[Federal Register Volume 88, Number 54 (Tuesday, March 21, 2023)]
[Notices]
[Pages 17086-17141]
[FR Doc No: 2023-05690]

Vol. 88

Tuesday,

No. 54

March 21, 2023

Part II

 Securities and Exchange Commission

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Joint Industry Plan; Notice of Filing of Amendment to the National
Market System Plan Governing the Consolidated Audit Trail; Notice

Federal Register / Vol. 88 , No. 54 / Tuesday, March 21, 2023 /
Notices

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97151; File No. 4-698]

Joint Industry Plan; Notice of Filing of Amendment to the
National Market System Plan Governing the Consolidated Audit Trail

I. Introduction

    On March 13, 2023, the Consolidated Audit Trail, LLC (``CAT LLC''),
on behalf of the following parties to the National Market System Plan
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or
``Plan''): \1\ BOX Exchange LLC; Cboe BYX Exchange, Inc., Cboe BZX
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc.,
Cboe C2 Exchange, Inc., Cboe Exchange, Inc., Financial Industry
Regulatory Authority, Inc., Investors Exchange LLC, Long-Term Stock
Exchange, Inc., MEMX, LLC, Miami International Securities Exchange LLC,
MIAX Emerald, LLC, MIAX PEARL, LLC, Nasdaq BX, Inc., Nasdaq GEMX, LLC,
Nasdaq ISE, LLC, Nasdaq MRX, LLC, Nasdaq PHLX LLC, The NASDAQ Stock
Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE Arca,
Inc., NYSE Chicago, Inc., and NYSE National, Inc. (collectively, the
``Participants,'' ``self-regulatory organizations,'' or ``SROs'') filed
with the Securities and Exchange Commission (``SEC'' or ``Commission'')
pursuant to section 11A(a)(3) of the Securities Exchange Act of 1934
(``Exchange Act''),\2\ and Rule 608 thereunder,\3\ a proposed amendment
to the CAT NMS Plan to implement a revised funding model (the ``Funding
Proposal'') for the consolidated audit trail (``CAT'') and to establish
a fee schedule for Participant CAT fees in accordance with the Funding
Proposal.\4\ Exhibit A, attached hereto, contains proposed revisions to
Articles I and XI of the CAT NMS Plan as well as proposed Appendix B to
the Plan containing the fee schedule. Exhibit B, attached hereto,
contains a comparison of the Funding Proposal to the executed share
funding proposal filed by CAT LLC on May 13, 2022,\5\ as amended in two
partial amendments,\6\ and later withdrawn on March 1, 2023.\7\ In
addition, CAT LLC provided an example of how a Historical CAT
Assessment would be calculated pursuant to the Funding Proposal, for
illustrative purposes only, as attached hereto as Exhibit C. The
Commission is publishing this notice to solicit comments from
interested persons on the amendment.\8\
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    \1\ The CAT NMS Plan is a national market system plan approved
by the Commission pursuant to Section 11A of the Exchange Act and
the rules and regulations thereunder. See Securities Exchange Act
Release No. 79318 (November 15, 2016), 81 FR 84696 (November 23,
2016).
    \2\ 15 U.S.C. 78k-1(a)(3).
    \3\ 17 CFR 242.608.
    \4\ See Letter from Brandon Becker, CAT NMS Plan Operating
Committee Chair, to Vanessa Countryman, Secretary, Commission, dated
March 13, 2023 (``Transmittal Letter'').
    \5\ See Securities Exchange Act Release No. 94984 (May 25,
2022), 87 FR 33226 (June 1, 2022). Comments received can be found on
the Commission's website at https://www.sec.gov/comments/4-698/4-698-a.htm.
    \6\ See Securities Exchange Act Release No. 96394 (Nov. 28,
2022), 87 FR 74183 (Dec. 2, 2022). Comments received can be found on
the Commission's website at https://www.sec.gov/comments/4-698/4-698-a.htm. See also Letter from Michael Simon, CAT NMS Plan
Operating Committee Chair, to Vanessa Countryman, Secretary,
Commission (Feb. 15, 2023).
    \7\ See Letter from Brandon Becker, CAT NMS Plan Operating
Committee Chair, to Vanessa Countryman, Secretary, Commission (Mar.
1, 2023).
    \8\ 17 CFR 242.608.
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II. Description of the Plan

    Set forth in this Section II is an executive summary of the Funding
Proposal, along with information required by Rule 608(a) under the
Exchange Act,\9\ and a description of the proposed revisions to the CAT
NMS Plan, substantially as prepared and submitted by the Participants
to the Commission.\10\
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    \9\ See 17 CFR 242.608(a).
    \10\ See Transmittal Letter, supra note 4. Unless otherwise
defined herein, capitalized terms used herein are defined as set
forth in the CAT NMS Plan.
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Executive Summary

    CAT LLC proposes to replace the funding model set forth in Article
XI of the CAT NMS Plan (the ``Original Funding Model'') with the
Funding Proposal. The Original Funding Model involves a bifurcated
approach, where costs associated with building and operating the CAT
would be borne by (1) Industry Members (other than alternative trading
systems (``ATSs'') that execute transactions in Eligible Securities
(``Execution Venue ATSs'')) through fixed tiered fees based on message
traffic for Eligible Securities, and (2) Participants and Industry
Members that are Execution Venue ATSs for Eligible Securities through
fixed tiered fees based on market share. In contrast, the Funding
Proposal would charge fees based on executed equivalent share volume of
transactions in Eligible Securities rather than based on market share
and message traffic.
    Under the Funding Proposal, CAT LLC proposes to establish two
categories of CAT fees. The first category of CAT fees would be fees
(``CAT Fees'') payable by Participants and Industry Members that are
CAT Executing Brokers for the Buyer and for the Seller with regard to
CAT costs not previously paid by the Participants (``Prospective CAT
Costs''). The CAT Fee for each transaction would be calculated by
multiplying the executed equivalent shares in the transaction by one-
third and the applicable ``Fee Rate.'' The Funding Proposal would
describe in detail each aspect relevant to the CAT Fees, including a
description of the Prospective CAT Costs, the calculation of the Fee
Rate, the definition of ``CAT Executing Broker,'' the fee filings made
pursuant to section 19(b) of the Exchange Act for CAT Fees, and
information available related to CAT Fees, both publicly and upon
request.
    The second category of CAT fees would be fees (``Historical CAT
Assessments'') to be payable by Industry Members that are CAT Executing
Brokers for the Buyer and for the Seller with regard to CAT costs
previously paid by the Participants (``Past CAT Costs''). The
Historical CAT Assessment for each transaction would be calculated by
multiplying the number of executed equivalent shares in the transaction
by one-third and the applicable ``Historical Fee Rate.'' Like with the
CAT Fees related to Prospective CAT Costs, the Funding Proposal would
describe in detail each aspect relevant to Historical CAT Assessments,
including a description of Historical CAT Costs, the calculation of the
Historical Fee Rate, the definition of ``CAT Executing Broker,'' the
fee filings made pursuant to section 19(b) of the Exchange Act for
Historical CAT Assessments, and information available related to
Historical CAT Assessments, both publicly and upon request.
    The Participants separately intend to file rule filings under
section 19(b) of the Exchange Act and Rule 19b-4(f)(2) thereunder to
establish the CAT Fees and Historical CAT Assessments to be charged to
Industry Members based on the Funding Proposal set forth in the CAT NMS
Plan.
    CAT LLC has gone through an extensive process of evaluating and
seeking comment on various funding models since the inception of CAT.
In addition to the variety of alternative models considered by CAT LLC
(as described in Section A.10 of this filing), the proposed CAT funding
model has been subject to substantial public review and comment via the
proposed amendment to the CAT NMS Plan published by the SEC on May 25,
2022

(the ``2022 Funding Proposal''),\11\ the subsequent order instituting
proceedings related to the 2022 Funding Proposal \12\ and two partial
amendments regarding the 2022 Funding Proposal.\13\ Thirteen comment
letters were submitted in response to the 2022 Funding Proposal, as
amended, and CAT LLC submitted three detailed responses to
comments.\14\ CAT LLC withdrew the 2022 Funding Proposal on March 1,
2023.\15\ Subject to certain minor revisions, the Funding Proposal set
forth herein is the same proposal as the 2022 Funding Proposal, as
amended in the two partial amendments. The minor changes made to the
2022 Funding Proposal are noted in this filing, and separately
identified in Exhibit B to this filing.
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    \11\ Securities Exchange Act Rel. No. 94984 (May 25, 2022), 87
FR 33226 (June 1, 2022) (``2022 Funding Proposal Release'').
    \12\ Securities Exchange Act Rel. No. 95634 (Aug. 30, 2022), 87
FR 54558 (Sept. 6, 2022).
    \13\ Securities Exchange Act Rel. No. 96394 (Nov. 28, 2022), 87
FR 74183 (Dec. 2, 2022) (``Partial Amendment I''), and Letter from
Michael Simon, CAT NMS Plan Operating Committee Chair, to Vanessa
Countryman, Secretary, Commission (Feb. 15, 2023) (``February 2023
Proposed Partial Amendment'').
    \14\ Letter from Michael Simon, CAT NMS Plan Operating Committee
Chair, to Vanessa Countryman, Secretary, Commission (Aug. 16, 2022);
Letter from Michael Simon, CAT NMS Plan Operating Committee Chair,
to Vanessa Countryman, Secretary, Commission (Nov. 15, 2022); and
February 2023 Proposed Partial Amendment.
    \15\ Letter from Brandon Becker, CAT NMS Plan Operating
Committee Chair, to Vanessa Countryman, Secretary, Commission (Mar.
1, 2023).
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    The Funding Proposal would provide reasonable fees that are
equitably allocated, not unfairly discriminatory, and do not impose an
undue burden on competition, in that the proposal reflects a reasonable
effort to allocate costs based on the extent to which different CAT
Reporters participate in and benefit from the equities and options
markets. Moreover, the Funding Proposal would be consistent with past
fee structures that have been approved by the Commission. It also is
transparent, would be relatively easy to calculate and administer, and
is designed not to have an impact on market activity because it is
neutral as to the location and manner of execution. The Exchange Act
does not require CAT LLC to demonstrate that the Funding Proposal is
superior to any other potential proposal. Instead, CAT LLC must
demonstrate that the Funding Proposal is consistent with the Exchange
Act and the rules and regulations thereunder. CAT LLC believes that the
Funding Proposal satisfies the requirements of the Exchange Act and
should be approved by the Commission.

Requirements Pursuant to Rule 608(a)

A. Description of the Proposed Amendments to the CAT NMS Plan
    CAT LLC describes in detail the Funding Proposal in this Section A:
     Definition of CAT Executing Broker: CAT LLC describes the
definition of a ``CAT Executing Broker'' in Section A.1 of this filing.
     CAT Budget: Budgeted CAT costs are described in Section
A.2 of this filing.
     CAT Fees related to Prospective CAT Costs: CAT LLC
discusses CAT Fees related to Prospective CAT Costs in Section A.3 of
this filing.
     Historical CAT Assessments: CAT LLC discusses Historical
CAT Assessments related to Historical CAT Costs in Section A.4 of this
filing.
     CAT Fee Schedule for Participants: To implement the CAT
fees to be paid by the Participants under the Funding Proposal, CAT LLC
proposes to add a fee schedule, entitled ``Consolidated Audit Trail
Funding Fees,'' to Appendix B of the CAT NMS Plan. This fee schedule is
discussed in Section A.5 of this filing.
     Additional Changes from Original Funding Model: CAT LLC
discusses additional proposed revisions to Article XI of the CAT NMS
Plan to implement the change from the Original Funding Model to the
Funding Proposal in Section A.6 of this filing.
     Billing and Collection of CAT Fees: The billing and
collection of CAT fees are discussed in Section A.7 of this filing.
     Illustrative Example of Funding Proposal: CAT LLC provides
an illustrative example of how a Historical CAT Assessment would be
calculated pursuant to the Funding Proposal in Section A.8 of this
filing. The illustrative example is set forth in detail in Exhibit C to
this filing.
     Advantages of and Support for Funding Proposal: CAT LLC
proposes to adopt the Funding Proposal as it provides a variety of
advantages over the Original Funding Model. CAT LLC discusses the
advantages of the Funding Proposal in Section A.9 of this filing.
     Alternative Funding Models Considered: CAT LLC discusses
the advantages and disadvantages of a variety of alternative funding
models to the Funding Proposal in Section A.10 of this filing.
     Satisfaction of Exchange Act and CAT NMS Plan
Requirements: CAT LLC discusses how the Funding Proposal satisfies each
of the funding principles and other requirements of the CAT NMS Plan,
as proposed to be revised herein, as well as the applicable
requirements of the Exchange Act in Section A.11 of this filing.
1. Definition of CAT Executing Broker
    Under the Funding Proposal, each Industry Member that is a CAT
Executing Broker for the buyer in a transaction in Eligible Securities
(``CAT Executing Broker for the Buyer'' or ``CEBB'') and each Industry
Member that is the CAT Executing Broker for the seller in a transaction
in Eligible Securities (``CAT Executing Broker for the Seller'' or
``CEBS'') would be required to pay CAT Fees and Historical CAT
Assessments. Accordingly, CAT LLC proposes to add a definition of the
term ``CAT Executing Broker'' to Section 1.1 of the CAT NMS Plan. CAT
LLC would define ``CAT Executing Broker'' to mean:

    (a) with respect to a transaction in an Eligible Security that
is executed on an exchange, the Industry Member identified as the
Industry Member responsible for the order on the buy-side of the
transaction and the Industry Member responsible for the sell-side of
the transaction in the equity order trade event and option trade
event in the CAT Data submitted to the CAT by the relevant exchange
pursuant to the Participant Technical Specifications; and (b) with
respect to a transaction in an Eligible Security that is executed
otherwise than on an exchange and required to be reported to an
equity trade reporting facility of a registered national securities
association, the Industry Member identified as the executing broker
and the Industry Member identified as the contra-side executing
broker in the TRF/ORF/ADF transaction data event in the CAT Data
submitted to the CAT by FINRA pursuant to the Participant Technical
Specifications; provided, however, in those circumstances where
there is a non-Industry Member identified as the contra-side
executing broker in the TRF/ORF/ADF transaction data event or no
contra-side executing broker is identified in the TRF/ORF/ADF
transaction data event, then the Industry Member identified as the
executing broker in the TRF/ORF/ADF transaction data event would be
treated as CAT Executing Broker for the Buyer and for the Seller.

    Under the Participant Technical Specifications, for transactions
occurring on a Participant exchange, there is a field for the exchange
to report the market participant identifier (``MPID'') of ``the member
firm that is responsible for the order on this side of the trade.''
\16\ The Industry Members

identified in these fields for the transaction reports would be the CAT
Executing Brokers for transactions executed on an exchange.
Specifically, the following fields of the Participant Technical
Specifications would indicate the CAT Executing Brokers for the
transactions executed on an exchange.
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    \16\ See Section 4.7 (Order Trade Event) and Section <IP_ADDRESS>
(Simple Option Trade Event: Side Details) of the 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.

                                          Equity Order Trade (EOT) \17\
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                                                                                Include
             No.                     Field name               Data type              Description          key
----------------------------------------------------------------------------------------------------------------
12.n.8/13.n.8...............  member.................  Member Alias..........  The identifier for the          C
                                                                                member firm that is
                                                                                responsible for the
                                                                                order on this side of
                                                                                the trade.
                                                                               Not required if there
                                                                                is no order for the
                                                                                side as indicated by
                                                                                the NOBUYID/NOSELLID
                                                                                instruction.
                                                                               This must be provided
                                                                                if orderID is
                                                                                provided..
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                                             Option Trade (OT) \18\
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                                                                                Include
             No.                     Field name               Data type              Description          key
----------------------------------------------------------------------------------------------------------------
16.n.13/17.n.13.............  member.................  Member Alias..........  The identifier for the         R
                                                                                member firm that is
                                                                                responsible for the
                                                                                order.
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    FINRA is required to report to the CAT transactions in Eligible
Securities reported to a FINRA trade reporting facility (i.e., the
FINRA Trade Reporting Facilities (``TRF''), Over-the Counter Reporting
Facility (``ORF'') and Alternative Display Facility (``ADF'')).\19\
Under the Participant Technical Specifications, for such transactions
reported to a FINRA trade reporting facility, FINRA is required to
report the MPID of the executing party as well as the MPID of the
contra-side executing party. The Industry Members identified in these
two fields for the transaction reports would be the CAT Executing
Brokers for over-the-counter transactions. Specifically, the following
fields of the Participant Technical Specifications will indicate the
CAT Executing Brokers for the transactions executed otherwise than on
an exchange.
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    \17\ See Table 23, Section 4.7 (Order Trade Event) of the 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.
    \18\ See Table 51, Section <IP_ADDRESS> (Simple Option Trade Event)
of the CAT Reporting Technical Specifications for Plan Participants
(Feb. 21, 2023).
    \19\ See Section 6.1 of the CAT Reporting Technical
Specifications for Plan Participants (Feb. 21, 2023).

                                  TRF/ORF/ADF Transaction Data Event (TRF) \20\
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                                                                                Include
             No.                     Field name               Data type              Description          key
----------------------------------------------------------------------------------------------------------------
26..........................  reportingExecutingMpid.  Member Alias..........  MPID of the executing          R
                                                                                party.
28..........................  contraExecutingMpid....  Member Alias..........  MPID of the contra-             C
                                                                                side executing party.
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    Note that a CAT Executing Broker in over-the-counter transactions
identified on the TRF/ORF/ADF Transaction Data Event is determined
based on the tape or media report, that is, a trade report that is
submitted to a FINRA trade reporting facility and reported to and
publicly disseminated by the appropriate exclusive Securities
Information Processor. A CAT Executing Broker for over-the-counter
transactions is not determined based on a non-tape report (e.g., a
regulatory report or a clearing report), which are not publicly
disseminated.\21\
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    \20\ See Table 61, Section 6.1 (TRF/ORF/ADF Transaction Data
Event) of the CAT Reporting Technical Specifications for Plan
Participants (Feb. 21, 2023).
    \21\ There is an exception to this statement for away-from-
market trades. These are non-media trades reported to the TRF with
an ``SRO Required Modifier Code'' of ``R''.
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    Therefore, with respect to transactions on an exchange and over-
the-counter transactions, CAT LLC would use transaction reports
reported to the CAT by FINRA or the exchanges to identify the
transaction for purposes of calculating the CAT fees as well as the CAT
Executing Broker for each transaction for purposes of calculating the
CAT fees. Accordingly, all data used to calculate the fees under the
Funding Proposal would be CAT Data, and, therefore, it would be
available through the CAT for calculating CAT fees. FINRA CAT would be
responsible for calculating the CAT fees and submitting invoices to the
CAT Executing Brokers based on this CAT Data. Moreover, defining a
``CAT Executing Broker'' in this way is a simpler analytical approach
than other potential approaches for defining the relevant executing
broker, such as identifying the originating broker for the order via an
evaluation of CAT linkages.\22\
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    \22\ Each CAT Executing Broker 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.
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    CAT LLC proposes to make use of the defined term ``CAT Executing
Broker'' in Proposed Section 11.3 in describing the Funding Proposal.
CAT LLC believes the proposed definition of CAT Executing Broker and
the use of the defined term in Article XI would set forth clearly when
and in what situations an Industry Member would be considered a CAT
Executing Broker for purposes of the Funding Proposal.
a. Treatment of ATSs
    The Funding Proposal would describe how CAT fees would be assessed
with

regard to transactions executed on ATSs, including clarification as to
which party to an ATS transaction would be treated as the CAT Executing
Broker for purposes of the Funding Proposal. The definition of a ``CAT
Executing Broker'' as proposed above would determine the CAT Executing
Brokers for transactions executed on an ATS. Specifically, if an ATS is
identified as the executing party and/or the contra-side executing
party in the TRF/ORF/ADF Transaction Data Event, then the ATS would be
a CAT Executing Broker for purposes of the Funding Proposal. If the ATS
is identified as the executing party for the buyer in such transaction
reports, then the ATS would be the CAT Executing Broker for the Buyer,
and if the ATS is identified as the executing party for the seller in
such transaction reports, then the ATS would be the CAT Executing
Broker for the Seller. An ATS also could be identified as both the CAT
Executing Broker for the Buyer and the CAT Executing Broker for the
Seller. ATSs would determine the executing party and the contra-side
executing party reported to FINRA's equity trading facilities in
accordance with the transaction reporting requirements for FINRA's
equity trading facilities.
b. Treatment of Fractional Shares
    The Funding Proposal also would address how transactions in
fractional shares would be treated. As described above, CAT fees would
be charged based on the Equity Order Trade Events, Options Trade Events
and the ADF/ORF/TRF Transaction Data Events in the Participant
Technical Specifications. None of these transaction reports provide for
fractional quantities; the transaction reports must reflect whole
shares/contracts. Therefore, under the Funding Proposal, CAT fees would
be calculated without reference to fractional shares or fractional
share components of executed orders.\23\
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    \23\ To the extent that FINRA's equity transaction reporting
facilities or the exchanges report transactions in fractional shares
in the future, then the calculation of CAT fees would reflect
fractional shares as well.
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c. Non-Industry Members on Transaction Reports
    The Funding Proposal also would address how transactions that
involve a non-Industry Member would be treated under the Funding
Proposal (e.g., for internalized trades or trades with a non-FINRA
member). The FINRA trade reporting requirements state that ``[w]hen
reporting a trade with a broker-dealer that is not a FINRA member, the
non-member should not be identified on the trade report as the contra
party to the trade.'' \24\ Accordingly, when the transaction in these
cases is reported to CAT via the TRF/ORF/ADF Transaction Data Event,
the field for the reportingExecutingMpid would be populated with the
MPID of the executing broker and the field for the contraExecutingMpid
would be blank or null. As noted above, the reportingExecutingMpid is a
required field (include key = `R') that must be entered on all CAT
reports, but the contraExecutingMpid field is conditional; it does not
need to be populated, specifically to account for cases like those at
issue here (e.g., transactions with a non-FINRA member). Therefore, in
those scenarios where the contraExecutingMpid is blank, the FINRA
member identified in the reportingExecutingMpid field would be treated
as the CAT Executing Broker for both the buy-side and the sell-side of
the transaction, that is, as the CEBS and CEBB.
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    \24\ FINRA Trade Reporting FAQ 202.1.
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    In addition, under the FINRA trade reporting requirements, there is
a limited exception to the general rule about not reporting a non-
member as the contra party to the trade. Specifically, pursuant to
FINRA Trade Reporting FAQ 202.1, ``[t]here is a limited exception where
a Canadian non-member firm uses the FINRA/NASDAQ TRF or ORF for
purposes of comparing trades pursuant to a valid Non-Member Addendum to
the NASDAQ Services Agreement. In that instance, however, the Canadian
non-member must appear on the trade report as the contra party to the
trade and not as the reporting party. For any trade report on which a
Canadian non-member appears as a party to the trade, the FINRA member
must appear as the reporting party.'' In this case involving the
Canadian non-member firm exception, the executing broker identified in
the reportingExecutingMpid field would be billed for both sides of the
transaction.
    CAT LLC proposes to include language in the definition of ``CAT
Executing Broker'' to address these scenarios. Specifically, CAT LLC
proposes to state the following in the definition of ``CAT Executing
Broker: ``in those circumstances where there is a non-Industry Member
identified as the contra-side executing broker in the TRF/ORF/ADF
transaction data event or no contra-side executing broker is identified
in the TRF/ORF/ADF transaction data event, then the Industry Member
identified as the executing broker in the TRF/ORF/ADF transaction data
event would be treated as CAT Executing Broker for the Buyer and for
the Seller.''
d. Cancellations and Corrections
    The Funding Proposal also would provide for cancellations and
corrections. CAT LLC expects to determine CAT fees based on the
transaction reports for a month as of a particular day. To the extent
that changes are made to the transaction reports on or before the day
the CAT fees are determined for the given month, the changes will be
reflected in the monthly bill. To the extent that changes are made to
the transaction reports after the day the CAT fees are determined for
that month, subsequent bills will reflect any changes via debits or
credits, as applicable. As CAT LLC is required under the CAT NMS Plan
to adopt policies, procedures, and practices regarding the billing and
collection of fees,\25\ CAT LLC will establish specific policies and
procedures regarding the treatment of such adjustments as those related
to cancellations and corrections. Furthermore, CAT LLC will inform
Industry Members and other market participants of these policies and
procedures via FAQs, CAT Alerts and/or other appropriate methods.
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    \25\ Section 11.1(d) of the CAT NMS Plan.
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2. CAT Budget
    Section 11.1(a) of the CAT NMS Plan describes the requirement for
the Operating Committee to approve an operating budget for CAT LLC on
an annual basis. It requires the budget to ``include the projected
costs of the Company, including the costs of developing and operating
the CAT for the upcoming year, and the sources of all revenues to cover
such costs, as well as the funding of any reserve that the Operating
Committee reasonably deems appropriate for prudent operation of the
Company.'' CAT LLC proposes to provide additional detail regarding the
CAT LLC operating budget by adding proposed subparagraphs (i) and (ii)
to Section 11.1(a) of the CAT NMS Plan. Such detailed information would
provide Participants, Industry Members and other interested parties
with a clear understanding of the CAT budget, and, in turn, the
calculation of the CAT Fees.
a. Budgeted CAT Costs
    CAT LLC proposes to add subparagraph (i) to Section 11.1(a) of the
CAT NMS Plan to provide additional clarity regarding the costs to be
included in the CAT budget. This proposed provision would list the
types of CAT costs to be included in the budget. Specifically, Proposed
Section

11.1(a)(i) of the CAT NMS Plan would state that ``[w]ithout limiting
the foregoing, the reasonably budgeted CAT costs shall include
technology (including cloud hosting services, operating fees, CAIS
operating fees, change request fees and capitalized developed
technology costs), legal, consulting, insurance, professional and
administration, and public relations costs, a reserve, and such other
categories as reasonably determined by the Operating Committee to be
included in the budget.''
    Because technology costs account for more than 90% of CAT costs,
CAT LLC proposes to provide more granular information about such costs.
Specifically, CAT LLC proposes to require the inclusion of five
subcategories of technology costs in the budget: (1) cloud hosting
services, (2) operating fees, (3) Customer and Account Information
System (``CAIS'') operating fees, (4) change request fees, and (5)
capitalized developed technology costs. Breaking out technology costs
in this manner is consistent with how such costs are broken out in the
CAT budgets available on the CAT website.\26\ CAT LLC currently does
not propose to require the disclosure of additional subcategories of
cost information, such as a further breakdown of the category of cloud
hosting services into production costs, including linker costs and
storage costs. However, CAT LLC will consider the need to provide
additional cost disclosure going forward.
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    \26\ The CAT LLC budgets are available on the CAT website at
https://www.catnmsplan.com/cat-financial-and-operating-budget.
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    Furthermore, CAT LLC has determined not to provide more detailed
subcategories for the other cost categories (that is, legal,
consulting, insurance, professional and administration, and public
relations costs) at this time. Breaking out these costs into further
subcategories would establish new subcategories that are not set forth
in the budgets. In addition, these costs in the aggregate represent
less than seven percent (7%) of total CAT costs, with professional and
administration costs and public relations costs, in particular, each
representing less than one percent (1%) of overall CAT costs.
Therefore, CAT LLC does not believe that these costs warrant additional
subcategory disclosure. CAT LLC further notes that it is not considered
a best practice to publicly disclose detailed legal or insurance
information, which is particularly sensitive. Nevertheless, CAT LLC
notes that the CAT NMS Plan requires that detailed cost information be
made available to the Commission upon request, and detailed information
on CAT costs and operations is regularly made available to the
Commission staff and the Advisory Committee on a confidential basis.
    CAT LLC also intends to determine costs for the operating budget
for the CAT in a reasonable manner. Accordingly, CAT LLC proposes to
amend Section 11.1(a) of the CAT NMS Plan to refer to a ``reasonable''
operating budget for CAT LLC.\27\ Specifically, the first sentence of
Section 11.1(a) of the CAT NMS Plan would be revised to read: ``On an
annual basis the Operating Committee shall approve a reasonable
operating budget for the Company.'' In addition, CAT LLC proposes to
include the term ``reasonably'' in proposed paragraph (a)(i) of Section
11.1 of the CAT NMS Plan. Specifically, CAT proposes to introduce the
term ``reasonably'' to the following proposed provision of the CAT NMS
Plan: ``Without limiting the foregoing, the reasonably budgeted CAT
costs shall include technology (including cloud hosting services,
operating fees, CAIS operating fees, change request fees, and
capitalized developed technology costs), legal, consulting, insurance,
professional and administration, and public relations costs, a reserve
and such other cost categories as reasonably determined by the
Operating Committee to be included in the budget.''
---------------------------------------------------------------------------

    \27\ As highlighted in Exhibit B, this proposed revision of
Section 11.1(a) of the CAT NMS Plan was not included in the proposed
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    Finally, CAT LLC proposes to amend Section 11.1(b) of the CAT NMS
Plan. Currently, Section 11.1(b) of the CAT NMS Plan states that:
    Subject to Section 11.2, the Operating Committee shall have
discretion to establish funding for the Company, including: (i)
establishing fees that the Participants shall pay; and (ii)
establishing fees for Industry Members that shall be implemented by
Participants. The Participants shall file with the SEC under Section
19(b) of the Exchange Act any such fees on Industry Members that the
Operating Committee approves, and such fees shall be labeled as
``Consolidated Audit Trail Funding Fees.''
    CAT LLC proposes to amend Section 11.1(b) to include a reference to
Section 11.1 as well as Section 11.2 in the ``subject to'' clause at
the beginning of the provision.\28\ CAT LLC believes this reference is
relevant because Section 11.1 sets forth requirements related to the
budget, and the budget is used in calculating CAT Fees.
---------------------------------------------------------------------------

    \28\ As highlighted in Exhibit B, this proposed revision to
Section 11.1(b) of the CAT NMS Plan was not included in the proposed
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

b. Reserve
    Section 11.1(a) of the CAT NMS Plan states that the budget shall
include ``the funding of any reserve that the Operating Committee
reasonably deems appropriate for prudent operation of the Company.'' In
addition, Proposed Section 11.1(a)(i) of the CAT NMS Plan would state
that the budgeted CAT costs shall include a reserve. Section 11.1(c) of
the CAT NMS Plan states that ``[a]ny surplus of the Company's revenues
over its expenses shall be treated as an operational reserve to offset
future fees.'' CAT LLC proposes to add subparagraph (ii) to Section
11.1(a) of the CAT NMS Plan to provide additional details regarding the
size and use of the reserve.
    To provide additional clarity regarding the size of the reserve,
CAT LLC proposes to add proposed paragraph (ii) to Section 11.1(a) of
the CAT NMS Plan to set forth the parameters for the size of the
reserve. An analysis of budgeted CAT costs and actual CAT costs for
2020, 2021 and the first nine months of 2022 demonstrates that actual
CAT costs were approximately 20% higher than budgeted amounts over this
period on a cumulative average basis. Based on the magnitude of
historical budget to actual variances as well as the difficulty in
accurately predicting various variable CAT costs, CAT LLC believes that
a 25% reserve would appear to be reasonable. Accordingly, Proposed
Section 11.1(a)(ii) of the CAT NMS Plan would state that ``[f]or the
reserve referenced in paragraph (a)(i) of this Section, the budget will
include an amount reasonably necessary to allow the Company to maintain
a reserve of not more than 25% of the annual budget.'' CAT LLC also
intends to include a reserve in the CAT budget that is reasonably
necessary to allow the CAT LLC to maintain a reserve of not more than
25% of the annual budget. Accordingly, CAT LLC proposes to include the
term ``reasonably'' in this sentence. Moreover, CAT LLC would calculate
the reserve based on the amount of the budget other than the reserve,
as the reserve is intended to provide funds for CAT LLC to pay its
bills if necessary. Accordingly, Proposed Section 11.1(a)(ii) of the
CAT NMS Plan would state that ``[f]or the avoidance of doubt, the
calculation of the amount of the reserve would

exclude the amount of the reserve from the budget.'' \29\
---------------------------------------------------------------------------

    \29\ As highlighted in Exhibit B, this proposed revision to
Section 11.1(a)(ii) of the CAT NMS Plan was not included in the
proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    CAT LLC also believes that it is reasonable to base the reserve on
a percentage of the budget. First, CAT LLC believes that setting the
reserve at 25% of the budget is appropriate in light of the timeline
for the collection of CAT fees.\30\ Many of CAT LLC's bills must be
paid on a monthly basis. However, CAT fees will be collected
approximately three months after the activity on which a CAT fee is
based--that is, 25% of the year. For example, activity in January would
be subject to a bill in February, which would be required to be paid
within 30 days,\31\ which would be in March. Accordingly, the reserve
would be available to address the funding needs related to the delay in
CAT LLC's receipt of the CAT fees.
---------------------------------------------------------------------------

    \30\ For a discussion of the billing and collection of CAT fees,
see Section A.7 of this filing.
    \31\ See Sections 3.7(b) and 11.4 of the CAT NMS Plan.
---------------------------------------------------------------------------

    Second, CAT LLC has established a number of measures for
establishing a reasonable budget for the CAT, thereby providing a
reasonable starting point for the reserve calculation. For example, the
CAT NMS Plan would require the budget to be ``reasonable.'' \32\ The
Fee Rate established at the beginning of the year would be adjusted
mid-year to address changes in the actual or budgeted costs or changes
in the actual or projected executed equivalent share volume. CAT LLC
has established a variety of cost management measures, as discussed in
detail in Section A.9.bb of this filing, and has and would provide
substantial cost transparency as discussed in detail in Section A.9.l
of this filing. The CAT fee filings pursuant to section 19(b) of the
Exchange Act would provide a description how the budget is reconciled
to the collected fees.
---------------------------------------------------------------------------

    \32\ See Proposed Section 11.1(a) of the CAT NMS Plan.
---------------------------------------------------------------------------

    CAT LLC proposes to provide additional clarification regarding the
collection of the reserve by providing additional information as to how
budget surpluses would be treated for purposes of the reserve. CAT LLC
proposes to clarify how CAT fees collected in excess of CAT costs,
including the reserve, would be used. Specifically, proposed
subparagraph (ii) of Section 11.1(a) of the CAT NMS Plan would state
that ``[t]o the extent collected CAT fees exceed CAT costs, including
the reserve of 25% of the annual budget, such surplus will be used to
offset future fees.'' In addition, CAT LLC further proposes to state in
Proposed Section 11.1(a)(ii) of the CAT NMS Plan that ``[f]or the
avoidance of doubt, the Company will only include an amount for the
reserve in the annual budget if the Company does not have a sufficient
reserve (which shall be up to but not more than 25% of the annual
budget).''
    The following examples explain the circumstances under which a
reserve would be included in the budget:
    (1) Suppose that the Operating Committee had approved a budget of
$100 million for CAT costs for Year X, and a reserve of $25 million,
for a total budget of $125 million for Year X. Suppose that CAT Fees of
$125 million were collected during Year X, and that actual CAT costs
for Year X were $100 million. Therefore, CAT ended Year X with $25
million in reserve. Suppose further that the Operating Committee had
approved a budget of $100 million for CAT costs and a reserve of $25
million, for a total budget of $125 million for Year X+1. Because CAT
LLC had collected $25 million in excess of costs for the reserve in
Year X, and the excess was not necessary to cover additional costs in
Year X, CAT LLC would not include any additional amount in the budget
for a reserve for Year X+1. CAT LLC would use the excess fees collected
for the reserve.
    (2) Suppose that the Operating Committee had approved a budget of
$100 million for CAT costs for Year Y, and a reserve of $25 million,
for a total budget of $125 million for Year Y. Suppose that CAT Fees of
$110 million were collected during Year Y, and that actual CAT costs
for Year Y were $100 million. Therefore, CAT ended Year Y with $10
million in reserve. Suppose further that the Operating Committee had
approved a budget of $100 million for CAT costs, and a reserve of $25
million, for a total budget of $125 million for Year Y+1. Because CAT
LLC had collected $10 million in excess of costs for the reserve in
Year Y, and the entire reserve was not necessary to cover additional
costs in Year Y, CAT LLC would only need to collect an additional $15
million for the reserve in Year Y+1, not $25 million.
c. Publicly Available Budgets
    CAT LLC publicly provides the annual operating budget for the
Company as well as updates to the budget that occur during the
year.\33\ This publicly available budget information describes in
detail the budget for the Company. For example, among other things, the
budget provides specific budgeted technology costs (including cloud
hosting services, operating fees, CAIS operating fees and change
request fees) and general and administrative costs (including legal,
consulting, insurance, professional and administration, and public
relations). The Company provides such budget information on a dedicated
web page on the CAT NMS Plan website to make it readily accessible to
CAT Reporters and others.
---------------------------------------------------------------------------

    \33\ To address potential changes related to the CAT during the
year, the Operating Committee may adjust the budgeted CAT costs for
the year as it reasonably deems appropriate for the prudent
operation of the Company. For example, the Operating Committee may
determine that an adjustment to the budget is necessary if actual
costs during the year are more or less than the budget, or if
unanticipated expenditures are necessary. To the extent that the
Operating Committee adjusts the budgeted CAT costs during the year
and determines to adjust the Fee Rate, the adjusted budgeted CAT
costs would be used in calculating the new Fee Rate for the
remaining months of the year.
---------------------------------------------------------------------------

3. CAT Fees Related to Prospective CAT Costs
    CAT LLC proposes to describe CAT Fees related to Prospective CAT
Costs in Section 11.3(a) of the CAT NMS Plan. Proposed Section 11.3(a)
of the CAT NMS Plan would describe that the CAT Fees related to
Prospective CAT Costs apply to both Participants and Industry Members,
the manner of calculating the Fee Rate for CAT Fees, the description of
the calculation of the Participant CAT Fees, a description of the
calculation of the Industry Member CAT Fees, a description of the fee
filings under section 19(b) of the Exchange Act for Industry Member CAT
Fees, and details regarding the calculation of the CAT Fees that are
available upon request or publicly available. The following describes
Proposed Section 11.3(a) of the CAT NMS Plan in detail.
a. Introductory Statement
    CAT LLC proposes to revise Section 11.3(a) of the CAT NMS Plan to
address CAT Fees related to Prospective CAT Costs for both Participants
and Industry Members. Accordingly, CAT LLC proposes to revise the
introductory statement in Proposed Section 11.3(a) of the CAT NMS Plan
to state that ``[t]he Operating Committee will establish fees (``CAT
Fees) to be payable by Participants and Industry Members with regard to
CAT costs not previously paid by the Participants (``Prospective CAT
Costs'') as follows:''.
b. Fee Rate for CAT Fees
    CAT LLC proposes to describe the timing and method for calculating
the Fee Rate for the CAT Fees related to Prospective CAT Costs in
Proposed

Section 11.3(a)(i) of the CAT NMS Plan, and to provide additional
detail regarding the Fee Rate in that provision. Proposed Section
11.3(a)(i) of the CAT NMS Plan would state that CAT Fees related to
Prospective CAT Costs would be calculated twice a year. Specifically,
this proposed provision would state that ``[t]he Operating Committee
will calculate the Fee Rate for the CAT Fee twice per year, once at the
beginning of the year and once during the year as follows.'' CAT LLC
recognizes the need to align CAT Fees with CAT costs. Requiring the
adjustment of the Fee Rate both at the beginning of the year and once
mid-year in response to changes in the budgeted or actual costs or
projected or actual total executed equivalent share volume during the
year would likely lead to the greater alignment of CAT Fees and CAT
costs, thereby potentially avoiding the collection of CAT Fees in
excess of CAT costs or CAT Fees that are insufficient to cover CAT
costs. Accordingly, CAT LLC proposes to require both an annual and a
mid-year adjustment of the Fee Rate for the CAT Fee.
i. General
    CAT LLC proposes to provide details regarding the calculation of
the Fee Rate for the CAT Fees in Proposed Section 11.3(a)(i) of the CAT
NMS Plan. The detail provided in Proposed Section 11.3(a)(i) of the CAT
NMS Plan would include a description of the calculation of the Fee Rate
at the beginning of the year and during the year, the counting method
for executed equivalent shares, the budgeted CAT costs, and the
projected total executed equivalent share volume of transactions in
Eligible Securities for the relevant period. Each of these aspects of
the CAT Fees are discussed in more detail below.
A. Annual Calculation of Fee Rate
    Proposed Section 11.3(a)(i)(A)(I) of the CAT NMS Plan would
describe the annual calculation of the Fee Rate and the requirement for
Participants to file a fee filing for CAT Fees to be charged Industry
Members calculated using the Fee Rate. This proposed provision also
would state that Participants and Industry Members would be required to
pay such CAT Fees once the CAT Fees are in effect with regard to
Industry Members. Specifically, this proposed provision would state:

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

    CAT LLC proposes to clarify that the annual calculation of CAT Fees
would be performed using reasonably budgeted CAT costs and reasonably
projected total executed equivalent share volume.\34\ Accordingly, CAT
LLC proposes to use the term ``reasonably'' twice in the following
sentence: ``For the beginning of each year, the Operating Committee
will calculate the Fee Rate by dividing the reasonably budgeted CAT
costs for the year by the reasonably projected total executed
equivalent share volume of all transactions in Eligible Securities for
the year.''
---------------------------------------------------------------------------

    \34\ As highlighted in Exhibit B, this proposed revision to add
the term ``reasonably'' before ``projected total executed equivalent
share volume'' in Proposed Section 11.3(a)(i)(A)(I) of the CAT NMS
Plan was not included in the proposed revisions related to the 2022
Funding Proposal.
---------------------------------------------------------------------------

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

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

    CAT LLC proposes to clarify that CAT Fees would be calculated
during the year using reasonably budgeted CAT costs and reasonably
projected total executed equivalent share volume.\35\ Accordingly, CAT
LLC proposes to use the term ``reasonably'' twice in the following
sentence: ``During each year, the Operating Committee will calculate a
new Fee Rate by dividing the reasonably budgeted CAT costs for the
remainder of the year by the reasonably projected total executed
equivalent share volume of all transactions in Eligible Securities for
the remainder of the year.''
---------------------------------------------------------------------------

    \35\ As highlighted in Exhibit B, this proposed revision to add
the term ``reasonably'' before ``projected total executed equivalent
share volume'' in Proposed Section 11.3(a)(i)(A)(II) of the CAT NMS
Plan was not included in the proposed revisions related to the 2022
Funding Proposal.
---------------------------------------------------------------------------

C. Continuing CAT Fee
    CAT LLC also proposes to add Section 11.3(a)(i)(A)(III) to the CAT
NMS Plan to clarify that CAT Fees related to Prospective CAT Costs do
not sunset automatically; such CAT Fees would remain in place until new
CAT Fees are in place with a new Fee Rate. The Funding Proposal is
designed to collect CAT fees continuously so as to provide
uninterrupted revenue to pay CAT bills. Specifically, this proposed
provision would state:

    For the avoidance of doubt, CAT Fees with a Fee Rate calculated
as set forth in this paragraph (a)(i) shall remain in effect until
the Operating Committee approves a new Fee Rate as described in this
paragraph (a)(i) and CAT Fees with the new Fee Rate are in effect
with regard to Industry Members in accordance with section 19(b) of
the Exchange Act.
D. Commencement of CAT Fee
    CAT LLC believes that it would be appropriate to commence the first
CAT Fee either at the beginning of the year or during the year (due to,
for example, mid-year approval of the CAT Fee by the SEC), whichever is
closest to the time that such a CAT Fee could become effective, so as
to seek prompt recovery of CAT costs. If the CAT Fee were to commence
during the year, the first CAT Fee would be calculated in the same way
that a mid-year CAT Fee would be calculated. To clarify this approach,
CAT LLC proposes to add Proposed Section 11.3(a)(i)(A)(IV) to the CAT
NMS Plan. This provision would state that ``[f]or the avoidance of
doubt, the first CAT Fee may commence at the beginning of the year or
during the year. If it were to commence during the year, the CAT Fee
would be calculated as described in paragraph (II) of this Section.''

ii. Executed Equivalent Shares
    CAT LLC proposes to describe in Proposed Section 11.3(a)(i)(B) of
the CAT NMS Plan how executed equivalent shares would be counted for
purposes of calculating CAT Fees. Under the Funding Proposal, a CAT Fee
would be charged with regard to each transaction in Eligible Securities
as reported in CAT Data. As set forth in Section 1.1 of the CAT NMS
Plan, ``Eligible Securities'' are defined to include all NMS Securities
and all OTC Equity Securities. Section 1.1 of the CAT NMS Plan, in
turn, defines an ``NMS Security'' as ``any security or class of
securities for which transaction reports are collected, processed, and
made available pursuant to an effective transaction reporting plan, or
an effective national market system plan for reporting transactions in
Listed Options.'' In addition, Section 1.1 of the CAT NMS Plan defines
an ``OTC Equity Security'' as ``any equity security, other than an NMS
Security, subject to prompt last sale reporting rules of a registered
national securities association and reported to one of such
association's equity trade reporting facilities.'' A CAT Fee would be
imposed with regard to transactions in Eligible Securities in the CAT
Data regardless of whether the trade is executed on an exchange or
otherwise than on an exchange.
    The Funding Proposal uses the concept of executed equivalent shares
as the transactions subject to a CAT Fee involve NMS Stocks, Listed
Options and OTC Equity Securities, each of which have different trading
characteristics.
    NMS Stocks. Under the Funding Proposal, each executed share for a
transaction in NMS Stocks would be counted as one executed equivalent
share. Accordingly, Proposed Section 11.3(a)(i)(B)(I) of the CAT NMS
Plan would state that ``[f]or purposes of calculating CAT Fees,
executed equivalent shares in a transaction in Eligible Securities will
be reasonably counted as follows: (I) each executed share for a
transaction in NMS Stocks will be counted as one executed equivalent
share.''
    Listed Options. Recognizing that Listed Options trade in contracts
rather than shares, each executed contract for a transaction in Listed
Options will be counted using the contract multiplier applicable to the
specific Listed Option in the relevant transaction. Typically, a Listed
Option contract represents 100 shares; however, it may also represent
another designated number of shares. Accordingly, Proposed Section
11.3(a)(i)(B)(II) of the CAT NMS Plan would state that ``[f]or purposes
of calculating CAT Fees, executed equivalent shares in a transaction in
Eligible Securities will be reasonably counted as follows: . . . (II)
each executed contract for a transaction in Listed Options will be
counted based on the multiplier applicable to the specific Listed
Option (i.e., 100 executed equivalent shares or such other applicable
multiplier).''
    OTC Equity Securities. 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 CAT Fees. Many OTC Equity Securities
are priced at less than one dollar--and a significant number are priced
at less than one penny--per share and low-priced shares tend to trade
in larger quantities. Accordingly, a disproportionately large number of
shares are involved in transactions involving OTC Equity Securities
versus NMS Stocks.\36\ Because the Funding Proposal would calculate CAT
Fees based on executed share volume, CAT Reporters trading OTC Equity
Securities would likely be subject to higher fees than their market
activity may warrant. To address this potential concern, the Funding
Proposal would count each executed share for a transaction in OTC
Equity Securities as 0.01 executed equivalent shares. Accordingly,
Proposed Section 11.3(a)(i)(B)(III) of the CAT NMS Plan would state
that ``[f]or purposes of calculating CAT Fees, executed equivalent
shares in a transaction in Eligible Securities will be reasonably
counted as follows: . . . (III) each executed share for a transaction
in OTC Equity Securities shall be counted as 0.01 executed equivalent
share.''
---------------------------------------------------------------------------

    \36\ For example, based on data from 2021, (1) the average price
per executed share of OTC Equity Securities was $0.072 and the
average price per executed share for NMS Stocks was $49.51; and (2)
the average trade size for OTC Equity Securities was 63,474 and the
average trade size for NMS Stocks was 166 shares. Trades in OTC
Equity Securities accounted for 77% of the number of all equity
shares traded, but only 0.51% of the notional value of all equity
shares traded.
---------------------------------------------------------------------------

    The discount to 1% was selected based on a reasoned analysis of a
variety of different metrics for comparing the markets for OTC Equity
Securities and NMS Stocks, rather than a simple calculation. For
example, using 2021 data, the Operating Committee calculated the
following metrics: (1) the ratio of total notional dollar value traded
for OTC Equity Securities to OTC Equity Securities and NMS Stocks was
0.051%; (2) the ratio of total trades in OTC Equity Securities to total
trades in OTC Equity Securities and NMS Stocks was 0.90%; and (3) the
ratio of average share price per trade of OTC Equity Securities to
average share price per trade for OTC Equity Securities and NMS Stocks
was 0.065%. In recognition of the fact that these calculations involve
averages and for ease of application, the Operating Committee
determined to round these metrics to 1%.
    In calculating CAT Fees, CAT LLC intends for executed equivalent
shares in a transaction in Eligible Securities to be reasonably
counted. Accordingly, CAT LLC proposes to include the term
``reasonably'' in the following sentence in Proposed Section
11.3(a)(i)(B) of the CAT NMS Plan: ``For purposes of calculating CAT
Fees, executed equivalent shares in a transaction in Eligible
Securities will be reasonably counted as follows:''.
iii. Budgeted CAT Costs
    The calculation of the Fee Rate for CAT Fees related to Prospective
CAT Costs requires the determination of the budgeted CAT costs for the
year or other relevant period. Proposed Section 11.3(a)(i)(C) of the
CAT NMS Plan would describe the budgeted CAT costs for calculating CAT
Fees. It would state the following:

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

    As discussed above, CAT LLC also proposes to provide additional
details regarding what is included in the annual operating budget
approved by the Operating Committee pursuant to Section 11.1(a) of the
CAT NMS Plan in proposed paragraphs (i) and (ii) of Section 11.1(a) of
the CAT NMS Plan.
    Moreover, CAT LLC proposes to clarify that CAT Fees must be
calculated using reasonably budgeted CAT costs.\37\ Accordingly, CAT
proposes to include the terms ``reasonably'' and ``reasonable'' the
following sentence: ``The budgeted CAT costs for the year shall be
comprised of all reasonable fees, costs and expenses reasonably
budgeted to be incurred by or for the Company in connection with the
development, implementation and

operation of the CAT as set forth in the annual operating budget
approved by the Operating Committee pursuant to Section 11.1(a) of the
CAT NMS Plan, or as adjusted during the year by the Operating
Committee.''
---------------------------------------------------------------------------

    \37\ As highlighted in Exhibit B, this proposed revision to add
the term ``reasonable'' before ``fees, cost and expenses'' in
Proposed Section 11.3(a)(i)(C) of the CAT NMS Plan was not included
in the proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

iv. Projected Total Executed Equivalent Share Volume
    The calculation of the Fee Rate for CAT Fees also requires the
determination of the projected total executed equivalent share volume
of transactions in Eligible Securities for each relevant period. Each
year, the Operating Committee would determine this projection based on
the total executed equivalent share volume of transactions in Eligible
Securities from the prior twelve months. Therefore, Proposed Section
11.3(a)(i)(D) of the CAT NMS Plan would state that ``[t]he Operating
Committee shall reasonably determine the projected total executed
equivalent share volume of all transactions in Eligible Securities for
each relevant period based on the executed equivalent share volume of
all transactions in Eligible Securities for the prior twelve months.''
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 upcoming relevant period. In
addition, CAT LLC proposes to allow the Operating Committee to base its
projection on the prior twelve months, but to use it discretion to
analyze the likely volume for the upcoming year. As set forth in
Proposed Section 11.3(a)(iii)(B), Participants will be required to
provide a description of the calculation of the projection in their fee
filings pursuant to section 19(b) of the Exchange Act. Furthermore, CAT
LLC intends to calculate the CAT Fees based on a reasonable
determination of the projected total executed equivalent share volume
of transactions in Eligible Securities. Accordingly, CAT LLC propose to
include the term ``reasonably'' in the Proposed Section 11.3(a)(i)(D)
of the CAT NMS Plan to indicate that the Operating Committee will
``reasonably determine the projected total executed equivalent share
volume.''
c. Participant CAT Fees for Prospective CAT Costs
    CAT LLC proposes to describe the Participant CAT Fees related to
Prospective CAT Costs in Proposed Section 11.3(a)(ii) of the CAT NMS
Plan. Proposed Section 11.3(a)(ii) of the CAT NMS Plan would have two
paragraphs (A) and (B), where paragraph (A) would describe the CAT Fee
obligation for Participants and paragraph (B) would clarify that
Participants would only be required to pay CAT Fees when Industry
Members are required to pay CAT Fees.
i. CAT Fee Obligation of the Participants
    CAT LLC proposes to add paragraph (A) to Proposed Section
11.3(a)(ii) of the CAT NMS Plan to describe the CAT Fee obligation of
the Participants. Specifically, proposed paragraph (A) of Proposed
Section 11.3(a)(ii) of the CAT NMS Plan would state the following:

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

    CAT LLC intends for the Participant CAT Fee to be calculated using
the Fee Rate reasonably determined pursuant to Proposed Section
11.3(a)(i) of the CAT NMS Plan. Accordingly, CAT LLC proposes to
include the term ``reasonably'' in the following sentence: ``[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.''
ii. Effectiveness of Participant CAT Fees
    CAT LLC also proposes to include proposed paragraph (B) of Proposed
Section 11.3(a)(ii) of the CAT NMS Plan to clarify that Participants
would only be required to pay CAT Fees when Industry Members are
required to pay CAT Fees. Under the Funding Proposal, CAT Fees are
designed to cover 100% of CAT costs by allocating costs between and
among Participants and Industry Members. However, the CAT Fees charged
to Participants are implemented via a different process than CAT Fees
charged to Industry Members. CAT Fees charged to Participants are
implemented via an approval of the CAT Fees by the Operating Committee
in accordance with the requirements of the CAT NMS Plan. In contrast,
CAT Fees charged to Industry Members may only become effective in
accordance with the requirements of section 19(b) of the Exchange Act.
Accordingly, proposed paragraph (B) of Proposed Section 11.3(a)(ii) of
the CAT NMS Plan would state that ``[e]ach Participant will be required
to pay the CAT Fee calculated using the Fee Rate reasonably determined
pursuant to paragraph (a)(i) of this Section 11.3 and approved by the
Operating Committee only if such CAT Fees are in effect with regard to
Industry Members in accordance with section 19(b) of the Exchange
Act.'' CAT LLC intends for the Participant CAT Fee to be calculated
using the Fee Rate reasonably determined pursuant to Proposed Section
11.3(a)(i) of the CAT NMS Plan. Accordingly, CAT LLC proposes to
include the term ``reasonably'' in the phrase ``the Fee Rate reasonably
determined'' in this provision.
d. Industry Member CAT Fees for Prospective CAT Costs
    CAT LLC proposes to describe the Industry Member CAT Fees related
to Prospective CAT Costs in Proposed Section 11.3(a)(iii) of the CAT
NMS Plan. Proposed Section 11.3(a)(iii) of the CAT NMS Plan would have
three paragraphs, (A), (B) and (C), where paragraph (A) would describe
the CAT Fee obligation for Industry Members, paragraph (B) would
described the required content of the fee filings required to be filed
pursuant to section 19(b) of the Exchange Act regarding the CAT Fees
for Industry Members, and paragraph (C) would clarify that Participants
would not make CAT fee filings regarding CAT Fees until the Financial
Accountability Milestone related to Period 4 as described in Section
11.6 of the CAT NMS Plan has been satisfied.
i. Industry Member CAT Fee Obligation
    CAT LLC proposes to describe the CAT Fees related to Prospective
CAT Costs that would be charged to Industry Members in Proposed Section
11.3(a)(iii)(A) of the CAT NMS Plan. Accordingly, Proposed Section
11.3(a)(iii)(A) of the CAT NMS Plan would state the following:

    Each Industry Member that is the CAT Executing broker for the
buyer in a transaction in Eligible Securities (``CAT Executing
Broker for the Buyer'' or ``CEBB'') and each Industry Member that is
the CAT Executing Broker for the seller in a transaction in Eligible
Securities (``CAT Executing Broker for the Seller'' or ``CEBS'')
will be required to pay a CAT Fee for each such transaction in
Eligible Securities in the prior month based on CAT Data. The CEBB's
CAT Fee or CEBS's CAT Fee (as applicable) for each transaction in
Eligible Securities will be calculated by multiplying the number of
executed equivalent shares in the transaction

by one-third and by the Fee Rate reasonably determined pursuant to
paragraph (a)(i) of this Section 11.3.

    CAT LLC intends for the Participant CAT Fee to be calculated using
the Fee Rate reasonably determined pursuant to Proposed Section
11.3(a)(i) of the CAT NMS Plan. Accordingly, CAT LLC proposes to
include the phrase ``the Fee Rate reasonably determined pursuant to
paragraph (a)(i) of this Section 11.3'' in this provision.
ii. Fee Filings Under Section 19(b) of the Exchange Act for Industry
Member CAT Fees
    CAT LLC proposes to describe the information that Participants
would be required to include in their fee filings to be made pursuant
to section 19(b) of the Exchange and Rule 19b-4 thereunder for Industry
Member CAT Fees in proposed paragraph (B) of Proposed Section
11.3(a)(iii) of the CAT NMS Plan.\38\ Specifically, such filings would
be required to include with regard to the CAT Fee: (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; \39\ (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 is calculated, and explain how the budget used in the calculation
is reconciled to the collected fees. Such detailed information would
provide Industry Members and other interested parties with a clear
understanding of the calculation of the CAT Fees and their relationship
to CAT costs.\40\
---------------------------------------------------------------------------

    \38\ CAT LLC expects the fee filings required to be made by the
Participants pursuant to Section 19(b) of the Exchange Act with
regard to CAT Fees to be filed pursuant to Section 19(b)(3)(A) of
the Exchange Act and Rule 19b-(f)(2) thereunder. In accordance with
Section 19(b)(3)(A) of the Exchange Act and Rule 19b-4(f)(2)
thereunder, such fee filings would be effective upon filing.
    \39\ CAT LLC intends to include any other categories as
reasonably determined by the Operation Committee. Accordingly, this
provision refers to ``such other categories as reasonably determined
by the Operating Committee to be included in the budget.''
    \40\ As a practical matter, the fee filing would provide the
exact fee per executed equivalent share to be paid for the CAT Fees,
by multiplying the Fee Rate by one-third and describing the relevant
number of decimal places for the fee.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to clarify that the budgeted CAT
costs described in the fee filings must provide sufficient detail to
demonstrate that the CAT budget used in calculating the CAT Fees is
reasonable and appropriate. Therefore, CAT LLC proposes to add the
following sentence to Proposed Section 11.3(a)(iii)(B) of the CAT NMS
Plan: ``The information provided in this Section would be provided with
sufficient detail to demonstrate that the budget for the upcoming year,
or part of year, as applicable, is reasonable and appropriate.''
iii. Financial Accountability Milestone
    CAT LLC recognizes that the collection of CAT Fees from Industry
Members is subject to Section 11.6 of the CAT NMS Plan regarding the
Financial Accountability Milestones. Accordingly, CAT LLC proposes to
clarify that Participants will not make fee filings pursuant to Section
19(b) of the Exchange Act regarding CAT Fees until the Financial
Accountability Milestone related to Period 4 described in Section 11.6
of the CAT NMS Plan has been satisfied. Specifically, CAT LLC proposes
to add proposed paragraph (C) to Proposed Section 11.3(a)(iii) to the
CAT NMS Plan to address the Financial Accountability Milestone. This
provision would state that ``[n]o Participant will make a filing with
the SEC pursuant to section 19(b) of the Exchange Act regarding any CAT
Fee related to Prospective CAT Costs until the Financial Accountability
Milestone related to Period 4 described in Section 11.6 has been
satisfied.''
e. CAT Fee Details
    CAT LLC proposes to provide Participants and CAT Executing Brokers
with details regarding the calculation of their CAT Fees upon request.
Specifically, CAT LLC proposes to add Proposed Section 11.3(a)(iv)(A)
to the CAT NMS Plan to describe this disclosure. This provision would
state that ``[d]etails regarding the calculation of a Participant or
CAT Executing Brokers' CAT Fees will be provided upon request to such
Participant or CAT Executing Broker. At a minimum, such details would
include each Participant or CAT Executing Broker's executed equivalent
share volume and corresponding fee by (1) Listed Options, NMS Stocks
and OTC Equity Securities, (2) by transactions executed on each
exchange and transactions executed otherwise than on an exchange, and
(3) by buy-side transactions and sell-side transactions.'' \41\ Such
information would provide Participants and CAT Executing Brokers with
the ability to understand the details regarding the calculation of
their CAT Fees.
---------------------------------------------------------------------------

    \41\ As highlighted in Exhibit B, this second sentence in
Proposed Section 11.3(a)(iv)(A) of the CAT NMS Plan was not included
in the proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to make certain aggregate statistics
regarding the CAT Fees publicly available. Specifically, CAT LLC
proposes to add Proposed Section 11.3(a)(iv)(B) to the CAT NMS Plan to
describe this public disclosure. This provision would state that
``[f]or each CAT Fee, at a minimum, CAT LLC will make publicly
available the aggregate executed equivalent share volume and
corresponding aggregate fee by (1) Listed Options, NMS Stocks and OTC
Equity Securities, (2) by transactions executed on each exchange and
transactions executed otherwise than on an exchange, and (3) by buy-
side transactions and sell-side transactions.'' \42\
---------------------------------------------------------------------------

    \42\ As highlighted in Exhibit B, Proposed Section
11.3(a)(iv)(B) of the CAT NMS Plan was not included in the proposed
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

4. Historical CAT Assessment
    CAT LLC proposes to describe Historical CAT Assessments related to
Historical CAT Costs in Proposed Section 11.3(b) of the CAT NMS Plan.
Proposed Section 11.3(b) of the CAT NMS Plan would describe that
Historical CAT Assessments apply only to Industry Members (not to
Participants), the manner of calculating the Historical Fee Rate for
the Historical CAT Assessment, a description of the calculation of the
Industry Member CAT Fees, a description of the fee filings under
section 19(b) of the Exchange Act for Historical CAT Assessments, and
details regarding the calculation of the Historical CAT Assessments
that are available upon request or publicly available. The following
describes in detail Section 11.3(b) of the CAT NMS Plan.
a. Introductory Statement
    CAT LLC proposes to revise Section 11.3(b) of the CAT NMS Plan to
address Historical CAT Assessments related to Historical CAT Costs to
be charged to Industry Members. Accordingly, CAT LLC proposes to revise
the introductory

statement in Proposed Section 11.3(b) of the CAT NMS Plan to state that
``[t]he Operating Committee will establish one or more fees (each a
``Historical CAT Assessment'') to be payable by Industry Members with
regard to CAT costs previously paid by the Participants (``Past CAT
Costs'') as follows:''.\43\ With the reference to ``one or more''
Historical CAT Fees, this provision also clarifies that there may be
one or more Historical CAT Assessments.
---------------------------------------------------------------------------

    \43\ Note that there may be one or more Historical CAT
Assessments, depending upon the timing of any approval of the
amendment to the CAT NMS Plan and the completion of the Financial
Accountability Milestones. For a discussion of the Financial
Accountability Milestones, see Section 11.6 of the CAT NMS Plan.
---------------------------------------------------------------------------

b. Calculation of Historical Fee Rate
    CAT LLC proposes to provide details regarding the calculation of
the Historical CAT Assessment in Proposed Section 11.3(b)(i) of the CAT
NMS Plan. These details would include a description of the calculation
of the Historical Fee Rate, the counting method for executed equivalent
shares, the Historical CAT Costs, the Historical Recovery Period, and
the projected total executed equivalent share volume of transactions in
Eligible Securities for the Historical Recovery Period.
i. General
    Proposed paragraph (a) of Proposed Section 11.3(b)(i) of the CAT
NMS Plan would describe the calculation of the Historical Fee Rate for
each Historical CAT Assessment and the requirement for Participants to
file a fee filing for each Historical CAT Assessment. This proposed
provision also would state that Industry Members would be required to
pay each Historical CAT Assessment once such Historical CAT Assessment
is in effect in accordance with section 19(b) of the Exchange Act.
Specifically, this proposed provision would state that:

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

    CAT LLC proposes to clarify that the calculation of each Historical
Fee Rate would be performed using reasonably projected total executed
equivalent share volume.\44\ Accordingly, CAT LLC proposes to use the
term ``reasonably'' to the describe ``projected total executed
equivalent share volume'' in this provision.
---------------------------------------------------------------------------

    \44\ As highlighted in Exhibit B, this proposed revision to add
the term ``reasonably'' before ``projected total executed equivalent
share volume'' in Proposed Section 11.3(b)(i)(A) of the CAT NMS Plan
was not included in the proposed revisions related to the 2022
Funding Proposal.
---------------------------------------------------------------------------

ii. Executed Equivalent Shares
    The Historical CAT Assessment would be calculated based on the same
executed equivalent share calculation as CAT Fees related to
Prospective CAT Costs. Accordingly, Proposed Section 11.3(b)(i)(B) of
the CAT NMS Plan would make it clear that the calculation is the same
for both types of fees. Specifically, Proposed Section 11.3(b)(i)(B) of
the CAT NMS Plan would state that ``[f]or purposes of calculating each
Historical CAT Assessment, executed equivalent shares in a transaction
in Eligible Securities will be reasonably counted in the same manner as
set forth in paragraph (a)(i)(B) of this Section 11.3.''
iii. Historical CAT Costs
    The calculation of the Historical CAT Assessment depends upon the
determination of the Historical CAT Costs. Proposed Section
11.3(b)(i)(C) of the CAT NMS Plan would describe the Historical CAT
Costs for calculating Historical CAT Assessments. The Operating
Committee will reasonably determine the Past CAT Costs sought to be
recovered through the Historical CAT Assessment. CAT LLC proposes to
make this approach clear in the language of the CAT NMS Plan by adding
Proposed Section 11.3(b)(i)(C) of the CAT NMS Plan, which would state
that ``[t]he Operating Committee will reasonably determine the
Historical CAT Costs sought to be recovered by each Historical CAT
Assessment, where the Historical CAT Costs will be Past CAT Costs minus
Past CAT Costs reasonably excluded from Historical CAT Costs by the
Operating Committee.'' \45\
---------------------------------------------------------------------------

    \45\ As highlighted in Exhibit B, this proposed revision to add
the term ``reasonably'' before ``excluded'' in Proposed Section
11.3(b)(i)(C) of the CAT NMS Plan was not included in the proposed
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    CAT LLC proposes to further clarify the amount to be collected via
the Historical CAT Assessments in Proposed Section 11.3(b)(i)(C) of the
CAT NMS Plan. Specifically, CAT LLC proposes to add the clarifying
statement that ``[e]ach Historical CAT Assessment will seek to recover
from CAT Executing Brokers two-thirds of Historical CAT Costs incurred
during the period covered by the Historical CAT Assessment.'' This
statement reiterates the requirement set forth in Proposed Section
11.3(b)(iii)(A) of the CAT NMS Plan regarding the calculation of the
Historical CAT Assessment, which requires the multiplication of the
number of executed equivalent shares in the transaction by one-third
and by the Historical Fee Rate. Each CEBS and CEBB pays one-third, and,
therefore, two-thirds of the Historical CAT Costs would be collected
from CAT Executing Brokers.
    CAT LLC also proposes to add the term ``reasonably'' to the
following sentence in Section 11.1(c) of the CAT NMS Plan before the
word ``incurred'': ``In determining fees on Participants and Industry
Members the Operating Committee shall take into account fees, costs and
expenses (including legal and consulting fees) reasonably incurred by
the Participants on behalf of the Company prior to the Effective Date
in connection with the creation and implementation of the CAT.'' \46\
The addition of the term ``reasonably'' would require such fees, costs
and expenses to be reasonable.
---------------------------------------------------------------------------

    \46\ As highlighted in Exhibit B, this proposed revision to
Section 11.1(c) of the CAT NMS Plan was not included in the proposed
revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

iv. Historical Recovery Period
    The calculation of the Historical CAT Assessment also depends upon
the determination of the Historical Recovery Period. As the total
amount of the Historical CAT Costs have not yet been determined because
the CAT fee model has not yet been approved and CAT LLC continues to
incur costs, CAT LLC has not determined the specific recovery period
for any particular Historical CAT Assessment. Based on CAT costs
incurred to date, however, CAT LLC believes that the Historical
Recovery Period should not be less than 24 months or more than five
years. In analyzing the potential Historical Recovery Periods, CAT LLC
sought to weigh the need for a reasonable Historical Fee Rate that
spreads the Historical CAT Costs over an appropriate amount of time and
the need to repay the loan notes to the Participants in a timely
fashion. CAT LLC analyzed potential recovery periods using the
Historical CAT Costs through 2022 and the total executed equivalent

share volume of transactions in Eligible Securities for 2021 to
calculate the projected total executed equivalent share volume of
transactions. Based on the variables in this analysis, CAT LLC
determined that the Historical Fee Rate calculated using a Historical
Recovery Period of two to five years would establish a reasonable
Historical Fee Rate even if Industry Members were required to pay a
Historical CAT Assessment and the ongoing CAT Fee at the same time. CAT
LLC notes, however, that the actual Historical CAT Assessment would be
calculated using up-to-date Historical CAT Costs and executed
equivalent share volume.
    Proposed Section 11.3(b)(i)(D)(I) of the CAT NMS Plan would
describe the Historical Recovery Period used in calculating the
Historical Fee Rate. This proposed provision would state that ``[t]he
length of the Historical Recovery Period used in calculating each
Historical Fee Rate will be reasonably established by the Operating
Committee based upon the amount of the Historical CAT Costs to be
recovered by the Historical CAT Assessment.'' \47\ This proposed
provision, however, would state that ``no Historical Recovery Period
used in calculating the Historical Fee Rate shall be less than 24
months or more than five years.'' As discussed below, the Historical
Recovery Period is used to calculate the Historical Fee Rate. The
actual recovery period may be longer or shorter than the Historical
Recovery Period depending on the actual executed equivalent share
volumes during the time that the Historical CAT Assessment is in
effect. Any Historical CAT Assessment would remain in effect until the
relevant Historical CAT Costs are recovered, whether that time is
shorter or longer than the Historical Recovery Period used in
calculating the Historical Fee Rate.
---------------------------------------------------------------------------

    \47\ This provision would require that the Historical Recovery
Period be ``reasonably'' established by the Operating Committee.
---------------------------------------------------------------------------

    Proposed Section 11.3(b)(i)(D)(II) of the CAT NMS Plan would
describe the length of the time that the Historical CAT Assessment
would be in effect, which may be greater than or less than the
Historical Recovery Period, depending on the amount of the Historical
CAT Assessments collected based on the actual volume during the time
that the Historical Assessment is in effect. Any Historical CAT
Assessment would remain in effect until the relevant Historical CAT
Costs are collected, whether that time is shorter or longer than the
Historical Recovery Period used in calculating the Historical Fee Rate.
Accordingly, this provision states that ``[n]otwithstanding the length
of the Historical Recovery Period used in calculating the Historical
Fee Rate, each Historical CAT Assessment calculated using the
Historical Fee Rate will remain in effect until all Historical CAT
Costs for the Historical CAT Assessment are collected.''
v. Projected Total Executed Equivalent Share Volume
    The Historical Fee Rate for a Historical CAT Assessment would be
calculated by using the projected total executed equivalent share
volume of all transactions in Eligible Securities for the Historical
Recovery Period for such Historical CAT Assessment. CAT LLC proposes to
clarify the manner of calculating the projected total executed
equivalent share volume for each Historical CAT Assessment in Proposed
Section 11.3(b)(i)(E) to the CAT NMS Plan. CAT LLC proposes to state in
this provision that the projection will be determined based on
transactions in Eligible Securities for the prior twelve months.
Accordingly, Proposed Section 11.3(b)(i)(E) of the CAT NMS Plan would
state that ``[t]he Operating Committee shall reasonably determine the
projected total executed equivalent share volume of all transactions in
Eligible Securities for each Historical Recovery Period based on the
executed equivalent share volume of all transactions in Eligible
Securities for the prior twelve months.'' As with the calculation of
the projections for CAT Fees, 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
upcoming relevant period. In addition, CAT LLC proposes to allow the
Operating Committee to base its projection on the prior twelve months,
but to use its discretion to analyze the likely volume for the upcoming
year. As set forth in Proposed Section 11.3(b)(iii)(B)(II) of the CAT
NMS Plan, Participants will be required to provide a description of the
calculation of the projection in their fee filings pursuant to section
19(b) of the Exchange Act for Historical CAT Assessments. As noted,
this provision would require the Operating Committee to ``reasonably''
determine the projected total executed equivalent share volume.
c. Past CAT Costs and Participants
    Proposed Section 11.3(b)(ii) of the CAT NMS Plan would clarify that
the Participants would not be required to pay the Historical CAT
Assessment as the Participants previously have paid all Past CAT Costs.
It would state that, ``[b]ecause Participants previously have paid Past
CAT Costs via loans to the Company, Participants would not be required
to pay any Historical CAT Assessment.'' In addition, Proposed Section
11.3(b)(ii) of the CAT NMS Plan would clarify that the Historical CAT
fees collected from Industry Members would be allocated to Participants
for repayment of the outstanding loan notes of the Participants to the
Company on a pro rata basis; such fees would not be allocated to
Participants based on the executed equivalent share volume of
transactions in Eligible Securities. Specifically, Proposed Section
11.3(b)(ii) of the CAT NMS Plan would state that ``[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.'' \48\
---------------------------------------------------------------------------

    \48\ As highlighted in Exhibit B, the sentence ``In 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'' has been
revised from the 2022 Funding Proposal. CAT LLC proposes to revise
the phrase ``cancellation of the loans made by the Company'' to
``cancellation of the loans made to the Company'' as the loans were
made to the Company, not by the Company. In addition, CAT LLC
proposes to revise the sentence to clarify that Participants will
remain responsible via the loan cancellations for one-third of
Historical CAT Costs as well as 100% of certain other Past CAT Costs
(e.g., the Excluded Costs discussed below).
---------------------------------------------------------------------------

d. Historical CAT Assessment for Industry Members
    CAT LLC proposes to describe the Historical CAT Assessment for
Industry Members in Proposed Section 11.3(b)(iii) of the CAT NMS Plan.
Proposed Section 11.3(b)(iii) of the CAT NMS Plan would have two
paragraphs, (A) and (B), where paragraph (A) would describe the
Historical CAT Assessment for Industry Member, and paragraph (B) would
describe the fee filings required to be filed pursuant to section 19(b)
of the Exchange Act regarding the Historical CAT Assessments.

i. Industry Member Obligation for Historical CAT Assessment
    CAT LLC proposes to describe the Historical CAT Assessment charged
to Industry Members in Proposed Section 11.3(b)(iii)(A) of the CAT NMS
Plan. Specifically, this proposed paragraph would state that:

    Each month in which a Historical CAT Assessment is in effect,
each CEBB and each CEBS shall pay a fee for each transaction in
Eligible Securities executed by the CEBB or CEBS from the prior
month as set forth in CAT Data, where the Historical CAT Assessment
for each transaction will be calculated by multiplying the number of
executed equivalent shares in the transaction by one-third and by
the Historical Fee Rate reasonably determined pursuant to paragraph
(b)(i) of this Section 11.3.

    As noted, this provision would require the Operating Committee to
``reasonably'' determine the Historical Fee Rate pursuant to Proposed
Section 11.3(b)(i) of the CAT NMS Plan.
ii. Historical CAT Assessment Fee Filings
    CAT LLC proposes to provide additional details regarding the fee
filings to be filed by the Participants regarding each Historical CAT
Assessment pursuant to section 19(b) of the Exchange Act in Proposed
Section 11.3(b)(iii)(B) of the CAT NMS Plan.\49\ Specifically, this
provision would describe that fee filings would be required for each
Historical CAT Assessment, the content of such fee filings, and the
effect of the Financial Accountability Milestones described in Section
11.6 of the CAT NMS Plan on the fee filings.
---------------------------------------------------------------------------

    \49\ CAT LLC expects the fee filings required to be made by the
Participants pursuant to Section 19(b) of the Exchange Act with
regard to Historical CAT Assessments to be filed pursuant to Section
19(b)(3)(A) of the Exchange Act. In accordance with Section
19(b)(3)(A) of the Exchange Act, fee filings made pursuant to
Section 19(b)(3)(A) of the Exchange Act would be effective upon
filing.
---------------------------------------------------------------------------

A. Number of Fee Filings for Historical CAT Assessments
    CAT LLC proposes to clarify how many fee filings pursuant to
section 19(b) of the Exchange Act Participants would be required to
make with regard to Historical CAT Assessments. CAT LLC proposes to
clarify that each Participant will be required to file a fee filing
pursuant to section 19(b) of the Exchange Act to describe each
Historical CAT Assessment. Accordingly, CAT LLC proposes to describe
this requirement in Proposed Section 11.3(b)(iii)(B)(I) of the CAT NMS
Plan, which would state that ``Participants will be required to file
with the SEC pursuant to section 19(b) of the Exchange Act a filing for
each Historical CAT Assessment.''
B. Content of Fee Filings for Historical CAT Assessments
    CAT LLC proposes to provide additional detail as to the information
that Participants would be required to include in their fee filings to
be made pursuant to section 19(b) of the Exchange and Rule 19b-4(f)(2)
for Historical CAT Assessments in proposed paragraph (b)(iii)(B)(II) of
Proposed Section 11.3 of the CAT NMS Plan. The proposed paragraph sets
forth the information about the Historical CAT Assessments that should
be included in the fee filings required to be made by the Participants
pursuant to section 19(b) of the Exchange Act. Specifically, such
filings would be required to include: (A) the Historical Fee Rate; (B)
a brief description of the amount and type of Historical CAT Costs,
including (1) the 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; (C) the Historical Recovery Period and the reasons for
its length; and (D) the projected total executed equivalent share
volume of all transactions in Eligible Securities for the Historical
Recovery Period, and a description of the calculation of the
projection. Such detailed information would provide Industry Members
and other interested parties with a clear understanding of the
calculation of each Historical CAT Assessment and its relationship to
Historical CAT Costs.\50\
---------------------------------------------------------------------------

    \50\ As a practical matter, the fee filing would provide the
exact fee per executed equivalent share to be paid for the
Historical CAT Assessment, by multiplying the Historical Fee Rate by
one-third and describing the relevant number of decimal places for
the fee.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to clarify that the Historical CAT
Costs described in the fee filings must provide sufficient detail to
demonstrate that such costs are reasonable and appropriate. Therefore,
CAT LLC proposes to add the following sentence to Proposed Section
11.3(b)(iii)(B)(II) of the CAT NMS Plan: ``The information provided in
this Section would be provided with sufficient detail to demonstrate
that the Historical CAT Costs are reasonable and appropriate.''
C. Financial Accountability Milestones
    CAT LLC recognizes that the collection of Historical CAT
Assessments from Industry Members is subject to Section 11.6 of the CAT
NMS Plan regarding the Financial Accountability Milestones.
Accordingly, CAT LLC proposes to clarify that Participants will not
make CAT fee filings pursuant to section 19(b) of the Exchange Act
regarding a Historical CAT Assessment until any applicable Financial
Accountability Milestone has been satisfied. Specifically, CAT LLC
proposes to add Proposed Section 11.3(b)(iii)(B)(III) to the CAT NMS
Plan. This provision would state that ``[n]o Participant will make a
filing with the SEC pursuant to section 19(b) of the Exchange Act
regarding any Historical CAT Assessment until any applicable Financial
Accountability Milestone described in Section 11.6 has been
satisfied.''
e. Historical CAT Assessment Details
    CAT LLC proposes to provide CAT Executing Brokers with details
regarding the calculation of their Historical CAT Assessments upon
request. Specifically, CAT LLC proposes to add Proposed Section
11.3(b)(iv)(A) to the CAT NMS Plan, which would state that ``[d]etails
regarding the calculation of a CAT Executing Broker's Historical CAT
Assessment will be provided upon request to such CAT Executing Broker.
At a minimum, such details would include each CAT Executing Broker's
executed equivalent share volume and corresponding fee by (1) Listed
Options, NMS Stocks and OTC Equity Securities, (2) by transactions
executed on each exchange and transactions executed otherwise than on
an exchange, and (3) by buy-side transactions and sell-side
transactions.'' \51\ Such information would provide CAT Executing
Brokers with the ability to understand the details regarding the
calculation of their Historical CAT Assessments.
---------------------------------------------------------------------------

    \51\ As highlighted in Exhibit B, the second sentence of
Proposed Section 11.3(b)(iv)(A) of the CAT NMS Plan was not included
in the proposed revisions related to the 2022 Funding Proposal.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to make certain aggregate statistics
regarding Historical CAT Assessments publicly available. Specifically,
CAT LLC proposes to add Proposed Section 11.3(b)(iv)(B) to the CAT NMS
Plan. This provision would state that ``[f]or each Historical CAT
Assessment, at a minimum, CAT LLC will make publicly available the
aggregate executed equivalent share volume and corresponding aggregate
fee by (1) Listed Options, NMS Stocks and OTC Equity Securities, (2) by
transactions executed on each exchange and transactions executed
otherwise than on an exchange, and (3) by buy-side

transactions and sell-side transactions.'' \52\
---------------------------------------------------------------------------

    \52\ As highlighted in Exhibit B, Section 11.3(b)(iv)(B) of the
CAT NMS Plan was not included in the proposed revisions related to
the 2022 Funding Proposal.
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5. CAT Fee Schedule for Participants
    To implement the Participant CAT fees, CAT LLC proposes to add a
fee schedule, entitled ``Consolidated Audit Trail Funding Fees,'' to
Appendix B of the CAT NMS Plan. Proposed paragraph (a) of the fee
schedule would describe the CAT Fees to be paid by the Participants
under the Funding Proposal. Specifically, 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 Eligible Securities in the prior month.''
6. Additional Changes From Original Funding Model
    CAT LLC proposes certain revisions to Article XI of the CAT NMS
Plan to implement the Funding Proposal. CAT LLC proposes to make the
following changes to the CAT NMS Plan in addition to the proposed
changes to the CAT NMS Plan discussed above.
a. Elimination of Definition of ``Execution Venue''
    Section 1.1 of the CAT NMS Plan defines the term ``Execution
Venue'' to mean ``a Participant or an alternative trading system
(`ATS') (as defined in Rule 300 of Regulation ATS) that operates
pursuant to Rule 301 of Regulation ATS (excluding any such ATS that
does not execute orders).'' Currently, the term ``Execution Venue'' is
used in Sections 11.2 and 11.3 of the CAT NMS Plan to describe how CAT
costs would be allocated among CAT Reporters under the Original Funding
Model. The Original Funding Model would have imposed fees based on
market share to CAT Reporters that are Execution Venues, including
ATSs, and fees based on message traffic for Industry Members' non-ATS
activities. In contrast, the Funding Proposal would impose fees based
on the executed equivalent shares of transactions in Eligible
Securities for three categories of CAT Reporters: Participants, CEBBs
and CEBSs. Accordingly, as the concept for an ``Execution Venue'' would
not be relevant for the Funding Proposal, CAT LLC proposes to delete
this term and its definition from Section 1.1 of the CAT NMS Plan.
b. Use of Executed Equivalent Share Volume Under Funding Proposal
    The Original Funding Model set forth in the CAT NMS Plan requires
Participants and Execution Venue ATSs to pay CAT fees based on market
share and Industry Members (other than Execution Venue ATSs) to pay CAT
fees based on message traffic. The CAT NMS Plan also describes how the
market share-based fee would be calculated for Participants and other
Execution Venue ATSs and how the message traffic-based fee would be
calculated for Industry Members (other than Execution Venue ATSs). CAT
LLC proposes to amend the CAT NMS Plan to require Participants, CEBBs
and CEBSs to pay CAT fees based on the number of executed equivalent
shares in a transaction in Eligible Securities, rather than based on
market share and message traffic. Accordingly, the Operating Committee
proposes to amend Section 11.2(b) and (c) and Section 11.3(a) and (b)
of the CAT NMS Plan to reflect the proposed use of the number of
executed equivalent shares in transactions in Eligible Securities in
calculating CAT fees.
    Section 11.2(b) of the CAT NMS Plan states that ``[i]n establishing
the funding of the Company, the Operating Committee shall seek . . .
(b) to establish an allocation of the Company's related costs among
Participants and Industry Members that is consistent with the Exchange
Act, taking into account the timeline for implementation of the CAT and
distinctions in the securities trading operations of Participants and
Industry Members and their relative impact upon Company resources and
operations.'' CAT LLC proposes to delete the requirement to take into
account ``distinctions in the securities trading operations of
Participants and Industry Members and their relative impact upon
Company resources and operations.'' This requirement related to using
message traffic and market share in the calculation of CAT fees, as
message traffic and market share were metrics related to the impact of
a CAT Reporter on the Company's resources and operations. With the
proposed move to the use of the executed equivalent shares metric
instead of message traffic and market share, the requirement is no
longer relevant.
    Section 11.2(c) of the CAT NMS Plan states that ``[i]n establishing
the funding of the Company, the Operating Committee shall seek . . .
(c) to establish a tiered fee structure in which the fees charged to:
(i) CAT Reporters that are Execution Venues, including ATSs, are based
upon the level of market share; (ii) Industry Members' non-ATS
activities are based upon message traffic.'' CAT LLC proposes to delete
subparagraphs (i) and (ii) and replace these subparagraphs with the
requirement that the fee structure in which the fees charged to
``Participants and Industry Members are based upon the executed
equivalent share volume of transactions in Eligible Securities.'' \53\
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    \53\ As discussed in the next section, the Operating Committee
also proposes to delete the reference to a ``tiered'' fee structure.
---------------------------------------------------------------------------

    In addition, CAT LLC proposes to amend the CAT funding principles
to clarify that CAT Fees and the Historical CAT Assessments are
intended to be cost-based fees--that is, the fees are designed to
recover the cost of the creation, implementation and operation of the
CAT. CAT LLC proposes to amend the funding principle set forth in
Section 11.2(c) by making a specific reference to the costs of the CAT.
With this proposed change, Proposed Section 11.2(c) would state that
``[i]n establishing the funding of the Company, the Operating Committee
shall seek: . . . to establish a fee structure in which the fees
charged to Participants and Industry Members are based upon the
executed equivalent share volume of transactions in Eligible
Securities, and the costs of the CAT.''
    Section 11.3(a) of the CAT NMS Plan provides additional detail
regarding the market share-based fees to be paid by Participants and
Execution Venue ATSs under the Original Funding Model. Specifically,
Section 11.3(a) of the CAT NMS Plan states:

    (a) The Operating Committee will establish fixed fees to be
payable by Execution Venues as provided in this Section 11.3(a):
    (i) Each Execution Venue that: (A) executes transactions; or (B)
in the case of a national securities association, has trades
reported by its members to its trade reporting facility or
facilities for reporting transactions effected otherwise than on an
exchange, in NMS Stocks or OTC Equity Securities will pay a fixed
fee depending on the market share of that Execution Venue in NMS
Stocks and OTC Equity Securities, with the Operating Committee
establishing at least two and no more than five tiers of fixed fees,
based on an Execution Venue's NMS Stocks and OTC Equity Securities
market share. For these purposes, market share for Execution Venues
that execute transactions will be calculated by share volume, and
market share for a national securities association that has trades
reported by its members to its trade reporting facility or
facilities for reporting transactions effected otherwise than on an
exchange in NMS Stocks or OTC Equity Securities will be calculated
based on share volume of trades reported, provided, however, that
the share volume reported to such national securities association by
an Execution Venue shall not

be included in the calculation of such national security
association's market share.
    (ii) Each Execution Venue that executes transactions in Listed
Options will pay a fixed fee depending on the Listed Options market
share of that Execution Venue, with the Operating Committee
establishing at least two and no more than five tiers of fixed fees,
based on an Execution Venue's Listed Options market share. For these
purposes, market share will be calculated by contract volume.

    CAT LLC proposes to delete Section 11.3(a) of the CAT NMS Plan and
replace this paragraph with a description of the CAT Fees related to
Prospective CAT Costs, as described above.
    Section 11.3(b) of the CAT NMS Plan provides additional detail
regarding the message traffic-based CAT fees to be paid by Industry
Members (other than Execution Venue ATSs) under the Original Funding
Model. Specifically, Section 11.3(b) of the CAT NMS Plan states:

    The Operating Committee will establish fixed fees to be payable
by Industry Members, based on the message traffic generated by such
Industry Member, with the Operating Committee establishing at least
five and no more than nine tiers of fixed fees, based on message
traffic. For the avoidance of doubt, the fixed fees payable by
Industry Members pursuant to this paragraph shall, in addition to
any other applicable message traffic, include message traffic
generated by: (i) an ATS that does not execute orders that is
sponsored by such Industry Member; and (ii) routing orders to and
from any ATS sponsored by such Industry Member.

    CAT LLC proposes to delete Section 11.3(b) of the CAT NMS Plan and
replace this paragraph with a description of the Historical CAT
Assessments, as described above.
c. Elimination of Tiered Fees
    CAT LLC proposes to eliminate the use of tiered fees that were
included in the Original Funding Model. Instead, under the Funding
Proposal, each Participant, CEBB or CEBS would pay a fee based solely
on its transactions in Eligible Securities. The Operating Committee
therefore proposes to amend Sections 11.1(d), 11.2(c), 11.3(a) and
11.3(b) of the CAT NMS Plan to eliminate tiered fees and related
concepts.
    Utilizing a tiered fee structure, by its nature, would create
certain inequities among the CAT fees paid by CAT Reporters. For
example, two CAT Reporters with comparable executed equivalent share
volume may pay notably different fees if one falls in a higher tier and
the other falls within a lower tier. Correspondingly, a tiered fee
structure generally would reduce fees for CAT Reporters with higher
executed share volume in one tier, while increasing fees for Industry
Members with lower executed share volume in the same tier, as compared
to a non-tiered fee. Furthermore, CAT Reporters in lower tiers
potentially pay more than they would without the use of tiers. While
tiering appropriately exists in various other self-regulatory fee
programs, CAT LLC proposes to eliminate the tiering concept for the
Funding Proposal.
    By charging each Participant, CEBB and CEBS a CAT fee directly
based on its own executed equivalent share volume, rather than charging
a tiered fee, the Funding Proposal would result in a CAT fee being tied
more directly to the CAT Reporter's executed share volume. In contrast,
with a tiered fee, CAT Reporters with different levels of executed
equivalent share volume that are placed in the same tier would all pay
the same CAT fee, thereby limiting the correlation between a CAT
Reporter's activity and its CAT fee.
    The proposed non-tiering approach is simpler and more objective to
administer than the tiering approach. With a tiering approach, the
number of tiers for Participants, CEBBs and CEBSs, the boundaries for
each tier and the fees assigned to each tier must be established. In
the absence of clear groupings of CAT Reporters, selecting the number
of, boundaries for, and the fees associated with each tier would be
subject to some level of subjectivity. Furthermore, the establishment
of tiers would need to be continually reassessed based on changes in
the executed equivalent share volume of transactions in Eligible
Securities, thereby requiring regular subjective assessments.
Accordingly, the removal of tiering from the Funding Proposal
eliminates a variety of subjective analyses and judgments from the
model and simplifies the determination of CAT fees.
    Section 11.1(d) of the CAT NMS Plan states that ``[c]onsistent with
this Article XI, the Operating Committee shall adopt policies,
procedures, and practices regarding the budget and budgeting process,
assignment of tiers, resolution of disputes, billing and collection of
fees, and other related matters.'' With the elimination of tiered fees,
the reference to the ``assignment of tiers'' would no longer be
relevant for the Funding Proposal. Therefore, CAT LLC proposes to
delete the reference to ``assignment of tiers'' from Section 11.1(d).
    Section 11.1(d) of the CAT NMS Plan also states that:

    For the avoidance of doubt, as part of its regular review of
fees for the CAT, the Operating Committee shall have the right to
change the tier assigned to any particular Person in accordance with
fee schedules previously filed with the Commission that are
reasonable, equitable and not unfairly discriminatory and subject to
public notice and comment, pursuant to this Article XI. Any such
changes will be effective upon reasonable notice to such Person.

    As noted above, unlike the Original Funding Model, the Funding
Proposal would not utilize tiered fees. Accordingly, these two
sentences would not be applicable to the Funding Proposal. Therefore,
CAT LLC proposes to delete these two sentences from Section 11.1(d) of
the CAT NMS Plan.
    CAT LLC proposes to delete the reference to ``tiered'' fees from
Section 11.2(c) of the CAT NMS Plan. Section 11.2(c) of the CAT NMS
Plan states that ``[i]n establishing the funding of the Company, the
Operating Committee shall seek: . . . (c) to establish a tiered fee
structure . . .'' CAT LLC propose to delete the word ``tiered'' from
this provision as the CAT fees would not be tiered under the Funding
Proposal.
    CAT LLC also proposes to delete paragraph (iii) of Section 11.2(c)
of the CAT NMS Plan. Paragraph (iii) of Section 11.2(c) of the CAT NMS
Plan states that the Operating Committee shall seek to establish a
tiered fee structure in which fees charged to:

the CAT Reporters with the most CAT-related activity (measured by
market share and/or message traffic, as applicable) be generally
comparable (where for these comparability purposes, the tiered fee
structure takes into consideration affiliations between or among CAT
Reporters, whether Execution Venues and/or Industry Members).

    Under the Original Funding Model, the comparability provision was
an important factor in determining the tiers for Industry Members and
Execution Venues. In determining the tiers, the Operating Committee
sought to establish comparable fees among the CAT Reporters with the
most Reportable Events.\54\ Under the Funding Proposal, however, the
comparability provision is no longer necessary, as a tiered fee
structure would not be used for Industry Members or Participants.
---------------------------------------------------------------------------

    \54\ See, e.g., Securities Exchange Act Rel. No. 82451 (Jan. 5,
2018), 83 FR 1399, 1406-07 (Jan. 11, 2018) (``2018 Fee Proposal
Release'').
---------------------------------------------------------------------------

    As discussed above, the Operating Committee proposes to replace the
language in Sections 11.3(a) and (b) of the CAT NMS Plan with language
implementing the Funding Proposal. These proposed changes would remove
the references to tiers in Sections 11.3(a)(i) and (ii) and 11.3(b) of
the CAT

NMS Plan, along with the other proposed changes. Specifically, Section
11.3(a)(i) of the CAT NMS Plan states that the Operating Committee,
when establishing fees for Execution Venues for NMS Stocks and OTC
Equity Securities, will establish ``at least two and no more than five
tiers of fixed fees, based on an Execution Venue's NMS Stocks and OTC
Equity Securities market share.'' Similarly, Section 11.3(a)(ii) of the
CAT NMS Plan states that the Operating Committee, when establishing
fees for Execution Venues that execute transactions in Listed Options,
will establish ``at least two and no more than five tiers of fixed
fees, based on an Execution Venue's Listed Options market share.''
Section 11.3(b) of the CAT NMS Plan states that the Operating
Committee, when establishing fees to be payable by Industry Members,
will establish ``at least five and no more than nine tiers of fixed
fees, based on message traffic.'' CAT LLC proposes to delete each of
these references to tiers from the CAT NMS Plan.
d. No Fixed Fees
    As discussed above, CAT LLC proposes to replace the language in
Sections 11.3(a) and (b) of the CAT NMS Plan with language implementing
the Funding Proposal. These proposed changes also would remove the
references to ``fixed fees'' in Sections 11.3(a), 11.3(a)(i),
11.3(a)(ii) and 11.3(b) and replaced them with references to ``fees.''
Under the Funding Proposal, the CAT fees to be paid by Participants,
CEBBs and CEBSs will vary in accordance with their executed equivalent
share volume of transactions in Eligible Securities, although the Fee
Rate will be fixed for a relevant period. Therefore, the concept of a
fixed fee--that is, a fee that does not vary depending on
circumstances--is not relevant under the Funding Proposal.
7. Billing and Collection of CAT Fees
    Consistent with Section 11.1(d) of the CAT NMS Plan, CAT LLC will
adopt policies, procedures and practices regarding the billing and
collection of fees. In addition, pursuant to Section 11.4 of the CAT
NMS Plan, CAT LLC will establish a system for the collection of CAT
fees from Participants and Industry Members. As set forth in Section
11.4 of the CAT NMS Plan, each Participant would be required to pay its
CAT fees authorized under the CAT NMS Plan as required by Section
3.7(b) of the CAT NMS Plan.\55\ Section 3.7(b) of the CAT NMS Plan
provides the following:
---------------------------------------------------------------------------

    \55\ Participants and CAT Executing Brokers would be responsible
for a fee each month in which they are a CAT Reporter. If a
Participant or CAT Executing Broker ceases to the meet the
definition of a CAT Reporter during a month, the Participant or CAT
Executing Broker would still be responsible for CAT fees associated
with its transactions during that month.

    Each Participant shall pay all fees or other amounts required to
be paid under this Agreement within thirty (30) days after receipt
of an invoice or other notice indicating payment is due (unless a
longer payment period is otherwise indicated) (the ``Payment
Date''). The Participant shall pay interest on the outstanding
balance from the Payment Date until such fee or amount is paid at a
per annum rate equal to the lesser of: (i) the Prime Rate plus 300
basis points; or (ii) the maximum rate permitted by applicable law.
If any such remaining outstanding balance is not paid within thirty
(30) days after the Payment Date, the Participants shall file an
amendment to this Agreement requesting the termination of the
participation in the Company of such Participant, and its right to
any Company Interest, with the SEC. Such amendment shall be
effective only when it is approved by the SEC in accordance with SEC
---------------------------------------------------------------------------
Rule 608 or otherwise becomes effective pursuant to SEC Rule 608.

    Section 11.4 of the CAT NMS Plan also addresses the payment of CAT
fees by Industry Members. Section 11.4 of the CAT NMS Plan states:

    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). If
an Industry Member fails to pay any such fee when due (as determined
in accordance with the preceding sentence), such Industry Member
shall pay interest on the outstanding balance from such due date
until such fee is paid at a per annum rate equal to the lesser of:
(a) the Prime Rate plus 300 basis points; or (b) the maximum rate
permitted by applicable law.

8. Illustrative Example of the Funding Proposal
    CAT LLC has prepared an example of how a Historical CAT Assessment
would be calculated pursuant to the Funding Proposal for illustrative
purposes only. The illustrative example is set forth in Exhibit C to
this filing. Note that the calculation of any actual Historical CAT
Assessment for Historical CAT Costs would differ from this example in
various ways, as described in more detail in Exhibit C.
9. Advantages of and Support for the Funding Proposal
    CAT LLC proposes to adopt the Funding Proposal as it provides a
variety of advantages over the Original Funding Model. CAT LLC
discusses these advantages in this section of the filing.
a. Comparable to Existing Fee Precedent
    The Funding Proposal would operate in a manner similar to other
funding models employed by the SEC and the Participants, including the
SEC's Section 31 fees, FINRA's trading activity fee (``FINRA TAF'') and
the options regulatory fee (``ORF'') utilized by options exchanges. The
SEC previously has determined that the Participants' sales value fees
related to Section 31, the FINRA TAF and the ORF are consistent with
the Exchange Act.
i. Section 31 Fees