[Federal Register Volume 81, Number 226 (Wednesday, November 23, 2016)]
[Notices]
[Pages 84696-85035]
[FR Doc No: 2016-27919]

Vol. 81

Wednesday,

No. 226

November 23, 2016

Part II

Book 2 of 2 Books

Pages 84695-85104

 Securities and Exchange Commission

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 Joint Industry Plan; Order Approving the National Market System Plan
Governing the Consolidated Audit Trail; Notice

Federal Register / Vol. 81 , No. 226 / Wednesday, November 23, 2016 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79318; File No. 4-698]

Joint Industry Plan; Order Approving the National Market System
Plan Governing the Consolidated Audit Trail

November 15, 2016.

SUPPLEMENTARY INFORMATION:

Table of Contents

Supplementary Information
I. Introduction
II. Background
III. Description of the Proposed Plan
    1. LLC Agreement
    2. Participants
    3. Management
    4. Initial Plan Processor Selection
    5. Functions and Activities of the CAT System
    6. Financial Matters
    7. Amendments
    8. Compliance Rule Applicable to Industry Members
    9. Plan Appendices
    10. Reporting Procedures
    11. Timeliness of Data Reporting
    12. Uniform Format
    13. Symbology
    14. CAT-Reporter-ID
    15. Customer-ID
    16. Order Allocation Information
    17. Options Market Maker Quotes
    18. Primary Market Transactions, Debt Securities and Futures
    19. Error Rates
    20. Retirement of Existing Trade and Order Data Rules and
Systems
    21. Regulatory Access
    22. Upgrades and New Functionalities
    23. Business Continuity and Disaster Recovery
    24. Records and Accounting and Dissolution and Termination of
the Company
    25. Security of Data
    26. Governing or Constituent Documents
    27. Development and Implementation Phases
    28. Written Understanding or Agreements Relating To
Interpretation of, or Participation in, the Plan
    29. Dispute Resolution
IV. Discussion and Commission Findings
    A. Definitions, Effectiveness of Agreement, and Participation
(Articles I, II, and III)
    B. Management of the Company (Article IV)
    1. Operating Committee
    2. Advisory Committee
    3. Officers of the Company
    4. Additional Governance Provisions
    C. Plan Processor Selection (Article V)
    D. Functions and Activities of the CAT System (Article VI)
    1. Data Recording and Reporting Requirements
    2. Format
    3. Reporting Timelines
    4. Data Elements
    5. Symbology
    6. Security of CAT Data
    7. Personally Identifiable Information
    8. Implementation Schedule
    9. Retirement of Existing Trade and Order Data Rules and Systems
    10. Primary Market Transactions and Futures
    11. Error Rate
    12. Business Continuity and Disaster Recovery
    13. Business Clock Synchronization and Timestamp Granularity
    14. Upgrades and New Functionalities
    15. Technical Specifications
    E. Capital Accounts, Allocations of Income and Loss, and
Distributions (Articles VII and VIII)
    F. Funding of the Company (Article XI)
    1. Funding Model Generally
    2. Funding Model's Allocation of Costs
    3. Message Traffic and Market Share Distinction
    4. Transparency and Alternatives to the Funding Model
    5. Miscellaneous
    G. Dispute Resolution
    H. Written Assessments, Audits and Reports
V. Economic Analysis
    A. Introduction
    B. Summary of Expected Economic Effects
    C. Framework for Economic Analysis
    1. Economic Framework
    2. Existing Uncertainties
    D. Baseline
    1. Current State of Regulatory Activities
    2. Current State of Trade and Order Data
    E. Benefits
    1. Improvements in Data Qualities
    2. Improvements to Regulatory Activities
    3. Other Provisions of the CAT NMS Plan
    F. Costs
    1. Analysis of Expected Costs
    2. Aggregate Costs to Industry
    3. Further Analysis of Costs
    4. Expected Costs of Security Breaches
    5. Second Order Effects
    G. Efficiency, Competition, and Capital Formation
    1. Competition
    2. Efficiency
    3. Capital Formation
    4. Related Considerations Affecting Competition, Efficiency and
Capital Formation
    H. Alternatives
    1. Timestamp Granularity
    2. Error Rate
    3. Error Correction Timeline
    4. Requiring Listing Exchange Symbology
    5. Clock Synchronization Logging Procedures
    6. Data Accessibility Standards
    7. Clock Synchronization Hours
    8. Primary Market Transactions
    9. Periodic Updates to Customer Information
    10. Bulk Data Downloads by CAT Reporters
    11. Alternatives to the CAT NMS Plan
    12. Alternatives Discussed in the CAT NMS Plan
VI. Paperwork Reduction Act
    A. Summary of Collection of Information Under Rule 613
    1. Central Repository
    2. Data Collection and Reporting
    3. Collection and Retention of National Best Bid and National
Best Offer, Last Sale Data and Transaction Reports
    4. Surveillance
    5. Participant Rule Filings
    6. Document on Expansion to Other Securities
    7. Written Assessment of Operation of the Consolidated Audit
Trail
    B. Proposed Use of Information
    1. Central Repository
    2. Data Collection and Reporting
    3. Collection and Retention of NBBO, Last Sale Data and
Transaction Reports
    4. Surveillance
    5. Document on Expansion to Other Securities
    6. Written Assessment of Operation of the Consolidated Audit
Trail
    C. Respondents
    1. National Securities Exchanges and National Securities
Associations
    2. Members of National Securities Exchanges and National
Securities Association
    D. Total Initial and Annual Reporting and Recordkeeping Burden
    1. Burden on National Securities Exchanges and National
Securities Associations
    2. Burden on Members of National Securities Exchanges and
National Securities Associations
    E. Summary of Collection of Information Under the CAT NMS Plan,
as Amended by the Commission
    1. One-Time Reports
    2. Non-Report Commission-Created Information Collections
    F. Proposed Use of Information Under the CAT NMS Plan, as
Amended by the Commission
    1. Independent Audit of Expenses Incurred Prior to the Effective
Date
    2. Review of Clock Synchronization Standards
    3. Coordinated Surveillance Report
    4. Assessment of Industry Member Bulk Access to Reported Data
    5. Assessment of Errors in Customer Information Fields
    6. Report on Impact of Tiered Fees on Market Liquidity
    7. Assessment of Material Systems Change on Error Rate
    8. Financial Statements
    9. Background Checks
    G. Total Initial and Annual Reporting and Recordkeeping Burden
of Information Collection Under the CAT NMS Plan, as Amended by the
Commission
    1. Burden on National Securities Exchanges and National
Securities Associations
    2. Request for Comment
    H. Collection of Information Is Mandatory
    I. Confidentiality
    J. Recordkeeping Requirements
VII. Conclusion

I. Introduction

    On February 27, 2015, pursuant to Section 11A of the Securities
Exchange Act of 1934 (``Exchange Act'' or ``Act'') \1\

and Rules 608 and 613 of Regulation NMS thereunder,\2\ BATS Exchange,
Inc. (n/k/a Bats BZX Exchange, Inc.), BATS-Y Exchange, Inc. (n/k/a Bats
BYX Exchange, Inc.), BOX Options Exchange LLC, C2 Options Exchange,
Incorporated, Chicago Board Options Exchange, Incorporated, Chicago
Stock Exchange, Inc., EDGA Exchange, Inc. (n/k/a Bats EDGA Exchange,
Inc.), EDGX Exchange, Inc. (n/k/a Bats EDGX Exchange, Inc.), Financial
Industry Regulatory Authority, Inc. (``FINRA''), International
Securities Exchange, LLC, ISE Gemini, LLC, Miami International
Securities Exchange LLC, NASDAQ OMX BX, Inc. (n/k/a NASDAQ BX, Inc.),
NASDAQ OMX PHLX LLC (n/k/a NASDAQ PHLX LLC), The NASDAQ Stock Market
LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE
MKT LLC, and NYSE Arca, Inc. (collectively, ``self-regulatory
organizations'', ``SROs'' or ``Participants''), filed with the
Securities and Exchange Commission (``Commission'' or ``SEC'') a
National Market System (``NMS'') Plan Governing the Consolidated Audit
Trail (the ``CAT NMS Plan,'' ``CAT Plan'' or ``Plan'').\3\ The SROs
filed amendments to the CAT NMS Plan on December 24, 2015, and on
February 8, 2016.\4\ The CAT NMS Plan, as amended, was published for
comment in the Federal Register on May 17, 2016.\5\
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    \1\ 15 U.S.C. 78k-1.
    \2\ 17 CFR 242.608.
    \3\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated February 27, 2015. Pursuant to Rule 613, the SROs
were required to file the CAT NMS Plan on or before April 28, 2013.
At the SROs' request, the Commission granted exemptions to extend
the deadline for filing the CAT NMS Plan to December 6, 2013, and
then to September 30, 2014. See Securities Exchange Act Release Nos.
69060 (March 7, 2013), 78 FR 15771 (March 12, 2013); 71018 (December
6, 2013), 78 FR 75669 (December 12, 2013). The SROs filed the CAT
NMS Plan on September 30, 2014 (the ``Initial CAT NMS Plan''). See
Letter from the SROs, to Brent J. Fields, Secretary, Commission,
dated September 30, 2014. The CAT NMS Plan filed on February 27,
2015, was an amendment to and replacement of the Initial CAT NMS
Plan.
    \4\ On December 24, 2015, the SROs submitted an Amendment to the
CAT NMS Plan. See Letter from Participants to Brent J. Fields,
Secretary, Commission, dated December 23, 2015. On February 9, 2016,
the Participants filed with the Commission an identical, but
unmarked, version of the February 27, 2015 CAT NMS Plan, as modified
by the December 24, 2015 Amendment, as well as a copy of the request
for proposal issued by the Participants to solicit Bids from parties
interested in serving as the Plan Processor for the consolidated
audit trail. See Letter from Participants to Brent J. Fields,
Secretary, Commission, dated February 8, 2016.
    \5\ The Commission voted to publish the February 9, 2016 version
of the CAT NMS Plan for public comment on April 27, 2016, and this
version of the Plan was published in the Federal Register on May 17,
2016. See Securities Exchange Act Release No. 77724, 81 FR 30614
(the ``Notice''). Unless the context otherwise requires, the ``CAT
NMS Plan'' shall refer to the February 27, 2015 CAT NMS Plan, as
modified by the December 24, 2015 Amendment and published for
comment on May 17, 2016. The Commission notes that the application
of ISE Mercury, LLC (``ISE Mercury'') for registration as a national
securities exchange was granted on January 29, 2016. See Securities
Exchange Act Release No. 76998 (January 29, 2016), 81 FR 6066
(February 4, 2016). In addition, the application of the Investors
Exchange LLC (``IEX'') for registration as a national securities
exchange was granted on June 17, 2016. See Securities Exchange Act
Release No. 78101 (June 17, 2016), 81 FR 41142 (June 23, 2016). ISE
Mercury and IEX will become Participants in the CAT NMS Plan and are
thus accounted for as Participants for purposes of this Order.
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    The Commission received 24 comment letters in response to the CAT
NMS Plan.\6\ On July 29, 2016, the Commission extended the deadline for
Commission action on the CAT NMS Plan and designated November 10, 2016
as the new date by which the Commission would be required to take
action.\7\ On September 2, 2016, the Participants submitted a response
to the comment letters that the Commission received in response to the
CAT NMS Plan.\8\ The Participants submitted additional response letters
on September 23, 2016 and October 7, 2016.\9\ On November 2 and 14,
2016, the Participants submitted additional letters.\10\ This Order
approves the CAT NMS Plan, with limited changes as described in detail
below. The Commission concludes that the Plan, as amended, is necessary
and appropriate in the public interest, for the protection of investors
and the maintenance of fair and orderly markets, to remove impediments
to, and perfect the mechanism of a national market system, or is
otherwise in furtherance of the purposes of the Act. A copy of the CAT
NMS Plan, as adopted, is attached as Exhibit A hereto.
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    \6\ See Letters to Brent J. Fields, Secretary, Commission, from
Kathleen Weiss Hanley, Bolton-Perella Chair in Finance, Lehigh
University, et al., dated July 12, 2016 (``Hanley Letter'');
Courtney Doyle McGuinn, FIX Operations Director, FIX Trading
Community, dated July 14, 2016 (``FIX Trading Letter''); Kelvin To,
Founder and President, Data Boiler Technologies, LLC, dated July 15,
2016 (``Data Boiler Letter''); Richard Foster, Senior Vice President
and Senior Counsel for Regulatory and Legal Affairs, Financial
Services Roundtable, dated July 15, 2016 (``FSR Letter''); David T.
Bellaire, Executive Vice President & General Counsel, Financial
Services Institute, dated July 18, 2016 (``FSI Letter''); Stuart J.
Kaswell, Executive Vice President & Managing Director, General
Counsel, Managed Funds Association, dated July 18, 2016 (``MFA
Letter''); David W. Blass, General Counsel, Investment Company
Institute, dated July 18, 2016 (``ICI Letter''); Larry E. Thompson,
Vice Chairman and General Counsel, Depository Trust & Clearing
Corporation, dated July 18, 2016 (``DTCC Letter''); Manisha Kimmel,
Chief Regulatory Officer, Wealth Management, Thomson Reuters, dated
July 18, 2016 (``TR Letter''); Theodore R. Lazo, Managing Director
and Associate General Counsel, and Ellen Greene, Managing Director,
Financial Services Operations, Securities Industry and Financial
Markets Association, dated July 18, 2016 (``SIFMA Letter'');
Anonymous, received July 18, 2016 (``Anonymous Letter I''); Mary Lou
Von Kaenel, Managing Director, Financial Information Forum, dated
July 18, 2016 (``FIF Letter''); Marc R. Bryant, Senior Vice
President, Deputy General Counsel, Fidelity Investments, dated July
18, 2016 (``Fidelity Letter''); Mark Husler, CEO, UnaVista, and
Jonathan Jachym, Head of North America Regulatory Strategy &
Government Relations, London Stock Exchange Group, dated July 18,
2016 (``UnaVista Letter''); Gary Stone, Chief Strategy Officer for
Trading Solutions and Global Regulatory and Policy Group, Bloomberg,
L.P., dated July 18, 2016 (``Bloomberg Letter''); Bonnie K. Wachtel,
Wachtel Co Inc., dated July 18, 2016 (``Wachtel Letter''); Dennis M.
Kelleher, President & CEO, Stephen W. Hall, Legal Director &
Securities Specialist, Lev Bagramian, Senior Securities Policy
Advisor, Better Markets, dated July 18, 2016 (``Better Markets
Letter''); John A. McCarthy, General Counsel, KCG Holdings, Inc.,
dated July 20, 2016 (``KCG Letter''); Industry Members of the
Development Advisory Group (``DAG'') (including Financial
Information Forum, Securities Industry and Financial Markets
Association and Securities Traders Association), dated July 20, 2016
(``DAG Letter''); Joanne Moffic-Silver, EVP, General Counsel &
Corporate Secretary, Chicago Board Options Exchange, Incorporated,
dated July 21, 2016 (``CBOE Letter''); Elizabeth K. King, NYSE
Group, Inc., dated July 21, 2016 (``NYSE Letter''); James Toes,
Securities President & CEO, Securities Traders Association, dated
July 25, 2016 (``STA Letter''); Anonymous, received August 12, 2016
(``Anonymous Letter II''); Scott Garrett, Member of Congress, et
al., dated October 14, 2016 (``Garrett Letter''). See Exhibit B for
a citation key to the comment letters received by the Commission on
the proposed CAT NMS Plan.
    \7\ See Securities Exchange Act Release No. 78441 (July 29,
2016), 81 FR 51527 (August 4, 2016).
    \8\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated September 2, 2016 (``Response Letter I'').
    \9\ See Letters from Participants to Brent J. Fields, Secretary,
Commission, dated September 23, 2016 (``Response Letter II'') and
October 7, 2016 (``Response Letter III'').
    \10\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated November 2, 2016 (``Participants' Letter I'');
Letter from Participants to Brent J. Fields, Secretary, Commission,
dated November 14, 2016 (``Participants' Letter II'').
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II. Background

    The Commission believes that the regulatory data infrastructure on
which the SROs and the Commission currently must rely generally is
outdated and inadequate to effectively oversee a complex, dispersed,
and highly automated national market system. In performing their
oversight responsibilities, regulators today must attempt to pull
together disparate data from a variety of existing information systems
lacking in completeness, accuracy, accessibility, and/or timeliness
\11\--a model that neither

supports the efficient aggregation of data from multiple trading venues
nor yields the type of complete and accurate market activity data
needed for robust market oversight.
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    \11\ Completeness refers to whether a data source represents all
market activity of interest to regulators, and whether the data is
sufficiently detailed to provide the information regulators require.
While current data sources provide the trade and order data required
by existing rules and regulations, those sources generally do not
provide all of the information of interest to regulators in one
consolidated audit trail. Accuracy refers to whether the data about
a particular order or trade is correct and reliable. Accessibility
refers to how the data is stored, how practical it is to assemble,
aggregate, and process the data, and whether all appropriate
regulators could acquire the data they need. Timeliness refers to
when the data is available to regulators and how long it would take
to process before it could be used for regulatory analysis. See
Adopting Release, infra note 14, at 45727.
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    Currently, FINRA and the exchanges maintain their own separate
audit trail systems for trading activity, which vary in scope, required
data elements and format. In performing their market oversight
responsibilities, SRO and Commission Staffs must rely heavily on data
from these various SRO audit trails. However, each of these systems has
shortcomings in completeness, accuracy, accessibility, or timeliness.
Some of these shortcomings are a result of the disparate nature of the
systems, which makes it impractical, for example, to follow orders
through their entire lifecycle as they may be routed, aggregated, re-
routed, and disaggregated across multiple markets. These systems also
lack key information useful for regulatory oversight, such as the
identity of the customers who originate orders, or that two sets of
orders may have been originated by the same customer.\12\ Although SRO
and Commission Staffs also have access to sources of market activity
data other than SRO audit trails, these sources likewise suffer from
their own drawbacks.\13\
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    \12\ The Commission notes that the SROs have taken steps in
recent years to update their audit trail requirements. For example,
NYSE, NYSE Amex LLC (n/k/a ``NYSE MKT LLC'') (``NYSE Amex''), and
NYSE ARCA, Inc. (``NYSE Arca'') have adopted audit trail rules that
coordinate with FINRA's Order Audit Trail System (``OATS'')
requirements. See Securities Exchange Act Release No. 65523 (October
7, 2011), 76 FR 64154 (October 17, 2011) (concerning NYSE);
Securities Exchange Act Release No. 65524 (October 7, 2011), 76 FR
64151 (October 17, 2011) (concerning NYSE Amex); Securities Exchange
Act Release No. 65544 (October 12, 2011), 76 FR 64406 (October 18,
2011) (concerning NYSE Arca). This allows the SROs to submit their
data to FINRA pursuant to a Regulatory Service Agreement (``RSA''),
which FINRA can then reformat and combine with OATS data. Despite
these efforts, however, significant deficiencies remain. See Notice,
supra note 5, at Section IV.D.2.b.
    \13\ See Notice, supra note 5, at Section IV.D.2.b (discussing
the limitations of current trade and order data systems).
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    Recognizing these shortcomings, on July 11, 2012, the Commission
adopted Rule 613 of Regulation NMS under the Act,\14\ which requires
the SROs to submit an NMS plan to create, implement, and maintain a
consolidated audit trail (``CAT'') that would capture customer and
order event information for orders in NMS securities, across all
markets, from the time of order inception through routing,
cancellation, modification, or execution in a single, consolidated data
source.\15\ Specifically, Rule 613 requires the Participants to
``jointly file . . . a national market system plan to govern the
creation, implementation, and maintenance of a consolidated audit trail
and Central Repository.'' \16\ The purpose of the Plan, and the
creation, implementation and maintenance of a comprehensive audit trail
for the U.S. securities markets described therein, is to
``substantially enhance the ability of the SROs and the Commission to
oversee today's securities markets and fulfill their responsibilities
under the federal securities laws.'' \17\ As contemplated by Rule 613,
the CAT ``will allow for the prompt and accurate recording of material
information about all orders in NMS securities, including the identity
of customers, as these orders are generated and then routed throughout
the U.S. markets until execution, cancellation, or modification. This
information will be consolidated and made readily available to
regulators in a uniform electronic format.'' \18\
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    \14\ See Securities Exchange Act Release No. 67457 (July 18,
2012), 77 FR 45722 (August 1, 2012) (``Adopting Release''); see also
Securities Exchange Act Release No. 62174 (May 26, 2010), 75 FR
32556 (June 8, 2010) (``Proposing Release'').
    \15\ 17 CFR 242.613(a)(1), (c)(1), (c)(7).
    \16\ 17 CFR 242.613(a)(1).
    \17\ See Adopting Release, supra note 14, at 45726.
    \18\ Id. The Plan also includes certain recording and reporting
obligations for OTC Equity Securities.
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    The SROs filed the CAT NMS Plan pursuant to Rule 613,\19\ as
modified by exemptive relief granted by the Commission, pursuant to
Rule 0-12 under the Act,\20\ from certain requirements of Rule 613.\21\
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    \19\ See supra note 4.
    \20\ 17 CFR 240.0-12.
    \21\ See Securities Exchange Act Release No. 77265 (March 1,
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''); Letter
from Participants to Brent J. Fields, Secretary, Commission, dated
January 30, 2015 (``Exemptive Request Letter''). Specifically, the
SROs requested exemptive relief from the Rule's requirements related
to: (i) The reporting of Options Market Maker quotations, as
required under Rule 613(c)(7)(ii) and (iv); (ii) the reporting and
use of the Customer-ID under Rule 613(c)(7)(i)(A), (iv)(F),
(viii)(B) and 613(c)(8); (iii) the reporting of the CAT-Reporter-ID,
as required under Rule 613(c)(7)(i)(C), (ii)(D), (ii)(E), (iii)(D),
(iii)(E), (iv)(F), (v)(F), (vi)(B), and (c)(8); (iv) the linking of
executions to specific subaccount allocations, as required under
Rule 613(c)(7)(vi)(A); and (v) the timestamp granularity requirement
of Rule 613(d)(3) for certain manual order events subject to
reporting under Rule 613(c)(7)(i)(E), (ii)(C), (iii)(C) and (iv)(C).
On April 3, 2015, the SROs filed a supplement related to the
requested exemption for Rule 613(c)(7)(vi)(A). See Letter from
Robert Colby, FINRA, on behalf of the SROs, to Brent J. Fields,
Secretary, Commission, dated April 3, 2015 (``April 2015
Supplement''). This supplement provided examples of how the proposed
relief related to allocations would operate. On September 2, 2015,
the SROs filed a second supplement to the Exemptive Request Letter.
See Letter from the SROs to Brent J. Fields, Secretary, Commission,
dated September 2, 2015 (``September 2015 Supplement''). This
supplement to the Exemptive Request Letter further addressed the use
of an ``effective date'' in lieu of a ``date account opened.''
Unless the context otherwise requires, the ``Exemption Request''
shall refer to the Exemptive Request Letter, as supplemented by the
April 2015 Supplement and the September 2015 Supplement.
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    The CAT NMS Plan filed by the SROs incorporates the SROs' NMS plan
approval process for reviewing, evaluating and ultimately selecting the
Plan Processor,\22\ as set forth in a separate NMS plan submitted by
the SROs and approved by the Commission (the ``Selection Plan'').\23\
On February 26, 2013, the Participants published a request for proposal
(``RFP'') soliciting Bids from parties interested in serving as the
Plan Processor.\24\ As of the publication date of this Order, the
Participants, through the process described in the Selection Plan, have
narrowed the pool of Bidders to three remaining Shortlisted
Bidders.\25\
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    \22\ As set forth in Section 1.1 of the CAT NMS Plan, supra note
5, the Plan Processor ``means the Initial Plan Processor or any
other Person selected by the Operating Committee pursuant to SEC
Rule 613 and Sections 4.3(b)(i) and 6.1 [to] perform the CAT
processing functions required by SEC Rule 613 and set forth in [the
CAT NMS Plan].'' All capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in Rule 613, the Adopting
Release, or the CAT NMS Plan, as applicable.
    \23\ See Securities Exchange Act Release Nos. 70892 (November
15, 2013), 78 FR 69910 (November 21, 2013) (``Selection Plan
Notice''); 75192 (June 17, 2015), 80 FR 36028 (June 23, 2015) (Order
Approving Amendment No. 1 to the Selection Plan); 75980 (September
24, 2015), 80 FR 58796 (September 30, 2015) (Order Approving
Amendment No. 2 to the Selection Plan); 77917 (May 25, 2016), 81 FR
35072 (June 1, 2016) (Notice of Filing and Immediate Effectiveness
of Amendment No. 3 to the Selection Plan); 78477 (August 4, 2016),
81 FR 52917 (August 10, 2016) (Notice of Filing and Immediate
Effectiveness of Amendment No. 4 to the Selection Plan); see also
Securities Exchange Act Release Nos. 71596 (February 21, 2014), 79
FR 11152 (February 27, 2014) (``Selection Plan Approval Order'');
74223 (February 6, 2015), 80 FR 7654 (February 11, 2015) (Notice of
Amendment No. 1 to the Selection Plan); 75193 (June 17, 2015), 80 FR
36006 (June 23, 2015) (Notice of Amendment No. 2 to the Selection
Plan).
    \24\ See Notice, supra note 5, at 30885-30952 for a complete
version of the Consolidated Audit Trail National Market System Plan
Request for Proposal (issued February 26, 2013, version 3.0 updated
March 4, 2014). Other materials related to the RFP are available at
http://catnmsplan.com/process/. Among other things, the RFP
describes the technical, business, and operational requirements for
CAT and outlines the information that must be submitted by Bidders
in response to the RFP.
    \25\ ``Shortlisted Bidders'' were selected by the Selection
Committee through the voting and scoring processes described in
Section 5.2 of the CAT NMS Plan. See CAT NMS Plan, supra note 5, at
Section 1.1; see also Section III.4, infra (describing the selection
of the Plan Processor).
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    The CAT NMS Plan also includes an economic analysis that, as
required by Rule 613, was conducted by the SROs.

The Commission notes that, in the Adopting Release for Rule 613, the
Commission considered the economic effects of the actions the SROs were
required to undertake pursuant to Rule 613, specifically the
requirement that the SROs develop an NMS plan, utilizing their own
resources and undertaking their own research, that addresses the
specific details, cost estimates, considerations, and other
requirements of the Rule.\26\ The Commission noted in the Adopting
Release that Rule 613 provided the SROs with ``flexibility in how they
[chose] to meet the requirements of the adopted Rule,'' \27\ allowing
the SROs to consider a number of different approaches in developing the
CAT NMS Plan. The Commission also noted that ``the costs and benefits
of creating a consolidated audit trail, and the consideration of
specific costs as related to specific benefits, is more appropriately
analyzed once the SROs narrow the expanded array of choices they have
under the adopted Rule and develop a detailed NMS plan.'' \28\
Accordingly, the Commission required the SROs to conduct an economic
analysis and deferred the Commission's own economic analysis of the
actual creation, implementation, and maintenance of the CAT until after
submission of the required NMS plan. In accordance with this approach,
the Commission included its preliminary analysis and conclusions
regarding the economic effects of the CAT NMS Plan when it published
the CAT NMS Plan for public comment.
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    \26\ See Adopting Release, supra note 14, at 45726.
    \27\ Id. at 45725.
    \28\ See Adopting Release, supra note 14, at 45725.
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III. Description of the Proposed Plan

    The Commission notes that this Section III describes the CAT NMS
Plan, as filed by the Participants pursuant to Rule 613 and modified by
the Exemption Order,\29\ that was published for public comment by the
Commission.\30\ Section IV, below, discusses the comments received as
well as amendments that the Commission is making to the Plan in light
of some of the comments; these amendments are marked against the
proposed Plan in Exhibit A to this Order.
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    \29\ See Exemption Order, supra note 21.
    \30\ See Notice, supra note 5.
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1. LLC Agreement

    The Participants propose to conduct the activities related to the
CAT in a Delaware limited liability company pursuant to a limited
liability company agreement, entitled the Limited Liability Company
Agreement (``LLC Agreement'') of CAT NMS, LLC (``Company'' or ``CAT
LLC'').\31\ The Participants will jointly own on an equal basis the
Company.\32\ The Company will create, implement and maintain the
CAT.\33\ The LLC Agreement, itself, including its appendices, is the
proposed Plan, which would be a national market system plan as defined
in Rule 600(b)(43) of NMS.\34\
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    \31\ Id.
    \32\ See CAT NMS Plan, supra note 5, at Section 3.2(d).
    \33\ Id. at Section 2.6.
    \34\ See Notice, supra note 5, at 30618.
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2. Participants

    Each national securities exchange and national securities
association currently registered with the Commission would be a
Participant in the Plan.\35\ The names and addresses of each
Participant are set forth in Exhibit A to the Plan.\36\ Article III of
the Plan provides that any entity approved by the Commission as a
national securities exchange or national securities association under
the Exchange Act after the Effective Date may become a Participant by
submitting to the Company a completed application in the form provided
by the Company and satisfying each of the following requirements: (1)
Executing a counterpart of the LLC Agreement as then in effect; and (2)
paying a fee to the Company in an amount determined by a Majority Vote
\37\ of the Operating Committee as fairly and reasonably compensating
the Company and the Participants for costs incurred in creating,
implementing and maintaining the CAT (including such costs incurred in
evaluating and selecting the Initial Plan Processor \38\ and any
subsequent Plan Processor) and for costs the Company incurs in
providing for the prospective Participant's participation in the
Company, including after consideration of certain factors identified in
Section 3.3(b) of the Agreement (``Participation Fee'').\39\ Amendment
of the Plan reflecting the admission of a new Participant will be
effective only when: (1) It is approved by the SEC in accordance with
Rule 608 or otherwise becomes effective pursuant to Rule 608; and (2)
the prospective Participant pays the Participation Fee.\40\
---------------------------------------------------------------------------

    \35\ Id.
    \36\ See CAT NMS Plan, supra note 5, at Section 3.1.
    \37\ ``Majority Vote'' means the affirmative vote of at least a
majority of all of the members of the Operating Committee or any
Subcommittee, as applicable, authorized to cast a vote with respect
to a matter presented for a vote (whether or not such a member is
present at any meeting at which a vote is taken) by the Operating
Committee or any Subcommittee, as applicable (excluding, for the
avoidance of doubt, any member of the Operating Committee or any
Subcommittee, as applicable, that is recused or subject to a vote to
recuse from such matter pursuant to Section 4.3(d) of the CAT NMS
Plan). See CAT NMS Plan, supra note 5, at Section 1.1.
    \38\ The ``Initial Plan Processor'' means the first Plan
Processor selected by the Operating Committee in accordance with
Rule 613, Section 6.1 and the Selection Plan. See CAT NMS Plan,
supra note 5, at Section 1.1.
    \39\ Id. at Section 3.3(a).
    \40\ Id. at Section 3.3(a)-(b).
---------------------------------------------------------------------------

    A number of factors are relevant to the determination of a
Participation Fee.\41\ Such factors are: (1) The portion of costs
previously paid by the Company for the development, expansion and
maintenance of the CAT which, under generally accepted accounting
principles (``GAAP''), would have been treated as capital expenditures
and would have been amortized over the five years preceding the
admission of the prospective Participant; (2) an assessment of costs
incurred and to be incurred by the Company for modifying the CAT or any
part thereof to accommodate the prospective Participant, which costs
are not otherwise required to be paid or reimbursed by the prospective
Participant; (3) Participation Fees paid by other Participants admitted
as such after the Effective Date; (4) elapsed time from the Effective
Date to the anticipated date of admittance of the prospective
Participant; and (5) such other factors, if any, as may be determined
to be appropriate by the Operating Committee and approved by the
Commission.\42\ In the event that the Company and a prospective
Participant do not agree on the amount of the Participation Fee, such
amount will be subject to review by the SEC pursuant to Section
11A(b)(5) of the Exchange Act.\43\
---------------------------------------------------------------------------

    \41\ See Notice, supra note 5, at 30618.
    \42\ See CAT NMS Plan, supra note 5, at Section 3.3(b).
    \43\ Id.; see also Exchange Act Section 11A(b)(2), 15 U.S.C.
78k-l(b)(5) (which provides that a prohibition or limitation on
access to services by a registered securities information processor
must be reviewed by the Commission upon application by an aggrieved
person).
---------------------------------------------------------------------------

    An applicant for participation in the Company may apply for limited
access to the CAT System \44\ for planning and testing purposes pending
its admission as a Participant by submitting to the Company a completed
Application for Limited Access to the CAT System in a

form provided by the Company, accompanied by payment of a deposit in
the amount established by the Company, which will be applied or
refunded as described in such application.\45\ To be eligible to apply
for such limited access, the applicant must have been approved by the
SEC as a national securities exchange or national securities
association under the Exchange Act but the applicant has not yet become
a Participant of the Plan, or the SEC must have published such
applicant's Form 1 Application or Form X-15AA-1 Application to become a
national securities exchange or a national securities association,
respectively.\46\
---------------------------------------------------------------------------

    \44\ ``CAT System'' means all data processing equipment,
communications facilities, and other facilities, including
equipment, utilized by the Company or any third parties acting on
the Company's behalf in connection with operation of the CAT and any
related information or relevant systems pursuant to the LLC
Agreement. See CAT NMS Plan, supra note 5, at Section 1.1.
    \45\ Id. at Section 3.3(c).
    \46\ Id.
---------------------------------------------------------------------------

    All Company Interests will have the same rights, powers,
preferences and privileges and be subject to the same restrictions,
qualifications and limitations.\47\ Once admitted, each Participant
will be entitled to one vote on any matter presented to Participants
for their consideration and to participate equally in any distribution
made by the Company (other than a distribution made pursuant to Section
10.2 of the Plan).\48\ Each Participant will have a Company Interest
equal to that of each other Participant.\49\
---------------------------------------------------------------------------

    \47\ Id. at Section 3.2(a).
    \48\ Id. at Sections 3.2(b), 10.2.
    \49\ Id. at Section 3.2(d).
---------------------------------------------------------------------------

    Article III also describes a Participant's ability to Transfer a
Company Interest. A Participant may only Transfer any Company Interest
to a national securities exchange or national securities association
that succeeds to the business of such Participant as a result of a
merger or consolidation with such Participant or the Transfer of all or
substantially all of the assets or equity of such Participant
(``Permitted Transferee'').\50\ A Participant may not Transfer any
Company Interest to a Permitted Transferee unless: (1) Such Permitted
Transferee executes a counterpart of the Plan; and (2) the amendment to
the Plan reflecting the Transfer is approved by the SEC in accordance
with Rule 608 or otherwise becomes effective pursuant to Rule 608.\51\
---------------------------------------------------------------------------

    \50\ Id. at Section 3.4(b).
    \51\ Id. at Section 3.4(c).
---------------------------------------------------------------------------

    In addition, Article III addresses the voluntary resignation and
termination of participation in the Plan. Any Participant may
voluntarily resign from the Company, and thereby withdraw from and
terminate its right to any Company Interest, only if: (1) A Permitted
Legal Basis \52\ for such action exists; and (2) such Participant
provides to the Company and each other Participant no less than thirty
days prior to the effective date of such action written notice
specifying such Permitted Legal Basis, including appropriate
documentation evidencing the existence of such Permitted Legal Basis,
and, to the extent applicable, evidence reasonably satisfactory to the
Company and other Participants that any orders or approvals required
from the SEC in connection with such action have been obtained.\53\ A
validly withdrawing Participant will have the rights and obligations
discussed below with regard to termination of participation.\54\
---------------------------------------------------------------------------

    \52\ ``Permitted Legal Basis'' means the Participant has become
exempt from, or otherwise has ceased to be subject to, Rule 613 or
has arranged to comply with Rule 613 in some manner other than
through participation in the LLC Agreement, in each instance subject
to the approval of the Commission. See CAT NMS Plan, supra note 5,
at Section 1.1.
    \53\ Id. at Section 3.6.
    \54\ Id. at Sections 3.6, 3.7.
---------------------------------------------------------------------------

    A Participant's participation in the Company, and its right to any
Company Interest, will terminate as of the earliest of: (1) The
effective date specified in a valid resignation notice; (2) such time
as such Participant is no longer registered as a national securities
exchange or national securities association; or (3) the date of
termination for failure to pay fees.\55\ With regard to the payment of
fees, each Participant is required to pay all fees or other amounts
required to be paid under the Plan within thirty days after receipt of
an invoice or other notice indicating payment is due (unless a longer
payment period is otherwise indicated) (the ``Payment Date'').\56\ If a
Participant fails to make such a required payment by the Payment Date,
any balance in the Participant's Capital Account will be applied to the
outstanding balance.\57\ If a balance still remains with respect to any
such required payment, the Participant will pay interest on the
outstanding balance from the Payment Date until such fee or amount is
paid at a per annum rate equal to the lesser of: (1) The Prime Rate
plus 300 basis points; or (2) the maximum rate permitted by applicable
law.\58\ If any such remaining outstanding balance is not paid within
thirty days after the Payment Date, the Participants will file an
amendment to the Plan requesting the termination of the participation
in the Company of such Participant, and its right to any Company
Interest, with the SEC.\59\ Such amendment will be effective only when
it is approved by the SEC in accordance with Rule 608 or otherwise
becomes effective pursuant to Rule 608.\60\
---------------------------------------------------------------------------

    \55\ Id. at Section 3.7(a).
    \56\ Id. at Section 3.7(b).
    \57\ Id.
    \58\ Id.
    \59\ Id.
    \60\ Id.
---------------------------------------------------------------------------

    From and after the effective date of termination of a Participant's
participation in the Company, profits and losses of the Company will
cease to be allocated to the Capital Account of the Participant.\61\ A
terminated Participant will be entitled to receive the balance in its
Capital Account as of the effective date of termination adjusted for
profits and losses through that date, payable within ninety days of the
effective date of termination, and will remain liable for its
proportionate share of costs and expenses allocated to it for the
period during which it was a Participant, for obligations under Section
3.8(c) regarding the return of amounts previously distributed (if
required by a court of competent jurisdiction), for its indemnification
obligations pursuant to Section 4.1, and for obligations under Section
9.6 regarding confidentiality, but it will have no other obligations
under the Plan following the effective date of termination.\62\ The
Plan will be amended to reflect any termination of participation in the
Company of a Participant, provided that such amendment will be
effective only when it is approved by the SEC in accordance with Rule
608 or otherwise becomes effective pursuant to Rule 608.\63\
---------------------------------------------------------------------------

    \61\ Id. at Section 3.7(c).
    \62\ Id.
    \63\ Id.
---------------------------------------------------------------------------

3. Management

    Article IV of the Plan establishes the overall governance structure
for the management of the Company. Specifically, the Participants
propose that the Company be managed by an Operating Committee.\64\
---------------------------------------------------------------------------

    \64\ The Operating Committee will manage the Company except for
situations in which the approval of the Participants is required by
the Plan or by non-waivable provisions of applicable law. See CAT
NMS Plan, supra note 5, at Article IV.
---------------------------------------------------------------------------

    The Operating Committee will consist of one voting member
representing each Participant and one alternate voting member
representing each Participant who will have a right to vote only in the
absence of the Participant's voting member of the Operating
Committee.\65\ Each of the voting and alternate voting members of the
Operating Committee will be appointed by the Participant that he or she
represents, will serve at the will of the Participant appointing such
member and will be subject to the confidentiality obligations of the

Participant that he or she represents as set forth in Section 9.6.\66\
One individual may serve as the voting member of the Operating
Committee for multiple Affiliated Participants, and such individual
will have the right to vote on behalf of each such Affiliated
Participant.\67\
---------------------------------------------------------------------------

    \65\ Id. at Section 4.2(a).
    \66\ Id. at Sections 4.2(a), 9.6.
    \67\ Id. at Section 4.2(a). An ``Affiliated Participant'' means
any Participant controlling, controlled by, or under common control
with another Participant. Id. at Section 1.1.
---------------------------------------------------------------------------

    The Operating Committee will elect, by Majority Vote, one of its
members to act as Chair for a term of two years.\68\ No Person may
serve as Chair for more than two successive full terms, and no Person
then appointed to the Operating Committee by a Participant that then
serves, or whose Affiliate then serves, as the Plan Processor will be
eligible to serve as the Chair.\69\ The Chair will preside at all
meetings of the Operating Committee, designate a Person to act as
Secretary, and perform such other duties and possess such other powers
as the Operating Committee may from time to time prescribe.\70\ The
Chair will not be entitled to a tie-breaking vote at any meeting of the
Operating Committee.\71\
---------------------------------------------------------------------------

    \68\ Id. at Section 4.2(b).
    \69\ Id.
    \70\ Id.
    \71\ Id.
---------------------------------------------------------------------------

    Each of the members of the Operating Committee, including the
Chair, will be authorized to cast one vote for each Participant that he
or she represents on all matters voted upon by the Operating
Committee.\72\ Action of the Operating Committee will be authorized by
Majority Vote (except under certain designated circumstances), subject
to the approval of the SEC whenever such approval is required under the
Exchange Act and the rules thereunder.\73\ For example, the Plan
specifically notes that a Majority Vote of the Operating Committee is
required to: (1) Select the Chair; (2) select the members of the
Advisory Committee (as described below); (3) interpret the Plan (unless
otherwise noted therein); (4) approve any recommendation by the Chief
Compliance Officer (``CCO'') pursuant to Section 6.2(a)(v)(A); (5)
determine to hold an Executive Session of the Operating Committee; (6)
determine the appropriate funding-related policies, procedures and
practices consistent with Article XI; and (7) act upon any other matter
specified elsewhere in the Plan (which includes the Appendices to the
Plan) as requiring a vote, approval or other action of the Operating
Committee (other than those matters expressly requiring a Supermajority
Vote or a different vote of the Operating Committee).\74\
---------------------------------------------------------------------------

    \72\ Id. at Section 4.3(a).
    \73\ Id.
    \74\ Id.
---------------------------------------------------------------------------

    Article IV requires a Supermajority Vote \75\ of the Operating
Committee, subject to the approval of the SEC when required, for the
following: (1) Selecting a Plan Processor, other than the Initial Plan
Processor selected in accordance with Article V of the Plan; (2)
terminating the Plan Processor without cause in accordance with Section
6.1(q); (3) approving the Plan Processor's appointment or removal of
the Chief Information Security Officer (``CISO''), CCO, or any
Independent Auditor in accordance with Section 6.1(b); (4) entering
into, modifying or terminating any Material Contract (if the Material
Contract is with a Participant or an Affiliate of a Participant, such
Participant and Affiliated Participant will be recused from any vote);
(5) making any Material Systems Change; (6) approving the initial
Technical Specifications or any Material Amendment to the Technical
Specifications proposed by the Plan Processor; (7) amending the
Technical Specifications on its own motion; and (8) acting upon any
other matter specified elsewhere in the Plan (which includes the
Appendices to the Plan) as requiring a vote, approval or other action
of the Operating Committee by a Supermajority Vote.\76\
---------------------------------------------------------------------------

    \75\ ``Supermajority Vote'' means the affirmative vote of at
least two-thirds of all of the members of the Operating Committee or
any Subcommittee, as applicable, authorized to cast a vote with
respect to a matter presented for a vote (whether or not such a
member is present at any meeting at which a vote is taken) by the
Operating Committee or any Subcommittee, as applicable (excluding,
for the avoidance of doubt, any member of the Operating Committee or
any Subcommittee, as applicable, that is recused or subject to a
vote to recuse from such matter pursuant to Section 4.3(d));
provided that if two-thirds of all of such members authorized to
cast a vote is not a whole number then that number shall be rounded
up to the nearest whole number. Id. at Section 1.1.
    \76\ Id. at Section 4.3(b).
---------------------------------------------------------------------------

    A member of the Operating Committee or any Subcommittee thereof (as
discussed below) shall recuse himself or herself from voting on any
matter under consideration by the Operating Committee or such
Subcommittee if such member determines that voting on such matter
raises a Conflict of Interest.\77\ In addition, if the members of the
Operating Committee or any Subcommittee (excluding the member thereof
proposed to be recused) determine by Supermajority Vote that any member
voting on a matter under consideration by the Operating Committee or
such Subcommittee raises a Conflict of Interest, such member shall be
recused from voting on such matter.\78\ No member of the Operating
Committee or any Subcommittee will be automatically recused from voting
on any matter except matters involving Material Contracts as discussed
in the prior paragraph, as otherwise specified in the Plan, and as
follows: (1) If a Participant is a Bidding Participant \79\ whose Bid
remains under consideration, members appointed to the Operating
Committee or any Subcommittee by such Participant or any of its
Affiliated Participants will be recused from any vote concerning: (a)
Whether another Bidder may revise its Bid; (b) the selection of a
Bidder; or (c) any contract to which such Participant or any of its
Affiliates would be a party in its capacity as Plan Processor; and (2)
if a Participant is then serving as Plan Processor, is an Affiliate of
the Person then serving as Plan Processor, or is an Affiliate of an
entity that is a Material Subcontractor to the Plan Processor, then in
each case members appointed to the Operating Committee or any
Subcommittee by such Participant or any of its Affiliated Participants
shall be recused from any vote concerning: (a) The proposed removal of
such Plan Processor; or (b) any contract between the Company and such
Plan Processor.\80\
---------------------------------------------------------------------------

    \77\ Id. at Section 4.3(d).
    \78\ Id.
    \79\ ``Bidding Participant'' means a Participant that: (a)
Submits a Bid; (b) is an Affiliate of an entity that submits a Bid;
or (c) is included, or is an Affiliate of an entity that is
included, as a Material Subcontractor as part of a Bid. Id. at
Section 1.1.
    \80\ Id. at Section 4.3(d).
---------------------------------------------------------------------------

    Article IV also addresses meetings of the Operating Committee.\81\
Meetings of the Operating Committee may be attended by each
Participant's voting Representative and its alternate voting
Representative and by a maximum of two nonvoting Representatives of
each Participant, by members of the Advisory Committee, by the CCO, by
other Representatives of the Company and the Plan Processor, by
Representatives of the SEC and by such other Persons that the Operating
Committee may invite to attend.\82\ The Operating Committee, however,
may, where appropriate, determine to meet in Executive Session during
which only voting members of the Operating Committee will be
present.\83\ The Operating Committee,

however, may invite other Representatives of the Participants, of the
Company, of the Plan Processor (including the CCO and the CISO) or the
SEC, or such other Persons that the Operating Committee may invite to
attend, to be present during an Executive Session.\84\ Any
determination of the Operating Committee to meet in an Executive
Session will be made upon a Majority Vote and will be reflected in the
minutes of the meeting.\85\ In addition, any Person that is not a
Participant but for which the SEC has published a Form 1 Application or
Form X-15AA-1 to become a national securities exchange or national
securities association, respectively, will be permitted to appoint one
primary Representative and one alternate Representative to attend
regularly scheduled Operating Committee meetings in the capacity of a
non-voting observer, but will not be permitted to have any
Representative attend a special meeting, emergency meeting or meeting
held in Executive Session of the Operating Committee.\86\
---------------------------------------------------------------------------

    \81\ Article IV also addresses, among other things, different
types of Operating Committee meetings (regular, special and
emergency), frequency of such meetings, how to call such meetings,
the location of the meetings, the role of the Chair, and notice
regarding such meetings. Id. at Section 4.4.
    \82\ Id. at Section 4.4(a).
    \83\ Id.
    \84\ Id.
    \85\ Id.
    \86\ Id. at Section 4.4(b).
---------------------------------------------------------------------------

    The Operating Committee may, by Majority Vote, designate by
resolution one or more Subcommittees it deems necessary or desirable in
furtherance of the management of the business and affairs of the
Company.\87\ For any Subcommittee, any member of the Operating
Committee who wants to serve thereon may so serve.\88\ If Affiliated
Participants have collectively appointed one member to the Operating
Committee to represent them, then such Affiliated Participants may have
only that member serve on the Subcommittee or may decide not to have
only that collectively appointed member serve on the Subcommittee.\89\
Such member may designate an individual other than himself or herself
who is also an employee of the Participant or Affiliated Participants
that appointed such member to serve on a Subcommittee in lieu of the
particular member.\90\ Subject to the requirements of the Plan and non-
waivable provisions of Delaware law, a Subcommittee may exercise all
the powers and authority of the Operating Committee in the management
of the business and affairs of the Company as so specified in the
resolution of the Operating Committee designating such
Subcommittee.\91\
---------------------------------------------------------------------------

    \87\ Id. at Section 4.12(a).
    \88\ Id.
    \89\ Id.
    \90\ Id.
    \91\ Id.
---------------------------------------------------------------------------

    Article IV requires that the Operating Committee maintain a
Compliance Subcommittee for the purpose of aiding the CCO as necessary,
including with respect to issues involving: (1) The maintenance of the
confidentiality of information submitted to the Plan Processor or
Central Repository pursuant to Rule 613, applicable law, or the Plan by
Participants and Industry Members; (2) the timeliness, accuracy, and
completeness of information submitted pursuant to Rule 613, applicable
law or the Plan by Participants and Industry Members; and (3) the
manner and extent to which each Participant is meeting its obligations
under Rule 613, Section 3.11, and as set forth elsewhere in the Plan
and ensuring the consistency of the Plan's enforcement as to all
Participants.\92\
---------------------------------------------------------------------------

    \92\ Id. at Section 4.12(b).
---------------------------------------------------------------------------

    Article IV also sets forth the requirements for the formation and
functioning of an Advisory Committee, which will advise the
Participants on the implementation, operation and administration of the
Central Repository, including possible expansion of the Central
Repository to other securities and other types of transactions.\93\
---------------------------------------------------------------------------

    \93\ Id. at Section 4.13(a), (d).
---------------------------------------------------------------------------

    Article IV describes the composition of the Advisory Committee. No
member of the Advisory Committee may be employed by or affiliated with
any Participant or any of its Affiliates or facilities.\94\ The
Operating Committee will select one member from representatives of each
of the following categories to serve on the Advisory Committee on
behalf of himself or herself individually and not on behalf of the
entity for which the individual is then currently employed: (1) A
broker-dealer with no more than 150 Registered Persons; (2) a broker-
dealer with at least 151 and no more than 499 Registered Persons; (3) a
broker-dealer with 500 or more Registered Persons; (4) a broker-dealer
with a substantial wholesale customer base; (5) a broker-dealer that is
approved by a national securities exchange: (a) To effect transactions
on an exchange as a specialist, market maker or floor broker; or (b) to
act as an institutional broker on an exchange; (6) a proprietary-
trading broker-dealer; (7) a clearing firm; (8) an individual who
maintains a securities account with a registered broker or dealer but
who otherwise has no material business relationship with a broker or
dealer or with a Participant; (9) a member of academia with expertise
in the securities industry or any other industry relevant to the
operation of the CAT System; (10) an institutional investor trading on
behalf of a public entity or entities; (11) an institutional investor
trading on behalf of a private entity or entities; and (12) an
individual with significant and reputable regulatory expertise.\95\ The
individuals selected to represent categories (1) through (12) above
must include, in the aggregate, representatives of no fewer than three
broker-dealers that are active in the options business and
representatives of no fewer than three broker-dealers that are active
in the equities business.\96\ In addition, upon a change in employment
of any such Advisory Committee member, a Majority Vote of the Operating
Committee will be required for such member to be eligible to continue
to serve on the Advisory Committee.\97\ Furthermore, the SEC's Chief
Technology Officer (or the individual then currently employed in a
comparable position providing equivalent services) will serve as an
observer of the Advisory Committee (but not be a member).\98\ The
members of the Advisory Committee will have a term of three years.\99\
---------------------------------------------------------------------------

    \94\ Id. at Section 4.13(b).
    \95\ Id.
    \96\ Id.
    \97\ Id.
    \98\ Id.
    \99\ Four of the initial twelve members of the Advisory
Committee will have an initial term of one year, and another four of
the initial twelve members of the Advisory Committee will have an
initial term of two years. Id. at Section 4.13(c).
---------------------------------------------------------------------------

    Members of the Advisory Committee will have the right to attend
meetings of the Operating Committee or any Subcommittee, to receive
information concerning the operation of the Central Repository, and to
submit their views to the Operating Committee or any Subcommittee on
matters pursuant to the Plan prior to a decision by the Operating
Committee on such matters.\100\ A member of the Advisory Committee will
not have a right to vote on any matter considered by the Operating
Committee or any Subcommittee.\101\ In addition, the Operating
Committee or any Subcommittee may meet in Executive Session if the
Operating Committee or Subcommittee determines by Majority Vote that
such an Executive Session is advisable.\102\ The Operating Committee
may solicit and consider views of other stakeholders on the operation
of the Central Repository in addition to those of the Advisory
Committee.\103\ Although members of the Advisory Committee

will have the right to receive information concerning the operation of
the Central Repository, the Operating Committee retains the authority
to determine the scope and content of information supplied to the
Advisory Committee, which will be limited to that information that is
necessary and appropriate for the Advisory Committee to fulfill its
functions.\104\ Any information received by members of the Advisory
Committee will remain confidential unless otherwise specified by the
Operating Committee.\105\
---------------------------------------------------------------------------

    \100\ Id. at Section 4.13(d).
    \101\ Id.
    \102\ See Notice, supra note 5, at 30621 n.54.
    \103\ Id.
    \104\ See CAT NMS Plan, supra note 5, at Section 4.13(e).
    \105\ Id.
---------------------------------------------------------------------------

    Article IV also describes the appointment of Officers for the
Company. Specifically, the CCO and the CISO, each of whom will be
employed solely by the Plan Processor and neither of whom will be
deemed or construed in any way to be an employee of the Company, will
be Officers of the Company.\106\ Neither such Officer will receive or
be entitled to any compensation from the Company or any Participant by
virtue of his or her service in such capacity (other than if a
Participant is then serving as the Plan Processor, compensation paid to
such Officer as an employee of such Participant).\107\ Each such
Officer will report directly to the Operating Committee.\108\ The CCO
will work on a regular and frequent basis with the Compliance
Subcommittee and/or other Subcommittees as may be determined by the
Operating Committee.\109\ Except to the extent otherwise provided in
the Plan, including Section 6.2, each such Officer will have such
fiduciary and other duties with regard to the Plan Processor as imposed
by the Plan Processor on such individual by virtue of his or her
employment by the Plan Processor.\110\
---------------------------------------------------------------------------

    \106\ Id. at Section 4.6(a).
    \107\ Id.
    \108\ Id.
    \109\ Id.
    \110\ Id. at Sections 4.6(a), 6.2.
---------------------------------------------------------------------------

    In addition, the Plan Processor will inform the Operating Committee
of the individual who has direct management responsibility for the Plan
Processor's performance of its obligations with respect to the
CAT.\111\ Subject to approval by the Operating Committee of such
individual, the Operating Committee will appoint such individual as an
Officer.\112\ In addition, the Operating Committee by Supermajority
Vote may appoint other Officers as it shall from time to time deem
necessary.\113\ Any Officer appointed pursuant to Section 4.6(b) will
have only such duties and responsibilities as set forth in the Plan, or
as the Operating Committee shall from time to time expressly
determine.\114\ No such Officer shall have any authority to bind the
Company (which authority is vested solely in the Operating Committee)
or be an employee of the Company, unless in each case the Operating
Committee, by Supermajority Vote, expressly determines otherwise.\115\
No person subject to a ``statutory disqualification'' (as defined in
Section 3(a)(39) of the Exchange Act) may serve as an Officer.\116\ It
is the intent of the Participants that the Company have no
employees.\117\
---------------------------------------------------------------------------

    \111\ Id. at Section 4.6(b).
    \112\ Id.
    \113\ Id.
    \114\ Id.
    \115\ Id.
    \116\ Id. The Plan uses the term ``statutory disqualification''
as defined in Section 3(a)(39) of the Exchange Act, which addresses
disqualification from membership or participation in, or association
with a member of, an SRO. While Officers of the Plan are not persons
associated with a member of an SRO, the Commission interprets this
provision of the Plan to mean that no person that is subject to one
of the statutory disqualifications set forth in Sections 3(a)(39)(A)
through (F) of the Exchange Act may serve as Officer.
    \117\ See CAT NMS Plan, supra note 5, at Section 4.6(b).
---------------------------------------------------------------------------

4. Initial Plan Processor Selection

    Article V of the Plan sets forth the process for the Participants'
evaluation of Bids and the selection process for narrowing down the
Bids and choosing the Initial Plan Processor.\118\ The initial steps in
the evaluation and selection process were and will be performed
pursuant to the Selection Plan; the final two rounds of evaluation and
voting, as well as the final selection of the Initial Plan Processor,
will be performed pursuant to the Plan.\119\
---------------------------------------------------------------------------

    \118\ The Plan Processor selection process set forth in the CAT
NMS Plan is identical to the post-CAT NMS Plan approval selection
process set forth in the Selection Plan. See Selection Plan, supra
note 23.
    \119\ By its terms, the Selection Plan will terminate upon
Commission approval of the Plan. Id.
---------------------------------------------------------------------------

    As discussed above, the Selection Committee has selected the
Shortlisted Bids pursuant to the Selection Plan. After reviewing the
Shortlisted Bids, the Participants have identified the optimal proposed
solutions for the CAT and, to the extent possible, included such
solutions in the Plan.\120\ The Selection Committee will determine, by
majority vote, whether Shortlisted Bidders will have the opportunity to
revise their Bids.\121\ To reduce potential conflicts of interest, no
Bidding Participant may vote on whether a Shortlisted Bidder will be
permitted to revise its Bid if a Bid submitted by or including the
Participant or an Affiliate of the Participant is a Shortlisted
Bid.\122\ The Selection Committee will review and evaluate all
Shortlisted Bids, including any permitted revisions submitted by
Shortlisted Bidders.\123\ In performing this review and evaluation, the
Selection Committee may consult with the Advisory Committee and such
other Persons as the Selection Committee deems appropriate, which may
include the DAG until the Advisory Committee is formed.\124\
---------------------------------------------------------------------------

    \120\ As noted above, the Participants stated their belief that
certain exemptive relief is necessary to include in the Plan all of
the provisions the Participants believe are part of the optimal
solution for the CAT. The Commission notes that the request for
exemptive relief was granted on March 1, 2016. See Exemption Order,
supra note 21.
    \121\ See CAT NMS Plan, supra note 5, at Section 5.2(c)(ii).
    \122\ Id. at Section 5.1(b)(ii).
    \123\ Id.
    \124\ Id.
---------------------------------------------------------------------------

    After receipt of any permitted revisions, the Selection Committee
will select the Initial Plan Processor from the Shortlisted Bids in two
rounds of voting where each Participant has one vote via its Voting
Senior Officer in each round.\125\ No Bidding Participant, however,
will be entitled to vote in any round if the Participant's Bid, a Bid
submitted by an Affiliate of the Participant, or a Bid including the
Participant or an Affiliate of the Participant is considered in such
round.\126\ In the first round, each Voting Senior Officer, subject to
the recusal provision in Section 5.2(e)(ii), will select a first and
second choice, with the first choice receiving two points and the
second choice receiving one point.\127\ The two Shortlisted Bids
receiving the highest cumulative scores in the first round will advance
to the second round.\128\ In the event of a tie, the tie will be broken
by assigning one point per vote to the tied Shortlisted Bids, and the
Shortlisted Bid with the most votes will advance.\129\ If this
procedure fails to break the tie, a revote will be taken on the tied
Bids with each vote

receiving one point.\130\ If the tie persists, the Participants will
identify areas for discussion, and revotes will be taken until the tie
is broken.\131\
---------------------------------------------------------------------------

    \125\ See Notice, supra note 5, at 30623. If the proposed
amendment to the Selection Plan is approved, the Selection Committee
may determine to narrow the number of Shortlisted Bids prior to the
two rounds of voting. Id. at 30623 n.58.
    \126\ This recusal provision is included in the Plan, as well as
in an amendment to the Selection Plan. See Order Approving Amendment
No. 2 to the Selection Plan, supra note 23.
    \127\ See CAT NMS Plan, supra note 5, at Section 5.2(e)(iii)(A).
    \128\ Id. at Section 5.2(e)(iii)(C). Each round of voting
throughout the Plan is independent of other rounds. See Notice,
supra note 5, at 30623 n.60.
    \129\ See CAT NMS Plan, supra note 5, at Section 5.2(e)(iii)(D).
    \130\ Id.
    \131\ Id.
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    Once two Shortlisted Bids have been chosen, the Voting Senior
Officers of the Participants (other than those subject to recusal) will
vote for a single Shortlisted Bid from the final two to determine the
Initial Plan Processor.\132\ If the tie persists, the Participants will
identify areas for discussion and, following these discussions, revotes
will be taken until the tie is broken.\133\ As set forth in Article VI
of the Plan, following the selection of the Initial Plan Processor, the
Participants will file with the Commission a statement identifying the
Initial Plan Processor and including the information required by Rule
608.\134\
---------------------------------------------------------------------------

    \132\ Id. at Section 5.2(e)(iii)(E).
    \133\ Id.
    \134\ Id. at Section 6.7(a)(i).
---------------------------------------------------------------------------

5. Functions and Activities of the CAT System

a. Plan Processor
    Article VI describes the responsibilities of the selected Plan
Processor. The Company, under the direction of the Operating Committee,
will enter into one or more agreements with the Plan Processor
obligating the Plan Processor to perform the functions and duties
contemplated by the Plan to be performed by the Plan Processor, as well
as such other functions and duties the Operating Committee deems
necessary or appropriate.\135\
---------------------------------------------------------------------------

    \135\ Id. at Section 6.1(a).
---------------------------------------------------------------------------

    As set forth in the Plan, the Plan Processor is required to develop
and, with the prior approval of the Operating Committee, implement
policies, procedures, and control structures related to the CAT System
that are consistent with Rule 613(e)(4), Appendix C and Appendix
D.\136\ The Plan Processor will: (1) Comply with applicable provisions
of 15 U.S. Code Sec.  78u-6 (Securities Whistleblower Incentives and
Protection) and the recordkeeping requirements of Rule 613(e)(8); (2)
consistent with Appendix D, Central Repository Requirements, ensure the
effective management and operation of the Central Repository; (3)
consistent with Appendix D, Data Management, ensure the accuracy of the
consolidation of the CAT Data \137\ reported to the Central Repository;
and (4) consistent with Appendix D, Upgrade Process and Development of
New Functionality, design and implement appropriate policies and
procedures governing the determination to develop new functionality for
the CAT including, among other requirements, a mechanism by which
changes can be suggested by Advisory Committee members, Participants,
or the Commission.\138\ Such policies and procedures also shall: (1)
Provide for the escalation of reviews of proposed technological changes
and upgrades to the Operating Committee; and (2) address the handling
of surveillance, including coordinated, Rule 17d-2 under the Exchange
Act or Regulatory Surveillance Agreement(s) (``RSA'') surveillance
queries and requests for data.\139\ Any policy, procedure or standard
(and any material modification or amendment thereto) applicable
primarily to the performance of the Plan Processor's duties as the Plan
Processor (excluding any policies, procedures or standards generally
applicable to the Plan Processor's operations and employees) will
become effective only upon approval by the Operating Committee.\140\
The Plan Processor also will, subject to the prior approval of the
Operating Committee, establish appropriate procedures for escalation of
matters to the Operating Committee.\141\ In addition to other policies,
procedures and standards generally applicable to the Plan Processor's
employees and contractors, the Plan Processor will have hiring
standards and will conduct and enforce background checks (e.g.,
fingerprint-based) for all of its employees and contractors to ensure
the protection, safeguarding and security of the facilities, systems,
networks, equipment and data of the CAT System, and will have an
insider and external threat policy to detect, monitor and remedy cyber
and other threats.\142\
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    \136\ Id. at Section 6.1(d).
    \137\ ``CAT Data'' means data derived from Participant Data,
Industry Member Data, SIP Data, and such other data as the Operating
Committee may designate as ``CAT Data'' from time to time. Id. at
Section 1.1.
    \138\ Id. at Section 6.1(d).
    \139\ Id.
    \140\ Id. at Section 6.1(e).
    \141\ Id. at Section 6.1(f).
    \142\ Id. at Section 6.1(g).
---------------------------------------------------------------------------

    The Plan Processor will enter into appropriate Service Level
Agreements (``SLAs'') governing the performance of the Central
Repository, as generally described in Appendix D, Functionality of the
CAT System, with the prior approval of the Operating Committee.\143\
The Plan Processor in conjunction with the Operating Committee will
regularly review and, as necessary, update the SLAs, in accordance with
the terms of the SLAs.\144\ As further contemplated in Appendix C,
System Service Level Agreements (SLAs), and in Appendix D, System SLAs,
the Plan Processor may enter into appropriate service level agreements
with third parties applicable to the Plan Processor's functions related
to the CAT System (``Other SLAs''), with the prior approval of the
Operating Committee.\145\ The CCO and/or the Independent Auditor will,
in conjunction with the Plan Processor, and as necessary the Operating
Committee, regularly review and, as necessary, update the Other SLAs,
in accordance with the terms of the applicable Other SLA.\146\ In
addition, the Plan Processor: (1) Will, on an ongoing basis and
consistent with any applicable policies and procedures, evaluate and
implement potential system changes and upgrades to maintain and improve
the normal day-to-day operating function of the CAT System; \147\ (2)
in consultation with the Operating Committee, will, on an as needed
basis and consistent with any applicable operational and escalation
policies and procedures, implement such material system changes and
upgrades as may be required to ensure effective functioning of the CAT
System; \148\ and (3) in consultation with the Operating Committee,
will, on an as needed basis, implement system changes and upgrades to
the CAT System to ensure compliance with applicable laws, regulations
or rules (including those promulgated by the SEC or any
Participant).\149\ Furthermore, the Plan Processor will develop and,
with the prior approval of the Operating Committee, implement a
securities trading policy, as well as necessary procedures, control
structures and tools to enforce this policy.\150\
---------------------------------------------------------------------------

    \143\ Id. at Section 6.1(h).
    \144\ Id.
    \145\ Id.
    \146\ Id.
    \147\ Id. at Section 6.1(i).
    \148\ Id. at Section 6.1(j).
    \149\ Id. at Section 6.1(k).
    \150\ Id. at Section 6.1(l).
---------------------------------------------------------------------------

    In addition, the Plan Processor will provide the Operating
Committee regular reports on the CAT System's operation and
maintenance.\151\ Furthermore, upon request of the Operating Committee
or any Subcommittee, the Plan Processor will attend any meetings of the
Operating Committee or such Subcommittee.\152\
---------------------------------------------------------------------------

    \151\ Id. at Section 6.1(o).
    \152\ Id. at Section 6.1(p).
---------------------------------------------------------------------------

    The Plan Processor may appoint such officers of the Plan Processor
as it deems necessary and appropriate to perform its functions under
the Plan and Rule 613.\153\ The Plan Processor, however, will be
required to appoint, at a

minimum, the CCO, the CISO, and the Independent Auditor.\154\ The
Operating Committee, by Supermajority Vote, will approve any
appointment or removal of the CCO, CISO, or the Independent
Auditor.\155\
---------------------------------------------------------------------------

    \153\ Id. at Section 6.1(b).
    \154\ Id.
    \155\ Id.
---------------------------------------------------------------------------

    In addition to a CCO, the Plan Processor will designate at least
one other employee (in addition to the person then serving as CCO),
which employee the Operating Committee has previously approved, to
serve temporarily as the CCO if the employee then serving as the CCO
becomes unavailable or unable to serve in such capacity (including by
reason of injury or illness).\156\ Any person designated to serve as
the CCO (including to serve temporarily) will be appropriately
qualified to serve in such capacity based on the duties and
responsibilities assigned to the CCO and will dedicate such person's
entire working time to such service (or temporary service) except for
any time required to attend to any incidental administrative matters
related to such person's employment with the Plan Processor that do not
detract in any material respect from such person's service as the
CCO.\157\ Article VI sets forth various responsibilities of the CCO.
With respect to all of his or her duties and responsibilities in such
capacity (including those as set forth in the Plan), the CCO will be
directly responsible and will directly report to the Operating
Committee, notwithstanding that she or he is employed by the Plan
Processor.\158\ The Plan Processor, subject to the oversight of the
Operating Committee, will ensure that the CCO has appropriate resources
to fulfill his or her obligations under the Plan and Rule 613.\159\ The
compensation (including base salary and bonus) of the CCO will be
payable by the Plan Processor, but be subject to review and approval by
the Operating Committee.\160\ The Operating Committee will render the
CCO's annual performance review.\161\
---------------------------------------------------------------------------

    \156\ Id.
    \157\ Id.
    \158\ Id. at Section 6.2(a)(iii).
    \159\ Id. at Section 6.2(a)(ii).
    \160\ Id. at Section 6.2(a)(iv).
    \161\ Id. at Section 6.2(b)(i).
---------------------------------------------------------------------------

    In addition to a CISO, the Plan Processor will designate at least
one other employee (in addition to the person then serving as CISO),
which employee the Operating Committee has previously approved, to
serve temporarily as the CISO if the employee then serving as the CISO
becomes unavailable or unable to serve in such capacity (including by
reason of injury or illness).\162\ Any person designated to serve as
the CISO (including to serve temporarily) will be appropriately
qualified to serve in such capacity based on the duties and
responsibilities assigned to the CISO under the Plan and will dedicate
such person's entire working time to such service (or temporary
service) except for any time required to attend to any incidental
administrative matters related to such person's employment with the
Plan Processor that do not detract in any material respect from such
person's service as the CISO.\163\
---------------------------------------------------------------------------

    \162\ Id.
    \163\ Id.
---------------------------------------------------------------------------

    The Plan Processor, subject to the oversight of the Operating
Committee, will ensure that the CISO has appropriate resources to
fulfill the obligations of the CISO set forth in Rule 613 and in the
Plan, including providing appropriate responses to questions posed by
the Participants and the SEC.\164\ In performing such obligations, the
CISO will be directly responsible and directly report to the Operating
Committee, notwithstanding that he or she is employed by the Plan
Processor.\165\ The compensation (including base salary and bonus) of
the CISO will be payable by the Plan Processor, but be subject to
review and approval by the Operating Committee, and the Operating
Committee will render the CISO's annual performance review.\166\
Consistent with Appendices C and D, the CISO will be responsible for
creating and enforcing appropriate policies, procedures, standards,
control structures and real-time tools to monitor and address data
security issues for the Plan Processor and the Central Repository, as
described in the Plan.\167\ At regular intervals, to the extent that
such information is available to the Company, the CISO will report to
the Operating Committee the activities of the Financial Services
Information Sharing and Analysis Center (``FS-ISAC'') or comparable
bodies to the extent that the Company has joined FS-ISAC or other
comparable body.\168\
---------------------------------------------------------------------------

    \164\ Id. at Section 6.2(b)(ii).
    \165\ Id. at Section 6.2(b)(iii).
    \166\ Id. at Section 6.2(b)(iv).
    \167\ Id. at Section 6.2(b)(v).
    \168\ Id. at Section 6.2(b)(vi).
---------------------------------------------------------------------------

    The Plan Processor will afford to the Participants and the
Commission such access to the Representatives of the Plan Processor as
any Participant or the Commission may reasonably request solely for the
purpose of performing such Person's regulatory and oversight
responsibilities pursuant to the federal securities laws, rules, and
regulations or any contractual obligations.\169\ The Plan Processor
will direct such Representatives to reasonably cooperate with any
inquiry, investigation, or proceeding conducted by or on behalf of any
Participant or the Commission related to such purpose.\170\
---------------------------------------------------------------------------

    \169\ Id. at Section 6.1(u).
    \170\ Id.
---------------------------------------------------------------------------

    The Operating Committee will review the Plan Processor's
performance under the Plan at least once each year, or more often than
once each year upon the request of two or more Participants that are
not Affiliated Participants.\171\ The Operating Committee will notify
the SEC of any determination made by the Operating Committee concerning
the continuing engagement of the Plan Processor as a result of the
Operating Committee's review of the Plan Processor and will provide the
SEC with a copy of any reports that may be prepared in connection
therewith.\172\
---------------------------------------------------------------------------

    \171\ Id. at Section 6.1(n).
    \172\ Id.
---------------------------------------------------------------------------

    The Operating Committee, by Supermajority Vote, may remove the Plan
Processor from such position at any time.\173\ However, the Operating
Committee, by Majority Vote, may remove the Plan Processor from such
position at any time if it determines that the Plan Processor has
failed to perform its functions in a reasonably acceptable manner in
accordance with the provisions of the Plan or that the Plan Processor's
expenses have become excessive and are not justified.\174\ In making
such a determination, the Operating Committee will consider, among
other factors: (1) The reasonableness of the Plan Processor's response
to requests from Participants or the Company for technological changes
or enhancements; (2) results of any assessments performed pursuant to
Section 6.6; (3) the timeliness of preventative and corrective
information technology system maintenance for reliable and secure
operations; (4) compliance with requirements of Appendix D; and (5)
such other factors related to experience, technological capability,
quality and reliability of service, costs, back-up facilities, failure
to meet service level agreement(s) and regulatory considerations as the
Operating Committee may determine to be appropriate.\175\
---------------------------------------------------------------------------

    \173\ Id. at Section 6.1(q).
    \174\ Id. at Section 6.1(r).
    \175\ Id.
---------------------------------------------------------------------------

    In addition, the Plan Processor may resign upon two year's (or such
other shorter period as may be determined by the Operating Committee by

Supermajority Vote) prior written notice.\176\ The Operating Committee
will fill any vacancy in the Plan Processor position by Supermajority
Vote, and will establish a Plan Processor Selection Subcommittee to
evaluate and review Bids and make a recommendation to the Operating
Committee with respect to the selection of the successor Plan
Processor.\177\
---------------------------------------------------------------------------

    \176\ Id. at Section 6.1(s).
    \177\ Id. at Section 6.1(t).
---------------------------------------------------------------------------

b. Central Repository
    The Central Repository, under the oversight of the Plan Processor,
and consistent with Appendix D, Central Repository Requirements, will
receive, consolidate, and retain all CAT Data.\178\ The Central
Repository will collect (from a Securities Information Processor
(``SIP'') or pursuant to an NMS plan) and retain on a current and
continuing basis, in a format compatible with the Participant Data and
Industry Member Data, all data, including the following: (1)
Information, including the size and quote condition, on quotes,
including the National Best Bid and National Best Offer for each NMS
Security; \179\ (2) Last Sale Reports and transaction reports reported
pursuant to an effective transaction reporting plan filed with the SEC
pursuant to, and meeting the requirements of, Rules 601 and 608; \180\
(3) trading halts, Limit Up-Limit Down price bands and LULD indicators;
\181\ and (4) summary data or reports described in the specifications
for each of the SIPs and disseminated by the respective SIP.\182\
---------------------------------------------------------------------------

    \178\ Id. at Section 6.5(a)(i).
    \179\ Id. at Section 6.5(a)(ii)(A).
    \180\ Id. at Section 6.5(a)(ii)(B).
    \181\ Id. at Section 6.5(a)(ii)(C).
    \182\ Id. at Section 6.5(a)(ii)(D).
---------------------------------------------------------------------------

    Consistent with Appendix D, Data Retention Requirements, the
Central Repository will retain the information collected pursuant to
paragraphs (c)(7) and (e)(7) of Rule 613 in a convenient and usable
standard electronic data format that is directly available and
searchable electronically without any manual intervention by the Plan
Processor for a period of not less than six years. Such data, when
available to the Participants' regulatory Staff and the SEC, will be
linked.\183\ In addition, the Plan Processor will implement and comply
with the records retention policy contemplated by Section
6.1(d)(i).\184\
---------------------------------------------------------------------------

    \183\ Id. at Section 6.5(b)(i).
    \184\ Id. at Section 6.5(b)(ii).
---------------------------------------------------------------------------

    Consistent with Appendix D, Data Access, the Plan Processor will
provide Participants and the SEC access to the Central Repository
(including all systems operated by the Central Repository), and access
to and use of the CAT Data stored in the Central Repository, solely for
the purpose of performing their respective regulatory and oversight
responsibilities pursuant to the federal securities laws, rules and
regulations or any contractual obligations.\185\ The Plan Processor
will create and maintain a method of access to the CAT Data stored in
the Central Repository that includes the ability to run searches and
generate reports.\186\ The method in which the CAT Data is stored in
the Central Repository will allow the ability to return results of
queries that are complex in nature, including market reconstructions
and the status of order books at varying time intervals.\187\ The Plan
Processor will, at least annually and at such earlier time promptly
following a request by the Operating Committee, certify to the
Operating Committee that only the Participants and the SEC have access
to the Central Repository (other than access provided to any Industry
Member for the purpose of correcting CAT Data previously reported to
the Central Repository by such Industry Member).\188\
---------------------------------------------------------------------------

    \185\ Id. at Section 6.5(c)(i).
    \186\ Id. at Section 6.5(c)(ii).
    \187\ Id. at Section 6.5(c)(ii).
    \188\ Id. at Section 6.5(c)(iii); see also id. at Appendix C,
The Security and Confidentiality of Information Reported to the
Central Repository, and Appendix D, Data Security, describe the
security and confidentiality of the CAT Data, including how access
to the Central Repository is controlled.
---------------------------------------------------------------------------

c. Data Recording and Reporting by Participants
    The Plan also sets forth the requirements regarding the data
recording and reporting by Participants.\189\ Each Participant will
record and electronically report to the Central Repository the
following details for each order and each Reportable Event,\190\ as
applicable (``Participant Data;'' also referred to as ``Recorded
Industry Member Data'', as discussed in the next Section):
---------------------------------------------------------------------------

    \189\ See CAT NMS Plan, supra note 5, at Section 6.3.
Participants may, but are not required to, coordinate compliance
with the recording and reporting efforts through the use of
regulatory services agreements and/or agreements adopted pursuant to
Rule 17d-2 under the Exchange Act.
    \190\ See CAT NMS Plan, supra note 5, at Section 6.5(d). The CAT
NMS Plan defines ``Reportable Event'' as ``includ[ing], but . . .
not limited to, the original receipt or origination, modification,
cancellation, routing, execution (in whole or in part) and
allocation of an order, and receipt of a routed order.'' Id. at
Section 1.1.

    for original receipt or origination of an order: (1) Firm
Designated ID(s) (FDIs) for each customer; \191\ (2) CAT-Order-ID;
\192\ (3) SRO-Assigned Market Participant Identifier of the Industry
Member receiving or originating the order; \193\ (4) date of order
receipt or origination; \194\ (5) time of order receipt or
origination (using time stamps pursuant to Section 6.8); \195\ and
(6) the Material Terms of the Order.\196\
---------------------------------------------------------------------------

    \191\ Id. at Section 6.3(d)(i)(A).
    \192\ Id. at Section 6.3(d)(i)(B).
    \193\ Id. at Section 6.3(d)(i)(C).
    \194\ Id. at Section 6.3(d)(i)(D).
    \195\ Id. at Section 6.3(d)(i)(E).
    \196\ Id. at Section 6.3(d)(i)(F). For a discussion of the
Material Terms of the Order required by Rule 613, see Adopting
Release, supra note 14, at 45750-52. The Commission notes that the
Participants include in the Plan a requirement for the reporting of
the OTC Equity Security symbol as one of the ``Material Terms of the
Order.'' See CAT NMS Plan, supra note 5, at Section 1.1.
---------------------------------------------------------------------------

    for the routing of an order: (1) CAT-Order-ID; \197\ (2) date on
which the order is routed; \198\ (3) time at which the order is
routed (using time stamps pursuant to Section 6.8); \199\ (4) SRO-
Assigned Market Participant Identifier of the Industry Member or
Participant routing the order; \200\ (5) SRO-Assigned Market
Participant Identifier of the Industry Member or Participant to
which the order is being routed; \201\ (6) if routed internally at
the Industry Member, the identity and nature of the department or
desk to which the order is routed; \202\ and (7) the Material Terms
of the Order.\203\
---------------------------------------------------------------------------

    \197\ See CAT NMS Plan, supra note 5, at Section 6.3(d)(ii)(A).
    \198\ Id. at Section 6.3(d)(ii)(B).
    \199\ Id. at Section 6.3(d)(ii)(C).
    \200\ Id. at Section 6.3(d)(ii)(D).
    \201\ Id. at Section 6.3(d)(ii)(E).
    \202\ Id. at Section 6.3(d)(ii)(F).
    \203\ Id. at Section 6.3(d)(ii)(G).
---------------------------------------------------------------------------

    for the receipt of an order that has been routed, the following
information: (1) CAT-Order-ID; \204\ (2) date on which the order is
received; \205\ (3) time at which the order is received (using time
stamps pursuant to Section 6.8); \206\ (4) SRO-Assigned Market
Participant Identifier of the Industry Member or Participant
receiving the order; \207\ (5) SRO-Assigned Market Participant
Identifier of the Industry Member or Participant routing the order;
\208\ and (6) the Material Terms of the Order.\209\
---------------------------------------------------------------------------

    \204\ Id. at Section 6.3(d)(iii)(A).
    \205\ Id. at Section 6.3(d)(iii)(B).
    \206\ Id. at Section 6.3(d)(iii)(C).
    \207\ Id. at Section 6.3(d)(iii)(D).
    \208\ Id. at Section 6.3(d)(iii)(E).
    \209\ Id. at Section 6.3(d)(iii)(F).
---------------------------------------------------------------------------

    if the order is modified or cancelled: (1) CAT-Order-ID; \210\
(2) date the modification or cancellation is received or originated;
\211\ (3) time at which the modification or cancellation is received
or originated (using time stamps pursuant to Section 6.8); \212\ (4)
price and remaining size of the order, if modified; \213\ (5) other
changes in Material Terms, if modified; \214\ and (6) whether the
modification or cancellation instruction was given by the Customer,
or was initiated by the Industry Member or Participant.\215\
---------------------------------------------------------------------------

    \210\ Id. at Section 6.3(d)(iv)(A).
    \211\ Id. at Section 6.3(d)(iv)(B).
    \212\ Id. at Section 6.3(d)(iv)(C).
    \213\ Id. at Section 6.3(d)(iv)(D).
    \214\ Id. at Section 6.3(d)(iv)(E).
    \215\ Id. at Section 6.3(d)(iv)(F).

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

    if the order is executed, in whole or in part: (1) CAT-Order-ID;
\216\ (2) date of execution; \217\ (3) time of execution (using time
stamps pursuant to Section 6.8); \218\ (4) execution capacity
(principal, agency or riskless principal); \219\ (5) execution price
and size;\220\ (6) the SRO-Assigned Market Participant Identifier of
the Participant or Industry Member executing the order; \221\ (7)
whether the execution was reported pursuant to an effective
transaction reporting plan or the Plan for Reporting of Consolidated
Options Last Sale Reports and Quotation Information; \222\ and (8)
other information or additional events as may otherwise be
---------------------------------------------------------------------------
prescribed in Appendix D, Reporting and Linkage Requirements.\223\

    \216\ Id. at Section 6.3(d)(v)(A).

    \217\ Id. at Section 6.3(d)(v)(B).
    \218\ Id. at Section 6.3(d)(v)(C).
    \219\ Id. at Section 6.3(d)(v)(D).
    \220\ Id. at Section 6.3(d)(v)(E).
    \221\ Id. at Section 6.3(d)(v)(F).
    \222\ Id. at Section 6.3(d)(v)(G).
    \223\ Id. at Section 6.3(d)(vi).
---------------------------------------------------------------------------

    As contemplated in Appendix D, Data Types and Sources, each
Participant will report Participant Data to the Central Repository for
consolidation and storage in a format specified by the Plan Processor,
approved by the Operating Committee and compliant with Rule 613.\224\
As further described in Appendix D, Reporting and Linkage Requirements,
each Participant is required to record the Participant Data
contemporaneously with the Reportable Event.\225\ In addition, each
Participant must report the Participant Data to the Central Repository
by 8:00 a.m. Eastern Time (``ET'') on the Trading Day following the day
that the Participant recorded the Participant Data.\226\ Participants
may voluntarily report the Participant Data prior to the 8:00 a.m. ET
deadline.\227\
---------------------------------------------------------------------------

    \224\ Id. at Section 6.3(a); Appendix D, Section 2.1.
    \225\ Id. at Section 6.3(b)(i); Appendix D, Section 3.
    \226\ Id. at Section 6.3(b)(ii).
    \227\ Id. at Section 6.3(b)(ii).
---------------------------------------------------------------------------

    Each Participant that is a national securities exchange is required
to comply with the above recording and reporting requirements for each
NMS Security registered or listed for trading on such exchange or
admitted to unlisted trading privileges on such exchange.\228\ Each
Participant that is a national securities association is required to
comply with the above recording and reporting requirements for each
Eligible Security for which transaction reports are required to be
submitted to the association.\229\
---------------------------------------------------------------------------

    \228\ Id. at Section 6.3(c)(i).
    \229\ Id. at Section 6.3(c)(ii).
---------------------------------------------------------------------------

d. Data Reporting and Recording by Industry Members
    The Plan also sets forth the data reporting and recording
requirements for Industry Members. Specifically, subject to Section
6.4(c), and Section 6.4(d)(iii) with respect to Options Market Makers,
and consistent with Appendix D, Reporting and Linkage Requirements,
each Participant, through its Compliance Rule, will require its
Industry Members to record and electronically report to the Central
Repository for each order and each Reportable Event the information
referred to in Section 6.3(d), as applicable (``Recorded Industry
Member Data'')--that is, Participant Data discussed above.\230\ In
addition, subject to Section 6.4(c), and Section 6.4(d)(iii) with
respect to Options Market Makers, and consistent with Appendix D,
Reporting and Linkage Requirements, each Participant, through its
Compliance Rule, will require its Industry Members to record and report
to the Central Repository the following (``Received Industry Member
Data'' and, collectively with the Recorded Industry Member Data,
``Industry Member Data''): (1) If the order is executed, in whole or in
part: (a) An Allocation Report; \231\ (b) SRO-Assigned Market
Participant Identifier of the clearing broker or prime broker, if
applicable; and (c) CAT-Order-ID of any contra-side order(s); (2) if
the trade is cancelled, a cancelled trade indicator; and (3) for
original receipt or origination of an order, information of sufficient
detail to identify the Customer.\232\
---------------------------------------------------------------------------

    \230\ Id. at Section 6.4(d)(i).
    \231\ Id. at Section 6.4(d)(ii).
    \232\ Id.
---------------------------------------------------------------------------

    With respect to the reporting obligations of an Options Market
Maker with regard to its quotes in Listed Options, Reportable Events
required pursuant to Sections 6.3(d)(ii) and (iv) will be reported to
the Central Repository by an Options Exchange in lieu of the reporting
of such information by the Options Market Maker.\233\ Each Participant
that is an Options Exchange will, through its Compliance Rule, require
its Industry Members that are Options Market Makers to report to the
Options Exchange the time at which a quote in a Listed Option is sent
to the Options Exchange (and, if applicable, any subsequent quote
modifications and/or cancellation time when such modification or
cancellation is originated by the Options Market Maker).\234\ Such time
information also will be reported to the Central Repository by the
Options Exchange in lieu of reporting by the Options Market Maker.\235\
---------------------------------------------------------------------------

    \233\ Id. at Section 6.4(d)(iii).
    \234\ Id.
    \235\ Id.
---------------------------------------------------------------------------

    Each Participant will, through its Compliance Rule, require its
Industry Members to record and report to the Central Repository other
information or additional events as prescribed in Appendix D, Reporting
and Linkage Requirements.\236\
---------------------------------------------------------------------------

    \236\ Id. at Section 6.4(d)(v).
---------------------------------------------------------------------------

    As contemplated in Appendix D, Data Types and Sources, each
Participant will require its Industry Members to report Industry Member
Data to the Central Repository for consolidation and storage in a
format(s) specified by the Plan Processor, approved by the Operating
Committee and compliant with Rule 613.\237\ As further described in
Appendix D, Reporting and Linkage Requirements, each Participant will
require its Industry Members to record Recorded Industry Member Data
contemporaneously with the applicable Reportable Event.\238\ In
addition, consistent with Appendix D, Reporting and Linkage
Requirements, each Participant will require its Industry Members to
report: (1) Recorded Industry Member Data to the Central Repository by
8:00 a.m. ET on the Trading Day following the day the Industry Member
records such Recorded Industry Member Data; and (2) Received Industry
Member Data to the Central Repository by 8:00 a.m. ET on the Trading
Day following the day the Industry Member receives such Received
Industry Member Data.\239\ Each Participant will permit its Industry
Members to voluntarily report Industry Member Data prior to the
applicable 8:00 a.m. ET deadline.\240\
---------------------------------------------------------------------------

    \237\ Id. at Section 6.4(e).
    \238\ Id. at Section 6.4(b)(i).
    \239\ Id. at Section 6.4(b)(ii).
    \240\ Id.
---------------------------------------------------------------------------

    Each Participant that is a national securities exchange must
require its Industry Members to report Industry Member Data for each
NMS Security registered or listed for trading on such exchange or
admitted to unlisted trading privileges on such exchange.\241\ Each
Participant that is a national securities association must require its
Industry Members to report Industry Member Data for each Eligible
Security for which transaction reports are required to be submitted to
the association.\242\
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    \241\ Id. at Section 6.4(c)(i).
    \242\ Id. at Section 6.4(c)(ii).
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e. Written Assessment
    As described in Article VI, the Participants are required to
provide the Commission with a written assessment of the operation of
the CAT that meets the requirements set forth in Rule 613, Appendix D,
and the Plan at least every

two years or more frequently in connection with any review of the Plan
Processor's performance under the Plan pursuant to Section 6.1(n).\243\
The CCO will oversee this assessment and will provide the Participants
a reasonable time to review and comment upon the written assessment
prior to its submission to the SEC.\244\ In no case will the written
assessment be changed or amended in response to a comment from a
Participant; rather any comment by a Participant will be provided to
the SEC at the same time as the written assessment.\245\
---------------------------------------------------------------------------

    \243\ See CAT NMS Plan, supra note 5, at Section 6.6(a)(i).
    \244\ Id. at Section 6.6(a)(ii).
    \245\ Id.
---------------------------------------------------------------------------

f. Business Clock Synchronization and Timestamp
    Section 6.8 of the Plan discusses the synchronization of Business
Clocks \246\ and timestamps.
---------------------------------------------------------------------------

    \246\ Id. at Section 1.1. The CAT NMS Plan defines a ``Business
Clock'' to mean ``a clock used to record the date and time of any
Reportable Event required to be reported under SEC Rule 613.'' Id.
---------------------------------------------------------------------------

    Each Participant is required to synchronize its Business Clocks
(other than such Business Clocks used solely for Manual Order Events)
at a minimum to within 50 milliseconds of the time maintained by the
National Institute of Standards and Technology (``NIST''), consistent
with industry standards.\247\ In addition, each Participant must,
through its Compliance Rule, require its Industry Members to: (1)
Synchronize their respective Business Clocks (other than such Business
Clocks used solely for Manual Order Events) at a minimum to within 50
milliseconds of the time maintained by the NIST, and maintain such a
synchronization; (2) certify periodically that their Business Clocks
meet the requirements of the Compliance Rule; and (3) report to the
Plan Processor and the Participant any violation of the Compliance Rule
pursuant to the thresholds set by the Operating Committee.\248\
Furthermore, each Participant is required to synchronize its Business
Clocks and, through its Compliance Rule, require its Industry Members
to synchronize their Business Clocks used solely for Manual Order
Events at a minimum to within one second of the time maintained by the
NIST, consistent with industry standards, and maintain such
synchronization.\249\ Each Participant will require its Industry
Members to certify periodically (according to a schedule defined by the
Operating Committee) that their Business Clocks used solely for Manual
Order Events meet the requirements of the Compliance Rule.\250\ The
Compliance Rule of a Participant shall require its Industry Members
using Business Clocks solely for Manual Order Events to report to the
Plan Processor any violation of the Compliance Rule pursuant to the
thresholds set by the Operating Committee.\251\ Pursuant to Section
6.8(c) of the CAT NMS Plan, the CCO, in conjunction with the
Participants and other appropriate Industry Member advisory groups,
annually must evaluate and make a recommendation to the Operating
Committee as to whether the industry standard has evolved such that the
clock synchronization standard should be tightened.\252\
---------------------------------------------------------------------------

    \247\ Id. at Section 6.8(a)(i). Participants and Industry
Members reviewed their respective internal clock synchronization
technology practices, and reviewed the results of The Financial
Information Forum (``FIF'') Clock Offset and determined that a 50
millisecond clock offset tolerance was consistent with the current
industry clock synchronization standard. See CAT NMS Plan, supra
note 5, at Appendix C, Section A.3(c) and D.12(p); see also
Financial Information Forum, FIF Clock Offset Survey Preliminary
Report (February 17, 2015), available at http://www.catnmsplan.com/industryfeedback/p602479.pdf and<EMAIL_ADDRESS>(``FIF Clock
Offset Survey'').
    \248\ See CAT NMS Plan, supra note 5, at Section 6.8(a)(ii).
    \249\ Id. at Section 6.8(a)(iii).
    \250\ Id.
    \251\ Id.
    \252\ Id. at Section 6.8(c).
---------------------------------------------------------------------------

    Appendix C discusses mechanisms to ensure compliance with the 50
millisecond clock offset tolerance.\253\ The Participants anticipate
that they and Industry Members will adopt policies and procedures to
verify the required clock synchronization each trading day before the
market opens, as well as periodically throughout the trading day.\254\
The Participants also anticipate that they and Industry Members will
document their clock synchronization procedures and maintain a log
recording the time of each clock synchronization performed, and the
result of such synchronization, specifically identifying any
synchronization revealing any clock offset between the Participant's or
Industry Member's Business Clock and the time maintained by the NIST
exceeding 50 milliseconds.\255\ The CAT NMS Plan states that once both
large and small broker-dealers begin reporting to the Central
Repository, and as clock synchronization technology matures further,
the Participants will assess, in accordance with Rule 613, tightening
the CAT's clock synchronization standards to reflect changes in
industry standards.\256\
---------------------------------------------------------------------------

    \253\ See id. at Appendix C, Section A.3(c).
    \254\ See id.
    \255\ See id. It was noted that such a log would include results
for a period of not less than five years ending on the then current
date. Id.
    \256\ See id. at Appendix C, Section D.12(p).
---------------------------------------------------------------------------

    Each Participant shall, and through its Compliance Rule require its
Industry Members to, report information required by Rule 613 and the
Plan to the Central Repository in milliseconds.\257\ To the extent that
any Participant utilizes timestamps in increments finer than the
minimum required by the Plan, the Participant is required to make
reports to the Central Repository utilizing such finer increment when
reporting CAT Data to the Central Repository so that all Reportable
Events reported to the Central Repository could be adequately
sequenced. Each Participant will, through its Compliance Rule: (1)
Require that, to the extent that its Industry Members utilize
timestamps in increments finer than the minimum required in the Plan,
such Industry Members will utilize such finer increment when reporting
CAT Data to the Central Repository; and (2) provide that a pattern or
practice of reporting events outside of the required clock
synchronization time period without reasonable justification or
exceptional circumstances may be considered a violation of SEC Rule 613
and the Plan.\258\ Notwithstanding the preceding sentences, each
Participant and Industry Member will be permitted to record and report
Manual Order Events to the Central Repository in increments up to and
including one second, provided that Participants and Industry Members
will be required to record and report the time when a Manual Order
Event has been captured electronically in an order handling and
execution system of such Participant or Industry Member (``Electronic
Capture Time'') in milliseconds.\259\ In conjunction with Participants'
and other appropriate Industry Member advisory groups, the CCO will
annually evaluate and make a recommendation to the Operating Committee
as to whether industry standards have evolved such that the required
synchronization should be shortened or the required timestamp should be
in finer increments.\260\ The Operating Committee will make
determinations regarding the need to revise the synchronization and
timestamp requirements.\261\
---------------------------------------------------------------------------

    \257\ See id. at Section 6.8(b).
    \258\ Id. at Section 6.8(b).
    \259\ Id.
    \260\ Id. at Section 6.8(c).
    \261\ Id. at Sections 6.8(a)(ii)(C), 6.8(a)(iii).

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

g. Technical Specifications
    Section 6.9 of the Plan establishes the requirements involving the
Plan Processor's Technical Specifications. The Plan Processor will
publish Technical Specifications that are at a minimum consistent with
Appendices C and D, and updates thereto as needed, providing detailed
instructions regarding the submission of CAT Data by Participants and
Industry Members to the Plan Processor for entry into the Central
Repository.\262\ The Technical Specifications will be made available on
a publicly available Web site to be developed and maintained by the
Plan Processor.\263\ The initial Technical Specifications and any
Material Amendments thereto will require the approval of the Operating
Committee by Supermajority Vote.\264\
---------------------------------------------------------------------------

    \262\ Id. at Section 6.9(a).
    \263\ Id.
    \264\ Id.
---------------------------------------------------------------------------

    The Technical Specifications will include a detailed description of
the following: (1) The specifications for the layout of files and
records submitted to the Central Repository; (2) the process for the
release of new data format specification changes; (3) the process for
industry testing for any changes to data format specifications; (4) the
procedures for obtaining feedback about and submitting corrections to
information submitted to the Central Repository; (5) each data element,
including permitted values, in any type of report submitted to the
Central Repository; (6) any error messages generated by the Plan
Processor in the course of validating the data; (7) the process for
file submissions (and re-submissions for corrected files); (8) the
storage and access requirements for all files submitted; (9) metadata
requirements for all files submitted to the CAT System; (10) any
required secure network connectivity; (11) data security standards,
which will, at a minimum: (a) Satisfy all applicable regulations
regarding database security, including provisions of Regulation Systems
Compliance and Integrity under the Exchange Act (``Reg SCI''); (b) to
the extent not otherwise provided for under the Plan (including
Appendix C thereto), set forth such provisions as may be necessary or
appropriate to comply with Rule 613(e)(4); and (c) comply with industry
best practices; and (12) any other items reasonably deemed appropriate
by the Plan Processor and approved by the Operating Committee.\265\
---------------------------------------------------------------------------

    \265\ Id. at Section 6.9(b).
---------------------------------------------------------------------------

    Amendments to the Technical Specifications may be made only in
accordance with Section 6.9(c).\266\ The process for amending the
Technical Specifications varies depending on whether the change is
material. An amendment will be deemed ``material'' if it would require
a Participant or an Industry Member to engage in significant changes to
the coding necessary to submit information to the Central Repository
pursuant to the Plan, or if it is required to safeguard the security or
confidentiality of the CAT Data.\267\ Except for Material Amendments to
the Technical Specifications, the Plan Processor will have the sole
discretion to amend and publish interpretations regarding the Technical
Specifications; however, all non-Material Amendments made to the
Technical Specifications and all published interpretations will be
provided to the Operating Committee in writing at least ten days before
being published.\268\ Such non-Material Amendments and published
interpretations will be deemed approved ten days following provision to
the Operating Committee unless two or more unaffiliated Participants
call for a vote to be taken on the proposed amendment or
interpretation.\269\ If an amendment or interpretation is called for a
vote by two or more unaffiliated Participants, the proposed amendment
must be approved by Majority Vote of the Operating Committee.\270\ Once
a non-Material Amendment has been approved or deemed approved by the
Operating Committee, the Plan Processor will be responsible for
determining the specific changes to the Central Repository and
providing technical documentation of those changes, including an
implementation timeline.\271\
---------------------------------------------------------------------------

    \266\ Id. at Section 6.9(c).
    \267\ Id.
    \268\ Id. at Section 6.9(c)(i).
    \269\ Id.
    \270\ Id.
    \271\ Id.
---------------------------------------------------------------------------

    Material Amendments to the Technical Specifications require
approval of the Operating Committee by Supermajority Vote.\272\ The
Operating Committee, by Supermajority Vote, may amend the Technical
Specifications on its own motion.\273\
---------------------------------------------------------------------------

    \272\ Id. at Section 6.9(c)(ii).
    \273\ Id. at Section 6.9(c)(iii).
---------------------------------------------------------------------------

h. Surveillance
    Surveillance requirements are described in Section 6.10. Using the
tools provided for in Appendix D, Functionality of the CAT System, each
Participant will develop and implement a surveillance system, or
enhance existing surveillance systems, reasonably designed to make use
of the consolidated information contained in the Central
Repository.\274\ Unless otherwise ordered by the SEC, within fourteen
months after the Effective Date, each Participant must initially
implement a new or enhanced surveillance system(s) as required by Rule
613 and Section 6.10(a) of the Plan.\275\ Participants may, but are not
required to, coordinate surveillance efforts through the use of
regulatory services agreements and agreements adopted pursuant to Rule
17d-2 under the Exchange Act.\276\
---------------------------------------------------------------------------

    \274\ See CAT NMS Plan, supra note 5, at Section 6.10(a).
    \275\ Id.
    \276\ Id. at Section 6.10(b).
---------------------------------------------------------------------------

    Consistent with Appendix D, Functionality of the CAT System, the
Plan Processor will provide Participants and the SEC with access to all
CAT Data stored in the Central Repository. Regulators will have access
to processed CAT Data through two different methods: (1) An online
targeted query tool; and (2) user-defined direct queries and bulk
extracts.\277\ The online targeted query tool will provide authorized
users with the ability to retrieve CAT Data via an online query screen
that includes the ability to choose from a variety of pre-defined
selection criteria.\278\ Targeted queries must include date(s) and/or
time range(s), as well as one or more of a variety of fields.\279\ The
user-defined direct queries and bulk extracts will provide authorized
users with the ability to retrieve CAT Data via a query tool or
language that allows users to query all available attributes and data
sources.\280\
---------------------------------------------------------------------------

    \277\ Id. at Section 6.10(c)(i).
    \278\ Id. at Section 6.10(c)(i)(A).
    \279\ Id.
    \280\ Id. at Section 6.10(c)(i)(B).
---------------------------------------------------------------------------

    Extraction of CAT Data will be consistent with all permission
rights granted by the Plan Processor.\281\ All CAT Data returned will
be encrypted, and PII data \282\ will be masked unless users have
permission to view the PII contained in the CAT Data that has been
requested.\283\
---------------------------------------------------------------------------

    \281\ Id. at Section 6.10(c)(ii).
    \282\ The proposed CAT NMS Plan defines PII as ``personally
identifiable information, including a social security number or tax
identifier number or similar information.'' Id. at Section 1.1.
    \283\ Id. at Section 6.10(c)(ii).
---------------------------------------------------------------------------

    The Plan Processor will implement an automated mechanism to monitor
direct query usage.\284\ Such monitoring will

include automated alerts to notify the Plan Processor of potential
issues with bottlenecks or excessively long queues for queries or CAT
Data extractions.\285\ The Plan Processor will provide the Operating
Committee or its designee(s) details as to how the monitoring will be
accomplished and the metrics that will be used to trigger alerts.\286\
---------------------------------------------------------------------------

    \284\ Id. at Section 6.10(c)(iii) (providing that ``[s]uch
monitoring shall include automated alerts to notify the Plan
Processor of potential issues with bottlenecks or excessively long
queues for queries or CAT Data extractions. The Plan Processor shall
provide the Operating Committee or its designee(s) details as to how
the monitoring will be accomplished and the metrics that will be
used to trigger alerts'').
    \285\ Id.
    \286\ Id.
---------------------------------------------------------------------------

    The Plan Processor will reasonably assist regulatory Staff
(including those of Participants) with creating queries.\287\ Without
limiting the manner in which regulatory Staff (including those of
Participants) may submit queries, the Plan Processor will submit
queries on behalf of regulatory Staff (including those of Participants)
as reasonably requested.\288\ The Plan Processor will staff a CAT help
desk, as described in Appendix D, CAT Help Desk, to provide technical
expertise to assist regulatory Staff (including those of Participants)
with questions about the content and structure of the CAT Data.\289\
---------------------------------------------------------------------------

    \287\ Id. at 6.10(c)(iv).
    \288\ Id. at Section 6.10(c)(v).
    \289\ Id. at Section 6.10(c)(vi).
---------------------------------------------------------------------------

i. Information Security Program
    As set forth in Section 6.12, the Plan Processor is required to
develop and maintain a comprehensive information security program for
the Central Repository that contains, at a minimum, the specific
requirements detailed in Appendix D, Data Security. The information
security program must be approved and reviewed at least annually by the
Operating Committee.\290\
---------------------------------------------------------------------------

    \290\ Id. at Section 6.12.
---------------------------------------------------------------------------

6. Financial Matters

    Articles VII and VIII of the Plan address certain financial matters
related to the Company. In particular, the Plan states that, subject to
certain special allocations provided for in Section 8.2, any net profit
or net loss will be allocated among the Participants equally.\291\ In
addition, subject to Section 10.2, cash and property of the Company
will not be distributed to the Participants unless the Operating
Committee approves by Supermajority Vote a distribution after fully
considering the reason that such distribution must or should be made to
the Participants, including the circumstances contemplated under
Section 8.3, Section 8.6, and Section 9.3.\292\ To the extent a
distribution is made, all Participants will participate equally in any
such distribution except as otherwise provided in Section 10.2.\293\
---------------------------------------------------------------------------

    \291\ Id. at Section 8.1.
    \292\ Id. at Section 8.5(a).
    \293\ Id.
---------------------------------------------------------------------------

    Article XI addresses the funding of the Company. On an annual basis
the Operating Committee will approve an operating budget for the
Company.\294\ The budget will include the projected costs of the
Company, including the costs of developing and operating the CAT System
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.\295\