
[Federal Register Volume 88, Number 215 (Wednesday, November 8, 2023)]
[Notices]
[Pages 77128-77134]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-24624]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98848]


Order Granting Conditional Exemptive Relief, Pursuant to Section 
36(a)(1) of the Securities Exchange Act of 1934 (``Exchange Act'') and 
Rule 608(e) of Regulation NMS Under the Exchange Act, From Certain 
Requirements of the National Market System Plan Governing the 
Consolidated Audit Trail

November 2, 2023.

I. Introduction

    In July 2012, the Securities and Exchange Commission (the 
``Commission'' or the ``SEC'') adopted Rule 613 of Regulation NMS, 
which required national securities exchanges and national securities 
associations (the ``Participants'') \1\ to jointly develop and submit 
to the Commission a national market system plan to create, implement, 
and maintain a consolidated audit trail (the ``CAT'').\2\ The goal of 
Rule 613 was to create a modernized audit trail system that would 
provide regulators with timely access to a comprehensive set of trading 
data, thus enabling regulators to more efficiently and effectively 
analyze and reconstruct market events, monitor market behavior, conduct 
market analysis to support regulatory decisions, and perform 
surveillance, investigation, and enforcement activities. On November 
15, 2016, the Commission approved the national market system plan 
required by Rule 613 (the ``CAT NMS Plan'').\3\
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    \1\ The Participants include BOX Exchange LLC, Cboe BYX 
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe C2 Exchange, Inc., 
Cboe EDGA Exchange, Inc., Cboe EDGX 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.
    \2\ See Securities Exchange Act Release No. 67457 (July 18, 
2012), 77 FR 45722 (Aug. 1, 2012) (``Rule 613 Adopting Release'').
    \3\ Securities Exchange Act Release No. 78318 (Nov. 15, 2016), 
81 FR 84696, (Nov. 23, 2016) (``CAT NMS Plan Approval Order''). The 
CAT NMS Plan is Exhibit A to the CAT NMS Plan Approval Order. See 
CAT NMS Plan Approval Order, at 84943-85034. 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 
(the ``Company''). Each Participant is a member of the Company and 
jointly owns the Company on an equal basis. The Participants 
submitted to the Commission a proposed amendment to the CAT NMS Plan 
on Aug. 29, 2019, which they designated as effective on filing. 
Under the amendment, the limited liability company agreement of a 
new limited liability company named Consolidated Audit Trail, LLC 
serves as the CAT NMS Plan, replacing in its entirety the CAT NMS 
Plan. See Securities Exchange Act Release No. 87149 (Sept. 27, 
2019), 84 FR 52905 (Oct. 3, 2019).
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    On December 16, 2020, the Commission issued two exemptive orders 
regarding the implementation of the CAT NMS Plan (collectively, the 
``2020 Orders''). The first order, in response to a request from the 
Participants, granted temporary conditional relief from certain 
performance requirements related to the online targeted query tool 
(``OTQT'').\4\ The second order granted temporary conditional relief 
from the following requirements: (1) requirements for lifecycle 
linkages timeframes; (2) requirements for re-processing of corrected 
data received after T+5; (3) linkage requirements for Securities 
Information Processor data (``SIP Data''); (4) reporting requirements 
for port-level settings; (5) requirements for lifecycle linkages 
between customer orders and ``representative'' orders; and (6) 
requirements for Participant reporting of rejected orders.\5\
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    \4\ See Securities Exchange Act Release No. 90689 (Dec. 16, 
2020), 85 FR 83667 (Dec. 22, 2020); see also Letter from Michael 
Simon, CAT NMS Plan Operating Committee Chair, to Vanessa 
Countryman, Secretary, Commission, dated Dec. 1, 2020, available at 
https://catnmsplan.com/sites/default/files/2020-12/12.01.20-CAT-Exemption-Request-OTQT.pdf.
    \5\ See Securities Exchange Act Release No. 90688 (Dec. 16, 
2020), 85 FR 83634 (Dec. 22, 2020).
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    On February 14, 2021, several of the Participants filed motions 
requesting that the Commission stay the 2020 Orders, based on their 
concern that portions of the orders ``interpret and apply the Plan in 
ways that will produce unintended adverse consequences, present 
implementation challenges, or both.'' \6\ That same day, several of 
those same Participants filed corresponding petitions for judicial 
review with the U.S. Court of Appeals for the District of Columbia 
Circuit (the ``D.C. Circuit'') seeking review of the 2020 Orders.\7\
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    \6\ See Motion for Partial Stay of Order 34-90689, at 2; Motion 
for Partial Stay of Order 34-90688, at 2. Financial Industry 
Regulatory Authority, Inc. and Long-Term Stock Exchange, Inc. did 
not join these motions.
    \7\ See Petition for Review, USCA Case No. 21-1065; Petition for 
Review, USCA Case No. 21-1066. Financial Industry Regulatory 
Authority, Inc., Investors Exchange LLC, Long-Term Stock Exchange, 
Inc., MEMX LLC, Miami International Securities Exchange LLC, MIAX 
Emerald, LLC, and MIAX PEARL, LLC did not join these petitions.
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    On July 8, 2022, the Commission issued a new order granting 
temporary exemptive relief (the ``2022 Order'').\8\ The 2022 Order, 
which superseded the

[[Page 77129]]

2020 Orders, modified and/or clarified certain aspects of the 2020 
Orders and gave the Participants until July 31, 2024 to either 
implement the functionality the Commission required for compliance with 
the relevant provisions of the CAT NMS Plan or to obtain Commission 
approval of alternative solutions that achieve the relevant regulatory 
objectives of Rule 613 and the CAT NMS Plan in a more cost-effective 
manner, including CAT NMS Plan amendments or exemptive relief. In 
addition, the Commission issued an order denying the Participants' stay 
motions, concluding that the administrative petitions to stay the 2020 
Orders were ``moot'' because those orders were ``no longer in force.'' 
\9\ On August 3, 2022, the Commission and the Participants submitted a 
stipulation of voluntary dismissal to the D.C. Circuit, and, on August 
5, 2022, the D.C. Circuit issued an order formally dismissing the 
lawsuits.\10\
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    \8\ See Securities Exchange Act Release No. 95234 (July 8, 
2022), 87 FR 42247 (July 14, 2022).
    \9\ See Securities Exchange Act Release No. 95235 (July 8, 
2022), 87 FR 42242 (July 14, 2022).
    \10\ See Order of Dismissal, USCA Case No. 21-1065 (consolidated 
with USCA Case No. 21-1066).
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    On September 6, 2022, in order to reserve their rights, a subset of 
the Participants filed a petition for review with the D.C. Circuit 
seeking review of the 2022 Order.\11\ The Commission understood that 
the Participants' concerns remained generally the same as expressed 
with respect to the 2020 Orders. The Commission subsequently issued an 
order, on May 18, 2023, extending the exemptive relief provided by the 
2022 Order (the ``2023 Order'') from July 31, 2024 to January 31, 2025, 
subject to the same conditions set forth in the 2022 Order.\12\ Since 
2021, the Participants and Commission staff engaged in discussions with 
the goal of resolving their differences with respect to the issues 
raised by the 2020 Orders, the 2022 Order, and the 2023 Order (the 
``prior Orders'').
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    \11\ See Petition for Review, USCA Case No. 22-1234. Financial 
Industry Regulatory Authority, Inc. and Investors' Exchange LLC did 
not join this petition.
    \12\ See Securities Exchange Act Release No. 97530 (May 18, 
2023), 88 FR 33655 (May 24, 2023).
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    In light of further developments throughout this period and in 
connection with the parties' settlement of the pending litigation, the 
Commission has determined to issue a new order granting the 
Participants conditional exemptive relief from certain requirements of 
the CAT NMS Plan, which are described in more detail below.\13\ If and 
when it takes effect, the relief granted in this Order will supersede 
the relief granted in the 2022 Order and the 2023 Order. This relief is 
to take effect upon issuance of an order by the D.C. Circuit dismissing 
with prejudice the Participants' petition for review of the 2022 Order. 
Unless and until that occurs, the 2022 Order and the 2023 Order shall 
continue to govern. Should the Participants file a petition for review 
of this Order, the relief granted herein will be rescinded by its own 
terms and the 2022 Order and the 2023 Order will resume governing.
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    \13\ In May 2020, the Commission adopted amendments to the CAT 
NMS Plan that establish four Financial Accountability Milestones and 
set target deadlines by which these milestones must be achieved. 
These amendments also reduce the amount of any fees, costs, and 
expenses that the Participants may recover from Industry Members if 
the Participants fail to meet the target deadlines. See Securities 
Exchange Act Release No. 88890 (May 15, 2020), 85 FR 31322 (May 22, 
2020). The Commission has stated that, to the extent that the 
Participants are availing themselves of exemptive relief from a CAT 
NMS Plan requirement, such requirement shall not be included in the 
requirements for a Financial Accountability Milestone, provided that 
the conditions of the exemption are satisfied. See, e.g., Securities 
Exchange Act Release No. 89051 (June 11, 2020), 85 FR 36631 (June 
17, 2020). In connection with issuing this Order, the Commission has 
determined that the Participants have sufficiently complied with the 
conditions set forth in the prior Orders and with the technical 
requirements for Quarterly Progress Reports set forth in section 
6.6(c) of the CAT NMS Plan, including for purposes of determining 
compliance with any applicable Financial Accountability Milestones. 
The Commission makes no determination as to the veracity of the 
factual assertions made in Quarterly Progress Reports submitted 
pursuant to section 6.6(c) or as to whether the Participants have 
complied with the applicable Financial Accountability Milestones in 
all other respects. Moreover, the Commission makes no determinations 
with respect to the Full Implementation of CAT NMS Plan Requirements 
milestone described in section 1.1 of the CAT NMS Plan or the 
potential application of fee reduction provisions set forth in 
section 11.6 of the CAT NMS Plan with respect to that milestone. 
Rather, the Commission will consider the Participants' compliance 
with the CAT NMS Plan requirements, and/or compliance with the 
conditions set forth in the prior Orders and the impact of that 
compliance, in the context of fee proposals related to that 
milestone. Moreover, the Commission makes no determinations 
regarding the Participants' compliance or non-compliance with other 
provisions or requirements of the CAT NMS Plan that are not 
discussed in the prior Orders or in this Order.
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II. Discussion and Exemptive Relief

    Section 36(a)(1) of the Exchange Act grants the Commission the 
authority to ``conditionally or unconditionally exempt any person, 
security, or transaction . . . from any provision or provisions of [the 
Exchange Act] or of any rule or regulation thereunder, to the extent 
that such exemption is necessary or appropriate in the public interest, 
and is consistent with the protection of investors.'' \14\ Rule 608(e) 
of Regulation NMS similarly grants the Commission the authority to 
``exempt from [Rule 608], either unconditionally or on specified terms 
and conditions, any self-regulatory organization, member thereof, or 
specified security, if the Commission determines that such exemption is 
consistent with the public interest, the protection of investors, the 
maintenance of fair and orderly markets and the removal of impediments 
to, and perfection of the mechanisms of, a national market system.'' 
\15\
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    \14\ 15 U.S.C. 78mm(a)(1).
    \15\ 17 CFR 242.608(e).
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    The Commission recognizes that the Participants have expended, and 
continue to expend, substantial resources and effort towards the 
development and implementation of the CAT. However, in the 2022 Order, 
the Commission stated that the current functionality of the CAT does 
not yet comply with CAT NMS Plan requirements for the above-described 
areas.\16\ The Participants have disagreed, and have further stated 
that, in many of these areas, strict compliance with the relevant CAT 
NMS Plan provisions would not be practical from a cost-benefit 
perspective.\17\ In light of that disagreement, the Commission stressed 
in the 2022 Order its willingness to consider alternative solutions 
that achieve the regulatory goals of Rule 613 and the CAT NMS Plan in a 
more cost-effective manner.\18\
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    \16\ See 2022 Order, supra note 8.
    \17\ See, e.g., id. at 42248.
    \18\ Id.
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    The Commission has determined that the exemptive relief granted 
herein--which is the product of multiple years of settlement 
discussions--is appropriate in the public interest and consistent with 
the protection of investors under section 36(a)(1) of the Exchange Act, 
as well as consistent with the public interest, the protection of 
investors, the maintenance of fair and orderly markets, and the 
perfection of the mechanisms of a national market system under Rule 
608(e) of Regulation NMS. The Commission approved the CAT NMS Plan to 
help to protect investors and maintain fair and orderly markets by 
providing a sophisticated audit trail that improves regulators' ability 
to investigate potential misconduct, to reconstruct and to analyze 
market events, and to support regulatory decisions with detailed and 
accurate data, among other benefits. The conditional exemptive relief 
in this Order allows for the implementation of alternative regulatory 
solutions that continue to advance the regulatory goals that Rule 613 
and the CAT NMS Plan were intended to promote, while reducing the 
implementation and operational costs, burdens, and/or

[[Page 77130]]

difficulties that would otherwise be incurred by the Participants and 
Industry Members \19\ that must fund the CAT. It also resolves the 
continued impasse over implementation of these aspects of the CAT, 
which impeded and distracted from these regulatory goals.
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    \19\ ``Industry Member'' is defined in section 1.1 of the CAT 
NMS Plan as ``a member of a national securities exchange or a member 
of a national securities association.''
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A. OTQT Performance Requirements

    The Commission grants conditional exemptive relief from the OTQT 
performance requirements related to query response times and parallel 
processing of queries set forth in appendix D, section 8.1.2 of the CAT 
NMS Plan.\20\ Such relief is subject to the following conditions:
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    \20\ The OTQT performance requirements set forth in appendix D, 
section 8.1.2 of the CAT NMS Plan are described in the 2022 Order. 
See 2022 Order, supra note 8, at 42248-50. The Commission 
understands that the Participants challenge the feasibility of 
strict compliance with these requirements.
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     The OTQT must maintain or improve current functionality 
that enables requests for ``all related lifecycles'' to be made either 
prior to or after the generation of a parent query.
     The OTQT must further satisfy the performance parameters 
set forth in Exhibit A.
     The Plan Processor must continue to test the OTQT's 
performance with benchmark queries and evaluate the response times for 
actual queries on a monthly basis. Such tests and evaluations should 
contain at least the same content that is currently provided to 
Commission staff and should be provided to Commission staff and the 
Operating Committee within 30 days from the end of each month.
     The Plan Processor must conduct an annual concurrency test 
by launching 300 simultaneous query requests across the different query 
categories and measuring the response times against the applicable 
performance standards. The concurrency test shall be based on 
historical actual queries, and the mix of queries shall be based on the 
percentage of actual queries by category. The concurrency test 
attributes shall be provided in writing and reviewed in advance with 
Commission staff and the Operating Committee. The Participants must 
also provide the results of the annual concurrency testing performed by 
the Plan Processor on the OTQT to Commission staff within 30 days from 
the date of such testing. If the concurrency test response times do not 
satisfy the performance standards set forth in Exhibit A (i.e., 
measured against a 90% compliance rate for each category, based on 
historical actual queries, with the mix of queries based on the 
percentage of actual queries by category), the Plan Processor shall 
promptly investigate and make recommendations to the Operating 
Committee for how to ensure adequate concurrency performance.
     The Plan Processor must establish policies and/or 
procedures requiring review of the OTQT's performance on a regular and 
ongoing basis and evaluation of opportunities for potential 
improvements to the OTQT's performance. The Participants must provide 
to Commission staff, on an annual basis, a written status update 
including information regarding any potential and actual implementation 
by the Plan Processor of improvements to the OTQT performance. The 
written status update shall also include an evaluation of (1) volume 
trends and projections; (2) usage patterns and types of queries 
performed; (3) response time statistics and trends; (4) outlier 
queries; (5) costs and benefits; and (6) regulatory need.
    The Commission believes that this conditional exemptive relief 
reflects a reasonable compromise approach. The standards set forth in 
Exhibit A preserve, as a baseline, the OTQT functionality that is 
already in place, which should provide a measure of certainty for 
regulatory users regarding this query tool's expected performance. The 
other conditions set forth above enable better oversight of the OTQT's 
performance by the Participants and the Commission, which the 
Commission believes is in the public interest.

B. Requirements for Lifecycle Linkages Timeframes

    The Commission grants conditional exemptive relief from the 
requirement set forth in appendix D, section 6.1 of the CAT NMS Plan 
that lifecycle linkages be created by T+1 at noon Eastern Time.\21\ 
Such relief is subject to the following conditions:
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    \21\ The lifecycle linkage performance requirements set forth in 
appendix D, section 6.1 of the CAT NMS Plan are described in the 
2022 Order. See 2022 Order, supra note 8, at 42250-52. The 
Commission understands that the Participants challenge the 
feasibility of strict compliance with these requirements.
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     The Plan Processor must maintain or improve the existing 
performance of functionality currently providing lifecycle linkages for 
all order events by T+1 at 9 p.m. Eastern Time, except an interim CAT 
Order ID will not be required for Options Quotes once the functionality 
described below is implemented.
     The Plan Processor must develop and implement the 
functionality to provide a final CAT Order ID and lifecycle linkage for 
Options Quotes by T+2 at 8 a.m. Eastern Time, including all enrichments 
currently provided for such order events at T+5 at 8 a.m. Eastern Time. 
The Plan Processor will no longer be required to provide an interim CAT 
Order ID for Options Quotes once this functionality has been 
implemented. When late or corrected data is received for Options Quotes 
between T+1 at 8 a.m. Eastern Time and T+4 at 8 a.m. Eastern Time, the 
Plan Processor must run, on an ad hoc basis, a second processing cycle 
such that lifecycle linkage and all enrichments currently provided for 
such order events are performed by T+5 at 8 a.m. Eastern Time.
    The Commission believes that this conditional exemptive relief 
facilitates settlement of the issues raised in the Participants' 
challenge to the 2022 order while preserving existing functionality for 
most types of order events.

C. Requirements for Re-Processing of Corrected Data Received After T+5 
\22\
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    \22\ For the purposes of this document, references to data 
received ``after T+5,'' or to post-T+5 data, submissions, or 
reports, are to data received ``after T+4 at 8 a.m. Eastern Time.''
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    The Commission grants conditional exemptive relief from the re-
processing requirements for corrected data received after T+5 that are 
set forth in appendix D, section 3 and section 6.2 of the CAT NMS 
Plan.\23\ Such relief is subject to the following conditions:
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    \23\ The T+5 re-processing requirements set forth in appendix D, 
section 3 and section 6.2 of the CAT NMS Plan are described in the 
2022 Order. See 2022 Order, supra note 8, at 42252-53. The 
requirements concern how the CAT Order ID and other data elements 
(e.g., sequence numbers, CAT Customer ID) are created for post-T+5 
data, as well as any applicable impacts to those data elements for 
on-time data within the same lifecycle that were previously 
delivered to regulatory users on T+5. The Commission understands 
that the Participants challenge the feasibility of strict compliance 
with these requirements.
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     The Plan Processor must maintain its implementation of 
functionality related to late data lifecycle association that was 
approved by the Operating Committee on January 14, 2022 (the ``Late to 
the Lifecycle process'') and on September 20, 2022 (the ``Targeted 
Replay process'') (collectively, the ``Enhanced Late to the Lifecycle 
process''). Prior to the implementation of this functionality, in the 
limited circumstances in which there was a missing link between two 
disjoined segments of an order lifecycle, new or corrected data would 
join only one of the pre-existing segments and would be assigned to 
only one of the relevant

[[Page 77131]]

lifecycle CAT Order IDs for the disjoined segment and evaluated for 
further re-processing. Under the Enhanced Late to the Lifecycle 
process, all late records (i.e., records received after T+5) include 
the date of the correction and, if applicable, the record identifier of 
the record being corrected as part of normal re-processing. In 
addition, the late record is now associated with all relevant 
lifecycles as part of normal re-processing, such that order event 
lifecycles may now be associated with more than one CAT Order ID.
     The Participants must approve a change order to adopt the 
below-described functionality no later than 30 days following the 
effective date of this Order:
    [cir] Functionality that creates a lifecycle mapping which 
indicates all lifecycle associations made during the Enhanced Late to 
the Lifecycle process;
    [cir] Functionality that presents to regulatory users post-T+5 data 
in a manner substantially similar to how such data would have been 
represented if it had been reported prior to T+5, including by 
replicating and replaying records with enrichments impacted by post-T+5 
submissions, creating updated enrichments, and persisting the 
replicated records within the underlying data (the ``Full Replay 
process''); and
    [cir] Functionality that enhances the OTQT, including the ability 
to include or exclude any records that were created or replaced as a 
result of the Full Replay process.
    Such functionality must be fully implemented and made available to 
regulatory users within twelve months of the change order's approval by 
the Participants.
     The Plan Processor must schedule the Enhanced Late to the 
Lifecycle process and the Full Replay process to run weekly, such that 
late reported data received through Friday of the prior week are 
available for regulatory users on the following business day at 8 a.m. 
Eastern Time, absent extraordinary circumstances, for data within the 
prior 18 months. For data outside of this 18-month window, the 
Participants must schedule the Enhanced Late to the Lifecycle process 
and the Full Replay process to run no less frequently than quarterly.
    The Commission understands that this alternative technological 
solution, when fully implemented, will meaningfully advance the 
regulatory goals of Rule 613 and the CAT NMS Plan by enabling 
regulatory users to view corrected data that is submitted after T+5 as 
part of an order event lifecycle (which may be represented by more than 
one CAT Order ID) and in a manner that does not require such regulatory 
users to know whether late records were submitted and/or to perform 
additional query steps to obtain the most up-to-date records. The 
Commission believes this alternative technological solution will help 
regulatory users to better understand the impact of post-T+5 reports.

D. Requirements for SIP Data Linkage

    The Commission grants conditional exemptive relief from the SIP 
Data linkage requirements that are set forth in section 6.5(b)(i) and 
appendix D, section 3 of the CAT NMS Plan.\24\ Such relief is subject 
to the following conditions:
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    \24\ The SIP Data linkage requirements set forth in section 
6.5(b)(i) and appendix D, section 3 of the CAT NMS Plan is described 
in the 2022 Order. See 2022 Order, supra note 8, at 42253-54. The 
Commission understands that the Participants challenge the 
feasibility of strict compliance with these requirements.
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     The Plan Processor must continue to provide regulatory 
users with the side-by-side view of SIP Data and other transactional 
data in the same format and manner that is currently available in the 
OTQT.\25\
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    \25\ This ``side-by-side'' functionality refers to the ability 
for users of the OTQT to include SIP Data in multi-object searches 
that include transactional data from Industry Member and Plan 
Participant CAT Reporters. For example, a regulatory user may elect 
to query Exchange Equity Events and SIP Trades simultaneously for 
trades in a given security; the results will be returned interweaved 
within a single result set, in a logical sequence.
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    This functionality requires regulatory users to manually match SIP 
Data with other transactional data reported to the CAT. However, the 
Commission believes this is an acceptable alternative solution that 
will continue to make available SIP Data to regulatory users while 
facilitating settlement of the issues raised in the Participants' 
challenge to the 2022 Order.

E. Reporting Requirements for Port-Level Settings

    The Commission grants conditional exemptive relief from the 
requirements as applied to port-level settings that are set forth in 
Rule 613(c)(7) and sections 6.3(d)(i)(F), 6.3(d)(ii)(G), 
6.3(d)(iii)(F), 6.3(d)(iv)(E), and 6.4(d)(i) of the CAT NMS Plan for 
the following special handling instructions described in the current 
CAT Industry Member Technical Specifications that may be set by 
Industry Members at the various Participant exchanges via exchange 
ports (the ``Exempted Port-Level Settings''): \26\
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    \26\ The requirements as applied to port-level settings set 
forth in in Rule 613(c)(7) and sections 6.3(d)(i)(F), 6.3(d)(ii)(G), 
6.3(d)(iii)(F), 6.3(d)(iv)(E), and 6.4(d)(i) of the CAT NMS Plan are 
described in the 2022 Order. See 2022 Order, supra note 8, at 42254-
55. The Commission understands that, notwithstanding this Order, the 
Participants continue to disagree with its interpretation of these 
requirements and challenge the feasibility of strict compliance with 
these requirements, other than with respect to the Exempted Port-
Level Settings. This Order does not resolve (or have any bearing on) 
the parties' remaining interpretive disagreement on this issue, but 
instead provides exemptive relief that renders resolution of the 
issue unnecessary as to all port-level settings other than the 
Exempted Port-Level Settings.

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ATT Attributable. Order is routed to an exchange or ATS with
 instructions that the order is attributable.
DNI Do Not Increase.
DNR Do Not Reduce.
DNRT Do Not Route.
RLO Retail Liquidity Order.
STP Self Trade Prevention.
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    Under the conditional exemptive relief granted herein, the 
Participants will not be required to obligate Industry Members to 
report these six special handling instructions when an Industry Member 
routes an order to a national securities exchange over an exchange port 
that is configured for one of these special handling instructions.\27\
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    \27\ As explained in the 2022 Order, the CAT NMS Plan does not 
require all port-level settings to be reported to the CAT. Rule 613 
and the CAT NMS Plan only require Participants and Industry Members 
to report port-level settings that are used by a sender or a 
receiver of an order to communicate the Material Terms of the Order, 
including ``any special handling instructions.'' Furthermore, Rule 
613 and the CAT NMS Plan only obligate the sender of an order to 
report the Material Terms of the Order that it communicated to and/
or agreed upon with the receiver of the order, including default or 
implicit special handling instructions communicated through a port-
level setting. If the receiver of an order subsequently attaches 
``any special handling instructions'' to an order without informing 
the sender, including special handling instructions communicated 
through a port-level setting, only the receiver would be obligated 
to report those Material Terms of the Order.
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    This conditional exemptive relief applies only when the Exempted 
Port-Level Settings are set at the port-level at a national securities 
exchange. Aside from the Exempted Port-Level Settings, this Order does 
not provide exemptive relief from the reporting requirements set forth 
in the CAT NMS Plan for any existing and/or new special handling 
instructions that may be set at the port-level at a national securities 
exchange and that may constitute Material Terms of the Order; likewise, 
this Order does not provide exemptive relief for any Material Terms of 
the Order that are set at the port-level on Industry Member alternative 
trading systems or broker-dealer port-level settings. To the extent 
that the Participants and/or Industry Members wish to receive similar 
exemptive relief related to other Material Terms of the Order set at 
the

[[Page 77132]]

port-level, they must submit an exemptive relief request to the 
Commission for its consideration.
    Such relief is subject to the following conditions:
     The Participants must report the Exempted Port-Level 
Settings in the order receipt record, regardless of whether such 
Exempted Port-Level Settings are ``triggered'' or ``applied.'' \28\
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    \28\ The Commission understands that the Participants disagree 
with its interpretation that special handling instructions that are 
never ``triggered'' or ``applied'' to an order qualify as Material 
Terms of the Order with respect to any other existing and/or new 
special handling instructions that may be set at the port-level at a 
national securities exchange.
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     The Participants must maintain and communicate to Industry 
Members via a CAT Alert a mapping of each exchange-specific port-level 
setting related to the Exempted Port-Level Settings, substantially in 
the form of the draft mapping the Participants have provided to the 
Commission.\29\
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    \29\ There are differences between the technical specifications 
utilized by Industry Members and Participants, as well as 
differences in reporting among the Participants. While the 
Participants may update this mapping for the Exempted Port-Level 
Settings as needed, new Material Terms of the Order that are set at 
the port-level and that are not specifically addressed this Order 
may not be added to this mapping without additional exemptive relief 
from the Commission.
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    The Commission believes that this alternative technological 
solution, when fully implemented, reflects a reasonable compromise 
approach with respect to a limited set of data.\30\
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    \30\ The Commission notes that its analysis is specific to the 
Exempted Port-Level Settings and reserves judgment as to whether the 
above-described alternative technological solution would be 
appropriate for any other Material Terms of the Order that are 
communicated via a port-level setting.
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F. Requirements for Lifecycle Linkages Between Customer Orders and 
``Representative'' Orders

    The Commission grants temporary conditional exemptive relief from 
the requirements set forth in appendix D, section 3 of the CAT NMS Plan 
related to lifecycle linkages between customer orders and 
representative orders until January 31, 2025.\31\ Such relief is 
intended to mirror the exemptive relief provided by the 2023 Order and 
is subject to the following condition:
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    \31\ The requirements related to lifecycle linkages between 
customer orders and representative orders set forth in appendix D, 
section 3 of the CAT NMS Plan are described in the 2022 Order. See 
2022 Order, supra note 8, at 42255-56.
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     The Participants must require Industry Members to report 
``representative'' orders as currently described in FAQs F5-F7 and as 
described in other exemptive relief issued by the Commission by January 
31, 2025.\32\
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    \32\ See, e.g., Securities Exchange Act Release No. 88702 (Apr. 
20, 2020), 85 FR 23075 (Apr. 24, 2020); 2022 Order, supra note 8, at 
42255-56. See also FAQ F5-F7, available at https://catnmsplan.com/faq.
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    The Commission believes that the relief provided in the 2023 Order 
gives Industry Members sufficient time to make any necessary systems 
changes to implement the required functionality, especially because the 
technical specifications and/or scenarios documents relating to the 
reporting and linkage of all ``representative'' orders have already 
been promulgated by the Participants. Therefore, the Commission does 
not believe it is necessary to issue any additional extension of 
exemptive relief in connection with these requirements.

G. Requirements for Participant Reporting of Rejected Orders

    The Commission grants conditional exemptive relief from the 
requirements set forth in Rule 613(c)(7) and section 6.3(d)(i) and 
appendix D, section 3 of the CAT NMS Plan relating to Participant 
reporting of rejected orders and subsequent linkage of such orders.\33\ 
Such relief is subject to the following conditions:
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    \33\ The requirements related to Participant reporting of 
rejected orders set forth in Rule 613(c)(7) and section 6.3(d)(i) 
and appendix D, section 3 of the CAT NMS Plan are described in the 
2022 Order. See 2022 Order, supra note 8, at 42256-57. The 
Commission understands that, notwithstanding this Order, the 
Participants continue to disagree with its interpretation of these 
requirements and challenge the feasibility of strict compliance with 
that interpretation. This Order does not resolve the parties' 
interpretive disagreement on this issue, but instead provides 
exemptive relief that renders resolution of the issue unnecessary.
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     The Participants must maintain or improve their existing 
reporting of orders that are received and subsequently rejected, 
including maintenance by Participants of any existing reporting or 
linkage of the keys necessary for the linkage processing specified 
below. The Plan Processor must maintain its existing validations of 
such orders.
     The Participants must approve a change order to adopt the 
below-described functionality no later than 60 days following the 
effective date of this Order:
    [cir] Functionality that will attempt ``forward lifecycle linkage'' 
processing, including all enrichments currently provided for other 
order events, of Industry Member MEOR, MOOR, and MEMR Order Route 
events containing a routeRejectedFlag populated as ``true'' with their 
corresponding Participant Reject Message events described in the 
Participant Technical Specifications in instances where the keys 
necessary for such linkage are available (i.e., Symbol (or Option ID), 
RoutingParty, RoutedOrderID, Session).\34\
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    \34\ The ``forward lifecycle linkage'' processing referred to 
above is intended to capture functionality that the Participants 
believe may be feasible in light of a study of recent data. Based on 
that study and based on current trading volume market share among 
the various Participant exchanges, the Plan Processor currently 
estimates that approximately 90% of Industry Member MEOR, MOOR, and 
MEMR Order Route events containing a routeRejectedFlag populated as 
``true'' may be programmatically linked with their corresponding 
Participant Reject Message events. For the avoidance of doubt, for 
purposes of satisfying the conditions of this Order, the 
Participants will not be required to modify their existing 
architectures or reporting and will not be required to provide 
``reverse linkage'' of Participant Reject Message events to Industry 
Member Order Route events. Moreover, this Order does not impose any 
required minimum linkage rate as a condition to exemptive relief. 
Linkage errors relating to rejected orders will not be required to 
be included in compliance error rates.
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    Such functionality must be fully implemented and made available to 
regulatory users within twelve months of the change order's approval by 
the Participants.
    The Commission understands that this alternative technological 
solution, when fully implemented, will meaningfully advance the 
regulatory goals of Rule 613 and the CAT NMS Plan by providing 
regulatory users with additional information about rejected orders.

III. Conclusion

    Accordingly, it is hereby ordered, pursuant to section 36(a)(1) of 
the Exchange Act \35\ and Rule 608(e) under the Exchange Act,\36\ that 
the above-described conditional exemptive relief be granted, effective 
immediately upon the date of issuance of an order by the D.C. Circuit 
dismissing the Participants' petition for review of the 2022 Order.
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    \35\ 15 U.S.C. 78mm(a)(1).
    \36\ 17 CFR 242.608(e).

    By the Commission.
Sherry R. Haywood,
Assistant Secretary.

Exhibit A

Online Targeted Query Tool Performance Parameters

    1. General: Subject to the specific conditions described in this 
Exhibit A, OTQT performance must satisfy both (i) an operational 
completion rate (measuring the successful completion of all 
attempted queries), and (ii) a query compliance rate (measuring the 
response time performance of all successfully completed queries).
    2. Operational Completion Rate: Queries will be subject to a 95% 
operational completion rate measured quarterly against

[[Page 77133]]

all attempted queries in the aggregate. The operational completion 
rate will measure the successful completion of all attempted 
queries, excluding failed queries resulting from a service 
interruption experienced by the Plan Processor's cloud service 
provider.
    3. Query Compliance Rate. Queries will be subject to a 90% query 
compliance rate measured monthly against all actual query results 
based on the categories and response times set forth below. The 
query compliance rate will measure the response time performance of 
all successfully completed queries for each category. Response times 
shall be measured from the time of query submission by the 
regulatory user to the time that the results are available to the 
regulatory user (i.e., including the time required to formulate a 
data mart).

------------------------------------------------------------------------
                                     Response time
             Category                  (minutes)         Description
------------------------------------------------------------------------
OLA Viewer........................               2
    Standard Queries
        Small.....................              10  See data objects
                                                     below.
        Medium....................              30  See data objects
                                                     below.
        Large.....................              60  See data objects
                                                     below.
        Complex...................             240   More than
                                                     one trade date or
                                                     object, or
                                                     Returns
                                                     more than 1M rows.
    All Related Lifecycles \37\
        Simple....................              20   Fewer than
                                                     10,000 lifecycles,
                                                     and
                                                     Single-day
                                                     lifecycle count.
        Complex...................             720   Fewer than
                                                     50,000 lifecycles,
                                                     and
                                                     Fewer than
                                                     60 lifecycle dates.
------------------------------------------------------------------------


                                                            Standard Query Data Objects \38\
--------------------------------------------------------------------------------------------------------------------------------------------------------
           Small (10 minutes)                               Medium (30 minutes)                                     Large (60 minutes)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Corporate Actions.......................  Equity Exchange Events................................  IM Equity Events.
Equity Member Dictionary................  Exchange Orders.......................................  Options Exchange Events.
Equity Off Exchange Events..............  IM Options Events.....................................  Options NBBO.
Equity Symbol Master....................  Market Participant Quotes.............................  Options Orders/Trades.
Equity Trade Events.....................  Options Quotes........................................  OPRA RAW.
FDID CCID Map...........................  SIP Quotes.
IDQS BBO
Market Maker Dictionary
OCC Options Product
OCC Options Series
Off Exchange Trade Events
Off Exchange Trades
Options Dictionary
Options Member Dictionary
Options Trade Events
OTC Halt Events
Self Help Declaration Events
SIP Admin
SIP CTA Admin Messages
SIP CTS Trade Summary
SIP CTS Trades
SIP Issue Status
SIP MWCB Status
SIP OTC Halts
SIP Quote Events
SIP Summary
SIP Trades
SIP UTP Admin Messages
SIP UTP LULD Price Band
SIP UTP Trade Prior Day As-Of
SIP UTP Trade Summary
SIP UTP Trades
--------------------------------------------------------------------------------------------------------------------------------------------------------

    4. Reporting Requirements. The Plan Processor shall provide a 
monthly report noting (i) the operational completion rate for all 
attempted queries in the aggregate, and (ii) the query compliance 
rate for each category described above, to Commission staff within 
30 days from the end of each month.
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    \37\ For an all related lifecycles request made prior to the 
generation of a parent query, the time of query submission will not 
commence until completion of the parent query.
    \38\ If a new data object is created in the future, the Plan 
Processor will undertake a six-month assessment period (commencing 
once the data object is populated with actual data) to understand 
volumes and regulatory usage and, based on these observations, will 
slot the new data object into one of these existing categories.
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    5. Reasonable Adjustment Period. In order to permit the Plan 
Processor to promptly scale up the OTQT to ensure adequate system 
capacity in the event of significant, unanticipated, or rapid 
changes in data volumes and/or user behavior that require 
application coding changes and/or changes to how historical data is 
stored, response times shall be subject to a reasonable adjustment 
period, (i) not to exceed 60 days for items

[[Page 77134]]

requiring application coding changes,\39\ and (ii) not to exceed 120 
days for items requiring changes to how a data object is stored and 
that may include changes impacting historical data in the object. 
These 60-day and 120-day periods shall be measured from the date on 
which the monthly compliance report is provided to Commission staff. 
For purposes of this condition:
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    \39\ Application coding changes are changes requiring a software 
release and deployment. For the avoidance of doubt, adding/removing 
system capacity or the incremental size of capacity changes (e.g., 
autoscaling compute node step size) within the limits of the OTQT 
system are configuration changes and are not considered application 
coding changes.
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     A significant, unanticipated, or rapid change in data 
volume shall be deemed to have occurred in the event of an average 
daily data volume increase of 30% in the applicable data object(s) 
from the lesser of: (i) the peak daily data volume observed in the 
prior month, or (ii) the peak daily data volume observed in the same 
month in the prior year.
     A significant, unanticipated, or rapid change in user 
behavior shall be deemed to have occurred in the event of an average 
daily OTQT query count increase of 30% from the lesser of: (i) the 
peak daily OTQT query count observed in the prior month, or (ii) the 
peak daily OTQT query count observed in the same month in the prior 
year.
    Written notification of these determinations will be provided to 
and reviewed with Commission staff.

[FR Doc. 2023-24624 Filed 11-7-23; 8:45 am]
BILLING CODE 8011-01-P


