[Federal Register Volume 82, Number 53 (Tuesday, March 21, 2017)]
[Notices]
[Pages 14563-14579]
[FR Doc No: 2017-05504]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80255; File No. SR-FINRA-2017-003]

Self-Regulatory Organizations; Financial Industry Regulatory
Authority, Inc.; Order Approving Proposed Rule Change To Adopt the
FINRA Rule 6800 Series (Consolidated Audit Trail Compliance Rule)

March 15, 2017.

I. Introduction

    On January 31, 2017, Financial Industry Regulatory Authority, Inc.
(``FINRA'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to adopt the FINRA Rule 6800 Series, to implement
the compliance rules regarding the National Market System Plan
Governing the Consolidated Audit Trail (the ``CAT NMS Plan'' or
``Plan'').\3\ The proposed rule change was published for comment in the
Federal Register on February 9, 2017.\4\ The Commission received 3
comments in response to the proposed rule change.\5\ On March 15, the
Participants \6\ submitted a response to the comment letters.\7\ This
order approves the proposed rule change.\8\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ FINRA originally filed this proposed rule change on January
17, 2017 under File No. SR-FINRA-2017-002; FINRA subsequently
withdrew that filing on January 30, 2017 and filed this proposed
rule change.
    \4\ Securities Exchange Act Release No. 79961 (February 3,
2017), 82 FR 10073 (``Notice'').
    \5\ See letter from William H. Herbert, Managing Director,
Financial Information Forum, dated March 1, 2017 (``FIF Letter'');
letter from Bonnie Wachtel, Wachtel & Co Inc., dated March 2, 2017
(``Wachtel Letter''); and letter from Manisha Kimmel, Chief
Regulatory Officer, Wealth Management, Thomson Reuters, dated March
2, 2017 (``Thomson Reuters Letter'').
    \6\ See infra Section II.
    \7\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated March 15, 2017 (``Participants' Response
Letter''). The Participants note that because all the Participants
filed rules similar to FINRA's proposed 6800 Series, the
Participants' Response Letter is submitted on behalf of all
Participants and applicable to all the Participants' proposed rules
implementing the CAT NMS Plan (``Participant Proposed Compliance
Rules''). Participants' Response Letter at 1.
    \8\ The Commission notes that for purposes of this Order, unless
otherwise specified, capitalized terms used are defined as set forth
in the Notice or in the CAT NMS Plan.
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II. Background

    On September 30, 2014, Bats BYX Exchange, Inc.; Bats BZX Exchange,
Inc.; Bats EDGA Exchange, Inc.; Bats EDGX Exchange, Inc.; BOX Options
Exchange LLC; C2 Options Exchange, Incorporated; Chicago Board Options
Exchange, Incorporated; Chicago Stock Exchange, Inc.; FINRA;
International Securities Exchange, LLC; Investors' Exchange LLC; ISE
Gemini, LLC; ISE Mercury, LLC; Miami International Securities Exchange
LLC; MIAX PEARL, LLC; NASDAQ BX, Inc.; NASDAQ PHLX LLC; The NASDAQ
Stock Market LLC; National Stock Exchange, Inc.; New York Stock
Exchange LLC; NYSE MKT LLC; and NYSE Arca, Inc. (collectively, the
``Participants'') filed with the Commission, pursuant to Section 11A of
the Exchange Act \9\ and Rule 608 of Regulation NMS thereunder,\10\ the
CAT NMS Plan.\11\ The

Participants filed the Plan to comply with Rule 613 of Regulation NMS
under the Exchange Act.\12\ The Plan was published for comment in the
Federal Register on May 17, 2016,\13\ and approved by the Commission,
as modified, on November 15, 2016.\14\
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    \9\ 15 U.S.C. 78k-1.
    \10\ 17 CFR 242.608.
    \11\ See Letter from the Participants to Brent J. Fields,
Secretary, Commission, dated September 30, 2014; and Letter from
Participants to Brent J. Fields, Secretary, Commission, dated
February 27, 2015. On December 24, 2015, the Participants submitted
an amendment to the CAT NMS Plan. See Letter from Participants to
Brent J. Fields, Secretary, Commission, dated December 23, 2015. The
CAT NMS Plan was approved by the Commission, with limited changes
made by the Commission, on November 15, 2016. See infra note 14.
    \12\ 17 CFR 242.613.
    \13\ Securities Exchange Act Release No. 77724 (April 27, 2016),
81 FR 30614 (May 17, 2016).
    \14\ Securities Exchange Act Release No. 79318 (November 15,
2016), 81 FR 84696 (November 23, 2016) (``Approval Order'').
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    The Plan is designed to create, implement and maintain a
consolidated audit trail (``CAT'') that would capture customer and
order event information for orders in NMS Securities and OTC Equity
Securities, across all markets, from the time of order inception
through routing, cancellation, modification, or execution in a single
consolidated data source. Each Participant is required to enforce
compliance by its Industry Members, as applicable, with the provisions
of the Plan, by adopting a Compliance Rule applicable to their Industry
Members.\15\ FINRA's proposed Rule 6800 Series sets forth FINRA's
``Audit Trail Compliance Rule'' implementing provisions of the CAT NMS
Plan that are applicable to FINRA members.\16\
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    \15\ See 17 CFR 242.613(g)(1).
    \16\ The Commission notes that the CAT NMS Plan defines an
``Industry Member'' as a member of a national securities exchange or
a member of a national securities association. CAT NMS Plan, supra
note 11 at Section 1.1. Because FINRA's proposed Rule 6800 Series
implements the CAT NMS Plan, the term ``Industry Member'' is used
throughout Series. For purposes of proposed Rule 6800 Series, the
term ``Industry Member'' means a FINRA member.
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III. Description of the Proposed Rule Change

    The proposed Rule 6800 Series includes twelve rules covering the
following areas: (1) Definitions; (2) clock synchronization; (3)
Industry Member Data reporting; (4) Customer information reporting; (5)
Industry Member information reporting; (6) time stamps; (7) clock
synchronization rule violations; (8) connectivity and data
transmission; (9) development and testing; (10) recordkeeping; (11)
timely, accurate and complete data; and (12) compliance dates.

A. Definitions (Rule 6810)

    Proposed Rule 6810 sets forth the definitions for the terms used in
the proposed Rule 6800 Series. Each of the defined terms in proposed
Rule 6810 is discussed below.
1. Account Effective Date
(a) Customer Information Approach
    Rule 613 of Regulation NMS requires that certain data elements be
reported to the CAT to enable regulators to identify Customers
associated with orders. FINRA notes that Rule 613(c)(7)(i)(A) requires
an Industry Member to report the ``Customer-ID'' for each Customer for
the original receipt or origination of an order,\17\ and that
``Customer-ID'' is defined in Rule 613(j)(5) to mean ``with respect to
a customer, a code that uniquely and consistently identifies such
customer for purposes of providing data to the Central Repository.''
\18\ Rule 613(c)(8) requires Industry Members to use the same Customer-
ID for each Customer.\19\ FINRA notes that the Commission granted the
Participants exemptive relief to permit the use of an alternative
approach to the requirement that an Industry Member report a Customer-
ID for every Customer upon original receipt or origination.\20\ The
alternative approach is called the ``Customer Information Approach.''
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    \17\ 17 CFR 242.613(c)(7)(i)(A).
    \18\ 17 CFR 242.613(j)(5).
    \19\ 17 CFR 242.613(c)(8).
    \20\ See Securities Exchange Act Release No. 77265 (March 1,
2016), 81 FR 11856 (March 7, 2016) (``Exemption Order''). See also
Letter from Participants to Brent J. Fields, Secretary, Commission,
dated January 30, 2015 (``Exemptive Request Letter'').
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    FINRA states that under the Customer Information Approach, the CAT
NMS Plan requires each Industry Member to assign a unique Firm
Designated ID to each Customer, and that for the Firm Designated ID,
Industry Members are permitted to use an account number or any other
identifier defined by the firm, provided each identifier is unique
across the firm for each business date (i.e., a single firm may not
have multiple separate customers with the same identifier on any given
date).\21\ Prior to their commencement of reporting to the CAT,
Industry Members must submit an initial set of Customer information to
the Central Repository, including the Firm Designated ID, Customer
Identifying Information and Customer Account Information (which may
include, as applicable, the Customer's name, address, date of birth,
individual tax payer identifier number (``ITIN'')/social security
number (``SSN''), individual's role in the account (e.g., primary
holder, joint holder, guardian, trustee, person with power of attorney)
and Legal Entity Identifier (``LEI'') and/or Large Trader ID
(``LTID'')). This process is referred to as the ``customer definition
process.''
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    \21\ See infra Section III.A.17 for a discussion of the
application of the term ``Firm Designated ID.''
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    FINRA noted that in accordance with the Customer Information
Approach, Industry Members are required to report only the Firm
Designated ID for each new order submitted to the Central Repository,
rather than the ``Customer-ID'' with individual order events. Within
the Central Repository, each Customer will be uniquely identified by
identifiers or a combination of identifiers such as ITIN/SSN, date of
birth, and as applicable, LEI and LTID. The Plan Processor will be
required to use these unique identifiers to map orders to specific
Customers across all Industry Members and Participants. To ensure
information identifying a Customer is up to date, Industry Members will
be required to submit to the Central Repository daily and periodic
updates for reactivated accounts, newly established accounts, and
revised Firm Designated IDs or associated reportable Customer
information.
(b) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry
Members will be required to report ``Customer Account Information'' to
the Central Repository. ``Customer Account Information'' is defined in
Rule 613(j)(4) to ``include, but not be limited to, account number,
account type, customer type, date account opened, and large trader
identifier (if applicable).'' \22\ Therefore, when reporting Customer
Account Information, an Industry Member is required to report the date
an account was opened. FINRA notes that the Participants requested and
received from the Commission an exemption to allow an ``Account
Effective Date'' to be reported in lieu of an account open date in
certain limited circumstances.\23\ The definition of ``Account
Effective Date'' as set forth in paragraph (a) of proposed Rule 6810
describes those limited circumstances in which an Industry Member may
report an ``Account Effective Date'' rather than the account open date.
FINRA states that the proposed definition is the same as the definition
of ``Account Effective Date'' set forth in Section 1.1 of the CAT NMS
Plan, provided, however, that specific

dates have replaced the descriptions of those dates set forth in
Section 1.1 of the Plan.
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    \22\ 17 CFR 242.613(j)(4).
    \23\ On September 2, 2015, the Participants filed a supplement
to the Exemptive Request Letter. See Letter from the Participants to
Brent J. Fields, Secretary, Commission, dated September 2, 2015.
This supplement to the Exemptive Request Letter further addressed
the use of an ``effective date'' in lieu of a ``date account
opened.''
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    Specifically, paragraph (a)(1) defines ``Account Effective Date''
to mean, with regard to those circumstances in which an Industry Member
has established a trading relationship with an institution but has not
established an account with that institution: (1) When the trading
relationship was established prior to November 15, 2018 for Industry
Members other than Small Industry Members, or prior to November 15,
2019 for Small Industry Members, either (a) the date the relationship
identifier was established within the Industry Member; (b) the date
when trading began (i.e., the date the first order was received) using
the relevant relationship identifier; or (c) if both dates are
available, the earlier date will be used to the extent that the dates
differ; or (2) when the trading relationship was established on or
after November 15, 2018 for Industry Members other than Small Industry
Members, or on or after November 15, 2019 for Small Industry Members,
the date the Industry Member established the relationship identifier,
which would be no later than the date the first order was received.
    Paragraph (a)(2) of proposed Rule 6810 states that an ``Account
Effective Date'' means, where an Industry Member changes back office
providers or clearing firms prior to November 15, 2018 for Industry
Members other than Small Industry Members, or prior to November 15,
2019 for Small Industry Members, the date an account was established at
the relevant Industry Member, either directly or via transfer.
    Paragraph (a)(3) of proposed Rule 6810 states that an ``Account
Effective Date'' means, where an Industry Member acquires another
Industry Member prior to November 15, 2018 for Industry Members other
than Small Industry Members, or prior to November 15, 2019 for Small
Industry Members, the date an account was established at the relevant
Industry Member, either directly or via transfer.
    Paragraph (a)(4) of proposed Rule 6810 states that ``Account
Effective Date'' means, where there are multiple dates associated with
an account established prior to November 15, 2018 for Industry Members
other than Small Industry Members, or prior to November 15, 2019 for
Small Industry Members, the earliest available date.
    Paragraph (a)(5) of proposed Rule 6810 states that an ``Account
Effective Date'' means, with regard to Industry Member proprietary
accounts established prior to November 15, 2018 for Industry Members
other than Small Industry Members, or prior to November 15, 2019 for
Small Industry Members: (1) The date established for the account in the
Industry Member or in a system of the Industry Member or (2) the date
when proprietary trading began in the account (i.e., the date on which
the first orders were submitted from the account). In addition,
proposed Rule 6810(a)(5) states that with regard to proposed Rule
6810(a)(2)-(5), the Account Effective Date will be no later than the
date trading occurs at the Industry Member or in the Industry Member's
system.
2. Active Accounts
    Under the Customer Information Approach, Industry Members are
required to report Customer Identifying Information and Customer
Account Information for only those accounts that are active.
Accordingly, paragraph (b) of proposed Rule 6810 defines a ``Active
Accounts'' as an account that has had activity in Eligible Securities
within the last six months. FINRA states that this is the same
definition as set forth in Section 1.1 of the CAT NMS Plan.
3. Allocation Report
(a) Allocation Report Approach
    Rule 613(c)(7)(vi)(A) of Regulation NMS requires each Industry
Member to record and report to the Central Repository ``the account
number for any subaccounts to which the execution is allocated (in
whole or in part).'' \24\ FINRA noted that the Participants requested
and received from the Commission exemptive relief from Rule 613 for an
alternative to this approach (``Allocation Report Approach'').\25\ The
Allocation Report Approach permits Industry Members to record and
report to the Central Repository an Allocation Report that includes,
among other things, the Firm Designated ID for any account(s) to which
executed shares are allocated when an execution is allocated in whole
or part in lieu of requiring the reporting of the account number for
any subaccount to which an execution is allocated, as is required by
Rule 613.\26\ Under Rule 613, regulators would be able to link the
subaccount to which an allocation was made to a specific order. In
contrast, under the Allocation Report Approach, regulators would only
be able to link an allocation to the account to which it was made, and
not to a specific order.
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    \24\ 17 CFR 242.613(c)(7)(vi)(A).
    \25\ On April 3, 2015, the Participants filed a supplement
related to their Exemptive Request Letter. See Letter from Robert
Colby, FINRA, on behalf of the Participants, to Brent J. Fields,
Secretary, Commission, dated April 3, 2015. This supplement provided
examples of how the proposed relief related to allocations would
operate.
    \26\ See Exemptive Request Letter, supra note 20, at 26-27;
Exemption Order, supra note 20.
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(b) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, paragraph
(c) of proposed Rule 6810 defines an ``Allocation Report.''
Specifically, an ``Allocation Report'' means a report made to the
Central Repository by an Industry Member that identifies the Firm
Designated ID for any account(s), including subaccount(s), to which
executed shares are allocated and provides the security that has been
allocated, the identifier of the firm reporting the allocation, the
price per share of shares allocated, the side of shares allocated, the
number of shares allocated to each account, and the time of the
allocation; provided, for the avoidance of doubt, any such Allocation
Report shall not be required to be linked to particular orders or
executions. FINRA states that this is the same definition as set forth
in Section 1.1 of the CAT NMS Plan.
4. Business Clock
    To create the required audit trail, Industry Members are required
to record the date and time of various Reportable Events to the Central
Repository. Industry Members will use ``Business Clocks'' to record
such dates and times. Accordingly, paragraph (d) of proposed Rule 6810
defines the term ``Business Clock'' as a clock used to record the date
and time of any Reportable Event required to be reported under this
Rule 6800 Series. FINRA states that this is the same definition as set
forth in Section 1.1 of the CAT NMS Plan, except FINRA proposes to
replace the phrase ``under SEC Rule 613'' at the end of the definition
in Section 1.1 of the Plan with the phrase ``under this Rule Series.''
FINRA represents that this change is intended to recognize that the
Industry Members' obligations with regard to the CAT are set forth in
this Rule 6800 Series.
5. CAT
    Paragraph (e) of proposed Rule 6810 defines the term ``CAT'' to
mean the consolidated audit trail contemplated by Rule 613. FINRA
states that this is the same definition as set forth in Section 1.1 of
the CAT NMS Plan.
6. CAT NMS Plan
    Paragraph (f) of proposed Rule 6810 defines the term ``CAT NMS
Plan'' to mean the National Market System Plan Governing the
Consolidated Audit Trail, as amended from time to time.

7. CAT-Order-ID
(a) Daisy Chain Approach
    FINRA states that under the CAT NMS Plan, a ``daisy chain
approach'' would be used to link and reconstruct the complete lifecycle
of each Reportable Event in CAT. According to this approach, Industry
Members would assign their own identifiers to each order event. Within
the Central Repository, the Plan Processor would replace the identifier
provided by the Industry Member for each Reportable Event with a single
identifier, called the CAT Order-ID, for all order events pertaining to
the same order. This CAT Order-ID would be used to link the Reportable
Events related to the same order.
(b) Definition of CAT-Order-ID
    To implement a daisy chain approach, FINRA proposes to define the
term ``CAT-Order-ID'' to mean a unique order identifier or series of
unique order identifiers that allows the Central Repository to
efficiently and accurately link all Reportable Events for an order, and
all orders that result from the aggregation or disaggregation of such
order. FINRA states that this is the same definition as set forth in
Rule 613(j)(1), and Section 1.1 of the CAT NMS Plan defines ``CAT-
Order-ID'' by reference to Rule 613(j)(1) of Regulation NMS.\27\
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    \27\ See 17 CFR 242.613(j)(1).
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8. CAT Reporting Agent
    The CAT NMS Plan permits an Industry Member to use a third party,
such as a vendor, to report the required data to the Central Repository
on behalf of the Industry Member.\28\ FINRA states that such a third
party, referred to in this proposed Rule 6800 Series as a ``CAT
Reporting Agent,'' would be one type of a Data Submitter,\29\ as that
term is used in the CAT NMS Plan. Therefore, proposed Rule 6810 defines
the term ``CAT Reporting Agent'' to mean a Data Submitter that is a
third party that enters into an agreement with an Industry Member
pursuant to which the CAT Reporting Agent agrees to fulfill such
Industry Member's obligations under this Rule 6800 Series.\30\
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    \28\ See CAT NMS Plan, supra note 11 at Appendix C, Section
A.1(a).
    \29\ See infra Section III.A.14 defining ``Data Submitter.''
    \30\ FINRA also notes that this definition is based on FINRA's
definition of a ``Reporting Agent'' as set forth in FINRA's Order
Audit Trail System (``OATS'') rules. Specifically, Rule 7410(n)
defines a ``Reporting Agent'' as a third party that enters into any
agreement with a member pursuant to which the Reporting Agent agrees
to fulfill such FINRA member's reporting obligations under Rule
7450. FINRA represents that the Reporting Agent for OATS fulfills a
similar role to the CAT Reporting Agent.
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9. Central Repository
    Paragraph (i) of proposed Rule 6810 defines the term ``Central
Repository'' to mean the repository responsible for the receipt,
consolidation, and retention of all information reported to the CAT
pursuant to Rule 613 of Regulation NMS and the CAT NMS Plan. FINRA
states that this is the same definition as set forth in Section 1.1 of
the CAT NMS Plan, except FINRA uses the phrase ``CAT NMS Plan'' in
place of the phrase ``this Agreement.''
10. Compliance Threshold
    Proposed Rule 6810 states that the term ``Compliance Threshold''
has the meaning set forth in proposed Rule 6893(d), which proposed Rule
is described and discussed below. FINRA states that this definition has
the same substantive meaning as the definition set forth in Section 1.1
of the CAT NMS Plan.
11. Customer
    Industry Members are required to submit to the Central Repository
certain information related to their Customers, including Customer
Identifying Information and Customer Account Information, as well as
data related to their Customer's Reportable Events. Accordingly,
paragraph (k) of proposed Rule 6810 proposes to define the term
``Customer.'' Specifically, the term ``Customer'' is defined to mean:
(1) the account holder(s) of the account at an Industry Member
originating the order; and (2) any person from whom the Industry Member
is authorized to accept trading instructions for such account, if
different from the account holder(s). FINRA states that this is the
same definition as set forth in Rule 613(j)(3), except FINRA proposes
to replace the references to a registered broker-dealer or broker-
dealer with a reference to an Industry Member for consistency of terms
used in the proposed Rule 6800 Series.\31\ FINRA also notes that
Section 1.1 of the CAT NMS Plan defines ``Customer'' by reference to
Rule 613(j)(3).
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    \31\ 17 CFR 242.613(j)(3).
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12. Customer Account Information
    As discussed above, under the Customer Information Approach,
Industry Members are required to report Customer Account Information to
the Central Repository as part of the customer definition process.
Accordingly, FINRA proposes to define the term ``Customer Account
Information'' to clarify what customer information would need to be
reported to the Central Repository.
    Paragraph (l) of proposed Rule 6810 defines the term ``Customer
Account Information'' to include, in part, account number, account
type, customer type, date account opened, and large trader identifier
(if applicable). Proposed Rule 6810(l), however, provides an
alternative definition of ``Customer Account Information'' in two
limited circumstances. First, in those circumstances in which an
Industry Member has established a trading relationship with an
institution but has not established an account with that institution,
the Industry Member will: (1) Provide the Account Effective Date in
lieu of the ``date account opened''; (2) provide the relationship
identifier in lieu of the ``account number''; and (3) identify the
``account type'' as a ``relationship.'' Second, in those circumstances
in which the relevant account was established prior to November 15,
2018 for Industry Members other than Small Industry Members, or prior
to November 15, 2019 for Small Industry Members, and no ``date account
opened'' is available for the account, the Industry Member will provide
the Account Effective Date in the following circumstances: (1) Where an
Industry Member changes back office providers or clearing firms and the
date account opened is changed to the date the account was opened on
the new back office/clearing firm system; (2) where an Industry Member
acquires another Industry Member and the date account opened is changed
to the date the account was opened on the post-merger back office/
clearing firm system; (3) where there are multiple dates associated
with an account in an Industry Member's system, and the parameters of
each date are determined by the individual Industry Member; and (4)
where the relevant account is an Industry Member proprietary account.
The proposed definition is the same as the definition of ``Customer
Account Information'' set forth in Section 1.1 of the CAT NMS Plan,
provided, however, that specific dates have replaced the descriptions
of those dates set forth in Section 1.1 of the Plan.
13. Customer Identifying Information
    As discussed above, under the Customer Information Approach,
Industry Members are required to report Customer Identifying
Information to the Central Repository as part of the customer
definition process. Accordingly, FINRA proposes to define the term
``Customer Account Information'' to include, but not be

limited to: Name, address, date of birth, ITIN/SSN, individual's role
in the account (e.g., primary holder, joint holder, guardian, trustee,
person with the power of attorney). With respect to legal entities,
``Customer Identifying Information'' includes, but is not limited to,
name, address, EIN/LEI or other comparable common entity identifier, if
applicable. The definition further notes that an Industry Member that
has an LEI for a Customer must submit the Customer's LEI in addition to
other information of sufficient detail to identify the Customer. FINRA
states that this is the same definition as set forth in Section 1.1 of
the CAT NMS Plan.
14. Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any
person that reports data to the Central Repository.\32\ Such Data
Submitters may include those entities that are required to submit data
to the Central Repository (e.g., national securities exchanges,
national securities associations and Industry Members), third-parties
that may submit data to the CAT on behalf of CAT Reporters (i.e., CAT
Reporting Agents), and outside parties that are not required to submit
data to the CAT but from which the CAT may receive data (e.g.,
securities information processors (``SIPs'')). To include this term in
the proposed Rule 6800 Series, FINRA proposes to define ``Data
Submitter'' to mean any person that reports data to the Central
Repository, including national securities exchanges, national
securities associations, broker-dealers, the SIPs for the CQS, CTA, UTP
and Plan for Reporting of Consolidated Options Last Sale Reports and
Quotation Information (``OPRA'') Plans, and certain other vendors or
third parties that may submit data to the Central Repository on behalf
of Industry Members.
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    \32\ See CAT NMS Plan, supra note 11 at Appendix C, Section
A.1(a).
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15. Eligible Security
    The reporting requirements of the proposed Rule 6800 Series only
apply to Reportable Events in Eligible Securities. Currently, an
Eligible Security includes NMS Securities and OTC Equity Securities.
Accordingly, paragraph (o) of proposed Rule 6810 defines the term
``Eligible Security'' to include: (1) All NMS Securities; and (2) all
OTC Equity Securities. FINRA states that this is the same definition as
set forth in Section 1.1 of the CAT NMS Plan.
16. Error Rate
(a) Generally
    The CAT NMS Plan requires the Plan Processor to: (1) Measure and
report errors every business day; (2) provide Industry Members daily
statistics and error reports as they become available, including a
description of such errors; (3) provide monthly reports to Industry
Members that detail an Industry Member's performance and comparison
statistics; (4) define educational and support programs for Industry
Members to minimize Error Rates; and (5) identify, daily, all Industry
Members exceeding the maximum allowable Error Rate. To timely correct
data-submitted errors to the Central Repository, the CAT NMS Plan
requires that the Central Repository receive and process error
corrections at all times. Further, the CAT NMS Plan requires that
Industry Members be able to submit error corrections to the Central
Repository through a web-interface or via bulk uploads or file
submissions, and that the Plan Processor, subject to the Operating
Committee's approval, support the bulk replacement of records and the
reprocessing of such records. The Participants, furthermore, require
that the Plan Processor identify Industry Member data submission errors
based on the Plan Processor's validation processes.\33\
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    \33\ Approval Order, supra note 14 at 84718.
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(b) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the
Error Rate, FINRA proposes to define the term ``Error Rate'' to mean
the percentage of Reportable Events collected by the Central Repository
in which the data reported does not fully and accurately reflect the
order event that occurred in the market. FINRA states that this is the
same definition as set forth in Rule 613(j)(6), and Section 1.1 of the
CAT NMS Plan defines ``Error Rate'' by reference to Rule 613(j)(6).\34\
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    \34\ 17 CFR 242.613(j)(6).
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(c) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee would set the
maximum Error Rate that the Central Repository would tolerate from an
Industry Member reporting data to the Central Repository.\35\ The
Operating Committee would review and reset the maximum Error Rate, at
least annually.\36\ If an Industry Member reports CAT data to the
Central Repository with errors such that their error percentage exceeds
the maximum Error Rate, then such Industry Member would not be in
compliance with the CAT NMS Plan or Rule 613.\37\ FINRA states that,
according to the CAT NMS Plan, FINRA or the SEC may take appropriate
action against an Industry Member for failing to comply with its CAT
reporting obligations.\38\ The CAT NMS Plan sets the initial Error Rate
at 5%.\39\ FINRA stated that it is anticipated that the maximum Error
Rate will be reviewed and lowered by the Operating Committee once
Industry Members begin to report to the Central Repository.\40\
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    \35\ CAT NMS Plan, supra note 11 at Section 6.5(d)(i).
    \36\ CAT NMS Plan, supra note 11 at Appendix C, Section A.3(b).
    \37\ CAT NMS Plan, supra note 11 at Appendix C, Section A.3(b);
17 CFR 242.613(g)-(h).
    \38\ CAT NMS Plan, supra note 11 at Appendix C, Section A.3(b).
    \39\ CAT NMS Plan, supra note 11 at Section 6.5(d)(i).
    \40\ CAT NMS Plan, supra note 11 at Appendix C, Section A.3(b).
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17. Firm Designated ID
    As discussed above, under the Customer Information Approach, the
CAT NMS Plan requires each Industry Member to utilize a unique Firm
Designated ID. Industry Members will be permitted to use as the Firm
Designated ID an account number or any other identifier defined by the
firm, provided each identifier is unique across the firm for each
business date. Industry Members will be required to report only the
Firm Designated ID for each new order submitted to the Central
Repository, rather than the ``Customer-ID'' with individual order
events. Accordingly, FINRA proposes to define the term ``Firm
Designated ID'' in proposed Rule 6810 to mean a unique identifier for
each trading account designated by Industry Members for purposes of
providing data to the Central Repository, where each such identifier is
unique among all identifiers from any given Industry Member for each
business date. FINRA states that this is the same definition as set
forth in Section 1.1 of the CAT NMS Plan. Industry Members will be
permitted to use an account number or any other identifier defined by
the firm, provided each identifier is unique across the firm for each
business date (i.e., a single firm may not have multiple separate
customers with the same identifier on any given date).\41\
---------------------------------------------------------------------------

    \41\ See supra Section IV for a discussion of the application of
the term ``Firm Designated ID.''
---------------------------------------------------------------------------

18. Industry Member
    Proposed Rule 6810 defines the term ``Industry Member'' to mean ``a
member of a national securities exchange or a

member of a national securities association that is required to record
and report information pursuant to the CAT NMS Plan and this Rule 6800
Series.'' FINRA states that this is the same definition as set forth in
Section 1.1 of the CAT NMS Plan; however, FINRA proposes to add the
phrase ``that is required to record and report information pursuant to
the CAT NMS Plan and this Rule 6800 Series'' to clarify that FINRA
members that do not handle orders in Eligible Securities are not
subject to any of the rules in the proposed Rule 6800 Series.
19. Industry Member Data
    Proposed Rule 6810 states that the term ``Industry Member Data''
has the meaning set forth in Rule 6830(a)(2). FINRA states that this
definition has the same substantive meaning as the definition set forth
in Section 1.1 of the CAT NMS Plan.
20. Initial Plan Processor
    Proposed Rule 6810 defines the term ``Initial Plan Processor'' to
mean the first Plan Processor selected by the Operating Committee in
accordance with Rule 613, Section 6.1 of the CAT NMS Plan and the
National Market System Plan Governing the Process for Selecting a Plan
Processor and Developing a Plan for the Consolidated Audit Trail.\42\
FINRA states that this is the same definition as set forth in Section
1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \42\ See Securities Exchange Act Release Nos. 70892 (November
15, 2013), 78 FR 69910 (November 21, 2013) (Selection Plan Notice);
75192 (June 17, 2015), 80 FR 36028 (June 23, 2015) (Order Approving
Amendment No. 1 to the Selection Plan); 75980 (September 24, 2015),
80 FR 58796 (September 30, 2015) (Order Approving Amendment No. 2 to
the Selection Plan); 77917 (May 25, 2016), 81 FR 35072 (June 1,
2016) (Notice of Filing and Immediate Effectiveness of Amendment No.
3 to the Selection Plan); 78477 (August 4, 2016), 81 FR 52917
(August 10, 2016) (Notice of Filing and Immediate Effectiveness of
Amendment No. 4 to the Selection Plan); see also Securities Exchange
Act Release Nos. 71596 (February 21, 2014), 79 FR 11152 (February
27, 2014) (Selection Plan Approval Order); 74223 (February 6, 2015),
80 FR 7654 (February 11, 2015) (Notice of Amendment No. 1 to the
Selection Plan); 75193 (June 17, 2015), 80 FR 36006 (June 23, 2015)
(Notice of Amendment No. 2 to the Selection Plan).
---------------------------------------------------------------------------

21. Listed Option or Option
    FINRA represented that the reporting requirements of the CAT NMS
Plan and proposed Rule 6800 Series apply to Eligible Securities, which
includes NMS Securities, which, in turn, includes Listed Options.
Certain requirements of proposed Rule 6800 Series apply specifically to
Listed Options. Accordingly, ``Listed Option'' or ``Option'' has the
meaning set forth in Rule 600(b)(35) of Regulation NMS.\43\ Rule
600(b)(35) of Regulation NMS defines a listed option as ``any option
traded on a registered national securities exchange or automated
facility of a national securities association.'' FINRA states that the
proposed definition of ``Listed Option'' is the same definition as the
definition set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \43\ 17 CFR 242.600(b)(35).
---------------------------------------------------------------------------

22. Manual Order Event
(a) Manual Order Event Approach
    The CAT NMS Plan sets forth clock synchronization and timestamp
requirements for Industry Members which reflect exemptions for Manual
Order Events granted by the Commission.\44\ Specifically, the Plan
requires Industry Members to record and report the time of each
Reportable Event using timestamps reflecting current industry standards
(which must be at least to the millisecond) or, if an Industry Member's
order handling or execution system uses timestamps in increments finer
than milliseconds, such finer increments, when reporting to the Central
Repository. For Manual Order Events, however, the Plan provides that
such events must be recorded in increments up to and including one
second, provided that Industry Members record and report the time the
event is captured electronically in an order handling and execution
system (``Electronic Capture Time'') in milliseconds. In addition,
Industry Members are required to synchronize their respective Business
Clocks (other than such Business Clocks used solely for Manual Order
Events) at a minimum to within 50 milliseconds of the time maintained
by the National Institute of Standards and Technology (``NIST''), and
maintain such synchronization. Each Industry Member is required to
synchronize its Business Clocks used solely for Manual Order Events,
however, at a minimum to within one second of the time maintained by
the NIST.
---------------------------------------------------------------------------

    \44\ See Exemption Order, supra note 20.
---------------------------------------------------------------------------

(b) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock
synchronization and time stamp purposes, FINRA proposes to define the
term ``Manual Order Event'' in proposed Rule 6810. Specifically, the
term ``Manual Order Event'' means a non-electronic communication of
order-related information for which Industry Members must record and
report the time of the event. FINRA states that this is the same
definition as set forth in Section 1.1 of the CAT NMS Plan.
23. Material Terms of the Order
    Proposed Rule 6830 requires Industry Members to record and report
to the Central Repository Material Terms of the Order with certain
Reportable Events (e.g., for the original receipt or origination of an
order, for the routing of an order). Accordingly, FINRA proposes to
define the term ``Material Terms of the Order'' to include: The NMS
Security or OTC Equity Security symbol; security type; price (if
applicable); size (displayed and non-displayed); side (buy/sell); order
type; if a sell order, whether the order is long, short, short exempt;
open/close indicator (except on transactions in equities); time in
force (if applicable); if the order is for a Listed Option, option type
(put/call), option symbol or root symbol, underlying symbol, strike
price, expiration date, and open/close (except on market maker
quotations); and any special handling instructions. FINRA states that
this is the same definition as set forth in Section 1.1 of the CAT NMS
Plan.
24. NMS Security
    NMS Securities are one of the types of Eligible Securities for the
CAT. Therefore, FINRA proposes to define the term ``NMS Security'' to
mean 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. FINRA states that this is
the same definition as set forth in Section 1.1 of the CAT NMS Plan.
25. NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish
different Trading Days for NMS Stocks, as defined in Rule 600(b)(47) of
Regulation NMS,\45\ Listed Options, OTC Equity Securities, and any
other securities that are included as Eligible Securities from time to
time. Accordingly, FINRA proposes to define the term ``NMS Stock'' to
mean any NMS Security other than an option. FINRA states that this is
the same definition as set forth in Rule 600(b)(47) of Regulation
NMS.\46\
---------------------------------------------------------------------------

    \45\ 17 CFR 242.600(b)(47).
    \46\ 17 CFR 242.600(b)(47).
---------------------------------------------------------------------------

26. Operating Committee
    Proposed Rule 6810 defines the term ``Operating Committee'' to mean
the governing body of the CAT NMS, LLC

designated as such and described in Article IV of the CAT NMS Plan.
FINRA states that this is the same definition as set forth in Section
1.1 of the CAT NMS Plan, except FINRA proposes to use the phrase ``CAT
NMS LLC'' in place of the phrase ``the Company'' for clarity.
27. Options Market Maker
(a) Options Market Maker Quote Exemption
    Rule 613(c)(7) provides that the CAT NMS Plan must require each
Industry Member to record and electronically report to the Central
Repository details for each order and each reportable event, including
the routing and modification or cancellation of an order.\47\ Rule
613(j)(8) defines ``order'' to include ``any bid or offer.'' \48\
Therefore, under Rule 613, the details for each Options Market Maker
quotation must be reported to the Central Repository by both the
Options Market Maker and the options exchange to which it routes its
quote.
---------------------------------------------------------------------------

    \47\ 17 CFR 242.613(c)(7).
    \48\ 17 CFR 242.613(j)(8).
---------------------------------------------------------------------------

    The Participants, however, requested and received exemptive relief
from Rule 613 of Regulation NMS so that the CAT NMS Plan may permit
Options Market Maker quotes to be reported to the Central Repository by
the relevant options exchange in lieu of requiring that such reporting
be done by both the options exchange and the Options Market Maker, as
is required by Rule 613.\49\ In accordance with the exemptive relief,
Options Market Makers will be required to report to the options
exchange the time at which a quote in a Listed Option is sent to the
options exchange. Such time information also will be reported to the
Central Repository by the options exchange in lieu of reporting by the
Options Market Maker.
---------------------------------------------------------------------------

    \49\ See Exemptive Request Letter, supra note 20, at 2;
Exemption Order, supra note 20 at 6.
---------------------------------------------------------------------------

(b) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker
quotes, FINRA proposes to define the term ``Options Market Maker'' to
mean a broker-dealer registered with an exchange for the purpose of
making markets in options contracts traded on the exchange. FINRA
states that this is the same definition as set forth in Section 1.1 of
the CAT NMS Plan.
28. Order
    The proposed Rule 6800 Series requires each Industry Member to
record and electronically report to the Central Repository certain
details for each order. Accordingly, FINRA proposes to define the term
``Order'' with respect to Eligible Securities, to include: (1) Any
order received by an Industry Member from any person; (2) any order
originated by an Industry Member; or (3) any bid or offer. FINRA states
that this is the same definition as set forth in Rule 613(j)(8), except
FINRA proposes to replace the phrase ``member of a national securities
exchange or national securities association'' with the term ``Industry
Member.''\50\ FINRA also notes that Section 1.1 of the CAT NMS Plan
defines ``Order'' by reference to Rule 613(j)(8).
---------------------------------------------------------------------------

    \50\ See 17 CFR 242.613(j)(8).
---------------------------------------------------------------------------

29. OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities
for the CAT. Therefore, FINRA proposes to define the term ``OTC Equity
Security'' to mean 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. FINRA states that this is the same
definition as set forth in Section 1.1 of the CAT NMS Plan.
30. Participant
    Proposed Rule 6810 defines the term ``Participant'' to mean each
Person identified as such in Exhibit A of the CAT NMS Plan, as amended,
in such Person's capacity as a Participant in CAT NMS, LLC. FINRA
states that this is the same definition in substance as set forth in
Section 1.1 of the CAT NMS Plan.
31. Person
    Proposed Rule 6810 defines the term ``Person'' to mean any
individual, partnership, limited liability company, corporation, joint
venture, trust, business trust, cooperative or association and any
heirs, executors, administrators, legal representatives, successors and
assigns of such Person where the context so permits. FINRA states that
this is the same definition as set forth in Section 1.1 of the CAT NMS
Plan.
32. Plan Processor
    Proposed Rule 6810 defines the term ``Plan Processor'' to mean the
Initial Plan Processor or any other Person selected by the Operating
Committee pursuant to Rule 613 and Sections 4.3(b)(i) and 6.1 of the
CAT NMS Plan, and with regard to the Initial Plan Processor, the
National Market System Plan Governing the Process for Selecting a Plan
Processor and Developing a Plan for the Consolidated Audit Trail, to
perform the CAT processing functions required by Rule 613 of Regulation
NMS and set forth in the CAT NMS Plan.
33. Received Industry Member Data
    Proposed Rule 6810 states that the term ``Received Industry Member
Data'' has the meaning set forth in Rule 6830(a)(2). FINRA represents
that this definition has the same substantive meaning as the definition
set forth in Section 1.1 of the CAT NMS Plan.
34. Recorded Industry Member Data
    Proposed Rule 6810 states that the term ``Recorded Industry Member
Data'' has the meaning set forth in Rule 6830(a)(1). FINRA states that
this definition has the same substantive meaning as the definition set
forth in in Section 1.1 of the CAT NMS Plan.
35. Reportable Event
    The proposed Rule 6800 Series requires each Industry Member to
record and electronically report to the Central Repository certain
details for each Reportable Event. FINRA proposes to define the term
``Reportable Event'' to include, but not be limited to, the original
receipt or origination, modification, cancellation, routing, execution
(in whole or in part) and allocation of an order, and receipt of a
routed order. FINRA states that this is the same definition as set
forth in Section 1.1 of the CAT NMS Plan.
36. SRO
    FINRA proposed to define the term ``SRO'' to mean any self-
regulatory organization within the meaning of Section 3(a)(26) of the
Exchange Act.\51\ FINRA states that this is the same definition as set
forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \51\ See 15 U.S.C. 78c(a)(26).
---------------------------------------------------------------------------

37. SRO-Assigned Market Participant Identifier
(a) Existing Identifier Approach
    The Participants requested and received exemptive relief from Rule
613 of Regulation NMS so that the CAT NMS Plan may permit the
``Existing Identifier Approach,'' which would allow an Industry Member
to report an existing SRO-Assigned Market Participant Identifier in
lieu of requiring the reporting of a universal CAT-Reporter-ID (that
is, a code that uniquely and consistently identifies an Industry Member
for purposes of providing data to the Central

Repository).\52\ The CAT NMS Plan reflects the Existing Identifier
Approach for purposes of identifying each Industry Member associated
with an order or Reportable Event. Under the Existing Identifier
Approach, Industry Members are required to record and report to the
Central Repository an SRO-Assigned Market Participant Identifier for
orders and certain Reportable Events to be used by the Central
Repository to assign a unique CAT-Reporter-ID to identify Industry
Members.
---------------------------------------------------------------------------

    \52\ See Exemptive Request Letter, supra note 20, at 19;
Exemption Order, supra note 20 at 49.
---------------------------------------------------------------------------

    For the Central Repository to link the SRO-Assigned Market
Participant Identifier to the CAT-Reporter-ID, each SRO will submit to
the Central Repository, on a daily basis, all SRO-Assigned Market
Participant Identifiers used by its Industry Members, as well as
information to identify each such Industry Member, including CRD number
and LEI, if the SRO has collected such LEI of the Industry Member.
Additionally, each Industry Member is required to submit to the Central
Repository the CRD number of the Industry Member as well as the LEI of
the Industry Member (if the Industry Member has an LEI). The Plan
Processor will use this information to assign a CAT-Reporter-ID to each
Industry Member for internal use within the Central Repository.
(b) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, FINRA proposes to
define the term ``SRO-Assigned Market Participant Identifier'' to mean
an identifier assigned to an Industry Member by an SRO or an identifier
used by a Participant.\53\ FINRA states that this is the same
definition as set forth in Section 1.1 of the CAT NMS Plan.
---------------------------------------------------------------------------

    \53\ FINRA notes that an Industry Member would be permitted to
use any existing SRO-Assigned Market Participant Identifier (e.g.,
FINRA MPID, NASDAQ MPID, NYSE Mnemonic, CBOE User Acronym and CHX
Acronym) when reporting order information to the Central Repository,
for example.
---------------------------------------------------------------------------

38. Small Industry Member
    FINRA represents that the requirements of the proposed Rule 6800
Series differ to some extent for Small Industry Members versus Industry
Members other than Small Industry Members. For example, the compliance
dates for reporting data to the CAT are different for Small Industry
Members versus other Industry Members. Accordingly, to clarify the
requirements that apply to which Industry Members, FINRA proposes to
define the term ``Small Industry Member'' to mean an Industry Member
that qualifies as a small broker-dealer as defined in Exchange Act Rule
0-10(c).\54\ FINRA states that this is the same in substance as the
definition of ``Small Industry Member'' as set forth in Section 1.1 of
the CAT NMS Plan. Specifically, Section 1.1 of the CAT NMS Plan defines
a ``Small Industry Member'' as ``an Industry Member that qualifies as a
small broker-dealer as defined in Rule 613.'' The definition of a small
broker-dealer under Rule 613, in turn, is a small broker-dealer as
defined in Exchange Act Rule 0-10(c).
---------------------------------------------------------------------------

    \54\ 17 CFR 240.0-10(c).
---------------------------------------------------------------------------

39. Trading Day
    Proposed Rule 6830(b) establishes the deadlines for reporting
certain data to the Central Repository using the term ``Trading Day.''
Accordingly, FINRA proposes that the term ``Trading Day'' shall have
the meaning as is determined by the Operating Committee. For the
avoidance of doubt, FINRA represents that the Operating Committee may
establish different Trading Days for NMS Stocks, Listed Options, OTC
Equity Securities, and any other securities that are included as
Eligible Securities from time to time.

B. Clock Synchronization (Rule 6820)

    Rule 613(d)(1) of Regulation NMS requires Industry Members to
synchronize their Business Clocks to the time maintained by NIST,
consistent with industry standards.\55\ To comply with this provision,
Section 6.8 of the Plan sets forth the clock synchronization
requirements for Industry Members.\56\ To implement these provisions
with regard to its Industry Members, FINRA proposes Rule 6820 to
require its Industry Members to comply with the clock synchronization
requirements of the Plan.
---------------------------------------------------------------------------

    \55\ 17 CFR 242.613(d)(1). Related to the clock synchronization
requirements, the Commission notes that the Participants, including
FINRA, also filed a request for an exemption from the March 15, 2017
filing deadline requirement set forth Section 6.7(a)(ii) of the CAT
NMS Plan and proposed FINRA Rule 6895(b)(1). See infra note 75. The
Commission granted the Participants' exemption request. See infra
note 77.
    \56\ In addition, Section 6.7(a)(ii) of the Plan sets forth the
timeline for CAT Reporters to comply with the clock synchronization
requirements.
---------------------------------------------------------------------------

1. Clock Synchronization
    Paragraph (a) of proposed Rule 6820 sets forth the manner in which
Industry Members must synchronize their Business Clocks. Paragraph
(a)(1) of proposed Rule 6820 requires each Industry Member to
synchronize its Business Clocks, other than such Business Clocks used
solely for Manual Order Events or used solely for the time of
allocation on Allocation Reports, at a minimum to within a fifty (50)
millisecond tolerance of the time maintained by the NIST atomic clock,
and maintain such synchronization. FINRA states that this is the same
requirement as set forth in Section 6.8(a)(ii)(A) of the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 6820 requires each Industry
Member to synchronize (1) its Business Clocks used solely for Manual
Order Events and (2) its Business Clocks used solely for the time of
allocation on Allocation Reports at a minimum to within a one second
tolerance of the time maintained by the NIST atomic clock, and maintain
such synchronization. FINRA states that this is the same requirement as
set forth in Section 6.8(a)(iii) and (iv) of the CAT NMS Plan.
Paragraph (a)(3) of proposed Rule 6820 clarifies that the tolerance
described in paragraphs (a)(1) and (2) of proposed Rule 6820 includes
all of the following: (1) The time difference between the NIST atomic
clock and the Industry Member's Business Clock; (2) the transmission
delay from the source; and (3) the amount of drift of the Industry
Member's Business Clock.
    Paragraph (a)(4) of proposed Rule 6820 requires Industry Members to
synchronize their Business Clocks every business day before market open
to ensure that timestamps for Reportable Events are accurate. In
addition, to maintain clock synchronization, Business Clocks must be
checked against the NIST atomic clock and re-synchronized, as
necessary, throughout the day.
2. Documentation
    Paragraph (b) of proposed Rule 6820 sets forth documentation
requirements with regard to clock synchronization. Specifically,
paragraph (b) requires Industry Members to document and maintain their
synchronization procedures for their Business Clocks. The proposed rule
requires Industry Members to keep a log of the times when they
synchronize their Business Clocks and the results of the
synchronization process. This log is required to include notice of any
time a Business Clock drifts more than the applicable tolerance
specified in paragraph (a) of the proposed rule. Such logs must include
results for a period of not less than five years ending on the then
current date, or for the entire period for which the Industry Member
has been required to comply with this Rule if less than five years.
FINRA states that these documentation requirements are the same as
those set forth in the

``Sequencing orders and Clock Synchronization'' section of Appendix C
of the CAT NMS Plan.
3. Certification
    Paragraph (c) of proposed Rule 6820 sets forth certification
requirements with regard to clock synchronization. Specifically,
paragraph (c) of proposed Rule 6820 requires each Industry Member to
certify to FINRA that its Business Clocks satisfy the synchronization
requirements set forth in paragraph (a) of proposed Rule 6820
periodically in accordance with the certification schedule established
by the Operating Committee pursuant to the CAT NMS Plan. FINRA states
that this requirement is the same requirement as set forth in Section
6.8(a)(ii)(B), (iii) and (iv) of the CAT NMS Plan. FINRA states that it
intends to announce to its Industry Members the certification schedule
established by the Operating Committee via Regulatory Notice.
4. Violation Reporting
    Paragraph (d) of proposed Rule 6820 establishes reporting
requirements with regard to clock synchronization. Paragraph (d) of
proposed Rule 6820 requires Industry Members to report to the Plan
Processor and FINRA violations of paragraph (a) of this Rule pursuant
to the thresholds set by the Operating Committee pursuant to the CAT
NMS Plan. FINRA states that this requirement is the same requirement as
set forth in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan.
FINRA intends to announce to its Industry Members the relevant
thresholds established by the Operating Committee via Regulatory
Notice.

C. Industry Member Data Reporting (Rule 6830)

    Rule 613(c) of Regulation NMS requires the CAT NMS Plan to set
forth certain provisions requiring Industry Members to record and
report data to the CAT.\57\ To comply with this provision, Section 6.4
of the CAT NMS Plan sets forth the data reporting requirements for
Industry Members. To implement these provisions with regard to its
Industry Members, FINRA proposes Rule 6830 to require its Industry
Members to comply with the Industry Member Data reporting requirements
of the Plan. Proposed Rule 6830 has five sections covering: (1)
Recording and reporting Industry Member Data, (2) timing of the
recording and reporting, (3) the applicable securities covered by the
recording and reporting requirements, (4) the security symbology to be
used in the recording and reporting, and (5) error correction
requirements, each of which is described below.
---------------------------------------------------------------------------

    \57\ See 17 CFR 242.613(c).
---------------------------------------------------------------------------

1. Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 6830 describes the recording and
reporting of Industry Member Data to the Central Repository. Paragraph
(a) consists of paragraphs (a)(1)-(a)(3), which cover Recorded Industry
Member Data, Received Industry Member Data and Options Market Maker
data, respectively. FINRA states that paragraphs (a)(1)-(a)(3) of
proposed Rule 6830 set forth the recording and reporting requirements
required in Section 6.4(d)(i)-(iii) of the CAT NMS Plan, respectively.
    Paragraph (a)(1) requires, subject to paragraph (a)(3) regarding
Options Market Makers, each Industry Member to record and
electronically report to the Central Repository the following details
for each order and each Reportable Event, as applicable (``Recorded
Industry Member Data'') in the manner prescribed by the Operating
Committee pursuant to the CAT NMS Plan:
     For original receipt or origination of an order: (1) Firm
Designated ID(s) for each Customer; (2) CAT-Order-ID; (3) SRO-Assigned
Market Participant Identifier of the Industry Member receiving or
originating the order; (4) date of order receipt or origination; (5)
time of order receipt or origination (using timestamps pursuant to
proposed Rule 6860); and (6) Material Terms of the Order;
     for the routing of an order: (1) CAT-Order-ID; (2) date on
which the order is routed; (3) time at which the order is routed (using
timestamps pursuant to proposed Rule 6860); (4) SRO-Assigned Market
Participant Identifier of the Industry Member routing the order; (5)
SRO-Assigned Market Participant Identifier of the Industry Member or
Participant to which the order is being routed; (6) if routed
internally at the Industry Member, the identity and nature of the
department or desk to which the order is routed; and (7) Material Terms
of the Order;
     for the receipt of an order that has been routed, the
following information: (1) CAT-Order-ID; (2) date on which the order is
received; (3) time at which the order is received (using timestamps
pursuant to proposed Rule 6860); (4) SRO-Assigned Market Participant
Identifier of the Industry Member receiving the order; (5) SRO-Assigned
Market Participant Identifier of the Industry Member or Participant
routing the order; and (6) Material Terms of the Order;
     if the order is modified or cancelled: (1) CAT-Order-ID;
(2) date the modification or cancellation is received or originated;
(3) time at which the modification or cancellation is received or
originated (using timestamps pursuant to proposed Rule 6860); (4) price
and remaining size of the order, if modified; (5) other changes in the
Material Terms of the Order, if modified; and (6) whether the
modification or cancellation instruction was given by the Customer or
was initiated by the Industry Member;
     if the order is executed, in whole or in part: (1) CAT-
Order-ID; (2) date of execution; (3) time of execution (using
timestamps pursuant to proposed Rule 6860; (4) execution capacity
(principal, agency or riskless principal); (5) execution price and
size; (6) SRO-Assigned Market Participant Identifier of the Industry
Member executing the order; (7) whether the execution was reported
pursuant to an effective transaction reporting plan or the Plan for
Reporting of Consolidated Options Last Sale Reports and Quotation
Information; and
     other information or additional events as may be
prescribed pursuant to the CAT NMS Plan.
    Paragraph (a)(2) of proposed Rule 6830 requires, subject to
paragraph (a)(3) regarding Options Market Makers, each Industry Member
to record and report to the Central Repository the following, as
applicable (``Received Industry Member Data'' and collectively with the
information referred to in Rule 6830(a)(1) ``Industry Member Data''))
in the manner prescribed by the Operating Committee pursuant to the CAT
NMS Plan:
     If the order is executed, in whole or in part: (1) An
Allocation Report; (2) SRO-Assigned Market Participant Identifier of
the clearing broker or prime broker, if applicable; and (3) CAT-Order-
ID of any contra-side order(s);
     if the trade is cancelled, a cancelled trade indicator;
and
     for original receipt or origination of an order, the Firm
Designated ID for the relevant Customer, and in accordance with
proposed Rule 6840, Customer Account Information and Customer
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 6830 states that each Industry
Member that is an Options Market Maker is not required to report to the
Central Repository the Industry Member Data regarding the routing,
modification or cancellation of its quotes in Listed Options. Each
Industry Member that is

an Options Market Maker, however, is required to report to the Exchange
the time at which its quote in a Listed Option is sent to the Exchange
(and, if applicable, any subsequent quote modification time and/or
cancellation time when such modification or cancellation is originated
by the Options Market Maker). This paragraph implements the Options
Market Maker Quote Exemption, as discussed above.
2. Timing of Recording and Reporting
    Paragraph (b) of proposed Rule 6830 describes the requirements
related to the timing of recording and reporting of Industry Member
Data. FINRA states that paragraphs (b)(1)-(b)(3) of proposed Rule 6830
set forth the requirements related to the timing of the recording and
reporting requirements required in Section 6.4(b)(i)-(ii) of the CAT
NMS Plan.
    Paragraph (b)(1) of proposed Rule 6830 requires each Industry
Member to record Recorded Industry Member Data contemporaneously with
the applicable Reportable Event. Paragraph (b)(2) of proposed Rule 6830
requires each Industry Member to report: (1) Recorded Industry Member
Data to the Central Repository by 8:00 a.m. Eastern Time on the Trading
Day following the day the Industry Member records such Recorded
Industry Member Data; and (2) Received Industry Member Data to the
Central Repository by 8:00 a.m. Eastern Time on the Trading Day
following the day the Industry Member receives such Received Industry
Member Data. Paragraph (b)(3) states that Industry Members may, but are
not required to, voluntarily report Industry Member Data prior to the
applicable 8:00 a.m. Eastern Time deadline.
3. Applicable Securities
    Paragraph (c) of proposed Rule 6830 describes the securities to
which the recording and reporting requirements of proposed Rule 6830
apply. FINRA states that paragraphs (c)(1) and (c)(2) of proposed Rule
6830 set forth the description of applicable securities as set forth in
Section 6.4(c)(i) and (ii) of the CAT NMS Plan, respectively. Paragraph
(c)(1) of proposed Rule 6830 requires each Industry Member to record
and report to the Central Repository the Industry Member Data as set
forth in paragraph (a) of proposed Rule 6830 for each NMS Security
registered or listed for trading on such exchange or admitted to
unlisted trading privileges on such exchange. Paragraph (c)(2) of
proposed Rule 6830 requires each Industry Member to record and report
to the Central Repository the Industry Member Data as set forth in
paragraph (a) of this proposed Rule 6830 for each Eligible Security for
which transaction reports are required to be submitted to FINRA.
4. Security Symbology
    Paragraph (d) of proposed Rule 6830 describes the security
symbology that Industry Members are required to use when reporting
Industry Member Data to the Central Repository. Paragraph (d)(1) of
proposed Rule 6830 requires, for each exchange-listed Eligible
Security, each Industry Member to report Industry Member Data to the
Central Repository using the symbology format of the exchange listing
the security. FINRA states that this requirement implements the
requirement set forth in Section 2 of Appendix D of the CAT NMS Plan to
use the listing exchange symbology when reporting data to the Central
Repository for exchange-listed Eligible Securities.
    For each Eligible Security that is not exchange-listed, however,
FNRA represents that there is no listing exchange to provide the
symbology format. Moreover, to date, the requisite symbology format has
not been determined. Therefore, paragraph (d)(2) of proposed Rule 6830
requires, for each Eligible Security that is not exchange-listed, each
Industry Member to report Industry Member Data to the Central
Repository using such symbology format as approved by the Operating
Committee pursuant to the CAT NMS Plan. FINRA states that it intends to
announce to its Industry Members the relevant symbology formats
established by the Operating Committee via Regulatory Notice.
5. Error Correction Timeline
    To ensure that the CAT contains accurate data, the CAT NMS Plan
requires Industry Members to correct erroneous data submitted to the
Central Repository. Therefore, FINRA proposes to adopt paragraph (e) of
proposed Rule 6830 which requires that for each Industry Member for
which errors in Industry Member Data submitted to the Central
Repository have been identified by the Plan Processor or otherwise,
such Industry Member submit corrected Industry Member Data to the
Central Repository by 8:00 a.m. Eastern Time on T+3. FINRA represents
that this requirement implements the error correction requirement set
forth in Section 6 of Appendix D of the CAT NMS Plan.

D. Customer Information Reporting (Rule 6840)

    Section 6.4(d)(iv) of the CAT NMS Plan requires Industry Members to
submit to the Central Repository certain information related to their
Customers in accordance with the Customer Information Approach
discussed above. FINRA proposes Rule 6840 to implement this provision
of the CAT NMS Plan with regard to its Industry Members.
1. Initial Set of Customer Information
    Paragraph (a) of proposed Rule 6840 requires each Industry Member
to submit to the Central Repository the Firm Designated ID, Customer
Account Information and Customer Identifying Information for each of
its Customers with an Active Account prior to such Industry Member's
commencement of reporting to the Central Repository and in accordance
with the deadlines set forth in Rule 6880.
2. Daily Updates to Customer Information
    Paragraph (b) of proposed Rule 6840 requires each Industry Member
to submit to the Central Repository any updates, additions or other
changes to the Firm Designated ID, Customer Account Information and
Customer Identifying Information for each of its Customers with an
Active Account on a daily basis.
3. Periodic Updates To Complete Set of Customer Information
    Paragraph (c) of proposed Rule 6840 requires each Industry Member,
on a periodic basis as designated by the Plan Processor and approved by
the Operating Committee, to submit to the Central Repository a complete
set of Firm Designated IDs, Customer Account Information and Customer
Identifying Information for each of its Customers with an Active
Account. This periodic refresh is intended to ensure that the Central
Repository has the most current information identifying a Customer.
FINRA states that it intends to announce to its Industry Members when
such a periodic refresh is required by the Plan Processor and the
Operating Committee via Regulatory Notice.
4. Error Correction Timeline
    Paragraph (d) of proposed Rule 6840 addresses the correction of
erroneous Customer data reported to the Central Repository to ensure an
accurate audit trail. Paragraph (d) requires, for each Industry Member
for which errors in Firm Designated ID, Customer Account Information
and Customer Identifying Information for each of its Customers

with an Active Account submitted to the Central Repository have been
identified by the Plan Processor or otherwise, such Member to submit
corrected data to the Central Repository by 5:00 p.m. Eastern Time on
T+3. FINRA states that this requirement implements the error correction
requirement set forth in Appendix C of the CAT NMS Plan.

E. Industry Member Information Reporting (Rule 6850)

    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to
submit to the Central Repository information sufficient to identify
such Industry Member, including CRD number and LEI, if such LEI has
been obtained, in accordance with the Existing Identifier Approach
discussed above. Proposed Rule 6850 requires each Industry Member to
submit to the Central Repository information sufficient to identify
such Industry Member, including CRD number and LEI, if such LEI has
been obtained, prior to such Industry Member's commencement of
reporting to the Central Repository and in accordance with the
deadlines set forth in Rule 6880, and keep such information up to date
as necessary. FINRA states that this provision of the CAT NMS Plan with
regard to its Industry Members information reporting.

F. Time Stamps (Rule 6860)

    Rule 613(d)(3) of Regulation NMS sets forth requirements for time
stamps used by CAT Reporters in recording and reporting data to the
CAT.\58\ To comply with this provision, Section 6.8(b) of the Plan sets
forth time stamp requirements for Industry Members. To implement this
provision with regard to its Industry Members, FINRA proposes new Rule
6860 to require its Industry Members to comply with the time stamp
requirements of the Plan.
---------------------------------------------------------------------------

    \58\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

1. Millisecond Time Stamps
    Paragraph (a) of proposed Rule 6860 sets forth the time stamp
increments to be used by Industry Members in their CAT reporting.
Paragraph (a)(1) of proposed Rule 6860 requires each Industry Member to
record and report Industry Member Data to the Central Repository with
time stamps in milliseconds, subject to paragraphs (a)(2) and (b) of
proposed Rule 6860. To the extent that any Industry Member's order
handling or execution systems utilize time stamps in increments finer
than milliseconds, paragraph (a)(2) of proposed Rule 6860 requires such
Industry Member to record and report Industry Member Data to the
Central Repository with time stamps in such finer increment, subject to
paragraph (b) of proposed Rule 6860 regarding Manual Order Events and
Allocation Reports.
2. One Second Time Stamps/Electronic Order Capture
    Paragraph (b) of proposed Rule 6860 sets forth the permissible time
stamp increments for Manual Order Events and Allocation Reports.
Specifically, paragraph (b)(1) of proposed Rule 6860 permits each
Industry Member to record and report Manual Order Events to the Central
Repository in increments up to and including one second, provided that
each Industry Member is required to record and report the Electronic
Capture Time in milliseconds. In addition, paragraph (b)(2) of proposed
Rule 6860 permits each Industry Member to record and report the time of
Allocation Reports in increments up to and including one second.

G. Time Stamp and Clock Synchronization Rule Violations (Rule 6865)

    Proposed Rule 6865 describes potential violations of the time stamp
and clock synchronization time period requirements set forth in the
proposed Rule 6800 Series. Proposed Rule 6865 states that an Industry
Member that engages in a pattern or practice of reporting Reportable
Events with time stamps generated by Business Clocks that are not
synchronized according the requirements set forth in this Rule Series
without reasonable justification or exceptional circumstances may be
considered in violation of this Rule. FINRA states that this provision
implements the requirements of Section 6.8 of the CAT NMS Plan which
requires the Compliance Rule to provide that a pattern or practice of
reporting events outside of the required clock synchronization time
period without reasonable justification or exceptional circumstances
may be considered a violation of Rule 613 of Regulation NMS or the CAT
NMS Plan.

H. Connectivity and Data Transmission (Rule 6870)

    Proposed Rule 6870 addresses connectivity and data transmission
requirements related to the CAT.
1. Data Transmission
    Paragraph (a) of proposed Rule 6870 describes the format(s) for
reporting Industry Member Data to the Central Repository. Specifically,
paragraph (a) of proposed Rule 6870 requires each Industry Member to
transmit data as required under the CAT NMS Plan to the Central
Repository utilizing such format(s) as may be provided by the Plan
Processor and approved by the Operating Committee. FINRA states that
this provision implements the formatting requirements as set forth in
Section 6.4(a) of the CAT NMS Plan.
2. Connectivity
    Paragraph (b) of proposed Rule 6870 addresses connectivity
requirements related to the CAT. Paragraph (b) of proposed Rule 6870
requires each Industry Member to connect to the Central Repository
using a secure method(s), including, but not limited to, private
line(s) and virtual private network connection(s). FINRA states that
this provision implements the connectivity requirements set forth in
Section 4 of Appendix D to the CAT NMS Plan.
3. CAT Reporting Agent
    Paragraph (c) permits Industry Members to enter into an agreement
with CAT Reporting Agents to fulfill their data reporting obligations
related to the CAT.\59\ Any such agreement must be evidenced in
writing, which specifies the respective functions and responsibilities
of each party to the agreement that are required to effect full
compliance with the requirements of the proposed Rule 6800 Series.
Paragraph (c)(2) of proposed Rule 6870 requires that all written
documents evidencing an agreement with a CAT Reporting Agent be
maintained by each party to the agreement. Paragraph (c)(3) states that
each Industry Member remains primarily responsible for compliance with
the requirements of the proposed Rule 6800 Series, notwithstanding the
existence of an agreement described in paragraph (c) of proposed Rule
6870.
---------------------------------------------------------------------------

    \59\ FINRA represents that paragraph (c) is based on FINRA Rule
7450(c), which permits OATS Reporting Members to enter into
agreements with Reporting Agents to fulfill the OATS obligations of
the OATS Reporting Member.
---------------------------------------------------------------------------

I. Development and Testing (Rule 6880)

    FINRA proposes Rule 6880 to address requirements for Industry
Members related to CAT development and testing.
1. Development
    Paragraph (a) of proposed Rule 6880 sets forth the testing
requirements and deadlines for Industry Members to develop and commence
reporting to the Central Repository. FINRA states that these
requirements are set forth in Appendix C to the CAT NMS Plan.
    Paragraph (a)(1) sets forth the deadlines related to connectivity
and

acceptance testing. Industry Members (other than Small Industry
Members) are required to begin connectivity and acceptance testing with
the Central Repository no later than August 15, 2018, and Small
Industry Members are required to begin connectivity and acceptance
testing with the Central Repository no later than August 15, 2019.
    Paragraph (a)(2) sets forth the deadlines related to reporting
Customer and Industry Member information. Paragraph (a)(2)(i) requires
Industry Members (other than Small Industry Members) to begin reporting
Customer and Industry Member information, as required by Rules 6840(a)
and 6850, respectively, to the Central Repository for processing no
later than October 15, 2018. Paragraph (a)(2)(ii) requires Small
Industry Members to begin reporting Customer and Industry Member
information, as required by Rules 6840(a) and 6850, respectively, to
the Central Repository for processing no later than October 15, 2019.
    Paragraph (a)(3) sets forth the deadlines related to the submission
of order data. Under paragraph (a)(3)(i), Industry Members (other than
Small Industry Members) are permitted, but not required, to submit
order data for testing purposes beginning no later than May 15, 2018.
In addition, Industry Members (other than Small Industry Members) are
required to participate in the coordinated and structured testing of
order submission, which will begin no later than August 15, 2018. Under
paragraph (a)(3)(ii), Small Industry Members are permitted, but not
required, to submit order data for testing purposes beginning no later
than May 15, 2019. In addition, Small Industry Members are required to
participate in the coordinated and structured testing of order
submission, which will begin no later than August 15, 2019.
    Paragraph (a)(4) states that Industry Members are permitted, but
not required to, submit Quote Sent Times on Options Market Maker quotes
to Exchanges, beginning no later than October 15, 2018, for testing
purposes.
2. Testing
    Paragraph (b) of proposed Rule 6880 implements the requirement
under the CAT NMS Plan that Industry Members participate in required
industry testing with the Central Repository. Specifically, proposed
Rule 6880 requires that each Industry Member participate in testing
related to the Central Repository, including any industry-wide disaster
recovery testing, pursuant to the schedule established pursuant to the
CAT NMS Plan. FINRA states that it intends to announce to its Industry
Members the schedule established pursuant to the CAT NMS Plan via
Regulatory Notice.

J. Recordkeeping (Rule 6890)

    Proposed Rule 6890 sets forth the recordkeeping obligations related
to the CAT for Industry Members. Proposed Rule 6890 requires each
Industry Member to maintain and preserve records of the information
required to be recorded under the proposed Rule 6800 Series for the
period of time and accessibility specified in Exchange Act Rule 17a-
4(b).\60\ The records required to be maintained and preserved under the
proposed Rule 6800 Series may be immediately produced or reproduced on
``micrographic media'' as defined in Rule 17a-4(f)(1)(i) \61\ or by
means of ``electronic storage media'' as defined in Rule 17a-
4(f)(1)(ii) \62\ that meet the conditions set forth in Rule 17a-4(f)
\63\ and be maintained and preserved for the required time in that
form. Proposed Rule 6890 is based on Rule 7440(a)(5), which sets forth
the recordkeeping requirements related to OATS.
---------------------------------------------------------------------------

    \60\ 17 CFR 240.17a-4(b).
    \61\ 17 CFR 240.17a-4(f)(1)(i).
    \62\ 17 CFR 240.17a-4(f)(1)(ii).
    \63\ 17 CFR 240.17a-4(f).
---------------------------------------------------------------------------

K. Timely, Accurate and Complete Data (Rule 6893)

1. General
    FINRA notes that Rule 613 of Regulation NMS and the CAT NMS Plan
emphasize the importance of the timeliness, accuracy, completeness and
integrity of the data submitted to the CAT.\64\ Accordingly, paragraph
(a) of proposed Rule 6893 requires that Industry Members record and
report data to the Central Repository as required by the proposed Rule
6800 Series in a manner that ensures the timeliness, accuracy,
integrity and completeness of such data. FINRA states that proposed
Rule 6893 implements the Plan's requirement with respect to the
importance of timely, accurate and complete data with regard to
Industry Members.
---------------------------------------------------------------------------

    \64\ See 17 CFR 242.613(e)(4)(i)(D)(ii); and CAT NMS Plan, supra
note 11 at Section 6.5(d).
---------------------------------------------------------------------------

2. LEIs
    In addition, without limiting the general requirement as set forth
in paragraph (a), paragraph (b) of proposed Rule 6893 requires Industry
Members to accurately provide the LEIs in their records as required by
the proposed Rule 6800 Series and states that Industry Members may not
knowingly submit inaccurate LEIs to the Central Repository. FINRA notes
that paragraph (b) notes, however, that this requirement does not
impose any additional due diligence obligations on Industry Members
with regard to LEIs for CAT purposes. Accordingly, FINRA states that
this provision does not impose any due diligence obligations beyond
those that may exist today with respect to information associated with
an LEI. Although Industry Members will not be required to perform
additional due diligence with regard to the LEIs for CAT purposes,
Industry Members will be required to accurately provide the LEIs in
their records and may not knowingly submit inaccurate LEIs to the CAT.
FINRA believes that paragraph (b) is consistent with the Approval Order
for the CAT NMS Plan regarding an Industry Member's obligations
regarding LEIs.\65\
---------------------------------------------------------------------------

    \65\ See Approval Order, supra note 14, at 84745.
---------------------------------------------------------------------------

3. Compliance With Error Rate
    Paragraph (c) states that, if an Industry Member reports data to
the Central Repository with errors such that its error percentage
exceeds the maximum Error Rate established by the Operating Committee
pursuant to the CAT NMS Plan, then such Industry Member would not be in
compliance with the Rule 6800 Series. As discussed above, the initial
maximum Error Rate is 5%, although the Error Rate is expected to be
reduced over time. FINRA states that it intends to announce to its
Industry Members changes to the Error Rate established pursuant to the
CAT NMS Plan via Regulatory Notice.
4. Compliance Thresholds
    Paragraph (d) of proposed Rule 6893 addresses compliance thresholds
related to reporting data to the CAT. Proposed Rule 6893 states that
each Industry Member is required to meet a separate compliance
threshold which will be an Industry Member-specific rate that may be
used as the basis for further review or investigation into the Industry
Member's performance with regard to the CAT (the ``Compliance
Thresholds''). FINRA notes that Compliance Thresholds will compare an
Industry Member's error rate to the aggregate Error Rate over a period
of time to be defined by the Operating Committee. Compliance Thresholds
will be set by the Operating Committee, and will be calculated at
intervals to be set by the Operating Committee.\66\ Compliance
Thresholds will include compliance with the data reporting and clock
synchronization requirements.

Proposed Rule 6893 states that an Industry Member's performance with
respect to its Compliance Threshold will not signify, as a matter of
law, that such Industry Member has violated this proposed rule series.
---------------------------------------------------------------------------

    \66\ See CAT NMS Plan, supra note 11 at Appendix C.
---------------------------------------------------------------------------

L. Compliance Dates (Rule 6895)

1. General
    Proposed Rule 6895 sets forth the compliance dates for the various
provisions of the proposed Rule 6800 Series. Paragraph (a) of proposed
Rule 6895 states that, except as set forth in paragraphs (b) and (c) of
this Rule or otherwise set forth in this Rule Series, the compliance
date for the proposed Rule 6800 Series will be the date of Commission
approval of the proposed rule change.
2. Clock Synchronization
    Paragraph (b) of proposed Rule 6895 establishes the compliance
dates for the clock synchronization requirements as set forth in
proposed Rule 6820. Paragraph (b)(1) states that each Industry Member
shall comply with Rule 6820 with regard to Business Clocks that capture
time in milliseconds commencing on or before March 15, 2017. Paragraph
(b)(2) states that each Industry Member shall comply with Rule 6820
with regard to Business Clocks that do not capture time in milliseconds
commencing on or before February 19, 2018. FINRA states that the
compliance date set forth in paragraph (b)(1) reflects the exemptive
relief requested by the Participants with regard to the clock
synchronization requirements related to Business Clocks that do not
capture time in milliseconds.\67\
---------------------------------------------------------------------------

    \67\ See infra notes 75 and 77, and accompanying text
(discussing the Participants' Clock Synchronization Exemption
Request and Order Granting Limited Exemptive Relief, Pursuant to
Rule 608(e) of the Securities Exchange Act of 1934, from the Clock
Synchronization Compliance Deadline Specified in Section 6.7(a)(ii)
of the National Market System Plan Governing the Consolidated Audit
Trail).
---------------------------------------------------------------------------

3. CAT Data Reporting
    Paragraph (c) of proposed Rule 6895 establishes the compliance
dates for the data recording and reporting requirements for Industry
Members. Paragraph (c)(1) requires each Industry Member (other than
Small Industry Members) to record and report the Industry Member Data
to the Central Repository by November 15, 2018. Paragraph (c)(2)
requires that each Industry Member that is a Small Industry Member to
record and report the Industry Member Data to the Central Repository by
November 15, 2019. FINRA states that such compliance dates are
consistent with the compliance dates set forth in Rule 613(a)(3)(v) and
(vi),\68\ and Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
---------------------------------------------------------------------------

    \68\ 17 CFR 242.613(a)(3)(v), (vi).
---------------------------------------------------------------------------

IV. Summary of Comments

    As noted above, the Commission received three comment letters on
the proposed rule change and a response letter from the
Participants.\69\ Two commenters raised concerns about the clock
synchronization requirements for Allocation Reports.\70\ One commenter
noted that the CAT NMS Plan states that the Participants have not yet
determined how the ``time of allocation'' will be defined and that the
Participants stated they would address this in the Technical
Specifications.\71\ Given that the time of allocation had not yet been
defined, this commenter stated that ``it was not possible to ensure
clock synchronization requirements on Allocation Reports at this
time.'' \72\ Another commenter asked for clarification whether the
Clock Synchronization Exemption Request, as discussed below, filed by
the Participants extends to time stamps required for Allocation
Reports, and for clarification regarding when time stamps on manual
orders and electronic capture of manual orders need to be captured.\73\
---------------------------------------------------------------------------

    \69\ See supra note 7.
    \70\ Thomson Reuters Letter at 1; FIF Letter at 1.
    \71\ Thomson Reuters Letter at 1.
    \72\ Thomson Reuters Letter at 1-2. See also FIF Letter at 2.
    \73\ FIF Letter at 1, 2.
---------------------------------------------------------------------------

    The Participants noted in their Response Letter that Section
6.7(a)(ii) of the CAT NMS Plan requires that Industry Members must
synchronize their Business Clocks and certify that they have satisfied
applicable Business Clock synchronization requirements by March 15,
2017.\74\ However, the Participants noted that, on January 17, 2017,
they filed with the Commission a request for exemptive relief from
Section 6.7(a)(ii) of the CAT NMS Plan (the ``Clock Synchronization
Exemption Request'').\75\ The Clock Synchronization Exemption Request
requested that the Commission permit the Participants to extend the
Business Clock synchronization compliance date in Section 6.7(a)(ii) of
the CAT NMS Plan from March 15, 2017 to February 19, 2018 for Industry
Members' Business Clocks that do not capture time in milliseconds.\76\
On March 2, 2017, the Commission granted the Exemption Request.\77\
---------------------------------------------------------------------------

    \74\ Participants' Response Letter at 2.
    \75\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated January 17, 2017 (``Clock Synchronization
Exemption Request Letter'').
    \76\ Id.
    \77\ See Order Granting Limited Exemptive Relief, Pursuant to
Rule 608(e) of the Securities Exchange Act of 1934, from the Clock
Synchronization Compliance Deadline Specified in Section 6.7(a)(ii)
of the National Market System Plan Governing the Consolidated Audit
Trail, Securities Exchange Act Release No. 80142 (March 2, 2017), 82
FR 13034 (March 8, 2017) (``Clock Synchronization Exemption
Order'').
---------------------------------------------------------------------------

    The Participants also noted that the Operating Committee of the CAT
NMS Plan recently approved guidance that clarifies that, for purposes
of the initial March 15, 2017 Business Clock synchronization and
certification deadlines, ``Business Clocks'' include those clocks that
currently capture time in milliseconds and that are used to record time
related to ``Reportable Events,'' as defined under the Plan, including,
without limitation, the original receipt or origination, modification,
cancellation, routing, execution (in whole or in part) and allocation
of an order, and receipt of a routed order, in Eligible Securities
(i.e., NMS Securities and OTC Equity Securities).\78\ The Participants
represented that each Participant has, or will, issue this guidance to
its members. The Participants further stated in their response letter
that to align the compliance rule with the Exemption Request, Business
Clocks used solely for the time of allocation on Allocation Reports
must comply with the March 15, 2017 synchronization deadline to the
extent that such Business Clocks currently capture time in
milliseconds.\79\
---------------------------------------------------------------------------

    \78\ Participants' Response Letter at 2.
    \79\ Id. at 3.
---------------------------------------------------------------------------

    With respect to time stamps on manual orders and electronic capture
of manual orders the Participants acknowledged in their response letter
that additional information will be provided in Technical
Specifications prepared by the Plan Processor and approved by the
Operating Committee.\80\ The Participants noted that the Technical
Specifications also will define the ``time of the allocation.'' The
Participants stated that as a result, they cannot issue additional
information or definitions at this time since the development and
construction of the CAT System and Central Repository are underway. The
Participants represented that they intend to work with the Plan
Processor to define various terms, including ``time of the
allocation,'' and to provide Technical Specifications approved by the
Operating Committee before

Industry Members will be required to report to the Central Repository
on November 15, 2018 (or November 15, 2019 for Small Industry Members)
or comply with the February 19, 2018 Business Clock synchronization
requirement.
---------------------------------------------------------------------------

    \80\ Id.
---------------------------------------------------------------------------

    One commenter discussed several concerns related to the clock
synchronization requirements of proposed FINRA Rule 6820(b).\81\ This
commenter noted that ``retention of a complete log of clock
synchronization events is an additional business cost without providing
compensatory regulatory benefit.'' \82\ This commenter urged FINRA to
collect clock synchronization data based on the data received as a
result of the requirements of FINRA Rule 4590 to see if such a log of
clock synchronization is ``required to effectively surveil for
compliance with clock synchronization standards'' and requested that
the Commission require FINRA to assess the effectiveness of the logging
requirement.\83\ This commenter also noted that there is a two year
difference in the log retention requirements between FINRA Rule 4590
and proposed Rule 6820(b) and stated that the extra two years of log
retention represents an additional business cost for storage and clock
management.\84\
---------------------------------------------------------------------------

    \81\ FIF Letter at 2.
    \82\ FIF Letter at 2.
    \83\ FIF Letter at 2.
    \84\ FIF Letter at 2.
---------------------------------------------------------------------------

    In response, the Participants stated that they believe that it is
appropriate for Industry Members to maintain a log of all clock
synchronization events in order to demonstrate the Industry Members'
compliance with the Proposed Compliance Rule and the CAT NMS Plan and
to retain such log for five-years.\85\ The Participants noted that the
Business Clock synchronization log was discussed and considered in the
CAT NMS Plan Proposing and Adopting Releases, and that the Commission
considered an alternative where Industry Members would record only
exceptions to the clock synchronization requirement. Because the CAT
NMS Plan contains the requirement that logs be created and retained for
five years, the Participants stated that the retention period set forth
in the Participants' Proposed Compliance Rules, including proposed
FINRA Rule 6820, is consistent with the data retention period
applicable to the Central Repository as set forth in Rule 613(e)(8).
---------------------------------------------------------------------------

    \85\ Participants' Response Letter at 4.
---------------------------------------------------------------------------

    With respect to the clock synchronization procedures in FINRA's
proposed Rule 6800 Series, one commenter also stated that proposed Rule
6820 ``does not contain any definition of clock synchronization
certification procedures and schedules, reporting procedures for
violation notification or any specifics regarding documentation
requirements.'' \86\ This commenter requested that the date for
compliance with the clock synchronization procedures be delayed, and
requested that there be the adoption of ``one set of procedures for
clock synchronization management and reporting to regulators be adopted
across FINRA and CAT.'' \87\
---------------------------------------------------------------------------

    \86\ FIF Letter at 3.
    \87\ FIF Letter at 3.
---------------------------------------------------------------------------

    In response, the Participants stated that they agree it would be
helpful to provide Industry Members with additional guidance regarding
Industry Members' compliance with the clock synchronization and
certification requirements set forth in the CAT NMS Plan and the
Proposed Compliance Rules.\88\ Accordingly, the Participants stated
that they have issued, or intend to issue, to their members guidance
approved by the Operating Committee regarding clock synchronization and
certification procedures and schedules, and documentation requirements
(i.e., regarding the logging of clock synchronization events). The
Participants represented that they intend to issue this guidance prior
to the initial March 15, 2017 compliance deadline. The Participants
also noted that thereafter the Participants will issue additional
guidance approved by the Operating Committee regarding the reporting of
violations of applicable clock synchronization thresholds. Accordingly,
the Participants stated that they believe that the Proposed Compliance
Rules need not be amended at this time.
---------------------------------------------------------------------------

    \88\ Participants' Response Letter at 5.
---------------------------------------------------------------------------

    Two commenters also discussed the application of the Firm
Designated ID requirement in the CAT NMS Plan. Both commenters noted
that the Proposed Compliance Rules require each Industry Member to
provide a Firm Designated ID ``for each Customer,'' whereas a ``Firm
Designated ID,'' in relevant part, is defined as a ``unique identifier
for each trading account. Both commenters requested that the
Participants amend the language of the Proposed Compliance Rules to
reflect the Exemption Order.\89\
---------------------------------------------------------------------------

    \89\ FIF Letter at 3-4; Thomson Reuters Letter at 2-5.
---------------------------------------------------------------------------

    In response the Participants stated that they recognize that the
definition of Firm Designated ID and the reporting requirements set
forth in Section 6.3 of the CAT NMS Plan, as well as the parallel
provisions in the proposed Participant Compliance Rules, including
FINRA's definition of ``Firm Designated ID'' in Rule 6810 are somewhat
unclear.\90\ The Participants noted that the Customer Information
Approach is intended to require that each broker-dealer assign a unique
Firm Designated ID at the account level, rather than the customer
level. Accordingly, the Participants state that Section 6.3(d)(i)(A) of
the CAT NMS Plan, which refers to the assignment of a ``Firm Designated
ID(s) for each Customer,'' should not be interpreted to mean that each
Customer must have a unique Firm Designated ID, rather, a Firm
Designated ID must be assigned at the account level, so that multiple
Customers may have the same Firm Designated ID. The Participants
further stated that they will consider issuing additional guidance,
subject to the approval of the Operating Committee of the CAT NMS Plan,
to Industry Members on this issue and, as necessary, whether to amend
the CAT NMS Plan to clarify the use of Firm Designated IDs.
---------------------------------------------------------------------------

    \90\ Participants' Response Letter at 5. The Participants noted
that Bats BZX Exchange, Inc.'s proposed Rule 4.7(a)(1)(A)(i) and
4.7(a)(2)(C) refers to ``Customer'' rather than ``account.'' See,
e.g., Bats BZX Exchange, Inc.'s Proposed Compliance Rule Notice of
Filing of a Proposed Rule Change to Adopt Rules 4.5 Through 4.16 to
Implement the Compliance Rule Regarding the National Market System
Plan Governing the Consolidated Audit Trail, Securities Exchange Act
Release No. 79927 (February 2, 2017), 82 FR 9874 (February 8, 2017).
---------------------------------------------------------------------------

    One commenter suggested that the Participants consider firms that
are exempt from reporting to OATS as ``Small Industry Members,''
stating that ``this should be so easy and so obviously warranted (given
the huge incremental cost of first-time order reporting for those firms
that choose to remain independent and comply) that we cannot imagine
any objection.'' \91\ This commenter also requested that a cost and
benefit analysis should be performed to review the impact of the CAT on
firms currently exempt from OATS.\92\
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    \91\ Wachtel Letter at 1.
    \92\ Wachtel Letter at 1, 3.
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    In response, the Participants stated they believe that the
definition of Small Industry Member for purposes of the CAT NMS Plan
and Participant Compliance Rules is appropriate and need not be
amended.\93\ The Participants noted that as a threshold matter, this
definition was created and adopted by the Commission rather than the
Participants, and that the definition of ``Small Industry Member'' in
the CAT NMS Plan refers to the definition of

``small broker-dealer'' in Rule 613 of Regulation NMS. Rule
613(a)(3)(v) and (vi) define ``small broker-dealer'' by using the
definition set forth in Rule 0-10(c) under the Exchange Act.\94\ In
adopting Rule 613, the Participants noted that the Commission explained
that defining ``small broker-dealer'' by reference to Rule 0-10(c) ``is
appropriate because it is an existing regulatory standard that is an
indication of small entities for which regulators should be sensitive
when imposing regulatory burden.'' \95\ The Participants stated that
they cannot modify the definition of ``Small Industry Member'' because
it is based on the definition of small broker-dealer in Rule 613 and
that the Commission would have to effectuate any change to the
requirement that broker-dealers (other than ``small broker-dealers'')
must report to the CAT no later than two years after the Effective
Date.\96\ The Participants also noted that after the CAT is operational
and the Central Repository begins to collect data, the Participants
will conduct various assessments, as set forth in Section 6.6 of the
CAT NMS Plan, regarding the operations and efficiency of the Plan
Processor, CAT and Central Repository. As necessary, the Participants
will consider whether to amend any requirements in the CAT NMS Plan or
Proposed Compliance Rules, provided that such amendments are necessary
or appropriate and comply with Rule 613 of Regulation NMS.
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    \93\ Participants' Response Letter at 6.
    \94\ Rule 0-10(c) defines a ``small broker-dealer'' as one that
has total capital of less than $500,000 on the date in the prior
fiscal year as of which its audited financial statements were filed
(or on the last business day of the preceding fiscal year if not
required to file such statements), and those not affiliated with any
other person that is not a small business or small organization. See
Rule 0-10(c).
    \95\ See Approval Order, supra note 14 at 45722, 45804.
    \96\ Participants' Response Letter at 6. The Participants added
that ``[s]eparately, the Commission explained that the CAT NMS Plan
``attempts to mitigate its impact on [OATS-exempt or excluded
broker-dealers or limited purpose broker-dealers] by proposing to
follow a cost allocation formula that should charge lower fees to
smaller broker-dealers.'' Accordingly, the Participants stated that
they do not believe that an additional cost-benefit analysis is
necessary at this time. Participants' Response Letter at 7.
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V. Discussion and Commission Findings

    After carefully considering the proposed rule change, the comments
submitted, and the Participants' response to the comments,\97\ the
Commission finds that the proposal is consistent with the requirements
of the Act and the rules and regulations thereunder applicable to a
national securities association.\98\ Specifically, the Commission finds
that the proposed rule change is consistent with Section 15A(b)(6) of
the Act,\99\ which requires, among other things, that FINRA's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest, and are not designed to permit unfair discrimination between
customers, issuers, brokers or dealers. In addition, the Commission
finds that the proposed rule change is consistent with Section
15A(b)(9) of the Act,\100\ which requires that FINRA rules not impose
any burden on competition that is not necessary or appropriate.
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    \97\ See supra note 7.
    \98\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \99\ 15 U.S.C. 78o-3(b)(6).
    \100\ 15 U.S.C. 78o-3(b)(9).
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    Rule 613(g) of Regulation NMS provides that each national
securities exchange and national securities association shall file with
the Commission pursuant to section 19(b)(2) of the Act and Rule 19b-4
on or before 60 days from approval of the CAT NMS Plan a proposed rule
change to require its members to comply with the requirements of this
section and the national market system plan approved by the Commission.
In addition, Rule 608(c) of Regulation NMS provides that ``[e]ach self-
regulatory organization shall comply with the terms of any effective
national market system plan of which it is a sponsor or participant.
Each self-regulatory organization also shall, absent reasonable
justification or excuse, enforce compliance with any such plan by its
members and persons associated with its members.'' \101\ FINRA, as a
Participant in the Plan, has an obligation to comply, and enforce
compliance by its members, with the terms of the Plan. Accordingly,
FINRA filed this proposed rule change to adopt the FINRA Rule 6800
Series, which would impose compliance obligations on FINRA members. As
discussed below, the Commission also believes the proposal is
consistent with the Act because it is designed to assist FINRA in
meeting its regulatory obligations pursuant to Rule 608 of Regulation
NMS and the Plan.
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    \101\ 17 CFR 242.608(c).
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A. Definitions (Rule 6810)

    The Commission finds that proposed FINRA Rule 6810 is consistent
with the Act as it implements the CAT NMS Plan. With the exception of
the term ``CAT Reporting Agent,'' the definitions in proposed Rule 6810
are consistent with the definitions of Article I, Section 1.1 of the
CAT NMS Plan. With respect to the inclusion of a definition for ``CAT
Reporting Agent,'' FINRA notes that the CAT NMS Plan permits an
Industry Member to use a third party, such as a vendor, to report the
required data to the Central Repository on behalf of an Industry
Member, and that as defined, a ``CAT Reporting Agent'' would be one
type of Data Submitter, which term is defined in the CAT NMS Plan.
    The Commission notes that two commenters discussed the need for
further clarification on the application of the term ``Firm Designated
ID.'' The Participants responded that the Customer Information Approach
is intended to require that each broker-dealer assign a unique Firm
Designated ID at the account level, rather than the customer
level.\102\ Accordingly, a Firm Designated ID must be assigned at the
account level, so multiple Customers may be associated with the same
Firm Designated ID. The Commission believes that the definition of the
term Firm Designated ID and its applicability to accounts is consistent
with the Customer Information Approach and the CAT NMS Plan.
---------------------------------------------------------------------------

    \102\ Participants' Response Letter 5.
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B. Clock Synchronization (Rule 6820)

    The Commission finds that proposed Rule 6820 is consistent with the
Act as it implements the clock synchronization provisions of the CAT
NMS Plan. The Commission notes that proposed Rule 6820 sets out the
clock synchronization requirements for FINRA industry members and that
these clock synchronization requirements, including the synchronization
standards, tolerance levels, documentation, certification and violation
reporting are consistent with and implement the clock synchronization
requirements of the CAT NMS Plan.
    As noted above, two commenters raised concerns about the clock
synchronization requirements in proposed Rule 6820, including whether
the synchronization requirements of the rule apply to Business Clocks
that capture Manual Order Events; the definition of ``time of
allocation,'' the necessity of the clock synchronization log; and the
details concerning the clock synchronization certification. The
Participants responded by clarifying the applicability of the clock
synchronization requirements to

Allocation Reports, and by stating that the Participants intend to work
with the Plan Processor to define various terms, including ``time of
allocation,'' and to provide Technical Specifications approved by the
Operating Committee--relating to time stamps on manual orders and
electronic capture of manual orders, as well as the ``time of
allocation''--before Industry Members will be required to report to the
Central Repository on November 15, 2018 (or November 15, 2019 for Small
Industry Members) or comply with the February 19, 2018 Business Clock
synchronization requirement.\103\ The Participants also provided
further details about the utility of the synchronization logs and
discussed the clock synchronization certification requirements. The
Commission believes that the Participants' response is reasonable and
consistent with the Act.
---------------------------------------------------------------------------

    \103\ Participants' Response Letter at 3. See also Clock
Synchronization Exemption Request Letter, supra note 75, and Clock
Synchronization Order, supra note 77.
---------------------------------------------------------------------------

C. Industry Member Data Reporting (Rule 6830)

    The Commission finds that proposed Rule 6830--which sets forth the
data reporting requirements for Industry Members--is consistent with
the Act as it implements the data reporting requirements for Industry
Members that are required by the CAT NMS Plan. As noted above, proposed
Rule 6830 is divided into five sections which address (1) recording and
reporting Industry Member Data, (2) timing of the recording and
reporting, (3) the applicable securities covered by the recording and
reporting requirements, (4) the security symbology to be used in the
recording and reporting,\104\ and (5) error correction requirements.
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    \104\ The Commission notes that, with respect to the security
symbology that must be reported by an Industry Member for an
Eligible Security that is not Exchange-listed, proposed Rule
6830(d)(2) states that an Industry Member should use the symbology
format approved by the Operating Committee. FINRA represents that
for such securities, there is no listing exchange to provide the
symbology format and that the requisite symbology format has not
been determined at this time.
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D. Customer Information Reporting (Rule 6840)

    The Commission finds that proposed Rule 6840--which sets forth the
requirements regarding the data reported to the CAT in order to
identify Customers--is consistent with the Act as it implements the
reporting provisions of the CAT NMS Plan relating to the identification
of Customers.

E. Industry Member Information Reporting (Rule 6850)

    The Commission finds that proposed Rule 6850--which sets forth the
requirements for Industry Members regarding the data that they must
report to identify such Industry Member, including the timeframe for
reporting such identifying information--is consistent with the Act as
it implements the Industry Member reporting provisions of the CAT NMS
Plan.

F. Time Stamps (Rule 6860)

    The Commission finds that proposed Rule 6860--which sets forth the
time stamp increments to be used by Industry Members in their CAT
Reporting--is consistent with the Act as it implements the time stamp
provisions of the CAT NMS Plan. In general, proposed Rule 6860(a)(1)
requires Industry Members to record and report Industry Member Data to
the Central Repository in milliseconds, but paragraph (a)(2) provides
that, to the extent any Industry Member's order handling or execution
systems utilize time stamps in increments finer than milliseconds, such
Industry Member is to record and report Industry Member Data to the
Central Repository with time stamps in such finer increment. Proposed
Rule 6860(b) addresses the need for Industry Members to capture Manual
Order Events in increments up to and including one second, provided
that each Industry Member is required to record and report the
Electronic Capture Time in milliseconds.

G. Time Stamp and Clock Synchronization Rule Violations (Rule 6865)

    The Commission finds that proposed Rule 6865 is consistent with the
Act as it implements the clock synchronization rule violation
provisions of the CAT NMS Plan. The Commission notes that proposed Rule
6865 describes potential violations of clock synchronization as well as
the time stamp time period requirements set forth in the CAT NMS Plan,
and specifically states that an Industry Member that engages in a
pattern or practice of reporting Reportable Events with time stamps
generated by Business Clocks that are not synchronized according to the
requirements set forth in the Rule 6800 Series without reasonable
justification or exceptional circumstances may be considered in
violation of this Rule.

H. Connectivity and Data Transmission (Rule 6870)

    The Commission finds that proposed Rule 6870--which addresses
connectivity and data transmission requirements related to the CAT--is
consistent with the Act as it implements the connectivity and data
transmission provisions of the CAT NMS Plan. Proposed Rule 6870(a)
requires each Industry Member to transmit data as required under the
CAT NMS Plan to the Central Repository utilizing such format(s) as may
be provided by the Plan Processor and approved by the Operating
Committee, and proposed Rule 6870(b) requires each Industry Member to
connect to the Central Repository using a secure method(s), including,
but not limited to, private line(s) and virtual private network
connection(s). Proposed Rule 6870(c) permits Industry Members to use
CAT Reporting Agents to fulfill their data reporting obligations
related to the CAT. The Commission notes that Rule 6870(c) is
substantively similar to FINRA Rule 7450(c), in that proposed Rule
6870(c), like FINRA Rule 7450(c), permits OATS Reporting Members to
enter into agreements with Reporting Agents to fulfill the OATS
obligations of the OATS Reporting Member, specifies responsibilities
and procedures for maintaining such agreements between the OATS
Reporting Member and the Reporting Members, and clarifies that an OATS
Reporting Member remains primarily responsible for compliance with the
OATS reporting rules.

I. Development and Testing (Rule 6880)

    The Commission finds that proposed Rule 6880 is consistent with the
Act as it implements the development and testing provisions of the CAT
NMS Plan. Proposed Rule 6880(a)(1) addresses Industry Members'
connectivity and testing requirements, including connectivity and
acceptance testing timelines. Proposed Rule 6880(a)(2) addresses the
requirements relating to Industry Members' reporting of Customer and
Industry Member information. Proposed Rule 6880(a)(3)-(4) addresses the
submission of order data, including the Quote Sent time to be reported
by Options Market Makers. Proposed Rule 6880(b) requires that each
Industry Member shall participate in the testing related to the Central
Repository, including any industry-wide disaster recovery testing.

J. Recordkeeping (Rule 6890)

    The Commission finds that proposed Rule 6890 is consistent with the
Act. The Commission notes that proposed Rule 6890 requires each
Industry Member to maintain and preserve, and specifies the manner in
which such records must be maintained and preserved, information
required to be recorded under the proposed Rule 6800

Series for the period of time and accessibility specified in Rule 17a-
4(b). \105\ Because proposed Rule 6890 incorporate Rule 17a-4(b) and
implements the recordkeeping provision of the CAT NMS Plan, the
Commission finds that proposed Rule 6890 is consistent with the Act.
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    \105\ 17 CFR 240.17a-4(b). FINRA also notes that proposed Rule
6890 is based on Rule 7440(a)(5), which sets forth the recordkeeping
requirements related to OATS.
---------------------------------------------------------------------------

K. Timely, Accurate and Complete Data (Rule 6893)

    The Commission finds that proposed Rule 6893 is consistent with the
Act as it implements the requirements for reporting timely, accurate
and complete data to the CAT as set forth in the CAT NMS Plan. FINRA
notes that proposed Rule 6893 implements the requirement in Rule 613
and the CAT NMS Plan that data reported to the CAT be timely, accurate
and complete. Specifically, proposed Rule 6893(a) requires that
Industry Members record and report data to the Central Repository as
required by the proposed Rule 6800 Series in a manner that ensures the
timeliness, accuracy, integrity and completeness of such data. Proposed
Rule 6893(b) requires Industry Members to accurately provide the LEIs
in their records as required by the proposed Rule 6800 Series and
states that Industry Members may not knowingly submit inaccurate LEIs
to the Central Repository. Paragraph (b) notes, however, that this
requirement does not impose any additional due diligence obligations on
Industry Members with regard to LEIs for CAT purposes. Proposed Rule
6893(c) and (d) require Industry Members to be in compliance with the
Error Rate as set forth in the CAT NMS Plan and the Compliance
Thresholds as discussed in the CAT NMS Plan and determined by the
Operating Committee. Proposed Rule 6893 implements the CAT NMS Plan's
provisions.

L. Compliance Dates (Rule 6895)

    The Commission finds that the compliance dates in proposed Rule
6895 are consistent with the Act, as they implement the compliance
dates for reporting data to the CAT as set forth in the CAT NMS Plan
and an exemptive order issued by the Commission. Proposed Rule 6895(a)
states that, except as set forth in paragraphs (b) and (c) of the Rule
or otherwise set forth in this Rule Series, the compliance date for the
proposed Rule 6800 Series will be the date of Commission approval of
the proposed rule change.
    Proposed Rule 6895(b)(1) states that each Industry Member that
captures time in milliseconds shall comply with Rule 6820 with regard
to Business Clocks on or before March 15, 2017. Paragraph (b)(2) states
that each Industry Member that does not capture time in milliseconds
shall comply with Rule 6820 with regard to Business Clocks on or before
February 19, 2018. The Commission notes that the compliance date set
forth in proposed Rule 6895(b)(2) reflects the exemptive relief
requested by the Participants and granted by the Commission with regard
to the clock synchronization requirements related to Business Clocks
that do not capture time in milliseconds.\106\
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    \106\ See supra note 77.
---------------------------------------------------------------------------

    Proposed Rule 6895(c)(1) requires each Industry Member (other than
Small Industry Members) to record and report the Industry Member Data
to the Central Repository by November 15, 2018. Proposed rule
6895(c)(2) requires that each Industry Member that is a Small Industry
Member to record and report the Industry Member Data to the Central
Repository by November 15, 2019.\107\ Proposed Rule 6895(c)(1) and
(c)(2) implement the CAT NMS Plan's provisions regarding the reporting
of Industry Member data to the Central Repository.
---------------------------------------------------------------------------

    \107\ Such compliance dates are consistent with the compliance
dates set forth in SEC Rule 613(a)(3)(v) and (vi), and Sections
6.7(a)(v) and (vi) of the CAT NMS Plan.
---------------------------------------------------------------------------

    The Commission notes that one commenter also requested that FINRA
classify all firms currently exempt from reporting to OATS to be
classified as a ``Small Industry Member'' as defined by the CAT NMS
Plan.\108\ The commenter notes that some OATS exempt firms would be
classified as Large Industry Members but really should be subject to
the three year implementation timeframe for Small Industry Members. The
Participants responded that the definition of ``Small Industry Member''
is appropriate because it is an existing regulatory standard. The
Commission believes that the proposed rule change's use of the ``Small
Industry Member'' definition is consistent with the CAT NMS Plan.
---------------------------------------------------------------------------

    \108\ Wachtel Letter at 1.
---------------------------------------------------------------------------

    The Commission notes that a commenter suggested that a cost/benefit
analysis be performed to review the impact of CAT on firms currently
exempt from reporting to OATS. The Participants responded the
Commission had already undertaken into account the impact of CAT on
firms currently exempt from OATS. The Commission likewise notes that it
took into account the impact of the Plan on firms currently exempt from
reporting to OATS when it approved the CAT NMS Plan.