CAT Data for data security and confidentiality purposes: (i) PII; and
(ii) other data related to orders and trades reported to the CAT.\598\
The Plan requires additional levels of protection for PII that is
collected from Customers and reported to the Central Repository.\599\
For example, the CAT NMS Plan requires that all CAT Data provided to
regulators must be encrypted, but that PII data shall be masked unless
users have permission to view the CAT Data that has been
requested.\600\ The Plan requires that all PII data must be encrypted
both at-rest and in-flight, including archival data storage methods
such as tape backup.\601\ Storage of unencrypted PII data is
prohibited.\602\ The Plan Processor must describe how PII encryption is
performed and the key management strategy (e.g., AES-256, 3DES).\603\
---------------------------------------------------------------------------

    \598\ See id. at Appendix C, Section A.4.
    \599\ See id. at Appendix C, Section A.4(a).
    \600\ See id. at Section 6.10(c)(ii).
    \601\ Id. at Appendix D, Section 4.1.2
    \602\ Id.
    \603\ Id.
---------------------------------------------------------------------------

    An additional protection afforded to PII concerns specific
requirements for access. The CAT NMS Plan specifies that by default,
users entitled to query CAT Data are not automatically authorized for
PII access, and that the process by which a person becomes entitled for
PII access, and how they then go about accessing PII data, must be
documented by the Plan Processor.\604\ Access to PII will be based on a
Role Based Access Control (``RBAC'') model, and shall follow the
``least privileged'' practice of limiting access as much as
possible.\605\ In this regard, the CAT NMS Plan states that access will
be limited to a ``need-to-know'' basis, and it is expected that the
number of people given access to PII

associated with Customers and accounts will be much lower than the
number granted access to non-PII CAT Data.\606\ The CAT NMS Plan
further specifies that any login system that is able to access PII must
follow non-PII password rules and must be further secured via MFA.\607\
MFA authentication for all logins (including non-PII) is required to be
implemented by the Plan Processor.\608\
---------------------------------------------------------------------------

    \604\ Id. at Appendix D, Section 4.1.6.
    \605\ Id.
    \606\ Id. at Appendix C, Section A.4.
    \607\ Id. at Appendix D, Section 4.1.4. MFA is a method
requiring a person to provide more than one factor (e.g.,
biometrics/personal information in addition to a password) in order
to be validated by the system. See CAT NMS Plan, supra note 5, at
Appendix C, Section D.12(e), n.250.
    \608\ See id. at Appendix D, Section 4.1.4.
---------------------------------------------------------------------------

    The CAT NMS Plan also requires that a designated officer or
employee at each Participant and the Commission, such as the chief
regulatory officer, must, at least annually, review and certify that
persons with PII access have appropriately been designated to access
PII in light of their respective roles.\609\ The CAT NMS Plan requires
that a full audit trail of access to the PII collected at the Central
Repository--which would include who accessed what data and when--must
be maintained, and that the CCO and CISO shall have access to daily PII
reports that list all users who are entitled for PII access, as well as
the audit trail of all PII access that has occurred for the day being
reported on.\610\
---------------------------------------------------------------------------

    \609\ Id. at Appendix D, Section 4.1.6.
    \610\ Id.
---------------------------------------------------------------------------

    The CAT NMS Plan also restricts the circumstances under which PII
can be provided to an authorized person. The CAT NMS Plan provides, for
example, that PII must not be included in the result set(s) from online
or direct query tools, reports or bulk data extraction.\611\ Instead,
the CAT NMS Plan requires any such results, reports or extractions to
be displayed with ``non-PII unique identifiers (e.g., Customer-ID or
Firm Designated ID).'' \612\ The CAT NMS Plan states that the PII
corresponding to these non-PII identifiers can be gathered by using a
separate ``PII workflow.'' \613\
---------------------------------------------------------------------------

    \611\ Id.
    \612\ Id.
    \613\ Id.
---------------------------------------------------------------------------

    Finally, the CAT NMS Plan further protects PII by requiring that
PII data be stored separately from other CAT Data.\614\ The Plan
specifies that PII cannot be stored with the transactional CAT Data,
and it must not be accessible from public internet connectivity.\615\
---------------------------------------------------------------------------

    \614\ Id.
    \615\ Id.
---------------------------------------------------------------------------

26. Governing or Constituent Documents

    Rule 608 requires copies of all governing or constituent documents
relating to any person (other than a self-regulatory organization)
authorized to implement or administer such plan on behalf of its
sponsors.\616\ The Participants will submit to the Commission such
documents related to the Plan Processor when the Plan Processor is
selected.\617\
---------------------------------------------------------------------------

    \616\ 17 CFR 242.608(a)(4)(i).
    \617\ See CAT NMS Plan, supra note 5, at Section 6.7(a)(i).
---------------------------------------------------------------------------

27. Development and Implementation Phases

    The terms of the Plan will be effective immediately upon approval
of the Plan by the Commission (the ``Effective Date'').\618\ The Plan
sets forth each of the significant phases of development and
implementation contemplated by the Plan, together with the projected
date of completion of each phase.\619\ These include the following,
each of which is subject to orders otherwise by the Commission:
---------------------------------------------------------------------------

    \618\ Effective Date is defined as ``the date of approval of
[the CAT NMS Plan] by the Commission.'' Id. at Section 1.1.
    \619\ Id. at Section 6.7, Appendix C, Section C.10.

    Within two months after the Effective Date, the Participants
will jointly select the winning Shortlisted Bid and the Plan
Processor pursuant to the process set forth in Article V. Following
the selection of the Initial Plan Processor, the Participants will
file with the Commission a statement identifying the Plan Processor
and including the information required by Rule 608;
    Within four months after the Effective Date, each Participant
will, and, through its Compliance Rule, will require its Industry
Members to, synchronize its or their Business Clocks and certify to
the Chief Compliance Officer (in the case of Participants) or the
applicable Participant (in the case of Industry Members) that it has
met this requirement;
    Within six months after the Effective Date, the Participants
must jointly provide to the SEC a document outlining how the
Participants could incorporate into the CAT information with respect
to equity securities that are not NMS Securities,\620\ including
Primary Market Transactions in securities that are not NMS
Securities, which document will include details for each order and
Reportable Event that may be required to be provided, which market
participants may be required to provide the data, the implementation
timeline, and a cost estimate;
---------------------------------------------------------------------------

    \620\ See id. at Section 6.7(a). In the Amendment to the CAT NMS
Plan, Section 6.11 excludes OTC Equity Securities from the document
the Participants would submit to the Commission, since the
Participants plan to include OTC Equity Securities as well as NMS
Securities in the initial phase in of CAT. See Notice, supra note 5,
at 30634 n.82.
---------------------------------------------------------------------------

    Within one year after the Effective Date, each Participant must
report Participant Data to the Central Repository;
    Within fourteen months after the Effective Date, each
Participant must implement a new or enhanced surveillance system(s);
    Within two years after the Effective Date, each Participant
must, through its Compliance Rule, require its Industry Members
(other than Small Industry Members) to report Industry Member Data
to the Central Repository; and
    Within three years after the Effective Date, each Participant
must, through its Compliance Rule, require its Small Industry
Members to provide Industry Member Data to the Central
Repository.\621\
---------------------------------------------------------------------------

    \621\ See CAT NMS Plan, supra note 5, at Section 6.7(a).

In addition, Industry Members and Participants will be required to
participate in industry testing with the Central Repository on a
schedule to be determined by the Operating Committee. Furthermore,
Appendix C, A Plan to Eliminate Existing Rules and Systems (Rule
613(a)(1)(ix)), and Appendix D, Data Types and Sources, set forth
additional implementation details concerning the elimination of rules
and systems.
    The CCO will appropriately document objective milestones to assess
progress toward the implementation of the CAT.\622\
---------------------------------------------------------------------------

    \622\ See id. at Section 6.7(b).
---------------------------------------------------------------------------

    As required by Rule 613(a)(1)(x),\623\ the CAT NMS Plan also sets
forth detailed objective milestones, with projected completion dates,
towards CAT implementation.\624\ The milestones discussed in the Plan
include timeframes for when the Plan Processor will publish Technical
Specifications for Participants and Industry Members to report order
and market maker quote data and Customer Account Information \625\ to
the Central

Repository, as well as timeframes for connectivity and acceptance
testing for the reporting of this information.\626\ For example, the
Plan Processor will publish Technical Specifications for Industry
Member submission of order data one year before Industry Members are
required to begin submitting this data to the Central Repository, and
the Plan Processor will begin connectivity testing and accepting order
data from Industry Members for testing purposes six months before
Industry Members are required to begin submitting this data to the
Central Repository.\627\ The Plan Processor will begin connectivity
testing and accepting order and market maker quote data from
Participants for testing purposes three months before Participants are
required to begin reporting this data to the Central Repository and
will publish Technical Specifications for Participant submission of
this data six months before Participants are required to submit this
data to the Central Repository.\628\ The CAT NMS Plan also includes
implementation timeframes for the linkage of the lifecycle of order
events, regulator access to the Central Repository, and the integration
of other data (such as SIP quote and trade data) into the Central
Repository.\629\
---------------------------------------------------------------------------

    \623\ 17 CFR 242.613(a)(1)(x).
    \624\ See CAT NMS Plan, supra note 5, at Appendix C, Section
C.10. The CAT NMS Plan requires the CCO to document these objective
milestones to assess progress toward the implementation of CAT. See
id. at Section 6.7(b).
    \625\ ``Customer Account Information'' shall include, but not be
limited to, account number, account type, customer type, date
account opened, and large trader identifier (if applicable); except,
however, that (a) 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 (i) provide the Account Effective Date in lieu of the
``date account opened''; (ii) provide the relationship identifier in
lieu of the ``account number''; and (iii) identify the ``account
type'' as a ``relationship''; (b) in those circumstances in which
the relevant account was established prior to the implementation
date of the CAT NMS Plan applicable to the relevant CAT Reporter (as
set forth in Rule 613(a)(3)(v) and (vi)), and no ``date account
opened'' is available for the account, the Industry Member will
provide the Account Effective Date in the following circumstances:
(i) 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;
(ii) 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; (iii)
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 (iv) where the
relevant account is an Industry Member proprietary account.'' See
id. at Section 1.1.
    \626\ See id. at Appendix C, Section C.10(a)-(b).
    \627\ See id. at Appendix C, Section C.10(b).
    \628\ See id.
    \629\ See id. at Appendix C, Section C.10(c)-(e).
---------------------------------------------------------------------------

28. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, the Plan

    The Participants have no written understandings or agreements
relating to interpretations of, or participation in, the Plan other
than those set forth in the Plan itself.\630\ For example, Section
4.3(a)(iii) states that the Operating Committee only may authorize the
interpretation of the Plan by Majority Vote, Section 6.9(c)(i)
addresses interpretations of the Technical Specifications, and Section
8.2 addresses the interpretation of Sections 8.1 and 8.2.\631\ In
addition, Section 3.3 sets forth how any entity registered as a
national securities exchange or national securities association under
the Exchange Act may become a Participant.\632\
---------------------------------------------------------------------------

    \630\ See Notice, supra note 5, at 30635.
    \631\ See CAT NMS Plan, supra note 5, at Sections 4.3(a)(iii),
6.9(c)(i), 8.2.
    \632\ See id. at Section 3.3.
---------------------------------------------------------------------------

29. Dispute Resolution

    The Plan does not include a general provision addressing the method
by which disputes arising in connection with the operation of the Plan
will be resolved.\633\ The Plan does, however, provide the means for
resolving disputes regarding the Participation Fee.\634\ Specifically,
Article III states that, in the event that the Company and a
prospective Participant do not agree on the amount of the Participation
Fee, such amount will be subject to the review by the Commission
pursuant to Section 11A(b)(5) of the Exchange Act.\635\ In addition,
the Plan addresses disputes with respect to fees charged to
Participants and Industry Members pursuant to Article XI. Specifically,
such disputes will be determined by the Operating Committee or a
Subcommittee designated by the Operating Committee.\636\ Decisions by
the Operating Committee or such designated Subcommittee on such matters
will be binding on Participants and Industry Members, without prejudice
to the rights of any Participant or Industry Member to seek redress
from the Commission pursuant to Rule 608 or in any other appropriate
forum.\637\
---------------------------------------------------------------------------

    \633\ See Notice, supra note 5, at 30635.
    \634\ See CAT NMS Plan, supra note 5, at Section 3.3(b).
    \635\ See id.; see also 15 U.S.C. 78k-l(b)(5).
    \636\ See CAT NMS Plan, supra note 5, at Section 11.5.
    \637\ Id.
---------------------------------------------------------------------------

IV. Discussion and Commission Findings

    In 1975, Congress directed the Commission, through the enactment of
Section 11A of the Act,\638\ to facilitate the establishment of a
national market system. Section 11A(a)(3)(B) of the Act authorizes the
Commission, ``by rule or order, to authorize or require self-regulatory
organizations to act jointly with respect to matters as to which they
share authority under this title in planning, developing, operating, or
regulating a national market system (or a subsystem thereof) or one or
more facilities.'' \639\ The Commission adopted Rule 613 of Regulation
NMS under the Act,\640\ requiring the SROs to submit an NMS plan to
create, implement, and maintain the CAT.\641\
---------------------------------------------------------------------------

    \638\ 15 U.S.C. 78k-1.
    \639\ 15 U.S.C. 78k-1(a)(3)(B).
    \640\ See Adopting Release, supra note 14; see also Proposing
Release, supra note 14.
    \641\ 17 CFR 242.613(a)(1), (c)(1), (c)(7).
---------------------------------------------------------------------------

    Rule 613 tasks the Participants with the responsibility to develop
a CAT NMS Plan that achieves the goals set forth by the Commission.
Because the Participants will be more directly responsible for the
implementation of the CAT NMS Plan, in the Commission's view, it is
appropriate that they make the judgment as to how to obtain the
benefits of a consolidated audit trail in a way that is practicable and
cost-effective in the first instance. The Commission's review of an NMS
plan is governed by Rule 608 and, under that rule, approval is
conditioned upon a finding that the proposed plan is ``necessary or
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 otherwise in
furtherance of the purposes of the Act.'' \642\ Further, Rule 608
provides the Commission with the authority to approve an NMS plan,
``with such changes or subject to such conditions as the Commission may
deem necessary or appropriate.'' \643\ In reviewing the policy choices
made by the Participants in developing the CAT NMS Plan, the Commission
has sought to ensure that they are supported by an adequate rationale,
do not call into question the Plan's satisfaction of the approval
standard in Rule 608, and reasonably achieve the benefits of a
consolidated audit trail without imposing unnecessary burdens. In
addition, because of the evolving nature of the data captured by the
CAT and the technology used, as well as the number of decisions still
to be made in the process of implementing the CAT NMS Plan, the
Commission has paid particular attention to the structures in place to
guide decision-making going forward. These include the governance of
the Company, the provisions made for Commission and other oversight,
the standards established, and the development milestones provided for
in the Plan.
---------------------------------------------------------------------------

    \642\ 17 CFR 242.608(b)(2); see also 15 U.S.C. 78k-1(a).
    \643\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    The Commission received 24 comment letters on the CAT NMS
Plan.\644\ The commenters included, among others, national securities
exchanges, technology providers, academics, broker-dealers, investors,
and organizations representing industry participants. Of the comment
letters received regarding the Plan, 13

expressed general support,\645\ 3 comment letters expressed opposition
to the Plan,\646\ and 8 comment letters neither supported nor opposed
the Plan.\647\ Many of the commenters suggested modifications to
certain provisions of the Plan or identified what they believed were
deficiencies in the Plan.
---------------------------------------------------------------------------

    \644\ See supra note 6.
    \645\ FSR, FSI, MFA, ICI, TR, SIFMA, FIF, Fidelity, UnaVista,
CBOE, KCG, and NYSE Letters.
    \646\ Better Markets, Bloomberg, and Data Boiler Letters.
    \647\ Anonymous I, Anonymous II, DAG, STA, DTCC, Hanley,
Wachtel, FIX Trading, and Garrett Letters.
---------------------------------------------------------------------------

    The most significant areas raised in the comment letters pertained
to: (i) The security and confidentiality of CAT Data (especially of
PII); (ii) the cost and funding of the CAT; (iii) the timing of the
retirement of duplicative regulatory reporting systems; (iv) the
implementation time frame; (v) governance (particularly with respect to
industry representation); (vi) the clock synchronization standard; (vi)
error rates; and (vii) an overall lack of detail in the CAT NMS Plan.
    As discussed in detail below, the Commission has determined to
approve the CAT NMS Plan, as amended, pursuant to Section 11A of the
Act \648\ and Rule 608.\649\ The Commission believes that the Plan is
reasonably designed to improve the completeness, accuracy,
accessibility and timeliness of order and execution data used by
regulators. The Commission believes that the Plan will facilitate
regulators' access to more complete, accurate and timely audit trail
data. The Plan will also allow for more efficient and effective
surveillance and analysis, which will better enable regulators to
detect misconduct, reconstruct market events, and assess potential
regulatory changes. As a result, the CAT NMS Plan should significantly
improve regulatory efforts by the SROs and the Commission, including
market surveillance, market reconstructions, enforcement
investigations, and examinations of market participants. The Commission
believes that improved regulatory efforts, in turn, will strengthen the
integrity and efficiency of the markets, which will enhance investor
protection and increase capital formation.
---------------------------------------------------------------------------

    \648\ 15 U.S.C. 78k-1.
    \649\ 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

    As noted, commenters raised concerns about, and suggested
alternatives to, certain Plan provisions. The Participants submitted
five letters which responded to the comments and provided certain
suggestions for amendments to the Plan, as discussed in detail below.
After considering the proposed Plan, the issues raised by commenters,
and the Participants' responses, the Commission has amended certain
aspects of the Plan and has determined that the proposed Plan, as
amended by the Commission, satisfies the standard of Rule 608. The
Commission finds that the CAT NMS Plan is necessary or 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.\650\ The Commission does not
believe that the remaining concerns identified by commenters
individually or collectively call into question the Plan's satisfaction
of the approval standard in Rule 608, or otherwise warrant a departure
from the policy choices made by the Participants.
---------------------------------------------------------------------------

    \650\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------

A. Definitions, Effectiveness of Agreement, and Participation (Articles
I, II, and III)

    Article I of the CAT NMS Plan sets forth definitions for certain
terms used in the CAT NMS Plan, as well as principles of
interpretation. Article II of the CAT NMS Plan describes the corporate
structure under which the Participants will build and maintain the CAT,
and Article III addresses participation in the Plan, including
admission of new Participants, resignation and termination of
Participants, and the obligations and liability of Participants.\651\
---------------------------------------------------------------------------

    \651\ See Section III.1.; Section III.2., supra.
---------------------------------------------------------------------------

    The Commission did not receive any comments relating to Article II
or III of the CAT NMS Plan, and is approving them as proposed, with
certain technical conforming changes to reflect the Participants'
proposal to treat the Company as a non-profit and certain Exchange Act
obligations.\652\ The Commission did receive comments on three
definitions: \653\ (1) Allocation Report; \654\ (2) Trading Day; \655\
and (3) Eligible Security.\656\
---------------------------------------------------------------------------

    \652\ See Sections IV.B and IV.F, infra.
    \653\ The Commission notes that some commenters recommended
changing specific provisions in the CAT NMS Plan, which would also
result in modifications to certain definitions set forth in Article
I (e.g., Error Rate and Primary Market Transaction). The Commission
discusses such comments in the Sections below in conjunction with
the relevant substantive CAT NMS Plan provisions.
    \654\ TR Letter at 9.
    \655\ FIF Letter at 95-96.
    \656\ Anonymous Letter I at 9.
---------------------------------------------------------------------------

    For the definition of Allocation Report,\657\ one commenter stated
that ``allocation time is not consistently defined or captured,'' and
that without further guidance, CAT Reporters may have difficulties
reporting this data element.\658\ The Participants responded to this
comment by explaining that the Participants have not yet determined how
``time of the allocation'' will be defined, but indicated that they
would address this in the Technical Specifications.\659\
---------------------------------------------------------------------------

    \657\ The Plan defines ``Allocation Report'' to mean 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. See CAT NMS Plan, supra note 5,
at Section 1.1.
    \658\ TR Letter at 9.
    \659\ Response Letter I at 25.
---------------------------------------------------------------------------

    For the definition of Trading Day,\660\ one commenter stated that
the cut-off time for Trading Day is not defined and argued that,
consistent with OATS, the cut-off time should be 4:00 p.m., ET.\661\
The commenter argued a later cut-off time would compress the time CAT
Reporters have to collect, validate, and report data in a timely
manner.\662\ The Participants responded to this comment by explaining
that a universal cut-off time for Trading Day is not recommended for
the CAT because cut-off times may differ based on the different types
of Eligible Securities (including the potential expansion of the
security types covered in Eligible Securities). Rather, the
Participants stated that the Operating Committee should determine cut-
off times for the Trading Day and indicated that they would address
this in the Technical Specifications.\663\
---------------------------------------------------------------------------

    \660\ The Plan states that ``Trading Day'' shall have such
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. See CAT NMS
Plan, supra note 5, at Section 1.1.
    \661\ FIF Letter at 95-96.
    \662\ Id. at 96, 124.
    \663\ Response Letter I at 31.
---------------------------------------------------------------------------

    For the definition of Eligible Security,\664\ one commenter stated
that ``a full audit trail would include transactions both on and off

exchange.'' \665\ The Participants noted that the CAT will capture on-
and off-exchange transactions for NMS Securities and OTC Equity
Securities, as the CAT would ``capture orders and transactions in NMS
Securities and OTC Equity Securities, even if they occur in ATSs/dark
pools, other trading venues or internally within broker-dealers.''
\666\
---------------------------------------------------------------------------

    \664\ The CAT NMS Plan provides that ``Eligible Security''
includes (a) all NMS Securities and (b) all OTC Equity Securities.
See CAT NMS Plan, supra note 5, at Section 1.1.
    \665\ Anonymous Letter I at 9.
    \666\ Response Letter I at 25.
---------------------------------------------------------------------------

    The Commission believes that the definitions and principles of
interpretation set forth in Article I of the CAT NMS Plan are
reasonably designed to provide clarity to the terms set forth in the
CAT NMS Plan. In response to the commenters that recommended
modifications to the definitions of Allocation Report and Trading Day,
the Commission believes it is reasonable for the Participants to
address the Allocation Report and Trading Day specifics raised by
commenters in the Technical Specifications to provide the CAT with
necessary flexibility during its implementation, and based on the
Plan's requirement that the Technical Specifications will be published
no later than one year prior to when Industry Member reporting
begins.\667\ With respect to Eligible Securities, the Commission
believes that the commenter's concern is addressed already in the Plan.
---------------------------------------------------------------------------

    \667\ See Section IV.D.8.a, infra.
---------------------------------------------------------------------------

    The Commission also notes that the Participants submitted a letter
to the Commission indicating that the names of certain Participants had
changed and that two new exchanges have been approved by the
Commission.\668\ Specifically, the Participants stated that BATS
Exchange, Inc. is now known as Bats BZX Exchange, Inc.; BATS Y-
Exchange, Inc. is now known as Bats BYX Exchange, Inc.; EDGA Exchange,
Inc. is now known as Bats EDGA Exchange, Inc.; EDGX Exchange, Inc. is
now known as Bats EDGX Exchange, Inc.; NASDAQ OMX BX, Inc. is now known
as NASDAQ BX, Inc.; and NASDAQ OMX PHLX LLC is now known as NASDAQ PHLX
LLC.\669\ In addition, the Participants stated that two new exchanges
were approved by the Commission: ISE Mercury, LLC and Investors'
Exchange, LLC.\670\ Thus, the Participants suggested that the
Commission amend the Plan to reflect that ISE Mercury, LLC and
Investors' Exchange LLC are Participants to the CAT NMS Plan, and to
include their names on the signature block for the CAT NMS Plan
(including the Plan's appendices).\671\ The Commission believes it is
appropriate to amend the CAT NMS Plan to reflect the name changes of
certain Participants because this will ensure that the names of those
Participants are accurately reflected, and to amend the CAT NMS Plan to
add ISE Mercury, LLC and Investors' Exchange, LLC as Participants to
the CAT NMS Plan because all SROs are intended to be Participants to
the CAT NMS Plan.\672\
---------------------------------------------------------------------------

    \668\ Participants' Letter I at 1.
    \669\ Id.
    \670\ Id.
    \671\ Id.
    \672\ See Notice, supra note 5, at 30618.
---------------------------------------------------------------------------

B. Management of the Company (Article IV)

    Article IV of the CAT NMS Plan describes the management structure
of CAT NMS, LLC.\673\ Many commenters raised concerns related to the
governance structure set forth in the CAT NMS Plan.\674\ Most of the
governance comments focused on the role, composition, obligations and
powers of the Operating Committee and the Advisory Committee.\675\ A
few commenters identified potential conflicts of interest (both with
respect to the Officers and the Participants) as well as other
governance concerns, including whether the CAT should be under the
Commission's direct and sole control.\676\
---------------------------------------------------------------------------

    \673\ See Section III.3, supra.
    \674\ FSI Letter at 3; MFA Letter at 3-4; ICI Letter at 10-13;
TR Letter at 6-7; SIFMA Letter at 24-29; FIF Letter at 14, 135-37;
Fidelity Letter at 6-8; Better Markets Letter at 4-6; KCG Letter at
5-7; DAG Letter at 3; NYSE Letter at 4-6; STA Letter at 1-2.
    \675\ MFA Letter at 3-4; ICI Letter at 10-13; SIFMA Letter at
24-29; KCG Letter at 5-7; DAG Letter at 3; NYSE Letter at 4-6; TR
Letter at 6-7; FIF Letter at 14, 135-37; see also STA Letter at 1
(supporting the DAG Letter's governance recommendations).
    \676\ FSI Letter at 3; MFA Letter at 3-4; ICI Letter at 10-13;
Better Markets Letter at 4-6.
---------------------------------------------------------------------------

1. Operating Committee
    Article IV of the CAT NMS Plan provides that an Operating Committee
will manage the CAT, where each Participant appoints one member of the
Operating Committee, and each Participant appointee has one vote.\677\
Article IV also sets forth certain other provisions relating to the
Operating Committee, including identification of those actions
requiring a Majority Vote, a Supermajority Vote, or a unanimous vote;
and the management of conflicts of interest. Commenters raised concerns
about the composition, voting and independence of the Operating
Committee.
---------------------------------------------------------------------------

    \677\ See CAT NMS Plan, supra note 5, at Section 4.2, Appendix
C, Section D.11(b).
---------------------------------------------------------------------------

    Some commenters argued that the composition of the Operating
Committee should not be limited to the SROs,\678\ arguing that non-SROs
also should have full voting powers.\679\ Commenters recommended that
the Operating Committee should include members who are broker-
dealers,\680\ and other non-SRO and non-broker-dealer market
participants,\681\ institutional investors, broker-dealers with a
substantial retail base, broker-dealers with a substantial
institutional base, a data management expert, and a federal agency
representative with national security cybersecurity experience.\682\
Another commenter recommended including representatives of registered
funds as members of the Operating Committee, noting their strong
interest in ensuring the security of CAT Data and that CAT Reporter
position information and trading strategies not be compromised.\683\
Two commenters argued that no legal authority bars broker-dealers or
other non-SROs from serving on the Operating Committee.\684\
---------------------------------------------------------------------------

    \678\ MFA Letter at 3-4; ICI Letter at 10-13; SIFMA Letter at
24-26; KCG Letter at 5-7; DAG Letter at 3; see also STA Letter at 1
(supporting the DAG Letter's governance recommendations).
    \679\ SIFMA Letter at 24-26; KCG Letter at 5-7; DAG Letter at 3;
see also STA Letter at 1 (supporting the DAG Letter's governance
recommendations).
    \680\ SIFMA Letter at 25; MFA Letter at 3; DAG Letter at 3; KCG
Letter at 6; see also STA Letter at 1 (supporting the DAG Letter's
governance recommendations).
    \681\ KCG Letter at 6; MFA Letter at 3.
    \682\ MFA Letter at 3.
    \683\ ICI Letter at 11. This commenter further noted that
registered funds' expertise in protecting trade and order
information could help formulate CAT-related data security policies.
Id.
    \684\ KCG Letter at 6; ICI Letter at 11.
---------------------------------------------------------------------------

    In support of their recommendation to expand the Operating
Committee's membership, commenters stressed the need for meaningful
input by stakeholders with specific expertise, which they believed
would improve the implementation and maintenance of the CAT.\685\ One
commenter described the CAT as ``a uniquely complex facility'' \686\
and another commenter described the CAT as ``a critical market utility
designed to benefit the national market system and all market
participants,'' and stated that as such ``the governance and operation
of the CAT NMS Plan should be structured to obtain meaningful input
from the broker-dealer community.'' \687\ One of these commenters noted
broker-dealers would have complementary ``expertise and insight'' to
the SROs, insofar as broker-dealers would be ``providing the

lion's share of the reported data to the CAT.'' \688\ This commenter
clarified that, in recommending broker-dealer participation on the
Operating Committee, the commenter ``does not expect (or request) that
broker-dealer representatives would have access to the surveillance
patterns and other regulatory means by which the SROs will use the data
collected by the CAT.'' \689\
---------------------------------------------------------------------------

    \685\ SIFMA Letter at 25; KCG Letter at 7.
    \686\ SIFMA Letter at 25.
    \687\ KCG Letter at 7. KCG suggested that the Advisory Committee
alone would have ``almost no voice in the operation [of the] NMS
plan'' based on the feedback regarding the administration and
operation of other NMS plans. KCG Letter at 7.
    \688\ SIFMA Letter at 25; see also ICI Letter at 11 (``The
perspective of other market participants--particularly given that
the central repository will house their sensitive information--would
help in the development and maintenance of the CAT.''); MFA Letter
at 3 (``The decisions of the Operating Committee, such as those
related to data security . . . will have a significant impact on
market participants immediately and in the future.''). One commenter
further noted that ``the SROs expect the broker-dealers to help fund
the costs of the CAT, and they proposed a funding model under which
the vast majority of the CAT building and operating costs would be
imposed on the broker-dealer firms.'' SIFMA Letter at 25.
    \689\ SIFMA Letter at 25.
---------------------------------------------------------------------------

    One commenter described the industry's experience as part of the
DAG as informing its belief that full industry participation on the
Operating Committee is required.\690\ This commenter stated that ``the
SROs limited the Industry's participation in important aspects of the
development process'' to an extent that direct engagement with Bidders
``provided a more complete and relevant picture of the proposed CAT
solution than had been received through involvement in the DAG.'' \691\
This commenter argued the Operating Committee should include non-SRO
industry participants because it would allow them to participate in
selecting a Plan Processor and developing the CAT operating
procedures.\692\
---------------------------------------------------------------------------

    \690\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's governance recommendations).
    \691\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's governance recommendations).
    \692\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's governance recommendations).
---------------------------------------------------------------------------

    One commenter recommended that the allocation of voting rights
among the Participants be reevaluated, noting that the Commission's
Equity Market Structure Advisory Committee (``EMSAC'') provided a
similar recommendation regarding plan governance generally.\693\ This
commenter also recommended limiting the number of Operating Committee
actions that require unanimous voting.\694\
---------------------------------------------------------------------------

    \693\ Fidelity Letter at 7. The Commission also notes that
although the commenter did not include the EMSAC's rationale for the
reallocation of voting rights recommendation, in the EMSAC
Recommendations cited by the commenter, the EMSAC explained that it
recommended reallocating voting rights because the ``reallocation of
voting rights [among NMS plan participants] is intended to better
reflect the proportional interests of NMS [p]lan participants'').
See EMSAC, Recommendations Regarding Enhanced Industry Participation
in Certain SRO Regulatory Matters (June 10, 2016), available at
https://www.sec.gov/spotlight/emsac/emsac-trading-venues-regulation-subcommittee-recomendation-61016.pdf (``EMSAC Recommendations'').
    \694\ Fidelity Letter at 7. This commenter noted that the EMSAC
provided this recommendation. The Commission notes that although the
commenter did not include the EMSAC's rationale for this
recommendation, in the EMSAC Recommendations cited by the commenter,
the EMSAC explained that it recommended the limited use of unanimous
voting requirements ``to prevent undue friction or delay in [p]lan
voting matters.'' See EMSAC Recommendations, supra note 693, at 8.
---------------------------------------------------------------------------

    Commenters also recommended that the Operating Committee include
``independent directors.'' \695\ One commenter recommended that these
independent directors be both non-industry and non-SRO.\696\ Other
commenters argued that the ``CAT governance structure should include
independent directors, comprised of both non-[i]ndustry and [i]ndustry
participants.'' \697\
---------------------------------------------------------------------------

    \695\ See Better Markets Letter at 6; DAG Letter at 3; see also
STA Letter at 1 (supporting the DAG Letter's governance
recommendations); SIFMA Letter at 25 n.4 (noting Rule 613 does not
preclude the SROs from including independent directors in the
Operating Committee).
    \696\ Better Markets Letter at 6.
    \697\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's governance recommendations).
---------------------------------------------------------------------------

    In response to comments regarding the composition of the Operating
Committee, the Participants argued that the Operating Committee should
remain as a committee solely of SROs because only SROs have a statutory
obligation under the Exchange Act to create, implement and maintain the
CAT and regulate securities markets, whereas broker-dealers do
not.\698\ The Participants also identified potential conflicts of
interest if the ``subjects of surveillance [are] involved in decision-
making of a plan that, at its core has SEC and [SRO] regulatory
surveillance as its primary objective.'' \699\ Finally, the
Participants discussed their belief that the Advisory Committee,
discussed below, is the appropriate forum for non-Participants to
provide their views.\700\
---------------------------------------------------------------------------

    \698\ Response Letter I at 6; see also, NYSE Letter at 5.
    \699\ Response Letter I at 6.
    \700\ Id. at 7.
---------------------------------------------------------------------------

    In response to comments regarding the allocation of voting rights
among the Participants, the Participants explained that each
Participant has one vote to permit equal representation among the
Participants.\701\ The Participants indicated their commitment to this
allocation of voting rights because each Participant independently has
obligations with regard to the CAT under Rule 613, and each
Participant's regulatory surveillance obligations are not constrained
by revenues or market share. The Participants also noted that this
voting model is common among other NMS plans.\702\
---------------------------------------------------------------------------

    \701\ Id.
    \702\ Id.
---------------------------------------------------------------------------

    In response to the commenter suggesting that the CAT NMS Plan
should limit the number of provisions requiring a unanimous vote, the
Participants highlighted that only three extraordinary circumstances
require a unanimous vote under the CAT NMS Plan: (i) Obligating
Participants to make a loan or capital contribution to the
Company;\703\ (ii) dissolving the Company; \704\ and (iii) acting by
written consent in lieu of a meeting.\705\
---------------------------------------------------------------------------

    \703\ The Participants explained this would impose an additional
and direct financial burden on each Participant, thus each
Participant's approval is important. Id. at 8.
    \704\ The Participants explained this would directly impact each
Participant's ability to meet its regulatory and compliance
requirements, so it is critical that each Participant consent to
this action. Id.
    \705\ The Participants explained that this would ensure that all
Operating Committee members would have knowledge of, and consider,
all actions taken by the Operating Committee if an action by written
consent is effected in lieu of a meeting. Id.
---------------------------------------------------------------------------

    In response to comments recommending the CAT governance structure
include independent directors, the Participants noted that many of the
Participants have independent representation on their governing boards,
such that each Participant's input regarding the CAT would reflect
independent views.\706\
---------------------------------------------------------------------------

    \706\ Id. at 7.
---------------------------------------------------------------------------

    The Commission notes that the Participants' proposed governance
structure--with both an Operating Committee and an Advisory Committee--
is similar to the governance structure used today by other NMS plans,
and the Commission believes that this general structure is reasonably
designed to allow the Participants to fulfill their regulatory
obligations and, at the same time, provide an opportunity for
meaningful input from the industry and other stakeholders.\707\

The Commission believes that it is reasonable for the Operating
Committee to be composed exclusively of SROs. As the Participants point
out, the CAT NMS Plan is the vehicle through which they will fulfill
key regulatory and oversight responsibilities. The Commission notes the
Participants' statutory obligations as SROs, the opportunity for
Advisory Committee input on the CAT NMS Plan decisions, the opportunity
for public comment on Plan amendments, and close Commission oversight,
when reaching that determination.\708\
---------------------------------------------------------------------------

    \707\ See 17 CFR 242.613; see, e.g., Securities Exchange Act
Release Nos. 77679 (April 21, 2016), 81 FR 24908 (April 21, 2016)
(NMS plan regarding addressing extraordinary market volatility);
75660 (August 11, 2015), 80 FR 48940 (August 14, 2015) (NMS plan
regarding the consolidated tape association); 75504 (July 22, 2015),
80 FR 45252 (July 29, 2015) (NMS plan regarding consolidated
quotations); 75505 (July 22, 2015), 80 FR 45254 (July 29, 2015) (NMS
plan regarding unlisted trading privileges). The Commission believes
it is reasonable for the CAT NMS Plan to include a governance
structure similar to that utilized by other NMS plans that the
Commission previously has found to be consistent with the Act. As
noted above, the Commission is separately reviewing the EMSAC
recommendations. See supra note 693.
    \708\ For these reasons, the Commission does not believe it is
necessary to mandate independent directors in the governance of the
CAT.
---------------------------------------------------------------------------

    Furthermore, the Commission notes that the current provisions,
which allocate voting rights such that each Participant has one vote,
is consistent with other NMS plans and recognizes that the obligations
imposed by Rule 613 on the SROs are also imposed on each SRO
independently. With respect to the limited use of a unanimous voting
standard, the Commission believes that the Plan is reasonably designed
to facilitate effective governance and notes that only the three
extraordinary Operating Committee actions specified above require
unanimity, whereas all other Operating Committee actions can be
accomplished with either a Majority Vote or Supermajority Vote.
    The Commission notes that Commission Staff may observe all meetings
(regular and special), including Executive Sessions, of the Operating
Committee and Advisory Committee and receive all minutes.\709\ The
Commission anticipates that only a few members of Commission Staff
would observe any given meeting.
---------------------------------------------------------------------------

    \709\ See Section IV.B.2, infra.
---------------------------------------------------------------------------

    The Commission also notes that independent of its review of the CAT
NMS Plan, the EMSAC has been reviewing, among other things, the issues
surrounding NMS plan governance. On June 10, 2016, the EMSAC presented
its recommendations in this area to the Commission.\710\
---------------------------------------------------------------------------

    \710\ See supra note 693.
---------------------------------------------------------------------------

    Finally, the Commission is amending Section 4.4(b) of the Plan to
specify that the Operating Committee's discretion to deviate from the
treatment, as set forth therein, of persons submitting a Form 1
application to become a national securities exchange or persons
submitting a Form X-15AA-A application to become a national securities
association, must be reasonable and not impose any unnecessary or
inappropriate burden on competition. The Commission is also amending
Section 3.3(b)(v) of the Plan to specify that the Operating Committee's
discretion, in considering other factors in determining the
Participation Fee of a new Participant, must be reasonable, equitable
and not unfairly discriminatory. The Commission believes these
amendments are appropriate because they set forth in the CAT NMS Plan
specific limitations with respect to the Operating Committee's
discretion that are consistent with existing SRO obligations under the
Exchange Act.\711\
---------------------------------------------------------------------------

    \711\ 15 U.S.C. 78f(b)(4)-(5), (8).
---------------------------------------------------------------------------

2. Advisory Committee
    Article IV of the Plan establishes an Advisory Committee charged
with advising the SROs on the implementation, operation, and
administration of the Central Repository.\712\ Under the Plan, the
Advisory Committee has the right to attend Operating Committee and
Subcommittee meetings--unless they are held in Executive Session--and
submit its views prior to a decision by the Operating Committee.\713\
As proposed, the composition of the Advisory Committee includes: (i)
Broker-dealers of varying sizes and types of business, including a
clearing firm, (ii) an individual who maintains a securities account,
(iii) an academic, (iv) institutional investors, and (v) the
Commission's Chief Technology Officer (or Commission equivalent), who
while not formally a member of the Advisory Committee, serves as an
observer.\714\
---------------------------------------------------------------------------

    \712\ See Section III.3, supra; see also CAT NMS Plan, supra
note 5, at Section 4.13(a), (d).
    \713\ See Section III.3, supra; see also CAT NMS Plan, supra
note 5, at Section 4.13(d).
    \714\ See Section III.3, supra; see also CAT NMS Plan, supra
note 5, at Section 4.13(b).
---------------------------------------------------------------------------

    Most comments regarding the Advisory Committee recommended
formalizing and expanding its role.\715\ Commenters made the following
recommendations: (i) Change the selection process of, and expand the
membership of, the Advisory Committee; \716\ (ii) form the Advisory
Committee before the CAT NMS Plan is approved; \717\ (iii) formalize
procedures for Advisory Committee meetings, including requiring
specific documentation and written correspondence; (iv) narrow the use
of Operating Committee Executive Sessions, whereby the Advisory
Committee is excluded from participating; and (v) adopt in the CAT NMS
Plan, the EMSAC's recommendations for NMS plan advisory
committees.\718\
---------------------------------------------------------------------------

    \715\ DAG Letter at 3; ICI Letter at 10-13; SIFMA Letter at 26-
29; FIF Letter at 14, 135-37; see also STA Letter at 1-2 (supporting
the SIFMA, FIF and DAG Letters' Advisory Committee recommendations);
but see NYSE Letter.
    \716\ TR Letter at 6-7; SIFMA Letter at 26-27; FIF Letter at 14,
135-37; see also STA Letter at 2 (supporting the SIFMA and FIF
Letters' Advisory Committee recommendations).
    \717\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's governance recommendations).
    \718\ SIFMA Letter at 26; ICI Letter at 10-13; see also STA
Letter at 1-2 (supporting the SIFMA Letter's Advisory Committee
recommendations).
---------------------------------------------------------------------------

    One commenter suggested that the process for selecting Advisory
Committee members should change to ensure that the Advisory Committee
membership is independent of the SROs.\719\ The commenter noted
selection of Advisory Committee members independent from the
Participants is critical in light of the inherent conflict of interest
the Participants face as sponsors and overseers of a Plan that will, at
the same time, impose obligations on the very same Participants.\720\
This commenter also recommended that the Advisory Committee members
should be selected by broker-dealer representatives--not by the SROs--
and in support of this position argued that the Advisory Committee's
purpose ``should be to represent the interest of the industry and bring
to bear the wide expertise of broker-dealers.'' \721\
---------------------------------------------------------------------------

    \719\ SIFMA Letter at 27; see also STA Letter at 2 (supporting
the SIFMA Letter's Advisory Committee recommendations).
    \720\ SIFMA Letter at 27; see also STA Letter at 2 (supporting
the SIFMA Letter's Advisory Committee recommendations).
    \721\ SIFMA Letter at 27; see also STA Letter at 2 (supporting
the SIFMA Letter's Advisory Committee recommendations).
---------------------------------------------------------------------------

    Those commenters that advocated expanding the membership of the
Advisory Committee \722\ suggested including: (i) Trade processing and
order management service bureaus; (ii) registered funds; (iii) inter-
dealer brokers; (iv) agency brokers; (v) retail brokers; (vi)
institutional brokers; (vii) proprietary trading firms; (viii) smaller
broker-dealers; (ix) firms with a floor presence; (x) and industry/
trade associations.\723\ One commenter recommended expanding the
Advisory Committee to 20 members, with a

minimum of 12 broker-dealers.\724\ Another commenter suggested
including two financial economists (preferably academic) with expertise
in both econometrics and the economics of the primary market and market
microstructure.\725\
---------------------------------------------------------------------------

    \722\ SIFMA Letter at 27; FIF Letter at 14, 135-37; TR Letter at
6-7 (arguing that a service bureau representative should be added to
the Advisory Committee to offer a ``collective perspective'' that
comes from supporting multiple clients); ICI Letter at 10-13; see
also STA Letter at 1-2 (supporting the SIFMA and FIF Letters'
Advisory Committee recommendations).
    \723\ TR Letter at 6; SIFMA Letter at 27; FIF Letter at 135; ICI
Letter at 12; see also STA Letter at 2 (supporting the SIFMA and FIF
Letters' Advisory Committee recommendations).
    \724\ FIF Letter at 135; see also STA Letter at 2 (supporting
the FIF Letter's Advisory Committee recommendations).
    \725\ Hanley Letter at 6.
---------------------------------------------------------------------------

    Another commenter recommended forming the Advisory Committee prior
to the CAT NMS Plan receiving the Commission's approval to ``allow
representative participation in the selection of the [Plan] Processor
and in developing [o]perating procedures.'' \726\
---------------------------------------------------------------------------

    \726\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's Advisory Committee recommendations).
---------------------------------------------------------------------------

    Commenters suggested increasing the governance role of the Advisory
Committee, with one commenter advocating that ``the Advisory Committee
should be involved in every aspect of the CAT,'' \727\ such as budgets,
fees and charges, and new requirements that may significantly burden
broker-dealers.\728\
---------------------------------------------------------------------------

    \727\ SIFMA Letter at 27; see also ICI Letter at 11; FIF Letter
at 14, 135-37; STA Letter at 2 (supporting the FIF and SIFMA
Letters' Advisory Committee recommendations).
    \728\ SIFMA Letter at 27; see also STA Letter at 2 (supporting
the SIFMA Letter's Advisory Committee recommendations).
---------------------------------------------------------------------------

    To facilitate increasing the Advisory Committee's role in the CAT's
governance, a few commenters offered concrete recommendations for
procedural safeguards.\729\ Two commenters suggested that the Operating
Committee be required to document a written rationale any time the
Operating Committee rejects an Advisory Committee recommendation.\730\
One of these commenters recommended that all documents prepared for or
submitted to the Operating Committee by the Plan Processor also be
submitted to the Advisory Committee, to keep the Advisory Committee
fully informed.\731\ One commenter recommended that agendas and
documentation for Operating Committee meetings be distributed to
Advisory Committee members in advance of meetings.\732\
---------------------------------------------------------------------------

    \729\ SIFMA Letter 27-29; ICI Letter at 10-13; TR Letter at 6-7;
see also STA Letter at 2 (supporting the SIFMA Letter's Advisory
Committee recommendations). These recommendations are similar to the
recommendations of the EMSAC.
    \730\ SIFMA Letter at 28; ICI Letter at 13; see also STA Letter
at 2 (supporting the SIFMA Letter's Advisory Committee
recommendations).
    \731\ ICI Letter at 13.
    \732\ SIFMA Letter at 28; see also STA Letter at 2 (supporting
the SIFMA Letter's Advisory Committee recommendations and noting its
concern with the frequency and timeliness of information provided to
the Advisory Committee).
---------------------------------------------------------------------------

    A commenter also recommended that all information concerning the
operation of the Central Repository be made available to the Advisory
Committee, except for limited information of a confidential regulatory
nature.\733\ This commenter added that when information is deemed to be
of a confidential regulatory nature, the SROs should maintain a written
record of what is designated confidential (and excluded from the
Advisory Committee) and include an explanation of such
designation.\734\
---------------------------------------------------------------------------

    \733\ SIFMA Letter at 28; ICI Letter at 10-13; see also STA
Letter at 2 (supporting the SIFMA Letter's Advisory Committee
recommendations).
    \734\ SIFMA Letter at 28; see also Fidelity Letter at 7 (noting
the ``Operating Committee determines the scope and content of
information supplied to the Advisory Committee''); STA Letter at 2
(supporting the SIFMA Letter's Advisory Committee recommendations).
---------------------------------------------------------------------------

    Two commenters recommended revising the confidentiality policies
related to the CAT to permit Advisory Committee members to ``share
information from the [Advisory Committee] meetings with their
colleagues and with other industry participants.'' \735\ One commenter
further suggested that an Advisory Committee member should be allowed
to make other firm personnel available that may have relevant expertise
if the Advisory Committee is ``tasked with evaluating issues outside
the members' subject matter expertise.'' \736\
---------------------------------------------------------------------------

    \735\ SIFMA Letter at 27, 28; DAG Letter at 3; see also STA
Letter at 1-2 (supporting the SIFMA and DAG Letters' Advisory
Committee recommendations).
    \736\ SIFMA Letter at 27; see also STA Letter at 2 (supporting
the SIFMA Letter's Advisory Committee recommendations).
---------------------------------------------------------------------------

    Two commenters suggested that the Advisory Committee should have a
right to review proposed amendments to the CAT NMS Plan that would
affect CAT Reporters.\737\ One of these commenters noted that ``[i]t
may not be obvious to the Operating Committee when a change to the Plan
impacts CAT [R]eporters in a material way.'' \738\ The other commenter
suggested modifying the Plan's definition of a Material Amendment \739\
to distinguish between amendments that are internal or external to the
Plan Processor.\740\ This commenter recommended that both internal and
external material amendments to the CAT NMS Plan be reviewed by the
Advisory Committee, but be designated for different levels of review.
This commenter suggested that material amendments that are ``internal''
to the Plan Processor would only be reviewed to ensure that that they
do not materially affect CAT Reporters; whereas, amendments that are
``external'' to the Plan Processor would require Advisory Committee
consultation and an implementation plan with reasonable time for
development and testing.\741\
---------------------------------------------------------------------------

    \737\ TR Letter at 7; FIF Letter at 136; see also STA Letter at
2 (supporting the FIF Letter's Advisory Committee recommendations).
    \738\ TR Letter at 7.
    \739\ The CAT NMS Plan defines a ``Material Amendment'' to the
Technical Specifications as an amendment that requires ``a
Participant or an Industry Member to engage in significant changes
to the coding necessary to submit information to the Central
Repository pursuant to the LLC Agreement or if it is required to
safeguard the security or confidentiality of the CAT Data.'' See CAT
NMS Plan, supra note 5, at Section 6.9(c).
    \740\ FIF Letter at 136; see also STA Letter at 2 (supporting
the FIF Letter's Advisory Committee recommendations). The commenter
references ``external'' material amendments as any change that
affects the CAT Reporter Interface, such as coding or configuration
changes. ``Internal'' material amendments are changes that do not
affect the CAT Reporter interface (i.e., does not require coding or
configuration changes).
    \741\ FIF Letter at 136; see also STA Letter at 2 (supporting
the FIF Letter's Advisory Committee recommendations).
---------------------------------------------------------------------------

    A commenter recommended specific CAT NMS Plan governance changes to
expand and clarify the role of the Advisory Committee.\742\ This
commenter supported: (i) Clarifying the process for selecting Advisory
Committee representatives; (ii) expanding and formalizing the role of
the Advisory Committee, such as providing it formal votes on matters
before the Operating Committee and the ability to initiate its own
recommendations; and (iii) significantly narrowing the use of Executive
Sessions for the Operating Committee.\743\ Moreover, a commenter
recommended that when the Operating Committee meets in Executive
Session, the SROs should maintain a written record including an
explanation of why an Executive Session is required.\744\
---------------------------------------------------------------------------

    \742\ Fidelity Letter at 7.
    \743\ Id. This commenter noted that the EMSAC provided these
recommendations; see also SIFMA Letter at 28; STA Letter at 2
(supporting the SIFMA Letter's Advisory Committee recommendations).
    \744\ SIFMA Letter at 28; see also Fidelity Letter at 7 (noting
there are ``no limitations on when the Operating Committee can call
an Executive Session'' and that the Operating Committee can, for any
reason, ``prohibit the Advisory Committee from attending any
Executive Session of the Operating Committee by a majority vote'');
STA Letter at 2 (supporting the SIFMA Letter's Advisory Committee
recommendations).
---------------------------------------------------------------------------

    One commenter, an SRO, stated that ``the governance structure in
the proposed CAT NMS Plan would establish an appropriate advisory role
for the Advisory Committee that is consistent with the requirements
specified by the Commission in Rule

613.'' \745\ This commenter stressed that while the SROs have a legal
obligation under Commission rules to create, implement and maintain a
consolidated audit trail and central repository, non-SROs do not have
this legal obligation. Accordingly, this commenter stated its belief
that Advisory Committee members should not have a voting right with
respect to Operating Committee actions.\746\ Finally, this commenter
argued that having non-SRO Advisory Committee members vote in
connection with the CAT NMS Plan would be incompatible with the
requirements of the Exchange Act and Commission rules that squarely
place the obligations to implement and enforce ``the CAT NMS Plan on
the shoulders of the SROs.'' \747\ In this regard, the commenter
highlighted the Rule 613(f) requirement that SROs ``develop and
implement a surveillance system, or enhance existing surveillance
systems, reasonably designed to make use of the consolidated
information contained in the consolidated audit trail.'' \748\
---------------------------------------------------------------------------

    \745\ NYSE Letter at 4.
    \746\ Id.
    \747\ Id. at 6.
    \748\ Id.
---------------------------------------------------------------------------

    Regarding the size and composition of the Advisory Committee, the
Participants recommended amending the Plan to include a service bureau
representative, because service bureaus ``perform audit trail reporting
on behalf of their customers . . . [and] would provide a valuable
perspective on how the CAT and any enhancements thereto would affect
the service bureau clients, which often include a number of small and
medium-sized firms.'' \749\ The Participants also recommended
augmenting the institutional investor representation on the Advisory
Committee by including institutional investor representation by an
adviser from registered funds, and increasing from two to three
institutional investor representatives with at least one of the
institutional investor representatives trading on behalf of an
investment company or group of investment companies registered pursuant
to the Investment Company Act of 1940.\750\ The Participants also
suggested removing references in the Advisory Committee eligibility
requirements for those institutional investors ``on behalf of a public
entity . . . and on behalf of a private entity,'' which is in response
to a comment noting the vagueness of the terms ``public'' and
``private'' with respect to institutional investors.\751\
---------------------------------------------------------------------------

    \749\ Response Letter I at 9.
    \750\ Id. at 10.
    \751\ Id.
---------------------------------------------------------------------------

    The Participants, however, disagreed with commenters that the
academic representative of the Advisory Committee should be limited to
a financial economist because a general requirement that ``a member of
academia with expertise in the securities industry or any other
industry relevant to the operation of the CAT System,'' does not
preclude a financial economist serving on the Advisory Committee so
long as they have the relevant expertise.\752\ The Participants also
disagreed with commenters that members of industry trade groups should
also serve on the Advisory Committee, noting that the CAT NMS Plan
includes a variety of representatives from the members of such trade
groups and would provide ``a meaningful opportunity for the
representation of the views of industry trade groups.'' \753\
Furthermore, the Participants disagreed with commenters who advocated
increasing the number of broker-dealer representatives on the Advisory
Committee from seven to twelve, and increasing the size of the Advisory
Committee from twelve to twenty members. The Participants noted that,
in ``balancing the goal of having a sufficient cross section of
representation with the goal of having a well-run committee,'' seven
broker-dealers of varying sizes and business types would provide
``significant opportunity to provide [broker-dealers'] views'' and
increasing an Advisory Committee from twelve to twenty creates a
committee structure that would ``likely hamper, rather than
facilitate,'' discussion.\754\
---------------------------------------------------------------------------

    \752\ Id.
    \753\ Id.
    \754\ Id. at 10-12.
---------------------------------------------------------------------------

    In response to commenters recommending a more active and
participatory role in operation of the CAT for non-SRO stakeholders,
the Participants stated that the Plan strikes an appropriate balance
between providing the ``industry with an active role in governance
while recognizing the Participants' regulatory obligations with regard
to the CAT.'' \755\ In response to a commenter recommending that
Advisory Committee members be selected by broker-dealer
representatives, the Participants stated their belief that the
Operating Committee should select the members, but agreed with
commenters that the Advisory Committee should be permitted to advise
the Operating Committee regarding potential Advisory Committee
members.\756\ The Participants suggested that the CAT NMS Plan be
amended to permit the Advisory Committee to advise the Operating
Committee on Advisory Committee member selection, provided however,
that the Operating Committee in its sole discretion would select
members of the Advisory Committee.\757\
---------------------------------------------------------------------------

    \755\ Id. at 13-14.
    \756\ Id.
    \757\ Id.
---------------------------------------------------------------------------

    In response to comments recommending formalized modes of written
communication between the Operating Committee and the Advisory
Committee, the Participants recommended that the CAT NMS Plan remain
unchanged.\758\ In support, the Participants stated their belief that
the proposed structure adequately addresses the commenters' concerns,
while recognizing the need for the Participants to have the opportunity
to discuss certain matters, particularly certain regulatory and
security issues, without the participation of the industry.\759\ The
Participants also noted that the Advisory Committee is permitted to
attend all of the non-Executive Session Operating Committee meetings,
where information concerning the operation of the CAT is received
(subject to the Operating Committee's authority to determine the scope
and content of information supplied to the Advisory Committee).\760\
Further, the Participants stated that minutes, subject to customary
exceptions for confidentiality and privilege considerations, will be
provided to the Advisory Committee. Finally, the Participants did not
support instituting formalized modes of written communication between
the Operating Committee and the Advisory Committee because such ``an
overly formulaic approach to [Operating Committee] interactions'' would
``hamper, rather than enhance, [Operating Committee] interactions with
the Advisory Committee.'' \761\
---------------------------------------------------------------------------

    \758\ Id. at 15-16.
    \759\ Id. at 16.
    \760\ Id.
    \761\ Id.
---------------------------------------------------------------------------

    With respect to comments recommending narrowing the use of
Operating Committee Executive Sessions, the Participants stated their
belief that the Operating Committee's capabilities to meet in Executive
Session are appropriate and cited the Commission's statement in the
Adopting Release that: ``meet[ing] in [E]xecutive [S]ession without
members of the Advisory Committee appropriately balances the need to
provide a mechanism for industry input into the operation of the
central repository, against the regulatory imperative that the
operations and decisions regarding the consolidated

audit trail be made by SROs who have a statutory obligation to regulate
the securities markets, rather than by members of the SROs, who have no
corresponding statutory obligation to oversee the securities markets.''
\762\ The Participants represented that their intended use of an
Executive Session is for limited purposes requiring confidentiality and
offered four examples: Matters that present an actual or potential
conflict of interest for Advisory Committee members (e.g., relating to
member's regulatory compliance); discussion of actual or potential
litigation; CAT security issues; and personnel issues. The Participants
also noted that Executive Sessions must be called by a Majority Vote
and that the meeting minutes are recorded, subject to confidentiality
and attorney-client privilege considerations.\763\
---------------------------------------------------------------------------

    \762\ Id. at 15.
    \763\ Id.
---------------------------------------------------------------------------

    Finally, in response to comments that the Advisory Committee should
form before the approval of the CAT NMS Plan, the Participants noted
that the Plan itself provides for the establishment of the Operating
Committee and the Advisory Committee and thus cannot be formed until
the Commission approves the Plan. The Participants also noted that the
DAG provides the Participants with ``advice regarding the development
of the Plan from an industry perspective.'' \764\
---------------------------------------------------------------------------

    \764\ Id. at 16.
---------------------------------------------------------------------------

    For reasons discussed below, the Commission finds reasonable the
Participants' suggested modifications to add a service bureau
representative, increase the number of institutional investor
representatives on the Advisory Committee, remove terms that create
vagueness for the institutional investor representative categories, and
make the applicable conforming changes to Section 4.13 of the Plan.
Accordingly, after considering the comments, the Commission is amending
Section 4.13 of the Plan to include a service bureau representative,
increase the number of institutional investor representatives from two
(2) to three (3), and remove the terms that a commenter identified as
creating vagueness with respect to the institutional investor category.
    The Commission understands that service bureaus frequently serve a
core role in reporting CAT Data on behalf of broker-dealers, and as
such, the Commission finds appropriate their inclusion as an Advisory
Committee member. Further, the Commission finds the increase from two
to three members on the Advisory Committee representing institutional
investors, as well as removing the references to ``on behalf of a
public entity'' and ``on behalf of a private entity'' due to the
vagueness of such terms with respect to institutional investor Advisory
Committee members, to be reasonable responses to commenters seeking
additional representation and clarity. The Commission also agrees with
the Participants that it is reasonable to not mandate inclusion of
representatives on the Advisory Committee from industry and trade
associations, given the existing substantial industry representation on
the Advisory Committee, which is reasonably designed to ensure a wide
range of meaningful industry perspectives.
    The Commission agrees with commenters who argued that the academic
representative on the Advisory Committee should be a financial
economist. The Commission acknowledges the Participants' response that
a financial economist is not precluded from serving as the academic
representative of the Advisory Committee, but the Commission believes
that specifying that the academic representative must be a financial
economist is appropriate to ensure the Advisory Committee and the
Operating Committee have access to such expertise in assessing the
CAT's operations and development. Accordingly, the Commission is
amending Section 4.13(b)(ix) of the Plan to specify that the academic
representative on the Advisory Committee must be a financial economist.
    The Commission agrees with the Participants' suggestion, in
response to commenters, to permit the Advisory Committee to recommend
Advisory Committee candidates to the Operating Committee. Accordingly,
the Commission is amending Section 4.13(d) of the Plan to permit the
Advisory Committee to recommend Advisory Committee candidates to the
Operating Committee, but notes that the Operating Committee still
maintains the sole discretion to select members of the Advisory
Committee.
    The Commission believes the amendment is reasonably designed to
ensure a robust selection process for Advisory Committee membership
that identifies candidates that best represent the industry
perspective. With respect to the comment suggesting that the Advisory
Committee be established before the approval of the CAT NMS Plan, the
Commission notes it would be premature and technically not possible to
establish an advisory committee to an NMS plan before such plan has
been approved by the Commission. Moreover, the Commission notes that
the interests of the industry and other stakeholders have been
represented through the DAG, the public comment process, and through
the SROs themselves as the CAT NMS Plan has been developed.
    The Commission is amending the Executive Sessions provision in
Section 4.4(a) of the Plan, as well as the Advisory Committee provision
in Section 4.13(b) of the Plan related to the Commission's Chief
Technology Officer (or equivalent) being an observer of the Advisory
Committee. As the Commission is responsible for regulatory oversight of
the Participants and the CAT NMS Plan, the Commission believes that it
is appropriate for the Plan to expressly provide that Commission Staff
may attend all CAT NMS Plan meetings, including those held in Executive
Session. Similarly, because the Commission has broad regulatory
responsibility for the Plan, the Commission does not believe it is
appropriate to limit to the Commission's Chief Technology Officer (or
equivalent) the right to serve as an observer at Advisory Committee
meetings. Accordingly, the Commission is amending Sections 4.4(a) and
4.13(b) to provide that Commission Staff may attend Executive Sessions,
and to permit the Commission to select the Commission representative to
observe Advisory Committee meetings. The Commission anticipates that
only a few members of Commission Staff would observe any given meeting.
    The Commission also is amending Section 4.13(e) of the Plan in
response to comments to provide that the Advisory Committee shall
receive the same documents and information concerning the operation of
the Central Repository as the Operating Committee. The Operating
Committee may, however, withhold such information to the extent it
reasonably determines such information requires confidential treatment.
Although the Plan as filed permits Advisory Committee members to attend
all of the non-Executive Session Operating Committee meetings, with
respect to information concerning the operation of the CAT, it allows
the Operating Committee broad discretion to determine the scope and
content of information supplied to the Advisory Committee. The
Commission believes it is important for the Advisory Committee to
fulfill its role that its members receive full information on Plan
operations (other than confidential information) and that it is
therefore appropriate to amend Section 4.13(e) of the Plan accordingly.

    With respect to the other comments regarding authority, composition
and role of the Advisory Committee, as well as the use of the Operating
Committee Executive Sessions, the Commission notes that the Plan
provisions relating to the Advisory Committee and the Operating
Committee Executive Sessions are similar to those in other NMS plans
and are, therefore, reasonable.\765\
---------------------------------------------------------------------------

    \765\ As previously stated, the Commission believes it is
reasonable for the CAT NMS Plan to include a governance structure
similar to that utilized by other NMS plans that the Commission
previously has found to be consistent with the Act. As with the
comments regarding the Operating Committee, some of the suggestions
made by commenters regarding the Advisory Committee are mirrored in
the EMSAC recommendations. As already discussed, the Commission is
separately reviewing these EMSAC recommendations. See supra note
693.
---------------------------------------------------------------------------

3. Officers of the Company
    The CAT NMS Plan requires the Company to appoint a CISO and a CCO,
who shall be employees solely of the Plan Processor.\766\ The Plan
acknowledges that the CISO and CCO may have fiduciary and other similar
duties to the Plan Processor pursuant to their employment with the Plan
Processor, and the Plan, as proposed, sets forth that to the extent
permitted by law, the CISO and CCO will have no fiduciary or similar
duties to the Company.\767\
---------------------------------------------------------------------------

    \766\ See Section III.3, supra; see also CAT NMS Plan, supra
note 5, at Section 4.6(a).
    \767\ See Section III.3, supra; see also CAT NMS Plan, supra
note 5, at Sections 4.6(a), 4.7(c).
---------------------------------------------------------------------------

    One commenter expressed concern that appointing a CISO and CCO who
would both be officers of the Company and employees of the Plan
Processor ``creates a potential conflict of interest that would
undermine the ability of these officers to effectively carry out their
responsibilities under the CAT NMS Plan because they would owe a
fiduciary duty to the Plan Processor rather than to the [Company].''
\768\ This commenter recommended that the officers of the Company
should be required to act in the best interest of the [Company] to
avoid conflicts of interest in carrying out their oversight
activities.\769\ In addition, this commenter suggested that the CAT NMS
Plan impose a fiduciary duty on the CISO and CCO, or at a minimum
require the Plan Processor to select individuals who do not have a
fiduciary duty to the Plan Processor to serve in these roles.\770\
---------------------------------------------------------------------------

    \768\ FSI Letter at 3.
    \769\ Id.
    \770\ Id.
---------------------------------------------------------------------------

    In response to these comments, the Participants suggested that the
CAT NMS Plan be changed so that all Officers of the Company, including
the CISO and CCO, have fiduciary duties to the Company in the same
manner and extent as an officer of a Delaware corporation.\771\ The
Participants also represented that the Operating Committee, in an
agreement with the Plan Processor, will have the Plan Processor
acknowledge that the Officers of the Company will owe fiduciary duties
to the Company, and to the extent that the duties owed to the Company
by the Officers of the Company, including the CISO or CCO, conflict
with any duties owed to the Plan Processor, the duties to the Company
should control.\772\
---------------------------------------------------------------------------

    \771\ Response Letter I at 18-19.
    \772\ Id. at 18.
---------------------------------------------------------------------------

    The Commission believes that the suggested modifications by the
Participants in response to comments about potential conflicts of
interest are reasonable. Accordingly, the Commission is amending
Section 4.7(c) of the Plan so that each Officer shall have the same
fiduciary duties and obligations to the Company as a comparable officer
of a Delaware corporation and in all cases shall conduct the business
of the Company and execute his or her duties and obligations in good
faith and in the manner that the Officer reasonably believes to be in
the best interests of the Company. Furthermore, the Commission is
amending Section 4.6(a) of the Plan to codify the Participants'
representation that that the Operating Committee, in an agreement with
the Plan Processor, will have the Plan Processor acknowledge that the
Officers of the Company will owe fiduciary duties to the Company, and
to the extent that the duties owed to the Company by the Officers of
the Company, including the CISO or CCO, conflict with any duties owed
to the Plan Processor, the duties to the Company should control.
    The Commission believes that amending the CAT NMS Plan to expressly
affirm the Officers' fiduciary duties or similar duties or obligations
to the Company provides clarity and assurances that the Officers will
act in the best interests of the Company.\773\ The Commission also
believes it is reasonable, as the Participants have suggested in their
response to comments, to have the Company and the Plan Processor enter
into an agreement that specifies not only that Officers have fiduciary
duties and obligations to the Company, but that if such Officers may
have competing duties and obligations owed to the Company and to the
Plan Processor, the duties and obligations to the Company should
control. At this time, it is unclear what competing duties and
obligations Officers may owe to the Company and the Plan Processor.
While in many cases, the Officers' duties towards the Plan Processor
and the Company are likely to be aligned, there may be circumstances
(e.g., related to the performance of the Plan Processor) where such
duties may conflict and the Commission finds reasonable that in such
circumstances, the duties to the Company should control in order to
mitigate any conflict between the interests of the Plan Processor and
those of the Company in administering the CAT. The Commission further
notes that the CAT NMS Plan provides reasonable oversight of the
Officers by the Operating Committee, for example, the Plan requires:
(i) The Operating Committee to approve the CISO and CCO with a
Supermajority Vote \774\; (ii) the CISO and CCO to devote, with minor
exceptions, their entire working time to serving as the CISO and CCO
\775\; (iii) the Operating Committee to oversee that the Plan Processor
allocates appropriate resources for the CISO and CCO to fulfill their
obligations \776\; (iv) the CISO and CCO to report directly to the
Operating Committee with respect to their duties \777\; (v) the
compensation of the CISO and CCO to be subject to the Operating
Committee's review and approval \778\; and (vi) an annual performance
review of the CISO and CCO to be conducted by the Operating
Committee.\779\
---------------------------------------------------------------------------

    \773\ While the SROs expressly waive fiduciary obligations to
the Company, the SROs are subject to statutory obligations to
regulate the securities markets and to create, implement and
maintain the CAT.
    \774\ See CAT NMS Plan, supra note 5, at Section 6.2(a)(i),
(b)(i).
    \775\ See id. at Section 6.2(a)(i), (b)(i).
    \776\ See id. at Section 6.2(a)(ii), (b)(ii).
    \777\ See id. at Section 6.2(a)(iii), (b)(iii).
    \778\ See id. at Section 6.2(a)(iv), (b)(iv).
    \779\ See id. at Section 6.2(a)(iv), (b)(iv).
---------------------------------------------------------------------------

4. Additional Governance Provisions
    Commenters raised additional governance concerns related to
conflicts of interest for the Participants, whether there should be an
audit committee, and whether the Participants should be required to
coordinate the administration of the CAT from a legal, administrative,
supervisory and enforcement perspective.\780\
---------------------------------------------------------------------------

    \780\ See SIFMA Letter at 27, 29; ICI Letter at 12; Better
Markets Letter at 5-6; DAG Letter at 3; see also STA Letter at 1
(supporting the DAG Letter's governance recommendations).
---------------------------------------------------------------------------

    Some commenters expressed concern that the Participants would have
a conflict of interest because of the various roles they perform with
respect

to the CAT. One commenter stated that the Participants are ``sponsors
and overseers of the Plan, while at the same time, the Plan will impose
obligations on [them].'' \781\ Another commenter raised concerns that
the Participants would ``control the [O]perating [C]ommittee for the
[P]lan, use CAT [D]ata for regulatory purposes, and potentially
commercialize the information that they report to the CAT.'' \782\ This
commenter suggested that these roles may ``present conflicting
incentives'' for Participants.\783\
---------------------------------------------------------------------------

    \781\ SIFMA Letter at 27.
    \782\ ICI Letter at 12.
    \783\ Id.
---------------------------------------------------------------------------

    One commenter argued that the Participants should not oversee and
control the CAT and recommended instead that the Commission should
build and host the CAT, which would then be under the Commission's
direct and sole control.\784\ In support of this view, the commenter
stated the Commission's statutory mission to protect investors would
make it better positioned to operate the CAT, as compared to for-profit
SROs, who would seek to maximize profits from the CAT Data.\785\ The
commenter suggested that the Commission could outsource the building of
the CAT and fund the CAT similar to how it funds its EDGAR system.\786\
The commenter stated that CAT NMS, LLC should reorganize as a not-for-
profit entity and set forth an organizational purpose aligned with the
Commission's mission statement.\787\ Finally, the commenter argued that
the Commission solely should control access to and usage of the CAT
System.\788\
---------------------------------------------------------------------------

    \784\ Better Markets Letter at 5.
    \785\ Id. at 5-6.
    \786\ Id. at 6.
    \787\ Id. The commenter recommended that the board of directors
of such entity contain a super-majority of independent directors to
oversee the not-for-profit CAT NMS, LLC, and that the chair of the
board of directors should be non-industry and appointed by the
Commission. Further, the commenter recommended that the Director of
the Division of Trading and Markets permanently serve as the vice-
chair of the board of directors. Better Markets Letter at 6; see
also DAG Letter at 3 (arguing that the CAT corporate governance
structure should have independent directors comprised of both non-
industry and industry participants); STA Letter at 1 (supporting the
DAG Letter's governance recommendations).
    \788\ Better Markets Letter at 6.
---------------------------------------------------------------------------

    Two commenters recommended that the Company governance structure
include an audit committee.\789\ One commenter noted that the audit
committee should be comprised of mostly independent directors.\790\
Another commenter stated the audit committee should be responsible for
the oversight of how the CAT's revenue sources are used for regulatory
purposes, and that the costs and financing of the CAT must be fully
transparent and publicly disclosed in annual reports, including audited
financial statements.\791\
---------------------------------------------------------------------------

    \789\ SIFMA Letter at 29; DAG Letter at 3; see also STA Letter
at 1 (supporting the DAG Letter's governance recommendations).
    \790\ DAG Letter at 3; see also STA Letter at 1 (supporting the
DAG Letter's governance recommendations). The Commission notes that
the commenter specified in its comment that their definition of
independent director includes industry participants (i.e., broker-
dealers). See DAG Letter at 3.
    \791\ SIFMA Letter at 29.
---------------------------------------------------------------------------

    Finally, one commenter suggested that the SROs should coordinate
the administration of the CAT through a single centralized body from a
legal, administrative, supervisory and enforcement perspective.\792\
The commenter recommended amending the Plan to require this
coordination, and suggested that such coordination could be facilitated
through agreements under SEC Rule 17d-2, regulatory service agreements
or some combination thereof.\793\ In support of this view, the
commenter noted that different CAT-related compliance requirements
among the SROs might arise and subject firms to duplicative regulation
and enforcement, with the accompanying inefficiencies, additional
costs, and potential inconsistencies.\794\
---------------------------------------------------------------------------

    \792\ Id.
    \793\ Id.
    \794\ Id.
---------------------------------------------------------------------------

    In response to commenters suggesting the formation of an audit
committee, the Participants stated that they would have the ability to
review CAT-related issues objectively because ``members of the
Operating Committee are not employed by the [Company] and are
fulfilling mandated regulatory oversight responsibilities, and that the
[Company] will not operate as a profit-making company, which may need
more scrutiny as compared to a company that is operating on a break-
even basis.'' \795\ Further, the Participants noted that the CAT NMS
Plan requires that a Compliance Subcommittee be established--and noted
that the Operating Committee in the future could decide if an audit
committee should be formed as a subcommittee.\796\
---------------------------------------------------------------------------

    \795\ Response Letter I at 8.
    \796\ Id. at 9.
---------------------------------------------------------------------------

    In response to commenters regarding the coordinated compliance and
enforcement oversight of the CAT, the Participants acknowledged the
benefits of having a single Participant be responsible for enforcing
compliance with Rule 613 and the CAT NMS Plan through Rule 17d-2
agreements, regulatory services agreements or some other approach and
represented that they would consider such an arrangement after the CAT
NMS Plan's approval.\797\ As discussed in Section IV.H, the Commission
is amending Section 6.6 of the Plan to require that the Participants
provide the Commission within 12 months of effectiveness of the Plan, a
report detailing the Participants' consideration of coordinated
surveillance (e.g., entering into 17d-2 agreements or regulatory
services agreements).\798\
---------------------------------------------------------------------------

    \797\ Id. at 17.
    \798\ See Section IV.H., supra.
---------------------------------------------------------------------------

    The Commission acknowledges the commenters' concern about the
conflicts inherent in having SROs performing various roles as overseers
of the Plan and at the same time enforcing compliance with Rule 613.
The Commission, however, highlights that the Participants are
performing roles specified pursuant to obligations under the Exchange
Act and the rules thereunder and remain under the direct oversight of
the Commission. With respect to comments expressing concerns that the
Participants may be in a position to commercialize the respective Raw
Data reported by each SRO submitting to the CAT, order and execution
information is already collected by SROs from its members and they are
permitted under current law to commercialize this data (e.g., direct
market feeds, provided that the terms are fair and reasonable and not
unreasonably discriminatory \799\) subject to appropriate rule filings
and oversight by the Commission.\800\ Thus, the Plan does not expand
the Participants' ability to commercialize their Raw Data beyond what
is currently permitted.
---------------------------------------------------------------------------

    \799\ 17 CFR 242.603.
    \800\ See, e.g., Securities Exchange Act Release Nos. 73918
(December 23, 2014), 79 FR 78920 (December 31, 2014) (BATS One
Feed); 74128 (January 23, 2015), 80 FR 4951 (January 29, 2015) (NYSE
Integrated Feed).
---------------------------------------------------------------------------

    With respect to comments that suggested that the Participants
should not oversee and control the CAT, but that instead it should be
under the Commission's direct and sole control, the Commission notes
that in the Adopting Release, the Commission mandated that the
Participants develop an NMS plan for the development and operation of
the CAT. As such, the CAT NMS Plan, as noticed, whereby the
Participants directly manage the CAT, was in furtherance of Rule 613 as
adopted. Additionally, because the Participants, as SROs, currently
serve as front-line regulators of many aspects of the securities
markets, including

administering the existing sources of regulatory data, the Commission
believes they are well positioned to oversee the CAT. Moreover, the
Commission believes that any potential conflicts arising from the
status of certain Participants as for profit enterprises are reasonably
addressed through the Plan provisions and Commission oversight.
    The Commission concurs with the Participants that it is reasonable
for the Company not to have an audit committee at this time. Further,
the Participants are permitted to form an audit committee, as a
subcommittee of the Operating Committee. The Commission notes that the
absence of a requirement for an audit committee is consistent with
other NMS plans.
    Section 9.2(a) of the Plan states that the Operating Committee
shall maintain a system of accounting for the Company established and
administered in accordance with GAAP (or another standard if determined
appropriate by the Operating Committee). Section 9.2(a) also requires,
among other things, that the Company prepare and provide to each
Participant an audited balance sheet, income statement and statement of
cash flow, to the extent the Operating Committee deems advisable. In
addition, Section 9.2(c) of the Plan states that all matters concerning
accounting procedures shall be determined by the Operating Committee.
The Participants recommended that the Commission amend Section 9.2(a)
to eliminate the flexibility for the Company to administer a system of
accounting in accordance with non-GAAP standards, thus requiring that
all financial statements or information that may be supplied to the
Participants shall be prepared in accordance with GAAP.\801\ In
addition, the Participants recommended amending the Plan to eliminate
the discretion of the Operating Committee to provide financials only if
it deems advisable and instead to require that the Company's audited
annual balance sheet, income statement, and statement of cash flows be
audited by an independent public accounting firm and made publicly
available.\802\ The Commission believes that the changes recommended by
the Participants are reasonable because they will promote greater
accuracy and transparency with respect to the Company's financial
accounting and is therefore amending the Plan accordingly.
---------------------------------------------------------------------------

    \801\ Participants' Letter II at 2.
    \802\ Participants' Letter II at 2.
---------------------------------------------------------------------------

    Section 6.1(o)(vi) of the Plan states that financial statements of
the Plan Processor, prepared in accordance with GAAP and audited by an
independent public accounting firm or certified by the Plan Processor's
Chief Financial Officer, shall be provided to the Operating Committee
no later than 90 days after the Plan Processor's fiscal year end. The
Participants recommended that the Commission amend the Plan to change
this timeframe to 180 days after the Plan Processor's fiscal year end
to provide further flexibility to the Plan Processor with respect to
the preparation of its financial statements.\803\ The Commission
believes that it is reasonable to provide this additional flexibility
and is therefore amending the Plan accordingly.
---------------------------------------------------------------------------

    \803\ Participants' Letter II at 1.
---------------------------------------------------------------------------

    The Commission also agrees with the commenters and Participants
that a coordinated approach to self-regulatory oversight may have
benefits, such as regulatory efficiencies and consistency, but believes
that it is reasonable for such an arrangement to be considered by the
Participants after the CAT NMS Plan's approval rather than mandating a
specific approach for SRO coordination under the Plan at this time--as
the Plan Processor has not been selected nor has the CAT System been
developed. The Commission nevertheless notes that, as described above,
it is amending the CAT NMS Plan to require a written assessment by the
Participants within 12 months of effectiveness of the Plan, considering
coordinated surveillance (e.g., entering into Rule 17d-2 agreements,
regulatory services agreements or other arrangements, to facilitate
regulatory coordination).\804\
---------------------------------------------------------------------------

    \804\ See Section IV.H, infra.
---------------------------------------------------------------------------

    Finally, the Commission notes that the CAT NMS Plan provides that
books and records of the CAT LLC shall be made available to the
Commission upon ``reasonable request.'' \805\ Because the CAT LLC is a
facility of the Participants, the Commission has the right to the books
and records of CAT LLC ``upon request'' under Exchange Act Rule 17a-
1,\806\ and therefore is amending Section 9.1 of the Plan to delete the
requirement that any request for the CAT LLC's books and records be
``reasonable.''
---------------------------------------------------------------------------

    \805\ See CAT NMS Plan, supra note 5, at Section 9.1.
    \806\ 17 CFR 240.17a-1(c).
---------------------------------------------------------------------------

C. Plan Processor Selection (Article V)

    Article V of the CAT NMS Plan sets forth the process for selecting
the Plan Processor following approval of the CAT NMS Plan.\807\ The
Plan Processor selection provisions in Article V are identical to the
selection process set forth in the Selection Plan.\808\
---------------------------------------------------------------------------

    \807\ See Section III.4, supra, for a more detailed description
of the Selection Plan.
    \808\ See Selection Plan, supra note 23.
---------------------------------------------------------------------------

    The Commission received three comments suggesting that the Plan
Processor selection process be accelerated,\809\ with some commenters
suggesting that the Selection Plan be amended to require the selection
of the Plan Processor prior to the approval of the CAT NMS Plan.\810\
According to one commenter, the earlier selection of a Plan Processor
would advance the release and development of the Technical
Specifications.\811\ Another commenter offered support for a specific
Bidder, noting their regulatory and technical competencies.\812\ One
commenter recommended that the Commission re-open the Plan Processor's
agreement with CAT NMS, LLC every five years to ensure that the Plan
remains state-of-the-art, and to provide a process for public
input.\813\ Another commenter stated that the Plan does not set forth
sufficient incentives for the Plan Processor and the Participants to
incorporate new technology into or to continuously innovate and strive
to reduce the costs of the CAT System.\814\
---------------------------------------------------------------------------

    \809\ FSR Letter at 10; TR Letter at 4-5; FIF Letter at 42-43.
    \810\ TR Letter at 4-5; FIF Letter at 42-43.
    \811\ TR Letter at 4-5; see also Section V.G.4, infra, for a
further discussion of these comment letters.
    \812\ Anonymous Letter I at 1 (advocating for FINRA's regulatory
abilities related to OATS); but see Anonymous Letter II (criticizing
FINRA's handling of OATS non-compliance).
    \813\ Better Markets Letter at 7.
    \814\ Data Boiler Letter at 17, 27.
---------------------------------------------------------------------------

    In response to the comments to accelerate the Plan Processor
selection process, the Participants acknowledged that the selection of
the Plan Processor will likely affect implementation issues and related
costs,\815\ but that it is not feasible to accelerate the selection of
the Plan Processor prior to the Commission's approval of the Plan. The
Participants noted that until the Plan is finalized and approved by the
Commission, the requirements of the CAT could change, which could
impact the selection of the Plan Processor.\816\ Moreover, the
Participants noted that Rule 613's requirement that the Plan Processor
be selected within two months after effectiveness of the Plan ensures
that the selection of the Plan

Processor will occur expeditiously once the Commission approves the
Plan.\817\
---------------------------------------------------------------------------

    \815\ Response Letter I at 51.
    \816\ The Participants note in Response Letter I that the
Selection Plan contemplates the selection of the Plan Processor
after the approval of the Plan. Id. at 52.
    \817\ 17 CFR 242.613(a)(3)(i).
---------------------------------------------------------------------------

    In response to the comment in support for a specific Bidder, the
Participants stated that they determined that utilizing a competitive
bidding process to select the Plan Processor was the most appropriate
way to promote an innovative and efficient CAT solution.\818\ Pursuant
to that process, the Participants noted that they have reduced the
number of Bidders to three Shortlisted Bidders.
---------------------------------------------------------------------------

    \818\ Response Letter I at 52.
---------------------------------------------------------------------------

    In response to the comment to re-open the Plan Processor's
agreement with the CAT LLC every five years and to provide a process
for public input on the agreement, the Participants stated that they
agree that it is important to ensure that the CAT solution remains
effective and efficient going forward.\819\ Accordingly, the
Participants noted that they have proposed a process for regularly
reviewing the performance of the Plan Processor throughout the term of
the Plan Processor's agreement and for modifying it if necessary to
avoid an outdated CAT solution. The Participants added that, as set
forth in the Plan, the Operating Committee will review the Plan
Processor's performance under the Plan at least once each year, or more
often than once each year upon the request of two or more Participants
that are not Affiliated Participants.\820\ In addition, the
Participants noted that the Plan sets forth the process for removing
the Plan Processor. Specifically, the Participants noted that the
Operating Committee, by Supermajority Vote, may remove the Plan
Processor from such position at any time, and that the Operating
Committee may, by Majority Vote, remove the Plan Processor from such
position at any time if it determines that the Plan Processor has
failed to perform its functions in a reasonably acceptable manner in
accordance with the provisions of the Plan. The Participants stated
that if they were to vote to remove the Plan Processor, the Operating
Committee would select a new Plan Processor through a competitive
bidding process.
---------------------------------------------------------------------------

    \819\ Id.
    \820\ See supra note 67 for a definition of ``Affiliated
Participants.''
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    In approving the Selection Plan, the Commission stated that the
Selection Plan is reasonably designed to achieve its objective of
facilitating the development of the CAT NMS Plan and the selection of
the Plan Processor.\821\ The Commission also found that the Selection
Plan is reasonably designed to govern the process by which the SROs
will formulate and submit the CAT NMS Plan, including the review,
evaluation, and narrowing down of Bids in response to the RFP, and
ultimately choosing the Plan Processor that will build, operate, and
maintain the consolidated audit trail.\822\ The Commission believes
that the process set out in the Selection Plan for selecting a Plan
Processor remains a reasonable approach, which will facilitate the
selection of Plan Processor through a fair, transparent and competitive
process and that no modifications to the Selection Plan are required to
meet the approval standard. In response to the commenters recommending
that the Plan Processor selection process be accelerated, the
Commission agrees with the Participants that changes to the CAT NMS
Plan that are being made in this Order may be relevant to the selection
of the Plan Processor. The Commission believes that selecting the Plan
Processor within two months of Plan approval, rather than prior to Plan
approval, will allow the remaining Bidders to consider the CAT NMS
Plan, as amended and approved by the Commission, and to make any
necessary modifications to their Bids, which will enable the
Participants to make a more fully informed decision on the Plan
Processor in light of the amended and approved CAT NMS Plan.\823\ The
Commission believes this timeframe to select the Plan Processor--two
months following Commission approval of the Plan--will not result in
the untimely release of the Technical Specifications.
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    \821\ See Selection Plan Approval Order, supra note 23.
    \822\ See id.
    \823\ In addition, the Commission notes that, pursuant to an
amendment to the Selection Plan, the Participants have already
narrowed the Bidders to three Shortlisted Bidders, which will
facilitate the timely completion of the Plan Processor selection
process. See Selection Plan, supra note 23.
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    In response to the comment that offered support for a specific
Bidder, the Commission agrees with the Participants that the
competitive bidding process to select the Plan Processor is a
reasonable and effective way to choose a Plan Processor and thus
believes that the process set forth in the Selection Plan should be
permitted to continue. In response to the commenter that recommended
that the Commission re-open the Plan Processor's agreement with the CAT
LLC every five years and provide a process for public input on the
agreement, the Commission believes that the CAT NMS Plan already
contains provisions that permit the reevaluation--and possible
replacement--of the Plan Processor. Thus, the Commission is not
amending the plan to require that the Plan Processor's agreement with
the CAT LLC be reevaluated every five years.
    Finally, in response to the commenter that stated that the Plan
does not provide sufficient incentives for the Plan Processor and the
Participants to incorporate new technology, innovate and reduce the
costs of the CAT System, the Commission believes that requirements for
regular evaluations of the operation of the CAT, the identification of
potential improvements, and the delivery of a written assessment to the
Commission, as well as the Plan's provisions regarding the possible
removal of the Plan Processor provide sufficient incentives for the
Plan Processor and the Participants in these areas.\824\
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    \824\ See CAT NMS Plan, supra note 5, at Section 4.3(b)(ii)
(providing that the Operating Committee may terminate the Plan
Processor without cause).
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D. Functions and Activities of the CAT System (Article VI)

    Article VI of the CAT NMS Plan sets forth the functions and
activities of the CAT System.\825\
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    \825\ See Section IV.B., supra.
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1. Data Recording and Reporting Requirements
    Article VI of the Plan imposes requirements regarding what data
elements must be reported to the Central Repository and by when. The
Commission received comments regarding to whom these requirements
should apply and the appropriateness of the provisions.
    One commenter recommended that firms using manual orders that are
currently exempt from OATS reporting pursuant to FINRA Rule 7470 should
also be exempt from the CAT reporting obligations.\826\ This commenter
argued that to qualify for such an exemption, a firm would need to
``eliminate many practices of regulatory concern'' and have a ``perfect
regulatory history,'' and that the exemption would have little impact
on the CAT because it would exclude only the reporting of events that
take place prior to delivery of an order to a market venue. The
commenter argued that the exemption is necessary to keep currently-
exempt firms in business due to the high costs that CAT reporting would
impose.\827\ This commenter further argued that the requested exemption
for OATS-exempt firms would not be the same as an exemption for ``small
firms,'' and that wrongdoers would not fall within this exemption
because of the limitations on the level of market activity, the

voluntary restrictions from operations such as market making and
trading with customers, the use of manual orders, and the expected high
levels of compliance.\828\
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    \826\ Wachtel Letter at 1-2.
    \827\ Id.
    \828\ Id.
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    Another commenter broadly stated that the data recording and
reporting procedures described in the CAT NMS Plan are inappropriate
and unreasonable.\829\ This commenter also stated that it may be easier
for the Plan Processor to work directly with service bureaus, rather
than with individual CAT Reporters, on data submission.\830\
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    \829\ Data Boiler Letter at 18. Specifically, the commenter
argued that to link information accurately, there must be ``a robust
event sequencing method,'' and stated that the Plan lacks sufficient
detail on this matter. The commenter further suggested that order
and execution information should be represented in a meaningful way
and recommended expressing this information in audio/musical notes
form.
    \830\ Id. at 19-20.
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    In response to the commenter's request that OATS-exempt firms also
be exempted from reporting to the CAT, the Commission believes that
completely exempting any group of broker-dealers from reporting
requirements would be contradictory to the goal of Rule 613, which is
to create an accurate, complete, accessible and timely audit
trail.\831\ To permit such an exemption would eliminate the collection
of audit trail information from a segment of broker-dealers and would
thus result in an audit trail that does not capture all orders by all
participants in the securities markets. The Commission believes that
the CAT should contain data from all broker-dealers, including those
that may appear to be at low risk for wrong-doing based on their
history of compliance or business model. Regulators will not only use
the CAT for surveillance and investigations, but also for market
reconstructions and market analyses. Therefore, data from all broker-
dealers is necessary.\832\
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    \831\ The Participants did not respond to this comment.
    \832\ As discussed in more detail below, the Commission believes
that even if regulatory burdens reduce the number of small broker-
dealers in specialized segments, overall competition in those
segments may not be harmed. See Section V.G.1, infra.
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    The Commission believes that the data recording and reporting
procedures outlined in the CAT NMS Plan meet the requirements of Rule
613 \833\ and are reasonable in that they are designed to ensure that
data is recorded and reported in a manner that will provide regulators
access to linked CAT Data that is timely, accurate, secure, and
complete.\834\ Further, while under certain circumstances it might be
efficient for the Plan Processor to work directly with service bureaus,
the reporting requirements in the CAT NMS Plan apply to CAT Reporters,
which are regulated entities, and therefore, it is necessary that the
Plan Processor deal directly with CAT Reporters in determining matters
related to reporting CAT Data.\835\
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    \833\ 17 CFR 242.613(c).
    \834\ In the Adopting Release for Exchange Act Rule 613, the
Commission stated that the data recording and reporting procedures
are reasonably designed ``to ensure that the [CAT] will be designed
in a way that provides regulators with the accurate, complete,
accessible, and timely market activity data they need for robust
market oversight.'' See Adopting Release, supra note 14, at 45743.
    \835\ The Commission notes that the CAT NMS Plan also requires
the Plan Processor to measure and monitor latency within the CAT.
See CAT NMS Plan, supra note 5, at Appendix D, Section 8.3.
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2. Format
    The CAT NMS Plan does not mandate the format in which data must be
reported to the Central Repository.\836\ Rather, the Plan provides that
the Plan Processor will determine the electronic format in which data
must be reported, and that the format will be described in the
Technical Specifications.\837\
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    \836\ See CAT NMS Plan, supra note 5, at Appendix C, Section
D.12(f); see also id. at Appendix C, Section A.1(a). The CAT NMS
Plan states that CAT Reporters could be required to report data
either in a uniform electronic format, or in a manner that would
allow the Central Repository to convert the data to a uniform
electronic format, for consolidation and storage. Id. at Appendix C,
Section A.1(b).
    \837\ Id. at Appendix D, Section 2.1. Appendix D states that
more than one format may be allowed to support the various market
participants that would report information to the Central
Repository. Id.; see also id. at Section 6.9.
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    Two commenters expressed support for allowing the Plan Processor to
determine the format for reporting data.\838\ One of these commenters
stated that prescribing an approach in the Plan may hinder scalability
and future system development.\839\
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    \838\ ICI Letter at 13.
    \839\ Data Boiler Letter at 9. This commenter also stated that
the formatting procedures in the Plan were insufficient and
recommended using an audio/musical approach. Id. at 18.
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    Three commenters, however, recommended that the format be specified
in the Plan.\840\ One commenter argued that mandating an approach in
the Plan, rather than waiting for the Technical Specifications, would
give the industry more time to develop approaches to reporting using
that format.\841\ The commenter also argued that if the format is not
known until the Technical Specifications are published, this would
limit the opportunity to make changes to the format, if necessary,
without disrupting the implementation schedule.\842\ The commenter
suggested that at least guidelines for a messaging protocol be included
in the Plan.\843\
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    \840\ FIF Letter at 90-92; FIX Trading Letter at 1; Better
Markets Letter at 7 (stating that ``the Commission should mandate
the most widely used, open-sourced, machine-readable data format
possible.'')
    \841\ FIF Letter at 90-91.
    \842\ Id. at 90.
    \843\ Id. at 91-92.
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    Commenters also expressed opinions about whether the Plan Processor
should allow CAT Reporters to use multiple formats or one uniform
format to report CAT Data. Four commenters generally supported an
approach that would allow CAT Reporters to report CAT Data using a non-
uniform format.\844\ Under such an approach, the Central Repository
would be responsible for normalizing the data into a uniform format to
link and store the data. These commenters noted that CAT Reporters
should be permitted to use any of the currently existing industry
protocols widely used by industry participants, such as OATS, SWIFT or
FIX.\845\ One commenter advocated for the use of its own electronic
communications protocol, FIX, stating that it would result in quicker
implementation times and simplify data aggregation.\846\ This commenter
noted that FIX is currently used by thousands of firms in the financial
services industry and that it would not make sense to require firms to
convert from a FIX format to a proprietary format designed by the Plan
Processor and mandated for CAT reporting.\847\ The commenter stated
that FIX already tracks the lifecycle of an order both within an
organization and across organizations, thus making it a good choice as
the format for the CAT.\848\ It also noted that it is used globally and
can be used for products beyond listed options and equities. Finally,
the commenter represented that FIX can handle any identifier, including
LEI, and can support the CAT NMS Plan's use of Customer-ID, average
price processing, options reporting, and the daisy chain approach for
reporting.\849\
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    \844\ FIF Letter at 90-92; ICI Letter at 13; FIX Trading Letter
at 1-2; Data Boiler Letter at 41.
    \845\ ICI Letter at 13; FIX Trading Letter at 1-2; Data Boiler
Letter at 41; FIF Letter at 91. FIF stated that CAT Reporters could
use either an existing format or a ``native'' format developed by
the Plan Processor. Another commenter was against trying to develop
a native CAT format. Data Boiler Letter at 20. This commenter
suggested preserving data in its most original format and then
converting trade streams into ``music formats'' for ease of storage
and comparison and to facilitate surveillance. Id.
    \846\ FIX Trading Letter at 1-2.
    \847\ Id. at 1; see also FIF Letter at 92.
    \848\ FIX Trading Letter at 2.
    \849\ Id. at 2-3.

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    One commenter stated that while mandating one uniform format would
reduce the burden on the Central Repository for consolidating and
storing data, it would impose a burden on CAT Reporters to accurately
translate their current reporting format into a uniform CAT interface
that could result in more errors than if the conversion to a uniform
format occurred at the Central Repository.\850\ Conversely, another
commenter cautioned that requiring one uniform format would create a
monopoly.\851\
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    \850\ FIF Letter at 92.
    \851\ Data Boiler Letter at 36, 41.
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    One commenter argued that while data reported in a non-uniform
format can be reliably converted into a uniform format, there are
benefits to using a uniform format.\852\ Specifically, the commenter
stated that using a uniform format can reduce data integrity issues
within the Plan Processor, reduce data processing times, lower error
correction rates between T+1 and T+3, reduce time and resources needed
to on-board participants, and improve data accuracy and consistency
across broker-dealers.\853\ The commenter also stated that use of a
uniform format would improve data completeness because exact fields and
standards would be defined.
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    \852\ UnaVista Letter at 2.
    \853\ Id.
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