Pursuant to section 31 of the Exchange Act, a national securities
exchange must pay the Commission a fee based on the aggregate dollar
amount of sales of securities transacted on the exchange, and a
national securities association must pay the Commission a fee based on
the aggregate dollar amount of sales of securities transacted by or
through any member of the association otherwise than on a national
securities exchange (collectively, ``covered sales''). The SEC
calculates the amount of section 31 fees due from each exchange or
FINRA by multiplying the aggregate dollar amount of its covered sales
by the fee rate set by the Commission in a procedure set forth in
section 31(j) of the Exchange Act. These fees are designed to recover
the costs related to the government's supervision and regulation of the
securities markets and securities professionals. Section 31 requires
the SEC to make annual and, in some cases, mid-year adjustments to the
fee rate. These adjustments are necessary to make the SEC's total
collection of transaction fees in a given year as close as possible to
the amount of the regular appropriation to the Commission by Congress
for that fiscal year.
    To recover the costs of their section 31 fee obligations, each of
the national securities exchanges and FINRA have adopted, and the SEC
has approved, rules assessing a regulatory transaction fee on their
members, the amount of which is set in accordance with section 31 of
the Exchange Act.\56\ Broker-dealers, in turn, often impose fees on
their customers that provide the funds to pay the fees owed to the
exchanges and FINRA.
---------------------------------------------------------------------------

    \56\ See, e.g., Section 3 of Schedule A of FINRA's By-Laws.
---------------------------------------------------------------------------

    Like the well-known, longstanding and accepted section 31-related
fee model, the Funding Proposal would use

a predetermined fee rate for the calculation of the fees, seek to
recover designated regulatory costs (as CAT provides a solely
regulatory function), and allow for the adjustment of the fee rate
during the year to seek to match regulatory costs with fees collected.
The Funding Proposal, however, would impose fees based on executed
equivalent share volume rather than the sales values of certain
transactions. Despite the different calculation metric, the Funding
Proposal is similar to a model well known, long accepted and justified
under the Exchange Act the purpose of which is also to cover costs
associated with the regulation of securities markets and securities
professionals.
ii. FINRA Trading Activity Fee
    The transaction-based fees charged under the Funding Proposal also
would be similar to FINRA's transaction-based trading activity fee,\57\
which was modeled on the Commission's section 31 fee.\58\ Although the
FINRA TAF is designed to cover a subset of the costs of FINRA services
(e.g., costs to FINRA of the supervision and regulation of members,
including performing examinations, financial monitoring, and policy,
rulemaking, interpretive, and enforcement activities) rather than all
of FINRA's costs like the CAT, the transaction-based calculation of the
FINRA TAF and the proposed CAT fees are similar. With the FINRA TAF,
FINRA members on the sell-side of a transaction are required to pay a
per share fee for each sale of covered securities, which includes
exchange registered securities, equity securities traded otherwise than
on an exchange, security futures, TRACE-Eligible Securities and
municipal securities, subject to certain exceptions. In approving the
FINRA TAF, the SEC stated that the implementation of the FINRA TAF ``is
consistent with section 15A(b)(5) of the Act, in that the proposal is
reasonably designed to recover NASD costs related to regulation and
oversight of its members.'' \59\ The SEC further stated that ``[t]he
Commission recognizes the difficulties inherent in restructuring the
NASD's regulatory fees, and believes that the NASD has done so in a
manner that is fair and reasonable.'' \60\ The CAT fees calculated
under the Funding Proposal would be similar to the FINRA TAF in that
they would be transaction-based fees intended to provide funding for
regulatory costs.
---------------------------------------------------------------------------

    \57\ Section 1 of Schedule A of FINRA's By-Laws.
    \58\ See Securities Exchange Act Rel. No. 46416 (Aug. 23, 2002),
67 FR 55901 (Aug. 30, 2002).
    \59\ Securities Exchange Act Rel. No. 47946 (May 30, 2003), 68
FR 34021, 34023 (June 6, 2003) (``TAF Release'').
    \60\ Id.
---------------------------------------------------------------------------

iii. Options Regulatory Fee
    The fees charged under the Funding Proposal also would be similar
to the ORF charged by the options exchanges.\61\ The ORF is a per
contract fee charged by an options exchange for certain options
transactions to options members of the relevant exchange. The ORF is
collected indirectly from exchange members through their clearing firms
by the Options Clearing Corporation on behalf of the Exchange. Revenue
generated from the ORF is designed to recover a material portion of an
options exchange's regulatory costs related to the supervision and
regulation of its members' options business, including performing
routine surveillance, investigations, examinations and financial
monitoring as well as policy, rulemaking, interpretive, and enforcement
activities. Exchange members generally pass-through the ORF to their
customers in the same manner that firms pass-through to their customers
the fees charged by self-regulatory organizations (``SROs'') to help
the SROs meet their obligations under section 31 of the Exchange
Act.\62\ The CAT fees calculated under the Funding Proposal would be
similar to the ORF in that they would be transaction-based fees
intended to provide funding for regulatory costs.
---------------------------------------------------------------------------

    \61\ See, e.g., Cboe Fee Schedule, MIAX Fee Schedule, and NYSE
Arca Fee Schedule.
    \62\ See, e.g., Securities Exchange Act Rel. No. 58817 (Oct. 20,
2008), 73 FR 63744, 63745 (Oct. 27, 2008).
---------------------------------------------------------------------------

b. Fee Metric: Executed Equivalent Share Volume
    CAT LLC proposes to use the executed equivalent share volume of
transactions in Eligible Securities as the means for allocating CAT
costs among Participants and Industry Members. The use of executed
equivalent share volume would replace the use of message traffic for
allocating costs among Industry Members and the use of market share for
allocating costs among Participants as set forth in the Original
Funding Model. The use of executed equivalent share volume is a
reasonable and equitable method for allocating costs for a variety of
reasons, and CAT LLC believes it improves upon the use of message
traffic.
    The proposed use of CAT-reported message traffic as set forth in
the Original Funding Model raised a variety of issues for allocating
CAT costs. First, based on a subsequent study of cost drivers for the
CAT, it was determined that message traffic may be a factor in the CAT
costs, but it is not the primary factor. CAT costs are dominated by
technology costs, and the predominant technology costs are data
processing (e.g., linker) and storage costs.\63\ The data processing
and storage costs are related to the level of message traffic, but such
costs also relate to other factors. The data processing and storage
costs also are directly related to the complexity of the reporting
requirements for the market activity. For example, in light of the
complexity of market activity, the CAT's order reporting and linkage
scenarios document for Industry Members is over 800 pages in length,
addressing nearly 200 scenarios.\64\ The processing and storage of such
a large number of complex reporting scenarios requires very complex
algorithms, which, in turn, lead to significant data processing and
storage costs. The data processing and storage costs also are driven by
the stringent performance, timelines and operational requirements for
processing CAT Data. For example, the CAT NMS Plan requires that CAT
order events be processed within established timeframes to ensure data
can be made available to Participants' regulatory staff and the SEC in
a timely manner. Accordingly, a CAT Reporter's message traffic may be a
factor, but not a primary factor, in terms of the costs of the CAT.
---------------------------------------------------------------------------

    \63\ For a detailed discussion of cost drivers of the CAT, see
CAT LLC Webinar, CAT Costs (Sept. 21, 2021), https://www.catnmsplan.com/events/cat-costs-september-21-2021.
    \64\ CAT Industry Member Reporting Scenarios, Version 4.10 (Oct.
21, 2022), https://www.catnmsplan.com/sites/default/files/2022-10/10.21.22_Industry_Member_Tech_Specs_Reporting_Scenarios_v4.10_CLEAN.pdf.
---------------------------------------------------------------------------

    Second, in general, Industry Member revenue, including revenue
derived from fees Industry Members charge their clients, is often
driven by transactions. Because message traffic is separate from
whether or not a transaction occurs, fees based on message traffic may
not correlate with common revenue or fee models. As a result, CAT fees
based on message traffic could impose an outsized adverse financial
impact on certain Industry Members.
    Third, imposing CAT fees on each CAT Reporter based on its message
traffic may have an adverse effect on competition, liquidity or other
aspects of market structure, and may increase model complexity. For
example, the number of messages for any given order, whether or not
ultimately executed, could vary depending on how a given order is
processed, leading to a lack of predictability on the applicable cost
to

process any given order or executions for broker-dealers or non-broker-
dealer customers.\65\ As one example, discussed in the context of the
previously proposed funding models,\66\ market makers in Eligible
Securities may have very high levels of message traffic due to their
quoting obligations. Such high levels of message traffic may lead to
outsized fees for market makers in comparison to their transaction
activity, thereby placing an excessive financial burden on market
makers. This, in turn, may lead to a decrease in the number of market
makers, resulting in a decrease in liquidity and a reduction in market
quality. To address this effect on market makers, CAT LLC proposed to
discount the fees that market makers would need to pay. However, such a
discount adds complexity to the message traffic approach, as the model
must determine when a discount is necessary and how much the discount
should be.
---------------------------------------------------------------------------

    \65\ The predictability of fees is discussed further below in
Section A.9.u of this filing.
    \66\ See 2018 Fee Proposal Release.
---------------------------------------------------------------------------

    The use of executed equivalent share volume to allocate CAT costs
addresses each of these concerns. The fees are not divorced from
transactions, the traditional source of revenue for Industry Members;
fees based on executed equivalent share volume would not adversely
impact certain market participants to the detriment of the markets, and
the model is simple to understand and implement. Moreover, in addition
to these benefits, the executed equivalent share volume is related to,
but not precisely linked to, the CAT Reporter's burden on the CAT. In
light of the many inter-related cost drivers of the CAT (e.g., storage,
message traffic, processing), determining the precise cost burden
imposed by each individual CAT Reporter on the CAT is not feasible.
Accordingly, CAT LLC has determined that trading activity provides a
reasonable proxy for cost burden on the CAT, and therefore is an
appropriate metric for allocating CAT costs among CAT Reporters. This
conclusion is consistent with the SEC's prior recognition of the use of
transaction volume in setting regulatory fees. For example, in
approving the FINRA TAF, the SEC recognized that transaction volume was
closely enough connected to FINRA's regulatory responsibilities to
satisfy the statutory standard in the Exchange Act.\67\
---------------------------------------------------------------------------

    \67\ TAF Release at 34024.
---------------------------------------------------------------------------

c. CAT Executing Brokers
i. Charging CAT Executing Brokers
    CAT LLC proposes to charge CAT fees to CAT Executing Brokers. CAT
LLC believes that such an approach is consistent with the requirements
of the Exchange Act for a variety of reasons, including the following
reasons.
    First, the proposal to charge executing brokers is broadly
supported by the industry.\68\ For example, SIFMA has supported
charging executing brokers, and continues to support charging executing
brokers, rather than clearing brokers.\69\ In one of its comment
letters on the 2022 Funding Proposal, SIFMA stated that ``we support
the Participants' decision to allocate CAT costs to executing brokers
rather than clearing brokers.'' \70\
---------------------------------------------------------------------------

    \68\ See Partial Amendment I at 74185; February 2023 Proposed
Partial Amendment at 5.
    \69\ See Letter from Ellen Greene, Managing Director, Equities
and Options Market Structure, SIFMA, to Vanessa Countryman,
Secretary, SEC (Dec. 14, 2022) (``December 2022 SIFMA Letter'') at
2; Letter from Ellen Greene, Managing Director, Equities and Options
Market Structure, SIFMA, to Vanessa Countryman, Secretary, SEC (Oct.
7, 2022) at 4-5.
    \70\ Letter from Ellen Greene, Managing Director, Equities and
Options Market Structure, and Joseph Corcoran, Managing Director,
Associate General Counsel, SIFMA, to Vanessa Countryman, Secretary,
SEC (Jan. 12, 2023) at 7. See also December 2022 SIFMA Letter at 2
(``[W]e support changing the payment obligation to executing
brokers.'').
---------------------------------------------------------------------------

    Second, the proposal to rely on executing brokers, rather than
clearing brokers, was proposed in direct response to comments raised by
SIFMA and other commenters on the 2022 Funding Proposal regarding the
cost burden that clearing firms may experience if clearing brokers were
charged CAT fees.\71\ As noted by commenters, imposing the fee payment
obligation on clearing brokers, rather than on executing brokers more
generally, potentially may impose a significant financial burden on
clearing firms if the fees imposed on clearing firms are not passed
through to their clients.
---------------------------------------------------------------------------

    \71\ See Partial Amendment I at 74185; February 2023 Proposed
Partial Amendment at 5.
---------------------------------------------------------------------------

    Third, charging the CEBBs and CEBSs would reflect the executing
role the CEBB and CEBS have in each transaction. Such a fee model is
currently used and well-known in the securities markets. For example,
SRO members regularly pay transaction-based fees. As a result, the CAT
fees could be paid by Industry Members without requiring significant
and potentially costly changes.
    Fourth, charging CEBBs and CEBSs is in line with the use of
transaction reports from the exchanges and FINRA's equity trading
reporting facilities for calculating the CAT fees. The CEBBs and CEBSs
are identified on the transaction reports, thereby streamlining the CAT
collection process.
    Fifth, CAT LLC does not believe that the proposal would burden CAT
Executing Brokers. The CEBBs and CEBSs could determine, but would not
be required, to pass their CAT fees through to their clients, who, in
turn, could pass their CAT fees to their clients, until the fee is
imposed on the ultimate participant in the transaction. With such a
pass-through, the CEBBs and CEBSs would not ultimately incur the cost
of all CAT fees related to their transactions. It is common practice in
the industry for broker-dealers to pass transaction-based fees through
to their clients, and CAT fees would introduce no unique issues for
passing the CAT fee on to clients.
    Finally, the proposal to charge CAT Executing Brokers CAT fees as
set forth in the Funding Proposal only addresses the party responsible
for the payment of the CAT fee. As an administrative matter regarding
the method of payment, each CAT Executing Broker may seek to enter into
a bilateral arrangement with its clearing broker for the clearing
broker to collect and pass-through the CAT fees as it does in other
contexts.
ii. Effect on Net Capital of CAT Executing Brokers
    CAT fees do not raise new or different issues for CAT Executing
Brokers with respect to net capital requirements than other
transaction-based fees charged to executing brokers. CAT fees will be
billed on a monthly basis, and Section 11.4 of the CAT NMS Plan states
that ``Participants shall require each Industry Member to pay all
applicable fees authorized under this Article XI within thirty (30)
days after receipt of an invoice or other notice indicating payment is
due (unless a longer payment period is otherwise indicated).'' With
respect to net capital requirements, CAT Executing Brokers may
determine whether to establish arrangements with their brokerage
clients to account for costs incurred by the CAT Executing Broker on
the client's behalf, including setting the terms under which they must
be repaid by their broker-dealer clients such that receivables need not
extend beyond 30 days.

d. Cost Allocation
i. One-Third/One-Third/One-Third Allocation of Prospective CAT Costs
Between CEBS, CEBB and Participant
    When calculating the CAT Fees related to Prospective CAT Costs
under the Funding Proposal, CAT LLC proposes to allocate one-third of
Prospective CAT Costs to Participants, one-third of Prospective CAT
Costs to CEBSs and one-third of Prospective CAT Costs to CEBBs. CAT LLC
believes that this proposed allocation satisfies the requirements of
the Exchange Act and Rule 608 of Regulation NMS under the Exchange Act.
    The proposed \1/3\, \1/3\, \1/3\ allocation of Prospective CAT
Costs recognizes the three primary roles in each transaction: the
buyer, the seller and the market regulator, and assigns an equal one-
third share of the fee per transaction to each of these three roles.
The Exchange Act itself recognizes the importance of these three roles
in a transaction by imposing registration and other regulatory
obligations on the broker-dealers and regulator involved in a
transaction. This allocation is similar to the approach taken with the
FINRA TAF, ORF and section 31 sales value fees, and also recognizes the
role of the market regulator and the buyer in the transaction as well
as the seller.
    Furthermore, the allocation of two-thirds of the CAT costs to
Industry Members and only one-third to Participants recognizes that a
substantial portion of CAT costs originates from Industry Members. CAT
costs are dominated by technology costs, and the predominant technology
costs are data processing (e.g., linker) and storage costs. The data
processing and storage costs are related to message traffic and the
complexity of the reporting requirements for CAT, which, in turn, are
determined by market activity. Industry Members are responsible for
originating trading activity that necessitates message traffic to the
CAT, and the complexity of Industry Members' chosen business models
contributes substantially to the costs of the CAT.
    One of the factors driving CAT costs is the complexity of the
Industry Members' CAT reporting requirements, which are driven by the
inherent complexity of Industry Members' chosen business models. For
example, in light of the complexity of market activity, the CAT's
reporting scenarios document for Industry Members is over 800 pages in
length, addressing almost 200 scenarios, including, for example,
scenarios related to representative orders, internal routing, order
modification, order cancellation, ATS scenarios, OTC scenarios, foreign
scenarios, child orders, proprietary orders, fractional shares, stop
and conditional orders, RFQs, floor activity and more.\72\ The
processing and storage of such a large number of complex reporting
scenarios requires very complex algorithms, which, in turn, lead to
significant data processing and storage costs. In contrast, the
Participants do not originate market activity or orders or otherwise
bring this level of complexity to the markets. As a result, the
technical specifications for the Participants are far less complex than
for Industry Members. For example, the technical specifications for
Participants have 13 reporting events for stock exchanges compared to
36 equity reporting events in the technical specifications for Industry
Members, and the technical specifications for Participants have 14
reporting events for options exchanges compared to 43 reporting options
events in the technical specifications for Industry Members.\73\ Since
the complexity of Industry Members' chosen business models contribute
substantially to the costs of the CAT, it is reasonable and equitable
to require that Industry Members pay a substantial portion of those
costs.
---------------------------------------------------------------------------

    \72\ CAT Industry Member Reporting Scenarios, Version 4.10 (Oct.
21, 2022), https://www.catnmsplan.com/sites/default/files/2022-10/10.21.22_Industry_Member_Tech_Specs_Reporting_Scenarios_v4.10_CLEAN.pdf.
    \73\ Compare CAT Reporting Technical Specifications for Plan
Participants, Version 4.1.0-r17 (Feb. 21, 2023), https://www.catnmsplan.com/sites/default/files/2023-02/02.21.2023-CAT-Reporting-Technical-Specifications-for-Participants-4.1.0-r17.pdf,
with CAT Reporting Technical Specifications for Industry Members,
Version 4.0.0 r18 (Dec. 16, 2022), https://www.catnmsplan.com/sites/default/files/2022-12/12.16.2022_CAT_Reporting_Technical_Specifications_for_Industry_Members_v4.0.0r18_CLEAN.pdf.
---------------------------------------------------------------------------

    Participant activity does not impact CAT costs in the same way that
Industry Member activity impacts CAT costs. The analysis regarding the
complexity of Industry Member activity is based on the effects of the
business models on the costs of the CAT, not on the complexity of the
market generally. The complexity of Industry Member activity adds
significantly to the cost of the CAT in a way that Participant activity
does not.
    Moreover, allocating a greater percentage of the CAT costs to
Participants would raise fairness issues in light of the greater
financial resources of Industry Members. There are only 25 Participants
and approximately 1,100 Industry Members.\74\ Moreover, based upon an
analysis of available CAT Reporter revenue, Participants only
represented approximately 4% of the total CAT Reporter revenue while
Industry Members represented 96% of the total CAT Reporter revenue.\75\
In addition, various individual Industry Members have revenue in excess
of some or all of the Participants. Accordingly, CAT LLC determined
that allocating a higher percentage of the total CAT costs to the
Participants was not a fair and equitable approach.
---------------------------------------------------------------------------

    \74\ An average of 1,124 unique CAT Reporters sent transaction
data to the CAT from July 1, 2022 to August 8, 2022.
    \75\ See Securities Exchange Act Rel. No. 91555 (Apr. 14, 2021),
86 FR 21050, 20155 (Apr. 21, 2021) (``2021 Fee Proposal Release'').
Industry Member revenue was calculated based on the total revenue
reported in the Industry Member's FOCUS reports. Participant revenue
was calculated based on revenue information provided in Form 1
amendments and/or publicly reported figures. Participants are not
required to file uniform FOCUS-type reports regarding revenue like
Industry Members. Accordingly, the revenue calculation for
Participants is not as straightforward as for Industry Members.
---------------------------------------------------------------------------

    Finally, CAT LLC analyzed a variety of alternative allocations of
CAT costs and continues to support the proposed one-third, one-third,
one-third allocation as consistent with the requirements of the
Exchange Act and the CAT NMS Plan. Alternative allocations considered
by CAT LLC are discussed in detail below in Section A.10 of this
filing.
ii. \1/3\, \1/3\ Allocation for Historical CAT Assessment
    Under the Funding Proposal, the CEBS and the CEBB would each pay
one-third of the fee obligation for each transaction related to
Historical CAT Costs. Because the Participants have already paid for
Past CAT Costs via loans to CAT LLC, the Participants would not be
required to pay any Historical CAT Assessment. As stated in Proposed
Section 11.3(b)(ii) of the CAT NMS Plan, ``[i]n lieu of a Historical
CAT Assessment, the Participants' one-third share of Historical CAT
Costs and such other additional Past CAT Costs as reasonably determined
by the Operating Committee will be paid by the cancellation of loans
made to the Company on a pro rata basis based on the outstanding loan
amounts due under the loans.'' Furthermore, Proposed Section
11.3(b)(ii) of the CAT NMS Plan would emphasize that ``[t]he Historical
CAT Assessment is designed to recover two-thirds of the Historical CAT
Costs.'' Like with the allocation of Prospective CAT Costs discussed
above, CAT LLC believes that the proposed allocation of the Historical
CAT Costs is consistent with the requirements of the Exchange Act and
the CAT NMS Plan,

iii. Internal Cost of Compliance by Industry Members
    CAT LLC does not propose to take into consideration the internal
costs incurred by Industry Members in complying with CAT requirements
in determining how to allocate costs between Industry Members and
Participants. There is no precedent for regulatory fees to be
determined based on the cost of compliance of the regulated entity.
Regulatory fees are intended to cover the regulatory costs of the
entity providing the regulation. In the case of the CAT, the Funding
Proposal is intended to charge fees to pay for the direct costs of the
CAT, not for ancillary compliance costs of Industry Members.\76\
Moreover, as a practical matter, accurately determining an Industry
Member's compliance costs, without recordkeeping requirements and
appropriate standards to determine expenses accurately, would be
infeasible.
---------------------------------------------------------------------------

    \76\ See CAT NMS Plan Approval Order at 84795, n.1749 (``The
Participants stated that the funding model provides a framework for
the recovery of the costs to create, develop and maintain the CAT,
and is not meant to address the cost of compliance for Industry
Members and Participants with the reporting requirements of Rule
613.'').
---------------------------------------------------------------------------

    Likewise, the substantial internal compliance costs of the
Participants are not taken into consideration in the Funding Proposal.
Each Participant incurs its own internal costs to comply with the
requirements of the CAT NMS Plan, including, among other things,
updating its systems for CAT reporting. Additionally, Participants have
expended countless internal hours on the creation, implementation and
operation of the CAT. These costs are not included in the cost
allocation under the Funding Proposal.
iv. Alternative Approach Based on Individualized CAT Reporter Cost to
CAT
    CAT LLC has determined not to propose a funding approach for the
CAT in which a CAT Reporter's fees would be based on each CAT
Reporter's exact cost burden on the CAT. In light of the many inter-
related cost drivers of the CAT (e.g., storage, message traffic,
processing), determining the precise cost burden imposed by each
individual CAT Reporter on the CAT is not feasible. Moreover, trading
activity provides a reasonable proxy for cost burden on the CAT, and
therefore is an appropriate metric for allocating CAT costs among CAT
Reporters. CAT LLC emphasizes that the Exchange Act requires CAT fees
to be fair, reasonable and equitably allocated, and CAT LLC believes
that the use of executed equivalent share volume satisfies these
requirements. The Exchange Act does not require each CAT Reporter's
fees to be a proxy for that CAT Reporter's cost burden on the CAT, let
alone an exact proxy.
A. Difficulty in Determining Individual CAT Reporter Costs Due to
Inter-Related Cost Drivers
    CAT LLC has analyzed the cost drivers for the CAT, and has
concluded that determining the precise cost burden imposed by each
individual CAT Reporter on the CAT is not feasible. The computation of
a specific CAT Reporter's burden on the CAT is complicated by the many
inter-related factors that contribute to CAT costs, including message
traffic, data processing, storage, the complexity of reporting
requirements, reporting timelines, infrastructure, connectivity and
more. The use of executed equivalent share volume as the metric for the
funding model is an improvement over the message traffic model. CAT LLC
analyzed the cost drivers of CAT and determined that, although message
traffic is one factor in CAT costs, it is not the primary factor. CAT
costs are dominated by technology costs, and the predominant technology
costs are data processing (e.g., linker) and storage costs. Compute
costs represent more than half of all technology costs. While such
costs are related in part to message traffic, they are driven by the
stringent performance timelines, data complexity and operational
requirements in the CAT NMS Plan. The Plan requires that order events
be processed, corrected, and made available to regulatory users within
established timeframes, including a four-hour window for initial
linkage processing. For this reason, among other issues with the
message traffic model and other considerations discussed herein, CAT
LLC determined to shift its focus to the new metric of executed
equivalent share volume from the message traffic and market share
metrics set forth in the CAT NMS Plan as approved.
B. Trading Activity as Reasonable Proxy for Cost Burden
    CAT LLC determined that trading activity provides a reasonable
proxy for cost burden on the CAT, and therefore is an appropriate
metric for allocating CAT costs among CAT Reporters. CAT LLC analyzed
reasonable metrics for determining CAT fees, and determined that,
although executed equivalent share volume is not an exact proxy for the
cost burden (nor need it be), trading activity provides a reasonable
proxy for cost burden on the CAT. Increased trading activity impacts
message traffic, data processing, storage and other factors, and thus
necessarily correlates with increased cost burden on the CAT. Moreover,
Industry Member activity in the market generally is engaged in for the
purpose of effecting transactions, and, as a result, it is common for
Participants to use transaction-based fees. Therefore, executed share
volume is an appropriate metric for allocating CAT costs among CAT
Reporters.
    This conclusion is consistent with the SEC's prior recognition of
the use of transaction volume in setting regulatory fees. For example,
in approving FINRA's TAF, the SEC recognized that transaction volume
was closely enough connected to FINRA's broad regulatory
responsibilities to satisfy the statutory standard in the Exchange
Act.\77\ FINRA proposed a transaction-based TAF to fund its member
regulatory activities in a variety of areas such as ``sales practices,
routine examinations, financial and operational reviews, new member
applications, enforcement * * * . . . wherever such member activity
occurs.'' \78\ The SEC noted that ``[a]ssessing fees in relation to
transactions correlates to heightened NASD responsibilities regarding
firms that engage in the trading,'' but the fees were not an exact
proxy for the costs of such regulatory responsibilities.\79\ The SEC
noted this lack of a precise correlation:
---------------------------------------------------------------------------

    \77\ TAF Release at 34023.
    \78\ Id.
    \79\ Id.

    In most cases, the NASD has direct responsibility to oversee the
firm's dealing with the public in effecting the transactions; the
NASD may also have responsibility to oversee the impact of the
trading on the firm's financial condition. In most cases, where
responsibility for certain member activities has been allocated to
other SROs, the NASD retains responsibility for other member
functions.\80\
---------------------------------------------------------------------------

    \80\ Id.

    Nevertheless, the SEC concluded that ``while trading activity is
not wholly correlated to the full range of NASD responsibility for
members in all instances, the Commission believes that they are closely
enough connected to satisfy the statutory standard.'' \81\ CAT LLC
believes that this same logic is applicable to the Funding Proposal.
---------------------------------------------------------------------------

    \81\ Id. at 34024.
---------------------------------------------------------------------------

v. Alternative Approach: 50-50 Allocation Between Industry Members and
Participant Exchanges
    CAT LLC has considered and rejected allocating 50% of CAT costs to
the

Participants and 50% to Industry Members under the Funding Proposal.
Although a 50-50 allocation between Industry Members and Participants
would provide a mathematically equal split between two groups, it would
not provide an equitable allocation between and among Industry Members
and Participants. Such an allocation raises fairness issues as Industry
Members have far greater financial resources than the Participants, and
the complexity of Industry Members' chosen business models contribute
substantially to the costs of the CAT.
e. Fee Pass-Throughs
i. General
    CAT LLC acknowledges that CAT Executing Brokers may choose to pass
the CAT fees through to their clients, who, in turn, may pass their CAT
fees through to their clients, until the fees are imposed on the
account that executed the transaction. Although the Funding Proposal
does not require such fee pass-throughs, CAT LLC continues to support
the concept of the potential pass-through of fees for various reasons.
    First, the SEC specifically contemplated and accepted the concept
of cost pass-throughs from Participants to their members when it
adopted Rule 613:

    There also would be costs associated with establishing and
operating the central repository that will be jointly owned by the
plan sponsors. The Commission believes it is important to understand
how the plan sponsors plan to allocate such costs among themselves
to help inform the Commission's decision regarding the possible
economic or competitive impact of the NMS plan amongst the SROs. In
addition, although the plan sponsors likely would initially incur
the costs to establish and fund the central repository directly,
they may seek to recover some or all of these costs from their
members. If the plan sponsors seek to recover costs from their
members, the Commission believes that it is important to understand
the plan sponsors' plans to allocate costs between themselves and
their members, to help inform the Commission's decision regarding
the possible economic or competitive impact of the NMS plan.\82\
---------------------------------------------------------------------------

    \82\ See generally Securities Exchange Act Rel. No. 67457 (Jul.
18, 2012), 77 FR 45722, 45795 (Aug. 1, 2012) (``Rule 613 Adopting
Release'') (emphasis added).

    Second, CAT LLC does not take a position on whether Industry
Members, in turn, should pass CAT fees on to their clients. However, in
adopting the CAT NMS Plan, the Commission specifically contemplated and
accepted that ``broker-dealers may seek to pass on to investors their
costs to build and maintain the CAT, which may include their own costs
and any costs passed on to them by Participants,'' noting that the
``extent to which these costs are passed on to investors depends on the
materiality of the costs and the ease with which investors can
substitute away from any given broker-dealer.'' \83\
---------------------------------------------------------------------------

    \83\ CAT NMS Plan Approval Order at 84992.
---------------------------------------------------------------------------

    Third, CAT LLC notes that the use of pass-through fees is a
commonly accepted practice that has been approved by the SEC in the
securities markets in some cases. For example, the practice of passing
through fees to broker-dealers and their customers is used in the
context of section 31 fees. Section 31 of the Exchange Act places
obligations only on national securities exchanges, national securities
associations, and the Commission. National securities exchanges and
national securities associations must pay certain fees and assessments
to the Commission. The Commission is required by section 31 of the
Exchange Act to collect such fees and assessments. Section 31 of the
Exchange Act, however, does not address the manner or extent to which
covered SROs may seek to recover the costs of their section 31
obligations from their members. Nor does section 31 of the Exchange Act
address the manner or extent to which members of covered SROs may seek
to pass any such charges on to their customers. However, as the SEC
noted, ``[i]n practice, the covered SROs obtain the funds for these
fees and assessments by assessing charges on their members, and the
members in turn pass these charges to their customers.'' \84\ Likewise,
in adopting the CAT NMS Plan, the Commission explained that under
section 31, ``Participants are required to pay transaction fees and
assessments to the Commission,'' that ``Participants, in turn, may
collect their section 31 fees and assessments from their broker-dealer
members,'' and, that ``broker-dealers may pass on regulatory charges
that support Participant supervision, such as with respect to section
31 fees.'' \85\
---------------------------------------------------------------------------

    \84\ Securities Exchange Act Rel. No. 49928 (June 28, 2004), 69
FR 41060, 41072 (July 7, 2004). See also SEC, Section 31 Transaction
Fees, Fast Answers, https://www.sec.gov/fast-answers/answerssec31htm.html (noting that the ``[t]he SROs have adopted
rules that require their broker-dealer members to pay a share of
these fees. Broker-dealers, in turn, impose fees on their customers
that provide the funds to pay the fees owed to their SROs.)''
    \85\ CAT NMS Plan Approval Order at 84992.
---------------------------------------------------------------------------

    Indeed, the language of certain exchange rules regarding section 31
specifically describe the pass-through process related to section 31
fees.\86\ For example, NYSE Arca Rule 2.18.01 states the following:
---------------------------------------------------------------------------

    \86\ See, e.g., NYSE American Rule 393.01; and NYSE Rule
440H.03.

    Pursuant to Rule 2.18, the Exchange makes an assessment on ETP
Holders that the Exchange uses to pay fees owing to the SEC in
accordance with section 31 of the Exchange Act (``the Rule 2.18
assessment''). The section 31 fees payable by the Exchange to the
SEC is determined based on the aggregate dollar amount of ``covered
sales,'' as defined by SEC Rule 31, effected on the Exchange by or
through any ETP Holder. ETP Holders, in some cases, have passed
along the Rule 2.18 assessment on a trade-by-trade basis to their
---------------------------------------------------------------------------
customers or correspondent firms.''

    The pass-through concept also is applied in the context of other
SRO regulatory fees applicable to the SROs' members. For example, ``it
is regular practice among some clearing and trading firms to `pass
through' the TAF to the underlying firm executing the trade. Further,
FINRA understands that the executing firms commonly pass the TAF
directly on to their customers. Typically, TAF fees are reflected on
the confirmation statement received by customers.'' \87\ Similarly, the
pass-through process is used for ORFs as well. ORFs are collected
indirectly from members through their clearing firms by OCC on behalf
of the respective options exchange. As noted in rule filings related to
ORFs, ``[t]he Exchange expects that [members] will pass through the ORF
to their customers in the same manner that firms pass-through to their
customers the fees charged by Self-Regulatory Organizations (`SROs') to
help the SROs meet their obligations under section 31 of the Exchange
Act.'' \88\
---------------------------------------------------------------------------

    \87\ Securities Exchange Act Rel. No. 90176 (Oct. 14, 2020), 85
FR 66592, 66603 (Oct. 20, 2020).
    \88\ Securities Exchange Act Rel. No. 67596 (Aug. 6, 2012), 77
FR 47902, 47903 (Aug. 10, 2012). See also Securities Exchange Act
Rel. No. 61133 (Dec. 9, 2009), 74 FR 66715, 66716 (Dec. 16, 2009)
(noting that ``[t]he Exchange expects that member firms will pass-
through the ORF to their customers in the same manner that firms
pass-through to their customers the fees charged by SROs to help the
SROs meet their obligation under Section 31 of the Exchange Act'');
Securities Exchange Act Rel. No. 83878 (Aug. 17, 2018), 83 FR 42715,
42717 (Aug. 23, 2018) (noting that ``by collecting the ORF in this
manner Members and non-Members could more easily pass-through the
ORF to their customers'').
---------------------------------------------------------------------------

    Fourth, commenters on prior CAT funding proposals have commented in
favor of a model similar to the section 31 fees in which the fee could
be passed through to Industry Members and ultimate customers.\89\ For
example, one commenter noted the benefits of a

model similar to the section 31 fees, arguing that ``[i]t would also
provide transparency into the fees which seek to recoup costs and a
vehicle to pass-thru fees to the ultimate beneficiary of each trade.''
\90\ Another commenter similarly advocated for a section 31-type model,
noting that ``SROs already have a well-established model for recouping
their section 31 fees by passing them through to their members.'' \91\
---------------------------------------------------------------------------

    \89\ See, e.g., Letter from Michael Blaugrund, Chief Operating
Officer, NYSE, to Vanessa Countryman, Secretary, SEC (May 10, 2021)
at 3; Letter from Andrew Stevens, General Counsel, IMC Chicago, LLC,
to Vanessa Countryman, Secretary, SEC (May 20, 2021) at 3.
    \90\ Letter from James Toes, President and CEO, and Andre
D'Amore, Chairman of the Board, Securities Trader Association, to
Vanessa Countryman, Secretary, SEC (June 10, 2021) at 4.
    \91\ Letter from Joanna Mallers, Secretary, FIA Principal
Traders Group, to Vanessa Countryman, Secretary, SEC (May 12, 2021)
at 4.
---------------------------------------------------------------------------

    Finally, the proposed pass-through process for CAT fees, like the
pass-through process for other regulatory fees, recognizes the reality
that regulatory costs incurred to maintain and enhance the quality of
the markets will necessarily increase costs for all market
participants, including the ultimate investor. Even if such pass-
throughs were limited or prohibited, CAT costs would be distributed in
other ways. A member of the Advisory Committee for the CAT and the
former Chief Economist of the Commission, emphasized that ``[b]ecause
the markets for exchange, dealing, and brokerage services are all
highly competitive in the long run, any fees imposed on any of these
groups will ultimately pass through to the retail and institutional
traders who use the markets.'' \92\ This commenter reasoned that:
---------------------------------------------------------------------------

    \92\ Letter from Larry Harris, Fred V. Keenan Chair in Finance,
USC Marshal School of Business, to Vanessa Countryman, Secretary,
SEC (June 21, 2022) (``Harris Letter'') at 2.

    In highly competitive markets, prices reflect the costs of doing
business in the long run. If those costs rise, they ultimately pass
through to the customers. For example, if the Participants
(primarily exchanges) were required to fund CAT NMS fully, they will
raise their fees (or fail to lower them when costs are falling) to
recover their funding costs. And if brokers' business models require
that they pay exchange fees on behalf of their clients, the brokers
will raise their commission rates to the customers. And if their
business models require zero commissions, brokers will provide fewer
services or charge more for non-transaction services to cover their
increased costs.\93\
---------------------------------------------------------------------------

    \93\ Id.
---------------------------------------------------------------------------

ii. Effect of Allocation on Fee Pass-Throughs
    CAT LLC determined not to allocate all CAT costs to Participants
under the Funding Proposal. Under the Funding Proposal, CEBBs would be
allocated one-third of the CAT costs, CEBSs would be allocated one-
third of the CAT costs and Participants would be allocated one-third of
the CAT costs. Under the Funding Proposal, Industry Members may
determine to pass their CAT fees on to their clients at their
discretion. Participants also may determine to pass their CAT fees on
to their members, or to pay the CAT fees charged to the Participant
through other means. If Participants were to determine to pass CAT fees
on to their members, they may choose to adopt a CAT-specific fee that
directly passes the CAT fee through to their members, in whole or in
part, or they may choose to increase other fees charged to members
(e.g., transaction fees). Participants would need to file any such fee
proposals with the SEC in accordance with section 19(b) of the Exchange
Act.
    If all CAT costs were allocated to Participants, however,
Participants would have the same options for covering the costs of the
CAT fees. They may choose to adopt a CAT-specific fee that directly
passes through the CAT fee through to their members, in whole or in
part, or they may choose to increase other fees charged to members
(e.g., transaction fees). Participants would need to file any such fee
proposals with the SEC in accordance with section 19(b) of the Exchange
Act. For any fee charged to Industry Members, Industry Members may
determine to pass their CAT fees on to their clients at their
discretion, as with the CAT fees under the Funding Proposal.
f. FINRA Fee
    Under the Funding Proposal, for each transaction in Eligible
Securities based on CAT Data, the CEBS, the CEBB and the applicable
Participant for the transaction each would pay a CAT Fee calculated by
multiplying the number of executed equivalent shares in the transaction
and the applicable Fee Rate and dividing the product by three. The
applicable Participant for the transaction would be the national
securities exchange on which the transaction was executed, or FINRA for
each transaction executed otherwise than on an exchange. CAT LLC
believes that the proposed CAT fees for FINRA are consistent with the
Exchange Act and the CAT NMS Plan. CAT LLC does not believe that the
assessment of a CAT fee on FINRA in the same manner as other
Participants would result in a burden on competition for FINRA or for
Industry Members engaging in activity otherwise than on an exchange.
    The Funding Proposal is designed to be neutral as to the manner of
execution and place of execution. The CAT fees would be the same
regardless of whether the transaction is executed on an exchange or in
the over-the-counter market. All Participants are self-regulatory
organizations that have the same regulatory obligations under the
Exchange Act, regardless of whether they operate as a for-profit or
not-for-profit entity. Their usage of CAT Data, either directly or
indirectly through regulatory services agreements, would be for the
same regulatory purposes in accordance with those obligations. By
treating each Participant the same, the CAT fees would not become a
competitive issue by and among the Participants.
    In addition, the size of FINRA's fee is calculated based on the
activity in the over-the-counter market, which is substantial. For
example, the executed equivalent share volume for over-the-counter
trades in Eligible Securities in 2021 was 1,361,484,729,008 out of a
total volume of 3,963,697,612,395 executed equivalent shares for trades
in Eligible Securities.\94\ Accordingly, approximately 34% of the
executed equivalent share volume in Eligible Securities took place in
the over-the-counter market.
---------------------------------------------------------------------------

    \94\ These figures for executed equivalent share volume for 2021
are set forth in the illustrative example in the notice of the 2022
Funding Proposal. See 2022 Funding Proposal Release at 33246.
---------------------------------------------------------------------------

    Moreover, FINRA and the exchanges should not be evaluated
differently based upon the potential for any particular Participant to
pass its CAT fees onto its members through regulatory, trading or other
fees. Each Participant will need to determine for itself how it will
obtain the funds to pay for its CAT fees. Because each Participant, not
just FINRA, is using CAT Data to satisfy the same self-regulatory
obligations, each Participant may determine to charge their members
fees to fund their share of the CAT fees, and the Exchange Act
specifically permits self-regulatory organizations to do so, provided
the fee filing requirements of the Exchange Act are satisfied. Indeed,
in approving the CAT NMS Plan, the SEC stated that ``the Exchange Act
specifically permits the Participants to charge members fees to fund
their self-regulatory obligations.'' \95\
---------------------------------------------------------------------------

    \95\ CAT NMS Plan Approval Order at 84794.
---------------------------------------------------------------------------

    Furthermore, FINRA and the exchanges should not be evaluated
differently based upon the potential for a particular Participant to
recoup its fees through revenue-generating activity other than fees
imposed on its members. FINRA, just like the exchange Participants, has
revenue sources other than membership fees. For example, FINRA
generates significant revenues via regulatory services agreements with

the exchanges, among other sources.\96\ These sources, too, may be used
to pay CAT fees, and, if they are used, it would not lead to an
increase in fees for Industry Members, but rather the exchange
Participants. Any review of how the Participants obtain their funds to
pay CAT fees is beyond the scope of the CAT fee filing.
---------------------------------------------------------------------------

    \96\ See 2021 FINRA Annual Financial Report at 43.
---------------------------------------------------------------------------

    The issues raised regarding the possibility of passing FINRA's
allocation to Industry Members also fail to recognize the basic fact
that Industry Members themselves face the same issue that they raise
with regard to FINRA. Industry Members may determine to pass their CAT
fees through to their customers, just as they may do with section 31-
related fees and other fees. Accordingly, the two-thirds allocation of
CAT costs to Industry Members may be entirely passed through to
investors, thereby alleviating Industry Members of any burden of
funding the CAT. As one commenter on the 2022 Funding Proposal, a
former member of the Advisory Committee for the CAT and the former
Chief Economist of the Commission, noted, ``[b]ecause the markets for
exchange, dealing, and brokerage services are all highly competitive in
the long run, any fees imposed on any of these groups will ultimately
pass through to the retail and institutional traders who use the
markets.'' \97\
---------------------------------------------------------------------------

    \97\ Harris Letter at 2.
---------------------------------------------------------------------------

    Finally, CAT LLC does not believe that FINRA should not be treated
as a market center for CAT funding purposes merely because FINRA is not
treated as a market center for governance purposes under the National
Market System Plan Regarding Consolidated Equity Market Data (``CT
Plan''). Although the CT Plan and the CAT Plan are both national market
system plans, their purpose and implementation are different. The CAT
NMS Plan, as approved by the Commission, explicitly contemplates
charging fees to all Participants, including FINRA. For example,
Section 11.1(b) of the CAT NMS Plan states that ``[s]ubject to Section
11.2, the Operating Committee shall have discretion to establish
funding for the Company, including: (i) establishing fees that the
Participants shall pay.'' \98\ In addition, the purpose of the CAT is
solely for regulatory purposes; it provides a regulatory system to
facilitate the performance of the self-regulatory obligations of all
the Participants, including the exchanges and FINRA. In contrast, the
CT Plan governs the public dissemination of real-time consolidated
equity market data for NMS stocks.
---------------------------------------------------------------------------

    \98\ See also Sections 11.2 and 11.3 of the CAT NMS Plan.
---------------------------------------------------------------------------

g. Impact on Options Versus Equities
    CAT LLC believes that the Funding Proposal provides for a fair,
reasonable and equitable treatment of the equities and options markets.
CAT LLC does not believe that the Funding Proposal would burden
inappropriately efficiency, competition or capital formation in how it
treats equities and options. As a preliminary matter, unlike other
previously proposed fee models,\99\ the Funding Proposal does not
allocate costs between the equities and options markets; instead, the
fee attributable to a transaction in an equity or option security
depends on equivalent executed share volume. In addition, the use of
equivalent executed share volume is designed to normalize options and
equities in the calculation of fees, and to recognize and address the
different trading characteristics of different types of securities.
Recognizing that Listed Options trade in contracts rather than shares,
the Funding Proposal would count executed equivalent share volume
differently for Listed Options. Specifically, each executed contract
for a transaction in Listed Options would be counted based on the
multiplier applicable to the specific Listed Option contract in the
relevant transaction (e.g., 100 executed equivalent shares or such
other applicable equivalency).
---------------------------------------------------------------------------

    \99\ See, e.g., 2018 Fee Proposal Release at 1400.
---------------------------------------------------------------------------

h. Sell-Side and Buy-Side
    CAT LLC proposes to charge both the buy-side and sell-side of a
transaction in Eligible Securities a CAT fee. The proposal to charge
both the buy-side and the sell-side of a transaction is consistent with
other types of fees charged to both the buyer and the seller that are
common in the industry. As such, CAT LLC believes that the proposal
would comply with the requirements of the Exchange Act. For example,
the ORF, a fee common to the options exchanges, is one example of a
regulatory fee charged to both the buy-side and sell-side of the
transaction. For example, the MIAX fee schedule lists the options
regulatory fee as applying ``per executed contract side.'' \100\
Similarly, under its pricing schedule, Nasdaq PHLX charges an options
regulatory fee ``per contract side.'' \101\ As set forth in its fee
schedule, CBOE EDGX also charges an options regulatory fee to each side
of the contract.\102\ In addition, the industry is familiar with
transaction-based fees charged to both the buyer and the seller by the
exchanges and FINRA.\103\
---------------------------------------------------------------------------

    \100\ MIAX Options Exchange, Fee Schedule, as of Mar. 3, 2023.
    \101\ Nasdaq PHLX Rules, Options 7, Section 6(D).
    \102\ Cboe EDGX Fee Schedule, effective Mar. 1, 2023.
    \103\ See, e.g., NYSE Price List 2023 for fees charged to both
sides.
---------------------------------------------------------------------------

i. Fee Rate Changes Twice per Year for CAT Fees Related to Prospective
CAT Costs
    CAT LLC proposes to require the calculation of the Fee Rate for CAT
Fees related to Prospective CAT Costs twice a year. CAT LLC believes
that the proposal to adjust the Fee Rate twice a year, once at the
beginning of the year and once during the year, appropriately balances
the need to coordinate the Fee Rate with potential changes in the costs
and projections with the cost and effort to the industry related to
more frequent fee changes.
    CAT LLC believes its proposal is in keeping with views expressed by
the industry in other contexts regarding the appropriate frequency of
regulatory rate changes. For example, in the ORF context, the industry
requested that rate changes be limited to twice per year. SIFMA stated
in a comment letter on one of the ORF fee proposals that ``[r]ates
should only be changed two times per year to reduce operational
complexity and reduce risk.'' \104\ The exchanges with ORF fees noted
that the possibility for fee rate changes only twice per year would
also ``better enable [their members] to properly account for ORF
charges among their customers.'' \105\ In light of these views on the
frequency of the rate changes, exchanges with an ORF have limited the
fee rate changes to twice a year.\106\
---------------------------------------------------------------------------

    \104\ See, e.g., Letter from Ellen Greene, Managing Director,
SIFMA to Vanessa Countryman, Secretary, SEC, re: SIFMA Comment
Letter on the Options Regulatory Fee Filings by SR-EMERALD-2019-01
(Apr. 10, 2019) at 5, https://www.sifma.org/wp-content/uploads/2019/04/MIAX-Emerald-ORF.pdf.
    \105\ See, e.g., Securities Exchange Act Rel. 93667 (Oct. 15,
2021).
    \106\ See, e.g., Cboe BZX Fee Schedule (``The Exchange may only
increase or decrease the ORF semi-annually''); MIAX Fee Schedule
(The Exchange may only increase or decrease the ORF semi-annually);
and BOX Fee Schedule (``The Exchange may only increase or decrease
the ORF semi-annually'').
---------------------------------------------------------------------------

j. Plan Amendment Process for Fee Rate Changes
    Under the Funding Proposal, once any Fee Rate has been established
by a majority vote of the Operating Committee in accordance with the
Funding Proposal set forth in the CAT NMS Plan,\107\ each Participant
would be required to pay the applicable CAT Fee

calculated in accordance with the requirements set forth in the CAT NMS
Plan (subject to the requirement for the Industry Member CAT Fee to be
in effect). CAT LLC does not plan to submit an amendment to the CAT NMS
Plan each time that the Fee Rate for the CAT Fee is established or
adjusted because of the length of time and burden required to amend the
CAT NMS Plan for each adjustment to the Fee Rate. Moreover, CAT LLC
believes that it is unnecessary to file a new separate amendment for
the Participant CAT Fees each time a new Fee Rate is approved because
the CAT NMS Plan would set forth in detail the manner in which the CAT
fees are established and the inputs for calculating the specific CAT
Fees would be published on the CAT website and included in the
Participant fee filings under section 19(b) of the Exchange Act for
Industry Member CAT fees. Therefore, the amendments to the Plan for a
fee rate change would be redundant and impractical in terms of timing.
---------------------------------------------------------------------------

    \107\ Participants would be required to pay the CAT Fee once the
CAT Fee is in effect with regard to Industry Members in accordance
with Section 19(b) of the Exchange Act.
---------------------------------------------------------------------------

    CAT LLC proposes to amend the CAT NMS Plan to describe in detail
how CAT Fees would be calculated, including the formula for the
calculation and the methods for determining the inputs for the
calculation (i.e., the budget, projected executed equivalent share
volume, executed equivalent shares per transaction). As such, the
Participants would be required to calculate the Fee Rate and the
related CAT Fees using the proposed formula; this process would be
mandatory, including the mid-year Fee Rate change. Moreover, the
budgetary and projection inputs to the calculation would be public,
including in public fee filings pursuant to section 19(b) of the
Exchange. Accordingly, CAT LLC does not believe that a Plan amendment
would be necessary each time a new Fee Rate is calculated in accordance
with the Plan.
    The CAT NMS Plan would require each Participant to pay the proposed
CAT Fees determined in accordance with the Funding Proposal. Proposed
Section 11.3(a)(ii)(A) sets forth the requirement for Participants to
pay the CAT fees. It states that ``[e]ach Participant that is a
national securities exchange will be required to pay the CAT Fee for
each transaction in Eligible Securities executed on the exchange in the
prior month based on CAT Data,'' and that ``[e]ach Participant that is
a national securities association will be required to pay the CAT Fee
for each transaction in Eligible Securities executed otherwise than on
an exchange in the prior month based on CAT Data.'' It further states
that ``[t]he CAT Fee for each transaction in Eligible Securities will
be calculated by multiplying the number of executed equivalent shares
in the transaction by one-third and by the Fee Rate reasonably
determined pursuant to paragraph (a)(i) of this Section 11.3.'' In
addition, proposed paragraph (a) of the Participant fee schedule would
state that ``[e]ach Participant shall pay the CAT Fee set forth in
Section 11.3(a) of the CAT NMS Plan to Consolidated Audit Trail, LLC in
the manner prescribed by Consolidated Audit Trail, LLC on a monthly
basis based on the Participant's transactions in the prior month.''
    The Participants would be required to follow the requirements set
forth in the CAT NMS Plan for establishing and calculating CAT Fees and
requiring the payment of the CAT Fees as both a regulatory and
contractual matter. Rule 613(h)(1) of Regulation NMS under the Exchange
Act states that ``[e]ach national securities exchange and national
securities association shall comply with the provisions of the national
market system plan approved by the Commission,'' that is, the CAT NMS
Plan. Rule 613(h)(2) of Regulation NMS under the Exchange Act states
that ``[a]ny failure by a national securities exchange or national
securities association to comply with the provisions of the national
market system plan approved by the Commission shall be considered a
violation of this section.'' Similarly, Rule 608(c) of Regulation NMS
under the Exchange Act states that ``[e]ach self-regulatory
organization shall comply with the terms of any effective national
market system plan of which it is a sponsor or a participant.'' Section
3.11 of the CAT NMS Plan reiterates this requirement, stating that
``[e]ach Participant shall comply with . . . the provisions of SEC Rule
613 and of this Agreement, as applicable, to the Participant.'' In
addition, each Participant is a signatory to the CAT NMS Plan as a
member of the limited liability company. Accordingly, a failure to
comply with the requirements of the CAT NMS Plan related to the CAT
fees would be a violation of the regulatory obligation to comply with
the CAT NMS Plan and a breach of contractual requirements of the CAT
NMS Plan.
k. Executed Equivalent Shares for NMS Stocks, Listed Options and OTC
Equity Securities
    The Funding Proposal uses the concept of executed equivalent shares
as the metric for calculating CAT fees for transactions in NMS Stocks,
Listed Options and OTC Equity Securities, each of which have different
trading characteristics. Under the Funding Proposal, each executed
share for a transaction in NMS Stocks would be counted as one executed
equivalent share, each executed contract for a transaction in Listed
Options would be counted using the contract multiplier applicable to
the specific Listed Option in the relevant transaction, and each
executed share for a transaction in OTC Equity Securities would be
counted as 0.01 executed equivalent shares. CAT LLC believes that the
proposed counting methods for each category of security are
appropriate, as discussed in detail above in Section A.3.b.ii of this
filing.
l. Cost Transparency
i. Cost Transparency and Level of Detail of CAT Costs
    CAT LLC provides substantial cost transparency for Past CAT Costs
and Prospective CAT Costs, including transparency above and beyond what
is required under the CAT NMS Plan, and more than other national market
system plans. Such transparency would include cost descriptions in the
fee filings made pursuant to section 19(b) of the Exchange Act and Rule
19b-4(f)(2) thereunder, as well as the public availability of CAT
financial and budget information.
    CAT LLC proposes to require substantial transparency for CAT costs
in the fee filings to be made pursuant to section 19(b) of the Exchange
Act. For example, Proposed Section 11.3(a)(iii)(B) of the CAT NMS Plan
would require such filings for CAT Fees to include, among other things,
the budget for the upcoming year (or remainder of the year, as
applicable), including a brief description of each line item in the
budget, including (1) technology line items of cloud hosting services,
operating fees, CAIS operating fees, change request fees and
capitalized developed technology costs, (2) legal, (3) consulting, (4)
insurance, (5) professional and administration, and (6) public
relations costs, a reserve and/or such other categories as reasonably
determined by the Operating Committee to be included in the budget and
the reason for changes in each such line item from the prior CAT Fee
filing; and a discussion of how the budget is reconciled to the
collected fees. Similarly, Proposed Section 11.3(b)(iii)(B)(II) of the
CAT NMS Plan would require such filings for Historical CAT Assessments
to include, among other things, a brief description of the amount and
type of Historical CAT Costs, including (1) technology line items of
cloud hosting services, operating fees, CAIS operating fees,

change request fees and capitalized developed technology costs, (2)
legal, (3) consulting, (4) insurance, (5) professional and
administration, and (6) public relations costs.
    CAT LLC provides substantial additional financial information
regarding the operation of the CAT as required by the CAT NMS Plan. For
example, CAT LLC currently makes detailed financial information about
the CAT publicly available. Section 9.2(a) of the CAT NMS Plan requires
CAT LLC to maintain a system of accounting established and administered
in accordance with GAAP and requires ``all financial statements or
information that may be supplied to the Participants shall be prepared
in accordance with GAAP (except that unaudited statements shall be
subject to year-end adjustments and need not include footnotes).''
Section 9.2(a) of the CAT NMS Plan also requires the Company to prepare
and provide to each Participant ``as soon as practicable after the end
of each Fiscal Year, a balance sheet, income statement, statement of
cash flows and statement of changes in equity for, or as of the end of,
such year, audited by an independent public accounting firm.'' The CAT
NMS Plan requires that this audited balance sheet, income statement,
statement of cash flows and statement of changes in equity be made
publicly available. Among other things, these financial statements
provide operating expenses, including technology, legal, consulting,
insurance, professional and administration and public relations costs.
CAT LLC also maintains a dedicated web page on the CAT NMS Plan website
that consolidates its annual financial statements in a public and
readily accessible place.\108\ The Company's annual financial
statements from inception in 2017 through 2021 are currently available
on the CAT website.
---------------------------------------------------------------------------

    \108\ See CAT Audited Financial Statements, https://www.catnmsplan.com/audited-financialstatements.
---------------------------------------------------------------------------

    In addition to providing financial information required under the
CAT NMS Plan and otherwise, CAT LLC also has voluntarily determined to
provide more financial transparency to the public regarding its costs.
For example, CAT LLC publicly provides its annual operating budget as
well as periodically provides updates to the budget that occur during
the year. CAT LLC includes such budget information on a dedicated web
page on the CAT NMS Plan website to make it readily accessible to the
public, like the CAT financial statements. CAT LLC also has held
webinars providing additional detail about CAT costs and about
potential alternative funding models for the CAT, and commenters
submitted questions and comments on the webinars.\109\
---------------------------------------------------------------------------

    \109\ See, e.g., CAT LLC Webinar, CAT Costs (Sept. 21, 2021),
https://www.catnmsplan.com/events/catcostsseptember-21-2021; CAT LLC
Webinar, CAT Funding (Sept. 22, 2021), https://www.catnmsplan.com/events/catfundingseptember-22-2021; and CAT LLC Webinar, CAT Funding
(Apr. 6, 2022), https://www.catnmsplan.com/events/cat-funding.
---------------------------------------------------------------------------

ii. Composition and Transparency of Past CAT Costs
    CAT LLC also provides detailed disclosures regarding Past CAT
Costs. The Historical Fee Rate for the Historical CAT Assessment would
be calculated based on actual past costs incurred by the CAT (except
for certain costs that CAT LLC has determined to exclude from the
calculation), rather than budgeted costs. The actual costs for prior to
2022 are set forth in detail in the audited financial statements for
the Company and its predecessor CAT NMS, LLC, which are available on
the CAT website.\110\ In addition, the following describes in detail
the Historical CAT Costs for prior to 2022. These Historical CAT Costs
figures are being provided in this filing for transparency purposes
only. The Participants expect to describe these costs in the relevant
fee filings that the Participants submit pursuant to section 19(b)
under the Exchange Act and Rule 19b-4(f)(2) thereunder regarding
Historical CAT Assessments.
---------------------------------------------------------------------------

    \110\ The audited financial statements for CAT NMS, LLC and
Consolidated Audit Trail, LLC are available at https://www.catnmsplan.com/audited-financial-statements.
---------------------------------------------------------------------------

A. Historical CAT Costs Incurred Prior to June 22, 2020 (i.e., Pre-FAM
Costs)
    The Participants expect to propose that Historical CAT Costs would
include costs incurred by CAT prior to June 22, 2020 and already funded
by the Participants, excluding Excluded Costs (described further
below). The Participants expect to propose that the Historical CAT
Costs would include costs for the period prior to June 22, 2020 of
$143,919,521. The Participants expect to propose that Participants
would remain responsible for one-third of this cost (which they have
previously paid), and Industry Members would be responsible for the
remaining two-thirds, with CEBBs paying one-third ($47,973,174) and
CEBSs paying one-third ($47,973,174). The following table breaks down
the Historical CAT Costs for the period prior to June 22, 2020 into the
categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT
NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                                                       costs for period
                  Operating expense                    prior to June 22,
                                                             2020
------------------------------------------------------------------------
Capitalized Developed Technology Costs and                   $71,475,941
 Transition Fee *...................................
Technology Costs:                                              33,568,579
  Cloud Hosting Services............................           10,268,840
  Operating Fees....................................           21,085,485
  CAIS Operating Fees...............................            2,072,908
  Change Request Fees...............................              141,346
Legal...............................................          19,674,463
Consulting..........................................          17,013,414
Insurance...........................................             880,419
Professional and administration.....................           1,082,036
Public relations....................................             224,669
                                                     -------------------
  Total Operating Expenses..........................         143,919,521
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $2,115,545 incurred during the period prior to June 22, 2020
  have been appropriately excluded from the above table.

B. CAT Costs Incurred in Period 1
    The Participants expect to propose that Historical CAT Costs would
include costs incurred by CAT and already funded by Participants during
FAM Period 1, which covers the period from June 22, 2020-July 31, 2020.
The Participants expect to propose that the Historical CAT Costs for
Period 1 are $6,377,343. The Participants expect to propose that
Participants would remain responsible for one-third of this cost (which
they have previously paid) ($2,125,781), and Industry Members would be
responsible for the remaining two-thirds, with CEBBs paying one-third
($2,125,781) and CEBSs paying one-third ($2,125,781). The following
table breaks down the Historical CAT Costs for Period 1 into the
categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT
NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                  Operating expense                   costs for period 1
------------------------------------------------------------------------
Capitalized Developed Technology Costs *............          $1,684,870
Technology Costs:                                               3,996,800
  Cloud Hosting Services............................            2,642,122
  Operating Fees....................................            1,099,680
  CAIS Operating Fees...............................              254,998
  Change Request Fees...............................  ..................
Legal...............................................             481,687
Consulting..........................................             137,209
Insurance...........................................  ..................
Professional and administration.....................              69,077

Public relations....................................               7,700
                                                     -------------------
  Total Operating Expenses..........................           6,377,343
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $362,121 incurred during Period 1 have been appropriately
  excluded from the above table.

C. CAT Costs Incurred in Period 2
    The Participants expect to propose that Historical CAT Costs would
include costs incurred by CAT and already funded by Participants during
FAM Period 2, which covers the period from August 1, 2020-December 31,
2020. The Participants expect to propose that the Historical CAT Costs
for Period 2 are $42,976,478. The Participants expect to propose that
Participants would remain responsible for one-third of this cost (which
they have previously paid) ($14,325,493), and Industry Members would be
responsible for the remaining two-thirds, with CEBBs paying one-third
($14,325,492.70) and CEBSs paying one-third ($14,325,492.70). The
following table breaks down the Historical CAT Costs for Period 2 into
the categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the
CAT NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                  Operating expense                   costs for period 2
------------------------------------------------------------------------
Capitalized Developed Technology Costs *............          $6,761,094
Technology Costs:                                              31,460,033
  Cloud Hosting Services............................           20,709,212
  Operating Fees....................................            9,108,700
  CAIS Operating Fees...............................            1,590,298
  Change Request Fees...............................               51,823
Legal...............................................           2,766,644
Consulting..........................................             532,146
Insurance...........................................             976,098
Professional and administration.....................             438,523
Public relations....................................              41,940
                                                     -------------------
  Total Operating Expenses..........................          42,976,478
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $1,892,505 incurred during Period 2 have been appropriately
  excluded from the above table.

D. CAT Costs Incurred in Period 3
    The Participants expect to propose that Historical CAT Costs would
include costs incurred by CAT and already funded by Participants during
FAM Period 3, which covers the period from January 1, 2021-December 31,
2021. The Participants expect to propose that the Historical CAT Costs
for Period 3 are $144,415,268. The Participants expect to propose that
Participants would remain responsible for one-third of this cost (which
they have previously paid) ($48,238,423), and Industry Members would be
responsible for the remaining two-thirds, with CEBBs paying one-third
($48,238,423) and CEBSs paying one-third ($48,238,423). The following
table breaks down the Historical CAT Costs for Period 3 into the
categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT
NMS Plan.

------------------------------------------------------------------------
                                                        Historical CAT
                  Operating expense                   costs for period 3
------------------------------------------------------------------------
Capitalized Developed Technology Costs *............         $10,763,372
Technology Costs:                                             123,639,402
  Cloud Hosting Services............................           94,574,759
  Operating Fees....................................           23,106,091
  CAIS Operating Fees...............................            5,562,383
  Change Request Fees...............................              396,169
Legal...............................................           6,333,248
Consulting..........................................           1,408,209
Insurance...........................................           1,582,714
Professional and administration.....................             595,923
Public relations....................................              92,400
                                                     -------------------
  Total Operating Expenses..........................         144,415,268
------------------------------------------------------------------------
* The non-cash amortization of these capitalized developed technology
  costs of $5,108,044 incurred during Period 3 have been appropriately
  excluded from the above table.

E. Excluded Costs
    The Participants expect to propose that Historical CAT Costs would
not include two categories of CAT costs (``Excluded Costs''): (1)
$48,874,937, which are all CAT costs incurred from November 15, 2017
through November 15, 2018, and (2) $14,749,362 of costs related to the
termination of the relationship with the Initial Plan Processor. The
Participants expect to propose that the Participants would remain
responsible for 100% of these costs, which total $63,624,299. CAT LLC
believes that the exclusions of these costs addresses concerns
previously expressed by commenters about costs incurred related to the
period of the operation of the Initial Plan Processor.
    First, the Participants expect to propose that Historical CAT Costs
would exclude all CAT costs incurred from November 15, 2017 through
November 15, 2018. CAT LLC determined to exclude all costs during this
one-year period from fees charged to Industry Members due to the delay
in the start of reporting to the CAT. The Participants expect to
propose that these costs are $48,874,937. The Participants expect to
propose that the Participants would remain responsible for 100% of this
$48,874,937 in costs. The following table breaks down these costs into
the categories set forth in Proposed Section 11.3(b)(iii)(B)(II) of the
CAT NMS Plan.

------------------------------------------------------------------------
                                                      Excluded costs for
                                                      November 15, 2017-
                  Operating expense                    November 15, 2018

------------------------------------------------------------------------
Capitalized Developed Technology Costs..............         $37,852,083
Technology Costs:
  Cloud Hosting Services............................
  Operating Fees....................................
  CAIS Operating Fees...............................
  Change Request Fees...............................
Legal...............................................           6,143,278
Consulting..........................................           4,452,106
Insurance...........................................
Professional and administration.....................             340,145
Public relations....................................              87,325
                                                     -------------------
  Total Operating Expenses..........................          48,874,937
------------------------------------------------------------------------

    Second, the Participants expect to propose that Historical CAT
Costs would not include $14,749,362 of costs related to the conclusion
of the relationship with the Initial Plan Processor. The Participants
expect to propose that Participants would remain responsible for 100%
of the $14,749,362 of these costs.
    Accordingly, the Participants expect to propose that Historical CAT
Costs would exclude a total of $63,624,299 of prior CAT costs, and the
Participants would remain responsible for 100% of these costs.
iii. Alternative Transparency Proposals
    CAT LLC believes that its proposed methods of cost transparency
will provide Industry Members and other interested parties with
detailed information about the CAT and the CAT fees. CAT LLC does not
believe that additional transparency measures, such as a mechanism to
allow for the review of budget information prior to a fee filing, or an
independent cost review mechanism, are necessary or appropriate.
A. Budget Disclosure Prior to Fee Filings
    CAT LLC does not believe that it is necessary to add a requirement
to the CAT NMS Plan to provide Industry Members and other members of
the public with an opportunity to review the budget that would be
included in

the SRO fee filings prior to such filings. CAT LLC is currently
providing CAT budget information to the public on a continuing basis.
CAT LLC publicly provides the annual operating budget for the CAT LLC
as well as regular updates to the budget that occur during the year.
This budget information is readily accessible to the public on a
dedicated web page on the CAT NMS Plan. CAT LLC does not just provide
the annual budget, or the mid-year budget, the two budgets that would
be necessary for the fee filings; it also provides other updates each
year. Accordingly, Industry Members and other members of the public
will have the opportunity to review regular updates of the budget more
often than is necessary for the fee filings. Such transparency would
allow Industry Members and other members of the public to understand
the budget and changes thereto throughout the year. Moreover, the fee
filing process under section 19(b) of the Exchange Act provides the
public with the opportunity to review the budgeted CAT costs that CAT
LLC would seek to recover via the CAT Fees.
B. Independent Cost Review Mechanism
    CAT LLC also does not believe that it would be necessary or
appropriate to include an independent review mechanism for the cost of
proposed CAT expenditures. First, as a preliminary matter, unlike the
Commission, CAT LLC is not a governmental entity, with a responsibility
to the taxpaying public. It is a private entity subject to the
regulatory requirements of the Exchange Act. Second, such a budget
review process is unnecessary as any CAT fees proposed to be
established pursuant to the CAT NMS Plan are already subject to the
existing, well-established review practices under Rule 608 of
Regulation NMS under the Exchange Act and section 19(b) of the Exchange
Act and Rule 19b-4 thereunder. Under those provisions, CAT fees must be
filed with the SEC, thereby providing transparency and an opportunity
for comment by the public, and may only be implemented if they satisfy
the requirements of the Exchange Act. Third, the SEC has the ability to
request budget and financial information from CAT LLC to the extent
that it believes that such additional information is necessary for it
to evaluate any CAT fee proposals.
m. Allocation of Past CAT Costs to Participants: Pro Rata Versus Use of
Funding Proposal
    The Participants have been responsible for all costs related to the
CAT to date, and Industry Members have not paid any of the costs to
date. Accordingly, under the Funding Proposal, the Participants would
not be required to pay a CAT fee related to Past CAT Costs in addition
to prior payments. The two-thirds of the Historical CAT Costs collected
from Industry Members would be allocated to the Participants pro rata,
based on the outstanding amounts due under the notes to the
Participants for repayment of outstanding loan notes to the Company.
The one-third of Historical CAT Costs that are not allocated to
Industry Members would not be allocated to the Participants pursuant to
the Funding Proposal based on executed equivalent shares. Instead, such
Historical CAT Costs would be allocated to the Participants pro rata
based on the outstanding amounts due under the notes (as discussed
further below in Section A.9.n of this filing). CAT LLC entered into
the loans with the Participants pursuant to its authority under the CAT
NMS Plan as approved by the SEC to pay for CAT costs, and, as such, the
loans and their repayment terms are consistent with the Exchange Act
and Rule 608 of Regulation NMS. The terms of the loans do not need to
satisfy the requirements of the funding model set forth in Article XI
of the CAT NMS Plan.
    Section 3.9 of the CAT NMS Plan states that ``[i]f the Company
requires additional funds to carry out its purposes, to conduct its
business, to meet its obligations, or to make any expenditure
authorized by this Agreement, the Company may borrow funds from such
one or more of the Participants, or from such third party lender(s),
and on such terms and conditions, as may be approved by a Supermajority
Vote of the Operating Committee.'' As the Company--CAT LLC--did not
have a source of revenue to fund its activities without a funding model
approved by the SEC, CAT LLC determined to borrow funds from the
Participants on terms approved by a Supermajority Vote of the Operating
Committee. After this vote, CAT LLC entered into loan agreements with
the Participants to cover CAT costs. The terms of the loan agreements
dictate that repayment of the notes will be pro rata, based on the
outstanding amounts loaned to CAT LLC. Accordingly, CAT LLC is
obligated by contract, approved in accordance with the terms of the CAT
NMS Plan, to repay the notes pro rata, not by another method.
    Moreover, Section 3.8 of the CAT NMS Plan states that ``[e]xcept as
may be determined by the unanimous vote of all the Participants or as
may be required by applicable law, no Participant shall be obligated to
contribute capital or make loans to the Company.'' The Participants
voluntarily have agreed to provide loans to CAT LLC under the agreed
upon terms to fund the CAT until a funding model is approved. Without a
unanimous vote of the Participants, however, CAT LLC cannot require the
Participants to make a new loan to CAT LLC. Accordingly, without the
agreement of the Participants, the loans must be repaid in accordance
with their terms.
n. Sufficient Detail Regarding Pro Rata Allocation of Past CAT Costs to
Participants
    Further with regard to the pro rata allocation of Past CAT Costs,
the manner in which the loans are repaid are governed by the loan
agreements between CAT LLC and the Participants, as approved by CAT
LLC. The following provides additional detail as to the allocation of
Past CAT Costs to Participants in accordance with the loans to CAT LLC.
    Pending SEC approval of CAT fees to fund the CAT, the Participants
voluntarily determined to fund the development and operation of the CAT
through quarterly loans to CAT LLC. The Participants determined to use
the market share, tier-based funding model applicable to Execution
Venues described in the proposed amendment to the CAT NMS Plan
submitted to the SEC on December 11, 2017 (without including ATSs as
Equity Execution Venues) to allocate loan amounts among Participants
(``Tiered Market Share Proposal'').\111\ As described in that proposal,
each Equity Execution Venue is placed in one of four tiers of fixed
fees based on market share, and each Options Execution Venue is placed
in one of two tiers of fixed fees based on market share. Equity
Execution Venue market share is determined by calculating each Equity
Execution Venue's proportion of the total volume of NMS Stock and OTC
Equity shares reported by all Equity Execution Venues during the
relevant time period. For purposes of calculating market share, the OTC
Equity Securities market share of Execution Venue ATSs trading OTC
Equity Securities as well as the market share of the FINRA OTC
reporting facility are discounted. Similarly, market share for Options
Execution Venues is determined by calculating each Options Execution
Venue's proportion of the total volume of Listed Options contracts
reported by all Options Execution Venues during the relevant time
period. The tiers are

refreshed on a quarterly basis in accordance with the Tiered Market
Share Proposal.
---------------------------------------------------------------------------

    \111\ See 2018 Fee Proposal Release.
---------------------------------------------------------------------------

    Each of the Participants voluntarily have loaned CAT LLC funds in
amounts in accordance with the Tiered Market Share Proposal to cover
Past CAT Costs. Accordingly, under the Funding Proposal, the
Participants propose to be reimbursed for two-thirds of the Historical
CAT Costs pro rata based on the outstanding amounts loaned to CAT LLC
pursuant to the Tiered Market Share Proposal, as this is what is
required under the loan contract between CAT LLC and the Participants.
Correspondingly, for the remaining one-third of the Historical CAT
Costs that are not reimbursed via the Historical CAT Assessment, the
Participants propose to remain responsible for the amounts loaned to
CAT LLC pursuant to the Tiered Market Share Proposal. The Participants'
one-third share of the Historical CAT Costs would be paid by the
cancellation of the loans on a pro rata basis. In addition, for any
Past CAT Costs that are excluded from Historical CAT Costs, the
Participants propose to remain responsible for the amounts loaned to
CAT LLC pursuant to the Tiered Market Share Proposal as well. These
excluded costs also would be paid by cancellation of the loans on a pro
rata basis.
o. Past CAT Costs: Collected From Current Versus Past Industry Members
and Use of Prior Month's Transactions
    CAT LLC believes that Historical CAT Assessments are appropriately
assessed to current Industry Members based on current market activity.
CAT LLC does not believe that Historical CAT Assessments should be
charged to Industry Members that were active at the time when the Past
CAT Costs were incurred and based on trading activity from the time
when the Past CAT Costs were incurred.
    CAT LLC believes that it is appropriate to collect the Historical
CAT Assessments from current Industry Members based on current market
activity because current market participants are the beneficiaries of
the regulatory value provided by the CAT to the securities markets. The
SEC has emphasized that the CAT provides a benefit to all market
participants,\112\ and, therefore, current Industry Members are
benefitting from the efforts to create and operate the CAT.
---------------------------------------------------------------------------

    \112\ See generally Rule 613 Adopting Release.
---------------------------------------------------------------------------

    In addition, the approach recognizes the many practical
difficulties of imposing fees retroactively on Industry Members' market
activity from the past, sometimes years in the past as the relevant
recovery period extends to 2012. For example, one of the practical
difficulties may include the fact that some Industry Members that would
be subject to such a retroactive fee may no longer be in business or no
longer registered as a broker-dealer that is subject to the
jurisdiction of the Participants or SEC. Indeed, this is likely to be a
substantial issue. For example, in the SEC's approval order of the CAT
NMS Plan, the SEC used an estimate of 1,800 broker-dealers subject to
CAT reporting for its cost estimates.\113\ However, the number of
current Industry Members has greatly diminished from these early
estimates to approximately 1,100.\114\ Therefore, at least
approximately 40% of the broker-dealers that may have been subject to
CAT reporting in 2012 are no longer CAT Reporters.
---------------------------------------------------------------------------

    \113\ CAT NMS Plan Approval Order at 84862.
    \114\ An average of 1,124 unique CAT Reporters sent transaction
data to the CAT from July 1, 2022 to August 8, 2022.
---------------------------------------------------------------------------

    Another practical issue involves the difficulty of accurately
determining the transactions in Eligible Securities of the Industry
Member for the past decade that would be subject to CAT fees. Because
the recovery period for Past CAT Costs spans a period in which the CAT
was not in existence yet, as well as periods in which CAT reporting was
being phased in, the CAT may not have any record of relevant
transactions from earlier periods, and it may not have a complete
record of the relevant transactions for later periods. The SEC
anticipated the recovery of CAT fees after such costs were incurred, as
it contemplated the recovery of CAT costs for the creation of the CAT
as well as its implementation and maintenance.\115\
---------------------------------------------------------------------------

    \115\ See, e.g., Rule 613(a)(1)(vii)(D) of Regulation NMS under
the Exchange Act.
---------------------------------------------------------------------------

    Moreover, imposing retroactive fees for past market activity could
raise fairness issues. For example, because the fee would be
retroactive, market participants could not have taken into
consideration the CAT fee when they decided to enter into the
transactions in the past. In addition, given the passage of time, past
CAT Reporters, particularly small CAT Reporters, may not be in a
position to pay a fee related to earlier market activity.\116\
---------------------------------------------------------------------------

    \116\ CAT LLC notes, however, that there has been substantial
continuity in the largest Industry Members over time. For the
illustrative example, the top 10 firms in terms of equivalent
executed shares in December 2022 are allocated more than half (52%)
of the total Industry Member CAT costs; eight of those 10 firms were
also ranked in the top 10 throughout 2021. The remaining two were
ranked 14th and 15th, respectively. Similarly, of the top 30 firms
in December 2022 (representing an allocation of 82% of the total
Industry Member CAT costs), all but three ranked in the top 30
throughout 2021. The three exceptions were ranked at 31, 33 and 40
in 2021. Furthermore, of the top 10 firms by CAT record volume year
to date in 2023, 7 were also top 10 reporters by message volume in
2020. The other three rose from ranks 17, 18, and 35. Of the top 30
firms by CAT record volume year to date in 2023, 25 were in the top
30 reporters of 2020.
---------------------------------------------------------------------------

    In addition, CAT LLC notes that the SEC has approved similar
funding practices with regard to new Participants for the CAT as well
as new participants for other national market system plans. In each
case, the new participant is required to pay a fee to join the plan,
and the fee is based on past costs for creating, implementing and
maintaining the plan at issue.\117\ As a result, a new participant
would be required to pay a fee for costs incurred in the past by the
relevant plan. For example, Section 3.3 of the CAT NMS Plan states
that, to become a new Participant to the CAT NMS Plan, the applicant
must:
---------------------------------------------------------------------------

    \117\ See, e.g., Section III(b) of the CTA Plan; Section VIII of
the UTP Plan.

pay a fee to the Company in an amount determined by a Majority Vote
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 and any
subsequent Plan Processor and for costs the Company incurs in
providing for the prospective Participant's participants in the
Company, including after consideration of the factors identified in
---------------------------------------------------------------------------
Section 3.3(b) (the ``Participation Fee'').

    As this provision indicates, new CAT Participants are required to
contribute to paying for costs incurred since the inception of the CAT.
Indeed, the costs related to evaluating and selecting the Initial Plan
Processor were incurred in 2017 and before.\118\ For example, a CAT
Participant applicant in 2023 may be required to pay a fee that
reflects CAT costs incurred years ago. Similarly, the Funding Proposal
would require current Industry Members to pay a share of CAT costs from
years ago.
---------------------------------------------------------------------------

    \118\ Letter from Participants, to Brent J. Fields, Secretary,
SEC re: Selection of Plan Processor for the National Market System
Plan Governing Consolidated Audit Trail (Jan. 18, 2017).
---------------------------------------------------------------------------

p. Budgeted Versus Incurred Costs
    Under the Funding Proposal, the budgeted CAT costs set forth in the
annual operating budget would be used to determine the Fee Rate for CAT
Fees related to Prospective CAT Costs. The budgeted CAT costs would
comprise estimated fees, costs and expenses to be reasonably incurred
by the Company for the development, implementation and operation of the
CAT during the year,

which would include costs for the Plan Processor, insurance, and third-
party support, as well as an operational reserve. CAT LLC does not
propose to use costs already incurred in calculating the CAT Fees.
    CAT LLC believes that using budgeted CAT costs, rather than CAT
costs already incurred, is critical to ``build[ing] financial stability
to support the Company as a going concern.'' \119\ Using budgeted CAT
costs to determine the Fee Rate would allow CAT LLC to collect fees
before bills become payable. If, however, CAT Fees are only collected
after bills become payable, then the Participants would be required to
continue to fund 100% of CAT costs to pay the bills as they come due.
Making the Participants responsible for all of the CAT costs upfront,
rather than one-third of the CAT costs, would change the proposed model
in a significant manner.
---------------------------------------------------------------------------

    \119\ Section 11.2(f) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Requiring the calculation of the Fee Rate based on incurred CAT
costs, rather than budgeted CAT costs would only be necessary if
budgeted and incurred CAT costs were likely to diverge. However, the
Funding Proposal has been designed to address this concern. As
proposed, CAT LLC would be required to calculate the Fee Rate each year
based upon the budget for the upcoming year, and to adjust the fee rate
mid-year to reflect changes in the budgeted or actual CAT costs or the
projected or actual executed equivalent share volume. Accordingly, CAT
LLC would be required to adjust CAT Fees twice a year to ensure that
they are closely aligned with CAT costs. Moreover, when establishing
the annual budget or its mid-year adjustment, CAT LLC would adjust the
budget to reflect any surplus or deficit in CAT Fees collected during
the prior period.
    In addition, the CAT NMS Plan requires that the Company operate on
a ``break-even'' basis, with fees imposed to cover costs and an
appropriate reserve. Any surpluses would be treated as an operational
reserve to offset future fees and would not be distributed to the
Participants as profits. To ensure that the Participants' operation of
the CAT will not contribute to the funding of their other operations,
Section 11.1(c) of the CAT NMS Plan specifically states that ``[a]ny
surplus of the Company's revenues over its expenses shall be treated as
an operational reserve to offset future fees.'' In addition, CAT LLC
proposes to limit the size of the reserve to not more than 25% of the
annual budget. To the extent that collected CAT fees exceed CAT costs,
including the reserve of 25% of the annual budget, such surplus shall
be used to offset future fees.\120\ Furthermore, CAT LLC is set up as a
business league to mitigate concerns that CAT LLC's earnings could be
used to benefit individual Participants.\121\
---------------------------------------------------------------------------

    \120\ See Proposed 11.1(a)(ii) of the CAT NMS Plan.
    \121\ To qualify as a business league under Section 501(c)(6) of
the Internal Revenue Code, an organization must ``not [be] organized
for profit and no part of the net earnings of [the organization can]
inure[ ] to the benefit of any private shareholder or individual.''
As the SEC stated when approving the CAT NMS Plan, ``the Commission
believes that the Company's application for Section 501(c)(6)
business league status addresses issues raised by commenters about
the Plan's proposed allocation of profit and loss by mitigating
concerns that the Company's earnings could be used to benefit
individual Participants.'' CAT NMS Plan Approval Order at 84793.
---------------------------------------------------------------------------

q. Continuous Fees Versus Sunsetting Fees
    CAT LLC does not propose to require the proposed CAT Fees related
to Prospective CAT Costs to sunset automatically; instead, a CAT Fee
would continue until a new CAT Fee is in place in accordance with the
requirements of the CAT NMS Plan and section 19(b) of the Exchange Act.
CAT LLC believes that it is critical that a CAT Fee remain in place at
all times. Accordingly, CAT LLC proposes to add Section
11.3(a)(i)(A)(III) of the CAT NMS Plan to clarify that CAT Fees related
to Prospective CAT Costs do not sunset automatically; such CAT Fees
would remain in place until new CAT Fees with a new Fee Rate is in
effect.
    The financial viability of the CAT would be put at risk without a
constant source of revenue. CAT LLC pays various bills, including
technology bills, on a monthly basis. Accordingly, even short delays in
the implementation of new CAT Fees after the sunsetting of a prior CAT
Fee may have a deleterious effect on the operation of the CAT. Indeed,
adopting sunsetting fees would contradict the funding principle of
seeking to ``build financial stability to support the Company as a
going concern.'' \122\
---------------------------------------------------------------------------

    \122\ Section 11.2(f) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Moreover, CAT LLC does not believe that a sunsetting requirement is
necessary to ensure that the CAT Fees are closely coordinated with
Prospective CAT costs. CAT LLC has proposed a comprehensive, multi-
pronged approach to ensure that the CAT Fees are closely tied to CAT
costs. First, CAT LLC will be required to calculate the Fee Rates for
the CAT Fees based on budgeted CAT costs. In addition, CAT LLC will be
required to calculate the Fee Rate twice a year to determine whether
the Fee Rate has changed due to changes in the budgeted or actual costs
or actual or projected executed equivalent share volume, and to make a
fee filing twice a year to reflect this calculation. Accordingly, the
Fee Rate would be required to be updated twice a year, thereby ensuring
the CAT Fees are closely tied to CAT costs.
    Second, the CAT NMS Plan requires that the Company operate on a
``break-even'' basis, with fees imposed to cover costs and an
appropriate reserve. Any surpluses would be treated as an operational
reserve to offset future fees and would not be distributed to the
Participants as profits. To ensure that the Participants' operation of
the CAT will not contribute to the funding of their other operations,
Section 11.1(c) of the CAT NMS Plan specifically states that ``[a]ny
surplus of the Company's revenues over its expenses shall be treated as
an operational reserve to offset future fees.'' Moreover, CAT LLC
proposes to amend the CAT NMS Plan to limit the reserve to no more than
25% of the annual budget and to clarify that CAT fees collected in
excess of the CAT costs, including the reserve, will be used to offset
future fees.\123\
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    \123\ See Proposed Section 11.1(a)(i) and (ii) of the CAT NMS
Plan.
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    Third, CAT LLC proposes to amend the CAT NMS Plan to require
Participants to provide significant details in their fee filings
regarding Industry Member CAT Fees. Proposed paragraph (a)(iii)(B) of
Section 11.3 of the CAT NMS Plan would state that, ``[w]hen the
Participants file with the SEC pursuant to section 19(b) of the
Exchange Act CAT Fees to be charged to Industry Members calculated
using the Fee Rate that the Operating Committee approved in accordance
with paragraph (a) of this Section 11.3,'' such filings would be
required to include (A) the Fee Rate; (B) the budget for the upcoming
year (or remainder of the year, as applicable), including a brief
description of each line item in the budget, including (1) technology
line items of cloud hosting services, operating fees, CAIS operating
fees, change request fees and capitalized developed technology costs,
(2) legal, (3) consulting, (4) insurance, (5) professional and
administration, and (6) public relations costs, a reserve and/or such
other categories as reasonably determined by the Operating Committee to
be included in the budget, and the reason for changes in each such line
item from the prior CAT Fee filing; (C) a discussion of how the budget
is reconciled to the collected fees; and (D) the projected total
executed equivalent share volume of all transactions in Eligible
Securities for the year (or

remainder of the year, as applicable), and a description of the
calculation of the projection. This detail would describe how the Fee
Rate was calculated and explain how the budget used in the calculation
is reconciled to the collected fees. Such detailed information would
provide Industry Members and other interested parties with a clear
understanding of the calculation of the CAT fees and their relationship
to CAT costs.
r. Conflicts of Interest
    CAT LLC believes that the current process for developing the CAT
funding model appropriately addresses potential conflicts of interest
related to CAT fees. The CAT NMS Plan, as approved by the SEC, adopts
various measures to protect against potential conflicts issues raised
by the Participants' fee-setting authority, including, but not limited
to, the fee filing requirements under the Exchange Act and operating
the CAT on a break-even basis. CAT LLC believes that these and other
measures address potential conflicts of interest related to CAT fees.
s. Effect on Efficiency, Competition or Capital Formation
    CAT LLC believes that the Funding Proposal would have a positive
impact on efficiency, competition and capital formation. The Funding
Proposal is designed to provide a predictable revenue stream sufficient
to cover CAT costs each year. In doing so, the Funding Proposal would
be designed to maintain the CAT as a going concern financially. By
providing for the financial viability of the CAT, the Funding Proposal
would allow the CAT to provide its intended benefits. For example, the
CAT is intended to provide significant improvements in efficiency
related to how regulatory data is collected and used. In addition, by
providing enhanced regulatory oversight and surveillance, the CAT could
result in improvements in market efficiency by deterring violative
activity. Similarly, the CAT is intended improve capital formation by
improving investor confidence in the market due to enhancements in
surveillance.
    In addition, the Funding Proposal would not impose an inappropriate
burden on competition. The Funding Proposal would operate in a manner
similar to the funding models employed by the SEC and the Participants
related to section 31 of the Exchange Act, the FINRA TAF and the ORF.
These fees are long-standing and have been approved by the Commission
as satisfying the requirements under the Exchange Act, including not
imposing a burden on the competition that is not necessary or
appropriate under the Exchange Act. In addition, the Funding Proposal
avoids potentially burdensome fees for market makers or other market
participants based on message traffic. Furthermore, the Funding
Proposal addresses the specific trading characteristics of Listed
Options and OTC Equity Securities to avoid adverse effects of the
trading of those instruments. For example, the Funding Proposal
includes the discounting of transactions involving OTC Equity Shares
which, given the volume of shares typically involved in such securities
transactions, otherwise may result in disproportionate fees to market
participants engaging in transaction in these securities.
    The Funding Proposal also would not unfairly burden FINRA or any of
the exchanges. The Funding Proposal is designed to be neutral as to the
manner of execution and place of execution. The CAT fees would be the
same regardless of whether the transaction is executed on an exchange
or in the over-the-counter market. All Participants are self-regulatory
organizations that have the same regulatory responsibilities under the
Exchange Act. Their usage of CAT Data will be for the same regulatory
purposes. By treating each Participant the same, the CAT fees would not
become a competitive issue by and among the Participants.
    CAT LLC does not believe that this proposal would unfairly burden
CEBBs and CEBSs. Such a transaction-based fee is a type of fee that is
currently used and well-known in the securities markets. For example,
SRO members regularly pay transaction-based fees. As a result, the CAT
fees could be paid by Industry Members without requiring significant
and potentially costly changes. Moreover, the CEBBs and CEBSs could
determine, but would not be required, to pass their CAT fees through to
their customers, who, in turn, could pass their CAT fees to their
customers, until the fee is imposed on the ultimate participant in the
transaction. With such a pass through, the CEBBs and CEBSs would not
ultimately incur the cost of all CAT fees related to their
transactions.
t. Straightforward Approach
    One advantage of the Funding Proposal is that the approach is
simple, straightforward and easy to understand. Using the predetermined
Fee Rate or Historical Fee Rate, CAT LLC would calculate CAT fees by
multiplying the number of executed equivalent shares in each
Participant, CEBB or CEBS's transactions in Eligible Securities by the
Fee Rate or Historical Fee Rate (as applicable) and one-third. The
values necessary for the calculation are readily available. The Fee
Rates and Historical Fee Rates would be publicly available, and
Participants, CEBBs and CEBSs have easy access to their transaction
data. Moreover, the two adjustments--one for Listed Options and one for
OTC Equity Securities--are similarly straightforward calculations. The
Funding Proposal does not include other complexities, such as tiered
fees, minimum or maximum fees, excluded types of Eligible Securities or
excluded transactions in Eligible Securities.
u. Predictable Fees
    The Funding Proposal also provides CAT Reporters with predictable
CAT fees. Because the fee rates would be established in advance,
Participants, CEBBs and CEBSs can calculate the CAT fee that applies to
each transaction when it occurs. Accordingly, CAT Reporters with a CAT
fee obligation may easily estimate and validate their applicable fees
based on their own trading data. In addition, to the extent any CAT
fees are passed on to customers, such customers also can calculate the
applicable CAT fee for each transaction.
    The predictability of CAT fees under the Funding Proposal improves
upon the lack of fee predictability in the Original Funding Model and
other message traffic-based models.\124\ For example, with potential
message traffic models,\125\ CAT Reporters would not know the actual
per message rate until after the end of the relevant reporting period
for which they were assessed the fee and also could not determine in
advance the number of messages that may be associated with a given
order or the total number of messages, thereby making it difficult for
a CAT Reporter to predict a CAT fee related to its market activity. In
addition, this lack of predictability related to message-based fees
also could complicate efforts by Industry Members to estimate, explain
and directly pass message-based fees back to customers, particularly if
no trade has occurred.
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    \124\ See Securities Exchange Act Rel. No. 92451 (July 20,
2021), 86 FR 40114, 40122 (July 26, 2021) (``2021 Fee Proposal
OIP'').
    \125\ Potential message traffic models, including the 2018 Fee
Proposal and 2021 Fee Proposal, and the message traffic only model,
are discussed further below in Section A.10 of this filing.
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v. Administrative Ease
    The Funding Proposal also would allow for ``ease of billing and
other administrative functions.'' \126\ As discussed above, the Funding
Proposal relies upon a basic calculation using

predetermined fee rate, thereby making the fee determination a
straightforward process. In addition, the CAT fees will be collected in
a manner similar to the collection process that Industry Members are
already accustomed, thereby further reducing the administrative burden
on the industry.
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    \126\ Section 11.2(d) of the CAT NMS Plan.
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w. Equal Treatment of Trading Venues
    The Funding Proposal also has the benefit of treating transactions
in Eligible Securities equally regardless of the trading venue. The Fee
Rate or Historical Fee Rate would be the same regardless of whether a
trade was executed on an exchange or in the OTC market, or how the
trade ultimately occurred more generally (e.g., in a manner that
generated more message traffic). As a result, it would not favor or
unfairly burden any one type of trading venue or method.
x. Equitable Treatment of Different Eligible Securities
    The Funding Proposal also recognizes and addresses the different
trading characteristics of different types of securities. Recognizing
that Listed Options trade in contracts rather than shares, the Funding
Proposal would count executed equivalent share volume differently for
Listed Options. Specifically, each executed contract for a transaction
in Listed Options would be counted based on the multiplier applicable
to the specific Listed Option contract in the relevant transaction
(e.g., 100 executed equivalent shares or such other applicable
equivalency). Similarly, in recognition of the different trading
characteristics of OTC Equity Securities as compared to NMS Stocks, the
Funding Proposal would discount the share volume of OTC Equity
Securities when calculating the CAT fees. Specifically, each executed
share for a transaction in OTC Equity Securities would be counted as
0.01 executed equivalent shares. As a result, the Funding Proposal
would not favor or unfairly burden any one type of product or product
type.
y. Contributions by Both Industry Members and Participants
    The Funding Proposal would require both Participants and Industry
Members to contribute to the funding of the CAT. To date, the
Participants have paid the full cost of the creation, implementation
and maintenance of the CAT since 2012, pending Commission approval of a
fee model. The continued funding of the CAT solely by the Participants
was and is not contemplated by the CAT NMS Plan, nor is it a
financially sustainable approach. As noted by the SEC, the CAT
``substantially enhance[s] the ability of the SROs and the Commission
to oversee today's securities markets,'' \127\ thereby benefiting all
market participants. The Funding Proposal would require both
Participants and Industry Members to contribute to the cost of the CAT,
as contemplated by Rule 613 and the CAT NMS Plan.
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    \127\ Rule 613 Adopting Release at 45726.
---------------------------------------------------------------------------

    Rule 613(a)(1)(vii)(D) specifically contemplates Industry Members
contributing to the payment of CAT costs. Specifically, this provision
requires the CAT NMS Plan to address ``[h]ow the plan sponsors propose
to fund the creation, implementation, and maintenance of the
consolidated audit trail, including the proposed allocation of such
estimated costs among the plan sponsors, and between the plan sponsors
and members of the plan sponsors.'' In approving Rule 613, the SEC
noted that ``although the plan sponsors likely would initially incur
the costs to establish and fund the central repository directly, they
may seek to recover some or all of these costs from their members.''
\128\
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    \128\ Id. at 45795.
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    In addition, as approved by the SEC, the CAT NMS Plan specifically
contemplates CAT fees to be paid by both Industry Members and
Participants. Section 11.1(b) of the CAT NMS Plan states that ``the
Operating Committee shall have discretion to establish funding for the
Company, including: (i) establishing fees that the Participants shall
pay; and (ii) establishing fees for Industry Members that shall be
implemented by the Participants.'' \129\ The Commission stated in
approving the CAT NMS Plan the following:
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    \129\ See also Sections 11.1(c), 11.2(c), and 11.3(a) and (b) of
the CAT NMS Plan.

    The Commission believes that the proposed funding model reflects
a reasonable exercise of the Participants' funding authority to
recover the Participants' costs related to the CAT. The CAT is a
regulatory facility jointly owned by the Participants and, as noted
above, the Exchange Act specifically permits the Participants to
charge members fees to fund their self-regulatory obligations. The
Commission further believes that the proposed funding model is
designed to impose fees reasonably related to the Participants'
self-regulatory obligations because the fees would be directly
associated with the costs of establishing and maintaining the CAT,
and not unrelated SRO services.\130\
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    \130\ CAT NMS Plan Approval Order at 84794.

    Likewise, the Commission stated that ``the Participants are
permitted to recoup their regulatory costs under the Exchange Act
through the collection of fees from their members, as long as such fees
are reasonable, equitably allocated and not unfairly discriminatory,
and otherwise are consistent with Exchange Act standards,'' \131\ and
noted that ``Rule 613(a)(1)(vii)(D) requires the Participants to
discuss in the CAT NMS Plan how they propose to fund the creation,
implementation and maintenance of the CAT, including the proposed
allocation of estimated costs among the Participants, and between the
Participants and Industry Members.'' \132\
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    \131\ Id. at 84795.
    \132\ Id. at 84797 (emphasis added).
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    In its amendments to the CAT NMS Plan regarding financial
accountability, the SEC reaffirmed the ability for the Participants to
charge Industry Members a CAT fee. Specifically, the SEC noted that the
amendments were not intended to change the basic funding structure for
the CAT, which may include fees established by the Operating Committee,
and implemented by the Participants, to recover from Industry Members
the costs and expenses incurred by the Participants in connection with
the development and implementation of the CAT.\133\
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    \133\ Securities Exchange Act Rel. No. 88890 (May 15, 2020), 85
FR 31322, 31329 (May 22, 2020).
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z. Use of CAT Data
    CAT Data would be used to calculate the CAT fees under the Funding
Proposal. CAT Data would be used to identify each transaction in
Eligible Securities for which a CAT fee would be collected.
Specifically, CAT fees will be charged with regard to trades reported
to CAT by FINRA via the ADF/ORF/TRF and by the exchanges. In addition,
the same transaction data in the CAT Data would be used in the
calculation of the projected total executed equivalent share volume for
the Fee Rate. Furthermore, the transaction data in the CAT Data
provides the identity of the relevant CAT Executing Brokers for each
transaction for purposes of the CAT fees. Using CAT Data for the CAT
fee calculations provides administrative efficiency, as the data will
be accessible via the CAT.
aa. Twelve Month Look Back for Projected Volume
    The calculation of the Fee Rate and the Historical Fee Rate
requires the determination of the projected total executed equivalent
share volume of transactions in Eligible Securities for the year. CAT
LLC proposes to determine this projection based on the total executed
equivalent share volume of transactions in Eligible Securities from the
prior twelve months. CAT LLC

determined that the use of the data from the prior twelve months
provides an appropriate balance between using data from a period that
is sufficiently long to avoid short term fluctuations while providing
data close in time to the calculation of the Fee Rate or Historical Fee
Rate. In addition, using twelve months, rather a period less than a