[Federal Register Volume 82, Number 119 (Thursday, June 22, 2017)]
[Notices]
[Pages 28540-28543]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-12987]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80952; File No. SR-NASDAQ-2017-059]


Self-Regulatory Organizations; The NASDAQ Stock Market LLC; 
Notice of Filing of a Proposed Rule Change To Adopt Rule 6896 and 
Chapter IX, Section 9

June 16, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that on June 8, 2017, The NASDAQ Stock Market LLC 
(``Nasdaq'' or ``Exchange'') filed with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') the proposed rule change as 
described in Items I and II, below, which Items have been prepared by 
the Exchange. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Rule 6896 and Chapter IX, Section 9 
(Consolidated Audit Trail--Fee Dispute Resolution) to establish the 
procedures for resolving potential disputes related to CAT Fees charged 
to Industry Members.\3\
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    \3\ Unless otherwise specified, capitalized terms used in this 
rule filing are defined as set forth herein, or in the Consolidated 
Audit Trail Funding Fees Rule, the CAT Compliance Rule Series or in 
the CAT NMS Plan.
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    The text of the proposed rule change is available on the Exchange's 
Web site at http://nasdaq.cchwallstreet.com, at the principal office of 
the Exchange, and at the Commission's Public Reference Room.

[[Page 28541]]

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

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

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

1. Purpose
    Bats BYX Exchange, Inc., Bats BZX Exchange, Inc., Bats EDGA 
Exchange, Inc., Bats EDGX Exchange, Inc., BOX Options Exchange LLC, C2 
Options Exchange, Incorporated, Chicago Board Options Exchange, 
Incorporated, Chicago Stock Exchange, Inc., Financial Industry 
Regulatory Authority, Inc. (``FINRA''), Investors' Exchange LLC, Miami 
International Securities Exchange, LLC, MIAX PEARL, LLC, NASDAQ BX, 
Inc., Nasdaq GEMX, LLC, Nasdaq ISE, LLC, Nasdaq MRX, LLC,\4\ NASDAQ 
PHLX LLC, The NASDAQ Stock Market LLC, New York Stock Exchange LLC, 
NYSE MKT LLC, NYSE Arca, Inc. and NYSE National, Inc.\5\ (collectively, 
the ``Participants'') filed with the Commission, pursuant to Section 
11A of the Exchange Act \6\ and Rule 608 of Regulation NMS 
thereunder,\7\ the National Market System Plan Governing the 
Consolidated Audit Trail (the ``CAT NMS Plan'' or ``Plan'').\8\ The 
Participants filed the Plan to comply with Rule 613 of Regulation NMS 
under the Exchange Act. The Plan was published for comment in the 
Federal Register on May 17, 2016,\9\ and approved by the Commission, as 
modified, on November 15, 2016.\10\ The Plan is designed to create, 
implement and maintain a consolidated audit trail (``CAT'') that would 
capture customer and order event information for orders in NMS 
Securities and OTC Equity Securities, across all markets, from the time 
of order inception through routing, cancellation, modification, or 
execution in a single consolidated data source. The Plan accomplishes 
this by creating CAT NMS, LLC (the ``Company''), of which each 
Participant is a member, to operate the CAT.\11\ Under the CAT NMS 
Plan, the Operating Committee of the Company (``Operating Committee'') 
has discretion to establish funding for the Company to operate the CAT, 
including establishing fees that the Participants will pay, and 
establishing fees for Industry Members that will be implemented by the 
Participants (``CAT Fees'').\12\ The Participants are required to file 
with the SEC under Section 19(b) of the Exchange Act any such CAT Fees 
applicable to Industry Members that the Operating Committee 
approves.\13\ Accordingly, the Exchange has filed a proposed rule 
change with the SEC to adopt the Consolidated Audit Trail Funding Fees, 
which will require Industry Members that are Exchange members to pay 
the CAT Fees determined by the Operating Committee.\14\ The Exchange 
submits this rule filing to adopt Rule 6896 and Chapter IX, Section 9 
(Consolidated Audit Trail--Fee Dispute Resolution) to establish the 
procedures for resolving potential disputes related to CAT Fees charged 
to Industry Members. The proposed rules are described below.
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    \4\ ISE Gemini, LLC, ISE Mercury, LLC and International 
Securities Exchange, LLC have been renamed Nasdaq GEMX, LLC, Nasdaq 
MRX, LLC, and Nasdaq ISE, LLC, respectively. See Securities Exchange 
Act Release No. 80248 (March 15, 2017), 82 FR 14547 (March 21, 
2017); Securities Exchange Act Release No. 80326 (March 29, 2017), 
82 FR 16460 (April 4, 2017); and Securities Exchange Act Release No. 
80325 (March 29, 2017), 82 FR 16445 (April 4, 2017).
    \5\ National Stock Exchange, Inc. has been renamed NYSE 
National, Inc. See Securities Exchange Act Release No. 79902 
(January 30, 2017), 82 FR 9258 (February 3, 2017).
    \6\ 15 U.S.C. 78k-1.
    \7\ 17 CFR 242.608.
    \8\ See Letter from the Participants to Brent J. Fields, 
Secretary, Commission, dated September 30, 2014; and Letter from 
Participants to Brent J. Fields, Secretary, Commission, dated 
February 27, 2015. On December 24, 2015, the Participants submitted 
an amendment to the CAT NMS Plan. See Letter from Participants to 
Brent J. Fields, Secretary, Commission, dated December 23, 2015.
    \9\ Securities Exchange Act Release No. 77724 (April 27, 2016), 
81 FR 30614 (May 17, 2016).
    \10\ Securities Exchange Act Rel. No. 79318 (November 15, 2016), 
81 FR 84696 (November 23, 2016) (``Approval Order'').
    \11\ The Plan also serves as the limited liability company 
agreement for the Company.
    \12\ Section 11.1(b) of the CAT NMS Plan.
    \13\ Id.
    \14\ See Securities Exchange Act Release No. 80655 (May 11, 
2017), 82 FR 22692 (May 17, 2017) (SR-NASDAQ-2017-044) [sic].
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(1) Definitions
    Paragraph (a) of Proposed Rule 6896 and Chapter IX, Section 9 sets 
forth the definitions for Proposed Rule 6896 and Chapter IX, Section 9. 
Paragraph (a)(1) of Proposed Rule 6896 and Chapter IX, Section 9 states 
that, for purposes of Rule 6896 and Chapter IX, Section 9, the terms 
``CAT NMS Plan'', ``Industry Member'', ``Operating Committee'', and 
``Participant'' are defined as set forth in the Rule 6810 and Chapter 
IX, Section 8(a) (Consolidated Audit Trail--Definitions), respectively, 
and the term ``CAT Fee'' is defined as set forth in the Consolidated 
Audit Trail Funding Fees. In addition, the Exchange proposes to add 
paragraph (a)(2) to Proposed Rule 6896 and Chapter IX, Section 9. New 
paragraph (a)(2) would define the term ``Subcommittee'' to mean a 
subcommittee designated by the Operating Committee pursuant to the CAT 
NMS Plan. This definition is the same substantive definition as set 
forth in Section 1.1 of the CAT NMS Plan.
(2) Fee Dispute Resolution
    Section 11.5 of the CAT NMS Plan requires Participants to adopt 
rules requiring that disputes with respect to fees charged to Industry 
Members pursuant to the CAT NMS Plan be determined by the Operating 
Committee or Subcommittee. Section 11.5 of the CAT NMS Plan also states 
that decisions by the Operating Committee or Subcommittee on such 
matters shall be binding on Industry Members, without prejudice to the 
right of any Industry Member to seek redress from the SEC pursuant to 
SEC Rule 608 or in any other appropriate forum. The Exchange proposes 
to adopt paragraph (b) of Proposed Rule 6896 and Chapter IX, Section 9. 
Paragraph (b) of Proposed Rule 6896 and Chapter IX, Section 9 states 
that disputes initiated by an Industry Member with respect to CAT Fees 
charged to such Industry Member pursuant to the Consolidated Audit 
Trail Funding Fees, including disputes related to the designated tier 
and the fee calculated pursuant to such tier, shall be resolved by the 
Operating Committee, or a Subcommittee designated by the Operating 
Committee, of the CAT NMS Plan, pursuant to the Fee Dispute Resolution 
Procedures adopted pursuant to the CAT NMS Plan and set forth in 
paragraph (c) of Proposed Rule 6896 and Chapter IX, Section 9. 
Decisions on such matters shall be binding on Industry Members, without 
prejudice to the rights of any such Industry Member to seek redress 
from the SEC or in any other appropriate forum.
    The Operating Committee has adopted ``Fee Dispute Resolution 
Procedures'' governing the manner in which disputes regarding CAT Fees 
charged pursuant to the Consolidated Audit Trail Funding Fees will be 
addressed. These Fee Dispute Resolution Procedures, as they relate to 
Industry Members, are set forth in paragraph (c) of Proposed Rule 6896 
and

[[Page 28542]]

Chapter IX, Section 9. Specifically, the Fee Dispute Resolution 
Procedures provide the procedure for Industry Members that dispute CAT 
Fees charged to such Industry Member pursuant to one or more of the 
Participants' Consolidated Audit Trail Funding Fees Rules, including 
disputes related to the designated tier and the fee calculated pursuant 
to such tier, to apply for an opportunity to be heard and to have the 
CAT Fees charged to such Industry Member reviewed. The Procedures are 
modeled after the adverse action procedures adopted by various 
exchanges,\15\ and will be posted on the Web site for the CAT NMS Plan 
Web site.\16\
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    \15\ See, e.g., Chapter X of BATS BZX Exchange, Inc. (Adverse 
Action); and Chapter X of NYSE National, Inc. (Adverse Action).
    \16\ The CAT NMS Plan Web site is www.catnmsplan.com.
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    Under these Procedures, an Industry Member that disputes CAT Fees 
charged to such Industry Member and that desires to have an opportunity 
to be heard with respect to such disputed CAT Fees must file a written 
application with the Company within 15 business days after being 
notified of such disputed CAT Fees. The application must identify the 
disputed CAT Fees, state the specific reasons why the applicant takes 
exception to such CAT Fees, and set forth the relief sought. In 
addition, if the applicant intends to submit any additional documents, 
statements, arguments or other material in support of the application, 
the same should be so stated and identified.
    The Company will refer applications for hearing and review promptly 
to the Subcommittee designated by the Operating Committee pursuant to 
Section 4.12 of the CAT NMS Plan with responsibility for conducting the 
reviews of CAT Fee disputes pursuant to these Procedures. This 
Subcommittee will be referred to as the Fee Review Subcommittee. The 
members of the Fee Review Subcommittee will be subject to the 
provisions of Section 4.3(d) of the CAT NMS Plan regarding recusal and 
Conflicts of Interest. The Fee Review Subcommittee will keep a record 
of the proceedings.
    The Fee Review Subcommittee will hold hearings promptly. The Fee 
Review Subcommittee will set a hearing date. The parties to the hearing 
shall furnish the Fee Review Subcommittee with all materials relevant 
to the proceedings at least 72 hours prior to the date of the hearing. 
Each party will have the right to inspect and copy the other party's 
materials prior to the hearing.
    The parties to the hearing will consist of the applicant and a 
representative of the Company who shall present the reasons for the 
action taken by the Company that allegedly aggrieved the applicant. The 
applicant is entitled to be accompanied, represented and advised by 
counsel at all stages of the proceedings.
    The Fee Review Subcommittee will determine all questions concerning 
the admissibility of evidence and will otherwise regulate the conduct 
of the hearing. Each of the parties will be permitted to make an 
opening statement, present witnesses and documentary evidence, cross 
examine opposing witnesses and present closing arguments orally or in 
writing as determined by the Fee Review Subcommittee. The Fee Review 
Subcommittee also will have the right to question all parties and 
witnesses to the proceeding. The Fee Review Subcommittee must keep a 
record of the hearing. The formal rules of evidence will not apply.
    The Fee Review Subcommittee must set forth its decision in writing 
and send the written decision to the parties to the proceeding. Such 
decisions will contain the reasons supporting the conclusions of the 
Fee Review Subcommittee.
    The decision of the Fee Review Subcommittee will be subject to 
review by the Operating Committee either on its own motion within 20 
business days after issuance of the decision or upon written request 
submitted by the applicant within 15 business days after issuance of 
the decision. The applicant's petition must be in writing and must 
specify the findings and conclusions to which the applicant objects, 
together with the reasons for such objections. Any objection to a 
decision not specified in writing will be considered to have been 
abandoned and may be disregarded. Parties may petition to submit a 
written argument to the Operating Committee and may request an 
opportunity to make an oral argument before the Operating Committee. 
The Operating Committee will have sole discretion to grant or deny 
either request.
    The Operating Committee will conduct the review. The review will be 
made upon the record and will be made after such further proceedings, 
if any, as the Operating Committee may order. Based upon such record, 
the Operating Committee may affirm, reverse or modify, in whole or in 
part, the decision of the Fee Review Subcommittee. The decision of the 
Operating Committee will be in writing, will be sent to the parties to 
the proceeding and will be final.
    The Procedures state that a final decision regarding the disputed 
CAT Fees by the Operating Committee, or the Fee Review Subcommittee (if 
there is no review by the Operating Committee), must be provided within 
90 days of the date on which the Industry Member filed a written 
application regarding disputed CAT Fees with the Company. The Operating 
Committee may extend the 90-day time limit at its discretion.
    In addition, the Procedures state that any notices or other 
documents may be served upon the applicant either personally or by 
leaving the same at its, his or her place of business or by deposit in 
the United States post office, postage prepaid, by registered or 
certified mail, addressed to the applicant at its, his or her last 
known business or residence address. The Procedures also state that any 
time limits imposed under the Procedures for the submission of answers, 
petitions or other materials may be extended by permission of the 
Operating Committee. All papers and documents relating to review by the 
Fee Review Subcommittee or the Operating Committee must be submitted to 
the Fee Review Subcommittee or Operating Committee, as applicable.
    The Procedures also note that decisions on such CAT Fee disputes 
made pursuant to these Procedures will be binding on Industry Members, 
without prejudice to the rights of any such Industry Member to seek 
redress from the SEC or in any other appropriate forum.
    Finally, an Industry Member that files a written application with 
the Company regarding disputed CAT Fees in accordance with these 
Procedures is not required to pay such disputed CAT Fees until the 
dispute is resolved in accordance with these Procedures, including any 
review by the SEC or in any other appropriate forum. For these 
purposes, the disputed CAT Fees means the amount of the invoiced CAT 
Fees that the Industry Member has asserted pursuant to these Procedures 
that such Industry Member does not owe to the Company. The Industry 
Member must pay any invoiced CAT Fees that are not disputed CAT Fees 
when due as set forth in the original invoice.
    Once the dispute regarding CAT Fees is resolved pursuant to these 
Procedures, if it is determined that the Industry Member owes any of 
the disputed CAT Fees, then the Industry Member must pay such disputed 
CAT Fees that are owed as well as interest on such disputed CAT Fees 
from the original due date (that is, 30 days after receipt of the 
original invoice of such CAT Fees) until such disputed CAT

[[Page 28543]]

Fees are paid at a per annum rate equal to the lesser of (i) the Prime 
Rate plus 300 basis points, or (ii) the maximum rate permitted by 
applicable law.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6(b)(5) of the Act,\17\ which requires, 
among other things, that the Exchange rules must be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, and, in general, to protect investors 
and the public interest, and not designed to permit unfair 
discrimination between customers, issuers, brokers and dealer [sic], 
and Section 6(b)(4) of the Act,\18\ which requires that Exchange rules 
provide for the equitable allocation of reasonable dues, fees, and 
other charges among members and issuers and other persons using its 
facilities.
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    \17\ 15 U.S.C. 78f(b)(5).
    \18\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that this proposal is consistent with the Act 
because it implements, interprets or clarifies Section 11.5 of the 
Plan, and is designed to assist the Exchange and its Industry Members 
in meeting regulatory obligations pursuant to the Plan. In approving 
the Plan, the SEC noted that the Plan ``is necessary and appropriate in 
the public interest, for the protection of investors and the 
maintenance of fair and orderly markets, to remove impediments to, and 
perfect the mechanism of a national market system, or is otherwise in 
furtherance of the purposes of the Act.'' \19\ To the extent that this 
proposal implements, interprets or clarifies the Plan and applies 
specific requirements to Industry Members, the Exchange believes that 
this proposal furthers the objectives of the Plan, as identified by the 
SEC, and is therefore consistent with the Act.
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    \19\ Approval Order at 84697.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    Section 6(b)(8) of the Act \20\ requires that Exchange rules not 
impose any burden on competition that is not necessary or appropriate. 
The Exchange does not believe that the proposed rule change will impose 
any burden on competition not necessary or appropriate in furtherance 
of the purposes of the Act. The Exchange notes that the proposed rule 
change implements Section 11.5 of the CAT NMS Plan approved by the 
Commission, and is designed to assist the Exchange in meeting its 
regulatory obligations pursuant to the Plan. Similarly, all national 
securities exchanges and FINRA are proposing this proposed rule to 
implement the requirements of the CAT NMS Plan. Therefore, this is not 
a competitive rule filing and, therefore, it does not raise competition 
issues between and among the exchanges and FINRA.
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    \20\ 15 U.S.C. 78f(b)(8)
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NASDAQ-2017-059 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NASDAQ-2017-059. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NASDAQ-2017-059, and should 
be submitted on or before July 13, 2017.
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    \21\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2017-12987 Filed 6-21-17; 8:45 am]
 BILLING CODE 8011-01-P