[Federal Register Volume 82, Number 25 (Wednesday, February 8, 2017)]
[Notices]
[Pages 9942-9954]
[FR Doc No: 2017-02538]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79933; File No. SR-NSX-2017-03]

Self-Regulatory Organizations; National Stock Exchange, Inc.;
Notice of Filing of Proposed Rule Change To Implement Compliance Rules
Regarding the National Market System Plan Governing the Consolidated
Audit Trail

February 2, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 30, 2017, National Stock Exchange, Inc. (``NSX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') a proposed rule change, as described in
Items I and II below, which Items have been substantially prepared by
the Exchange.\3\ The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ The Exchange originally filed this proposed rule change on
January 17, 2017 under File No. SR-NSX-2017-02, and the Exchange
subsequently withdrew that filing on January 30, 2017 and filed this
proposed rule change.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend Chapter XIV of its rules to
implement the compliance rule (``Compliance Rule'') regarding the
National Market System Plan Governing the Consolidated Audit Trail.
[sic] (the ``CAT NMS Plan'' or ``Plan'').\4\
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    \4\ Unless otherwise specified, capitalized terms used in this
rule filing are defined as set forth herein or in the CAT NMS Plan.
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    The text of the proposed rule change is available at the Exchange's
Web site at www.nsx.com, at the principal office of the Exchange, and
at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements
concerning the purpose of and statutory basis for the proposed rule
change and discussed any comments it received on the proposed rule
change. The text of these statements may be examined at the places
specified in Item IV below. The Exchange has prepared summaries, set
forth in Sections A, B, and C below, of the most significant parts of
such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Bats BZX Exchange, Inc., Bats BYX 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., Financial Industry
Regulatory Authority, 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. [sic] NASDAQ PHLX LLC) [sic], The NASDAQ Stock Market
LLC, NSX, New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca,
Inc. (collectively, ``self-regulatory organizations'', ``SROs'' or
``Participants''), filed with the Commission a National Market System
(``NMS'') Plan Governing the Consolidated Audit Trail (the ``CAT NMS
Plan,'' ``CAT Plan'' or ``Plan'').\5\ The SROs filed amendments to the
CAT NMS Plan on December 24, 2015, and on February 8, 2016.\6\ The Plan
was published for comment in the Federal Register on May 17, 2016,\7\
and approved by the Commission, as modified, on November 15, 2016.\8\
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    \5\ See Letter from 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.
Pursuant to Rule 613, the SROs were required to file the CAT NMS
Plan on or before April 28, 2013. At the SROs' request, the
Commission granted exemptions to extend the deadline for filing the
CAT NMS Plan to December 6, 2013, and then to September 30, 2014.
See Securities Exchange Act Release Nos. 69060 (March 7, 2013), 78
FR 15771 (March 12, 2013); 71018 (December 6, 2013), 78 FR 75669
(December 12, 2013). The SROs filed the CAT NMS Plan on September
30, 2014 (the ``Initial CAT NMS Plan''). See Letter from the SROs,
to Brent J. Fields, Secretary, Commission, dated September 30, 2014.
The CAT NMS Plan filed on February 27, 2015, was an amendment to and
replacement of the Initial CAT NMS Plan.
    \6\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated December 23, 2015. On February 9, 2016, the
Participants filed with the Commission an identical, but unmarked,
version of the February 27, 2015 CAT NMS Plan, as modified by the
December 24, 2015 Amendment, as well as a copy of the request for
proposal issued by the Participants to solicit Bids from parties
interested in serving as the Plan Processor for the consolidated
audit trail. See Letter from Participants to Brent J. Fields,
Secretary, Commission, dated February 8, 2016.
    \7\ Securities Exchange Act Release No. 77724 (Apr. 27, 2016),
81 FR 30614 (May 17, 2016).
    \8\ Securities Exchange Act Release No. 79318 (Nov. 15, 2016),
81 FR 84696 (Nov. 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.\9\ As is described more fully below, the Exchange is proposing
to amend Chapter XIV of its rules, which is currently a ``reserved''
chapter, to adopt Rules 14.1 through 14.12; these rules set forth the
Compliance Rule to require Industry Members to comply with the
provisions of the CAT NMS Plan. The proposed rule change includes
twelve proposed 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. Each of these proposed rules is discussed in detail
below.
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    \9\ See Rule 613(g)(1).
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(i) Definitions
    Proposed Rule 14.1 (Consolidated Audit Trail--Definitions) sets
forth the definitions for the terms used in the Chapter XIV Rule
Series. Each of the defined terms in Proposed Rule 14.1 is discussed in
detail in this section.
(A) Account Effective Date
(I) Customer Information Approach
    SEC Rule 613 requires that numerous data elements be reported to
the CAT to ensure there is sufficient information to create the
lifecycle of an order, and provide regulators with sufficient detail
about an order to perform their regulatory duties. Certain required
elements are intended to ensure that the regulators can identify the
Customers associated with orders. For example, Rule 613(c)(7)(i)(A)
requires an Industry Member to report the ``Customer-IDs'' for each
Customer for the original receipt or origination of an order.

``Customer-ID'' is defined in SEC 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.''
SEC Rule 613(c)(8) requires Industry Members to use the same Customer-
ID for each Customer. The SEC 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.\10\ The alternative approach is called the
Customer Information Approach.
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    \10\ 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 at 12 (``Exemptive Request Letter''); and CAT
NMS Plan at Appendix C, Section A.1(a)(iii).
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    Under the Customer Information Approach, the CAT NMS Plan would
require each Industry Member to assign a unique Firm Designated ID to
each Customer. As the Firm Designated ID, Industry Members would 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). Prior to their
commencement of reporting to the CAT, Industry Members would 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 LEI and/or Larger
[sic] Trader ID (``LTID'')). This process is referred to as the
customer definition process.
    In accordance with the Customer Information Approach, Industry
Members would 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. Within the Central
Repository, each Customer would 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 would 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 would 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.
(II) Definition of Account Effective Date
    In connection with the Customer Information Approach, Industry
Members would be required to report Customer Account Information to the
Central Repository. ``Customer Account Information'' is defined in SEC
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).'' Therefore, when reporting Customer
Account Information, an Industry Member is required to report the date
an account was opened. The Participants requested and received an
exemption to allow an ``Account Effective Date'' to be reported in lieu
of an account open date in certain limited circumstances. The
definition of ``Account Effective Date'' as set forth in Paragraph (a)
of proposed Rule 14.1 describes those limited circumstances in which an
Industry Member may report an ``Account Effective Date'' rather than
the account open date. 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.
    Specifically, Paragraph (a)(1) defines ``Account Effective Date
[sic] 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 14.1 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) 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) 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) 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). With regard to paragraphs (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.
(B) Active Account
    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. This will
alleviate the need for Industry Members to update such information for
non-active accounts, but still ensure that the Central Repository will
collect audit trail data for Customer accounts that have any Reportable
Events. Accordingly, paragraph (b) of Proposed Rule 14.1 defines an
``Active Account'' as an account that has had activity in Eligible
Securities within the last six months. This is the same

definition as set forth in Section 1.1 of the CAT NMS Plan.
(C) Allocation Report
(I) Allocation Report Approach
    SEC Rule 613(c)(7)(vi)(A) 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).'' The Participants requested and received from the SEC exemptive
relief from SEC Rule 613 for an alternative to this approach
(``Allocation Report Approach''). The Allocation Report Approach would
permit 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 SEC Rule 613.\11\ Under SEC
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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    \11\ See Exemptive Request Letter at 26-27; and Exemption Order.
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(II) Definition of Allocation Report
    To assist in implementing the Allocation Report Approach, paragraph
(c) of Proposed Rule 14.1 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. This is the same definition as set forth in Section 1.1 of
the CAT NMS Plan.
(D) 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 14.1
defines the term ``Business Clock'' as a clock used to record the date
and time of any Reportable Event required to be reported under the
Rules in Chapter XIV. This is the same definition as set forth in
Section 1.1 of the CAT NMS Plan, except the Exchange 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.''
This change is intended to recognize that the Industry Members'
obligations with regard to the CAT are set forth in this [sic] Rules
contained in Chapter XIV.
(E) CAT
    Paragraph (e) of Proposed Rule 14.1 defines the term ``CAT'' to
mean the consolidated audit trail contemplated by SEC Rule 613. This is
the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(F) CAT NMS Plan
    Paragraph (f) of Proposed Rule 14.1 defines the term ``CAT NMS
Plan'' to mean the National Market System Plan Governing the
Consolidated Audit Trail, as amended from time to time.
(G) CAT-Order-ID
(I) Daisy Chain Approach
    Under the CAT NMS Plan, the Daisy Chain Approach is used to link
and reconstruct the complete lifecycle of each Reportable Event in CAT.
According to this Approach, Industry Members assign their own
identifiers to each order event. Within the Central Repository, the
Plan Processor later replaces 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 is used to link the Reportable Events related to the same
order.
(II) Definition of CAT-Order-ID
    To implement the Daisy Chain Approach, Paragraph (g) of Proposed
Rule 14.1 defines the term ``CAT-Order-ID.'' The term ``CAT-Order-ID''
is defined 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. This is
the same definition as set forth in SEC Rule 613(j)(1), and Section 1.1
of the CAT NMS Plan defines ``CAT-Order-ID'' by reference to SEC Rule
613(j)(1).
(H) 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.\12\ Such a third party, referred to
in the Chapter XIV Rule Series as a ``CAT Reporting Agent,'' would be
one type of a Data Submitter, that is, a party that submits data to the
Central Repository. Paragraph (h) of proposed Rule 14.1 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
reporting obligations under the rules set forth in Chapter XIV.
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    \12\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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    This definition is based on FINRA's definition of a ``Reporting
Agent'' as set forth in FINRA's rule related to its Order Audit Trail
System (``OATS''). Specifically, FINRA 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 member's obligations under Rule 7450. The Reporting Agent for OATS
fulfills a similar role to the CAT Reporting Agent.
(I) Central Repository
    Paragraph (i) of Proposed Rule 14.1 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 SEC Rule 613 and the CAT NMS Plan. This is the same
definition as set forth in Section 1.1 of the CAT NMS Plan, except the
Exchange uses the phrase ``CAT NMS Plan'' in place of the phrase ``this
Agreement.''
(J) Compliance Threshold
    Paragraph (j) of Proposed Rule 14.1 defines the term ``Compliance
Threshold'' as having the meaning set forth in Proposed Rule 14.11(d).
This definition has the same substantive meaning as the definition set
forth in Section 1.1 of the CAT NMS Plan. As discussed in detail below
with regard to Proposed Rule 14.11(d), 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. This Industry Member-specific rate is the ``Compliance
Threshold.''

(K) 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 14.1 proposes to define the term
``Customer.'' Specifically, the term ``Customer'' would be 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). This is the same definition as
set forth in SEC Rule 613(j)(3), except the Exchange 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 Chapter XIV Rule Series. The Exchange also notes that Section 1.1
of the CAT NMS Plan defines ``Customer'' by reference to SEC Rule
613(j)(3).
(L) 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, the Exchange 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 14.1 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 14.1(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.
(M) 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, the Exchange proposes to define the
term ``Customer Account Information'' to clarify what Customer
information would need to be reported to the Central Repository.
    Paragraph (m) of Proposed Rule 14.1 defines the term ``Customer
Identifying Information'' to mean information of sufficient detail to
identify a Customer. With respect to individuals, ``Customer
Identifying Information'' includes, but is not limited to: Name,
address, date of birth, individual tax payer identification number
(``ITIN'')/social security number (``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, Employer Identification Number (``EIN'')/Legal Entity
Identifier (``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. This
is the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(N) Data Submitter
    The CAT NMS Plan uses the term ``Data Submitter'' to refer to any
person that reports data to the Central Repository.\13\ 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 Chapter XIV Rule Series, the Exchange proposes to define ``Data
Submitter'' in paragraph (n) of Proposed Rule 14.1. Specifically,
paragraph (n) of Proposed Rule 14.1 defines a ``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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    \13\ Appendix C, Section A.1(a) of the CAT NMS Plan.
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(O) Eligible Security
    The reporting requirements of the Chapter XIV Rule 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 14.1 defines the term
``Eligible Security'' to include: (1) All NMS Securities; and (2) all
OTC Equity Securities. The terms ``NMS Securities'' and ``OTC Equity
Securities'' are defined, in turn, below. This is the same definition
as set forth in Section 1.1 of the CAT NMS Plan.
(P) Error Rate
(I) Maximum Error Rate
    Under the CAT NMS Plan, the Operating Committee sets the maximum
Error Rate that the Central Repository would tolerate from an Industry
Member reporting data to the Central Repository.\14\ The Operating
Committee reviews and resets the maximum Error Rate, at least
annually.\15\ 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.\16\ As such, the Exchange or the SEC
``[sic] may take appropriate action against an Industry Member for
failing to comply with its CAT reporting obligations.\17\ The CAT NMS
Plan sets the initial Error Rate at 5%.\18\ 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.\19\
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    \14\ Section 6.5(d)(i) of the CAT NMS Plan.
    \15\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \16\ Appendix C, Section A.3(b) of the CAT NMS Plan; Rule
613(g)-(h).
    \17\ Appendix C, Section A.3(b) of the CAT NMS Plan.
    \18\ Section 6.5(d)(i) of the CAT NMS Plan.
    \19\ Appendix C, Section A.3(b) of the CAT NMS Plan.
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    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.\20\
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    \20\ Approval Order at 84718.
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(II) Definition of Error Rate
    To implement the requirements of the CAT NMS Plan related to the
Error Rate, the Exchange proposes to define the term ``Error Rate'' in
Proposed Rule 14.1. Paragraph (p) of Proposed Rule 14.1 defines 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. This is the same definition as set forth in SEC Rule 613(j)(6),
and Section 1.1 of the CAT NMS Plan defines ``Error Rate'' by reference
to SEC Rule 613(j)(6).
(Q) Firm Designated ID
    As discussed above, under the Customer Information Approach, the
CAT NMS Plan would require each Industry Member to assign a unique Firm
Designated ID to each Customer. Industry Members would 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 (i.e., a single firm may not have multiple
separate customers with the same identifier on any given date).
Industry Members would 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, the
Exchange proposes to define the term ``Firm Designated ID'' in Proposed
Rule 14.1.
    Specifically, paragraph (q) of Proposed Rule 14.1 defines the term
``Firm Designated ID'' 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.
This is the same definition as set forth in Section 1.1 of the CAT NMS
Plan. Industry Members would 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).
(R) Industry Member
    Paragraph (r) of Proposed Rule 14.1 defines the term ``Industry
Member'' to mean a member of a national securities exchange or a member
of a national securities association.'' This is the same definition as
set forth in Section 1.1 of the CAT NMS Plan.
(S) Industry Member Data
    Paragraph (s) of Proposed Rule 14.1 states that the term ``Industry
Member Data'' has the meaning set forth in Rule 14.3(a)(2). This
definition has the same substantive meaning as the definition set forth
in Section 1.1 of the CAT NMS Plan. The definition of ``Industry Member
Data'' is discussed more fully in the discussion below regarding
Proposed Rule 14.3(a)(2).
(T) Initial Plan Processor
    Paragraph (t) of Proposed Rule 14.1 defines the term ``Initial Plan
Processor'' to mean the first Plan Processor selected by the Operating
Committee in accordance with SEC 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. This is the same definition as set forth in Section 1.1 of
the CAT NMS Plan, although the proposed definition uses the full name
of the ``Selection Plan.''
(U) Listed Option or Option
    The CAT NMS Plan and this Chapter XIV Rule Series apply to Eligible
Securities, which includes NMS Securities, which, in turn, includes
Listed Options. Certain requirements of the Chapter XIV Rule Series
apply specifically to Listed Options. Accordingly, Paragraph (u) of
Proposed Rule 14.1 defines the term ``Listed Option'' or ``Option.''
Specifically, paragraph (u) of Proposed Rule 14.1 states that the term
``Listed Option'' or ``Option'' has the meaning set forth in SEC Rule
600(b)(35) of Regulation NMS. SEC Rule 600(b)(35), in turn, defines a
listed option as ``any option traded on a registered national
securities exchange or automated facility of a national securities
association.'' The Exchange notes 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.
(V) Manual Order Event
(I) 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.\21\ 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 a synchronization. Industry Members are required to
synchronize their Business Clocks used solely for Manual Order Events,
however, at a minimum to within one second of the time maintained by
the NIST.
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    \21\ See Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Manual Order Event
    In order to clarify what a Manual Order Event is for clock
synchronization and time stamp purposes, the Exchange proposes to
define the term ``Manual Order Event'' in Proposed Rule 14.1.
Specifically, paragraph (v) of Proposed Rule 14.1 defines the term
``Manual Order Event'' to mean a non-electronic communication of order-
related information for which Industry Members must record and report
the time of the event. This is the same definition as set forth in
Section 1.1 of the CAT NMS Plan.
(W) Material Terms of the Order
    Proposed Rule 14.3 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, the Exchange proposes
to define the term ``Material Terms of the Order'' in Proposed Rule
14.1. Specifically, paragraph (w) of Proposed Rule 14.1 defines 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. This is the same definition as
set forth in Section 1.1 of the CAT NMS Plan.
(X) NMS Security
    NMS Securities are one of the types of Eligible Securities for the
CAT. Therefore, the Exchange proposes to define the term ``NMS
Security'' in Proposed Rule 14.1. Specifically, paragraph (x) of
proposed Rule 14.1 defines 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. This is the same
definition as set forth in Section 1.1 of the CAT NMS Plan.
(Y) NMS Stock
    Under the CAT NMS Plan, the Operating Committee may establish
different Trading Days for NMS Stocks (as defined in SEC Rule
600(b)(47)), Listed Options, OTC Equity Securities, and any other
securities that are included as Eligible Securities from time to time.
Accordingly, the Exchange proposes to define the term ``NMS Stock'' in
Paragraph (y) of Proposed Rule 14.1 to mean any NMS Security other than
an option. This is the same definition as set forth in SEC Rule
600(b)(47) of Regulation NMS.
(Z) Operating Committee
    Paragraph (z) of Proposed Rule 14.1 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. This is the
same definition as set forth in Section 1.1 of the CAT NMS Plan, except
the Exchange proposes to use the phrase ``CAT NMS LLC'' in place of the
phrase ``the Company'' for clarity.
(AA) Options Market Maker
(I) 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. SEC Rule
613(j)(8) defines ``order'' to include ``any bid or offer.'' 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.
    The Participants, however, requested and received exemptive relief
from Rule 613 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 SEC
Rule 613.\22\ In accordance with the exemptive relief, Options Market
Makers would 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.
---------------------------------------------------------------------------

    \22\ See Exemptive Request Letter at 2, and Exemption Order.
---------------------------------------------------------------------------

(II) Definition of Options Market Maker
    To implement the requirements related to Option Market Maker
quotes, the Exchange proposes to define the term ``Options Market
Maker'' in Proposed Rule 14.1. Specifically, paragraph (aa) of Proposed
Rule 14.1 defines 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 such exchange. This is the same definition
as set forth in Section 1.1 of the CAT NMS Plan.
(BB) Order
    The Chapter XIV Rule Series requires each Industry Member to record
and electronically report to the Central Repository certain details for
each order. Accordingly, the Exchange proposes to define the term
``Order'' in Proposed Rule 14.1. Specifically, paragraph (bb) of
Proposed Rule 14.1 defines 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. This is the same definition as set forth in Rule
613(j)(8), except the Exchange proposes to replace the phrase ``member
of a national securities exchange or national securities association''
with the term ``Industry Member.'' The Exchange notes that Section 1.1
of the CAT NMS Plan defines ``Order'' by reference to SEC Rule
613(j)(8).
(CC) OTC Equity Security
    OTC Equity Securities are one of the types of Eligible Securities
for the CAT. Therefore, the Exchange proposes to define the term ``OTC
Equity Security'' in Proposed Rule 14.1. Specifically, paragraph (cc)
of proposed Rule 14.1 defines 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. This is

the same definition as set forth in Section 1.1 of the CAT NMS Plan.
(DD) Participant
    Paragraph (dd) of Proposed Rule 14.1 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. This is the same definition in substance
as set forth in Section 1.1 of the CAT NMS Plan.
(EE) Person
    Paragraph (ee) of proposed Rule 14.1 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. This is the same definition as set forth in Section
1.1 of the CAT NMS Plan.
(FF) Plan Processor
    Paragraph (ff) of proposed Rule 14.1 defines the term ``Plan
Processor'' to mean the Initial Plan Processor or any other Person
selected by the Operating Committee pursuant to SEC Rule 613 and
Sections 4.3(b)(i) and 6.1 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 SEC Rule 613 and set forth in the CAT NMS Plan.
(GG) Received Industry Member Data
    Paragraph (gg) of proposed Rule 14.1 states that the term
``Received Industry Member Data'' has the meaning set forth in Rule
14.3(a)(2). This definition has the same substantive meaning as the
definition set forth in Section 1.1 of the CAT NMS Plan. The definition
of ``Received Industry Member Data'' is discussed more fully in the
discussion below regarding Proposed Rule 14.3(a)(2).
(HH) Recorded Industry Member Data
    Paragraph (hh) of proposed Rule 14.1 states that the term
``Recorded Industry Member Data'' has the meaning set forth in Rule
14.3(a)(1). This definition has the same substantive meaning as the
definition set forth in Section 1.1 of the CAT NMS Plan. The definition
of ``Recorded Industry Member Data'' is discussed more fully in the
discussion below regarding Proposed Rule 14.3(a)(1).
(II) Reportable Event
    Proposed Rules 14.1 through 14.12 require each Industry Member to
record and electronically report to the Central Repository certain
details for each Reportable Event. To clarify these requirements, the
Exchange proposes to define the term ``Reportable Event'' in Proposed
Rule 14.1. Specifically, paragraph (ii) of Proposed Rule 14.1 states
that the term ``Reportable Event'' includes, but is not limited to, the
original receipt or origination, modification, cancellation, routing,
execution (in whole or in part) and allocation of an order, and receipt
of a routed order. This is the same definition as set forth in Section
1.1 of the CAT NMS Plan.
(JJ) SRO
    Paragraph (jj) of proposed Rule 14.1 defines the term ``SRO'' to
mean any self-regulatory organization within the meaning of Section
3(a)(26) of the Exchange Act. This is the same definition as set forth
in Section 1.1 of the CAT NMS Plan.
(KK) SRO-Assigned Market Participant Identifier
(I) Existing Identifier Approach
    The Participants requested and received exemptive relief from Rule
613 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).\23\ 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.
---------------------------------------------------------------------------

    \23\ See Exemptive Request Letter at 19, and Exemption Order.
---------------------------------------------------------------------------

    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 [sic], including CRD
number or [sic] \24\ LEI, if the SRO has collected such LEI of the
industry member [sic]. Additionally, each Industry Member is required
to submit to the Central Repository the CRD number of the industry
member [sic] as well as the LEI of the industry member [sic], if the
industry member [sic] 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.
---------------------------------------------------------------------------

    \24\ The Commission notes that the SRO must submit to the
Central Repository the CRD number as well as the LEI of each such
Industry Member, if the SRO has collected the LEI of the Industry
Member.
---------------------------------------------------------------------------

(II) Definition of SRO-Assigned Market Participant Identifier
    To implement the Existing Identifier Approach, the Exchange
proposes to define the term ``SRO-Assigned Market Participant'' in
Proposed Rule 14.1. Specifically, paragraph (kk) of proposed Rule 14.1
defines 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. This is the same definition as set forth in
Section 1.1 of the CAT NMS Plan. For example, 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.
(LL) Small Industry Member
    The requirements of the proposed rules 14.1 through 14.12 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, the Exchange proposes to define
the term ``Small Industry Member'' in Proposed Rule 14.1. Specifically,
paragraph (ll) of proposed Rule 14.1 defines the term ``Small Industry
Member'' to mean an Industry Member that qualifies as a small broker-
dealer as defined in Rule 0-10(c) under the Securities Exchange Act of
1934, as amended. 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 SEC Rule 613.'' The
definition of a small broker-dealer under SEC Rule 613, in turn, is a
small broker-dealer as defined in SEC Rule 0-10(c).
(MM) Trading Day
    Proposed Rule 14.3(b) establishes the deadlines for reporting
certain data to the Central Repository using the term ``Trading Day.''
Accordingly, the Exchange proposes to define the term ``Trading Day''
in proposed Rule 14.1. Specifically, Paragraph (mm) of proposed Rule
14.1 states that the term ``Trading Day'' shall have the meaning as is
determined by the Operating Committee. For the avoidance of doubt, the
Operating Committee may establish different Trading Days for NMS Stocks
(as defined in SEC Rule 600(b)(47), Listed Options, OTC Equity
Securities, and any other securities that are included as Eligible
Securities from time to time.
(ii) Clock Synchronization
    Rule 613(d)(1) under Regulation NMS requires Industry Members to
synchronize their Business Clocks to the time maintained by NIST,
consistent with industry standards. To comply with this provision,
Section 6.8 of the Plan sets forth the clock synchronization
requirements for Industry Members.\25\ To implement these provisions
with regard to its Industry Members, the Exchange proposes Rule 14.2
(Consolidated Audit Trail--Clock Synchronization) to require its
Industry Members to comply with the clock synchronization requirements
of the Plan.
---------------------------------------------------------------------------

    \25\ In addition, Section 6.7(a)(ii) of the Plan sets forth the
timeline for CAT Reporters to comply with the clock synchronization
requirements.
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 14.2 sets forth the manner in which
Industry Members must synchronize their Business Clocks. Paragraph
(a)(1) of Proposed Rule 14.2 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. 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 14.2 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. 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 14.2 clarifies that the tolerance
described in paragraphs (a)(1) and (2) of the proposed Rule 14.2
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. This description of the clock
synchronization tolerance is the same as set forth in paragraph (b) of
FINRA Rule 4590 (Synchronization of Member Business Clocks).
    Paragraph (a)(4) of proposed Rule 14.2 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. This description of the required
frequency of clock synchronization is the same as set forth in
paragraph (c) of FINRA Rule 4590 (Synchronization of Member Business
Clocks).
    Paragraph (b) of Proposed Rule 14.2 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.
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. Moreover, these documentation requirements
regarding clock synchronization are comparable to those set forth in
Supplementary Material .01 of FINRA Rule 4590 (Synchronization of
Member Business Clocks).
    Paragraph (c) of proposed Rule 14.2 sets forth certification
requirements with regard to clock synchronization. Specifically,
paragraph (c) of proposed Rule 14.2 requires each Industry Member to
periodically certify to the Exchange that its Business Clocks satisfy
the synchronization requirements set forth in paragraph (a) of Proposed
Rule 14.2, in accordance with the certification schedule established by
the Operating Committee pursuant to the CAT NMS Plan. This requirement
is the same requirement as set forth in Section 6.8(a)(ii)(B), (iii)
and (iv) of the CAT NMS Plan. The Exchange intends to announce to its
Industry Members the certification schedule established by the
Operating Committee via an Information Circular.
    Paragraph (d) of Proposed Rule 14.2 establishes further reporting
requirements with regard to clock synchronization. Paragraph (d) of
Proposed Rule 14.2 requires Industry Members to report to the Plan
Processor and to the Exchange violations of paragraph (a) of this Rule
pursuant to the thresholds set by the Operating Committee pursuant to
the CAT NMS Plan. This requirement is the same requirement as set forth
in Section 6.8(a)(ii)(C), (iii) and (iv) of the CAT NMS Plan. The
Exchange intends to announce to its Industry Members the relevant
thresholds established by the Operating Committee via an Information
Circular.
(iii) Industry Member Data Reporting
    Rule 613(c) under Regulation NMS requires the CAT NMS Plan to set
forth certain provisions requiring Industry Members to record and
report data to the CAT. 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, the Exchange proposes Rule 14.3 (Consolidated Audit
Trail--Industry Member Data Reporting) to require its Industry Members
to comply with the Industry Member Data reporting requirements of the
Plan. Proposed Rule 14.3 has six [sic] sections covering: (1) Recording
and reporting Industry Member Data, (2) timing of the recording and
reporting, (3) the applicable securities cover [sic] by the recording
and reporting requirements, (4) format, [sic] (5) the security
symbology to be used in the recording and reporting, and (6) error
correction requirements, each of which is described below.

(A) Recording and Reporting Industry Member Data
    Paragraph (a) of proposed Rule 14.3 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. Paragraphs (a)(1)-(a)(3) of Proposed Rule 14.3 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 14.6); 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 14.6); (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 14.6); (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 14.6); (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 14.6; (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 14.3 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 14.3(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 14.4, Customer Account Information and Customer
Identifying Information for the relevant Customer.
    Paragraph (a)(3) of proposed Rule 14.3 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.
(B) Timing of Recording and Reporting
    Paragraph (b) of proposed Rule 14.3 describes the requirements
related to the timing of recording and reporting of Industry Member
Data. Paragraphs (b)(1)-(b)(3) of proposed Rule 14.3 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 14.3 requires each Industry
Member to record Recorded Industry Member Data contemporaneously with
the applicable Reportable Event. Paragraph (b)(2) of Proposed Rule 14.3
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.
(C) Applicable Securities
    Paragraph (c) of proposed Rule 14.3 describes the securities to
which the recording and reporting requirements of proposed Rule 14.3
apply. Paragraphs (c)(1) and (c)(2) of proposed Rule 14.3 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 14.3 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 14.3 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 14.3
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 14.3 for each Eligible Security for which
transaction reports are required to be submitted to FINRA.
(D) Security Symbology
    Paragraph (d) of proposed Rule 14.3 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 14.3
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. 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,
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 14.3 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. The Exchange intends to announce to its Industry Members
the relevant symbology formats established by the Operating Committee
via an Information Circular.
(E) Error Correction
    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, the Exchange proposes to adopt paragraph
(e) of proposed Rule 14.3, which addresses the correction of erroneous
data reported to the Central Repository. Paragraph (e) of proposed Rule
14.3 requires, 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, that such Industry Member submit
corrected Industry Member Data to the Central Repository by 8:00 a.m.
Eastern Time on T+3. This requirement implements the error correction
requirement set forth in Section 6 of Appendix D of the CAT NMS Plan.
(iv) Customer Information Reporting
    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. The Exchange proposes Rule 14.4 (Consolidated Audit
Trail--Customer Information Reporting) to implement this provision of
the CAT NMS Plan with regard to its Industry Members. Specifically,
paragraph (a) of proposed Rule 14.4 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 14.9.
    Paragraph (b) of proposed Rule 14.4 requires each Industry Member
to submit to the Central Repository on a daily basis 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.
    Paragraph (c) of proposed Rule 14.4 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. The
Exchange intends to announce to its Industry Members when such a
periodic refresh is required by the Plan Processor and the Operating
Committee via an Information Circular.
    Finally, paragraph (d) of proposed Rule 14.4 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. This requirement implements the error
correction requirement set forth in Appendix C of the CAT NMS Plan.
(v) Industry Member Information Reporting
    Section 6.4(d)(vi) of the CAT NMS Plan requires Industry Members to
submit to the Central Repository, on a daily basis [sic],\26\
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. The Exchange proposes
Rule 14.5 (Consolidated Audit Trail--Industry Member Information
Reporting) to implement this provision of the CAT NMS Plan with regard
to its Industry Members. Specifically, proposed Rule 14.5 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 14.9, and keep such information up
to date as necessary.
---------------------------------------------------------------------------

    \26\ The Commission notes that Section 6.4(d)(vi) of the CAT NMS
Plan does not specify a submission frequency.
---------------------------------------------------------------------------

(vi) Time Stamps
    Rule 613(d)(3) under Regulation NMS sets forth requirements for
time stamps used by CAT Reporters in recording and reporting data to
the CAT.\27\ 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, the Exchange
proposes new Rule 14.6 (Consolidated Audit Trail--Time Stamps) to
require its Industry Members to comply with the time stamp requirements
of the Plan.
---------------------------------------------------------------------------

    \27\ 17 CFR 242.613(d)(3).
---------------------------------------------------------------------------

    Paragraph (a) of proposed Rule 14.6 sets forth the time stamp
increments to be used by Industry Members in their CAT reporting.
Paragraph (a)(1) of proposed Rule 14.6 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 14.6. 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 14.6 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 14.6 regarding Manual Order Events and
Allocation Reports.
    Paragraph (b) of proposed Rule 14.6 sets forth the permissible time
stamp increments for Manual Order Events and Allocation Reports.
Specifically, paragraph (b)(1) of proposed Rule 14.6

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
time when a Manual Order Event has been captured electronically in an
order handling and execution system of such Member (``Electronic
Capture Time'') in milliseconds. In addition, paragraph (b)(2) of
proposed Rule 14.6 permits each Industry Member to record and report
the time of Allocation Reports in increments up to and including one
second.
(vii) Clock Synchronization Rule Violations
    Proposed Rule 14.7 (Consolidated Audit Trail--Clock Synchronization
Rule Violations [sic]) describes potential violations of the clock
synchronization time period requirements set forth in the Chapter XIV
Rule Series. Proposed Rule 14.7 states that an Industry Member that
engages in a pattern or practice of reporting Reportable Events outside
of the required clock synchronization time period as set forth in this
Rule Series without reasonable justification or exceptional
circumstances may be considered in violation of this Rule. 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 SEC Rule 613
or the CAT NMS Plan.
(viii) Connectivity and Data Transmission
    Proposed Rule 14.8 (Consolidated Audit Trail--Connectivity and Data
Transmission) addresses connectivity and data transmission requirements
related to the CAT. Paragraph (a) of Proposed Rule 14.8 describes the
format(s) for reporting Industry Member Data to the Central Repository,
thereby implementing the formatting requirements as set forth in
Section 6.4(a) of the CAT NMS Plan. Specifically, paragraph (a) of
proposed Rule 14.8 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.
    Paragraph (b) of proposed Rule 14.8 addresses connectivity
requirements related to the CAT. Paragraph (b) of proposed Rule 14.8
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). This provision
implements the connectivity requirements set forth in Section 4 of
Appendix D to the CAT NMS Plan.
    Paragraph (c) permits Industry Members to use CAT Reporting Agents
to fulfill their data reporting obligations related to the CAT.
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.
Specifically, Paragraph (c)(1) of proposed Rule 14.8 states that any
Industry Member may enter into an agreement with a CAT Reporting Agent
pursuant to which the CAT Reporting Agent agrees to fulfill the
obligations of such Industry Member under the Chapter XIV Rule Series.
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 Chapter XIV Rule Series. The Exchange notes that,
currently, no standardized form agreement for CAT Reporting Agent
arrangements has been adopted. Paragraph (c)(2) of proposed Rule 14.8
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 Chapter XIV Rule Series,
notwithstanding the existence of an agreement described in paragraph
(c) of proposed Rule 14.8.
(ix) Development and Testing
    The Exchange proposes Rule 14.9 (Consolidated Audit Trail--
Development and Testing) to address requirements for Industry Members
related to CAT development and testing. Paragraph (a) of Proposed Rule
14.9 sets forth the testing requirements and deadlines for Industry
Members to develop and commence reporting to the Central Repository.
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 14.4(a)
and 14.5, 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 14.4(a) and 14.5, 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, beginning no
later than October 15, 2018.
    Paragraph (b) of Proposed Rule 14.9 implements the requirement
under the CAT NMS Plan that Industry Members participate in required
industry testing with the Central Repository.\28\ Specifically,
proposed Rule 14.9 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. The Exchange intends to announce to its
Industry Members the schedule established pursuant to the CAT NMS Plan
via an Information Circular.
---------------------------------------------------------------------------

    \28\ Adopting Release [sic] at 84725.

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

(x) Recordkeeping
    Proposed Rule 14.10 (Consolidated Audit Trail--Recordkeeping) sets
forth the recordkeeping obligations related to the CAT for Industry
Members. Proposed Rule 14.10 requires each Industry Member to maintain
and preserve records of the information required to be recorded under
the Chapter XIV Rule Series for the period of time and accessibility
specified in SEC Rule 17a-4(b). The records required to be maintained
and preserved under the Chapter XIV Rule Series may be immediately
produced or reproduced on ``micrographic media'' as defined in SEC Rule
17a-4(f)(1)(i) or by means of ``electronic storage media'' as defined
in SEC Rule 17a-4(f)(1)(ii) that meet the conditions set forth in SEC
Rule 17a-4(f) and be maintained and preserved for the required time in
that form. Proposed Rule 14.10 is based on FINRA Rule 7440(a)(5), which
sets forth the recordkeeping requirements related to OATS.
(xi) Timely, Accurate and Complete Data
    SEC Rule 613 and the CAT NMS Plan emphasize the importance of the
timeliness, accuracy, completeness and integrity of the data submitted
to the CAT.\29\ Accordingly, proposed Rule 14.11 (Consolidated Audit
Trail--Timely, Accurate and Complete Data) implements this requirement
with regard to Industry Members. Paragraph (a) of proposed Rule 14.11
requires that Industry Members record and report data to the Central
Repository as required by the Chapter XIV Rule Series in a manner that
ensures the timeliness, accuracy, integrity and completeness of such
data.
---------------------------------------------------------------------------

    \29\ See Rule 613(e)(4)(i)(D)(ii); and Section 6.5(d) of the CAT
NMS Plan.
---------------------------------------------------------------------------

    In addition, without limiting the general requirement as set forth
in paragraph (a), paragraph (b) of proposed Rule 14.11 requires
Industry Members to accurately provide the LEIs in their records as
required by the Chapter XIV Rule 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. Accordingly, 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. Paragraph (b) is
consistent with the SEC's statements in the Approval Order for the CAT
NMS Plan regarding an Industry Member's obligations regarding LEIs.\30\
---------------------------------------------------------------------------

    \30\ Approval Order at 84745.
---------------------------------------------------------------------------

    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 Chapter XIV Rule Series. As discussed above, the
initial maximum Error Rate is 5%, although the Error Rate is expected
to be reduced over time. The Exchange intends to announce to its
Industry Members changes to the Error Rate established pursuant to the
CAT NMS Plan via an Information Circular.
    Furthermore, paragraph (d) of proposed Rule 14.11 addresses
Compliance Thresholds related to reporting data to the CAT. Proposed
Rule 14.11 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''). 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.\31\ Compliance
Thresholds will include compliance with the data reporting and clock
synchronization requirements. Proposed Rule 14.11 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.
---------------------------------------------------------------------------

    \31\ Appendix C of the CAT NMS Plan.
---------------------------------------------------------------------------

(xi) Compliance Dates
    Proposed Rule 14.12 (Consolidated Audi [sic] Trail--Compliance
Dates) sets forth the compliance dates for the various provisions of
the rules contained in Chapter XIV. Proposed paragraph (a) specifies
that paragraphs (b) and (c) of proposed Rule 14.12 set forth the
additional details with respect to the compliance dates of the Rules in
Chapter XIV. Furthermore, paragraph (a) specifies that, unless
otherwise noted, the Rules set forth in Chapter XIV are fully effective
and ETP Holders must comply with their terms.
    Paragraph (b) of Proposed Rule 14.12 establishes the compliance
dates for the clock synchronization requirements as set forth in
proposed Rule 14.2. Paragraph (b)(1) states that each Industry Member
shall comply with Rule 14.2 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 14.2
with regard to Business Clocks that do not capture time in milliseconds
commencing on or before February 19, 2018. 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.\32\
---------------------------------------------------------------------------

    \32\ See Letter from Participants to Brent J. Fields, Secretary,
Commission, dated January 17, 2017 requesting exemptive relief from
SEC Rule 613(a)(3)(iii) and Section 6.7(a)(ii) of the CAT NMS Plan.
---------------------------------------------------------------------------

    Paragraph (c) of proposed Rule 14.12 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. Such compliance dates are consistent with the
compliance dates set forth in SEC Rule 613(a)(3)(v) and (vi), and
Section 6.7(a)(v) and (vi) of the CAT NMS Plan.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b)(5) of the Act,\33\ which require,
among other things, that the rules of the Exchange must be designed to
prevent fraudulent and manipulative acts and practices, to promote just
and equitable principles of trade, and, in general, to protect
investors and the public interest, and Section 6(b)(8) of the Act,\34\
which requires that the Exchange's rules not impose any burden on
competition that

is not necessary or appropriate in furtherance of the purposes of the
Act.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(6) [sic].
    \34\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    The Exchange believes that this proposal is consistent with the Act
because it implements, interprets or clarifies the provisions of the
Plan, and is designed to assist SRO and its Industry Members in meeting
regulatory obligations pursuant to the Plan. In approving the Plan, the
SEC noted that the Plan ``is necessary and appropriate in the public
interest, for the protection of investors and the maintenance of fair
and orderly markets, to remove impediments to, and perfect the
mechanism of a national market system, or is otherwise in furtherance
of the purposes of the Act.'' \35\ To the extent that this proposal
implements, interprets or clarifies the Plan and applies specific
requirements to Industry Members, the Exchange believes that this
proposal furthers the objectives of the Plan, as identified by the SEC,
and is therefore consistent with the Act.
---------------------------------------------------------------------------

    \35\ Approval Order at 84697.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
notes that the proposed rule change implements provisions of the CAT
NMS Plan, and is designed to assist the Exchange in meeting its
regulatory obligations pursuant to the Plan. The Exchange also notes
that the proposed rule change implementing provisions of the CAT NMS
Plan will apply equally to all firms that trade NMS Securities and OTC
Equity Securities. In addition, all national securities exchanges and
FINRA are proposing the same rules. Therefore, this rule filing does
not present any competitive issues and, therefore, it does not impose a
burden on competition.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Market Participants or Others

    The Exchange has not solicited or received any comments on the
proposed rule change from market participants or others.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NSX-2017-03 on the subject line.
Paper Comments
     Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSX-2017-03. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NSX-2017-03 and should be
submitted on or before March 1, 2017.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-02538 Filed 2-7-17; 8:45 am]
 BILLING CODE 8011-01-P