 
the Historical CAT Costs sought to be recovered by the Historical CAT 
Assessment, where the Historical CAT Costs will be Past CAT Costs minus 
Past CAT Costs excluded from Historical CAT Costs by the Operating 
Committee.
    (D) Historical Recovery Period.
    (I) The length of the Historical Recovery Period used in 
calculating the Historical Fee Rate will be established by the 
Operating Committee based upon the amount of the Historical CAT Costs 
to be recovered by the Historical CAT Assessment; provided, however, no 
Historical Recovery Period used in calculating the Historical Fee Rate 
shall be less than 24 months or more than five years.
    (II) Notwithstanding the length of the Historical Recovery Period 
used in calculating the Historical Fee Rate, the Historical CAT 
Assessment calculated using the Historical Fee Rate will remain in 
effect until all Historical CAT Costs are collected.
    (E) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities for Historical Recovery Period. The 
Operating Committee shall determine the projected total executed 
equivalent share volume of all transactions in Eligible Securities for 
the Historical Recovery Period based on the executed equivalent share 
volume of all transactions in Eligible Securities for the prior twelve 
months.
    (ii) Past CAT Costs and Participants. Because Participants 
previously have paid Past CAT Costs via loans to the Company, 
Participants would not be required to pay the Historical CAT 
Assessment. The Historical CAT Assessment to be paid by Industry 
Members and collected by the Company will be used by the Company to 
repay a portion of the loans from the Participants to the Company on a 
pro rata basis. The Historical CAT Assessment is designed to recover 
two-thirds of the Historical CAT Costs.
    (iii) Historical CAT Assessment for Industry Members.
    (A) Each month in which the Historical CAT Assessment is in effect, 
each EBB and each EBs shall pay a fee for each transaction in Eligible 
Securities executed by the EBB or EBS from the prior month as set forth 
in CAT Data, where the Historical CAT Assessment for each transaction 
will be calculated by multiplying the number of executed equivalent 
shares in the transaction by one-third and by the

[[Page 74199]]

Historical Fee Rate determined pursuant to paragraph (b)(i) of this 
Section 11.3.
    (B) Historical CAT Fee Filing. When the Participants file with the 
SEC pursuant to Section 19(b) of the Exchange Act the Historical CAT 
Assessment calculated using the Historical Fee Rate that the Operating 
Committee approved in accordance with paragraph (b) of this Section 
11.3, such filing shall set forth (A) the Historical Fee Rate; (B) a 
brief description of the amount and type of the Historical CAT Costs; 
(C) the Historical Recovery Period and the reasons for its length; and 
(D) the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the Historical Recovery Period, 
and a description of the calculation of the projection.
    [(i) Each Industry Member that is the clearing firm for the buyer 
in a transaction in Eligible Securities (``Clearing Broker for the 
Buyer'' or ``CBB'') will be required to pay a fee for each such 
transaction in Eligible Securities based on CAT Data. The CBB's fee for 
each transaction in Eligible Securities will be calculated by 
multiplying the number of executed equivalent shares in the transaction 
by one-third and by the Fee Rate.]
    [(ii) Each Industry Member that is the clearing firm for the seller 
in a transaction in Eligible Securities (``Clearing Broker for the 
Seller'' or ``CBS'') will be required to pay a fee for each transaction 
in Eligible Securities based on CAT Data. The CBS's fee for each 
transaction in Eligible Securities will be calculated by multiplying 
the number of executed equivalent shares in the transaction by one-
third and by the Fee Rate.]
    [(iii) CBBs and CBSs will be required to pay CAT fees related to 
Past CAT Costs. The Fee Rate for the CAT fees related to Past CAT Costs 
will be calculated by dividing the Past CAT Costs for the relevant 
period (as determined by the Operating Committee) by the projected 
total executed equivalent share volume of all transactions in Eligible 
Securities for the relevant period based on CAT Data.]
    [(iv) CBBs and CBSs will be required to pay CAT fees related to 
Prospective CAT Costs. The Fee Rate for the CAT fees related to 
Prospective CAT Costs will be the same as set forth in paragraph 
(a)(iv) above.]
    (c) The Operating Committee may establish any other fees ancillary 
to the operation of the CAT that it reasonably determines appropriate, 
including fees: (i) for the late or inaccurate reporting of information 
to the CAT; (ii) for correcting submitted information; and (iii) based 
on access and use of the CAT for regulatory and oversight purposes (and 
not including any reporting obligations).
    (d) The Company shall make publicly available a schedule of 
effective fees and charges adopted pursuant to this Agreement as in 
effect from time to time. The Operating Committee shall review such fee 
schedule on at least an annual basis and shall make any changes to such 
fee schedule that it deems appropriate. The Operating Committee is 
authorized to review such fee schedule on a more regular basis, but 
shall not make any changes on more than a semiannual basis unless, 
pursuant to a Supermajority Vote, the Operating Committee concludes 
that such change is necessary for the adequate funding of the Company.
* * * * *

APPENDIX B

Fee Schedule

Consolidated Audit Trail Funding Fees for Participants

    (a) CAT Fee.
    [(1) Each Participant that is a national securities exchange shall 
pay a fee for each transaction in Eligible Securities executed on the 
exchange based on CAT Data, where the fee for each transaction will be 
calculated by multiplying the number of executed equivalent shares in 
the transaction by one-third and by the Fee Rate.
    (2) Each Participant that is a national securities association 
shall pay a fee for each transaction in Eligible Securities executed 
otherwise than on exchange based on CAT Data, where the fee for each 
transaction will be calculated by multiplying the number of executed 
equivalent shares in the transaction by one-third and by the Fee Rate.
    (b) Fee Rate.
    (1) The Operating Committee will calculate the Fee Rate at the 
beginning of each year by dividing the budgeted CAT costs for the year 
by the projected total executed equivalent share volume of all 
transactions in Eligible Securities for the year. After setting the Fee 
Rate at the beginning of each year, the Fee Rate may be adjusted once 
during the year, if necessary, due to changes in the budgeted or actual 
costs or projected or actual total executed equivalent share volume 
during the year.
    (2) For purposes of calculating the fees, executed equivalent 
shares in a transaction in Eligible Securities will be counted as 
follows:
    (i) each executed share for a transaction in NMS Stocks will be 
counted as one executed equivalent share;
    (ii) each executed contract for a transaction in Listed Options 
will be counted based on the multiplier applicable to the specific 
Listed Option (i.e., 100 executed equivalent shares or such other 
applicable multiplier); and
    (iii) each executed share for a transaction in OTC Equity 
Securities shall be counted as 0.01 executed equivalent share.
    (3) Budgeted CAT Costs. The budgeted CAT costs for the year shall 
be comprised of all fees, costs and expenses budgeted to be incurred by 
or for the Company in connection with the development, implementation 
and operation of the CAT as set forth in the annual operating budget 
approved by the Operating Committee pursuant to Section 11.1(a) of the 
CAT NMS Plan, or as adjusted during the year by the Operating 
Committee.
    (4) Projected Total Executed Equivalent Share Volume of 
Transactions in Eligible Securities. The Operating Committee shall 
determine the projected total executed equivalent share volume of all 
transactions in Eligible Securities for each relevant period based on 
the executed equivalent share volume of all transactions in Eligible 
Securities for the prior six months.]
    [(c) Fee Payments/Collection.] Each Participant shall pay the CAT 
Fee [fee] set forth in Section 11.3(a) of the CAT NMS Plan [paragraph 
(a)] to Consolidated Audit Trail, LLC in the manner prescribed by 
Consolidated Audit Trail, LLC on a monthly basis based on the 
Participant's transactions in Eligible Securities in the prior month.
* * * * *
[FR Doc. 2022-26235 Filed 12-1-22; 8:45 am]
BILLING CODE 8011-01-P


